<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by Registrant [X]
Filed by a Party other than the
Registrant [_]
Check the appropriate box: [_]Confidential,]for use of the
[_]Preliminary]Proxy Statement Commission only (as permitted by
Rule 14a-6(e)(2))
[X]Definitive]Proxy Statement
[_]Definitive]Additional Materials
[_]Soliciting]Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
FIRST MISSISSIPPI CORPORATION
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
BOARD OF DIRECTORS OF FIRST MISSISSIPPI CORPORATION
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[_]No filing fee required.
[X]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Mississippi Chemical common stock, par value $.01 per share (Mississippi
Chemical Common Stock)
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
6,904,762
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$22.625 per unit price based on the high and low prices of Mississippi
Chemical Common Stock reported on the Nasdaq Stock Market's National
Market on September 13, 1996.
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$156.2 million
- -------------------------------------------------------------------------------
(5) Total fee paid:
$31,245.00
- -------------------------------------------------------------------------------
[X]Fee paid previously with preliminary materials.
- -------------------------------------------------------------------------------
[_]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No:
- -------------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------------
(4) Date Filed:
- -------------------------------------------------------------------------------
<PAGE>
November 18, 1996
Dear First Mississippi Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
First Mississippi Corporation to be held at 10:00 a.m. local time on December
20, 1996, at Dennery's in Jackson, Mississippi. I hope you will be present or
represented by proxy at this important meeting.
On August 27, your board of directors approved the merger of the company's
fertilizer operations with Mississippi Chemical Corporation in a transaction
representing a combined value in debt and equity on that date of $297 million.
The transaction will utilize a structure commonly referred to as a "Morris
Trust" and will occur in two steps. First, the company's chemicals and non-
fertilizer businesses will be spun off to shareholders in a new publicly
traded company (the new company). Second, fertilizer operations will be
acquired by Mississippi Chemical in a stock-for-stock merger. The spinoff and
the merger are intended to be tax free.
Mississippi Chemical produces nitrogen and potash fertilizers for sale
primarily in the southern farming regions of the United States and in areas
served by the Mississippi River system and phosphate fertilizers for sale
primarily in international markets. The company, formed in 1948 as a
fertilizer cooperative, now trades on the New York Stock Exchange under the
symbol "GRO" and is listed in The Wall Street Journal and other major daily
newspapers as "MissChem."
In the merger, you will receive, subject to adjustment, approximately 0.335
of a share of Mississippi Chemical stock for each share of First Mississippi
stock that you own. This is equivalent to $7.12 per First Mississippi share
based on the market price of $21.25 for Mississippi Chemical on August 27. You
will also receive one share of stock in the new company for each share of
First Mississippi stock you own.
At closing, First Mississippi's debt will be refinanced and increased to
approximately $150 million. The debt will remain the obligation of First
Mississippi, which will become a subsidiary of Mississippi Chemical as a
result of the merger. The new company will be essentially debt free when spun
off and is expected to have approximately $50 million in cash.
The merger must be approved by the shareholders of both First Mississippi
and Mississippi Chemical. The enclosed Joint Proxy Statement/Prospectus
describes the plan in greater detail and asks you and other First Mississippi
shareholders to approve the transaction. Also, Appendix E to the Joint Proxy
Statement/Prospectus is a prospectus for the new company's stock and further
describes what the new company's businesses and management will be. After
careful consideration, your board of directors has unanimously determined that
the spin-off and merger are in the best interest of First Mississippi and its
shareholders, and unanimously recommends that you vote FOR the approval of the
merger. We hope to complete the transaction in December 1996.
At the annual meeting you will also be asked to elect six directors to the
First Mississippi board of directors. Shareholders are entitled to vote all
shares of First Mississippi common stock owned by them on October 30, 1996,
the record date.
<PAGE>
We urge you to consider carefully these important matters described in the
attached Joint Proxy Statement/Prospectus. In order to ensure that your vote
is represented at the meeting, please indicate your choice on the proxy form,
date and sign it, and return it in the enclosed envelope. Please mark and
return the proxy even if you plan to attend the meeting in person. If you have
questions, please contact our Investor Relations Department at 601/948-7550.
Yours truly,
FIRST MISSISSIPPI CORPORATION
J. Kelley Williams
Chairman and Chief Executive Officer
<PAGE>
FIRST MISSISSIPPI CORPORATION
JACKSON, MISSISSIPPI
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 20, 1996
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of Shareholders of FIRST
MISSISSIPPI CORPORATION, a Mississippi corporation ("First Mississippi"), has
been called by the Board of Directors of First Mississippi and will be held at
Dennery's, 330 Greymont Avenue, Jackson, Mississippi, on December 20, 1996, at
10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger and Reorganization, dated as of August 27, 1996 (the
"Merger Agreement"), among Mississippi Chemical Corporation, a Mississippi
corporation ("Mississippi Chemical"), MISS SUB, INC., a Mississippi
corporation and a wholly owned subsidiary of Mississippi Chemical ("Miss
Sub"), and First Mississippi and the merger contemplated thereby, pursuant to
which, among other things, immediately following the spin-off of First
Mississippi's non-fertilizer operations to shareholders in the Distribution
described in the accompanying Joint Proxy Statement/Prospectus, Miss Sub will
be merged with and into First Mississippi upon the terms and conditions
contained in the Merger Agreement (the "Merger"), all as more fully described
in the accompanying Joint Proxy Statement/Prospectus, including the appendices
thereto.
At the effective time of the Merger (the "Effective Time"), (i) Miss Sub
will be merged with and into First Mississippi, with First Mississippi
surviving the Merger as a wholly owned subsidiary of Mississippi Chemical and
(ii) each share of First Mississippi common stock, par value $1.00 per share
(the "First Mississippi Common Stock"), issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive a
fraction of a share (in whole shares only) of common stock of Mississippi
Chemical, determined as provided in Section 2.1 of the Merger Agreement.
2. To elect six directors, to hold office for the terms specified in the
Joint Proxy Statement/Prospectus and until their successors are elected and
qualified.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
The Joint Proxy Statement/Prospectus and the appendices thereto (including
the Merger Agreement attached as Appendix A thereto) form a part of this
Notice.
First Mississippi shareholders who do not vote in favor of the Merger, who
file a written notice with First Mississippi prior to the time the vote with
respect to the Merger is taken at the Annual Meeting, and who otherwise comply
with Article 13 of the Mississippi Business Corporation Act (a copy of which
is attached as Appendix F to the accompanying Joint Proxy
Statement/Prospectus) will be entitled to certain dissenters' rights in
connection with the Merger.
Only holders of record of First Mississippi Common Stock at the close of
business on October 30, 1996 are entitled to notice of and to vote at the
Annual Meeting or any adjournments or postponements thereof. Approval and
adoption of the Merger Agreement and the Merger requires the affirmative vote
of a majority of the total
<PAGE>
number of votes entitled to be cast at the Annual Meeting. Holders of record
may be asked to vote to adjourn the Annual Meeting for up to 30 days to
solicit additional votes if necessary to approve and adopt the Merger
Agreement. The affirmative vote of a plurality of the votes entitled to be
cast at the Annual Meeting in person or by proxy is required in order to elect
a director.
By Order of the Board of Directors,
JAMES L. McARTHUR, Secretary
P. O. Box 1249
Jackson, Mississippi 39215-1249
November 18, 1996
----------------
IMPORTANT NOTICES
SHAREHOLDERS RECEIVING MORE THAN ONE PROXY BECAUSE OF SHARES REGISTERED IN
DIFFERENT NAMES OR ADDRESSES MUST COMPLETE AND RETURN EACH PROXY IN ORDER TO
VOTE ALL SHARES TO WHICH THEY ARE ENTITLED TO VOTE.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING. YOUR PROXY WILL BE REVOCABLE, EITHER IN
WRITING OR BY VOTING IN PERSON AT THE ANNUAL MEETING, AT ANY TIME PRIOR TO ITS
EXERCISE. PLEASE DATE AND SIGN YOUR NAME EXACTLY AS IT APPEARS ON THE PROXY.
PLEASE DO NOT SEND IN STOCK CERTIFICATES AT THIS TIME.
THE BOARD OF DIRECTORS OF FIRST MISSISSIPPI CORPORATION UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER.
----------------
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION FIRST MISSISSIPPI CORPORATION
YAZOO CITY, MISSISSIPPI JACKSON, MISSISSIPPI
JOINT PROXY STATEMENT/PROSPECTUS
ANNUAL MEETING OF SHAREHOLDERS
MISSISSIPPI CHEMICAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
FIRST MISSISSIPPI CORPORATION
DECEMBER 20, 1996
This Joint Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors (the "Mississippi Chemical
Board") of Mississippi Chemical Corporation, a Mississippi corporation
("Mississippi Chemical"), for use at the 1996 Annual Meeting of Shareholders
of Mississippi Chemical (the "Mississippi Chemical Annual Meeting") to be held
at the Owen Cooper Administration Building, Highway 49 East, Yazoo City,
Mississippi, on Friday, December 20, 1996, at 9:00 a.m., local time, and at
any adjournments or postponements thereof. At the Mississippi Chemical Annual
Meeting, Mississippi Chemical shareholders will consider and vote upon a
proposal to approve the issuance (the "Stock Issuance") of shares of
Mississippi Chemical common stock, par value $.01 per share (including the
associated preferred stock purchase rights, "Mississippi Chemical Common
Stock"), to the shareholders of First Mississippi Corporation, a Mississippi
corporation ("First Mississippi"), in connection with the Agreement and Plan
of Merger and Reorganization, dated as of August 27, 1996 (the "Merger
Agreement"), among Mississippi Chemical, First Mississippi and MISS SUB, INC.,
a Mississippi corporation and wholly-owned subsidiary of Mississippi Chemical
("Miss Sub"), relating to the proposed merger (the "Merger") of Miss Sub with
and into First Mississippi (sometimes referred to as the "Surviving
Corporation"). The Merger Agreement is attached as Appendix A and is
incorporated herein by reference. Assuming that Mississippi Chemical issues
6,904,762 shares in the Merger, Mississippi Chemical shareholders immediately
prior to the Merger will continue to hold approximately 75% of the outstanding
Mississippi Chemical Common Stock on a fully diluted basis following the
Merger.
This Joint Proxy Statement/Prospectus is also furnished in connection with
the solicitation of proxies by the Board of Directors (the "First Mississippi
Board") of First Mississippi, for use at the 1996 Annual Meeting of
Shareholders of First Mississippi (the "First Mississippi Annual Meeting") to
be held at Dennery's, 330 Greymont Avenue, Jackson, Mississippi on Friday,
December 20, 1996 at 10:00 a.m., local time. At the First Mississippi Annual
Meeting, the First Mississippi shareholders will consider and vote upon the
Merger Agreement and the Merger.
The Merger is the second step of a two step transaction commonly referred to
as a "Morris Trust." In the first step, First Mississippi's chemicals and
other non-fertilizer businesses will be spun off to shareholders by means of a
pro rata dividend distribution (the "Distribution") of common stock of
ChemFirst Inc. ("ChemFirst"). In the second step, First Mississippi, which
after the Distribution will be comprised solely of First Mississippi's
fertilizer operations, will be merged with Miss Sub.
(continued on next page)
-------
SEE "RISK FACTORS" ON PAGE 28 OF THIS JOINT PROXY STATEMENT/PROSPECTUS FOR
A DISCUSSION OF CERTAIN MATTERS WITH RESPECT TO THE DISTRIBUTION, THE MERGER
AND AN INVESTMENT IN MISSISSIPPI CHEMICAL COMMON STOCK UPON CONSUMMATION OF
THE MERGER. THE CHEMFIRST PROSPECTUS IS ATTACHED AS APPENDIX E. SEE "RISK
FACTORS" ON PAGE E-9 THEREIN FOR CERTAIN MATTERS RELEVANT TO THE OWNERSHIP OF
CHEMFIRST COMMON STOCK.
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to shareholders of Mississippi Chemical and First
Mississippi on or about November 21, 1996.
NEITHER THIS TRANSACTION NOR THE SECURITIES TO BE ISSUED IN CONNECTION WITH
THE MERGER HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------
The Date of this Joint Proxy Statement/Prospectus is November 18, 1996.
<PAGE>
(continued from first page)
As a result of the Merger, First Mississippi will become a wholly-owned
subsidiary of Mississippi Chemical. In the Merger, each share of First
Mississippi common stock, par value $1.00 per share ("First Mississippi Common
Stock"), will be converted into the right to receive a fraction of a share of
Mississippi Chemical Common Stock. The conversion ratio is subject to
adjustment as described herein; however, assuming that the average price of
Mississippi Chemical Common Stock during the 10-trading-day period prior to
the Merger remains at or below $25.00 and 20,621,736 shares of First
Mississippi Common Stock are outstanding at the time of the Merger, each share
of First Mississippi Common Stock will be converted into .3348 of a share of
Mississippi Chemical Common Stock. See "The Merger--Terms of the Merger--
Conversion of First Mississippi Common Stock in the Merger."
The Merger Agreement provides that, subject to the satisfaction or waiver of
certain conditions, prior to the Merger, First Mississippi will effect the
Distribution, as contemplated by the Distribution Agreement (the "Distribution
Agreement") to be entered into between First Mississippi and ChemFirst, a
Mississippi corporation and wholly-owned subsidiary of First Mississippi.
Pursuant to the Distribution Agreement, all of First Mississippi's assets,
liabilities (other than certain debt) and businesses, other than its
fertilizer related assets, liabilities and businesses (such fertilizer related
assets, liabilities and businesses, the "Fertilizer Business"), will be
transferred to ChemFirst and all of the common stock, par value $1.00 per
share (the "ChemFirst Common Stock"), of ChemFirst will be distributed to
First Mississippi shareholders in the form of a pro rata dividend. The
Distribution will separate the Fertilizer Business from First Mississippi's
other businesses and will enable Mississippi Chemical to acquire only the
Fertilizer Business in the Merger; the Distribution will leave First
Mississippi's remaining businesses as a separate publicly held company
(ChemFirst), owned by the existing First Mississippi shareholders. The
Distribution is intended to be tax-free to First Mississippi shareholders for
Federal income tax purposes. For more information regarding the Distribution,
see "The Distribution." For more information regarding ChemFirst, see the
ChemFirst Prospectus attached as Appendix E to this Joint Proxy
Statement/Prospectus. Prior to the Distribution, First Mississippi will
consummate the Financing described in this Joint Proxy Statement/Prospectus. A
portion of the proceeds of the Financing will be used to refinance First
Mississippi's existing indebtedness and pay certain transaction costs, with
the remaining proceeds, estimated to be approximately $50.0 million, to be
contributed to ChemFirst prior to the Distribution. As a result of the
Financing, which will remain the obligation of the Surviving Corporation, and
the application of its proceeds, at the time of the Distribution, ChemFirst
will have no significant long-term indebtedness and available cash reserves
currently estimated to be approximately $50.0 million. See "Pro Forma
Financial Information" in the ChemFirst Prospectus attached as Appendix E to
this Joint Proxy Statement/Prospectus. A form of the Distribution Agreement is
attached as Appendix B and incorporated herein by reference. First Mississippi
does not intend to effect the Distribution in the event that the Merger is not
approved at the First Mississippi Annual Meeting.
There is currently no trading market for ChemFirst Common Stock; however, it
is expected that a "when-issued" trading market will develop for the ChemFirst
Common Stock prior to the Merger. Application has been made to list the
ChemFirst Common Stock on the New York Stock Exchange (the "NYSE").
As a result of the Morris Trust transaction, holders of First Mississippi
Common Stock immediately prior to the Distribution will receive shares of
ChemFirst Common Stock in the Distribution and, upon surrendering their First
Mississippi Common Stock share certificates in accordance with the Merger
Agreement, will receive shares of Mississippi Chemical Common Stock in the
Merger.
This Joint Proxy Statement/Prospectus also constitutes the prospectus of
Mississippi Chemical that is part of a Registration Statement on Form S-4 (the
"Mississippi Chemical Registration Statement") filed with the Securities and
Exchange Commission (the "Commission") with respect to the issuance of up to
6,904,762 shares of Mississippi Chemical Common Stock to be issued pursuant to
the Merger. Appendix E to this Joint Proxy Statement/Prospectus is furnished
to First Mississippi shareholders as a prospectus in connection with the
distribution of ChemFirst Common Stock pursuant to the Distribution Agreement.
The ChemFirst Prospectus is part of ChemFirst's Registration Statement on Form
S-1 (the "ChemFirst Registration Statement") filed with the Commission.
Mississippi Chemical has furnished all information in this Joint Proxy
Statement/Prospectus with respect to Mississippi Chemical and Miss Sub and
First Mississippi has furnished all information in this Joint Proxy
Statement/Prospectus with respect to First Mississippi and ChemFirst.
<PAGE>
DOCUMENTS DELIVERED HEREWITH
Mississippi Chemical shareholders will receive a copy of the Mississippi
Chemical 1996 Annual Report to Shareholders together with this Joint Proxy
Statement/Prospectus.
AVAILABLE INFORMATION
Mississippi Chemical and First Mississippi are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, file reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by Mississippi Chemical and First Mississippi with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Such material should also be available on line
at the Commission Web site (http:/www.sec.gov) through the Commission's EDGAR
retrieval system. Mississippi Chemical Common Stock and First Mississippi
Common Stock are listed on the NYSE. Reports and other information concerning
Mississippi Chemical and First Mississippi can also be inspected at the
offices of the New York Stock Exchange, 30 Broad Street, New York, New York
10005. First Mississippi Common Stock is also listed on the Philadelphia Stock
Exchange, Chicago Stock Exchange and Pacific Stock Exchange.
This Joint Proxy Statement/Prospectus, which constitutes a part of the
Mississippi Chemical Registration Statement, does not contain all of the
information set forth in the Mississippi Chemical Registration Statement,
certain items of which are contained in schedules and exhibits to the
Mississippi Chemical Registration Statement as permitted by the rules and
regulations of the Commission. For further information, reference is made to
the Mississippi Chemical Registration Statement, including the schedules and
exhibits filed as a part thereof or incorporated by reference therein.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each such statement is qualified
in its entirety by reference to the copy of the applicable document filed as
an appendix hereto or as otherwise filed with the Commission. The Mississippi
Chemical Registration Statement and the exhibits and schedules thereto may be
inspected, without charge, and copies thereof may be obtained at prescribed
rates, at the offices of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. This Joint Proxy Statement/Prospectus does not contain all of the
information to be set forth in the ChemFirst Registration Statement. The
ChemFirst Registration Statement and the exhibits and schedules thereto may be
inspected, without charge, and copies thereof may be obtained at prescribed
rates, at the offices of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Certain important information relating to the Distribution is set
forth in the ChemFirst Prospectus which is a part of this Joint Proxy
Statement/Prospectus and is attached as Appendix E. See "Additional
Information" in the ChemFirst Prospectus.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS JOINT PROXY STATEMENT/ PROSPECTUS, OR A
SOLICITATION OF A PROXY FROM ANY PERSON, IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER, SOLICITATION OF AN OFFER OR PROXY
SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS
NOR ANY DISTRIBUTION OF THE SECURITIES MADE UNDER THIS JOINT PROXY STATEMENT/
PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF MISSISSIPPI CHEMICAL OR FIRST MISSISSIPPI
AT ANY TIME SUBSEQUENT TO THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
i
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Mississippi Chemical incorporates herein by reference the following
documents filed by it with the Commission pursuant to the Exchange Act: (i)
its Annual Report on Form 10-K for the year ended June 30, 1996, (ii) its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, and
(iii) the descriptions of Mississippi Chemical Common Stock and the
Mississippi Chemical Preferred Stock Purchase Rights contained in its
registration statements on Form 8-A each dated September 23, 1996.
First Mississippi incorporates herein by reference (i) its Annual Report on
Form 10-K/A for the year ended June 30, 1996, (ii) its Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996, and (iii) its Current
Report on Form 8-K dated September 9, 1996.
All documents filed by Mississippi Chemical and First Mississippi pursuant
to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the
date of this Joint Proxy Statement/Prospectus and prior to the dates of the
Mississippi Chemical Annual Meeting and the First Mississippi Annual Meeting
shall be deemed to be incorporated by reference in this Joint Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents. All information appearing in this Joint Proxy Statement/Prospectus
is qualified in its entirety by the information and financial statements
(including notes thereto) appearing in the documents incorporated by reference
herein.
Any statement contained in a document incorporated or deemed incorporated by
reference herein shall be modified or superseded, for purposes of this Joint
Proxy Statement/Prospectus, to the extent that a statement contained herein or
in any subsequently filed document that is deemed to be incorporated herein
modifies or supersedes any such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. MISSISSIPPI CHEMICAL AND
FIRST MISSISSIPPI HEREBY UNDERTAKE TO PROVIDE WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS HAS BEEN DELIVERED, ON WRITTEN OR ORAL REQUEST OF ANY
SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED TO ABOVE THAT
HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
INTO SUCH DOCUMENTS). DOCUMENTS RELATING TO MISSISSIPPI CHEMICAL ARE AVAILABLE
UPON REQUEST FROM MISSISSIPPI CHEMICAL CORPORATION, P.O. BOX 388, YAZOO CITY,
MISSISSIPPI 39194, ATTENTION: ROSALYN B. GLASCOE, CORPORATE SECRETARY, (601)
746-4131. DOCUMENTS RELATING TO FIRST MISSISSIPPI ARE AVAILABLE UPON REQUEST
FROM FIRST MISSISSIPPI CORPORATION, 700 NORTH STREET, P.O. BOX 1249, JACKSON,
MISSISSIPPI, 39215-1249, ATTENTION: JAMES L. MCARTHUR, SECRETARY, (601) 948-
7550. IN ORDER TO ASSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD
BE MADE BY DECEMBER 13, 1996.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DOCUMENTS DELIVERED HEREWITH............................................. i
AVAILABLE INFORMATION.................................................... i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........................ ii
SUMMARY.................................................................. 1
The Companies............................................................ 1
Mississippi Chemical................................................... 1
Miss Sub............................................................... 1
First Mississippi...................................................... 1
ChemFirst.............................................................. 1
The Annual Meetings...................................................... 2
Mississippi Chemical Annual Meeting.................................... 2
First Mississippi Annual Meeting....................................... 2
The Distribution and the Merger.......................................... 2
Background of the Distribution and the Merger.......................... 2
Recommendations of the Boards.......................................... 3
Overview of the Distribution and the Merger............................ 3
Terms of the Merger.................................................... 3
Interests of Certain Persons in the Transactions....................... 7
Termination or Amendment of Merger Agreement........................... 7
Dissenters' Rights..................................................... 8
Accounting Treatment................................................... 8
The Distribution....................................................... 8
Opinions of Financial Advisors........................................... 9
Certain Federal Income Tax Consequences.................................. 9
Shareholders' Comparative Rights......................................... 9
Comparative Per Share Market Information................................. 10
Selected Historical Financial Information
Mississippi Chemical................................................... 11
First Mississippi...................................................... 12
First Mississippi Fertilizer Business to Be Merged..................... 13
Comparative Per Share Data of Mississippi Chemical and First Mississip-
pi.................................................................... 14
Mississippi Chemical Corporation Selected Pro Forma Financial Data..... 15
UNAUDITED CONDENSED PRO FORMA FINANCIAL STATEMENTS....................... 17
Mississippi Chemical Unaudited Condensed Pro Forma Consolidated Financial
Statements.............................................................. 17
Mississippi Chemical Unaudited Condensed Pro Forma Consolidated Balance
Sheet................................................................... 18
Mississippi Chemical Unaudited Condensed Pro Forma Consolidated Income
Statement For the Fiscal Year Ended June 30, 1996....................... 19
Mississippi Chemical Unaudited Condensed Pro Forma Consolidated Income
Statement For the Three Months Ended September 30, 1996................. 20
Notes to Unaudited Condensed Pro Forma Consolidated Financial Statements. 21
Mississippi Chemical Corporation Management's Discussion and Analysis of
Condensed Pro Forma Consolidated Financial Statements................... 23
DILUTION................................................................. 26
CAPITALIZATION........................................................... 27
RISK FACTORS............................................................. 28
Risk Factors Relating to ChemFirst....................................... 29
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE ANNUAL MEETINGS....................................................... 30
General................................................................... 30
The Mississippi Chemical Annual Meeting................................... 30
Proposal One--Stock Issuance............................................ 30
Proposal Two--Election of Directors..................................... 30
Record Date; Voting at the Meeting; Vote Required; Principal
Shareholders........................................................... 30
Revocability of Proxies................................................. 31
Dissenters' Rights...................................................... 31
The First Mississippi Annual Meeting...................................... 31
Date, Time and Place; Purpose of Meeting................................ 31
Record Date............................................................. 32
Proxies; Voting and Revocation.......................................... 32
Votes Required to Approve the Merger; Principal Shareholders............ 33
Solicitation of Proxies................................................... 33
RECENT DEVELOPMENTS....................................................... 34
BACKGROUND OF THE DISTRIBUTION AND THE MERGER............................. 36
REASONS FOR THE TRANSACTIONS; RECOMMENDATIONS OF THE BOARDS............... 37
Mississippi Chemical...................................................... 37
First Mississippi......................................................... 39
OPINIONS OF AND PRESENTATIONS BY THE FINANCIAL ADVISORS................... 40
Financial Advisor to Mississippi Chemical................................. 40
Financial Advisor to First Mississippi.................................... 44
THE MERGER................................................................ 49
Terms of the Merger....................................................... 49
The Merger.............................................................. 49
Conversion of First Mississippi Common Stock in the Merger.............. 49
Exchange of Certain Stock Options....................................... 51
Cash in Lieu of Fractional Shares....................................... 51
Effective Time; Closing................................................... 51
Directors and Officers After the Merger................................... 51
Exchange of Certificates in the Merger.................................... 51
Representations and Warranties............................................ 52
Conduct of Business Prior to the Effective Time; Certain Covenants........ 53
Financing and Application of Proceeds..................................... 54
Retained Cash............................................................. 55
Audited Closing Balance Sheet............................................. 55
AMPRO Facility............................................................ 55
Stock Exchange Listing.................................................... 55
Indemnification........................................................... 55
Tax-Free Transactions..................................................... 56
Certain Regulatory Matters................................................ 56
No Solicitation........................................................... 56
Conditions................................................................ 56
Termination and Amendment................................................. 58
Termination............................................................. 58
Effect of Termination................................................... 59
Termination Fee......................................................... 59
Amendment............................................................... 59
Expenses.................................................................. 59
Accounting Treatment...................................................... 59
</TABLE>
iv
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Interests of Certain Persons in the Transactions.......................... 59
Ownership of Mississippi Chemical Common Stock.......................... 60
Exchange of First Mississippi Options................................... 60
Indemnification......................................................... 60
Resales of Mississippi Chemical Common Stock Issued in the Merger;
Affiliates............................................................... 60
Dissenters' Rights........................................................ 60
THE DISTRIBUTION.......................................................... 62
Background of and Reasons for the Distribution............................ 62
Terms of the Distribution Agreement....................................... 62
Terms of the Tax Disaffiliation Agreement................................. 65
Terms of the Employee Benefits Agreement.................................. 66
Certain Information regardingChemFirst after the Distribution............. 67
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 68
Consequences of the Transfers and the Distribution........................ 68
Consequences of the Merger................................................ 69
THE COMPANIES............................................................. 70
Mississippi Chemical...................................................... 70
Miss Sub.................................................................. 70
First Mississippi......................................................... 70
ChemFirst................................................................. 70
DESCRIPTION OF CAPITAL STOCK OF MISSISSIPPI CHEMICAL...................... 71
Common Stock.............................................................. 71
Preferred Stock........................................................... 71
Rights to Purchase Preferred Stock........................................ 71
Transfer Agent and Registrar.............................................. 72
COMPARATIVE RIGHTS OF SHAREHOLDERS OF MISSISSIPPI CHEMICAL AND
FIRST MISSISSIPPI........................................................ 73
Voting Rights............................................................. 73
Special Meetings; Corporate Action Without a Meeting...................... 74
Dividends................................................................. 74
Dissenters' Rights........................................................ 75
Provisions Relating to Directors.......................................... 75
Derivative Suits.......................................................... 76
State Anti-Takeover Statutes.............................................. 76
Fiduciary Duties of Directors............................................. 76
Limitation of Director Liability.......................................... 76
Indemnification........................................................... 77
Preemptive Rights......................................................... 77
LEGAL MATTERS............................................................. 77
EXPERTS................................................................... 78
</TABLE>
v
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[FIRST MISSISSIPPI ONLY]
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ELECTION OF FIRST
MISSISSIPPI DIRECTORS...................................................... 79
Voting securities........................................................... 79
Board of Directors.......................................................... 79
Election of Directors....................................................... 80
Security Ownership of
Management................................................................. 85
Director Compensation....................................................... 89
Executive Officers.......................................................... 90
Compensation Committee
Interlocks and Insider
Participation.............................................................. 95
Compensation & Human
Resources Committee
Report on Executive
Compensation............................................................... 95
Components of Executive
Compensation............................................................... 96
Performance Graph........................................................... 98
Certain Relationships
and Related
Transactions............................................................... 99
Auditors.................................................................... 100
Shareholder Proposals....................................................... 100
Other Matters............................................................... 100
INDEX TO FINANCIAL
PAGES...................................................................... F-1
</TABLE>
APPENDICES
A.The Merger Agreement
B. Distribution Documents (the Distribution Agreement, the Tax Disaffiliation
Agreement and the Employee Benefits Agreement)
C.Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
D.Opinion of CS First Boston Corporation
E.ChemFirst Prospectus
F.Mississippi Dissenters' Rights Statute
G.Certain Compensation Information Relating to Mississippi Chemical
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<PAGE>
SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by the more detailed information appearing elsewhere in this Joint
Proxy Statement/Prospectus, the documents incorporated herein by reference and
the Appendices attached hereto.
The information contained in the Joint Proxy Statement/Prospectus with
respect to Mississippi Chemical, Miss Sub and their affiliates has been
supplied by Mississippi Chemical, which is solely responsible for such
information, and the information with respect to First Mississippi, ChemFirst
and their affiliates has been supplied by First Mississippi, which is solely
responsible for such information. Certain capitalized terms which are used but
not defined in this summary are defined elsewhere in this Joint Proxy
Statement/Prospectus.
THE COMPANIES
MISSISSIPPI CHEMICAL
Mississippi Chemical is a full product line fertilizer supplier. Mississippi
Chemical produces nitrogen and potash fertilizers for sale primarily in the
southern farming regions of the United States and in areas served by the
Mississippi River system and phosphate fertilizers for sale primarily in
international markets. Mississippi Chemical was incorporated in Mississippi in
1994 and is the successor by merger, effective July 1, 1994, to a business that
was formed in 1948 as the first fertilizer cooperative in the United States. In
August 1994, Mississippi Chemical completed an initial public offering of
5,800,000 shares of Common Stock, of which 3,397,928 shares were sold by
Mississippi Chemical. In August 1996, Mississippi Chemical acquired
substantially all of the assets of New Mexico Potash Corporation and Eddy
Potash, Inc. (collectively, the "Potash Companies"). See "Recent Developments."
The principal executive offices of Mississippi Chemical are located at Highway
49 East, P.O. Box 388, Yazoo City, Mississippi 39194, and its telephone number
is (601) 746-4131. See "The Companies."
MISS SUB
Miss Sub is a newly formed Mississippi corporation and a wholly-owned
subsidiary of Mississippi Chemical. Miss Sub was organized for the purpose of
effecting the Merger pursuant to the Merger Agreement. Miss Sub has no material
assets and has not engaged in any activities except in connection with the
Merger. The principal executive offices of Miss Sub are located at Highway 49
East, P.O. Box 388, Yazoo City, Mississippi 39194, and its telephone number is
(601) 746-4131.
FIRST MISSISSIPPI
First Mississippi was incorporated in Mississippi in 1957. First
Mississippi's principal activities involve the production of chemicals and
fertilizer and related products and services. These activities include: the
production and sale of a variety of organic chemicals, including industrial
chemical intermediates, complex fine chemicals used for agricultural and
pharmaceutical, polymer and photosensitive applications and electronic
performance chemicals used in the semiconductor and related industries; the
production and sale of anhydrous ammonia and urea; the design and production of
low-emission burners, flares and incinerators and thermal plasma equipment for
steel production, waste treatment and research; and the production of steel
ingots and billets from melted scrap. The principal executive offices of First
Mississippi are located at 700 North Street, P. O. Box 1249, Jackson,
Mississippi 39215-1249, and its telephone number is (601) 948-7550. See "The
Companies."
CHEMFIRST
ChemFirst, a wholly owned subsidiary of First Mississippi, was incorporated
in 1983 but has had no activities during the last five years. Prior to the
Distribution, First Mississippi will transfer all of its cash and non-
fertilizer assets and liabilities (other than certain debt) and businesses to
ChemFirst. The principal executive offices of ChemFirst are located at 700
North Street, P. O. Box 1249, Jackson, Mississippi 39215-1249 and its telephone
number is (601) 948-7550. See "The Distribution" and the ChemFirst Prospectus
attached as Appendix E.
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<PAGE>
THE ANNUAL MEETINGS
MISSISSIPPI CHEMICAL ANNUAL MEETING
The Mississippi Chemical Annual Meeting will be held on December 20, 1996 at
the offices of Mississippi Chemical, the Owen Cooper Administration Building,
Highway 49 East, Yazoo City, Mississippi 39194, commencing at 9:00 a.m., local
time, for the purpose of considering and acting upon proposals to (i) approve
the Stock Issuance; (ii) elect three members to the Board of Directors for a
three-year term; and (iii) transact such other business as may properly come
before the Mississippi Chemical Annual Meeting or any adjournments or
postponements thereof. Only holders of record of Mississippi Chemical Common
Stock at the close of business on October 30, 1996 (the "Mississippi Chemical
Record Date") will be entitled to vote at the Mississippi Chemical Annual
Meeting. As of the Mississippi Chemical Record Date, there were 21,065,783
shares of Mississippi Chemical Common Stock issued and outstanding, all of
which are entitled to vote.
Approval of the Stock Issuance requires the affirmative vote of the holders
of a majority of the shares of Mississippi Chemical Common Stock present, in
person or by proxy, at the Mississippi Chemical Annual Meeting (assuming a
quorum is present) and the election of each nominee for director requires a
plurality of votes cast. See "The Annual Meetings--The Mississippi Chemical
Annual Meeting."
FIRST MISSISSIPPI ANNUAL MEETING
The First Mississippi Annual Meeting will be held on December 20, 1996, at
Dennery's, 330 Greymont Avenue, Jackson, Mississippi, at 10:00 a.m., local
time, for the purpose of considering and voting upon proposals to (i) approve
and adopt the Merger Agreement and the Merger, (ii) elect six directors, to
hold office for the terms specified in this Joint Proxy Statement/Prospectus
and until their successors are elected and qualified, and (iii) transact such
other business as may properly come before the First Mississippi Annual Meeting
or any adjournments or postponements thereof. Only holders of record of First
Mississippi Common Stock at the close of business on October 30, 1996 (the
"First Mississippi Record Date") will be entitled to vote at the First
Mississippi Annual Meeting. At the First Mississippi Record Date, there were
20,621,736 shares of First Mississippi Common Stock issued and outstanding, all
of which are entitled to vote.
Approval of the Merger Agreement and the Merger requires the affirmative vote
of the holders of a majority of the shares of First Mississippi Common Stock
outstanding, and the election of each nominee for director requires a plurality
of the votes cast (assuming a quorum is present). See "The Annual Meetings--The
First Mississippi Annual Meeting." Although shareholder approval of the
Distribution is not required under applicable Mississippi law and is not being
sought, First Mississippi does not intend to effect the Distribution in the
event that the Merger is not approved at the First Mississippi Annual Meeting.
THE DISTRIBUTION AND THE MERGER
BACKGROUND OF THE DISTRIBUTION AND THE MERGER
In February 1996, Mississippi Chemical's President and Chief Executive
Officer telephoned First Mississippi's Chief Executive Officer to inquire
whether First Mississippi would like to explore the possibility of Mississippi
Chemical acquiring the Fertilizer Business in a Morris Trust transaction,
because Mississippi Chemical wished to acquire only the Fertilizer Business in
the transaction. After exploring various strategic alternatives concerning its
Fertilizer Business, First Mississippi determined that the disposition of the
Fertilizer Business to Mississippi Chemical in a Morris Trust transaction was
in the best interest of First Mississippi and its shareholders. The Morris
Trust transaction is comprised of two steps: In the first step, First
Mississippi's chemicals and other non-fertilizer businesses and assets will be
spun off in the Distribution of ChemFirst Common Stock. In the second step,
First Mississippi, which after the Distribution will be comprised solely of the
Fertilizer Business, will be merged with Miss Sub. The Distribution will
separate the Fertilizer Business from First Mississippi's other businesses and
enable Mississippi Chemical to acquire only the Fertilizer Business in the
Merger; the Distribution will leave First Mississippi's remaining businesses as
a separate publicly held company (ChemFirst), owned by the existing
shareholders of First Mississippi Common Stock. Both the
2
<PAGE>
Distribution and the Merger are intended to be tax-free to First Mississippi
and its shareholders for Federal income tax purposes. Mississippi Chemical has
determined that the Merger, which is intended to be tax-free to Mississippi
Chemical and its shareholders, is in the best interest of Mississippi Chemical
and its shareholders. See "Background of the Distribution and the Merger."
RECOMMENDATIONS OF THE BOARDS
The Mississippi Chemical Board has unanimously approved the Merger Agreement
and determined that the Merger and the Stock Issuance are fair and in the best
interests of Mississippi Chemical and its shareholders. THE MISSISSIPPI
CHEMICAL BOARD UNANIMOUSLY RECOMMENDS THAT MISSISSIPPI CHEMICAL SHAREHOLDERS
VOTE FOR THE STOCK ISSUANCE. For a discussion of factors considered by the
Mississippi Chemical Board in reaching its decision, see "Reasons for the
Transactions; Recommendations of the Boards--Mississippi Chemical."
The First Mississippi Board has unanimously approved the Merger Agreement and
the Distribution Agreement and determined that the Merger and the Distribution,
taken as a whole, are fair and in the best interests of First Mississippi and
its shareholders. THE FIRST MISSISSIPPI BOARD UNANIMOUSLY RECOMMENDS THAT FIRST
MISSISSIPPI SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER. For a discussion of the factors considered by the
First Mississippi Board in reaching its decision, see "Reasons for the
Transactions; Recommendations of the Boards--First Mississippi." In considering
the recommendation of the First Mississippi Board with respect to the Merger,
First Mississippi shareholders should be aware that certain officers and
directors have direct or indirect interests in recommending the Merger, apart
from their interests as First Mississippi shareholders, which are not identical
to those of unaffiliated shareholders of First Mississippi. See "The Merger--
Interests of Certain Persons in the Transactions."
OVERVIEW OF THE DISTRIBUTION AND THE MERGER
The Merger Agreement provides that, following the Distribution, First
Mississippi will be merged with Miss Sub, with First Mississippi surviving the
Merger as a wholly-owned subsidiary of Mississippi Chemical. First Mississippi
will consist of only the Fertilizer Business at the time of the Merger. By
means of a spin-off of First Mississippi's chemicals and other non-fertilizer
businesses, the Distribution will separate First Mississippi's Fertilizer
Business from its other businesses prior to the Merger. As a result of the
Distribution and the Merger, First Mississippi shareholders will no longer own
shares of First Mississippi Common Stock but will receive shares of ChemFirst
Common Stock and Mississippi Chemical Common Stock. Assuming that Mississippi
Chemical issues 6,904,762 shares in the Merger, Mississippi Chemical
shareholders at the time of the Merger will continue to hold approximately 75%
of the outstanding Mississippi Chemical Common Stock on a fully diluted basis.
TERMS OF THE MERGER
General. At the Effective Time (defined below), Miss Sub will merge with and
into First Mississippi, with First Mississippi as the Surviving Corporation. As
a result of the Merger, First Mississippi will become a wholly owned subsidiary
of Mississippi Chemical. Pursuant to the Merger Agreement, each share of First
Mississippi Common Stock will be converted into the right to receive a fraction
of a share of Mississippi Chemical Common Stock.
Conversion of First Mississippi Common Stock in the Merger. Under the Merger
Agreement, each share of First Mississippi Common Stock will be converted into
a fraction of a share of Mississippi Chemical Common Stock based on a formula.
Under this formula, the conversion ratio varies with the number of shares of
First Mississippi Common Stock outstanding at the time of the Merger and the
"Average Mississippi Chemical Price." The Average Mississippi Chemical Price is
calculated by averaging the opening price, high price, low price and closing
price for Mississippi Chemical Common Stock for the 10 trading days preceding
the trading day before the Effective Time. If the Average Mississippi Chemical
Price does not exceed $25.00 at the Effective Time, Mississippi Chemical will
issue an aggregate of 6,904,762 shares of Mississippi Chemical
3
<PAGE>
Common Stock to the First Mississippi shareholders. In such event, the
conversion ratio will equal 6,904,762 divided by the number of shares of First
Mississippi Common Stock outstanding at the Effective Time. Pursuant to a
formula contained in the Merger Agreement, Mississippi Chemical will issue a
decreasing number of shares of Mississippi Chemical Common Stock to the First
Mississippi shareholders if the Average Mississippi Chemical Price is between
$25.00 and $27.00. In this price range, the aggregate value of the shares of
Mississippi Chemical Common Stock that First Mississippi shareholders will be
entitled to receive in the Merger will remain constant at approximately $172.6
million. Under the Merger Agreement, if the Average Mississippi Chemical Price
is $27.00 or higher, Mississippi Chemical will issue an aggregate of 6,393,298
shares of Mississippi Chemical Common Stock to the First Mississippi
shareholders, and the conversion ratio will equal 6,393,298 divided by the
outstanding shares of First Mississippi Common Stock. If calculated as of
November 14, 1996, the Average Mississippi Chemical Price would be $25.43.
As a result of this conversion formula, as the trading price of Mississippi
Chemical Common Stock increases to $25.00 prior to the Merger, the value of the
Mississippi Chemical Common Stock that shareholders of First Mississippi will
receive in the Merger also increases. Any increase in the trading value of
Mississippi Chemical Common Stock from $25.00 to $27.00 will not increase the
value of the Mississippi Chemical Common Stock to be issued because the
aggregate number of shares to be issued in the Merger will be adjusted downward
(subject to a maximum adjustment) so that the value of Mississippi Chemical
Common Stock to be issued in the Merger remains constant at approximately
$172.6 million. However, as the trading price of Mississippi Chemical Common
Stock increases above $27.00, the value of the Mississippi Chemical Common
Stock that shareholders of First Mississippi will receive will again increase
accordingly. For a more detailed discussion of the conversion formula, see the
table below and "The Merger--Terms of the Merger--Conversion of First
Mississippi Common Stock in the Merger." The First Mississippi Board and the
Mississippi Chemical Board determined the Merger consideration through arm's-
length negotiations.
The following table illustrates the number of shares of Mississippi Chemical
Common Stock that the First Mississippi shareholders will be entitled to
receive on an aggregate and a per share basis and calculates an estimated
market value of such consideration on an aggregate and a per share basis
("Merger Consolidation Per Share"). The table does not reflect the increase in
the value of ChemFirst Common Stock as a result of the contribution of certain
proceeds of the Financing (defined below) to ChemFirst pursuant to the
Distribution Agreement. See "--Financing and Application of Proceeds." There
can be no assurance that, at the Effective Time, the actual trading price of
Mississippi Chemical Common Stock to be received in the Merger will equal the
estimated trading value shown in the table, even if the Average Mississippi
Chemical Price shown in the table is in fact used to calculate the shares
issuable under the Merger Agreement.
MERGER CONSIDERATION CALCULATIONS
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF AGGREGATE MERGER
SHARES OF CONSIDERATION ASSUMED TRADING
MISSISSIPPI BASED ON AVERAGE MERGER VALUE OF MERGER
AVERAGE MISSISSIPPI CHEMICAL COMMON MISSISSIPPI CONSIDERATION CONSIDERATION
CHEMICAL PRICE(1) STOCK TO BE ISSUED CHEMICAL PRICE PER SHARE(2) PER SHARE(3)
- ------------------- ------------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
$17.00 6,904,762 $117,380,954 0.3348 $5.69
$18.00 6,904,762 $124,285,716 0.3348 $6.03
$19.00 6,904,762 $131,190,478 0.3348 $6.36
$20.00 6,904,762 $138,095,240 0.3348 $6.70
$21.00 6,904,762 $145,000,002 0.3348 $7.03
$22.00 6,904,762 $151,904,764 0.3348 $7.37
$23.00 6,904,762 $158,809,526 0.3348 $7.70
$24.00 6,904,762 $165,714,288 0.3348 $8.04
$25.00 6,904,762 $172,619,046 0.3348 $8.37
$25.43(4) 6,788,008 $172,619,046 0.3292 $8.37
$26.00 6,639,194 $172,619,046 0.3220 $8.37
$27.00 6,393,298 $172,619,046 0.3100 $8.37
$28.00 6,393,298 $179,012,344 0.3100 $8.68
$29.00 6,393,298 $185,405,642 0.3100 $8.99
$30.00 6,393,298 $191,798,940 0.3100 $9.30
</TABLE>
4
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- --------
(1) In the event that the Average Mississippi Chemical Price at the Effective
Time is less than $19.00, the amount of the Financing will increase under
the terms of the Merger Agreement and result in additional cash
distributions to ChemFirst under the terms of the Distribution Agreement.
See "--Financing and Application of Proceeds."
(2) Represents the number of shares of Mississippi Chemical Common Stock to be
issued in the Merger in consideration for each share of First Mississippi
Common Stock, assuming 20,621,736 shares of First Mississippi Common Stock
are outstanding as of the Effective Time.
(3) The assumed trading value of the Merger Consideration Per Share is
calculated by multiplying the Merger Consideration Per Share times the
Average Mississippi Chemical Price.
(4) $25.43 represents the Average Mississippi Chemical Price calculated as of
November 14, 1996.
Because a fixed number of shares of Mississippi Chemical Common Stock will be
issued in the Merger (unless the Average Mississippi Chemical Price is between
$25.00 and $27.00), because additional shares of First Mississippi Common Stock
may be issued prior to the Effective Time, including pursuant to the exercise
of First Mississippi stock options, and because the market price of Mississippi
Chemical Common Stock fluctuates, the value of the shares of Mississippi
Chemical Common Stock that each First Mississippi shareholder will be entitled
to receive in the Merger may increase or decrease prior to and following the
Merger. See "Risk Factors--Changes in Merger Consideration Per Share" and "The
Merger--Terms of the Merger--Conversion of First Mississippi Common Stock in
the Merger."
All shares of First Mississippi Common Stock, when converted pursuant to the
Merger, will no longer remain outstanding and will automatically be cancelled
and retired, and each holder of a certificate representing any such shares will
cease to have any rights with respect thereto, except the right to receive the
shares of Mississippi Chemical Common Stock and any cash in lieu of fractional
shares of Mississippi Chemical Common Stock to be issued or paid upon the
surrender of such certificate in accordance with the Merger Agreement.
Fractional Shares. The Merger Agreement provides that each First Mississippi
shareholder will receive, without interest, cash in lieu of any fractional
share of Mississippi Chemical Common Stock such shareholder would be entitled
to receive after aggregating all shares such shareholder is entitled to receive
in the Merger.
Financing and Application of Proceeds. Pursuant to the Merger Agreement,
Mississippi Chemical has agreed to use its best efforts to assist First
Mississippi in arranging a customary bank facility for First Mississippi that
will be funded immediately prior to the Distribution (the "Financing"). The
Financing will be in an aggregate amount of $150.0 million, subject to certain
adjustments. For more detailed information regarding the terms of the
Financing, see "Unaudited Condensed Pro Forma Financial Statements--Mississippi
Chemical Corporation Management's Discussion and Analysis of Unaudited
Condensed Pro Forma Financial Statements--Pro Forma Liquidity and Capital
Resources" and "The Merger--Financing and Application of Proceeds."A portion of
the proceeds of the Financing will be used to refinance First Mississippi's
existing indebtedness and pay certain transaction costs, with the remaining
proceeds, estimated to be approximately $50.0 million, to be contributed to
ChemFirst prior to the Distribution pursuant to the terms of the Distribution
Agreement. As a result of the Financing, which will remain the obligation of
the Surviving Corporation, and the application of its proceeds, at the time of
the Distribution, ChemFirst will have no significant long-term indebtedness and
available cash reserves currently estimated to be approximately $50.0 million.
See "Pro Forma Financial Information" in the ChemFirst Prospectus attached as
Appendix E to this Joint Proxy Statement/Prospectus.
The amount of the Financing will be adjusted in the event the Average
Mississippi Chemical Price falls below $19.00. In such event, the Financing
will be increased by an amount equal to the product of (i) the excess of $19.00
over the Average Mississippi Chemical Price times (ii) 6,904,762, up to a
maximum adjustment of
5
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approximately $13.8 million. The result of this increase in the Financing will
be that the cash to be distributed to ChemFirst prior to the Distribution will
be increased by a corresponding amount. The amount of the Financing will be
adjusted for certain other events as well. See "The Merger--Financing and
Application of Proceeds."
Retained Cash. In the event that the Merger has not been consummated by
December 31, 1996, the Financing will be increased by $56,575 per day from
January 1, 1997 until the Effective Time, thus increasing by a corresponding
amount the cash to be distributed to ChemFirst prior to the Distribution;
however, any net cash generated by the Fertilizer Business from January 1, 1997
to the Effective Time will not be distributed to ChemFirst but will remain
property of the Fertilizer Business and will be held by First Mississippi at
the Effective Time.
Effective Time of the Merger. The Merger will become effective upon the
filing of the articles of merger (the "Articles of Merger") with the
Mississippi Secretary of State or as otherwise provided in the Articles of
Merger (the "Effective Time"). Assuming that the requisite shareholder approval
of the Stock Issuance and the Merger is obtained, it is anticipated that the
Effective Time of the Merger will occur as soon as practicable following the
Mississippi Chemical Annual Meeting and the First Mississippi Annual Meeting.
If all other conditions to the Merger have not been satisfied prior to the
shareholder meetings, however, it is expected that the Merger will occur within
two business days after such conditions have been satisfied or waived.
Assumption of First Mississippi Options. At the Effective Time, each
outstanding option to purchase shares of First Mississippi Common Stock or to
purchase First Mississippi Convertible Debentures, whether vested or unvested,
exercisable or unexercisable (a "First Mississippi Option"), held by any First
Mississippi employee who will be an employee of the Fertilizer Business
immediately following the Distribution (a "Fertilizer Employee"), will be
exchanged for an option (a "Mississippi Chemical Option") to purchase a number
of shares of Mississippi Chemical Common Stock equal to the number of shares of
First Mississippi Common Stock into which such First Mississippi Option was
exercisable times a conversion ratio (the "Mississippi Chemical Option
Conversion Ratio") equal to the average trading price of First Mississippi
Common Stock for a ten-trading-day period preceding the trading day prior to
the date that the First Mississippi Common Stock commences trading on an ex-
dividend basis with respect to the Distribution, divided by the average trading
price of Mississippi Chemical Common Stock over the same period. The exercise
price of the Mississippi Chemical Option will equal the exercise price of the
First Mississippi Option divided by the Mississippi Chemical Option Conversion
Ratio. See "The Merger--Terms of the Merger."
Indemnification. Under the Merger Agreement, the Surviving Corporation agrees
to indemnify each person who is now, who has been at any time prior to the date
of the Merger Agreement or who becomes prior to the Effective Time, an officer,
director or employee of First Mississippi or any of its subsidiaries from and
against claims related to the Fertilizer Business to the fullest extent
permitted under the Mississippi Business Corporation Act (the "MBCA"). See "The
Merger--Indemnification."
Government and Regulatory Approvals. Consummation of the Merger is
conditioned upon the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). On September 16, 1996, Mississippi Chemical and First Mississippi each
filed notification reports under the HSR Act with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the
"DOJ"). The waiting period was terminated on October 15, 1996. See "The
Merger--Certain Regulatory Matters."
Other Conditions to Merger. The obligations of Mississippi Chemical and First
Mississippi to consummate the Merger are subject to shareholder approvals,
receipt of tax opinions and the satisfaction of certain customary and other
conditions, including, without limitation, that the Financing has been funded,
that the Distribution has become effective and that shares of Mississippi
Chemical Common Stock to be issued in the Merger have been authorized for
listing on the NYSE subject to notice of issuance. See "The Merger--
Conditions."
6
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
In considering the recommendation of the First Mississippi Board,
shareholders of First Mississippi should be aware that certain members of
management of First Mississippi and the First Mississippi Board have certain
interests in the Distribution and the Merger that are in addition to the
interests of shareholders generally. See "The Merger--Interests of Certain
Persons in the Transactions."
Ownership of Mississippi Chemical Common Stock. Certain directors and
executive officers of First Mississippi beneficially own Mississippi Chemical
Common Stock as follows: J. Kelley Williams, First Mississippi's Chairman and
Chief Executive Officer, holds 3,600 shares of Mississippi Chemical Common
Stock in the name of J. Kelley Williams Revocable Trust and his wife, Jean P.
Williams, holds 10,000 shares of Mississippi Chemical Common Stock; William A.
Percy, II, a First Mississippi director, holds 2,587 shares of Mississippi
Chemical Common Stock; James W. Crook, a First Mississippi director, holds 250
shares of Mississippi Chemical Common Stock in the names of James W. and Bruce
D. Crook; and Charles R. Gibson, President of FirstMiss Fertilizer, Inc., a
First Mississippi subsidiary, holds 2,000 shares of Mississippi Chemical Common
Stock.
Exchange of First Mississippi Options. Each First Mississippi Option held by
a director or an executive officer of First Mississippi and employees of First
Mississippi, other than Fertilizer Employees, will be exchanged for an option
to purchase ChemFirst Common Stock. See "The Distribution--Terms of the
Employee Benefits Agreement."
Indemnification. The Merger Agreement provides for certain indemnification of
officers and directors of First Mississippi. See "The Merger--Indemnification".
TERMINATION OR AMENDMENT OF MERGER AGREEMENT
Termination. The Merger Agreement may be terminated under certain
circumstances, including (a) the mutual consent of Mississippi Chemical and
First Mississippi, (b) either by Mississippi Chemical or First Mississippi at
any time prior to the consummation of the Merger (i) upon a material breach of
a representation, warranty, covenant or agreement on the part of the other
party, or if any representation or warranty of such party becomes untrue, in
either case such that the conditions to the Merger could not be satisfied by
March 31, 1997, (ii) if the Merger has not been consummated before March 31,
1997, (iii) if the Merger Agreement and the Merger fail to receive the
requisite vote for approval and adoption by the shareholders of First
Mississippi at the First Mississippi Annual Meeting or if the Stock Issuance
fails to receive the requisite vote for approval by the shareholders of
Mississippi Chemical at the Mississippi Chemical Annual Meeting, or (iv) if the
Average Mississippi Chemical Price is less than $17.00; (c) by Mississippi
Chemical, if the First Mississippi Board withdraws, modifies or changes its
recommendation of the Merger Agreement or the Merger in a manner adverse to
Mississippi Chemical; and (d) by First Mississippi, (i) if First Mississippi
has received a proposal for an Acquisition Transaction (defined below) that it
advises Mississippi Chemical in writing that First Mississippi wishes to accept
or (ii) if the Financing has not been arranged by December 31, 1996. See "The
Merger--Termination and Amendment--Termination."
Amendment. The Merger Agreement may be amended or modified and any condition
specified therein may be waived by the mutual consent of Mississippi Chemical
and First Mississippi; provided that, (i) after any shareholder approval, no
amendment will be made if applicable law requires further approval by the
shareholders and (ii) after the Effective Time, no amendment will be made
without the written consent of ChemFirst. See "The Merger--Termination and
Amendment--Amendment."
Termination Fee. Under certain circumstances, First Mississippi may be
required to pay Mississippi Chemical upon termination of the Merger Agreement a
fee of $8.0 million, inclusive of all Mississippi Chemical expenses. See "The
Merger--Termination and Amendment--Termination Fee."
7
<PAGE>
No Solicitation. Except as otherwise provided in the Merger Agreement, First
Mississippi has agreed that (i) it will immediately cease any existing
discussions or negotiations conducted prior to the date of the Merger Agreement
with respect to any merger, consolidation, business combination, sale of a
significant amount of assets outside of the ordinary course of business, sale
of shares of capital stock outside of the ordinary course of business, tender
or exchange offer, spin-off, recapitalization or similar transaction involving
the sale of First Mississippi or any of its subsidiaries or divisions (but
excluding certain potential transactions identified to Mississippi Chemical by
First Mississippi) (an "Acquisition Transaction") and (ii) it will not solicit
any person, entity or group concerning any Acquisition Transaction (other than
the transactions contemplated by the Merger Agreement); provided that First
Mississippi may (i) furnish information or enter into negotiations to the
extent the First Mississippi Board determines after receiving the advice of
outside counsel that the failure to do so would be inconsistent with its
fiduciary duties under applicable law and prior to furnishing such information
or entering into discussions or negotiations with any person, entity or group
First Mississippi (x) provides immediate written notice to Mississippi Chemical
and (y) either enters into a confidentiality agreement with such person, entity
or group on terms no more favorable than the confidentiality agreement, dated
August 9, 1996, between First Mississippi and Mississippi Chemical (the
"Confidentiality Agreement") or releases Mississippi Chemical from the
standstill provisions of the Confidentiality Agreement not applicable to such
person; and (ii) recommend to its shareholders a bona fide transaction or
combination of transactions that the First Mississippi Board determines after
consulting with its legal and other advisors is more favorable, from a
financial point of view, to the shareholders of First Mississippi than the
Distribution and the Merger. See "The Merger--No Solicitation."
DISSENTERS' RIGHTS
Mississippi Chemical shareholders are not entitled to dissenters' or
appraisal rights in connection with the Merger or the Stock Issuance. First
Mississippi shareholders who do not vote in favor of the Merger, who file a
written notice with First Mississippi prior to the time that the vote with
respect to the Merger is taken at the First Mississippi Annual Meeting, and who
have otherwise complied with Article 13 of the MBCA will be entitled to certain
dissenters' rights in connection with the Merger. See "The Merger--Dissenters'
Rights" and the Mississippi Dissenters' Statute attached as Appendix F to
copies of this Joint Proxy Statement/Prospectus being mailed to First
Mississippi shareholders.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase" under generally accepted
accounting principles. See "The Merger--Accounting Treatment."
THE DISTRIBUTION
Subject to shareholder approval of the Merger, the Distribution will be
effected prior to the Merger. The Distribution will, by means of a spin-off of
First Mississippi's chemicals and other non-fertilizer businesses, separate
First Mississippi's Fertilizer Business from its other businesses and will
enable Mississippi Chemical to acquire only the Fertilizer Business in the
Merger; the Distribution will leave First Mississippi's remaining businesses as
a separate publicly held company (ChemFirst), owned by the existing First
Mississippi shareholders. Subject to shareholder approval of the Merger, prior
to the Distribution, First Mississippi will transfer all of its cash and all of
its assets and liabilities (other than those comprising the Fertilizer Business
and the Financing) to ChemFirst. ChemFirst is a wholly-owned subsidiary of
First Mississippi. The directors and officers of First Mississippi will also be
directors and officers of ChemFirst at the time of the Distribution. Except as
otherwise provided in the Distribution Agreement, the Employee Benefits
Agreement and the Tax Disaffiliation Agreement (collectively, the "Distribution
Documents") and the Merger Agreement, ChemFirst will assume all liabilities not
related to the Fertilizer Business and First Mississippi (the Surviving
Corporation in the Merger) will retain all liabilities related to the
Fertilizer Business and the Financing. See "The Distribution--Terms of the
Distribution Agreement--the Transfers" and "--Transfer of Liabilities" and the
form of Distribution Agreement included as Appendix B to this Joint Proxy
Statement/Prospectus for additional information regarding the transfer of
assets to and assumption of liabilities by ChemFirst.
8
<PAGE>
Pursuant to the Distribution, each First Mississippi shareholder will receive
one share of ChemFirst Common Stock for each share of First Mississippi Common
Stock held by such shareholder. The Distribution will be effected by the
distribution to each holder of record of First Mississippi Common Stock on a
date to be set by the First Mississippi Board, currently anticipated to be the
first business day after shareholder approval of the Merger (the "Distribution
Record Date"), of certificates representing ChemFirst Common Stock. See "The
Distribution--Terms of the Distribution Agreement--The Distribution." As a
result of the Distribution, the shareholders of First Mississippi will become
the shareholders of ChemFirst.
OPINIONS OF FINANCIAL ADVISORS
The Mississippi Chemical Board has received a written opinion from Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") dated August 27, 1996 to the
effect that, as of such date and based on and subject to limitations set forth
in such opinion, the Merger Consideration Per Share is fair to Mississippi
Chemical and its shareholders from a financial point of view. See "Opinions of
and Presentations by the Financial Advisors--Financial Advisor to Mississippi
Chemical." CS First Boston Corporation ("CS First Boston"), financial advisor
to First Mississippi, has issued its written opinion to the First Mississippi
Board that, as of August 27, 1996, the date of approval of the Merger Agreement
by the First Mississippi Board, the terms of the Distribution and the Merger,
taken together, were fair, from a financial point of view, to the holders of
First Mississippi Common Stock. See "Opinions of and Presentations by the
Financial Advisors--Financial Advisor to First Mississippi."
The written opinions of DLJ and CS First Boston are reproduced in their
entirety as Appendices C and D, respectively, to this Joint Proxy
Statement/Prospectus. Shareholders are urged to read such opinions carefully in
their entirety for a description of the procedures followed, assumptions and
qualifications made, matters considered, and limitations on the review
undertaken by DLJ and CS First Boston, respectively.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Mississippi Chemical and First Mississippi will each receive the opinion of
its respective counsel to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). Mississippi Chemical,
First Mississippi and ChemFirst will also receive an opinion of First
Mississippi's special counsel to the effect that (i) the transfers contemplated
by the Distribution Agreement (the "Transfers") will qualify as one or more
tax-free transactions under one or more of Sections 332, 351 or 368(a)(1)(D) of
the Code and (ii) the Distribution will qualify as a tax-free distribution
under Section 355 of the Code. Receipt of these opinions is a condition
precedent to the consummation of the Merger. See "Certain Federal Income Tax
Consequences."
SHAREHOLDERS' COMPARATIVE RIGHTS
The rights of First Mississippi's shareholders are currently governed by
First Mississippi's Charter of Incorporation and Bylaws. Upon effectiveness of
the Merger, First Mississippi's shareholders will become shareholders of
Mississippi Chemical and their rights as Mississippi Chemical shareholders will
be governed by Mississippi Chemical's Articles of Incorporation and Bylaws. See
"Comparative Rights of Shareholders of Mississippi Chemical and First
Mississippi." Pursuant to the Distribution, First Mississippi shareholders will
also become shareholders of ChemFirst. See "Description of ChemFirst Capital
Stock" in the ChemFirst Prospectus which is included as Appendix E to this
Joint Proxy Statement/Prospectus for a description of the rights of ChemFirst
shareholders.
9
<PAGE>
COMPARATIVE PER SHARE MARKET INFORMATION
Mississippi Chemical Common Stock is listed under the trading symbol "GRO" on
the NYSE. Prior to October 10, 1996, Mississippi Chemical Common Stock was
listed under the trading symbol "MISS" on the Nasdaq Stock Market's National
Market. First Mississippi Common Stock is listed under the trading symbol "FRM"
on the NYSE, the Philadelphia Stock Exchange, the Chicago Stock Exchange and
the Pacific Stock Exchange. The following table sets forth for the periods
indicated the high and low sales prices per share of Mississippi Chemical
Common Stock and First Mississippi Common Stock, as reported by the Nasdaq
Stock Market's National Market and the NYSE, as applicable.
There is currently no public trading market for the ChemFirst Common Stock
and there can be no assurance that an active trading market will develop or, if
a trading market develops, that such a market will be maintained. There can be
no assurance as to the prices at which the ChemFirst Common Stock will trade
after the Distribution. See the discussion under the caption "Risk Factors--
Absence of Trading Market" contained in the ChemFirst Prospectus attached as
Appendix E.
<TABLE>
<CAPTION>
MISSISSIPPI FIRST
CHEMICAL MISSISSIPPI (1)
----------- ---------------
HIGH LOW HIGH LOW
----- ----- ---------------
FISCAL YEAR ENDED JUNE 30, 1994
<S> <C> <C> <C> <C>
First Quarter....................................... N/A N/A 11.00 8.50
Second Quarter...................................... N/A N/A 13.25 8.50
Third Quarter....................................... N/A N/A 17.00 12.75
Fourth Quarter...................................... N/A N/A 16.88 14.00
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1995
<S> <C> <C> <C> <C>
First Quarter....................................... 19.25 15.00 20.63 14.25
Second Quarter...................................... 19.00 14.75 25.00 19.50
Third Quarter....................................... 19.88 16.50 26.88 22.50
Fourth Quarter...................................... 20.13 15.38 34.13 20.75
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1996
<S> <C> <C> <C> <C>
First Quarter....................................... 23.88 19.88 40.13 31.75
Second Quarter...................................... 25.13 21.00 41.38 20.25
Third Quarter....................................... 24.75 19.75 27.25 20.25
Fourth Quarter...................................... 22.50 19.25 25.25 21.00
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1997
<S> <C> <C> <C> <C>
First Quarter....................................... 23.38 17.75 28.25 21.13
Second Quarter (through November 14)................ 26.00 23.00 29.88 26.75
</TABLE>
- --------
(1) On October 20, 1995, First Mississippi distributed to its shareholders all
of the capital stock that it owned of Getchell Gold Corporation
(approximately 81% of Getchell Gold Corporation outstanding common stock).
On August 27, 1996, the last trading day prior to the public announcement of
the Merger, the closing sales price per share of Mississippi Chemical Common
Stock as reported on the Nasdaq Stock Market's National Market was $21.25. On
October 30, 1996, there were 10,630 holders of record of Mississippi Chemical
Common Stock and there were 21,065,783 shares of outstanding Mississippi
Chemical Common Stock.
On August 27, 1996, the last trading day prior to the public announcement of
the Merger, the closing sales price per share of First Mississippi Common Stock
as reported on the NYSE was $24.00. On October 30, 1996, there were 5,438
holders of record of First Mississippi Common Stock and there were 20,621,736
shares of outstanding First Mississippi Common Stock.
10
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
MISSISSIPPI CHEMICAL
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The following tables present certain selected consolidated financial data
with respect to Mississippi Chemical for each of the fiscal years in the five-
year period ended June 30, 1996 and the interim periods ended September 30,
1996 and 1995. The selected consolidated financial data in the table for the
five fiscal years ended June 30, 1996 is derived from the consolidated
financial statements of Mississippi Chemical, which have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports.
The selected consolidated financial data for the interim periods ended
September 30, 1996 and 1995 has been prepared by Mississippi Chemical without
audit. The data in these tables should be read in conjunction with the
Consolidated Financial Statements and related notes of Mississippi Chemical,
which are incorporated by reference into this Joint Proxy Statement/Prospectus
from Mississippi Chemical's 1996 Annual Report on Form 10-K and Mississippi
Chemical's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30 FISCAL YEAR ENDED JUNE 30
----------------- --------------------------------------------
1996 1995 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $ 91,290 $ 96,570 $428,789 $388,154 $309,360 $289,125 $239,657
Operating income........ 14,740 16,885 84,818 80,969 37,905 29,180 40,804
Income from continuing
operations before
cumulative effect of
change in accounting
principle.............. 9,295 9,704 54,178 52,230 26,912 22,681 31,349
Net income.............. 9,295 9,704 54,178 52,230 36,523 4,790 13,003
Income from continuing
operations assuming
conversion from a
cooperative to a
regular business
corporation as of July
1, 1991 (1)............ N/A N/A N/A N/A 21,415 17,533 22,821
Earnings per share (2).. $ 0.44 $ 0.43 $ 2.46 $ 2.34 $ 1.10 $ 0.92 $ 1.23
Weighted average common
shares outstanding (3). 21,250 22,349 21,980 22,365 19,454 19,035 18,521
<CAPTION>
SEPTEMBER 30 JUNE 30
----------------- --------------------------------------------
1996 1995 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 55,461 $ 68,451 $ 81,613 $ 70,790 $ 34,931 $ 22,802 $ 35,225
Total assets............ 399,159 311,780 341,006 302,215 298,430 296,053 303,158
Long-term debt,
excluding long-term
debt due within one
year................... 50,919 34 -- 2,478 57,217 52,357 59,333
Shareholders' equity.... 248,869 226,216 247,825 227,307 142,956 119,574 128,195
Cash dividends declared
per common share (4)... 0.10 0.08 0.36 0.16 -- -- --
</TABLE>
- --------
(1) For 1994, 1993 and 1992, Mississippi Chemical operated as a cooperative and
realized deductions for income taxes for amounts paid in cash as patronage
refunds to its shareholder-members. If the conversion from a cooperative to
a regular business corporation had occurred as of July 1, 1991, income
taxes would have been increased by the following approximate amounts: $5.5
million, $5.1 million and $8.5 million for fiscal 1994, 1993 and 1992,
respectively.
(2) For 1994, 1993 and 1992, earnings per share reflect the reorganization of
Mississippi Chemical from a cooperative to a regular business corporation
as if it had occurred July 1, 1991, and is based on income from continuing
operations.
(3) For 1994, 1993 and 1992, weighted average common shares outstanding reflect
the reorganization of Mississippi Chemical from a cooperative to a regular
business corporation as if it had occurred July 1, 1991.
(4) For 1994, 1993 and 1992, Mississippi Chemical operated as a cooperative and
paid cash patronage refunds in lieu of cash dividends.
11
<PAGE>
FIRST MISSISSIPPI
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The following table sets forth selected historical consolidated financial
data for First Mississippi Corporation and subsidiaries for each of the years
in the five year period ended June 30, 1996 and the three months ended
September 30, 1996 and 1995. Such data has been derived from, and should be
read in conjunction with, the audited consolidated financial statements
(including related notes thereto) and financial information contained in First
Mississippi's 1996 Annual Report on Form 10-K/A and September 30, 1996
Quarterly Report on Form 10-Q. See "Incorporation of Certain Information by
Reference" and "Available Information."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30 FISCAL YEAR ENDED JUNE 30
----------------- ---------------------------------------------
1996 1995 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $154,207 $142,230 $594,937 $571,270 $413,075 $351,167 $370,194
Earnings from continuing
operations before
income taxes, investee
earnings (loss) and
cumulative effect of
change in accounting
principle.............. 20,531 21,920 60,566 104,198 25,569 7,461 20,763
Earnings from continuing
operations before
cumulative effect of
change in accounting
principle.............. 12,789 13,563 38,049 64,707 14,013 4,121 13,007
Net earnings (loss)..... 12,789 12,480 35,220 57,794 21,863 (23,369) 4,227
Earnings per share from
continuing operations
before cumulative
effect of change in
accounting principle... $ 0.61 $ 0.64 $ 1.81 $ 3.14 $ 0.70 $ 0.20 $ 0.66
Net earnings (loss) per
common share........... $ 0.61 $ 0.59 $ 1.68 $ 2.80 $ 1.09 $ (1.17) $ 0.22
Weighted average common
shares outstanding..... 20,894 21,048 20,980 20,632 20,126 20,003 19,853
<CAPTION>
SEPTEMBER 30 JUNE 30
----------------- ---------------------------------------------
1996 1995 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 86,442 $113,764 $ 86,919 $110,107 $ 78,874 $ 50,121 $ 59,865
Total assets............ 461,534 464,665 437,308 444,717 369,397 364,136 441,995
Long-term debt,
excluding long-term
debt due within one
year................... 76,732 83,256 79,909 84,394 104,275 113,519 144,280
Shareholders' equity.... 242,208 247,770 230,267 232,996 177,687 160,774 188,378
Cash dividend declared
per common share....... 0.10 0.10 0.40 0.35 0.30 0.30 0.30
</TABLE>
12
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
Except for the income statement data for the three months ended September 30,
1996 and 1995, the selected combined financial data of the business of First
Mississippi after the Distribution (the "First Mississippi Fertilizer Business
to be Merged") set forth in the table below have been derived from the combined
financial statements of the First Mississippi Fertilizer Business to be Merged
for each of the years in the five-year period ended June 30, 1996. The combined
financial statements of the First Mississippi Fertilizer Business to be Merged
have been audited as of June 30, 1996 and 1995 and for each of the years in the
three-year period ended June 30, 1996. The financial information for the three
months ended September 30, 1996 and 1995 has been derived from unaudited
financial information of First Mississippi Fertilizer Business to be Merged.
Such financial information includes all adjustments, which are of a normal
recurring nature and which, in the opinion of Management, are necessary for a
fair presentation of the results of the periods presented. The selected
combined financial data set forth below should be read in conjunction with the
First Mississippi Fertilizer Business to be Merged Special-Purpose Combined
Financial Statements and the accompanying notes, "Management's Discussion and
Analysis of Financial Position and Results of Operations--Fertilizer Business
to be Merged" contained elsewhere herein and the First Mississippi historical
consolidated financial statements and the accompanying notes contained in First
Mississippi's 1996 Annual Report on Form 10-K/A, which are incorporated by
reference. See "Incorporation of Certain Information by Reference," "Available
Information" and "Index to Combined Financial Statements of First Mississippi
Fertilizer Business to be Merged." This information should also be read in
conjunction with the Mississippi Chemical unaudited pro forma financial
information and accompanying discussion included elsewhere herein. See
"Unaudited Condensed Pro Forma Consolidated Financial Statements."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30 FISCAL YEAR ENDED JUNE 30
--------------- ---------------------------------------------
1996 1995 1996 1995 1994 1993 1992
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $58,822 $51,603 $215,629 $238,887 $161,958 $139,007 $176,213
Earnings from operations
before income taxes and
investee earnings
(loss) and cumulative
effect of change in
accounting principle... 13,683 18,480 65,272 85,469 24,611 12,548 22,403
Earnings from operations
before cumulative
effect of change in
accounting principle... 8,620 11,646 41,371 53,920 15,448 7,831 14,105
Net earnings............ 8,620 11,646 41,371 53,920 16,202 7,831 14,105
Earnings per equivalent
First Mississippi
share.................. $ 0.41 $ 0.55 $ 1.97 $ 2.61 $ 0.81 $ 0.39 $ 0.71
Weighted average common
shares outstanding of
First Mississippi...... 20,894 21,048 20,980 20,632 20,126 20,003 19,853
<CAPTION>
SEPTEMBER 30 JUNE 30
--------------- ---------------------------------------------
1996 1995 1996 1995 1994 1993 1992
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit).............. $ 4,122 $ 6,775 $ 8,328 $ 13,115 $ 8,124 $ (432) $ 9,864
Total assets............ 99,011 56,517 95,356 48,662 44,585 42,300 51,899
Equity.................. 67,370 29,966 68,880 32,630 27,917 21,442 36,322
</TABLE>
13
<PAGE>
COMPARATIVE PER SHARE DATA OF MISSISSIPPI CHEMICAL AND FIRST MISSISSIPPI
MISSISSIPPI CHEMICAL PRO FORMA PER COMMON SHARE DATA
The following table sets forth for Mississippi Chemical Common Stock certain
historical and pro forma combined and pro forma equivalent per share financial
information for the year ended June 30, 1996 and as of and for the three months
ended September 30, 1996. The pro forma combined amounts included in the table
below are based on the purchase method of accounting and a preliminary
allocation of the purchase price. The following information should be read in
conjunction with and is qualified in its entirety by the historical financial
statements of Mississippi Chemical and First Mississippi, which have been
incorporated herein by reference. See "Available Information" and
"Incorporation of Certain Information by Reference." This information should
also be read in conjunction with the Special-Purpose Combined Financial
Statements and accompanying notes of the First Mississippi Fertilizer Business
to be Merged included elsewhere herein, and the pro forma financial information
and accompanying discussion set forth under "Unaudited Condensed Pro Forma
Consolidated Financial Statements."
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 JUNE 30, 1996
---------------------------- -----------------------
MISSISSIPPI MISSISSIPPI MISSISSIPPI MISSISSIPPI
CHEMICAL CHEMICAL CHEMICAL CHEMICAL
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Earnings per common
share................... $0.44 $0.51 $2.46 $2.82
Dividends per common
share................... $0.10 $0.10 $ .36 $ .36
<CAPTION>
AS OF SEPTEMBER 30, 1996
----------------------------
<S> <C> <C>
Book value per common
share................... $11.82 $15.07
</TABLE>
EQUIVALENT FIRST MISSISSIPPI PRO FORMA PER COMMON SHARE DATA
The following table sets forth for First Mississippi Common Stock certain per
share historical financial information and for Mississippi Chemical and
ChemFirst, certain per share pro forma financial information for the year ended
June 30, 1996 and as of and for the three months ended September 30, 1996. The
Pro Forma Mississippi Chemical information is derived by multiplying the
Mississippi Chemical pro forma earnings, dividends, and book value per share by
an assumed Merger Consideration Per Share ratio of .3348 shares of Mississippi
Chemical Common Stock for each share of First Mississippi Common Stock. The pro
forma ChemFirst information is derived by multiplying the ChemFirst pro forma
earnings and book value per share by the Distribution ratio of one share of
ChemFirst Common Stock for each share of First Mississippi Common Stock.
The following information should be read in conjunction with and is qualified
in its entirety by the consolidated financial statements of First Mississippi
included in its 1996 Annual Report on Form 10-K/A, its September 30, 1996
Quarterly Report on Form 10-Q and Mississippi Chemical's Unaudited Condensed
Pro Forma Consolidated Financial Statements and accompanying notes included
elsewhere herein and the ChemFirst financial information contained under the
heading "Pro Forma Financial Information" included in the ChemFirst Prospectus
attached as Appendix E.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1996 YEAR ENDED JUNE 30, 1996
------------------------------------------- --------------------------------------------
FIRST PRO FORMA FIRST PRO FORMA
MISSISSIPPI MISSISSIPPI PRO FORMA TOTAL MISSISSIPPI MISSISSIPPI PRO FORMA TOTAL
HISTORICAL CHEMICAL CHEMFIRST PRO FORMA HISTORICAL CHEMICAL CHEMFIRST PRO FORMA
----------- ----------- --------- --------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings before
extraordinary item and
cumulative effect of
accounting changes per
common share........... $.61 $.17 $.25 $.42 $1.81 $.94 $.09 $1.03
Dividends per common
share.................. $.10 $.03 N/A(1) $.03 $ .40 $.12 N/A(1) $ .12
<CAPTION>
AS OF SEPTEMBER 30, 1996
-------------------------------------------
FIRST PRO FORMA
MISSISSIPPI MISSISSIPPI PRO FORMA TOTAL
HISTORICAL CHEMICAL CHEMFIRST PRO FORMA
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Book value per common
share.................. $11.75 $5.05 $15.40 $20.45
</TABLE>
- --------
(1) ChemFirst has no history of paying dividends. See "Description of ChemFirst
Common Stock--Common Stock" in the ChemFirst Prospectus attached to this
Joint Proxy Statement/Prospectus as Appendix E.
14
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION SELECTED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The following Selected Unaudited Pro Forma Financial Data illustrates the pro
forma effect of the Merger. Additionally, the Selected Pro Forma Financial Data
for the fiscal year ended June 30, 1996 includes the pro forma effects of
Mississippi Chemical's previous acquisition of certain assets and the
assumption of certain liabilities of the Potash Companies, which occurred on
August 16, 1996. The Selected Pro Forma Financial Data for the three months
ended September 30, 1996 reflect the actual results after the consummation of
the acquisitions related to the Potash Companies. The Merger and the previously
consummated purchase of the Potash Companies are hereinafter collectively
referred to as the "Purchase Transactions."
The Purchase Transactions will be accounted for as purchases. The allocation
of the purchase price for the Merger has not been finally determined.
Accordingly, the amounts reflected below may differ from the amounts that would
have been determined if the final purchase price allocations had been known.
The pro forma income statement data for the fiscal year ended June 30, 1996 is
based on the income statement of Mississippi Chemical for the year ended June
30, 1996, and assumes that the Purchase Transactions occurred on July 1, 1995.
The pro forma income statement data for the three months ended September 30,
1996 is based on the income statement of Mississippi Chemical for the three
months ended September 30, 1996 and assumes that the Merger occurred on July 1,
1996. The selected unaudited pro forma financial data should be read in
conjunction with the Selected Historical Financial Information of Mississippi
Chemical, the Mississippi Chemical Unaudited Condensed Pro Forma Consolidated
Financial Statements and accompanying notes and discussion, the First
Mississippi Fertilizer Business to be Merged Special-Purpose Combined Financial
Statements, "Recent Developments," other financial information of Mississippi
Chemical and the First Mississippi Fertilizer Business to be Merged included
elsewhere in this Joint Proxy Statement/Prospectus and Mississippi Chemical's
1996 Annual Report on Form 10-K and Mississippi Chemical's Quarterly Report on
Form 10-Q for the period ended September 30, 1996. See "Available Information"
and "Incorporation of Certain Information by Reference."
The Selected Pro Forma Financial Data includes certain estimates (e.g.,
number of shares to be issued, financing amounts and terms, purchase price
allocations, etc.). Mississippi Chemical's management does not believe that the
effects of any changes in these estimates, individually or in the aggregate,
will have a material effect on the Selected Pro Forma Financial Data.
The Selected Pro Forma Financial Data of Mississippi Chemical does not
purport to represent what the financial position or results of operations of
Mississippi Chemical would actually have been if the Acquisition Transactions
had in fact been consummated on such date or at the beginning of the period
indicated or to project the financial position or results of operations for any
future date or period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, 1996 JUNE 30, 1996
------------------ -----------------
<S> <C> <C>
PRO FORMA INCOME STATEMENT DATA:
Net sales................................ $150,112 $698,404
Operating income......................... 24,770 144,269
Net income............................... 14,391 81,422
Earnings per share....................... 0.51 2.82
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
<S> <C>
PRO FORMA BALANCE SHEET DATA:
Working capital......................... $ 64,065
Total assets............................ 799,149
Long-term debt, excluding long-term debt
due within one year.................... 204,919
Shareholders' equity.................... 421,488
Cash dividends declared per common
share.................................. 0.10
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, 1996 JUNE 30, 1996
------------------ -----------------
<S> <C> <C>
PRO FORMA OPERATING DATA:
Net sales (1):
Nitrogen.............................. $107,567 $470,823
DAP................................... 31,021 142,084
Potash................................ 10,859 83,540
Other................................. 665 1,957
-------- --------
Net sales........................... $150,112 $698,404
======== ========
Tons sold (1):
Nitrogen.............................. 696 2,983
DAP................................... 171 754
Potash................................ 143 1,182
</TABLE>
- --------
(1) The Pro Forma Operating Data does not give effect to the capital
improvements currently underway at First Mississippi's AMPRO facility. This
project is scheduled for completion by calendar year-end and is expected to
increase anhydrous ammonia production capacity by approximately 125,000
tons per year.
16
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
MISSISSIPPI CHEMICAL UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS
The unaudited pro forma information set forth below is presented to show the
pro forma effect of the Merger as if it had been consummated on September 30,
1996, for balance sheet presentation purposes and as of July 1, 1995 for
fiscal 1996 and July 1, 1996 for the three months ended September 30, 1996,
for income statement presentation purposes pursuant to the assumptions and
adjustments in the accompanying notes to Mississippi Chemical Unaudited
Condensed Pro Forma Consolidated Financial Statements. The Merger will be
accounted for as a purchase. The allocation of the purchase price has been
estimated. Accordingly, the amounts reflected below may differ from the
amounts when the final purchase price allocation is determined.
The following pro forma information is not necessarily indicative of the
results of operations and financial position of Mississippi Chemical as they
may be in the future or they might have been had the Merger occurred as of the
date assumed. This pro forma information should be read in conjunction with
the historical Consolidated Financial Statements of Mississippi Chemical which
are set forth in Mississippi Chemical's Annual Report on Form 10-K for the
year ended June 30, 1996, and Mississippi Chemical's quarterly report on Form
10-Q for the quarter ended September 30, 1996 which are incorporated herein by
reference. See "Available Information" and "Incorporation of Certain
Information by Reference." This pro forma information should also be read in
conjunction with the Special-Purpose Combined Financial Statements of the
First Mississippi Fertilizer Business to be Merged included elsewhere herein.
For purposes of this pro forma presentation, the Mississippi Chemical
statement of income for the year ended June 30, 1996 has been adjusted to
reflect the pro forma income statement effect of Mississippi Chemical's
acquisition of certain assets and assumption of certain liabilities of the
Potash Companies, which occurred August 16, 1996. For the pro forma effect of
the acquisition of the Potash Companies, refer to "Recent Developments."
The unaudited condensed pro forma consolidated financial statements include
certain estimates (e.g., number of shares to be issued, financing amounts and
terms, purchase price allocations, etc.) Mississippi Chemical's management
does not believe that the effects of any changes in these estimates,
individually or in the aggregate, will have a material effect on the unaudited
condensed pro forma consolidated financial statements.
17
<PAGE>
MISSISSIPPI CHEMICAL UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)
The following Unaudited Condensed Pro Forma Consolidated Balance Sheet is
based on (i) the unaudited historical Consolidated Balance Sheet of
Mississippi Chemical as of September 30, 1996, which includes the acquisitions
related to the Potash Companies, and (ii) the unaudited historical Special-
Purpose Combined Balance Sheet of the First Mississippi Fertilizer Business to
be Merged as of September 30, 1996, and has been prepared to reflect the
Merger after giving effect to the pro forma adjustments described in the Notes
to Unaudited Condensed Pro Forma Consolidated Financial Statements as if the
Merger had occurred on September 30, 1996.
<TABLE>
<CAPTION>
FIRST
MISSISSIPPI
FERTILIZER FERTILIZER
MISSISSIPPI BUSINESS TO BUSINESS MISSISSIPPI
CHEMICAL BE MERGED PRO FORMA CHEMICAL
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.. $ 12,300 $ -- $ 74(1) $ 12,374
Accounts receivable........ 40,770 25,438 2,653(1) 68,861
Inventories................ 57,983 6,141 4,411(1) 68,535
Prepaid expenses and other
current assets............ 9,801 820 74(1) 10,695
-------- ------- -------- --------
Total current assets..... 120,854 32,399 7,212 160,465
Investments and other assets:
Investment in Farmland
MissChem Limited.......... 39,089 -- -- 39,089
Investment in affiliated
companies................. -- 23,979 (9,302)(1) 14,677
Other...................... 15,308 -- 198,249 (2) 213,804
247 (1)
-------- ------- -------- --------
Total investments and
other assets............ 54,397 23,979 189,194 267,570
Properties held for sale..... 52,919 -- -- 52,919
Property, plant and
equipment, at cost, less
accumulated depreciation,
depletion and amortization.. 170,989 42,633 100,000(2) 318,195
4,573(1)
-------- ------- -------- --------
$799,149
$399,159 $99,011 $300,979
======== ======= ======== ========
Current liabilities:
Long-term debt due within
one year.................. $ 167 $ -- $ -- $ 167
Note payable............... 3,900 -- -- 3,900
Accounts payable & accrued
liabilities............... 55,022 28,277 2,730(1) 86,029
Income taxes payable....... 6,304 -- -- 6,304
-------- ------- -------- --------
Total current
liabilities............. 65,393 28,277 2,730 96,400
Long-term debt............... 50,919 -- 154,000(3) 204,919
Other long-term liabilities
and deferred credits........ 18,144 -- -- 18,144
Deferred income taxes........ 15,834 3,364 39,000(2) 58,198
Shareholders' equity
Common stock............... 229 -- 51(4) 280
Additional paid-in capital. 178,420 -- 135,812(4) 314,232
Retained earnings.......... 106,976 -- -- 106,976
Parent Company investment
in subsidiaries sold...... -- 67,370 (67,370)(4) --
Treasury stock............. (36,756) -- 36,756 (4) --
-------- ------- -------- --------
Total shareholders'
equity.................. 248,869 67,370 105,249 421,488
-------- ------- -------- --------
$399,159 $99,011 $300,979 $799,149
======== ======= ======== ========
Shares outstanding........... 21,062 27,967
======== ========
</TABLE>
The Unaudited Condensed Pro Forma Consolidated Balance Sheet should be read in
conjunction with the accompanying notes to the Unaudited Condensed Pro Forma
Consolidated Financial Statements.
18
<PAGE>
MISSISSIPPI CHEMICAL UNAUDITED CONDENSED PRO FORMA CONSOLIDATED INCOME
STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The following Unaudited Condensed Pro Forma Consolidated Income Statement
for the fiscal year ended June 30, 1996, is based on (i) the audited
historical Consolidated Statement of Income of Mississippi Chemical for the
fiscal year ended June 30, 1996, as adjusted to reflect the acquisition of the
Potash Companies (see "Recent Developments"), and (ii) the audited historical
Special-Purpose Combined Statement of Operations of the First Mississippi
Fertilizer Business to be Merged for the fiscal year ended June 30, 1996,
after giving effect to the pro forma adjustments described in the notes to
Unaudited Condensed Pro Forma Consolidated Financial Statements as if the
Merger had occurred on July 1, 1995.
<TABLE>
<CAPTION>
MISSISSIPPI FIRST
CHEMICAL MISSISSIPPI
ADJUSTED FOR FERTILIZER FERTILIZER
ACQUISITION OF BUSINESS TO BUSINESS MISSISSIPPI
POTASH BE MERGED PRO FORMA CHEMICAL
COMPANIES HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................. $482,775 $215,629 $ -- $698,404
Operating expenses:
Cost of products sold... 341,786 147,765 2,968 (5) 492,519
Selling, general and
administrative......... 54,079 2,619 4,918 (5) 61,616
-------- -------- -------- --------
395,865 150,384 7,886 554,135
-------- -------- -------- --------
Operating income.......... 86,910 65,245 (7,886) 144,269
Other income (expense):
Interest, net........... (1,028) (9,433)(6) (10,461)
Other................... 1,744 277 2,021
-------- -------- -------- --------
Income before income
taxes.................... 87,626 65,522 (17,319) 135,829
Income tax expense........ 33,986 24,151 (3,730)(7) 54,407
-------- -------- -------- --------
Net income................ $ 53,640 $ 41,371 $(13,589) $ 81,422
======== ======== ======== ========
Earnings per share........ $ 2.44 $ 2.82
======== ========
Weighted Average Common
and Common Equivalent
Shares Outstanding....... 21,980 28,885
======== ========
</TABLE>
This Unaudited Condensed Pro Forma Consolidated Income Statement should be
read in conjunction with
the accompanying notes to Unaudited Condensed Pro Forma Consolidated Financial
Statements.
19
<PAGE>
MISSISSIPPI CHEMICAL UNAUDITED CONDENSED PRO FORMA CONSOLIDATED INCOME
STATEMENT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The following Unaudited Condensed Pro Forma Consolidated Income Statement
for the three months ended September 30, 1996, is based on (i) the unaudited
historical Consolidated Statement of Income of Mississippi Chemical for the
three months ended September 30, 1996, which includes the acquisitions related
to the Potash Companies, and (ii) the unaudited historical Special-Purpose
Combined Statement of Operations of the First Mississippi Fertilizer Business
to be Merged for the three months ended September 30, 1996, after giving
effect to the pro forma adjustments described in the notes to Unaudited
Condensed Pro Forma Consolidated Financial Statements as if the Merger had
occurred on July 1, 1996.
<TABLE>
<CAPTION>
FIRST
MISSISSIPPI
FERTILIZER FERTILIZER
MISSISSIPPI BUSINESS TO BUSINESS MISSISSIPPI
CHEMICAL BE MERGED PRO FORMA CHEMICAL
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................... $91,290 $58,822 $ -- $150,112
Operating expenses:
Cost of products sold..... 63,379 45,851 922 (8) 110,152
Selling, general and
administrative........... 13,171 780 1,239 (8) 15,190
------- ------- -------- --------
76,550 46,631 2,161 125,342
------- ------- -------- --------
Operating income............ 14,740 12,191 (2,161) 24,770
Other income (expense):
Interest, net............. 422 -- (2,358)(9) (1,936)
Other..................... 98 1,492 -- 1,590
------- ------- -------- --------
Income before income taxes.. 15,260 13,683 (4,519) 24,424
Income tax expense.......... 5,965 5,063 (995)(10) 10,033
------- ------- -------- --------
Net income.................. $ 9,295 $ 8,620 $ (3,524) $ 14,391
======= ======= ======== ========
Earnings per share.......... $ 0.44 $ 0.51
======= ========
Weighted average common and
common equivalent shares
outstanding................ 21,250 28,155
======= ========
</TABLE>
This Unaudited Condensed Pro Forma Consolidated Income Statement should be
read in conjunction with
the accompanying Notes to Unaudited Condensed Pro Forma Consolidated Financial
Statements.
20
<PAGE>
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
BALANCE SHEET ADJUSTMENTS
The Unaudited Condensed Pro Forma Consolidated Balance Sheet gives effect to
the adjustments set forth below to reflect Mississippi Chemical's proposed
acquisition of the First Mississippi Fertilizer Business to be Merged pursuant
to the Merger Agreement for an aggregate consideration of $322.6 million. For
purposes of this pro forma, it has been assumed that 6,904,762 shares of
Mississippi Chemical Common Stock valued at $25.00 per share will be issued to
First Mississippi shareholders and that the First Mississippi Fertilizer
Business to be Merged will have approximately $150.0 million of indebtedness
outstanding at closing, giving a total valuation of the First Mississippi
Fertilizer Business to be Merged of approximately $322.6 million. The actual
number of shares of Mississippi Chemical Common Stock to be issued will, in
accordance with the Merger Agreement, be determined based on the Average
Mississippi Chemical Price. The Merger Agreement provides that each First
Mississippi shareholder will receive cash in lieu of fractional shares of
Mississippi Chemical Common Stock. The accompanying Pro Forma Condensed
Balance Sheet assumes that no fractional shares will be issued.
(1) Prior to the Merger, the Fertilizer Business accounted for its 50% joint
venture interest in Triad using the equity method. Subsequent to the
Merger, Mississippi Chemical will own 100% of Triad. Accordingly, this
reflects the reversal of the Fertilizer Business's equity investment and
effectively consolidates the Fertilizer Business's proportionate share of
Triad, which when combined with Mississippi Chemical's proportionate
share, will reflect Mississippi Chemical's 100% ownership of Triad.
(2) Provisional allocation of the Fertilizer Business purchase price and other
purchase accounting adjustments in accordance with Mississippi Chemical's
accounting policies:
<TABLE>
<S> <C>
(a) property, plant and equipment................................. $100,000
(b) goodwill...................................................... 198,249
(c) net assets/liabilities acquired from Fertilizer Business to be
Merged........................................................... 67,370
(d) deferred taxes................................................ (39,000)
(e) transaction costs............................................. (4,000)
--------
$322,619
========
</TABLE>
No intangible assets other than goodwill were identified that required
separate valuation.
(3) To reflect that the First Mississippi Fertilizer Business to be Merged
will have approximately $154.0 million of indebtedness outstanding at
closing relating to the following:
<TABLE>
<S> <C>
Debt component of purchase price................................... $150,000
Transaction costs.................................................. 4,000
--------
$154,000
========
</TABLE>
(4) Reflects the Stock Issuance and the elimination of predecessor equity of
the First Mississippi Fertilizer Business to be Merged.
INCOME STATEMENT ADJUSTMENTS
The Unaudited Condensed Pro Forma Consolidated Income Statement for the
fiscal year ended June 30, 1996 gives effect to the following pro forma
adjustments necessary to reflect the Merger:
(5) Reflects depreciation expense ($2,968) on the acquired property, plant and
equipment, as adjusted for the previously described purchase accounting
adjustment, based on estimated useful lives of 20 years established by
Mississippi Chemical and reflects amortization ($4,918) of the related
goodwill over 40 years resulting from the Merger. Mississippi Chemical has
selected a 40-year economic life for the goodwill based on its experience
in the industry and its past association with First Mississippi.
Mississippi Chemical believes that the assets acquired will generate cash
flows for at least 40 years into the future. Management believes that such
expected cash flows will recoup the value assigned to the goodwill.
21
<PAGE>
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
INCOME STATEMENT ADJUSTMENTS (CONTINUED)
(6) Reflects interest expense on the $154,000 of long-term debt at 6.125%.
This rate is based on the London Interbank Offered Rate (LIBOR) and
approximates the rate that would apply under an executed committment
letter with Harris Trust & Savings Bank and Bank of Montreal. An increase
in LIBOR of 1/8 of 1% would result in an increase in pro forma interest
expense of $192.5 for fiscal 1996.
(7) Adjusts income tax expense to reflect Mississippi Chemical's fiscal 1996
effective tax rate of 38.8%, recognizes the tax effect of the pro forma
adjustments at 38.8% and increases income tax expense for non-deductible
amortization of goodwill which increases the effective tax rate to 40.1%.
The Unaudited Condensed Pro Forma Consolidated Income Statement for the
three months ended September 30, 1996 gives effect to the following pro forma
adjustments necessary to reflect the Merger.
(8) Reflects depreciation expense ($922) on the acquired property, plant and
equipment, as adjusted for the previously described purchase accounting
adjustment, based on estimated useful lives of 20 years established by
Mississippi Chemical and amortization ($1,239) of the related goodwill
over 40 years resulting from the Merger.
(9) Reflects interest expense on the $154,000 of long-term debt at 6.125%.
This rate is based on LIBOR and approximates the rate that would apply
under an executed commitment letter with Harris Trust & Savings Bank and
Bank of Montreal. An increase in LIBOR of 1/8 if 1% would result in and
increase in pro forma interest expense of $48.1 for the three months ended
September 30, 1996.
(10) Adjusts income tax expense to reflect Mississippi Chemical's first
quarter effective tax rate of 39.1%, recognizes the tax effect of the pro
forma adjustments at 39.1% and increases income tax expense for non-
deductible amortization of goodwill which increases the effective tax
rate to 41.1%.
Note: Prior to the Merger, Mississippi Chemical and the Fertilizer Business
each had the right and obligation to withdraw, at cost, one-half of the
production of Triad. Each then either sold that product to third parties
or further upgraded that product for ultimate third-party sale.
Accordingly, Mississippi Chemical and the Fertilizer Business's
historical income statements reflected the operations of Triad through
cost of sales and the revenues of each venture partner included the
ultimate third-party sale of product. Consequently, no income statement
pro forma adjustment is required to reflect the income statement effect
of consolidating Triad.
22
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The Management's Discussion and Analysis of Mississippi Chemical Unaudited
Condensed Pro Forma Consolidated Financial Statements should be read in
conjunction with "Recent Developments" and with Management's Discussion and
Analysis of Financial Condition and Results of Operations of Mississippi
Chemical, which is set forth in Mississippi Chemical's 1996 Annual Report on
Form 10-K and Mississippi Chemical's quarterly report on Form 10-Q for the
quarter ended September 30, 1996 which are incorporated by reference into this
Joint Proxy Statement/Prospectus. See "Available Information" and
"Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 JUNE 30, 1996
-------------------- ---------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C> <C>
Pro Forma Income
Statement Data:
Net Sales............. $91,290 $150,112 $428,789 $698,404
Operating Income...... 14,740 24,770 84,818 144,269
Income Before Income
Taxes................ 15,260 24,424 88,493 135,829
Income Tax Expense.... 5,965 10,033 34,315 54,407
Net Income............ 9,295 14,391 54,178 81,422
Earnings per share.... $0.44 $0.51 $2.46 $2.82
Tons sold:
Nitrogen.............. 343 696 1,770 2,983
DAP................... 171 171 754 754
Potash................ 143 143 418 1,182
</TABLE>
Mississippi Chemical's pro forma net sales for fiscal 1996 are $698.4
million compared to historical net sales of $428.8 million. The $269.6 million
increase is due to the inclusion of $215.6 million of net sales of the First
Mississippi Fertilizer Business to be Merged and $54 million of net sales of
the Potash Companies. Pro forma net sales for the three months ended September
30, 1996 are $150.1 million compared to historical net sales of $91.3 million.
The $58.8 million increase is due to the inclusion of the First Mississippi
Fertilizer Business to be Merged.
Pro forma operating income for fiscal 1996 is $144.3 million, an increase of
$59.5 million over the historical amount of $84.8 million. This increase is
due to a $2.1 million contribution from the Potash Companies and a $57.4
million contribution from the First Mississippi Fertilizer Business to be
Merged. The contribution from the First Mississippi Fertilizer Business to be
Merged was impacted by increased depreciation resulting from the purchase
price allocation and the amortization of goodwill. Pro forma operating income
for the quarter ended September 30, 1996 is $24.8 million which is an increase
of $10.1 million over the historical amount of $14.7 million. This increase
was due to the contribution from First Mississippi Fertilizer Business to be
Merged offset by charges for depreciation and the amortization of goodwill
resulting from the purchase price allocation.
Pro forma net interest expense increased to $10.5 million compared to $2.2
million of historical interest income for fiscal 1996. This $12.7 million
increase in interest expense resulted primarily from the assumption of $154
million of debt in connection with the Merger ($150 million of purchase price
and $4 million of transaction costs) and from the foregone interest income
resulting from the purchase of the Potash Companies, which was funded
primarily with cash on hand. Pro forma net interest expense for the three
months ended September 30, 1996 increased to $1.9 million compared to $422,000
of historical interest income. This $2.3 million increase reflects interest on
$154 million of long term debt at closing.
Pro forma income before income taxes increased $47.3 million from $88.5
million to $135.8 million for fiscal 1996 and increased $9.1 million from
$l5.3 million to $24.4 million for the quarter ended September 30, 1996
primarily due to the contribution from the First Mississippi Fertilizer
Business to be Merged.
23
<PAGE>
Pro forma income tax expense for fiscal 1996 increased $20.1 million to
$54.4 million from historical income tax expense of $34.3 million for fiscal
1996. Pro forma income tax expense increased $4.0 million from $6.0 million to
$10.0 million for the three months ended September 30, 1996. These increases
are primarily due to the income tax expense related to the First Mississippi
Fertilizer Business to be Merged, which increased the effective tax rate on a
pro forma basis to 40.1% for fiscal 1996 and 41.1% for the three months ended
September 30, 1996. The effective tax rate increase results from the
nondeductible amortization of goodwill associated with the Merger.
A $32.0 million expansion project at the AMPRO plant of the Fertilizer
Business is scheduled to be completed in December 1996. The AMPRO expansion is
expected to increase annual ammonia production by approximately 125,000 tons.
The AMPRO expansion will result in only minimal increases in fixed production
costs other than depreciation expense related to the project. The project is
also expected to improve natural gas conversion efficiencies through the
installation of a new technologically advanced ammonia converter which will
reduce total gas consumption by approximately 0.6 MMBTU per ton of ammonia
produced and consequently reduce variable per-ton operating costs. The cost of
the AMPRO expansion is included in the purchase price of the Fertilizer
Business. The pro forma income statement does not reflect any contribution
from the AMPRO expansion.
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
Pro forma cash and cash equivalents is $12.4 million at September 30, 1996,
which reflects the consolidation of the Fertilizer Business to be merged.
During April 1996, Mississippi Chemical entered into a $125.0 million credit
facility with NationsBank of Tennessee, N.A. ("NationsBank"), as agent for a
syndicate of commercial banks, replacing all previous lines Mississippi
Chemical had with NationsBank. Under this new facility, Mississippi Chemical
has a $40.0 million short-term line of credit and an $85.0 million revolving
line of credit with a term of three years. These lines of credit bear interest
at the Prime Rate or at rates related to LIBOR. Mississippi Chemical also has
a $5.0 million short-term line of credit with another financial institution.
During fiscal 1996, Mississippi Chemical had no outstanding borrowings under
any of its lines of credit. At September 30, 1996, $54.6 million was
outstanding under the NationsBank line.
In October, 1996, Mississippi Chemical executed a commitment letter with
Harris Trust & Savings Bank ("Harris") and Bank of Montreal ("BOM") providing
for a new credit facility (the "Replacement Facility"), which would increase
Mississippi Chemical's available line of credit. Under the terms of the
commitment letter, the Replacement Facility would provide Mississippi Chemical
with a senior unsecured revolving credit facility of up to approximately
$150.0 million with a five-year term. The commitment letter also provides that
the Replacement Facility will bear interest at the borrower's option at either
Harris' Prime commercial rate, at rates related to the Fed Funds Rate, at
rates related to LIBOR, or at rates determined by competitive bids.
Mississippi Chemical anticipates that the Replacement Facility will be closed
prior to the Effective Time and will replace Mississippi Chemical's $125.0
million credit facility with NationsBank.
First Mississippi has executed a commitment letter with Harris and BOM with
respect to the Financing. Under the terms of the Financing commitment letter,
the Financing will provide First Mississippi with a senior unsecured revolving
credit facility of up to $150.0 million (subject to adjustment as provided in
the Merger Agreement) with a term of five years. The proceeds of the Financing
will be used by First Mississippi to refinance existing indebtedness and pay
certain transaction costs. It is expected that the First Mississippi
Fertilizer Business to be Merged will have approximately $150.0 million of
indebtedness outstanding at closing. The Financing commitment letter also
provides that the Financing will bear interest at the borrower's option at
either Harris' Prime commercial rate, at rates related to the Fed Funds rate,
at rates related to LIBOR, or at rates determined by competitive bids. It is
contemplated that the Financing will be closed prior to the Effective Time.
24
<PAGE>
Mississippi Chemical has entered into a 50-50 joint venture ("Farmland
MissChem Limited") with Farmland Industries, Inc., to construct and operate a
2,040-short-ton-per-day anhydrous ammonia plant to be located near Point
Lisas, The Republic of Trinidad and Tobago. The project is expected to cost
approximately $330.0 million. The portion of the project cost in excess of
required equity contributions is to be financed by the joint venture on a non-
recourse project basis. Startup of the facility is scheduled for mid-1998.
In late fiscal 1996, Mississippi Chemical began an expansion at its nitrogen
fertilizer manufacturing facilities at Yazoo City. The project includes the
addition of a 650-ton-per-day nitric acid plant, a new 500-ton-per-day ammonia
plant and modifications to its ammonium nitrate plant to increase production
from approximately 750,000 to 950,000 tons per year. Mississippi Chemical
estimates that the total cost of the expansion will be $130.0 million. This
expansion is scheduled to be fully operational during the first half of 1998.
In August 1996, Mississippi Chemical acquired substantially all of the
assets of New Mexico Potash Corporation and Eddy Potash, Inc., subsidiaries of
Trans-Resources, Inc., for $45.0 million, plus an adjustment for working
capital on hand at closing (approximately $10.0 million). The assets purchased
included the two Trans-Resources mines located near Carlsbad, New Mexico, with
an annual production capacity of approximately 870,000 tons of potash.
Mississippi Chemical believes that cash generated from operations and the
Replacement Facility, will be sufficient to satisfy its financing requirements
through fiscal 1998.
25
<PAGE>
DILUTION
The net tangible book value of Mississippi Chemical at September 30, 1996,
was approximately $11.76 per share of Mississippi Chemical Common Stock. After
giving effect to the issuance of 6,904,762 shares pursuant to the Merger, the
pro forma net tangible book value of Mississippi Chemical as of September 30,
1996, would have been $7.94 per share. This represents an immediate decrease
in pro forma net tangible book value of $3.82 per share to existing
shareholders and an immediate dilution of $17.06 per share to new investors
after the Merger. The following table illustrates this per-share dilution:
<TABLE>
<S> <C> <C>
Assumed merger price per share................................... $25.00
Net tangible book value per share before the Merger............ $11.76
Decrease in net tangible book value per share due to the
Merger........................................................ 3.82
------
Pro forma net tangible book value per share after the Merger..... 7.94
------
Dilution in net tangible book value per share to investors after
the Merger...................................................... $17.06
======
</TABLE>
26
<PAGE>
CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth as of September 30, 1996, the capitalization
of Mississippi Chemical, adjusted to reflect the Merger. See the "Unaudited
Condensed Pro Forma Consolidated Balance Sheet" and the accompanying notes
thereto. This table should be read in conjunction with the Consolidated
Financial Statements of Mississippi Chemical and the accompanying notes,
appearing in Mississippi Chemical's 1996 Annual Report on Form 10-K and
Mississippi Chemical's quarterly report on Form 10-Q for the quarter ended
September 30, 1996, incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Information by Reference."
<TABLE>
<S> <C>
Long-term debt due within one year.................................... $ 167
========
Long-term debt (excluding amounts due within one year)(1)............. $204,919
Shareholders' equity:
Preferred stock, $.01 par value; 500,000 shares authorized; none
outstanding........................................................ --
Common stock, $.01 par value; 100,000,000 shares authorized;
27,966,555 issued and outstanding following the Merger(2).......... 280
Additional paid-in capital.......................................... 314,232
Retained earnings................................................... 106,976
--------
Total shareholders' equity........................................ 421,488
--------
Total capitalization............................................ $626,407
========
</TABLE>
- --------
(1) Includes First Mississippi Fertilizer Business to be Merged's assumed
outstanding indebtedness at closing of approximately $150,000 and
approximately $4,000 of long-term debt to be incurred by Mississippi
Chemical to finance estimated transaction costs.
(2) Pursuant to the Merger Agreement, this reflects the issuance of 6,904,762
shares of Mississippi Chemical Common Stock (of which 1,836,460 shares
were previously held by Mississippi Chemical as treasury stock) for the
issued and outstanding shares of First Mississippi Common Stock. For
purposes of this capitalization table, Average Mississippi Chemical Price
is assumed to be $25.00 per share at the Effective Time.
27
<PAGE>
RISK FACTORS
In addition to the other information set forth in this Joint Proxy
Statement/Prospectus, the following factors should be considered by the
Mississippi Chemical shareholders and the First Mississippi shareholders
before voting on the proposals herein. This Joint Proxy Statement/Prospectus
contains certain forward-looking statements within the meaning of Section 27A
of the Securities Act, and Section 21E of the Exchange Act. Such statements
are subject to inherent risks and uncertainties, some of which cannot be
predicted or quantified. Actual results could differ materially from those
projected in the forward-looking statements as a result of certain of the risk
factors set forth under "Risk Factors" and elsewhere in this Joint Proxy
Statement/Prospectus.
Expected Benefits of Combined Business May Not Be Achieved. There can be no
assurance that the expected benefits of the Merger related to the combined
businesses as described under "The Merger--Reasons for the Merger;
Recommendations of the Boards" will be achieved. The integration of the two
fertilizer operations may present management challenges and there can be no
assurance that such actions will be successfully accomplished within a
specified period of time.
Changes in Merger Consideration Per Share. The stock price of Mississippi
Chemical Common Stock at the Effective Time may vary from the prices as of the
date of execution of the Merger Agreement, the date hereof, or the date on
which shareholders vote on the Merger due to, among other factors, changes in
the business, operations and prospects of Mississippi Chemical or First
Mississippi, market assessments of the likelihood that the Merger will be
consummated and the timing thereof, and general market and economic
conditions. Because the Merger consideration is a fixed number of shares of
Mississippi Chemical Common Stock (unless the Average Mississippi Chemical
Price is between $25.00 and $27.00), because additional shares of First
Mississippi Common Stock may be issued prior to the Effective Time, including
pursuant to the exercise of First Mississippi Options, and because the market
price of Mississippi Chemical Common Stock fluctuates, the value of the shares
of Mississippi Chemical Common Stock that each First Mississippi shareholder
will be entitled to receive in the Merger may increase or decrease prior to
and following the Merger. See "The Merger--Terms of the Merger--Conversion of
the First Mississippi Common Stock in the Merger."
Factors Affecting Fertilizer Demand and Prices. With virtually all of its
nitrogen fertilizer net sales and approximately 88% of its total net sales in
fiscal 1996 derived from domestic markets, Mississippi Chemical's operating
results are highly dependent upon conditions in the United States agricultural
industry. Likewise, a significant portion of the Fertilizer Business' sales
are derived from domestic markets. A variety of factors beyond Mississippi
Chemical's and the Fertilizer Business' control can materially affect domestic
fertilizer demand and pricing. These factors include, but are not limited to,
United States planted acreage, government agricultural policies, projected
grain stocks, crop failure, weather and changes in agricultural production
methods. Since fertilizers, particularly anhydrous ammonia are used for
industrial applications, industrial markets and the general economy also
affect fertilizer demand and prices.
International market conditions also significantly influence Mississippi
Chemical's and the Fertilizer Business' operating results. The market for
fertilizers is influenced by such factors as the relative value of the United
States dollar and its impact upon the cost of importing fertilizers, foreign
agricultural policies, the existence of, or changes in, import or foreign
currency exchange barriers in certain foreign markets, changes in the hard
currency demands of certain countries, such as the former Soviet Union, and
other regulatory policies of foreign governments, as well as the laws and
policies of the United States affecting foreign trade and investment.
Mississippi Chemical and the Fertilizer Business are also subject to general
risks of doing business abroad, including risks associated with economic or
political instability and potential import restrictions or quotas.
In the past, fertilizer prices have been extremely volatile, with
significant price changes from one growing season to the next. Current product
prices reflect that world supply and demand for fertilizers are currently in a
more favorable balance than in certain prior years. However, fertilizers are
global commodities and can be
28
<PAGE>
subject to intense price competition from domestic and foreign sources. No
assurance can be given that average realized prices paid for Mississippi
Chemical's and the Fertilizer Business' fertilizer products will continue at
current levels.
Seasonality. The usage of fertilizer is highly seasonal, and Mississippi
Chemical's and the Fertilizer Business' quarterly results reflect the fact
that, in their markets, significantly more fertilizer is purchased in the
spring. Significant portions of Mississippi Chemical's and the Fertilizer
Business' net sales and operating income are generated in the last four months
of their fiscal years (March through June). Quarterly results can vary
significantly from one year to the next due primarily to weather-related
shifts in planting schedules and purchase patterns. Mississippi Chemical and
the Fertilizer Business incur substantial expenditures for fixed costs
throughout the year and substantial expenditures for inventory in advance of
the spring planting season.
Dependence on Natural Gas. Natural gas is the primary raw material used in
the manufacture of nitrogen fertilizer products. Natural gas is used as both a
chemical feedstock and a fuel to produce anhydrous ammonia, which is then used
in the production of all other nitrogen fertilizers. Anhydrous ammonia is also
a raw material in the production of diammonium phosphates. Accordingly,
Mississippi Chemical's and the Fertilizer Business' profitability are
dependent upon the price and availability of natural gas. A significant
increase in the price of natural gas that is not recovered through an increase
in the price of Mississippi Chemical's or the Fertilizer Business' fertilizer
products or an extended interruption in the supply of natural gas to their
production facilities could have a material adverse effect on their results of
operations and financial condition.
Environmental Regulations. Mississippi Chemical and the Fertilizer Business
are subject to various environmental laws and regulations of Federal, state
and local governments. Significant capital expenditures and operating costs
have been incurred and will continue to be incurred as a result of these laws
and regulations. Mississippi Chemical cannot predict or quantify the impact of
new or changed laws or regulations. In the normal course of business,
Mississippi Chemical and the Fertilizer Business are exposed to risks such as
possible release of hazardous substances into the environment. Such releases
could cause substantial damage or injuries and result in material costs to
Mississippi Chemical.
Competition. Fertilizer products are global commodities and customers base
their purchasing decisions principally on the delivered price of the product.
As a result, markets for Mississippi Chemical's and the Fertilizer Business'
products are highly competitive. A number of United States producers compete
with Mississippi Chemical and the Fertilizer Business in domestic and export
markets, and producers in other countries, including state-owned and
government-subsidized entities, compete with Mississippi Chemical in the
United States and in foreign markets to which Mississippi Chemical exports.
Many of Mississippi Chemical's competitors are significantly larger and have
greater financial resources than Mississippi Chemical.
RISK FACTORS RELATING TO CHEMFIRST
An investment in ChemFirst Common Stock involves certain risks, including
the absence of an existing trading market for such stock, ChemFirst's
obligations to indemnify the Fertilizer Business from and against certain
claims and to assume responsibility for certain liabilities of First
Mississippi, ChemFirst's reliance on a small number of major customers, anti-
takeover measures provided for under Mississippi law and adopted by the
ChemFirst Board, ChemFirst's exposure to environmental regulations and claims
and possible disruptions in availability and the uncertain price of raw
materials necessary in ChemFirst's operations. For a more complete discussion
of the risks relating to an investment in ChemFirst, see "Risk Factors" in the
ChemFirst Prospectus attached as Appendix E. First Mississippi shareholders
are urged to read the ChemFirst Prospectus in its entirety.
29
<PAGE>
THE ANNUAL MEETINGS
GENERAL
The Mississippi Chemical Annual Meeting will be held at 9:00 a.m. local time
on December 20, 1996 at the Owen Cooper Administration Building, Highway 49
East, Yazoo City, Mississippi 39194. The First Mississippi Annual Meeting will
be held on December 20, 1996, at 10:00 a.m. local time at Dennery's, 330
Greymont Avenue, Jackson, Mississippi.
THE MISSISSIPPI CHEMICAL ANNUAL MEETING
At the Mississippi Chemical Annual Meeting, the shareholders of Mississippi
Chemical will be asked to consider and vote upon proposals (i) to approve and
authorize the Stock Issuance; (ii) to elect three members to the Board of
Directors to hold office for a period of three years and until their
successors are duly elected and qualified and (iii) to transact such other
business as may come before the Mississippi Chemical Annual Meeting or any
adjournments or postponements thereof.
Proposal One--Stock Issuance
The Stock Issuance is being submitted to the shareholders of Mississippi
Chemical for approval in accordance with Mississippi Chemical's listing
agreement with the NYSE. Among other things, the NYSE listing agreement
generally requires that Mississippi Chemical's shareholders approve an
acquisition transaction or series of related transactions that will result in
the issuance of shares of Mississippi Chemical Common Stock if the new shares
will have 20% or more of the voting power outstanding before such issuance.
Because the issuance of shares of Mississippi Chemical Common Stock pursuant
to the Merger Agreement would exceed 20% of the voting power currently
outstanding, the proposal is being submitted to Mississippi Chemical
shareholders for approval in accordance with the NYSE rules and the listing
agreement.
THE MISSISSIPPI CHEMICAL BOARD UNANIMOUSLY RECOMMENDS THAT MISSISSIPPI
CHEMICAL SHAREHOLDERS VOTE "FOR" APPROVAL OF THE STOCK ISSUANCE.
Proposal Two--Election of Directors
The Articles of Incorporation of Mississippi Chemical provide that the
Mississippi Chemical Board shall consist of no fewer than nine or more than 15
directors, with the exact number of directors to be fixed by the Mississippi
Chemical Board, and that the Mississippi Chemical Board shall be divided into
three classes, with one class being elected each year for a three-year term.
The number of directors has been fixed, effective as of the date following the
Mississippi Chemical Annual Meeting, at eleven and three directors are to be
elected at the annual meeting to serve for three years or until the 1999
annual meeting of shareholders and until their respective successors shall
have been elected and qualified. The persons named as proxies in the
accompanying proxy card have indicated that they intend to vote for the
election of the three nominees set forth hereinafter. See "Election of
Mississippi Chemical Directors--Nominees for Election to Serve until 1999."
In the event that any of the nominees for election as director is not
available to serve as a director at the time of election at the meeting, proxy
cards may be voted for a substitute nominee as well as for the remaining
nominees named herein. However, Mississippi Chemical's management has no
reason to anticipate that any nominees will be unavailable.
THE BOARD OF DIRECTORS RECOMMENDS THAT MISSISSIPPI CHEMICAL SHAREHOLDERS
VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR SET FORTH HEREIN.
Record Date; Voting at the Meeting; Vote Required; Principal Shareholders
Only holders of record on the Mississippi Chemical Record Date are entitled
to notice of, and to vote at the Mississippi Chemical Annual Meeting and any
adjournments or postponements thereof. There were issued and
30
<PAGE>
outstanding 21,065,783 shares of Mississippi Chemical Common Stock on the
Mississippi Chemical Record Date. Each holder of Mississippi Chemical Common
Stock will be entitled to one vote, in person or by proxy, for each share
standing in his or her name on the books of Mississippi Chemical on the
Mississippi Chemical Record Date on any matter submitted to a vote of the
Mississippi Chemical shareholders. The presence, in person or by proxy, of
holders of record of a majority of the shares entitled to vote constitutes a
quorum for action at the Mississippi Chemical Annual Meeting. Proposal One
requires the affirmative vote of the holders of a majority of the shares of
Mississippi Chemical Common Stock present and voting, in person or by proxy,
at the Mississippi Chemical Annual Meeting, provided a quorum is present at
the Mississippi Chemical Annual Meeting. Proposal Two requires each director
nominee to receive a plurality of votes cast. Abstentions and broker nonvotes
are counted for purposes of determining the presence or absence of a quorum
for transaction of business. Abstentions and broker nonvotes will have no
effect on the outcome of the vote on the Stock Issuance proposal.
Of the 21,065,783 shares of Mississippi Chemical Common Stock outstanding as
of the Mississippi Chemical Record Date, approximately 114,269 shares (less
than 1.0%), were held by directors and executive officers of Mississippi
Chemical. In addition, as of the Mississippi Chemical Record Date, First
Mississippi's directors and officers as a group beneficially owned 18,437
shares (less than 1.0%) of the outstanding shares of Mississippi Chemical
Common Stock. For information with respect to beneficial ownership of
Mississippi Chemical Common Stock by Mississippi Chemical directors and
executive officers, see "Election of Mississippi Chemical Directors--
Management Ownership of Mississippi Chemical Common Stock" included in this
Joint Proxy Statement/Prospectus to be delivered to Mississippi Chemical
shareholders only or "Management Ownership of Mississippi Chemical Common
Stock" included in Appendix G to this Joint Proxy Statement/Prospectus to be
delivered to First Mississippi shareholders only.
Revocability of Proxies
A proxy for use at the Mississippi Chemical Annual Meeting is enclosed with
this Joint Proxy Statement/Prospectus. A Mississippi Chemical shareholder
executing and returning a proxy may revoke it at any time prior to the voting
thereof either by revoking the proxy in person at the Mississippi Chemical
Annual Meeting or by delivering a signed written notice of revocation to the
office of the Secretary of Mississippi Chemical (P.O. Box 388, Yazoo City,
Mississippi 39194) before the meeting begins. All shares represented by a
properly executed proxy, unless such proxy previously has been revoked, will
be voted in accordance with the directions on such proxy. If no directions are
given to the contrary on such proxy, the shares of Mississippi Chemical Common
Stock represented by such proxy will be voted FOR approval of all proposals
addressed at the meeting. It is not anticipated that any matters will be
presented at the Mississippi Chemical Annual Meeting other than as set forth
in the notice of the Mississippi Chemical Annual Meeting. If, however, other
matters are properly presented at the Mississippi Chemical Annual Meeting, the
proxy will be voted in accordance with the best judgment of the person or
persons voting the proxy.
Dissenters' Rights
Holders of Mississippi Chemical Common Stock will not have any dissenters'
rights in connection with, or as a result of, the matters to be acted upon at
the Mississippi Chemical Annual Meeting. See "The Merger--Dissenters' Rights."
THE FIRST MISSISSIPPI ANNUAL MEETING
Date, Time and Place; Purpose of Meeting
This Joint Proxy Statement/Prospectus is being furnished in connection with
the solicitation of proxies by the First Mississippi Board for use at the
First Mississippi Annual Meeting. The First Mississippi Annual Meeting will be
held at Dennery's, 330 Greymont Avenue, Jackson, Mississippi, on December 20,
1996, at 10:00 a.m., local time. The First Mississippi Annual Meeting will be
held for the purpose of considering and voting
31
<PAGE>
upon proposals to (i) approve and adopt the Merger Agreement and the Merger,
(ii) to elect six directors, to hold office for the terms specified in this
Joint Proxy Statement/Prospectus and until their successors are elected and
qualified, and (iii) to transact such other business as may properly come
before the First Mississippi Annual Meeting or any adjournments or
postponements thereof.
Management of First Mississippi knows of no matters to be brought before the
First Mississippi Annual Meeting other than those referred to herein. If any
other business should properly come before the First Mississippi Annual
Meeting, the persons named in the proxy will vote in accordance with their
best judgment.
THE FIRST MISSISSIPPI BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER, AS WELL
AS EACH OF THE FOREGOING ADDITIONAL ACTIONS.
Record Date
The First Mississippi Board has fixed the close of business on October 30,
1996 as the First Mississippi Record Date. Only the holders of record of the
outstanding shares of First Mississippi Common Stock on the First Mississippi
Record Date will be entitled to notice of, and to vote at, the First
Mississippi Annual Meeting and any adjournments or postponements thereof. At
the First Mississippi Record Date, 20,621,736 shares of First Mississippi
Common Stock were outstanding and entitled to vote. The presence, in person or
by proxy, of a majority of the aggregate number of shares of First Mississippi
Common Stock outstanding and entitled to vote on the First Mississippi Record
Date is necessary to constitute a quorum at the First Mississippi Annual
Meeting.
Proxies; Voting and Revocation
Shares of First Mississippi Common Stock represented by a properly executed
proxy received prior to the vote at the First Mississippi Annual Meeting and
not revoked will be voted at the First Mississippi Annual Meeting as directed
in the proxy. IF A PROXY IS SUBMITTED AND NO DIRECTIONS ARE GIVEN, THE PROXY
WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER, AND FOR THE ADDITIONAL PROPOSALS REFERRED TO HEREIN. First Mississippi
intends to count shares of First Mississippi Common Stock present in person at
the First Mississippi Annual Meeting but not voting, and shares of First
Mississippi Common Stock for which it has received proxies but with respect to
which holders of shares have abstained on any matter, as present at the First
Mississippi Annual Meeting for purposes of determining the presence or absence
of a quorum for the transaction of business. Since the affirmative vote of the
holders of a majority of the outstanding shares of First Mississippi Common
Stock entitled to vote on the Merger is required to approve and adopt the
Merger Agreement and the Merger, such nonvoting shares and abstentions will
have the effect of a vote against the approval of the Merger Agreement. In
addition, under the rules of the NYSE, brokers who hold shares in street name
for customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers with respect to the
approval and adoption of the Merger Agreement and the Merger without specific
instructions from such customers. Given that Mississippi law requires the
affirmative vote of the holders of a majority of the outstanding shares of
First Mississippi Common Stock entitled to vote on the Merger Agreement and
the Merger, the failure of such customers to provide specific instructions
with respect to their shares of First Mississippi Common Stock to their broker
will have the same effect as a vote against the approval of the Merger
Agreement and the Merger.
Each share of First Mississippi Common Stock is entitled to one vote with
respect to the proposal to approve and adopt the Merger Agreement and the
Merger. The persons named as proxies by a shareholder may propose and vote for
one or more adjournments or postponements of the First Mississippi Annual
Meeting to permit further solicitation of proxies in favor of such proposal;
provided, however, that no proxy that is voted against the proposal to approve
and adopt the Merger Agreement and the Merger will be voted in favor of any
such adjournment or postponement. The voting requirements with respect to the
other matters to be voted on at the First Mississippi Annual Meeting,
including the election of directors are described in the section entitled
"Election of First Mississippi Directors," which is included in this Joint
Proxy Statement/Prospectus to be delivered to First Mississippi shareholders
only.
32
<PAGE>
A shareholder of record may revoke a proxy by filing an instrument of
revocation with James L. McArthur, Secretary of First Mississippi (First
Mississippi Corporation, P.O. Box 1249, Jackson, Mississippi 39215-1249), by
filing a duly executed proxy bearing a later date, or by appearing at the
First Mississippi Annual Meeting in person, notifying the Secretary, and
voting by ballot at the First Mississippi Annual Meeting. Any shareholder of
record attending the First Mississippi Annual Meeting may vote in person
whether or not a proxy has been previously given, but the mere presence
(without notifying the Secretary) of a shareholder at the First Mississippi
Annual Meeting will not constitute revocation of a previously given proxy. In
addition, shareholders whose shares of First Mississippi Common Stock are not
registered in their own name will need additional documentation from the
record holder of such shares to vote personally at the First Mississippi
Annual Meeting.
Votes Required to Approve the Merger; Principal Shareholders
The affirmative vote of the holders of a majority of the shares of First
Mississippi Common Stock issued, outstanding and entitled to vote at the First
Mississippi Annual Meeting is necessary to approve and adopt the Merger
Agreement and the Merger. The approval of the Merger Agreement by holders of
First Mississippi Common Stock is a condition to the consummation of the
Merger.
As of the First Mississippi Record Date, 20,621,736 shares of First
Mississippi Common Stock were outstanding and entitled to vote. Approximately
1,232,391 of such shares, or approximately 6.0%, were held by directors and
executive officers of First Mississippi, its subsidiaries and their respective
affiliates, all of which they intend to vote for approval of the Merger
Agreement and the Merger. In addition, as of the First Mississippi Record
Date, Mississippi Chemical's directors and officers as a group beneficially
owned 1,300 shares (less than 1.0%) of the outstanding shares of First
Mississippi Common Stock, all of which they intend to vote for approval of the
Merger Agreement and the Merger.
Information with respect to beneficial ownership of First Mississippi Common
Stock by entities owning more than 5.0% of such stock and more detailed
information with respect to beneficial ownership of First Mississippi Common
Stock by First Mississippi directors and executive officers are incorporated
by reference to First Mississippi's 1996 Annual Report on Form 10-K/A. See
"Incorporation of Certain Information by Reference." Such information is also
set forth in the section entitled "Election of First Mississippi Directors--
Security Ownership of Management," which is included in this Joint Proxy
Statement/Prospectus to be delivered to First Mississippi shareholders only.
SOLICITATION OF PROXIES
The expense of printing and mailing this Joint Proxy Statement/Prospectus
and the material used in this solicitation of proxies will be borne equally by
Mississippi Chemical and First Mississippi. It is contemplated that
Mississippi Chemical and First Mississippi proxies will be solicited through
the mail and directly by officers, directors and regular employees of
Mississippi Chemical and First Mississippi. Mississippi Chemical and First
Mississippi will reimburse banks, brokerage houses and other custodians,
nominees and fiduciaries for their reasonable expenses in forwarding these
proxy materials to the principals. Mississippi Chemical has engaged Morrow &
Co. to represent it in connection with the solicitation of proxies at a cost
of $6,000 plus expenses. First Mississippi has engaged Morrow & Co. to
represent it in connection with the solicitation of proxies at a cost of
$6,000 plus expenses.
33
<PAGE>
RECENT DEVELOPMENTS
On August 16, 1996, Mississippi Chemical acquired substantially all of the
assets and assumed substantially all of the liabilities of the Potash
Companies. The purchase price for the Potash Companies was $45 million plus an
adjustment for working capital on hand at closing (approximately $10.0
million). Mississippi Chemical funded this acquisition with cash on hand and
existing lines of credit. The Potash Companies operate two potash mines and
related facilities located near Carlsbad, New Mexico, which have a combined
annual production capacity of approximately 870,000 tons. Mississippi Chemical
currently operates a potash facility in the Carlsbad area which produces
approximately 420,000 tons of potash annually. The Potash Companies produce
several industrial grades of potash which will enable Mississippi Chemical to
expand its product line to serve certain industrial markets.
The following Unaudited Condensed Pro Forma Consolidated Income Statement
for the Potash Acquisition for the fiscal year ended June 30, 1996, is based
on (i) the audited historical Consolidated Statement of Income of Mississippi
Chemical for the fiscal year ended June 30, 1996 and (ii) the unaudited
combined statement of income of the Potash Companies for the fiscal year ended
June 30, 1996, after giving effect to the pro forma adjustments described in
the notes below. Such adjustments have been made assuming that the acquisition
by Mississippi Chemical of the Potash Companies took place on July 1, 1995.
See Mississippi Chemical Unaudited Condensed Pro Forma Consolidated Income
Statement.
MISSISSIPPI CHEMICAL CORPORATION UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED INCOME STATEMENT FOR THE POTASH ACQUISITION
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
MISSISSIPPI
CHEMICAL
ADJUSTED
FOR
MISSISSIPPI POTASH ACQUISITION
CHEMICAL POTASH PRO FORMA OF POTASH
HISTORICAL COMPANIES ADJUSTMENTS COMPANIES
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales...................... $428,789 $53,986 $ -- $482,775
Operating expenses:
Cost of products sold........ 291,403 51,142 (759)(1) 341,786
Selling, general and adminis-
trative..................... 52,568 1,511 -- 54,079
-------- ------- ------- --------
343,971 52,653 (759) 395,865
-------- ------- ------- --------
Operating income............... 84,818 1,333 759 86,910
Other Income (expense):
Interest, net................ 2,229 -- (2,446)(2) (1,028)
(811)(2)
Other........................ 1,446 298 -- 1,744
-------- ------- ------- --------
Income before income taxes..... 88,493 1,631 (2,498) 87,626
Income tax expense............. 34,315 652 (981)(3) 33,986
-------- ------- ------- --------
Net income..................... $ 54,178 $ 979 $(1,517) $ 53,640
======== ======= ======= ========
Earnings per share............. $ 2.46 $ 2.44
======== ========
Weighted average common and
common equivalent shares out-
standing...................... 21,980 21,980
======== ========
</TABLE>
34
<PAGE>
The Unaudited Condensed Pro Forma Consolidated Income Statement for the
Potash Acquisition gives effect to the following pro forma adjustments
necessary to reflect the acquisition of the Potash Companies:
(1) Adjustments to the Potash Companies to reflect the application of the
purchase price for $55,600 which included $45,000 for property, plant and
equipment and $10,600 for working capital. The application of MCC
accounting policies relating to depreciation and depletion of property,
plant and equipment resulted in a decrease in depreciation and depletion
expense of $759 using the following estimated useful lives:
<TABLE>
<S> <C>
Buildings 20 Years
Machinery and Equipment 5-20 Years
Reserves 14-22 Years
</TABLE>
(2) Reflects an estimated $2,446 of foregone interest income on cash used
to purchase the Potash Companies of approximately $44,000 at Mississippi
Chemical's average interest rate on investments for fiscal 1996 of 5.57%.
Also reflects interest expense of $811 for approximately $11,000 of debt
assumed to have been incurred to fund the purchase at an interest rate of
6.9%. This rate is based on LIBOR and approximates the rate that would have
applied to Mississippi Chemical's existing lines of credit in fiscal 1996.
(3) Adjusts income tax expense to reflect Mississippi Chemical's fiscal
1996 effective tax rate of 38.8%.
The management of Mississippi Chemical believes that the operating results
of the Potash Companies for the relevant period are not indicative of future
performance. During the relevant period, the Potash Companies' operating
results were adversely impacted by low mining productivity and abnormally high
workers' compensation expenses. Additional mining equipment has been ordered
and certain other measures have been taken to improve mine productivity.
Mississippi Chemical also expects to achieve meaningful production synergies
and cost reductions as a result of the coordinated operation of the three
Carlsbad mines, the elimination of duplicative positions, the efficient use of
a combined labor force, and the internal exchange of Potash leases to improve
ore grades.
35
<PAGE>
BACKGROUND OF THE DISTRIBUTION AND THE MERGER
First Mississippi has regularly considered possible strategies and
transactions involving its diverse businesses to enhance its profitability,
competitive position and strategic focus, and thereby increase shareholder
value. As part of this ongoing process, beginning in 1992, First Mississippi
has taken various steps in order to focus on its chemicals operations. In
1993, First Mississippi sold its operations in coal mining and oil and gas
exploration and production, and in 1995, it completed the tax-free spin-off to
shareholders of its 81% interest in FirstMiss Gold, Inc. (now known as
Getchell Gold). After the completion of the Getchell Gold spin-off, First
Mississippi continued to direct cash flow from its fertilizer business to grow
its chemicals business.
Even after the completion of these transactions, First Mississippi
management and the First Mississippi Board believed that the stock market did
not reflect appropriately the value of First Mississippi. Specifically, First
Mississippi management believed that the market price of First Mississippi
Common Stock was more reflective of the lower earnings multiples at which
stocks of fertilizer companies trade rather than a higher blended
fertilizer/chemicals earnings multiple that would be reflective of First
Mississippi's two principal businesses.
In February 1996, while First Mississippi was studying various strategic
alternatives concerning the Fertilizer Business, Charles O. Dunn, President
and Chief Executive Officer of Mississippi Chemical, telephoned J. Kelley
Williams, Chairman of the Board and Chief Executive Officer of First
Mississippi, to inquire as to whether First Mississippi would be interested in
exploring the possibility of Mississippi Chemical acquiring the Fertilizer
Business in a "Morris Trust" transaction whereby First Mississippi's chemicals
and other non-fertilizer assets and operations would be spun off to its
shareholders in a tax-free distribution followed by the sale of its remaining
fertilizer business to Mississippi Chemical in a tax-free stock-for-stock
merger.
At the First Mississippi Board meeting in February 1996, First Mississippi
management informed the First Mississippi Board of Mississippi Chemical's
indication of interest in the Fertilizer Business and reviewed with the board
possible strategic alternatives for the Fertilizer Business, including a
Morris Trust transaction. Following the presentation, the First Mississippi
Board formally authorized management to evaluate and pursue strategic
alternatives with respect to the Fertilizer Business, including its
disposition in a Morris Trust transaction or other forms of disposition and
including a spin-off of the Fertilizer Business.
Following the February board meeting, First Mississippi engaged CS First
Boston to assist in its evaluation of the Fertilizer Business and, if
appropriate, its disposition.
With First Mississippi's assistance, CS First Boston prepared a confidential
Offering Memorandum with respect to the possible divestiture of the Fertilizer
Business. In April 1996, CS First Boston distributed the Offering Memorandum
to various parties interested in the Fertilizer Business upon their execution
of confidentiality agreements. From April 1996 through August 1996, CS First
Boston and First Mississippi had discussions with various parties regarding
their interest in the Fertilizer Business and possible transaction structures.
While a number of parties expressed interest in the Fertilizer Business, none
of these discussions resulted in a proposal for the Fertilizer Business more
favorable to First Mississippi than the Merger. In certain instances, the
parties were unable to complete a Morris Trust transaction because they did
not have the stock consideration necessary for this form of transaction and
the other consideration offered was considered inadequate. Also, the
anticipated timing and contingencies expressed in other indications of
interest made them less favorable than the Distribution and the Merger.
During this period of soliciting indications of interest from other parties,
First Mississippi invited Mississippi Chemical to participate in the process.
However, Mississippi Chemical initially declined to participate in any auction
process or to execute the confidentiality agreement that was a condition to
receiving a copy of the Offering Memorandum.
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At a meeting of the First Mississippi Board held in May 1996, the First
Mississippi Board reviewed and discussed the status of the proposed
transaction and contacts that had been made to date with prospective
purchasers.
On August 1, 1996, Mississippi Chemical advised First Mississippi management
that it was still interested in acquiring the Fertilizer Business and was
willing to enter into a confidentiality agreement. On August 9, 1996,
Mississippi Chemical executed the Confidentiality Agreement and began a due
diligence review. After its initial due diligence review, Mississippi Chemical
provided First Mississippi with an expression of interest. On August 12, 1996,
First Mississippi provided Mississippi Chemical a draft of the Merger
Agreement and the parties negotiated the terms of the Merger Agreement and
related transaction documents over the course of the next few weeks.
On August 26, 1996, Mississippi Chemical made a formal offer to acquire
First Mississippi's Fertilizer Business on the terms embodied in the Merger
Agreement which had been negotiated over the previous few weeks.
At the August 27, 1996 meeting of the First Mississippi Board, management
presented the offer to the First Mississippi Board and informed the First
Mississippi Board of the events leading up to the offer, including
management's negotiations with Mississippi Chemical. CS First Boston then
reviewed the offer for the First Mississippi Board and provided its analysis.
CS First Boston then provided the First Mississippi Board its opinion that, as
of August 27, 1996, the Distribution and the Merger, taken together, were fair
to the shareholders of First Mississippi from a financial point of view. See
"Opinions of and Presentations by the Financial Advisors--Financial Advisor to
First Mississippi."
Following its deliberations, the First Mississippi Board unanimously
approved the Merger and the Distribution (subject to final declaration of the
Distribution dividend at a later meeting), the Merger Agreement, the
Distribution Agreement and the related transaction documents.
During the first half of 1996, the Mississippi Chemical management kept the
Mississippi Chemical Board periodically advised as to the desirability of
acquiring the Fertilizer Business and management's contacts with First
Mississippi. At a special meeting held on August 19, 1996, management and DLJ
made presentations to the Mississippi Chemical Board on the proposed
transaction and the status of the negotiations. See "--Opinions of and
Presentations by Financial Advisors--Financial Advisor to Mississippi
Chemical." At such meeting, the Mississippi Chemical Board authorized the
making of a formal offer to acquire the Fertilizer Business. A subsequent
telephone meeting of the Mississippi Chemical Board was held on August 27,
1996. At this meeting management updated the Mississippi Chemical Board on the
transactions, DLJ delivered its opinion to the Mississippi Chemical Board to
the effect that, as of such date and based on and subject to the assumptions,
limitations, and qualifications set forth in the opinion, the Merger
Consideration Per Share was fair to Mississippi Chemical and its shareholders
from a financial point of view and the Mississippi Chemical Board unanimously
approved the Merger and the Stock Issuance. See "Opinions of and Presentations
by Financial Advisors--Financial Advisor to Mississippi Chemical."
Following the August 27 meetings of the First Mississippi Board and the
Mississippi Chemical Board, the parties executed the Merger Agreement.
REASONS FOR THE TRANSACTIONS; RECOMMENDATIONS OF THE BOARDS
MISSISSIPPI CHEMICAL
The Mississippi Chemical Board has unanimously determined that the Merger
and the Stock Issuance are advisable and fair to and in the best interests of
the shareholders of Mississippi Chemical and has approved the Merger
Agreement. Accordingly, the Mississippi Chemical Board unanimously recommends
that the shareholders of Mississippi Chemical vote in favor of the Stock
Issuance. In reaching its determination, the
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Mississippi Chemical Board consulted with Mississippi Chemical's management,
as well as its financial advisors and legal counsel, and considered a number
of reasons and factors, including, but not limited to, the following:
(a) The Merger will enhance Mississippi Chemical's position as a major
nitrogen fertilizer producer. By creating a larger nitrogen fertilizer
company, Mississippi Chemical expects to improve its prospects for
future growth and to achieve greater market recognition among
customers. With the addition of the Fertilizer Business, Mississippi
Chemical increases its ability to sell nitrogen fertilizer products
both domestically and abroad. In fiscal 1996, the Fertilizer Business
sold approximately 4% of its production into international markets,
whereas Mississippi Chemical has sold substantially all of its nitrogen
fertilizer production domestically.
(b) The Mississippi Chemical Board determined that the acquisition of the
Fertilizer Business is an important strategic transaction for
Mississippi Chemical as the consolidation of the AMPRO and Triad
facilities (including the substantially complete AMPRO expansion) will
create one of the premier nitrogen complexes in North America. The
quality and location of the facilities will afford significant
opportunity to add other nitrogen fertilizer products at the
Donaldsonville, Louisiana site in the future, without building new
ammonia capacity.
(c) Currently, Mississippi Chemical is a net purchaser of ammonia, which
Mississippi Chemical uses as a raw material for its other nitrogen and
phosphate fertilizer products. As a net purchaser of ammonia,
Mississippi Chemical has been subject to changing market prices for
ammonia which has a direct impact on the profitability of its upgraded
nitrogen and phosphate fertilizer products. With the addition of the
Fertilizer Business, Mississippi Chemical will produce enough ammonia
to satisfy all of its current ammonia raw material requirements and
will become a net seller of ammonia.
(d) The Mississippi Chemical Board determined that the Merger would have
very little impact on Mississippi Chemical's current overhead costs. As
a result, per ton selling, general and administrative costs are
expected to decline. The Mississippi Chemical Board also determined
that consolidating Triad under one owner should generate cost savings
and operating efficiencies by removing the complexities of management
by two separate owners. Such savings should enable the combined company
to compete more effectively with North American and international
nitrogen fertilizer producers.
(e) The pro forma accretive impact of the Merger on Mississippi Chemical's
earnings per share as set forth in "Comparative Per Share Data of
Mississippi Chemical and First Mississippi."
(f) The fact that, after the Merger, Mississippi Chemical would have a
greater public float for its common shares, providing shareholders with
a more extensive market for their shares.
(g) The Mississippi Chemical Board believes that assumption of $154.0
million of debt, subject to adjustment, is prudent in light of
Mississippi Chemical's underleveraged capital structure. Mississippi
Chemical has been operating its business virtually debt free since its
initial public offering in August 1994. By adding $154.0 million of
debt, Mississippi Chemical expects to significantly lower its weighted
average cost of capital reflecting the lower after-tax cost of debt as
compared to common equity. The Mississippi Chemical Board believes that
Mississippi Chemical will remain financially strong after the
assumption of debt with the acquisition of the Fertilizer Business,
with a pro forma debt to capitalization ratio of approximately 33%.
(h) The Merger Consideration Per Share and the historical market prices and
trading information with respect to Mississippi Chemical Common Stock.
(i) The terms and conditions of the Merger Agreement, which were viewed as
providing an equitable basis for the Merger from the standpoint of
Mississippi Chemical.
(j) The presentation of DLJ delivered to the Mississippi Chemical Board, on
August 19, 1996 and the written opinion of DLJ delivered on August 27,
1996, to the effect that, as of such date and based on and subject to
the assumptions, limitations and qualifications set forth in the
opinion, the Merger Consideration Per Share is fair to Mississippi
Chemical and its shareholders from a financial point of view. See
"Opinions and Presentations by Financial Advisors--Financial Advisor to
Mississippi Chemical."
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The foregoing discussion of the information and factors considered and given
weight by the Mississippi Chemical Board is not intended to be exhaustive, but
is believed to include all of the material factors considered by the
Mississippi Chemical Board. In view of a variety of factors considered in
connection with its evaluation of the Merger, the Mississippi Chemical Board
did not find it practicable to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Mississippi Chemical
Board may have given different weights to different factors.
For the above reasons, the Mississippi Chemical Board believes that the
terms of the Merger Agreement and the Merger are fair to, and in the best
interests of, Mississippi Chemical and the holders of Mississippi Chemical
Common Stock. At the meeting held on August 27, 1996, the Mississippi Chemical
Board unanimously approved the Stock Issuance, the Merger Agreement and the
Merger and recommended that Mississippi Chemical shareholders vote FOR
approval of the Stock Issuance.
FIRST MISSISSIPPI
The First Mississippi Board has unanimously determined that the Distribution
and the Merger, taken together, are fair to and in the best interests of First
Mississippi and its shareholders. THE FIRST MISSISSIPPI BOARD HAS UNANIMOUSLY
APPROVED THE DISTRIBUTION AND THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND UNANIMOUSLY RECOMMENDS THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY FIRST
MISSISSIPPI SHAREHOLDERS.
In reaching this determination and recommendation, the First Mississippi
Board considered the following:
(a) the terms and conditions of the Merger Agreement, including (i) the
amount and form of the consideration, (ii) the cash to be contributed to
ChemFirst prior to the Distribution, (iii) the fixed nature of the Merger
Consideration Per Share, subject only to certain limited downward adjustments,
(iv) the Financing, including the increase in the amount of the Financing if
the Average Mississippi Chemical Price falls to between $17.00 and $19.00 per
share, (v) the terms and conditions under which First Mississippi may
terminate the Merger Agreement in order to accept a more favorable transaction
proposal from a third party upon payment of a termination fee of $8.0 million,
and (vi) the degree of flexibility provided to First Mississippi to conduct
the business of ChemFirst, prior to the Effective Time;
(b) the historical and prospective business of First Mississippi, including,
among other things, the financial condition of First Mississippi, the
strategic direction of First Mississippi's business and the opportunity for
First Mississippi's chemicals businesses to expand and the historical and
future prospects of Mississippi Chemical and its existing financial condition,
as well as the existing conditions in, and future prospects of, the fertilizer
industry and the competitive position of Mississippi Chemical in that
industry--the First Mississippi Board believes that the historical, current
and prospective conditions in the fertilizer industry support its
determination that a fertilizer producer with Mississippi Chemical's favorable
financial condition and access to financing as well as its increased economies
of scale after the transaction may enable it to compete more effectively with
other fertilizer producers than the Fertilizer Business would otherwise be
able to;
(c) the fact that the Distribution and the Merger will allow First
Mississippi shareholders to retain a significant continuing interest in a
business in the chemicals industry through their continuing ownership interest
in ChemFirst following the Distribution, and to retain a significant
continuing interest in a business in the fertilizer industry through their
ownership of Mississippi Chemical Common Stock (representing an aggregate of
approximately 25% of the outstanding Mississippi Chemical Common Stock);
(d) historical data relating to market prices and trading volumes of and
dividends on First Mississippi Common Stock, historical data relating to
market prices and trading volumes of and dividends on Mississippi Chemical
Common Stock and market prices of Mississippi Chemical Common Stock compared
to those of certain other publicly traded companies--in the opinion of First
Mississippi's Board, these factors support its determination because, in the
Merger, First Mississippi shareholders will receive common stock of a company
that is a strong competitor in the fertilizer industry, with net income in
1996 of approximately $54.0 million, and which in the First Mississippi
Board's opinion, has the size and experience to compete effectively in the
fertilizer industry .
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(e) historical data on price/earnings multiples of fertilizer companies, on
the one hand, and chemical companies, on the other and the fact that chemical
companies have in general traded at higher price/earnings multiples than
fertilizer companies;
(f) the regulatory approvals and tax opinions required for the Merger and
the estimated length of time required to consummate the Merger;
(g) the alternatives to the Merger, including, among other things,
continuing to operate the Fertilizer Business and a tax free spin-off to
shareholders of the Fertilizer Business--the First Mississippi Board believes
that these considerations and the fact that First Mississippi explored other
possibilities prior to entering the Merger Agreement support its
determination. After exploring these possibilities, the First Mississippi
Board determined that the Merger and the Distribution represented the most
attractive alternative in light of the likelihood of achieving, the risks
associated with, and the overall value that would be provided by, such other
possibilities (and in light of the other factors discussed in this section);
(h) the fact that CS First Boston had solicited interest from a number of
other companies and received unsolicited calls from other interested parties
for the sale of the Fertilizer Business, and that Mississippi Chemical's
proposal resulting in the Merger Agreement was, in the view of the First
Mississippi Board, the most favorable proposal received by First Mississippi;
(i) the structure of the Distribution and Merger, the Merger being
conditional on the Distribution and vice versa, which would permit First
Mississippi shareholders to receive shares of ChemFirst Common Stock in the
Distribution and to exchange all their First Mississippi Common Stock for
Mississippi Chemical Common Stock in the Merger, all on a tax-free basis; and
(j) the presentation of CS First Boston delivered to the First Mississippi
Board at its meeting on August 27, 1996, including its opinion that, as of
such date, the terms of the Distribution and the Merger, taken together, are
fair to such shareholders from a financial point of view. See "Opinions of and
Presentations by the Financial Advisors--Financial Advisors to First
Mississippi."
Based on all of these considerations, and such other matters as the members
of the First Mississippi Board deemed relevant, the First Mississippi Board
unanimously approved the Merger Agreement and the transactions contemplated
thereby.
The foregoing discussion of the information and factors considered and given
weight by the First Mississippi Board is not intended to be exhaustive but is
believed to include all of the material factors considered by the First
Mississippi Board. In addition, in reaching the determination to approve and
recommend the Merger Agreement, the First Mississippi Board did not assign any
relative or specific weights to the foregoing factors which were considered,
and individual directors may have given differing weights to different
factors. The First Mississippi Board is, however, unanimous in its
recommendation to the holders of First Mississippi Common Stock that the
Merger Agreement to be approved and adopted.
THE FIRST MISSISSIPPI BOARD UNANIMOUSLY RECOMMENDS THAT FIRST MISSISSIPPI
SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER.
OPINIONS OF AND PRESENTATIONS BY THE FINANCIAL ADVISORS
FINANCIAL ADVISOR TO MISSISSIPPI CHEMICAL
In its role as financial advisor to Mississippi Chemical, DLJ was asked by
Mississippi Chemical to render an opinion (the "DLJ Opinion") to the
Mississippi Chemical Board as to the fairness to Mississippi Chemical and its
shareholders, from a financial point of view, of the Merger Consideration Per
Share pursuant to the terms of the Merger Agreement. On August 27, 1996, DLJ
delivered the DLJ Opinion to the effect that as of the date
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of such opinion, and based upon and subject to the assumptions, limitations
and qualifications set forth in such opinion, the Merger Consideration Per
Share was fair to Mississippi Chemical and its shareholders from a financial
point of view.
A COPY OF THE DLJ OPINION IS ATTACHED AS APPENDIX C TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. MISSISSIPPI CHEMICAL SHAREHOLDERS ARE URGED TO READ THE
DLJ OPINION IN ITS ENTIRETY FOR ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER
MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY DLJ.
The DLJ Opinion was prepared for the Mississippi Chemical Board and is
directed only to the fairness of the Merger Consideration Per Share to
Mississippi Chemical and its shareholders from a financial point of view and
does not constitute a recommendation to any Mississippi Chemical shareholder
as to how such shareholder should vote at the Mississippi Chemical Annual
Meeting. DLJ was not retained as an advisor or agent to Mississippi Chemical
shareholders or any other person, other than as an advisor to the Mississippi
Chemical Board. As part of its investment banking business, DLJ is regularly
engaged in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes.
The DLJ Opinion does not constitute an opinion as to the price at which the
Mississippi Chemical Common Stock will actually trade at any time. The Merger
Consideration Per Share was determined in arm's length negotiations between
Mississippi Chemical and First Mississippi, in which negotiations DLJ advised
Mississippi Chemical. No restrictions or limitations were imposed by
Mississippi Chemical upon DLJ with respect to the investigations made or the
procedures followed by DLJ in rendering its opinion.
In arriving at its opinion, DLJ reviewed drafts of the Merger Agreement and
the Distribution Agreement. DLJ also reviewed financial and other information
that was publicly available or furnished to it by Mississippi Chemical and
First Mississippi, including information provided during discussions with
their respective managements. Included in such information were certain
financial projections of Mississippi Chemical prepared by the management of
Mississippi Chemical, certain financial projections of the Fertilizer Business
prepared by the management of First Mississippi. In addition, DLJ compared
certain financial and securities data of Mississippi Chemical and the
Fertilizer Business with various other companies whose securities are traded
in public markets, reviewed the historical stock prices and trading volumes of
Mississippi Chemical Common Stock, reviewed prices, premiums paid in certain
other selected business combinations and conducted such other financial
studies, analyses and investigations as DLJ deemed appropriate for purposes of
rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that
was available to it from public sources, that was provided to it by
Mississippi Chemical and First Mississippi or their respective
representatives, or that was otherwise reviewed by it. DLJ also assumed that
the financial projections supplied to it were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
respective managements of Mississippi Chemical and First Mississippi as to the
future operating and financial performance of Mississippi Chemical and the
Fertilizer Business, respectively. DLJ did not make any independent evaluation
of the assets or liabilities of Mississippi Chemical and the Fertilizer
Business nor did DLJ independently verify the information reviewed by it. As
to all legal matters, DLJ relied on advice of counsel to Mississippi Chemical.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, its date. It should be understood that, although subsequent
developments may affect its opinion, DLJ does not have any obligations to
update, revise or reaffirm the DLJ Opinion.
The following is a summary of the presentation made by DLJ to the
Mississippi Chemical Board at its August 19, 1996 board meeting.
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Analysis of Certain Other Publicly Traded Companies. To provide contextual
data and comparative market information, DLJ compared selected historical
earnings and operating and financial ratios for the Fertilizer Business (both
excluding the effect of the AMPRO expansion and including the effect of the
AMPRO expansion as if it had occurred at the beginning of the 1996 fiscal
year) to the corresponding publicly available data and ratios of Mississippi
Chemical and certain other fertilizer companies, focusing primarily on
nitrogen fertilizer producers, whose securities are publicly traded
(collectively, the "Comparable Companies"). The Comparable Companies consisted
of: Agrium, Inc., Arcadian Corporation, First Mississippi, Terra Industries
Inc. and Viridian Inc. Such data and ratios included ratios of Enterprise
Value ("Enterprise Value" is defined as Market Capitalization ("Market
Capitalization" is defined as the product of the stock price and total shares
outstanding) plus Net Debt ("Net Debt" is defined as total debt less cash and
cash equivalents)) as a multiple of earnings before interest, taxes,
depreciation and amortization ("EBITDA") and earnings before interest and
taxes ("EBIT") for the latest reported twelve months ("LTM") and estimated for
the year ended 1997. Enterprise Value for the Fertilizer Business is defined
as Purchase Price ("Purchase Price" is the market price of the shares of
Mississippi Chemical Common Stock to be issued pursuant to the Merger
Agreement) plus the amount of debt of the Fertilizer Business to be assumed by
the Surviving Corporation ($150.0 million). The average Comparable Company
multiples, excluding high and low values, of Enterprise Value to LTM EBITDA
and Enterprise Value to 1997 estimated EBITDA were 4.4x and 4.5x,
respectively. Mississippi Chemical's corresponding multiples as a stand-alone
business were 4.3x and 3.8x, respectively. This compares to comparable
multiples of 4.1x and 4.0x, respectively, for the Fertilizer Business,
excluding the AMPRO expansion. Including the pro forma effects of the AMPRO
expansion, the multiples were 3.4x and 3.6x, respectively. The average
Comparable Company multiple, excluding high and low values, of Enterprise
Value to LTM EBIT and Enterprise Value to estimated 1997 EBIT were 5.2x and
4.8x, respectively. Mississippi Chemical's corresponding multiples as a stand-
alone business were 5.2x and 4.7x, respectively. This compares to comparable
multiples of 4.3x for both the LTM EBIT and estimated 1997 EBIT for the
Fertilizer Business, excluding the AMPRO expansion. Including the pro forma
effects of the AMPRO expansion, the multiples were 3.6x and 3.9x,
respectively.
DLJ also considered the multiples of Market Capitalization to LTM net income
and Market Capitalization to estimated 1997 net income for the Comparable
Companies. Market Capitalization for the Fertilizer Business is defined as
Purchase Price. The average Comparable Company multiples of LTM net income and
estimated 1997 net income were 7.6x and 7.3x, respectively. Mississippi
Chemical's corresponding multiples as a stand-alone business were 8.5x and
7.6x, respectively. This compares to comparable multiples of 4.2x for both the
LTM net income and estimated 1997 net income for the Fertilizer Business,
excluding the AMPRO expansion, and multiples of 3.4x and 3.7x, respectively,
including the pro forma effects of the AMPRO expansion.
Analysis of Selected Comparable Transactions. DLJ compared selected
financial data, including Enterprise Value as a multiple of EBITDA and EBIT
for the Fertilizer Business with similar publicly available data for selected
merger and acquisition transactions in the fertilizer industry. DLJ noted that
none of the selected transactions reviewed was identical to the Merger and
that, accordingly, the analysis of comparable transactions necessarily
involves complex considerations and judgments concerning timing and
differences in financial and operating characteristics of the Fertilizer
Business and other factors that would affect the acquisition value of the
selected transactions.
DLJ compared the multiple proposed to be paid pursuant to the Merger
Agreement to selected recent fertilizer industry merger and acquisition
transactions. Based on the multiples of Enterprise Value to LTM EBITDA, the
implied purchase multiple of the Fertilizer Business was 4.1x without
including the impact of the AMPRO expansion, and 3.4x, including the pro forma
effects of the AMPRO expansion. This compares to an average Enterprise Value
to LTM EBITDA multiple of 6.9x for all the selected fertilizer merger and
acquisition transactions and 5.6x for the selected nitrogen fertilizer merger
and acquisition transactions. Based on multiples of Enterprise Value to LTM
EBIT, the implied purchase price multiple for the Fertilizer Business was
4.3x, without including the impact of the AMPRO expansion, and 3.6x, including
the pro forma effects of the AMPRO expansion. This compares to an average
Enterprise Value to LTM EBIT multiple of 10.8x for all the selected fertilizer
merger and acquisition transactions and 9.4x for the selected nitrogen
fertilizer merger and acquisition transactions.
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Discounted Cash Flow Analysis. DLJ also performed a discounted cash flow
analysis to determine the implied Enterprise Value of the Fertilizer Business.
In conducting its analysis, DLJ relied on certain assumptions, financial
projections and other information provided by First Mississippi management and
Mississippi Chemical management. Using the information set forth in the
Fertilizer Business projections, developed by Mississippi Chemical using
information from First Mississippi, DLJ performed stand-alone discounted cash
flow analyses for the Fertilizer Business. DLJ calculated the estimate "Free
Cash Flow" based on stand-alone projected unleveraged operating income
adjusted for: (i) taxes; (ii) certain projected non-cash items (i.e.,
depreciation and amortization); (iii) projected changes in working capital
(excluding cash balances); and (iv) projected capital expenditures. DLJ
analyzed the Fertilizer Business stand-alone projections and discounted the
stream of free cash flows from fiscal 1997 to fiscal 2006, provided in such
projections, back to current dollars using discount rates ranging from 12% to
15%. To estimate the residual values of the Fertilizer Business stand-alone at
the end of the forecast period, DLJ applied terminal multiples of 3.75 to 4.50
to the projected fiscal 2006 EBITDA and discounted such value estimates back
to current dollars using discount rates ranging from 12% to 15%. DLJ then
aggregated the present values of the free cash flows and the present values of
the residual values to derive a range of implied Enterprise Values for the
Fertilizer Business stand-alone. The range of implied Enterprise Values
resulting from these calculations was between $308 million and $382 million.
Stock Trading History. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices for Mississippi Chemical
Common Stock for the twelve month period ended August 16, 1996. This
information was presented solely to provide the Mississippi Chemical Board
with background regarding the stock price of Mississippi Chemical over the
twelve month period indicated. DLJ noted the high and low prices for
Mississippi Chemical over the indicated period were $25.125 and $17.75,
respectively.
Pro Forma Merger Analysis. DLJ analyzed certain pro forma effects resulting
from the Merger. DLJ reviewed the financial effects resulting from the Merger
by combining the operations of Mississippi Chemical and the Fertilizer
Business as projected by the managements of Mississippi Chemical and First
Mississippi both including and excluding the AMPRO expansion. The analysis
indicated that the pro forma earnings per share ("EPS") of Mississippi
Chemical on a fully taxed basis, without taking into account operating
synergies contemplated to result from the Merger, would have been higher in
the fiscal year ended June 30, 1996 and would be higher in the fiscal years
ending June 30, 1997 and 1998 than comparable projections for Mississippi
Chemical as a stand-alone company during the same periods.
Contribution Analysis. DLJ analyzed Mississippi Chemical's and the
Fertilizer Business's relative contribution to the combined companies with
respect to total revenues, EBITDA, EBIT and net income. Its analysis was made
for the actual fiscal year ended June 30, 1996 and projected results for the
fiscal years ending June 30, 1997 and 1998 (based on Mississippi Chemical
management projections). As a result of the Merger, current Mississippi
Chemical shareholders will own approximately 75% of the Mississippi Chemical
Common Stock after the Effective Time. This compares with Mississippi
Chemical's contribution to the combined companies' pro forma results for the
fiscal year ending June 30, 1996 of approximately 64% of revenues, 54% of
EBITDA, 51% of EBIT and 56% of net income.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ, but describes, in summary form, the principal
elements of the presentation made by DLJ to the Mississippi Chemical Board on
August 19, 1996. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Each of the analyses conducted by DLJ was carried out in order to
provide a different perspective on the transaction and add to the total mix of
information available. DLJ did not form a conclusion as to whether any
individual analyses, considered in isolation, supported or failed to support
an opinion as to fairness from a financial point of view. Rather, in reaching
its conclusion, DLJ considered the results of the analysis in light of each
other and ultimately reached its opinion based on the results of all analyses
taken as a whole. DLJ did not place particular reliance or weight on any
individual analysis, but instead concluded that its analyses, taken as a
whole, supported its determination. Accordingly, notwithstanding the separate
factors summarized above, DLJ believes that its
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analyses must be considered as a whole and that selecting portions of its
analysis and the factors considered by it, without considering all analyses
and factors, could create an incomplete or misleading view of the evaluation
process underlying its opinion. In performing its analyses, DLJ made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters. The analyses performed by DLJ are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Pursuant to the terms of an engagement letter dated August 6, 1996,
Mississippi Chemical agreed to pay DLJ a retainer fee of $100,000 upon
execution of the engagement letter, a fee of $100,000 upon notification that
DLJ was prepared to deliver the DLJ Opinion, and, upon consummation of the
Merger, a financial advisory fee of $2 million against which will be credited
the $200,000 in fees already earned. Mississippi Chemical has also agreed to
reimburse DLJ promptly for all out-of-pocket expenses (including the
reasonable fees and out-of-pocket expenses of counsel) incurred by DLJ in
connection with its engagement, and to indemnify DLJ and certain related
persons against certain liabilities in connection with its engagement,
including liabilities under the federal securities laws. The terms of the fee
arrangement with DLJ, which DLJ and Mississippi Chemical believe are customary
in transactions of this nature, were negotiated at arm's length between
Mississippi Chemical and DLJ and the Mississippi Chemical Board was aware of
such arrangement, including the fact that a significant portion of the
aggregate fee payable to DLJ is contingent upon consummation of the Merger.
In the ordinary course of business, DLJ may actively trade the securities of
both Mississippi Chemical and First Mississippi (and, after the Distribution,
ChemFirst) for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
FINANCIAL ADVISOR TO FIRST MISSISSIPPI
CS First Boston was retained to act as the exclusive financial advisor to
First Mississippi in connection with exploration of strategic alternatives for
the Fertilizer Business in March 1996. CS First Boston was selected by First
Mississippi because of its qualifications and familiarity with companies in
the fertilizer industry in which First Mississippi is engaged, as well as its
reputation as an internationally recognized investment banking firm. CS First
Boston has consented to the reprinting of its fairness opinion and the summary
of its activities included herein.
Opinion of CS First Boston
At the request of the First Mississippi Board, on August 27, 1996, CS First
Boston delivered a written opinion to the First Mississippi Board that, on the
basis of and subject to the matters set forth in its written opinion, as of
such date, the terms of the Distribution and the Merger, taken together, were
fair, from a financial point of view, to the holders of First Mississippi
Common Stock. In preparing this opinion, CS First Boston performed a variety
of financial and comparative analyses and made a detailed presentation to the
First Mississippi Board.
THE FULL TEXT OF THE WRITTEN OPINION OF CS FIRST BOSTON IS SET FORTH IN
APPENDIX D TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND DESCRIBES THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN. THE
OPINION OF CS FIRST BOSTON WAS FURNISHED FOR THE INFORMATION OF THE FIRST
MISSISSIPPI BOARD IN CONNECTION WITH ITS CONSIDERATION OF THE MERGER AND
DISTRIBUTION, TAKEN TOGETHER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
FIRST MISSISSIPPI SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE ON THE
MERGER. FIRST MISSISSIPPI SHAREHOLDERS ARE URGED TO READ THE OPINION IN ITS
ENTIRETY.
In connection with its opinion, CS First Boston reviewed certain publicly
available business and financial information relating to First Mississippi,
Mississippi Chemical and ChemFirst, as well as the Merger Agreement
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<PAGE>
and the form of Distribution Agreement (collectively, the "Transaction
Agreements"). CS First Boston also reviewed certain other information,
including financial forecasts and related information provided to CS First
Boston by First Mississippi; Blue Johnson Associates, a well-recognized source
for industry pricing forecasts and consultants to First Mississippi; and
Mississippi Chemical; and met with First Mississippi's and Mississippi
Chemical's managements (including the expected management of ChemFirst) to
discuss the business and prospects of First Mississippi, the Fertilizer
Business, ChemFirst and Mississippi Chemical. CS First Boston also considered,
as applicable, certain financial and stock market data of First Mississippi,
ChemFirst and/or Mississippi Chemical and compared that data with similar data
for other publicly held companies in businesses similar to those of First
Mississippi, ChemFirst and/or Mississippi Chemical and considered the
financial terms of certain other business combinations and other transactions
which had been effected. CS First Boston also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which it deemed relevant.
In connection with its review, CS First Boston did not assume any
responsibility for independent verification of any of the foregoing
information and relied on it being complete and accurate in all material
respects. With respect to the financial forecasts, CS First Boston assumed
that such forecasts were reasonably prepared on bases reflecting the best
currently available estimates and judgments of First Mississippi's and
Mississippi Chemical's managements (including the expected management of
ChemFirst) as to the future financial performance of First Mississippi,
ChemFirst and Mississippi Chemical. CS First Boston did not make an
independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of First Mississippi, ChemFirst or Mississippi Chemical, nor was
CS First Boston furnished with any such evaluations or appraisals. CS First
Boston assumed that ChemFirst would not have any material contingent
liabilities except as reflected in First Mississippi's financial statements.
CS First Boston's opinion was necessarily based upon financial, economic,
market and other conditions as they existed and could be evaluated on the date
of its opinion. CS First Boston did not express any opinion as to what the
value of the ChemFirst Common Stock actually would be when issued to the
holders of First Mississippi Common Stock in the Distribution or the prices at
which such common stock would trade subsequent to the Distribution. CS First
Boston also did not express any opinion as to what the value of the
Mississippi Chemical Common Stock actually would be when issued to the holders
of First Mississippi Common Stock in the Merger or the prices at which such
common stock would trade subsequent to the Merger. In advising First
Mississippi as to the fairness from a financial point of view of the terms of
the Distribution and the Merger, taken together, the opinion of CS First
Boston addressed only the financial terms of the Distribution and the
consideration to be received by the holders of First Mississippi Common Stock
in the Merger. CS First Boston also understood that the financial statements,
pro forma financial statements and registration statement of ChemFirst had not
yet been prepared. In connection with its engagement, CS First Boston
approached third parties to solicit indications of interest in a possible
acquisition of the Fertilizer Business and held preliminary discussions with
certain of those parties prior to the date of the opinion. However, in the
course of its engagement, CS First Boston did not approach any third parties
to solicit indications of interest in a possible acquisition of First
Mississippi as a whole. CS First Boston was not requested to opine as to, and
its opinion did not in any manner address, First Mississippi's underlying
business decision to effect the Distribution and the Merger taken together.
CS First Boston assumed, with the consent of First Mississippi and
Mississippi Chemical, that the Distribution and the Merger taken together
would comply with applicable federal and state laws, including, without
limitation, laws relating to the payment of dividends, bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer or other similar
laws affecting creditors' rights generally. CS First Boston assumed, with the
consent of First Mississippi and Mississippi Chemical, that receipt of
ChemFirst Common Stock and Mississippi Chemical Common Stock would be tax-free
for federal income tax purposes to holders of First Mississippi Common Stock
and that none of First Mississippi, ChemFirst, and Mississippi Chemical would
recognize income, gain or loss as a result of the Distribution and the Merger
taken together. CS First Boston also assumed, with the consent of First
Mississippi, that the Distribution and the Merger taken together would not
result, individually or in the aggregate, in the cancellation of any contracts
material to ChemFirst or its prospects. In addition, CS First Boston assumed,
with the consent of First Mississippi and Mississippi Chemical,
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that First Mississippi and Mississippi Chemical would perform their respective
indemnification obligations which may arise under the Distribution Agreement
in accordance with its terms. CS First Boston assumed, with the consent of
First Mississippi, that (i) the net working capital of the Fertilizer Business
as of the Effective Time would be $8.0 million; (ii) there would be no unpaid
balance as of the Effective Time of the AMPRO Retrofit (as defined in the
Merger Agreement) due under the Kellogg Agreement (as defined in the Merger
Agreement); (iii) the Effective Date would occur on or before March 31, 1997;
(iv) the refinancing of the outstanding debt of the Fertilizer Business (other
than accounts payable incurred in the ordinary course of the Fertilizer
Business) in the manner contemplated by the Merger Agreement, together with
all transaction, severance and other costs payable by First Mississippi in
connection with the transactions contemplated by the Merger Agreement, would
require an aggregate amount of $105 million, and that all of the proceeds of
the Financing, less such $105 million, would be contributed to ChemFirst by
First Mississippi.
On the basis of and subject to the foregoing, CS First Boston rendered its
opinion that, as of the date of such opinion, the terms of the Distribution
and the Merger, taken together, were fair, from a financial point of view, to
the holders of First Mississippi Common Stock.
In preparing its opinion to the First Mississippi Board, CS First Boston
performed a variety of financial and comparative analyses, including those
described under "--Presentation by CS First Boston." The summary of the CS
First Boston analyses set forth below does not purport to be a complete
description of the analyses underlying the CS First Boston opinion, but
includes a summary of the material valuation methodologies employed by CS
First Boston. The preparation of a fairness opinion is a complex analytic
process involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
described in summary fashion. In arriving at its opinion, CS First Boston, as
financial advisor to First Mississippi, made qualitative judgments as to the
significance and relevance of each analysis and factor considered by it.
Accordingly, CS First Boston believes that its analyses must be considered as
a whole and that selecting portions of its analyses and factors considered,
without considering all analyses and factors, could create a misleading or
incomplete view of the processes underlying such analyses and its opinion. In
its analyses, CS First Boston made numerous assumptions with respect to First
Mississippi, the Fertilizer Business, ChemFirst, Mississippi Chemical,
industry performance, regulatory, general business, economic, market and
financial conditions and other matters, many of which are beyond the control
of First Mississippi, ChemFirst, and Mississippi Chemical. No company,
transaction or business used in such analyses as a comparison is identical to
First Mississippi, the Fertilizer Business, ChemFirst, Mississippi Chemical or
the Distribution and the Merger taken together, nor is an evaluation of the
results of such analyses entirely mathematical; rather, it involves complex
considerations and judgments concerning financial and operating
characteristics and other factors which could affect the acquisition, public
trading or other values of the companies, business segments or transactions
being analyzed. The estimates contained in such analyses and the ranges of
valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by such
analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, because such
assumptions and estimates are inherently subject to substantial uncertainty,
the actual results of First Mississippi, the Fertilizer Business, ChemFirst,
Mississippi Chemical, as well as industry performance, regulatory, general
business, economic, market and financial conditions, and other matters, may
differ materially from those assumed in preparing the analyses, which could
cause actual results to differ materially from such analyses.
Presentation by CS First Boston
At the meeting of the First Mississippi Board on August 27, 1996, CS First
Boston, as the financial advisor to First Mississippi, made a presentation to
the First Mississippi Board of its analyses as of such date delivered in
connection with its opinion, a summary of which appears below.
The following quantitative information, to the extent it is based on market
data, is based on market data as it existed at August 27, 1996, and is not
necessarily indicative of current market conditions.
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<PAGE>
Market Test. Because First Mississippi believed that likely acquirors of the
Fertilizer Business would not be interested in the other businesses of First
Mississippi, First Mississippi and CS First Boston, as financial advisor to
First Mississippi, focused their efforts on soliciting indications of
interests from strategic buyers with a publicly-traded equity currency which
could be used in a Morris Trust transaction as consideration. During such
auction, CS First Boston contacted eight such potential purchasers and
received unsolicited calls from several other interested parties. All of the
potential purchasers contacted were companies in the fertilizer industry.
Discounted Cash Flow Analysis of the First Mississippi Fertilizer
Business. CS First Boston analyzed the discounted cash flow value of the
equity of the Fertilizer Business using discount rates ranging from 12.0% to
13.0% and terminal EBITDA multiples ranging from 3.5x to 3.75x. Based upon the
foregoing, CS First Boston estimated that the discounted cash flow value of
the equity of the First Mississippi Fertilizer Business (excluding First
Mississippi's 50% interest in a Pasadena, Texas ammonia terminal purchased for
$11 million in March 1996 (the "Excluded Terminal")) ranged from approximately
$274.1 million to approximately $293.2 million.
Comparable Companies Analysis. CS First Boston analyzed the ratio of
adjusted market value (as of August 23, 1996) to estimated (actual in the case
of Mississippi Chemical) 1996 and estimated 1997 EBITDA for four nitrogen
fertilizer companies, consisting of Mississippi Chemical, Arcadian, Viridian
and Terra Industries (the "Comparable Companies"). The adjusted market value
(market value plus net debt) to estimated (actual in the case of Mississippi
Chemical) 1996 EBITDA ratios for the Comparable Companies ranged from 3.4x to
4.4x, and the adjusted market value to estimated 1997 EBITDA ranged from 2.7x
to 4.3x. CS First Boston performed a similar analysis with respect to three
potash/phosphate fertilizer companies; however, CS First Boston advised the
First Mississippi Board that the analysis of the potash/phosphate fertilizer
companies was not as relevant as the analysis of the Comparable Companies
because, as a nitrogen fertilizer manufacturer, First Mississippi produces
different commodities than the potash/phosphate fertilizer companies. CS First
Boston estimated that the Fertilizer Business (excluding the Excluded
Terminal) would have an implied reference range of $235 million to $265
million, based on its estimate of a comparable companies EBITDA multiple range
of 3.5x to 3.9x.
Comparable Acquisitions. CS First Boston noted that there was only one
recent nitrogen fertilizer transaction with enough public information
available to guide relative valuation: Terra Industries' acquisition of
Agricultural Minerals and Chemicals in October 1994 with a price/trailing 12
month EBITDA of 3.5x and price/trailing 3 year average EBITDA of 4.4x. Given
such circumstances, CS First Boston concluded that the valuation for the
Fertilizer Business derived from the comparable acquisitions analysis was not
as relevant as certain of the other valuation methodologies described in this
section, but that it did lend support to the ranges suggested by such other
valuation methodologies.
Valuation of the Consideration for the Merger. CS First Boston noted that
Mississippi Chemical will assume, as part of the consideration for the Merger,
$150 million to $164 million (depending on the stock price of Mississippi
Chemical Common Stock) in First Mississippi indebtedness attributable to the
Financing in the Merger, that First Mississippi, immediately prior to the
Distribution, will refinance its existing debt with the proceeds of the
Financing then distribute the excess proceeds (estimated to be between $45
million to $59 million) to ChemFirst, and that ChemFirst is expected to begin
its independent existence debt-free with a cash surplus. CS First Boston also
noted that the value of the stock consideration in the Merger will fluctuate
based on the stock price of Mississippi Chemical Common Stock because holders
of common stock of First Mississippi will receive a fixed number of shares of
Mississippi Chemical (subject to a downward adjustment from $25 up to $27 per
share of Mississippi Chemical Common Stock). See "The Merger-- Terms of the
Merger--Conversion of First Mississippi Common Stock in the Merger". CS First
Boston performed a relative contribution analysis in which it analyzed pro
forma revenues, EBITDA and EBIT of the combination of Mississippi Chemical and
the Fertilizer Business for fiscal years 1995, 1996 and 1997 (estimated),
based, in part, on certain forecasted financial information provided by the
managements of First Mississippi and Mississippi Chemical. CS First Boston
advised the First Mississippi Board that the most relevant portion of the
relative contribution analysis was the analysis for fiscal year 1997. Such pro
forma contribution analysis indicated that First Mississippi would contribute
forecasted revenues of 35%, EBITDA of 41%, and EBIT of 43% to the combined
entity for fiscal year 1997 (estimated), assuming that no benefits from
operating earnings synergies
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would be achieved in the Merger. Pro forma for the Merger and assuming a
Mississippi Chemical Common Stock price of $21 per share (the closing price on
August 23, 1996), the adjusted market value of Mississippi Chemical would be
$686 million, of which the consideration for the Merger would constitute 43%,
and holders of First Mississippi Common Stock would receive Mississippi
Chemical Common Stock representing an approximate 24% stake in Mississippi
Chemical. This was compared to the contribution by the Fertilizer Business to
the revenues, EBITDA and EBIT of the combined entity in 1995, 1996 and 1997
(estimated). Assuming $295 million in consideration for the Merger, with
outstanding debt of $150 million, CS First Boston noted the pro forma
accretive effect in 1996 and expected accretive effect in 1997 and 1998 of the
Merger to existing holders of Mississippi Chemical Common Stock. CS First
Boston also reviewed the recent trading history of Mississippi Chemical Common
Stock, including stock repurchase activity by Mississippi Chemical. CS First
Boston compared, as of August 23, 1996, the ratios of stock price to estimated
1996 and 1997 earnings and the ratios of adjusted market value to estimated
1996 and 1997 EBITDA for the Comparable Companies (excluding Mississippi
Chemical) to those ratios for Mississippi Chemical. The 1996 price to
estimated earnings ratios for the Comparable Companies (excluding Mississippi
Chemical) ranged from 6.8x to 7.7x, as compared to 8.5x for Mississippi
Chemical. The 1997 price to estimated earnings ratios for the Comparable
Companies ranged from 6.3x to 7.9x, as compared to 7.9x for Mississippi
Chemical. The adjusted market value to estimated 1996 EBITDA ratios for the
Comparable Companies ranged from 3.4x to 4.4x, as compared to 3.8x for
Mississippi Chemical. The adjusted market value to estimated 1997 EBITDA
ratios for the Comparable Companies ranged from 2.7x to 4.3x, as compared to
3.5x for Mississippi Chemical.
Review of ChemFirst. CS First Boston also analyzed certain forecasted
financial information for ChemFirst giving effect to the Distribution and the
Merger taken together provided by the management of First Mississippi
(including the expected management of ChemFirst, which forecasted information
excluded any effect from cash contributions from First Mississippi) prior to
the Distribution. CS First Boston performed an analysis of ChemFirst based
upon estimated 1996 and 1997 EBITDA and earnings per share (EPS) trading
multiples of a select group of comparable public specialty chemical companies,
including Cambrex, Cabot, H.B. Fuller, ISP, Learonal, Quaker Chemical and
Sigma-Aldrich.
The foregoing is a summary of the material terms of the presentation by CS
First Boston to the First Mississippi Board on August 27, 1996, and does not
purport to be a complete description of such presentation. The analyses by CS
First Boston in connection with such presentation do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. As described above, the opinion of CS First Boston and
its presentation to the First Mississippi Board was one of a number of factors
considered by the First Mississippi Board in connection with its approval of
the Merger and the Distribution.
Financial Advisory Fees
For its financial advisory services in connection with the Merger and the
Distribution, CS First Boston will receive a fee equal to 0.65% of the
Aggregate Consideration in connection with the Merger and the Distribution.
For this purpose, "Aggregate Consideration" means the total fair market value
(at the time of closing) of all consideration (including cash, securities,
property, all debt remaining on the financial statements of the Fertilizer
Business at closing, any other indebtedness and obligations assumed by
Mississippi Chemical and any other form of consideration) paid or payable, or
otherwise to be distributed, directly or indirectly, to First Mississippi, or
to First Mississippi's shareholders, in connection with the Distribution and
the Merger. In addition, CS First Boston [has received] a financial advisory
fee of $250,000, which is fully creditable against the fee described above.
First Mississippi has also agreed to reimburse CS First Boston for its
reasonable out-of-pocket expenses, including the fees and expenses of legal
counsel and any other advisors retained by it, and to indemnify CS First
Boston and certain of its related persons against certain liabilities in
connection with its engagement, including certain liabilities under the
federal securities laws.
In the ordinary course of its business, CS First Boston may actively trade
in the debt and equity securities of First Mississippi and Mississippi
Chemical (and, after the Distribution, ChemFirst) for its own account or for
the accounts of its customers, and, accordingly, may at any time hold long or
short positions in such securities.
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THE MERGER
This section of this Joint Proxy Statement/Prospectus describes certain
aspects of the proposed Merger. To the extent that it relates to the Merger
Agreement, the following description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which is
attached as Appendix A to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference. All shareholders are urged to read the
Merger Agreement in its entirety.
TERMS OF THE MERGER
The Merger
At the Effective Time, First Mississippi, Mississippi Chemical and Miss Sub
will consummate the Merger in which Miss Sub will be merged with and into
First Mississippi, with First Mississippi as the Surviving Corporation, and
the separate corporate existence of Miss Sub shall cease. As a result of the
Merger, First Mississippi will become a wholly owned subsidiary of Mississippi
Chemical.
Conversion of First Mississippi Common Stock in the Merger
Pursuant to the Merger Agreement, at the Effective Time, each issued and
outstanding share of First Mississippi Common Stock will be converted into the
right to receive the Merger Consideration Per Share in fully paid and
nonassessable shares of Mississippi Chemical Common Stock. The "Merger
Consideration Per Share" means 6,904,762 shares of Mississippi Chemical Common
Stock divided by the number of shares of First Mississippi Common Stock
outstanding at the Effective Time as certified to Mississippi Chemical by
First Mississippi's transfer agent and registrar (the "Effective Time
Outstanding Shares"); provided that, if the average of the Daily Prices (as
defined below), as derived from The Wall Street Journal, for the 10 trading
days immediately preceding the trading day prior to the Effective Time (the
"Average Mississippi Chemical Price"), exceeds $25.00, then the Merger
Consideration Per Share will be the greater of (i) 6,393,298 shares of
Mississippi Chemical Common Stock divided by the Effective Time Outstanding
Shares and (ii) the number of shares of Mississippi Chemical Common Stock
determined by dividing (A) the product of (x) 6,904,762 multiplied by (y) a
fraction, the numerator of which is $25.00 and the denominator of which is the
Average Mississippi Chemical Price, by (B) the Effective Time Outstanding
Shares. The term "Daily Price" means for each trading day the average of the
opening price, high price, low price and closing price for Mississippi
Chemical Common Stock. Merger Consideration Per Share was determined through
arm's-length negotiations between First Mississippi and Mississippi Chemical.
Because a fixed number of shares of Mississippi Chemical Common Stock will
be issued in the Merger (unless the Average Mississippi Chemical Price is
between $25.00 and $27.00), because additional shares of First Mississippi
Common Stock may be issued prior to the Effective Time, including pursuant to
the exercise of First Mississippi Options, and because the market price of
Mississippi Chemical Common Stock fluctuates, the value of the shares of
Mississippi Chemical Common Stock that each First Mississippi shareholder will
be entitled to receive may increase or decrease prior to and following the
Merger. Set forth below is a table setting out the calculation of the Merger
Consideration Per Share based on various Average Mississippi Chemical Prices
and the assumed trading value of such consideration at such Average
Mississippi Chemical Prices. Such table does not reflect the increase in the
value of ChemFirst Common Stock as a result of the Financing and the
contribution of certain proceeds thereof to ChemFirst pursuant to the
Distribution Agreement. There can be no assurance that at the Effective Time
the actual trading price of Mississippi Chemical Common Stock to be received
in the Merger will equal the estimated trading value shown in the table even
if the Average Mississippi Chemical Price shown in the table is in fact used
to calculate the Merger Consideration Per Share pursuant to the Merger
Agreement.
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MERGER CONSIDERATION CALCULATIONS
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF AGGREGATE MERGER
SHARES OF MISSISSIPPI CONSIDERATION ASSUMED TRADING
CHEMICAL BASED ON AVERAGE MERGER VALUE OF MERGER
AVERAGE MISSISSIPPI COMMON STOCK TO MISSISSIPPI CONSIDERATION CONSIDERATION
CHEMICAL PRICE(1) BE ISSUED CHEMICAL PRICE PER SHARE(2) PER SHARE(3)
- ------------------- --------------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
$17.00 6,904,762 $117,380,954 0.3348 $5.69
$17.50 6,904,762 $120,833,335 0.3348 $5.86
$18.00 6,904,762 $124,285,716 0.3348 $6.03
$18.50 6,904,762 $127,738,097 0.3348 $6.19
$19.00 6,904,762 $131,190,478 0.3348 $6.36
$19.50 6,904,762 $134,642,859 0.3348 $6.53
$20.00 6,904,762 $138,095,240 0.3348 $6.70
$20.50 6,904,762 $141,547,621 0.3348 $6.86
$21.00 6,904,762 $145,000,002 0.3348 $7.03
$21.50 6,904,762 $148,452,383 0.3348 $7.20
$22.00 6,904,762 $151,904,764 0.3348 $7.37
$22.50 6,904,762 $155,357,145 0.3348 $7.53
$23.00 6,904,762 $158,809,526 0.3348 $7.70
$23.50 6,904,762 $162,261,907 0.3348 $7.87
$24.00 6,904,762 $165,714,288 0.3348 $8.04
$24.50 6,904,762 $169,166,669 0.3348 $8.20
$25.00 6,904,762 $172,619,046 0.3348 $8.37
$25.43(4) 6,788,008 $172,619,046 0.3292 $8.37
$25.50 6,769,375 $172,619,046 0.3283 $8.37
$26.00 6,639,194 $172,619,046 0.3220 $8.37
$26.50 6,513,926 $172,619,046 0.3159 $8.37
$27.00 6,393,298 $172,619,046 0.3100 $8.37
$27.50 6,393,298 $175,815,695 0.3100 $8.53
$28.00 6,393,298 $179,012,344 0.3100 $8.68
$28.50 6,393,298 $182,208,993 0.3100 $8.84
$29.00 6,393,298 $185,405,642 0.3100 $8.99
$29.50 6,393,298 $188,602,291 0.3100 $9.15
$30.00 6,393,298 $191,798,940 0.3100 $9.30
</TABLE>
- --------
(1) In the event that the Average Mississippi Chemical Price at the Effective
Time is less than $19.00, the amount of the Financing will increase under
the terms of the Merger Agreement and result in additional cash
distributions to ChemFirst under the terms of the Distribution Agreement.
See " --The Financing and Application of Proceeds."
(2) Represents the number of shares of Mississippi Chemical Common Stock to be
issued in the Merger in consideration for each share of First Mississippi
Common Stock, assuming 20,621,736 shares of First Mississippi Common Stock
are outstanding as of the Effective Time.
(3) The assumed trading value of the Merger Consideration Per Share is
calculated by multiplying the Merger Consideration Per Share times the
Average Mississippi Chemical Price.
(4) $25.43 represents the Average Mississippi Chemical Price calculated as of
November 14, 1996.
All shares of First Mississippi Common Stock, when converted pursuant to the
Merger, will no longer be outstanding and will automatically be cancelled and
retired, and each holder of a certificate representing any such shares will
cease to have any rights with respect thereto, except the right to receive the
shares of Mississippi Chemical Common Stock and any cash in lieu of fractional
shares of Mississippi Chemical Common Stock to be
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issued or paid in consideration therefor upon the surrender of such
certificate in accordance with the Merger Agreement without interest. As of
the First Mississippi Record Date, 20,621,736 shares of First Mississippi
Common Stock were outstanding. First Mississippi does not anticipate any
material change in the number of shares of First Mississippi Common Stock
outstanding during the period between the First Mississippi Record Date and
the Effective Time, although certain holders of First Mississippi Options are
entitled to exercise such options, which would increase the number of shares
of First Mississippi Common Stock outstanding.
Exchange of Certain Stock Options
At the Effective Time, each outstanding First Mississippi Option held by any
Fertilizer Employee will be exchanged for a Mississippi Chemical Option equal
to the number of shares of First Mississippi Common Stock into which such
First Mississippi Option was exercisable times the Mississippi Chemical Option
Conversion Ratio (the average trading price of First Mississippi Common Stock
for the 10 trading day period preceding the trading day prior to the date that
the First Mississippi Common Stock commences trading on an ex-dividend basis
with respect to the Distribution divided by the average trading price of
Mississippi Chemical Common Stock over the same period). The exercise price of
the Mississippi Chemical Option will equal the exercise price of the First
Mississippi Option divided by the Mississippi Chemical Option Conversion
Ratio.
Each First Mississippi Option held by any person other than a Fertilizer
Employee will be exchanged for options to purchase ChemFirst Common Stock. See
"The Distribution--Terms of the Employee Benefits Agreement."
Cash in Lieu of Fractional Shares
No fractional shares of Mississippi Chemical Common Stock will be issued in
the Merger. The Merger Agreement provides that each First Mississippi
shareholder who otherwise would have been entitled to receive a fractional
share of Mississippi Chemical Common Stock will be entitled to receive, in
lieu thereof, an amount in cash equal to such fraction multiplied by the
Average Mississippi Chemical Price.
EFFECTIVE TIME; CLOSING
The Merger will become effective and the Effective Time will occur following
the Distribution, upon the filing of Articles of Merger with the Secretary of
State of the State of Mississippi or at such time thereafter as is provided in
the Articles of Merger. The Merger Agreement provides that the closing of the
Merger (the "Closing") will take place on a date to be specified by First
Mississippi and Mississippi Chemical, which date shall be no later than the
second business day after the satisfaction or waiver of certain of the
conditions specified therein or on such other date as the parties thereto may
agree. The date and time at which the Closing occurs is referred to herein as
the "Closing Date."
DIRECTORS AND OFFICERS AFTER THE MERGER
The directors of Miss Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, each to hold office in accordance
with the charter and bylaws of the Surviving Corporation (the charter and
bylaws of Miss Sub as in effect at the Effective Time). The officers of Miss
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the charter and
bylaws of the Surviving Corporation until their successors are duly elected or
appointed and qualified.
EXCHANGE OF CERTIFICATES IN THE MERGER
As soon as practicable after the Effective Time, KeyCorp Shareholder
Services, Inc. (the "Exchange Agent") will mail to each First Mississippi
shareholder of record (i) a letter of transmittal and (ii) instructions for
use in effecting the surrender of certificates, which prior to the Effective
Time represented outstanding shares
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<PAGE>
of First Mississippi Common Stock ("Certificates"), in exchange for
certificates representing shares of Mississippi Chemical Common Stock. FIRST
MISSISSIPPI SHAREHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR
EXCHANGE UNTIL SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. Until
surrendered, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive a certificate representing that
number of whole shares of Mississippi Chemical Common Stock into which the
shares of First Mississippi Common Stock formerly represented by such
Certificate were converted in the Merger and a cash payment in lieu of any
fractional shares of Mississippi Chemical Common Stock. The holders of
Certificates will not be entitled to receive dividends or other distributions
declared or made after the Effective Time with respect to Mississippi Chemical
Common Stock until such Certificates are surrendered and no cash payment with
respect to fractional shares shall be paid to any such holder until such
Certificates are surrendered. There shall be paid to the record holder of the
Mississippi Chemical Common Stock issued in exchange for each Certificate,
without interest, (i) at the time of such surrender, the amount of cash
payable in lieu of any fractional shares of Mississippi Chemical Common Stock
to which such holder is entitled and the amount of dividends or other
distributions with a record date after the Effective Time theretofore
previously paid with respect to such whole shares of Mississippi Chemical
Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to such surrender and a payment date subsequent to surrender payable
with respect to such whole shares of Mississippi Chemical Common Stock.
Prior to the Effective Time, Mississippi Chemical will deposit with the
Exchange Agent certificates representing the Mississippi Chemical Common Stock
together with cash to be paid in lieu of fractional shares. Holders who do not
surrender their Certificates within six months of the Effective Time can look
only to Mississippi Chemical for payment of their claim to Mississippi
Chemical Common Stock and any cash due for fractional shares.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties thereto. The Merger Agreement includes representations and warranties
by First Mississippi as to: (a) the corporate organization of First
Mississippi, its subsidiaries and the Fertilizer Business; (b) the
capitalization of First Mississippi; (c) the authorization of First
Mississippi's execution and performance of the Merger Agreement and the
Distribution Agreement; (d) required consents and approvals; (e) the
noncontravention of any agreement, law, or charter or bylaw provision by the
Merger Agreement, the Distribution Agreement and the consummation by First
Mississippi of the transactions contemplated thereby; (f) the absence of the
need, except as specified, for governmental consents to the Merger to be
obtained by First Mississippi; (g) the accuracy of certain of First
Mississippi's reports and financial statements filed under the Exchange Act;
(h) the accuracy of information supplied by First Mississippi for use in this
Joint Proxy Statement/Prospectus; (i) the accuracy of the pro forma balance
sheet relating to the Fertilizer Business delivered to Mississippi Chemical;
(j) pending or threatened litigation against or related to the Fertilizer
Business; (k) the terms, existence, operations, liabilities and compliance
with applicable laws of First Mississippi's employee benefit plans; (l) the
absence of undisclosed liabilities of, and of material adverse changes or
events relating to, the Fertilizer Business; (m) no violation of law by First
Mississippi; (n) certain tax matters; (o) certain environmental matters; (p)
certain agreements of the Fertilizer Business; (q) the receipt of an opinion
of First Mississippi's financial advisor in connection with the Merger and the
Distribution; (r) title to assets; (s) the lack of labor controversies
relating to the Fertilizer Business; and (t) maintenance of insurance.
The Merger Agreement also includes representations and warranties by
Mississippi Chemical and Miss Sub as to: (a) the corporate organization of
Mississippi Chemical and Miss Sub; (b) the capitalization of Mississippi
Chemical; (c) the authorization of Mississippi Chemical's and Miss Sub's
execution and performance of the Merger Agreement; (d) required consents and
approvals; (e) the noncontravention of any agreement, law, or charter or bylaw
provision by the Merger Agreement and the consummation by Mississippi Chemical
and Miss Sub of the transactions contemplated thereby; (f) the absence of the
need, except as specified, for governmental
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consents to the Merger; (g) the accuracy of certain of Mississippi Chemical's
reports and financial statements filed under the Exchange Act; (h) the
accuracy of information supplied by Mississippi Chemical for use in this Joint
Proxy Statement/Prospectus and the Registration Statement; (i) pending or
threatened litigation against Mississippi Chemical or any subsidiary; (j) no
violation of law by Mississippi Chemical or any subsidiary; (k) certain
environmental matters; (l) the lack of prior operations of Miss Sub; (m)
ownership of First Mississippi Common Stock by Mississippi Chemical; and (n)
the receipt of an opinion of Mississippi Chemical's financial advisor in
connection with the Merger.
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME; CERTAIN COVENANTS
First Mississippi
The Merger Agreement provides that, during the period from the date of the
Merger Agreement until the Effective Time, except (i) for the Distribution and
the other transactions expressly provided for in the Distribution Agreement,
(ii) as contemplated or permitted by the Merger Agreement or (iii) to the
extent that Mississippi Chemical otherwise consents in writing: (a) First
Mississippi and its subsidiaries will carry on the Fertilizer Business in the
usual, regular and ordinary course consistent with past practice; (b) First
Mississippi will not (i) declare or pay any dividends, except for the
Distribution and for regular quarterly cash dividends, (ii) reclassify any of
its capital stock or (iii) repurchase any shares of its capital stock; (c)
with certain exceptions, First Mississippi will not, and will not permit any
of its subsidiaries to, issue any shares of its capital stock of any class,
any other equity interests or any securities convertible into, or any
warrants, calls, options or other rights to acquire, any such shares, equity
interests or convertible securities; (d) First Mississippi will not amend its
Charter of Incorporation or Bylaws in a manner adverse to Mississippi Chemical
or Miss Sub or otherwise inconsistent with the transactions contemplated by
the Merger Agreement; (e) First Mississippi will not dispose of, or agree to
dispose of, any of the assets included in the Fertilizer Business, except in
the ordinary course of business; (f) with certain exceptions, First
Mississippi will not, nor will it permit any of its subsidiaries to, incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities
of First Mississippi or any of its subsidiaries; (g) except as would not
increase the costs of the Fertilizer Business and except for changes in
response to any changes in applicable law, First Mississippi will not, and
will not permit any of its subsidiaries to, adopt or amend or terminate any
employee benefit plan or, except for normal increases in the ordinary course
of business, increase the compensation or fringe benefits of any director,
officer or employee; (h) First Mississippi will not take any action that would
or is reasonably likely to result in any of the conditions to the Merger not
being satisfied or would materially impair the ability of First Mississippi to
consummate the Distribution or the Merger; (i) First Mississippi will abide by
and cause ChemFirst to abide by their respective obligations under the
Distribution Documents; and (j) First Mississippi will not change any of its
accounting principles, policies or procedures, except as may be required by
generally accepted accounting principles.
Mississippi Chemical
The Merger Agreement provides that, during the period from the date of the
Merger Agreement until the Effective Time, except (i) as contemplated or
permitted by the Merger Agreement or (ii) to the extent that First Mississippi
shall otherwise consent in writing: (a) Mississippi Chemical and its
subsidiaries will carry on their business in the usual, regular and ordinary
course consistent with past practice; (b) Mississippi Chemical will not (i)
declare or pay any dividends, except for regular quarterly cash dividends,
(ii) reclassify any of its capital stock or (iii) repurchase any shares of its
capital stock other than repurchases of Mississippi Chemical Common Stock
pursuant to its repurchase program and made prior to the 10 trading days prior
to the date of the first trading day used in calculating the Average
Mississippi Chemical Price; (c) Mississippi Chemical will not, and will not
permit any of its subsidiaries to, issue any shares of its capital stock of
any class, any other equity interests or any securities convertible into, or
any warrants, calls, options or other rights to acquire, any such shares,
equity interests or convertible securities; (d) Mississippi Chemical will not
amend its Articles of Incorporation or bylaws in a manner adverse to First
Mississippi or otherwise inconsistent with the transactions
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contemplated by the Merger Agreement; (e) with certain exceptions, Mississippi
Chemical will not, nor will it permit any of its subsidiaries to incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities
of Mississippi Chemical or any of its subsidiaries; (f) Mississippi Chemical
will not change any of its accounting principles, policies or procedures,
except as may be required by generally accepted accounting principles; and (g)
Mississippi Chemical will not take any action that would or is reasonably
likely to result in any of the conditions to the Merger set forth in the
Merger Agreement not being satisfied or that would materially impair the
ability of Mississippi Chemical or Miss Sub to consummate the Merger.
First Mississippi Rights Plan
First Mississippi has agreed to take all action necessary to render the
rights issued pursuant to the Rights Agreement, dated as of February 27, 1996
(the "First Mississippi Rights Agreement"), between First Mississippi and
KeyCorp Shareholder Services, Inc., as rights agent, inapplicable to the
Merger, the Distribution and all other transactions contemplated by the Merger
Agreement.
FINANCING AND APPLICATION OF PROCEEDS
Under the Merger Agreement, Mississippi Chemical has agreed to use its best
efforts to assist First Mississippi in arranging the Financing. As further
described below, a portion of the proceeds of the Financing will be used to
refinance First Mississippi's existing indebtedness and pay certain
transaction costs, with the remaining proceeds, estimated to be approximately
$50.0 million, to be contributed to ChemFirst prior to the Distribution
pursuant to the terms of the Distribution Agreement. As a result of the
Financing, which will remain the obligation of the Surviving Corporation, and
the application of its proceeds, at the time of the Distribution ChemFirst
will have no significant long-term indebtedness and available cash reserves,
currently estimated to be approximately $50.0 million. See "Pro Forma
Financial Information" in the ChemFirst Prospectus attached as Appendix E to
this Joint Proxy Statement/Prospectus. The Financing will be in an aggregate
amount of $150.0 million, subject to the following adjustments: (a) the amount
of the Financing will be increased (i) by an amount equal to the product of
(x) $19.00 less the Average Mississippi Chemical Price times (y) 6,904,762,
subject to a maximum adjustment of approximately $13.8 million, (ii) the costs
of obtaining the Financing and (iii) if the Closing has not occurred by
December 31, 1996, $56,575 per day from January 1, 1997 until the Effective
Time, and the net cash used by the Fertilizer Business after December 31,
1996; (b) the amount of the Financing will be reduced by the unpaid balance as
of the Effective Time of First Mississippi's capital improvement commitments
in connection with its AMPRO facility; and (c) the amount of the Financing
will be increased or reduced by the amount by which the Estimated Net Working
Capital is greater than or less than, respectively, $8.0 million. Without
qualifying Mississippi Chemical's obligations with respect to the Financing,
the Financing will be on terms that are acceptable to Mississippi Chemical.
The proceeds of the Financing will be used, in part, to refinance in full all
outstanding debt of First Mississippi (other than accounts payable), as well
as to pay any and all transaction, severance and other costs payable by First
Mississippi in connection with the transactions contemplated by the Merger
Agreement, with the excess proceeds to be distributed to ChemFirst as
described above. First Mississippi will be responsible for the costs of
obtaining the Financing (including, without limitation, any commitment or
agent fees, reasonable attorney fees or other costs and expenses associated
with the Financing). In the event that First Mississippi's shareholders do not
approve the Merger Agreement and the Merger, First Mississippi and Mississippi
Chemical will reimburse each other for one half of any costs incurred by them
in connection with the Financing. In the event the Merger Agreement is
terminated for any other reason, Mississippi Chemical will be responsible for
and reimburse First Mississippi for any costs reasonably incurred in
connection with the Financing. In the event that First Mississippi is unable
to arrange a bank facility for the Financing on terms acceptable to
Mississippi Chemical, Mississippi Chemical will be responsible for arranging
alternative funds from an independent, unrelated third party for the
Financing.
First Mississippi has executed a commitment letter with Harris and BOM with
respect to the Financing. Under the terms of the Financing commitment letter,
the Financing will provide First Mississippi with a senior unsecured revolving
credit facility of up to $150.0 million (subject to adjustment as provided in
the Merger
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Agreement) with a term of five years. The Financing commitment letter also
provides that the Financing will bear interest at the borrower's option at
either Harris' Prime commercial rate, at rates related to the Fed Funds rate,
at rates related to LIBOR, or at rates determined by competitive bids. It is
contemplated that the Financing will be closed prior to the Effective Time.
RETAINED CASH
In the event that the Merger has not been consummated by December 31, 1996,
as described above, the Financing will be increased $56,575 per day from
January 1, 1997 until the Effective Time, thus increasing by a corresponding
amount the cash to be distributed to ChemFirst prior to the Distribution;
however, any net cash generated by the Fertilizer Business from January 1,
1997 to the Effective Time will not be distributed to ChemFirst but will
remain the property of the Fertilizer Business and will be held by First
Mississippi at the Effective Time.
AUDITED CLOSING BALANCE SHEET
The Merger Agreement provides that no later than 45 days after the Effective
Time, ChemFirst shall deliver to Mississippi Chemical an audited combined
balance sheet for the Fertilizer Business as of the earlier of the Effective
Time or December 31, 1996 after giving effect to the Distribution (but not to
the Financing or the Merger), which shall be audited by ChemFirst's
independent public accountants (the "Audited Closing Balance Sheet"). To the
extent that the net working capital of the Fertilizer Business as shown on the
Audited Closing Balance Sheet is more or less than the Estimated Net Working
Capital, First Mississippi
shall pay to ChemFirst, or ChemFirst shall pay to First Mississippi, the
amount of such excess or shortfall, respectively, in cash within five days of
the delivery of the Audited Closing Balance Sheet.
AMPRO FACILITY
Pursuant to the Merger Agreement, First Mississippi has agreed to use all
reasonable efforts to cause the capital improvements to First Mississippi's
AMPRO facility currently in progress to be completed by December 31, 1996.
STOCK EXCHANGE LISTING
Mississippi Chemical has agreed in the Merger Agreement to use all
reasonable efforts to cause the shares of Mississippi Chemical Common Stock to
be issued in the Merger to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Closing Date.
INDEMNIFICATION
The Merger Agreement provides that, from and after the Effective Time, the
Surviving Corporation shall indemnify, defend and hold harmless each person
who is now, who has been at any time prior to the date of the Merger Agreement
or who becomes prior to the Effective Time, an officer, director or employee
of First Mississippi or any of its subsidiaries (the "Indemnified Parties")
against all losses, claims, damages, costs, expenses, liabilities or
judgments, or amounts that are paid in settlement with the approval of the
indemnifying party (which approval shall not be unreasonably withheld) of, or
in connection with, any claim, action, suit, proceeding or investigation to
the extent related to, or to the extent arising from, the Fertilizer Business
and based in whole or in part on or arising in whole or in part out of the
fact that such person is or was a director, officer or employee of First
Mississippi or any of its subsidiaries, whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether asserted
or claimed prior to, or at or after, the Effective Time, in each case to the
fullest extent a corporation is permitted under the MBCA (notwithstanding the
bylaws of First Mississippi or the Surviving Corporation) to indemnify its own
directors, officers and employees, as the case may be (and the Surviving
Corporation will pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the full extent permitted by
law upon receipt of any affirmation and undertaking contemplated by Section
8.53 of the MBCA).
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TAX-FREE TRANSACTIONS
First Mississippi, Mississippi Chemical and Miss Sub have agreed to report
the Transfers, the Distribution, and the Merger as tax-free transactions under
the Code on all tax returns and take no position inconsistent therewith. First
Mississippi, Mississippi Chemical and Miss Sub have also agreed not to take or
cause or permit to be taken, any action that would disqualify the Transfers,
the Distribution, and the Merger as tax-free transactions under the Code,
excluding any action to be taken pursuant to the Merger Agreement to effect
the Merger. See "Certain Federal Income Tax Consequences."
CERTAIN REGULATORY MATTERS
Under the HSR Act, and the rules promulgated thereunder by the FTC, the
Merger may not be consummated unless certain waiting period requirements have
been satisfied. On September 16, 1996, each of Mississippi Chemical and First
Mississippi filed the Notification and Report Forms with the DOJ and the FTC
for review in connection with the Merger. The waiting period was terminated on
October 15, 1996.
NO SOLICITATION
The Merger Agreement provides that First Mississippi will immediately cease
any existing discussions or negotiations conducted prior to the date of the
Merger Agreement with respect to any Acquisition Transaction. The Merger
Agreement further provides that First Mississippi, its subsidiaries and their
respective directors and officers shall not, and its or its subsidiaries,
affiliates, representatives and agents shall not, directly or indirectly,
solicit any person, entity or group concerning any Acquisition Transaction
(other than the transactions contemplated by the Merger Agreement); provided
that First Mississippi may (i) furnish information or enter into negotiations
to the extent the First Mississippi Board determines after receiving the
advice of outside counsel that the failure to do so would be inconsistent with
its fiduciary duties under applicable law and prior to furnishing such
information to, or entering into discussions or negotiations with such person,
entity or group First Mississippi (x) provides immediate written notice to
Mississippi Chemical to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person, entity or group,
and (y) either enters into with such person, entity or group a confidentiality
agreement in reasonable, customary form on terms not more favorable to such
person, entity or group than the terms contained in the Confidentiality
Agreement, or releases Mississippi Chemical from the standstill provisions of
the Confidentiality Agreement to the extent such provisions are not applicable
to such other person; and (ii) recommend to its shareholders a bona fide
transaction or combination of transactions that the First Mississippi Board
determines after consulting with its legal and other advisors is more
favorable, from a financial point of view, to the shareholders of First
Mississippi than the Distribution and the Merger. First Mississippi agrees not
to release any third party from its obligations, or grant any consent, under
any existing standstill provision relating to any Acquisition Transaction or
otherwise under any confidentiality or other agreement without similarly
releasing or granting a consent to Mississippi Chemical under the
Confidentiality Agreement.
CONDITIONS
Conditions to Each Party's Obligation to Effect the Merger
The Merger Agreement provides that the respective obligations of the parties
to effect the Merger are subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
(a) The Merger Agreement has been approved and adopted by the affirmative
vote of the holders of at least a majority of the outstanding shares of
First Mississippi Common Stock and the Stock Issuance has been approved by
the affirmative vote of the holders of at least a majority of the shares of
Mississippi Chemical Common Stock present, in person or by proxy, and
entitled to vote at a meeting of Mississippi Chemical shareholders for
which a quorum exists;
(b) the shares of Mississippi Chemical Common Stock issuable to First
Mississippi's shareholders pursuant to the Merger Agreement shall have been
authorized for listing on the NYSE, upon official notice of issuance;
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(c) other than the filing of the Articles of Merger, all authorizations,
consents, orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any governmental authority or
other public or private third party, of which the failure to obtain would
have a material adverse effect on Mississippi Chemical and its subsidiaries
or the Surviving Corporation and its subsidiaries, in each case taken as a
whole, shall have been filed, occurred or been obtained and Mississippi
Chemical shall have received all state securities or "blue sky" permits and
other authorizations necessary to issue the Mississippi Chemical Common
Stock pursuant to the Merger Agreement;
(d) the registration statement of which this Joint Proxy
Statement/Prospectus forms a part shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceeding
by the Commission seeking a stop order;
(e) no temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger or the
Distribution shall be in effect;
(f) any applicable waiting period under the HSR Act shall have expired or
been terminated; and
(g) the Distribution shall have become effective in accordance with the
Distribution Agreement.
Conditions of Mississippi Chemical's and Miss Sub's Obligations to Effect the
Merger
The obligations of Mississippi Chemical and Miss Sub to effect the Merger
are subject to the satisfaction, on or prior to the Closing Date, of the
following additional conditions unless waived by Mississippi Chemical and Miss
Sub:
(a) the representations and warranties of the First Mississippi contained
in the Merger Agreement shall be true and correct in all material respects
as of the Closing Date as though made on and as of the Closing Date;
(b) First Mississippi shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement and
the Distribution Agreement at or prior to the Closing Date;
(c) Mississippi Chemical shall have received the opinion of Hughes &
Luce, L.L.P. to the effect that the Merger qualifies as a tax-free
reorganization within the meaning of the Code;
(d) Mississippi Chemical shall have received the opinion of Skadden,
Arps, Slate, Meagher & Flom to the effect that the Transfers qualify as one
or more tax-free transactions under the Code and that the Distribution
qualifies as a tax-free distribution under the Code; and
(e) At the Effective Time, all First Mississippi Options other than First
Mississippi Options held by employees of the Fertilizer Business, shall
have been terminated or exchanged for options to acquire ChemFirst Common
Stock or shall have been fully assumed by ChemFirst.
Conditions of First Mississippi's Obligations to Effect the Merger
The obligation of First Mississippi to effect the Merger is subject to the
satisfaction, on or prior to the Closing Date, of the following additional
conditions unless waived by First Mississippi:
(a) the representations and warranties of Mississippi Chemical and Miss
Sub contained in the Merger Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the
Closing Date;
(b) Mississippi Chemical and Miss Sub shall have performed in all
material respects all obligations required to be performed by them under
the Merger Agreement at or prior to the Closing Date;
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(c) First Mississippi shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom to the effect that the Merger qualifies as a tax-free
reorganization within the meaning of the Code, that the Transfers qualify
as one or more tax-free transactions under the Code and that the
Distribution qualifies as a tax-free distribution under the Code; and
(d) The Financing shall have been obtained by First Mississippi; the
Financing shall have been funded; and the proceeds of the Financing shall
have been applied pursuant to the Merger Agreement and the Distribution
Agreement.
TERMINATION AND AMENDMENT
Termination
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Merger and the Merger Agreement
by the shareholders of First Mississippi:
(a) by mutual consent of Mississippi Chemical and First Mississippi;
(b) by either Mississippi Chemical or First Mississippi if the Merger has
not been consummated before March 31, 1997 (unless the failure to so
consummate the Merger by such date is due to an act or failure to act of
the party seeking to terminate the Merger Agreement);
(c) by either Mississippi Chemical or First Mississippi if the Average
Mississippi Chemical Price is less than $17.00;
(d) by Mississippi Chemical, upon a material breach of any
representation, warranty, covenant or agreement on the part of First
Mississippi set forth in the Merger Agreement such that the conditions set
forth in the Merger Agreement regarding the truth of representations and
warranties of First Mississippi and the performance of all required
obligations of First Mississippi, as the case may be, would be incapable of
being satisfied by March 31, 1997; provided that, in any case, a willful
breach will be deemed to cause such conditions to be incapable of being
satisfied if such willful breach is not remedied within 10 days after
receipt by First Mississippi of written notice from Mississippi Chemical
specifying the nature of such willful breach and requesting that it be
remedied;
(e) by First Mississippi, upon a material breach of any representation,
warranty, covenant or agreement on the part of Mississippi Chemical set
forth in the Merger Agreement such that the conditions set forth in the
Merger Agreement regarding the truth of representations and warranties of
Mississippi Chemical and Miss Sub and the performance of all required
obligations of Mississippi Chemical and Miss Sub, as the case may be, would
in incapable of being satisfied by March 31, 1997; or provided that, in any
case, a willful breach will be deemed to cause such conditions to be
incapable of being satisfied if such willful breach is not remedied within
10 days after receipt by Mississippi Chemical of written notice from First
Mississippi specifying the nature of such willful breach and requesting
that it be remedied;
(f) by Mississippi Chemical if (i) First Mississippi's shareholders do
not approve the Merger and the Merger Agreement at the First Mississippi
Annual Meeting, (ii) Mississippi Chemical's shareholders do not approve the
Stock Issuance at the Mississippi Chemical Annual Meeting or (iii) First
Mississippi withdraws, amends or modifies in a manner adverse to
Mississippi Chemical its favorable recommendation of the Merger; or
(g) by First Mississippi if (i) First Mississippi's shareholders do not
approve the Merger and the Merger Agreement at the First Mississippi Annual
Meeting, (ii) Mississippi Chemical's shareholders do not approve the Stock
Issuance at the Mississippi Chemical Annual Meeting, (iii) First
Mississippi has received a proposal for an Acquisition Transaction that it
advises Mississippi Chemical in writing it wishes to accept or (iv) the
Financing has not been arranged by December 31, 1996.
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Effect of Termination
In the event of a termination of the Merger Agreement, the Merger Agreement
will become void and there will be no liability or obligation on the part of
First Mississippi, Mississippi Chemical or Miss Sub or their affiliates or
respective officers or directors, other than the provisions of the Merger
Agreement described below under "--Termination Fee"; provided that any such
termination will not relieve any party from liability for willful breach of
the Merger Agreement.
Termination Fee
If (a)(i) Mississippi Chemical terminates the Merger Agreement following
First Mississippi's withdrawal, amendment or modification of its favorable
recommendation of the Merger or (ii) First Mississippi terminates the Merger
Agreement following the receipt of a proposal for an Acquisition Transaction
that it advises Mississippi Chemical in writing that it wishes to accept and
(b) within one year after such termination, First Mississippi enters into an
agreement, letter of intent or binding arrangement with respect to an
Acquisition Transaction or an Acquisition Transaction occurs (provided,
however, that in the case of an Acquisition Transaction involving only
ChemFirst or any of its Subsidiaries (a "ChemFirst Acquisition Transaction"),
payment will be due only if First Mississippi began discussions or
negotiations, received a proposal or indication of interest or entered into an
agreement, letter of intent or binding arrangement with respect to such
ChemFirst Acquisition Transaction prior to the termination of the Merger
Agreement), First Mississippi will be required to pay to Mississippi Chemical
a fee, in cash, of $8.0 million. Upon payment of such $8.0 million fee to
Mississippi Chemical in accordance with the Merger Agreement, First
Mississippi shall have no further liability with respect to the transactions
contemplated thereby.
Amendment
The Merger Agreement may be amended by the parties thereto, by action taken
or authorized by their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with the Merger by the
shareholders of First Mississippi or Mississippi Chemical; provided that (i)
after any such approval, no amendment shall be made which by law requires
further approval by such shareholders without such further approval and (ii)
after the Effective Time, the Merger Agreement may be amended only with the
written consent of ChemFirst.
EXPENSES
The Merger Agreement provides that whether or not the Merger is consummated
and except as described above under "--Termination and Amendment--Termination
Fee," all fees, costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby shall be paid by the party
incurring such expenses; provided that Mississippi Chemical and First
Mississippi will each pay one-half of the printing costs incurred with respect
to this Joint Proxy Statement/Prospectus.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase" for financial accounting
purposes in accordance with generally accepted accounting principles, whereby
the purchase price will be allocated based on fair values of assets acquired
and liabilities assumed. Such allocations will be made based upon valuations
and other studies that have not been finalized. The excess of such purchase
price over the amounts so allocated will be allocated to goodwill.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
In considering the recommendation of the First Mississippi Board of
Directors, shareholders of First Mississippi should be aware that certain
members of management of First Mississippi and the First Mississippi Board
have certain interests in the Distribution and the Merger that are in addition
to the interests of shareholders generally.
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Ownership of Mississippi Chemical Common Stock
Certain directors and executive officers of First Mississippi beneficially
own Mississippi Chemical Common Stock as follows: J. Kelley Williams, First
Mississippi's Chairman and Chief Executive Officer, holds 3,600 shares of
Mississippi Chemical Common Stock in the name of J. Kelley Williams Revocable
Trust and his wife, Jean P. Williams, holds 10,000 shares of Mississippi
Chemical Common Stock; William A. Percy, II, a First Mississippi director,
holds 2,587 shares of Mississippi Chemical Common Stock; James W. Crook, a
First Mississippi director, holds 250 shares of Mississippi Chemical Common
Stock in the names of James W. and Bruce D. Crook; and Charles R. Gibson,
President of FirstMiss Fertilizer, Inc., a First Mississippi subsidiary,
holds, 2,000 shares of Mississippi Chemical Common Stock.
Exchange of First Mississippi Options
Each First Mississippi Option held by a director or executive officer of
First Mississippi and employees of First Mississippi, other than Fertilizer
Employees, will be exchanged for an option to purchase ChemFirst Common Stock.
See "The Distribution--Terms of the Employee Benefits Agreement."
Indemnification
The Merger Agreement provides for certain indemnification of officers and
directors of First Mississippi. See "--Indemnification" above.
RESALES OF MISSISSIPPI CHEMICAL COMMON STOCK ISSUED IN THE MERGER; AFFILIATES
The Mississippi Chemical Common Stock to be issued to First Mississippi
shareholders in connection with the Merger will be freely transferable under
the Securities Act, except for shares issued to any person who may be deemed
an "affiliate" of First Mississippi within the meaning of Rule 145 under the
Securities Act. Persons who may be deemed to be affiliates of First
Mississippi generally include individuals or entities that control, are
controlled by, or are under common control with First Mississippi, and may
include the directors and principal executive officers of First Mississippi as
well as any principal shareholder of First Mississippi.
DISSENTERS' RIGHTS
Mississippi Chemical shareholders are not entitled to dissenters' rights in
connection with the Merger or the Stock Issuance. First Mississippi
shareholders who do not vote in favor of the Merger, who file a written notice
with First Mississippi prior to the time that the vote with respect to the
Merger is taken at the First Mississippi Annual Meeting and who otherwise
comply with Article 13 of the MBCA ("Article 13") will be entitled to certain
dissenters' rights in connection with the Merger.
The following is a summary of Article 13 and the procedures for dissenting
from the Merger and demanding dissenters' rights. This summary is qualified in
its entirety by reference to Article 13, which is reprinted in full as
Appendix F to this Joint Proxy Statement/Prospectus provided to First
Mississippi shareholders.Any First Mississippi shareholder who wishes to
exercise statutory dissenters' rights or who wishes to preserve the right to
do so should refer to the statute and consult counsel prior to taking any
action, since FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Article 13 states that persons in whose name shares are registered in the
records of a corporation and persons who are beneficial owners of shares held
in a voting trust or by nominees as the record holders (collectively defined,
for purposes of this section only, as shareholders) are entitled to
dissenters' rights, as long as they comply with the provisions set forth in
Article 13.
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Procedure for Exercise of Dissenters' Rights
Shareholders who wish to exercise dissenters' rights:
(i) must deliver to First Mississippi, before the vote with respect to
the Merger is taken, written notice of their intent to demand payment for
their shares if the Merger is adopted; and
(ii) must not vote their shares in favor of the Merger.
Shareholders who do not satisfy these requirements are not entitled to payment
for shares under Article 13.
Although shareholders electing to exercise appraisal rights under Article 13
must not vote FOR adoption of the Merger, a vote against adoption of the
Merger is not required in order for shareholders to exercise dissenters'
rights. If a shareholder returns a signed proxy but does not specify a vote
against adoption of the Merger or a discretion to abstain, the proxy will be
voted for adoption of the Merger, which will have the effect of waiving that
shareholder's dissenters' rights.
If the Merger is approved, the Surviving Corporation must notify all
shareholders entitled to assert dissenters' right under Article 13 that the
action was taken and send them a dissenters' notice no later than 10 days
after the Effective Time.
Upon receipt of the dissenters' notice, dissenters must make a payment
demand by the date set by the Surviving Corporation in the notice. A
shareholder who elects to exercise dissenters' rights must mail or deliver his
or her written demand to: Rosalyn B. Glascoe, Corporate Secretary, Owen Cooper
Administration Building, Highway 49 East, P. O. Box 388, Yazoo City,
Mississippi 39194-0388. The written demand for payment should comply with the
provisions of Article 13 and should specify the shareholder's name and mailing
address, the number of shares of First Mississippi Common Stock owned, and
that the shareholder is demanding payment of his or her shares. The
shareholder must also certify that the shareholder acquired beneficial
ownership of the shares before the date set forth in the dissenters' notice
and deposit his or her share certificates in accordance with the terms of the
dissenters' notice. Failure to make a payment demand or to deposit the share
certificates where required, each by the date set forth in the dissenters'
notice, shall forfeit the shareholder's entitlement to payment for his or her
shares.
As soon as the Merger is approved, or upon receipt of a payment demand, the
Surviving Corporation will pay dissenting shareholders who complied with
Article 13 the amount that the Surviving Corporation estimates to be the fair
value of the dissenters' shares, plus accrued interest. Such fair value will
be determined after giving effect to the Distribution.
Procedure if the Dissenters are Dissatisfied with the Payment Offer
Dissenters may reject the Surviving Corporation's offer and demand payment
of the fair value of their shares and interest due as determined through a
judiciary appraisal of their shares, or may notify the Surviving Corporation
in writing of their own estimate of the fair value of their shares and amount
of interest due and demand payment of their estimate. To be entitled to such
rights, the dissenters must notify the Surviving Corporation of their demand
in writing within 30 days after the Surviving Corporation made or offered
payment for shares.
If a judiciary appraisal is required because, as set forth in the preceding
paragraph, a dissenter has rejected the Surviving Corporation's offer and
demanded payment of the fair value of the shares and interest due as
determined through a judiciary appraisal, the Surviving Corporation will
commence a proceeding within 60 days after receiving the payment demand and
petition an appropriate court, as described in Article 13, to determine the
fair value of the shares and accrued interest.
The court in an appraisal proceeding shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
who may be appointed by the court; legal counsel and experts for the
respective parties. The court may assess the costs against the Surviving
Corporation, except that the court may assess costs against all or some of the
dissenters to the extent the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13.
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THE DISTRIBUTION
This section of the Joint Proxy Statement/Prospectus describes certain
aspects of the proposed Distribution. To the extent that they relate to the
Distribution Documents, the following descriptions do not purport to be
complete and are qualified in their entirety by reference to the Distribution
Documents, which are attached as Appendix B to this Joint Proxy
Statement/Prospectus and incorporated herein by reference. ALL SHAREHOLDERS
ARE URGED TO READ THE DISTRIBUTION AGREEMENT, THE TAX DISAFFILIATION AGREEMENT
AND THE EMPLOYEE BENEFITS AGREEMENT IN THEIR ENTIRETY. In addition, the First
Mississippi shareholders are urged to read in its entirety the ChemFirst
Prospectus attached as Appendix E.
BACKGROUND OF AND REASONS FOR THE DISTRIBUTION
Because the Fertilizer Business is the only business of First Mississippi
that Mississippi Chemical proposes to acquire, First Mississippi has
determined to effect the Distribution, which, based upon the opinion of
special counsel to First Mississippi, will be tax free to First Mississippi
shareholders for Federal income tax purposes (except to the extent of cash
received for fractional shares). See "Certain Federal Income Tax
Consequences." The Distribution will separate the Fertilizer Business from
First Mississippi's other businesses and will enable Mississippi Chemical to
acquire only the Fertilizer Business in the Merger; the Distribution will
leave First Mississippi's remaining businesses as a separate publicly held
company (ChemFirst), owned by the existing First Mississippi shareholders.
First Mississippi's agreement to effect the Distribution fulfilled a condition
to Mississippi Chemical's willingness to enter into the Merger Agreement.
Although the Distribution will not be effected unless the Merger is approved
and is about to occur, the Distribution is separate from the Merger and the
shares of ChemFirst Common Stock to be received by holders of First
Mississippi Common Stock in the Distribution do not constitute a part of the
Merger consideration. FIRST MISSISSIPPI SHAREHOLDER APPROVAL OF THE
DISTRIBUTION IS NOT REQUIRED UNDER MISSISSIPPI LAW AND SUCH APPROVAL IS NOT
BEING SOUGHT. HOWEVER, FIRST MISSISSIPPI DOES NOT INTEND TO EFFECT THE
DISTRIBUTION IN THE EVENT THAT THE MERGER IS NOT APPROVED AT THE FIRST
MISSISSIPPI ANNUAL MEETING.
TERMS OF THE DISTRIBUTION AGREEMENT
The Distribution will, by means of a spin-off of First Mississippi's
chemicals and other non-fertilizer businesses, separate First Mississippi's
Fertilizer Business from its other businesses and enable Mississippi Chemical
to acquire only the Fertilizer Business in the Merger.
The Distribution
The Distribution Agreement provides that the Distribution will be effected
prior to the Merger by the dividend distribution to each holder of record of
First Mississippi Common Stock as of the close of business on the Distribution
Record Date of certificates representing one share of ChemFirst Common Stock
for every share of First Mississippi Common Stock held by such shareholder.
The Transfers
The Distribution Agreement provides for First Mississippi to consummate the
Transfers prior to the Distribution. The Transfers include the following
transactions, each of which will be effected prior to the time of the
Distribution:
(a) First Mississippi will transfer, assign and convey to ChemFirst, all
of the issued and outstanding capital stock of its non-fertilizer
subsidiaries, including those of its chemicals, combustion, plasma
processing and steel operations.
(b) In addition to the transfers referred to above, First Mississippi
will, or will cause its subsidiaries to, transfer, assign and convey to
ChemFirst all other assets of First Mississippi which are not primarily
related to the Fertilizer Business, including, but not limited to: (i) all
assets of First Mississippi and its subsidiaries located in the Jackson,
Mississippi metropolitan area (other than books and records of First
Mississippi to the extent that they do not relate to the business of
ChemFirst); (ii) all cash and cash equivalents (including
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marketable securities) of the Fertilizer Business and all excess proceeds
of the Financing except as otherwise provided in the Merger Agreement;
(iii) the note receivable from Getchell Gold and (iv) certain other
receivables.
(c) Prior to the Distribution, FirstMiss Fertilizer, Inc. will be merged
with and into First Mississippi with First Mississippi as the surviving
corporation in the merger.
(d) Prior to First Mississippi's transfer of the capital stock of FEC
Marketing, Inc. to ChemFirst, FEC Marketing, Inc. will transfer its
interests in FirstMiss Fertilizer Limited Partnership and FirstMiss
Fertilizer of Texas LP to a Fertilizer Business entity.
As a result of the Transfers, at the time of the Distribution ChemFirst will
own all of the assets of First Mississippi other than those of the Fertilizer
Business.
Transfer of Liabilities
Pursuant to the Distribution Agreement, the parties will further agree that,
except as otherwise provided in the Merger Agreement and the Distribution
Documents at or prior to the time of the Distribution, ChemFirst will assume
all liabilities of First Mississippi and its subsidiaries, other than
liabilities to the extent arising out of, based upon, or resulting from the
operation of the business of, or to the extent relating to, the Fertilizer
Business (the "ChemFirst Assumed Liabilities"), and First Mississippi will
retain First Mississippi's debt and all liabilities (whether arising before or
after the time of the Distribution) to the extent arising out of, based upon,
or resulting from the operation of, or to the extent relating to, the
Fertilizer Business (the "First Mississippi Assumed Liabilities"). However,
the First Mississippi Assumed Liabilities will not include any liability with
respect to the former operation of the fertilizer manufacturing facility in
Ft. Madison, Iowa.
Certain Further Transfers
The Distribution Agreement provides that if, after the time of the
Distribution, either ChemFirst or First Mississippi holds assets which by the
terms of the Distribution Agreement or the Merger Agreement were intended to
be assigned and transferred to, or retained by, the other party, such party
will promptly assign and transfer or cause to be assigned and transferred such
assets to the other party.
Use of Names
Following the time of the Distribution, ChemFirst will have the sole and
exclusive ownership of and right to use all of the names, trademarks, trade
names and other proprietary rights of First Mississippi, other than "Urifirst"
and "Urifeed."
Certain Covenants
The Distribution Agreement provides that for two years after the time of the
Distribution, neither First Mississippi nor ChemFirst will, directly or
indirectly, solicit the employment of any employee of the other party and its
subsidiaries; provided that ChemFirst may solicit the employment of certain
employees identified pursuant to the Distribution Agreement.
The Distribution Agreement also provides that prior to the time of the
Distribution, First Mississippi will transfer and assign to ChemFirst all of
First Mississippi's insurance policies other than (i) any policy which relates
solely to the Fertilizer Business and (ii) any policy that is not assignable
pursuant to its terms (a "Non-Assignable Policy"). In the event any policy is
a Non-Assignable Policy, First Mississippi will keep such policy in effect
during its remaining term and will refrain from taking any actions (other than
making a claim) which may affect ChemFirst's entitlement to the benefits of,
or coverage under, such policy. With respect to First Mississippi's (i)
general liability policy and (ii) excess casualty policy, in the event such
policies are assigned to
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ChemFirst pursuant to the Distribution Agreement, ChemFirst will keep such
policies in effect during their respective terms and will refrain from taking
any actions (other than making a claim) which may effect First Mississippi's
entitlement to the benefits of, or coverage under, such policies. First
Mississippi and ChemFirst will also agree in the Distribution Agreement to
cooperate with each other with respect to the processing of any claims which
are covered by any insurance policy in existence prior to the time of the
Distribution.
Settlement of Intercompany Balances
In connection with the Distribution, all amounts owing between the ChemFirst
entities and the Fertilizer Business entities, other than amounts arising in
the ordinary course of business, will be deemed paid in full at or prior to
the Distribution.
Mutual Indemnities
The Distribution Agreement provides that effective upon the Distribution,
ChemFirst will indemnify and hold First Mississippi, its affiliates,
successors and assigns and the officers, directors, partners, employees,
agents and representatives of any of them, harmless from and against any and
all ChemFirst Assumed Liabilities. Effective upon the Distribution, First
Mississippi will indemnify and hold ChemFirst, its affiliates, successors and
assigns and the officers, directors, partners, employees, agents and
representatives of any of them, harmless from and against any and all First
Mississippi Assumed Liabilities. If either of the foregoing indemnities is
unavailable for any reason, the parties have agreed to contribute in respect
of any such loss, claim, damage or liability on an equitable basis.
Mutual Releases
The Distribution Agreement provides that effective upon the Distribution and
except as otherwise specifically set forth in the Distribution Agreement, each
of ChemFirst and First Mississippi releases and forever discharges the other,
and its officers, directors, agents, affiliates, record and beneficial
security holders (including, without limitation, trustees and beneficiaries of
trusts holding such securities), advisors and representatives, of and from all
debts, demands, actions, causes of action, suits, accounts, covenants,
contracts, agreements, damages, and any and all claims, demands and
liabilities whatsoever of every name and nature, both in law and in equity,
against such other party or any of its assigns that the releasing party has or
ever had, which arise out of or relate to events, circumstances or actions
taken by such other party prior to the Distribution; provided, however, that
the foregoing general release will not apply to the Distribution Agreement or
the transactions contemplated thereby and does not affect either party's right
to enforce the Distribution Agreement or any other agreement contemplated
thereby in accordance with its terms. The Distribution Agreement provides that
each party understands and agrees that, except as otherwise specifically
provided therein, neither the other party nor any of its subsidiaries is, in
the Distribution Agreement or any other agreement or document, representing or
warranting to such party in any way as to the assets, businesses or
liabilities transferred or assumed as contemplated by the Distribution
Agreement or as to any consents or approvals required in connection with the
consummation of the transactions contemplated by the Distribution Agreement,
it being agreed and understood that each party shall take or keep all of its
assets "as is" and that it shall bear the economic and legal risk that
conveyance of such assets may prove to be insufficient or that the title to
any assets may be other than good and marketable and free from encumbrances.
Conditions to the Distribution
The obligations of First Mississippi and ChemFirst to consummate the
Distribution are subject to the fulfillment of each of the following
conditions: (i) the Tax Disaffiliation Agreement and Employee Benefits
Agreement shall have been executed and delivered by each of First Mississippi
and ChemFirst; (ii) the Transfers as described in the Distribution Agreement
shall have been successfully consummated; (iii) each condition to the Closing
of the Merger Agreement set forth therein, other than the condition to each
parties obligations set forth
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therein as to the satisfaction of conditions contained in the Distribution
Agreement, shall have been fulfilled; (iv) any registration statement filed by
ChemFirst with the Commission in connection with the issuance of ChemFirst
Common Stock in the Distribution shall have become effective, and shall not be
the subject of any stop order or proceeding by the Commission seeking a stop
order; (v) the shares of ChemFirst Common Stock to be issued in the
Distribution shall have been listed on the NYSE, subject to official notice of
issuance; (vi) all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any governmental entity or any other public or private entity the failure of
which to obtain would have a material adverse effect on ChemFirst and its
subsidiaries taken as a whole or First Mississippi and its subsidiaries taken
as a whole, shall have been filed, occurred, or been obtained; (vii) no
temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Distribution shall be in
effect; (viii) First Mississippi and ChemFirst shall have received an opinion
of Skadden, Arps, Slate, Meagher & Flom to the effect that the Distribution
qualifies as a tax-free distribution under Section 355 of the Code; and (ix)
the Financing shall have been obtained and the transfer of cash and cash
equivalents to ChemFirst as described above under "The Transfers" shall have
been consummated.
Amendment
Pursuant to the Merger Agreement, First Mississippi and ChemFirst may not
modify or amend the Distribution Agreement in a manner adverse to Mississippi
Chemical without the consent of Mississippi Chemical.
TERMS OF THE TAX DISAFFILIATION AGREEMENT
In connection with the Distribution and Merger, First Mississippi and
ChemFirst entered into the Tax Disaffiliation Agreement, which sets forth each
party's rights and obligations with respect to the allocation and payment of
liabilities, and entitlements to refunds, if any, of Federal, state, local or
foreign taxes for periods before and after the Distribution. The Tax
Disaffiliation Agreement also provides for related matters, such as the
allocation of responsibility for and the provision of cooperation in the
filing of any tax returns and the conduct of audits.
Under the Tax Disaffiliation Agreement, ChemFirst is, except as described
below, responsible for (i) any tax liability of First Mississippi and its
subsidiaries for periods ending on or before the Distribution (including any
tax liability imposed as a result of First Mississippi or its subsidiaries
having joint and several liability as members of an affiliated group of
corporations), (ii) any tax liability resulting from the Distribution, the
Merger or the Transfers, and (iii) any tax liability of ChemFirst or its
subsidiaries for all periods. ChemFirst will be entitled to any tax refunds
that relate to those periods. First Mississippi (the Surviving Corporation) is
responsible for (i) taxes of First Mississippi and its subsidiaries for
taxable periods (or portions thereof) beginning after the Distribution; and
(ii) all taxes of First Mississippi or ChemFirst and their respective
subsidiaries for any period resulting from the breach of any representation,
warranty or covenant of Mississippi Chemical or, with respect to breaches
occurring after the Distribution, First Mississippi set forth in the Merger
Agreement, the Distribution Agreement or the Tax Disaffiliation Agreement.
Accordingly, in the event the Distribution is determined not to qualify as a
tax-free distribution under Section 355 of the Code, the Merger is determined
not to qualify as a tax-free reorganization under Section 368(a) of the Code,
or the Transfers are determined not to consist of tax-free transactions (in
each case for reasons other than being due to actions taken by Mississippi
Chemical or its subsidiaries, or by First Mississippi or its subsidiaries with
respect to periods (or portions thereof) beginning after the Distribution),
then ChemFirst will be responsible for all corporate taxes resulting
therefrom. First Mississippi and ChemFirst will be entitled to any tax refunds
that relate to those periods for which they are liable for taxes due.
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TERMS OF THE EMPLOYEE BENEFITS AGREEMENT
In connection with the Distribution, First Mississippi and ChemFirst will
enter into the Employee Benefits Agreement which will govern the rights and
obligations of First Mississippi and ChemFirst after the Distribution with
respect to the employees of First Mississippi. Prior to the time of the
Distribution, First Mississippi and ChemFirst will cooperate to transfer each
employee of First Mississippi other than Fertilizer Employees to the employ of
ChemFirst effective as of the time of the Distribution. With respect to such
transferred employees and all other past, present, active or inactive
employees of First Mississippi (or their dependents or beneficiaries), other
than the Fertilizer Employees, ChemFirst will assume the liabilities and
obligations with respect to, and continue to be responsible for, all
liabilities and obligations whatsoever in connection with claims made by or on
behalf of such persons in respect of salary, wages, benefits, severance pay,
salary continuation and similar obligations accrued and earned prior to the
time of the Distribution and the termination or alleged termination of such
persons' employment with First Mississippi. With respect to Fertilizer
Employees, First Mississippi will retain the liabilities and obligations with
respect to, and continue to be responsible for, all liabilities and
obligations whatsoever in connection with claims made by or on behalf of such
persons in respect of salary, wages, benefits, severance pay, salary
continuation and similar obligations accrued and earned prior to the time of
the Distribution and the termination or alleged termination of such persons'
employment with First Mississippi.
Pursuant to the Employee Benefits Agreement, ChemFirst will assume all
employee benefit plans of First Mississippi and all other employment,
severance and benefit plans, contracts or arrangements covering all employees
or former employees of First Mississippi who are not Fertilizer Employees.
Under the Employee Benefits Agreement, First Mississippi and ChemFirst will
agree to cooperate to amend all employee benefit plans to be transferred as
necessary to establish ChemFirst as successor to First Mississippi as to all
duties, liabilities and obligations under each of such plans and to take such
other steps as may be necessary to prevent the consummation of the
transactions contemplated by the Merger from causing a termination of
employment with respect to such plans.
The Employee Benefits Agreement further provides that each First Mississippi
Option held by any employee or former employee of First Mississippi other than
a Fertilizer Employee, whether vested or unvested, exercisable or
unexercisable, will be exchanged for an option (a "ChemFirst Option") to
purchase a number of shares of ChemFirst Common Stock equal to the number of
shares of First Mississippi Common Stock into which such First Mississippi
Option was exercisable times a conversion ratio (the "ChemFirst Option
Conversion Ratio") equal to the fair market value of the First Mississippi
Common Stock divided by the fair market value of the ChemFirst Common Stock.
The exercise price of the ChemFirst Option will equal the exercise price of
the First Mississippi Option divided by the ChemFirst Option Conversion Ratio.
For purposes of the Employee Benefits Agreement, the fair market value of the
First Mississippi Common Stock will be the greater of (x) the average of the
trading prices of First Mississippi Common Stock for the ten trading days
immediately preceding the date that the First Mississippi Common Stock
commences trading on an ex-dividend basis (with respect to the Distribution)
or (y) the sum of (A) the average of the trading prices of the First
Mississippi Common Stock for the period from the ex-dividend date (with
respect to the Distribution) to the time of the Distribution and (B) the
average of the trading prices of the ChemFirst Common Stock for the ten
trading days following the tenth trading day after the time of the
Distribution (the "ChemFirst Average Price"). The fair market value of the
ChemFirst Common Stock will equal the ChemFirst Average Price. Pursuant to the
Employee Benefits Agreement, effective as of the time of the Distribution,
each outstanding First Mississippi Convertible Debenture will, subject to any
required consent of the holder of such First Mississippi Convertible
Debenture, be exchanged for a ChemFirst debenture which shall be substantially
identical to such First Mississippi Convertible Debenture provided that such
debenture shall be convertible into securities of ChemFirst based on a
conversion rate which is appropriately adjusted consistent with the
adjustments with respect to the exchange of First Mississippi Options for
ChemFirst Options.
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CERTAIN INFORMATION REGARDING CHEMFIRST AFTER THE DISTRIBUTION
General
After the Distribution, the principal businesses of ChemFirst will involve
continuous production of aniline, nitrobenzene, nitrotoluene and toluidines;
custom production of fine chemicals for chemical, agricultural and
pharmaceutical companies; and production of electronic performance chemicals
for the semiconductor and related industries. Other significant businesses
will include the design and production of low-emission burners, flares and
incinerators and thermal plasma equipment for steel production, waste
treatment and research. ChemFirst will also produce steel ingots and billets
from melted scrap. See "Business" in the Chemfirst Prospectus included as
Appendix E hereto.
Management
At the time of the Distribution, ChemFirst's board of directors will be
identical to First Mississippi's except that two additional directors -Michael
J. Ferris and Dan F. Smith- will serve on ChemFirst's board. The executive
officers of First Mississippi will hold the same positions with ChemFirst as
they currently hold with First Mississippi. See "Management" in the ChemFirst
Prospectus included as Appendix E hereto. The compensation and benefits
ChemFirst will provide its management will be comparable to that currently
provided by First Mississippi.
Description of ChemFirst Common Stock
The rights and privileges of holders of ChemFirst Common Stock are
substantially the same as those of holders of First Mississippi Common Stock
except that, under ChemFirst's Articles of Incorporation, directors of
ChemFirst may only be removed for cause, ChemFirst shareholders are not
entitled to cumulate their votes for election of directors, certain amendments
to ChemFirst's Articles of Incorporation require the affirmative vote of the
holders of four-fifths of the outstanding shares unless recommended by two-
thirds of the board of directors and amendments to ChemFirst's by-laws which
are made by shareholders require the affirmative vote of two-thirds of the
outstanding shares.
ChemFirst has adopted a shareholder rights plan which is substantially
similar to the First Mississippi rights plan. Each share of ChemFirst Common
Stock distributed pursuant to the Distribution will be distributed with an
associated right under the ChemFirst rights plan.
For a further description of the rights and privileges of holders of
ChemFirst Common Stock, see "Description of ChemFirst Capital Stock" in the
ChemFirst Prospectus included as Appendix E hereto.
Risk Factors Relating to ChemFirst
For a discussion of certain risks associated with an investment in ChemFirst
Common Stock, see "Risk Factors" in the ChemFirst Prospectus included as
Appendix E hereto.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material Federal income tax
consequences of the Transfers, the Distribution and the Merger to the holders
of First Mississippi Common Stock. The Federal income tax discussion set forth
below is for general information only and may not apply to particular
categories of holders of First Mississippi Common Stock subject to special
treatment under the Code, including, without limitation, foreign holders and
holders whose First Mississippi securities were acquired pursuant to the
exercise of any employee stock option or otherwise as compensation. EACH
HOLDER OF FIRST MISSISSIPPI COMMON STOCK IS URGED TO CONSULT HIS OR HER TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE TRANSFERS,
THE DISTRIBUTION AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
The discussion below refers to certain opinions of counsels to First
Mississippi and Mississippi Chemical. Counsels' opinions are based upon
certain qualifications and assumptions as noted therein and are based upon
certain representations of Mississippi Chemical and First Mississippi. Neither
Mississippi Chemical nor First Mississippi has requested an advance ruling
from the Internal Revenue Service as to the tax consequences of the Transfers,
the Distribution or the Merger. Each counsel's opinion represents such
counsel's best legal judgment. Counsels' opinions are not binding on the
Internal Revenue Service or the courts, and there can be no assurance that the
Internal Revenue Service or the courts will not take one or more contrary
positions.
CONSEQUENCES OF THE TRANSFERS AND THE DISTRIBUTION
As a condition of consummating the Merger and the Distribution, Mississippi
Chemical, First Mississippi and ChemFirst will receive at or prior to closing
an opinion from First Mississippi's special counsel, Skadden, Arps, Slate,
Meagher & Flom (Illinois) ("Counsel"), to the effect that, on the basis of the
facts, representations and assumptions set forth in the tax opinion, for
Federal income tax purposes, the Distribution qualifies as a tax-free
distribution under Section 355 of the Code, and the Transfers will not be
taxable transactions under one or more of Sections 332, 351 or 368(a)(1)(D) of
the Code. Mississippi Chemical and First Mississippi have agreed that this
condition to closing the Distribution and the Merger cannot be waived by the
parties. Accordingly, the transactions will not be consummated without the
receipt of such opinion. Based upon such opinion, the following is a summary
of certain material Federal income tax consequences of the Transfers and the
Distribution:
1. A First Mississippi shareholder will not recognize any income, gain or
loss as a result of the Distribution, except, as described below, in
connection with cash received in lieu of fractional shares.
2. A First Mississippi shareholder who receives cash in lieu of fractional
shares of ChemFirst Common Stock will be treated as if such fractional shares
had been received by the shareholder as part of the Distribution and then sold
by such shareholder. Accordingly, such shareholder will recognize gain or loss
equal to the difference between the cash so received and the portion of the
tax basis in the ChemFirst Common Stock that is allocable to such fractional
shares. Such gain or loss will be capital gain or loss, provided that such
fractional shares would have been held by such shareholder as a capital asset
at the time of the Distribution.
3. Following the Distribution, a First Mississippi shareholder will
apportion his or her tax basis for his or her shares of First Mississippi
Common Stock prior to the Distribution between such First Mississippi Common
Stock and the ChemFirst Common Stock received (or in the case of fractional
shares, deemed received) in the Distribution in proportion to the relative
fair market values of such First Mississippi Common Stock and ChemFirst Common
Stock on the Distribution date.
4. A First Mississippi shareholder's holding period for the ChemFirst Common
Stock received in the Distribution will include the period during which such
shareholder held his or her First Mississippi Common Stock with respect to
which the ChemFirst Common Stock was received, provided that First Mississippi
Common Stock is held as a capital asset by such shareholder at the time of the
Distribution.
5. No gain or loss will be recognized by First Mississippi as a result of
the Transfers or the Distribution (other than income, if any, recognized by
First Mississippi or its subsidiaries in connection with excess loss accounts
under regulation (S)1.1502-19).
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If the Internal Revenue Service were to successfully challenge the Federal
income tax treatment of the Transfers and Distribution set forth in Counsel's
opinion and it were ultimately determined that the Distribution did not
qualify under Section 355 of the Code, then for Federal income tax purposes
(i) each First Mississippi shareholder would be required to recognize dividend
income to the extent of such shareholder's allocable share of First
Mississippi's current and accumulated earnings and profits on the receipt of
ChemFirst Common Stock in the Distribution in an amount equal to the fair
market value of the shares of ChemFirst Common Stock received in the
Distribution (the "Distribution Amount"), and, to the extent the Distribution
Amount exceeded such shareholder's allocable share of First Mississippi's
current and accumulated earnings and profits, such shareholder would be
required to reduce his or her tax basis in First Mississippi Common Stock to
zero and thereafter recognize gain, and (ii) First Mississippi would be
required to recognize gain on the Distribution to the extent that the fair
market value of the shares of ChemFirst Common Stock issued in the
Distribution exceeded First Mississippi's tax basis in such shares. In this
event, (a) the tax basis of the shares of ChemFirst Common Stock received by a
First Mississippi shareholder would be the fair market value of such shares on
the date of the Distribution, and (b) the holding period for such shares of
ChemFirst Common Stock would begin the day after the date of the Distribution.
Current treasury regulations require each First Mississippi shareholder who
receives ChemFirst Common Stock pursuant to the Distribution to attach to his
or her Federal income tax return for the year in which the Distribution occurs
a detailed statement setting forth such data as may be appropriate in order to
show the applicability of Section 355 to the Distribution. ChemFirst will
convey the appropriate information to each First Mississippi shareholder of
record as of the Distribution Record Date.
CONSEQUENCES OF THE MERGER
As a condition to consummating the Merger, First Mississippi will receive at
or prior to closing an opinion of Counsel and Mississippi Chemical will
receive at or prior to closing an opinion from its counsel, Hughes & Luce,
L.L.P., stating that based upon the facts, representations and assumptions set
forth in the opinions, for Federal income tax purposes, the Merger will
qualify as a reorganization within the meaning of Section 368(a). Mississippi
Chemical and First Mississippi have agreed that this condition to closing the
Merger cannot be waived by the parties. Accordingly, the Merger will not be
consummated without the receipt of such opinions. Based upon such opinions,
the following is a summary of certain of the material Federal income tax
consequences of the Merger:
1. No gain or loss will be recognized by First Mississippi shareholders
whose shares of First Mississippi Common Stock are exchanged solely for
Mississippi Chemical Common Stock pursuant to the Merger (except with respect
to cash received by such First Mississippi shareholders in lieu of fractional
share interests in Mississippi Chemical Common Stock). A First Mississippi
shareholder who receives cash in lieu of fractional shares of Mississippi
Chemical Common Stock will be treated as if such fractional shares had been
received by the shareholder as part of the Merger and then sold by such
shareholder. Accordingly, such shareholder will recognize gain or loss equal
to the difference between the cash so received and the portion of the tax
basis in First Mississippi Common Stock (as determined immediately following
the Distribution) that is allocable to such fractional shares. Such gain or
loss will be capital gain or loss, provided that such fractional shares would
have been held by such shareholder as a capital asset at the Effective Time.
2. The aggregate tax basis of the Mississippi Chemical Common Stock received
(or, in the case of fractional shares, deemed received) by First Mississippi
shareholders who exchange their First Mississippi Common Stock solely for
Mississippi Chemical Common Stock in the Merger will be the same as the
aggregate tax basis of the First Mississippi Common Stock (as determined
immediately following the Distribution) surrendered in exchange therefor.
3. The holding period for the shares of Mississippi Chemical Common Stock
received in the Merger will include the period during which the shares of the
First Mississippi Common Stock surrendered in exchange therefor were held,
provided that such shares of First Mississippi Common Stock were held as
capital assets at the Effective Time.
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4. No gain or loss will be recognized by First Mississippi, Miss Sub or
Mississippi Chemical as a result of the Merger (other than income, if any,
recognized by First Mississippi or its subsidiaries in connection with excess
loss accounts under regulation (S)1.1502-19).
THE COMPANIES
A more detailed description of the business of Mississippi Chemical is
contained in Mississippi Chemical's Annual Report on Form 10-K incorporated
herein by reference. A more detailed description of the business of First
Mississippi and the Fertilizer Business is contained in First Mississippi's
Annual Report on Form 10-K/A incorporated herein by reference. See
"Incorporation of Certain Information by Reference."
MISSISSIPPI CHEMICAL
Mississippi Chemical is a full product line fertilizer supplier. Mississippi
Chemical produces nitrogen and potash fertilizers for sale primarily in the
southern farming regions of the United States and in areas served by the
Mississippi River system and phosphate fertilizers for sale primarily in
international markets. Mississippi Chemical was incorporated in Mississippi in
1994 and is the successor by merger, effective July 1, 1994, to a business
which was formed in 1948 as the first fertilizer cooperative in the United
States. In August 1994, Mississippi Chemical completed an initial public
offering of 5,800,000 shares of Common Stock, of which 3,397,928 shares were
sold by Mississippi Chemical. In August 1996, Mississippi Chemical acquired
substantially all of the assets of the Potash Companies. For additional
information regarding the acquisition of the Potash Companies, see "Recent
Developments." The principal executive offices of Mississippi Chemical are
located at Highway 49 East, P.O. Box 388, Yazoo City, Mississippi 39194, and
its telephone number is (601) 746-4131.
MISS SUB
Miss Sub is a newly formed Mississippi corporation and a wholly-owned
subsidiary of Mississippi Chemical. Miss Sub was organized for the purpose of
effecting the Merger pursuant to the Merger Agreement. Miss Sub has no
material assets and has not engaged in any activities except in connection
with the Merger. The principal executive offices of Miss Sub are located at
Highway 49 East, P.O. Box 388, Yazoo City, Mississippi 39194, and its
telephone number is (601) 746-4131.
FIRST MISSISSIPPI
First Mississippi was incorporated in Mississippi in 1957. First
Mississippi's principal activities involve the production of chemicals and
fertilizer and related products and services. These activities include: the
production and sale of a variety of organic chemicals, including industrial
chemical intermediates, complex fine chemicals used for agricultural and
pharmaceutical, polymer and photosensitive applications and electronic
performance chemicals used in the semiconductor and related industries; the
production and sale of anhydrous ammonia and urea; the design and production
of low-emmission burners, flares and incenerators and thermal plasma equipment
for steel production, waste treatment and research; and the production of
steel ingots and billets from melted scrap. The principal executive offices of
First Mississippi are located at 700 North Street, P. O. Box 1249, Jackson,
Mississippi 39215-1249.
CHEMFIRST
ChemFirst, a wholly owned subsidiary of First Mississippi, was incorporated
in 1983 but has had no activities during the last five years. Prior to the
Distribution, First Mississippi will transfer all of its cash, assets and
liabilities (other than those of the Fertilizer Business and its obligations
under the Financing) to ChemFirst. The principal executive offices of
ChemFirst are located at 700 North Street, P. O. Box 1249, Jackson,
Mississippi 39215-1249. See "The Distribution" and the ChemFirst Prospectus
attached as Appendix E.
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DESCRIPTION OF CAPITAL STOCK OF MISSISSIPPI CHEMICAL
The authorized capital stock of Mississippi Chemical consists of 100,500,000
shares, of which 100,000,000 shares are Mississippi Chemical Common Stock and
500,000 shares are preferred stock, par value $.01 per share. At October 30,
1996, there were 21,065,783 shares of Mississippi Chemical Common Stock
outstanding and held of record by 10,630 shareholders and no shares of
preferred stock outstanding. A more detailed description of the capital stock
of Mississippi Chemical is contained in Mississippi Chemical's registration
statements on Form 8-A, each dated September 23, 1996 and incorporated herein
by reference. See "Incorporation of Certain Information by Reference."
COMMON STOCK
The issued and outstanding shares of Mississippi Chemical Common Stock are,
and the shares being offered hereby will, upon payment therefor, be validly
issued, fully paid and nonassessable. Subject to the rights of holders of
Preferred Stock, the holders of outstanding shares of Mississippi Chemical
Common Stock are entitled to receive dividends out of assets legally available
therefor at such times and in such amounts as the Mississippi Chemical Board
may from time to time determine. The shares of Mississippi Chemical Common
Stock are neither redeemable nor convertible, and the holders thereof have no
preemptive or subscription rights to purchase any securities of Mississippi
Chemical. Each outstanding share of Mississippi Chemical Common Stock is
entitled to one vote on all matters submitted to a vote of shareholders. There
is no cumulative voting in the election of Directors.
PREFERRED STOCK
Mississippi Chemical's Articles of Incorporation authorize the Mississippi
Chemical Board to issue the preferred stock in classes or series and to
establish the designations, preferences, qualifications, limitations or
restrictions of any class or series with respect to the rate and nature of
dividends, the price and terms and conditions on which shares may be redeemed,
the terms and conditions for conversion or exchange into any other class or
series of the stock, voting rights and other terms. Mississippi Chemical may
issue, without the approval of the holders of Mississippi Chemical Common
Stock, preferred stock that has voting, dividend or liquidation rights
superior to the Mississippi Chemical Common Stock and that may adversely
affect the rights of holders of Mississippi Chemical Common Stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
adversely affect the voting power of the holders of Mississippi Chemical
Common Stock and could have the effect of delaying, deferring or preventing a
change in control of Mississippi Chemical.
RIGHTS TO PURCHASE PREFERRED STOCK
Mississippi Chemical declared a dividend of one preferred share purchase
right (a "Right") payable on August 15, 1994 to shareholders of record as of
August 5, 1994 for each share of Mississippi Chemical Common Stock.
Mississippi Chemical Common Stock issued after August 5, 1994 will be issued
with an associated Right. Each Right entitles its holder to purchase one one-
hundredth of a share of Mississippi Chemical preferred stock, Series A, $0.01
par value per share (the "Series Preferred Stock"), at an exercise price of
$50.00 per share (the "Purchase Price"), subject to certain adjustments. Prior
to the date that the Rights become exercisable, the Rights may be transferred
only in connection with the underlying shares of Mississippi Chemical Common
Stock. The Rights will expire on August 15, 2004, unless earlier redeemed or
exchanged by Mississippi Chemical.
The Rights are exercisable upon the earlier to occur of (i) 10 days
following the date of public disclosure that a person or group, together with
its affiliates and associates (an "Acquiring Person"), has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding Mississippi Chemical Common Stock and (ii) 10 days following
commencement of or disclosure of an intention to commence a tender offer or
exchange offer if, upon consummation of the offer, such person or group,
together with such persons' affiliates and associates, could acquire
beneficial ownership of 25% or more of the outstanding Mississippi Chemical
Common Stock.
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If Mississippi Chemical is acquired in a merger or other business
combination in which the Mississippi Chemical Common Stock does not remain
outstanding or is changed or 50% or more of Mississippi Chemical's
consolidated assets or earning power is sold, leased, pledged or otherwise
transferred or disposed of, the Rights will "flip over" and entitle each
holder of a Right to purchase at the then-current Purchase Price, common stock
of the acquiring company with a market value of two times the Purchase Price.
If (i) a person acquires 20% of the outstanding Mississippi Chemical Common
Stock, (ii) Mississippi Chemical is the surviving corporation in a merger with
an Acquiring Person and the Mississippi Chemical Common Stock remains
outstanding and unchanged, or (iii) an Acquiring Person engages in one of
certain "self-dealing" transactions, the Rights will "flip in" and entitle
each holder to purchase at the then-current Purchase Price, Mississippi
Chemical Common Stock with a market value of two times the Purchase Price. Any
of these events is a "Triggering Event." Any Rights owned by an Acquiring
Person become null and void upon the occurrence of the earlier of the a
decision of the Mississippi Chemical Board to exchange the Rights and a
Triggering Event. Under certain circumstances, the disinterested directors can
approve a transaction with a specific shareholder that would otherwise be a
Triggering Event, and freeze the Rights in connection with that specific
transaction.
At any time any person becomes an Acquiring Person and prior to such time as
such person, together with its affiliates, becomes the beneficial holder of at
least 50% of the outstanding Mississippi Chemical Common Stock, Mississippi
Chemical may, provided that all necessary regulatory approvals have been
obtained, exchange the Rights (other than the Rights owned by such Acquiring
Person, which become null and void), in whole or in part, at a ratio of one
share of Mississippi Chemical Common Stock per Right, subject to adjustment.
Prior to ten days after it has become public that an Acquiring Person has
become such (with the possibility for the Mississippi Chemical Board to extend
that period for an additional ten days), Mississippi Chemical may redeem the
Rights at a price of $0.01 per Right. Mississippi Chemical may, without the
approval of any holder of the Rights, but only if at that time the Mississippi
Chemical Board consists of a majority of disinterested directors, supplement
or amend any provision of the Rights Agreement, except the redemption price.
Series Preferred Stock issued upon exercise of the Rights will not be
redeemable. Each share of Series Preferred Stock will be entitled to a minimum
preferential quarterly dividend of $25.00 per share, but will be entitled to
an aggregate dividend of 100 times the dividend declared per share of
Mississippi Chemical Common Stock, if greater. In the event of liquidation,
the holders of the Series Preferred Stock will be entitled to a minimum
preferential liquidation payment of $100.00 per share, but will be entitled to
an aggregate payment of 100 times the payment made per share of Mississippi
Chemical Common Stock, if greater. In the event of any merger or other
business combination in which Mississippi Chemical Common Stock is exchanged,
each share of Series Preferred Stock will be entitled to receive 100 times the
amount received per share of Mississippi Chemical Common Stock.
The Rights have certain anti-takeover effects. The Rights may deter takeover
attempts because they may cause substantial dilution to a person or group that
attempts to acquire Mississippi Chemical on terms not approved by the
Mississippi Chemical Board, except pursuant to an offer conditioned upon a
substantial number of Rights being acquired. The Rights should not interfere
with any merger or business combination approved by the Mississippi Chemical
Board because the Rights are redeemable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Mississippi Chemical Common Stock
is Harris Trust and Savings Bank.
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COMPARATIVE RIGHTS OF SHAREHOLDERS OF MISSISSIPPI CHEMICAL AND FIRST
MISSISSIPPI
Upon consummation of the Merger, the shareholders of First Mississippi will
become shareholders of Mississippi Chemical. Although the charters and bylaws
of the two companies are similar in many respects, there are material
differences between their governing documents that should be carefully
considered by First Mississippi shareholders in evaluating the proposed
Merger. The following comparison of Mississippi Chemical's articles and bylaws
and First Mississippi's charter and bylaws does not purport to be complete and
is qualified in its entirety by reference to such instruments. Copies of the
Mississippi Chemical Articles of Incorporation and Bylaws are available for
inspection at its offices and copies will be sent to Mississippi Chemical and
First Mississippi shareholders upon request. Copies of the First Mississippi
Charter of Incorporation and Bylaws are available for inspection at its
offices and copies will be sent to First Mississippi shareholders upon
request.
VOTING RIGHTS
Required Vote For Certain Business Combinations. Mississippi law generally
requires approval of a merger, consolidation, share exchange, or sale of
assets other than in the regular course of business (a "Change of Control
Transaction") by the affirmative vote of the holders of a majority of the
outstanding shares of the corporation entitled to vote thereon, unless the
MBCA, the articles of incorporation, or the board of directors in a submission
to shareholders requires a greater vote. In addition, Mississippi law provides
that if any class of stock is entitled to vote as a class, approval of the
plan of merger or share exchange also requires the affirmative vote of the
holders of a majority of the shares of each class of stock entitled to vote as
a class thereon.
Mississippi law does not require a shareholder vote to approve a merger if:
(a) the articles of incorporation of the surviving corporation will not differ
(except for a few specific exceptions) from its articles before the merger;
(b) each shareholder of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger will hold the
same number of shares, with identical designations, preferences, limitations,
and relative rights, immediately after; (c) the number of voting shares
outstanding immediately after the merger, plus the number of voting shares
issuable as a result of the merger (either by the conversion of securities
issued pursuant to the merger or the exercise of rights and warrants issued
pursuant to the merger), will not exceed by more than 20% the total number of
voting shares of the surviving corporation outstanding immediately before the
merger; and (d) the number of participating shares outstanding immediately
after the merger, plus the number of participating shares issuable as a result
of the merger (either by the conversion of securities issued pursuant to the
merger or the exercise of rights and warrants issued pursuant to the merger),
will not exceed by more than 20% the total number of participating shares
outstanding immediately before the merger.
The Charter of Incorporation and the Bylaws of First Mississippi provide
that the holders of four-fifths of the outstanding shares of stock of the
corporation must approve Change of Control Transactions and certain other
similar transactions. However, a majority of the outstanding shares can
approve such a transaction (a) if two-thirds of the First Mississippi Board
approves a memorandum of understanding setting forth the principal terms of
the transaction and the transaction is substantially consistent therewith or
(b) if the other party to the transaction is a direct or indirect subsidiary
of First Mississippi.
The Articles of Incorporation of Mississippi Chemical provide that any
Change of Control Transaction requires the affirmative vote of at least two-
thirds of the outstanding common stock as well as the affirmative vote of at
least two-thirds of the outstanding voting power entitled to be cast on the
transaction by each voting group entitled to vote separately thereon. However,
if the transaction has been approved and recommended to the shareholders by
two-thirds of the Mississippi Chemical Board, then the Change of Control
Transaction requires only the affirmative vote of a majority of the
outstanding voting power and each voting class.
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Charter and By-Law Amendments. Mississippi law generally provides that an
amendment to corporate articles of incorporation requires the approval of a
majority of the shareholders. Under Mississippi law, unless the MBCA, the
articles of incorporation, or the board of directors in a submission to the
shareholders requires a greater vote or a class vote, the amendment must also
be approved by a majority of the votes entitled to be cast on the amendment by
any voting group with respect to which the amendment would create dissenters'
rights. In addition, Mississippi law provides that, in some circumstances, the
holders of the outstanding shares of a class are entitled to vote as a
separate voting group on a proposed amendment to the articles of
incorporation. Mississippi law generally provides that either the board of
directors or the shareholders may amend the corporation's bylaws.
First Mississippi's Charter of Incorporation provides that certain
provisions cannot be amended without the approval of four-fifths of the
outstanding voting power. However, if two-thirds of the First Mississippi
Board recommend to the shareholders the adoption of any such amendment, the
shareholders of record holding two-thirds of the outstanding shares of stock
of the corporation entitled to vote in elections of directors may amend such
provisions. The First Mississippi Board may amend the First Mississippi
Bylaws.
The Articles of Incorporation of Mississippi Chemical generally provide that
an article may be amended by the majority vote of the outstanding voting
power. However, certain articles may be amended only upon approval of at least
two-thirds of the outstanding voting power unless a greater vote is required
under the MBCA. The Mississippi Chemical Bylaws generally provide that a
majority of the outstanding stock or a majority of the Mississippi Chemical
Board may amend the bylaws unless the shareholders in amending a particular
bylaw provide expressly that the Mississippi Chemical Board may not amend such
bylaw.
Cumulative Voting. Under Mississippi law, shareholders have a right to
cumulate their votes for directors unless the articles of incorporation
provide otherwise. First Mississippi shareholders have cumulative voting
rights, but Mississippi Chemical shareholders do not.
SPECIAL MEETINGS; CORPORATE ACTION WITHOUT A MEETING
Special Meetings. Under Mississippi law, a corporation will hold a special
meeting of shareholders: (i) on call of its board of directors or the
person(s) authorized to do so by the articles of incorporation or bylaws or
(ii) unless the articles of incorporation provide otherwise, if the holders of
at least 10% of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date, and deliver to the
corporation's secretary one or more written demands for the meeting that
describe the purpose(s) for which it is to be held. The First Mississippi
Bylaws and the Mississippi Chemical Articles and Bylaws currently provide that
the holders of at least 10% of all the votes entitled to vote at the proposed
special meeting may call such meeting upon written demand.
Corporate Action Without a Meeting. Under Mississippi law, action required
or permitted by the MBCA to be taken at a shareholders' meeting may be taken
without a meeting if the action is taken by all the shareholders entitled to
vote on the action. The action must be evidenced by one or more written
consents describing the action taken, signed by all the shareholders entitled
to vote on the action, and delivered to the corporation for inclusion in the
minutes or filing with the corporate records. Both First Mississippi and
Mississippi Chemical allow corporate action without a meeting.
DIVIDENDS
Under Mississippi law, a board of directors may authorize distributions to
its shareholders subject to the articles of incorporation. No distribution may
be made if, after giving it effect, (i) the corporation would not be able to
pay its debts as they become due in the usual course of business or (ii) the
corporation's total assets would be less than the sum of its total liabilities
plus, unless the articles of incorporation permit otherwise, the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy
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the preferential rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution. Both the First
Mississippi Board and the Mississippi Chemical Board may declare distributions
in accordance with Mississippi law.
DISSENTERS' RIGHTS
Under Mississippi law, a shareholder generally is entitled to dissent from
and obtain payment of the fair value of his or her shares in the event of: (a)
a merger to which the corporation is a party (i) if shareholder approval is
required for the merger and the shareholder is entitled to vote on the merger
or (ii) if the corporation is a subsidiary that is merged with its parent, in
some circumstances; (b) a share exchange to which the corporation is a party
as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan; (c) a sale or exchange of all, or substantially
all, of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, except in certain circumstances; (d) an amendment of the articles of
incorporation that materially and adversely affects rights in respect of a
dissenter's shares in certain ways or (e) any corporate action taken pursuant
to a shareholder vote to the extent the articles of incorporation, bylaws, or
a resolution of the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their shares.
Mississippi law also provides for judicial appraisal of shares in certain
circumstances. See "The Merger--Dissenters' Rights" and the Dissenters' Rights
Statute attached as Appendix F to copies of this Joint Proxy
Statement/Prospectus delivered to First Mississippi shareholders.
PROVISIONS RELATING TO DIRECTORS
Number of Directors. The Bylaws of First Mississippi provide that the First
Mississippi Board will consist of 12 persons, except that the number of
directors will be temporarily increased to 13 beginning in November 1996, in
anticipation of the retirement of a director in early 1997. Thereafter, the
number of directors will be 12. The Articles of Incorporation and the Bylaws
of Mississippi Chemical provide that the Mississippi Chemical Board will
consist of no less than nine and no more than 15 directors, the exact number
to be fixed and determined from time to time by resolution of a majority of
the Mississippi Chemical Board.
Vacancies. The Bylaws of First Mississippi provide that all vacancies in the
First Mississippi Board will be filled by the First Mississippi Board, subject
to shareholders confirmation if the new director's term extends beyond the
next shareholders meeting. The Bylaws of Mississippi Chemical provide that,
unless the articles of incorporation provide otherwise, the Mississippi
Chemical Board may fill any vacancy. The Articles of Incorporation of
Mississippi Chemical provide that any vacancy arising from the early
retirement of a director may be filled by a vote of the remaining directors or
the shareholders.
Classification. The Charter of Incorporation and the Bylaws of First
Mississippi provide for classification of the First Mississippi Board into
three classes as nearly equal in number as possible, with one class being
elected annually. The Articles of Incorporation and the Bylaws of Mississippi
Chemical also provide for classification of the Mississippi Chemical Board
into three classes as nearly equal in number as possible, with one class being
elected annually.
Shareholder Nominations. The Charter of Incorporation and the Bylaws of
First Mississippi contain no provisions relating to shareholder nominations.
The Bylaws of Mississippi Chemical provide that the Mississippi Chemical Board
designates nominees for each class of directors.
Removal. Under Mississippi law, shareholders may remove one or more
directors with or without cause unless the articles of incorporation provide
that directors may be removed only for cause. However, Mississippi law
provides that if a director is elected by a voting group of shareholders, only
the shareholders of that voting group may participate in the vote to remove
him or her. Further, Mississippi law states that if cumulative voting is
authorized, a director may not be removed if the number of votes sufficient to
elect him or her under cumulative voting is voted against his or her removal.
However, if cumulative voting is not authorized,
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Mississippi law provides that a director may be removed only if the number of
votes cast to remove him or her exceeds the number of votes cast not to remove
him or her.
Neither the Charter of Incorporation nor the Bylaws of First Mississippi
contain provisions relating to the removal of directors. The Articles of
incorporation and Bylaws of Mississippi Chemical provide that shareholders may
remove one or more director(s) only for cause and only if the number of votes
cast to remove the director exceeds the number of votes cast not to remove the
director.
DERIVATIVE SUITS
Under Mississippi law, shareholders may bring suits on behalf of a
corporation to enforce the rights of a corporation. However, a shareholder may
not commence or maintain a derivative proceeding unless the shareholder (i)
was a shareholder of the corporation at the time of the act or omission
complained of or became a shareholder through transfer by operation of law
from one who was a shareholder at that time and (ii) fairly and adequately
represents the interests of the corporation in enforcing the rights of the
corporation. Further, prior to bringing suit, a shareholder must have made a
written demand upon the corporation, which has been rejected or deemed
rejected (if 90 days has elapsed without a response). In addition, upon
termination of the derivative proceeding, the court may order the corporation
to pay the plaintiff's reasonable expenses or order the plaintiff to pay any
defendant's reasonable expenses under certain circumstances.
STATE ANTI-TAKEOVER STATUTES
The Mississippi Shareholder Protection Act ("MSPA") generally provides for
more stringent voting requirements for the approval of certain business
combinations with interested shareholders (persons owning 20% or more of the
voting power of the outstanding voting stock of a corporation). In addition to
any vote otherwise required by law, by the certificate of incorporation, or by
the bylaws of a corporation, a business combination covered by the MSPA must,
with some exceptions, be approved by the affirmative vote of at least (a) 80%
of the votes entitled to be cast by outstanding shares of voting stock of the
corporation, voting together as a single class and (b) two-thirds of the votes
entitled to be cast by shareholders other than the interested shareholder,
voting together as a single class.
The Mississippi Control Share Act ("MCSA") generally provides for the
decrease in voting power of certain "Control Shares" of a corporation. Control
Shares are shares owned by any one person or group of persons that would, when
added to all other shares of the corporation owned by such person or group,
entitle such person or group to exercise voting power within the following
ranges: one-fifth to one-third, one-third to one-half, or more than one-half
of all voting power of the corporation. Unless otherwise provided in the
articles of incorporation before a person acquires Control Shares, the voting
power of the Control Shares is reduced to zero unless the corporation's
shareholders approve, after receipt of a disclosure statement with respect to
such person, a resolution according the shares the same voting rights as they
had before they became control shares.
Both First Mississippi and Mississippi Chemical are subject to the MSPA and
the MCSA.
FIDUCIARY DUTIES OF DIRECTORS
Under Mississippi law, a director will discharge his or her duties as a
director in good faith, with the care an ordinarily prudent person in a like
position would exercise under similar circumstances, and in a manner he or she
reasonably believes to be in the best interests of the corporation.
LIMITATION OF DIRECTOR LIABILITY
Under Mississippi law, a director is not liable for any action taken as a
director, or any failure to take any action, if he or she acted in good faith,
with the care an ordinarily prudent person in a like position would exercise
under similar circumstances, and in a manner he or she reasonably believes to
be in the best interests of the corporation.
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The Charter of Incorporation and the Bylaws of First Mississippi contain no
provisions dealing with the limitation of director liability. The Articles of
Incorporation of Mississippi Chemical provide that the liability of directors
for money damages for any action taken, or any failure to take any action, as
a director or officer, is eliminated to the fullest extent permitted by the
provisions of the MBCA, except that liability will not be eliminated for the
amount of financial benefit received by a director to which the director is
not entitled, an intentional infliction of harm on Mississippi Chemical or its
shareholders, unlawful distributions, or an intentional violation of criminal
law.
INDEMNIFICATION
Under Mississippi law, a corporation may indemnify directors and officers
against liability incurred in a proceeding if (a) he or she conducted himself
or herself in good faith; (b) he or she reasonably believed that his or her
conduct was (i) in the corporation's best interests (where the conduct was in
his or her official capacity) or (ii) not opposed to the corporation's best
interests (in all other cases); and (c) in the case of any criminal
proceeding, he or she had no reasonable cause to believe his or her conduct
was unlawful. However, Mississippi law provides that a corporation may not
indemnify a director or an officer (a) in connection with a proceeding by or
in the right of the corporation in which the director or officer was adjudged
liable to the corporation or (b) in connection with any other proceeding
charging improper personal benefit to him or her, whether or not involving
action in his or her official capacity, in which he or she was adjudged liable
on the basis that personal benefit was improperly received by him or her.
Under Mississippi law, a corporation must indemnify a director or officer who
was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he or she was a party because he or she is or was a
director or officer of the corporation against reasonable expenses incurred by
him or her in connection with the proceeding.
The Charter of Incorporation and the Bylaws of First Mississippi do not
specifically provide for indemnification; however, as permitted by Mississippi
law, the shareholders of First Mississippi have adopted a resolution providing
for indemnification of officers, directors and employees. The resolution
generally clarifies and broadens the circumstances under which indemnity is
provided by First Mississippi, and extends indemnification beyond directors
and officers, to employees. First Mississippi has also entered into
Indemnification Agreements with certain of its officers and directors. These
Indemnification Agreements provide for indemnification of such officers or
directors in the circumstances and subject to conditions set forth in the
shareholder resolution. The effect of the Indemnification Agreements is to add
to the indemnification rights granted by the resolution a contractual right to
such indemnification which cannot be terminated or altered by amendment of the
resolution. The Articles of Incorporation of Mississippi Chemical provide that
the company will, to the fullest extent permitted by the provisions of the
MBCA, indemnify any director, officer, employee, and agent against any and all
of the expenses, liabilities, or other matters referred to in or covered by
any provisions of the MBCA.
PREEMPTIVE RIGHTS
Neither First Mississippi shareholders nor Mississippi Chemical shareholders
have preemptive rights to acquire the corporation's unissued shares.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Mississippi
Chemical Common Stock to be issued in connection with the Merger and with
respect to certain Federal income tax consequences of the Merger are being
passed upon for Mississippi Chemical by Hughes & Luce, L.L.P., Dallas, Texas.
The Federal income tax consequences to First Mississippi shareholders in
connection with Transfers, the Distribution and the Merger are being passed
upon for First Mississippi by Skadden, Arps, Slate, Meagher & Flom (Illinois),
Chicago, Illinois.
77
<PAGE>
EXPERTS
The consolidated financial statements of Mississippi Chemical, including the
notes thereto as of June 30, 1996 and 1995 and for each of the three years in
the period ended June 30, 1996, incorporated by reference in this Joint Proxy
Statement/Prospectus and elsewhere in the registration statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their report with respect thereto, and are incorporated by reference herein
in reliance upon the authority of said firm as experts in giving said reports.
The special purpose combined financial statements of First Mississippi
Fertilizer Business to be Merged as of June 30, 1996 and 1995 and for each of
the years in the three-year period ended June 30, 1996, included herein, and
the consolidated financial statements of First Mississippi Corporation as of
June 30, 1996 and 1995 and for each of the years in the three-year period
ended June 30, 1996, incorporated by reference herein, have been included or
incorporated by reference herein and in the registration statement in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing or incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
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<PAGE>
ELECTION OF FIRST MISSISSIPPI DIRECTORS
VOTING SECURITIES
Record Date. Shareholders of record at the close of business on October 30,
1996, are entitled to notice of and to vote at the First Mississippi Annual
Meeting.
Shares Outstanding. As of October 30, 1996, a total of 20,621,736 shares of
First Mississippi Common Stock were outstanding and entitled to vote. Each
share is entitled to one (1) vote per share on each matter submitted to a vote
at the First Mississippi Annual Meeting except with regard to election of
Directors wherein shareholders have cumulative rights.
According to a Form 13G filed with the Commission by The Goldman Sachs
Group, L.P., and Goldman, Sachs & Co. ("Goldman Sachs"), 85 Broad Street, New
York, New York 10004, Goldman Sachs owned as of December 31, 1995, an
aggregate of 8.5% of Common Stock of First Mississippi. According to the
report, Goldman Sachs has shared voting power as to 1,762,991 shares and no
voting power as to 8,100 shares. See "--Security Ownership of Management" for
information as to J. Kelley Williams, who is also a greater than five percent
(5%) holder of First Mississippi Common Stock.
BOARD OF DIRECTORS
The First Mississippi Board represents the interests of all shareholders and
is responsible for setting policy and objectives for First Mississippi in
accord with its charter, Bylaws, Mississippi laws and other applicable
governmental regulations. The Board is currently composed of ten (10) non-
employee Directors and one (1) employee, the Chief Executive Officer; however,
at the time of the First Mississippi Annual Meeting the number of directors
will be thirteen. The Board is divided into three (3) groups, normally elected
for three- year terms. The Board held six (6) meetings during fiscal 1996. All
of the Directors of First Mississippi have attended at least seventy-five
percent (75%) of the First Mississippi Board meetings and meetings of
committees on which they serve which were held during fiscal 1996 except Mr.
Speed, who attended less than seventy-five percent (75%) of such meetings.
The COMMITTEE ON DIRECTOR AFFAIRS is composed of four (4) non-employee
Directors and is responsible for nominating new Board members, appointing
members to Board Committees, assessing Board performance and recommending
Board compensation for action by the Board. The Chairman of this committee
also chairs executive sessions of the outside members of the Board. The
Committee on Director Affairs considers suggestions for Director nominations
from all sources. Stockholder suggestions for nominees for the 1997 Annual
Meeting, together with appropriate detailed biographical information, should
be submitted to the Corporate Secretary no later than June 30, 1997. The
Committee on Director Affairs met three (3) times during fiscal 1996.
The AUDIT COMMITTEE is composed of four (4) non-employee Directors with
broad latitude for inquiry into all operations of First Mississippi. Its
primary responsibilities include making a recommendation to the Board on the
selection of independent auditors, reviewing audit reports prepared by
independent auditors, internal auditors, insurance auditors and other
consultants engaged by First Mississippi to examine specific areas of
corporate operations, and examining the adequacy of compliance with various
governmental regulations and corporate policies and procedures. The Audit
Committee met four (4) times during fiscal 1996.
The COMPENSATION & HUMAN RESOURCES COMMITTEE is composed of three (3) non-
employee Directors and is charged with the responsibility of recommending to
the Board a program of overall compensation for First Mississippi and its
subsidiaries, including Executive Officers and other Key Employees. These
responsibilities include administration of First Mississippi's Long-Term
Incentive Plans. The Compensation & Human Resources Committee met five (5)
times during fiscal 1996.
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<PAGE>
Committee assignments are indicated below.
Section 16(a) Reporting Delinquencies. Section 16(a) of the Exchange Act
requires officers and directors of First Mississippi, and persons who own more
than ten percent (10%) of a registered class of First Mississippi's equity
securities to file reports of ownership and changes in their ownership with the
Commission and First Mississippi monitors compliance and acts as the Compliance
Officer for such filings of its officers and directors and prepares and files
reports for such persons based on information supplied by them. Based solely on
its review of such information, First Mississippi believes that for fiscal
1996, its officers and directors were in compliance with all applicable filing
requirements, except that due to an administrative oversight, a report on Form
5 (Annual Statement of Beneficial Ownership of Securities) was inadvertently
filed late regarding two transactions by Mr. Tepas in First Mississippi's 401
(k) Plan.
ELECTION OF DIRECTORS
Article VIII of First Mississippi's Charter of Incorporation and Section 3.3
of First Mississippi's Bylaws specify in part "The Board of Directors shall be
divided into three (3) groups which shall be as nearly equal as may be
possible." Section 3.2 of First Mississippi's Bylaws states "Each existing
director on August 22, 1995 who had completed less than nine (9) consecutive
years of service on the Board of Directors on that date will offer a written
resignation upon the completion of nine (9) consecutive years of service if
under age 65 at that time. In addition, all directors who were under age 65 on
August 22, 1995 will offer a written resignation upon reaching age 65. Future
directors will offer resignations upon completion of nine (9) consecutive years
of service prior to age 65 and again upon reaching age 65. In each case, the
Committee on Director Affairs (or successor committee) will make a
recommendation with respect to continued service to the Board of Directors for
action. Directors will retire at age 70." In accordance with these Bylaw
provisions, Mr. Reed retired upon reaching age 70 on April 10, 1996 and Mr.
Moreton will be required to resign upon reaching age 70 on September 24, 1997.
Also in accordance with these Bylaw provisions, Dr. Murrill and Mr. Williams,
both of whom are nominees for Directors, will be required to offer their
resignation as a Director of First Mississippi prior to the expiration of the
three (3) year term for which they are being nominated below. For the same
reason, Mr. Speed will be required to offer his resignation as a Director of
First Mississippi prior to the expiration of the three (3) year term which he
is currently serving. Pursuant to First Mississippi's Bylaws, the Committee on
Director Affairs will make a recommendation with respect to the continued board
service of each of these three Directors at the time their respective
resignations are submitted in accordance with the above-referenced Bylaw
provisions.
The sections below set forth for each nominee for election as a Director and
for each continuing Director who is not a nominee, based on information
supplied by him, his age as of the date of the First Mississippi Annual
Meeting, any presently held positions with First Mississippi, his principal
occupation as of the date of this Joint Proxy Statement/Prospectus and for the
past five (5) years, the year in which his term of office will expire, other
Directorships in public companies, and his tenure of service as a Director of
First Mississippi.
NOMINEES FOR ELECTION AS DIRECTORS
TO SERVE A THREE (3) YEAR TERM TO EXPIRE IN 1999
JAMES E. FLIGG Director since: 1994 Term Expires: 1996
Mr. Fligg, 60, is Senior Executive Vice President,
Strategic Planning and International Business
Development, Amoco Corporation, based in Chicago,
Illinois, and has been since October 1995. From July
1993 until October 1995, he was Executive Vice
President, Chemicals Sector, Amoco Corporation. He
was President of Amoco Chemical Company, an
international chemical manufacturing and marketing
subsidiary of Amoco Corporation based in Chicago,
Illinois, from July 1991 until October 1995.
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<PAGE>
He was a director of Amoco Chemical from 1984 until
October 1995. He was Executive Vice President,
International Operations and Polymer Products, from
1989 to July 1991. During fiscal 1996, two of First
Mississippi's subsidiaries purchased a total of
approximately $12.1 million in products from Amoco
Chemical Company or one of its affiliates.
He is a member of the Compensation & Human Resources
Committee.
ROBERT P. GUYTON Director since: 1969 Term Expires: 1996
Mr. Guyton, 59, is Chairman and Chief Executive
Officer of Smart Choice Holdings, Inc., an owner and
operator of automobile dealerships and finance
companies, a position he has held since July 1996. He
was Vice President and Financial Consultant for
Raymond James & Associates, Inc., an asset management
and investment banking company in Atlanta, Georgia, a
position he has held from August 1993 to July 1996.
He was self-employed as a management consultant from
June 1991 to July 1993. He was Chairman and Chief
Executive Officer of Bank South Corporation, Atlanta,
Georgia, from 1990 to 1991. He served as President
and Chief Executive Officer of Bank South Corporation
from 1981 to 1990. He is a member of the Board of
Directors of Piccadilly Cafeterias, Inc., a
restaurant chain, Baton Rouge, Louisiana. Mr. Guyton
is a Director of Power Sources, Inc., a 50% owned
subsidiary of First Mississippi.
He is Chairman of the Audit Committee.
PAUL W. MURRILL Director since: 1969 Term Expires: 1996
Dr. Murrill, 62, is a professional engineer. He is
Chairman of the Board of Directors of Piccadilly
Cafeterias, Inc., a restaurant chain, Baton Rouge,
Louisiana. He has been a director of Entergy
Corporation since 1994, when it purchased Gulf States
Utilities Company, an electric and gas utility
company in Beaumont, Texas, of which Dr. Murrill was
a director. Until March 1990, Dr. Murrill was also a
Special Advisor to the Chairman of the Board of Gulf
States. Dr. Murrill had also previously served as
Chairman of the Board and Chief Executive Officer of
that company. He is a Director of ZYGO, a high
precision instrument company, Middlefield,
Connecticut; Howell Corporation, a diversified energy
company, Houston, Texas; and Tidewater, Inc., an oil
service company, New Orleans, Louisiana. He is a
director of FirstMiss Fertilizer, Inc., a subsidiary
of First Mississippi.
He is a member of the Audit Committee.
J. KELLEY WILLIAMS Director since: 1971 Term Expires: 1996
Mr. Williams, 62, is the Chairman of the Board and
Chief Executive Officer of First Mississippi and has
been since 1988. From 1988 until August 1995, he was
President, Chief Executive Officer and Chairman of
the Board. He was President and Chief Executive
Officer from 1971 until 1988. He is a Director of
Deposit Guaranty Corporation and Deposit Guaranty
National Bank, Jackson, Mississippi, and Chairman of
the Board of Getchell Gold
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<PAGE>
Corporation (formerly FirstMiss Gold Inc.),
Englewood, Colorado. He is Chairman of the Board of
Callidus Technologies Inc., FirstMiss Fertilizer,
Inc., FirstMiss Steel, Inc., First Chemical
Corporation, Plasma Energy Corporation, Plasma
Processing Corporation and Power Sources, Inc. (50%
owned), all subsidiaries of First Mississippi.
NOMINEE FOR ELECTION AS DIRECTOR
TO SERVE A TWO (2) YEAR TERM TO EXPIRE IN 1998
DAN F. SMITH Mr. Smith, 50, is President and Chief Operating
Officer of Lyondell Petrochemical Company of Houston,
Texas, a position he has held since August 1994.
Lyondell manufactures and sells petrochemicals and
refinery products. From May 1993 until August 1994,
he was Executive Vice President and Chief Operating
Officer of Lyondell. He was Vice President, Corporate
Planning, of Atlantic Richfield Company, Los Angeles,
California, from October 1991 to May 1993. From July
1991 to October 1991, he was Executive Vice President
and Chief Financial Officer of Lyondell. During
fiscal 1996, a subsidiary of First Mississippi sold a
total of approximately $308,000 in products to
Lyondell Petrochemical Company and its affilites.
NOMINEE FOR ELECTION AS DIRECTOR
TO SERVE A ONE (1) YEAR TERM TO EXPIRE IN 1997
MICHAEL J. FERRIS Mr. Ferris, 51, is Executive Vice President,
Chemicals Group, of Vulcan Materials Company, a
chemical manufacturer located in Birmingham, Alabama.
Vulcan serves principally the chemical, paper and
water treatment industries. Prior to becoming
Executive Vice President of Vulcan in 1996, Mr.
Ferris served in various positions at Vulcan
Chemicals, a division of Vulcan Materials Company,
since 1974, including President and Executive Vice
President.
CONTINUING DIRECTORS WHOSE TERMS EXPIRE AFTER 1996
RICHARD P. ANDERSON Director since: 1987 Term Expires: 1997
Mr. Anderson, 67, is the President and Chief
Executive Officer of The Andersons, Inc., an
agribusiness company in Maumee, Ohio, and has been
since 1981. He is a Director of Centerior Energy
Corporation, an electric utility company in
Cleveland, Ohio, and N-Viro International
Corporation, a waste recycling company in Toledo,
Ohio. He is also a Director of Plasma Processing
Corporation, a subsidiary of First Mississippi.
He is a member of the Committee on Director Affairs
and Chairman of the Compensation & Human Resources
Committee.
PAUL A. BECKER Director since: 1985 Term Expires: 1998
Mr. Becker, 57, is a Managing Director of Mitchell
Hutchins Asset Management, Inc., an investment
management company in New York City, and wholly owned
by Paine Webber Group, Inc. Mr. Becker has been
employed by Paine Webber Group, Inc. since 1978.
Mitchell Hutchins serves as an investment manager for
First Mississippi's pension plan until August 1996.
He is a member of the Audit Committee.
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<PAGE>
JAMES W. CROOK Director since: 1971 Term Expires: 1998
Mr. Crook, 66, is Chairman of the Board of Melamine
Chemicals, Inc. (MCI), which manufactures melamine in
Donaldsonville, Louisiana, and has been since 1987.
First Mississippi owns approximately 23% of the
common stock of MCI. MCI obtains all of its raw
materials (urea) from Triad Chemical, a joint-venture
between First Mississippi and Mississippi Chemical
Corporation. During fiscal year 1996, First
Mississippi was paid approximately $11.6 million by
MCI for urea. Mr. Crook is a retired Vice President
of First Mississippi, a position he held from 1965 to
June 1985. Mr. Crook is also a member of the Triad
Chemical Management Committee and a Director of
FirstMiss Fertilizer, Inc. and FirstMiss Steel, Inc.,
subsidiaries of First Mississippi.
He is a member of the Committee on Director Affairs
and the First Mississippi Corporation Foundation
Advisory Committee.
CHARLES P. MORETON Director since: 1984 Term Expires: 1998
Mr. Moreton, 69, has been a private investor,
primarily in the oil and gas business, since 1991. He
was Chairman of the Board of Commet Resources, Inc.,
a natural gas transmission and marketing company in
Houston, Texas, from 1986 until its dissolution in
July 1991. He was a Director of Tanglewood
Bancshares, Inc., Houston, Texas, until August 1,
1995. He is a Director of Plasma Processing
Corporation, a subsidiary of First Mississippi.
He is a member of the Audit Committee.
Under First Mississippi's corporate governance
guidelines adopted by the First Mississippi Board,
Mr. Moreton will be required to resign from the First
Mississippi Board upon reaching age 70, which will
occur prior to the expiration of his term.
WILLIAM A. PERCY, II Director since: 1988 Term Expires: 1997
Mr. Percy, 56, is a partner of Trail Lake
Enterprises, a cotton and soybean farming operation
in Arcola, Mississippi, and has been since 1986.
Since September 1992, he has been the Chairman of the
Board of Staple Cotton Cooperative Association in
Greenwood, Mississippi. Until July 1, 1994, he was a
Director of Mississippi Chemical Corporation (MCC),
which manufactures and sells fertilizer. First
Mississippi and MCC are engaged in a joint-venture,
Triad Chemical, in Donaldsonville, Louisiana. Mr.
Percy is also President and Chief Executive Officer
of Greenville Compress Co., Greenville, Mississippi.
He was a Director of the Sunburst Bank of
Mississippi, Grenada, Mississippi, until it was
purchased by Union Planters Bank in July 1995. He is
also a Director of Callidus Technologies Inc.,
FirstMiss Fertilizer, Inc., and Plasma Energy
Corporation, subsidiaries of First Mississippi.
He is a member of the Compensation & Human Resources
Committee and the First Mississippi Corporation
Foundation Advisory Committee.
LELAND R. SPEED Director since: 1965 Term Expires: 1998
Mr. Speed, 64, is Chief Executive Officer and
Chairman of the Board of Parkway Properties, Inc.
(formerly The Parkway Company), and Chairman,
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[FIRST MISSISSIPPI ONLY]
Chief Executive Officer and Trustee of EastGroup
Properties, real estate investment companies, both of
Jackson, Mississippi. He is Chairman and Director of
Delta Industries, Inc., a construction materials
manufacturer and a Director of Farm Fish, Inc. and
Mississippi Valley Gas Company, all of Jackson,
Mississippi. He was Trustee and President of Eastover
Corporation from 1977 through December 1994;
President and Director of Congress Street Properties
from 1984 through November 1994; and President and
Director of LNH REIT, INC. from 1991 through May
1996. He was also President, Chief Executive Officer
and Director of Rockwood National Corporation, a real
estate developer, from 1983 through June 1994. He was
a Trustee of First Continental Investors REIT,
Houston, Texas from 1983 through May 1994. He is also
a Director of First Chemical Corporation, a
subsidiary of First Mississippi.
He is a member of the Committee on Director Affairs
and the First Mississippi Corporation Foundation
Advisory Committee.
R. GERALD TURNER Director since: 1987 Term Expires: 1997
Dr. Turner, 50, is the President of Southern
Methodist University in Dallas, Texas, a position he
assumed in June 1995. He was the Chancellor of the
University of Mississippi in Oxford, Mississippi,
from 1984 through June 1995. He has been a director
of River Oaks Furniture, Inc., a furniture
manufacturer based in Fulton, Mississippi, since
1994, a Director of JC Penney Co., Inc., a retailer,
since 1995 and a director of Mobile
Telecommunications Technologies Corp, a provider of
nationwide paging and voice messaging services, since
July 1996. He is also a Director of Callidus
Technologies Inc., a subsidiary of First Mississippi.
He is Chairman of the Committee on Director Affairs
and a member of the First Mississippi Corporation
Foundation Advisory Committee.
THE FIRST MISSISSIPPI BOARD RECOMMENDS A VOTE FOR THE NOMINEES.
---
Cumulative Voting. A First Mississippi stockholder has the right to cumulate
votes for the election of Directors. A stockholder shall have the right to cast
one (1) vote for each share owned by him or her for as many Directors as there
are to be elected (6), or cumulate such votes and give one (1) nominee as many
votes as there are Directors to be elected multiplied by the number of his or
her shares, or distribute them on the same principle among as many nominees and
in such manner as desired. The First Mississippi Board solicits discretionary
authority to cumulate votes.
Voting Procedures on Election of Directors. Shareholders have the right to
vote "For" or "Withhold Authority" to vote for some or all of the nominees for
Directors. Pursuant to the First Mississippi Bylaws and Mississippi law, the
presence, in person or by proxy, of a majority of the outstanding shares of
First Mississippi Common Stock entitled to vote shall constitute a quorum to
convene the First Mississippi Annual Meeting. Therefore, any proxy authorized
to be voted at the First Mississippi Annual Meeting on any matter, whether or
not marked to "Withhold Authority" or to effect a broker non-vote, will be
counted in establishing a quorum. The election of Directors will require the
affirmative vote of a plurality of the shares voted at the Annual Meeting in
person or by proxy. Votes withheld and broker non-votes will not be included in
vote totals for Director nominees and will have no effect on the outcome of the
vote. In the absence of specific instructions, proxies will be voted for the
nominees.
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SECURITY OWNERSHIP OF MANAGEMENT
Gold Distribution. On October 20, 1995, First Mississippi distributed to its
shareholders the shares of Getchell Gold Corporation ("Getchell"), formerly
FirstMiss Gold, Inc., held by First Mississippi (the "Gold Distribution").
Following the Gold Distribution, in accordance with the provisions of the Long-
Term Incentive Plans of First Mississippi, the number of shares of First
Mississippi Common Stock underlying outstanding debentures, debenture options
and nonqualified stock options ("NQSOs"), as well as the effective exercise
prices relating thereto, were adjusted to reflect the distribution value of the
Getchell shares. This adjustment increased the number of shares underlying the
awards outstanding at the time of the Gold Distribution and reduced the
respective exercise prices by a factor of 1.61.
The Directors and Officers of First Mississippi beneficially own as of August
27, 1996, Convertible Debentures Options, Convertible Preferred Stock, NQSOs
and First Mississippi Common Stock as follows:
<TABLE>
<CAPTION>
COMMON TOTAL COMMON
STOCK PERCENT STOCK PERCENT
BENEFICIALLY OF COMMON BENEFICIALLY OF
DIRECTOR/OFFICER OWNED(1) CLASS STOCK OWNED(2) CLASS
- ---------------- ------------ ------- ------- ------------ -------
<S> <C> <C> <C> <C> <C>
Richard P. Anderson........ 9,450(3)
NQSO..................... 1,500 10,950 *
Paul A. Becker............. 10,000
1988-1 Series............ 1,610 20%
1989-2 Series............ 1,610 20%
1990-2 Series............ 1,610 20%
1991-2 Series............ 1,610 20%
1992-1 Series............ 1,610 20%
NQSO..................... 1,500
-----
9,550 19,550 *
James W. Crook............. 119,187(4)
NQSO..................... 1,500 120,687 *
James E. Fligg............. 500
1994-1 Series............ 1,610 100%
NQSO..................... 1,500
-----
3,110 3,610 *
Robert P. Guyton........... 23,000
NQSO..................... 1,500 24,500 *
Charles P. Moreton......... 13,250
NQSO..................... 1,500 14,750 *
Paul W. Murrill............ 7,900(5)
1988-1 Series............ 1,610 20%
1989-2 Series............ 1,610 20%
1990-2 Series............ 1,610 20%
1991-2 Series............ 1,610 20%
1992-1 Series............ 1,610 20%
NQSO..................... 1,500
-----
9,550 17,450 *
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
COMMON TOTAL COMMON
STOCK PERCENT STOCK PERCENT
BENEFICIALLY OF COMMON BENEFICIALLY OF
DIRECTOR/OFFICER OWNED(1) CLASS STOCK OWNED(2) CLASS
- ---------------- ------------ ------- ------- ------------ -------
<S> <C> <C> <C> <C> <C>
William A. Percy, II...... 36,275(6)
1988-1 Series........... 1,610 20%
1989-2 Series........... 1,610 20%
1990-2 Series........... 1,610 20%
1991-2 Series........... 1,610 20%
1992-1 Series........... 1,610 20%
NQSO.................... 1,500
-------
9,550 45,925 *
Leland R. Speed........... 12,720
1988-1 Series........... 1,610 20%
1989-2 Series........... 1,610 20%
1990-2 Series........... 1,610 20%
1991-2 Series........... 1,610 20%
1992-1 Series........... 1,610 20%
NQSO.................... 1,500
-------
9,550 22,270 *
R. Gerald Turner.......... 7,900(7)
NQSO.................... 1,500 9,400 *
J. Kelley Williams........ 870,465(8)
1987-A Series........... 40,250 78%
1988-A Series........... 72,450 63%
1989-1 Series........... 72,450 100%
1990-1 Series........... 72,450 98%
NQSO.................... 60,000
-------
317,600 1,188,065 5.6%
Charles R. Gibson......... 13,917(9)
NQSO.................... 14,007 27,924 *
George M. Simmons......... 241
1988-A Series**......... 6,440 6%
1989-A Series........... 1,610 6%
NQSO.................... 10,350
-------
18,400 18,641 *
R. Michael Summerford..... 70,546
NQSO.................... 16,422 86,968 *
Thomas G. Tepas........... 1,500(10)
NQSO.................... 48,272 49,772 *
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
COMMON TOTAL COMMON
STOCK PERCENT STOCK PERCENT
BENEFICIALLY OF COMMON BENEFICIALLY OF
DIRECTOR/OFFICER OWNED(1) CLASS STOCK OWNED(2) CLASS
- ---------------- ------------ ------- --------- ------------ -------
<S> <C> <C> <C> <C> <C>
All Directors and Executive
officers as a Group (24
Persons)(11).............. 1,229,691
1987-A Series............ 48,300 94%
1988-A Series**.......... 86,940 75%
1988-1 Series............ 6,440 80%
1989-A Series............ 4,025 15%
1989-1 Series............ 72,450 100%
1989-2 Series............ 6,440 80%
1990-1 Series............ 72,450 85%
1990-2 Series............ 6,440 80%
1991-1 Series............ 4,830 75%
1991-2 Series............ 6,440 80%
1992-1 Series............ 6,440 80%
1994-1 Series............ 1,610 100%
NQSO..................... 222,960
-------
545,765 1,775,456 8.4%
</TABLE>
- --------
* Represents less than one percent (1%) of class.
** Represents 6,440 shares of First Mississippi Common Stock underlying
Convertible Debentures that have already been purchased through the exercise
of First Mississippi Debenture Options.
(1) Numbers represent shares of First Mississippi Common Stock underlying the
Subordinated Debentures and NQSOs beneficially owned by the Directors and
Officers. The Convertible Debentures are immediately convertible into the
specified number of shares of Convertible Preferred Stock of the same
series and then immediately convertible into the specified number of shares
of First Mississippi Common Stock. NQSOs are exercisable no earlier than
six (6) months from date of grant into shares of First Mississippi Common
Stock.
(2) In connection with the Shareholder Rights Plan adopted by First Mississippi
on February 27, 1996, which replaced an expiring plan, preferred stock
purchase rights were distributed to shareholders and are deemed to be
attached to the outstanding shares of First Mississippi Common Stock,
including the outstanding shares of First Mississippi Common Stock reported
above as being owned by Directors and Officers. Under certain conditions,
each right may be exercised to purchase one one-hundredth (1/100) of a
share of a new series of preferred stock, at an exercise price of $100
(subject to adjustment). The rights, which do not have voting rights,
expire in 2006 and may be redeemed by First Mississippi at a price of $.01
per right prior to a specified period of time after the occurrence of
certain events. In certain events, each right (except certain rights
beneficially owned by 10% or more owners, which rights are voided) will
entitle its holder to purchase shares of First Mississippi Common Stock
with a value of twice the then current exercise price.
(3) Shares voting and investment power of 3,700 shares with Mrs. Anderson.
(4) Included are 700 shares owned by Mrs. Crook of which Mr. Crook has no
voting and investment power and disclaims beneficial ownership.
(5) Included are 775 shares owned by Mrs. Murrill of which Dr. Murrill has no
voting and investment power and disclaims beneficial ownership.
(6) Included are 31,500 shares of which Mr. Percy has sole voting and
investment power as President of Greenville Compress Company and of which
he disclaims beneficial ownership.
(7) Shares voting and investment power of 7,800 shares with Mrs. Turner.
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(8) Included are 171,518 shares of which Mr. Williams shares voting and
investment power, and 4,327 shares for which he has no voting and
investment power and disclaims beneficial ownership. Excluded are 61,750
shares held in the Jean P. Williams Revocable Trust, of which Mr. Williams
has no voting and investment power and disclaims beneficial ownership.
(9) Shares voting and investment power of 2,375 shares with Mrs. Gibson.
(10) Shares voting and investment power with Mrs. Tepas.
(11) Except for 2,000 shares, 200 shares, 2,000 shares and 100 shares for which
Mr. Daniel Anderson, Mr. Barker, Mr. Moore, and Mr. Chustz, respectively,
have shared voting and investment power, and except for 12 shares owned by
Mr. McArthur's wife, of which he has no voting and investment power and
disclaims beneficial ownership, and except as otherwise indicated in these
notes, the shares beneficially owned by the persons indicated in the table
above represent sole voting and investment power.
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DIRECTOR COMPENSATION
Directors who are not employees are compensated for their services with a
retainer of $16,000 per year. In addition, non-employee Directors receive fees
for attendance at duly called Board and committee meetings. Effective May 22,
1996, the fees paid are $1,000 per day for attendance at duly called Board and
committee meetings or a fee of $500 for half-day committee meetings except for
committee chairmen, who receive a fee of $1,250 per day for meetings and $625
for half-day meetings. Prior to this date, non-employee Directors' fees were
$900 per day for attendance at duly called Board meetings or a fee of $450 for
half-day committee meetings except for committee chairmen, who received a fee
of $1,200 per day for meetings and $600 for half-day meetings. This increase
was recommended by the Committee on Director Affairs to align board
compensation with peer companies. Travel expenses to and from meetings are
reimbursed to all Directors. No fees are paid for informal meetings. Attendance
at meetings held by telephone conference call are paid at the half-day rate.
Directors performing special services at the request of the Chief Executive
Officer are paid a per diem of $1,000 per day, except for committee chairmen,
who are paid a per diem of $1,250 per day.
Under First Mississippi's 1988 Long-Term Incentive Plan, non-employee
Directors were automatically awarded for five (5) years, debenture options to
purchase convertible debentures. Debenture Options may be exercised any time
within ten (10) years after the date of grant to purchase Convertible
Debentures. Each debenture may be converted six (6) months after the date of
grant of the applicable option into Convertible Preferred Stock at a conversion
price equal to the fair market value of First Mississippi Common Stock on the
date the debenture options were granted. Each share of Convertible Preferred
Stock is, in turn, immediately convertible into 1.61 shares of First
Mississippi Common Stock. There will be no further awards under this plan.
Under First Mississippi's 1995 Long-Term Incentive Plan (the "1995 Plan"),
each non-employee Director will be eligible annually for a nonqualified stock
option grant. The number of shares subject to each such option shall be
determined by First Mississippi performance as measured by First Mississippi's
return on equity calculated as the average two (2) year total net income
divided by the average two (2) year stockholder equity and measured as a
rolling average of the two immediately preceding fiscal years. However, no
awards shall be awarded in the event of an average return of less than 10% and
in the event of an average return of 20% or more, no more than 1,500 options
may be granted to any non-employee Director in any given year.
The exercise price for each such option is the fair market value of First
Mississippi Common Stock as of the date of the grant of the option. Each option
vests six months after the date of grant and terminates on the tenth
anniversary of the date of grant. Accordingly, each non-employee Director
received options to purchase 1,500 shares of First Mississippi Common Stock in
November 1995 and will receive options to purchase an additional 1,500 shares
following the 1996 annual meeting.
Also under the 1995 Plan, non-employee Directors may make an irrevocable
election to receive share units in exchange for deferring all or some portion
of their annual retainer at a per share unit exchange price that is eighty-five
percent (85%) of the fair market value of First Mississippi Common Stock
determined as of the first day of the year during which all or a portion of the
deferred retainer was to be paid. Dividends earned pursuant to the share units
are reinvested in the form of additional share units.
In fiscal 1986, First Mississippi established a Deferred Income Plan for
Directors, Officers and Key Employees (Plan A) which superseded the previous
deferred income arrangement and pursuant to which deferral opportunities in any
given year, up to a maximum of three (3) years, were offered at the discretion
of the Board. Amounts deferred under Plan A earn interest at a prescribed rate
which, as originally established, was twenty percent (20%), compounded
annually, subject to reduction as described below. First Mississippi is owner
and beneficiary of life insurance policies covering most of the participants in
Plan A. The benefits associated with these policies are expected to cover First
Mississippi's financial obligations incurred in connection with Plan A,
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<PAGE>
including the interest accrued on the amounts deferred thereunder in excess of
market rates, resulting in no net cost to First Mississippi over the life of
the plan. Plan A provides that the interest rate may be reduced prospectively
and, if necessary, may be adjusted retroactively, due to severe economic
changes including, but not limited to, changes in tax law. However, no
retroactive changes in the rate of a return may occur unless such economic
changes are material, adverse and retroactive in nature. Further, in no event
shall the interest rate on amounts deferred under Plan A be reduced to a level
lower than the ten (10)-year Treasury Note Rate. Effective January 1, 1994, the
Director participants in Plan A still serving on the Board voluntarily reduced
the applicable interest rate to one hundred twenty percent (120%) of the
applicable annual federal long-term rate as specified in the Internal Revenue
Code. At the same time, the First Mississippi Board closed Plan A for any new
participants or deferral opportunities, subject to the existing rights and
obligations thereunder. The interest rate for the first six months of fiscal
year 1994 for all Directors remained at twenty percent (20%). In fiscal year
1989, First Mississippi established a successor Deferred Compensation Plan for
Outside Directors (Plan B) to insure continuation of deferral opportunities for
Directors. Plan B was amended effective January 1, 1994, to change the interest
rate prospectively to one hundred twenty percent (120%) of the applicable
annual federal long-term rate as specified in the Internal Revenue Code.
Amounts deferred under Plan B prior to January 1, 1994 earned interest based on
the Chase Manhattan Bank, N.A. Prime Rate, less one percent (1%). The deferrals
under both Plan A and Plan B are held by First Mississippi until retirement,
resignation or other termination of services. Director J. Kelley Williams
participates only in Plan A (See Note 8 under Summary Compensation Table).
First Mississippi furnishes Directors with $100,000 accidental death and
dismemberment and $250,000 of business travel accident insurance. First
Mississippi also has a Retirement Plan for its non-employee Directors under
which all such Directors who have served at least one (1) three-year term will,
under certain conditions, receive an annual retirement benefit equal to their
annual retainer at retirement for each year of service, not to exceed fifteen
(15) years. The amount of the retainer to be received after retirement shall be
fixed at the time of retirement. The plan also provides for a lump sum payment
to a Director under certain conditions in the event of a change of control and
to his beneficiary upon his death.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to the Executive
Officers of First Mississippi, including age as of the date of the First
Mississippi Annual Meeting. All Executive Officers are elected by the First
Mississippi Board and hold office until the next Annual Meeting of Shareholders
and thereafter until their successors are elected and qualify.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD, YEAR FIRST ELECTED AND TERM OF OFFICE
- ---- --- ----------------------------------------------------
<S> <C> <C>
Daniel P. Anderson...... 44 Vice President, Health, Safety and Environmental Affairs, July 1, 1995;
Vice President, Environmental Affairs, First Chemical Corporation, 1990.
Robert B. Barker........ 51 Vice President, Corporate Development and Acquisitions, October 1996;
President, Quality Chemicals, Inc., 1990.
W. P. Bartlett.......... 58 President, Callidus Technologies Inc., 1989; President, Penteco
Corporation, 1983-1989.
J. Steve Chustz......... 48 General Counsel, 1993; Interim General Counsel, May 1993 through
November 1993; Associate General Counsel, 1987.
Paul Jerry Coder........ 54 President, EKC Technology, Inc., December 1992; Vice President,
Market Research, EKC Technology, Inc., June 1992; Vice President,
KCI Chemicals, Inc., June 1987-February 1992.
Charles R. Gibson....... 59 President, FirstMiss Fertilizer, Inc., 1989; Vice President, 1985-1989.
</TABLE>
90
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION HELD, YEAR FIRST ELECTED AND TERM OF OFFICE
- ---- --- ----------------------------------------------------
<S> <C> <C>
Samir A. Hakooz......... 49 President, Plasma Energy Corporation ("PEC"), 1991; Executive Vice
President and General Manager, PEC, July, 1990; Vice President of
Marketing, PEC, April, 1990.
Scott A. Martin......... 38 President, Quality Chemicals, Inc., October, 1996; Vice President and
General Manager Custom Manufacturing, Quality Chemicals,
July, 1995; Vice President, Operations, Quality Chemicals, August, 1991.
James L. McArthur....... 53 Secretary and Manager, Investor Relations, 1993; Manager, Investor
Relations, 1988.
Terry L. Moore.......... 47 President, Plasma Processing Corporation, 1990; Vice President,
Marketing, PEC, 1988-1990.
George M. Simmons....... 53 President, First Chemical Corporation, July 1, 1995; Vice President,
Marketing, First Chemical Corporation, 1985.
R. Michael Summerford... 48 Vice President and Chief Financial Officer, 1988; Vice President,
1983-1988.
Thomas G. Tepas......... 49 President and Chief Operating Officer, August 1995; Various senior
management positions with Hercules, Inc., including Senior Vice
President, 1994 to August 1995; Group Vice President and President of
the Food and Functional Products Division, 1992; President of the
Flavor and Food Ingredients Division, 1991.
J. Kelley Williams...... 62 Chairman of the Board and Chief Executive Officer, August 1995;
Chairman of the Board, President and Chief Executive Officer, 1988;
President and Chief Executive Officer, 1971-1988.
Frank D. Winter......... 55 President and Chief Executive Officer, FirstMiss Steel, Inc., 199 ;
Self-employed consultant, 1991-1992; President, Atlas Specialty Steels,
1987-1991.
</TABLE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION(1) OPTIONS(2) COMPENSATION(3)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ------------------ ---- ------- ------- --------------- --------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Kelley Williams (4) 1996 475,000 324,400 1,886,548(5) 60,000 29,545(8)(9)(10)
Chairman & Chief 1995 450,000 360,000 127,697(5) 0 22,050
Executive Officer 1994 330,000 200,000 (6) 35,000 52,975
Thomas G. Tepas 1996 187,500 135,000 (6) 48,272* 48,786(9)(10)(11)
President & Chief
Operating Officer
Charles R. Gibson 1996 194,500 95,000 142,044(5) 14,007* 30,876(8)(9)(10)
President, FirstMiss 1995 181,113 86,100 401,783(5) 17,200 26,132
Fertilizer, Inc. 1994 168,916 82,800 35,393(5) 15,000 23,816
R. Michael Summerford 1996 196,271 95,500 858,782(5) 16,422* 12,100(8)(9)(10)
Vice President and 1995 191,725 86,900 212,965(5) 21,300 11,701
Chief Financial Officer 1994 182,458 73,400 (6) 25,000 11,357
George M. Simmons 1996 163,227 81,600 71,239(5)(7) 2,300 13,313(8)(9)(10)
President, First 1995 127,342 35,400 (6) 10,829
Chemical
Corporation 1994 120,731 32,000 151,598(5)(7) 6,192
</TABLE>
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<PAGE>
- --------
* During fiscal 1996, the effective exercise price and number of underlying
securities for all stock options outstanding at the time of the Gold
Distribution were adjusted to reflect the distribution value of the Getchell
shares. Mr. Tepas', Mr. Gibson's and Mr. Summerford's unexercised option
awards issued in 1996 before the Gold Distribution reflect this adjustment.
See "Security Ownership of Management."
(1) Other Annual Compensation includes payouts under Performance Option
arrangements, direct cash payments related to tax reimbursements related to
long-term incentives, tax planning and tax return preparation services, and
imputed income and tax reimbursements resulting from the personal use of
company automobiles and country clubs. Tax reimbursement payments represent
payments to eligible employees of thirty-seven percent (37%) of First
Mississippi's federal income tax deduction resulting from the exercise of
Convertible Debenture Options, NQSOs, Incentive Stock Options (ISO) and
Performance Options. These payments are not applicable for options granted
since August 22, 1995.
(2) NQSOs were granted to Officers and certain key employees of First
Mississippi in 1996, 1995 and 1994. The options for 1996 were awarded under
the 1995 Long-Term Incentive Plan. Options for 1995 and 1994 were granted
under the 1988 Long-Term Incentive Plan, under which no further grants will
be made. No shares of First Mississippi Common Stock are available for the
grant of awards under the 1980 Long-Term Incentive Plan. The share amounts
for a particular fiscal year under this column reflect only the shares
underlying options which were granted during the respective year (the
shares underlying options granted subsequent to fiscal year end but based
on performance in the prior fiscal year are included in the share amounts
for the subsequent year during which the related options were actually
granted).
(3) All Other Compensation is comprised of company contributions related to
First Mississippi's 401(k) Plan, including amounts provided by First
Mississippi's Benefits Restoration Plan ("BRP"), executive life insurance,
relocation expenses and the above market portion of interest earned under
the Deferred Income Plan (Plan A).
The BRP permits participants in the 401(k) Plan to make contributions, and
First Mississippi to match the same, in amounts permitted by the 401(k) Plan
but which would otherwise be in excess of those permitted by certain
Internal Revenue Code limitations.
(4) Mr. Williams' base salary was reduced twenty-five percent (25%) at his
request from June 1, 1993 to July 1, 1994, in consideration of losses due
to restructuring in fiscal 1993.
(5) Tax reimbursement payments in fiscal year 1996 to Mr. Williams, Mr. Gibson,
Mr. Summerford and Mr. Simmons were $1,856,591, $122,905, $844,060 and
$16,304, respectively. Tax reimbursement payments in fiscal 1995 to Mr.
Williams, Mr. Gibson and Mr. Summerford were $78,625, $386,803 and
$196,493, respectively. Tax reimbursement payments in fiscal 1994 to Mr.
Gibson and Mr. Simmons were $23,171 and $38,150, respectively.
(6) Aggregate perquisites and other personal benefits were less than $50,000 or
ten percent (10%) of the total annual salary and bonus reported for the
named Executive Officer and thus are excluded from the table.
(7) Includes payments received by Mr. Simmons on exercise of Performance
Options of $44,064 in 1996 and $103,107 in 1994.
(8) Above market interest earned under the Deferred Income Plan in fiscal 1996
was $0, $19,805, $2,850 and $5,172 for Mr. Williams, Mr. Gibson, Mr.
Summerford and Mr. Simmons, respectively. Mr. Williams voluntarily reduced
the interest rate on his deferrals effective January 1, 1994 to one hundred
twenty percent (120%) of the applicable annual federal long-term rate as
specified in the Internal Revenue Code. See "Directors Compensation."
(9) Company contributions to the 401(k) Plan in fiscal 1996 were $6,000,
$1,200, $6,000, $6,000 and $6,000 for Mr. Williams, Mr. Tepas, Mr. Gibson,
Mr. Summerford and Mr. Simmons, respectively. Accruals to the 401(k)
related BRP were $13,000, $3,100, $1,780, $1,800 and $529 for Mr. Williams,
Mr. Tepas, Mr. Gibson, Mr. Summerford and Mr. Simmons, respectively.
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<PAGE>
(10) The Executive life insurance program was changed effective November 1,
1995, to provide cash subsidies to participants based on age-based premium
cost replacing a program under which First Mississippi provided the
insurance and paid the premiums directly. Direct insurance payments in
fiscal 1996 were $1,425, $283, $585, $590 and $490 for Mr. Williams, Mr.
Tepas, Mr. Gibson, Mr. Summerford and Mr. Simmons, respectively. Cash
subsidies in fiscal 1996 were $9,120, $1,080, $2,706, $860 and $1,121 for
Mr. Williams, Mr. Tepas, Mr. Gibson, Mr. Summerford and Mr. Simmons,
respectively.
(11) Relocation expenses paid by First Mississippi during 1996 on behalf of Mr.
Tepas were $43,258.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO ALL EXERCISE TEN-YEAR OPTION TERM
($) (2)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------------
NAME GRANTED(1) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- -------------- --------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
J. Kelley
Williams 60,000 23.4% 23.13 11/10/05 872,591 2,211,318
Thomas G.
Tepas 23,800 9.3% 23.13 11/10/05 346,128 877,156
24,472 9.5% 20.38 08/22/05 313,661 794,879
Charles R.
Gibson 14,007 5.5% 20.38 08/22/05 179,530 454,964
R. Michael
Summerford 16,422 6.4% 20.38 08/22/05 210,483 533,406
George M.
Simmons 2,300 0.9% 23.13 11/10/05 33,449 84,767
</TABLE>
- --------
(1) The share amounts under this column do not include 60,000, 21,300, 14,100,
16,900 and 5,100 shares underlying options which were granted on August 27,
1996 to Mr. Williams, Mr. Tepas, Mr. Gibson, Mr. Summerford and Mr.
Simmons, respectively.
(2) The dollar amounts under these columns represent the potential realizable
value of each grant assuming that the market value of First Mississippi
Common Stock appreciates from the date of grant to the expiration of the
option at annualized rates of 5% and 10%. These assumed rates of
appreciation have been specified by the Commission for illustrative
purposes only and are not intended to forecast future financial performance
or possible future appreciation in the price of First Mississippi Common
Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SECURITIES AGGREGATE VALUE OF
ACQUIRED VALUE UNDERLYING UNEXERCISED UNEXERCISED, IN-THE-MONEY
NAME ON EXERCISE REALIZED ($) OPTIONS AT 6/30/96(1) OPTIONS AT 6/30/96 ($) (1)(2)
- ---- ---------------- ------------ ---------------------- -----------------------------
<S> <C> <C> <C> <C>
J. Kelley Williams 175,000 5,017,813 317,600 3,370,975
Thomas G. Tepas -- -- 48,272 45,752
Charles R. Gibson 17,200 332,175 14,007 26,187
R. Michael Summerford 93,300 2,281,244 16,422 30,702
George M. Simmons -- -- 18,400 204,788
</TABLE>
- --------
(1) All option information disclosed relates to exerciseable options. There
were no unexerciseable options at fiscal year end.
(2) Value was computed as the difference between the individual option price
and the per share closing price of First Mississippi Common Stock on June
30, 1996, as reported on the consolidated transaction system for NYSE
issues. Only options with fair market values in excess of the exercise
price are reflected in this column.
93
<PAGE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
PERFORMANCE OR
OTHER PERIOD UNTIL ESTIMATED
NAME NUMBER OF UNITS MATURATION OR PAYOUT FUTURE PAYOUTS
- ---- --------------- -------------------- --------------
<S> <C> <C> <C>
George M. Simmons 9,600 (2) (3)
</TABLE>
- --------
(1) In fiscal 1996, First Mississippi adopted a Performance Option Plan for
First Chemical Corporation providing for awards payable only in cash based
on appreciation in value of units, such appreciated value being based on
the subsidiary's pre-tax operating profit and the price earnings multiples
of a peer group of publicly held companies. Options shown in this table
represent performance units granted under this plan on August 22, 1995.
This table does not include 6,700 performance units granted on August 27,
1996.
(2) Performance units granted August 22, 1995 are exercisable no earlier than
six (6) months from date of grant and until ten (10) years from grant. The
units are valued on a quarterly basis and may be exercised by the
participant within fifteen (15) business days from the date of valuation.
(3) The performance options granted on August 22, 1995, have a base price of
$20.30 and may be exercised as noted above. Estimated future value will be
based on the appreciated value of the options on the exercise date and
cannot be reasonably estimated at this time. However, if unit values
appreciated at annual rates of 5% and 10%, the potential realizable value
at the end of their ten (10)-year term would be $122,559 and $310,589,
respectively.
OTHER COMPENSATION
In 1970, the First Mississippi shareholders authorized the noncontributory
Retirement Plan for the Employees of First Mississippi. Employees become one
hundred percent (100%) vested after five (5) years of employment. The plan
provides for normal retirement at age sixty-five (65) with actuarially adjusted
provisions for early and postponed retirement dates. Retirement benefits are
based on years of service and average compensation (wages and salary) of the
five (5) highest consecutive years during employment. The benefits listed in
the table below are not subject to any reduction for social security or other
offset amounts.
The following table shows the estimated annual retirement benefit payable to
participating employees including Executive Officers based on earnings and
years of service classifications as indicated.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS FOR YEARS OF CREDITED SERVICE
AVERAGE ANNUAL -----------------------------------------------------------
COMPENSATION (5 HIGHEST
CONSECUTIVE YEARS) 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- ----------------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$100,000 $ 17,712 $ 35,424 $ 53,136 $ 70,848
150,000 26,712 53,424 80,136 106,848
200,000 35,712 71,424 107,136 142,848
300,000 53,712 107,424 161,136 214,848
400,000 71,712 143,424 215,136 286,848
450,000 80,712 161,424 242,136 322,848
500,000 89,712 179,424 269,136 358,848
</TABLE>
The table includes amounts that exceed limitations allowed under Section 415
of the Code. First Mississippi's BRP provides that if a retired employee's
benefits calculated under the Retirement Plan exceed the maximum allowed under
the Code, First Mississippi will supplement such employee's benefits to the
extent such benefit is in excess of the limitation.
Years of service for the Executive Officers listed in the Summary
Compensation Table are: J. Kelley Williams, thirty (30) years; Thomas G. Tepas,
one (1) year; Charles R. Gibson, twenty-six (26) years; R. Michael Summerford,
eighteen (18) years; and George M. Simmons, eleven (11) years.
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<PAGE>
Termination Agreements. During fiscal 1996, the First Mississippi Board
approved and First Mississippi entered into Termination Agreements (the
"Termination Agreements") for the Executive Officers of First Mississippi,
including Mr. Williams, Mr. Tepas, Mr. Gibson, Mr. Summerford and Mr. Simmons.
The Termination Agreements are contingent upon a Change of Control, as defined
in the Agreements, and provide for three-year terms which are automatically
extended unless First Mississippi determines not to renew or there is a Change
of Control of First Mississippi during any three-year term. Each officer, other
than the Chief Executive Officer, would be paid upon termination of employment
for reasons other than cause, death or disability or upon resignation for good
reason, subsequent to a Change of Control during the term of the Termination
Agreement, three (3) times the sum of the five-year average of his annual base
salary and bonus. First Mississippi's Chief Executive Officer is entitled to
the same termination benefit as described above for all other Executive
Officers, except for the fact that the Chief Executive Officer may resign for
any reason, as opposed to "good reason," within thirty-six (36) months of a
Change of Control and still be entitled to the termination benefit. Upon
termination, the individual would have the option, unless he notifies First
Mississippi otherwise, to receive a cash payment equal to the cash value of all
his NQSOs, Debenture Options and Convertible Debentures, whether then
exercisable or not. Following termination, First Mississippi will pay amounts
previously due to individuals for early stock disposition of grants issued in
1994 and earlier under First Mississippi's tax sharing plan. No individual
would receive payments in the event of death, disability or termination for
cause. In addition, the Termination Agreements provide for an additional
payment to be made by First Mississippi to the Chief Executive Officer if any
of the severance payments provided for by the Termination Agreements or any
other payments made pursuant to a Change of Control of First Mississippi (the
"Total Payments") become subject to an additional tax ("Excise Tax") imposed by
Section 4999 of the Code, such that the net of all of the payments received by
the Officer after the imposition of the Excise Tax on the Total Payments and
any federal income tax on the additional payment shall be equal to the Total
Payments.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Chief Executive Officer serves as a member ex-officio of the Compensation
& Human Resources Committee, but may not serve as Chairman or vote or
participate in or be present for Committee decisions regarding his own
compensation. He does not make recommendations about nor participate in
decisions regarding any aspect of his compensation.
In addition, Mr. Crook, who retired from First Mississippi as Vice President
in 1985, is Chairman of Melamine Chemicals ("MCI"), and Mr. Summerford, an
Executive Officer of First Mississippi, is a director of MCI.
COMPENSATION & HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Philosophy. The Company's compensation philosophy is designed to maximize
stockholder value and serve the best interest of stockholders and employees.
The philosophy incorporates the following principles:
(a) Compensation should attract and retain qualified employees and stimulate
their useful and profitable efforts on behalf of the Company;
(b) Compensation should be internally equitable and externally competitive; and
(c) Compensation should be defined broadly and comprehensively.
Committee Members. The Compensation & Human Resources Committee (the
"Compensation Committee") is a Committee of the Board composed of not less than
three (3) Directors who are not officers or regular employees of the Company or
of any subsidiary of the Company. The Chief Executive Officer ("CEO") of the
Company is also a member ex-officio but may not serve as chairman or vote or
participate in or be present
95
<PAGE>
for Compensation Committee decisions regarding his own compensation. The
Compensation Committee selects and is advised by independent outside
consultants as considered appropriate.
Charter. The Compensation Committee operates under a charter approved by the
Board in August 1990, and amended in August 1994, which formally defines
responsibilities, authorities and procedures. The charter provides for members
to be elected annually by the Board. The chairman is elected annually by the
Compensation Committee, but may not serve longer than three consecutive years.
The primary responsibility of the Compensation Committee is to assure
development, implementation and maintenance of competitive compensation and
benefits to attract, motivate and retain qualified officers, management and
employees.
Overall compensation and benefits are targeted at the median or mid-market of
peer companies. Compensation includes base pay and annual and long-term
performance incentives. Incentives are tied to financial results versus peer
companies and/or to specific performance objectives linked to stockholder
value. Peer companies are public companies with products and markets and other
characteristics comparable to the Company and/or its subsidiaries.
Duties. The Compensation Committee's duties include the following:
(a)To recommend to the Board compensation policies for the Company and its
subsidiaries;
(b)To recommend to the Board the base salary and annual incentive awards for
Executive Officers;
(c) To review and report to the Board base salaries and annual incentive
awards for other highly compensated officers and employees; and
(d)To designate participants and grant awards under the Long-Term Incentive
Plan.
COMPONENTS OF EXECUTIVE COMPENSATION
Base Salary. The Compensation Committee annually reviews and compares base
salaries and salary ranges for similar positions in other companies in relevant
markets defined by company size, industry and location. Executive, technical
and other highly compensated positions are valued in the national market using
data developed by nationally recognized compensation consulting firms. The
published compensation data used by the Compensation Committee to establish
base salary ranges is not necessarily comprised of the same peer group of
companies included in the Five-Year Cumulative Total Return Graph. Salary
ranges and actual salaries are adjusted annually, taking into consideration
position value, market pricing, operating results, individual performance and
other relevant factors.
The Compensation Committee recommended and the Board approved merit increases
to the four (4) named Executive Officers other than the CEO that averaged 2.1%
in fiscal 1996.
Annual Incentive Awards. Annual incentive awards, in the form of cash
payments, are designed to achieve specific short-term results and to further
long-term objectives. Financial and other objectives for the Company,
subsidiaries and program participants are set at the beginning of each fiscal
year. The process involves the Board, the Compensation Committee, the CEO and
program participants. The Compensation Committee annually reviews and
recommends to the Board participation and award opportunity. Award opportunity
is based on guidelines developed by nationally recognized compensation
consultants. At fiscal year end, incentives are awarded following review of
Company and subsidiary results and performance versus objectives and peer
results and personal performance of participants versus objectives. As a
general rule, no awards are made unless the Company is profitable. However,
awards have been made for superior individual performance in profitable
subsidiaries when the Company has had a loss.
96
<PAGE>
The Compensation Committee recommended and the Board approved $407,100 in
annual incentive awards for the four (4) named Executive Officers other than
the CEO based on Company and subsidiary financial results, performance compared
to peers and achievement of personal objectives for fiscal 1996.
Long-Term Incentive Awards. Participation in the Long-Term Incentive Plan is
limited to officers and key managers based on responsibility, authority,
potential impact on the Company, and competitive practice for similar positions
in peer companies. The Compensation Committee annually reviews and approves
participation and potential award ranges. Award ranges are based on guidelines
developed by nationally recognized compensation consultants. At fiscal year
end, the Compensation Committee reviews Company condition and performance
versus long-term goals and recommends awards under the Long-Term Incentive
Plan. Awards may be in the form of stock options, restricted stock, stock
appreciation rights, performance shares or units, supplemental cash, or other
such forms as appropriate.
The Company also has adopted four (4) Performance Unit Plans outside of the
Long-Term Incentive Plans for certain of its non-public subsidiaries in which
subsidiary executive officers participate. In three (3) plans, awards are
payable in cash only based on the subsidiary's profits and price earning
multiples of a group of publicly held peer companies. In the other plan, awards
are payable in cash only at the end of a five-year period based on actual
results versus targets.
The Compensation Committee granted 81,001 nonqualified stock options and
9,600 performance units to the four (4) named Executive Officers excluding the
CEO in fiscal 1996.
CEO Compensation. The independent Directors evaluate the CEO's performance
versus objectives established at the beginning of the year. The Compensation
Committee considers this evaluation and compensation at peer companies in its
review and makes a recommendation to the Board regarding all elements of CEO
compensation. Mr. Williams' performance review for fiscal 1996 included an
assessment of total return to shareholders versus peers, return on equity,
operating earnings compared to budget and prior year, financial performance
versus peers, restructuring and dispositions, balance sheet improvements and
market capitalization. Based on the Compensation Committee's recommendation,
the Board approved an annual incentive payment of $324,400. Mr. Williams'
salary was increased to $500,000 effective January 1, 1996, which is an 11.1%
increase. In addition, Mr. Williams received 60,000 non-qualified Stock Options
priced at fair market value on date of grant during fiscal 1996.
COMPENSATION & HUMAN RESOURCES
COMMITTEE
Richard P. Anderson, Chairman
James E. Fligg
W. A. Percy, II
The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934 (collectively the "Acts"), except to the extent First
Mississippi specifically incorporates this information by reference and shall
not otherwise be deemed filed under such Acts.
97
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return on
First Mississippi Common Stock during the five (5)-year period ended June 30,
1996 to the Standard and Poor's 500 Stock Index and that of peer issuers
selected by First Mississippi over the same period. The graph assumes a one
hundred dollar ($100) investment on June 30, 1991.
[INSERT GRAPH]
<TABLE>
<CAPTION>
06/30/91 06/29/92 06/29/93 06/29/94 06/29/95 06/29/96
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Mississippi
Corporation 100 102.89 89.93 145.98 331.09 353.32
- --------------------------------------------------------------------------
S&P 500 Index 100 113.36 128.15 129.92 163.74 206.28
- --------------------------------------------------------------------------
Peer Group 100 93.79 111.57 122.66 119.52 175.17
</TABLE>
The peer group consists of public companies operating in the same industries
as First Mississippi. Peer companies were grouped by industry and weighted by
market capitalization. Industry indices were then weighted by First
Mississippi's asset mix, including chemicals, fertilizer, gold, oil and gas and
coal. Oil and gas and coal were excluded for 1994 and 1995 due to First
Mississippi's disposition of its oil and gas and coal operations and are not a
part of 1994's or 1995's operating results. Gold was excluded for 1996 due to
the distribution of Getchell in October 1995. The per share value of the
distribution as used for this table was $15.05, based on the market value of
Getchell shares.
Companies in the 1996 peer group are: Dexter Corporation, IMC Fertilizer
Group, MacDermid, Inc., New Jersey Steel, NS Group, Olin Corporation, Quaker
Chemical and Terra Industries. Energy companies included in
1992-1993 comparisons are: Amax, Inc., AOI Coal, ENSERCH Corporation, Forest
Oil, Wainoco Oil and Westmoreland Coal. Quantum Chemical was removed from the
1994 comparisons after being acquired by Hanson plc. Gold companies included in
1992-1995 comparisons are: Agnico-Eagle Mines, Atlas Corporation, Battle
Mountain Gold, Echo Bay Mines, Ltd., FMC Gold and Freeport McMoRan Resource
Partners, L.P.
98
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gold Distribution. Until October 20, 1995, First Mississippi owned 14,750,000
shares of Common Stock of Getchell (approximately 81% of the outstanding Common
Stock). On that date, First Mississippi distributed all of the stock it owned
in Getchell to its own shareholders. During fiscal 1996, Messrs. Moreton,
Summerford and Williams, who currently serve as a director, Vice President and
Chief Financial Officer, and Chairman and Chief Executive Officer,
respectively, of First Mississippi, served as members of the board of Getchell,
with Mr. Williams serving as Chairman. In June 1996, Mr. Moreton resigned from
the Getchell Board. At August 31, 1996, Mr. Williams beneficially owned 613,165
shares of common stock of Getchell, or approximately 2.4% of the total number
of shares outstanding.
Debt Owed by Getchell. Prior to the Gold Distribution, First Mississippi
provided to Getchell capital and operating advances from time to time.
Effective the date of the Gold Distribution, the debt was $52.5 million and
First Mississippi and Getchell entered into a new long-term loan agreement (the
"Loan Agreement") which provided that the total outstanding amount would be due
in September 2000, that Getchell would repay $15.0 million to First Mississippi
from the proceeds of a public common stock offering prior to April 1996, that
interest would accrue at a rate not exceeding the London Inter-Bank Offered
Rate plus one percent, and that the interest would not be paid in cash, but
rather would be capitalized to the note. In November 1995, Getchell reduced the
debt by $15.0 million, from proceeds of a common stock offering. The debt was
further reduced by the settlement of the Tax Sharing Agreement (described
below). At June 30, 1996, the total aggregate debt owed to First Mississippi
pursuant to the Loan Agreement was $24.7 million.
Tax Sharing Agreement. In October 1987, First Mississippi and Getchell
entered into a Tax Sharing Agreement for the period during which Getchell was a
member of the affiliated group of corporations of which First Mississippi is
the common parent (the "Affiliated Group"). Under the agreement, Getchell
accrued income taxes (payable to First Mississippi) as if Getchell and its
subsidiaries were, since the inception of the agreement on October 28, 1987, a
separate affiliated group of corporations filing consolidated income tax
returns. In determining the amount of such payments, Getchell was potentially
bound by tax elections, conventions, treatments or methods utilized by First
Mississippi in filing its consolidated income tax returns. The Tax Sharing
Agreement also provided for payments in respect of net operating losses and
certain other tax benefits by First Mississippi to Getchell or, under some
circumstances, by Getchell to First Mississippi, in taxable years in which
Getchell was no longer a member of the Affiliated Group. Effective with the
Gold Distribution on October 20, 1995, the Tax Sharing Agreement was
terminated. In settlement of the Agreement, $13.9 million was used to reduce
the debt owed by Getchell to First Mississippi.
Tax Ruling Agreement. First Mississippi obtained a letter ruling from the
Internal Revenue Service in April 1995 providing for tax-free distribution to
its shareholders of its shares of Getchell's common stock. In September 1995,
First Mississippi and Getchell entered into the Tax Ruling Agreement which sets
forth certain covenants and agreements of Getchell relevant to maintaining the
tax-free nature of the distribution of the common stock.
The Tax Ruling Agreement provides that Getchell will complete an underwritten
public equity of common stock generating aggregate proceeds of at least $50.0
million prior to April 1996. In late 1995, Getchell satisfied this requirement
by issuing common stock to the public which generated net proceeds of
approximately $137.5 million. The Tax Ruling Agreement also required Getchell
to repay at least $15.0 million of debt owed to First Mississippi from the net
proceeds of the common equity issue, which repayment occurred in November,
1995.
The Tax Ruling Agreement provides also that Getchell will not, prior to one
year from the date of the Gold Distribution, enter into any agreement to merge
or consolidate with or into any other corporation, to liquidate, to sell or
transfer all or substantially all of its assets, to redeem or repurchase any of
its capital stock (except for the
99
<PAGE>
redemption of the stock of one or more Getchell employees upon his or her
termination) or to issue additional shares of its capital stock (except in
connection with the public offering of common stock described above, or
issuances pursuant to Getchell's employee benefit or compensation plans),
unless it first obtains an opinion of counsel or a supplemental ruling from the
I.R.S. that such action does not interfere with the Tax Ruling.
In the event Getchell takes such actions or solicits or assists any person or
group to commence a tender offer, if such person or group would acquire
ownership of 20% or more of Getchell's outstanding Common Stock without an
opinion or a supplemental Internal Revenue Service ruling, Getchell agreed
under the Tax Ruling Agreement to indemnify and hold First Mississippi and
certain affiliated corporations harmless against any and all federal, state and
local taxes, interest, penalties and additions thereto imposed upon or incurred
by such corporations as a result of such action's effect on the tax free nature
of the Gold Distribution.
AUDITORS
The accounting firm of KPMG Peat Marwick LLP ("KPMG") was approved by the
Board to serve as independent auditor of First Mississippi for fiscal 1997.
KPMG has served as independent auditor of First Mississippi for the past
thirty-four (34) years. First Mississippi has been advised that neither KPMG
nor any of its associates has a material interest in First Mississippi or any
affiliate thereof. Representatives of KPMG are expected to be present at the
First Mississippi Annual Meeting, will be afforded an opportunity to make a
statement, if they desire, and will be available to respond to appropriate
questions from shareholders.
SHAREHOLDER PROPOSALS
Proposals from shareholders intended to be included in First Mississippi's
proxy statement for the 1997 Annual Meeting must be received by First
Mississippi on or before June 30, 1997, and may be omitted unless the
submitting stockholder meets certain requirements.
In order for any business to be transacted at the First Mississippi Annual
Meeting by a stockholder, including the nomination of a nominee for Director,
that business must be properly brought before the meeting by that shareholder
giving written notice to the Secretary of First Mississippi of the business to
be transacted, in addition to other information, no later than five (5)
business days after First Mississippi gives notice of the date and place of the
meeting.
OTHER MATTERS
The management of First Mississippi knows of no other matter which may come
before the First Mississippi Annual Meeting. However, if any matter other than
those referred to herein should properly come before the meeting, the proxies
will be voted with respect thereto in accordance with the judgment of the proxy
holder.
100
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
INDEX TO SPECIAL-PURPOSE COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditor's Report.............................................. F-2
Special-Purpose Combined Balance Sheets as of June 30, 1996 and 1995...... F-3
Special-Purpose Combined Statements of Operations for the years ended
June 30, 1996, 1995 and 1994............................................. F-4
Special-Purpose Combined Statements of Cash Flows for the years ended
June 30, 1996, 1995 and 1994............................................. F-5
Notes to Special-Purpose Combined Financial Statements.................... F-6
Managements Discussion and Analysis of Financial Position and Results of
Operations............................................................... F-13
Interim Special-Purpose Combined Financial Statements (unaudited)
Special-Purpose Combined Balance Sheet as of September 30, 1996.......... F-3
Special-Purpose Combined Statements of Operations for the three months
ended September 30, 1996 and 1995....................................... F-4
Special Purpose Combined Statements of Cash Flows for the three months
ended September 30, 1996 and 1995....................................... F-5
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
First Mississippi Corporation:
We have audited the accompanying special-purpose combined balance sheets of
First Mississippi Fertilizer Business to be Merged ("the Company") as of June
30, 1996 and 1995, and the related special-purpose combined statements of
operations and cash flows for each of the years in the three-year period ended
June 30, 1996. These special-purpose combined financial statements are the
responsibility of First Mississippi Corporation's management. Our
responsibility is to express an opinion on these special-purpose combined
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 special-purpose combined
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the special-purpose combined financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the special-
purpose combined financial statements. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying special-purpose combined financial statements were prepared
on the basis of presentation described in note 1, and include the assets,
liabilities, revenues and expenses of First Mississippi Fertilizer Business to
be Merged.
In our opinion, the special-purpose combined financial statements referred
to above present fairly, in all material respects, the financial position of
First Mississippi Fertilizer Business to be Merged as of June 30, 1996 and
1995, and the results of its operations and its cash flows for each of the
years in the three-year period ended June 30, 1996, pursuant to the basis of
presentation described in note 1, in conformity with generally accepted
accounting principles.
As discussed in notes 1 and 4, First Mississippi Fertilizer Business to be
Merged changed its method of accounting for income taxes as of July 1, 1993 to
adopt the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
KPMG Peat Marwick LLP
Jackson, Mississippi
September 6, 1996
F-2
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
SPECIAL-PURPOSE COMBINED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JUNE 30,
SEPTEMBER 30, -------------
1996 1996 1995
------------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ -- -- 400
Receivables:
Trade, less allowance for doubtful accounts of
$232 in 1996 and $297 in 1995................. 12,675 16,878 13,660
Affiliated companies (note 2).................. 12,615 7,118 1,725
Other.......................................... 148 135 6
------- ------ ------
Total receivables............................ 25,438 24,131 15,391
------- ------ ------
Inventories:
Finished products.............................. 2,920 3,130 3,928
Raw materials and supplies..................... 2,520 2,553 2,334
Product exchange agreements.................... 701 514 --
------- ------ ------
Total inventories............................ 6,141 6,197 6,262
------- ------ ------
Prepaid expenses and other current assets........ 343 390 2,136
Deferred income taxes (note 4)................... 477 514 220
------- ------ ------
Total current assets......................... 32,399 31,232 24,409
------- ------ ------
Investment in affiliated companies (note 2)........ 23,979 23,947 9,245
Property, plant and equipment, at cost less
accumulated depreciation (note 3)................. 42,633 40,177 15,008
------- ------ ------
$99,011 95,356 48,662
======= ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Deferred revenue................................. $1,076 296 614
Accounts payable:
Trade.......................................... 23,553 15,513 6,463
Affiliated companies (note 2).................. 2,500 5,343 3,593
------- ------ ------
Total accounts payable....................... 26,053 20,856 10,056
------- ------ ------
Accrued expenses and other current liabilities... 565 511 529
Inventory due under product exchange agreements.. 583 1,241 95
------- ------ ------
Total current liabilities.................... 28,277 22,904 11,294
Deferred income taxes (note 4)..................... 3,364 3,572 4,738
Equity............................................. 67,370 68,880 32,630
------- ------ ------
Commitments and contingent liabilities (notes 4, 5
and 6)............................................
$99,011 95,356 48,662
======= ====== ======
</TABLE>
See accompanying notes to special-purpose combined financial statements.
F-3
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
SPECIAL-PURPOSE COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
-------------------------------------------
1996 1995 1996 1995 1994
--------- ---------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Sales........................... $58,822 51,603 215,629 238,887 161,958
Interest and other income
(expense), net (note 7)........ 1,492 327 27 (157) 519
--------- -------- ------- ------- -------
60,314 51,930 215,656 238,730 162,477
--------- -------- ------- ------- -------
Costs and expenses:
Cost of sales................... 45,851 32,624 147,765 150,819 135,943
General, selling and
administrative expenses........ 780 826 2,619 2,442 1,923
--------- -------- ------- ------- -------
46,631 33,450 150,384 153,261 137,866
--------- -------- ------- ------- -------
Earnings from operations before
income taxes and investee
earnings (loss) and cumulative
effect of change in accounting
principle........................ 13,683 18,480 65,272 85,469 24,611
Income taxes (note 4)............. 5,063 6,834 24,151 31,623 9,106
Equity in net earnings (loss) of
affiliated companies (note 2).... -- -- 250 74 (57)
--------- -------- ------- ------- -------
Earnings from operations before
cumulative effect of change in
accounting principle............. 8,620 11,646 41,371 53,920 15,448
Cumulative effect of change in
accounting principle (note 4).... -- -- -- -- 754
--------- -------- ------- ------- -------
Net earnings.................... $ 8,620 11,646 41,371 53,920 16,202
========= ======== ======= ======= =======
</TABLE>
See accompanying notes to special-purpose combined financial statements.
F-4
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
SPECIAL-PURPOSE COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30 YEARS ENDED JUNE 30
---------------- ------------------------
1996 1995 1996 1995 1994
------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings..................... $ 8,620 11,646 41,371 53,920 16,202
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization.. 688 699 2,745 2,763 2,552
Deferred income taxes.......... (171) (366) (1,460) (494) (243)
Undistributed (earnings) loss
of affiliates................. (32) -- (57) (119) 92
Loss on disposal of property,
plant and equipment........... -- -- 15 52 8
Cumulative effect of accounting
change........................ -- -- -- -- (754)
Changes in current assets and
liabilities:
Receivables.................... (1,307) (7,262) (8,740) (5,527) (224)
Inventories.................... 56 1,330 65 2,970 (3,837)
Prepaid expenses and other
current assets................ 47 1,802 1,746 (1,585) (415)
Accounts payable............... 5,197 10,336 10,800 (990) 2,042
Accrued expenses and other
current liabilities........... (604) 740 1,128 76 50
Deferred revenue............... 781 (266) (318) 553 (6,039)
------- ------- ------- ------- ------
Net cash provided by
operating activities........ 13,275 18,660 47,295 51,619 9,434
------- ------- ------- ------- ------
Cash flows from investing
activities:
Capital expenditures............. (3,145) (418) (27,929) (1,865) (329)
Proceeds from sale of property,
plant and equipment............. -- -- -- 3 --
Acquisition of investments and
other assets.................... -- (3,663) (14,480) (283) --
Advances to equity investee...... -- -- (150) -- --
Other............................ -- -- (15) -- --
------- ------- ------- ------- ------
Net cash used in investing
activities.................. (3,145) (4,081) (42,574) (2,145) (329)
------- ------- ------- ------- ------
Cash flows from financing
activities--advances to First
Mississippi, including payments
for income taxes.................. (10,130) (14,311) (5,121) (49,207) (8,972)
------- ------- ------- ------- ------
Net increase (decrease) in cash and
cash equivalents.................. -- 268 (400) 267 133
Cash and cash equivalents at
beginning of period............... -- 400 400 133 --
------- ------- ------- ------- ------
Cash and cash equivalents at end of
period............................ $ -- 668 -- 400 133
======= ======= ======= ======= ======
</TABLE>
See accompanying notes to special-purpose combined financial statements.
F-5
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
NOTES TO SPECIAL-PURPOSE COMBINED FINANCIAL STATEMENTS
JUNE 30, 1996, 1995 AND 1994 AND
SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation and Combination
The accompanying special-purpose combined financial statements have been
prepared pursuant to Section 3.7(a) of the Agreement and Plan of Merger and
Reorganization ("the Agreement") dated as of August 27, 1996 by and among
Mississippi Chemical Corporation ("MCC"), MISS SUB, INC., a wholly owned
subsidiary of MCC ("Miss Sub") and First Mississippi Corporation ("First
Mississippi").
The Agreement contemplates that the following transactions will occur:
. A tax-free spinoff of the chemicals and related businesses of First
Mississippi in the form of a new publicly traded company.
. The refinancing of First Mississippi's debt, increasing the debt to
approximately $150,000, which will be assumed by the surviving
corporation in the merger.
. The transfer of cash of approximately $50,000 to the spun off company.
. A tax-free merger of First Mississippi's fertilizer business with Miss
Sub.
The special-purpose combined financial statements exclude all the assets,
liabilities (including contingent liabilities) revenues and expenses of First
Mississippi and its subsidiaries other than the assets, liabilities, revenues
and expenses of its fertilizer business operated by FirstMiss Fertilizer, Inc.
and its subsidiaries (includes Triad Chemical and certain other fertilizer
assets) ("First Mississippi Fertilizer Business to be Merged" or "the
Company") prior to the transactions contemplated by the Agreement.
The special-purpose combined financial statements have been prepared as if
the fertilizer business had operated as an independent, stand alone entity for
all periods presented. Except as described below, such financial statements
have been prepared using the historical basis of accounting and include the
assets, liabilities, revenues, expenses and income taxes of First
Mississippi's fertilizer business. The Company's employee benefit plans will
not be assumed by MCC, therefore, these financial statements do not include
any liabilities or disclosure regarding such plans, but the cost of such plans
is included as described below. Intercompany balances and transactions have
been eliminated. Advances to First Mississippi and its other subsidiaries have
been reflected as a reduction of equity and as a use of cash in the statement
of cash flows. Direct expenses incurred by First Mississippi on behalf of the
Company are allocated to the Company based on the actual costs incurred.
Indirect expenses incurred by First Mississippi have not been allocated to the
Company because they have been insignificant. Management believes that this
method of allocation is reasonable and that such costs would not be materially
different if they had been incurred with unaffiliated third parties.
The Company produces nitrogen fertilizers and sells product throughout the
United States and internationally. The Company's customers vary in size and
typically participate in agricultural and intermediate industrial chemical
businesses. Credit is extended based on an evaluation of the customer's
financial condition, and collateral or other forms of security are not
generally required. Expected credit losses have been provided for in the
special-purpose combined financial statements. There have been no credit
losses for the three years ended June 30, 1996. An adjustment to decrease the
allowance for doubtful accounts by $65 was made during 1996.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-6
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
NOTES TO SPECIAL-PURPOSE COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
(c) Recognition of Revenue
Revenues generally are recorded when title and risk of ownership pass.
(d) 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.
(e) Investments
Investments in joint ventures, partnerships and other equity investments
are accounted for by the equity method.
(f) Depreciation and Amortization
Depreciation of plant and equipment is based on cost and the estimated
useful lives of the separate units of property. Straight-line and
accelerated methods are primarily used in determining the amount of
depreciation charged to expense.
(g) Income Taxes
Effective July l, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax assets and liabilities 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.
(h) Pension Plans
Pension cost is determined using the "projected unit credit" actuarial
method for reporting purposes. The Company's funding policy is to
contribute annually at amounts not less than the minimum requirements of
the Employee Retirement Income Security Act of 1974. Pension expense for
the years ended June 30, 1996, 1995 and 1994 was $49, $27 and $66,
respectively.
(i) Cash and Cash Equivalents
The Company considers all short-term investments with original maturities
of three months or less when purchased to be cash equivalents.
(j) Forward Sales and Purchases
The Company periodically purchases contracts for the future delivery 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.
(k) Contingencies
Estimated losses from loss contingencies, including environmental
liability costs for remediation, are charged to expense when it is probable
that 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.
(l) Unaudited Interim Financial Information
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments that are necessary for a fair presentation, have been
included in the unaudited financial information as of and for the three
months ended September 30, 1996 and 1995.
F-7
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
NOTES TO SPECIAL-PURPOSE COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
2. INVESTMENTS
Investments in affiliated companies accounted for by the equity method were
$23,947 and $9,245, respectively, at June 30, 1996 and 1995. Equity earnings
(losses), net of taxes, were $250, $74 and $(57), respectively, for the years
ended June 30, 1996, 1995 and 1994. The following is summary balance sheet
information related to affiliated companies. Income statement information is
not significant.
<TABLE>
<CAPTION>
JUNE 30
---------------
1996 1995
------- ------
<S> <C> <C>
Triad Chemical:
Current assets............................................... $16,339 14,981
Noncurrent assets............................................ 8,539 8,251
Current liabilities.......................................... (6,273) (4,742)
------- ------
Net equity................................................... 18,605 18,490
------- ------
Arcadian/FirstMiss Fertilizer LLC:
Current assets............................................... $ 658 --
Noncurrent assets............................................ 6,953 --
Current liabilities.......................................... (29) --
------- ------
Net equity................................................... 7,582 --
------- ------
FirstMiss Fertilizer LP:
Noncurrent assets............................................ 21,707 --
------- ------
Net equity................................................... 21,707 --
------- ------
$47,894 18,490
======= ======
</TABLE>
The Company obtained a 50% interest in Arcadian/FirstMiss Fertilizer LLC, an
ammonia barge transport company on July 7, 1995. On April 17, 1996, the
Company obtained a 50% interest in FirstMiss Fertilizer, LP, an ammonia
storage terminal facility.
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 $33,892 in 1996, $28,726 in 1995 and $33,563 in 1994.
3. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
JUNE 30
ESTIMATED --------------
USEFUL LIVES 1996 1995
------------ ------- ------
<S> <C> <C> <C>
Land and land improvements.......................... $ 882 882
Buildings........................................... 10-35 111 111
Plant facilities and equipment...................... 10-12 74,491 46,729
Other facilities and equipment...................... 8-10 346 291
------- ------
75,830 48,013
Less accumulated depreciation....................... 35,653 33,005
------- ------
$40,177 15,008
======= ======
</TABLE>
F-8
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
NOTES TO SPECIAL-PURPOSE COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
Construction in progress included in the above property captions at June 30,
1996 and 1995 amounted to $27,263 and $109, respectively.
Depreciation and amortization expense related to the above amounted to
$2,745 in 1996, $2,479 in 1995 and $2,552 in 1994.
4. INCOME TAXES
The Company changed its method of accounting for income taxes as described
in note 1. The cumulative effect of this change in accounting for income taxes
was $754.
Income tax expense differs from the statutory federal rate of 35% applied to
earnings before income taxes and investee earnings (loss) as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-----------------------
1996 1995 1994
------- ------ -----
<S> <C> <C> <C>
Computed "expected" tax expense....................... $22,845 29,914 8,614
State income taxes, net of federal income tax benefit. 741 1,271 452
Exempt earnings of Foreign Sales Corp................. -- (5) (19)
Adjustment to deferred tax assets and liabilities for
enacted change in
tax law and rates.................................... -- -- 132
Other, net............................................ 565 443 (73)
------- ------ -----
Actual tax expense.................................. $24,151 31,623 9,106
======= ====== =====
</TABLE>
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
----------------------
1996 1995 1994
------- ------ -----
<S> <C> <C> <C>
Current:
Federal............................................... $24,224 30,417 8,530
State................................................. 1,387 1,700 818
------- ------ -----
25,611 32,117 9,348
------- ------ -----
Deferred:
Federal............................................... (1,213) (426) (223)
State................................................. (247) (68) (19)
------- ------ -----
(1,460) (494) (242)
------- ------ -----
Total:
Federal............................................... 23,011 29,991 8,307
State................................................. 1,140 1,632 799
------- ------ -----
$24,151 31,623 9,106
======= ====== =====
</TABLE>
F-9
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
NOTES TO SPECIAL-PURPOSE COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
The significant components of deferred income tax expense attributable to
income from operations for the years ended June 30, 1996, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-----------------------
1996 1995 1994
-------- ------ ------
<S> <C> <C> <C>
Deferred tax expense from changes in temporary
differences........................................... $(1,460) (494) (376)
Adjustment to deferred tax assets and liabilities for
enacted change in
tax law and rates..................................... -- -- 134
-------- ----- -----
$(1,460) (494) (242)
======== ===== =====
</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, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
JUNE 30
---------------
1996 1995
------- ------
<S> <C> <C>
Deferred tax assets:..........................................
Accounts receivable, principally due to allowance for
doubtful accounts.......................................... $ 219 219
Deferred compensation....................................... 62 46
Accrued expenses............................................ 36 35
Accrued pension costs....................................... 101 94
Other, net.................................................. 508 --
------- ------
Total gross deferred tax assets........................... 926 394
------- ------
Deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation............................................... (3,746) (4,387)
State income taxes.......................................... (238) (465)
Other, net.................................................. -- (60)
------- ------
Total gross deferred tax liabilities...................... (3,984) (4,912)
------- ------
Net deferred tax liability................................ $(3,058) (4,518)
======= ======
</TABLE>
In assessing the reliability 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
at June 30, 1996, management believes it is more likely than not the Company
will realize the benefits of these deductible differences.
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, 1996.
F-10
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
NOTES TO SPECIAL-PURPOSE COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
5. COMMITMENTS AND CONTINGENT LIABILITIES
The Company has entered into various operating leases for transportation
equipment (primarily railroad tank cars), fertilizer pipelines and storage
facilities, and other miscellaneous items of equipment.
The following is a schedule by years of future minimum rental payments under
operating leases that have initial or remaining noncancelable terms in excess
of one year as of June 30, 1996:
<TABLE>
<CAPTION>
YEARS ENDING
JUNE 30
- ------------
<S> <C>
1997...................................................................... $254
1998...................................................................... 251
1999...................................................................... 225
2000...................................................................... 150
----
Total minimum payments required............................................ $880
====
</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 $33 in 1996, $47 in 1995 and $56 in
1994), was approximately $542 in 1996, $906 in 1995 and $1,195 in 1994. In
most cases, management expects that, in the normal course of business, leases
will be renewed or replaced by other leases.
The Company 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 $6,649 at
June 30, 1996. Total purchases under this agreement were $17,860 in 1996,
$24,542 in 1995 and $13,989 in 1994. The present value of take-or-pay
obligations at June 30, 1996 was $6,283.
Company operations are subject to a wide variety of environmental laws and
regulations governing emissions to the air, discharges to water sources, and
the handling, storage, treatment and disposal of waste materials, as well as
other laws and regulations concerning health and safety conditions. The
Company accrues for the estimated costs of any investigatory and remediation
efforts relating to the environment.
The Company has pending 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.
6. FORWARD SALES AND PURCHASES
The key raw material in the manufacturing of anhydrous ammonia is natural
gas, which is typically purchased for delivery 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 NYMEX. Increases or decreases in the fair market value of
the NYMEX contracts generally offset changes in spot market prices. These
activities have been designated as hedging activities and are accounted for as
such. At June 30, 1996, the Company had no natural gas future purchase
contracts in place. At June 30, 1995, the net unrealized losses from these
contracts was $363.
F-11
<PAGE>
FIRST MISSISSIPPI FERTILIZER BUSINESS TO BE MERGED
NOTES TO SPECIAL-PURPOSE COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
7. INTEREST AND OTHER INCOME
Interest and other income (expense) items are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Interest income--other.. $ 85 95 54
Sub-charter, license,
rental and fee income
(expense).............. 107 (53) 768
Contract buy-outs
expense................ -- (50) (377)
Other................... (165) (149) 74
------- ------ ------
$ 27 (157) 519
======= ====== ======
</TABLE>
8. EQUITY
A summary of changes in equity is as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Beginning balance................................... $32,630 $ 27,917 $20,687
Net earnings........................................ 41,371 53,920 16,202
Advances to First Mississippi Corporation........... (5,121) (49,207) (8,972)
------- -------- -------
Ending balance...................................... $68,880 $ 32,630 $27,917
======= ======== =======
</TABLE>
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments approximate their
fair values.
F-12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--FERTILIZER BUSINESS TO BE MERGED
For purposes of the following discussion, the Fertilizer Business to be
Merged has been treated as First Mississippi's sole continuing operation and
First Mississippi's chemicals and related businesses have been excluded. The
following is a discussion of the financial condition and results of operations
of the Fertilizer Business to be Merged. The discussion should be read in
conjunction with the financial statements included elsewhere.
OVERVIEW
The Fertilizer Business to be Merged is primarily involved with
manufacturing and selling anhydrous ammonia ("ammonia") and urea. The
Fertilizer Business to be Merged also purchases and sells ammonia and urea
through its brokerage operations, which while representing a significant
portion of sales and costs of sales, are not considered material to the
operating results.
QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
Operating Results. Net earnings for the quarter ending September 30, 1996
were down 26% from the same quarter in the prior year, primarily due to lower
average unit margins as detailed in the table and discussion below.
The table below recaps prices and production information for the quarters
ending September 30, 1996 and 1995, on a short ton basis. Natural gas is based
on dollars per MMBtu.
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Average Ammonia Price........................................ $164 $171
Average Urea Price........................................... $175 $178
Natural Gas Cost............................................. $2.34 $1.54
AMPRO Production............................................. 130,509 109,084
Triad Ammonia Production (1)................................. 60,995 61,258
Triad Urea Production (1).................................... 71,833 69,715
</TABLE>
- --------
(1) Volumes represent the 50% share of the joint venture owned by the
Fertilizer Business to be Merged. Approximately 69% of Triad ammonia is
used in the production of urea.
Sales. Net sales for the current quarter were up 14% from the same quarter
in the prior year as increased volume offset lower average prices. Sales
volume increased 19% due to higher brokerage sales and increased AMPRO ammonia
production, which was up 20% over last year due to a 15-day outage in the
prior year. Average sales prices declined 4% on lower ammonia and urea prices.
Gross Margin. Gross margin was down 32% due to the lower average product
prices and higher production cost. Production cost increased due to a 52%
increase in average natural gas prices. There were no gains or losses from
natural gas hedging in the current or prior quarter.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities for the current quarter was down versus
the same quarter prior year due to the lower net earnings as described above.
Investing activities in the current year reflect capital expenditures related
to the AMPRO ammonia plant capacity expansion while the prior year includes
investments to increase transportation capabilities. Net cash advanced to
First Mississippi in the current quarter was $10.1 million, versus $14.3
million for the same period in the prior year.
F-13
<PAGE>
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
Operating Results. Net earnings for 1996, 1995 and 1994 were $41.4 million,
$53.9 million and $16.2 million. The increase in earnings for 1995 over 1994,
and the decrease from 1995 to 1996 were primarily due to changes in the unit
margins for manufactured ammonia, as detailed in the table and discussions
below.
The following table recaps prices and production information for the three
years on a short ton basis. Natural gas is based on dollars per MMBtu.
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Average Ammonia Price................................... $174 $211 $130
Average Urea Price...................................... $189 $163 $126
Natural Gas Cost........................................ $2.25 $1.92 $2.19
AMPRO Production........................................ 490,791 467,742 499,718
Triad Ammonia Production (1)............................ 232,011 217,036 239,093
Triad Urea Production (1)............................... 278,635 283,548 255,165
</TABLE>
- --------
(1) Volumes represent the 50% share of the joint venture owned by the
Fertilizer Business to be Merged. Approximately 69% of Triad ammonia is
used in the production of urea.
Sales. Net sales for 1996 were down 10% from 1995 as ammonia prices declined
18%, more than offsetting a 16% increase in urea prices. Total sales volume
remained about the same at 1.2 million tons with captive production accounting
for approximately 74% of total volume, up from 70% in 1995. The higher
production for 1996 was primarily due to scheduled maintenance in 1995. Net
sales for 1995 increased 47% over 1994 as a 57% increase in average price was
partially offset by lower volume. 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 was strong due to increased
production of fibers, plastics and resins. Urea prices increased on higher
ammonia prices and strong offshore demand.
Gross Margin. Gross margin for 1996 was down 23% from 1995 due to the lower
ammonia prices and higher production cost. Production cost for 1996 increased
due to higher natural gas prices. The average price of natural gas purchased
at spot prices and consumed in production increased 36%; however gains of $1.1
million on forward purchase contracts in 1996, versus losses in 1995, reduced
the overall average gas cost increase to 17%. At June 30, 1996, the Fertilizer
Business to be Merged had no open forward purchase contracts for natural gas.
Gross margin for 1995 increased 239% from 1994 on higher ammonia prices and
lower production cost. The production cost for ammonia and urea for 1995
declined from 1994, primarily due to lower prices for natural gas, which
decreased 12% below 1994's level. Included in natural gas cost for 1995 is
$5.9 million in net futures contracts losses versus net gains of $0.7 million
in 1994.
General selling and administrative expenses. General selling and
administrative expenses were $2.6 million, $2.4 million and $1.9 million for
1996, 1995 and 1994, respectively. The higher expenses in 1996 and 1995 were
primarily due to additional compensation expense pursuant to a compensation
plan tied to the increase in value of First Mississippi Common Stock.
Income taxes; Cumulative Effect of Change in Accounting Principles. In July
1993, the company adopted the Financial Accounting Standards Board's Statement
No. 109 "Accounting for Income Taxes" ("Statement 109"). Adoption of Statement
No. 109 changed the company's method of accounting for income taxes from the
deferred method required under APB Opinion 11 to the asset and liability
method. The Fertilizer Business to Be Merged opted to report the impact of
this accounting change as a cumulative effect of change in accounting
principle rather than to restate prior years' income tax provisions. See Note
4 to the Combined Financial Statements.
F-14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities increased from 1994 to 1995 and
decreased from 1995 to 1996, primarily due to swings in net earnings as
described above. Investing activities were up in 1996, reflecting increased
capital expenditures related to an AMPRO ammonia plant capacity expansion and
investments in two new joint ventures to increase storage and barge
transportation capabilities. In August 1995, AMPRO began an expansion project
that is expected to be completed in mid-December 1996. This project is
expected to lower natural gas consumption by 0.6MMBtu's per ton and increase
ammonia production at the plant by approximately 125,000 tons annually. Net
cash advanced to First Mississippi was $5.1 million, $49.2 million and $9.0
million in 1996, 1995 and 1994, respectively.
FORWARD PURCHASES
The key raw material in the manufacturing of anhydrous ammonia is natural
gas. Natural gas is presently purchased for delivery at market prices under
short-term contracts. To secure fixed prices for part of its natural gas
requirements, the Fertilizer Business to be Merged 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. These activities
have been designated hedging of anticipated raw material purchases and are
accounted for as such. During 1996, the Fertilizer Business to be Merged
hedged approximately 13% of its purchases of natural gas for fiscal 1996. At
June 30, 1996, the Fertilizer Business to be Merged had no open contracts.
ENVIRONMENTAL MATTERS
The Fertilizer Business to be Merged operations are subject to a wide
variety of constantly changing environmental laws and regulations governing
emissions to the air, discharges to water sources, and the handling, storage,
treatment and disposal of waste materials, as well as other laws and
regulations concerning health and safety conditions, for which it must incur
certain costs. Capital expenditures for environmental protection were $0.1
million for 1996. Expenses related to the operation and maintenance of
environmental facilities and the disposal of hazardous and nonhazardous waste
were approximately $0.2 million in 1994, 1995 and 1996. In addition, the
Fertilizer Business to be Merged accrues for anticipated costs associated with
investigatory and remediation efforts relating to the environment. To date,
these accruals, as well as any actual expenditures, have not been material to
the Fertilizer Business to be Merged operations or financial condition.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," for fiscal years beginning after
December 15, 1995. The provisions of Statement No. 121 require the Fertilizer
Business to be Merged to review its long-lived assets for impairment on an
exception basis whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through future cash
flows. Any loss will be recognized in the income statement and certain
disclosures regarding the impairment are to be made in the financial
statements. The Fertilizer Business to be Merged is evaluating the provisions
of Statement No. 121 and does not anticipate a material effect on its
financial position or results of operations.
F-15
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF AUGUST 27, 1996
BY AND AMONG
MISSISSIPPI CHEMICAL CORPORATION
MISS SUB, INC.
AND
FIRST MISSISSIPPI CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
The Merger
<C> <S> <C>
Section 1.1 The Merger................................................. 1
Section 1.2 Effective Time of the Merger............................... 1
Section 1.3 Closing.................................................... 2
Section 1.4 Effects of the Merger...................................... 2
Section 1.5 Articles of Incorporation and Bylaws....................... 2
Section 1.6 Directors.................................................. 2
Section 1.7 Officers................................................... 2
ARTICLE II
Conversion of Securities
Section 2.1 Conversion of Capital Stock................................ 2
Section 2.2 Exchange of Certificates................................... 3
Section 2.3 Dissenting Shares.......................................... 4
ARTICLE III
Representations and Warranties of the Company
Section 3.1 Organization............................................... 5
Section 3.2 Capitalization............................................. 5
Section 3.3 Authority.................................................. 6
Section 3.4 Consents and Approvals; No Violations...................... 6
Section 3.5 SEC Reports and Financial Statements....................... 7
Section 3.6 Information in Disclosure Documents and Registration
Statements................................................. 7
Section 3.7 Retained Business.......................................... 7
Section 3.8 Litigation................................................. 8
Section 3.9 Employee Benefits.......................................... 8
Section 3.10 Absence of Certain Changes or Events....................... 9
Section 3.11 No Violation of Law........................................ 10
Section 3.12 Taxes...................................................... 10
Section 3.13 Environmental Matters...................................... 11
Section 3.14 Material Contracts......................................... 11
Section 3.15 Rights Agreement........................................... 11
Section 3.16 Brokers or Finders......................................... 11
Section 3.17 State Takeover Statutes.................................... 12
Section 3.18 Opinion of Financial Advisor............................... 12
Section 3.19 Title to Assets............................................ 12
Section 3.20 Employees.................................................. 12
Section 3.21 Insurance.................................................. 12
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
ARTICLE IV
Representations and Warranties of Parent and Sub
<C> <S> <C>
Section 4.1 Organization............................................... 12
Section 4.2 Capitalization............................................. 13
Section 4.3 Authority.................................................. 13
Section 4.4 Consents and Approvals; No Violations...................... 13
Section 4.5 SEC Reports and Financial Statements....................... 14
Section 4.6 Information in Disclosure Documents and Registration
Statements................................................. 14
Section 4.7 Litigation................................................. 15
Section 4.8 Absence of Certain Changes or Events....................... 15
Section 4.9 No Violation of Law........................................ 15
Section 4.10 Environmental Matters...................................... 15
Section 4.11 Interim Operations of Sub.................................. 15
Section 4.12 Unwanted Businesses........................................ 15
Section 4.13 Purchases of Company Stock................................. 15
Section 4.14 Brokers or Finders......................................... 16
Section 4.15 Opinion of Financial Advisor............................... 16
ARTICLE V
Covenants Pending the Effective Time
Section 5.1 Covenants of the Company with Respect to the Retained
Business................................................... 16
Section 5.2 Covenants of the Company................................... 18
Section 5.3 Covenants of Parent........................................ 18
ARTICLE VI
Additional Agreements
Section 6.1 Reasonable Efforts......................................... 19
Section 6.2 Access to Information...................................... 19
Section 6.3 Stockholders Meetings...................................... 20
Section 6.4 Legal Conditions to Distribution and Merger................ 20
Section 6.5 Stock Exchange Listing..................................... 20
Section 6.6 Company Severance Obligations.............................. 20
Section 6.7 Employee Matters; Company Stock Plans...................... 20
Section 6.8 Fees and Expenses.......................................... 22
Section 6.9 Indemnification............................................ 22
Section 6.10 No Solicitations........................................... 22
Section 6.11 Distribution............................................... 23
Section 6.12 Tax-Free Nature of Transactions............................ 23
Section 6.13 Audited Closing Balance Sheet.............................. 23
Section 6.14 Financing.................................................. 24
Section 6.15 AMPRO Facility............................................. 24
Section 6.16 Comfort Letters............................................ 24
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
ARTICLE VII
Conditions
<C> <S> <C>
Section 7.1 Conditions to Each
Party's Obligation to
Effect the Merger............................................ 25
Section 7.2 Conditions of
Obligations of Parent
and Sub...................................................... 25
Section 7.3 Conditions of
Obligations of the
Company...................................................... 26
ARTICLE VIII
Termination and Amendment
Section 8.1 Termination.................................................. 27
Section 8.2 Effect of Termination........................................ 27
Section 8.3 Termination Fee.............................................. 28
Section 8.4 Amendment.................................................... 28
Section 8.5 Extension; Waiver............................................ 28
ARTICLE IX
Miscellaneous
Section 9.1 Nonsurvival of
Representations and
Warranties................................................... 28
Section 9.2 Notices...................................................... 29
Section 9.3 Interpretation............................................... 29
Section 9.4 Counterparts................................................. 29
Section 9.5 Entire Agreement; No
Third-Party
Beneficiaries................................................ 30
Section 9.6 Governing Law................................................ 30
Section 9.7 Specific Performance......................................... 30
Section 9.8 Publicity.................................................... 30
Section 9.9 Assignment................................................... 30
Section 9.10 Attorney-Client
Privilege; Work Product...................................... 30
Section 9.11 Other........................................................ 30
Section 9.12 Further Assurances........................................... 31
</TABLE>
ANNEXES AND EXHIBITS
Annex I--Distribution Agreement
Exhibit A--Retained Business
Financial Statements
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of August 27,
1996, by and among Mississippi Chemical Corporation, a Mississippi corporation
("Parent"), Miss Sub, Inc., a Mississippi corporation and a wholly owned
subsidiary of Parent ("Sub"), and First Mississippi Corporation, a Mississippi
corporation (the "Company").
WHEREAS, Parent desires to acquire the Company's fertilizer business but
does not wish to acquire the other businesses conducted or to be conducted by
the Company;
WHEREAS, the Board of Directors of the Company has approved a plan of
distribution embodied in the form of a draft agreement attached hereto as
Annex I, as may be amended pursuant to the provisions of Section 6.11 hereof
(the "Distribution Agreement"), which will be entered into prior to the
Effective Time (as defined in Section 1.2) pursuant to which all of the
Company's assets, other than those used primarily in the Retained Business (as
defined in Section 3.7), will be contributed to a wholly owned subsidiary of
the Company ("Newco") (such contributions, together with all mergers, other
intercompany transfers of assets, and other actions described in Article IV of
the Distribution Agreement, the "Transfer") and shares of capital stock of
Newco will be distributed (the "Distribution") on a pro rata basis to the
stockholders of the Company as provided in the Distribution Agreement in order
to divest the Company of the businesses and operations that Parent is
unwilling to acquire;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have determined that, following the Distribution, the merger of Sub with and
into the Company (the "Merger") with the Company surviving as a wholly owned
subsidiary of Parent would be advantageous and beneficial to their respective
corporations and stockholders; and
WHEREAS, for federal income tax purposes, it is intended that (i) the
Distribution shall qualify as a tax-free distribution under Section 355 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the Merger
shall qualify as a reorganization under Section 368(a) of the Code, and this
Agreement is intended to be and is adopted as a plan of reorganization.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
The Merger
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof
and the Mississippi Business Corporation Act (the "MBCA"), at the Effective
Time, the Company and Sub shall consummate the Merger pursuant to which (i)
Sub shall be merged with and into the Company, (ii) the separate corporate
existence of Sub shall thereupon cease, (iii) the Company shall be the
surviving corporation in the Merger (the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Mississippi and (iv) the
corporate existence of the Company with its properties, rights, privileges,
powers and franchises shall continue unaffected by the Merger.
Section 1.2 Effective Time of the Merger. Upon the terms and subject to the
conditions hereof, articles of merger (the "Articles of Merger") shall be duly
prepared, executed and acknowledged by the Company and thereafter delivered to
the Secretary of State of the State of Mississippi, for filing, as provided in
the MBCA, as soon as practicable on or after the Closing Date (as defined in
Section 1.3). The Merger shall become effective
A-1
<PAGE>
immediately following the Distribution, upon the filing of the Articles of
Merger with the Secretary of State of the State of Mississippi or at such time
thereafter as is provided in the Articles of Merger (the "Effective Time").
Section 1.3 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties, which shall be
no later than the second business day after satisfaction or waiver of the
conditions set forth in Article VII hereof, at the offices of the Company, 700
North Street, Jackson, Mississippi 39202-3095, unless another date or place is
agreed to in writing by the parties hereto. The date and time at which the
Closing occurs is referred to herein as the "Closing Date."
Section 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the MBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.5 Articles of Incorporation and Bylaws.
(a) The Articles of Incorporation of Sub in effect at the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation until
amended in accordance with the MBCA.
(b) The bylaws of Sub in effect at the Effective Time shall be the bylaws
of the Surviving Corporation until amended in accordance with the MBCA.
Section 1.6 Directors. The directors of Sub at the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold office from
the Effective Time in accordance with the Articles of Incorporation and bylaws
of the Surviving Corporation and until his or her successor is duly elected
and qualified.
Section 1.7 Officers. The officers of Sub at the Effective Time shall be the
initial officers of the Surviving Corporation, each to hold office from the
Effective Time in accordance with the Articles of Incorporation and bylaws of
the Surviving Corporation and until his or her successor is duly appointed and
qualified.
ARTICLE II
Conversion of Securities
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holders of any shares
of Common Stock, par value $1.00 per share, of the Company (the "Company
Common Stock") or Parent, as the holder of the capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $1.00 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All shares of
Company Common Stock that are owned by the Company and any shares of
Company Common Stock owned by Parent, Sub or any other wholly-owned
Subsidiary (as hereinafter defined) of Parent shall be cancelled and
retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor. As used in this
Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships the general partnership interests of which
held by such party and any Subsidiary of such party do not have a majority
of the voting interest in such partnership) or (ii) securities or other
interests having by their terms a majority of the outstanding voting power
with
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respect to such corporation or other organization are directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
(c) Exchange Ratio for Company Common Stock. Subject to Section 2.2(e),
each issued and outstanding share of Company Common Stock (other than
shares to be cancelled in accordance with Section 2.1(b) and Dissenting
Shares, as defined in Section 2.3) shall be converted into the right to
receive the Merger Consideration Per Share in fully paid and nonassessable
shares of Common Stock, par value $0.01 per share, of Parent ("Parent
Common Stock"). The "Merger Consideration Per Share" shall mean 6,904,762
shares of Parent Common Stock divided by the number of shares of Company
Common Stock outstanding at the Effective Time as certified to Parent by
the Company's transfer agent and registrar (the "Effective Time Outstanding
Shares"), rounded to the nearest one ten-thousandth of a share; provided,
however, if the average of the Daily Prices, as derived from The Wall
Street Journal, for the ten (10) trading days immediately preceding the
trading day prior to the Effective Time (such number rounded to the nearest
one one-hundredth of a cent, the "Average Parent Price"), is more than
$25.00, then the Merger Consideration Per Share shall be the greater of (i)
6,393,298 shares of Parent Common Stock divided by the Effective Time
Outstanding Shares and (ii) the number (rounded to the nearest one ten-
thousandth of a share) of Parent Common Shares determined by dividing (A)
the product of (x) 6,904,762 multiplied by (y) a fraction, the numerator of
which is $25.00 and the denominator of which is the Average Parent Price,
by (B) the Effective Time Outstanding Shares. The term "Daily Price" shall
mean for each trading day the average of the opening price, high price, low
price and closing price for the Parent Common Stock. At the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive the
shares of Parent Common Stock and any cash in lieu of fractional shares of
Parent Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without
interest.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall deposit
with KeyCorp Shareholder Services, Inc. or such other bank or trust company
designated by the Company (and reasonably acceptable to Parent) (the
"Exchange Agent"), for the benefit of the holders of shares of Company
Common Stock, for exchange in accordance with this Article II through the
Exchange Agent, certificates representing the shares of Parent Common Stock
issuable pursuant to Section 2.1 in exchange for outstanding shares of
Company Common Stock, together with cash to be paid in lieu of fractional
shares (such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto contemplated by Section 2.2(c) and cash
in lieu of fractional shares, being hereinafter referred to as the
"Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Company Common
Stock (the "Certificates") whose shares were converted pursuant to Section
2.1 into the right to receive shares of Parent Common Stock (i) a letter of
transmittal (which shall be in such form and have such provisions as Parent
and the Company may reasonably specify) and (ii) instructions for
surrendering the Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to
the provisions of this Article II and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a transferee if the Certificate representing
such Company Common Stock is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid.
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Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender a certificate representing shares of
Parent Common Stock and cash in lieu of any fractional shares of Parent
Common Stock as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock which such holder is entitled to receive upon
the surrender thereof in accordance with this Section 2.2, and no cash
payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2(e) until the holder of record of such Certificate
shall so surrender such Certificate. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be paid to
the record holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of any cash payable in lieu of any fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof (including any
cash paid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be
cancelled and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificate or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Parent. In lieu of any such fractional shares, each holder of Company
Common Stock who would otherwise have been entitled to a fraction of a
share of Parent Common Stock upon surrender of Certificates for exchange
will be entitled to receive a cash payment in lieu of such fractional share
in an amount equal to such fraction multiplied by the Average Parent Price.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the stockholders of the Company for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
stockholders of the Company who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of their claim
for Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to Parent
Common Stock.
(g) No Liability. Neither Parent nor the Company shall be liable to any
holder of shares of Company Common Stock or Parent Common Stock, as the
case may be, for such shares (or dividends or distributions with respect
thereto) or cash for payment in lieu of fractional shares delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 2.3 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of the Company Common Stock which immediately prior to
the Effective Time are held by stockholders who have properly exercised and
perfected appraisal rights under Section 79-4-13.02 of the MBCA (the
"Dissenting Shares") shall not be converted into the right to receive shares
of Parent Common Stock as provided in Section 2.1 hereof, but the holders of
Dissenting Shares shall be entitled to receive such consideration from the
Surviving Corporation as shall be determined pursuant to Section 79-4-13.02 of
the MBCA; provided, however, that, if
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any such holder shall have failed to perfect or shall withdraw or lose his
right to appraisal and payment under the MBCA, such holder's shares of Company
Common Stock shall thereupon be deemed to have been converted as of the
Effective Time into the right to receive shares of Parent Common Stock,
without any interest thereon, as provided in Section 2.1 and such shares shall
no longer be Dissenting Shares.
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization. As used in this Agreement, any reference to the
Company and its Subsidiaries means the Company and each of its Subsidiaries;
any reference to Newco and its Subsidiaries means Newco at the time of the
Distribution and those entities that at or immediately prior to the
Distribution will be direct or indirect Subsidiaries of or merged with or
liquidated into Newco; and references to Subsidiaries of Newco mean those
entities that at or immediately prior to the Distribution will be direct or
indirect Subsidiaries of or merged with or liquidated into Newco. As used in
this Agreement, any reference to any event, change or effect having a material
adverse effect on or with respect to an entity (or group of entities taken as
a whole) means that such event, change or effect is materially adverse to the
business, properties, assets, results of operations or financial condition of
such entity (or, if with respect thereto, of such group of entities taken as a
whole). Each of the Company and its Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a material adverse
effect on the Retained Business taken as a whole. The Company and each of its
Subsidiaries are duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated
by them or the nature of the business conducted by them makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not in the aggregate have a
material adverse effect on the Retained Business taken as a whole or on the
ability of the Company and its Subsidiaries to consummate the transactions
contemplated hereby. True, accurate and complete copies of the Company's
Charter of Incorporation and bylaws, including all amendments thereto, have
heretofore been delivered to Parent.
Section 3.2 Capitalization. The authorized capital stock of the Company
consists of: (i) 100,000,000 shares of Company Common Stock of which, as of
August 26, 1996, 20,614,491 shares were issued and outstanding, and (ii)
20,000,000 shares of preferred stock (the "Company Preferred Stock"), of
which, as of the date hereof, no shares are issued or outstanding. 250,000
shares of Company Preferred Stock are designated Series X Junior Participating
Preferred Stock (the "Company Series X Preferred Stock") and are reserved for
issuance in accordance with the Rights Agreement, dated as of February 27,
1996 (the "Rights Agreement"), by and between the Company and Society National
Bank, as Rights Agent (the "Company Rights Agent"), pursuant to which the
Company has issued rights (the "Company Rights") to purchase shares of Company
Series X Preferred Stock and 249,167 shares of Company Preferred Stock (with
the designations set forth in Section 3.2 of the disclosure schedule delivered
by the Company to Parent on the date hereof (the "Company Disclosure
Schedule")) are reserved for issuance pursuant to the terms of debentures
convertible into Company Preferred Stock (the "Company Convertible
Debentures") and debenture options. As of the date hereof, 926,759 shares of
Company Common Stock were reserved for issuance upon exercise of outstanding
stock options and debenture options (which debenture options are exercisable
for Company Convertible Debentures which are convertible into Company
Preferred Stock which is then convertible into Company Common Stock) and upon
conversion of Company Convertible Debentures pursuant to the Company's 1980
Long-Term Incentive Plan (the "1980 Plan"), 1988 Long-Term Incentive Plan (the
"1988 Plan") and 1995 Long-Term Incentive Plan (the "1995 Plan" and, together
with the 1980 Plan and the 1988 Plan, the "Company Stock Plans"). All the
outstanding shares of the Company's capital stock are, and all shares which
may be issued pursuant to Company
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Stock Plans will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and non-assessable and free of any
preemptive rights in respect thereof. Except as set forth above or in Section
3.2 of the Company Disclosure Schedule, as of the date hereof, there are no
existing options, warrants, calls, subscriptions or other rights or other
agreements, commitments, understandings or restrictions of any character
binding on the Company or any of its Subsidiaries with respect to the issued
or unissued capital stock of the Company or any of its Subsidiaries. Except as
set forth in Section 3.2 of the Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries.
Section 3.3 Authority. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and the Distribution Agreement
and to consummate the transactions contemplated hereby and thereby other than,
with respect to the Merger, the approval and adoption of this Agreement by the
affirmative vote of the holders of at least a majority of the outstanding
shares of Company Common Stock and, with respect to the Distribution, the
declaration of the Distribution by the Company's Board of Directors. The
execution, delivery and performance of this Agreement and the Distribution
Agreement by the Company and the consummation by the Company of the
Distribution and the Merger and of the other transactions contemplated hereby
and thereby have been duly authorized by the Company's Board of Directors, and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the Distribution Agreement or for the Company to
consummate the transactions so contemplated hereby or thereby other than, with
respect to the Merger, the approval and adoption of this Agreement by the
affirmative vote of the holders of at least a majority of the outstanding
shares of Company Common Stock and, with respect to the Distribution,
declaration of the Distribution by the Company's Board of Directors. This
Agreement has been duly executed and delivered by the Company and, assuming
this Agreement constitutes a valid and binding obligation of Parent and Sub,
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms. Prior to the Distribution, the
Distribution Agreement will be duly executed and delivered by each of the
Company and Newco and upon such execution and delivery will constitute a valid
and binding obligation of each of the Company and Newco, enforceable against
each of them in accordance with its terms.
Section 3.4 Consents and Approvals; No Violations. Except (a) as set forth
in Section 3.4 of the Company Disclosure Schedule, (b) for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Securities Act of 1933, as amended (the "Securities
Act"), the New York Stock Exchange (the "NYSE"), the National Association of
Securities Dealers, Inc., the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), filings under state securities or "blue sky"
laws and the filing with the Secretary of State of the State of Mississippi of
the Articles of Merger and articles of merger with respect to the merger of
FirstMiss Fertilizer, Inc. into the Company and (c) as may be necessary as a
result of any facts or circumstances relating solely to Parent or any of its
Subsidiaries, none of the execution, delivery or performance of this Agreement
or the Distribution Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby or thereby and compliance by
the Company with any of the provisions hereof or thereof will (i) conflict
with or result in any breach of any provisions of the charters or bylaws of
the Company or of any of its Subsidiaries, (ii) require any filing by the
Company or any of its Subsidiaries with, or any permit, authorization, consent
or approval to be obtained by the Company or any of its Subsidiaries of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental
Entity"), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument, obligation or
commitment to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound
("Contracts") or (iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of its Subsidiaries,
except, in the case of clause (ii), (iii) or (iv), for failures to file or
obtain, violations, breaches or defaults which would not have a material
adverse effect on the Retained Business taken as a whole or the ability of the
Company to consummate the transactions contemplated hereby.
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Section 3.5 SEC Reports and Financial Statements. The Company has timely
filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to Parent true and complete copies of, all periodic
reports required to be filed by it since July 1, 1995 under the Exchange Act
(as such documents have been amended since the time of their filing, together
with all such periodic reports to be filed from the date hereof to the
Effective Time, collectively, the "Company SEC Documents"). Except with
respect to information concerning the Triad Chemical Joint Venture ("Triad"),
as to which the Company makes no representation or warranty for the purposes
of this Section 3.5, the Company SEC Documents, including without limitation
any financial statements or schedules included therein, at the time filed, (a)
did not or will not, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied or
will comply, as the case may be, in all material respects with the applicable
requirements of the Exchange Act. Except with respect to information
concerning Triad, as to which the Company makes no representation or warranty
for purposes of this Section 3.5, the consolidated financial statements of the
Company included in the Company SEC Documents (including the notes and
schedules thereto, the "Company Financial Statements") comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of the unaudited statements, as permitted
by Form 10-Q of the SEC) and fairly present in all material respects (subject,
in the case of the unaudited financial statements, to normal audit
adjustments) the consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
Section 3.6 Information in Disclosure Documents and Registration
Statements. Except with respect to information concerning Triad, as to which
the Company makes no representation or warranty for purposes of this Section
3.6, none of the information supplied or to be supplied by the Company or its
representatives for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger
(the "S-4") will, at the time such registration statement becomes effective
under the Securities Act and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (ii) the joint
proxy statement relating to the meetings of each of the Company's and Parent's
stockholders to be held in connection with the Merger (the "Proxy Statement")
will, at the date mailed to the Company's and Parent's stockholders and at the
time of each of the meetings of the Company's and Parent's stockholders to be
held in connection with the Merger, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or Sub for inclusion in the Proxy
Statement, with respect to information concerning Parent or any of its
Subsidiaries incorporated by reference in the Proxy Statement or with respect
to information concerning Triad.
Section 3.7 Retained Business.
(a) Attached hereto as Exhibit A is an unaudited pro forma consolidated
balance sheet of the Retained Business of the Company and its Subsidiaries
at June 30, 1996 (including certain explanatory notes thereto, the
"Retained Business Balance Sheet") and an unaudited pro forma consolidated
statement of operations for the Retained Business of the Company and its
Subsidiaries for the year ended June 30, 1996 (including certain
explanatory notes thereto, the "Retained Business Income Statement" and,
together with the Retained Business Balance Sheet, the "Retained Business
Financial Statements"). The "Retained Business" means and includes the
assets, liabilities, capital stock and partnership interests reflected on
the Retained Business Balance Sheet, as such assets and liabilities may
have changed since the date of the Retained Business Balance Sheet, but in
any event shall include all of the Company's direct and indirect
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right, title and interest (including minority interests) in the assets used
primarily in, and all of the Company's liabilities and obligations
(accrued, absolute, contingent, undisclosed or otherwise) which are
primarily related to or have arisen or will arise from, the production,
distribution, sale and storage of ammonia and urea and purchase and resale
of ammonia and urea (except for those assets and liabilities identified in
Section 3.7 of the Company Disclosure Schedule under the headings "Excluded
Assets" and "Excluded Liabilities," which shall not be included in the
Retained Business and which are referred to herein as the "Excluded Assets"
and "Excluded Liabilities"). The Retained Business shall include the
following entities: FirstMiss Fertilizer, Inc.; AMPRO Fertilizer, Inc.; FMF
Barge, Inc.; FMF, Inc. ("FMF"); a 50% interest in Arcadian/FirstMiss
Fertilizer LLC; a 50% interest in Triad; and the partnership interests
currently held by FEC Marketing, Inc. ("FEC") and FMF in FirstMiss
Fertilizer Limited Partnership and FirstMiss Fertilizer Texas LP (the
"Partnerships"). As of the Effective Date, the interests in the
Partnerships currently held by FEC will be held by an entity other than FEC
included in the Retained Business that will be designated by Parent.
(b) Except with respect to information concerning Triad, as to which the
Company makes no representation or warranty for purposes of this Section
3.7, the Retained Business Financial Statements have been prepared in
accordance with generally accepted accounting principles on a basis
consistent with the Company Financial Statements, and, except as set forth
in Section 3.7 of the Company Disclosure Schedule, fairly present in all
material respects (subject to normal audit adjustments) the consolidated
financial position of the Company and its Subsidiaries as at the date
thereof, after giving pro forma effect to the Distribution (assuming the
Distribution occurred on June 30, 1996), and the consolidated results of
their operations for the one-year period then ended, after giving pro forma
effect to the Distribution (assuming the Distribution occurred on July 1,
1995).
(c) At the Effective Time, except for the Excluded Assets and as
contemplated by this Agreement or the Distribution Agreement, neither Newco
nor any of its Subsidiaries will own or have rights to use any of the
assets or property, whether tangible, intangible or mixed, which are
necessary for the conduct of the Retained Business as conducted on the date
hereof. Except as set forth in Section 3.7 of the Company Disclosure
Schedule, at the Effective Time neither Newco nor any of its Subsidiaries
will be a party to any material agreement or arrangement with the Surviving
Corporation or any of its Subsidiaries (other than the Distribution
Agreement and any agreements contemplated by the Distribution Agreement,
including the Tax Disaffiliation Agreement and the Employee Benefits
Agreement).
Section 3.8 Litigation. Except as disclosed in the Company SEC Documents
filed prior to the date hereof or as set forth in Section 3.8 of the Company
Disclosure Schedule and except with respect to information concerning Triad,
as to which the Company makes no representation or warranty for purposes of
this Section 3.8, there is no suit, action, proceeding or investigation
relating to the Retained Business pending or, to the knowledge of the Company,
threatened, against the Company or any of its Subsidiaries before any
Governmental Entity which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on the Retained Business taken as a
whole or the ability of the Company to consummate the transactions
contemplated hereby. Except as disclosed in the Company SEC Documents filed
prior to the date hereof or as set forth in Section 3.8 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is
subject to any outstanding order, writ, injunction or decree relating to the
Retained Business which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on the Retained Business taken as a
whole or a material adverse effect on the ability of the Company to consummate
the transactions contemplated hereby.
Section 3.9 Employee Benefits.
(a) Other than with respect to Triad, as to which the Company makes no
representation or warranty for purposes of this Section 3.9, Section 3.9 of
the Company Disclosure Schedule contains a list of all "employee benefit
plans" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all bonus, stock option,
fringe benefit, vacation, incentive, severance, employment or other benefit
plans, programs, agreements and arrangements (the "Benefit
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Plans"), which cover employees or former employees of the Company and its
Subsidiaries who are or were employed in the Retained Business (the
"Employees"). True and complete copies of all Benefit Plans, any trust
instruments and/or insurance contracts, if any, forming a part of any such
plans, and all amendments thereto; current summary plan descriptions; where
applicable, the most current determination letter received from the
Internal Revenue Service (the "Service") and most recent determination
letter application; and where applicable, annual reports, financial
statements and actuarial reports for the last three plan years, which
fairly and accurately reflect the financial condition of the plans have
been made available to Parent.
(b) All Benefit Plans are in compliance with ERISA, the Code and all
other applicable laws in all material respects. Each Benefit Plan which is
an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA (a "Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
from the Service, and the Company is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. Neither
the Company nor any of its Subsidiaries or any ERISA Affiliate (as defined
below) has contributed or been required to contribute to any Multiemployer
Plan (as defined in ERISA) with respect to any Employees.
(c) No liability under Subtitle C or D of Title IV of ERISA has been
incurred by the Company or any Subsidiary with respect to any ongoing,
frozen or terminated Benefit Plan, currently or formerly maintained by any
of them, or the Plan of any entity which is or has been considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the
Code (an "ERISA Affiliate") which would have a material adverse effect on
the Retained Business taken as a whole.
(d) All contributions required to be made or accrued as of June 30, 1996
under the terms of any Benefit Plan for which the Surviving Corporation or
any of its Subsidiaries may have liability have been timely made or have
been reflected on the Retained Business Balance sheet. Neither any Pension
Plan nor any single-employer plan of an ERISA Affiliate has incurred an
"accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA in an amount which would
have a material adverse effect on the Retained Business taken as a whole.
Neither the Company nor any of its Subsidiaries has provided, or is
required to provide, security to any Pension Plan pursuant to Section
401(a)(29) of the Code.
(e) Neither the Company nor any of its Subsidiaries has any obligations
for retiree health and life benefits for Employees or former Employees
under any Benefit Plan, except as set forth in Section 3.9 of the Company
Disclosure Schedule or as required by Part 6 of Title I of ERISA.
(f) The Company and its Subsidiaries have no unfunded liabilities with
respect to any Pension Plan which covers former Employees in an amount
which would have a material adverse effect on the Retained Business taken
as a whole.
(g) Immediately after the Effective Time, the Surviving Corporation or
its Subsidiaries could terminate each Benefit Plan in accordance with its
terms without incurring any material liability.
(h) With respect to the Company and the Retained Business, the
transactions contemplated by this Agreement and the Distribution Agreement
will not cause any additional payments to be due under any Benefit Plan,
nor accelerate the payment or vesting of any amounts due under any Benefit
Plan, nor result in any excess parachute payment within the meaning of Code
Section 280G except for payments which are paid prior to the Effective
Time, accrued on the Audited Closing Balance Sheet (as defined in Section
6.13) or for which funds have been reserved, or amounts due which are
assumed by Newco pursuant to the Distribution Agreement.
Section 3.10 Absence of Certain Changes or Events. Since June 30, 1996, the
Company and its Subsidiaries have conducted the Retained Business only in the
ordinary and usual course consistent with past practice, except as set forth
in Section 3.10 of the Company Disclosure Schedule, and there has not been any
change or development, or combination of changes or developments which
individually or in the aggregate have had or are reasonably likely to have a
material adverse effect on the Retained Business taken as a whole.
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Section 3.11 No Violation of Law. Except as disclosed in the Company SEC
Documents as filed prior to the date hereof or as set forth in Section 3.11 of
the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is in violation of, or, to the knowledge of the Company, is under
investigation with respect to or has been given notice or been charged by any
Governmental Entity with any violation of, any law, statute, order, rule,
regulation or judgment of any Governmental Entity, except for violations
which, in the aggregate, would not have a material adverse effect on the
Retained Business taken as a whole. The Company and its Subsidiaries have all
permits, licenses, franchises and other governmental authorizations, consents
and approvals necessary to conduct the Retained Business as presently
conducted, except for any such permits, licenses, franchises or other
governmental authorizations, consents and approvals the failure of which to
have would not have a material adverse effect on the Retained Business taken
as a whole.
Section 3.12 Taxes.
(a) Except as disclosed in the Company Financial Statements for the year
ended June 30, 1995 or as set forth in Section 3.12 of the Company
Disclosure Schedule:
(i) the Company and its Subsidiaries have (A) duly filed with the
appropriate governmental authorities all Tax Returns (as hereinafter
defined) required to be filed by them on or prior to the Effective
Time, other than those Tax Returns the failure of which to file would
not have a material adverse effect on the Retained Business taken as a
whole, and such Tax Returns are true, correct and complete in all
material respects, and (B) duly paid in full or made provision in
accordance with generally accepted accounting principles for the
payment of, and withheld, all Taxes (as hereinafter defined) required
to be shown on such Tax Returns or required to be withheld by them,
respectively;
(ii) as of the date hereof, the Tax Returns for the Company and its
Subsidiaries are not currently the subject of any audit, investigation
or proceeding by the Service or, to the Company's knowledge, any state
or local taxing authority, and the Company and its Subsidiaries have
not received any written notice of deficiency or assessment from any
taxing authority with respect to liabilities for material Taxes of the
Company or its Subsidiaries which have not been paid or finally
settled, other than audits, deficiencies or assessments disclosed in
Section 3.12 of the Company Disclosure Schedule which are being
contested in good faith through appropriate proceedings;
(iii) no waiver of any statute of limitations in respect of Taxes or
any extension of time with respect to a Tax assessment or deficiency
granted by the Company or any of its Subsidiaries is currently in
effect;
(iv) none of the Company and its Subsidiaries is a party to any Tax
allocation or sharing agreement, other than the Tax Disaffiliation
Agreement; and
(v) none of the Company and its Subsidiaries has been a member of any
affiliated group within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended, or any similar affiliated or
consolidated group for tax purposes under state, local or foreign law
(other than a group the common parent of which is the Company), or has
any liability for the Taxes of any person (other than the Company and
its Subsidiaries) under Treasury Regulation Section 1.1502-6 or any
similar provision of state, local or foreign law as a transferee or
successor, by contract or otherwise.
(b) "Taxes" means all taxes, charges, fees, levies, imposts, duties or
other assessments, including, without limitation, income, gross receipts,
excise, personal property, real property, sales, ad valorem, value-added,
leasing, withholding, social security, occupation, use, service, service
use, license, payroll, franchise, transfer and recording taxes, fees and
charges, imposed by the United States or any state, local, or foreign
governmental authority whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include any
interest, fines, penalties or additional amounts attributable or imposed on
or with respect to any such taxes, charges, fees, levies, imposts, duties
or other assessments. "Tax Return" means any return, report or other
document or information required to be supplied to a taxing authority in
connection with Taxes.
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Section 3.13 Environmental Matters.
(a) Except as disclosed in the Company SEC Documents as filed prior to
the date hereof or as set forth in Section 3.13 of the Company Disclosure
Schedule, except for such matters that, individually or in the aggregate,
would not have a material adverse effect on the Retained Business taken as
a whole and except with respect to information concerning Triad, as to
which the Company makes no representation or warranty for purposes of this
Section 3.13, (i) the Retained Business of the Company and its Subsidiaries
is in compliance in all material respects with all applicable Environmental
Laws (as hereinafter defined); (ii) the properties included in the Retained
Business and presently owned or operated by the Company or its Subsidiaries
(the "Company Properties") do not contain any Hazardous Substance (as
hereinafter defined) other than as permitted under applicable Environmental
Laws; (iii) neither the Company nor any of its Subsidiaries has since July
1, 1994 received or is aware of any actual claims, notices, demand letters,
lawsuits or requests for information from any Governmental Entity or any
private third party alleging that the Retained Business is in violation of,
or liable under, any Environmental Laws; and (iv) none of the Company, its
Subsidiaries or the Company Properties is subject to any court order,
administrative order or decree relating to the Retained Business arising
under any Environmental Law.
(b) "Environmental Law" means any applicable Federal, state or local law,
regulation, permit, judgment or agreement with any Governmental Entity,
relating to (x) the protection, preservation or restoration of the
environment or to human health or safety, or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances. "Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law.
Section 3.14 Material Contracts. Other than with respect to Triad, Section
3.14 of the Company Disclosure Schedule identifies any Contract included in
the Retained Business to which the Company or any of its Subsidiaries is a
party or by which any of its assets or operations may be bound that is (i) a
loan or similar agreement or indebtedness evidenced by a note or other
instrument, or any direct or indirect guarantee of indebtedness of any other
person, in excess of $1,000,000; (ii) any Contract that expressly limits the
right to terminate the Contract without penalty upon less than one year's
notice and such Contract provides for future payments in excess of $5,000,000
within the next twelve (12) months from the date hereof; (iii) any Contract
for the purchase, sale or transportation of natural gas; (iv) any Contract
related to product purchases or product sales in excess of $500,000; and (v)
any Contract related to capital expenditures, which provides for future
payments in excess of $5,000,000 within the next twelve (12) months from the
date hereof. Except as set forth in Section 3.14 of the Company Disclosure
Schedule and except with respect to Triad, as to which the Company makes no
representation or warranty for purposes of this Section 3.14, (i) each of the
Contracts included in the Retained Business to which the Company or any of its
Subsidiaries is a party or by which any of its assets or operations may be
bound is in full force and effect, except where the failure to be in full
force and effect would not have a material adverse effect on the Retained
Business taken as a whole and (ii) there are no existing defaults by the
Company or such Subsidiary thereunder which default would result in a material
adverse effect on the Retained Business taken as a whole.
Section 3.15 Rights Agreement. As of the Effective Time, the Company will
have taken all necessary action to render the Company Rights inapplicable to
the Merger, the Distribution and the other transactions contemplated hereby.
Section 3.16 Brokers or Finders. Neither the Company nor any of its
Subsidiaries has any liability to any agent, broker, investment banker,
financial advisor or other firm or person for any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement except CS First Boston Corporation, whose fees
and expenses, as previously disclosed to Parent, will be paid by the Company
in accordance with the Company's agreement with such firm.
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Section 3.17 State Takeover Statutes. The provisions of the Mississippi
Control Share Act and the Mississippi Shareholder Protection Act will not
apply to the Merger, the Distribution or any of the other transactions
contemplated hereby, and to the Company's knowledge, no other state takeover
statute or similar statute or regulation applies to the Merger, the
Distribution, or any of the other transactions contemplated hereby.
Section 3.18 Opinion of Financial Advisor. The Company has received the
opinion of CS First Boston Corporation to the effect that, as of the date of
such opinion, the terms of the Distribution and Merger, taken together, are
fair, from a financial point of view, to the holders of common stock of the
Company.
Section 3.19 Title to Assets. The Company has title and/or rights sufficient
to carry-on operations as contemplated by (the AMPRO Retrofit as defined in
Section 6.15) or presently conducted to that portion of the real property (and
the rights, privileges and appurtenances pertaining to such real property)
included in the Retained Business on which the AMPRO ammonia plant and related
operations are located, subject only to the following permitted exceptions:
(i) all highway, roadway, railroad, utility, drainage, pipeline and other like
easements, servitudes and rights of way which an inspection or survey of the
property would show and which do not materially adversely affect use of the
property as a fertilizer manufacturing facility and related operations, (ii)
liens for ad valorem taxes not yet due and payable, (iii) easements,
restrictions and encumbrances which do not materially adversely affect use of
the property as a fertilizer manufacturing facility and related operations and
(iv) all rights, title and interests of (x) Parent and (y) Triad. Except as
otherwise set forth above, except with respect to any other real property
included in the Retained Business, as to which the Company makes no
representation or warranty for purposes of this Section 3.19 and except as set
forth in Section 3.19 of the Company Disclosure Schedule, the Company owns all
of the material assets included in the Retained Business free and clear of any
liens, claims, security interests or encumbrances that, individually or in the
aggregate, are reasonably likely to have a material adverse effect on the
Retained Business taken as a whole.
Section 3.20 Employees. Other than with respect to Triad, the Company has
made available to Parent a list of the employees currently employed in the
Retained Business indicating the positions which they now hold, their current
rates of compensation and which employees, if any, are on short or long term
disability, family and medical, military, workers' compensation, or any other
type of leave of absence; and copies of all employee handbooks, and policy and
procedure manuals. With respect to the Retained Business other than Triad,
neither the Company nor any of its Subsidiaries is a party to, or is bound by,
any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is the Company or
any of its Subsidiaries the subject of any proceeding or organizing activity
asserting that it or any such Subsidiary has committed an unfair labor
practice or seeking to compel it or such Subsidiary to bargain with any labor
organization as to wages and conditions of employment, nor is there any
strike, labor dispute, slow down or stoppage involving the Company or any of
its Subsidiaries pending or, to the knowledge of the Company, threatened that,
individually or in the aggregate, are reasonably likely to have a material
adverse effect on the Retained Business taken as a whole.
Section 3.21 Insurance. Set forth in Section 3.21 of the Company Disclosure
Schedule is a schedule of the insurance coverage (including policy limits,
coverage layers, and named insureds) maintained by the Company on the assets,
properties, premises, operations and personnel of the Company, including the
Retained Business.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted except
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where the failure to be so organized, existing and in good standing or to have
such power and authority would not have a material adverse effect on Parent
and its Subsidiaries taken as a whole. Parent and each of its Subsidiaries are
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by them or the
nature of the business conducted by them makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not in the aggregate have a material adverse effect on
Parent and its Subsidiaries taken as a whole or on the ability of Parent or
Sub to consummate the transactions contemplated hereby. True, accurate and
complete copies of Parent's and Sub's Articles of Incorporation and bylaws,
including all amendments thereto, have heretofore been delivered to the
Company.
Section 4.2 Capitalization. As of the date hereof, the authorized capital
stock of Parent consists of: (i) 100,000,000 shares of Parent Common Stock of
which, as of June 30, 1996, 21,353,450 shares were issued and outstanding and
1,550,000 shares were held in treasury, and (ii) 500,000 shares of preferred
stock, par value $0.01 per share, of which, as of the date hereof, no shares
were issued and outstanding ("Parent Preferred Stock"). 250,000 shares of
Parent Preferred Stock are designated Preferred Stock, Series A and are
reserved for issuance in accordance with the Rights Agreement, dated as of
August 8, 1994, by and between Parent and Harris Trust and Savings Bank, as
Rights Agent, pursuant to which Parent has issued rights to purchase shares of
Parent Preferred Stock. All the outstanding shares of Parent's capital stock
are, and all shares of Parent Common Stock which are to be issued pursuant to
the Merger will be when issued in accordance with the terms hereof, duly
authorized, validly issued, fully paid and nonassessable and free of any
preemptive rights in respect thereto. Except for Parent Common Stock issuable
to directors, officers and employees pursuant to Parent stock option and other
benefit plans and except for this Agreement, there are no existing options,
warrants, calls, subscriptions or other rights or other agreements,
commitments, understandings or restrictions of any character relating to the
issued or unissued capital stock of Parent or any of its Subsidiaries. As of
the date hereof, the authorized capital stock of Sub consists of 1,000 shares
of Common Stock, par value $0.01 per share, all of which are validly issued,
fully paid and nonassessable and are owned of record and beneficially by
Parent. After June 30, 1996 and prior to the date hereof, no material number
of shares of Parent Common Stock have been issued except issuances of shares
reserved for issuance as described above.
Section 4.3 Authority. Parent and Sub have the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval of the issuance of shares of Parent Common Stock to the Company's
stockholders pursuant to this Agreement by an affirmative vote of the holders
of at least a majority of the shares of Parent Common Stock present, in person
or by proxy, and entitled to vote at the meeting of Parent's stockholders
referred to in Section 6.3(b) for which a quorum exists). The execution,
delivery and performance of this Agreement by each of Parent and Sub and the
consummation by Sub of the Merger and by Parent and Sub of the other
transactions contemplated hereby have been duly authorized by the Boards of
Directors of Parent and Sub and Parent as the sole stockholder of Sub, and no
other corporate proceedings on the part of Parent or Sub are necessary to
authorize this Agreement or for Parent and Sub to consummate the transactions
so contemplated (other than, with respect to the Merger, the approval of the
issuance of shares of Parent Common Stock to the Company's stockholders
pursuant to this Agreement by an affirmative vote of the holders of at least a
majority of the shares of Parent Common Stock present, in person or by proxy,
and entitled to vote at the meeting of Parent's stockholders referred to in
Section 6.3(b) for which a quorum exists). This Agreement has been duly
executed and delivered by each of Parent and Sub, and, assuming this Agreement
constitutes a valid and binding obligation of the Company, constitutes a valid
and binding obligation of each of Parent and Sub, enforceable against each of
them in accordance with its terms.
Section 4.4 Consents and Approvals; No Violations. Except (a) as set forth
in Section 4.4 of the disclosure schedule delivered by Parent to the Company
on or prior to the date hereof (the "Parent Disclosure Schedule"), (b) for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, the HSR Act, the NYSE or the NASDAQ National Market, as the case may be,
filings under state securities or "blue sky" laws, and the filing with the
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Secretary of State of the State of Mississippi of the Articles of Merger and
(c) as may be necessary as a result of any facts or circumstances relating
solely to the Company and its Subsidiaries, neither the execution, delivery or
performance of this Agreement by Parent and Sub nor the consummation by Parent
and Sub of the transactions contemplated hereby nor compliance by Parent and
Sub with any of the provisions hereof will (i) conflict with or result in any
breach of any provision of the respective charter or bylaws of Parent and Sub,
(ii) require any filing by Parent or its Subsidiaries with, or permit,
authorization, consent or approval to be obtained by Parent or its
Subsidiaries of, any Governmental Entity, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
Contract to which Parent or any of its Subsidiaries is a party or by which any
of them or any of their properties or assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries, except, in the case of clause
(ii), (iii) or (iv), for failures to file or obtain, violations, breaches or
defaults which would not, individually or in the aggregate, have a material
adverse effect on Parent or Sub or the ability of Parent or Sub to consummate
the transactions contemplated hereby.
Section 4.5 SEC Reports and Financial Statements. Each of Parent and its
Subsidiaries has timely filed with the SEC and has heretofore made available
to the Company true and complete copies of all periodic reports required to be
filed by it since July 1, 1995 under the Exchange Act (as such documents have
been amended since the time of their filing, together with all such periodic
reports to be filed from the date hereof to the Effective Time, collectively,
the "Parent SEC Documents"). Except with respect to information concerning
Triad, as to which Parent makes no representation or warranty for purposes of
this Section 4.5, the Parent SEC Documents, including without limitation any
financial statements or schedules included therein, at the time filed, (a) did
not or will not, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied or
will comply, as the case may be, in all material respects with the applicable
requirements of the Exchange Act. Except with respect to information
concerning Triad, as to which Parent makes no representation or warranty for
purposes of this Section 4.5, the consolidated financial statements of Parent
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited financial statements, as permitted by Form 10-Q
of the SEC) and fairly present (subject, in the case of the unaudited
statements, to normal audit adjustments) the consolidated financial position
of Parent and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
Section 4.6 Information in Disclosure Documents and Registration
Statements. Except with respect to information concerning Triad, as to which
Parent makes no representation or warranty for purposes of this Section 4.6,
none of the information supplied by Parent or Sub or their representatives for
inclusion or incorporation by reference in (i) the S-4 will, at the time the
S-4 becomes effective under the Securities Act and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (ii) the Proxy Statement will, at the date mailed to each of
the Company's and Parent's stockholders and at the time of each of the
meetings of the Company's and Parent's stockholders to be held in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The S-4 and the Proxy Statement will comply as to
form in all material respects with the provisions of the Securities Act of
1933, as amended and the rules and regulations thereunder, except that no
representation is made by Parent and Sub with respect to statements made
therein based on information supplied by the Company for inclusion in the S-4
and the Proxy Statement, with respect to information concerning the Company
incorporated by reference in the S-4 and the Proxy Statement or with respect
to information concerning Triad.
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Section 4.7 Litigation. Except as disclosed in the Parent SEC Documents
filed prior to the date of this Agreement and except with respect to
information concerning Triad, as to which Parent makes no representation or
warranty for purposes of this Section 4.7, there is no suit, action,
proceeding or investigation pending or, to the knowledge of Parent,
threatened, against Parent or any of its Subsidiaries before any Governmental
Entity which, individually or in the aggregate, might reasonably be expected
to have a material adverse effect on Parent and its Subsidiaries taken as a
whole or a material adverse effect on the ability of Parent or Sub to
consummate the transactions contemplated by this Agreement. Except as
disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, neither Parent nor any of its Subsidiaries is subject to any
outstanding order, writ, injunction or decree which, individually or in the
aggregate, might reasonably be expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole or a material adverse effect on
the ability of Parent or Sub to consummate the transactions contemplated
hereby.
Section 4.8 Absence of Certain Changes or Events. Since June 30, 1996, there
has not been any change or development, or combination of changes or
developments which individually or in the aggregate have had or are reasonably
likely to have a material adverse effect on Parent and its Subsidiaries taken
as a whole.
Section 4.9 No Violation of Law. Except as disclosed in the Parent SEC
Documents as filed prior to the date hereof or as set forth in Section 4.9 of
the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is
in violation of, or, to the knowledge of Parent, is under investigation with
respect to or has been given notice or been charged by any Governmental Entity
with any violation of, any law, statute, order, rule, regulation or judgment
of any Governmental Entity, except for violations which, in the aggregate, do
not have a material adverse effect on the Parent and its Subsidiaries taken as
a whole. Parent and its Subsidiaries have all permits, licenses, franchises
and other governmental authorizations, consents and approvals necessary to
conduct their businesses as presently conducted, except for any such permits,
licenses, franchises or other governmental authorizations, consents and
approvals the failure of which to have would not have a material adverse
effect on Parent and its Subsidiaries taken as a whole.
Section 4.10 Environmental Matters. Except as disclosed in the Parent SEC
Documents as filed prior to the date hereof or as set forth in Section 4.10 of
the Parent Disclosure Schedule, except for such matters that, individually or
in the aggregate, would not have a material adverse effect on Parent and its
Subsidiaries taken as a whole and except with respect to information
concerning Triad, as to which Parent makes no representation or warranty for
purposes of this Section 4.10, (i) Parent and its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws;
(ii) the properties presently owned or operated by Parent or its Subsidiaries
(the "Parent Properties") do not contain any Hazardous Substance other than as
permitted under applicable Environmental Laws; (iii) neither Parent nor any of
its Subsidiaries has, since July 1, 1994, received any actual claims, notices,
demand letters, lawsuits or requests for information from any Governmental
Entity or any private third party alleging that Parent is in violation of, or
liable under, any Environmental Laws; and (iv) none of Parent, its
Subsidiaries or the Parent Properties is subject to any court order,
administrative order or decree arising under any Environmental Law.
Section 4.11 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as
contemplated hereby.
Section 4.12 Unwanted Businesses. Parent is unwilling to consummate the
Merger unless the Company has divested itself of all of the Company's assets
and Newco has assumed all of the Company's liabilities, other than those
relating to the Retained Business.
Section 4.13 Purchases of Company Stock. Except as set forth in Section 4.13
of the Parent Disclosure Schedule, neither Parent nor any of its affiliates
has acquired any shares of capital stock of the Company. Section 4.13 of
Parent Disclosure Schedule sets forth the amount of Parent Common Stock
repurchased by Parent in the last six (6) months pursuant to its stock
repurchase program (the "Repurchase Program") or otherwise and the amount of
repurchases authorized by Parent's Board of Directors.
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Section 4.14 Brokers or Finders. Neither Parent nor any of its Subsidiaries
has any liability to any agent, broker, investment banker, financial advisor
or other firm or person for any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement except Donaldson, Lufkin & Jenrette Securities
Corporation, whose fees and expenses will be paid by Parent in accordance with
the Parent's agreement with such firm.
Section 4.15 Opinion of Financial Advisor. Parent has received the opinion
of Donaldson, Lufkin & Jenrette Securities Corporation to the effect that the
Merger Consideration Per Share is fair to Parent from a financial point of
view.
ARTICLE V
Covenants Pending the Effective Time
Section 5.1 Covenants of the Company with Respect to the Retained
Business. During the period from the date of this Agreement and continuing
until the Effective Time, the Company agrees as to itself and its Subsidiaries
that except (i) for the Distribution and the other transactions, actions or
events provided for in the Distribution Agreement, including the Employee
Benefits Agreement, (ii) as contemplated or permitted by this Agreement, (iii)
as set forth in Section 5.1 of the Company Disclosure Schedule or (iv) to the
extent that Parent shall otherwise consent in writing (which consent will not
be unreasonably withheld or delayed):
(a) Ordinary Course. The Company and its Subsidiaries shall carry on the
Retained Business in the usual, regular and ordinary course consistent with
past practice and use all reasonable efforts to preserve intact the present
business organization, keep available, consistent with past practice, the
services of the present officers and employees and preserve the
relationships with customers, suppliers and others having business dealings
with the Retained Business, it being understood, however, that (i) certain
employees of the Retained Business will also be engaged in activities for
Newco and its Subsidiaries and certain officers of the Company will resign
at the time of the Distribution and will serve as officers of Newco, and
(ii) the failure of any employees of the Retained Business to remain
employees of the Retained Business or become employees of Parent or any
Subsidiary of Parent shall not constitute a breach of this covenant.
Without limiting the foregoing, except as set forth in Section 5.1 of the
Company Disclosure Schedule and except for "like kind" replacements and
repairs of equipment, the Company will not make or enter into any
contracts, commitments or agreements obligating the Company to make any
capital expenditures primarily relating to, or arising from, the Retained
Business in excess of $1,000,000, in the aggregate.
(b) Dividends; Changes in Stock. The Company shall not (i) declare or pay
any dividends (including dividends in Company Common Stock) on or make
other distributions in respect of any of its capital stock (including such
a distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar
transaction), except for regular quarterly cash dividends consistent with
amounts currently paid and the Distribution, (ii) split (including a
reverse stock split), combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (iii) repurchase, redeem or otherwise acquire, or permit any Subsidiary
to repurchase, redeem or otherwise acquire, any shares of capital stock of
the Company or any of its Subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall the Company
permit any of its Subsidiaries included in the Retained Business to, issue,
transfer or sell, or authorize or propose or agree to the issuance,
transfer or sale of, any shares of its capital stock of any class, any
other equity interests or any securities convertible into, or any rights,
warrants, calls, subscriptions, options or other rights or agreements,
commitments or understandings to acquire, any such shares, equity interests
or convertible securities, other than (i) the issuance of shares of Company
Common Stock, Company Preferred Stock and Company Convertible Debentures
upon the exercise or conversion of stock options, debenture options,
debentures or stock grants outstanding on the date of this Agreement
pursuant to Company Stock Plans and in accordance with their present terms
(or conversions of Company Preferred Stock issued upon the exercise of
debenture options-outstanding on the date of this Agreement into Company
Common Stock pursuant to the terms
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thereof), (ii) issuances by a wholly owned Subsidiary of its capital stock
to its parent, (iii) the authorization and issuance of Company Series X
Preferred Stock or Company Common Stock in connection with the Company
Rights and reservation for issuance of shares of Company Series X Preferred
Stock or Company Common Stock in connection with the Company Rights in
addition to those presently reserved for issuance, and (iv) the granting of
stock options, debenture options or stock grants to employees of the
Company other than the Retained Employees (as defined in Section 6.7) and
issuance of securities upon exercise of the foregoing.
(d) Governing Documents. The Company shall not amend its Charter of
Incorporation or bylaws in a manner adverse to Parent and Sub or otherwise
inconsistent with the transactions contemplated hereby.
(e) Indebtedness. The Company shall not, nor shall it permit any of its
Subsidiaries to, incur (which shall not be deemed to include (i) entering
into credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements or (ii) refinancings of
existing indebtedness) any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of the Company or any of its
Subsidiaries or guarantee any obligations of others other than (v) in the
ordinary course of business consistent with past practice, (w) pursuant to
existing credit or guaranty agreements, (x) Company Convertible Debentures
issuable upon exercise of debenture options, (y) indebtedness incurred
solely by, or that will be assumed and become the obligation solely of
Newco or any of its Subsidiaries at the Time of Distribution (as defined in
the Distribution Agreement) or (z) the Financing (as defined in Section
6.14).
(f) Changes to Benefit Plans. Except as would not increase the costs of
the Retained Business and except for changes in response to any changes in
applicable law, the Company shall not, nor shall it permit any of its
Subsidiaries (other than Newco and its Subsidiaries) to, (i) enter into,
adopt, amend (except as may be required by law and except for immaterial
amendments) or terminate any Benefit Plan or any agreement, arrangement,
plan or policy between the Company or any such Subsidiary and one or more
of its directors, officers or Employees or (ii) except for normal increases
in the ordinary course of business consistent with past practice and the
payment of bonuses to employees in the aggregate not to exceed the amount
set forth in Section 5.1 of the Company Disclosure Schedule, increase in
any manner the compensation or fringe benefits of any director, officer or
Employee or pay any benefit to any director, officer or Employee not
required by any plan or arrangement as in effect as of the date hereof or
enter into any contract, agreement, commitment or arrangement to do any of
the foregoing; provided that the foregoing shall not prohibit the Company
from hiring and paying new employees in the ordinary course of business
consistent with past practice.
(g) Filings. The Company shall promptly provide Parent (or its counsel)
copies of all filings (other than those portions of filings under the HSR
Act which Parent has no reasonable interest in obtaining in connection with
the Merger) made by the Company with any Federal, state or foreign
Governmental Entity in connection with this Agreement, the Distribution
Agreement and the transactions contemplated hereby and thereby.
(h) Accounting Policies and Procedures. The Company will not and will not
permit any of its Subsidiaries to change any of its accounting principles,
policies or procedures, except as may be required by generally accepted
accounting principles.
(i) Newco. The Company shall (i) abide and cause Newco to abide by their
respective obligations under the Distribution Agreement, Tax Disaffiliation
Agreement and Employee Benefits Agreement and (ii) not terminate or amend,
or waive compliance with any obligations under, the Distribution Agreement,
Tax Disaffiliation Agreement or Employee Benefits Agreement in any manner
adverse to Parent and Sub.
(j) Sale of Assets. The Company shall not sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, or agree to sell,
lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of
the assets included in the Retained Business, except for dispositions of
inventories and equipment in the ordinary course of the Retained Business
and consistent with past practice.
(k) Retained Cash. After December 31, 1996, all net cash generated by the
Retained Business after December 31, 1996 shall be retained by the Company.
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Section 5.2 Covenants of the Company. During the period from the date of
this Agreement and continuing to the Effective Time, the Company agrees as to
itself and its Subsidiaries that the Company shall not, and shall not permit
any of its Subsidiaries to, take any action, including, without limitation,
with respect to the terms of the Articles of Incorporation or bylaws of Newco,
that would or is reasonably likely to result in any of the conditions to the
Merger set forth in Article VII not being satisfied or that would materially
impair the ability of the Company to consummate the Distribution in accordance
with the terms of the Distribution Agreement or the Merger in accordance with
the terms hereof or would materially delay such consummation.
Section 5.3 Covenants of Parent. During the period from the date of this
Agreement and continuing until the Effective Time, Parent agrees as to itself
and its Subsidiaries that except (i) as contemplated or permitted by this
Agreement, (ii) as set forth in Section 5.3 of the Parent Disclosure Schedule
or (iii) to the extent that the Company shall otherwise consent in writing
(which consent will not be unreasonably withheld or delayed):
(a) Ordinary Course. Parent and its Subsidiaries shall carry on their
businesses in the usual, regular and ordinary course consistent with past
practice and use all reasonable efforts to preserve intact the present
business organization, keep available, consistent with past practice, the
services of the present officers and employees and preserve the
relationships with customers, suppliers and others having business dealings
with them.
(b) Dividends; Changes in Stock. Parent shall not (i) declare or pay any
dividends (including dividends in Parent Common Stock) on or make other
distributions in respect of any of its capital stock (including such a
distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar
transaction), except for regular quarterly cash dividends, (ii) split
(including a reverse split), combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (iii) repurchase, redeem or otherwise acquire, or permit any Subsidiary
to repurchase, redeem or otherwise acquire, any shares of capital stock of
Parent or any of its Subsidiaries other than repurchases of Parent Common
Stock pursuant to the Repurchase Program and made prior to the ten (10)
trading days prior to the date of the first trading day used in calculating
the Average Parent Price.
(c) Issuance of Securities. Parent shall not, nor shall Parent permit any
of its Subsidiaries to, issue, transfer or sell, or authorize or propose or
agree to the issuance, transfer or sale of, any shares of its capital stock
of any class, any other equity interests or any securities convertible
into, or any rights, warrants, calls, subscriptions, options or other
rights or agreements, commitments or understandings to acquire, any such
shares, equity interests or convertible securities, other than (i) the
issuance of shares of Parent Common Stock upon the exercise of stock
options or stock grants pursuant to existing employee benefit plans,
(ii) issuances by a wholly owned Subsidiary of its capital stock to its
parent, and (iii) the authorization and issuance of capital stock upon
exercise of Parent's existing rights plan and reservation for issuance of
shares of capital stock in addition to those presently reserved for
issuance pursuant to Parent's existing rights plan.
(d) Governing Documents. Parent shall not amend its Articles of
Incorporation or bylaws in a manner adverse to the Company or otherwise
inconsistent with the transactions contemplated hereby.
(e) Indebtedness. Parent shall not, nor shall it permit any of its
Subsidiaries to, incur (which shall not be deemed to include (i) entering
into credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements or (ii) refinancings of
existing indebtedness) any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of Parent or any of its Subsidiaries
or guarantee any obligations of others other than (w) in the ordinary
course of business consistent with past practice, (x) pursuant to existing
credit or guaranty agreements, (y) the Financing (as defined in Section
6.14) or (z) additional indebtedness not to exceed $50,000,000 in the
aggregate.
(f) Filings. Parent shall promptly provide the Company (or its counsel)
copies of all filings (other than those portions of filings under the HSR
Act which the Company has no reasonable interest in obtaining in connection
with the Merger) made by Parent with any Federal, state or foreign
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby and thereby.
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(g) Accounting Policies and Procedures. Parent will not and will not
permit any of its Subsidiaries to change any of its accounting principles,
policies or procedures, except as may be required by generally accepted
accounting principles.
(h) Cooperation. Parent shall not take, nor permit Sub or any of its
other Subsidiaries to take, any action that would or is reasonably likely
to result in any of the conditions to the Merger set forth in Article VII
not being satisfied or that would materially impair the ability of Parent
or Sub to consummate the Merger in accordance with the terms hereof or
materially delay such consummation, and Parent shall promptly advise the
Company orally and in writing of any change in, or event with respect to,
the business or operations of Parent having, or which, insofar as can
reasonably be foreseen, could have, a material adverse effect on Parent and
its Subsidiaries taken as a whole.
ARTICLE VI
Additional Agreements
Section 6.1 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
including, without limitation, (i) the prompt preparation and filing with the
SEC of the S-4 and the Proxy Statement, (ii) such actions as may be required
to have the S-4 declared effective under the Securities Act and to have the
Proxy Statement cleared by the SEC, in each case as promptly as practicable,
including by consulting with each other as to, and responding promptly to, any
SEC comments with respect thereto, (iii) the prompt preparation and filing of
all necessary documents under the HSR Act, (iv) such actions as may be
required to have the applicable waiting period under the HSR Act expire or
terminate as promptly as practicable, including by consulting with each other
as to, and responding promptly to any comments or requests for information
with respect thereto, (v) such actions as may be required to be taken under
applicable state securities or "blue sky" laws in connection with the issuance
of shares of Parent Common Stock contemplated hereby, and (vi) the
distribution of the prospectus constituting a part of the S-4 and the Proxy
Statement to stockholders of the Company. Each party shall promptly consult
with the other and provide any necessary information with respect to all
filings made by such party with any Governmental Entity in connection with
this Agreement and the transactions contemplated hereby.
Section 6.2 Access to Information. Upon reasonable notice, each of the
Company and Parent shall (and shall cause its Subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
other party, access, during normal business hours during the period prior to
the Effective Time, to all its properties, books, contracts, commitments and
records (with respect to the Company, to the extent relating to the Retained
Business), and, during such period, each of the Company and Parent shall (and
shall cause each of their respective Subsidiaries to) furnish promptly to the
other (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of
federal securities laws and (b) all other information concerning its business,
properties and personnel (with respect to the Company, to the extent related
to the Retained Business) as such other party may reasonably request. After
the Effective Time, upon reasonable notice, Parent shall cause the Surviving
Corporation and its Subsidiaries to afford to the officers, employees,
accountants, counsel and other representatives of Newco access, during normal
business hours, to the Surviving Corporation's and its Subsidiaries' books and
records which Newco may reasonably request in order to complete tax filings or
for other legitimate business purposes. Unless otherwise required by law, the
parties will hold any information made available pursuant to this Section 6.2
which is nonpublic in confidence in accordance with the confidentiality
agreement, dated August 9, 1996 (the "Confidentiality Agreement"), between
Parent and the Company.
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Section 6.3 Stockholders Meetings.
(a) The Company shall call a meeting of its stockholders to be held as
promptly as practicable for the purpose of voting upon the approval and
adoption of this Agreement. The Company will, through its Board of
Directors, recommend to its stockholders approval and adoption of this
Agreement and, if the Company determines such approval to be necessary or
appropriate, the Distribution and shall use all reasonable efforts to hold
such meeting as soon as practicable after the date hereof; provided,
however, that the Board of Directors of the Company may fail to make such a
recommendation, or withdraw, modify or change any such recommendation if it
determines after receiving the advice of outside counsel that making such
recommendation, or that the failure to withdraw, modify or change its
recommendation, would be inconsistent with its fiduciary duties under
applicable law.
(b) Parent shall call a meeting of its stockholders to be held as
promptly as practicable for the purpose of voting upon the approval of the
issuance of the shares of Parent Common Stock to the Company's stockholders
pursuant to this Agreement. Parent will, through its Board of Directors,
recommend to its stockholders such approval and shall use all reasonable
efforts to hold such meeting as soon as practicable after the date hereof;
provided, however, that the Board of Directors of Parent may fail to make
such a recommendation, or withdraw, modify or change any such
recommendation if it determines after receiving the advice of outside
counsel that making such recommendation, or that the failure to withdraw,
modify or change its recommendation, would be inconsistent with its
fiduciary duties under applicable law.
Section 6.4 Legal Conditions to Distribution and Merger. Each of the
Company, Parent and Sub will use all reasonable efforts to comply promptly
with all legal requirements which may be imposed on it or its respective
Subsidiaries with respect to the Distribution and the Merger (which actions
shall include, without limitation, furnishing all information required under
the HSR Act and will promptly cooperate with and furnish information to each
other in connection with any such requirements imposed upon any of them or any
of their respective Subsidiaries in connection with the Distribution or the
Merger). Subject to the terms and conditions hereof, each of the Company,
Parent and Sub will, and will cause its Subsidiaries to, promptly use all
reasonable efforts to obtain (and will consult and cooperate with each other
in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party,
required to be obtained or made by such party in connection with the
Distribution or the Merger or the taking of any action contemplated thereby or
by this Agreement or the Distribution Agreement.
Section 6.5 Stock Exchange Listing. Parent shall use all reasonable efforts
to cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on either the NYSE or the NASDAQ National Market System,
depending on where the Parent Common Stock is listed as of the Effective Time,
and any other securities exchange on which shares of Parent Common Stock may
at such time be listed, subject to official notice of issuance, prior to the
Closing Date.
Section 6.6 Company Severance Obligations. Subject to the proviso in the
following sentence, the Company will pay with the proceeds of the Financing
(as defined in Section 6.14) or Newco will assume the transaction bonus and
severance payments arising out of the transactions contemplated by this
Agreement pursuant to any contract, agreement or arrangement of which the
Company or any of its Subsidiaries is a party, including, without limitation,
payments pursuant to the agreements listed in Section 6.6 of the Company
Disclosure Schedule. In no event shall Parent, any of its Subsidiaries or the
Surviving Corporation be responsible for any such payments, or be under any
obligation to honor or assume any such obligations; provided, however, Parent
and the Surviving Corporation shall assume and retain, with respect to the
Retained Employees (as defined in Section 6.7), any and all severance
obligations that arise due to events or actions occurring after the Effective
Time.
Section 6.7 Employee Matters; Company Stock Plans.
(a) The Company and Parent agree that Parent will, to the extent
practicable, immediately after the Effective Time and for at least six (6)
months thereafter, permit the operating personnel of the Retained
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Business and the other Company employees listed in Section 6.7 to the
Parent Disclosure Schedule who will remain in the employ of the Surviving
Corporation after the Effective Time (collectively, the "Retained
Employees") (i) to participate in a group health plan of Parent, or one of
its Subsidiaries that similarly situated employees of Parent participate,
in accordance with the terms of the plan and, subject to the approval of
its stop-loss carrier on reasonable terms and subject to applicable legal
requirements, to waive any pre-existing condition clause or waiting period
requirement in such group health plan and to give credit for deductible
amounts paid by a Retained Employee during the current deductible year of
such group health plan while employed by the Company; (ii) to participate
in and receive credit under tax qualified retirement plans of Parent or any
of its Subsidiaries that similarly situated employees of Parent
participate, for which they are otherwise eligible, solely for eligibility
and vesting purposes, for their service with the Company, to the extent
permitted by applicable tax-qualification requirements; and (iii) to
participate in other benefit plans of Parent which are offered to similarly
situated employees.
(b) Effective as of the Effective Time, each outstanding option to
purchase shares of Company Common Stock or to purchase Company Convertible
Debentures (a "Company Option") held by a Retained Employee under the
Company Stock Plans whether vested or unvested, exercisable or
unexercisable, shall be exchanged for an option (a "Parent Option") to
purchase the number of shares of Parent Common Stock equal to the product
of (1) the quotient of (x) the Average Company Stock Price, and (y) the
Average Parent Stock Price (the "Conversion Ratio") and (2) the number of
shares of Company Common Stock that the holder of such option would have
been entitled to receive had such holder exercised such option in full and
in the case of a Company Option exercisable for Company Convertible
Debentures, converted such convertible debentures into Company Preferred
Stock and then into Company Common Stock, (not taking into account whether
or not such option or convertible debenture was in fact exercisable)
(rounded to the nearest whole share) at an exercise price equal to the per
share exercise price of such Company Options divided by the Conversion
Ratio (rounded to the nearest cent), which Parent Option shall be subject
to the same terms and conditions (including the vesting schedule) as the
Company Option; provided, however, that the Parent Option shall be
exercisable only for Parent Common Stock. The obligations of the Company
with respect to such Parent Options shall be transferred to and assumed by
Parent. For purposes of this Section 6.7(b), (i) "Average Parent Stock
Price" shall mean the average of the closing prices of the Parent Common
Stock on the New York Stock Exchange Composite Transactions Reporting
System or the NASDAQ National Market System, as the case may be, as
reported by The Wall Street Journal, for the 10 trading days immediately
proceeding the trading day prior to the date that the Company Common Stock
commences trading on an x-dividend basis with respect to the Distribution
(the "Measuring Period") and (ii) "Average Company Stock Price" shall mean
the average of the closing prices of the Company Common Stock on the New
York Stock Exchange Composite Transactions Reporting System, as reported by
The Wall Street Journal, for the Measuring Period.
(c) As soon as practicable after the Effective Time, Parent shall deliver
to the Retained Employees having options exchanged pursuant to Section
6.7(b) above appropriate notices setting forth their rights pursuant
thereto.
(d) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
under the options converted in accordance with this Section 6.7. As soon as
practicable after the Effective Time, Parent shall file a registration
statement on Form S-3 or Form S-8, as appropriate (or any successor or
other appropriate forms), or another appropriate form with respect to the
shares of Parent Common Stock subject to such options or, to the extent
required by law or in accordance with past practice, awards and shall use
its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such
options or awards remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements
under Section 16(a) of the Exchange Act, where applicable, Parent shall
administer the options exchanged pursuant to this Section 6.7 in a manner
that complies with Rule 16b-3 promulgated under the Exchange Act to the
extent the applicable options complied with such rule prior to the Merger.
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(e) Nothing in this Agreement shall be construed to require Parent or the
Company to continue the employment of any Retained Employee for any period
of time, or, except as required by Section 6.7(a) above, to offer any
particular type or level of benefits to any employee. Nothing in this
Agreement shall prevent Parent or the Company from disciplining or
terminating any Retained Employee or from amending or terminating any
benefit plans at any time.
Section 6.8 Fees and Expenses. Subject to the Distribution Agreement,
whether or not the Merger is consummated and except as otherwise provided
herein, all fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses; provided, however, that Parent and the Company shall
each pay one-half of the printing costs incurred with respect to the S-4 and
the Proxy Statement.
Section 6.9 Indemnification.
(a) The Company shall, and from and after the Effective Time the
Surviving Corporation shall, indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date of this
Agreement or who becomes prior to the Effective Time, an officer, director
or employee of the Company or any of its Subsidiaries (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses, liabilities
or judgments, or amounts that are paid in settlement with the approval of
the indemnifying party (which approval shall not be unreasonably withheld)
of, or in connection with, any claim, action, suit, proceeding or
investigation to the extent related to, or to the extent arising from, the
Retained Business and based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer or
employee of the Company or any of its Subsidiaries, whether pertaining to
any matter existing or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), in each case to the full extent a corporation
is permitted under the MBCA (notwithstanding the bylaws of the Company or
the Surviving Corporation) to indemnify its own directors, officers and
employees, as the case may be (and the Surviving Corporation will pay
expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law
upon receipt of any affirmation and undertaking contemplated by Section
8.53 of the MBCA). Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising before or after the Effective Time), (i)
the Indemnified Parties may retain counsel satisfactory to them with the
consent of the Company (or the consent of the Surviving Corporation after
the Effective Time) which consent of the Company (or, after the Effective
Time, the Surviving Corporation) with respect to such counsel retained by
the Indemnified Parties may not be unreasonably withheld, (ii) the Company
(or after the Effective Time, the Surviving Corporation) shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received, and (iii) the Company (or
after the Effective Time, the Surviving Corporation) will use all
reasonable efforts to assist in the vigorous defense of any such matter,
provided that neither the Company nor the Surviving Corporation shall be
liable for any settlement of any claim effected without its written
consent, which consent, however, shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section 6.9,
upon learning of any such claim, action, suit, proceeding or investigation,
shall notify the Company or the Surviving Corporation (but the failure so
to notify shall not relieve the Company or the Surviving Corporation from
any liability which it may have under this Section 6.9 except to the extent
such failure materially prejudices such party), and shall deliver to the
Company (or after the Effective Time, the Surviving Corporation) the
affirmation and undertaking contemplated by Section 8.53 of the MBCA. The
Indemnified Parties as a group may retain only one law firm to represent
them with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue
between the positions of any two or more Indemnified Parties.
(b) The provisions of this Section 6.9 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs
and representatives.
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Section 6.10 No Solicitations. The Company will immediately cease any
existing discussions or negotiations conducted prior to the date hereof with
respect to any merger, consolidation, business combination, sale of a
significant amount of assets outside of the ordinary course of business, sale
of shares of capital stock outside of the ordinary course of business, tender
or exchange offer, spin-off, recapitalization or similar transaction involving
the sale of the Company or any of its Subsidiaries or divisions but excluding
those potential transactions set forth in Section 6.10 of the Company
Disclosure Schedule (an "Acquisition Transaction"). The Company, its
Subsidiaries and their respective directors and officers shall not, and its or
its Subsidiaries' affiliates, representatives and agents shall not, directly
or indirectly, solicit any person, entity or group concerning any Acquisition
Transaction (other than the transactions contemplated by this Agreement);
provided that the Company may (i) furnish information or enter into
negotiations to the extent the Company's Board of Directors determines after
receiving the advice of outside counsel that the failure to do so would be
inconsistent with its fiduciary duties under applicable law and prior to
furnishing such information to, or entering into discussions or negotiations
with such person, entity or group the Company (x) provides immediate written
notice to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person, entity or group,
and (y) either enters into with such person, entity or group a confidentiality
agreement in reasonable, customary form on terms not more favorable to such
person, entity or group than the terms contained in the Confidentiality
Agreement or releases Parent from the standstill provisions of the
Confidentiality Agreement not applicable to such person; and (ii) recommend to
its stockholders a bona fide transaction or combination of transactions that
the Board of Directors determines after consulting with its legal and other
advisors is more favorable, from a financial point of view, to the
stockholders of the Company than the Distribution and the Merger (a "Higher
Proposal"). The Company agrees not to release any third party from its
obligations, or grant any consent, under any existing standstill provision
relating to any Acquisition Transaction or otherwise under any confidentiality
or other agreement without similarly releasing or granting a consent to Parent
under the Confidentiality Agreement.
Section 6.11 Distribution. Prior to the Closing, the Company will enter into
the Distribution Agreement in the form attached hereto with such changes which
are not adverse to Parent and Sub and cause Newco to enter into the
Distribution Agreement and the Company will take all action necessary to
effect the Distribution pursuant to the terms of the Distribution Agreement.
Section 6.12 Tax-Free Nature of Transactions. Each party agrees to report
the Transfer as a tax-free transaction under Section 332, 351 or 368(a) of the
Code, the Distribution as a tax-free distribution under Section 355 of the
Code and the Merger as a tax-free reorganization within the meaning of Section
368(a)(1)(B) of the Code on all Tax Returns and other filings, and take no
position inconsistent therewith. The parties shall not, and shall not permit
any of their respective Subsidiaries to, take or cause or permit to be taken,
any action that would disqualify the Distribution as a tax-free distribution
under Section 355 of the Code, disqualify the Transfer as a tax-free
transaction under Section 332, 351 or 368(a) or disqualify the Merger as a
reorganization within the meaning of Section 368(a)(1)(B) of the Code,
excluding any action to be taken pursuant to this Agreement to effect the
Merger.
Section 6.13 Audited Closing Balance Sheet. No later than 45 days after the
Effective Date, Newco shall deliver to Parent an audited consolidated balance
sheet for the Retained Business at the earlier of the Effective Date or
December 31, 1996 after giving effect to the Distribution (but not to the
Financing (as defined in Section 6.14) or the Merger), which shall be audited
by Newco's independent public accountants as in accordance with generally
accepted auditing standards (the "Audited Closing Balance Sheet"). The Audited
Closing Balance Sheet shall be prepared in accordance with generally accepted
accounting principles on a basis consistent with the Company Financial
Statements. To the extent that the net working capital (current assets less
current liabilities) of the Retained Business as shown on the Audited Closing
Balance Sheet is more or less than the estimated net working capital as of the
Effective Date certified pursuant to Section 6.14, the Company shall pay to
Newco, or Newco shall pay to the Company, the amount of such excess or
shortfall, respectively, in cash within five days of the delivery of the
Audited Closing Balance Sheet. The Company agrees that representatives of
Parent and Newco shall be given access to all work papers, books, records and
other information related to
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the preparation of the Audited Closing Balance Sheet. In addition, the Company
will authorize, and will use all reasonable efforts to provide Parent and
Newco with access to all work papers of the Company's independent public
accountants in connection with or relating to their audit of the Audited
Closing Balance Sheet.
Section 6.14 Financing. Parent will use its best efforts to assist the
Company in arranging a customary bank facility for the Company that will be
funded immediately prior to the Time of Distribution (as defined in the
Distribution Agreement) (the "Financing"). The Financing will be in an
aggregate amount equal to $150,000,000 plus (i) the product of (x) the lesser
of (A) $2.00 and (B) the amount, if any, by which the Average Parent Price is
less than $19.00 times (y) 6,904,762, plus (ii) the costs of obtaining the
Financing (including, without limitation, any commitment or agent fees,
reasonable attorney fees or other costs and expenses associated with the
Financing), plus (iii) the product of (x) $56,575 times (y) the number of
calendar days by which the Effective Date is after December 31, 1996, plus
(iv) the net cash used by the Retained Business after December 31, 1996
through the Effective Date, minus (v) the unpaid balance as of the Effective
Date of the AMPRO Retrofit due under the Kellogg Agreement (as defined in
Section 6.15) (which unpaid balance as of July 31, 1996 is set forth in
Section 6.15 of the Company Disclosure Schedule), plus or minus (vi) the
amount by which the estimated net working capital of the Retained Business as
of the earlier of the Effective Date or December 31, 1996 as certified by the
chief financial officer of the Company is more or less, respectively, than
$8,000,000. Without qualifying Parent's obligations pursuant to the last
sentence of this Section 6.14, the Financing will be on terms that are
acceptable to Parent. The parties agree that the proceeds of the Financing
will be used to refinance in full all outstanding debt of the Retained
Business (other than accounts payable incurred in the ordinary course of the
Retained Business), as well as any and all transaction, severance and other
costs payable by the Company in connection with the transactions contemplated
by this Agreement. To the extent that the proceeds of the Financing are not
fully applied as set forth above, any remaining proceeds may be contributed to
Newco at the discretion of the Company. The Company shall be responsible for
the costs of obtaining the Financing (including, without limitation, any
commitment or agent fees, reasonable attorney fees or other costs and expenses
associated with the Financing), although the parties recognize that Parent
will incur costs related to the Financing in connection with satisfying itself
as to the terms and conditions of the Financing. In the event that the
Company's stockholders do not approve the Merger, the Distribution and the
other transactions contemplated by this Agreement, the Company and Parent will
reimburse each other for one-half of any costs incurred by them in connection
with the Financing. In the event this Agreement is terminated for any other
reason, Parent shall be responsible for and reimburse the Company for any
costs reasonably incurred in connection with the Financing. In the event that
the Company is unable to arrange a bank facility for the Financing, Parent
will be responsible for arranging alternative funds from an independent,
unrelated third party for the Financing.
Section 6.15 AMPRO Facility. The Company shall use all reasonable efforts to
cause the capital improvements to the Company's AMPRO Facility currently in
progress (the "AMPRO Retrofit") as set forth in that certain contract dated
September 7, 1995 between the Company and M.W. Kellogg (the "Kellogg
Agreement") to be completed (including plant shutdowns, tie-ins and resumption
of operations) by December 31, 1996 (with performance testing to be completed
after December 31, 1996) on the terms and conditions set forth in the Kellogg
Agreement. Section 6.15 of the Company Disclosure Schedule sets forth the
unpaid balance of the cost of completion of the AMPRO Retrofit as of July 31,
1996 under the Kellogg Agreement. If despite the Company's reasonable efforts,
the AMPRO Retrofit is not mechanically complete and ready for tie-ins to be
made during the time of turnaround scheduled for December 1, 1996 through
December 15, 1996 then the turnaround shall be delayed until such time as the
AMPRO Retrofit can be mechanically completed and made ready for tie-ins during
the turnaround period.
Section 6.16 Comfort Letters.
(a) The Company shall use all reasonable efforts to cause KPMG Peat
Marwick LLP, the Company's independent public accountants, to deliver a
letter dated as of the date of the Proxy Statement, and addressed to itself
and Parent and their respective Boards of Directors, in form and substance
reasonably satisfactory to Parent, and customary in scope and substance for
agreed-upon procedures letters delivered by
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independent public accountants in connection with registration statements
and proxy statements similar to the S-4 and the Proxy Statement.
(b) Parent shall use all reasonable efforts to cause Arthur Andersen &
Co., the Parent's independent public accountants, to deliver a letter dated
as of the date of the Proxy Statement, and addressed to itself and the
Company and their respective Boards of Directors, in form and substance
reasonably satisfactory to the Company, and customary in scope and
substance for agreed-upon procedures letters delivered by independent
public accountants in connection with registration statements and proxy
statements similar to the S-4 and the Proxy Statement.
ARTICLE VII
Conditions
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of the parties to effect the Merger are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
(a) Stockholder Approvals. This Agreement shall have been approved and
adopted by (i) the affirmative vote of the holders of at least a majority
of the outstanding shares of Company Common Stock and (ii) the affirmative
vote of the holders of at least a majority of the shares of Parent Common
Stock present, in person or by proxy, and entitled to vote at the meeting
of stockholders of Parent referred to in Section 6.3(b) for which a quorum
exists.
(b) Stock Exchange Listing. The shares of Parent Common Stock issuable to
the Company's stockholders pursuant to this Agreement shall have been
authorized for listing on the NYSE or the NASDAQ National Market System, if
Parent Common Stock has not been listed on the NYSE, upon official notice
of issuance.
(c) Other Approvals. Other than the filing of the Articles of Merger
provided for by Section 1.2, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity or other public or private
third party, the failure of which to obtain would have a material adverse
effect on Parent and its Subsidiaries or the Surviving Corporation and its
Subsidiaries, in each case taken as a whole, shall have been filed,
occurred or been obtained. Parent shall have received all state securities
or "blue sky" permits and other authorizations necessary to issue the
Parent Common Stock pursuant to this Agreement.
(d) Registration Statement. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceeding
by the SEC seeking a stop order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or the Distribution shall be in effect (each
party agreeing to use all reasonable efforts to have any such order
reversed or injunction lifted).
(f) HSR Approval. Any applicable waiting period under the HSR Act shall
have expired or been terminated.
(g) Consummation of the Distribution. The Distribution shall have become
effective in accordance with the Distribution Agreement.
Section 7.2 Conditions of Obligations of Parent and Sub. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction, on or
prior to the Closing Date, of the following conditions unless waived by Parent
and Sub:
(a) Representations and Warranties. The representations and warranties of
the Company contained herein shall be true and correct in all material
respects as of the Closing Date as though made on and as of the Closing
Date, except to the extent such representations and warranties speak as of
an earlier date (in which case, such representations and warranties shall
be true and correct in all material respects as of such
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earlier date) and except as otherwise contemplated by this Agreement, and
Parent shall have received a certificate signed on behalf of the Company by
the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement and the Distribution Agreement at or prior to
the Closing Date, and Parent shall have received a certificate signed on
behalf of the Company by the chief financial officer of the Company to such
effect.
(c) Opinion of Counsel. Parent shall have received the opinion of
Skadden, Arps, Slate, Meagher & Flom or Baker, Donelson, Bearman & Caldwell
substantially to the effect set forth in Section 7.2(c) of the Company
Disclosure Schedule.
(d) Opinion of Tax Counsel. Parent shall have received the opinion of
Hughes & Luce, L.L.P. to the effect the Merger qualifies as a tax-free
reorganization within the meaning of Section 368(a) of the Code.
(e) Opinion of Counsel Regarding the Distribution. Parent shall have
received the opinion of Skadden, Arps, Slate, Meagher & Flom to the effect
that the Transfer qualifies as one or more tax-free transactions under one
or more of Sections 332, 351, and 368(a)(1)(D) of the Code and that the
Distribution qualifies as a tax-free distribution under Section 355 of the
Code.
(f) Indebtedness of the Retained Business. As of the Effective Time, the
Retained Business shall have no outstanding Indebtedness, other than the
Financing. The term "Indebtedness" shall mean any indebtedness for borrowed
money, indebtedness evidenced by a note or other instrument, capitalized
lease obligations, obligations for the deferred purchase price of assets or
direct or indirect guarantees of any of the foregoing.
(g) Company Options. At the Effective Time, all Company Options, other
than Company Options held by Retained Employees, shall have been terminated
or exchanged for Newco Options or shall have been fully assumed by Newco.
Section 7.3 Conditions of Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction of the following
conditions, on or prior to the Closing Date, unless waived by the Company:
(a) Representations and Warranties. The representations and warranties of
Parent and Sub contained in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the
Closing Date, except to the extent such representations and warranties
speak as of an earlier date (in which case, such representations and
warranties shall be true and correct in all material respects as of such
earlier date) and except as otherwise contemplated by this Agreement, and
the Company shall have received a certificate signed on behalf of Parent
and Sub by the chief financial officer of Parent and Sub, respectively, to
such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by
the chief financial officer of Parent to such effect.
(c) Opinion of Counsel. The Company shall have received the opinion of
Hughes & Luce, L.L.P. substantially to the effect set forth in Section 7.3
of the Parent Disclosure Schedule. In giving such opinion, Hughes & Luce,
L.L.P. may rely as to matters of Mississippi law on opinions of local
counsel reasonably satisfactory to the Company.
(d) Opinion of Tax Counsel. The Company shall have received an opinion of
Skadden, Arps, Slate, Meagher & Flom to the effect that the Merger
qualifies as a tax-free reorganization within the meaning of Section 368(a)
of the Code, that the Transfer qualifies as one or more tax-free
transactions under one or more of Sections 332, 351, and 368(a)(1)(D) of
the Code and that the Distribution qualifies as a tax-free distribution
under Section 355 of the Code.
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(e) Financing. The Financing shall have been obtained by the Company; the
Financing shall have been funded; and the proceeds of the Financing shall
have been applied pursuant to Section 6.14 and the Distribution Agreement.
ARTICLE VIII
Termination and Amendment
Section 8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the Merger and this
Agreement by the stockholders of the Company:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated before March 31, 1997 (unless the failure to so consummate the
Merger by such date shall be due to the action or failure to act of the
party seeking to terminate this Agreement);
(c) by either Parent or the Company if the Average Parent Price is less
than $17.00;
(d) by Parent, upon a material breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue in any material respect, in either case such that the
conditions set forth in Section 7.2(a) or Section 7.2(b) of this Agreement,
as the case may be, would be incapable of being satisfied by March 31,
1997; provided, that in any case, a willful breach shall be deemed to cause
such conditions to be incapable of being satisfied for purposes of this
Section 8.1(c) if such willful breach shall not have been remedied within
ten (10) days after receipt by the Company of written notice from Parent
specifying the nature of such willful breach and requesting that it be
remedied;
(e) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue in any material respect, in either case such that the conditions set
forth in Section 7.3(a) or Section 7.3(b) of this Agreement, as the case
may be, would be incapable of being satisfied by March 31, 1997; or
provided, that in any case, a willful breach shall be deemed to cause such
conditions to be incapable of being satisfied for purposes of this Section
8.1(d) if such willful breach shall not have been remedied within ten (10)
days after receipt by Parent of written notice from the Company, specifying
the nature of such willful breach and requesting that it be remedied;
(f) by Parent if (i) the Company's stockholders do not approve the Merger
and this Agreement at the meeting required under Section 6.3(a) hereof,
(ii) Parent's stockholders do not approve the issuance of the shares of
Parent Common Stock to the Company's stockholders pursuant to this
Agreement at the meeting required under Section 6.3(b) or (iii) the Company
withdraws, amends or modifies in a manner adverse to Parent its favorable
recommendation of the Merger; or
(g) by the Company if (i) the Company's stockholders do not approve the
Merger and this Agreement at the meeting required under Section 6.3(a)
hereof, (ii) Parent's stockholders do not approve the issuance of the
shares of Parent Common Stock to the Company's stockholders pursuant to
this Agreement at the meeting required under Section 6.3(b), (iii) the
Company has received a proposal for an Acquisition Transaction that it
advises Parent in writing the Company wishes to accept or (iv) the
Financing has not been arranged by December 31, 1996.
Section 8.2 Effect of Termination. In the event of a termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their affiliates or
respective officers or directors, other than the provisions of Section 8.3;
provided, however, that any such termination shall not relieve any party from
liability for willful breach of this Agreement (including, without limitation,
a willful breach of Section 6.14 by Parent) or from its obligations under the
Confidentiality Agreement.
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Section 8.3 Termination Fee. If (a)(i) Parent terminates this Agreement
pursuant to Section 8.1(f)(iii) or (ii) the Company terminates this Agreement
pursuant to 8.1(g)(iii) and (b) within one year after such termination, the
Company enters into an agreement, letter of intent or binding arrangement with
respect to an Acquisition Transaction or an Acquisition Transaction occurs
(provided, however, that in the case of an Acquisition Transaction involving
only Newco or any of its Subsidiaries (a "Newco Acquisition Transaction"),
payment hereunder will be due only if the Company began discussions or
negotiations, received a proposal or indication of interest or entered into an
agreement, letter of intent or binding arrangement with respect to such Newco
Acquisition Transaction prior to the termination of this Agreement), the
Company will pay to Parent within one business day following the execution and
delivery of such agreement or letter of intent or the entering into of such an
arrangement or the occurrence of such Acquisition Transaction, as the case may
be, a fee, in cash, of $8,000,000; provided, however, that the Company in no
event will be obligated to pay more than one such $8,000,000 fee with respect
to all such agreements and occurrences and such termination and such fee shall
be the exclusive remedy of Parent for the transactions contemplated hereby
upon termination of this Agreement pursuant to Section 8.1(f)(iii) or Section
8.1(g)(iii) and shall be deemed inclusive of expenses incurred by Parent. Upon
the payment of the $8,000,000 to Parent in accordance with this Section 8.3,
the Company shall have no further liability with respect to the transactions
contemplated hereby.
Section 8.4 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of the Company or of Parent; provided that (i)
after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval and (ii)
after the Effective Time, this Agreement may be amended only with the written
consent of Newco. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 8.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by the respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions contained here. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.
ARTICLE IX
Miscellaneous
Section 9.1 Nonsurvival of Representations and Warranties. None of the
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties set forth in this
Agreement or in any instrument delivered pursuant to the terms hereof.
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Section 9.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given on the date delivered if delivered
personally (including by reputable overnight courier), on the date transmitted
if sent by facsimile (which is confirmed) or mailed by registered or certified
mail (return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Mississippi Chemical Corporation
Owen Cooper Administration Building
Highway 49 East
Yazoo City, Mississippi 39194
Attn: Robert E. Jones
Facsimile: (601) 751-2912
Confirmation: (601) 751-2930
with a copy to
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attn: Alan J. Bogdanow
Facsimile: (214) 939-6100
Confirmation: (214) 939-5500
and
(b) if to the Company, to
First Mississippi Corporation
700 North Street
Jackson, Mississippi 39215-1249
Attn: Michael Summerford
Facsimile: (601) 948-7550
Confirmation: (601) 949-9876
with a copy to
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
Attn: Charles W. Mulaney, Jr.
Facsimile: (312) 407-0411
Confirmation: (312) 407-0700
Section 9.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to
be followed by the words "without limitation." The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available. The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be
deemed to refer to August 27, 1996.
Section 9.4 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when a counterpart has been signed by each of the parties and
delivered to each of the other parties, it being understood that all parties
need not sign the same counterpart.
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Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein, including the
Distribution Agreement) and the Confidentiality Agreement (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and thereof, and (b) except as provided in Section 6.9, are not intended to
confer upon any person other than the parties hereto and thereto any rights or
remedies hereunder or thereunder; provided that after the Effective Time,
Newco may enforce the obligations of Parent, Sub or the Company under this
Agreement.
Section 9.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Mississippi without regard to any
applicable conflicts-of-law principles.
Section 9.7 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or equity.
Section 9.8 Publicity. Except as otherwise required by law or the rules of
the NYSE or the NASDAQ National Market System, for so long as this Agreement
is in effect and then with as much advance notice to the other party as is
practicable under the circumstances, neither the Company nor Parent shall, or
shall permit any of its Subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld or delayed.
Section 9.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights hereunder to any direct or indirect
wholly owned Subsidiary of Parent, and after the Effective Time, Newco shall
be entitled to enforce the obligations of Parent, Sub and the Company pursuant
to this Agreement (including the documents and instruments referred to herein)
and the Confidentiality Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 9.10 Attorney-Client Privilege; Work Product. Anything herein or in
the Distribution Agreement notwithstanding, except with respect to matters
addressed in the opinion referred to in Section 7.3(d) hereof, the
transactions contemplated hereby and by the Distribution Agreement shall not
be deemed to transfer to Parent, Sub or the Surviving Corporation any right to
waive, nor shall they be deemed to waive, any attorney-client privilege
between the Company, the present officers and directors of the Company or
Newco and their legal counsel with respect to legal advice concerning the
transactions contemplated hereby and by the Distribution Agreement, in either
case concerning privileged communications (or work product related thereto) at
any time prior to the Closing Date. Parent, Sub and the Surviving Corporation
and their successors and assigns shall not be entitled to waive or have
access, nor shall they attempt to waive or seek access, to any privileged
communication (or work product related thereto) between the Company, the
present officers and directors of the Company or Newco and their legal counsel
relating to the Merger or the Distribution or matters relating to Newco, its
subsidiaries and their respective businesses.
Section 9.11 Other. Except as otherwise provided for herein and the other
agreements to be entered into in connection herewith as to which Parent and
the Company agree that neither of them has a cause of action against the other
for violation of the parties rights with respect to Triad, it is expressly
understood and agreed that this Agreement and any other agreement to be
entered into in connection herewith shall not affect in any way and shall be
without prejudice to and with full reservation of Parent's and the Company's
rights with respect to Triad. Nothing in this Agreement or any other agreement
to be entered into in connection herewith shall constitute an acknowledgment
by either Parent or the Company of the existence and enforceability of any
such rights.
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Section 9.12 Further Assurances. Subject to the terms and conditions hereof
and, as applicable, of the Distribution Agreement, the Company and Parent
will, and will cause their respective Subsidiaries to, do such additional
things as are necessary or proper to carry out and effectuate the intent of
this Agreement or any part hereof or the transactions contemplated hereby,
including, without limitation, the providing of reasonable transition
assistance services by Newco at cost to the Surviving Corporation for a period
not to exceed one year after the Effective Time.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
and Plan of Merger and Reorganization to be signed by their respective
officers thereunto duly authorized as of the date first written above.
Mississippi Chemical Corporation
/s/ Robert E. Jones
By: _________________________________
Name: Robert E. Jones
Title: Senior Vice President and
General Counsel
Miss Sub, Inc.
/s/ Robert E. Jones
By: _________________________________
Name: Robert E. Jones
Title: Vice President
First Mississippi Corporation
/s/ R. Michael Summerford
By: _________________________________
Name: R. Michael Summerford
Title: Vice President and Chief
Financial Officer
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EXHIBIT B TO APPENDIX B
EMPLOYEE BENEFITS AND COMPENSATION AGREEMENT
BETWEEN
FIRST MISSISSIPPI CORPORATION
AND
[NEWCO]
DATED , 1996
<PAGE>
EMPLOYEE BENEFITS AND COMPENSATION AGREEMENT
This Agreement dated as of , 1996 between FIRST MISSISSIPPI
CORPORATION (the "Company"), a Mississippi corporation with offices at 700
North Street, Jackson Mississippi and [Newco] ("Newco"), a Mississippi
corporation with offices at [ ], shall govern the rights and
obligations of the Company and Newco with respect to compensation and benefits
of the employees of each of the Company and Newco in connection with the
transaction effected by the Distribution, as described below. The term, the
Company, when used in this Agreement shall not be construed to include Newco
where such construction would have the effect of negating any obligation of
Newco hereunder. The term, Newco, when used shall not be construed to include
the Company where such construction would have the effect of negating any
obligation of the Company hereunder.
RECITALS
WHEREAS, the Company, Mississippi Chemical Corporation, a Mississippi
corporation ("Parent") and Miss Sub, Inc., a Mississippi corporation and a
wholly owned subsidiary of Parent ("Sub"), have entered into an Agreement and
Plan of Merger and Reorganization, dated as of , 1996 (the "Merger
Agreement"), providing for the Merger (as defined in the Merger Agreement) of
Sub with and into the Company, with the Company as the surviving corporation;
and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Distribution dated as of , 1996 (the "Distribution Agreement"),
including the satisfaction or waiver of the conditions set forth in Article VI
of the Distribution Agreement, immediately prior to the Effective Time (as
defined in Section 1.2 of the Merger Agreement), the Board of Directors
expects to distribute all of the then-outstanding shares of Common Stock, par
value $ per share, of Newco ("Newco Common Stock") as a dividend to the
holders of Common Stock, par value $1.00 per share, of the Company ("Company
Common Stock"), on a pro rata basis (the "Spin-Off"); and
WHEREAS, the purpose of the Spin-Off is to make possible the Merger by
divesting the Company of the businesses and operations conducted or to be
conducted by Newco, which Parent is unwilling to acquire; and
WHEREAS, the Distribution Agreement sets forth or provides for certain
agreements between the Company and Newco in consideration of the separation of
their ownership, including this Employee Benefits and Compensation Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained in this Agreement, the Distribution Agreement and in the other
agreements and instruments provided for in such agreement, the parties hereto
agree as follows.
ARTICLE I
Definitions
"Company Stock Plans" means the First Mississippi Corporation 1995 Long-Term
Incentive Plan, the First Mississippi Corporation 1988 Long-Term Incentive
Plan, and the First Mississippi Corporation 1980 Long-Term Incentive Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Transferred Employee" means each person employed by the Company other than
the Retained Employees and any other person who becomes an employee of the
Newco Group immediately after the Time of Distribution.
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Any capitalized terms not otherwise defined herein, shall have the meaning
set forth in the Distribution Agreement or the Merger Agreement.
ARTICLE II
Salary, Wages, Payroll and Related Benefits
2.1 Prior to the Time of Distribution, the Company and Newco shall cooperate
to transfer each Transferred Employee to the employ of Newco effective as of
the Time of Distribution.
2.2 With respect to the Transferred Employees and all other past, present,
active or inactive employees of the Initial Group (or their dependents or
beneficiaries), other than the Retained Employees, Newco shall assume the
liabilities and obligations with respect to, and continue to be responsible
for, all liabilities and obligations whatsoever in connection with claims made
by or on behalf of such persons in respect of salary, wages, benefits,
severance pay, salary continuation, COBRA continuation and similar obligations
relating to the continued employment, or the termination or alleged
termination of such persons' employment with the Newco Group, including,
without limitation, by reason of consummation of the transactions contemplated
in the Distribution Agreement or the Merger Agreement or otherwise and neither
the Company nor any member of the Company Group shall assume such liability.
2.3 With respect to Retained Employees, except as specifically provided in
this Agreement and in Section 6.6 of the Merger Agreement, the Company shall
retain the liabilities and obligations with respect to, and continue to be
responsible for, all liabilities and obligations whatsoever in connection with
claims made by or on behalf of such persons in respect of salary, wages,
benefits, severance pay, salary continuation, COBRA continuation and similar
obligations relating to the continued employment, unpaid and unused vacation
benefits accrued and earned prior to the Time of Distribution and the
termination or alleged termination of such persons' employment with the
Company Group by reason of the consummation of the transactions contemplated
in the Distribution Agreement or the Merger Agreement or otherwise and neither
Newco nor any member of the Newco Group shall assume such liability.
ARTICLE III
Long Term Incentive Plans
3.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend the Company Stock Plans as may be necessary to provide for
the assumption of such plans by Newco to the extent set forth in Section 3.2
below, and (ii) take such other steps (consistent with applicable law and the
terms of such affected plans) as may be necessary to prevent the consummation
of the transactions contemplated by this Agreement, the Distribution Agreement
and the Merger Agreement (including the transfer of employment of any
Transferred Employee) from causing, resulting in or being treated as a
termination of employment or a change of control with respect to the Company
Stock Plans.
3.2 Effective as of the Time of Distribution, (i) Newco shall assume the
Company Stock Plans with respect to the participants in such plans who are
employees of the Newco Group or former employees or current or former
directors of the Company and its Subsidiaries and hold Company Options (as
defined below) as of the Time of Distribution (the "Newco Optionees"); (ii)
each outstanding option to purchase shares of Company Common Stock or to
purchase Company Convertible Debentures (a "Company Option") under the Company
Stock Plans, whether vested or unvested, exercisable or unexercisable, that
was granted to a person who, immediately after the Time of Distribution, is a
Newco Optionee, shall, subject to any required consent of the holder of such
Company Option, be exchanged for an option (a "Newco Option") to purchase the
number of shares of Newco Common Stock equal to the product of (1) the
quotient of (x) the fair market value of the Company Common Stock, and (y) the
fair market value of a share of Newco Common Stock (the "Conversion
B-B-3
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Ratio") and (2) the number of shares of Company Common Stock that the holder
of such option would have been entitled to receive had such holder exercised
such option in full and in the case of a Company Option exercisable for
Convertible Debentures, converted such Debentures into Company Preferred Stock
and then into Company Common Stock (not taking into account whether or not
such option or convertible debenture was in fact exercisable) (rounded to the
nearest whole share) at a per share exercise price equal to the per share
exercise price of such Company Options divided by the Conversion Ratio
(rounded to the nearest cent), which Newco Option shall be subject to the same
terms and conditions (including the vesting schedule) as the Company Option;
provided, however, that the Newco Option shall be exercisable only for Newco
Common Stock, and provided, further that, in the case of any Company Stock
Option to which Section 421 of the Internal Revenue Code of 1986, as amended
(the "Code") applies by reason of its qualification under any Sections 422-424
of the Code ("incentive stock options"), the option price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code; and (iii) the obligations of the Company with respect to
such Newco Options shall be transferred to and assumed by Newco. For purposes
of this Section 3.2, the fair market value of the Company Common Stock shall
be equal to the greater of (x) the average of the closing prices of Company
Common Stock on the New York Stock Exchange (the "NYSE") Composite
Transactions Reporting Systems, as reported by The Wall Street Journal, for
the ten (10) trading days immediately preceding the date that the Company
Common Stock commences trading on an ex-dividend basis (with respect to the
Distribution) or (y) the sum of (A) the average of the closing prices of the
Company Common Stock for the period from the ex-dividend date (with respect to
the Distribution) to the Time of Distribution and (B) the average of the
closing prices of the Newco Common Stock on the NYSE Composite Transactions
Reporting System, as reported by The Wall Street Journal, for the ten (10)
trading days following the tenth trading day after the Time of Distribution
(the "Newco Average Price"). The fair market value of a share of Newco Common
Stock shall be equal to the Newco Average Price. Effective as of the Time of
Distribution, each outstanding Company Convertible Debenture shall, subject to
any required consent of the holder of such Company Convertible Debenture, be
exchanged for a Newco debenture which shall be substantially identical to such
Company Convertible Debenture provided that such debenture shall be
convertible into securities of Newco based on a conversion rate which is
appropriately adjusted consistent with the adjustments with respect to the
exchange of Company Options for Newco Options. The Company and Newco agree to
enter into a supplemental indenture in accordance with the Company Convertible
Debenture indenture in connection with the exchange of such Company
Convertible Debentures.
ARTICLE IV
Non-Tax-Qualified Benefit Plans
4.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend the First Mississippi Corporation 1986 Deferred Income
Plan, the First Mississippi Corporation 1989 Deferred Compensation Plan for
Outside Directors and the First Mississippi Corporation Benefits Restoration
Plan as may be necessary to provide for the assumption of such Plans by Newco
as set forth in Section 4.2 below, and (ii) take such other steps (consistent
with applicable law and the terms of the affected plans) as may be necessary
to prevent the consummation of the transactions contemplated by this
Agreement, the Distribution Agreement and the Merger Agreement (including the
transfer of employment of any Transferred Employee) from causing, resulting in
or being treated as a termination of employment, cessation of service as a
director or a change of control with respect to such plans.
4.2 Effective as of the Time of Distribution, each of the First Mississippi
Corporation 1986 Deferred Income Plan, the First Mississippi Corporation 1989
Deferred Compensation Plan for Outside Directors and the First Mississippi
Corporation Benefits Restoration Plan shall be transferred from the Company to
Newco and Newco shall assume such plans and (i) succeed the Company as the
plan sponsor, plan administrator, employer or other party under such plan and
any agreements related thereto and be vested with any and all of the powers,
duties, rights and privileges of such plan sponsor, plan administrator,
employer or other party thereunder; and (ii) assume and agree to perform and
discharge all of the duties and obligations of the employer, sponsor and/or
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plan administrator thereunder and to pay, and be solely responsible for all of
the liabilities and obligations of any kind (whether absolute, accrued,
contingent or otherwise) of the employer, sponsor and/or plan administrator
thereunder in respect of, arising under or required to be performed with
respect to the Transferred Employees and Retained Employees under any such
plan, agreement or arrangement.
ARTICLE V
Employee Welfare Benefit Plans
5.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend the First Mississippi Corporation Life, AD&D, Medical and
Dental Plan; the First Mississippi Corporation Flexible Benefits Plan; and the
First Mississippi Corporation Long-Term Disability Plan as may be necessary to
provide for the assumption by Newco of the liabilities of such plans in
accordance with the provisions set forth below, and (ii) take such other steps
(consistent with applicable law and the terms of the affected plan) as may be
necessary to prevent the consummation of the transactions contemplated by this
Agreement, the Distribution Agreement and the Merger Agreement (including the
transfer of employment of any Transferred Employee) from causing, resulting in
or being treated as a termination of employment with respect to such plans.
5.2 Effective as of the Time of Distribution, Newco shall assume the First
Mississippi Corporation Life, AD&D, Medical and Dental Plan and any existing
retiree health or life benefit plan agreement, plan or trust and, pursuant to
the terms of such plans assume the liability with respect to and honor or
cause its insurance carriers to honor all claims for benefits incurred by (i)
Transferred Employees (or their dependents or beneficiaries) under such plans
at any time, (ii) all other past, present, active or inactive employees or
retirees of the Initial Group (or their dependents or beneficiaries) other
than Retained Employees at any time and (iii) Retained Employees prior to the
Time of Distribution in accordance with the terms of such plans, and without
interruption as a result of the transactions contemplated by this Agreement,
the Distribution Agreement or the Merger Agreement and the Company shall be
relieved of and shall not assume such liability. As soon as administratively
possible after the Time of Distribution, the Company shall transfer all funds
of the Company's plan (including funds for any contributions or premiums due
from the Company or any subsidiaries of the Company which have accrued as of
the Time of Distribution) to the plan.
5.3 Effective as of the Time of Distribution, Newco shall assume the First
Mississippi Corporation Flexible Benefits Plan and pursuant to the terms of
such plan, assume the liability with respect to and honor or cause its
insurance carriers to honor all claims for benefits incurred by (i)
Transferred Employees (or their dependents or beneficiaries) under such plan
at any time, (ii) all other past, present, active or inactive employees of the
Initial Group (or their dependents or beneficiaries) other than Retained
Employees at any time and (iii) Retained Employees prior to the Time of
Distribution in accordance with the terms of such plan, without interruption
as a result of the transactions contemplated by this Agreement, the
Distribution Agreement or the Merger Agreement and the Company shall be
relieved of and shall not assume such liability. As soon as administratively
possible after the Time of Distribution, the Company shall transfer all funds
of the Company's plan (including funds for any contributions or premiums due
from the Company or any subsidiaries of the Company which have accrued as of
the Time of Distribution) to the plan.
5.4 Effective as of the Time of Distribution, Newco shall assume the First
Mississippi Corporation Long-Term Disability Plan and pursuant to the terms of
such plan, assume the liability with respect to and honor or cause its
insurance carriers to honor all claims for benefits incurred by (i)
Transferred Employees (or their dependents or beneficiaries) under such plan
at any time, (ii) all other past, present, active or inactive employees of the
Initial Group (or their dependents or beneficiaries) other than Retained
Employees at any time and (iii) Retained Employees prior to the Time of
Distribution in accordance with the terms of such plan, without interruption
as a result of the transactions contemplated by this Agreement, the
Distribution Agreement or the Merger Agreement and the Company shall be
relieved of and shall not assume such liability.
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ARTICLE VI
Tax-Qualified Defined Contribution Plans
6.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend each of the First Mississippi Corporation 401(k) Savings
Plan and the First Mississippi Employee Stock Ownership Plan as may be
necessary to provide for the such assumption of such plans by Newco as set
forth below, and (ii) take such other steps (consistent with applicable law
and the terms of the affected plan) as may be necessary to prevent the
consummation of the transactions contemplated by this Agreement, the
Distribution Agreement and the Merger Agreement (including the transfer of
employment of any Transferred Employee) from causing, resulting in or being
treated as a termination of employment with respect to the Transferred
Employees who are participants in such plans.
6.2 Effective as of the Time of Distribution, each of the First Mississippi
Corporation 401(k) Savings Plan and the First Mississippi Employee Stock
Ownership Plan shall be transferred from the Company to Newco (and the Company
shall transfer the related trusts (including funds for any contributions due
from the Company or subsidiaries of the Company which have accrued or that
have been deducted from payroll as of the Time of Distribution) and Newco
shall assume such plans and (i) succeed the Company as the plan sponsor, plan
administrator, employer or other party under such plans and any agreements
related thereto and be vested with any and all of the powers, duties, rights
and privileges of such plan sponsor, plan administrator, employer or other
party thereunder; and (ii) assume and agree to perform and discharge all of
the duties and obligations of the employer, sponsor and/or plan administrator
thereunder and to pay and be solely responsible for all of the liabilities and
obligations of any kind (whether absolute, accrued, contingent or otherwise)
of the employer, sponsor and/or plan administrator thereunder in respect of,
arising under or required to be performed under any such plan, agreement or
arrangement.
6.3 Effective as of the Time of Distribution, each Retained Employee's
account balance in the First Mississippi Corporation 401(k) Savings Plan and
the First Mississippi Employee Stock Ownership Plan shall become fully vested
and non-forfeitable without regard to such Retained Employee's length of
service. As soon as practicable following the Time of Distribution, Newco
shall cause the accounts of Retained Employees in the First Mississippi
Corporation 401(k) Savings Plan and the First Mississippi Employee Stock
Ownership Plan to be distributable to them.
ARTICLE VII
Tax-Qualified Defined Benefit Plans
7.1 Prior to the Time of the Distribution, the Company and Newco shall (i)
cooperate to amend the Retirement Plan for Employees of First Mississippi
Corporation as may be necessary to provide for the assumption of such plans by
Newco as set forth below, (ii) provide that the Retained Employees will cease
to accrue benefits under such plans as of the Time of Distribution and (iii)
take such other steps (consistent with applicable law and the terms of the
affected plan) as may be necessary to prevent the consummation of the
transactions contemplated by this Agreement, the Distribution Agreement and
the Merger Agreement (including the transfer of employment of any Transferred
Employee) from causing, resulting in or being treated as a termination of
employment or a change of control with respect to the Transferred Employees
who are participants in such plan.
7.2 Effective as of the Time of Distribution, each Retained Employee's
accrued benefit under the Retirement Plan for Employees of First Mississippi
Corporation shall become fully vested and nonforfeitable without regard to
such Retained Employee's length of service. Effective as of the Time of
Distribution, the Company shall transfer to Newco and Newco shall assume the
Retirement Plan for Employees of First Mississippi Corporation (and the
Company shall transfer the related trust (including funds for any
contributions or premiums due from the Company or subsidiaries of the Company
which have accrued as of the Time of
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<PAGE>
Distribution)). In connection with such transfer and assumption Newco shall
(i) succeed the Company as the plan sponsor, plan administrator, employer or
other party under such plan and any agreements related thereto and be vested
with any and all of the powers, duties, rights and privileges of such plan
sponsor, plan administrator, employer or other party thereunder; and (ii)
assume and agree to perform and discharge all of the duties and obligations of
the employer, sponsor or plan administrator thereunder and to pay, and be
solely responsible for all of the liabilities and obligations of any kind
(whether absolute, accrued, contingent or otherwise) of the employer, sponsor
and/or plan administrator thereunder in respect of, arising under or required
to be performed with respect to the Retained Employees and the Transferred
Employees under such plan.
ARTICLE VIII
Retained Employees
8.1 Rights. The rights of Retained Employees with respect to the periods
following the Time of Distribution will be governed by the Merger Agreement.
ARTICLE IX
Miscellaneous
9.1 Governing Law. This Agreement and the transactions contemplated hereby
shall be construed in accordance with and governed by the internal laws of the
State of Mississippi.
9.2 Entire Agreement. This Agreement constitutes the entire understanding of
the parties hereto with respect to the subject matter hereof, superseding all
negotiations, prior discussions and prior agreements. To the extent a subject
is specifically covered in this Agreement and to the extent any other
agreement is in conflict herewith, this Agreement, if more specific, shall
control.
9.3 Parties In Interest. Neither party may assign its rights or delegate any
of its duties under this Agreement without prior written consent of the other.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Nothing contained
in this Agreement, express or implied, is intended to confer upon any third
party any benefits, rights or remedies.
9.4 Effectiveness. This Agreement shall become effective at the Time of
Distribution and may be terminated by the parties at any time prior thereto by
written agreement.
9.5 Reformation and Severability. If any provision of this Agreement shall
be held to be invalid, unenforceable or illegal in any jurisdiction under any
circumstances for any reason, (i) such provision shall bc reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal and preserve the original intent of the parties, or (ii) if such
provision cannot be so reformed, such provision shall be severed from this
Agreement. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or
under any other circumstances. Neither such holding nor such reformation or
severance shall affect or impair the legality, validity or enforceability of
any other provision of this Agreement to the extent that such other provision
is not itself actually in conflict with any applicable law.
9.6 Titles and Heading. All titles and headings have been inserted solely
for the convenience of the parties and are not intended to be a part of this
Agreement or to affect its meaning or interpretation.
9.7 No Reliance. No third party is entitled to rely on any of the
representations, warranties and agreements of the parties contained in this
Agreement. The parties assume no liability to any third party because of any
reliance on the representation, warranties and agreements of the parties
contained in this Agreement.
B-B-7
<PAGE>
IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by
their duly authorized officers as of this day of , 1996.
First Mississippi Corporation
By: _________________________________
Title:
[Newco]
By: _________________________________
Title:
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APPENDIX C
August 27,1996
Board of Directors
Mississippi Chemical Corporation
Owen Cooper Building
Highway 49 East
Yazoo City, MS 39194-0388
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Mississippi Chemical Corporation (the "Company")
of the consideration to be paid by the Company pursuant to the terms of the
Agreement and Plan of Merger and Reorganization dated as of August 27, 1996
(the "Agreement"), by and among the Company, Miss Sub, Inc. and First
Mississippi Corporation ("First Mississippi"), pursuant to which Miss Sub,
Inc. will be merged (the "Merger") with and into the Company. At the time of
the Merger, First Mississippi will be a holding company that will only hold
capital stock and partnership interests in the following entities: FirstMiss
Fertilizer, Inc.; AMPRO Fertilizer, Inc.; FMF Barge, Inc.; a 50% interest in
Arcadian/FirstMiss Fertilizer LLC; and a 50% interest in the join venture
referred to as the Triad Chemical Joint Venture; and a 50% interest in an
ammonia storage terminal located in Pasadena, TX, (such entities, being
hereinafter referred to as "First Mississippi Fertilizer").
Pursuant to the Agreement, subject to certain exceptions, each share of
common stock, par value $1.00 per share, of First Mississippi ("First
Mississippi Common Stock") will be converted into the right to receive shares
of common stock, par value $0.01 per share, of the Company ("Company Common
Stock") equal to the Merger Consideration Per Share (as defined below). The
"Merger Consideration Per Share" is equal to 6,904,762 shares of Company
Common Stock divided by the number of shares of First Mississippi Common Stock
outstanding at the consummation of the Merger; provided, however, if the
average of the opening, high, low and closing prices for each of the ten
trading days immediately preceding the trading day prior to the consummation
of the Merger (such number, the "Average Company Price"), is more than $25.00,
then the Merger Consideration Per Share will be the greater of (i) 6,393,298
shares of Company Common Stock divided by the number of shares of First
Mississippi Common Stock outstanding at the consummation of the Merger and
(ii) the number of shares of Company Common Stock determined by dividing (A)
the product of (x) 6,904,762 multiplied by (y) a fraction, the numerator of
which is $25.00 and the denominator of which is the Average Company Price, by
(B) the number of shares of First Mississippi Common Stock outstanding at the
consummation of the Merger.
In addition, the Company will use its best efforts to assist in arranging a
customary bank facility for First Mississippi that will be funded immediately
prior to the Time of Distribution (as defined in the Distribution Agreement)
(the "Financing"). The Financing will be in an aggregate amount equal to
$150,000,000 plus (i) the product of (x) the lesser of (A) $2.00 and (B) the
amount, if any, by which the Average Company Price is less than $19.00 times
(y) 6,904,762 plus (ii) the costs of obtaining the Financing, plus (iii) the
product of (x) $56,575 times (y) the number of calendar days by which the date
of consummation of the Merger is after December 31, 1996 plus (iv) the net
cash used by First Mississippi Fertilizer after December 31, 1996 through the
date of the consumation of the Merger, minus (v) the unpaid balance as of the
date of the consummation of the Merger of the AMPRO Retrofit due under the
agreement with the contractor (as defined in the Agreement), plus or minus (v)
the amount by which the estimated net working capital of First Mississippi
Fertilizer as of the date of consummation of the Merger is more or less,
respectively, than $8,000,000.
In arriving at our opinion, we have reviewed the drafts of the Agreement and
the Distribution Agreement, each dated August 27, 1996. We also have reviewed
financial and other information that was publicly available or furnished to us
by the Company and First Mississippi, including information provided during
discussions with
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their respective managements. Included in the information provided during
discussions with the respective managements were certain financial projections
of First Mississippi Fertilizer prepared by the management of the First
Mississippi Fertilizer and certain financial projections of the Company
prepared by the management of the Company. In addition, we have compared
certain financial and securities data of the Company and First Mississippi
Fertilizer with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the
Company Common Stock, reviewed prices and premiums paid in other business
combinations, and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that
was available to us from public sources, that was provided to us by the
Company and First Mississippi or their respective representatives, or that was
otherwise reviewed by us. With respect to the financial projections supplied
to us, we have assumed that they have been reasonably prepared on the basis
reflecting the best currently available estimates and judgments of the
managements of the Company and First Mississippi as to the future operating
and financial performance of the Company and First Mississippi Fertilizer. We
have not assumed any responsibility for making any independent evaluation of
First Mississippi's assets or liabilities or for making any independent
verification of any of the information reviewed by us. We have relied as to
all legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as
of, the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
price at which the Company Common Stock will actually trade at any time. In
addition, we are expressing no opinion as to the fairness of the Distribution
(as defined in the Agreement). Our opinion does not constitute a
recommendation to any member of the Board of Directors of the Company or
shareholder as to how such member or shareholder should vote on the proposed
transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Merger Consideration Per Share is fair to the Company
and its shareholders from a financial point of view.
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
/s/ Peter Bacon
By: _________________________________
Peter Bacon
MANAGING DIRECTOR
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APPENDIX D
August 27, 1996
Board of Directors
First Mississippi Corporation
700 North Street
Jackson, MS 39202-3095
Dear Sirs:
We understand that First Mississippi Corporation (the "Company") has entered
an Agreement and Plan of Merger and Reorganization, dated as of August 27,
1996 (the "Merger Agreement"), with Mississippi Chemical Corporation (the
"Acquiror") and a wholly owned subsidiary of the Acquiror (the "Sub"), and
that the Company, the Acquiror and/or certain of their respective affiliates
also have entered or will enter into certain other agreements, including an
Agreement and Plan of Distribution (the "Distribution Agreement") by and
between the Company and a newly formed (or to be formed) Mississippi
corporation that is or will be a wholly owned subsidiary of the Company
("Newco"). We understand that, pursuant to these agreements, among other
things: (i) the Company will transfer, and Newco will assume, all of the
assets and liabilities of the Company not associated with the Company's
fertilizer business; (ii) the Company will retain, assume or incur
approximately $150 million to $164 million of indebtedness (the "Financing")
and will contribute approximately $45 million to $59 million in cash and
marketable securities to Newco; (iii) prior to the Merger (as hereinafter
defined), the Company will distribute to the holders of common Stock of the
Company all of the outstanding shares of common stock of Newco ("Newco
Shares") (collectively, the "Distribution"); and (iv) the Sub will merge with
and into the Company (the "Merger") pursuant to which the Company will become
a wholly owned subsidiary of the Acquiror and the outstanding shares of common
stock, par value $1.00 per share, of the Company will be converted into the
right to receive between 6,393,298 and 6,904,762 shares of common stock, par
value $0.01 per share of the Acquiror ("Acquiror Shares"), on the terms
specified in the Merger Agreement. (The transactions contemplated by the
Merger Agreement and the Distribution Agreement are collectively referred to
herein as the "Transactions.")
You have asked us to advise you with respect to the fairness to the holders of
common stock of the Company, from a financial point of view, of the terms of
the Distribution and the Merger, taken together.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, the Acquiror and
Newco, as well as the Merger Agreement and the form of the Distribution
Agreement attached to the Merger Agreement as Annex I. We have also reviewed
certain other information, including financial forecasts and related
information, provided to us by the Company; Blue, Johnson Associates, a well-
recognized source for Industry pricing forecasts and consultants to the
Company; and the Acquiror; and we have met with the Company's and the
Acquiror's managements (including the expected management of Newco) to discuss
the business and prospects of the Company, the Company's fertilizer business,
Newco and the Acquiror.
We have also considered certain financial and stock market data of the
Company, Newco and/or the Acquiror, and we have compared that data with
similar data for other publicly held companies in businesses similar to those
of the Company, Newco and the Acquiror and we have considered the financial
terms of certain other business combinations and other transactions which have
been effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
we deemed relevant.
D-1
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Board of Directors
August 27, 1996
Page 2
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
on its being complete and accurate in all material respects. With respect to
the financial forecasts, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's and the Acquiror's managements (including the
expected management of Newco) as to the future financial performance of the
Company, Newco and the Acquiror. In addition, we have not made an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, Newco or the Acquiror, nor have we been furnished with any
such evaluations or appraisals. Further, we have assumed that Newco will not
have any material contingent liabilities except as reflected in the Company's
financial statements. Our opinion is necessarily based upon financial,
economic, market and other conditions as they exist and can be evaluated on
the date hereof. We are not expressing any opinion as to what the value of the
common stock of Newco actually will be when issued to the Company's
shareholders in the Distribution or the prices at which such common stock will
trade subsequent to the Distribution. We also are not expressing any opinion
as to what the value of the common stock of the Acquiror actually will be when
issued to the Company's shareholders in the Merger or the prices at which such
common stock will trade subsequent to the Merger. With respect to our opinion,
in advising you as to the fairness from a financial point of view of the terms
of the Distribution and the Merger, taken together, our opinion addresses only
the financial terms of the Distribution and the consideration to be received
by the shareholders of the Company in the Merger. We also understand that the
financial statements, pro forma financial statements and registration
statement of Newco have not yet been prepared. In connection with our
engagement, we approached third parties to solicit indications of interest in
a possible acquisition of the Company's fertilizer business, and held
preliminary discussions with certain of these parties prior to the date
hereof. However, in the course of our engagement, we did not approach any
third parties to solicit indications of interest in a possible acquisition of
the Company as a whole. We have not been requested to opine, and our opinion
does not in any manner address, the Company's underlying business decision to
effect the Transactions.
We have assumed, with the consent of the Company and the Acquiror, that the
Transactions will comply with applicable federal and state laws, including,
without limitation, laws relating to the payment of dividends, bankruptcy,
insolvency, reorganization, fraudulent conveyance, fraudulent transfer or
other similar laws now or hereafter in effect affecting creditors' rights
generally. We have assumed, with the consent of the Company and the Acquiror,
that receipt of the Newco Shares and Acquiror Shares will be tax-free for
federal income tax purposes to the shareholders of the Company and that none
of the Company, Newco and the Acquiror will recognize income, gain or loss as
a result of the Transactions. We have also assumed, with the consent of the
Company, that the Transactions will not result, individually or in the
aggregate, in the cancellation of any contracts material to Newco or its
prospects. In addition, we have assumed, with the consent of the Company and
the Acquiror, that the Company and the Acquiror will perform their respective
indemnification obligations which may arise under the Distribution Agreement
in accordance with its terms. We have also assumed, with the consent of the
Company, that (i) the net working capital of the Retained Business (as defined
in the Merger Agreement) as of the Effective Date (as defined in the Merger
agreement) is $8 million; (ii) there is no unpaid balance as of the Effective
Date of the AMPRO Retrofit (as defined in the Merger Agreement) due under the
Kellogg Agreement (as defined in the Merger Agreement); (iii) the Effective
Date occurs on or before March 31, 1997; (iv) the refinancing of the
outstanding debt of the Retained Business (other than accounts payable
incurred in the ordinary course of the Retained Business) in the manner
contemplated by the Merger Agreement, together with all transaction, severance
and other costs payable by the Company in connection with the transactions
contemplated by the Merger Agreement, will require an aggregate amount of $105
million, and that all of the proceeds of the Financing, less such $105
million, will be contributed to Newco by the Company.
We have acted as financial advisor to the Company in connection with the
Transactions and will receive a fee for our services, a substantial portion of
which is contingent upon the consummation of the Transactions or certain
alternative transactions.
D-2
<PAGE>
Board of Directors
August 27, 1996
Page 3
In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities of both the Company and the Acquiror for
our own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities or in the securities of
Newco following the Distribution.
It is understood that this letter is for information of the Board of Directors
of the Company in connection with its consideration of the Transactions, does
not constitute a recommendation to any shareholder as to how such shareholder
should vote on the proposed Transactions and is not to be quoted or referred
to, in whole or in part, in any registration statement, prospectus or proxy
statement, or in any other document used in connection with the offering or
sale of securities, nor shall this letter be used for other purposes, without
our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the terms of the Distribution and the Merger, taken together, are
fair, from a financial point of view, to the holders of the common stock of
the Company.
Very truly yours,
CS FIRST BOSTON CORPORATION
By: /s/ John L. Garcia
----------------------------
John L. Garcia
Managing Director
D-3
<PAGE>
APPENDIX E
PROSPECTUS
CHEMFIRST INC.
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
----------------
This Prospectus is being furnished to shareholders of First Mississippi
Corporation, a Mississippi corporation ("First Mississippi"), in connection
with the contemplated pro rata distribution (the "Distribution") to First
Mississippi shareholders of shares of common stock, par value $1.00 per share
(the "ChemFirst Common Stock"), of ChemFirst Inc. ("ChemFirst"), a Mississippi
corporation and wholly owned subsidiary of First Mississippi. Holders of
shares of common stock, par value $1.00 per share (the "First Mississippi
Common Stock"), of First Mississippi will receive one share of ChemFirst
Common Stock for every share of First Mississippi Common Stock held at the
close of business on the record date to be set by the Board of Directors of
First Mississippi in connection with the Distribution (the "Distribution
Record Date"), which is expected to be the business day immediately prior to
the date of the Merger described below. The Distribution will result in 100%
of the outstanding shares of ChemFirst Common Stock being distributed to
holders of First Mississippi Common Stock on a pro rata basis. The aggregate
number of shares of ChemFirst Common Stock to be issued to First Mississippi
shareholders in the Distribution will depend on the aggregate number of shares
of First Mississippi Common Stock outstanding on the Distribution Record Date
and, accordingly, is not determinable as of the date of this Prospectus.
However, based upon the number of shares of First Mississippi Common Stock
outstanding on the date of this Prospectus, 20,621,736 shares of ChemFirst
Common Stock will be issued to First Mississippi shareholders in the
Distribution. This Prospectus constitutes the prospectus of ChemFirst relating
to such shares of ChemFirst Common Stock.
As more fully described herein under "The Transfers and the Distribution,"
at the time of the Distribution, ChemFirst will own all of First Mississippi's
assets and will have assumed all of First Mississippi's liabilities except
those relating primarily to First Mississippi's fertilizer business (the
"Fertilizer Business") and except for certain indebtedness of First
Mississippi. As used in this Prospectus, "ChemFirst" means ChemFirst and its
consolidated subsidiaries at the time of the Distribution, including the
assets and liabilities which will be transferred to ChemFirst by First
Mississippi and assumed by ChemFirst as contemplated in the Agreement and Plan
of Distribution to be entered into between First Mississippi and ChemFirst
prior to the Distribution (the "Distribution Agreement"), a copy of the form
of which is attached as Appendix B to the Joint Proxy Statement/Prospectus to
which this Prospectus is Appendix E (the "Joint Proxy Statement/Prospectus").
Also, unless the context otherwise indicates, all references to ChemFirst in
this Prospectus shall include the businesses of ChemFirst as conducted by
First Mississippi prior to the Distribution, and the information contained in
this Prospectus assumes that the Transfers described under "The Transfers and
the Distribution" have been completed. See "Business," "The Transfers and the
Distribution" and "Pro Forma Financial Information."
No consideration will be paid by First Mississippi shareholders for the
shares of ChemFirst Common Stock to be received by them in the Distribution.
There is currently no public trading market for the shares of ChemFirst Common
Stock. ChemFirst has applied for the listing of ChemFirst Common Stock on the
New York Stock Exchange (the "NYSE").
The consummation of the Distribution is a condition to the parties'
obligations to consummate the merger (the "Merger") provided for in the
Agreement and Plan of Merger and Reorganization, dated as of August 27, 1996
(the "Merger Agreement"), among Mississippi Chemical Corporation, a
Mississippi corporation ("Mississippi Chemical"), MISS SUB, INC., a
Mississippi corporation and wholly owned subsidiary of Mississippi Chemical
("Miss Sub"), and First Mississippi, a copy of which is attached as Appendix A
to the Joint Proxy Statement/Prospectus. However, the Distribution will not be
effected unless all of the other conditions to the Merger, including approval
of the Merger by shareholders of First Mississippi, have been satisfied or
waived. See "The Merger" in the Joint Proxy Statement/Prospectus.
----------------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN CHEMFIRST COMMON STOCK.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 18, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 5
ChemFirst.............................................................. 5
Overview of the Distribution and the Merger............................ 5
The Distribution....................................................... 6
Summary Historical Financial Information............................... 8
RISK FACTORS.............................................................. 9
Absence of Trading Market.............................................. 9
Relationship with First Mississippi; Reorganization to Effect Distribu-
tion.................................................................. 9
Reliance on Major Customers............................................ 9
Anti-takeover Measures................................................. 9
Possible Costs and Liabilities Relating to Environmental Matters....... 9
Disruptions in Availability and Price of Raw Materials................. 10
BUSINESS.................................................................. 11
General................................................................ 11
Operating Strategy..................................................... 11
Chemicals.............................................................. 11
Combustion and Thermal Plasma.......................................... 15
Steel Production....................................................... 17
Other Operations....................................................... 17
Employees.............................................................. 17
Patents and Licenses................................................... 17
Legal Proceedings...................................................... 18
Insurance.............................................................. 18
Environmental Considerations........................................... 18
Properties............................................................. 18
THE TRANSFERS AND THE DISTRIBUTION........................................ 20
Background of and Reasons for the Distribution......................... 20
Terms of the Distribution Agreement.................................... 20
Terms of the Tax Disaffiliation Agreement.............................. 23
Terms of the Employee Benefits Agreement............................... 24
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 25
Consequences of the Transfers and the Distribution..................... 25
Consequences of the Merger............................................. 26
LISTING AND TRADING OF CHEMFIRST COMMON STOCK............................. 27
CAPITALIZATION............................................................ 28
PRO FORMA FINANCIAL INFORMATION........................................... 29
SELECTED HISTORICAL FINANCIAL INFORMATION................................. 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 33
MANAGEMENT................................................................ 39
Directors.............................................................. 39
Committees of the Board of Directors................................... 41
Compensation of Directors.............................................. 42
Executive Officers..................................................... 43
Executive Compensation Prior to the Distribution....................... 44
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination Agreements with First Mississippi.......................... 46
Option Grants for First Mississippi Common Stock in Last Fiscal Year... 47
Aggregated Options Exercised in Last Fiscal Year and Year End Option
Values................................................................ 47
Long-Term Incentive Plans--Awards in Last Fiscal Year.................. 48
Other Compensation..................................................... 48
BENEFICIAL OWNERSHIP OF CHEMFIRST COMMON STOCK............................ 50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 53
DESCRIPTION OF CHEMFIRST CAPITAL STOCK.................................... 55
Authorized Capital Stock............................................... 55
Common Stock........................................................... 55
Preferred Stock........................................................ 55
Shareholder Rights Plan................................................ 57
No Preemptive Rights................................................... 59
Description of Certain Statutory, Charter and Bylaw Provisions......... 59
INDEMNIFICATION OF DIRECTORS AND OFFICERS................................. 61
ADDITIONAL INFORMATION.................................................... 62
LEGAL MATTERS............................................................. 63
EXPERTS................................................................... 63
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
E-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
E-4
<PAGE>
SUMMARY
The following is a summary of the information contained elsewhere in this
Prospectus. This summary does not purport to be complete and is qualified in
its entirety by, and is subject to, the more detailed information and financial
statements, including the notes thereto, set forth in this Prospectus. This
Prospectus is Appendix E to the Joint Proxy Statement/Prospectus. Unless
otherwise defined herein, capitalized terms used in this summary shall have the
respective meanings ascribed to them elsewhere in this Prospectus. SHAREHOLDERS
ARE URGED TO READ CAREFULLY THIS PROSPECTUS IN ITS ENTIRETY.
CHEMFIRST
ChemFirst is currently a wholly owned subsidiary of First Mississippi. It was
incorporated in 1983 but has had no activities during the last five years.
Prior to the Distribution, First Mississippi will transfer or cause to be
transferred to ChemFirst all of its assets other than those which are part of
the Fertilizer Business and ChemFirst will assume all of First Mississippi's
liabilities except to the extent that they relate to the Fertilizer Business
and except for certain indebtedness. The information in this Prospectus assumes
that these transfer of assets and assumption of liabilities have been
completed. At the time of the Distribution, ChemFirst's principal businesses
will involve continuous production of aniline, nitrobenzene, nitrotoluene and
toluidines; custom production of fine chemicals for chemical, agricultural and
pharmaceutical companies and production of electronic performance chemicals for
the semiconductor and related industries. Other significant businesses will
include the design and production of low-emission burners, flares and
incinerators and thermal plasma equipment for steel production, waste treatment
and research. ChemFirst will also produce steel ingots and billets from melted
scrap. The mailing address of ChemFirst's principal executive offices is 700
North Street, P.O. Box 1249, Jackson, MS 39215-1249, and the telephone number
at such address is (601) 948-7550.
OVERVIEW OF THE DISTRIBUTION AND THE MERGER
First Mississippi has entered into the Merger Agreement whereby, upon the
terms and subject to the conditions set forth therein, first, First Mississippi
will spin-off its chemicals and other non-fertilizer businesses to shareholders
in the Distribution and second, First Mississippi will be merged with Miss Sub,
with First Mississippi surviving the Merger and becoming a wholly-owned
subsidiary of Mississippi Chemical. As a condition to and in order to
facilitate the Merger, First Mississippi has agreed to effect the Distribution
prior to consummation of the Merger. In the Distribution all of the outstanding
shares of ChemFirst Common Stock will be distributed pro rata to First
Mississippi's shareholders on the Distribution Record Date. The Distribution
will, by means of a spin-off of First Mississippi's chemicals and other non-
fertilizer businesses, separate the Fertilizer Business from First
Mississippi's other businesses and enable Mississippi Chemical to acquire only
the Fertilizer Business in the Merger.
Pursuant to the Merger Agreement, at the effective time of the Merger (the
"Effective Time"), each issued and outstanding share of First Mississippi
Common Stock will be converted into the right to receive a fraction of a share
of common stock, par value $.01 per share, of Mississippi Chemical (the
"Mississippi Chemical Common Stock") as described under "The Merger--Terms of
the Merger--Conversion of First Mississippi Common Stock in the Merger" in the
Joint Proxy Statement/Prospectus.
As a result of the Distribution and the Merger, First Mississippi
shareholders as of the Distribution Record Date will receive ChemFirst Common
Stock in the Distribution and, upon surrendering their First Mississippi Common
Stock share certificates in accordance with the Merger Agreement, will receive
Mississippi Chemical Common Stock in the Merger.
Pursuant to the Distribution Agreement, prior to the Distribution, First
Mississippi will transfer or cause to be transferred to ChemFirst all of its
assets other than those which are part of the Fertilizer Business and ChemFirst
will assume all of First Mississippi's liabilities except to the extent that
they relate to the Fertilizer Business and except for certain indebtedness
(collectively, the "Transfers"). Prior to the Distribution, First Mississippi
will consummate the Financing described in the Joint Proxy
Statement/Prospectus. A portion of the proceeds of the Financing will be used
to refinance First Mississippi's existing indebtedness and pay certain costs
E-5
<PAGE>
related to the Merger, with the remaining proceeds, estimated to be
approximately $50.0 million, to be contributed to ChemFirst prior to the
Distribution. As a result of the Financing, which will remain the obligation of
the Fertilizer Business to be acquired by Mississippi Chemical in the Merger,
and the application of its proceeds, at the time of the Distribution ChemFirst
will have no significant long-term indebtedness and available cash reserves
currently estimated to be approximately $50.0 million. See "Pro Forma Financial
Information." In accordance with the terms of the Distribution Agreement, each
of First Mississippi and ChemFirst have agreed to indemnify the other after the
Distribution with respect to certain losses, damages, claims and liabilities
assumed or retained by that party. See "The Transfers and the Distribution--
Terms of the Distribution Agreement."
The foregoing is a brief summary of certain terms of the Distribution, the
Merger and related transactions affecting ChemFirst. A more complete
description of the Merger and the Merger Agreement may be found in the Joint
Proxy Statement/Prospectus. The Distribution and the Distribution Agreement
between ChemFirst and First Mississippi are more fully described herein under
"The Transfers and the Distribution--Terms of the Distribution Agreement" and a
copy of the Distribution Agreement is attached as Appendix B to the Joint Proxy
Statement/Prospectus.
THE DISTRIBUTION
Distributing Corporation........ First Mississippi. References to First Mis-
sissippi include its subsidiaries, except
where the context otherwise requires.
Distributed Corporation......... ChemFirst, which, by the Distribution Record
Date, will hold the assets and be responsible
for the liabilities of First Mississippi
other than those of the Fertilizer Business
and certain indebtedness.
Shares to be Distributed........ Assumed to be 20,621,736 shares of ChemFirst
Common Stock. However, after giving effect to
the conversion of all outstanding convertible
debentures of First Mississippi (the "Con-
vertible Debentures") and the subsequent con-
version of the First Mississippi convertible
preferred stock into which such Debentures
are convertible (the "Convertible Preferred
Stock"), the exercise of outstanding and ex-
ercisable options to acquire Convertible De-
bentures (the "Debenture Options") and the
conversion of the Convertible Debentures ex-
ercisable therefor and subsequent conversion
of the Convertible Preferred Stock issuable
upon such conversion, and the exercise of
outstanding and exercisable options to pur-
chase First Mississippi Common Stock ("Stock
Options"), up to 21,331,850 shares of
ChemFirst Common Stock will be issued in the
Distribution.
Distribution Ratio.............. One share of ChemFirst Common Stock for every
share of First Mississippi Common Stock owned
as of the close of business on the Distribu-
tion Record Date. See "The Transfers and the
Distribution--Terms of the Distribution
Agreement--The Distribution."
Federal Income Tax
Consequences................... It is a condition to the Distribution and the
Merger that Skadden, Arps, Slate, Meagher &
Flom (Illinois), special counsel to First
Mississippi, issue an opinion to the effect
that the Distribution qualifies as a tax-free
distribution under Sec-
E-6
<PAGE>
tion 355 of the Internal Revenue Code of
1986, as amended (the "Code"), the Merger
qualifies as a tax-free transaction under
Section 368(a) of the Code, and the Transfers
qualify as one or more tax-free transactions
under one or more of Sections 332, 351 and
368(a)(1)(D) of the Code. See "Certain Fed-
eral Income Tax Consequences." In addition,
it is a condition to the Merger that Hughes &
Luce, LLP, counsel to Mississippi Chemical,
issue an opinion to Mississippi Chemical to
the effect that the Merger qualifies as a
tax-free transaction under Section 368(a) of
the Code.
Trading Market.................. There is currently no public market for
ChemFirst Common Stock. ChemFirst has applied
for the listing of ChemFirst Common Stock on
the NYSE. See "Listing and Trading of
ChemFirst Common Stock."
Effect of the Distribution...... In connection with the Distribution, First
Mississippi will transfer to ChemFirst all of
First Mississippi's assets and liabilities
other than those of the Fertilizer Business
and certain indebtedness. First Mississippi
will deliver to the Distribution Agent shares
of ChemFirst Common Stock representing 100%
of the outstanding shares of ChemFirst Common
Stock for distribution to the holders of
First Mississippi Common Stock as of the
close of business on the Distribution Record
Date. Upon consummation of the Distribution,
the holders of First Mississippi Common Stock
on the Distribution Record Date will be the
shareholders of ChemFirst.
Relationship with First
Mississippi after the
Distribution................... First Mississippi and ChemFirst have agreed
to indemnify each other after the Distribu-
tion with respect to certain losses, damages,
claims and liabilities assumed or retained by
that party, including certain tax liabili-
ties. See "Risk Factors--Relationship with
First Mississippi; Reorganization to Effect
Distribution," and "The Transfers and the
Distribution--Terms of the Distribution
Agreement--Mutual Indemnities," "The Trans-
fers and the Distribution--Terms of the Tax
Disaffiliation Agreement" and "The Transfers
and the Distribution--Terms of the Employee
Benefits Agreement."
Distribution Record Date........ It is expected that the Distribution Record
Date will be established as the close of
business on the business day immediately
prior to the day on which the Effective Time
occurs.
Date of Distribution............ The Distribution will be effective the close
of business on the Distribution Record Date.
The distribution of certificates of shares of
ChemFirst Common Stock will occur as promptly
as practicable thereafter.
Distribution Agent, Transfer
Agent and Registrar............ KeyCorp Shareholder Services, Inc.
Risk Factors.................... First Mississippi shareholders should care-
fully consider the matters discussed under
the section entitled "Risk Factors" in this
Prospectus.
E-7
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
As a result of the proposed Distribution, the historical consolidated
financial statements of ChemFirst will reflect the historical results of
operations and financial position of First Mississippi, reflecting the
classification of the Fertilizer Business as a discontinued operation.
The summary historical consolidated financial information set forth below has
been derived from the audited financial statements of ChemFirst Inc. for the
periods ended June 30, 1996, 1995 and 1994, except for income statement data
for the three months ended September 30, 1996 and 1995, balance sheet data at
September 30, 1996 and balance sheet data at June 30, 1994. ChemFirst Inc.'s
Consolidated Balance Sheets at June 30, 1996 and 1995 and the related
Statements of Operations, Stockholders' Equity and Cash Flows for the three
years ended June 30, 1996 and notes thereto appear elsewhere herein. The
financial information for the three-month interim periods ended September 30,
1996 and 1995 has been derived from ChemFirst Inc.'s unaudited interim
financial statements, presented elsewhere herein, that reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of
the results of the interim periods presented; all such adjustments are of a
normal recurring nature. The balance sheet data at June 30, 1994 has been
derived from ChemFirst Inc.'s unaudited consolidated financial statements. The
summary historical financial information set forth below should be read in
conjunction with and is qualified in its entirety by reference to ChemFirst
Inc.'s historical consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
CHEMFIRST INC.
THREE MONTHS ENDED FISCAL YEAR ENDED JUNE
SEPTEMBER 30, 30,
--------------------- ------------------------
1996 1995 1996 1995 1994
------- ------------- ------- ------- -------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales......................... $95,432 88,746 370,547 331,721 249,091
Earnings (loss) from
continuing operations before
income taxes (benefit),
investee earnings (loss) and
cumulative effect of change
in accounting principle...... 6,718 3,387 (4,929) 18,484 1,226
Earnings (loss) from
continuing operations before
cumulative effect of change
in accounting principle...... 4,090 1,886 (3,458) 10,638 (1,271)
Net earnings.................. 12,789 12,480 35,220 57,794 21,863
Earnings (loss) per share from
continuing operations before
cumulative effect of change
in accounting principle...... 0.20 0.09 (0.16) 0.52 (0.06)
Net earnings per share........ 0.61 0.59 1.68 2.80 1.09
Weighted average common shares
outstanding.................. 20,894 21,048 20,980 20,632 20,126
<CAPTION>
AT AT JUNE 30,
SEPTEMBER 30, ------------------------
1996 1996 1995 1994
------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital....................... $ 86,442 86,918 110,107 78,874
Total assets.......................... 432,483 413,635 433,327 357,845
Long-term debt, excluding long-term
debt due within one year............. 76,732 79,909 84,394 104,275
Shareholders' equity.................. 242,208 230,267 232,996 177,687
Cash dividend declared per common
share................................ 0.10 0.40 0.35 0.30
</TABLE>
E-8
<PAGE>
RISK FACTORS
ABSENCE OF TRADING MARKET
There is currently no existing trading market for ChemFirst Common Stock and
there can be no assurance as to the establishment or continuity of any such
market. ChemFirst has applied for listing of ChemFirst Common Stock on the
NYSE. Even if a trading market does develop in the ChemFirst Common Stock,
there can be no assurance that trading will be sustained or that the volume
would be sufficient for trading to occur with any frequency. As a result, it
could be difficult to make purchases or sales of ChemFirst Common Stock in the
market at any particular time. There can be no assurance as to the price at
which ChemFirst Common Stock will trade.
RELATIONSHIP WITH FIRST MISSISSIPPI; REORGANIZATION TO EFFECT DISTRIBUTION
Following the Distribution, ChemFirst will have certain obligations to
indemnify the Fertilizer Business. Under the Distribution Agreement, ChemFirst
has agreed to indemnify and hold harmless the Fertilizer Business from and
against certain claims and actions related to the businesses that ChemFirst
will assume in the Distribution. ChemFirst will also release the Fertilizer
Business from claims against it (with some exceptions) relating to events or
circumstances that arose before the Distribution. Under the Tax Disaffiliation
Agreement described herein and attached to the Joint Proxy
Statement/Prospectus as Appendix B (the "Tax Disaffiliation Agreement"),
subject to certain exceptions, ChemFirst will assume responsibility for any
tax liabilities of First Mississippi for the period before the Distribution,
tax liabilities resulting from the Transfers, the Distribution or the Merger;
and any tax liabilities of ChemFirst. Under the Employee Benefits Agreement,
ChemFirst has also assumed responsibilities for all obligations to past
employees of First Mississippi who are not employees of the Fertilizer
Business. See "The Transfers and the Distributions."
RELIANCE ON MAJOR CUSTOMERS
Certain of ChemFirst's largest customers account for a significant
percentage of its revenues. ChemFirst's sales in 1996 to its two largest
customers constituted approximately 23% of its consolidated sales. No other
customer accounted for more than 5% of ChemFirst's consolidated sales in 1996.
Although ChemFirst has had long-standing relationships with these customers,
if ChemFirst lost any significant portion of its sales to either of these
customers, such loss could have a material adverse effect on the business and
results of operations of ChemFirst.
ANTI-TAKEOVER MEASURES
ChemFirst, a Mississippi corporation, is subject to the Mississippi Business
Corporation Act (the "MBCA"), including the Mississippi Shareholder Protection
Act (Sections 79-25-1 through 79-25-9 of the MBCA). As of the time of the
Distribution, ChemFirst will have also enacted various anti-takeover measures,
including a shareholder rights plan (the "Shareholder Rights Plan"). As a
result of the application of the Mississippi Shareholder Protection Act,
certain provisions in ChemFirst's Articles of Incorporation and Bylaws and the
Shareholder Rights Plan, potential acquirors of ChemFirst may find it more
difficult or be discouraged from attempting to effect an acquisition
transaction with ChemFirst that is not supported by the Board of Directors of
ChemFirst, thereby possibly depriving holders of ChemFirst securities of
certain opportunities to sell or otherwise dispose of such securities at
above-market prices pursuant to such transactions. See "Description of
ChemFirst Capital Stock--Shareholder Rights Plan" and "Description of
ChemFirst Capital Stock--Description of Certain Statutory, Charter and Bylaw
Provisions."
POSSIBLE COSTS AND LIABILITIES RELATING TO ENVIRONMENTAL MATTERS
Production of many of ChemFirst's chemicals involves the use, storage,
transportation and disposal of toxic and hazardous materials. ChemFirst's
operations are subject to extensive international and federal, state and local
laws and regulations relating to the storage, handling, emission,
transportation and discharge of materials into the environment and the
maintenance of safe conditions in the workplace.
E-9
<PAGE>
Risks of substantial costs and liabilities are inherent in certain plant
operations and certain products produced at ChemFirst's plants, as they are
with other companies engaged in the chemical, combustion and steel businesses,
and there can be no assurance that significant costs and liabilities will not
be incurred. Moreover, future developments, such as increasingly strict
environmental, safety and health laws and regulations, and enforcement
policies thereunder, could result in substantial costs and liabilities to
ChemFirst and could subject ChemFirst's handling, manufacture, use, reuse, or
disposal of substances or pollutants at its plants to more rigorous scrutiny
than at present.
ChemFirst is involved in several claims, lawsuits, administrative
proceedings and investigations relating to environmental matters. The ultimate
extent of liabilities with respect to such matters as well as the timing of
related cash disbursements cannot be determined with certainty. See
"Business--Environmental Considerations."
DISRUPTIONS IN AVAILABILITY AND PRICE OF RAW MATERIALS
ChemFirst uses significant amounts of various chemicals as raw materials in
manufacturing a number of its chemicals products. See "Business--Chemicals--
Raw Materials." Specifically, the primary chemicals used by ChemFirst are
benzene, toluene, ammonia, natural gas, ethanol, hydrogen, hydrogen peroxide,
o-aminophenol, o-nitrophenol, formaldehyde, butaldehyde, hydroxylamine, DGA
and NMP. The availability and prices of these chemicals are subject to various
factors, including those described below.
Benzene and toluene are readily available commodity by-products of oil
refining. Like most commodities, the prices of benzene and toluene are subject
to fluctuation. Benzene prices are affected by the demand for a variety of
products, principally including styrene and phenolic resins. The price of
toluene, an octane-enhancing additive for unleaded gasoline, is directly
affected by the demand for and price of unleaded gasoline.
ChemFirst purchases ammonia and ethanol in the spot market for use in its
manufacturing processes. Prices paid by ChemFirst for natural gas are affected
by the degree of interruptibility of the gas supply. Hydroxylamine used by
ChemFirst is currently available from only one supplier located in Japan. The
remainder of ChemFirst's raw materials are generally available in adequate
quantities from several suppliers, subject to market variation in price. There
can be no assurance that future price changes or disruption in the
availability of ChemFirst's principal raw materials will not adversely affect
ChemFirst's operating results. See "Business--Chemicals--Raw Materials."
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BUSINESS
GENERAL
The principal businesses of ChemFirst involve continuous production of
aniline, nitrobenzene, nitrotoluene and toluidines; custom production of fine
chemicals for chemical, agricultural and pharmaceutical companies and
production of electronic performance chemicals for the semiconductor and
related industries. Other significant businesses include the design and
production of low-emission burners, flares and incinerators and thermal plasma
equipment for steel production, waste treatment and research. ChemFirst also
produces steel ingots and billets from melted scrap.
In May 1996, ChemFirst announced that its wholly owned subsidiary, Plasma
Processing Corporation, was shutting down its only production facility and
exiting the aluminum dross processing (aluminum recovery) business. Losses
from that business were $27.3 million in fiscal 1996, including provisions of
$18.3 million related to the shutdown of facilities. See "--Combustion and
Thermal Plasma."
OPERATING STRATEGY
Following the Distribution, the operations of ChemFirst will be focused on
chemicals and related products and services with planned dispositions of
aluminum dross processing and steel operations. ChemFirst's strategic
objective is to build its chemicals business through internal growth and
expansion and through acquisitions that support and complement existing
businesses, using cash from the Financing which will be distributed to
ChemFirst prior to the Distribution under the terms of the Distribution
Agreement, from the proceeds of the dispositions of aluminum dross processing
and steel assets and from operating cash flow and borrowings. ChemFirst's goal
is to increase sales and earnings, reduce earnings cyclicality and provide
attractive returns on capital employed and shareholders' equity to enhance
shareholder return. Capital expenditures in support of this strategy were
$33.0 million in fiscal 1996. An additional $162.0 million is budgeted for
capital expenditures over the next two years.
CHEMICALS
General
ChemFirst's chemicals business had sales of $227.8 million in fiscal 1996,
which accounted for approximately 61% of ChemFirst's consolidated sales for
fiscal 1996. Chemicals had an operating profit of $44.0 million in fiscal
1996. ChemFirst's chemicals business is operated principally through three
subsidiaries: First Chemical Corporation ("FCC"); Quality Chemicals, Inc.
("Quality Chemicals"); and EKC Technology, Inc. ("EKC").
ChemFirst groups its chemical products into three major categories:
industrial chemical intermediates, fine chemicals and electronic performance
chemicals. Industrial chemical intermediaries are manufactured by FCC and
include aniline and nitrobenzene. ChemFirst's fine chemicals are produced by
both Quality Chemicals and FCC, and include chemicals for use by companies for
agricultural, pharmaceutical, polymer and photosensitive applications.
ChemFirst's electronic performance chemicals include organic photoresist
removers, which are produced by EKC, and other chemicals used in the
semiconductor and related industries. The primary distinction between
intermediates and fine chemicals is the degree to which further processing is
required to produce the end product used by consumers. Electronic performance
chemicals are not consumed into the end product but are instead used during a
manufacturing process for a specific purpose.
Of these three categories, industrial chemical intermediates are chemicals
in the least advanced state of production and the most affected by changes in
the business cycle or in the cost of raw materials. These chemicals are
typically sold in large volumes to industrial customers that purchase on the
basis of the chemical's molecular content. The key to successful production of
these chemicals is efficient chemical conversion of large
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quantities of raw materials and productive use of plant capacity. Providing
technical services to customers is generally less important.
Fine chemicals are sold in relatively small volumes to a narrow base of
customers, which are either end-users or producers of performance chemicals.
Because of their specialized, complex molecular content, there are typically
few uses for fine chemicals and significantly more technical service is
expected from the customer. The key to successful production of fine chemicals
is identifying the markets for the product and developing a highly exacting
chemical synthesis for use in the production process. Profit margins typically
are higher than those associated with the production of industrial chemical
intermediates.
Purchasers of performance chemicals, who are end-users, acquire the product
to achieve a specific performance objective. As with fine chemicals,
performance chemicals are typically sold in relatively small volumes and have
relatively few uses, although the customer base is often larger than that for
fine chemicals. The production and sale of these chemicals are labor intensive
and are usually dependent on a highly technical proprietary formulae and a
sophisticated, well-trained customer service staff. Profit margins are
relatively high and are usually not significantly affected by increases in the
price of raw materials.
Industrial Chemical Intermediates
FCC, located in Pascagoula, Mississippi, owns and operates facilities for
the continuous production of aniline, nitrobenzene, nitrotoluenes and
toluidines. FCC's operating facilities are supported by storage, rail, truck
and barge distribution facilities and quality control laboratories and also
include research laboratories, a pilot plant and multipurpose batch facilities
for the development and production of specialty chemicals. FCC utilizes state-
of-the-art technology for nitration and a proprietary process for continuous
hydrogenation. The Pascagoula facilities' total nitrated aromatic production
capacity is approximately 516 million pounds per year. Actual fiscal 1996
production was 429 million pounds, approximately 83% of average annual
capacity.
FCC is among the largest merchant marketers of aniline in the United States,
and its Pascagoula complex is one of the largest aniline production facilities
in the United States. Aniline's primary end use is in rigid polyurethane foam,
an insulation material that is widely used in residential and commercial
construction. Aniline is also used in the manufacture of impact-resistant
plastic that is used as a replacement for metal in automobile parts such as
bumpers where flexibility and impact resistance are important. Aniline's other
primary applications are in the production of an antioxidizing (anti-cracking)
agent used in the manufacture of synthetic rubber and in a widely used
herbicide for corn and soybeans. The aniline sold by FCC accounted for
approximately 19% of ChemFirst's consolidated sales for the fiscal year ended
June 30, 1996. Most of FCC's aniline production is sold under contracts
containing price-adjustment mechanisms that substantially protect FCC from
fluctuations in the prices of raw materials.
FCC recently entered into a long-term agreement with Bayer Corporation
("Bayer") to build, own and operate a world scale nitrobenzene and aniline
facility at Bayer's Baytown, Texas chemical complex. The facility will be an
integral part of Bayer's MDI (methylene diphenyl diisocyantate) manufacturing
operations. Completion of Phase I of the facility is scheduled for early 1998.
A large majority of FCC's current aniline production is sold to Bayer under a
long-term contract. It is intended that this contract will terminate if a
potential Phase II of the new facility is completed. The estimated cost to FCC
of Phase I is in excess of $50.0 million. The cost of Phase II is estimated to
be considerably less.
Custom Manufacturing of Fine Chemicals
Through its Quality Chemicals subsidiary, ChemFirst is a batch producer of
fine chemicals manufactured to the specifications of its customers. Although
historically its customers have purchased small quantities of Quality
Chemicals' products primarily for new product development and market testing,
recently the amount of chemicals sold by Quality Chemicals for use in
commercially marketed products has increased
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significantly. Companies involved in the mass production of chemically based
consumer products often find it expensive and inefficient to manufacture small
quantities of the complex chemicals required for new product development or
products with limited markets. By providing a versatile array of custom
services to a number of such companies, Quality Chemicals achieves economies
of scale and is able to manufacture certain fine chemicals more economically
than they can be manufactured by its customers.
Quality Chemicals' facilities, located in Tyrone, Pennsylvania, and Dayton,
Ohio, include equipment for multi-step batch processing to custom produce
complex fine chemicals used by chemical, agricultural and pharmaceutical
companies. Both of these facilities are owned by Quality Chemicals. Following
capacity additions and plant modifications to the Tyrone facility in fiscal
1996, annual production capacity is now between 4.5 million and 6.0 million
pounds, depending on the products being produced and the type of custom
processing required. Fiscal 1996 production was approximately 4.5 million
pounds. Annual production capacity for the Dayton facility is between
approximately 1.5 million and 2.0 million pounds depending on the products
being produced and the type of custom processing required. Fiscal 1996
production was approximately 1.1 million pounds.
Quality Chemicals' current production is based on multi-step organic
syntheses. Quality Chemicals has versatile facilities that use numerous
reactors capable of producing custom fine chemicals in quantities ranging from
the very small amounts needed for initial product testing, through pilot plant
production of developmental quantities and continuing through the commercial
production of chemicals with specific markets.
Approximately 46% of Quality Chemicals' revenue in fiscal 1996 was derived
from sales of a herbicide ingredient to one manufacturer under an agreement
that will expire in 2002. A substantial portion of the remainder of Quality
Chemicals' sales is derived from a group of agricultural intermediaries and
actives. Quality Chemicals' other significant products include Diphenyl
isopthalate, an intermediate used in the production of fibers for fire-
retardant fabrics and in transparent, heat-resistant plastics; rubber
additives used in the manufacture of chemical-resistant rubber; and a co-
catalyst for a high-volume polyolefin plastic.
Electronic Performance Chemicals
EKC produces a line of electronic performance chemicals and products used in
the semiconductor and related industries. These products include organic
photoresist removers and cleaning solutions which remove photoresist and dry-
etch residue during the manufacture of semiconductors. These chemicals
comprise approximately 95% of EKC's sales. Approximately 47% of EKC's net
sales for fiscal 1996 were outside of the United States, and approximately 19%
of EKC's net sales for fiscal 1996 were made by its Scotland-based subsidiary,
EKC Limited, which sells EKC's products in the European market. Most of these
products are produced on-site utilizing the same proprietary formulations used
by EKC in the United States with a small percentage manufactured in the United
States and distributed by the subsidiary into Europe. The remaining portion of
non-United States sales were made in the Pacific Rim through distributors.
EKC's production facilities are located in Hayward, California and East
Kilbride, Scotland, with marketing, technical and administrative support
located at both locations. Additional marketing and technical support was
added in Tokyo, Japan during fiscal 1996. Facilities include mixing vessels,
cleanroom packaging facilities, advanced quality control analytical
laboratories and product applications laboratories. EKC owns its California
facility, which is a 65,000-square-foot state-of-the art facility. A research
and development laboratory is being added in California to provide additional
facilities for EKC's expanded research staff. The California operation
includes bulk storage facilities with bulk storage facilities and a factory
addition planned at Scotland within a year. EKC's Scotland facility is a
15,000-square-foot warehousing, manufacturing and office facility. The
facility is owned but the land is leased pursuant to a long-term contract. In
fiscal 1996, EKC leased office space in Tokyo, Japan to provide additional
marketing and technical support for accelerating development of its Japanese
markets. The California facility is currently utilizing 65% of production
capability on a two-shift, five-day basis. The Scotland facility is currently
utilizing 40% of production capability on a one-shift, five-day basis.
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Marketing and Sales
Chemicals are marketed globally. Approximately 15% of ChemFirst's sales in
fiscal 1996 were exports. ChemFirst has long-term contracts with a number of
its largest customers. A majority of chemicals sales are made through
ChemFirst's internal sales force.
FCC's products are sold in drums and in bulk as intermediates into the
construction, transportation, semiconductor, agricultural chemical,
pharmaceutical, pigment, photographic, specialty polymer and ultra violet
(U.V.) curing markets. Exported product is shipped in ocean-going tankers,
iso-containers or drums to European, Japanese and South American markets.
Domestic shipments are by barge, rail or tank trucks. As discussed above, a
significant amount of FCC's sales are to a single customer under a long-term
contract. See "--Industrial Chemical Intermediates, Fine Chemicals and
Performance Chemicals."
Quality Chemicals' specialty chemical products are sold in drums into
pharmaceutical, electronic chemical, agricultural chemical and specialty
polymer markets. A significant amount of Quality Chemicals' sales are to three
customers under long-term contracts.
EKC's performance products are marketed domestically and internationally
within Europe and the Pacific Rim. Approximately 47% of sales are
international. EKC's California facility services North America and the
Pacific Rim and Scotland facility services the European community.
Approximately 40% of all international sales are into Europe and 60% into the
Pacific Rim. Chemicals are distributed in gallon, liter, returnable drum and
tote bin containers.
Raw Materials
Benzene and toluene, two of FCC's principal raw materials, are readily
available commodity by-products of oil refining. Like most commodities, the
prices of benzene and toluene are subject to fluctuation. Benzene prices are
affected by the demand for a variety of products, principally including
styrene and phenolic resins. The price of toluene, an octane-enhancing
additive for unleaded gasoline, is directly affected by the demand for and
price of unleaded gasoline. However, FCC is protected from fluctuations in raw
material prices in the contracts under which most of its aniline production is
sold. The remainder of its production is sold under short-term contracts or
purchase orders at prices that generally reflect its actual raw material cost.
Other significant raw materials include ammonia, natural gas and ethanol.
FCC purchases ammonia and ethanol at market prices. FCC purchases natural gas
in the spot market for use in making the hydrogen necessary for its
manufacturing processes. This gas is transported into the Pascagoula plant
through an interstate pipeline. Prices paid by ChemFirst for natural gas are
affected by the degree of interruptibility of the gas supply.
Quality Chemicals' primary raw materials include hydrogen, hydrogen
peroxide, o-aminophenol, o-nitrophenol, formaldehyde, butaldehyde and natural
gas. Quality Chemicals obtains its raw materials from a number of different
sources. ChemFirst does not believe that any one source of raw materials is
material to Quality Chemicals' business.
EKC's primary raw materials include hydroxylamine, DGA and NMP. With the
exception of hydroxlyamine, raw materials are generally available in adequate
quantities from several suppliers, subject to market variation in price.
Hydroxylamine is currently available from one supplier, located in Japan. Two
major manufacturers have announced plans to construct facilities capable of
manufacturing aqueous hydroxylamine with production anticipated to begin
within the next three years.
Research and Development
ChemFirst conducts research and development to improve existing products and
to produce new specialty chemicals. Approximately $4.5 million, $5.3 million
and $4.3 million was spent on research and development in
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fiscal 1996, 1995 and 1994, respectively. Research facilities include
laboratories, pilot plant and semi-works for process research and development
with gram to multi-pound sample production capabilities. FCC also sponsors
applied research at leading universities in the United States and maintains a
radiation curing applications laboratory in Pascagoula to evaluate new
products and provide customer technical support. These closely directed
programs have led to the development and introduction of proprietary
technology in fine chemicals and in the FirstCure(R) line of performance
polymer products. EKC conducts research and development internally to improve
existing products and to identify and develop new chemistries. EKC also
sponsors applied research at two leading universities in the U.K. In addition,
EKC has entered into joint development agreements with a major semiconductor
manufacturer and an industry consortium to develop advanced products to meet
future semiconductor manufacturing technology.
Competition
FCC is one of five major United States producers of aniline, with
approximately 18% of domestic capacity and an estimated 5% of world capacity.
FCC is the only United States producer of nitrotoluenes, with an estimated 10%
of world capacity. Major competitors are large chemical companies. Competition
is based on price, service, quality, marketing and research and development
support capabilities.
Based on market share, Quality Chemical is among the top 10 custom chemical
manufacturing companies in the United States. Major competitors are both
smaller and larger companies. Competition is based on service, quality,
manufacturing expertise in chemistries and processes, research and development
capabilities and price.
EKC is one of the world's largest producers of post-metal cleaning solutions
with 28% of the world market representing 34% in North America, 40% in Europe
and 20% in the Pacific Rim. Although there are approximately 12 companies
participating in this market worldwide, only EKC and three others specialize
in developing proprietary post-metal cleaning solutions for the semiconductor
and related industries. Competition is based on price, service, product
performance, quality and product development capabilities. EKC has reached an
agreement whereby it would license its HDA(TM) (hyrodxylamine) technology to a
major competitor. See "--Patents and Licenses."
Seasonality of Business
Generally, chemical sales are not seasonal and working capital requirements
do not vary significantly from period to period.
COMBUSTION AND THERMAL PLASMA
Combustion and thermal plasma principally includes the development and
marketing of proprietary equipment and systems for industrial applications.
These include design and production of low-emission burners, flares and
incinerators and thermal plasma equipment for steel production, waste
treatment and research. Raw materials and components for these operations are
available from numerous vendors. The businesses are not considered materially
seasonal. Working capital requirements rose during fiscal 1996 as ChemFirst
expanded into new markets with less favorable payment terms. Combustion and
thermal plasma sales in fiscal 1996 were $65.6 million, representing
approximately 18% of ChemFirst's consolidated sales for such period, and it
had an operating loss of $30.9 million for fiscal 1996 including provisions of
$18.3 million related to the shutdown of facilities. See "--General."
Combustion Equipment and Services
Callidus Technologies Inc., a wholly owned subsidiary of ChemFirst ("CTI"),
was organized in fiscal 1990. CTI's principal products and services are custom
designed and fabricated gas/liquid incinerators, flares, solid waste systems,
vapor recovery units, burners and predictive emissions monitoring and process
optimization software services. CTI also provides engineering and consulting
services for environmental and combustion applications.
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CTI markets worldwide to refining, petrochemical, chemical, wood products
and other industries requiring disposal of gas, liquid and solid wastes.
Marketing is primarily through a combination of manufacturers' representatives
and company personnel. The market is well established but growing through
advancements of existing technology, driven primarily by increasingly strict
environmental regulations both in the United States and abroad. Competition is
based on a wide variety of factors, with the most prominent being price,
technological innovation and delivery schedule. CTI competes with the John
Zink Company, which has a significant share of the burner, flare and vapor
recovery markets. Numerous competitors exist in the gas and liquids
incineration market. Primary competition in the solids waste systems market
comes from alternative technologies. CTI offers predictive emissions
monitoring and process optimization software services utilizing products
licensed by CTI's customers. CTI is affected by a variety of factors beyond
its control, including governmental control of environmental standards and
compliance deadlines, competitor pricing strategies and changing technology,
any of which could impact CTI's operating results. CTI leases office space in
Tulsa, Oklahoma, owns a manufacturing and test facility in Beggs, Oklahoma,
and has offices in Belgium, England, Italy, France, Germany and Japan.
Thermal Plasma
Plasma Energy Corporation, a wholly owned subsidiary of ChemFirst ("PEC"),
is the leading international supplier of plasma heating systems and related
processes to the metals and waste industries. PEC, a technology-based
engineering company, develops, manufactures, sells and services these systems
for use in steel manufacturing, specialty metals refinement and various
environmental waste recycling processes, including municipal solid waste
("MSW") ash vitrification.
Thermal plasma heating systems convert electrical energy into high
temperature thermal energy using an ionized gas or "plasma." These high
temperatures are produced instantly with no combustion or combustion by-
products. A thermal plasma heating system typically consists of a torch, power
supply, cooling system and control panel. The torch usually operates within a
furnace or heating vessel, in which it can be inserted or retracted according
to operational requirements. PEC holds more than 20 patents in 10 countries,
including several in steel, vacuum melting and waste applications. See "--
Patents and Licenses."
PEC markets industrial-scale commercial systems for controlling temperature
in steel making and waste treatment and reduction. PEC owns a testing facility
used for system integration, system and process development and customer
training. A separate administrative office is leased. Both facilities are
located in Raleigh, North Carolina. Marketing is performed directly by PEC.
International sales are supported by qualified overseas representatives.
Plasma heating systems are sold in both the domestic and international
markets. PEC has two principal domestic competitors and four foreign
competitors. Price competition is intense and competitors' pricing strategies
may impact PEC's operating results.
Plasma Processing Corporation ("PPC") was formed during fiscal 1990 to
commercialize patented technology developed by PEC and Alcan International
Limited ("Alcan") of Canada for the recovery of aluminum from dross using
thermal plasma technology. PPC completed construction of an aluminum dross
processing plant located in Millwood, West Virginia in June 1991 utilizing the
technology. The plant also produced a co-product that can be utilized in
refractory industries. In June 1995, aluminum dross processing operations were
curtailed to concentrate on the development of the co-product markets. In May
1996, due in part to historical and projected near-term losses, PPC announced
the shutdown of the Millwood facility and permanent exit from the aluminum
dross processing business. Operations have continued, however, at its joint
venture, Newminco, formed in August 1995 which manufactures lightweight
aggregate materials based on technology licensed by PPC.
In September 1996, ChemFirst entered into a letter of intent providing for
the sale of substantially all of PPC's aluminum dross processing assets and
technology. That letter of intent expired on November 1, 1996; however,
ChemFirst continues to negotiate with the party to the letter of intent.
Assets that are not part of this proposed transaction will be liquidated by
ChemFirst. Based on the status of current negotiations, ChemFirst does not
anticipate any material gain or loss related to these dispositions.
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STEEL PRODUCTION
ChemFirst operates a steel melting and production facility through its
wholly owned subsidiary FirstMiss Steel, Inc. ("FMS") in Hollsopple,
Pennsylvania. ChemFirst is actively seeking a buyer for FMS. FMS had net sales
of $77.1 million in fiscal 1996, which constituted 21% of ChemFirst's
consolidated sales. FMS had an operating profit of $1.3 million for such
period. FMS's approximately 400,000 square-foot leased facility is located
about 100 miles east of Pittsburgh. Following upgrades to one of FMS's two
electric arc furnaces in January 1995, annual capacity of the operation now
includes 150,000 tons of carbon, alloy and specialty grade, bottom-poured
ingots and 50,000 tons of high-grade steel billets through the caster. In
January 1996, the second electric arc furnace was removed and a NOD converter
was added, which combined with the newly upgraded electric arc furnace and the
existing VOD units form the "Triplex" process for producing stainless steel.
This new process will increase stainless steel capacity. Horizontally cast
billets are produced for sale to the specialty remelt and reroll markets.
Production during fiscal 1996 totaled 110,000 tons consisting primarily of
cast ingots and value-added products. The value-added product line was
introduced in fiscal 1992 and includes specialty stainless and tool steel
ingots or billets, which are converted into forged billets, bars and plate by
outside processors. FirstMiss Alloys was formed during fiscal 1993 to produce
small quantities of cobalt, nickel, copper and iron-based alloys in bars and
wire produced from two small horizontal continuous casters, small bottom-
poured forging ingots and remelt sand ingots. Raw materials consist of steel
scrap and various alloys, of which there is an adequate supply in the North
American market.
Carbon and alloy steel ingots are sold directly to the forging industry,
ring rollers, extruders and integrated steel producers. FMS competes primarily
with three other steel companies in this market and, within the group, ranks
second in total steel production capacity. Specialty steel products are
primarily sold to steel service centers and forgers. Two customers account for
24% of FMS's total revenue. FirstMiss Alloy products are sold as feedstock
directly to forgers, extruders and investment casters. There are numerous
competitors, both domestic and foreign, that compete with FMS in the specialty
steel and ferrous and non-ferrous metals markets. Competitive factors include
price, quality and service. Carbon steel ingots and billets are commodities
and are extremely price competitive.
OTHER OPERATIONS
ChemFirst owns 50% of Power Sources, Inc. ("PSI") of Charlotte, North
Carolina, which burns wood residue and other biomass in industrial boilers to
create steam energy. The steam is sold under long-term contracts to industrial
users. PSI operates seven plants located in North Carolina, South Carolina,
Tennessee and Mississippi.
EMPLOYEES
ChemFirst employs approximately 1,100 persons. Approximately 550 persons are
employed in the chemicals business, 285 are employed in combustion and thermal
plasma and 205 in steel. In addition, ChemFirst has approximately 60 persons
employed in its corporate headquarters. Certain senior management and
administrative employees are based in Jackson, Mississippi. Management
believes that its relations with its employees are good. None of ChemFirst's
employees are covered by a collective bargaining agreement except certain of
FMS's employees.
PATENTS AND LICENSES
ChemFirst owns or licenses a significant number of patents relating to
various products and processes. These patents expire at various times over the
next 17 years. ChemFirst does not consider its business to be materially
dependent on any one particular patent or patent license.
EKC has entered a licensing agreement with a major competitor whereby EKC
licenses its HDA(TM) (hydroxylamine) technology. The agreement results from a
patent violation complaint brought by EKC against the competitor in federal
court. The agreement allows the competitor to continue to market its products
which utilize EKC's hydroxylamine technology, but provides for EKC to receive
a royalty and license fee.
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LEGAL PROCEEDINGS
While ChemFirst is involved in several suits and claims in the ordinary
course of business, including claims relating to environmental matters, see
"--Environmental Considerations," ChemFirst is not now a party to any legal
proceeding that ChemFirst believes would have a material adverse effect on
ChemFirst's business.
INSURANCE
ChemFirst maintains business interruption, general liability and property
damage insurance coverage as well as other insurance as appropriate for the
conduct of its business.
ENVIRONMENTAL CONSIDERATIONS
ChemFirst operations are subject to a wide variety of environmental laws and
regulations governing emissions to the air, discharges to water sources, and
the handling, storage, treatment and disposal of waste materials, as well as
other laws and regulations concerning health and safety conditions. ChemFirst
holds a number of environmental permits and licenses regulating air emissions,
water discharges and hazardous waste disposal and, to the best of its
knowledge, is in material compliance with such requirements at all locations.
ChemFirst makes capital and other expenditures in a continuing effort to
comply with environmental laws and regulations, or changing interpretations of
existing laws and regulations. ChemFirst's environmental capital expenditures
for fiscal 1996 were $1.7 million. Projected environmental capital
expenditures for fiscal 1997 and 1998 are $3.5 million and $2.2 million,
respectively. While these expenditures are necessary to comply with
environmental laws and regulations, they may also reduce operating expenses
and improve efficiencies.
ChemFirst monitors and participates in the environmental regulatory
development process which assists it in evaluating new laws and regulations.
ChemFirst does not anticipate a material increase in expenses related to
current environmental regulations, but because federal and state environmental
laws and regulations are constantly changing, ChemFirst is unable to predict
their future impact.
ChemFirst has received notices from the United States Environmental
Protection Agency or a similar state agency that it has been deemed a
potentially responsible party ("PRP") under Superfund or a comparable state
statute at several sites and, thus, may be liable for a share of the
associated remediation cost. ChemFirst contributed $183,000 toward clean up of
one of these sites during fiscal 1996. It is difficult to estimate ChemFirst's
ultimate liability in these matters due to several uncertainties such as, but
not limited to, the method and extent of remediation, the percentage of
material attributable to ChemFirst at the site relative to that attributable
to other parties, and the financial capabilities of the other PRPs. Based on
currently available information, however, ChemFirst does not believe that its
future liability at these sites will be material to its financial condition or
cash flow.
The current owner of a fertilizer manufacturing facility, previously
operated under lease by a subsidiary of ChemFirst, has performed a feasibility
study and a remediation action plan for that site, subject to regulatory
approval. A previous owner takes the position that ChemFirst has some
financial responsibility for the closure activities; however, ChemFirst denies
liability in this matter, but believes that it has set up adequate reserves
for any potential liability as part of its accounting for discontinued
operations.
PROPERTIES
In addition to those described above, ChemFirst owns or leases the following
properties:
ChemFirst owns an approximately 26,000 square-foot office building in
Jackson, Mississippi, which is its corporate headquarters.
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FCC leases 7 acres of waterfront property from the Jackson County Port
Authority at an annual cost of $9,156. This property is used by FCC for
loading and unloading ocean going vessels and barges. The lease expires in
2003.
ChemFirst, through FCC, owns 180 acres of land near FCC's Pascagoula plant.
Jackson County, Mississippi, has the right to reclaim this land and retain
one-fifth of the $2.2 million installment purchase price if ChemFirst has not
commenced construction of facilities on the property by September 1997.
ChemFirst and a subsidiary of Mississippi Chemical have entered into an
agreement pursuant to which ChemFirst would convey approximately 110 acres of
such land to the subsidiary in exchange for approximately 23 acres of land
near FCC's Pascagoula plant and $1.2 million in cash. The consummation of this
exchange is subject to a number of conditions, including the release by
Jackson County, Mississippi, of ChemFirst's obligation to begin construction
on any part of the 180-acre parcel.
ChemFirst owns approximately 585 acres of undeveloped land located in
Hillsborough County, Florida.
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THE TRANSFERS AND THE DISTRIBUTION
This section of the Prospectus describes certain aspects of the proposed
Transfers and the Distribution. To the extent that they relate to the
Distribution Agreement, the Tax Disaffiliation Agreement or the Employee
Benefits Agreement, the following descriptions do not purport to be complete
and are qualified in their entirety by reference to the Distribution
Agreement, the Tax Disaffiliation Agreement or the Employee Benefits
Agreement, as the case may be, which are attached as Appendix B to the Joint
Proxy Statement/Prospectus and are incorporated herein by reference. ALL FIRST
MISSISSIPPI SHAREHOLDERS ARE URGED TO READ THE DISTRIBUTION AGREEMENT, THE TAX
DISAFFILIATION AGREEMENT AND THE EMPLOYEE BENEFITS AGREEMENT IN THEIR
ENTIRETY.
BACKGROUND OF AND REASONS FOR THE DISTRIBUTION
Because the Fertilizer Business is the only business of First Mississippi
that Mississippi Chemical proposes to acquire, First Mississippi has
determined to effect the Distribution, which, based upon the opinion of
counsel to First Mississippi, will be tax free to First Mississippi
shareholders for Federal income tax purposes (except to the extent of cash
received for fractional shares). See "Certain Federal Income Tax
Consequences." First Mississippi's agreement to effect the Distribution
fulfilled a condition to Mississippi Chemical's willingness to enter into the
Merger Agreement.
Although the Distribution will not be effected unless the Merger is approved
and is about to occur, the Distribution is separate from the Merger and the
shares of ChemFirst Common Stock to be received by holders of First
Mississippi Common Stock in the Distribution do not constitute a part of the
Merger consideration.
TERMS OF THE DISTRIBUTION AGREEMENT
The Distribution will, by means of a spin-off of First Mississippi's
chemicals and other non-fertilizer businesses, separate First Mississippi's
Fertilizer Business from its other businesses and enable Mississippi Chemical
to acquire the Fertilizer Business only in the Merger.
The Distribution
The Distribution Agreement provides that the Distribution will be effected
by the distribution to each holder of record of First Mississippi Common Stock
as of the close of business on the Distribution Record Date of certificates
representing one share of ChemFirst Common Stock for every share of First
Mississippi Common Stock held by such holder. As a result of the Distribution,
the shareholders of record of First Mississippi at the close of business on
the Distribution Record Date will own all of the outstanding ChemFirst Common
Stock.
The Transfers
The Distribution Agreement provides for a series of stock transfers, assets
transfers and mergers between and among First Mississippi and certain of First
Mississippi's subsidiaries prior to the Distribution (collectively, the
"Transfers"). The Transfers include the following transactions, each of which
will be effected prior to the time of the Distribution:
(a) First Mississippi will transfer, assign and convey to ChemFirst, all
of the issued and outstanding capital stock of its non-fertilizer
subsidiaries, including those of its chemicals, combustion and thermal
plasma and steel operations.
(b) In addition to the transfers referred to above, First Mississippi
will, or will cause its subsidiaries to, transfer, assign and convey to
ChemFirst all other assets of First Mississippi which are not primarily
related to the Fertilizer Business, including, but not limited to (i) all
assets of First Mississippi and its subsidiaries located in the Jackson,
Mississippi metropolitan area (other than books and records of First
Mississippi to the extent that they do not relate to the business of
ChemFirst); (ii) the note receivable from Getchell Gold; and (iii) other
receivables.
E-20
<PAGE>
(c) Prior to the Distribution, FirstMiss Fertilizer, Inc. will be merged
with and into First Mississippi with First Mississippi as the surviving
corporation in the merger.
(d) Prior to First Mississippi's transfer of the capital stock of FEC
Marketing, Inc. to ChemFirst, FEC Marketing, Inc. will transfer its
interests in FirstMiss Fertilizer Limited Partnership and FirstMiss
Fertilizer of Texas LP to a Fertilizer Business entity.
As a result of the Transfers, ChemFirst will own all of the assets of First
Mississippi other than those of the Fertilizer Business.
Prior to the Distribution, First Mississippi will consummate the Financing
described in the Joint Proxy Statement/Prospectus. A portion of the proceeds
of the Financing will be used to refinance First Mississippi's existing
indebtedness and pay certain costs related to the Merger, with the remaining
proceeds, estimated to be approximately $50.0 million, to be contributed to
ChemFirst prior to the Distribution. As a result of the Financing, which will
remain the obligation of the Fertilizer Business to be acquired by Mississippi
Chemical in the Merger, and the application of its proceeds, at the time of
the Distribution ChemFirst will have no significant long-term indebtedness and
available cash reserves currently estimated to be approximately $50.0 million.
See "Pro Forma Financial Information."
Transfer of Liabilities
Pursuant to the Distribution Agreement, the parties will further agree that,
except as otherwise provided in the Merger Agreement, the Distribution
Agreement, the Tax Disaffiliation Agreement and the Employee Benefits
Agreement, at or prior to the time of the Distribution, ChemFirst will assume
all liabilities of First Mississippi and its subsidiaries, other than
liabilities to the extent arising out of, based upon, or resulting from the
operation of the business of, or to the extent relating to, the Fertilizer
Business (the "ChemFirst Assumed Liabilities"), and First Mississippi will
retain First Mississippi's debt and all liabilities (whether arising before or
after the time of the Distribution) to the extent arising out of, based upon,
or resulting from the operation of, or to the extent relating to, the
Fertilizer Business (the "First Mississippi Assumed Liabilities"). However,
the First Mississippi Assumed Liabilities will not include any liability with
respect to the former operation of the fertilizer manufacturing facility in
Ft. Madison, Iowa.
Certain Further Transfers
The Distribution Agreement provides that if, after the time of the
Distribution, either ChemFirst or First Mississippi holds assets which by the
terms of the Distribution Agreement or the Merger Agreement were intended to
be assigned and transferred to, or retained by, the other party, such party
will promptly assign and transfer or cause to be assigned and transferred such
assets to the other party.
Use of Names
Following the time of the Distribution, ChemFirst will have the sole and
exclusive ownership of and right to use all of the names, trademarks, trade
names and other proprietary rights of First Mississippi, other than "Urifirst"
and "Urifeed."
Certain Covenants
The Distribution Agreement provides that for two years after the time of the
Distribution, neither First Mississippi nor ChemFirst will, directly or
indirectly, solicit the employment of any employee of the other party and its
subsidiaries; provided that ChemFirst may solicit the employment of certain
employees identified pursuant to the Distribution Agreement.
The Distribution Agreement also provides that prior to the time of the
Distribution, First Mississippi will transfer and assign to ChemFirst all of
First Mississippi's insurance policies other than (i) any policy which relates
solely to the Fertilizer Business and (ii) any policy that is not assignable
pursuant to its terms (a "Non-
E-21
<PAGE>
Assignable Policy"). In the event any policy is a Non-Assignable Policy, First
Mississippi will keep such policy in effect during its remaining term and will
refrain from taking any actions (other than making a claim) which may affect
ChemFirst's entitlement to the benefits of, or coverage under, such policy.
With respect to First Mississippi's (i) general liability policy and (ii)
excess casualty policy, in the event such policies are assigned to ChemFirst
pursuant to the Distribution Agreement, ChemFirst will keep such policies in
effect during their respective terms and will refrain from taking any actions
(other than making a claim) which may effect First Mississippi's entitlement
to the benefits of, or coverage under, such policies. First Mississippi and
ChemFirst will also agree in the Distribution Agreement to cooperate with each
other with respect to the processing of any claims which are covered by any
insurance policy in existence prior to the time of the Distribution.
Settlement of Intercompany Balances
In connection with the Distribution, all amounts owing between the ChemFirst
entities and the Fertilizer Business entities, other than amounts arising in
the ordinary course of business, will be deemed paid in full at or prior to
the Distribution.
Mutual Indemnities
The Distribution Agreement provides that effective upon the Distribution,
ChemFirst will indemnify and hold First Mississippi, its affiliates,
successors and assigns and the officers, directors, partners, employees,
agents and representatives of any of them, harmless from and against any and
all ChemFirst Assumed Liabilities. Effective upon the Distribution, First
Mississippi will indemnify and hold ChemFirst, its affiliates, successors and
assigns and the officers, directors, partners, employees, agents and
representatives of any of them, harmless from and against any and all First
Mississippi Assumed Liabilities. If either of the foregoing indemnities is
unavailable for any reason, the parties have agreed to contribute in respect
of any such loss, claim, damage or liability on an equitable basis.
Mutual Releases
The Distribution Agreement provides that effective upon the Distribution and
except as otherwise specifically set forth in the Distribution Agreement, each
of ChemFirst and First Mississippi releases and forever discharges the other,
and its officers, directors, agents, affiliates, record and beneficial
security holders (including, without limitation, trustees and beneficiaries of
trusts holding such securities), advisors and representatives, of and from all
debts, demands, actions, causes of action, suits, accounts, covenants,
contracts, agreements, damages, and any and all claims, demands and
liabilities whatsoever of every name and nature, both in law and in equity,
against such other party or any of its assigns that the releasing party has or
ever had, which arise out of or relate to events, circumstances or actions
taken by such other party prior to the Distribution; provided, however, that
the foregoing general release will not apply to the Distribution Agreement or
the transactions contemplated thereby and does not affect either party's right
to enforce the Distribution Agreement or any other agreement contemplated
thereby in accordance with its terms. The Distribution Agreement provides that
each party understands and agrees that, except as otherwise specifically
provided therein, neither the other party nor any of its subsidiaries is, in
the Distribution Agreement or any other agreement or document, representing or
warranting to such party in any way as to the assets, businesses or
liabilities transferred or assumed as contemplated by the Distribution
Agreement or as to any consents or approvals required in connection with the
consummation of the transactions contemplated by the Distribution Agreement,
it being agreed and understood that each party shall take or keep all of its
assets "as is" and that it shall bear the economic and legal risk that
conveyance of such assets may prove to be insufficient or that the title to
any assets may be other than good and marketable and free from encumbrances.
Conditions to the Distribution
The obligations of First Mississippi and ChemFirst to consummate the
Distribution are subject to the fulfillment of each of the following
conditions: (i) the Tax Disaffiliation Agreement and Employee Benefits
E-22
<PAGE>
Agreement shall have been executed and delivered by each of First Mississippi
and ChemFirst; (ii) the Transfers as described in the Distribution Agreement
shall have been successfully consummated; (iii) each condition to the closing
of the Merger Agreement set forth therein, other than the condition to each
parties obligations set forth therein as to the satisfaction of conditions
contained in the Distribution Agreement, shall have been fulfilled; (iv) any
registration statement filed by ChemFirst with the Commission in connection
with the issuance of ChemFirst Common Stock in the Distribution shall have
become effective, and shall not be the subject of any stop order or proceeding
by the Commission seeking a stop order; (v) the shares of ChemFirst Common
Stock to be issued in the Distribution shall have been listed on the NYSE,
subject to official notice of issuance; (vi) all authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any governmental entity or any other public or
private entity the failure of which to obtain would have a material adverse
effect on ChemFirst and its subsidiaries taken as a whole or First Mississippi
and its subsidiaries taken as a whole, shall have been filed, occurred, or
been obtained; (vii) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
Distribution shall be in effect; (viii) First Mississippi and ChemFirst shall
have received an opinion of Skadden, Arps, Slate, Meagher & Flom to the effect
that the Distribution qualifies as a tax-free distribution under Section 355
of the Code; and (ix) the Financing shall have been obtained and the transfer
of cash to ChemFirst as described above under "The Transfers" shall have been
consummated.
Amendment
Pursuant to the Merger Agreement, First Mississippi and ChemFirst may not
modify or amend the Distribution Agreement in a manner adverse to Mississippi
Chemical without the consent of Mississippi Chemical.
TERMS OF THE TAX DISAFFILIATION AGREEMENT
In connection with the Distribution and Merger, First Mississippi and
ChemFirst entered into the Tax Disaffiliation Agreement, which sets forth each
party's rights and obligations with respect to the allocation and payment of
liabilities, and entitlements to refunds, if any, of Federal, state, local or
foreign taxes for periods before and after the Distribution. The Tax
Disaffiliation Agreement also provides for related matters, such as the
allocation of responsibility for and the provision of cooperation in the
filing of any tax returns and the conduct of audits.
Under the Tax Disaffiliation Agreement, ChemFirst is, except as described
below, responsible for (i) any tax liability of First Mississippi and its
subsidiaries for periods ending on or before the Distribution (including any
tax liability imposed as a result of First Mississippi or its subsidiaries
having joint and several liability as members of an affiliated group of
corporations), (ii) any tax liability resulting from the Distribution, the
Merger or the Transfers, and (iii) any tax liability of ChemFirst or its
subsidiaries for all periods. ChemFirst will be entitled to any refunds that
relate to those liabilities. First Mississippi (that is, the Fertilizer
Business to be merged with Miss Sub in the Merger) is responsible for (i)
taxes of First Mississippi and its subsidiaries for taxable periods (or
portions thereof) beginning after the Distribution; and (ii) all taxes of
First Mississippi or ChemFirst and their respective subsidiaries for any
period resulting from the breach of any representation, warranty or covenant
of Mississippi Chemical or, with respect to breaches occurring after the
Distribution, First Mississippi set forth in the Merger Agreement, the
Distribution Agreement or the Tax Disaffiliation Agreement. Accordingly, in
the event the Distribution is determined not to qualify as a tax-free
distribution under Section 355 of the Code, the Merger is determined not to
qualify as a tax-free reorganization under Section 368(a) of the Code, or the
Transfers are determined not to consist of tax-free transactions, in each case
due to the actions taken by Mississippi Chemical or its subsidiaries, or by
First Mississippi or its subsidiaries with respect to periods (or portions
thereof) beginning after the Distribution, then First Mississippi shall be
responsible for all corporate taxes resulting therefrom. First Mississippi and
ChemFirst will be entitled to any refunds that relate to those liabilities for
which they are liable.
E-23
<PAGE>
TERMS OF THE EMPLOYEE BENEFITS AGREEMENT
In connection with the Distribution, First Mississippi and ChemFirst will
enter into the Employee Benefits Agreement which will govern the rights and
obligations of First Mississippi and ChemFirst after the Distribution with
respect to the employees of First Mississippi. Prior to the time of the
Distribution, First Mississippi and ChemFirst will cooperate to transfer each
employee of First Mississippi other than those who will remain employees of
the Fertilizer Business immediately after the Distribution (the "Fertilizer
Employees") to the employ of ChemFirst effective as of the time of the
Distribution. With respect to such transferred employees and all other past,
present, active or inactive employees of First Mississippi (or their
dependents or beneficiaries), other than the Fertilizer Employees, ChemFirst
will assume the liabilities and obligations with respect to, and continue to
be responsible for, all liabilities and obligations whatsoever in connection
with claims made by or on behalf of such persons in respect of salary, wages,
benefits, severance pay, salary continuation and similar obligations accrued
and earned prior to the time of the Distribution and the termination or
alleged termination of such persons' employment with First Mississippi. With
respect to Fertilizer Employees, First Mississippi will retain the liabilities
and obligations with respect to, and continue to be responsible for, all
liabilities and obligations whatsoever in connection with claims made by or on
behalf of such persons in respect of salary, wages, benefits, severance pay,
salary continuation and similar obligations accrued and earned prior to the
time of the Distribution and the termination or alleged termination of such
persons' employment with First Mississippi.
Pursuant to the Employee Benefits Agreement, ChemFirst will assume all
employee benefit plans of First Mississippi and all other employment,
severance and benefit plans, contracts or arrangements covering all employees
or former employees of First Mississippi who are not Fertilizer Employees.
Under the Employee Benefits Agreement, First Mississippi and ChemFirst will
agree to cooperate to amend all employee benefit plans to be transferred as
necessary to establish ChemFirst as successor to First Mississippi as to all
duties, liabilities and obligations under each of such plans and to take such
other steps as may be necessary to prevent the consummation of the
transactions contemplated by the Merger from causing a termination of
employment with respect to such plans.
The Employee Benefits Agreement further provides that each Stock Option and
Debenture Option held by any employee or former employee of First Mississippi
other than a Fertilizer Employee, whether vested or unvested, exercisable or
unexercisable, will be exchanged for an option (a "ChemFirst Option") to
purchase a number of shares of ChemFirst Common Stock equal to the number of
shares of First Mississippi Common Stock into which such Stock Option or
Debenture Option was exercisable times a conversion ratio (the "ChemFirst
Option Conversion Ratio") equal to the fair market value of the First
Mississippi Common Stock divided by the fair market value of the ChemFirst
Common Stock. The exercise price of the ChemFirst Option will equal the
exercise price of the Stock Option or Debenture Option divided by the
ChemFirst Option Conversion Ratio. For purposes of the Employee Benefits
Agreement, the fair market value of the First Mississippi Common Stock will be
the greater of (x) the average of the trading prices of First Mississippi
Common Stock for the ten trading days immediately preceding the date that the
First Mississippi Common Stock commences trading on an ex-dividend basis (with
respect to the Distribution) or (y) the sum of (A) the average of the trading
prices of the First Mississippi Common Stock for the period from the ex-
dividend date (with respect to the Distribution) to the time of the
Distribution and (B) the average of the trading prices of the ChemFirst Common
Stock for the ten trading days following the tenth trading day after the time
of the Distribution (the "ChemFirst Average Price"). The fair market value of
the ChemFirst Common Stock will equal the ChemFirst Average Price. Pursuant to
the Employee Benefits Agreement, effective as of the time of the Distribution,
each outstanding Convertible Debenture will, subject to any required consent
of the holder of such Convertible Debenture, be exchanged for a ChemFirst
debenture which shall be substantially identical to such Convertible Debenture
provided that such debenture shall be convertible into securities of ChemFirst
based on a conversion rate which is appropriately adjusted consistent with the
adjustments with respect to the exchange of Stock Options and Debenture
Options for ChemFirst Options.
E-24
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material Federal income tax
consequences of the Transfers, the Distribution and the Merger to the holders
of First Mississippi Common Stock. The Federal income tax discussion set forth
below is for general information only and may not apply to particular
categories of holders of First Mississippi Common Stock subject to special
treatment under the Code, including, without limitation, foreign holders and
holders whose First Mississippi Common Stock was acquired pursuant to the
exercise of any employee stock option or otherwise as compensation. EACH
HOLDER OF FIRST MISSISSIPPI COMMON STOCK IS URGED TO CONSULT HIS OR HER TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE TRANSFERS,
THE DISTRIBUTION AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
First Mississippi has not requested an advance ruling from the Internal
Revenue Service as to the tax consequences of the Transfers, the Distribution
or the Merger.
CONSEQUENCES OF THE TRANSFERS AND THE DISTRIBUTION
As a condition of consummating the Merger and the Distribution, Mississippi
Chemical, First Mississippi and ChemFirst will receive an opinion from First
Mississippi's special counsel, Skadden, Arps, Slate, Meagher & Flom (Illinois)
("Counsel"), to the effect that, on the basis of the facts, representations
and assumptions set forth in the tax opinion, for Federal income tax purposes,
the Distribution qualifies as a tax-free distribution under Section 355 of the
Code, and the Transfers will not be taxable transactions under one or more of
Sections 332, 351 or 368(a)(1)(D) of the Code. Based upon such opinion, the
following is a summary of certain material Federal income tax consequences of
the Transfers and the Distribution:
1. A First Mississippi shareholder will not recognize any income, gain or
loss as a result of the Distribution, except, as described below, in
connection with cash received in lieu of fractional shares.
2. A First Mississippi shareholder who receives cash in lieu of
fractional shares of ChemFirst Common Stock will be treated as if such
fractional shares had been received by the shareholder as part of the
Distribution and then sold by such shareholder. Accordingly, such
shareholder will recognize gain or loss equal to the difference between the
cash so received and the portion of the tax basis in the ChemFirst Common
Stock that is allocable to such fractional shares. Such gain or loss will
be capital gain or loss, provided that such fractional shares would have
been held by such shareholder as a capital asset at the time of the
Distribution.
3. Following the Distribution, a First Mississippi shareholder will
apportion his or her tax basis for his or her shares of First Mississippi
Common Stock prior to the Distribution between such First Mississippi
Common Stock and the ChemFirst Common Stock received (or in the case of
fractional shares, deemed received) in the Distribution in proportion to
the relative fair market values of such First Mississippi Common Stock and
ChemFirst Common Stock on the Distribution Date.
4. A First Mississippi shareholder's holding period for the ChemFirst
Common Stock received in the Distribution will include the period during
which such shareholder held his or her First Mississippi Common Stock with
respect to which the ChemFirst Common Stock was received, provided that
First Mississippi Common Stock is held as a capital asset by such
shareholder at the time of the Distribution.
5. No gain or loss will be recognized by First Mississippi as a result of
the Transfers or the Distribution (other than income, if any, recognized by
First Mississippi or its subsidiaries in connection with excess loss
accounts under regulation (S)1.1502-19).
Counsel's opinion is based upon certain representations and assumptions and
represents Counsel's best legal judgment. Such opinion is not binding on the
Internal Revenue Service or the courts. If the Internal Revenue Service were
to successfully challenge the Federal income tax treatment of the Transfers
and Distribution set forth in Counsel's opinion and it were ultimately
determined that the Distribution did not qualify under Section
E-25
<PAGE>
355 of the Code, then for Federal income tax purposes (i) each First
Mississippi shareholder would be required to recognize dividend income to the
extent of such shareholder's allocable share of First Mississippi's current
and accumulated earnings and profits on the receipt of ChemFirst Common Stock
in the Distribution in an amount equal to the fair market value of the shares
of ChemFirst Common Stock received in the Distribution (the "Distribution
Amount"), and, to the extent the Distribution Amount exceeded such
shareholder's allocable share of First Mississippi's current and accumulated
earnings and profits, such shareholder would be required to reduce his or her
tax basis in First Mississippi Common Stock to zero and thereafter recognize
gain, and (ii) First Mississippi would be required to recognize gain on the
Distribution to the extent that the fair market value of the shares of
ChemFirst Common Stock issued in the Distribution exceeded First Mississippi's
tax basis in such shares. In this event, (a) the tax basis of the shares of
ChemFirst Common Stock received by a First Mississippi shareholder would be
the fair market value of such shares on the date of the Distribution, and (b)
the holding period for such shares of ChemFirst Common Stock would begin the
day after the date of the Distribution.
Current treasury regulations require each First Mississippi shareholder who
receives ChemFirst Common Stock pursuant to the Distribution to attach to his
or her Federal income tax return for the year in which the Distribution occurs
a detailed statement setting forth such data as may be appropriate in order to
show the applicability of Section 355 to the Distribution. ChemFirst will
convey the appropriate information to each First Mississippi shareholder of
record as of the Distribution Record Date.
CONSEQUENCES OF THE MERGER
As a condition to consummating the Merger, First Mississippi will receive an
opinion of Counsel and Mississippi Chemical will receive an opinion from its
counsel, Hughes & Luce, L.L.P., stating that based upon the facts,
representations and assumptions set forth in the opinions, for Federal income
tax purposes, the Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code. Based upon such opinions, the following is a
summary of certain of the material Federal income tax consequences of the
Merger:
1. No gain or loss will be recognized by First Mississippi shareholders
whose shares of First Mississippi Common Stock are exchanged solely for
Mississippi Chemical Common Stock pursuant to the Merger (except with
respect to cash received by such First Mississippi shareholders in lieu of
fractional share interests in Mississippi Chemical Common Stock). A First
Mississippi shareholder who receives cash in lieu of fractional shares of
Mississippi Chemical Common Stock will be treated as if such fractional
shares had been received by the shareholder as part of the Merger and then
sold by such shareholder. Accordingly, such shareholder will recognize gain
or loss equal to the difference between the cash so received and the
portion of the tax basis in First Mississippi Common Stock (as determined
immediately following the Distribution) that is allocable to such
fractional shares. Such gain or loss will be capital gain or loss, provided
that such fractional shares would have been held by such shareholder as a
capital asset at the Effective Time.
2. The aggregate tax basis of the Mississippi Chemical Common Stock
received (or, in the case of fractional shares, deemed received) by First
Mississippi shareholders who exchange their First Mississippi Common Stock
solely for Mississippi Chemical Common Stock in the Merger will be the same
as the aggregate tax basis of the First Mississippi Common Stock (as
determined immediately following the Distribution) surrendered in exchange
therefor.
3. The holding period for the shares of Mississippi Chemical Common Stock
received in the Merger will include the period during which the shares of
the First Mississippi Common Stock surrendered in exchange therefor were
held, provided that such shares of First Mississippi Common stock were held
as capital assets at the Effective Time.
4. No gain or loss will be recognized by First Mississippi, Miss Sub or
Mississippi Chemical as a result of the Merger (other than income, if any,
recognized by First Mississippi or its subsidiaries in connection with
excess loss accounts under regulation (S)1.1502-19).
E-26
<PAGE>
LISTING AND TRADING OF CHEMFIRST COMMON STOCK
ChemFirst has applied for listing of the ChemFirst Common Stock on the NYSE.
ChemFirst Common Stock received pursuant to the Distribution will be freely
transferable under the Securities Act of 1933, as amended (the "Securities
Act"), except for shares of ChemFirst Common Stock received by any person who
may be deemed an "affiliate" of ChemFirst within the meaning of Rule 145 under
the Securities Act. Persons who may be deemed to be affiliates of ChemFirst
after the Distribution generally include individuals or entities that control,
are controlled by, or are under common control with ChemFirst, and may include
the directors and principal executive officers of ChemFirst as well as any
principal shareholder of ChemFirst. Persons who are affiliates of ChemFirst
may sell their shares of ChemFirst Common Stock received pursuant to the
Distribution only pursuant to an effective registration statement under the
Securities Act covering such securities, or in compliance with the resale
provisions of Rule 144 or Rule 145 or Regulation S under the Securities Act.
E-27
<PAGE>
CAPITALIZATION
The following table sets forth, as of September 30, 1996, the historical
capitalization of ChemFirst Inc. and the pro forma capitalization of ChemFirst
to reflect the Transfers, the Financing and the Distribution and the
refinancing of First Mississippi's indebtedness. This information should be
read in conjunction with ChemFirst Inc.'s consolidated financial statements
and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------
CHEMFIRST INC. CHEMFIRST
HISTORICAL PRO FORMA
------------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
SHORT-TERM DEBT:
Current installments of long-term debt.......... $ 14,426 1,140
------------- ------------
Total Short-Term Debt....................... 14,426 1,140
LONG-TERM DEBT:
Senior notes.................................... 66,428 --
Bank revolving loan............................. 8,000 --
Other long-term debt............................ 2,304 2,304
------------- ------------
Total Long-Term Debt........................ 76,732 2,304
SHAREHOLDERS' EQUITY:
Serial preferred stock, $1.00 par value,
20,000,000 shares authorized (actual),
20,000,000 shares authorized (pro forma); none
issued and outstanding (actual), none issued
and outstanding (pro forma).................... -- --
Common stock, $1.00 par value (actual), $1.00
par value (pro forma); 100,000,000 shares au-
thorized (actual), 100,000,000 shares autho-
rized (pro forma); 20,614,491 issued and out-
standing (actual), 20,614,491 issued and
outstanding (pro forma)........................ 20,614 20,614
Additional paid-in capital...................... 15,446 15,446
Retained earnings............................... 206,148 281,493
------------- ------------
Total Shareholders' Equity.................. 242,208 317,553
------------- ------------
TOTAL CAPITALIZATION............................ $333,366 320,997
============= ============
</TABLE>
E-28
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The pro forma condensed consolidated balance sheet of ChemFirst Inc. as of
September 30, 1996 and pro forma condensed consolidated statement of
operations of ChemFirst Inc. for the year ended June 30, 1996 and the three
months ended September 30, 1996 have been presented as if the Distribution had
occurred on September 30, 1996 for the balance sheet and July 1, 1995 for the
statements of operations.
The pro forma condensed consolidated financial statements should be read in
conjunction with the other financial information elsewhere in this Prospectus.
The pro forma condensed consolidated information is presented for illustrative
purposes only and is not necessarily indicative either of (i) the operating
results or financial position that would have occurred had the Distribution
occurred on July 1, 1995 in the case of the condensed consolidated statements
of operations, or on September 30, 1996, in the case of pro forma condensed
consolidated balance sheet, or (ii) ChemFirst Inc.'s future operating results
or financial position.
E-29
<PAGE>
CHEMFIRST INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
CHEMFIRST INC. CHEMFIRST
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments....... $ 11,268 150,000 (1) 69,894
(87,714)(2)
(3,660)(3)
Accounts receivable..................... 69,253 69,253
Inventories:
Finished products..................... 24,916 24,916
Work in process....................... 24,904 24,904
Raw materials and supplies............ 22,476 22,476
-------- ------- -------
Total inventories................... 72,296 72,296
-------- ------- -------
Prepaid expenses and other current as-
sets................................... 8,810 8,810
Net current assets of discontinued oper-
ations................................. 2,914 (2,914)(4) 0
-------- ------- -------
Total current assets................ 164,541 55,712 220,253
-------- ------- -------
Investments and other assets............ 52,976 52,976
Property, plant and equipment, net...... 147,745 147,745
Noncurrent assets of discontinued opera-
tions.................................. 67,221 (67,221)(4)
-------- ------- -------
$432,483 (11,509) 420,974
======== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term
debt................................. $ 14,426 (13,286)(2) 1,140
Deferred revenue...................... 3,484 3,484
Accounts payable...................... 30,999 3,500 (5) 34,499
Accrued expenses and other current li-
abilities............................ 29,190 29,190
Net current liabilities of discontin-
ued operations....................... -- 724 (4) 724
-------- ------- -------
Total current liabilities........... 78,099 (9,062) 69,037
-------- ------- -------
Long-term debt.......................... 76,732 (74,428)(2) 2,304
Deferred revenue and other liabilities.. 14,254 14,254
Noncurrent liabilities of discontinued
operations............................. 3,364 (3,364)(4)
Deferred income taxes................... 17,826 17,826
Shareholders' equity:
Common stock, 20,614,491 shares issued
and outstanding historical and pro
forma................................ 20,614 20,614
Additional paid-in capital............ 15,446 15,446
Retained earnings..................... 206,148 82,505 (6) 281,493
(3,660)(3)
(3,500)(5)
-------- ------- -------
Total shareholders' equity.......... 242,208 75,345 317,553
-------- ------- -------
$432,483 (11,509) 420,974
======== ======= =======
</TABLE>
- --------
Notes:
(1) To record cash proceeds from the Financing.
(2) To reflect use of proceeds to retire senior debt and outstanding
indebtedness under bank credit facility.
(3) Payment of fees ($6,000 less tax benefit of $2,340 at the statutory rate)
related to prepayment of senior debt and outstanding indebtedness under
bank credit facility.
(4) To remove historical carrying value of the Fertilizer Business.
(5) To reflect an additional accrued liability of $3,500 for financial
advisory, legal, accounting, printing and similar expenses which are
expected to be incurred.
(6) The disposition of the Fertilizer Business will result in a gain of
$82,505, reflecting net cash proceeds of $150,000, as described in note
(1) above, less the carrying value of the Fertilizer Business net assets
of $67,495 as described in note (4) above.
E-30
<PAGE>
CHEMFIRST INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
--------------------------------------
CHEMFIRST INC. CHEMFIRST
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Revenues:
Sales.................................. $ 370,547 370,547
Interest and other income, net......... 6,157 6,157
--------- -------
376,704 376,704
Costs and expenses:
Cost of sales.......................... 288,677 288,677
General, selling and administrative ex-
penses................................ 58,557 58,557
Other operating expenses............... 25,157 25,157
Interest expense....................... 9,242 (8,912)(1) 330
--------- ------ -------
381,633 (8,912) 372,721
Earnings from continuing operations
before taxes, investee earnings and
cumulative effect of change in
accounting principle.................... (4,929) 8,912 3,983
Income tax expense (benefit)............. (688) 3,476 (2) 2,788
Equity in net earnings of affiliated com-
panies.................................. 783 783
--------- ------ -------
Earnings (loss) from continuing opera-
tions................................... $ (3,458) 5,436 1,978
========= ====== =======
Earnings (loss) per common share from
continuing operations................... $ (0.16) 0.09
Weighted average shares.................. 20,980 20,980
</TABLE>
- --------
(1) To remove interest expense related to retired indebtedness.
(2) To record tax effect at 39% (the combined statutory federal and state
rate) of adjustments reflected in (1) above.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1996
--------------------------------------
CHEMFIRST INC. CHEMFIRST
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Revenues:
Sales.................................. $ 95,432 95,432
Interest and other income, net......... 2,775 2,775
-------- -------
98,207 98,207
Costs and expenses:
Cost of sales.......................... 72,540 72,540
General, selling and administrative ex-
penses................................ 15,831 15,831
Other operating expenses............... 1,353 1,353
Interest expense....................... 1,765 (1,701)(1) 64
-------- ------ -------
91,489 (1,701) 89,788
Earnings from continuing operations be-
fore taxes, investee earnings and cumu-
lative effect of change in accounting
principle............................... 6,718 1,701 8,419
Income tax expense....................... 2,886 663 (2) 3,549
Equity in net earnings of affiliated com-
panies.................................. 258 258
-------- ------ -------
Earnings from continuing operations...... $ 4,090 1,038 5,128
======== ====== =======
Earnings per common share from continuing
operations.............................. $ 0.20 0.25
Weighted average shares.................. 20,894 20,894
</TABLE>
- --------
(1) To remove interest expense related to retired indebtedness.
(2) To record tax effect at 39% (the combined statutory federal and state
rate) of adjustments reflected in (1) above.
E-31
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical consolidated financial information set forth below
has been derived from the audited financial statements of ChemFirst Inc. for
the periods ended June 30, 1996, 1995 and 1994, except for income statement
and other financial data for the three months ended September 30, 1996 and
1995, balance sheet data at September 30, 1996 and balance sheet data at June
30, 1994. ChemFirst Inc.'s Consolidated Balance Sheets at June 30, 1996 and
1995 and the related Statements of Operations, Stockholders' Equity and Cash
Flows for the three years ended June 30, 1996 and notes thereto appear
elsewhere herein. The financial information for the three-month interim
periods ended September 30, 1996 and 1995 has been derived from ChemFirst
Inc.'s unaudited interim financial statements, presented elsewhere herein,
that reflect all adjustments that, in the opinion of management, are necessary
for a fair presentation of the results of the interim periods presented; all
such adjustments are of a normal recurring nature. The financial information
for the years ended June 30, 1994, 1993 and 1992 and the balance sheet data at
June 30, 1994 has been derived from ChemFirst Inc.'s unaudited consolidated
financial statements. The selected historical financial information set forth
below should be read in conjunction with and is qualified in its entirety by
reference to ChemFirst Inc.'s historical consolidated financial statements and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.
CHEMFIRST INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED JUNE 30,
------------------- ------------------------------------------
1996 1995 1996 1995 1994 1993 1992
--------- --------- ------- ------- ------- ------- -------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................... $ 95,432 88,746 370,547 331,721 249,091 209,525 186,086
Earnings (loss) from
continuing operations
before taxes, investee
earnings (loss) and cu-
mulative effect of
change in accounting
principle.............. 6,718 3,387 (4,929) 18,484 1,226 (5,122) (3,306)
Earnings (loss) from
continuing operations
before cumulative
effect of change in
accounting principle... 4,090 1,886 (3,458) 10,638 (1,271) (3,731) (2,115)
Net earnings (loss)..... 12,789 12,480 35,220 57,794 21,863 (23,369) 4,227
Earnings (loss) per
share from continuing
operations before
cumulative effect of
change in accounting
principle.............. 0.20 0.09 (0.16) 0.52 (0.06) (0.19) (0.11)
Net earnings (loss) per
share.................. 0.61 0.59 1.68 2.80 1.09 (1.17) 0.22
Weighted average common
shares outstanding..... 20,894 21,048 20,980 20,632 20,126 20,003 19,853
OTHER FINANCIAL DATA:
Capital expenditures.... 13,071 4,366 35,909 26,160 19,775 23,518 14,895
Depreciation and amorti-
zation................. 4,853 4,919 18,210 17,324 15,762 14,215 12,495
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30,
AT SEPTEMBER 30, ---------------------------------------
1996 1996 1995 1994 1993 1992
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Working Capi-
tal........... $86,442 86,918 110,107 78,874 50,121 59,865
Total assets... 432,483 413,635 433,327 357,845 348,596 429,123
Long-term debt,
excluding
long-term debt
due within
one year...... 76,732 79,909 84,394 104,275 113,519 144,280
Shareholder's
equity........ 242,208 230,267 232,996 177,687 160,774 188,378
Cash dividend
declared per
common share.. 0.10 0.40 0.35 0.30 0.30 0.30
</TABLE>
E-32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is based upon and should be read in conjunction
with the selected historical financial information and ChemFirst Inc.'s
financial statements, including the notes thereto, included elsewhere in this
Prospectus.
GENERAL
As a result of the proposed Distribution, and for purposes of this
Prospectus, ChemFirst Inc.'s operating results have been restated to reflect
the classification of the Fertilizer Business as a discontinued operation.
THREE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS THREE MONTHS ENDED SEPTEMBER 30,
1995
Consolidated Results
Earnings from continuing operations for the three months ended September 30,
1996, were up $2.2 million over the same period last year, with increased
Chemicals earnings and sales.
Segment Operations
<TABLE>
<CAPTION>
INDUSTRY SEGMENT
INFORMATION
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Sales to unaffiliated customers:
Chemicals............................................... $ 64,351 54,344
Combustion and Thermal Plasma........................... 14,875 15,997
Steel................................................... 16,206 18,405
--------- --------
Total.................................................. $ 95,432 88,746
========= ========
Operating profit (loss) before income taxes, investee
earnings (loss) and cumulative effect of change in ac-
counting principle:
Chemicals............................................... $ 12,881 10,457
Combustion and Thermal Plasma........................... (356) (1,152)
Steel................................................... (581) 350
--------- --------
11,944 9,655
Unallocated corporate expenses.......................... (4,136) (5,685)
Interest income (expense), net.......................... (1,255) (712)
Other income (expense), net............................. 165 129
--------- --------
Total.................................................. $ 6,718 3,387
========= ========
</TABLE>
Chemicals pretax operating results were up 23% over the same period in the
prior year due to license proceeds from a electonics chemicals competitor and
an 18% increase in sales. Sales grew on increased aniline, custom
manufacturing and HDA based electronic chemicals volume.
Combustion and Thermal Plasma pretax operating results for the current
quarter improved $0.8 million over the prior year, primarily due to
elimination of aluminum dross processing losses following the shut down of
operations in the fourth quarter of the prior year. Sales declined 7% on lower
Thermal Plasma orders.
E-33
<PAGE>
Steel pretax operating results were down $0.9 million from the prior year
due to lower gross margin. Gross margin declined as sales fell 12% on a 17%
decrease in volume.
Unallocated corporate expenses were down 27%, primarily due to last year's
higher long-term incentives tied to stock price appreciation. Net interest
expense increased over the prior year due to lower interest income.
Discontinued Operations
After tax net income for fertilizer operations for the current quarter was
$8.7 million, down 26% versus the same period in the prior year on higher
production cost and lower average fertilizer prices. Production cost increased
on a 52% increase in natural gas cost. Sales rose 10%, despite the lower
prices, on a 19% increase in volume due to higher brokerage sales and
increased AMPRO ammonia production, which was up 20% over last year due to a
15-day outage in the prior year. Prior year results also include $1.1 million
in operating losses related to discontinued Gold operations.
Capital Resources and Liquidity
Cash flow from operations for the three months ended September 30, 1996, was
up 20% over the same period in the prior year which included $3.2 million of
cash used in discontinued Gold operations. Investing activities increased over
the prior year due to an $8.4 million increase in Chemicals capital
expenditures, primarily related to expansion of custom manufacturing
operations. Financing activities in the current year included a $3.0 million
reduction in borrowings under the Company's long-term revolving credit
facility.
1996 VERSUS 1995
Consolidated Results
Results of continuing operations for 1996 were a loss of $3.5 million versus
earnings of $10.6 million for 1995 due to an $18.3 million ($11.7 million
after-tax) provision for the shutdown of aluminum dross operations and
increased general, selling and administrative expenses. General, selling and
administrative expenses were up $10.5 million due to higher corporate expenses
and growth in combustion operations.
Segment Operations
<TABLE>
<CAPTION>
INDUSTRY SEGMENT
INFORMATION
YEAR ENDED JUNE 30,
---------------------------
1996 1995
------------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Sales to unaffiliated customers:
Chemicals...................................... $227,837 209,472
Combustion and Thermal Plasma.................. 65,624 56,347
Steel.......................................... 77,086 65,902
------------- ------------
Total........................................ $370,547 331,721
============= ============
Operating profit (loss) before income taxes,
investee earnings (loss) and cumulative effect
of change in accounting principle:
Chemicals...................................... $ 44,058 40,019
Combustion and Thermal Plasma.................. (30,944) (6,230)
Steel.......................................... 1,332 27
------------- ------------
14,446 33,816
Unallocated corporate expenses................... (15,015) (10,661)
Interest expense, net............................ (4,620) (5,346)
Other income (expense), net...................... 260 675
------------- ------------
Total........................................ $ (4,929) 18,484
============= ============
</TABLE>
E-34
<PAGE>
Chemicals operating profits were up 10% to a record $44.1 million on a 9%
increase in sales primarily due to higher aniline and electronic chemicals
volumes. Aniline sales volume increased 13% due to increased production
following capacity additions in the prior year. Demand for aniline remains
strong due to its use in the production of methylene diphenyl diisodyanate
(MDI), which is a key component in the production of polyurethane foams and
elastomers. In July 1996, ChemFirst Inc. entered into an agreement with Bayer
to build, own and operate a world scale nitrobenzene and aniline facility,
which will be an integral part of Bayer's United States MDI manufacturing
operations. See "Business--Chemicals--FCC-Industrial Chemical Intermediates,
Fine Chemicals and Performance Chemicals." Start-up for the facility is
scheduled to be completed in 1998 with initial aniline production capacity of
approximately 250 million pounds per year. In electronic chemicals, sales
volume increased 26% driven by an 82% increase in the hydroxylamine based
(HDA(TM)) products volume.
Combustion and Thermal Plasma results were a loss of $30.9 million for 1996,
versus a loss of $6.2 million in 1995. The losses in both years were primarily
due to aluminum dross processing operations. Losses in 1996 included an $18.3
million pretax charge related to the shutdown of the aluminum dross processing
plant, located in Millwood, West Virginia, following adoption of a plan by the
Board of Directors on May 21, 1996, to close the facility. The decision to
close the facility, which operated at a loss since inception, was based in
part on projections that indicated operations were unlikely to be profitable
in the near future. The charge included write-downs of $12.3 million for
property, plant and equipment, $0.6 million for spare parts, $0.4 million for
inventory and $5.0 million in accruals for other estimated costs to be
incurred related to the closure. In addition, results were down for combustion
operations despite a 34% increase in sales, as gross margins declined $1.1
million due to cost overruns in several large projects and general, selling
and administrative expenses increased $4.5 million due to operations growth.
The Company does not anticipate combustion operations overhead growth to be as
rapid in fiscal 1997 with improvement in margin projected based on current
order backlog.
Steel operating results improved for 1996, as gross margin improved on
higher sales. Steel sales increased from $65.9 million to $77.1 million on a
10% increase in average sales price and 7% increase in volume.
Unallocated corporate expenses were up $4.4 million over the prior year,
primarily due to the spinoff of Getchell Gold Corporation ("Getchell"),
formerly FirstMiss Gold Inc., and expenses for potential acquisitions and
environmental compliance not directly allocable to subsidiary operations.
Included in 1996 and 1995 are $2.5 million and $3.1 million, respectively, of
compensation expenses tied to appreciation of Stock Options and Debenture
Options. Net interest expense for the year was down 14% from the prior year
due to increased interest income.
1995 VERSUS 1994
Consolidated Results
Results from continuing operations for 1995 were a profit of $10.6 million
versus a loss of $1.3 million in 1994, on higher chemicals earnings and
improved performance in combustion operations. Sales were up 33% and gross
margin increased to 23% of sales from 22% for the prior year. Equity income
was up $1.1 million as results at Melamine Chemicals, Inc. improved due to
higher revenues and increased margins.
E-35
<PAGE>
Segment Operations
<TABLE>
<CAPTION>
INDUSTRY SEGMENT
INFORMATION
YEAR ENDED JUNE 30,
--------------------------
1995 1994
------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Sales to unaffiliated customers:
Chemicals....................................... 209,472 161,045
Combustion and Thermal Plasma................... 56,347 33,779
Steel........................................... 65,902 54,267
------------ ------------
Total......................................... 331,721 249,091
============ ============
Operating profit (loss) before income taxes,
investee earnings (loss) and cumulative effect of
change in accounting principle:
Chemicals....................................... 40,019 30,295
Combustion and Thermal Plasma................... (6,230) (9,393)
Steel........................................... 27 (3,370)
------------ ------------
33,816 17,532
Unallocated corporate expenses.................... (10,661) (8,435)
Interest expense, net............................. (5,346) (8,176)
Other income (expense), net....................... 675 305
------------ ------------
Total......................................... 18,484 1,226
============ ============
</TABLE>
Chemicals sales and pretax operating results for 1995 were up 30% and 32%,
respectively, over 1994 on strong demand for electronic chemicals, custom
manufacturing services and intermediates. Intermediate sales, which accounted
for 46% of sales, increased on 20% higher volume, primarily nitrobenzene, and
a 6% improvement in average unit price. Nitrobenzene volume was up due to a
multi-year contract entered into in late 1994 that will fully utilize
nitrobenzene capacity through 1999. Custom manufacturing services and
electronic chemicals sales for semiconductor production increased, primarily
due to higher volume.
Combustion and Thermal Plasma results for 1995 improved $3.2 million over
1994, primarily due to increased combustion sales, which grew 83%. In
addition, 1994 results included $0.9 million in costs for a successful patent
defense. The losses in both years were primarily due to aluminum dross
processing operations.
Steel results for 1995 improved by $3.4 million over 1994. Steel gross
profit improved $2.3 million as sales increased 21% to $65.9 million,
primarily due to an increase in average unit price. Also included in 1995
steel results was $1.0 million in income related to asset sales and insurance
recoveries.
Unallocated corporate expenses for 1995 were up over 1994 due to $3.1
million of compensation expenses tied to appreciation of Stock Options and
Debenture Options. Expenses for 1994 included $1.3 million in additional
interest related to deferred compensation. Net interest expense for 1995 was
down versus 1994 on lower average debt and $1.2 million in additional interest
income from increased short-term investments.
DISCONTINUED OPERATIONS
Fertilizer
On August 27, 1996, First Mississippi entered into the Merger Agreement with
Mississippi Chemical, under which Mississippi Chemical will acquire the
Fertilizer Business. Immediately prior to the Distribution, First
Mississippi's debt will be refinanced and increased to approximately $150.0
million. This debt will be retained by the Fertilizer Business in the Merger.
Cash on hand after this refinancing (and the payment of certain Merger related
expenses), estimated at approximately $50.0 million, will be transferred to
ChemFirst, which will be essentially debt free. The Merger is subject to
approval by the shareholders of both First Mississippi and Mississippi
Chemical, legal opinions that the Distribution and the Merger are tax-free and
customary regulatory approvals. It is expected that the transaction will be
consummated by December 31, 1996.
E-36
<PAGE>
1996 versus 1995. Fertilizer after tax net income was down 23% to $41.4
million on lower average sales prices and higher natural gas cost. Average
fertilizer sales prices declined 11% on 18% lower ammonia prices, more than
offsetting a 16% increase in urea prices. Total sales volume remained about
the same at 1.2 million tons with captive production accounting for about 74%
of total volume, up from 70% in the prior year. The higher production was
primarily due to scheduled maintenance in the prior year. The average price of
natural gas purchased at spot prices and consumed in production increased 36%;
however, hedging gains of $1.1 million in the current year, versus hedging
losses of $5.9 million in the prior year, reduced the overall average gas cost
increase to 17%. At June 30, 1996, First Mississippi had no open forward
purchase contracts for natural gas.
1995 versus 1994. Fertilizer after tax net income for 1995 was up $38.0
million over 1994 due to higher prices, primarily ammonia, and lower
production cost. Sales rose on a 57% increase in average price, which offset
lower volume. Ammonia prices averaged $210 per ton for 1995 versus $130 per
ton in 1994, and urea prices averaged $163 per ton in 1995 versus $126 per ton
in 1994. Volume declined on lower brokerage sales. The ammonia supply/demand
balance remained tight through fiscal 1995. Agricultural demand was strong in
1995, driven by high grain prices and low world inventories. Industrial demand
for production of fibers, plastics, and resins was also strong. Urea prices
increased on higher ammonia prices and strong offshore demand. Production cost
for ammonia and urea declined, primarily due to lower prices for natural gas,
which decreased 12% below 1994 levels. Included in natural gas cost for 1995
is $5.9 million in net futures contracts losses versus net gains of $0.7
million in 1994.
Gold
On October 20, 1995, ChemFirst Inc. completed the spinoff of its 81% owned
subsidiary, Getchell, to shareholders (the "Gold Distribution"). Included in
discontinued operations for fiscal 1996 is $1.1 million in after tax losses,
net of minority interest, related to operations of Getchell for the period
prior to the distribution.
1995 versus 1994. After tax results for 1995, net of minority interest, were
a loss of $6.9 million versus a profit of $5.0 million in 1994. Results
declined due to impairment and abandonment charges of $11.5 million, including
a $2.4 million write-off for an inactive silver exploration property and $9.1
million of assets associated with termination of mining in its main pit.
Mining was discontinued in the pit when results of a geotechnical monitoring
program indicated continued pit mining would destabilize areas along the pit
walls. Production for 1995 declined 24% due to lower mill feed grade and lower
heap leach production. Mill feed grades from the open pit were down from 1994
when high-grade North Pit ore was used for mill feed. In addition, delays in
mining the Main Pit and Getchell Main Underground required increased use of
lower grade stockpiled ore. Sales declined 25%, primarily due to the lower
production.
Loss on disposal of businesses for 1996 reflects estimated additional costs
of $1.7 million after tax related to operations discontinued in prior years.
ENVIRONMENTAL MATTERS
ChemFirst Inc.'s operations are subject to a wide variety of constantly
changing environmental laws and regulations governing emissions to the air,
discharges to water sources, and the handling, storage, treatment and disposal
of waste materials, as well as other laws and regulations concerning health
and safety conditions, for which it must incur certain costs. ChemFirst Inc.'s
capital expenditures for environmental protection were $1.7 million for 1996
and are projected to be $3.5 million and $2.3 million for 1997 and 1998,
respectively. ChemFirst Inc.'s expenses related to the operation and
maintenance of environmental facilities and the disposal of hazardous and
nonhazardous waste were approximately $3.3 million, $2.8 million and $2.5
million in 1996, 1995 and 1994, respectively. In addition, ChemFirst Inc.
accrues for anticipated costs associated with investigatory and remediation
efforts relating to the environment. At June 30, 1996, ChemFirst Inc.'s
accrued liability for these matters totaled $1.5 million.
E-37
<PAGE>
At June 30, 1996, ChemFirst Inc. was guarantor of $17.1 million in
reclamation bonds related to the disposed coal operations. Replacement bonds
have been submitted to the appropriate state authorities. The bonds guaranteed
by ChemFirst Inc. are anticipated to be released by the end of December 1996.
CAPITAL RESOURCES AND LIQUIDITY
Cash and short-term investments declined $34.8 million from 1995, primarily
due to increased investing activities and lower cash flow from operations.
Investing activities of continuing operations included higher capital
expenditures, primarily to increase chemicals production capacities and a note
collection representing proceeds received from Getchell following its spinoff
in October 1995. Additional uses of cash included $5.5 million for the
purchase of 235,900 shares of First Mississippi Common Stock, which
represented approximately 28% of the $20.0 million repurchase authorization
announced in May 1995. Cash provided by continuing operations declined $33.0
million from the prior year primarily due to lower earnings and increases in
working capital in chemicals and combustion operations. At June 30, 1996,
total debt had declined $5.0 million from the prior year; however, total debt
as a percentage of total debt and equity only declined from 30% to 29% due to
the $31.3 million reduction in equity related to the distribution of Getchell
common stock.
Capital expenditures for continuing operations are projected at
approximately $162.0 million over the next two years, up significantly over
prior years due to growth plans for its chemicals businesses, which include
the construction of the new aniline facility. See "--1996 Versus 1995--Segment
Operations." The disposition of the Fertilizer Business, based on its past two
year performance, will have a significant effect on operating cash flow of
ChemFirst. Fertilizer generated total net cash of approximately $55.0 million
in 1996 and 1995 combined. The excess proceeds of the Financing to be
distributed to ChemFirst, however, will reduce debt to near zero and provide
an anticipated surplus of approximately $50.0 million. This surplus cash plus
cash flow from operations, combined with ChemFirst's access to new bank credit
facilities is believed to adequately provide for ChemFirst's growth strategy
over the next two years.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," for fiscal years beginning after
December 15, 1995. The provisions of Statement No. 121 require ChemFirst to
review its long-lived assets for impairment on an exception basis whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through future cash flows. Any loss will be
recognized in the income statement and certain disclosures regarding the
impairment are to be made in the financial statements. ChemFirst is evaluating
the provisions of Statement No. 121 and does not anticipate a material effect
on its financial position or results of operations.
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-
Based Compensation," for fiscal years beginning after December 15, 1995.
Statement No. 123 allows companies to recognize compensation expense for
grants of stock, stock options and other equity instruments to employees based
upon fair value or permits them to continue to apply the existing accounting
rules contained in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25"). Companies choosing to continue on
APB No. 25 are required to disclose pro forma net income and earnings per
share data based on fair value. ChemFirst anticipates continuing to account
for stock-based compensation in accordance with APB No. 25 and therefore the
adoption of Statement No. 123 would not have an impact on ChemFirst's
financial position or results of operations.
E-38
<PAGE>
MANAGEMENT
DIRECTORS
The board of directors of ChemFirst (the "Board") consists of thirteen
persons, each of whom has been elected for a term expiring at the annual
meeting of ChemFirst shareholders indicated below and until his or her
successor shall have been elected and qualified. The following table sets
forth information concerning the individuals who serve as directors of
ChemFirst. Under ChemFirst's corporate governance guidelines adopted by the
Board, Mr. Moreton will be required to resign from the Board upon reaching age
70, which will occur prior to the expiration of his term.
<TABLE>
<CAPTION>
TERM EXPIRES AT
NAME AGE ANNUAL MEETING IN
---- --- -----------------
<S> <C> <C>
James E. Fligg....................................... 60 1999
Robert P. Guyton..................................... 59 1999
Paul W. Murrill...................................... 62 1999
J. Kelley Williams................................... 62 1999
Richard P. Anderson.................................. 67 1997
Paul A. Becker....................................... 57 1998
James W. Crook....................................... 66 1998
Charles P. Moreton................................... 69 1998
William A. Percy..................................... 56 1997
Leland R. Speed...................................... 64 1998
R. Gerald Turner..................................... 50 1997
Michael J. Ferris.................................... 51 1997
Dan F. Smith......................................... 50 1998
</TABLE>
Mr. Fligg is Senior Executive Vice President, Strategic Planning and
International Business Development, Amoco Corporation, based in Chicago,
Illinois, and has been since October 1995. From July 1993 until October 1995,
he was Executive Vice President, Chemicals Sector, Amoco Corporation. He was
President of Amoco Chemical Company, an international chemical manufacturing
and marketing subsidiary of Amoco Corporation based in Chicago, Illinois, from
July 1991 until October 1995. He was a director of Amoco Chemical from 1984
until October 1995. He was Executive Vice President, International Operations
and Polymer Products, from 1989 to July 1991. During fiscal 1996, two of the
ChemFirst's subsidiaries purchased a total of approximately $12.1 million in
products from Amoco Chemical Company or one of its affiliates. He is a member
of the Compensation & Human Resources Committee.
Mr. Guyton is Chairman and Chief Executive Officer of Smart Choice Holdings,
Inc., an owner and operator of automobile dealerships and finance companies, a
position he has held since July 1996. He was Vice President and Financial
Consultant for Raymond James & Associates, Inc., an asset management and
investment banking company in Atlanta, Georgia, a position he held from August
1993 to July 1996. He was self-employed as a management consultant from June
1991 to July 1993. He was Chairman and Chief Executive Officer of Bank South
Corporation, Atlanta, Georgia, from 1990 to 1991. He served as President and
Chief Executive Officer of Bank South Corporation from 1981 to 1990. He is a
member of the Board of Directors of Piccadilly Cafeterias, Inc., a restaurant
chain, Baton Rouge, Louisiana. Mr. Guyton is a Director of Power Sources,
Inc., a 50% owned subsidiary of ChemFirst. He is Chairman of the Audit
Committee.
Dr. Murrill is a professional engineer. He is Chairman of the Board of
Directors of Piccadilly Cafeterias, Inc., a restaurant chain, Baton Rouge,
Louisiana. He has been a director of Entergy Corporation since 1994, when it
purchased Gulf States Utilities Company, an electric and gas utility company
in Beaumont, Texas, of which Dr. Murrill was a director. Until March 1990, Dr.
Murrill was also a Special Advisor to the Chairman of the Board of Gulf
States. Dr. Murrill had also previously served as Chairman of the Board and
Chief Executive Officer of that company. He is a Director of ZYGO, a high
precision instrument company, Middlefield, Connecticut; Howell Corporation, a
diversified energy company, Houston, Texas; and Tidewater, Inc., an oil
service company, New Orleans, Louisiana. He is a member of the Audit
Committee.
E-39
<PAGE>
Mr. Williams is the Chairman of the Board and Chief Executive Officer of
ChemFirst and has been since 1988. From 1988 until August 1995, he was
President, Chief Executive Officer and Chairman of the Board. He was President
and Chief Executive Officer from 1971 until 1988. He is a Director of Deposit
Guaranty Corporation and Deposit Guaranty National Bank, Jackson, Mississippi,
and Chairman of the Board of Getchell Gold Corporation, Englewood, Colorado.
He is Chairman of the Board of Callidus Technologies Inc., FirstMiss Steel,
Inc., First Chemical Corporation, Plasma Energy Corporation, Plasma Processing
Corporation and Power Sources, Inc. (50% owned), all subsidiaries of
ChemFirst.
Mr. Anderson is the President and Chief Executive Officer of The Andersons,
Inc., an agribusiness company in Maumee, Ohio, and has been since 1981. He is
a Director of Centerior Energy Corporation, an electric utility company in
Cleveland, Ohio, and N-Viro International Corporation, a waste recycling
company in Toledo, Ohio. He is also a Director of Plasma Processing
Corporation, a subsidiary of ChemFirst. He is a member of the Committee on
Director Affairs and Chairman of the Compensation & Human Resources Committee.
Mr. Becker is a Managing Director of Mitchell Hutchins Asset Management,
Inc., an investment management company in New York City, and wholly owned by
Paine Webber Group, Inc. Mr. Becker has been employed by Paine Webber Group,
Inc. since 1978. Mitchell Hutchins served as an investment manager for First
Mississippi's pension plan until August 1996. He is a member of the Audit
Committee.
Mr. Crook is Chairman of the Board of Melamine Chemicals, Inc. ("MCI"),
which manufactures melamine in Donaldsonville, Louisiana, and has been since
1987. ChemFirst owns approximately 23% of the common stock of MCI. MCI obtains
all of its raw materials (urea) from Triad Chemical, a joint-venture between
First Mississippi and Mississippi Chemical. During fiscal year 1996, First
Mississippi was paid approximately $11.6 million by MCI for urea. Mr. Crook is
a retired Vice President of First Mississippi, a position he held from 1965 to
June 1985. Mr. Crook is also a Director of FirstMiss Steel, Inc., a subsidiary
of ChemFirst. He is a member of the Committee on Director Affairs and the
First Mississippi Corporation Foundation Advisory Committee.
Mr. Moreton has been a private investor, primarily in the oil and gas
business, since 1991. He was Chairman of the Board of Commet Resources, Inc.,
a natural gas transmission and marketing company in Houston, Texas, from 1986
until its dissolution in July 1991. He was a Director of Tanglewood
Bancshares, Inc., Houston, Texas, until August 1, 1995. He is a Director of
Plasma Processing Corporation, a subsidiary of ChemFirst. He is a member of
the Audit Committee.
Mr. Percy is a partner of Trail Lake Enterprises, a cotton and soybean
farming operation in Arcola, Mississippi, and has been since 1986. Since
September 1992, he has been the Chairman of the Board of Staple Cotton
Cooperative Association in Greenwood, Mississippi. Until July 1, 1994, he was
a Director of Mississippi Chemical Corporation ("Mississippi Chemical"), which
manufactures and sells fertilizer. First Mississippi and Mississippi Chemical
are engaged in a joint-venture, Triad Chemical, in Donaldsonville, Louisiana.
Mr. Percy is also President and Chief Executive Officer of Greenville Compress
Co., Greenville, Mississippi. He was a Director of the Sunburst Bank of
Mississippi, Grenada, Mississippi, until it was purchased by Union Planters
Bank in July 1995. He is also a Director of Callidus Technologies Inc., and
Plasma Energy Corporation, subsidiaries of ChemFirst. He is a member of the
Compensation & Human Resources Committee and the First Mississippi Corporation
Foundation Advisory Committee.
Mr. Speed is Chief Executive Officer and Chairman of the Board of Parkway
Properties, Inc. (formerly The Parkway Company), and Chairman, Chief Executive
Officer and Trustee of EastGroup Properties, real estate investment companies,
both of Jackson, Mississippi. He is Chairman and Director of Delta Industries,
Inc., a construction materials manufacturer and a Director of Farm Fish, Inc.
and Mississippi Valley Gas Company, all of Jackson, Mississippi. He was
Trustee and President of Eastover Corporation from 1977 through December 1994;
President and Director of Congress Street Properties from 1984 through
November 1994; and President and Director of LNH REIT, INC. from 1991 through
May 1996. He was also President, Chief Executive Officer and Director of
Rockwood National Corporation, a real estate developer, from 1983 through June
1994. He was a Trustee of First Continental Investors REIT, Houston, Texas
from 1983 through May 1994. He is also a
E-40
<PAGE>
Director of First Chemical Corporation, a subsidiary of ChemFirst. He is a
member of the Committee on Director Affairs and the First Mississippi
Corporation Foundation Advisory Committee.
Dr. Turner is the President of Southern Methodist University in Dallas,
Texas, a position he assumed in June 1995. He was the Chancellor of the
University of Mississippi in Oxford, Mississippi, from 1984 through June 1995.
He has been a director of River Oaks Furniture, Inc., a furniture manufacturer
based in Fulton, Mississippi, since 1994, and a Director of JC Penney Co.,
Inc., a retailer, since 1995 and a director of Mobile Telecommunications
Technologies Corp., a provider of nationwide paging and voice messaging
services, since July 1996. He is also a Director of Callidus Technologies
Inc., a subsidiary of ChemFirst. He is Chairman of the Committee on Director
Affairs and a member of the First Mississippi Corporation Foundation Advisory
Committee.
Mr. Ferris is Executive Vice President, Chemicals Group, of Vulcan Materials
Company, a chemical manufacturer located in Birmingham, Alabama. Vulcan serves
principally the chemical, paper and water treatment industries. Prior to
becoming Executive Vice President of Vulcan in 1996, Mr. Ferris served in
various positions at Vulcan Chemicals, a division of Vulcan Materials Company,
since 1974, including President and Executive Vice President.
Mr. Smith is President and Chief Operating Officer of Lyondell Petrochemical
Company of Houston, Texas, a position he has held since August 1994. Lyondell
manufactures and sells petrochemicals and refinery products. From May 1993
until August 1994, he was Executive Vice President and Chief Operating Officer
of Lyondell. He was Vice President, Corporate Planning, of Atlantic Richfield
Company, Los Angeles, California, from October 1991 to May 1993. From July
1991 to October 1991, he was Executive Vice President and Chief Financial
Officer of Lyondell. During fiscal 1996, CTI sold a total of approximately
$308,000 in products to Lyondell Petrochemical Company and its affiliates.
ChemFirst's Bylaws divide the Board into three groups, with regular three-
year staggered terms and initial terms of three, two and one years for each
group.
Under ChemFirst's Bylaws, ChemFirst directors are required to offer
resignations upon completion of nine (9) consecutive years of service
(including service with First Mississippi) prior to reaching age 65 and again
upon reaching age 65. In each case, the Committee on Director Affairs (or
successor committee) will make a recommendation for action with respect to
continued service to the Board of Directors. Directors must retire at age 70.
In accordance with the Bylaws, Mr. Moreton will be required to resign upon
reaching age 70 on September 24, 1997. Also in accordance with these Bylaw
provisions, Mr. Speed, Dr. Murrill and Mr. Williams will be required to offer
their resignations as directors of ChemFirst prior to the expiration of their
terms. Pursuant to ChemFirst's Bylaws, the Committee on Director Affairs will
make a recommendation with respect to the continued Board service of each of
these three directors at the time their respective resignations are submitted
in accordance with the Bylaws.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has established three committees: the Committee on Director
Affairs, the Audit Committee, and the Compensation & Human Resources
Committee. Each is described below.
The Committee on Director Affairs is composed of four (4) non-employee
Directors and is responsible for nominating new Board members, appointing
members to Board Committees, assessing Board performance and recommending
Board compensation for action by the Board. The Chairman of this committee
also chairs executive sessions of the outside members of the Board. The
Committee on Director Affairs considers suggestions for Director nominations
from all sources.
The Audit Committee is composed of four (4) non-employee Directors with
broad latitude for inquiry into all operations of the Company. Its primary
responsibilities include making a recommendation to the Board on the selection
of independent auditors, reviewing audit reports prepared by independent
auditors, internal auditors, insurance auditors and other consultants engaged
by ChemFirst to examine specific areas of corporate operations, and examining
the adequacy of compliance with various governmental regulations and corporate
policies and procedures.
E-41
<PAGE>
The Compensation & Human Resources Committee is composed of three (3) non-
employee Directors and is charged with the responsibility of recommending to
the Board a program of overall compensation for the Company and its
subsidiaries, including Executive Officers and other Key Employees. These
responsibilities include administration of the Company's Long-Term Incentive
Plans.
The Chief Executive Officer serves as a member ex-officio of the
Compensation & Human Resources Committee, but may not serve as Chairman or
vote or participate in or be present for Committee decisions regarding his own
compensation. He does not make recommendations about nor participate in
decisions regarding any aspect of his compensation.
COMPENSATION OF DIRECTORS
Directors who are not employees will be compensated for their services with
a retainer of $16,000 per year. In addition, non-employee Directors will
receive fees for attendance at duly called Board and committee meetings. The
fees paid will be $1,000 per day for attendance at duly called Board and
committee meetings or a fee of $500 for half-day committee meetings except for
committee chairmen, who will receive a fee of $1,250 per day for meetings and
$625 for half-day meetings. Travel expenses to and from meetings will be
reimbursed to all Directors. No fees will be paid for informal meetings.
Attendance at meetings held by telephone conference call will be paid at the
half-day rate. Directors performing special services at the request of the
Chief Executive Officer will be paid a per diem of $1,000 per day, except for
committee chairmen, who will be paid a per diem of $1,250 per day.
Under First Mississippi's 1988 Long-Term Incentive Plan, which will be
assumed by ChemFirst in connection with the Transfers and the Distribution,
non-employee Directors were automatically awarded for five (5) years,
Debenture Options to purchase Convertible Debentures. Debenture Options may be
exercised any time within ten (10) years after the date of grant to purchase
Convertible Debentures. Each debenture may be converted six (6) months after
the date of grant of the applicable option into Convertible Preferred Stock.
Each share of Convertible Preferred Stock is, in turn, immediately convertible
into First Mississippi Common Stock. There will be no further awards under
this plan. Debenture Options issued prior to the Distribution will be
exchanged for ChemFirst Debenture Options pursuant to the terms of the
Employee Benefits Agreement. See "The Transfers and the Distribution--Terms of
the Employee Benefits Agreement."
Under First Mississippi's 1995 Long-Term Incentive Plan, which will be
assumed by ChemFirst in connection with the Transfers and the Distribution
(the "1995 Plan"), each non-employee Director is eligible annually for a
nonqualified stock option grant. The number of shares subject to each such
option shall be determined by ChemFirst performance as measured by First
Mississippi's return on equity calculated as the average two (2) year total
net income divided by the average two (2) year shareholder equity and measured
as a rolling average of the two immediately preceding fiscal years. However,
no awards shall be awarded in the event of an average return of less than 10%
and in the event of an average return of 20% or more, no more than 1,500
options may be granted to any non-employee Director in any given year.
The exercise price for each such option is the fair market value of First
Mississippi Common Stock as of the date of the grant of the option. Each
option vests six months after the date of grant and terminates on the tenth
anniversary of the date of grant. Accordingly, each non-employee Director
received options to purchase 1,500 shares of First Mississippi Common Stock in
November 1995 and will receive options to purchase an additional 1,500 shares
following First Mississippi's next Annual Meeting. Such options will be
exchanged for ChemFirst Options. See "The Transfers and the Distribution--
Terms of the Employee Benefits Agreement."
Also under the 1995 Plan, non-employee Directors may make an irrevocable
election to receive share units in exchange for deferring all or some portion
of their annual retainer at a per share unit exchange price that is eighty-
five percent (85%) of the fair market value of First Mississippi Common Stock
determined as of the first day of the year during which all or a portion of
the deferred retainer was to be paid. Dividend equivalents earned pursuant to
the share units are reinvested in the form of additional share units.
E-42
<PAGE>
In fiscal 1986, First Mississippi established a Deferred Income Plan for
Directors, Officers and Key Employees (Plan A) which superseded the previous
deferred income arrangement and pursuant to which deferral opportunities in
any given year, up to a maximum of three (3) years, were offered at the
discretion of the Board. Amounts deferred under Plan A earn interest at a
prescribed rate which, as originally established, was twenty percent (20%),
compounded annually, subject to reduction as described below. First
Mississippi is owner and beneficiary of life insurance policies covering most
of the participants in Plan A. The benefits associated with these policies are
expected to cover First Mississippi's financial obligations incurred in
connection with Plan A, including the interest accrued on the amounts deferred
thereunder in excess of market rates, resulting in no net cost to First
Mississippi over the life of the plan. Plan A provides that the interest rate
may be reduced prospectively and, if necessary, may be adjusted retroactively,
due to severe economic changes including, but not limited to, changes in tax
law. However, no retroactive changes in the rate of a return may occur unless
such economic changes are material, adverse and retroactive in nature.
Further, in no event shall the interest rate on amounts deferred under Plan A
be reduced to a level lower than the ten (10)-year Treasury Note Rate.
Effective January 1, 1994, the Director participants in Plan A still serving
on the Board voluntarily reduced the applicable interest rate to one hundred
twenty percent (120%) of the applicable annual federal long-term rate as
specified in the Internal Revenue Code. At the same time, the Board closed
Plan A for any new participants or deferral opportunities, subject to the
existing rights and obligations thereunder. The interest rate for the first
six months of fiscal year 1994 for all Directors remained at twenty percent
(20%). In fiscal year 1989, First Mississippi established a successor Deferred
Compensation Plan for Outside Directors (Plan B) to insure continuation of
deferral opportunities for Directors. Plan B was amended effective January 1,
1994, to change the interest rate prospectively to one hundred twenty percent
(120%) of the applicable annual federal long-term rate as specified in the
Internal Revenue Code. Amounts deferred under Plan B prior to January 1, 1994
earned interest based on the Chase Manhattan Bank, N.A. Prime Rate, less one
percent (1%). At the time of the Distribution, ChemFirst will assume both Plan
A and Plan B. The deferrals under both Plan A and Plan B will be held by
ChemFirst until retirement, resignation or other termination of services.
Director J. Kelley Williams will participate only in Plan A.
ChemFirst will furnish Directors with $100,000 accidental death and
dismemberment and $250,000 of business travel accident insurance. At the time
of the Distribution, ChemFirst will assume First Mississippi's Retirement Plan
for its non-employee Directors under which all such Directors who have served
at least one (1) three-year term with First Mississippi or ChemFirst will,
under certain conditions, receive an annual retirement benefit equal to their
annual retainer at retirement for each year of service with First Mississippi
and ChemFirst, not to exceed fifteen (15) years. The amount of the retainer to
be received after retirement shall be fixed at the time of retirement. The
plan also provides for a lump sum payment to a Director under certain
conditions in the event of a change of control and to his beneficiary upon his
death.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to the executive
officers of ChemFirst. All executive officers are elected by the Board and
hold office until the next annual meeting of shareholders and thereafter until
their successors are elected and qualified. The following executive officers
of ChemFirst and its subsidiaries were elected at the October 30, 1996 meeting
of the Board, and all held the same positions at First Mississippi Corporation
prior thereto.
<TABLE>
<CAPTION>
POSITION HELD, YEAR FIRST
NAME AGE ELECTED AND TERM OF OFFICE
- ---- --- --------------------------
<S> <C> <C>
Daniel P. Anderson...... 44 Vice President, Health, Safety and Environmental
Affairs, July 1, 1995; Vice President, Environmental
Affairs, First Chemical Corporation, 1990.
Robert B. Barker........ 51 Vice President, Corporate Development and
Acquisitions, October 1996;
President, Quality Chemicals, Inc., 1990.
</TABLE>
E-43
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD, YEAR FIRST
NAME AGE ELECTED AND TERM OF OFFICE
- ---- --- --------------------------
<S> <C> <C>
W. P. Bartlett.......... 58 President, Callidus Technologies Inc., 1989;
President, Penteco Corporation, 1983-1989.
J. Steve Chustz......... 48 General Counsel, 1993; Interim General Counsel,
May 1993 through November 1993; Associate
General Counsel, 1987.
Paul Jerry Coder........ 54 President, EKC Technology, Inc., December 1992;
Vice President, Market Research, EKC Technology,
Inc., June 1992; Vice President, KCI Chemicals, Inc.,
June 1987--February 1992.
Samir A. Hakooz......... 49 President, Plasma Energy Corporation ("PEC"), 1991;
Executive Vice President and General Manager, PEC,
July, 1990; Vice President of Marketing, PEC,
April, 1990; Vice President, Marketing and
Vice President of Utility Products for
General Atomics Company, through April 1990.
Scott A. Martin......... 38 President, Quality Chemicals, Inc., October, 1996;
Vice President and General Manager Custom
Manufacturing, Quality Chemicals, July 1995;
Vice President, Operations, Quality Chemicals, August 1991.
James L. McArthur....... 53 Secretary and Manager, Investor Relations, 1993;
Manager, Investor Relations, 1988.
Terry L. Moore.......... 47 President, Plasma Processing Corporation, 1990;
Vice President, Marketing, PEC, 1985-1990.
George M. Simmons....... 53 President, First Chemical Corporation, July 1, 1995;
Vice President, Marketing, First Chemical
Corporation, 1985.
R. Michael Summerford... 48 Vice President and Chief Financial Officer, 1988;
Vice President, 1983-1988.
Thomas G. Tepas......... 49 President and Chief Operating Officer, August 1995;
Various senior management positions with Hercules,
Inc., including Senior Vice President, 1994 to
August 1995; Group Vice President and President
of the Food and Functional Products Division, 1992;
President of the Flavor and Food Ingredients
Division, 1991.
J. Kelley Williams...... 62 Chairman of the Board and Chief Executive Officer,
August 1995; Chairman of the Board, President
and Chief Executive Officer, 1988;
President and Chief Executive Officer, 1971-1988.
Frank D. Winter......... 55 President and Chief Executive Officer,
FirstMiss Steel, Inc., 1992;
Self-employed consultant, 1991-1992; President,
Atlas Specialty Steels, 1987-1991.
</TABLE>
EXECUTIVE COMPENSATION PRIOR TO THE DISTRIBUTION
The following table sets forth certain information concerning compensation
paid by First Mississippi during fiscal years 1996, 1995 and 1994 to First
Mississippi's Chief Executive Officer and the other four most highly
compensated persons, based on the salary and bonus earned in 1996, who were
executive officers of First Mississippi on June 30, 1996, and who will be
executive officers of ChemFirst at the time of the Distribution.
E-44
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION (1) OPTIONS (2) COMPENSATION (3)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ---- ------- ------- ---------------- --------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
J. Kelley Williams (4).. 1996 475,000 324,400 1,886,548(5) 60,000 29,545(8)(9)(10)
Chairman & Chief 1995 450,000 360,000 127,697(5) 22,050
Executive Officer 1994 330,000 200,000 (6) 35,000 52,975
Thomas G. Tepas......... 1996 187,500 135,000 (6) 48,272* 48,921(9)(10)(11)
President & Chief
Operating Officer
R. Michael Summerford... 1996 196,271 95,500 858,782(5) 16,422* 12,100(8)(9)(10)
Vice President & 1995 191,725 86,900 212,965(5) 21,300 11,701
Chief Financial Officer 1994 182,458 73,400 (6) 25,000 11,357
George M. Simmons....... 1996 163,227 81,600 71,239(5)(7) 2,300 13,313(8)(9)(10)
President, First Chemi-
cal 1995 127,342 35,400 (6) 10,829
Corporation 1994 120,731 32,000 151,598(5)(7) 6,192
Robert B. Barker........ 1996 163,227 57,000 (6) 2,300 12,845(8)(9)(10)
President, Quality 1995 136,204 37,000 (6) 10,776
Chemicals, Inc. 1994 126,650 33,400 261,849(7) 6,839
</TABLE>
- --------
* During fiscal 1996, the effective exercise price and number of underlying
securities for all Stock Options outstanding at the time of the Gold
Distribution were adjusted to reflect the distribution value of the
Getchell shares. Mr. Tepas' and Mr. Summerford's unexercised option awards
issued in 1996 before the Gold Distribution reflect this adjustment. See
"Beneficial Ownership of ChemFirst Common Stock."
(1) Other Annual Compensation includes payouts under Performance Option
arrangements, direct cash payments related to tax reimbursements related
to long-term incentives, tax planning and tax return preparation services,
and imputed income and tax reimbursements resulting from the personal use
of company automobiles and country clubs. Tax reimbursement payments
represent payments to eligible employees of thirty-seven percent (37%) of
First Mississippi's federal income tax deduction resulting from the
exercise of Debenture Options, Non-Qualified Stock Options ("NQSOs"),
Incentive Stock Options ("ISOs") and Performance Options. These payments
are not applicable for options granted since August 22, 1995.
(2) NQSOs were granted to officers and certain key employees of First
Mississippi in 1996, 1995 and 1994. The options for 1996 were awarded
under the 1995 Long-Term Incentive Plan. Options for 1995 and 1994 were
granted under the 1988 Long-Term Incentive Plan, under which no further
grants will be made. No shares of First Mississippi Common Stock are
available for the grant of awards under the 1980 Long-Term Incentive Plan.
The share amounts for a particular fiscal year under this column reflect
only the shares underlying options which were granted during the
respective fiscal year (that is, shares underlying options granted
subsequent to fiscal year end but based on performance in the prior fiscal
year are included in the share amounts for the subsequent year during
which the related options were actually granted).
(3) All Other Compensation is comprised of company contributions related to
First Mississippi's 401(k) Plan, including amounts provided by First
Mississippi's Benefits Restoration Plan ("BRP"), executive life insurance,
relocation expenses and the above market portion of interest earned under
the Deferred Income Plan (Plan A).
The BRP permits participants in the 401(k) Plan to make contributions, and
First Mississippi to match the same, in amounts permitted by the 401(k)
Plan but which would otherwise be in excess of those permitted by certain
Code limitations.
E-45
<PAGE>
(4) Mr. Williams' base salary was reduced twenty-five percent (25%) at his
request from June 1, 1993 to July 1, 1994, in consideration of losses due
to restructuring in fiscal 1993.
(5) Tax reimbursement payments in fiscal year 1996 to Mr. Williams, Mr.
Summerford and Mr. Simmons were $1,856,591; $844,060 and $16,304,
respectively. Tax reimbursement payments in fiscal 1995 to Mr. Williams
and Mr. Summerford were $78,625 and $196,493, respectively. Tax
reimbursement payments in fiscal 1994 to Mr. Simmons and Mr. Barker were
$38,150 and $69,396, respectively.
(6) Aggregate perquisites and other personal benefits were less than $50,000
or ten percent (10%) of the total annual salary and bonus reported for the
named executive officer and thus are excluded from the table.
(7) Includes payments received by Mr. Simmons on exercise of Performance
Options of $44,064 in 1996 and payments received by Mr. Simmons and Mr.
Barker of $103,107 and $187,558, respectively, in 1994.
(8) Above market interest earned under the Deferred Income Plan in fiscal 1996
was $2,850; $5,172 and $4,705 for Mr. Summerford, Mr. Simmons and Mr.
Barker, respectively. Mr. Williams voluntarily reduced the interest rate
on his deferrals effective January 1, 1994 to one hundred twenty percent
(120%) of the applicable annual federal long-term rate as specified in the
Internal Revenue Code. See "Compensation of Directors."
(9) Company contributions to the 401(k) Plan in fiscal 1996 were $6,000;
$1,200; $6,000; $6,000 and $6,000 for Mr. Williams, Mr. Tepas, Mr.
Summerford, Mr. Simmons and Mr. Barker. Accruals to the 401(k) related BRP
were $13,000; $3,100; $1,800; $529 and $529 for Mr. Williams, Mr. Tepas,
Mr. Summerford, Mr. Simmons and Mr. Barker, respectively.
(10) The Executive life insurance program was changed effective November 1,
1995, to provide cash subsidies to participants based on age-based
premium cost replacing a program under which the Company provided the
insurance and paid the premiums directly. Direct insurance payments in
fiscal 1996 were $1,425; $283; $590; $490 and $490 for Mr. Williams, Mr.
Tepas, Mr. Summerford, Mr. Simmons and Mr. Barker, respectively. Cash
subsidies in fiscal 1996 were $9,120; $1,080; $860; $1,121 and $1,121 for
Mr. Williams, Mr. Tepas, Mr. Summerford, Mr. Simmons and Mr. Barker,
respectively.
(11) Relocation expenses paid by First Mississippi during 1996 on behalf of
Mr. Tepas were $43,258.
TERMINATION AGREEMENTS WITH FIRST MISSISSIPPI
During fiscal 1996, the Board of Directors of First Mississippi approved and
First Mississippi entered into Termination Agreements for the Executive
Officers of First Mississippi, including Mr. Williams, Mr. Tepas, Mr.
Summerford, Mr. Simmons and Mr. Barker. The Termination Agreements are
contingent upon a Change of Control, as defined in the Agreements, and provide
for three-year terms which are automatically extended unless First Mississippi
determines not to renew or there is a Change of Control of First Mississippi
during any three-year term. The consummation of the Transfers, the
Distribution and the Merger will not result in a Change of Control under the
Termination Agreements. Each officer, other than the Chief Executive Officer,
would be paid upon termination of employment for reasons other than cause,
death or disability or upon resignation for good reason, subsequent to a
Change of Control during the term of the Termination Agreement, three (3)
times the sum of the five-year average of his annual base salary and bonus.
First Mississippi's Chief Executive Officer is entitled to the same
termination benefit as described above for all other Executive Officers,
except for the fact that the Chief Executive Officer may resign for any
reason, as opposed to "good reason," within thirty-six (36) months of a Change
of Control and still be entitled to the termination benefit. Upon termination,
the individual would have the option, unless he notifies First Mississippi
otherwise, to receive a cash payment equal to the cash value of all his NQSOs,
Debenture Options and Convertible Debentures, whether then exercisable or not.
Following termination, First Mississippi will pay amounts previously due to
individuals for early stock disposition of grants issued in 1994 and earlier
under First Mississippi's tax sharing plan. No individual would receive
payments in the event of death, disability or termination for cause. In
addition, the Termination Agreements provide for an additional payment to be
made by First Mississippi to the Chief Executive Officer if any of the
severance payments provided for by the Termination Agreements or any other
payments made pursuant to a Change of Control of First Mississippi (the "Total
Payments") become subject to an additional tax ("Excise Tax") imposed by
Section 4999 of the Code, such that the net of all of the payments received by
the Officer after the imposition of the Excise Tax on the Total Payments and
any federal income tax on the
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<PAGE>
additional payment shall be equal to the Total Payments. Pursuant to the
Distribution Agreement, at the time of the Distribution, ChemFirst will assume
the obligations of First Mississippi under the Termination Agreements. See
"The Transfers and the Distribution--Terms of the Distribution Agreement."
OPTION GRANTS FOR FIRST MISSISSIPPI COMMON STOCK IN LAST FISCAL YEAR
The following table provides information on Stock Options to purchase First
Mississippi Common Stock granted in fiscal year 1996 to the executive officers
named in the Summary Compensation Table above. Pursuant to the Employee
Benefits Agreement, at the time of the Distribution these Stock Options will
be converted to ChemFirst Options. See "The Transfers and the Distribution--
Terms of the Employee Benefits Agreement."
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED STOCK PRICE APPRECIATION FOR
UNDERLYING TO ALL EXERCISE TEN-YEAR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ($)(2)
NAME GRANTED(1) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ---------- -------------- --------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
J. Kelley Williams...... 60,000 23.4% 23.13 11/10/05 872,591 2,211,318
Thomas G. Tepas......... 23,800 9.3% 23.13 11/10/05 346,128 877,156
24,472 9.5% 20.38 08/22/05 313,661 794,879
R. Michael Summerford... 16,422 6.4% 20.38 08/22/05 210,483 533,406
George M. Simmons....... 2,300 0.9% 23.13 11/10/05 33,449 84,767
Robert B. Barker........ 2,300 0.9% 23.13 11/10/05 33,449 84,767
</TABLE>
- --------
(1) The share amounts under this column do not include 60,000; 21,300; 16,900,
5,100 and 4,100 shares underlying options which were granted on August 27,
1996 to Mr. Williams, Mr. Tepas, Mr. Summerford, Mr. Simmons and Mr.
Barker, respectively.
(2) The dollar amounts under these columns represent the potential realizable
value of each grant assuming that the market value of First Mississippi
Common Stock appreciates from the date of grant to the expiration of the
option at annualized rates of 5% and 10%. These assumed rates of
appreciation have been specified by the Securities and Exchange Commission
for illustrative purposes only and are not intended to forecast future
financial performance or possible future appreciation in the price of
First Mississippi stock.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table sets forth certain information with regard to the
aggregated options to purchase First Mississippi Common Stock exercised in the
year ended June 30, 1996 and the option values as of the end of that year for
the chief executive officer and other executive officers of First Mississippi
listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES AGGREGATE VALUE OF
SHARES ACQUIRED VALUE UNDERLYING UNEXERCISED UNEXERCISED, IN-THE-MONEY
NAME ON EXERCISE REALIZED ($) OPTIONS AT 6/30/96(1) OPTIONS AT 6/30/96 ($)(2)
- ---- --------------- ------------ ---------------------- -------------------------
<S> <C> <C> <C> <C>
J. Kelley Williams...... 175,000 5,017,813 317,600 3,370,975
Thomas G. Tepas......... -- -- 48,272 45,752
R. Michael Summerford... 93,300 2,281,244 16,422 30,702
George M. Simmons....... -- -- 18,400 204,788
Robert B. Barker........ -- -- 16,790 184,903
</TABLE>
- --------
(1) All option information disclosed relates to exercisable options. There
were no unexercisable options at fiscal year end.
E-47
<PAGE>
(2) Value was computed as the difference between the individual option price
and the per share closing price of First Mississippi Common Stock on June
30, 1996, as reported on the consolidated transaction system for NYSE
issues. Only options with fair market values in excess of the exercise
price are reflected in this column.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR(1)
The following table sets forth certain information with regard to awards
under First Mississippi's Long-Term Incentive Plan in the last fiscal year
ended June 30, 1996.
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF OTHER PERIOD UNTIL ESTIMATED
NAME UNITS MATURATION OR PAYOUT FUTURE PAYOUTS
---- --------- -------------------- --------------
<S> <C> <C> <C>
George M. Simmons................. 9,600 (2) (3)
Robert B. Barker.................. 9,600 (2) (3)
</TABLE>
- --------
(1) In fiscal 1996, First Mississippi adopted Performance Option Plans for
First Chemical Corporation and Quality Chemicals, Inc., providing for
awards payable only in cash based on appreciation in value of units, such
appreciated value being based on the subsidiary's pre-tax operating profit
and the price earnings multiples of a peer group of publicly held
companies. Options shown in this table represent performance units granted
under these plans on August 22, 1995. This table does not include
performance units granted on August 27, 1996 of 6,700 and 17,500 to Mr.
Simmons and Mr. Barker, respectively.
(2) Performance units granted August 22, 1995 are exercisable no earlier than
six (6) months from date of grant and until ten (10) years from grant. The
units are valued on a quarterly basis and may be exercised by the
participant within fifteen (15) business days from the date of valuation.
(3) The performance options granted on August 22, 1995, have a base price of
$20.30 and may be exercised as noted above. Estimated future value will be
based on the appreciated value of the options on the exercise date and
cannot be reasonably estimated at this time. However, if unit values
appreciated at annual rates of 5% and 10%, the potential realizable value
at the end of their ten (10)-year term would be $122,529 and $310,589,
respectively, for Mr. Simmons and Mr. Barker.
OTHER COMPENSATION
In 1970, First Mississippi shareholders authorized the noncontributory
Retirement Plan for the Employees of First Mississippi. Employees become one
hundred percent (100%) vested after five (5) years of employment. The plan
provides for normal retirement at age sixty-five (65) with actuarially
adjusted provisions for early and postponed retirement dates. Retirement
benefits are based on years of service and average compensation (wages and
salary) of the five (5) highest consecutive years during employment. The
benefits listed in the table below are not subject to any reduction for social
security or other offset amounts.
The following table shows the estimated annual retirement benefit payable to
participating employees including executive officers based on earnings and
years of service classifications as indicated.
<TABLE>
<CAPTION>
AVERAGE ANNUAL ESTIMATED ANNUAL BENEFITS FOR YEARS OF CREDITED SERVICE
COMPENSATION (5 HIGHEST -------------------------------------------------------
CONSECUTIVE YEARS) 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- ----------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$100,000................ $ 17,712 $ 35,424 $ 53,136 $ 70,848
150,000................. 26,712 53,424 80,136 106,848
200,000................. 35,712 71,424 107,136 142,848
300,000................. 53,712 107,424 161,136 214,848
400,000................. 71,712 143,424 215,136 286,848
450,000................. 80,712 161,424 242,136 322,848
500,000................. 89,712 179,424 269,136 358,848
</TABLE>
E-48
<PAGE>
The table includes amounts that exceed limitations allowed under Section 415
of the Code. First Mississippi's BRP provides that if a retired employee's
benefits calculated under the Retirement Plan exceed the maximum allowed under
the Code, First Mississippi will supplement such employee's benefits to the
extent such benefit is in excess of the limitation.
Years of service for the executive officers listed in the Summary
Compensation Table are: J. Kelley Williams, thirty (30) years; Thomas G.
Tepas, one (1) year; R. Michael Summerford, eighteen (18) years; George M.
Simmons, eleven (11) years and Robert B. Barker, twenty-one (21) years.
E-49
<PAGE>
BENEFICIAL OWNERSHIP OF CHEMFIRST COMMON STOCK
The following table sets forth certain projected information as of the
Distribution Record Date regarding the beneficial ownership of shares of
ChemFirst Common Stock by (i) each person known by ChemFirst to own
beneficially more than five percent of the outstanding shares of First
Mississippi Common Stock, (ii) each director of ChemFirst, (iii) certain
executive officers of ChemFirst and (iv) the directors and executive officers
of ChemFirst as a group. The ownership information presented below with
respect to all persons and organizations is based on record ownership of First
Mississippi Common Stock as of October 30, 1996 (other than Goldman Sachs
Group, L.P.) and assumes no change in record ownership of First Mississippi
Common Stock or beneficial ownership of Stock Options or Debenture Options
between such date and the Distribution Record Date.
<TABLE>
<CAPTION>
TOTAL COMMON
COMMON STOCK STOCK PERCENT
BENEFICIALLY PERCENT OF COMMON BENEFICIALLY OF
NAME OWNED(1)(2) CLASS STOCK OWNED(3) CLASS
- ---- ------------ ---------- ------- ------------ -------
<S> <C> <C> <C> <C> <C>
Directors and Named
Executive Officers:
Richard P. Anderson..... 9,450(4)
NQSO................... 2,101 11,551 *
Paul A. Becker.......... 10,000
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
------
13,376 23,376 *
James W. Crook.......... 116,087(5)
NQSO................... 2,101 118,188 *
James E. Fligg.......... 500
1994-1 Series.......... 2,255 100%
NQSO................... 2,101
------
4,356 4,856 *
Robert P. Guyton........ 23,000
NQSO................... 2,101 25,101 *
Charles P. Moreton...... 13,250
NQSO................... 2,101 15,351 *
Paul W. Murrill......... 7,900(6)
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
------
13,376 21,276 *
William A. Percy, II.... 36,275(7)
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
------
13,376 49,651 *
</TABLE>
E-50
<PAGE>
<TABLE>
<CAPTION>
TOTAL COMMON
COMMON STOCK STOCK PERCENT
BENEFICIALLY PERCENT OF COMMON BENEFICIALLY OF
NAME OWNED(1)(2) CLASS STOCK OWNED(3) CLASS
- ---- ------------ ---------- --------- ------------ -------
<S> <C> <C> <C> <C> <C>
Leland R. Speed......... 12,720
1988-1 Series.......... 2,255 20%
1989-2 Series.......... 2,255 20%
1990-2 Series.......... 2,255 20%
1991-2 Series.......... 2,255 20%
1992-1 Series.......... 2,255 20%
NQSO................... 2,101
-------
13,376 26,096 *
R. Gerald Turner........ 7,900(8)
NQSO................... 2,101 10,001 *
J. Kelley Williams...... 870,465(9)
1987-A Series.......... 56,375 78%
1988-A Series.......... 101,475 63%
1989-1 Series.......... 101,475 100%
1990-1 Series.......... 101,475 98%
NQSO................... 84,037
-------
444,887 1,315,302 6.2%
Robert B. Barker........ 10,772(10)
1987-A Series.......... 11,275 16%
1988-A Series.......... 6,765 4%
1989-A Series.......... 2,255 6%
NQSO................... 3,221
-------
23,516 34,288 *
George M. Simmons....... 243
1988-A Series**........ 9,000 6%
1989-A Series.......... 2,255 6%
NQSO................... 14,496
-------
25,771 26,014 *
R. Michael Summerford... 70,546
NQSO................... 23,001 93,547 *
Thomas G. Tepas 1,759(11)
NQSO................... 67,611 69,370 *
All Directors and Execu-
tive Officers as a
Group (26 Persons)(12). 1,218,366
1987-A Series.......... 67,650 94%
1988-A Series**........ 121,770 75%
1988-1 Series.......... 9,020 80%
1989-A Series.......... 5,637 15%
1989-1 Series.......... 101,475 100%
1989-2 Series.......... 9,020 80%
1990-1 Series.......... 101,475 85%
</TABLE>
E-51
<PAGE>
<TABLE>
<CAPTION>
TOTAL COMMON
COMMON STOCK STOCK PERCENT
BENEFICIALLY PERCENT OF COMMON BENEFICIALLY OF
NAME OWNED(1)(2) CLASS STOCK OWNED(3) CLASS
- ---- ------------ ---------- ------ ------------ -------
<S> <C> <C> <C> <C> <C>
1990-2 Series.......... 9,020 80%
1991-1 Series.......... 6,765 75%
1991-2 Series.......... 9,020 80%
1992-1 Series.......... 9,020 80%
1994-1 Series.......... 2,225 100%
NQSO................... 294,343
-------
746,470 1,964,836 9.2
5% Beneficial Holder:
Goldman Sachs Group,
L.P.(13)................ 1,771,091 8.3
Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
</TABLE>
- --------
* Represents less than one percent (1%) of class.
** Represents 9,020 shares of First Mississippi Common Stock underlying
Convertible Debentures that have already been purchased through the
exercise of Debenture Options.
(1) On October 20, 1995, First Mississippi distributed to its shareholders
the shares of Getchell held by First Mississippi pursuant to the Gold
Distribution. Following the Gold Distribution, in accordance with the
provisions of the Long-Term Incentive Plans of First Mississippi, the
number of shares of First Mississippi Common Stock underlying outstanding
Convertible Debentures, Debenture Options and NQSOs, as well as the
effective exercise prices relating thereto, were adjusted to reflect the
distribution value of the Getchell shares. This adjustment increased the
number of shares underlying the awards outstanding at the time of the
Gold Distribution and reduced the respective exercise prices by a factor
of 1.61.
(2) Numbers represent shares of First Mississippi Common Stock underlying the
Convertible Debentures and NQSOs beneficially owned by the directors and
officers. The Convertible Debentures are immediately convertible into the
specified number of shares of Convertible Preferred Stock of the same
series and then immediately convertible into the specified number of
shares of First Mississippi Common Stock. NQSOs are exercisable no
earlier than six (6) months from date of grant into shares of First
Mississippi Common Stock and presently all are exercisable.
(3) It is anticipated that prior to the Distribution, ChemFirst will adopt a
Shareholder Rights Plan pursuant to which, preferred stock purchase
rights will be attached to the outstanding shares of ChemFirst Common
Stock, including the outstanding shares of ChemFirst Common Stock
projected above as being owned by directors and officers immediately
following the Distribution. Under certain conditions, each right will be
exercisable to purchase one one-hundredth (1/100) of a share of a new
series of preferred stock, at an exercise price of $100 (subject to
adjustment). The rights, which will not have voting rights, will expire
in 2006 and will be redeemable by ChemFirst at a price of $.01 per right
prior to a specified period of time after the occurrence of certain
events. In certain events, each right (except certain rights beneficially
owned by 10% or more owners, which rights are voided) will entitle its
holder to purchase shares of ChemFirst Common Stock with a value of twice
the then current exercise price. See "Description of ChemFirst Capital
Stock--Shareholder Rights Plan."
(4) Shares voting and investment power of 3,700 shares with Mrs. Anderson.
(5) Included are 700 shares owned by Mrs. Crook of which Mr. Crook has no
voting and investment power and disclaims beneficial ownership.
(6) Included are 775 shares owned by Mrs. Murrill of which Dr. Murrill has no
voting and investment power and disclaims beneficial ownership.
(7) Included are 31,500 shares of which Mr. Percy has sole voting and
investment power as President of Greenville Compress Company and of which
he disclaims beneficial ownership.
E-52
<PAGE>
(8) Shares voting and investment power of 7,800 shares with Mrs. Turner.
(9) Included are 171,518 shares of which Mr. Williams shares voting and
investment power, and 4,327 shares for which he has no voting and
investment power and disclaims beneficial ownership. Excluded are 61,750
shares held in the Jean P. Williams Revocable Trust, of which Mr. Williams
has no voting and investment power and disclaims beneficial ownership.
(10) Shares voting and investment power of 200 shares with Mrs. Barker.
(11) Shares voting and investment power with Mrs. Tepas.
(12) Except for 2,000 shares, 2,000 shares, and 100 shares for which Mr.
Daniel Anderson, Mr. Moore and Mr. Chustz, respectively, have shared
voting and investment power, and except for 12 shares owned by Mr.
McArthur's wife, of which he has no voting and investment power and
disclaims beneficial ownership, and except as otherwise indicated in
these notes, the shares beneficially owned by the persons indicated in
the table above represent sole voting and investment power.
(13) Based on Form 13G filed by the Investor with the Securities and Exchange
Commission. Included 1,762,991 shares as to shared voting power and 8,100
shares with no voting power.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gold Distribution. Until October 20, 1995, First Mississippi owned
14,750,000 shares of common stock of Getchell (approximately 81% of the
outstanding common stock). On that date, First Mississippi distributed all of
the stock it owned in Getchell to its shareholders. During fiscal 1996,
Messrs. Moreton, Summerford and Williams, who currently serve as a director,
Vice President, Chief Financial Officer, and Chairman and Chief Executive
Officer, respectively, of First Mississippi, served as members of the board of
Getchell, with Mr. Williams serving as Chairman. In June 1996, Mr. Moreton
resigned from the Getchell Board. At August 31, 1996, Mr. Williams
beneficially owned 613,165 shares of common stock of Getchell, or 2.4% of the
total number of shares outstanding.
Debt Owed by Getchell. Prior to the Gold Distribution, First Mississippi
provided to Getchell capital and operating advances from time to time.
Effective the date of the Gold Distribution, the debt was $52.5 million and
First Mississippi and Getchell entered into a new long-term loan agreement
(the "Loan Agreement") which provided that the total outstanding amount would
be due in September 2000, that Getchell would repay $15.0 million to First
Mississippi from the proceeds of a public common stock offering prior to April
1996, that interest would accrue at a rate not exceeding the London Inter-Bank
Offered Rate plus one percent, and that the interest would not be paid in
cash, but rather would be capitalized to the note. In November 1995, Getchell
reduced the debt by $15.0 million, from proceeds of a common stock offering.
The debt was further reduced by the settlement of the Tax Sharing Agreement
(described below). At June 30, 1996, the total aggregate debt owed to First
Mississippi pursuant to the Loan Agreement was $24.7 million. The Loan
Agreement will be transferred to ChemFirst pursuant to the Transfers.
Tax Sharing Agreement. In October 1987, First Mississippi and Getchell
entered into a Tax Sharing Agreement for the period during which Getchell was
a member of the affiliated group of corporations of which First Mississippi is
the common parent (the "Affiliated Group"). Under the agreement, Getchell
accrued income taxes (payable to First Mississippi) as if Getchell and its
subsidiaries were, since the inception of the agreement on October 28, 1987, a
separate affiliated group of corporations filing consolidated income tax
returns. In determining the amount of such payments, Getchell was potentially
bound by tax elections, conventions, treatments or methods utilized by First
Mississippi in filing its consolidated income tax returns. The Tax Sharing
Agreement also provided for payments in respect of net operating losses and
certain other tax benefits by First Mississippi to Getchell or, under some
circumstances, by Getchell to First Mississippi, in taxable years in which
Getchell was no longer a member of the Affiliated Group. Effective with the
Gold Distribution on October 20, 1995, the Tax Sharing Agreement was
terminated. In settlement of the Agreement, approximately $13.9 million was
used to reduce the debt owed by Getchell to First Mississippi.
Tax Ruling Agreement. First Mississippi obtained a letter ruling from the
Internal Revenue Service in April 1995 providing for tax-free distribution to
its shareholders of its shares of Getchell's common stock. In
E-53
<PAGE>
September 1995, First Mississippi and Getchell entered into the Tax Ruling
Agreement which sets forth certain covenants and agreements of Getchell
relevant to maintaining the tax-free nature of the distribution of the common
stock.
The Tax Ruling Agreement provides that Getchell will complete an
underwritten public equity of common stock generating aggregate proceeds of at
least $50.0 million prior to April 1996. In late 1995, Getchell satisfied this
requirement by issuing common stock to the public which generated net proceeds
of approximately $137.5 million. The Tax Ruling Agreement also required
Getchell to repay at least $15.0 million of debt owed to First Mississippi
from the net proceeds of the common equity issue, which repayment occurred in
November 1995.
The Tax Ruling Agreement provides also that Getchell will not, prior to one
year from the date of the spinoff, enter into any agreement to merge or
consolidate with or into any other corporation, to liquidate, to sell or
transfer all or substantially all of its assets, to redeem or repurchase any
of its capital stock (except for the redemption of the stock of one or more
Getchell employees upon his or her termination) or to issue additional shares
of its capital stock (except in connection with the public offering of common
stock described above, or issuances pursuant to Getchell's employee benefit or
compensation plans), unless it first obtains an opinion of counsel or a
supplemental ruling from the Internal Revenue Service that such action does
not interfere with the Tax Ruling.
In the event Getchell were to be taken such actions or solicits or assists
any person or group to commence a tender offer, if such person or group would
acquire ownership of 20% or more of Getchell's outstanding Common Stock
without an opinion or a supplemental Internal Revenue Service ruling, Getchell
agreed under the Tax Ruling Agreement to indemnify and hold First Mississippi
and certain affiliated corporations harmless against any and all federal,
state and local taxes, interest penalties and additions thereto imposed upon
or incurred by such corporations as a result of such action's effect on the
tax free nature of the Gold Distribution. The Tax Ruling Agreement will be
transferred to ChemFirst pursuant to the Transfers.
For a description of certain other relationships and related transactions
with respect to entities related to directors and executive officers of
ChemFirst, see "Management--Directors" and "Management--Executive Officers."
E-54
<PAGE>
DESCRIPTION OF CHEMFIRST CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of ChemFirst consists of 100,000,000 shares of
ChemFirst Common Stock, par value $1.00 per share, and 20,000,000 shares of
Preferred Stock. At the Distribution Record Date there are expected to be
approximately 20,621,736 shares of ChemFirst Common Stock outstanding held of
record by approximately 5,438 persons. No shares of Preferred Stock have been
issued by ChemFirst.
Based on the 20,621,736 shares of First Mississippi Common Stock outstanding
at October 30, 1996, 20,621,736 shares of ChemFirst Common Stock will be
distributed to First Mississippi shareholders in the Distribution. All the
shares of ChemFirst Common Stock to be distributed to First Mississippi
shareholders in the Distribution will be fully paid and non-assessable.
COMMON STOCK
Dividends will be payable on ChemFirst Common Stock at the discretion of the
Board from sources legally available therefor. Upon dissolution of ChemFirst,
holders of the ChemFirst Common Stock will be entitled to share pro rata in
the assets remaining after payment of corporate debts and any other priority
claims. ChemFirst Common Stock will not be subject to any redemption or
sinking fund provisions and will have no subscription rights. Each holder of
ChemFirst Common Stock will be entitled to one vote per share.
PREFERRED STOCK
ChemFirst's Board of Directors may authorize the issuance of up to
20,000,000 shares of Preferred Stock in one or more series, which series may
have such voting powers (if any), and such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
or restrictions thereof, as the Board shall establish in its resolution
providing for the issuance of such series. Any series of Preferred Stock
issued by ChemFirst may have dividend, dissolution and other preferences over
ChemFirst Common Stock and may be convertible into shares of ChemFirst Common
Stock. ChemFirst will at or prior to the time of the Distribution, designate a
series of ChemFirst Preferred Stock as Series X Junior Participating Preferred
Stock (the "Series X Preferred Stock"), in connection with the Shareholder
Rights Plan. See "--Shareholder Rights Plan" below.
Pursuant to its authority to designate series of Preferred Stock, the Board
has established the 1987-A, 1988-A, 1988-1, 1989-A, 1989-1, 1989-2, 1990-1,
1990-2, 1991-1, 1991-2, 1992-1 and 1994-1 Series Convertible Preferred Stock
for issuance in connection with certain benefit plans of ChemFirst and has
authorized the issuance of such Preferred Stock as follows: up to 97,000
shares of the 1987-A Series, 156,000 shares of the 1988-A Series, 11,000
shares of the 1988-1 Series, 103,000 shares of the 1989-A Series, 45,000
shares of the 1989-1 Series, 11,000 shares of the 1989-2 Series, 138,000
shares of the 1990-1 Series, 11,000 shares of the 1990-2 Series, 155,000
shares of the 1991-1 Series, 11,000 shares of the 1991-2 Series, 11,000 shares
of the 1992-1 Series and 1,000 shares of the 1994-1 Series upon conversion of,
respectively, the 1987-A, 1988-A, 1988-1, 1989-A, 1989-1, 1989-2, 1990-1,
1990-2, 1991-1, 1991-2, 1992-1 and 1994-1 Series Convertible Debentures.
The 1987-A, 1988-A, 1988-1, 1989-A, 1989-1, 1989-2, 1990-1, 1990-2, 1991-1,
1991-2, 1992-1 Series and 1994-1 Series Convertible Preferred Stock (sometimes
referred to collectively as the "Series Stock") each has a par value of $1.00
per share and is entitled to a quarterly non-cumulative preferential dividend
of $.05 per share, payable quarterly. Each share of Series Stock will be
convertible immediately into 1.61 shares of ChemFirst's Common Stock, subject
to adjustment in certain events (including with respect to the Distribution).
The Board of Directors is authorized to determine the appropriate adjustments,
if any, to the number of shares of the ChemFirst's Common Stock issuable upon
conversion of the Series Stock in the event of a reclassification,
recapitalization, merger, consolidation, reorganization, issuance of warrants,
rights or debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, including, without
E-55
<PAGE>
limitation, a distribution of the stock of a subsidiary (including the
Distribution), combination or exchange of shares, repurchase of shares, or any
other change of ChemFirst's corporate structure, which, in the judgment of the
Board materially affects the value of ChemFirst's shares subsequent to the
grant of a regular Debenture Option or subsequent to the conversion of a Stock
Option into a Special Debenture Option.
ChemFirst will not issue fractional shares of ChemFirst Common Stock upon
conversion of Series Stock. In lieu of such fractions, ChemFirst will pay to
the holder of Series Stock requesting conversion an amount in cash equal to the
market value of such fraction at the time of such conversion, as determined by
the Board.
Any or all of the Series Stock outstanding at any time may be redeemed at the
option of ChemFirst in whole or in part at any time upon not less than 20 nor
more than 60 days' notice to the record holders at their last addresses as
shown in the stock transfer records of ChemFirst. The conversion right with
respect to any shares called for redemption will be lost unless exercised no
later than the day fixed for redemption. The redemption price per share (the
"Redemption Price") for Series Stock will be as follows (plus in each case
accrued and unpaid dividends per share on the respective series of stock to the
date of redemption):
<TABLE>
<CAPTION>
REDEMPTION
SERIES STOCK PRICE PER SHARE
------------ ---------------
<S> <C>
1987-A................................................... $14.4375
1988-A................................................... 15.9375
1988-1................................................... 16.125
1989-A................................................... 17.50
1989-1................................................... 17.50
1989-2................................................... 13.8125
1990-1................................................... 11.00
1990-2................................................... 9.3750
1991-1................................................... 9.8125
1991-2................................................... 9.3125
1992-1................................................... 7.8125
1994-1................................................... 21.3125
</TABLE>
Under the MBCA, no redemption could be made if ChemFirst were insolvent or
would be rendered insolvent by such redemption or if such redemption would
reduce ChemFirst's net assets below the aggregate amount payable to holders of
shares having prior or equal rights to ChemFirst's assets upon involuntary
dissolution.
Upon any voluntary or involuntary liquidation or dissolution of ChemFirst,
the holders of the Series Stock will be entitled to a liquidation preference
equal to the Redemption Price for the appropriate series as set forth above,
plus any declared but unpaid dividends on the respective series of stock,
before any distribution of assets may be made to the holders of ChemFirst
Common Stock or other shares junior to the Series Stock. After the holders of
the Series Stock have received such amount, they may not participate in any
remaining assets and surplus funds of ChemFirst. If the amounts which holders
of the Series Stock and any other series of Preferred Stock ranking equally as
to distribution of assets are entitled to receive in any voluntary or
involuntary liquidation or dissolution are not paid in full, the shares of
Series Stock and such other series of Preferred Stock will share ratably in any
distribution of assets in accordance with the amounts which would be payable on
such distribution if all amounts to which the holders of each such series are
entitled are paid in full.
Additional series of Preferred Stock may be created and shares thereof may be
issued by ChemFirst without any approval or action by the holders of the Series
Stock being necessary, and such additional series of stock may rank equally
with the Series Stock as to distribution of ChemFirst's assets in the event of
liquidation or dissolution.
E-56
<PAGE>
The holders of shares of Series Stock will not be entitled to vote except in
certain circumstances as provided by the MBCA. Holders of Series Stock do not
have preemptive rights.
SHAREHOLDER RIGHTS PLAN
The Board of Directors of ChemFirst has declared a dividend distribution of
one right (a "Right") for each share of ChemFirst Common Stock to be
distributed to First Mississippi shareholders pursuant to the Distribution.
Each Right will entitle the registered holder to purchase from First
Mississippi a unit consisting of one one-hundredth of a share (a "Unit") of
Series X Preferred Stock, at a purchase price per Unit of $100.00 (the
"Purchase Price"). The description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") between ChemFirst and a Rights
Agent.
Initially, the Rights will be attached to all ChemFirst Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from ChemFirst
Common Stock and a Rights Distribution Date will occur upon the earliest of
any of the following events:
(i) 10 days following a public announcement that a person or group (an
"Acquiring Person"), together with persons affiliated or associated with
it, has acquired, or obtained the right to acquire, beneficial ownership of
15 percent or more of the outstanding shares of ChemFirst Common Stock (the
"Stock Acquisition Date");
(ii) 10 business days (or such later date as the Board of Directors of
the Registrant shall determine) following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 15 percent or more of such outstanding shares of ChemFirst Common
Stock; or
(iii) 10 business days following a determination by the Board of
Directors of the Registrant that a person (an "Adverse Person"), alone or
together with its affiliates and associates, has become the beneficial
owner of more than 10% of the Common Stock and that (a) such beneficial
ownership is intended to cause ChemFirst to repurchase the Common Stock
beneficially owned by such person or to cause pressure on to ChemFirst take
action or enter into transactions intended to provide such person with
short-term financial gain under circumstances where the Board of Directors
determines that the best long-term interests of ChemFirst would not be
served by taking such action or entering into such transactions at the time
or (b) such beneficial ownership is causing or reasonably likely to cause a
material adverse impact on the business or prospects of ChemFirst;
provided, however, that the Board of Directors of ChemFirst shall not
declare any person to be an Adverse Person if such person has reported or
is required to report its ownership of Common Stock on Schedule 13G under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or on
Schedule 13D under the Exchange Act which Schedule 13D does not state any
intention to, or reserve the right to, control or influence ChemFirst or
engage in certain other actions, so long as such person neither reports nor
is required to report such ownership other than as described in this
proviso (the earliest of such dates being called the "Distribution Date").
Until the Rights Distribution Date (or earlier redemption or expiration of
the Rights), (i) the Rights will be transferred with and only with the
ChemFirst Common Stock (except in connection with redemption of the Rights),
(ii) new ChemFirst Common Stock certificates issued after the Record Date upon
transfer, replacement or new issuance of ChemFirst Common Stock will contain a
notation incorporating the Rights Agreement by reference and (iii) the
surrender for transfer of any certificates for ChemFirst Common Stock
outstanding will also constitute the transfer of the Rights associated with
the ChemFirst Common Stock represented by such certificate.
The Rights will first become exercisable on the Rights Distribution Date and
will expire at the close of business on October 30, 2006 (the "Expiration
Date"), unless earlier redeemed by ChemFirst as described below.
Notwithstanding the foregoing, the Rights will not be exercisable after the
occurrence of a Triggering Event (defined below) until ChemFirst's right of
redemption has expired.
E-57
<PAGE>
As soon as practicable after the Rights Distribution Date, separate
certificates evidencing the Rights (the "Rights Certificates") will be mailed
to holders of record of ChemFirst Common Stock as of the close of business on
the Rights Distribution Date and, thereafter, such separate Rights
Certificates alone will evidence the Rights. Except for shares of ChemFirst
Common Stock issued or sold after the Rights Distribution Date pursuant to the
exercise of stock options or under any employee benefit plan or arrangement
granted or awarded prior to the Rights Distribution Date, or the exercise,
conversion or exchange of securities issued by ChemFirst, and except as
otherwise determined by the Board of Directors, only shares of ChemFirst
Common Stock issued prior to the Rights Distribution Date will be issued with
Rights.
In the event that any person shall become (a) an Acquiring Person (except
(i) pursuant to an offer for all outstanding shares of ChemFirst Common Stock
which the independent directors determine to be fair to and otherwise in the
best interest of ChemFirst and its shareholders after receiving advice from
one or more investment banking firms (a "Qualifying Offer") and (ii) for
certain persons who report their ownership on Schedule 13G under the Exchange
Act, or on Schedule 13D under the Exchange Act, provided that they do not
state any intention to, or reserve the right to, control or influence
ChemFirst and such persons certify that they became an Acquiring Person
inadvertently and they agree that they will not acquire any additional shares
of ChemFirst Common Stock) or (b) an Adverse Person (either such event is
referred to herein as a "Triggering Event"), then the Rights will "flip-in"
and entitle each holder of a Right, except as provided below, to purchase,
upon exercise at the then-current Purchase Price, that number of shares of
Common Stock having a market value of two times such Purchase Price.
Any Rights beneficially owned at any time on or after the earlier of the
Rights Distribution Date and the Stock Acquisition Date by an Acquiring
Person, an Adverse Person or an affiliate or associate of an Acquiring Person
or an Adverse Person (whether or not such ownership is subsequently
transferred) will become null and void upon the occurrence of a Triggering
Event, and any holder of such Rights will have no right to exercise such
Rights.
In the event that, following a Triggering Event, ChemFirst is acquired in a
merger or other business combination in which the ChemFirst Common Stock does
not remain outstanding or is changed (other than a merger following a
Qualifying Offer) or 50 percent of the assets or earning power of ChemFirst
and its Subsidiaries (as defined in the Rights Agreement) (taken as a whole)
is sold or otherwise transferred to any person (other than ChemFirst or any
Subsidiary of the Registrant) in one transaction or a series of related
transactions, the Rights will "flip-over" and entitle each holder of a Right,
except as provided in the preceding paragraph, to purchase, upon exercise of
the Right at the then-current Purchase Price, that number of shares of common
stock of the acquiring company (or, in certain circumstances, one of its
affiliates) which at the time of such transaction would have a market value of
two times such Purchase Price.
The Purchase Price is subject to adjustment from time to time to prevent
dilution upon the (i) declaration of a dividend on the Preferred Stock payable
in shares of Preferred Stock, (ii) subdivision of the outstanding Preferred
Stock, (iii) combination of the outstanding Preferred Stock into a smaller
number of shares, (iv) issuance of any shares of ChemFirst's capital stock in
a reclassification of the Preferred Stock (including any such reclassification
in connection with a consolidation or merger in which ChemFirst is the
continuing or surviving corporation), (v) grant to holders of the Preferred
Stock of certain rights, options, or warrants to subscribe for Preferred Stock
or securities convertible into Preferred Stock at less than the current market
price of the Preferred Stock, or (vi) distribution to holders of the Preferred
Stock of other evidences of indebtedness, cash (other than a regular quarterly
cash dividend payable out of the earnings or retained earnings of ChemFirst),
subscription rights, warrants, or assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent of the Purchase Price.
At any time until the earlier of (i) 10 days following the Stock Acquisition
Date and (ii) the Expiration Date, ChemFirst (under certain circumstances only
with the concurrence of a majority of the Continuing
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<PAGE>
Directors (as defined in the Rights Agreement)) may redeem the Rights in
whole, but not in part, at a price of $.01 per Right, subject to adjustments.
ChemFirst may not redeem the Rights following a determination that any person
is an Adverse Person. ChemFirst may, at its option, pay the redemption price
in cash, shares of ChemFirst Common Stock (based on the current market price
of the ChemFirst Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors of ChemFirst.
Immediately upon the action of the ChemFirst's Board of Directors ordering
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the applicable
redemption price. In addition, after a Triggering Event, at the election of
the Board of Directors of ChemFirst, the outstanding Rights (other than those
beneficially owned by an Acquiring Person, Adverse Person or an affiliate or
associate of an Acquiring Person or Adverse Person) may be exchanged, in whole
or in part, for shares of ChemFirst Common Stock, or shares of preferred stock
of ChemFirst having essentially the same value or economic rights as such
shares. Immediately upon the action of the Board of Directors of ChemFirst
authorizing any such exchange, and without any further action or any notice,
the Rights (other than Rights which are not subject to such exchange) will
terminate and such Rights will only entitle holders to receive the shares
issuable upon such exchange.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of ChemFirst, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to shareholders or to ChemFirst, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for ChemFirst Common Stock (or other consideration) of the
Registrant or for common stock of the acquiring company as set forth above.
At any time prior to the Rights Distribution Date, ChemFirst may, without
the approval of any holder of the Rights, supplement or amend any provision of
the Rights Agreement. Thereafter, the Rights Agreement may be amended only (i)
to cure ambiguities, (ii) to correct inconsistent provisions, (iii) to shorten
or lengthen any time period thereunder (under certain circumstances only with
the concurrence of a majority of the Continuing Directors) or (iv) in ways
that do not adversely affect the Rights holders (other than an Acquiring
Person or Adverse Person). From and after the Rights Distribution Date, the
Rights Agreement may not be amended to lengthen (A) a time period relating to
when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than an Acquiring Person or Adverse
Person).
Until the Rights Distribution Date, ChemFirst will issue one Right with each
share of ChemFirst Common Stock that shall become outstanding so that all such
shares will have attached Rights. 250,000 shares of Preferred Stock have been
reserved for issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire ChemFirst
on terms not approved by ChemFirst's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board
of Directors of ChemFirst since the Board of Directors may, at its option, at
any time until 10 days following the Stock Acquisition Date, redeem all, but
not less than all, of the then outstanding Rights at the applicable redemption
price.
NO PREEMPTIVE RIGHTS
No holder of any stock of any class of ChemFirst capital stock authorized at
the time of the Distribution will then have any preemptive right to subscribe
to any securities of any kind or class.
DESCRIPTION OF CERTAIN STATUTORY, CHARTER AND BYLAW PROVISIONS
Mississippi Shareholder Protection Act
Sections 79-25-1 through 79-25-9 of the MBCA (the "Shareholder Protection
Act"), a statutory provision restricting business combinations with
shareholders who acquire 20 percent or more of a corporation's voting
E-59
<PAGE>
stock, is applicable to First Mississippi and will be applicable to ChemFirst
after the Distribution. The Shareholder Protection Act prohibits certain
"business combination" transactions between a publicly held Mississippi
corporation and any "interested shareholder" for a period of two years after
the date on which the interested shareholder became an interested shareholder
unless (a) 80 percent of the outstanding shares and two-thirds of the shares
not owned by the 20 percent holder approve the combination; (b) 80 percent of
the continuing directors approve the combination; or (c) the aggregate amount
of the offer meets certain fair price criteria.
The Shareholder Protection Act would not prevent the holder of a controlling
interest from exercising control over ChemFirst and would not prevent a
hostile takeover or hostile acquisition of control of ChemFirst. The
Shareholder Protection Act may, however, discourage or make more difficult a
hostile takeover or acquisition of control.
Mississippi Control Share Act
ChemFirst has elected in its Articles of Incorporation to not be subject to
Sections 79-27-1 through 79-27-11 of the MBCA (known as the Control Share
Act).
Classified Board of Directors
The Articles of Incorporation and Bylaws provide for ChemFirst's Board of
Directors to be divided into three classes of Directors serving staggered
three-year terms, as is the case under First Mississippi's Restated Charter of
Incorporation as currently in effect. As a result, approximately one-third of
the members of ChemFirst's Board will be elected each year. See "Management--
Directors." This provision could prevent a party who acquires outstanding
voting stock of ChemFirst having a majority voting power from obtaining
control of ChemFirst's Board until the second annual shareholders' meeting
following the date the acquiror obtains the controlling interest, and thus
could have the effect of discouraging a potential acquiror from making a
tender offer or otherwise attempting to obtain control of ChemFirst.
Accordingly, this provision could increase the likelihood that incumbent
directors will retain their positions.
Number of Directors; Removal; Vacancies
The Bylaws provide that the number of directors initially will be 13. The
number of directors will automatically be reduced to 12 when any director
whose term expires in 1998 ceases to be a member of the Board. Directors may
be removed only for cause. The Bylaws of ChemFirst provide that only the Board
will be entitled to fill vacancies on the Board, including vacancies created
by expansion of the Board.
No Cumulative Voting
The Articles of Incorporation of ChemFirst provide that shareholders shall
not be entitled to cumulate their votes for election of directors. First
Mississippi shareholders currently have the right to cumulate their votes for
election of directors.
Special Meetings
ChemFirst's Articles of Incorporation provide that special meetings of
ChemFirst's shareholders may be held only upon call of the Board or the chief
executive officer or upon written demand of the holders of at least twenty
percent of the shares entitled to vote upon an issue proposed to be considered
at the special meeting. Shareholder demands must state the purpose or purposes
for which the meeting is to be held. ChemFirst's Bylaws require that the
purpose or purposes for which a special meeting is called must be stated in
the notice of the meeting and prohibit consideration of matters not within the
stated purpose or purposes at the meeting.
Amendment of Certain Provisions of the Articles of Incorporation
The provisions of ChemFirst's Articles of Incorporation relating to the
classified Board, approval of certain major corporate transactions, removal of
directors, the call of special shareholder meetings and amendment of the
Bylaws may be amended only by the affirmative vote of the holders of not less
than four-fifths of the outstanding shares entitled to vote in elections of
directors, unless such an amendment has been recommended by two-thirds of all
of the directors.
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Shareholder Nominations
The Bylaws establish procedures that must be followed for a shareholder to
nominate individuals for election to the ChemFirst Board.
Shareholder Proposals
The Bylaws establish procedures that must be followed for a shareholder to
submit a proposal for consideration at an annual meeting of the shareholders
of ChemFirst.
Amendment of Bylaw Provisions
The Articles of Incorporation provide that Bylaw provisions may be adopted,
amended or repealed by the Board.
Any amendment, modification or repeal of the provisions of the Bylaws which
is made by shareholders will require approval by the affirmative vote of the
holders of two-thirds of the total number of shares of First Mississippi
Common Stock entitled to vote.
Preferred Stock
Under the Articles of Incorporation, ChemFirst's Board has the authority to
provide by resolution for the issuance of shares of one or more series of
ChemFirst Preferred Stock and to fix the terms and conditions of each such
series. See "--Preferred Stock." The authorized shares of ChemFirst Preferred
Stock, as well as authorized but unissued shares of ChemFirst Common Stock,
will be available for issuance without further action by ChemFirst's
shareholders, unless shareholder action is required by applicable law or by
the rules of a stock exchange on which any series ofChemFirst's stock may then
be listed.
These provisions will give ChemFirst's Board the power to approve the
issuance of a series of ChemFirst Preferred Stock that could, depending on its
terms, either impede or facilitate the completion of a merger, tender offer or
other takeover attempt. For example, the issuance of new shares might impede a
business combination if the terms of those shares include voting rights which
would enable a holder to block business combinations. Conversely, the issuance
of new shares might facilitate a business combination if those shares have
general voting rights sufficient to cause an applicable percentage vote
requirement to be satisfied.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subarticle E of Article 8 of the MBCA empowers a Mississippi corporation to
indemnify against liability an individual who is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, formal or informal (a
"Proceeding"), because such person is or was a director. To be eligible for
indemnification, the director must have conducted himself in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. Liability indemnified against includes the obligation to pay a
judgment, settlement, penalty, fine or reasonable expenses incurred with
respect to a Proceeding. The MBCA precludes a corporation from indemnifying a
director in connection with a Proceeding by or in the right of the corporation
in which the director was adjudged liable to the corporation or in connection
with any other Proceeding charging improper personal benefit to a director,
whether or not involving action in the director's official capacity, in which
the director was adjudged liable on the basis that personal benefit was
improperly received by the director.
Subarticle E further provides that if a director is wholly successful, on
the merits or otherwise, in the defense of any Proceeding to which he was a
party because he is or was a director, the corporation must indemnify him
against reasonable expenses incurred in connection with the Proceeding. Also,
a court may order a company to
E-61
<PAGE>
indemnify a director if it determines the director is fairly and reasonably
entitled to indemnification in view of all of the relevant circumstances.
Subarticle E also allows corporations to indemnify officers, employees or
agents to the same extent as directors, and provides for mandatory or court-
ordered indemnification for these persons as described above. Finally, the
MBCA allows corporations to purchase and maintain insurance on behalf of
directors, officers, employees or agents against liability asserted against or
incurred by him in that capacity or arising from his status as such, whether
or not the corporation would have the power to indemnify such person against
liability under Subarticle E.
ChemFirst's Bylaws provide for indemnification of ChemFirst's officers and
directors to the fullest extent allowed by Mississippi law and further permit
such indemnification with respect to other employees and agents. First
Mississippi has entered into indemnification agreements with certain of its
officers and its directors. The effect of these agreements is to add to the
indemnification rights otherwise granted a contractual right to such
indemnification. It is anticipated that ChemFirst will assume these agreements
at the time of the Distribution.
ChemFirst will have directors' and officers' liability insurance which
protects each director or officer from certain claims and suits, including
shareholder derivative suits, even where the director may be determined to not
be entitled to indemnification under the MBCA and claims and suits arising
under the Securities Act. The policy may also afford coverage under
circumstances where the facts do not justify a finding that the director or
officer acted in good faith and in a manner that was in or not opposed to the
best interests of ChemFirst.
The foregoing represents a summary of the general effect of the MBCA,
ChemFirst's Articles of Incorporation and Bylaws and directors' and officers'
liability insurance coverage for purposes of general description only.
ADDITIONAL INFORMATION
ChemFirst has filed the Form S-1 with the Commission under the Securities
Act, with respect to the shares of ChemFirst Common Stock being received by
First Mississippi shareholders in the Distribution. This Prospectus does not
contain all of the information set forth in the Form S-1 and the exhibits and
schedules thereto. Statements made in this Prospectus as to the contents of
any contract, agreement or other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Form S-1, reference is made to such
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
The Form S-1 and the exhibits and schedules thereto filed by ChemFirst may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 5th Street, N.W., Washington, D.C. 20549, as well
as at the Regional Offices of the Commission at Suite 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such information
can also be obtained by mail from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
Following the Distribution, ChemFirst will be required to comply with the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and will file annual, quarterly and other reports with the
Commission. ChemFirst will also be subject to the proxy solicitation
requirements of the Exchange Act and, accordingly, will furnish audited
financial statements to its shareholders in connection with its annual
meetings of shareholders.
No person is authorized by First Mississippi or ChemFirst to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized.
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<PAGE>
LEGAL MATTERS
The validity of the shares of ChemFirst Common Stock offered hereby will be
passed upon for ChemFirst by Baker, Donelson, Bearman & Caldwell, Jackson,
Mississippi and certain U.S. federal income tax consequences of the Transfers
and the Distribution will be passed upon for ChemFirst by Skadden, Arps,
Slate, Meagher & Flom (Illinois), Chicago, Illinois.
EXPERTS
The consolidated financial statements of ChemFirst Inc. as of June 30, 1996
and 1995 and for each of the years in the three year period ended June 30,
1996 have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing.
E-63
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report.............................................. F-2
Consolidated Balance Sheets as of June 30, 1996 and 1995.................. F-3
Consolidated Statements of Operations for the years ended June 30, 1996,
1995 and 1994............................................................ F-4
Consolidated Statements of Stockholders' Equity for the years ended June
30, 1996, 1995 and 1994.................................................. F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1996,
1995 and 1994............................................................ F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
Interim Consolidated Financial Statements (unaudited)
<TABLE>
<S> <C>
Consolidated Balance Sheet as of September 30, 1996........................ F-3
Consolidated Statements of Operations for the three months ended September
30, 1996 and 1995......................................................... F-4
Consolidated Statements of Stockholders' Equity for the three months ended
September 30, 1996 and 1995............................................... F-5
Consolidated Statements of Cash Flows for the three months ended September
30, 1996 and 1995......................................................... F-6
</TABLE>
E-F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder ChemFirst Inc.:
We have audited the accompanying consolidated balance sheets of ChemFirst
Inc. as of June 30, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended June 30, 1996. These consolidated financial statements
are the responsibility of ChemFirst Inc.'s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ChemFirst
Inc. as of June 30, 1996 and 1995, and the results of its operations and its
cash flows for each of the years in the three-year period ended June 30, 1996,
in conformity with generally accepted accounting principles.
As discussed in notes 1 and 7, ChemFirst Inc. changed its method of
accounting for income taxes as of July 1, 1993 to adopt the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
KPMG Peat Marwick LLP
Jackson, Mississippi
September 6, 1996
except for the fifth
paragraph of note 5,
which is as of
November 13, 1996
E-F-2
<PAGE>
CHEMFIRST INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
SEPTEMBER 30, ---------------
1996 1996 1995
------------- ------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 11,268 5,303 40,123
Receivables:
Trade, less allowance for doubtful accounts of
$925, $781 and $732 ......................... 65,738 60,029 52,546
Affiliated companies (note 3)................. 9 201 192
Other (note 7)................................ 3,506 9,025 4,099
-------- ------- -------
Total receivables........................... 69,253 69,255 56,837
-------- ------- -------
Inventories:
Finished products............................. 24,916 22,335 21,278
Work in process............................... 24,904 28,494 19,051
Raw materials and supplies.................... 22,476 19,494 18,210
-------- ------- -------
Total inventories........................... 72,296 70,323 58,539
-------- ------- -------
Prepaid expenses and other current assets (note
7)............................................ 8,810 5,542 6,872
Net current assets of discontinued operations
(note 2)...................................... 2,914 7,008 18,974
-------- ------- -------
Total current assets........................ 164,541 157,431 181,345
-------- ------- -------
Investments and other assets:
Investments in affiliated companies (note 3)... 13,970 13,547 12,257
Other investments (note 3)..................... 27,962 27,496 3,931
Intangible and other assets, at cost less ap-
plicable amortization (note 4)................ 11,044 11,404 13,396
-------- ------- -------
Total investments and other assets.......... 52,976 52,447 29,584
-------- ------- -------
Property, plant and equipment, at cost less ac-
cumulated depreciation and amortization (notes
5 and 6)....................................... 147,745 139,647 130,456
Noncurrent assets of discontinued operations
(note 2)....................................... 67,221 64,110 91,942
-------- ------- -------
$432,483 413,635 433,327
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note
6)............................................ $ 14,426 14,534 15,076
Deferred revenue.............................. 3,484 1,802 1,434
Accounts payable--trade (including book over-
drafts of $4,650, $5,019 and $9,334)......... 30,999 29,773 35,520
Accrued expenses and other current liabilities
(note 15).................................... 29,190 24,404 19,208
-------- ------- -------
Total current liabilities................... 78,099 70,513 71,238
-------- ------- -------
Long-term debt, excluding current installments
(note 6)....................................... 76,732 79,909 84,394
Other long-term liabilities..................... 14,254 13,864 12,289
Long-term liabilities and minority interest of
discontinued operations (note 2)............... 3,364 3,572 13,771
Deferred income taxes (note 7).................. 17,826 15,510 18,639
Stockholders' equity (notes 6, 8 and 9):
Serial preferred stock. Authorized 20,000,000
shares; none issued........................... -- -- --
Common stock of $1 par value. Authorized
100,000,000 shares; outstanding 20,614,491
shares in 1996 and 20,438,208 shares in 1995.. 20,614 20,614 20,438
Additional paid-in capital..................... 15,446 14,234 7,656
Retained earnings.............................. 206,148 195,419 204,902
-------- ------- -------
Total stockholders' equity.................. 242,208 230,267 232,996
-------- ------- -------
Commitments and contingent liabilities (notes 7,
8 and 10) $432,483 413,635 433,327
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
E-F-3
<PAGE>
CHEMFIRST INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
-------------------------------------------
1996 1995 1996 1995 1994
--------- ---------------- ------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues:
Sales (note 12)................. $ 95,432 88,746 370,547 331,721 249,091
Interest and other income, net
(note 11)...................... 2,775 2,195 6,157 6,120 3,264
--------- -------- ------- ------- -------
98,207 90,941 376,704 337,841 252,355
--------- -------- ------- ------- -------
Costs and expenses:
Cost of sales................... 72,540 68,352 288,677 254,364 193,154
General, selling and
administrative expenses........ 15,831 15,191 58,557 48,091 42,470
Other operating expenses........ 1,353 1,643 6,901 7,347 5,459
Provision for plant shut-down
(note 5)....................... -- -- 18,256 -- --
Interest expense (note 6)....... 1,765 2,368 9,242 9,555 10,046
--------- -------- ------- ------- -------
91,489 87,554 381,633 319,357 251,129
--------- -------- ------- ------- -------
Earnings (loss) from continuing
operations before income taxes,
investee earnings (loss) and
cumulative effect of change in
accounting principle............. 6,718 3,387 (4,929) 18,484 1,226
Income tax expense (benefit) (note
7)............................... 2,886 1,694 (688) 8,706 2,248
Equity in net earnings (loss) of
affiliated companies (note 3).... 258 193 783 860 (249)
--------- -------- ------- ------- -------
Earnings (loss) from continuing
operations before cumulative
effect of change in accounting
principle........................ 4,090 1,886 (3,458) 10,638 (1,271)
Earnings from discontinued
operations, net of taxes (note
2)............................... 8,699 10,594 40,424 47,156 21,038
Loss on disposal of business, net
of taxes (note 2)................ -- -- (1,746) -- --
Cumulative effect of change in
accounting principle (note 7).... -- -- -- -- 2,096
--------- -------- ------- ------- -------
Net earnings.................. $ 12,789 12,480 35,220 57,794 21,863
========= ======== ======= ======= =======
Earnings (loss) per common share
(note 9):
Continuing operations........... $ .20 .09 (.16) .52 (.06)
Discontinued operations......... .41 .50 1.84 2.28 1.05
Cumulative effective of change
in accounting principle........ -- -- -- -- .10
--------- -------- ------- ------- -------
Total earnings per common
share........................ $ .61 .59 1.68 2.80 1.09
========= ======== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
E-F-4
<PAGE>
CHEMFIRST INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
-----------------------------------------------
COMMON STOCK ADDITIONAL
----------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
------------ --------- ----------------------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Balance, June 30, 1993......... 19,980,440 $ 19,980 2,424 138,370
Net earnings................... -- -- -- 21,863
Dividends declared--$.30 per
share......................... -- -- -- (6,010)
Common stock issued:
Employee stock options....... 39,350 39 351 --
Convertible debentures....... 66,300 67 561 --
Income tax benefit on exercise
of stock options and
convertible debentures........ -- -- 42 --
------------ --------- -------- ---------
Balance, June 30, 1994......... 20,086,090 20,086 3,378 154,223
Net earnings................... -- -- -- 57,794
Dividends declared--$.35 per
share......................... -- -- -- (7,115)
Common stock issued:
Employee stock options....... 86,218 86 555 --
Convertible debentures....... 265,900 266 2,917 --
Income tax benefit on exercise
of stock options and
convertible debentures........ -- -- 806 --
------------ --------- -------- ---------
Balance, June 30, 1995......... 20,438,208 20,438 7,656 204,902
Net earnings................... -- -- -- 35,220
Dividends declared--$.40 per
share......................... -- -- -- (8,161)
Distribution of common stock of
Getchell Gold Corp............ -- -- -- (31,277)
Common stock issued:
Employee stock options....... 111,483 111 878 --
Convertible debentures....... 300,700 301 2,880 --
Purchase and retirement of
common shares............... (235,900) (236) -- (5,265)
Income tax benefit on exercise
of stock options and
convertible debentures........ -- -- 2,820 --
------------ --------- -------- ---------
Balance, June 30, 1996......... 20,614,491 $ 20,614 14,234 195,419
============ ========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
E-F-5
<PAGE>
CHEMFIRST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
-------------------- ----------------------------
1996 1995 1996 1995 1994
--------- --------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings.............. $ 12,789 12,480 35,220 57,794 21,863
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Depreciation and
amortization............ 4,853 4,919 18,210 17,324 15,762
Provision for plant shut-
down.................... -- -- 18,256 -- --
Provision for losses on
receivables............. 136 80 728 196 550
Deferred income taxes,
net of effect of
accounting change in
1994.................... 190 1,880 (1,890) 7,244 11,266
(Gain) loss on property,
plant and equipment..... -- -- (657) 81 4
(Gain) loss on
disposition of
investments and other
assets.................. 12 -- (50) 19 286
Undistributed (earnings)
loss of affiliates, net
of taxes................ (437) (320) (976) (816) 214
Changes in current assets
and liabilities, net of
effects of dispositions:
Receivables............. (8,778) 4,397 (131) (10,011) 827
Inventories............. (2,233) (6,949) (14,134) (12,190) (6,200)
Prepaid expenses........ 6,208 (427) (8,746) (878) (1,178)
Accounts payable........ 1,039 (941) (7,063) 10,221 (4,746)
Accrued expenses and
other current
liabilities............ 7,358 2,965 (685) 8,496 (4,475)
Deferred revenue......... 2,070 392 1,961 2,762 3,187
Other, net............... (396) (378) (1,140) 117 17
Net earnings from
discontinued operations. (8,699) (10,595) (38,678) (47,156) (21,038)
--------- --------- -------- -------- --------
Net cash provided by
continuing operations... 14,112 7,503 225 33,203 16,339
Net cash provided by
discontinued operations. 13,437 15,502 44,945 72,901 9,491
--------- --------- -------- -------- --------
Net cash provided by
operating activities. 27,549 23,005 45,170 106,104 25,830
--------- --------- -------- -------- --------
Cash flows from investing
activities:
Capital expenditures...... (13,071) (4,366) (35,909) (26,160) (19,775)
Investment in equity
investees, net........... -- -- 14 -- 1
Acquisition of investments
and other assets......... (23) (48) (177) (1,405) (1,027)
Collection of note
receivable............... -- -- 15,000 -- --
Proceeds from sale of
property, plant and
equipment................ 2 -- 741 304 175
Proceeds from disposition
of investments and other
assets................... -- 140 630 -- 7,594
Proceeds from sale of
subsidiaries............. -- -- -- -- 8,462
Other investing........... -- -- 15 -- (1)
--------- --------- -------- -------- --------
Net cash used in investing
activities of continuing
operations............... (13,092) (4,274) (19,686) (27,261) (4,571)
Net cash used in investing
activities of
discontinued operations.. (3,145) (7,257) (45,763) (29,144) (16,146)
--------- --------- -------- -------- --------
Net cash used in
investing activities. (16,237) (11,531) (65,449) (56,405) (20,717)
--------- --------- -------- -------- --------
Cash flows from financing
activities:
Principal repayments of
long-term debt........... (3,286) (270) (15,550) (6,512) (11,100)
Dividends (note 9)........ (2,061) (2,057) (8,161) (8,622) (6,010)
Purchase of common stock.. -- -- (5,491) -- --
Proceeds from long-term
borrowings............... -- -- 11,000 151 1,706
Proceeds from issuance of
common stock............. -- 1,302 3,661 2,567 944
--------- --------- -------- -------- --------
Net cash used in
financing activities. (5,347) (1,025) (14,541) (12,416) (14,460)
--------- --------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents. 5,965 10,449 (34,820) 37,283 (9,347)
Cash and cash equivalents
at beginning of year...... 5,303 40,123 40,123 2,840 12,187
--------- --------- -------- -------- --------
Cash and cash equivalents
at end of year............ $ 11,268 50,572 5,303 40,123 2,840
========= ========= ======== ======== ========
Supplemental disclosures of
cash flow information:
Cash paid during the year
for:
Interest, net of amounts
capitalized............. $ 1,776 2,658 9,605 9,566 10,166
========= ========= ======== ======== ========
Income taxes, net........ $ (4,845) 99 23,603 20,680 15,581
========= ========= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
E-F-6
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1995 AND 1994
AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT AMOUNTS PER SHARE)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As discussed in note 14, on August 27, 1996 First Mississippi Corporation
("First Mississippi") and Mississippi Chemical Corporation ("MCC") entered
into an Agreement and Plan of Merger and Reorganization.
The Agreement contemplates that the following transactions will occur:
. A tax-free spinoff of the chemicals and related businesses of First
Mississippi in the form of a new publicly traded company ("ChemFirst
Inc.").
. The refinancing of First Mississippi's debt, increasing the debt to
approximately $150,000, which will be assumed by the surviving
corporation in the merger.
. The transfer of cash of approximately $50,000 to ChemFirst Inc.
. A tax-free merger of First Mississippi's fertilizer business ("First
Mississippi Fertilizer Business to be Merged") with a subsidiary of MCC.
In the accompanying consolidated financial statements, the assets,
liabilities, revenues and expenses of First Mississippi Fertilizer Business to
be Merged are included in discontinued operations. The transactions described
above will be reported in the historical consolidated financial statements
when they occur.
ChemFirst Inc. (the "Company") produces chemicals for industry and
agriculture and related products and services which are marketed globally.
Further descriptions of the Company's products and the relative significance
of its operations are included in the industry segment information data in
note 12 to the financial statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Intercompany balances and transactions have been
eliminated in consolidation. Investments in joint ventures, partnerships and
other equity investments are accounted for by the equity method.
Recognition of Revenue
Revenues generally are recorded when title and risk of ownership pass,
except for long-term construction type contracts, which are accounted for
under the percentage of completion method.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out and weighted average methods for purchased
inventories of finished product, and using the average cost method with
respect to all other inventories.
Depreciation and Amortization
Depreciation of plant and equipment and depreciable investments is based on
cost and the estimated useful lives (or term of lease, if shorter) of the
separate units of property. The straight-line and accelerated methods are
primarily used in determining the amount of depreciation charged to expense.
Goodwill of businesses acquired is amortized generally over 20 years using the
straight-line method. Other intangibles are amortized over their estimated
useful lives (5-17 years) using the straight-line method.
E-F-7
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Loan costs are amortized over the terms of related loans using the interest
method.
Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax liabilities and assets for differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
Pension Plans
Pension cost is determined using the "projected unit credit" actuarial
method for reporting purposes. The Company's funding policy is to contribute
annually at amounts not less than the minimum requirements of the Employee
Retirement Income Security Act of 1974.
Stock Options
All stock options are nonqualified or incentive options and require no
charges against income upon grant or exercise. The tax benefit the Company
receives from dispositions that result in ordinary income to option recipients
is reflected in stockholders' equity.
Cash and Cash Equivalents
The Company considers all short-term investments with original maturities of
three months or less to be cash equivalents.
Investments
Realized gains and losses on investments are determined on the basis of
specific costs and are included in gain (loss) on investments, net. Equity
investments are carried at fair value in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," ("SFAS No. 115"). Fair value is based on year end
market prices as quoted by the appropriate security exchange. Any significant
unrealized holding gains and losses for available-for-sale securities are
excluded from earnings and reported as a net amount in a separate component of
stockholders' equity until realized. The effect of applying SFAS No. 115 is
not material.
Contingencies
Estimates of loss contingencies, including environmental liability costs for
remediation, are charged to expense when it is probable an asset has been
impaired or a liability incurred and the amount can be reasonably estimated.
If a potentially material loss contingency is reasonably possible, or probable
but cannot be estimated, then the nature of the contingency and an estimated
range of possible loss, if determinable and material, are disclosed.
Reclassifications
Certain consolidated financial statement amounts for 1995 and 1994 have been
reclassified for consistent presentation.
Unaudited Interim Financial Information
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments that are necessary for a fair presentation, have been
included in the unaudited financial information as of and for the three months
ended September 30, 1996 and 1995.
E-F-8
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. DISCONTINUED OPERATIONS
On October 20, 1995, the Company distributed to its shareholders its entire
ownership of Getchell Gold Corporation ("Getchell"), formerly known as
FirstMiss Gold Inc. The June 30, 1996 consolidated balance sheet includes a
$31,277 reduction of retained earnings in connection with the distribution of
Getchell. Each First Mississippi shareholder received approximately seven-
tenths of a common share of Getchell for each share of First Mississippi
owned.
As discussed in notes 1 and 14, the Company has entered an agreement to
discontinue its fertilizer operations.
The net assets and liabilities of the discontinued operations (primarily
Getchell and the fertilizer operations) have been segregated in the
consolidated financial statements. The following is the composition of those
net assets and liabilities at September 30, 1996 and June 30, 1996 and 1995:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 JUNE 30, 1996
------------- -------------------------------------
TOTAL FERTILIZER GETCHELL OTHER TOTAL
------------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Receivables............... $ 24,289 $ 19,319 -- -- 19,319
Inventories............... 6,114 6,040 -- -- 6,040
Prepaid expenses and other
current assets........... 1,562 5,322 -- 2,651 7,973
Deferred revenue.......... (1,076) (295) -- -- (295)
Accounts payable.......... (26,091) (20,856) -- (38) (20,894)
Accrued expenses and other
current liabilities...... (1,884) (1,840) -- (3,295) (5,135)
-------- -------- --- ------- --------
Net current assets
(liabilities) of
discontinued operations.. $ 2,914 $ 7,690 -- (682) 7,008
======== ======== === ======= ========
Noncurrent assets of
discontinued operations.. $ 67,221 $ 64,110 -- -- 64,110
======== ======== === ======= ========
Long-term liabilities and
minority interest of
discontinued operations.. $ 3,364 $ 3,572 -- -- 3,572
======== ======== === ======= ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
----------------------------------
FERTILIZER GETCHELL OTHER TOTAL
---------- -------- ----- -------
<S> <C> <C> <C> <C>
Receivables................................ $ 14,808 1,856 -- 16,664
Inventories................................ 5,906 9,554 -- 15,460
Prepaid expenses and other current assets.. 2,756 1,176 1,990 5,922
Deferred revenue........................... (614) -- -- (614)
Accounts payable........................... (10,056) (6,522) -- (16,578)
Accrued expenses and other current
liabilities............................... (720) (578) (582) (1,880)
-------- ------ ----- -------
Net current assets (liabilities) of
discontinued operations................... $ 12,080 5,486 1,408 18,974
======== ====== ===== =======
Noncurrent assets of discontinued
operations................................ $ 24,253 67,689 -- 91,942
======== ====== ===== =======
Long-term liabilities and minority interest
of discontinued operations................ $ 4,738 9,033 -- 13,771
======== ====== ===== =======
</TABLE>
E-F-9
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The statements of operations have been reclassified to separate discontinued
and continued operations. Revenues and net earnings (losses) of the
discontinued operations for the quarters ended September 30, 1996 and 1995 and
years ended June 30, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1996 1995 1996 1995 1994
------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C>
Fertilizer
Sales and revenues............ $60,267 52,806 217,002 237,152 164,099
======= ====== ======== ======= =======
Income from operations before
taxes........................ 13,813 18,533 65,495 85,714 24,343
Income tax expense............ 5,114 6,856 24,238 31,719 9,002
Equity in net earnings (loss)
of equity investees.......... -- -- 250 74 (57)
Cumulative effect of change in
accounting principle......... -- -- -- -- 754
------- ------ -------- ------- -------
Earnings from discontinued op-
erations, net................ $ 8,699 11,677 $ 41,507 54,069 16,038
======= ====== ======== ======= =======
Getchell
Sales and revenues............ $ -- 17,961 17,961 71,617 95,300
======= ====== ======== ======= =======
Income (loss) from operations
before taxes................. -- (2,118) $ (2,118) (17,929) 5,599
Income tax (expense) benefit.. -- 750 750 (7,550) 900
Minority interests............ -- 285 285 3,466 (1,049)
Cumulative effect of change in
accounting principle......... -- -- -- -- 1,350
------- ------ -------- ------- -------
Earnings (loss) from
discontinued operations, net. -- (1,083) $ (1,083) (6,913) 5,000
======= ====== ======== ======= =======
Total operating results of
discontinued operations...... $ 8,699 10,594 $ 40,424 47,156 21,038
======= ====== ======== ======= =======
</TABLE>
A pretax loss of $2,700 was recorded in 1996 related to previously
discontinued businesses and is included in loss on disposal of business, net
of applicable income tax benefit of $954, in the accompanying consolidated
financial statements. Such losses resulted from revised estimates of
environmental remediation costs and settlements of operating costs related to
previously discontinued phosphate fertilizer (1982) and oil and gas (1993)
businesses.
3. INVESTMENTS
Investments in affiliated companies accounted for by the equity method were
$13,547 and $12,257, respectively, at June 30, 1996 and 1995. Equity earnings
(losses), net of taxes, were $783, $860 and $(249), respectively, for years
ended June 30, 1996, 1995 and 1994.
The following is a summary of financial information related to affiliated
companies:
<TABLE>
<CAPTION>
JUNE 30
--------------
1996 1995
------- ------
<S> <C> <C>
Current assets................................................ $27,184 21,575
Noncurrent assets............................................. 45,396 40,429
Current liabilities........................................... 9,045 8,559
Noncurrent liabilities........................................ 17,897 11,854
------- ------
Net equity.................................................... $45,638 41,591
======= ======
</TABLE>
The Company has a 50% ownership interest in Power Sources, Inc. which burns
wood waste to create steam for industrial users. The Company also has a 23.4%
interest in Melamine Chemicals, Inc. ("MCI"). The MCI investment had a quoted
market value of approximately $11,634 and $11,475, with carrying amounts of
$8,153 and $7,508, at June 30, 1996 and 1995, respectively.
E-F-10
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash advances to Getchell for the period from July 1, 1995 to October 20,
1995, the spinoff date, were $8,850. At the date of the spinoff, the Company
received a promissory note in the amount of $52,507 from Getchell in
settlement of all prior cash advances. The note bears interest at a rate based
on the London Interbank Offered Rate (6.625% at June 30, 1996). Interest and
principal are due in September, 2000. Subsequent to the spinoff date, the note
principal amount was reduced by a cash repayment of $15,000 and an offset of
$13,939 representing settlement of tax attributes utilized by the Company
during the time Getchell was included in the Company's consolidated income tax
returns. The aggregate unpaid principal amount of the note, including accrued
interest, of $24,733 at June 30, 1996 is included in other investments.
4. INTANGIBLE AND OTHER ASSETS
The major classes of intangible and other assets are summarized below:
<TABLE>
<CAPTION>
JUNE 30
--------------
1996 1995
------- ------
<S> <C> <C>
Goodwill...................................................... $16,868 16,868
Other......................................................... 10,134 9,873
------- ------
27,002 26,741
Less accumulated amortization................................. 15,598 13,345
------- ------
$11,404 13,396
======= ======
</TABLE>
The net carrying amount of goodwill at June 30, 1996 and 1995 was $9,778 and
$10,872, respectively, and is all related to the chemical segment.
Amortization expense related to the above amounted to $1,959 in 1996, $2,415
in 1995 and $2,640 in 1994.
5. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
JUNE 30
ESTIMATED ----------------
USEFUL LIVES 1996 1995
------------ -------- -------
<S> <C> <C> <C>
Assets owned:
Land and land improvements.................. 10-20 $ 6,200 4,794
Buildings................................... 20-45 11,768 6,648
Plant facilities and equipment.............. 5-15 152,935 134,324
Other facilities and equipment.............. 5-12 80,461 72,031
Construction in progress.................... 10,653 6,940
-------- -------
Total assets owned........................ 262,017 224,737
-------- -------
Assets leased:
Land improvements........................... 10-20 509 509
Buildings................................... 10 216 216
Other facilities and equipment.............. 20 8,958 8,958
-------- -------
Total capital leases...................... 9,683 9,683
-------- -------
Total property, plant and equipment....... 271,700 234,420
Less accumulated depreciation and amorti-
zation................................... 132,053 103,964
-------- -------
Net property, plant and equipment......... $139,647 130,456
======== =======
</TABLE>
E-F-11
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and amortization expense related to the above, amounted to
$16,251 in 1996, $14,909 in 1995 and $13,122 in 1994.
Interest capitalized amounted to $186 in 1996, $135 in 1995 and $396 in
1994.
On May 21, 1996, the Board of Directors of the Company authorized a plan to
close its aluminum dross processing facility at Millwood, West Virginia, which
was operated by its wholly owned subsidiary Plasma Processing Corporation,
("PPC"). PPC's operations are included in the Company's Combustion and Thermal
Plasma segment. This facility, completed in June 1991, was built to process
aluminum dross using patented thermal plasma technology. The decision to close
the Millwood facility, which operated at a loss since inception, was based in
part on projections that indicated operations were unlikely to be profitable
in the near future. The plan assumes the plant will operate for a portion of
the first quarter of fiscal 1997 to fulfill contractual obligations then cease
operations and be held for disposition by sale if possible. As a result of
this plan, the Company incurred a pretax charge of $18,256 ($11,706 after tax)
during the fourth quarter of fiscal 1996. The charge included write-downs to
reduce carrying values to estimated net realizable values (estimated fair
values less costs to sell) of $12,271 for property, plant and equipment, $570
for spare parts, $350 for inventory and $5,065 in accruals for other estimated
costs to be incurred related to the closure. The majority of the accrual
represents the estimated cost of $3,100 in excess of market value to process
inventory to meet contractual obligations and $500 for disposal of
unmarketable inventory. In addition, the accrual includes $525 for severance,
$200 for contract cancellations and $740 for other estimated costs. Excluding
the above charge, operating losses for PPC were approximately $9,000, $8,400
and $5,700 in 1996, 1995 and 1994, respectively.
In September 1996, the Company executed a letter of intent for the sale of
substantially all of PPC's assets. That letter of intent expired on November
1, 1996; however, ChemFirst continues to negotiate with the party to the
letter of intent. Assets that are not part of the proposed transaction will be
liquidated by the Company. Based on the status of current negotiations, the
Company does not anticipate any material gain or loss related to these
dispositions. The carrying value of PPC's net assets at June 30, 1996, was
approximately $6,000.
Although the Company does not have a formal plan or timetable for disposal,
it is also seeking a buyer for its steel melting and production facility
operated by FirstMiss Steel, Inc. The Company has had negotiations with
potential buyers, but the Company is uncertain as to whether a sale of the
steel operations to such potential buyers can be completed on terms acceptable
to the Company. The Company believes it will not incur a material loss if a
sale is closed.
6. LONG-TERM DEBT
A summary of long-term debt follows:
<TABLE>
<CAPTION>
JUNE 30
--------------
1996 1995
------- ------
<S> <C> <C>
Unsecured:
9.42% senior notes payable to institutional investors, due
in annual installments of $13,286 through June 2002....... $79,714 93,000
Notes payable under revolving credit facility, due February
1998...................................................... 11,000 --
Other notes................................................ 1,100 3,078
Secured:
Capital lease obligations, with interest rates at 4.0%, due
in monthly installments through May 2000.................. 2,360 2,703
Other notes................................................ 269 689
------- ------
94,443 99,470
Less current installments of long-term debt.................. 14,534 15,076
------- ------
Long-term debt, excluding current installments............. $79,909 84,394
======= ======
</TABLE>
E-F-12
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under loan agreements in effect at June 30, 1996, there were no compensating
balance requirements. The above obligations mature in various amounts through
2002, including approximately, $14,534 in 1997, $24,915 in 1998, $14,199 in
1999, $14,144 in 2000 and $13,367 in 2001.
The Company has a bank revolving credit facility totaling $65,000 which is
committed until February 1998. Borrowings under the facility are priced at a
rate based on either the London Interbank Offered Rate, or the prime rate,
contingent on the Company's debt-to-equity ratio. A commitment fee ranging
from .225 to .375 of 1% per annum is charged on the daily average unused
commitment under the revolving credit facility and is also based on the debt-
to-equity ratio. Commitment fees for the years ended June 30, 1996, 1995 and
1994 totaled $183, $216 and $189, respectively.
The senior notes and bank credit agreements contain various restrictions
related to working capital, funded debt, net worth, fixed charges coverage,
distributions, repurchases of stock and dispositions of assets. At June 30,
1996 and 1995, the Company was in compliance with these covenants.
At June 30, 1996, the fair value of the 9.42% senior notes payable to
institutional investors approximates carrying value due to penalties and fees
which are due in the event of prepayment. The recorded amounts for all other
long-term debt of the Company approximate fair values as well.
Total interest costs incurred for the years ended June 30, 1996, 1995 and
1994 were $9,428, $9,690 and $10,442, respectively.
7. INCOME TAXES
The cumulative effect of the change in accounting for income taxes of
continuing operations described in note 1 resulted in a benefit of $2,096 and
was reported as a cumulative effect of a change in accounting principle in the
June 30, 1994 consolidated financial statements.
Total income tax expense (benefit) for the years ended June 30, 1996, 1995
and 1994 was allocated as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-----------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Continuing operations.............................. $ (688) 8,706 2,248
Discontinued operations............................ 22,534 24,169 9,902
Stockholders' equity, for compensation expense for
tax purposes in excess of amounts recognized for
financial reporting purposes...................... (2,820) (806) (42)
------- ------ ------
$19,026 32,069 12,108
======= ====== ======
</TABLE>
E-F-13
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense (benefit) differs from the statutory Federal rate of 35%
applied to earnings (loss) from continuing operations before income taxes,
minority interests and investee earnings (loss) for the years ended June 30,
1996, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
---------------------
1996 1995 1994
------- ----- -----
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)............ $(1,725) 6,469 429
State income taxes, net of Federal income tax bene-
fit................................................. 1,224 1,045 536
Loss from operations of foreign subsidiaries......... -- 444 423
Amortization of goodwill............................. 411 392 423
Exempt earnings of Foreign Sales Corporation......... (212) (260) (128)
Increase in net cash surrender value of life insur-
ance................................................ (324) (254) (232)
Tax provision adjustments for pending Internal
Revenue Service matters............................. 150 1,275 --
Adjustment to deferred tax assets and liabilities for
enacted change in tax law and rates................. -- -- 370
Other, net........................................... $ (212) (405) 427
------- ----- -----
Actual tax expense (benefit)--continuing opera-
tions............................................. $ (688) 8,706 2,248
======= ===== =====
</TABLE>
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-----------------------
1996 1995 1994
------- ----- -------
<S> <C> <C> <C>
Current:
Federal........................................... $ 557 (334) (9,023)
State............................................. 1,003 1,686 964
Foreign........................................... (358) 110 (205)
------- ----- -------
1,202 1,462 (8,264)
======= ===== =======
Deferred:
Federal........................................... (2,771) 7,305 12,672
State............................................. 881 (43) (2,160)
Foreign........................................... -- (18) --
------- ----- -------
(1,890) 7,244 10,512
======= ===== =======
Total:
Federal........................................... $(2,214) 6,971 3,649
State............................................. 1,884 1,643 (1,196)
Foreign........................................... (358) 92 (205)
------- ----- -------
$ (688) 8,706 2,248
======= ===== =======
</TABLE>
The significant components of deferred income tax expense attributable to
income from continuing operations for the years ended June 30, 1996, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
---------------------
1996 1995 1994
------- ----- ------
<S> <C> <C> <C>
Deferred tax expense (benefit) from changes in
temporary differences and the valuation allowance... $(1,890) 7,244 10,144
Adjustment to deferred tax assets and liabilities for
enacted change in tax law and rates................. -- -- 368
------- ----- ------
$(1,890) 7,244 10,512
======= ===== ======
</TABLE>
E-F-14
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and the deferred tax liabilities at June
30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
JUNE 30
-----------------
1996 1995
-------- -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for
doubtful accounts..................................... $ 229 24
Deferred compensation.................................. 3,116 2,732
Incentive compensation accrual......................... 667 882
Inventory costs........................................ 1,121 617
State net operating loss carryforward.................. 2,687 1,364
Alternative minimum tax credit carryforward............ -- 5,383
Accrued vacation costs................................. 611 542
Accrued pension costs.................................. 824 697
Other, net............................................. 4,020 3,845
-------- -------
Total gross deferred tax assets...................... 13,275 16,086
Less: valuation allowance.............................. (2,579) (1,262)
-------- -------
Net deferred tax assets.............................. 10,696 14,824
-------- -------
Deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation.......................................... (9,290) (16,477)
Investment in affiliated companies, principally due to
undistributed earnings................................ (12,946) (12,946)
State income taxes..................................... (1,967) (798)
-------- -------
Total gross deferred tax liabilities................. (24,203) (30,221)
-------- -------
Net deferred tax liability........................... $(13,507) (15,397)
======== =======
</TABLE>
The net deferred tax liability at June 30, 1996 and June 30, 1995 consists
of a long-term deferred tax liability of $15,510 and $18,639, respectively,
and a current deferred tax asset of $2,003 and $3,242, respectively. The
current deferred tax asset is included in prepaid expenses and other current
assets in the consolidated balance sheets.
The valuation allowance for the gross deferred tax assets as of July 1,
1995, 1994 and 1993 was $2,579, $1,262 and $3,074, respectively. The net
change in the total valuation allowance for the year ended June 30, 1996 was
an increase of $1,317 and for the year ended June 30, 1995, a decrease of
$1,812. The valuation allowance is related to certain state net operating
losses, which the Company believes are less than likely to be recognized. The
decrease in the valuation allowance for the year ended June 30, 1995 is
attributable to a reduction in state net operating loss carryforwards for
states where the Company is no longer required to file income tax returns.
Subsequently recognized tax benefits relating to the allowance for deferred
tax assets will be reported in the consolidated statements of operations.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, recoverable
taxes paid, projected taxable income and tax planning strategies in making
this assessment. Based on the reversal of existing deferred tax liabilities
and projections for future taxable income over the periods which the deferred
tax assets are deductible, management believes it is more likely than not the
Company will realize the benefit of these deductible differences, net of the
existing valuation allowance at June 30, 1996.
E-F-15
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Refundable income taxes of $6,020 and $3,236 at June 30, 1996 and 1995,
respectively, are included in other current receivables in the accompanying
consolidated financial statements.
The Company's federal income tax returns have been examined through June 30,
1992, and all years prior to June 30, 1989 are closed. Federal income tax
returns for the years ended June 30, 1993 and 1994 are currently under
examination. Issues relating to the years ended June 30, 1989 through June 30,
1992 are being contested through various stages of administrative appeal. In
addition, the Company has various state income tax returns in the process of
examination or administrative appeal. Management believes that adequate
provision has been made for any adjustments which might be assessed for open
years through June 30, 1996.
Prior to the spinoff, the Company filed a consolidated federal income tax
return which included Getchell. In accordance with a Tax Sharing Agreement
dated October 1, 1987 between the Company and Getchell, Getchell recomputed
its income tax provision each year on a separate return basis and paid to the
Company amounts approximating the federal income taxes Getchell would have
paid if Getchell filed an independent consolidated return. The Tax Sharing
Agreement also applied to certain state and franchise tax returns which the
Company filed on a combined or consolidated basis. Based on the June 30, 1995
income tax returns, Getchell had approximately $19,472 of unused tax assets
which the Company was required to reimburse under the terms of the Tax Sharing
Agreement. Prior to the distribution of Getchell to Company shareholders, the
Company and Getchell negotiated a settlement of $13,929 in cancellation of the
Tax Sharing Agreement.
8. EMPLOYEE BENEFIT AND INCENTIVE PLANS
The Company has a noncontributory defined benefit pension plan covering
substantially all full-time permanent employees. The benefits are based on
years of service and participants' compensation during the last five years of
employment.
Net annual pension expense for this plan for the years ended June 30, 1996,
1995 and 1994 included the following components:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost...................................... $ 2,055 1,987 1,876
Interest cost..................................... 1,807 1,697 1,503
Actual return on plan assets...................... (3,317) (4,478) (481)
Net amortization and deferral..................... 854 2,358 (1,697)
------- ------- -------
Net annual pension expense........................ $ 1,399 1,564 1,201
======= ======= =======
</TABLE>
The assumptions used in calculating the expense for 1996, 1995 and 1994
included a discount rate of 7.75%, a rate of increase in compensation levels
of 4%, 4% and 4.5%, respectively, and a 9% expected long-term rate of return
on assets. Net annual pension expense included above and allocated to
discontinued operations was $189, $412 and $409 for 1996, 1995 and 1994,
respectively. Plan assets are invested primarily in equity securities and U.S.
Government and corporate bonds.
E-F-16
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status of the plan at June 30,
1996 and 1995:
<TABLE>
<CAPTION>
JUNE 30
---------------
1996 1995
------- ------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations............................... $19,300 15,974
======= ======
Accumulated benefit obligations.......................... $22,401 18,453
======= ======
Projected benefit obligation............................... $30,838 25,048
Plan assets at fair value.................................. 27,947 25,257
------- ------
Plan assets in excess of (less than) projected benefit ob-
ligation.................................................. (2,891) 209
Unrecognized net gain from past experience................. (730) (3,030)
Unrecognized prior service cost............................ 1,077 1,159
Unrecognized transition credit, net........................ (2,634) (2,947)
------- ------
Pension liability.......................................... $(5,178) (4,609)
======= ======
</TABLE>
The Company also has a nonqualified supplemental pension plan. This plan
provides for incremental pension payments from the Company's funds to restore
those pension benefits earned, but reduced due to income tax regulations. The
total accrual at June 30, 1996 and 1995, relating to this unfunded plan was
$1,177 and $933, respectively. Net annual pension expense for this plan was
$245 in 1996, $187 in 1995 and $82 in 1994; including expenses allocated to
discontinued operations for those years of $82, $38 and $0, respectively.
The Company has a contributory 401(k) savings plan and an employee stock
ownership plan, both of which cover substantially all eligible employees who
have completed six months of service. Total expense under the plans amounted
to approximately $1,468 in 1996, $1,301 in 1995 and $1,106 in 1994. These
plans and the pension plan invest in the Company's stock. The total number of
shares held by the plans at June 30, 1996 and 1995, was approximately 357,000
and 337,000, respectively.
E-F-17
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Directors, officers and certain key employees of the Company participate in
the long-term incentive plans (the Plans) under which the Company has reserved
shares of common stock for issuance. Awards under the Plans include stock
options, options to purchase debentures convertible into preferred stock and
then convertible into common stock of the Company, stock appreciation rights,
performance units, restricted stock, supplemental cash and such other forms as
the Board of Directors may direct. Options under all plans are granted at the
market price of the shares on the date of the grants. As of June 30, 1996,
858,150 shares remained available for granting. Additional information
follows:
<TABLE>
<CAPTION>
STOCK OPTIONS DEBENTURE OPTIONS
----------------------- -----------------------
AVERAGE AVERAGE
NUMBER OPTION PRICE NUMBER OPTION PRICE
OF SHARES PER SHARE OF SHARES PER SHARE
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Balance, June 30, 1993........... 163,750 $10.86 863,000 $12.49
Options granted................ 113,000 9.41 -- --
Options exercised.............. (39,350) 9.90 (177,800) 12.71
Options forfeited.............. (45,800) 12.98 (58,000) 13.73
-------- ------ -------- ------
Balance, June 30, 1994........... 191,600 9.69 627,200 12.31
Options granted................ 63,600 15.06 1,000 21.31
Options exercised.............. (102,400) 9.77 (172,200) 12.04
-------- ------ -------- ------
Balance June 30, 1995............ 152,800 11.87 456,000 12.43
Options granted before spinoff. 93,600 32.81 -- --
Options exercised before spin-
off........................... (123,400) 11.47 (247,200) 10.80
Option conversion adjustment*.. 75,034 -- 127,368 --
Options granted after spinoff.. 123,200 23.21 -- --
Options exercised after spin-
off........................... (483) 9.36 -- --
Options forfeited.............. (550) 23.13 -- --
-------- ------ -------- ------
Balance, June 30, 1996........... 320,201 $19.71 336,168 $ 8.92
======== ====== ======== ======
Exercisable, June 30, 1996....... 320,201 336,168
======== ========
</TABLE>
- --------
* The number of shares of common stock underlying outstanding debentures,
debenture options and nonqualifying stock options, as well as stock option
prices, were adjusted to reflect the distribution value (note 2) of the
Getchell shares. This adjustment increased the number of shares underlying
the outstanding awards and reduced the exercise prices by a factor of 1.61.
9. STOCKHOLDERS' EQUITY
Earnings per share calculations are based on the weighted average number of
common shares and common share equivalents outstanding during each year,
20,980,439 in 1996, 20,632,383 in 1995 and 20,126,093 in 1994.
In connection with the Shareholder Rights Plan adopted by the Company on
February 27, 1996, preferred stock purchase rights were distributed to
stockholders and are deemed to be attached to the outstanding shares of common
stock of the Company. Under certain conditions, each right may be exercised to
purchase one one-hundredth ( 1/100) of a share of a new series of preferred
stock, at an exercise price of $100 (subject to adjustment). The rights, which
do not have voting rights, expire in 2006 and may be redeemed by the Company
at a price of $0.01 per right prior to a specified period of time after the
occurrence of certain events. In certain events, each right (except certain
rights beneficially owned by 10% or more owners, which rights are voided) will
entitle its holder to purchase shares of common stock with a value of twice
the then current exercise price.
E-F-18
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company elected to accelerate dividend payments beginning in fiscal year
1995. As a result, five dividend payments were made versus the usual four
during that particular year.
10. COMMITMENTS AND CONTINGENT LIABILITIES
The Company has entered into various capital and operating leases for
transportation equipment (primarily railroad tank cars), chemical pipelines
and storage facilities, office buildings and land and other miscellaneous
items of equipment.
The following is a schedule by years of future minimum rental payments for
all capital leases and those operating leases with initial or remaining
noncancelable terms in excess of one year, as of June 30, 1996:
<TABLE>
<CAPTION>
YEARS ENDING OPERATING CAPITAL
JUNE 30 LEASES LEASES
------------ --------- -------
<S> <C> <C>
1997................................................ $1,591 641
1998................................................ 1,408 641
1999................................................ 883 641
2000................................................ 586 632
2001................................................ 531 --
Later years.......................................... 517 --
------ ------
Total minimum payments required...................... $5,516 2,555
======
Less imputed interest................................ 195
------
$2,360
======
</TABLE>
Provisions applicable to certain transportation equipment leases provide for
mileage credits computed on the basis of usage. No recognition has been given
to the effect of such credits in the amounts presented above.
Rental expense, including short-term rentals (net of mileage credits and
short-term subleases of approximately $249 in 1996, $255 in 1995 and $202 in
1994), was approximately $4,092 in 1996, $4,181 in 1995 and $3,575 in 1994. In
most cases, management expects that, in the normal course of business, leases
will be renewed or replaced by other leases.
Company operations are subject to a wide variety of environmental laws and
regulations governing emissions to the air, discharges to water sources, and
the handling, storage, treatment and disposal of waste materials, as well as
other laws and regulations concerning health and safety conditions. The
Company accrues for anticipated costs associated with investigatory and
remediation efforts relating to the environment. At June 30, 1996 the
Company's estimated liability for these matters totaled $1,500.
At June 30, 1996, the Company provided financial guarantees related to
discontinued coal and gold operations of $17,100 and $12,000, respectively.
The $12,000 guarantee related to gold operations was canceled in August 1996.
The Company has pending several claims incurred in the normal course of
business which, in the opinion of management and legal counsel, can be
disposed of without material effect on the accompanying consolidated financial
statements.
E-F-19
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INTEREST AND OTHER INCOME
Interest and other income (expense) items are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
---------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Interest income....................................... $ 4,622 4,211 1,870
Royalty, license, rental and fee income (expense)..... 555 223 1,084
Gain (loss) on disposition of noncurrent assets....... 708 242 (292)
Other................................................. 272 1,444 602
------- ------ ------
$ 6,157 6,120 3,264
======= ====== ======
</TABLE>
12. INDUSTRY SEGMENT INFORMATION
As of June 30, 1996, the Company operated principally in the following
industry segments: Chemicals, Combustion and Thermal Plasma and Steel.
Operations in the chemicals segment include production and sale of specialty
chemicals and organic chemical intermediates, and research and development for
new products and production processes for specialty chemicals. The combustion
and thermal plasma segment develops, markets and utilizes proprietary
combustion and thermal plasma equipment and services for environmental
applications and manufacturing. At June 30, 1996, the classification
Combustion and Thermal Plasma includes the operations of Plasma Energy, Plasma
Processing and Callidus Technologies. The classification Steel includes the
operations of FirstMiss Steel.
The chemicals segment had unaffiliated major customer sales of $61,773,
$68,066 and $42,512 in 1996, 1995 and 1994, respectively.
E-F-20
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a breakdown by industry segment of the Company's
consolidated financial statements at June 30, 1996, 1995 and 1994 and for each
of the years then ended:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Chemicals....................................... $227,837 209,472 161,045
Combustion and Thermal Plasma................... 65,624 56,347 33,779
Steel........................................... 77,086 65,902 54,267
Transfers between business segments:
Combustion and Thermal Plasma................... 812 -- --
Intercompany eliminations....................... (812) -- --
-------- ------- -------
Total......................................... $370,547 331,721 249,091
======== ======= =======
Operating profit (loss) before income taxes,
investee earnings (loss) and cumulative effect of
change in accounting principle:
Chemicals....................................... $ 44,058 40,019 30,295
Combustion and Thermal Plasma................... (30,944) (6,230) (9,393)
Steel........................................... 1,332 27 (3,370)
-------- ------- -------
14,446 33,816 17,532
Unallocated corporate expenses.................... (15,015) (10,661) (8,435)
Interest expense, net............................. (4,620) (5,346) (8,176)
Other income (expense), net....................... 260 675 305
-------- ------- -------
Total......................................... $ (4,929) 18,484 1,226
======== ======= =======
Depreciation and amortization:
Chemicals....................................... $ 12,888 11,577 10,723
Combustion and Thermal Plasma................... 2,522 2,726 2,193
Steel........................................... 2,239 2,421 2,201
Corporate....................................... 561 600 645
-------- ------- -------
Total......................................... $ 18,210 17,324 15,762
======== ======= =======
Identifiable assets:
Chemicals....................................... $178,381 150,199 132,739
Combustion and Thermal Plasma................... 41,242 40,993 33,591
Steel........................................... 63,481 63,733 52,452
-------- ------- -------
283,104 254,925 218,782
Corporate assets and investments.................. 59,413 67,486 31,251
Discontinued operations........................... 71,118 110,916 107,812
-------- ------- -------
Total......................................... $413,635 433,327 357,845
======== ======= =======
Capital expenditures:
Chemicals....................................... $ 30,032 19,460 11,735
Combustion and Thermal Plasma................... 2,871 3,258 5,263
Steel........................................... 2,546 3,126 2,094
Corporate....................................... 460 316 683
-------- ------- -------
Total......................................... $ 35,909 26,160 19,775
======== ======= =======
Export sales to unaffiliated customers:
North, Central and South America................ $ 7,529 5,182 5,059
Europe and Asia................................. 45,748 36,828 20,027
Africa and Australia............................ 837 189 1,251
-------- ------- -------
Total......................................... $ 54,114 42,199 26,337
======== ======= =======
</TABLE>
E-F-21
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total segment research and development expenses were $6,278 in 1996, $7,227
in 1995 and $5,401 in 1994. Certain corporate expenses, primarily those
related to the overall management of the Company, were not allocated to the
operating segments.
Identifiable assets by industry segment are those assets used in the
Company's operations in each industry and include investments in joint
ventures and partnerships. Corporate assets and investments are principally
cash and short-term investments, nontrade receivables and certain other
investments.
The Company's trade receivables are primarily concentrated with the
chemicals segment. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral on trade receivables. The
Company believes that consolidated trade receivables are well diversified,
thereby reducing potential credit risk, and that adequate allowances are
maintained for any uncollectible trade receivables.
The Company has revenue-producing operations in foreign countries. These
operations and related foreign currency translation adjustments are not
material.
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data follow:
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------- YEAR ENDED
SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 JUNE 30
------------ ----------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
1996:
Sales.................. $88,746 86,595 97,138 98,068 370,547
======= ====== ====== ======= =======
Gross profit........... $20,394 20,428 20,426 20,622 81,870
======= ====== ====== ======= =======
Net earnings (loss)
from continuing
operations............ $ 1,886 3,231 2,501 (11,076) (3,458)
======= ====== ====== ======= =======
Net earnings (loss).... $12,480 15,158 11,618 (4,036) 35,220
======= ====== ====== ======= =======
Earnings (loss) per
share:
Continuing
operations.......... $ .09 .15 .12 (.52) (.16)
======= ====== ====== ======= =======
Net earnings (loss).. $ .59 .72 .56 (.19) 1.68
======= ====== ====== ======= =======
1995:
Sales.................. $76,402 77,660 84,884 92,775 331,721
======= ====== ====== ======= =======
Gross profit........... $18,793 18,186 19,089 21,289 77,357
======= ====== ====== ======= =======
Net earnings from
continuing operations. $ 3,117 2,733 3,029 1,759 10,638
======= ====== ====== ======= =======
Net earnings........... $15,023 12,942 19,654 10,175 57,794
======= ====== ====== ======= =======
Earnings per share:
Continuing
operations.......... $ .15 .13 .15 .09 .52
======= ====== ====== ======= =======
Net earnings......... $ .74 .63 .95 .49 2.80
======= ====== ====== ======= =======
</TABLE>
The above quarterly earnings per share calculations are based on the
weighted average shares outstanding during each quarter whereas the annual
earnings per share calculations are based on the weighted average shares
outstanding during the year.
Net earnings declined in the third quarter of fiscal 1996 primarily due to
lower margins in discontinued fertilizer operations, and in the fourth quarter
of fiscal 1996 due to losses related to the shutdown of PPC's operations (see
Note 5).
Net earnings declined in the fourth quarter of fiscal 1995 due to losses at
discontinued Gold operations resulting from impairment and abandonment
charges.
E-F-22
<PAGE>
CHEMFIRST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
14. SUBSEQUENT EVENT
On August 27, 1996, First Mississippi entered into a definitive merger
agreement with MCC, under which MCC will acquire all the fertilizer interests
of First Mississippi. The transaction will occur in two steps: first, the tax-
free spinoff to First Mississippi's shareholders of First Mississippi's
chemicals and related businesses in the form of a new publicly traded company
that will retain the First Mississippi name; and second, the tax-free merger
of First Mississippi's fertilizer operations with a subsidiary of MCC. In the
merger, First Mississippi's stockholders will receive, subject to some
adjustment, approximately 6,900,000 shares of MCC stock, or 0.335 shares of
MCC stock for each share of First Mississippi's stock. At closing First
Mississippi's debt will be refinanced and increased to approximately $150,000
and will be assumed by MCC in the merger. An estimated loss of approximately
$6,000 will be incurred in the refinancing. After this refinancing and the
payment of certain expenses, cash on hand, currently estimated at
approximately $50,000, will be transferred to ChemFirst Inc., which will be
essentially debt free. The transaction is subject to, among other things,
approval by the stockholders of both First Mississippi and MCC and customary
regulatory approvals. It is expected that the transaction will be consummated
by December 31, 1996.
15. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Details of accrued expenses and other current liabilities are as follows:
<TABLE>
<CAPTION>
JUNE 30
--------------
1996 1995
------- ------
<S> <C> <C>
Accrued costs for exiting aluminum business (note 5)............ $ 5,065 --
Other accruals, individually less than 5% of current liabili-
ties........................................................... 19,339 19,208
------- ------
$24,404 19,208
======= ======
</TABLE>
16. VALUATION AND QUALIFYING ACCOUNTS
Details regarding the allowances for doubtful accounts and restructuring
costs are as follows:
<TABLE>
<CAPTION>
OTHER
BALANCE AT CHARGED TO ADDITIONS BALANCE
BEGINNING COSTS AND (DEDUCTIONS), AT END
OF YEAR EXPENSES NET OF YEAR
---------- ---------- ------------- -------
<S> <C> <C> <C> <C>
Year ended June 30, 1996:
Allowance for doubtful accounts.. $ 732 607 (558) 781
Allowance for restructuring
costs........................... $ 582 -- -- --
Year ended June 30, 1995:
Allowance for doubtful accounts.. $ 424 180 128 732
Allowance for restructuring
costs........................... $ 2,460 -- (1,878) 582
Year ended June 30, 1994:
Allowance for doubtful accounts.. $ 4,287 405 (4,268) 424
Allowance for restructuring
costs........................... $21,535 -- (19,075) 2,460
</TABLE>
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments not discussed in
note 6 approximate their fair values.
E-F-23
<PAGE>
APPENDIX F
MISSISSIPPI BUSINESS CORPORATION ACT
ARTICLE 13
DISSENTERS' RIGHTS
SUBARTICLE A. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
79-4-13.01 DEFINITIONS--In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 79-4-13.02 and who exercises that right when
and in the manner required by Sections 79-4-13.20 through 79-4-13.28.
(3) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be
inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
79-4-13.02 RIGHT TO DISSENT.--(a) A shareholder is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate action:
(1) Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by Section 79-4-
11.03 or the articles of incorporation and the shareholder is entitled to
vote on the merger, or (ii) if the corporation is a subsidiary that is
merged with its parent under Section 79-4-11.04;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one (1) year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
F-1
<PAGE>
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fraction share so created is to be acquired
for cash under Section 79-4-6.04; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) Nothing in subsection (a)(4) shall entitle a shareholder of a
corporation to dissent and obtain payment for his shares as a result of an
amendment of the articles of incorporation exclusively for the purpose of
either (i) making such corporation subject to application of the Mississippi
Control Share Act, or (ii) making such act inapplicable to a control share
acquisition of such corporation.
(c) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
79-4-13.03 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered
in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
SUBARTICLE B. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
79-4-13.20 NOTICE OF DISSENTERS' RIGHTS.--(a) If proposed corporate action
creating dissenters' rights under Section 79-4-13.02 is submitted to a vote at
a shareholders' meeting, the meeting notice must state that shareholders are
or may be entitled to assert dissenters' rights under this article and be
accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Section 79-4-13.02
is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in Section 79-4-
13.22.
79-4-13.21 NOTICE OF INTENT TO DEMAND PAYMENT.--(a) If proposed corporate
action creating dissenters' rights under Section 79-4-13.02 is submitted to a
vote at a shareholders' meeting, a shareholder who wishes to assert
dissenters' rights (1) must deliver to the corporation before the vote is
taken written notice of his intent to demand payment for his shares if the
proposed action is effectuated, and (2) must not vote his shares in favor of
the proposed action.
(b) A shareholder who does not satisfy the requirement of subsection (a) is
not entitled to payment for his shares under this article.
F-2
<PAGE>
79-4-13.22 DISSENTERS' NOTICE.--(a) If proposed corporate action creating
dissenters' rights under Section 79-4-13.02 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of Section 79-4-13.21.
(b) The dissenters' notice must be sent no later than ten (10) days after
the corporate action was taken, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty (30) nor more than sixty (60) days
after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
79-4-13.23 DUTY TO DEMAND PAYMENT.--(a) A shareholder sent a dissenters'
notice described in Section 79-4-13.22 must demand payment, certify whether he
acquired beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to Section 79-4-13.22(b)(3), and
deposit his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his shares under
subsection (a) retains all other rights of a shareholder until these rights
are cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under this article.
79-4-13.24 SHARE RESTRICTIONS.--(a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment
is received until the proposed corporate action is taken or the restrictions
released under Section 79-4-13.26.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.
79-4-13.25 PAYMENT.--(a) Except as provided in Section 79-4-13.27, as soon
as the proposed corporate action is taken, or upon receipt of a payment
demand, the corporation shall pay each dissenter who complied with Section 79-
4-13.23 the amount the corporation estimates to be the fair value of his
shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenters' right to demand payment under Section
79-4-13.28; and
(5) A copy of this article.
F-3
<PAGE>
79-4-13.26 FAILURE TO TAKE ACTION.--(a) If the corporation does not take the
proposed action within sixty (60) days after the date set for demanding
payment and depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 79-4-13.22 and repeat the payment demand
procedure.
79-4-13.27 AFTER-ACQUIRED SHARES.--(a) A corporation may elect to withhold
payment required by Section 79-4-13.25 from a dissenter unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated
and a statement of the dissenters' right to demand payment under Section 79-4-
13.28.
79-4-13.28 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.--
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate (less any payment under Section 79-4-13.25), or reject the
corporation's offer under Section 79-4-13.27 and demand payment of the fair
value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under Section 79-4-13.25
or offered under Section 79-4-13.27 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under Section 79-4-13.25 within
sixty (60) days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set
for demanding payment.
(b) A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection (a)
within thirty (30) days after the corporation made or offered payment for his
shares.
SUBARTICLE C. JUDICIAL APPRAISAL OF SHARES
79-4-13.30 COURT ACTION.--(a) If a demand for payment under Section 79-4-
13.28 remains unsettled, the corporation shall commence a proceeding within
sixty (60) days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the
corporation does not commence the proceeding within the 60-day period, it
shall pay each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the chancery court of
the county where a corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic
corporation merged with or whose shares were acquired by the foreign
corporation was located.
F-4
<PAGE>
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under Section 79-4-13.27.
79-4-13.31 COURT COSTS AND COUNSEL FEES.--(a) The court in an appraisal
proceeding commenced under Section 79-4-13.30 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously or not in good faith in
demanding payment under Section 79-4-13.28.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Sections 79-4-13.20 through 79-4-13.28; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously or not in good faith with
respect to the rights provided by this article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
F-5
<PAGE>
APPENDIX G
CERTAIN COMPENSATION INFORMATION RELATING
TO MISSISSIPPI CHEMICAL
The Articles of Incorporation of Mississippi Chemical provide that the
Mississippi Chemical Board shall consist of no fewer than nine or more than
fifteen directors, with the exact number of directors to be fixed by the
Mississippi Chemical Board, and that the Mississippi Chemical Board shall be
divided into three classes, with one class being elected each year for a
three-year term. The number of directors had been fixed at twelve but, on July
17, 1996, the Board voted to reduce its number to eleven effective immediately
following the Mississippi Chemical Annual Meeting and, accordingly, three
directors are to be elected at the annual meeting to serve for three years or
until the 1999 annual meeting of shareholders and until their respective
successors shall have been elected and qualified.
NOMINEES FOR ELECTION TO SERVE UNTIL 1999
Wayne A. Thames, Age 60
Director of Mississippi Chemical since 1973. For more than the past five
years, Mr. Thames has been a cattleman in Evergreen, Alabama.
Member: Director Affairs Committee.
W. R. Dyess, Age 57
Director of Mississippi Chemical since 1991. Since 1972, Mr. Dyess has
served as President of Dyess Farm Center, Inc., in Bardwell, Texas, and ABC Ag
Center, Inc., in Corsicana, Texas.
Member: Audit Committee and Director Affairs Committee.
David M. Ratcliffe, Age 47
Director of Mississippi Chemical since July 1994. Early in 1995, Mr.
Ratcliffe became Senior Vice President of External Affairs of the Southern
Company, an Atlanta, Georgia, based utility holding company. From 1991 to
1995, Mr. Ratcliffe served as President and Chief Executive Officer of
Mississippi Power Company, an electric utility. From 1989 until 1991, he was
Executive Vice President of Southern Company Services, Inc.
Member: Audit Committee.
REMAINING DIRECTORS
Directors Continuing to Serve until 1997
Coley L. Bailey, Age 45
Director of Mississippi Chemical since 1978 and has served as Chairman of
the Mississippi Chemical Board since 1988. For more than the past five years,
Mr. Bailey has been engaged in farming activities in Yalobusha County,
Mississippi.
Member: Executive Committee and Ex Officio Member of all other Committees.
Charles O. Dunn, Age 48
Director of Mississippi Chemical since 1992. Mr. Dunn has been employed by
Mississippi Chemical since 1978 and was elected President and Chief Executive
Officer of Mississippi Chemical in April 1993. Prior to
G-1
<PAGE>
becoming President, he served in various positions within Mississippi
Chemical, including Attorney and Executive Vice President.
Member: Executive Committee.
Woods E. Eastland, Age 51
Director of Mississippi Chemical since July 1994. Since 1986, Mr. Eastland
has been President and Chief Executive Officer of Staplcotn & Stapldiscount, a
cotton marketing and financing cooperative located in Greenwood, Mississippi.
Member: Compensation Committee.
John Sharp Howie, Age 56
Director of Mississippi Chemical since 1966 and has served as Vice Chairman
of the Board since 1988. For more than the past five years, Mr. Howie has been
engaged in farming activities in Yazoo County, Mississippi.
Member: Executive Committee and Compensation Committee.
Directors Continuing to Serve until 1998
John W. Anderson, Age 61
Director of Mississippi Chemical since 1989. Mr. Anderson is the former
President and Chief Executive Officer of Alabama Farmers Cooperative, Inc. He
served in that capacity from 1989 to 1995 when he retired.
Member: Executive Committee and Audit Committee.
Frank R. Burnside, Jr., Age 47
Director of Mississippi Chemical since 1985. For more than the past five
years, Mr. Burnside has been a farm supply dealer and Vice President and
Manager of Newellton Elevator Company, Inc., Newellton, Louisiana.
Member: Compensation Committee.
Robert P. Dixon, Age 53
Director of Mississippi Chemical since 1986. For more than the past five
years, Mr. Dixon has been the President and Chief Executive Officer of SF
Services, Inc., North Little Rock, Arkansas, a regional agricultural
cooperative.
Member: Compensation Committee and Executive Committee.
George Penick, Age 48
Director of Mississippi Chemical since July 1994. Mr. Penick is President of
the Foundation for the Mid-South, a private philanthropic foundation, and has
served in that position since 1990.
Member: Director Affairs Committee.
Director Emeritus
Tom C. Parry, Age 68
Appointed director emeritus of Mississippi Chemical in 1994. Mr. Parry was
President of Mississippi Chemical and a member of the Mississippi Chemical
Board from 1972 until 1993.
Member: Director Affairs Committee.
G-2
<PAGE>
COMPENSATION OF DIRECTORS
All nonemployee directors, including the director emeritus but excluding
Coley L. Bailey and John Sharp Howie, are paid an annual retainer of $12,000
and $1,000 per meeting, plus expenses. Coley L. Bailey, as Chairman of the
Mississippi Chemical Board, receives an annual retainer of $40,000 a year,
plus expenses. John Sharp Howie, as Vice Chairman of the Mississippi Chemical
Board, receives an annual retainer of $18,000 and $1,000 per meeting, plus
expenses. Charles O. Dunn, as President and Chief Executive Officer, receives
no additional remuneration for serving as a director.
Nonemployee directors may elect to receive his or her annual retainer in
shares of restricted stock pursuant to the 1995 Restricted Stock Purchase Plan
for Nonemployee Directors. At the beginning of each fiscal year, the number of
shares of restricted stock that the nonemployee director is entitled to
receive is determined by dividing 125% of his retainer for the ensuing 12-
month period by the fair market value of Mississippi Chemical Common Stock
based on the average of the closing price of the stock for the 20 days prior
to the beginning of the fiscal year.
In addition, pursuant to the 1995 Stock Option Plan for Nonemployee
Directors, each nonemployee director was granted an option to purchase 5,000
shares of Mississippi Chemical Common Stock on November 15, 1995. The
Chairman, Coley L. Bailey and the Vice Chairman, John Sharp Howie were granted
options to purchase 10,000 and 7,000 shares, respectively. Each nonemployee
director who has been granted an initial option under this directors' plan
will be granted additional annual options to purchase 1,500 shares of
Mississippi Chemical Common Stock on each July 1 (August 19 for fiscal 1997)
that the nonemployee director remains a member of the Mississippi Chemical
Board, except that the annual options for the Chairman and Vice Chairman will
be 3,000 and 2,000, respectively. The exercise price for such options shall
equal the average of the closing price of Mississippi Chemical Common Stock
for the 20 days prior to the grant date.
BOARD OF DIRECTORS AND COMMITTEES
The Mississippi Chemical Board is responsible for establishing broad
corporate policies and for overseeing the general performance of Mississippi
Chemical. The Mississippi Chemical Board meets regularly four times per year,
and holds special meetings as required. In fiscal 1996, the Mississippi
Chemical Board met 8 times.
Each director spends considerable time in preparing for and attending Board
and Committee meetings. During Mississippi Chemical's most recent fiscal year,
the directors as a group attended at least 93.5% of the Board meetings and
meetings of Committees to which they were appointed.
Board Committees
The Mississippi Chemical Board has established four standing committees: the
Audit Committee, the Compensation Committee, the Director Affairs Committee
and the Executive Committee. Each committee met three times during the 1996
fiscal year. The Audit Committee recommends the appointment of independent
auditors and oversees the accounting and audit functions of Mississippi
Chemical. The Compensation Committee recommends executive officers' salaries
and bonuses and reviews and recommends stock and compensation plans. No member
of the Compensation Committee or the Audit Committee is or has been an
employee of Mississippi Chemical. The Director Affairs Committee operates as a
nominating committee for the slate of directors and officers and periodically
reviews the performance of the Mississippi Chemical Board. Shareholder
recommendations for director nominees may be considered, but there are no
established procedures for the submission of such recommendations to the
Director Affairs Committee for consideration. To the extent permitted by law,
the Executive Committee has the authority to take all actions that the
Mississippi Chemical Board as a whole would be able to take.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At the close of business on the Mississippi Chemical Record Date,
Mississippi Chemical had 21,065,783 shares outstanding. As of such date, no
person is known by Mississippi Chemical to beneficially own more than five
percent of the outstanding Mississippi Chemical Common Stock.
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<PAGE>
MANAGEMENT OWNERSHIP OF MISSISSIPPI CHEMICAL COMMON STOCK
Under regulations of the Commission, persons who have power to vote or to
dispose of shares of Mississippi Chemical, either alone or jointly with
others, are deemed to be beneficial owners of those shares. The following
table shows, as of September 6, 1996, the beneficial ownership of each
director and of each Named Executive Officer (defined below), and of all
directors and executive officers as a group, of shares of Mississippi Chemical
Common Stock, including shares covered by options which can be exercised
within 60 days from the date of this Joint Proxy Statement/Prospectus. This
information has been furnished to Mississippi Chemical by the individuals
named. For more detailed information relating to Mississippi Chemical's
executive officers, see "Directors and Executive Officers of the Registrant"
in Mississippi Chemical's Annual Report on Form 10-K, which is incorporated
herein by reference. See "Incorporation of Certain Information by Reference"
in the attached Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL NUMBER OF SHARES PERCENT
OR NUMBER IN GROUP BENEFICIALLY OWNED OF CLASS
------------------- ------------------ --------
<S> <C> <C>
John W. Anderson(1)........................... 4,141 **
Coley L. Bailey(2)............................ 8,215 **
Frank R. Burnside, Jr.(3)..................... 23,907 **
Robert P. Dixon(4)............................ 2,136 **
W. R. Dyess(5)................................ 35,500 **
Woods E. Eastland(6).......................... 5,588 **
John Sharp Howie(7)........................... 8,331 **
G. David Jobe................................. 0 **
George Penick(8).............................. 1,693 **
David M. Ratcliffe(9)......................... 1,750 **
Wayne Thames(10).............................. 9,552 **
Tom C. Parry(11).............................. 7,696 **
Charles O. Dunn(12)........................... 88,569 **
C. E. McCraw(13).............................. 42,580 **
David W. Arnold(14)........................... 31,800 **
Robert E. Jones(15)........................... 43,500 **
Timothy A. Dawson(16)......................... 19,225 **
John J. Duffy(17)............................. 27,385 **
Ethel Truly(18)............................... 15,945 **
All directors and executive officers as a
group (19 persons)........................... 377,513* 1.8%
</TABLE>
- --------
* Includes 1994 and 1995 stock options for officers; includes 20% of 1995
stock options for directors.
** Less than 1%.
(1) Mr. Anderson owns 2,141 shares individually and holds 1,000 stock
options which are exercisable within 60 days from the date of this Joint
Proxy Statement/Prospectus. Mr. Anderson's wife, Evelyn Anderson, owns
1,000 shares.
(2) Of the total number of shares beneficially owned, Mr. Bailey owns 6,215
shares individually and holds 2,000 stock options which are exercisable
within 60 days from the date of this Joint Proxy Statement/Prospectus.
(3) Mr. Burnside owns 3,880 shares individually and holds 1,000 stock
options which are exercisable within 60 days from the date of this Joint
Proxy Statement/Prospectus. He is the beneficial owner of 18,827 shares
owned by Newellton Elevator Company, Inc., and 200 shares as guardian of
his minor children.
(4) Mr. Dixon owns 776 shares individually and holds 1,000 stock options
which are exercisable within 60 days from the date of this Joint Proxy
Statement/Prospectus. He is the beneficial owner of 360 shares owned by
Robert P. Dixon d/b/a Benchmark Farms.
(5) Mr. Dyess owns 474 shares individually and holds 1,000 stock options
which are exercisable within 60 days from the date of this Joint Proxy
Statement/Prospectus. He is the beneficial owner of 25,153 shares owned
by Dyess Farm Center, Inc., and 8,873 shares owned by ABC Ag Center,
Inc.
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<PAGE>
(6) Mr. Eastland owns 693 shares individually and holds 1,000 stock options
which are exercisable within 60 days from the date of this Joint Proxy
Statement/Prospectus. He is the beneficial owner of 3,895 shares owned by
the Elizabeth C. Eastland Trust.
(7) Mr. Howie owns 5,028 shares individually and holds 1,400 stock options
which are exercisable within 60 days from the date of this Joint Proxy
Statement/Prospectus. He is the beneficial owner of 1,903 shares owned by
Pauline W. Howie and John Sharp Howie d/b/a Cedar Grove Plantation.
(8) Of the total number of shares beneficially owned, Mr. Penick holds 1,000
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
(9) Of the total number of shares beneficially owned, Mr. Ratcliffe holds
1,000 stock options which are exercisable within 60 days from the date of
this Joint Proxy Statement/Prospectus.
(10) Of the total number of shares beneficially owned, Mr. Thames holds 1,000
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
(11) Of the total number of shares beneficially owned, Mr. Parry holds 1,000
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
(12) Of the total number of shares beneficially owned, Mr. Dunn holds 83,069
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
(13) Of the total number of shares beneficially owned, Mr. McCraw holds 41,580
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
(14) Of the total number of shares beneficially owned, Dr. Arnold holds 30,800
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
(15) Of the total number of shares beneficially owned, Mr. Jones holds 38,500
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
(16) Of the total number of shares beneficially owned, Mr. Dawson holds 16,725
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
(17) Of the total number of shares beneficially owned, Mr. Duffy holds 24,825
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
(18) Of the total number of shares beneficially owned, Ms. Truly holds 15,345
stock options which are exercisable within 60 days from the date of this
Joint Proxy Statement/Prospectus.
G-5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information with respect to all compensation
paid or earned for services rendered to Mississippi Chemical in fiscal 1996,
1995 and 1994 by Mississippi Chemical's Chief Executive Officer and
Mississippi Chemical's four highest paid executive officers other than the
Chief Executive Officer (together, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------------
(A) (B) (C) (D) (E) (G)
OTHER
NAME AND SALARY BONUS COMPENSATION(1) OPTIONS AWARDED(2)
PRINCIPAL POSITION YEAR ($) ($) ($) (#)
- ------------------ ---- ------- ------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Charles O. Dunn......... 1996 350,000 150,500 4,565 37,219
President and Chief 1995 310,008 133,304 4,503 45,850
Executive Officer 1994 280,008 89,603 4,562 N/A
C. E. McCraw............ 1996 230,136 71,343 4,565 18,630
Senior Vice President-- 1995 222,340 68,928 4,503 22,950
Operations 1994 209,760 47,406 4,562 N/A
Robert E. Jones......... 1996 198,276 49,569 4,565 17,250
Senior Vice President 1995 188,832 47,208 4,503 21,250
and General Counsel 1994 174,840 111,683 4,562 N/A
David W. Arnold......... 1996 182,040 45,510 4,565 13,800
Senior Vice President-- 1995 175,884 43,971 4,503 17,000
Technical Group 1994 168,312 30,666 4,562 N/A
John J. Duffy........... 1996 155,544 34,219 4,579 12,075
Vice President-- 1995 150,288 37,572 4,552 12,750
Marketing 1994 134,784 13,478 4,044 N/A
</TABLE>
- --------
(1) The amounts disclosed in column (e) represent Mississippi Chemical's
matching contribution on the employee's salary deferral contributions
under its 401(k) plan.
(2) Stock option grants made on August 18, 1994, and November 15, 1995, were
reduced by approximately 15% and 31%, respectively. This reduction was
made to recognize the reduced "risk of forfeiture" created by a change in
the terms of the affected option. Prior to the change, options became
exercisable based upon the percent of increase in stock value during the
five years after the date of grant (nine years and nine months after the
date of grant, the option became fully exercisable). At its July 26, 1996,
meeting, the Compensation Committee amended the options so that options
are fully exercisable six months following the date of grant.
Annual Bonuses
Annual bonuses for executive officers are intended to reward key employees
who have a material impact on Mississippi Chemical's operating results. Annual
bonuses are based on an "Economic Value Added" concept. No bonuses are paid
unless Mississippi Chemical's "Operating Income as a Percent of Capital"
equals Mississippi Chemical's "Weighted Average Cost of Capital," as defined
in the Officer Incentive Plan. Under this plan, when Operating Income as a
Percent of Capital meets the Weighted Average Cost of Capital, the President
receives an incentive payment of 20% of his base annual salary. For each 1%
that Operating Income as a Percent of Capital exceeds the Weighted Cost of
Capital, the President becomes eligible for a discretionary incentive payment
of an additional 1 1/2% of his base annual salary, up to a total bonus of 33%
of his base annual salary. The decision on the amount of discretionary bonus,
if any, is made by the Mississippi Chemical Board based on a recommendation
from the Compensation Committee. The four most highly compensated executive
G-6
<PAGE>
officers other than the President are included in the same plan. If Operating
Income as a Percent of Capital equals the Weighted Average Cost of Capital,
each officer receives an incentive payment of either 9% or 13% of his base
salary, depending on position. For each 1% that Operating Income as a Percent
of Capital exceeds the Weighted Average Cost of Capital, the four executives
(John J. Duffy, C. E. McCraw, Robert E. Jones, and David W. Arnold) are
eligible for a discretionary bonus of 1 1/2% of his base annual salary, up to
a total bonus of 15% or 21% of his base annual salary, depending on position.
The amount of the discretionary bonus, if any, is determined by the President
and reported to the Mississippi Chemical Board of Directors through the
Compensation Committee. In addition to the Officer Incentive Plan, all
Mississippi Chemical employees including executive officers are eligible for
performance bonuses of up to 10% of base annual compensation based on
operating results of Mississippi Chemical.
Stock Incentive Plan
On August 2, 1994, the Mississippi Chemical Board adopted, subject to
shareholder approval, the Mississippi Chemical Corporation 1994 Stock
Incentive Plan (the "Stock Incentive Plan"). On November 15, 1995, the
Compensation Committee granted options to acquire an aggregate of 131,404
shares of Mississippi Chemical Common Stock to 10 officers and key employees.
Benefits under the Stock Incentive Plan may be granted to officers and key
employees of Mississippi Chemical selected by the Compensation Committee based
on their responsibilities and potential impact of their services to
Mississippi Chemical.
The following table contains information covering stock options granted
during the fiscal year ended June 30, 1996, to the Named Executive Officers
pursuant to the 1994 Stock Incentive Plan and the number and value of
unexercised stock options held by those officers at the end of the last fiscal
year. No stock appreciation rights ("SARs") were granted in conjunction with
the options.
Option Tables
OPTION GRANTS DURING 1996 FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE
EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) YEAR(1) ($/SHARE) DATE PRESENT VALUE(2)
---- ----------- ---------- --------- ---------- ----------------
(A) (B) (C) (D) (E) (F)
<S> <C> <C> <C> <C> <C>
Charles O. Dunn......... 37,219 28.32 23.96 11/15/05 418,714
C. E. McCraw............ 18,630 14.18 23.96 11/15/05 209,588
Robert E. Jones......... 17,250 13.13 23.96 11/15/05 194,063
David W. Arnold......... 13,800 10.50 23.96 11/15/05 155,250
John J. Duffy........... 12,075 9.19 23.96 11/15/05 135,844
</TABLE>
- --------
(1) Total options granted during 1996 were 131,404 shares to the Named
Executive Officers and all other employees.
(2) Based on the Black-Scholes option pricing model adapted for use in valuing
stock options. The actual value, if any, a participant may realize will
depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized by a participant will be at or near the value estimated by the
Black-Scholes model. In connection with the 1994 Stock Incentive Plan, the
participants are expected by the Compensation Committee of the Board of
Directors to accumulate and hold shares equal to a multiple of their
salary. The model assumptions include (a) an option term of 10 years; (b)
a risk-free rate of return of 6.13% based on United States Treasury strips
with a duration equal to the expected term of the option; (c) a volatility
factor calculated using monthly stock prices for a peer group of four
fertilizer companies for the ten years prior to the grant date; and (d) a
dividend rate of $.08 per share per quarter.
G-7
<PAGE>
OPTION EXERCISES IN 1996 FISCAL YEAR AND FISCAL YEAR ENDED JUNE 30, 1996,
VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN THE MONEY OPTIONS
SHARES FY END 06/30/96 (#) AT FY END 06/30/96 ($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles O. Dunn......... 0 0 83,069 0 262,262 0
C. E. McCraw............ 0 0 41,580 0 131,274 0
Robert E. Jones......... 0 0 38,500 0 121,550 0
David W. Arnold......... 0 0 30,800 0 97,240 0
John J. Duffy........... 0 0 24,825 0 72,930 0
</TABLE>
Exercisable numbers are the number of options which were exercisable as of
June 30, 1996, with vesting calculated per the plan guidelines.
RETIREMENT PROGRAM
Pension Plan
Mississippi Chemical provides a "Defined Benefit" retirement plan for all
regular employees meeting established age and employment service requirements.
Benefits are determined based on average pay and years of credited service.
Annual Mississippi Chemical contributions on behalf of individual specified
participants are not calculated by plan actuaries. Only an employee's "base
pay" expressed as an annual rate of pay on the plan anniversary date is
covered by the plan. Plan compensation does not include bonuses, overtime or
shift differentials. The following table displays estimated annual benefits
payable at age 65 to newly hired persons in specified compensation and years
of service categories. Listed benefits are not subject to deductions for
social security or other offset amounts. The figures below reflect the benefit
and compensation limits that are applicable under federal law.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
25,000 4,688 6,250 7,813 9,375 10,938
50,000 9,375 12,500 15,625 18,750 21,875
100,000 24,330 31,630 38,863 46,230 53,935
150,000 39,330 51,630 63,863 76,230 88,935
200,000 39,330 51,630 63,863 76,230 88,935
250,000 39,330 51,630 63,863 76,230 88,935
300,000 39,330 51,630 63,863 76,230 88,935
350,000 39,330 51,630 63,863 76,230 88,935
400,000 39,330 51,630 63,863 76,230 88,935
450,000 39,330 51,630 63,863 76,230 88,935
500,000 39,330 51,630 63,863 76,230 88,935
</TABLE>
Years of service for the Named Executive Officers are: Charles O. Dunn--17;
C. E. McCraw--22; Robert E. Jones--21; David W. Arnold--29; and John J.
Duffy--7.
Supplemental Benefit Plan
Mississippi Chemical maintains a non-qualified Supplemental Benefit Plan for
any employee designated by the plan administrator (including all Named
Executive Officers in the Summary Compensation Table) who is a participant in
the "Defined Benefit" Pension Plan and whose benefits from that Plan will, at
his retirement, be
G-8
<PAGE>
limited by the Internal Revenue Code. In 1995, the Plan was amended to provide
participants with Company matching contributions to which they would have been
entitled under the "Defined Contribution" 401(k) savings plan, but which
Mississippi Chemical could not make because of the operation of the Internal
Revenue Code.
Benefits from this Plan will be payable to a participant beginning at the
time and under the terms that would have applied if such benefits had been
payable from the Pension Plan or 401(k) plan, as the case may be.
The following table shows estimated annual benefits payable under the
Supplemental Benefit Plan to persons in specified compensation and years of
service categories. (The actual benefit paid under the supplemental plan is
the amount the participant would have received under Mississippi Chemical's
Defined Benefit or Defined Contribution Plan absent the application of the
relevant Internal Revenue Code sections.)
SUPPLEMENTAL BENEFIT PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
200,000 15,000 20,000 25,000 30,000 35,000
250,000 30,000 40,000 50,000 60,000 70,000
300,000 45,000 60,000 75,000 90,000 105,000
350,000 60,000 80,000 100,000 120,000 140,000
400,000 75,000 100,000 125,000 150,000 175,000
450,000 90,000 120,000 150,000 180,000 210,000
500,000 105,000 140,000 175,000 210,000 245,000
</TABLE>
Years of service for the Named Executive Officers are: Charles O. Dunn--17;
C. E. McCraw--22; Robert E. Jones--21; David W. Arnold--29; and John J.
Duffy--7.
In July of 1996, the Compensation Committee approved an amendment to the
Supplemental Benefit Plan that provides for additional benefits to certain
participants, including all of the Named Executive Officers, in the event of a
change of control (as defined in the plan). If the executive's employment is
terminated by Mississippi Chemical within three years after a change of
control "without cause" (as defined) or by the executive for "good reason" (as
defined), his benefits will generally be increased as if he had continued
employment and continued participation in the plan through the third
anniversary of his termination. The executive may also elect to terminate his
employment for any reason within 90 days of a "change of control" and elect to
receive the increased benefits. However, benefits will be limited so that
excess parachute payments do not result under Section 280G of the Code.
SEVERANCE AGREEMENTS
At its July 26, 1996 meeting, the Compensation Committee approved severance
agreements to be entered into between Mississippi Chemical and certain of its
executive officers, including all five of the Named Executive Officers. Each
of the agreements provides certain additional compensation in the event of a
change of control (as defined in the agreements) of Mississippi Chemical.
Payments are triggered under each agreement if the executive is terminated by
Mississippi Chemical within three years following a change of control "without
cause" (as defined in the agreement); if the executive terminates employment
for "good reason" (as defined) within three years following a change of
control, or if the executive terminates employment with Mississippi Chemical
for any reason within 90 days of a change of control. The benefits paid
generally include an amount equal to the executive's annual base salary; a pro
rata portion of the executive's target bonus for the current fiscal year; a
cash payment equal to 36 months of medical plan premiums; and continuation of,
and payment of premiums for, certain welfare benefits. If the executive
executes a liability release in favor of Mississippi Chemical, he will be
entitled to benefits equal to another two times his base salary. Total
benefits contingent on a change of control (including special change of
control benefits under the supplemental benefit plan and stock options) are
generally limited so that Mississippi Chemical will not pay any "excess
parachute payment" within the meaning of section 280G of
G-9
<PAGE>
the Code unless the amounts that would be reduced to avoid any "excess
parachute payment" are more than the additional taxes (including the excise
tax under Code section 4999) that the executive would owe if such amounts were
paid to him.
OTHER BENEFIT PROGRAMS
The executive officers participate in various health, life and disability
insurance programs, pension plan and a retirement savings 401(k) plan, that
are generally made available to all employees. Executive officers also receive
certain traditional perquisites that are customary for their positions.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This report and the following performance graph shall not be deemed to be
incorporated by reference by any general statement which incorporates by
reference this Joint Proxy Statement/Prospectus into any filing under the
Securities Act or Exchange Act and they shall not otherwise be deemed filed
under such Acts.
Overview
The Mississippi Chemical Board has established a four-member Compensation
Committee. Each member of the Compensation Committee is a nonemployee
director.
Mississippi Chemical's executive officer compensation program consists of
base salary, annual bonuses, long-term incentive compensation in the form of
stock options and various benefits including medical, pension, and 401(k)
savings plans generally available to employees of Mississippi Chemical.
Compensation Policies
The Compensation Committee's executive compensation policies are designed to
provide competitive levels of compensation that integrate pay with Mississippi
Chemical's annual and longer-term performance goals, reward above-average and
discourage below-average performance, recognize individual initiative and
achievements, assist Mississippi Chemical in attracting and retaining
qualified executives and build the ownership of Mississippi Chemical Stock by
key managers. The Compensation Committee is of the view that stock ownership
by management and stock-based performance compensation arrangements are
beneficial in aligning the interests of management with the interests of
Mississippi Chemical's shareholders and ultimately enhance shareholder value.
The Compensation Committee further believes that bonus and other forms of
incentive-based compensation encourage management to attain preset commercial
goals for Mississippi Chemical.
Base Salary
Base salaries of the President and Chief Executive Officer and the other
executive officers are based on internal equity and external competitiveness.
Mississippi Chemical has retained W.M.S. Management Consultants ("WMS"), a
compensation consulting firm, to assist in the establishment of salary ranges
for each executive officer. To establish appropriate salary ranges, WMS
considers both internal and external factors, such as position responsibility
and impact, requisite education and experience and compensation levels for
comparable positions in similar organizations (including companies represented
in the 8-Stock Custom Composite Index shown in the Performance Graph).
Individual salaries are within the range established by the independent
consultant, the precise salary is based on subjective individual performance
evaluations. In these evaluations the Compensation Committee considers
financial criteria, including earnings per share improvement, return on equity
and growth in shareholder value. The Compensation Committee also applies non-
financial performance measures, including customer and supplier relationships,
environmental compliance, employee safety, productivity enhancements, and
management development. It is the objective of the Compensation Committee to
develop salary programs that attract and maintain qualified key employees and
that will reflect their actual performance.
G-10
<PAGE>
Annual Bonuses
The Compensation Committee administers Mississippi Chemical's annual bonus
plan. In administering the annual bonus plan, the Compensation Committee took
into account the plan criteria and determined that plan criteria had been met
and that bonuses were appropriate within the limitations of the plan. Bonuses
were granted to the officers as set forth in the Summary Compensation Table
based on the Compensation Committee's judgment that the performance met the
plan criteria, which compares return on capital to weighted average cost of
capital.
Stock Incentive Plan
The Compensation Committee also administers the stock option program. The
Compensation Committee evaluated the contribution of key executives and, based
on its evaluation, options were awarded for the fiscal year ended June 30,
1996, as set forth in the Option Grants Table. Individual grants are based
primarily on the executive officer's level of responsibility and potential
impact.
The Compensation Committee believes that the overall program it has adopted,
with its emphasis on long-term and incentive-based compensation, serves to
focus the efforts of Mississippi Chemical's executives on the attainment of a
sustained high rate of growth and profitability for the benefit of Mississippi
Chemical and its shareholders.
Compensation Committee Composition
The foregoing report is submitted by the members of the Compensation
Committee as of June 30, 1996:
John Sharp Howie, Chairman
Frank R. Burnside, Jr.
Woods E. Eastland
Robert P. Dixon
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Except as stated below, there are no interlocks or insider participation
with any executive officers of Mississippi Chemical or with the members of the
Compensation Committee.
Certain Transactions with Customers
During fiscal 1996 and 1995, sales to SF Services, Inc. ("SFS") were
approximately $36.5 million and $32.3 million, respectively, representing
approximately 8.5% and 8.3%, respectively, of Mississippi Chemical's net sales
and approximately 6.8% and 7.3%, respectively, of SFS's consolidated gross
revenues. During fiscal year 1995, SFS bought Mississippi Chemical's storage
facility located in North Little Rock, Arkansas, for approximately $600,000.
In the opinion of Mississippi Chemical, the sale was on terms as favorable to
Mississippi Chemical as if transacted with an unaffiliated third party. Robert
P. Dixon, a director of Mississippi Chemical, is an executive officer of SFS.
During fiscal 1996 and 1995, sales to Alabama Farmers Cooperative, Inc.
("AFC") were approximately $17.4 million and $16.7 million, respectively.
These sales represent 7.5% and 7.2%, respectively, of the gross revenues of
AFC. John W. Anderson, a director of Mississippi Chemical, was an executive
officer of AFC until September 30, 1995. Sales to SFS and AFC were on terms
and conditions comparable to arms'-length transactions with other customers.
All sales of product to directors and their affiliates have been and are
made in the ordinary course of business at prices and terms which are
determined based on prevailing competitive conditions and which are no less
favorable to Mississippi Chemical than the prices and terms of transactions
with other customers.
On May 23, 1995, the Board of Directors authorized the repurchase of up to
1.5 million shares of Mississippi Chemical's outstanding common stock.
Pursuant to this authorization, on July 21, 1995, Mississippi Chemical
purchased 200,000 shares at $20 per share from AFC and on July 27, 1995,
Mississippi Chemical purchased 200,000 shares at $20 per share from SFS. The
closing price as quoted by the Nasdaq National Market System for Mississippi
Chemical's stock was $21.88 on July 21 and $22.50 on July 27.
G-11
<PAGE>
PERFORMANCE GRAPH
(GRAPH)
<TABLE>
<CAPTION>
AUG. 94 SEP. 94 DEC. 94 MAR. 95 JUN. 95 SEP. 95 DEC. 95 MAR. 96 JUN. 96
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mississippi Chemical
Corp. $100 $119 $109 $115 $126 $134 $149 $130 $129
NASDAQ Composite
Index(U.S.) $100 $100 $ 99 $107 $123 $138 $139 $146 $158
Custom Composite Index(8
Stocks) $100 $112 $102 $117 $139 $159 $181 $172 $175
Natwest Fertilizer Index $100 $119 $107 $112 $143 $162 $182 $173 $174
</TABLE>
The 8-Stock Custom Composite Index consists of Agrium Inc. (Nasdaq),
Arcadian Corp., First Mississippi Corp., Freeport-McMoRan Resource Partners,
IMC Global Inc., Potash Corp. of Saskatchewan (NYSE), Terra Industries, Inc.,
and Vigoro Corp.
Note: Agrium Inc. began trading on the Nasdaq on May 5, 1995. The company is
included in the Custom Composite Index beginning May 31, 1995. Prior to August
10, 1995 the total return to Arcadian Corp. reflected Arcadian Partners LP.
G-12
<PAGE>
P
R
O
X
Y
FIRST MISSISSIPPI CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON DECEMBER 20, 1996
The undersigned hereby appoints Richard P. Anderson, Charles P. Moreton and R.
Gerald Turner, and each of them, with the power of substitution and revocation,
as attorneys and proxies to appear and vote all shares of Common Stock held by
the undersigned, at the Annual Meeting of First Mississippi Corporation, to be
held on December 20, 1996, and at any and all adjournments thereof; and the
undersigned hereby instructs said proxies to vote as indicated on all matters
referred to on the reverse side and described in the proxy statement for the
meeting, and in accordance with their judgment on all other matters that may
properly come before the meeting.
ELECTION OF DIRECTORS, Nominees:
Three year term -James E. Fligg, Robert P. Guyton, Paul W. Murrill, J. Kelley
Williams
Two year term -Dan F. Smith
One year term -Michael J. Ferris
All proxies will vote as specified on the reverse side. IN THE ABSENCE OF
SPECIFIC INSTRUCTIONS, PROXIES WILL VOTE (1) FOR the elections of the director
nominees, (2) FOR approval of the Agreement and Plan of Merger and
Reorganization, dated as of August 27, 1996, among Mississippi Chemical
Corporation, MISS SUB INC. and First Mississippi Corporation, and the merger
contemplated thereby, and (3) on all other matters that may properly come
before the meeting in accordance with their judgment.
SEE REVERSE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
[X] Please mark your votes as in this example.
SHARES IN YOUR NAME REINVESTMENT SHARES |
|
_____
1. Election of Directors (see reverse) FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
- -----------------------------------------------
2. To approve and adopt the Agreement and Plan of Merger and Reorganization and
the Merger. FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion upon such other matters as may properly come before the
meeting. (Crossout if vote is withheld.)
[_] I have comments
I will attend
[_] annual meeting
SIGNATURE(S) ________________________ DATE ___________________________________
SIGNATURE(S) ________________________ DATE ___________________________________
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS, EACH SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE
FULL NAME AS SUCH.
- --------------------------------------------------------------------------------
FIRST MISSISSIPPI CORPORATION
1996 ANNUAL MEETING
You are cordially invited to attend the annual meeting of stockholders of First
Mississippi Corporation. The meeting will be held Friday, December 20, 1996,
at 10:00 AM (CST) at Dennery's, 330 Greymont Avenue, Jackson, Mississippi.
Please mark the boxes on the proxy card to indicate how your shares should be
voted. Sign and return your proxy as soon as possible in the enclosed postage-
paid envelope.
Votes are tabulated by KeyCorp Shareholder Services, Inc., the Company's
transfer agent. Any comments noted on the proxy card or an attachment will be
forwarded to the Corporate Secretary by KeyCorp. Please indicate if you have
comments by marking the appropriate box.
James L. McArthur
Secretary
