<PAGE>
As filed with the Securities and Exchange Commission on May 24, 1994
Registration No. 33-53119
================================================================================
AMENDMENT NO. 1
TO
FORM S-4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
MISSISSIPPI CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0292638
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2898
(Primary Standard Industrial Classification Code Number)
P.O. Box 388, Yazoo City, Mississippi 39194 (601) 746-4131
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
__________________________
ROBERT E. JONES
Vice President and General Counsel
Mississippi Chemical Corporation
P.O. Box 388
Yazoo City, Mississippi 39194
(601) 746-4131
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of Communications to:
FREDERICK W. AXLEY, P.C.
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
(312) 372-2000
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Title of Each Maximum Maximum
Class of Amount Offering Aggregate Amount of
Securities to be Price Per Offering Registration
Being Registered Registered Unit (1) Price (1) Fee
- --------------------------------------------------------------------------------
Common Stock of MCC 20,000,000 $15 $300,000,000 $103,448
Sub, Inc. $.01 par value.... Shares
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
================================================================================
<PAGE>
PRELIMINARY
MISSISSIPPI CHEMICAL CORPORATION
To our fellow Shareholders:
The enclosed Proxy Statement/Prospectus describes a proposal for a basic
change in your investment in Mississippi Chemical Corporation. The proposal
requires shareholder approval in order to be effective.
We urge that you give prompt and careful attention to the Proxy
Statement/Prospectus in order that you may make your own determination as to how
you will vote your shares.
Your Board of Directors strongly supports the proposal. We believe it
benefits Mississippi Chemical shareholders as a group. We expect to vote all of
our own shares in favor of the proposal.
The Board unanimously recommends that you join us in voting for the
proposal.
May 27, 1994 The Board of Directors of
Mississippi Chemical
Corporation
/s/ Coley L. Bailey
-----------------------------
Coley L. Bailey
Chairman of the Board
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
---------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TUESDAY, JUNE 28, 1994
To the Shareholders:
You are hereby notified of, and cordially invited to attend, a special
meeting of the shareholders of Mississippi Chemical Corporation (the
"Cooperative"), which will be held at the Owen Cooper Administration Building,
Highway 49 East, Yazoo City, Mississippi on June 28, 1994, at 9:00 A.M., local
time, for the purpose of considering and voting upon a proposal, unanimously
recommended and adopted by the Board of Directors, to adopt a Plan of
Reorganization (the "Plan") merging the Cooperative into a newly created wholly
owned subsidiary without cooperative traits. Only shareholders of record on May
6, 1994, the record date for the meeting, will be entitled to vote at the
meeting.
By the terms of the Plan:
(i) the Cooperative will merge itself into a newly created, wholly
owned subsidiary which is a Mississippi for-profit business corporation
(the "New Company");
(ii) in the merger:
(a) the outstanding shares of Nitrogen Series I, Nitrogen Series II
and Nitrogen Series III common stock of the Cooperative will be
converted into common stock of the New Company;
(b) the outstanding shares of Mixed Series IV and Mixed Series V
common stock of the Cooperative will be converted into the right to
receive $15 per share; and
(c) the outstanding shares of Potash Series VI common stock of the
Cooperative will be converted into the right to receive $50 per
share;
(iii) each holder of Capital Equity Credits and Allocated Surplus
Accounts including, but not limited to, this year's Capital Equity
Credits and Allocated
-i-
<PAGE>
Surplus Accounts, if any, will be offered the right to exchange those
interests for common stock of the New Company;
(iv) holders of fractional shares of common stock of the New Company
will receive cash in exchange for fractional shares based upon a per share
value of $15; and
(v) the New Company will offer its shareholders who, after
implementation of the Plan, would own fewer than 100 shares the right to
exchange all of their shares New Company Common Stock for cash at the rate
of $15 per share.
Under Mississippi law, the Cooperative's shareholders have dissenters'
rights with respect to their shares of Cooperative common stock if the Plan is
adopted without their consent and if they comply with the requirements of
Article 13 of the Mississippi Business Corporation Act, a copy of which is
included in the accompanying materials.
THE BOARD OF DIRECTORS HAS APPROVED AND ADOPTED THE PLAN AND UNANIMOUSLY
RECOMMENDS THAT IT BE ADOPTED BY THE SHAREHOLDERS.
Dated: May 27, 1994 /s/ Rosalyn B. Glascoe
-------------------------
Rosalyn B. Glascoe,
Corporate Secretary
WHETHER OR NOT YOU PLAN TO ATTEND PERSONALLY, PLEASE COMPLETE, DATE AND SIGN
YOUR PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
-YOUR VOTE IS IMPORTANT-
-ii-
<PAGE>
SUBJECT TO COMPLETION DATE OF MAILING
MAY 27, 1994
MISSISSIPPI CHEMICAL CORPORATION
PROXY STATEMENT/PROSPECTUS
----------
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of Mississippi Chemical
Corporation (the "Cooperative") for use at the Special Meeting of Shareholders
to be held on June 28, 1994 , and at all adjournments thereof (the
"Meeting").
This Proxy Statement/Prospectus is also being furnished in connection with
the offer to exchange Capital Equity Credits and Allocated Surplus Accounts for
common stock of the New Company and the offer to repurchase shares from holders
of fewer than 100 shares of New Company Common Stock as described herein.
The purpose of the Meeting is to consider and act upon a proposal,
unanimously recommended and adopted by the Board of Directors of the
Cooperative, to adopt a Plan of Reorganization (the "Plan"), a copy of which is
attached as Appendix A hereto. Under the terms of the Plan, the Cooperative
will merge into a newly created, wholly owned subsidiary (the "New Company"),
will cease to be operated as a cooperative, and will become a non-cooperative
business corporation with a single class of common stock.
By the terms of the Plan, the Cooperative will merge into the New Company,
the shares of the Cooperative's common stock will be converted into New Company
common stock and/or cash, holders of Capital Equity Credits and Allocated
Surplus Accounts of the Cooperative will be offered the right to exchange
these interests for shares of the New Company, and, pursuant to the Plan,
shareholders who, after implementation of the merger and the exchange
offer, would own less than 100 shares of the New Company, will be offered
the right to exchange those shares for cash.
The Board of Directors of the Cooperative unanimously recommends that the
Cooperative shareholders vote FOR adoption of the Plan.
<PAGE>
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus, or incorporated
in it by reference, and, if given or made, such information or representation
should not be relied upon as having been authorized. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this Proxy Statement/Prospectus,
or the solicitation of a proxy, in any jurisdiction to or from any person to
whom it is unlawful to make such offer, or solicitation of an offer, or proxy
solicitation in such jurisdiction. Neither the delivery of this Proxy
Statement/Prospectus nor any distribution of the securities offered pursuant to
this Proxy Statement/Prospectus shall, under any circumstances, create an
implication that there has been no change in the affairs of the Cooperative or
the New Company since the date of this Proxy Statement/Prospectus.
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 PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is May 27, 1994.
-2-
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY.................................................. 5
INFORMATION CONCERNING THE MEETING....................... 12
Date, Place, Time..................................... 12
Record Date 12
Vote Required......................................... 12
Proxies 12
Other Matters to be Considered........................ 13
Solicitation of Proxies............................... 13
THE PLAN OF REORGANIZATION............................... 13
Principal Provisions of the Plan...................... 13
Reasons for the Plan.................................. 15
The Merger of the Cooperative into the New Company.... 17
The Exchange Offer: Capital Equity Credits and
Allocated Surplus Accounts...................... 18
The Offer to Cash Out Shareholders of the New Company
Who Own Fewer Than 100 Shares................... 21
Delivery of New Company Certificates.................. 21
Consequences of the Plan to Cooperative Shareholders.. 22
Tax Consequences of the Plan.......................... 24
Amendment or Abandonment of the Plan.................. 27
Market for the Cooperative Common Stock and Related
Shareholder Matters............................. 28
DISSENTERS' RIGHTS....................................... 28
CAPITALIZATION........................................... 31
PRO FORMA FINANCIAL STATEMENTS........................... 33
THE NEW COMPANY.......................................... 41
Introduction.......................................... 41
Policies and Objectives............................... 41
Summary of New Company Articles of Incorporation and
Bylaws.......................................... 41
Shareholder Protective Devices........................ 42
Management............................................ 43
The New Company Following the Effective Date.......... 45
THE COOPERATIVE.......................................... 47
Business.............................................. 47
Organization.......................................... 48
Fertilizer Operations................................. 49
Marketing............................................. 51
Competition........................................... 52
Raw Materials......................................... 53
Employment............................................ 54
Patents and Licenses.................................. 54
Research and Development.............................. 55
Seasonal Factors...................................... 55
Compliance With Environmental Regulations............. 55
Properties............................................ 56
Legal Proceedings..................................... 59
Current Directors and Executive Officers of the
Cooperative..................................... 62
Compensation of Directors............................. 66
Compensation of Executive Officers.................... 66
Board Compensation Committee.......................... 68
Pension Plan.......................................... 68
-3-
<PAGE>
Supplemental Benefit Plan............................. 69
Security Ownership of Certain Beneficial Owners and
Management...................................... 70
NEWSPRINT SOUTH, INC. ................................... 71
Description of Newsprint South, Inc. ................. 71
The Disposition of NSI................................ 73
Continuing Relationships Between the Cooperative
and NSI......................................... 74
OTHER MATTERS............................................ 75
Certain Relationships and Related Transactions........ 75
Relationship with Independent Accountants............. 76
Legal Matters......................................... 76
Experts............................................... 76
APPENDIX A: Plan of Reorganization
APPENDIX B: Articles of Incorporation of the New Company
APPENDIX C: Bylaws of the New Company
APPENDIX D: Dissenters' rights: Article 13 of the Mississippi Business
Corporation Act
APPENDIX E: Opinion of D.L. Johnson & Co.
AVAILABLE INFORMATION
The Cooperative has filed a Registration Statement under the Securities Act
of 1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission (the "Commission") covering the shares of New Company Common Stock to
be issued in connection with the Plan. As permitted by the rules and
regulations of the Commission, this Proxy Statement/Prospectus omits certain
information, exhibits and undertakings contained in the Registration Statement.
For further information pertaining to the securities offered hereby, reference
is made to the Registration Statement, including the exhibits filed as a part
thereof.
The Cooperative is, and, following the Effective Date the New Company will be,
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). In accordance therewith, the Cooperative
files reports and other information with the Commission. Reports and other
information filed by the Cooperative can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 1400, 500 West Madison, Northwestern Atrium, Chicago, Illinois 60606.
Copies of such material can also be obtained from the Public Reference Section
of the Commission, Room 1024, at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
-4-
<PAGE>
SUMMARY
The following is a summary of certain information regarding the Plan, provided
for the convenience of the Cooperative's shareholders. This summary is not
intended to be complete and is qualified in its entirety by the more detailed
information appearing elsewhere in this Proxy Statement/Prospectus and in the
appendices hereto. Shareholders are urged to review carefully the entire Proxy
Statement/Prospectus and appendices.
THE COOPERATIVE
The Cooperative was organized in 1948 under the general corporate laws of
the state of Mississippi and is operated as a cooperative in accordance with the
applicable provisions of the Internal Revenue Code. The principal business of
the Cooperative is to provide fertilizer products to its shareholders pursuant
to preferred patronage rights by which the shareholders have the right to
purchase fertilizer products from the Cooperative in proportion to the type and
amount of stock which they own. The shareholder receives a patronage refund on
its purchases to the extent of any excess of the purchase price of the
fertilizer products over the cost of such products. The address of the
Cooperative's principal executive office is Owen Cooper Administration Building,
Highway 49 East, Yazoo City, Mississippi 39194, and its telephone number is
(601) 746-4131.
PURPOSE OF THE MEETING
The purpose of the Meeting is to consider and act upon a proposal to adopt a
Plan of Reorganization pursuant to which the Cooperative will merge with and
into a newly created wholly owned subsidiary, the New Company, which is
a non-cooperative Mississippi business corporation with one class of common
stock.
THE PLAN
Effective Date of the Plan.
If the Plan is approved by the required number of shareholders, it will
become effective on July 1, 1994.
-5-
<PAGE>
The Merger.
The Cooperative will merge into the New Company (the "Merger"). In
connection with the Merger, the common stock of the Cooperative (the
"Cooperative Common Stock") will be converted into common stock of the New
Company (the "New Company Common Stock") and/or the right to receive cash in the
following manner:
(i) the outstanding shares of Nitrogen Series I, Nitrogen Series II
and Nitrogen Series III common stock of the Cooperative (collectively,
the "Nitrogen Shares") will be converted into shares of New Company
Common Stock on the following bases:
(1) Each share of Nitrogen Series I Stock will be converted into
24 shares of New Company Common Stock;
(2) Each share of Nitrogen Series II Stock will be converted
into 8 shares of New Company Common Stock; and
(3) Each share of Nitrogen Series III Stock will be converted
into 1.6 shares of New Company stock;
(ii) The outstanding shares of Mixed Series IV Common Stock and
Mixed Series V Common Stock of the Cooperative (collectively, the
"Mixed Shares") will be converted into the right to receive $15 for
each share;
(iii) The outstanding shares of Potash Series VI Common Stock of the
Cooperative (the "Potash Shares") will be converted into the right to
receive $50 for each share; and
(iv) The New Company will not issue fractional shares. Pursuant to
the Plan, holders of fractional shares of New Company Common Stock will
receive cash based on a per share value of $15.
The Offer to Exchange Capital Equity Credits and Allocated Surplus Accounts
for Shares of New Company Common Stock.
-6-
<PAGE>
In connection with the Plan, the holders of capital equity credits of the
Cooperative (the "Capital Equity Credits") and allocated surplus accounts of the
Cooperative (the "Allocated Surplus Accounts") will be offered the right to
exchange their Capital Equity Credits and Allocated Surplus Account rights for
New Company Common Stock having a value related to the present value of their
Capital Equity Credits and Allocated Surplus Accounts (the "Exchange Offer").
Each $15 in present value (using an 8% discount factor) of Capital Equity
Credits and Allocated Surplus Accounts may be exchanged for one share of New
Company Common Stock. The Board, after considering a number of factors
described in more detail herein, believes that it is not unreasonable to
conclude that one share of New Company Common Stock will initially trade within
a range of $12 to $18 after the Merger; $15 is the midpoint of this range.
IN THE EVENT THAT HOLDERS OF CAPITAL EQUITY CREDITS AND ALLOCATED SURPLUS
ACCOUNTS DO NOT ELECT TO ACCEPT THE EXCHANGE OFFER, THEY MAY NEVER REALIZE VALUE
ON THESE INTERESTS. For a complete description of the exchange and how values
were determined, see "The Plan of Reorganization--The Exchange Offer:
Capital Equity Credits and Allocated Surplus Accounts".
The Offer to Exchange Certain New Company Shares for Cash.
In connection with the Plan, the New Company will offer its shareholders,
who would, after implementation of the Plan (including the exchange of Capital
Equity Credits and Allocated Surplus Accounts), own fewer than 100 shares of New
Company Common Stock, the right to exchange all of their shares of New Company
Common Stock for cash at the rate of $15 per share.
Reasons for the Plan.
The Board of Directors of the Cooperative believes that, to realize the full
potential of its operations, it must have access to additional capital
sources. The Plan should provide the New Company with wider access to capital
markets and increased options in connection with potential acquisitions,
partnerships and alliances. The Board of Directors of the Cooperative also
believes that the Plan may provide the best method for the shareholders of the
Cooperative to realize maximum value from their ownership of interests in the
Cooperative. The Board believes that the Cooperative's Nitrogen Stock is
substantially undervalued compared to the shares of similar publicly traded
companies which are not cooperatives due to a lack of liquidity caused primarily
by certain restrictions placed on the sale or transfer of the Cooperative Common
Stock. The Board also believes that the reorganization will provide greater
flexibility
-7-
<PAGE>
in the marketing of the New Company's products and should improve the New
Company's ability to be a more responsive and preferred supplier of fertilizer
products.
THE NEW COMPANY
Operation and Management of the New Company.
The New Company will operate as a non-cooperative business corporation. See
"New Company -- Operations" and "New Company --Articles of Incorporation". The
New Company has been incorporated in Mississippi and will be operated under
Subchapter C of the Internal Revenue Code. It has one class of common stock and
has authorized but unissued preferred stock. All of the New Company Common
Stock is currently held by the Cooperative. The New Company will be managed by
its Board of Directors consisting of 12 members, nine of whom are current
directors of the Cooperative and three of whom are newly-appointed independent
directors. A vote to approve the plan will have the effect of confirming the
election of the New Company's directors for the terms indicated above and the
meeting will constitute the first annual meeting of shareholders of the New
Company. It is intended that the officers, employees, business, properties and
production operations of the New Company will be substantially similar to those
of the Cooperative, except as otherwise indicated herein.
Dividend Policy of the New Company.
The Board of Directors currently expects that the New Company will pay
dividends to its shareholders. The amount and the timing of these payments will
be based on a number of factors, including the capital requirements of the New
Company's business, the financial condition of the New Company, and the dividend
policies of similar publicly-traded companies. There can be no assurance that
the New Company will pay any dividends, at any time. In the future, it is
possible that agreements with lenders may limit or restrict the New Company's
ability to pay dividends or may restrict the amount of dividends that may be
paid.
MARKET INFORMATION
The Cooperative Common Stock is not currently listed on any national or
local exchange and is subject to restrictions on its transferability. After the
Effective Date, the New Company intends to apply for quotation of the New
Company Common Stock on the NASDAQ System. There can be no assurance that the
New
-8-
<PAGE>
Company Common Stock will be quoted on any exchange or that any market will
develop.
SIGNIFICANT FACTORS TO BE CONSIDERED BY SHAREHOLDERS
Tax Consequences.
It is intended that the Merger and the Exchange Offer will constitute a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended. As a consequence, shareholders exchanging Cooperative
Common Stock in the Merger or Capital Equity Credits and Allocated Surplus
Accounts in the Exchange Offer will be taxed for federal income tax purposes on
any gain realized only to the extent of cash received. For a discussion of
significant tax consequences of the Merger and the Exchange Offer, see "Tax
Consequences."
Operations
The Cooperative is organized and operated on a cooperative basis. The New
Company will be organized and operated as a regular business corporation, not as
a cooperative. This will significantly change the nature of the continuing
shareholders' ownership interests in the business enterprise. The New Company
will not pay patronage refunds to its patrons, and shareholders of the New
Company will not have the right to purchase fertilizer on a preferred basis. To
the extent that the right to buy fertilizer on a preferred basis is significant
to the operations of a shareholder, the shareholder should consider the impact
of the loss of this right in determining whether to support the Plan. See, "The
Merger -- Consequences of the Merger to Cooperative Shareholders."
BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE PLAN IS
ADVANTAGEOUS TO THE SHAREHOLDERS OF THE COOPERATIVE, HAS UNANIMOUSLY ADOPTED THE
PLAN AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR ITS ADOPTION.
SHAREHOLDER APPROVAL
Record Date.
Shareholders of record at the close of business on May 23, 1994
(the "Record Date") are entitled to vote at the Meeting. See "Information
Concerning the Meeting -- Record Date."
-9-
<PAGE>
Required Vote for Adoption of the Plan.
Adoption of the Plan requires the affirmative vote of the holders of a
majority of each class of outstanding shares of the Cooperative Common Stock
voting separately. See "Information Concerning the Meeting -- Vote Required".
Each shareholder is entitled to one vote for each share of Cooperative Common
Stock held on the Record Date.
Dissenters' Rights.
Under Mississippi law, shareholders have dissenters' rights with respect to
shares of Cooperative Common Stock if the Plan is adopted without their consent
and certain procedures are followed. FAILURE TO STRICTLY COMPLY WITH THE
DISSENTERS' RIGHTS PROCEDURES WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
SEE "DISSENTERS' RIGHTS".
OTHER MATTERS
Disposition of NSI.
On March 22, 1994, the Cooperative's Board of Directors authorized
management to dispose of the Cooperative's interest in Newsprint South, Inc.
("NSI"), a wholly owned subsidiary of the Cooperative. This action was
taken due to substantial losses incurred to date by NSI and the expectation of
continuing losses. The Cooperative and the principal parties to the leveraged
lease transaction pursuant to which the NSI facilities are financed are
discussing a proposed transaction involving a transfer by the Cooperative of a
majority of its interest in NSI to GECC and others. If for any reason the
proposed transaction is not implemented, it is the intention of the Cooperative
to dispose of a majority of its interest in NSI to others in a transaction which
will be completed as soon as possible, but not later than June 30, 1995. The
disposition of NSI will also allow the New Company to focus its attention on its
core fertilizer business. For more information, see "Newsprint South, Inc."
-10-
<PAGE>
SUMMARY OF CERTAIN FINANCIAL DATA
The following table, which sets forth certain historical financial
information, in summary form, with respect to the Cooperative, is qualified in
its entirety by, and should be read in conjunction with, the financial
statements and related notes appearing elsewhere herein. The historical
financial information has not been restated to reflect the prospective
disposition of NSI.
MISSISSIPPI CHEMICAL CORPORATION
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE NINE
MONTHS MONTHS FISCAL YEAR ENDED
ENDED ENDED -----------------------------------------------------
INCOME STATEMENT DATA: 3/31/94 3/31/93 1993 1992 1991 1990 1989
- --------------------------- ------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $281,222 $260,986 $387,010 $334,598 $321,840 $252,547 $209,879
MARGINS (LOSS) BEFORE
INCOME TAXES AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE $ (6,710) $ (2,787) $ 3,932 $ 12,099 $ 38,611 $ 4,876 $ 46,917
CUMULATIVE BENEFIT TO
JULY 1, 1993, OF CHANGE
IN ACCOUNTING FOR
DEFERRED INCOME TAXES $10,255 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
NET MARGINS (LOSS) $ 8,560 $ (1,048) $ 4,790 $ 13,003 $ 39,384 $ 7,225 $ 42,304
PATRONAGE REFUNDS $ 7,001 $ 17,367 $ 13,820 $ 22,895 $ 46,120 $ 20,537 $ 39,739
BALANCE SHEET DATA:
- ---------------------------
TOTAL ASSETS $329,950 $318,459 $320,612 $330,527 $325,110 $288,772 $577,054
PROPERTY HELD FOR SALE $ 66,928 $ 66,928 $ 66,928 $ 66,928 $ 66,928 $ 66,928 $ 66,928
NET PROPERTY, PLANT AND
EQUIPMENT $125,132 $130,635 $129,385 $116,801 $ 96,417 $ 78,448 $374,252
WORKING CAPITAL $ 28,535 $ 30,407 $ 28,170 $ 40,027 $ 70,756 $ 77,972 $ 50,835
LONG-TERM DEBT $ 70,679 $ 88,172 $ 73,526 $ 69,942 $ 78,621 $ 76,099 $350,596
SHAREHOLDER-MEMBERS' EQUITY $121,548 $110,189 $119,574 $128,195 $138,762 $138,255 $150,912
</TABLE>
Note: Numbers are as reported to the SEC on Form 10-Q as of 3/31/94 and
3/31/93, and on Form 10-K as of the fiscal years ended 1993; 1992; 1991; 1990
and 1989.
-11-
<PAGE>
INFORMATION CONCERNING THE MEETING
DATE, PLACE, TIME.
The Meeting will be held on June 28, 1994, at 9:00 A.M. local time, at the
Cooperative's offices, Owen Cooper Administration Building, Highway 49 East,
Yazoo City, Mississippi.
RECORD DATE.
The record date for determination of the Cooperative's shareholders
entitled to notice of and to vote at the Meeting is the close of business on
May 23, 1994. As of that date the following shares of Cooperative Common Stock
were outstanding:
Shares of Nitrogen Series I Common Stock 10,168
Shares of Nitrogen Series II Common Stock 1,393,856
Shares of Nitrogen Series III Common Stock 2,581,166
Shares of Mixed Series IV Common Stock 94,537
Shares of Mixed Series V Common Stock 2,773
Shares of Potash Series VI Common Stock 37,156
Each holder of Cooperative Common Stock outstanding on the Record Date is
entitled to one vote for each share so held upon each matter properly submitted
to the Meeting.
VOTE REQUIRED.
The presence, in person or by proxy, of the holders of at least a majority
of the shares of each class of Cooperative Common Stock outstanding on the date
of the Meeting and entitled to vote thereat will constitute a quorum for the
transaction of business at the Meeting. The affirmative vote of a majority of
the outstanding shares of each class of the Cooperative Common Stock voting
separately is required to adopt the Plan.
The Cooperative has three classes of common stock, being the Nitrogen
Stock, Mixed Stock and Potash Stock. Series, I, II and III constitute the
Nitrogen class of shares, Series IV and V constitute the Mixed class of shares
and Series VI constitutes the Potash class of shares.
PROXIES.
Shares of Cooperative Common Stock represented by properly executed proxies
will, unless previously revoked, be voted at the Meeting in accordance with the
instructions contained thereon. If no direction is indicated on the proxy, the
shares will be voted in favor of the Plan.
-12-
<PAGE>
Any shareholder may revoke his or her proxy at any time before the proxy is
voted by delivering a duly executed proxy bearing a later date or by giving
written notice of revocation to Rosalyn B. Glascoe, Corporate Secretary, Owen
Cooper Administration Building, Highway 49 East, P.O. Box 388, Yazoo City,
Mississippi 39194-0388. A shareholder who attends the Meeting in person may
also revoke his or her proxy by voting his or her shares at the Meeting.
OTHER MATTERS TO BE CONSIDERED.
It is not anticipated that any other matters will be brought before the
Meeting. If, however, other matters are presented, proxies will be voted in
accordance with the best judgment of the holders of the proxies.
SOLICITATION OF PROXIES.
The Cooperative will bear the entire cost of the solicitation of proxies
for the Meeting. In addition to solicitation by mail, directors, officers and
employees of the Cooperative may, without additional compensation, solicit
proxies personally or by telephone.
The Cooperative has engaged Georgeson & Company, Inc., a firm specializing
in the solicitation of proxies, for assistance in the current solicitation at an
estimated fee of $50,000, plus reimbursement of its out-of-pocket expenses.
THE PLAN OF REORGANIZATION
This section of this Proxy Statement/Prospectus describes certain of the more
important aspects of the Plan. The following description does not purport to be
complete and is qualified in its entirety by reference to the Plan. You are
urged to read the Plan which is set forth in its entirety in Appendix A.
PRINCIPAL PROVISIONS OF THE PLAN.
The fundamental purpose of the Plan is to allow the Cooperative to be
operated as a regular business corporation, without cooperative traits and to
reorganize its business structure in order to maximize its value and the
potential of its operations.
Effective Date.
If approved, the Plan will become effective as of the opening of business
on July 1, 1994 (the "Effective Date"). The date of filing the Articles of
Merger will be on or as soon as practicable after the date of shareholder
adoption of the Plan, and is currently expected to be the same day on which the
Plan is adopted by the shareholders.
-13-
<PAGE>
The New Company.
MCC Sub, Inc. which has been incorporated under the Mississippi Business
Corporation Act is a wholly owned subsidiary of the Cooperative. It was
organized to allow the Cooperative, pursuant to the Plan, to be merged into it.
The Articles of Incorporation and the Bylaws of the New Company are attached as
Appendix B and Appendix C, respectively, hereto. For more information about the
New Company, see "The New Company".
The Plan.
The Plan, as adopted by the Board of Directors and unanimously recommended
to the Cooperative's shareholders for their approval, is attached as Appendix A
hereto. Pursuant to the Plan:
(a) Merger: The Cooperative will be merged into the New Company on the
Effective Date and thereafter will cease to exist. The New Company will be the
surviving corporation. On the Effective Date, as part of the Merger, the name
of the New Company will be changed to "Mississippi Chemical Corporation", and
the New Company's outstanding shares, consisting of 100 shares currently held by
the Cooperative, will be canceled. After the Effective Date, title to all of
the Cooperative's assets will be vested in the New Company, and the New
Company will have all of the liabilities of the Cooperative. Only certain
shareholders of the Cooperative will become shareholders of the New
Company.
(b) Shares of Cooperative Common Stock: On the Effective Date, the shares
of Cooperative Common Stock (see "-- Mechanics of the Exchange Offer" for a
discussion of valuation methodology) pursuant to the Merger will be
automatically converted into shares of New Company Common Stock and the right to
receive cash in the following manner:
(i) Holders of the Nitrogen Shares will receive New Company Common
Stock on the following bases:
(1) Each share of Nitrogen Series I stock will be converted into 24
shares of New Company Common Stock;
(2) Each share of Nitrogen Series II stock will be converted into 8
shares of New Company Common Stock; and
(3) Each share of Nitrogen Series III stock will be converted into
1.6 shares of New Company stock;
(ii) Holders of Mixed Series IV stock and Mixed Series V stock will
receive $15 cash, without interest, for each Mixed Share;
-14-
<PAGE>
(iii) Holders of Potash Series VI stock will receive $50 cash,
without interest, for each Potash Share; and
(iv) The New Company will not issue fractional shares. Pursuant to
the Plan, holders otherwise entitled to receive fractional shares of New
Company Common Stock will receive cash, without interest, based upon a per
share value of $15.
(c) Capital Equity Credits and Allocated Surplus Accounts: In connection
with the Plan, the holders of capital equity credits of the Cooperative (the
"Capital Equity Credits") and allocated surplus accounts of the Cooperative (the
"Allocated Surplus Accounts") are being offered the right to exchange their
Capital Equity Credits and Allocated Surplus Account rights for one share of New
Company Common Stock for each $15 of present value of their Capital Equity
Credits and Allocated Surplus Accounts determined as described under the "The
Exchange Offer: Capital Equity Credits and Allocated Surplus Accounts".
Holders of Capital Equity Credits and Allocated Surplus Accounts who do not
elect to exchange those interests will receive interests in the New Company
similar to those they now hold in the Cooperative. The sole right attributable
to those interests will be the right to be paid the face amount of those
interests in the unlikely event of a liquidation of the New Company. HOLDERS
WHO DO NOT EXCHANGE THEIR CAPITAL EQUITY CREDITS AND ALLOCATED SURPLUS ACCOUNTS
MAY NEVER REALIZE VALUE FOR THESE INTERESTS.
A VOTE IN FAVOR OF THE PLAN ALSO CONSTITUTES AN ELECTION TO PARTICIPATE IN
THE EXCHANGE OFFER.
(d) Offer to Cash Out Small Shareholders: In connection with the Plan,
the New Company will offer its shareholders who would, after implementation of
the Plan (including the exchange of Capital Equity Credits and Allocated Surplus
Accounts), own fewer than 100 shares of New Company Common Stock, the right to
exchange all of their shares of New Company Common Stock for cash at the rate of
$15 per share. A vote in favor of the Plan is not necessarily an election to
participate in or reject this offer.
See "Tax Consequences" for a summary of certain federal and state income
tax effects of the Plan.
REASONS FOR THE PLAN
The Board of Directors of the Cooperative believes that the Plan may
provide the best method for realizing maximum value from the Cooperative's stock
ownership. The Board believes that the Cooperative's stock is substantially
undervalued compared to similar publicly traded companies due to a lack of
liquidity caused primarily by certain restrictions placed on
-15-
<PAGE>
the sale or transfer of the Cooperative's stock. The Cooperative's Bylaws
restrict the sale or transfer of stock to persons engaged in agricultural
production. A prohibition against the payment of dividends also contributes to
the current lack of liquidity.
Historically, the Cooperative's stock has not been acquired for investment
purposes, rather, shareholders have purchased the Cooperative's stock to secure
the preferred right to purchase the Cooperative's fertilizer products and to
receive a patronage refund with respect to such purchases. Due to these
features, the dollar value of the Cooperative's stock in the hands of fertilizer
users has been primarily a function of the prevailing supply/demand relationship
for fertilizer and the Cooperative's net cost of producing and selling its
products. Despite the nature of the Cooperative's stock, the Cooperative was
able to sell stock to raise equity to finance its operations until the late
1970s. Worldwide production expansions in the late 1970s and early 1980s
resulted in an oversupply of fertilizer products. With competitively priced
fertilizer products readily available, persons requiring a supply of fertilizer
were no longer willing to purchase the Cooperative's stock to obtain fertilizer
supplies. As a result, the Cooperative, in order to sell its products, has been
compelled to provide its patrons with product quantities in excess of their
entitlement based on stock ownership. At the same time, former patrons who no
longer require the Cooperative's product have found it difficult to dispose of
their stock at reasonable prices. These factors have materially depressed the
demand for and price of the Cooperative's stock. In recent years, the
Cooperative has introduced programs which provide incentives to current users to
increase their stock ownership; however, these programs have been only
moderately successful in generating demand for the Cooperative's stock. In the
opinion of the Cooperative's Board of Directors, the Cooperative's stock remains
undervalued and it is unlikely that patrons will purchase sufficient stock to
provide sufficient capital to adequately fund future operations. The Board
believes that substantial shareholder value may be created through the
conversion of the Cooperative to a publicly traded entity.
With current patrons reluctant to purchase the Cooperative's stock and with
former patrons limited in their ability to dispose of their stock, the ownership
and customer bases of the Cooperative have diverged. This situation has created
uncertainty as to which patrons will exercise their preferred right to purchase
the Cooperative's products and has interfered with the orderly marketing of the
Cooperative's products. The Board believes that the Plan will provide greater
marketing flexibility and should improve the New Company's ability to be a
responsive and preferred supplier of fertilizer products.
The Plan should provide the New Company with economic and efficient access
to capital markets. As a cooperative, few options for raising capital have been
available. For many years, the Cooperative's sole source of equity capital has
been retained earnings. In a capital-intensive business, this lack of access to
financial markets could place the
-16-
<PAGE>
Cooperative at a significant competitive disadvantage. Once the Plan is
implemented, the New Company will be free of these capital structure constraints
and will be in an enhanced position to fund future projects for modernizing
plants and expanding operations. Finally, as an issuer of transferable
securities, the New Company should have greater flexibility and increased
options in connection with potential acquisitions, partnerships and alliances.
While there can be no assurances that a market for the New Company Common
Stock will develop, management presently intends to apply for quotation on the
NASDAQ System as soon as practicable after the Effective Date.
THE BOARD OF DIRECTORS DEEMS THE PLAN TO BE IN THE BEST INTERESTS OF THE
COOPERATIVE AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY DETERMINED THAT THE PLAN IS
ADVANTAGEOUS TO THE SHAREHOLDERS OF THE COOPERATIVE, HAS UNANIMOUSLY ADOPTED THE
PLAN, AND RECOMMENDS THAT SHAREHOLDERS VOTE TO ADOPT THE PLAN.
THE MERGER OF THE COOPERATIVE INTO THE NEW COMPANY
The Merger will occur on the Effective Date. Upon the Effective Date, the
Cooperative will cease to exist. Title to all of the assets of the Cooperative
will be vested in the New Company and the New Company will have all the
liabilities of the Cooperative. Only certain shareholders of the Cooperative
will become shareholders of the New Company.
Nitrogen Shares.
Holders of Nitrogen Shares will, upon the effectiveness of the Merger,
become shareholders of the New Company with each Nitrogen Share being converted
into shares of New Company Common Stock on the following basis:
(i) Each share of Nitrogen Series I Stock will be converted into 24 shares
of New Company Common Stock.
(ii) Each share of Nitrogen Series II Stock will be converted into 8 shares
of New Company Common Stock.
(iii) Each share of Nitrogen Series III Stock will be converted into 1.6
shares of New Company Common Stock.
The specific exchange ratios for the Cooperative's Nitrogen Series I,
Series II and Series III Common Stock were determined by the Directors of the
Cooperative taking into account the preferred patronage rights of each series to
purchase specific amounts of nitrogen fertilizer products. Currently, a holder
of Nitrogen Common Stock is entitled to purchase one ton of nitrogen
fertilizer product for each .533 shares of Nitrogen Series I Common Stock it
holds, one ton for each 1.6 shares of Nitrogen Series II Common Stock and one
ton for each 8 shares of Nitrogen Series III Common
-17-
<PAGE>
Stock. Consequently, each share of Nitrogen Series I Common Stock
now entitles its holder to patronage purchases of three times the amount of
fertilizer of Nitrogen Series II Common Stock and 15 times the amount of
Nitrogen Series III Common Stock. Historically, these differences in
preferred patronage rights have been the primary determinate of value in
transactions between shareholders involving these shares. The Board of
Directors in considering exchange ratios for the Nitrogen Series I,
Series II and Series III Common Stock gave significant weight to these
transactions.
Mixed Shares.
The Mixed Shares will, pursuant to the Merger, be converted into the right
to receive $15 per share, without interest. The $15 amount is equal to the par
value of the Mixed Shares and represents the maximum amount the holders of Mixed
Shares would be entitled to upon liquidation of the Cooperative.
Potash Shares.
The Board has determined that the Potash Shares will, pursuant to the
Merger, be converted into the right to receive $50 per share, without interest.
The $50 amount is based on the amount paid by the Cooperative for Potash Shares
in recent transactions with shareholders.
Fractional Shares.
The New Company will not issue fractional shares. Pursuant to the Plan,
shareholders who would otherwise be entitled to receive fractional shares of New
Company Common Stock will be paid cash for their fractional shares at the rate
of $15 per share, without interest.
THE EXCHANGE OFFER: CAPITAL EQUITY CREDITS AND ALLOCATED SURPLUS ACCOUNTS
In connection with the Plan, the New Company will offer to exchange New
Company Common Stock for all and any Capital Equity Credits and Allocated
Surplus Accounts.
Description of Capital Equity Credits.
During the period from 1975 through 1991, patronage refunds were paid
partly in Capital Equity Credits. All Capital Equity Credits issued since
fiscal 1981 remain outstanding.
Capital Equity Credits are reflected in an appropriate capital account
maintained in the name of the shareholder to whom credits are issued. Capital
Equity Credits have no fixed maturity date, bear no interest or dividends, have
no voting rights, have no preemptive rights to purchase any stock offered by the
Cooperative and have no preferred patronage rights to purchase products from the
Cooperative. Capital Equity Credits are
-18-
<PAGE>
subordinate to all debts of the Cooperative. Capital Equity Credits are not
transferable by their holder. In the event of the liquidation of the
Cooperative, Capital Equity Credits are redeemed after the payment of all
outstanding indebtedness.
The Board of Directors has the right, but no obligation, to retire or
redeem Capital Equity Credits through the payment of cash at a future date.
Even though the Board of Directors of the Cooperative has expressed an intention
to establish a 10-year revolving plan to redeem Capital Equity Credits, no
Capital Equity Credits have been redeemed during the past two fiscal years.
Description of Allocated Surplus Accounts.
With respect to fiscal years ended June 30, 1992 and 1993, the
Cooperative's Board of Directors set aside, as a reserve, 40% and 50%,
respectively, of the net margins of the Cooperative from business done with
shareholders. This reserve is reflected in Allocated Surplus Accounts which are
maintained in the name of individual shareholders. This reserve was allocated
to individual shareholders in proportion to the margins on business with the
shareholder to total margins on business done with shareholders.
The decision to establish Allocated Surplus Accounts rather than Capital
Equity Credits was based upon the Cooperative's need to increase its permanent
equity capital as the ability to raise permanent equity as a cooperative was
limited. Without this need to increase permanent equity, the Board would have
established Capital Equity Credits instead of Allocated Surplus Accounts. For
purposes of the Exchange Offer, Allocated Surplus Accounts will be treated like
Capital Equity Credits.
In the event of a liquidation of the Cooperative, Allocated Surplus
Accounts are paid after the redemption of all outstanding Capital Equity
Credits.
Mechanics of the Exchange Offer.
The Board of Directors has determined that in connection with the Plan, the
holders of the Capital Equity Credits and Allocated Surplus Accounts will
receive the right to exchange the "present value" of those interests for shares
of New Company Common Stock at the rate of one share of New Company Common Stock
for each $15 present value of the Capital Equity Credits and Allocated Surplus
Accounts.
-19-
<PAGE>
The following table sets forth the Cooperative's valuation of the various
series of Capital Equity Credits and Allocated Surplus Accounts:
<TABLE>
<CAPTION>
Year Assumed Face Amount Present Value Present Value
- ------ Redemption Date -------------- ------------- Factor
---------------- -------------
<S> <C> <C> <C> <C>
1982 1994 $ 654,002 $ 654,002 1.000000
1983 1995 1,610,424 1,491,133 .925926
1984 1996 4,809,315 4,123,212 .857339
1985 1997 3,333,306 2,646,086 .793832
1988 1998 10,617,018 7,803,825 .735030
1989 1999 14,783,253 10,061,234 .680583
1990 2000 8,213,352 5,175,805 .630170
1991 2001 18,331,134 10,696,041 .583490
1992 2002 15,263,214 8,246,240 .540269
1993 2003 13,819,804 6,913,343 .500249
1994 2004 7,500,000(est) 3,473,951 .463193
----------- -----------
TOTAL $98,934,822 $61,284,872
</TABLE>
The Board of Directors of the Cooperative has stated that it presently
intends to set aside a reserve in Allocated Surplus Accounts for the fiscal year
ending June 30, 1994. The $7,500,000 for 1994 represents 40% of the current
estimate of margins from business done with the Cooperative's shareholders.
The method of valuing the Capital Equity Credits and Allocated Surplus
Accounts was determined by the Board in consultation with D. L. Johnson &
Co., an independent financial advisor. The present value of Capital Equity
Credits and Allocated Surplus Accounts is determined by applying to the face
amount a discount factor of 8% from an assumed redemption date to a current
date. The 8% discount factor is based on an estimated borrowing rate for the
Cooperative over the weighted average assumed redemption dates of these
interests. The Allocated Surplus Accounts are treated in the same manner as the
Capital Equity Credits. The $15 per share exchange value was determined in
consultation with the independent financial advisor retained by the
Board. In reaching the conclusion that it would not be unreasonable to assume
that the New Company Common Stock after the Merger would initially trade within
a range of $12 to $18 per share the Board considered a number of factors,
including an analysis of selected comparable publicly traded companies,
evaluations of the Cooperative's historical and projected financial performance
and financial condition and current and expected trends in agriculture and in
the fertilizer industry.
-20-
<PAGE>
The $15 value was set as the midpoint of the $12 to $18 range. The financial
advisor's opinion was not in conflict with the Board's opinion.
IN MAKING A DECISION AS TO WHETHER TO EXCHANGE CAPITAL EQUITY CREDITS AND
ALLOCATED SURPLUS ACCOUNTS FOR SHARES OF NEW COMPANY COMMON STOCK, THE HOLDERS
OF THE CAPITAL EQUITY CREDITS AND ALLOCATED SURPLUS ACCOUNTS SHOULD UNDERSTAND
THAT NO GUARANTEE HAS BEEN MADE AS TO ANY PRICE AT WHICH THE NEW COMPANY COMMON
STOCK MAY TRADE AFTER THE MERGER. THE BOARD HAS DETERMINED TO MAKE THE EXCHANGE
OFFER BECAUSE, OTHERWISE, THE HOLDERS OF THE CAPITAL EQUITY CREDITS AND
ALLOCATED SURPLUS ACCOUNTS WOULD HAVE NO WAY TO REALIZE ANY CURRENT VALUE FOR
THOSE RIGHTS, THEIR ONLY RIGHT BEING TO RECEIVE THE FACE AMOUNT OF THE INTERESTS
UPON LIQUIDATION OF THE NEW COMPANY.
THE OFFER TO CASH OUT SHAREHOLDERS OF THE NEW COMPANY WHO OWN FEWER THAN 100
SHARES.
In connection with the Plan, the New Company will offer its shareholders
who own fewer than 100 shares of New Company Common Stock the right to exchange
all, but not less than all, of their New Company shares at the rate of $15 per
share.
1994 Allocated Surplus Accounts.
It is presently intended that, subsequent to any establishment of Allocated
Surplus Accounts for fiscal 1994, New Company shareholders who own fewer than
100 shares will be offered an additional opportunity at that time to exchange
their shares for cash.
DELIVERY OF NEW COMPANY CERTIFICATES
As promptly as practicable after the Effective Date, the New Company will
mail a letter to each holder of record of Cooperative Common Stock and to each
holder of Capital Equity Credits and Allocated Surplus Accounts as of the
Effective Date notifying them of the effectiveness of the Plan and including
directions on how to receive delivery of New Company Common Stock certificates
or cash (the "Letter of Transmittal").
The holders of Cooperative Common Stock will be asked to return the Letter
of Transmittal together with their certificates of Cooperative Common Stock.
Upon receipt thereof, the New Company will mail to the shareholders (i)
certificates representing all the shares of New Company Common Stock owned by
holders of Nitrogen Shares, and by holders of Capital Equity Credits and
Allocated Surplus Accounts which elect to participate in the Exchange Offer; or
(ii) cash in payment of the Mixed Shares, the Potash Shares, fractional shares
of New Company Common Stock or (iii) cash in payment of New Company Common Stock
to New Company shareholders who after the Plan own less than 100 shares of New
Company Common Stock and who pursuant to the Plan elect to exchange those shares
for cash.
-21-
<PAGE>
The Plan provides that after the Effective Date and until Cooperative
Common Stock certificates are exchanged, no dividend payable with respect to New
Company Common Stock will be paid to the holders of certificates representing
shares of Cooperative Common Stock. Upon exchange of the share certificates,
however, there will be paid the amount (without interest and less the amount of
taxes, if any, which may have been imposed or paid thereon) of all dividends, if
any, which have been declared and paid after the Effective Date of the Merger
with respect to the shares of New Company Common Stock issuable under the Plan
in respect of the shares of Cooperative Common Stock represented by the
surrendered certificates.
After the Effective Date, there will be no further transfer of certificates
theretofore representing shares of Cooperative Common Stock and, if any
certificates are presented for transfer, they will be cancelled and certificates
for New Company Common Stock will be issued for those Cooperative Common
Stock Certificates.
CONSEQUENCES OF THE PLAN TO COOPERATIVE SHAREHOLDERS
The primary purpose of the Cooperative is to provide fertilizer products to
its shareholders pursuant to their preferred patronage rights and to pay such
shareholders patronage refunds to the extent of any excess of the average
purchase price over the cost of such products. Following the Merger,
shareholders will no longer have preferred patronage rights and will no longer
receive patronage refunds with respect to purchases of fertilizer products from
the New Company. In addition there will be other important differences in the
rights of shareholders and in the nature of their stock. In the aggregate these
changes, which are described below, represent a fundamental change in the
shareholders' investment.
Elimination of Preferred Patronage Rights.
The ownership of stock in the Cooperative gives the shareholder the
preferred right to purchase the Cooperative's products in accordance with an
allocation formula which takes into consideration the number of shares and the
type of stock owned. Periodic shortages of fertilizer were a primary reason for
originally forming the Cooperative. During periods of shortage, the preferred
patronage rights were of material importance to shareholders. As a result of
worldwide capacity expansions, fertilizer supplies have been more than adequate
to meet demand since the late 1970s. As a result, preferred patronage rights
have lost their historical significance and are not as material to the
operations of shareholders as during earlier periods of shortage. Following the
Merger, shareholders of the New Company will no longer have a preferred right to
purchase the New Company's products. Notwithstanding this change, the New
Company anticipates that its customer base will be substantially similar to the
customer base of the Cooperative. The New Company also expects to be able to
meet the product needs of Cooperative shareholders to the extent they are
presently purchasing from the Cooperative.
-22-
<PAGE>
Elimination of Patronage Refunds.
Shareholders of the Cooperative are entitled to receive a patronage refund
from the Cooperative on products purchased from the Cooperative to the extent of
any excess of the selling price of the product over the cost of manufacturing,
distributing and selling the product. Separate patronage refunds are made for
the various products provided by the Cooperative. Patronage refunds may be
paid in cash, common stock, certificates of indebtedness, capital equity credits
or any combination thereof. After the Merger, shareholders of the New Company
will not be paid patronage refunds on their purchases. Cash patronage refunds
for the last three fiscal years have been $13,820,000 for 1993, $22,895,000 for
1992 and $27,672,000 for 1991. Although it is expected that the New Company
will pay dividends to its shareholders, cash distributions to shareholders may
decrease after the Merger due to several factors including the New Company's
inability to deduct distributions to shareholders for tax purposes and the
increased capital requirements of the New Company to finance its operations.
There can be no assurance that the New Company will pay dividends at particular
times or in particular amounts
Mississippi Potash and Mississippi Phosphates, two of the Cooperative's
subsidiaries, are not presently operated on a cooperative basis. Since no
dividends are payable on any class of Cooperative Common Stock, the earnings, if
any of Mississippi Phosphates and Mississippi Potash are not available for
distribution to the Cooperative shareholders. Following the Merger, the
earnings, if any, of Mississippi Phosphates and Mississippi Potash could be
distributed to the New Company and become available to its shareholders
as dividends.
Mixed and Potash Shares.
The Cooperative discontinued the manufacture of mixed fertilizer products
in 1988 and has not provided such products to its shareholders on a patronage
basis since that time. Sales of potash products to shareholders pursuant to
their preferred patronage rights have not been material for the last five fiscal
years. As a result, the Board of Directors has determined that the Mixed and
Potash Shares which have been essentially idle should be converted into the
right to receive cash in accordance with the terms of the Merger.
Rights on Liquidation.
The Articles of Incorporation of the Cooperative provide that in the event
of the liquidation of the Cooperative there shall first be paid the debts of the
Cooperative and any assets remaining shall be distributed in the following
order: payment of certificates of indebtedness issued as patronage refunds;
redemption of Capital Equity Credits; payment of Allocated Surplus Accounts;
payment of outstanding common stock of all classes at par; and any assets
remaining will be distributed to the then holders of stock in proportion to
their patronage refunds received during
-23-
<PAGE>
the preceding ten years. The Articles of Incorporation of the New Company
provide that upon liquidation or dissolution, after providing for all
liabilities and any liquidation rights of persons who do not elect to exchange
Capital Equity Credits and Allocated Surplus Accounts for New Company Common
Stock, the remaining assets will be distributed to the holders of New Company
Common Stock based on stock ownership.
No Transfer Restrictions.
The Cooperative Common Stock lacks liquidity due to sale and transfer
restrictions, limited marketability and a prohibition against the payment of
dividends. After implementation of the Plan, these restrictions will be
eliminated and the New Company stock will be freely transferable.
TAX CONSEQUENCES OF THE PLAN
The following is a summary of material federal income tax considerations
for shareholders involved in the implementation of the Plan. This summary is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), the rules
and regulations promulgated thereunder, published rulings and court decisions as
in effect on the date of this Proxy Statement/Prospectus. No assurance can be
given that legislative or administrative changes or court decisions may not be
forthcoming which would significantly modify the summary below. Any changes may
or may not be retroactive with respect to transactions prior to the date of such
changes.
This summary deals only with material federal income tax considerations of
potential significance to most shareholders. It does not deal with all aspects
of federal income taxation that may be relevant to particular shareholders,
especially to those taxpayers subject to special treatment under federal income
tax laws. Nor does it deal with state or local tax considerations. In view of
the complexities of the federal, state and local tax considerations involved in
the implementation of the Plan, shareholders are urged to consult their tax
advisors with respect to the tax consequences of their own tax situation.
McDermott, Will & Emery is acting as special tax counsel to the Cooperative
in connection with the Plan of Reorganization.
The Merger.
It is intended that the proposed Merger of the Cooperative into the New
Company will constitute a reorganization within the meaning of Section 368(a) of
the Code. The consequences of this characterization are as follows:
(1) Neither the Cooperative nor the New Company will recognize gain or
loss upon consummation of the Merger. The basis of the assets of the
Cooperative in the hands of the New Company will be the same as the basis of
those assets in the hands of the Cooperative immediately prior to the
-24-
<PAGE>
Merger, and the holding period of the assets of the New Company will include the
period during which the assets were held by the Cooperative.
(2) A shareholder of the Cooperative exchanging Cooperative Common Stock
for New Company Common Stock will not recognize gain or loss on the exchange if
the shareholder receives no cash in the exchange. If the shareholder receives
cash in the exchange, the shareholder will recognize gain, if any, realized on
the exchange, but only to the extent of cash received. For this purpose the
amount of gain realized by a shareholder on the exchange will equal the
difference between (x) the fair market value of New Company Common Stock plus
the amount of cash received in the exchange (other than cash received in lieu of
a fractional share) and (y) the basis of the shareholder in Cooperative Common
Stock surrendered in the exchange.
(3) If, for a shareholder receiving cash, the exchange has the effect of
the distribution of a dividend, then the amount of gain recognized will be
treated as a dividend. If, for a shareholder receiving cash, the exchange does
not have the effect of the distribution of a dividend, then the gain recognized
will be treated as a gain from the sale or exchange of property. For most
shareholders, gain treated as gain from the sale or exchange of property will be
treated as capital gain.
(4) The determination of whether the exchange has the effect of the
distribution of a dividend is made on a shareholder basis employing rules
similar to those set forth under Section 302(b) of the Code for determining
whether a redemption of shares of stock has the effect of a dividend. These
rules are applied comparing what the shareholder's stock holdings in the New
Company would hypothetically have been in the absence of the distribution of
cash with what the stock holdings are with the distribution of cash, and
determining whether the difference is a meaningful reduction of the
shareholder's interest sufficient to justify exchange treatment.
In general, shareholders falling within the following categories should be
accorded exchange treatment for cash received: (i) shareholders who will not
own, directly or by attribution, any stock of the New Company after the Merger
and Exchange Offer; (ii) shareholders whose actual ownership percentage of New
Company Common Stock after the Merger and Exchange Offer is less than 80% of
what their hypothetical stock ownership percentage would have been if additional
stock had been distributed rather than cash; or (iii) shareholders whose actual
ownership percentage of New Company Common Stock after the Merger and Exchange
Offer is de minimis, whose hypothetical ownership of the New Company's Common
Stock would have also been de minimis had they received additional stock rather
than cash, and whose actual ownership percentage is in fact less than their
hypothetical stock ownership percentage. A shareholder not falling within one
of these categories may nevertheless be accorded exchange treatment depending
upon its individual facts and circumstances.
(5) For a shareholder who does not qualify for exchange treatment, the
cash received will be treated as dividend income under Section 301(c)
-25-
<PAGE>
of the Code. A corporate shareholder and a cooperative shareholder which is
treated as an exempt cooperative under Section 521 of the Code will generally be
entitled to a 70 percent dividends-received deduction under Section 243(c) of
the Code. No similar deduction is available to an individual shareholder, and
the Internal Revenue Service has taken the position that Section 277 of the Code
disallows the dividends-received deduction to nonexempt cooperative
shareholders. The applicability of Section 277 of the Code to nonexempt
cooperatives is currently in dispute.
(6) Shareholders receiving cash in lieu of fractional shares of New
Company Common Stock will be treated as if the fractional shares had been
distributed as part of the exchange and then redeemed by the New Company since
such payments do not represent separately bargained-for consideration, but are
merely a mechanical rounding off of the fraction in the exchange. Such cash
payments should be treated as having been received as a distribution in full
payment in exchange for the fractional shares deemed redeemed. Gain or loss
will be recognized measured by the difference between the redemption price and
the adjusted basis of the fractional share deemed redeemed, and, for most
shareholders the cash received for fractional shares will be treated as capital
gain or loss. All shareholders are advised to consult their own tax advisors
for advice with respect to their particular circumstances .
(7) The basis of the New Company Common Stock to be received in the Merger
(including fractional shares deemed received and redeemed) by a shareholder will
be the same as the basis of the Cooperative Common Stock surrendered in the
Merger, reduced by the amount of cash received (excluding cash received for
fractional share interests) and increased by the amount of gain, if any,
recognized on the receipt of cash (other than gain recognized with respect to
fractional shares).
(8) The holding period of the New Company Common Stock to be received by a
shareholder in the Merger will include the holding period of the Cooperative
Common Stock surrendered in the Merger.
The Exchange Offer.
It is intended that the proposed offer to exchange Capital Equity Credits
and Allocated Surplus Accounts for New Company Common Stock will constitute a
reorganization within the meaning of Section 368(a) of the Code. The
consequences of this characterization are as follows:
(1) A holder exchanging Capital Equity Credits for New Company Common
Stock will recognize no gain or loss on the exchange. If the holder also
receives cash in the exchange in lieu of a fractional share, the holder will be
taxed upon the cash received as an amount received in redemption of a
nonqualified written notice of allocation. Such amount would be includable in
income pursuant to Section 1385(c) of the Code.
-26-
<PAGE>
The Capital Equity Credits were distributed by the Cooperative in prior
years as part of the Cooperative's patronage refunds. The Capital Equity
Credits are nonqualified written notices of allocation as that term is defined
in Section 1388(d) of the Code. As a result, holders generally have no basis in
such notices, and, upon redemption, sale or other disposition, must report gain
realized (up to the stated dollar amount of the Capital Equity Credits) as
ordinary income. New Company Common Stock received in exchange for Capital
Equity Credits will continue to have these attributes.
(2) A holder exchanging its interest in Allocated Surplus Accounts for New
Company Common Stock will recognize no gain or loss on the exchange. If the
holder also receives cash in the exchange in lieu of a fractional share, the
holder will be taxed on the amount received in a manner similar to the treatment
of a shareholder receiving cash in the Merger. Since holders have no basis in
their interests in Allocated Surplus Accounts, they will have no basis in the
shares of New Company Common Stock received in exchange for such interests.
The Offer to Cash Out Holders of Fewer than 100 Shares.
A shareholder owning fewer than 100 shares of New Company Common Stock who
elects to exchange those shares for cash will recognize gain on the exchange
equal to the difference between the amount of cash received and the
shareholder's basis in the shares surrendered (determined as described above).
Assuming the shareholder exchanges all of the shares of New Company Common Stock
it owns directly or indirectly, the gain realized should generally be treated as
capital gain except to the extent that it is attributable to New Company Common
Stock received in exchange for Capital Equity Credits (see discussion above).
AMENDMENT OR ABANDONMENT OF THE PLAN
The Cooperative's Board of Directors may modify or amend the Plan, without
shareholder approval, if it determines that such an action would be in the best
interests of the Cooperative and its shareholders. In the event that a
modification or amendment appears necessary and will, in the judgment of the
Board, materially and adversely affect the interest of the shareholders, the
amendment or modification will be submitted to the shareholders for adoption.
The Board of Directors of the Cooperative may abandon the Plan, without
shareholder approval, at any time prior to its effectiveness (either before or
after shareholder adoption) if it determines that abandonment would be in the
best interest of the Cooperative or its shareholders. The Board has indicated
that, if dissenters to the Plan who comply with the Mississippi Business
Corporation Act constitute more than 30% of the total vote, it may decide to
abandon the Plan.
If the Plan is not implemented because it does not receive the requisite
shareholder vote, or because the Board of Directors of the
-27-
<PAGE>
Cooperative determines for some other reason that it is advisable to abandon the
Plan, it is contemplated that the business of the Cooperative will continue in
the present manner.
MARKET FOR THE COOPERATIVE COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Market.
There is no established trading market for the Cooperative Common Stock,
and no established trading market is expected to develop prior to the Effective
Date. After the Effective Date, the New Company intends to apply for quotation
of New Company Common Stock on the NASDAQ System. There can be no assurance
that this quotation will occur or that a market for the New Company Common Stock
will develop.
Transfer Restrictions.
In order to implement the purpose of the Cooperative to provide
manufactured products to shareholders who are users of the products,
restrictions have been placed on the transfer of all classes of Cooperative
Common Stock. Under the restrictions, no sale or transfer of any class of
Cooperative Common Stock may be made, by operation of law or otherwise, by any
shareholder to any person unless that person is (a) primarily engaged in the
production of agricultural products or is an association of such producers, or
(b) the name of the purchaser or transferee is submitted in writing to the Board
of Directors of the Cooperative and approved by it. The Board of Directors of
the Cooperative has the right to permit Cooperative Common Stock to be purchased
by or transferred to persons who are not bona fide producers of agricultural
products or associations thereof, subject to the limitations of Subchapter T of
the Code. No such restrictions will apply to the New Company Common Stock.
DISSENTERS' RIGHTS
The following is a summary of Article 13 of the Mississippi Business
Corporation Act ("Article 13") and the procedures for dissenting from the Plan
and demanding dissenters' rights. This summary is qualified in its entirety by
reference to Article 13, which is reprinted in full as Appendix D to this Proxy
Statement/Prospectus. Appendix D should be reviewed carefully by any
shareholder who wishes to exercise statutory dissenters' rights or who wishes to
preserve the right to do so, 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.
-28-
<PAGE>
Procedure for Exercise of Dissenters' Rights.
Shareholders who wish to exercise dissenters' rights:
(i) must deliver to the Cooperative, before the vote is taken, written
notice of their intent to demand payment for their shares if the Plan is
adopted; and
(ii) must not vote their shares in favor of the Plan.
Shareholders who do not satisfy these requirements are not entitled to payment
for shares under Article 13.
Shareholders electing to exercise appraisal rights under Article 13 must
not vote FOR adoption of the Plan, but a vote against adoption of the Plan is
not required in order for a shareholder to exercise dissenters' rights. If a
shareholder returns a signed proxy but does not specify a vote against adoption
of the Plan or a direction to abstain, the proxy will be voted for adoption of
the Plan, which will have the effect of waiving that shareholder's dissenters'
rights.
If the Plan is approved, the New Company 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 ten days after the Effective
Date.
Upon receipt of the dissenters' notice, dissenters must make a payment
demand by the date set by the Cooperative 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 Cooperative Common Stock owned, and that the shareholder is
demanding payment of his or her shares. The shareholder must also
certify that the shareholder had beneficial ownership of the shares before the
date set forth in the notice, and deposit his or her share certificates in
accordance with the terms of the 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 Plan is approved, or upon receipt of a payment demand, the
New Company shall pay shareholders who complied with Article 13 the amount the
New Company estimates to be the fair value of their shares, plus accrued
interest.
Procedure if the Dissenters are Dissatisfied with the Payment Offer.
-29-
<PAGE>
Dissenters may reject the New Company'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 New Company 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 New Company of their demand in writing within 30 days after the New
Company 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 New Company's offer and
demanded payment of the fair value of the shares and interest due as determined
through a judiciary appraisal, the New Company shall 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, of legal counsel and of experts for the
respective parties. The court shall assess the costs against the New Company,
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.
THE ABOVE IS MERELY A SUMMARY OF ARTICLE 13 OF THE MISSISSIPPI BUSINESS
CORPORATION ACT. THIS SUMMARY IS QUALIFIED BY REFERENCE TO ARTICLE 13, WHICH IS
COPIED IN ITS ENTIRETY AS APPENDIX D TO THIS PROXY STATEMENT/PROSPECTUS.
SHAREHOLDERS DESIRING TO EXERCISE DISSENTERS' RIGHTS SHOULD REFER TO THE STATUTE
AND SHOULD CONSULT COUNSEL PRIOR TO TAKING ANY ACTION, SINCE FAILURE TO COMPLY
STRICTLY WITH THE PROVISIONS OF ARTICLE 13 MAY DEFEAT THEIR DISSENTERS' RIGHTS.
-30-
<PAGE>
CAPITALIZATION
The capitalization of the Cooperative at March 31, 1994 and the pro forma
capitalization of the Cooperative at such date, adjusted to give effect to the
Plan, on the basis described in the Notes to Pro Forma Financial Statements, are
as follows:
MISSISSIPPI CHEMICAL CORPORATION
HISTORICAL AND PRO FORMA CAPITALIZATION
AS OF MARCH 31, 1994
<TABLE>
<CAPTION>
(Dollars In Thousands, except share data)
- ------------------------------------------------------------
NSI CONVERSION
PRO FORMA PRO FORMA PRO
HISTORICAL ADJUSTMENTS SUBTOTAL ADJUSTMENTS FORMA
---------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
LONG-TERM DEBT (EXCLUDING CURRENT PORTION DUE)
- ------------------------------------------------------------
EXISTING LONG-TERM DEBT $ 70,679 (21,729)(h) $ 48,950 $ - $ 48,950
-------- -------- -------- -------- ---------
TOTAL DEBT 70,679 (21,729) 48,950 - 48,950
-------- -------- -------- -------- ---------
SHAREHOLDERS' EQUITY
- ------------------------------------------------------------
COMMON STOCK:
NITROGEN SERIES I (50,000 authorized and 10,168
outstanding) 306 - 306 (306)(a) -
NITROGEN SERIES II (2,500,000 authorized
and 1,393,856 outstanding) 20,908 - 20,908 (20,908)(a) -
NITROGEN SERIES III (2,750,000 authorized and
2,581,166 outstanding) 5,161 - 5,161 (5,161)(a) -
MIXED SERIES IV (1,500,000 authorized and
94,537 outstanding) 1,418 - 1,418 (1,418)(b) -
MIXED SERIES V (1,000,000 authorized and
2,773 outstanding) 42 - 42 (42)(b) -
POTASH SERIES VI (150,000 authorized and
13,155 outstanding) 197 - 197 (197)(g) -
-------- -------- -------- -------- ---------
28,032 - 28,032 (28,032) -
-------- -------- -------- -------- ---------
NEW COMPANY COMMON STOCK - - - 155 (a) 155
- - - 28 (c) 28
- - - 12 (d) 12
- - - (3)(f) (3)
-------- -------- -------- -------- ---------
TOTAL NEW COMPANY COMMON STOCK - - - 192 192
-------- -------- -------- -------- ---------
TOTAL COMMON STOCK 28,032 - 28,032 (27,840) 192
ADDITIONAL PAID-IN CAPITAL 66,008 - 66,008 26,220 (a) 92,228
- - - (461)(g) (461)
- - - 42,623 (c) 42,623
</TABLE>
-31-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- - - (4,353)(f) (4,353)
- - - (12)(d) (12)
-------- -------- -------- -------- ---------
TOTAL ADDITIONAL PAID-IN CAPITAL 66,008 - 66,008 64,017 130,025
CAPITAL EQUITY CREDITS 62,352 - 62,352 (62,352)(c) -
RETAINED EARNINGS (DEFICIT) (34,844) 38,680 (h) 3,836 (2,825)(e) 1,011
- (13,829)(i) (13,829) 19,701 (c) 5,872
- (12,000)(j) (12,000) - (12,000)
- (3,500)(k) (3,500) - (3,500)
- (191)(m) (191) - (191)
-------- -------- -------- -------- ---------
TOTAL RETAINED EARNINGS (DEFICIT) (34,844) 9,160 (25,684) 16,876 (8,808)
-------- -------- -------- -------- ---------
TOTAL SHAREHOLDERS' EQUITY 121,548 9,160 130,708 (9,299) 121,409
-------- -------- -------- -------- ---------
TOTAL CAPITALIZATION $192,227 $(12,569) $179,658 $ (9,299) $ 170,359
======== ======== ======== ======== =========
</TABLE>
-32-
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to the Plan
and reflect the intention to dispose of a majority of the Cooperative's
interest in its wholly owned subsidiary, Newsprint South, Inc.
The pro forma financial statements should be read in conjunction with the
Notes to Pro Forma Financial Statements and the Cooperative's consolidated
financial statements and related notes appearing elsewhere in this Proxy
Statement/Prospectus.
MISSISSIPPI CHEMICAL CORPORATION
PRO FORMA BALANCE SHEET
MARCH 31, 1994
(Dollars In Thousands, except share data)
<TABLE>
<CAPTION>
NSI CONVERSION
PRO FORMA PRO FORMA PRO
ASSETS: HISTORICAL ADJUSTMENTS SUBTOTAL ADJUSTMENTS FORMA
- ------- ---------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 4,851 $ (880) (h) $ 3,971 $ - $ 3,971
ACCOUNTS AND NOTES 44,950 (12,161) (h) 32,789 - 32,789
RECEIVABLE
INVENTORIES 46,975 (7,307) (h) 39,668 - 39,668
DEFERRED INCOME TAX 6,353 (125) (h) 6,228 - 6,228
BENEFIT
PREPAID EXPENSES AND
OTHER CURRENT ASSETS 4,046 (88) (h) 3,958 - 3,958
--------- --------- -------- ---------- -------
TOTAL CURRENT ASSETS 107,175 (20,561) 86,614 - 86,614
INVESTMENTS AND OTHER
ASSETS:
NATIONAL BANK FOR 8,887 (4,246) (h) 4,641 - 4,641
COOPERATIVES
- 4,000 (l) 4,000 - 4,000
--------- --------- -------- ---------- -------
TOTAL NATIONAL
BANK FOR COOPERATIVES 8,887 (246) 8,641 - 8,641
OTHER 10,463 12,980 (h) 23,443 - 23,443
- (13,829) (i) (13,829) - (13,829)
--------- --------- -------- ---------- -------
TOTAL OTHER 10,463 (849) 9,614 - 9,614
--------- --------- -------- ---------- -------
TOTAL INVESTMENTS AND
OTHER ASSETS 19,350 (1,095) 18,255 - 18,255
DEFERRED INCOME TAX BENEFIT 11,365 (21,390) (h) (10,025) - (10,025)
- 10,025 (h) 10,025 - 10,025
--------- --------- -------- ---------- -------
TOTAL DEFERRED INCOME TAX
BENEFIT 11,365 (11,365) - - -
PROPERTIES HELD FOR SALE 66,928 - 66,928 - 66,928
</TABLE>
-33-
<PAGE>
<TABLE>
<CAPTION>
NSI CONVERSION
PRO FORMA PRO FORMA PRO
HISTORICAL ADJUSTMENTS SUBTOTAL ADJUSTMENTS FORMA
----------------- ------------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
PROPERTY, PLANT AND
EQUIPMENT, AT COST,
LESS ACCUMULATED
DEPRECIATION, DEPLETION 125,132 (9,236) (h) 115,896 - 115,896
AND AMORTIZATION ----------------- ------------------- ----------------- -------------- -----------------
TOTAL ASSETS $ 329,950 $ (42,257) $ 287,693 $ - $ 287,693
================= =================== ================= ============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
LONG-TERM DEBT DUE WITHIN
ONE YEAR $ 4,738 $ (440) (h) $ 4,298 $ - $ 4,298
NOTES PAYABLE 14,655 (4,655) (h) 10,000 - 10,000
ACCOUNTS PAYABLE 24,881 (5,199) (h) 19,682 - 19,682
ACCRUED INTEREST 1,515 - 1,515 - 1,515
INCOME TAX PAYABLE 2,448 - 2,448 - 2,448
ACCRUED LIABILITIES 23,402 (16,791) (h) 6,611 1,460 (b) 8,071
- 12,000 (j) 12,000 4,356 (f) 16,356
- 3,500 (k) 3,500 658 (g) 4,158
- 4,000 (l) 4,000 - 4,000
- 191 (m) 191 - 191
----------------- ------------------- ----------------- -------------- -----------------
TOTAL ACCRUED
LIABILITIES 23,402 2,900 26,302 6,474 32,776
DIVIDENDS PAYABLE 7,001 - 7,001 - 7,001
----------------- ------------------- ----------------- -------------- -----------------
TOTAL CURRENT
LIABILITIES 78,640 (7,394) 71,246 6,474 77,720
LONG-TERM DEBT 70,679 (21,729) (h) 48,950 - 48,950
OTHER LONG-TERM LIABILITIES 52,219 (25,455) (h) 26,764 - 26,764
DEFERRED INCOME TAX PAYABLE - 10,025 (h) 10,025 2,825 (e) 12,850
DEFERRED GAIN ON SALE OF
NEWSPRINT MILL 6,864 (6,864) (h) - - -
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
NSI CONVERSION
PRO FORMA PRO FORMA PRO
HISTORICAL ADJUSTMENTS SUBTOTAL ADJUSTMENTS FORMA
---------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS EQUITY:
COMMON STOCK:
NITROGEN SERIES
(SERIES I,
II & III) 26,375 - 26,375 (26,375) (a) -
MIXED SERIES (SERIES
IV & V) 1,460 - 1,460 (1,460) (b) -
POTASH SERIES (SERIES
VI) 197 - 197 (197) (g) -
NEW COMPANY
COMMON
STOCK - - - 155 (a) 155
- - - 28 (c) 28
- - - 12 (d) 12
- - - (3) (f) (3)
-------- ----------- ------- --------- --------
TOTAL NEW COMPANY
COMMON STOCK - - - 192 192
-------- ----------- ------- --------- --------
TOTAL COMMON STOCK 28,032 - 28,032 (27,840) 192
ADDITIONAL PAID-IN CAPITAL 66,008 - 66,008 26,220 (a) 92,228
- - - (461) (g) (461)
- - - 42,623 (c) 42,623
- - - (4,353) (f) (4,353)
- - - (12) (d) (12)
-------- ----------- ------- --------- --------
TOTAL ADDITIONAL PAID-IN
CAPITAL 66,008 - 66,008 64,017 130,025
CAPITAL EQUITY CREDITS 62,352 - 62,352 (62,352) (c) -
RETAINED DEFICIT SINCE
JUNE 30, 1988 (34,844) 38,680 (h) 3,836 (2,825) (e) 1,011
- (13,829) (i) (13,829) 19,701 (c) 5,872
- (12,000) (j) (12,000) - (12,000)
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
NSI CONVERSION
PRO FORMA PRO FORMA PRO
HISTORICAL ADJUSTMENTS SUBTOTAL ADJUSTMENTS FORMA
---------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
- (3,500) (k) (3,500) - (3,500)
- (191) (m) (191) - (191)
---------- ----------- -------- ----------- ---------
TOTAL RETAINED DEFICIT
SINCE JUNE 30, 1988 (34,844) 9,160 (25,684) 16,876 (8,808)
---------- ----------- -------- ----------- ---------
TOTAL SHAREHOLDERS'
EQUITY 121,548 9,160 130,708 (9,299) 121,409
---------- ----------- -------- ----------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $329,950 $(42,257) $287,693 $ - $287,693
========== =========== ======== =========== =========
</TABLE>
Note: Historical numbers are as reported to the SEC on Form 10-Q as of
3/31/94.
-36-
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI CHEMICAL CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1994
(Dollars In Thousands, except share data)
- -----------------------------------------
NSI CONVERSION
PRO FORMA PRO FORMA PRO
REVENUES: HISTORICAL ADJUSTMENTS SUBTOTAL ADJUSTMENTS FORMA
---------- ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
NET SALES $ 280,956 $ (70,473) (h) $210,483 $ - $ 210,483
OTHER 266 (8) (h) 258 - 258
---------- ----------- -------- ----------- ----------
TOTAL REVENUES 281,222 (70,481) 210,741 - 210,741
COSTS AND EXPENSES:
COST OF PRODUCTS SOLD 238,014 (84,860) (h) 153,154 - 153,154
PROVISION FOR CLOSURE OF
GYPSUM DISPOSAL AREA 5,922 - 5,922 - 5,922
SELLING, GENERAL AND
ADMINISTRATIVE 39,668 (6,083) (h) 33,585 - 33,585
INTEREST, NET 4,328 (1,245) (h) 3,083 - 3,083
INTEREST CAPITALIZED - - - - -
---------- ----------- -------- ----------- ----------
TOTAL COSTS AND
EXPENSES 287,932 (92,188) 195,744 - 195,744
---------- ----------- -------- ----------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE (6,710) 21,707 (h) 14,997 - 14,997
INCOME TAXES (CREDIT) (5,015) 8,086 (h) 3,071 2,825(e) 5,896
---------- ----------- -------- ----------- ----------
INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE $ (1,695) $ 13,621 $ 11,926 $ (2,825) $ 9,101
========== =========== ======== =========== ==========
</TABLE>
-37-
<PAGE>
<TABLE>
<CAPTION>
NSI CONVERSION
PRO FORMA PRO FORMA PRO
HISTORICAL ADJUSTMENTS SUBTOTAL ADJUSTMENTS FORMA
---------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
EARNINGS PER SHARE AND
- ----------------------
COMMON STOCK EQUIVALENTS:
- ------------------------
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ 0.47
============
EQUIVALENT NUMBER OF SHARES 19,320,012
============
</TABLE>
Note: Historical numbers are as reported to the SEC on Form 10-Q as of
3/31/94.
-38-
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1993
<TABLE>
<CAPTION>
(Dollars In Thousands, except share data)
NSI CONVERSION
PRO FORMA PRO FORMA PRO
HISTORICAL ADJUSTMENTS SUBTOTAL ADJUSTMENTS FORMA
---------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES:
NET SALES $386,418 $ (97,293)(h) $289,125 $ - $ 289,125
OTHER 592 - 592 - 592
-------- --------- -------- ------- ----------
TOTAL REVENUES 387,010 (97,293) 289,717 - 289,717
COSTS AND EXPENSES:
COST OF PRODUCTS SOLD 323,920 (110,380)(h) 213,540 - 213,540
SELLING, GENERAL AND
ADMINISTRATIVE 54,648 (8,418)(h) 46,230 - 46,230
INTEREST, NET 5,537 (941)(h) 4,596 - 4,596
INTEREST CAPITALIZED (1,027) - (1,027) - (1,027)
-------- --------- -------- ------- ----------
TOTAL COSTS AND
EXPENSES 383,078 (119,739) 263,339 - 263,339
-------- --------- -------- ------- ----------
INCOME BEFORE INCOME TAXES 3,932 22,446 26,378 - 26,378
INCOME TAXES (CREDIT) (858) 4,555 (h) 3,697 7,256 (e) 10,953
-------- --------- -------- ------- ----------
NET INCOME $ 4,790 $ 17,891 $ 22,681 $(7,256) $ 15,425
======== ========= ======== ======= ==========
EARNINGS PER SHARE AND
COMMON STOCK EQUIVALENTS:
NET INCOME $ 0.81
==========
EQUIVALENT NUMBER OF SHARES 19,035,276
==========
</TABLE>
Note: Historical numbers are as reported to the SEC on Form 10-K as of 6/30/93.
-39-
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
MARCH 31, 1994 and JUNE 30, 1993
(1) SUMMARY OF GENERAL ASSUMPTIONS AND ACCOUNTING POLICIES
The pro forma financial statements have been prepared on the assumption that
the Plan has been approved by the shareholders. The objective of the pro forma
financial statements is to show how the historical financial statements of the
Cooperative would have been affected had the Plan already been consummated.
Adjustments have been made to reflect the merger into the New Company and the
exchange of Capital Equity Credits and Allocated Surplus Accounts and to reflect
the other assumptions described in the ensuing notes to pro forma financial
statements.
The significant accounting policies followed by the Cooperative have been
used in the preparation of the New Company's pro forma financial statements.
These policies together with additional information are included in the Notes to
Consolidated Financial Statements in the Cooperative's 1993 Annual Report (see
the Index to Financial Statements on F-1) and should be read in conjunction with
the accompanying pro forma financial statements.
(2) BALANCE SHEET ASSUMPTIONS
The Pro Forma Condensed Balance Sheets have been prepared based on the
following assumptions:
(a) Reflects the conversion of the outstanding shares of Nitrogen Series I,
Nitrogen Series II and Nitrogen Series III Common Stock into New Company
Common Stock.
(b) Reflects the conversion of the outstanding shares of Mixed Series IV and
Mixed Series V Common Stock into the right to receive $15 per share, which
is the par value of those shares.
(c) Reflects the conversion of all Capital Equity Credits into New Company
Common Stock at a rate of one share of New Company Common Stock for each
$15 in present value of the Capital Equity Credits.
(d) Reflects the conversion of all 1992, 1993 and 1994 (estimated) Allocated
Surplus Accounts into New Company Common Stock at a rate of one share of
New Company Common Stock for each $15 in present value of the Allocated
Surplus Accounts.
(e) Reflects the tax effect of converting from a cooperative to a regular
corporation.
(f) Reflects the redemption of New Company Common Stock for shareholders who
own fewer than 100 shares after the conversion.
(g) Reflects the conversion of the outstanding shares of Potash Series VI
common stock into the right to receive $50 per share.
(h) Represents the conveyance of the Cooperative's interest in its wholly owned
subsidiary, NSI.
(i) Reflects a reserve against the 3/31/94 intercompany receivable from NSI to
the Cooperative related to newsprint contract obligations.
(j) Represents an accrual for the Cooperative's continuing obligation (fiscal
years 1995 and 1996) to NSI resulting from the Cooperative's contract
to purchase newsprint for resale.
(k) Reflects an additional capital contribution to NSI of $7,000,000 reduced by
the amount that the tax sharing payments through 6/30/94 to NSI exceed
$2,000,000.
(l) Reflects the Cooperative buying NSI's investment in CoBank at a price of
$4,000,000. NSI's book value of this investment is $3,985,900.
(m) Reflects an accrual for the Cooperative's continuing obligation (4/1/94
through 6/30/94) to NSI resulting from the Cooperative's contract to
purchase newsprint for resale.
-40-
<PAGE>
THE NEW COMPANY
INTRODUCTION
The New Company has been formed solely to facilitate the effectuation of the
Plan.
The New Company has been organized under the Mississippi Business Corporation
Act. The principal office of the New Company is located at Owen Cooper
Administration Building, Highway 49 East, Yazoo City, Mississippi 39194-0388,
and its telephone number at that address is (601) 746-4131. Following the
effectiveness of the Plan, the shareholders of the New Company will be the
current holders of the Nitrogen Shares and those holders of Capital Equity
Credits and Allocated Surplus Accounts who elect to participate in the Exchange
Offer.
POLICIES AND OBJECTIVES
General.
The New Company will operate as a noncooperative business corporation. The
New Company has been incorporated in Mississippi and operates under Subchapter C
of the Internal Revenue Code. The New Company will be managed by its Board of
Directors consisting of 12 members. It is currently anticipated that the
officers, employees, day-to-day business, properties and production operations
of the New Company will be substantially similar to those of the Cooperative,
except as otherwise indicated herein.
Borrowing and Other Financing.
The Cooperative's traditional source of financing has been retained patronage
earnings from shareholder business, CoBank and commercial banks. Except with
respect to circumstances not pertinent to the New Company, CoBank's charter
prohibits direct loans to parties which are not operated on a cooperative basis
and which satisfy certain other nonfinancial requirements. Since the New Company
will not be operated on a cooperative basis, it will not be eligible for new
financing from CoBank. Existing loans from CoBank will be due at their scheduled
maturities. The Cooperative has previously obtained a $20 million revolving
loan from Nations Bank. The outstanding borrowing under this loan at March 31,
1994 was approximately $3 million. The Cooperative has received a commitment
from Nations Bank regarding an increase in the revolving loan amount to $50
million, the outstanding principal (up to $20 million) to be converted to a term
loan at a future date. The New Company expects this new facility to be in place
prior to June 30, 1994. CoBank has expressed an interest in participating in
such loan to the extent permitted by its charter.
SUMMARY OF NEW COMPANY ARTICLES OF INCORPORATION AND BYLAWS
The rights, powers and obligations of the New Company will be governed by the
Articles of Incorporation and Bylaws of the New Company. Copies of the Articles
of Incorporation and Bylaws of the New Company are attached hereto as Appendix B
and Appendix C, respectively, and should be studied carefully before voting for
or against the Plan. The following is a brief
-41-
<PAGE>
summary of all material provisions of the Articles of Incorporation and Bylaws
of the New Company. It and other references to the Articles of Incorporation and
Bylaws of the New Company in this Proxy Statement/Prospectus do not purport to
be complete and are subject to and qualified in their entirety by reference to
the Articles of Incorporation and Bylaws of the New Company.
The New Company will initially have only one outstanding class of common
stock: voting common stock. The New Company's Articles of Incorporation
authorize 100 million shares of Common Stock. All shareholders of the New
Company will have the same voting and liquidation rights per share of common
stock. The New Company has authorized 500,000 shares of preferred stock, which
may be issued from time to time in series with dividend and voting rights,
preferences and other terms as may be determined by the Board of Directors.
SHAREHOLDER PROTECTIVE DEVICES.
Each of the items described in this section could result in the New Company
being less attractive to a potential acquirer and could result in shareholders
receiving less for their New Company Common Stock than otherwise might be
available in the event of a takeover attempt.
Mississippi Control Share Act.
Pursuant to Article 10 of its Articles of Incorporation, the New Company has
chosen to be subject to the Mississippi Control Share Act which provides, in the
case of a public company which has more than 500 of its shareholders resident in
Mississippi or more than 10 percent of its shares owned by Mississippi
residents, that once a potential acquirer notifies a company of the intention to
purchase 20 percent, 33 1/3 percent or more than 50 percent of the company's
shares and requests a special meeting, a shareholders' meeting must be held
within 50 days, at the acquirer's expense, to vote on whether the control shares
(those held by the acquiring entity) may exercise voting rights. If a request is
not made, shareholders will vote on whether to restore voting rights at the next
shareholder meeting. Without the approval of a majority of the outstanding
shares, excluding shares owned by the acquirer and company officers and
employee-directors, the control shares do not receive voting rights until three
years have passed.
Mississippi Shareholder Protection Act.
Pursuant to Article 10 of its Articles of Incorporation, the New Company has
chosen to be subject to the Mississippi Shareholder Protection Act. By the terms
of the Act a corporation may not enter into any business combination with a 20
percent shareholder unless: (a) 80 percent of the outstanding shares and two-
thirds of the shares not owned by the 20 percent shareholder 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 effect of these provisions would be to make it more difficult for a
change in control of the New Company to occur.
-42-
<PAGE>
Blank Check Preferred Stock.
The New Company also has an authorized class of preferred stock the terms of
which may be designated by the Board of Directors. This stock may be used in
acquisitions, as a financing vehicle or could be issued in connection with a
shareholder rights plan or to a friendly party who would agree to support
management. To the extent that an issuance of preferred stock in connection
with a shareholder rights plan or an issuance to a friendly party could act to
delay or perhaps prevent an unfriendly takeover of the New Company, the
existence of the blank check preferred stock might be considered to be
disadvantageous to shareholders.
Classified Board.
The Articles of Incorporation of the New Company provide for a classified
board of directors which is intended to provide continuity in the governance of
the New Company in that it prevents the entire Board from being replaced in a
single election. To the extent that the classified Board is effective it could
delay a change in control of the New Company which might not be beneficial to
the shareholders. Directors may be removed only for "cause", as defined in
the Articles of Incorporation. The liability of directors is eliminated and
indemnification is provided to directors, officers, employees and agents to the
fullest extent permitted by Mississippi law.
Supermajority Vote on Major Transactions.
Any merger, sale of substantially all assets, dissolution or similar major
transaction requires the approval of at least two-thirds of the Common Stock,
provided that only majority approval is needed if the major transaction is
approved by at least two-thirds of the directors then in office.
MANAGEMENT
It is anticipated that the New Company will be managed in substantially the
same way as the Cooperative. For a detailed description of the Cooperative's
management policies, see "The Cooperative--Management."
Board of Directors.
The New Company's Board of Directors will be composed of the following
members, nine of whom are currently directors of the Cooperative and three of
whom are newly-appointed independent directors, each director to serve until the
annual meeting of shareholders in the year indicated opposite his name (current
Cooperative directors not on the Board of Directors of the New Company will also
be asked to serve on a Transition Advisory Committee for two years):
<TABLE>
<CAPTION>
Class Serving Until Class Serving Until Class Serving Until
1995 Annual Meeting 1996 Annual Meeting 1997 Annual Meeting
- ---------------------- ------------------- -------------------
<S> <C> <C>
Frank R. Burnside, Jr. Wayne Thames Charles O. Dunn
John W. Anderson W.R. Dyess Coley L. Bailey
Robert P. Dixon G. David Jobe John Sharp Howie
George Penick David M. Ratcliffe Woods E. Eastland
</TABLE>
-43-
<PAGE>
The Board of Directors of the New Company has elected Coley L. Bailey and
John Sharp Howie as Chairman and Vice-Chairman, respectively. The Board of
Directors of the New Company has also elected Tom C. Parry as Director Emeritus.
Information regarding Mr. Penick, Mr. Ratcliffe and Mr. Eastland, who are not
currently officers or directors of the Cooperative, is set forth here:
Mr. George Penick (age 46), President, Foundation for the Mid South, a
private philanthropic foundation, has served in that position since 1990. Prior
to that time he was first executive director of the Jessie Ball duPont Fund.
Mr. Ratcliffe (age 46), has served as President and Chief Executive Officer
of Mississippi Power Company, an electric utility in southeast Mississippi,
since 1991. Prior to that time he was Executive Vice President of Southern
Company Services.
Mr. Eastland (age 49), has been President and Chief Executive Officer of
Staplcotn & Stapldiscount, a cotton marketing cooperative located in Greenwood,
Mississippi, since 1986.
See "The Cooperative -- Current Directors and Executive Officers of the
Cooperative" for additional information on the other individuals named above.
A VOTE TO APPROVE THE PLAN WILL HAVE THE EFFECT OF ELECTING THE NEW COMPANY'S
DIRECTORS FOR THE TERMS INDICATED ABOVE AND THE MEETING WILL CONSTITUTE THE
FIRST ANNUAL MEETING OF SHAREHOLDERS OF THE NEW COMPANY.
Executive Officers.
The Board of Directors of the New Company has unanimously appointed the
existing executive officers of the Cooperative to serve as the executive
officers of the New Company in the same positions as indicated under "The
Cooperative -- Current Directors and Executive Officers of the Cooperative."
Compensation.
It is contemplated that upon completion of this transaction, the Board of
Directors of the New Company will reassess the current compensation programs and
will adopt policies and programs which more closely link compensation to
enhanced corporate financial performance and increases in shareholder value. The
objective will be to align management interests directly with the interests of
the New Company's stockholders. In the development of compensation programs, it
is expected that the New Company will retain one or more compensation consulting
firms to assess external competitiveness by comparing the New Company's existing
programs with those of its peer group--major U.S. fertilizer companies. It is
anticipated that the existing employee benefits offered by the Cooperative will
be offered by the New Company to its employees.
Security Ownership of the Officers and Directors.
The following table shows the prospective number of shares of New Company
Common Stock directly owned by the officers and directors of the New
-44-
<PAGE>
Company following the completion of the Merger. All directors of the New
Company have indicated that they intend to exchange all of their Capital Equity
Credits and Allocated Surplus Accounts for New Company Common Stock in the
Exchange Offer and the following table reflects such elections.
Officers and Directors of the New Company
Conversion of Cooperative Common Stock Directly Owned to
New Company Common Stock
Shares Owned as of March 18, 1994
<TABLE>
<CAPTION>
Shares Directly Owned
---------------------
New Company
Nitrogen Common Stock
Name Series II Series III Owned* % of Class
<S> <C> <C> <C> <C>
John Anderson 53 - 448 0.00%
Coley L. Bailey 324 1,020 4,664 0.02%
Frank R. Burnside, Jr. - 1,900 3,187 0.02%
Robert P. Dixon - 190 380 0.00%
Woods E. Eastland - 3,000 5,486 0.03%
W. R. Dyess - - - -
John Sharp Howie 133 376 1,971 0.01%
G. David Jobe - - - -
George Penick - - - -
David M. Ratcliffe - - - -
Wayne Thames 277 1,629 5,779 0.03%
Charles O. Dunn - - - -
David W. Arnold - - - -
Rosalyn B. Glascoe - - - -
William F. Hawkins - - - -
Robert E. Jones - - - -
C. E. McCraw - - - -
</TABLE>
Conversion Factors:
- ------------------
Series II - Multiply by 8
Series III - Multiply by 1.6
* Does not include shares that could be received in exchange of Allocated
Surplus Accounts for fiscal 1994.
THE NEW COMPANY FOLLOWING THE EFFECTIVE DATE.
In connection with the Plan, the name of the New Company will be changed to
"Mississippi Chemical Corporation". Upon consummation of the Plan, the New
Company will be owned by persons who were holders of record of the Nitrogen
Shares or who exchanged their Capital Equity Credits and Allocated Surplus
Accounts pursuant to the Exchange Offer.
-45-
<PAGE>
Employees.
It is expected that all of the Cooperative's employees will be offered
similar positions with the New Entity.
Dividend Policy of the New Company Following the Effective Date.
The Board of Directors of the New Company currently expects that the New
Company will pay dividends to its shareholders. The amount and timing of these
payments will be based on a number of factors, including the capital
requirements of the New Company's business, the financial condition of the New
Company, and the dividend policies of similarly situated publicly traded
companies. There can be no assurance that dividends will be paid in any minimum
amounts or at any particular times. In the future, the New Company may agree
to limit its ability to pay dividends in connection with agreements with
lenders.
Fertilizer Markets.
The vast majority of the Cooperative's sales of nitrogen fertilizer are made
to its shareholders who purchase such products pursuant to preferred patronage
rights and who receive patronage refunds with respect to such purchases.
Although the New Company will grant no preferred patronage rights and will not
pay patronage refunds, it is expected that the New Company will maintain a
nitrogen fertilizer customer base substantially similar to the Cooperative's.
DAP and virtually all of the potash fertilizers are presently sold on a
noncooperative basis. No changes are expected in the markets for these
products.
Market for New Company Stock.
The Cooperative Common Stock is not currently listed on any national or local
exchange. After the Effective Date, the New Company intends to apply for
quotation of the New Company Common Stock on the NASDAQ System. However, there
can be no assurance that such quotation will occur or that a market for the New
Company Common Stock will develop.
Proposed Public Offering.
Subject to shareholder approval of the Plan, the New Company intends to make
a public offering of approximately 3,000,000 newly-issued shares of New Company
Common Stock for the purpose of raising funds to repay debt and to finance
certain capital expenditures and the growth of its operations. In addition,
certain large shareholders of the New Company will be offered the opportunity to
sell approximately one million shares in the offering. The New Company expects
to file a registration statement with the Securities and Exchange Commission
with respect to the offering during June, 1994 and expects that the offering
will be consummated sometime following the effectiveness of the Plan. The
public offering however is contingent upon a number of factors, including stock
market conditions and the determination as to the timing of the offering. There
can be no assurance that the offering will be consummated or, if consummated, as
to the price to which the New Company Common Stock will be sold. Moreover, the
number of shares of New Company Common Stock to be sold in the offering by the
New Company and by shareholders may change. The offering of shares
-46-
<PAGE>
of New Company Common Stock to be included in the offering will be made only by
means of a prospectus complying with the requirements of the Securities and
Exchange Act of 1933 and this proxy statement does not constitute an offer to
sell or solicitation of an offer to buy any shares of New Company Common
Stock.
THE COOPERATIVE
BUSINESS
The Cooperative was organized in September 1948, under the general corporate
laws of the State of Mississippi and is operated as a cooperative in accordance
with the applicable provisions of the Code. The mailing address for the
principal executive offices of the Cooperative is Owen Cooper Administration
Building, P.O. Box 388, Yazoo City, Mississippi 39194-0388, and its telephone
number is (601) 746-4131.
The principal business of the Cooperative is to provide fertilizer products
to its shareholders pursuant to preferred patronage rights by which the
shareholders have the right to purchase fertilizer products from the
Cooperative. Subject to the right of the Board of Directors of the Cooperative
to provide for reasonable reserves, each shareholder receives a patronage refund
on each purchase to the extent of any excess of the purchase price of the
fertilizer products over the cost of such products.
The Cooperative owns a nitrogen fertilizer production facility at Yazoo City,
Mississippi, and has a 50% interest in a nitrogen fertilizer production facility
at Donaldsonville, Louisiana. The Louisiana facility ("Triad") is operated as a
joint venture by the Cooperative and First Mississippi Corporation. The
Cooperative also owns a potash mine and related facilities in Carlsbad, New
Mexico. Following an extended shutdown due to market conditions, the
Cooperative resumed potash production at the Carlsbad facilities during fiscal
1989. On July 1, 1993, the Cooperative placed these potash assets and
facilities in a newly formed, wholly owned Mississippi subsidiary, Mississippi
Potash, Inc. ("Mississippi Potash").
In April 1988, the Cooperative sold its Pascagoula, Mississippi, fertilizer
manufacturing facility where it had produced mixed fertilizer products. The
purchaser operated the facility for approximately two years, after which it
filed a voluntary Chapter 7 bankruptcy petition and the U.S. bankruptcy trustee
("Trustee") took control of the facilities for liquidation. On December 7,
1990, the Trustee conveyed the Pascagoula facilities to the Cooperative in lieu
of foreclosure of the Cooperative's security interest in the facilities. The
Cooperative organized a new Delaware subsidiary, Mississippi Phosphates
Corporation ("Mississippi Phosphates"), and conveyed the Pascagoula facility to
Mississippi Phosphates. Mississippi Phosphates returned the Pascagoula facility
to full operation and production of diammonium phosphate fertilizer ("DAP") in
December 1991.
The Cooperative also owns a subsidiary which produces newsprint. For a
description of this business, see "Newsprint South, Inc.".
-47-
<PAGE>
The Cooperative's primary sources of capital have been retained patronage
earnings from shareholder business, CoBank and commercial banks. CoBank makes
loans to its members at competitive fixed and variable rates. To the extent
that CoBank's revenues exceed cost and expenses and any reserves set up by its
Board of Directors, a patronage refund is paid. The Cooperative has also
utilized other financing sources, including insurance companies.
ORGANIZATION
The Cooperative is operated as a cooperative and provides chemical fertilizer
products to shareholders who supply the Cooperative with both business and
capital. The shareholders are entitled to purchase the Cooperative's fertilizer
production in quantities allocated by the Cooperative in proportion to the
amount of Cooperative Common Stock which such shareholders own. Products are
sold at prices determined by the Board of Directors of the Cooperative. Such
prices are generally related to the market prices prevailing from time to time.
The excess, if any, of prices paid by shareholders over the Cooperative's cost
of production and distribution of such products constitutes its net margins on
shareholder business.
The Cooperative does not pay dividends. The only return to shareholders is
paid in the form of a patronage refund. After providing for reasonable
reserves, net margins on shareholder business are distributed annually as
patronage refunds to shareholders in proportion to the quantity of their
purchases expressed in tons. The costs and revenues of the Cooperative's
nitrogen fertilizer products and potash products are determined separately for
the purpose of calculating and paying patronage refunds.
Separate patronage refund calculations are made for the several commodities
in the nitrogen class, these being ammonium nitrate, anhydrous ammonia, urea,
and nitrogen solutions. Losses, if any, on any commodity within the nitrogen
class are deducted pro rata from the margins, if any, realized on other
commodities within the nitrogen class. For any fiscal year in which the
Cooperative may sustain a loss attributable to the patronage of shareholders on
nitrogen products (as a class) or on potash products (as a class), the Board of
Directors deducts the losses on one or more classes of products from the margins
on the other class or classes of products on a prorated basis and the resulting
net margins, if any, are distributed to those shareholders who purchased during
such fiscal year that class or classes of products on which the net margins were
realized. Patronage refund computations and allocations are made in accordance
with federal income tax accounting principles. The right to receive margins on
shareholder business as patronage refunds is subject to the discretionary right
of the Board of Directors of the Cooperative to set up reasonable reserves to be
withheld from patronage earnings prior to the end of any fiscal year. The
Cooperative has a lien on the patronage refund payable to any shareholder for
any sums due the Cooperative by such shareholder.
For the fiscal years ended June 30, 1993 and 1992, the Board of Directors of
the Cooperative authorized an allocated reserve of 50% and 40%, respectively, of
the net margins on business done with shareholders. The remaining 50% and 60%,
respectively, was paid as cash patronage
-48-
<PAGE>
refunds. For the fiscal year ended June 30, 1991, the Board of Directors
authorized the payment of 60% of total patronage refunds in cash and 40% in
nonqualified Capital Equity Credits. The Board of Directors has the right, but
no obligation, to retire or redeem Capital Equity Credits through payment at
some future date. On October 1, 1991, the Cooperative redeemed 1980-81 Capital
Equity Credits totaling $7,785,000. The Board of Directors did not elect to
redeem any additional Capital Equity Credits in fiscal year 1993 or fiscal year
1994.
As a nonexempt cooperative, the Cooperative is entitled under the federal
income tax laws to deduct the full amount of patronage refunds paid in cash or
qualified notices of allocation for income tax purposes. It therefore pays
income taxes on taxable income resulting from business with nonmembers,
nonqualified allocations of patronage refunds and all reserves from business
with shareholders. In addition, various loan agreements have covenants that
place restrictions on the payment of cash patronage refunds. For tax purposes,
shareholders are required to include in their gross income, patronage refunds
which are paid in cash, common stock, subordinated debentures, qualified notices
of allocation, or any combination thereof. Nonqualified Capital Equity Credits
are not taxable income to the shareholder at the time of issuance and are not
deductible by the Cooperative. When nonqualified Capital Equity Credits are
redeemed, they are taxable income to the shareholder and are deductible by the
Cooperative.
In 1990, the Cooperative transferred the Pascagoula facilities to Mississippi
Phosphates. Mississippi Phosphates was organized under the general corporate
laws of the state of Delaware and is taxed under Subchapter C of the Code.
In fiscal 1993, the Cooperative organized a new wholly owned subsidiary,
Mississippi Potash, Inc. On July 1, 1993, the Cooperative transferred its
potash assets and operations to Mississippi Potash. Mississippi Potash was
organized under the general corporate laws of the state of Mississippi and is
taxed under Subchapter C of the Code.
During fiscal 1993, the Cooperative organized another new wholly owned
Mississippi subsidiary, Mississippi Nitrogen, Inc. ("Mississippi Nitrogen").
Mississippi Nitrogen markets nitrogen products of the Cooperative on a
nonpatronage basis to Cooperative shareholders and nonshareholders alike.
Mississippi Nitrogen was organized under the general corporate laws of the state
of Mississippi and is taxed under Subchapter C of the Code.
FERTILIZER OPERATIONS
The Cooperative and its subsidiaries are engaged in the manufacture and sale
of fertilizer products. The types of fertilizers produced by the Cooperative
and its subsidiaries are: nitrogen, potash and phosphates. Nitrogen
products produced by the Cooperative are anhydrous ammonia, ammonium nitrate,
nitrogen solutions and urea. Mississippi Potash produces various grades of
potash at its Carlsbad, New Mexico, facilities. In the fiscal year ended June
30, 1992, Mississippi Phosphates returned the Cooperative's former Pascagoula,
Mississippi, facility to full operation in the production of DAP.
-49-
<PAGE>
During the period indicated, the Cooperative and its subsidiaries produced
the following tons of finished products (includes amounts withdrawn from
Triad):
-50-
<PAGE>
<TABLE>
<CAPTION>
PRODUCT FISCAL YEAR ENDED JUNE 30,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Anhydrous Ammonia 711,014 721,126 727,697 673,740 620,207
(including tonnage
used in manufacturing
other products)
Other Nitrogen 1,568,386 1,463,331 1,475,647 1,367,900 1,372,490
Products
Phosphates 665,046 294,514 -0- -0- -0-
Potash 300,538 308,177 306,872 289,458 195,551
</TABLE>
During the period indicated, the Cooperative and its subsidiaries sold the
following tons of finished products:
<TABLE>
<CAPTION>
PRODUCT FISCAL YEAR ENDED JUNE 30,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Nitrogen Fertilizer 1,601,728 1,543,741 1,575,174 1,435,813 1,473,837
Mixed Fertilizer -0- -0- -0- -0- 99,531
Phosphates 692,110 262,492 -0- -0- -0-
Potash 282,993 339,081 331,971 282,035 133,762
</TABLE>
Note: Differences in tons produced and tons sold are primarily due to exchanges
with and purchases from third parties, differences in beginning and ending
inventories and the use of anhydrous ammonia as a raw material in the production
of other products.
Total revenues contributed by sales of fertilizers during the period
indicated were:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED JUNE 30
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C>
$289,125 $239,657 $214,990 $180,342 $208,584
</TABLE>
MARKETING
The majority of the Cooperative's nitrogen fertilizer sales are made to its
shareholders who are entitled to purchase the Cooperative's nitrogen
-51-
<PAGE>
fertilizer products in quantities allocated by the Cooperative in proportion to
the amount of stock each shareholder owns. All phosphate and virtually all
potash sales were to nonshareholders.
The Cooperative's nitrogen fertilizer products are marketed primarily through
dealers or agents under a contractual arrangement whereby the dealer or agent
delivers the product to shareholders in satisfaction of the preferred patronage
rights of the shareholder to buy product from the Cooperative. Sales may also
be made to an agent against the stock ownership of that agent. Some nitrogen
products of the Cooperative are marketed on a nonpatronage basis by the
Cooperative's wholly owned subsidiary, Mississippi Nitrogen.
The majority of potash sales are made in the domestic market on a
noncooperative basis. All international sales of potash are made through a
third-party agent.
Substantially all of Mississippi Phosphates sales are made through Atlantic
Fertilizer & Chemical Corporation which has been appointed the exclusive
distributor of DAP produced by Mississippi Phosphates and which sells primarily
in international markets.
In fiscal 1993, sales to Atlantic Fertilizer & Chemical Corporation, SF
Services, Inc., and Alabama Farmers Cooperative, Inc., the three largest
fertilizer customers of the Cooperative and its subsidiaries, were approximately
$79,150,000 (27.4%), $32,957,000 (11.4%) and $13,860,000 (4.8%), respectively.
In fiscal 1992, sales to Atlantic Fertilizer & Chemical Corporation, SF
Services, Inc., and Missouri Farmers Association were approximately $36,034,000
(15.0%), $32,080,000 (13.4%) and $13,879,000 (5.8%), respectively. In fiscal
1991, sales to SF Services, Inc., Alabama Farmers Cooperative and Missouri
Farmers Association were approximately $38,261,000 (17.8%), $13,320,000 (6.2%),
and $13,178,000 (6.1%), respectively.
COMPETITION
The Cooperative produces and sells nitrogen fertilizer products primarily in
the southern United States and is competing with firms located both within and
outside its market area which are larger in total resources and total sales.
The fertilizer business is highly competitive and products of other producers
are comparable with the Cooperative's products. Soil conditions, weather, crop
types, government programs and various other factors affect the type and
quantity of fertilizer that a particular consumer will use. The principal
methods of competing are price, quality, service and availability of product.
The chemical fertilizer industry has historically been subject to cyclical
fluctuations based on fertilizer supply and demand levels.
The states which make up the Cooperative's primary fertilizer trade area are
Mississippi, Alabama, Arkansas, Texas, Louisiana, Missouri, Georgia, Florida,
Tennessee and Kentucky. The aggregate production rates of the existing
fertilizer plants presently supplying such states are not available; however, it
is believed the annual production is currently in excess of consumption.
-52-
<PAGE>
According to industry figures, U.S. nitrogen disappearance (movement from
producers into the domestic and foreign markets or for upgrading into other
products) decreased by 5% in fiscal year 1993. During 1993, nitrogen
consumption was adversely affected by a severe drought in the southeastern
United States and by flooding in the Midwest which idled crop acreage. Nitrogen
fertilizer demand for the 1993-94 year should improve over 1992-93 levels as
higher prices for corn and soybeans and lower crop set-aside requirements are
expected to cause an increase in spring 1994 plantings.
U.S. potash consumption declined in fiscal 1993, due largely to the weather-
related delays in the fall harvest and in the spring planting in the U.S.
Midwest. U.S. potash exports also declined from previous levels as a result of
increased competition from exports from the former Soviet Union. According to
industry figures, U.S. potash disappearance decreased by 4% and U.S. potash
production decreased approximately 15% during the 1992-93 year. The anticipated
increase in spring plantings and a return of normal weather patterns should
boost U.S. potash consumption and stabilize prices.
U.S. DAP exports declined during the 1992-93 year due to significant
decreases in purchases by China and India. The drop in U.S. exports and
declining domestic demand resulted in excess supplies and severely depressed
prices. The purchase levels of India and China remain the key variables facing
the U.S. phosphate industry. A recent increase in purchases by India and China
has created upward price pressure. Increased demand for the 1994 planting
season should also be positively influenced by the need for additional phosphate
in areas where nutrients have been depleted by flood waters.
RAW MATERIALS
Natural Gas
The natural gas requirements of the Yazoo City plant are supplied primarily
by Shell Western E&P Inc. ("SWEPI"), a subsidiary of Shell Oil Company
("Shell"). In 1972, the Cooperative and Shell entered into a gas purchase and
sale contract whereby Shell agreed to supply natural gas to the Yazoo City
plant. The 1972 Shell contract, as amended, has been superseded by a new
contract with SWEPI effective as of January 1, 1986. The 1986 contract
established Shell's daily delivery obligation at 35,000 Mcf per day through
April 1989, and 30,000 Mcf per day thereafter. Under the SWEPI contract, the
price for certain specified quantities is fixed and the price for certain other
specified quantities reflects changes in prevailing market conditions. The
primary term of the SWEPI contract expired on March 31, 1994. SWEPI continues
to furnish 30,000 Mcf of natural gas per day under the terms of the contract for
a 120-day "renegotiation period" to allow the opportunity for structuring a new
contract. The Yazoo City facility currently has access to two major interstate
pipelines and a large intrastate system. As a result, the Cooperative is
confident that competitively priced natural gas will be available to the plant.
Fertilizer production at Yazoo City has not been materially affected by any
curtailment of natural gas deliveries for the past several years.
-53-
<PAGE>
The Triad facility is presently connected to five intrastate pipeline
systems. The natural gas requirements for the plant are currently being
supplied by three of these pipelines under various market-related pricing
arrangements. Due to Triad's favorable access to natural gas supplies, the loss
of any supplier would not have a material adverse impact on plant operations.
In August of 1992, hurricane Andrew caused a temporary interruption of natural
gas supplies, resulting in a temporary interruption of Triad production.
Natural gas is in ample supply, but the price of gas became increasingly
volatile in fiscal 1993 due to supply/demand coming more into equilibrium than
in previous years.
Phosphate Rock
The Pascagoula fertilizer facility's requirements for phosphate rock are
approximately 1,100,000 short tons per year. As of September 15, 1991,
Mississippi Phosphates, the Cooperative's wholly owned subsidiary, entered into
a contract with Office Cherifien des Phosphates to supply Mississippi
Phosphates's phosphate rock requirements. The price of phosphate rock is based
on prevailing market conditions and the operating performance of Mississippi
Phosphates.
Sulfur
Sulfur is used by Mississippi Phosphates in the production of DAP. Sulfur is
in adequate supply and is available on the open market in quantities sufficient
to satisfy Mississippi Phosphates' current requirements of approximately 300,000
tons per year. In recent years, the price of sulfur has declined due to an
excess of supply which continues.
Ammonia
Ammonia is used by Mississippi Phosphates as a raw material in the production
of DAP. Until recently, ammonia has been in adequate supply. In early 1994,
intermittent shortages developed and since February the domestic ammonia market
has experienced an approximate 60% increase in price. Although ammonia
prices have taken a more pronounced seasonal jump during the current year, it is
anticipated that these prices will return to a more moderate level over the next
several months. Several factors acting concurrently have contributed to
these developments. In the domestic market, increased corn acreages and
excellent early planting weather have created an unusually large and
concentrated agricultural demand, at a time when the industrial demand is also
strong. This increased demand is against a backdrop of a reduced available
production due to plant expansions of ammonia upgrading facilities and several
unplanned short-term plant outages. International supplies have also been tight
due primarily to reduced and unreliable shipments from the former Soviet
Union.
EMPLOYMENT
As of March 30, 1994, the Cooperative and its subsidiaries employed
approximately 1,165 persons at all locations. Approximately 220 of these
persons were employed by NSI. The Cooperative considers its employee relations
to be generally satisfactory.
-54-
<PAGE>
PATENTS AND LICENSES
The Cooperative has no patents, licenses, franchises or concessions which are
of material importance to the Cooperative's business.
RESEARCH AND DEVELOPMENT
The Cooperative has a research and development staff of 12 full-time
professional employees whose activities relate primarily to the development of
new products and the improvement of existing products. The Cooperative estimates
that approximately $1,505,000 will be spent on research and development
activities during fiscal 1994. The expenditures on research activities sponsored
by the Cooperative during fiscal years 1993, 1992 and 1991 were approximately
$1,435,000, $1,703,000 and $1,231,000, respectively.
SEASONAL FACTORS
The nitrogen and potash fertilizer business of the Cooperative is seasonal to
the extent that approximately 40% to 50% of the Cooperative's sales occur during
the last four months of the fiscal year. Sales of phosphate fertilizer are
generally uniform throughout the year.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Cooperative's fertilizer and newsprint operations are subject to federal,
state and local laws and regulations pertaining to the environment among which
are: The Clean Air Act, The Clean Water Act, The Resource Conservation and
Recovery Act, The Comprehensive Emergency Response Compensation and Liability
Act, The Toxic Substances Control Act, and The Mississippi State Pollution
Prevention Act. The Cooperative's and its subsidiaries' facilities require
operating permits which are subject to review by governmental agencies. The
Cooperative believes that its policies and procedures now in effect are
generally in compliance with applicable laws and with the permits relating to
the facilities.
In the past, significant capital and operating costs related to environmental
laws have been incurred. The majority of the Cooperative's environmental capital
expenditures have been in response to the requirements of the Clean Air Act and
the Clean Water Act. Since 1967, the Cooperative has spent approximately $50
million on its fertilizer production facilities in order to meet applicable
federal and state pollution standards.
Capital expenditures related to environmental obligations for the past three
fiscal years were approximately as follows: 1993 - $7 million; 1992 - $10
million; 1991 - $4 million. The foregoing expenditures reflect $18 million
related to the construction of a new nitric acid plant and related facilities at
the Cooperative's Yazoo City facility which was completed in early 1993 at a
cost of approximately $32 million. This facility replaced existing production
from other plants which were shut down. Enhanced environmental protection under
the Clean Air Act was a primary factor in the Cooperative's decision to
construct the plant.
-55-
<PAGE>
Environmental capital expenditures are expected to be approximately $1.5
million for the fiscal year ending June 30, 1994 and $5.8 million for the
following year. Future environmental expenditures will include a recently
approved expenditure of approximately $7 million to replace an existing scrubber
system at Yazoo City with a new system which will reduce particulate emissions
from fertilizer prill towers. The Cooperative has also approved a $1.3 million
expenditure to relocate the discharge point of the Yazoo City facility's
combined storm and process water to the Yazoo River.
On March 31, 1994, Mississippi Phosphates Corporation charged to earnings
approximately $6 million relating to the estimated cost of the future closure of
the phosphogypsum disposal facility located at Pascagoula. In future years,
Mississippi Phosphates expects to record additional charges of approximately $3
million related to future closure of the facility. The current $6 million charge
relates to the portion of the disposal facility utilized to date, and the future
expense of approximately $3 million will be accrued over the estimated remaining
life of the facility.
In the normal course of its business, the Cooperative is exposed to risks
such as possible release of hazardous substances into the environment. Such
releases could cause substantial damage or injuries. Environmental expenditures
have been and will continue to be significant. The Cooperative does not believe
that such costs have had or will have a material adverse effect on its business;
however, it is impossible to predict or quantify the impact of future
environmental laws and regulations.
The Cooperative is also involved in certain legal proceedings arising out of
environmental matters.
In 1986, 17 lawsuits were filed against Triad Chemical and other defendants
in Louisiana state courts in which numerous plaintiffs alleged personal injuries
and property damage resulting from exposure to hazardous waste from the
Combustion, Inc. site. Additionally, Triad has been notified by the
Environmental Protection Agency under Section 104 of CERCLA of the possible
disposition of Triad waste at the Combustion site.
PROPERTIES
General
The Cooperative manufactures nitrogen fertilizer products at its Yazoo City,
Mississippi, plant and at its 50%-owned production facility at Donaldsonville,
Louisiana. Mississippi Potash owns potash mining and refining facilities near
Carlsbad, New Mexico, which produce various grades of potash. Mississippi
Phosphates manufactures DAP at its fertilizer production facilities in
Pascagoula, Mississippi, which facilities were returned to full operation in
December of 1991.
The plants of the Cooperative and its subsidiaries are complete with
necessary support facilities, such as roads, railroad tracks, storage, offices,
laboratories, warehouses, machine shops and loading facilities. Adequate
supplies of water and electric power are available at all
-56-
<PAGE>
locations. In addition to the fertilizer storage facilities at Yazoo City and
Pascagoula, Mississippi, Carlsbad, New Mexico, and Donaldsonville, Louisiana,
the Cooperative also owns or leases 23 major fertilizer storage and distribution
facilities at other locations in Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, Missouri, Tennessee and Texas, with a total system-wide storage
capacity of approximately 393,000 tons.
The Cooperative owns an administration building at Yazoo City which contains
approximately 65,000 square feet of office space.
Yazoo City
The Cooperative's Yazoo City manufacturing facility, which is located on
approximately 1,180 acres owned by the Cooperative, is a closely integrated,
multi-plant nitrogen fertilizer production complex. The complex includes
facilities for the production of anhydrous ammonia, ammonium nitrate fertilizer,
nitrogen solutions and urea fertilizer, as well as a 20.5 megawatt cogeneration
power plant. The principal facilities at Yazoo City are:
<TABLE>
<CAPTION>
FACILITY DESIGN CAPACITY
<S> <C>
Anhydrous Ammonia Plant 1,400 tons per day
Nitric Acid Plants 2,150 tons per day
Ammonium Nitrate Synthesis Plant 2,830 tons per day
Ammonium Nitrate Prilling Facilities 2,100 tons per day
Urea Synthesis Plant 500 tons per day
Nonpressure Solutions Plant 1,400 tons per day
Ammonia Storage 36,000 tons
Ammonium Nitrate Storage 60,000 tons
Urea Storage 9,000 tons
Nonpressure Solutions Storage 18,700 tons
</TABLE>
Note: Nonpressure solutions are made from ammonium nitrate synthesis and
urea synthesis. Prilled urea is made from urea synthesis. Production
of solutions at the above rate would fully utilize urea synthesis
capacity.
In fiscal 1993, the Cooperative completed construction of a new nitric acid
plant and a new ammonium nitrate neutralizer and modification of existing
neutralizers at its Yazoo City facilities. These projects, which cost
approximately $32,000,000, were financed with internally generated funds and
long-term borrowings. These projects resulted in increased design capacity for
nitric acid production of approximately 200 tons per day and an increased design
capacity for ammonium nitrate synthesis production of 630 tons per day.
Donaldsonville
-57-
<PAGE>
The Donaldsonville facility (Triad) is a closely integrated, multi-plant
nitrogen fertilizer production complex at which anhydrous ammonia and urea
fertilizer are produced. The Donaldsonville complex is located on approximately
46 acres fronting the Mississippi River. The principal facilities at
Donaldsonville are:
<TABLE>
<CAPTION>
FACILITY DESIGN CAPACITY
<S> <C>
Anhydrous Ammonia Plant 1,275 tons per day
Urea Synthesis Plant 1,700 tons per day
Urea Prilling Facilities 1,500 tons per day
Ammonium Storage 30,000 tons
Bulk Urea Storage 35,000 tons
</TABLE>
Note: The Company is entitled to one-half of the production from the
Donaldsonville facility.
Triad also owns dock and loading facilities which allow the plant to be
served by oceangoing vessels.
Pascagoula
The plant site is located on approximately 1,500 acres of land near
Pascagoula, Mississippi, owned by Mississippi Phosphates. A portion of the
plant site fronts approximately 1,400 feet on a deep water channel, thus
allowing the plant to be served by oceangoing vessels. The Pascagoula facility
is a closely integrated, multi-plant phosphate fertilizer complex which
manufactures DAP. The principal facilities at Pascagoula are:
<TABLE>
<CAPTION>
FACILITY DESIGN CAPACITY
<S> <C>
Sulfuric Acid Plants 3,000 tons per day
Phosphoric Acid Plant 900 tons per day
Fertilizer Granulation Plant 1,865 tons per day
Ammonia Storage 25,000 tons
Wet Rock Storage 80,000 tons
DAP Storage 45,000 tons
</TABLE>
Carlsbad, New Mexico
On July 1, 1993, the Cooperative transferred its potash assets to Mississippi
Potash. Current estimated total production capacity is 400,000 tons per year of
muriate of potash. The total production capacity is in the form of granular
muriate of potash. Granular potash storage capacity is 130,000 tons. Compactor
potash storage capacity is 30,000 tons.
-58-
<PAGE>
Revised estimates of potash ore reserves underlying the Carlsbad properties
were compiled in 1981 and 1983. According to these estimates, Mississippi
Potash's reserves were estimated to contain 346,238,000 tons of in-situ ore with
an average grade of 15.25% K\\2\\O or 297,862,000 tons of recoverable ore with
an average grade of 14.88% K\\2\\O. Since these estimates were made, ore
extracted would indicate remaining reserves of 334,445,130 tons of in-situ ore
with an average grade of 15.26% K\\2\\O or 297,862,000 tons of recoverable ore
with an average grade of 14.88% K\\2\\O. With expected ore processing
efficiencies, this estimated reserve base is equivalent to 57,179,653 tons of
product muriate of potash with an average grade of 60% K\\2\\O.
In fiscal 1993, Mississippi Potash purchased additional underground mining
and conveying equipment at a cost of approximately $4,800,000. This acquisition
will allow the extraction of an additional bank of richer ore, thereby adding to
the efficiency of the Carlsbad extraction process. In early fiscal 1994,
Mississippi Potash's Board of Directors approved additional capital expenditures
of approximately $2,200,000 for expansion of the granular potash production
capability at the Carlsbad facility. This project was completed in recent weeks
resulting in potash production capacity of 400,000 tons per year. This expansion
was financed with internally generated funds.
Hardee County - Florida
In 1980, the Cooperative completed the purchase of phosphate rock property in
Hardee County, Florida. This property, containing approximately 10,000 acres, is
estimated by the Cooperative to contain approximately 61,685,000 recoverable
tons of phosphate rock of commercial quality (averaging 66% BPL). As of July 16,
1990, the Cooperative entered into an agreement with a major fertilizer company
whereby the Cooperative granted to that company the exclusive option, for a
period of four years from the contract date, to purchase the Cooperative's
Hardee County, Florida, phosphate rock properties. The Cooperative and the
option holder are in the process of negotiating new arrangements with respect to
the properties.
LEGAL PROCEEDINGS
Combustion, Inc., Litigation
On July 15, 1986, the first of 17 lawsuits was filed by numerous plaintiffs
in the Twenty-first Judicial District Court, Parish of Livingston, State of
Louisiana, against Triad Chemical (a joint venture in which the Cooperative has
a 50% interest) and approximately 80 to 90 other named defendants. An additional
211 parties have been added as third-party defendants. The plaintiffs' claims
are based on alleged personal injuries and property damages as a result of
exposure to hazardous waste from the Combustion, Inc., site in Livingston
Parish, Louisiana.
These cases were removed to the United States District Court for the Middle
District of Louisiana, then remanded to State Court, and have now
-59-
<PAGE>
been removed once again to Federal Court. Plaintiffs have filed a motion to
have the cases remanded to State Court.
The plaintiffs moved for certification of a class for the purpose of
consolidating the pending litigation as one class action suit, and in January
1991, a state class was certified by the District Court judge. The Louisiana
First Circuit Court of Appeal affirmed the certification of the class, but
reversed the definition of the class and remanded the issue to the trial court
for further determination.
Triad is vigorously defending its position in these proceedings and considers
its defense meritorious.
CERCLA Sites
Triad has received and responded to letters issued by the United States
Environmental Protection Agency ("EPA") under Section 104 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") relative to
the possible disposition of Triad waste at two disposal sites identified as the
Combustion, Inc. site south of Baton Rouge, Louisiana, and the Cleve Reber site
in Ascension Parish, Louisiana. Under CERCLA, generators of waste may be held
responsible for investigation and site cleanup costs.
Potash Litigation
On April 1, 1993, the first of 12 class action lawsuits was filed
against the Company and other United States and Canadian potash
producers. These suits were consolidated into a single action in Minnesota.
In addition, other actions containing substantially similar allegations were
filed in United States District Courts in Illinois and Virginia. These suits
were also consolidated with the Minnesota proceeding.
In these consolidated complaints, plaintiffs alleged that, beginning in 1987,
the Canadian potash producers conspired to fix the price of potash sold in the
United States in violation of the federal antitrust laws, specifically Section 1
of the Sherman Act. The conspiracy allegedly spread to include the United
States producers named as defendants. For the violations, plaintiffs requested
an injunction prohibiting the defendants from continuing the alleged conspiracy,
unspecified monetary damages and attorneys' fees.
A state court action was also filed against the Company and other
United States and Canadian potash producers in the Superior Court of California.
Similarly, this action alleged that a price-fixing conspiracy existed among the
defendants, which violated California Uniform Competition Statutes. This suit
was removed to federal court and consolidated with the Minnesota cases.
Upon motion made by defendants, the Minnesota District Court, on December 8,
1993, disqualified certain of the plaintiffs' attorneys in the consolidated
action, finding the plaintiffs' claims were based on
-60-
<PAGE>
privileged information improperly or illegally disclosed to plaintiffs. The
Court further ordered plaintiffs to file amended complaints, each with an
affidavit stating the basis for the allegations contained therein, within 30
days to the date of its order.
All of the plaintiffs have now filed amended complaints. The Company has
not been named as a defendant in any of the amended Minnesota filings . In
addition, the Company has been voluntarily dismissed by the plaintiffs in the
California state action. The Company expects to enter into a Tolling Agreement
with two of the Minnesota plaintiffs whereby the Company will agree that the
running of time under any applicable statute of limitations will be tolled for
the period from the date of the Tolling Agreement through September 30, 1994.
Potash Investigation
On November 24, 1993, the Antitrust Division of the Department of Justice
served the Company with a grand jury subpoena in connection with its
investigation of these allegations of price fixing by United States and Canadian
potash producers. The subpoena requests that the Company produce certain
documents relating to its potash business in the United States and Canada. The
Company is in the process of assembling these documents for production.
Other Legal Proceedings
In addition to the foregoing, the Cooperative and its subsidiaries, in the
ordinary course of business, are the subject of, or a party to, other various
pending or threatened legal proceedings. The Cooperative believes that any
ultimate liability arising from these actions would not have a material effect
on its financial position or results of operations.
-61-
<PAGE>
CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COOPERATIVE
Directors
The Cooperative is governed by a Board of Directors consisting of 24 persons.
Directors are elected for a term of three years. The following persons are now
serving on the Board of Directors of the Cooperative.
<TABLE>
<CAPTION>
YEAR
FIRST YEAR
DATE ELECTED TERM
NAME AND ADDRESS OF BIRTH DIRECTOR EXPIRES PRESENT PRINCIPAL OCCUPATION
<S> <C> <C> <C> <C>
W.H. Allen, Jr. 04/16/52 1988 1994 President, The Catfish Institute
P.O. Box 247
Belzoni, MS 39038
John W. Anderson* 12/15/34 1989 1995 President and Chief Executive
P.O. Box 2227 Officer, Alabama Farmers
Decatur, AL 35609 Cooperative, Inc. (Farmer Co-op)
Coley L. Bailey* 12/27/50 1978 1994 Farmer
691 Air Industrial Park Road
Grenada, MS 38901
Chairman of the Board of
Directors
U. Owen Bibb, Jr. 05/12/33 1988 1994 Farmer (Partner, The Bibb
P.O. Box 1075 Company)
Tunica, MS 38676
F. Neal Bolton 06/19/38 1984 1996 Sugar Processing Executive
P.O. Box 67 (General Manager and
St. James, LA 70086 Secretary-Treasurer, St. James
Sugar Co-op)
Randon D. Bounds 01/06/49 1991 1994 Fertilizer Dealer (Owner and
401 South Main Street General Manager, Paul E.
Picayune, MS 39466 Bounds, Inc.)
Bruce J. Brumfield* 05/12/38 1984 1996 Farmer (Partner, Brumfield
P.O. Box 165 Plantation and FTB Farms)
Inverness, MS 38753
Frank R. Burnside, Jr.* 02/28/49 1985 1994 Farm Supply Dealer (Vice
P.O. Box 535 President - Manager, Newellton
Newellton, LA 71357 Elevator Company, Inc.)
Robert A. Carson* 01/16/27 1962 1995 Farmer (Partner, Buckskin
Route 1, Box 112 Plantation)
Lambert, MS 38643
John A. Denton 03/20/52 1990 1996 Farmer (Vice President, Denton
P.O. Box 189 Company, Inc.; Partner, J&P
Shelby, MS 38774 Planting Company)
</TABLE>
-62-
<PAGE>
<TABLE>
<CAPTION>
YEAR
FIRST YEAR
DATE ELECTED TERM
NAME AND ADDRESS OF BIRTH DIRECTOR EXPIRES PRESENT PRINCIPAL OCCUPATION
<S> <C> <C> <C> <C>
Robert P. Dixon* 08/06/43 1986 1995 President and Chief Executive
P.O. Box 5489 Officer, SF Services, Inc.
North Little Rock AR 72119 (Farmer Co-op)
Charles O. Dunn* 11/16/47 1992 1996 President and Chief Executive
P.O. Box 388 Officer, Mississippi Chemical
Yazoo City, MS 39194 Corporation; Vice Chairman
and Chief Executive Officer,
Newsprint South, Inc.
W.R. Dyess 05/25/39 1991 1995 Farm Supply Dealer (President
103 North 7th Street and Owner, Dyess Farm
Corsicana, TX 75110 Center, Inc., and ABC Ag
Center, Inc.)
A.T. Evans* 10/26/30 1981 1996 Farmer (Managing Partner, E.F.
P.O. Box 7 Nunn and Company)
Shuqualak, MS 39361
John A. Gaston 10/17/38 1991 1996 Senior Vice President -
P.O. Box 5489 Principal Financial
North Little Rock, AR 72119 Officer, SF Services,
Inc. (Farmer Co-op)
Thomas H. Gist, Jr. 12/17/34 1977 1995 Farmer
Route 3, Box 261
Marianna, AR 72360
Carroll F. Harpole 05/11/35 1986 1995 President, Chem-Nut, Inc.
P.O. Box 3706 (Distributor of Agricultural
Albany, GA 31707 Chemical)
John Sharp Howie* 12/22/39 1966 1996 Farmer (President, Howie
23 Woodlawn Drive Cedar Grove, Inc.; Partner, L&J
Yazoo City, MS 39194 Farms and Cedar Grove
Vice Chairman of Board of Plantation)
Directors
G. David Jobe* 01/05/43 1989 1995 Senior Vice President,
615 Locust Street Corporate Operations, MFA
Columbia, MO 65201 Incorporated (Farmer Co-op)
Tom C. Parry* 03/17/28 1972 1995 Retired President, Mississippi
240 Gulf Shore Drive, #732 Chemical Corporation
Destin, FL 32541
W.A. Percy II* 11/17/39 1988 1994 Farmer (Partner, Trail Lake
P.O. Box 189 Enterprises, President,
Arcola, MS 38722 Greenville Compress Company)
Gene C. Pickens 04/04/27 1984 1996 Farmer (Director, Alabama
265 Co. Road 19 Farmers Cooperative, Inc.)
Mount Hope, AL 35651 (Farmer Co-op)
</TABLE>
-63-
<PAGE>
<TABLE>
<CAPTION>
YEAR
FIRST YEAR
DATE ELECTED TERM
NAME AND ADDRESS OF BIRTH DIRECTOR EXPIRES PRESENT PRINCIPAL OCCUPATION
<S> <C> <C> <C> <C>
E.C.A. Runge 08/04/33 1985 1994 Professor and Head of Soil and
Soil and Crop Sciences Dept. Crop Sciences Department,
Texas A&M University Texas A&M University
College Station, TX 77843
Wayne Thames* 03/30/36 1973 1994 Cattleman
Route 2, Box 194-A
Evergreen, AL 36401
</TABLE>
* Member of Executive Committee.
All of the above named directors have served on the Cooperative's Board of
Directors and in the occupations shown above for more than five years except the
following:
John W. Anderson - Mr. Anderson is a resident of Decatur, Alabama. In May of
1989, he was named Chief Executive Officer of Alabama Farmers Cooperative, Inc.
Prior to 1989, Mr. Anderson was Manager of the Anderson's Peanuts Division of
Alabama Farmers Cooperative. He had been affiliated with Anderson's Peanut
Division since 1984.
G. David Jobe - Mr. Jobe is a resident of Columbia, Missouri, where he serves as
Senior Vice President of Corporate Operations of MFA Incorporated. He has been
affiliated with MFA since 1981.
John A. Denton - Mr. Denton is a farmer and a resident of Cleveland,
Mississippi. Since 1973, he has served as Vice President of Denton Company,
Inc. He is also a partner in J&P Planting Company and a Vice President of
Denton Gin Company, Inc., and Shelby Service petroleum.
Randon D. Bounds - Mr. Bounds is a resident of Carriere, Mississippi, and is a
fertilizer dealer. Since 1988, he has served as President and General Manager
of Paul E. Bounds, Inc., with stores in Picayune and Poplarville,
Mississippi.
W.R. Dyess - Mr. Dyess is a farm supply dealer and a resident of Ennis, Texas.
Since 1972, he has served as President of Dyess Farm Center, Inc., in Bardwell,
Texas, and ABC Ag Center, Inc., in Corsicana, Texas.
John A. Gaston - Mr. Gaston is a resident of North Little Rock, Arkansas. Since
1991, he has served as Senior Vice President-Principal Financial Officer of SF
Services, Inc., in North Little Rock, Arkansas. During fiscal 1991, Southern
Farmers Association and MFC Services (AAL) combined their assets to create SF
Services, Inc. Prior to 1991, Mr. Gaston served MFC Services
-64-
<PAGE>
(AAL) for 26 years in various positions, including Senior Vice President and
Treasurer.
Charles O. Dunn - Mr. Dunn has been employed by Mississippi Chemical
Corporation since 1978; he was elected President and Chief Executive Officer
of the Cooperative in April 1993. Prior to becoming President, Mr. Dunn
served in various positions within the Cooperative, including Attorney and
Executive Vice President. Mr. Dunn is also Vice Chairman of the Board of
Directors and Chief Executive Officer of Newsprint South, Inc.
On August 23, 1991, the Cooperative's Board of Directors passed a resolution
authorizing SF Services, Inc., to have two representatives on the Cooperative's
Board at all times.
Executive Officers of the Cooperative
Officers are elected for a one-year term by the Board of Directors. The
following executive officers have been elected and were serving as of July 1,
1993:
<TABLE>
<CAPTION>
EFFECTIVE
EMPLOYMENT DATE IN
DATE OF DATE WITH PRIOR POSITION WITH PRESENT
OFFICER BIRTH COOPERATIVE COOPERATIVE POSITION
<S> <C> <C> <C> <C> <C>
Charles O. Dunn 11/16/47 12/1/78 11/01/88 Executive Vice 4/1/93
President and Chief to President
Executive Officer 04/01/93
W.F. Hawkins 1/19/31 07/12/66 10/27/81 Senior Vice 4/28/87
Senior Vice President- to President-Finance
Finance and 04/28/87
Administration
David W. Arnold 12/06/36 08/01/66 10/27/87 Senior Vice 7/1/91
Senior Vice President- to President-
Technical Group 07/01/91 Research and
Engineering
C.E. McCraw 03/26/48 01/14/74 04/28/87 Vice President- 10/29/91
Senior Vice President- to Operations
Fertilizer Group 07/01/91
07/01/91 Vice President-
to Fertilizer Group
10/29/91
Robert E. Jones 08/18/47 02/19/74 06/24/86 General Counsel 10/24/89
Vice President and to
General Counsel 10/24/89
</TABLE>
-65-
<PAGE>
<TABLE>
<CAPTION>
EFFECTIVE
EMPLOYMENT DATE IN
DATE OF DATE WITH PRIOR POSITION WITH PRESENT
OFFICER BIRTH COOPERATIVE COOPERATIVE POSITION
<S> <C> <C> <C> <C> <C>
Rosalyn B. Glascoe 07/06/44 04/13/81 6/24/86
Corporate Secretary
</TABLE>
All officers are full-time employees of the Cooperative.
COMPENSATION OF DIRECTORS
Coley L. Bailey, who is chairman of the Board of Directors of the
Cooperative, is paid a monthly fee of $1,667 plus expenses. All other
directors, excluding Charles O. Dunn, are paid $400 per meeting day, plus
expenses. Charles O. Dunn receives no remuneration as a director.
COMPENSATION OF EXECUTIVE OFFICERS
The primary components of the Cooperative's executive officers' compensation
program are base salaries and annual bonuses.
-66-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted
Name and Compen- Stock LTIP All Other
Principal Salary Bonus sation Award(s) Options/ Payouts Compensation
Position Year ($) ($) ($) ($) SARs (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles O. Dunn 1993 $243,319 $64,612 $4,427 $ $ $ $
President 1992 $216,600 $65,846 $4,303 $ $ $ $
1991 $202,416 $68,822 $4,116 $ $ $ $
W.F. Hawkins 1993 $212,628 $45,077 $4,427 $ $ $ $
Senior V. Pres. - 1992 $198,720 $55,344 $4,303 $ $ $ $
Finance and 1991 $185,700 $57,567 $4,116 $ $ $ $
Administration
C.E. McCraw 1993 $195,132 $41,758 $4,427 $ $ $ $
Senior V. Pres. - 1992 $175,008 $46,377 $4,303 $ $ $ $
Fertilizer Group 1991 $151,836 $42,515 $4,116 $ $ $ $
Robert E. Jones 1993 $162,648 $32,123 $4,427 $ $ $ $
V. Pres. and 1992 $152,016 $34,584 $4,303 $ $ $ $
General Counsel 1991 $142,008 $35,502 $4,116 $ $ $ $
David W. Arnold 1993 $159,540 $30,711 $4,427 $ $ $ $
Senior V. Pres. - 1992 $149,100 $33,920 $4,303 $ $ $ $
Technical Group 1991 $139,344 $34,836 $4,116 $ $ $ $
</TABLE>
* In 1973 the Cooperative established a thrift plan for its employees.
Under this plan, employees may defer up to a maximum of 17.6% of their base pay,
or $8,994 as allowed by law. The Cooperative matches the first 6% of the
employee's contribution at the rate of $0.50 to the $1.00. Effective April 1,
1984, the plan was converted to a 401(k) plan. Employee salary deferrals are
included, for purposes of this report, as other annual compensation in the
Summary Compensation Table. Employees become fully vested in Cooperative
matching contributions after five years' participation in the plan. The amounts
disclosed in column (e) of the Summary Compensation Table represent employee
salary deferrals otherwise payable during the fiscal year ended June 30, 1993.
-67-
<PAGE>
Base Salaries.
Base salaries of the President and other executive officers are based on
internal equity and external competitiveness. The Cooperative has retained
W.M.S., a compensation consulting firm to assist in the establishment of salary
ranges for each executive officer. Individual salaries are set within the
established range based on subjective individual performance evaluations. It is
the objective of the Compensation Committee of the Cooperative to develop salary
programs which attract and maintain qualified key employees.
Annual Bonuses.
Annual bonuses for executive officers are intended to reward key employees
who have a material impact on the Cooperative's operating results. Bonuses are
not paid unless the Cooperative's financial performance, as measured by
specified ratios, ranks in the top 50% of an industry survey. The President's
bonus is based on corporate performance. Other executive officers' bonuses are
based in part on corporate performance, as measured by specific financial
measurements, and in part on management's evaluation of each executive officer's
performance. These criteria are reviewed and approved by the Compensation
Committee. Under this plan, the Chief Executive Officer's bonus can range as
high 30% of base salary. Other executive officers can achieve bonuses up to a
maximum percentage established by the Compensation Committee. For 1993, maximum
bonus potential for the Cooperative's four most highly compensated executive
officers, other than the Chief Executive Officer, ranged between 15% and 21%.
BOARD COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors reviews and approves the
compensation policies of the Cooperative and the compensation paid to executive
officers. The members of the Compensation Committee are John Sharp Howie,
Chairman, Bruce J. Brumfield, Robert P. Dixon and Thomas H. Gist, Jr.
No member of the Compensation Committee is an employee of the Cooperative.
PENSION PLAN
The Cooperative 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
Cooperative contributions on behalf of individual specified participants cannot
be calculated by plan actuaries. Only an employee's "base pay" is covered by
the plan. Plan compensation does not include bonuses, overtime or shift
differentials. The following table shows 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.
-68-
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
REMUNERATION YEARS OF SERVICE
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 $10,005 $12,500 $ 15,625 $ 18,750 $ 21,875
$100,000 $25,005 $32,440 $ 39,763 $ 47,175 $ 54,880
$150,000 $40,005 $52,440 $ 64,763 $ 77,175 $ 89,880
$200,000 $55,005 $72,440 $ 89,763 $104,077 $104,077
$250,000 $65,757 $86,776 $104,077 $104,077 $104,077
$300,000 $65,757 $86,776 $104,077 $104,077 $104,077
$350,000 $65,757 $86,776 $104,077 $104,077 $104,077
$400,000 $65,757 $86,776 $104,077 $104,077 $104,077
$450,000 $65,575 $86,776 $104,077 $104,077 $104,077
</TABLE>
Years of service for the officers listed in the Summary Compensation Table
are: Charles O. Dunn - 15; William F. Hawkins - 27; C.E. McCraw -20; Robert E.
Jones - 20; and David W. Arnold - 28.
SUPPLEMENTAL BENEFIT PLAN
In fiscal 1984, the Cooperative established a nonqualified "Defined Benefit"
Supplemental Benefit Plan for any employee who is a participant in the Pension
Plan and whose benefits from that Plan will, at his retirement, be limited by
the operation of Section 415 of the Internal Revenue Code and/or, effective for
fiscal 1991, Section 407(a)(17) of the Code. The purpose of the supplemental
plan is to make up the difference between the defined pension benefit permitted
under Section 415 of the Code and what would otherwise be payable but for the
Section 415 limit.
Benefits from this Plan will be payable to any participant designated by the
Plan Administrator on a monthly basis beginning at the time and under the terms
that would have applied if such benefits had been payable from the Pension Plan.
The following table shows estimated annual benefits payable under the Plan to
persons in specified compensation and years of service categories.
-69-
<PAGE>
The actual benefit paid under the supplemental plan is the supplemental benefit
minus the allowable pension plan benefit.
SUPPLEMENTAL BENEFIT PLAN TABLE
<TABLE>
<CAPTION>
REMUNERATION YEARS OF SERVICE
<S> <C> <C> <C>
20 30 40
$150,000 $ -0- $ -0- $ 2,351
$200,000 $ -0- $ 6,518 $ 42,351
$250,000 $ 8,456 $36,581 $ 82,351
$300,000 $28,456 $66,581 $122,351
$350,000 $48,456 $96,581 $162,351
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the record date, the voting securities of the Cooperative owned of
record or beneficially by any person who owns of record, or is known by the
Cooperative to own beneficially, more than 5% of any class of such securities
are shown below:
<TABLE>
<CAPTION>
AMOUNT
NAME AND ADDRESS TYPE OF OWNED PERCENT OF
TITLE OF SHARES OWNERSHIP (SHARES) CLASS
<S> <C> <C> <C> <C>
SF Services, Inc. Nitrogen Record 469,080 11.8
824 N. Palm Street Potash Record 24,001 64.6
P.O. Box 5489
N. Little Rock, AR 72119
Mulberry Phosphates, Inc. Nitrogen None None -0-
P.O. 797 Potash Record 12,110 32.6
Mulberry, FL 33860
</TABLE>
As of the record date, the officers and directors collectively owned directly
and indirectly approximately 51,000 shares which represents less than 1.3% of
all classes of outstanding shares of Cooperative Common Stock. The Cooperative
knows of no contractual arrangements which may at a subsequent date result in a
change in control of the Cooperative.
-70-
<PAGE>
NEWSPRINT SOUTH, INC.
DESCRIPTION OF NEWSPRINT SOUTH, INC.
General.
The Cooperative's wholly owned subsidiary, Newsprint South, Inc.
("NSI"), manufactures and distributes newsprint. NSI was organized in 1986
under the general corporate laws of the state of Delaware. It is taxed as a
general corporation under Subchapter C of the Internal Revenue Code. It is
currently anticipated that, prior to the Merger, the Cooperative will
dispose of a majority of its interest in the outstanding common stock
of NSI.
Business.
In 1989, NSI completed the construction of a newsprint mill near
Grenada, Mississippi, at a cost of approximately $350 million. NSI
sold the newsprint mill and leased it back from a third party. The operating
lease provides for a 20-year term which expires December 31, 2009. Rental
payments are made semiannually and may vary based on prevailing interest
rates.
For the last three fiscal years, NSI's sales were $97,293,000 for
1993; $95,472,000 for 1992; and $106,073,000 for 1991. During the last four
fiscal years, NSI incurred losses of $17,891,000 for 1993; $18,346,000 for 1992;
$8,653,000 for 1991; and $21,838,000 for 1990. A further significant loss is
projected for fiscal 1994.
NSI's losses are directly attributable to depressed conditions in the
newsprint industry, since mill operations have been reliable and costs have been
reduced due to increased production and improved mill performance.
U.S. newsprint prices have been extremely depressed for several years
and are currently at historical lows. A massive capacity buildup during the
late 1980's coincided with a decline in newsprint consumption, causing an acute
supply/demand imbalance and a precipitous decline in the price of newsprint.
Newsprint prices declined by over 30% during the period from 1988 to mid-1992,
causing record losses for the newsprint industry. Following a brief and modest
improvement in prices during late 1992 and early 1993, prices have returned to
mid-1992 levels. A price increase has been announced for late Spring 1994.
However, even if this increase is fully implemented, NSI's manufacturing and
distribution costs will still be well in excess of the sales price of newsprint.
NSI is not expected to return to profitability in the near term.
As a result of NSI's losses, which are expected to continue, and
continuing negative industry trends, the Cooperative's Board of Directors has
authorized the Cooperative's management to dispose of the Cooperative's interest
in NSI.
-71-
<PAGE>
Properties.
NSI's newsprint mill is located on approximately 900 acres in Grenada
County, Mississippi. The facility includes an administration building, chipping
and chip storage facilities, warehouse and paper storage facilities, a paper
machine, a thermomechanical pulp mill, water intake, pipeline and storage
facilities.
NSI began manufacturing newsprint in July of 1989. Annual design
production capacity of the mill is 224,000 tons of newsprint. Production during
the fiscal years ended June 30, 1993, 1992, and 1991, was 236,687; 227,434; and
224,835 tons, respectively.
Marketing.
Newspaper publishers, commercial printers and other users of newsprint
located primarily in the South and Southwest have contracted to purchase
approximately 218,000 tons of NSI's newsprint production, which accounts for
approximately 97% of NSI's design production capacity. These contracts provide
for prices based on prevailing market conditions.
NSI has identified a number of southern states as its primary market
area. These states have experienced a newsprint demand growth similar to
that of the total U.S. southern region--the fastest growing newsprint demand
market in the U.S. In fiscal years 1993, 1992 and 1991, NSI's sales in these
states accounted for 87.0%, 84.6% and 82.2%, respectively, of total newsprint
sales.
Competition.
Canada is the largest supplier of newsprint to the U.S. market,
supplying approximately 50% of total U.S. demand.
Currently, NSI's principal competitors are both southern regional
producers and other North American producers. It is anticipated that the most
significant future competition will consist of 10 southern regional producers,
none of which are expected to hold a dominant regional market share. The
principal methods of competing are price and quality.
Raw Materials.
Pine timber is the principal raw material required for NSI's newsprint
production. Production at the mill also requires significant amounts of water
and electricity. Pine timber is in ample supply within the area surrounding the
mill, and NSI has access to adequate supplies that it either owns, has under
contract, or can readily obtain on the open market. During fiscal 1993, demand
for timber continued to increase in NSI's procurement area and prices rose.
Electricity is supplied to the site pursuant to a contract with the Tennessee
Valley Authority. Water supplies are adequate and are obtained from fully
permitted water intake facilities on the Yalobusha River near the mill.
Employees.
NSI has approximately 220 employees.
-72-
<PAGE>
Compliance with Environmental Regulations.
The thermomechanical pulp ("TMP") production process utilized in NSI's
newsprint mill was selected in part because of its minimal environmental impact
as compared to traditional Kraft processes. Since completion of the mill, there
have been no material environmental capital expenditures. Additionally, because
the mill was recently constructed in accordance with applicable environmental
standards, environmental expenditures in future years are not expected to be
material under existing governmental standards. Presently, the EPA has proposed
rules commonly known as the "cluster rule" which would affect both air and water
emissions from the pulp and paper industry. NSI is assessing the cost of
complying with these rules if implemented. NSI believes that it is in compliance
in all material respects with applicable environmental requirements. The mill is
operated under permits relating to both the Clean Air Act and the Clean Water
Act. NSI cannot predict the impact of future laws and regulations.
THE DISPOSITION OF NSI
The Board of Directors of the Cooperative has determined that NSI and
its newsprint operations no longer represent a strategic business for the
Cooperative and that a disposition of those interests is in the best interest of
the Cooperative. The Board does not consider it likely that NSI will be
profitable in the foreseeable future. As of a current date, NSI has a
substantial negative net worth and, in the absence of a significant and
prolonged improvement in NSI's performance, the common equity of NSI is unlikely
to have any material value. The Board believes that the disposition of NSI will
benefit the Cooperative by enabling it to focus attention on its core fertilizer
business. At the same time, NSI will be free to continue efforts to restructure
its obligations in a manner which will permit continued operations.
The Cooperative and the principal parties (the mill owner and the
primary lender) to the leveraged lease transaction pursuant to which the NSI
facilities are financed are discussing a proposed transaction involving a
transfer by the Cooperative of a majority of its interest in NSI. Under the
terms of the proposed transaction, the Cooperative will pay $19 million to NSI
in various forms, including capital contributions, payments in liquidation of
the Cooperative's obligations under a newsprint purchase contract and certain
tax-compensating payments pursuant to a tax-sharing agreement. Prior loans in
the amount of approximately $14 million made by the Cooperative to NSI pursuant
to a newsprint purchase contract between the Cooperative and NSI will be
converted to capital. Pursuant to the proposed transaction, the Cooperative will
also purchase from NSI CoBank common stock in the face amount of $3,985,000 for
a purchase price of $4 million. This stock is scheduled for redemption at the
face amount by CoBank during the next five years. It is the Cooperative's
objective to complete this transaction prior to June 30, 1994. Consummation is
subject to the prior approval of the boards of directors of the respective
parties and to the negotiation and execution of definitive documents.
If for any reason the above-described transaction is not implemented,
it is the intention of the Cooperative to dispose of a
-73-
<PAGE>
majority of its interest in the NSI stock pursuant to an alternate transaction
which will be completed as soon as possible, but not later than June 30, 1995.
The mill owner and the primary lender have taken the position that a
disposition of NSI by the Cooperative requires their prior consent. The
Cooperative believes that it has the right to proceed with a disposition of its
interests without any prior consent and that it can do so in a manner consistent
with all of its obligations in connection with the financing of NSI.
Although NSI's debts are "non-recourse" to the Cooperative and the
Cooperative is not responsible for NSI's continuing losses, as a wholly owned
subsidiary, NSI's financial results are consolidated with those of the
Cooperative. Following the disposition of a majority of the Cooperative's
interest in NSI, NSI will cease to be a wholly owned subsidiary of the
Cooperative and its financial results will no longer be consolidated with those
of the New Company.
CONTINUING RELATIONSHIPS BETWEEN THE COOPERATIVE AND NSI
It is anticipated that the Cooperative will retain a minority interest
in NSI.
The Cooperative currently provides certain services to NSI under a
management services agreement dated August 15, 1989. Under this arrangement, the
Cooperative provides engineering, accounting, data processing, legal and other
services to NSI for a monthly fee plus reimbursement of all direct expenses
incurred on behalf of NSI. During the years ended June 30, 1993 and 1992, NSI
incurred charges from the Cooperative of $2,510,000 and $2,548,000,
respectively, under the management services agreement. The current term of this
agreement expires October 1, 1994. Under the proposed arrangements with the
leveraged lease parties, the Cooperative would continue to provide management
services during a transition period of up to six months.
When NSI was formed, the Cooperative entered into an agreement with
NSI to purchase for resale up to 61,145 tons of newsprint per year. The
agreement provides that the Cooperative's obligation to purchase is reduced by
the extent to which NSI enters into agreements for the sale of such newsprint to
third parties. NSI has secured customers for the newsprint, and no deliveries of
newsprint have been made directly to the Cooperative. If the ultimate customers
purchase the newsprint at prices less than NSI's cash costs and expenses,
determined consistent with generally accepted accounting principles, the
Cooperative is required to advance NSI the difference between the price paid by
such customers and NSI's cash costs and expenses. Amounts payable from the
Cooperative to NSI under this agreement were $3,995,000 for the fiscal year
ended June 30, 1993, and $4,190,000 for the fiscal year ended June 30, 1992. The
Cooperative's obligations to make payments based on NSI's costs expires on June
30, 1996. NSI is obligated to repay the Cooperative these amounts when the
market price of newsprint exceeds the related cost of production and NSI has
achieved specified levels of profitability. The term of this agreement extends
until December 31, 2010. Under the proposed transaction with the primary parties
to the leveraged lease, the Cooperative would be
-74-
<PAGE>
released from its further obligations under the newsprint contract. If for any
reason the proposed transaction is not completed, the newsprint contract would
remain in effect.
OTHER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others.
The primary business of the Cooperative is to provide fertilizer products to
its shareholders pursuant to preferred patronage rights by which they have the
right to purchase fertilizer products in proportion to the type and amount of
Cooperative Common Stock they own. In order to purchase Cooperative
Stock, the prospective purchaser must first demonstrate a need for the
Cooperative's products. The vast majority of the Cooperative's sales are made
to its shareholders. Consequently, the directors of the Cooperative are either
direct customers of the Cooperative or are affiliated in some capacity with
direct customers of the Cooperative. All sales of product to directors and
their affiliates are made in the ordinary course of business at prices and terms
which are determined based on prevailing competitive conditions and which are
comparable to the prices and terms of transactions with other shareholders of
the Cooperative.
Patronage refunds paid to shareholders holding of record or beneficially more
than 5% of any class of the Cooperative's outstanding shares during the past
three fiscal years were as follows:
<TABLE>
<CAPTION>
PATRONAGE REFUNDS
(DOLLARS IN THOUSANDS)
NAME OF SHAREHOLDER 1993 1992 1991
<S> <C> <C> <C>
SF Services, Inc. $1,873 $2,982 $7,708
N. Little Rock, AR
Mulberry Phosphates, Inc. 0 0 0
Mulberry, FL
</TABLE>
Effective November 1, 1987, SF Services, Inc. ("SFS") and the Cooperative
entered into a lease agreement by the terms of which SFS leased the
Cooperative's storage facility located at North Little Rock, Arkansas, for a
period of five years, with an option to purchase said facility. The option was
exercised prior to July 1, 1992. Completion of this transaction is expected to
occur shortly. Two members of the Cooperative's Board of Directors, Robert P.
Dixon and John A. Gaston, are executive officers of SFS.
-75-
<PAGE>
On August 30, 1993, the Cooperative conveyed a storage facility located at
Decatur, Alabama to Alabama Farmers Cooperative, Inc. John W. Anderson is a
member of the Cooperative's Board of Directors and is the President and Chief
Executive Officer of Alabama Farmers Cooperative, Inc.
In the opinion of management, the transactions described are on terms as
favorable to the Cooperative as if transacted with unaffiliated third parties.
Certain Business Relationships.
During the fiscal year ended June 30, 1993, sales to SFS were approximately
$33 million representing approximately 8.5% of the Cooperative's consolidated
gross revenues and approximately 8.6% of SFS's consolidated gross
revenues. Robert P. Dixon and John A. Gaston are executive officers of SFS.
During fiscal 1993, sales to Alabama Farmers Cooperative, Inc. ("AFC") and Chem-
Nut, Inc. ("Chem-Nut") were approximately $14 million and approximately $8
million, respectively. These sales represent 6.6% of the gross revenues
of AFC and 5.9% of the gross revenues of Chem-Nut. John W. Anderson and Caroll
F. Harpole are executive officers of AFC and Chem-Nut, respectively.
Sales to SFS, AFC and Chem-Nut were on terms and conditions comparable to
transactions with other shareholders.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen & Co. has served as the Cooperative's independent
public accountants for approximately four years, and has been elected to serve
as the independent public accountants for the Cooperative for the fiscal year
ending June 30, 1994. Arthur Andersen & Co. has been elected to serve as the
independent public accountants for the New Company.
LEGAL MATTERS
Legal matters in connection with the Plan will be passed upon for the
Cooperative by Robert E. Jones, Vice President and General Counsel of the
Cooperative. Certain legal matters relating to the federal tax consequences of
the Plan will be passed upon for the Cooperative by McDermott, Will & Emery of
Chicago, Illinois.
EXPERTS
The financial statements included in the Proxy Statement/Prospectus on pages
F-11 through F-31 have been examined by Arthur Andersen & Co., independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
By Order of the Board of Directors
-76-
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Consolidated Balance Sheets F-2
March 31, 1994 (unaudited) and
June 30, 1993
Consolidated Statements of Operations F-3
Three months ended March 31, 1994 and 1993 (unaudited)
and Nine months ended March 31, 1994 and 1993
(unaudited)
Consolidated Statements of Cash Flows F-4
Nine months ended March 31, 1994 and 1993 (unaudited)
Consolidated Statements of Shareholder-Members' F-5
Equity
Fiscal Year Ended June 30, 1993 and Nine months ended
March 31, 1994 (unaudited)
Notes to Consolidated Financial Statements (unaudited) F-6
March 31, 1994 MD&A F-8
Report of Independent Public Accountants F-14
Consolidated Balance Sheets F-15
June 30, 1993 and 1992
Consolidated Statements of Operations F-16
June 30, 1993, 1992 and 1991
Consolidated Statements of Shareholder-Members' F-17
Equity at June 30, 1993, 1992 and 1992
Consolidated Statements of Cash Flows F-18
June 30, 1993, 1992 and 1992
Notes to Consolidated Financial Statements F-19
Schedule V - Property, Plant and Equipment F-32
Schedule VI - Accumulated Depreciation, Depletion and F-33
Amortization of Property, Plant and Equipment
Schedule IX - Short-Term Borrowings F-34
Schedule X - Supplementary Income Statement Information F-35
June 30, 1993 MD&A F-36
</TABLE>
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands)
March 31, June 30,
1994 1993
---------- ----------
ASSETS Note 1
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,851 $ 22,706
Accounts and notes receivable 44,950 39,115
Inventories:
Finished products 14,161 9,009
Raw materials and supplies 5,003 5,426
Replacement parts 27,811 27,268
--------- ---------
Total inventories 46,975 41,703
Deferred income tax benefit 6,353 -
Prepaid expenses and other current assets 4,046 3,730
--------- ---------
TOTAL CURRENT ASSETS 107,175 107,254
INVESTMENTS AND OTHER ASSETS
National Bank for Cooperatives 8,887 9,006
Other 10,463 8,039
--------- ---------
TOTAL INVESTMENTS AND OTHER ASSETS 19,350 17,045
DEFERRED INCOME TAX BENEFIT 11,365 -
PROPERTY HELD FOR SALE 66,928 66,928
PROPERTY, PLANT AND EQUIPMENT, at cost 378,164 370,701
Less accumulated depreciation,
depletion and amortization (253,032) (241,316)
--------- ---------
Net property, plant and equipment 125,132 129,385
--------- ---------
$ 329,950 $ 320,612
========= =========
LIABILITIES AND SHAREHOLDER-MEMBERS' EQUITY
CURRENT LIABILITIES:
Long-term debt due within one year $ 4,738 $ 11,237
Notes payable 14,655 13,315
Accounts payable 24,881 29,330
Accrued interest 1,515 1,122
Accrued liabilities 23,402 10,213
Income taxes payable 2,448 47
Patronage refunds payable 7,001 13,820
-------- --------
TOTAL CURRENT LIABILITIES 78,640 79,084
LONG-TERM DEBT 70,679 73,526
OTHER LONG-TERM LIABILITIES 52,219 41,238
DEFERRED GAIN ON SALE OF NEWSPRINT MILL 6,864 7,190
SHAREHOLDER-MEMBERS' EQUITY 121,548 119,574
-------- --------
$ 329,950 $ 320,612
========= =========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine months ended
March 31, March 31,
------------------- -------------------
(Dollars in thousands) 1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $126,360 $101,986 $280,956 $260,111
Other 180 426 266 875
-------- -------- -------- --------
126,540 102,412 281,222 260,986
COSTS AND EXPENSES:
Cost of products sold 98,283 85,517 238,014 224,466
Provision for closure
of gypsum disposal
area 5,922 -0- 5,922 -0-
Selling, general and
administrative 18,140 12,739 39,668 35,888
Interest (net) 1,171 1,398 4,328 4,446
Interest capitalized -0- (99) -0- (1,027)
-------- -------- -------- --------
123,516 99,555 287,932 263,773
-------- -------- -------- --------
MARGINS (LOSS) BEFORE
INCOME TAXES AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 3,024 2,857 (6,710) (2,787)
INCOME TAXES (CREDIT) (1,360) (1,739) (5,015) (1,739)
-------- -------- -------- --------
MARGINS (LOSS) BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 4,384 4,596 (1,695) (1,048)
CUMULATIVE BENEFIT TO
JULY 1, 1993, OF CHANGE
IN ACCOUNTING FOR
DEFERRED INCOME TAXES -0- -0- 10,255 -0-
-------- -------- -------- --------
NET MARGIN (LOSS) $ 4,384 $ 4,596 $ 8,560 $ (1,048)
======== ======== ======== ========
NET MARGINS (LOSS)
APPLIED TO:
Member equities $ 6,267 $ 10,017 $ 7,001 $ 17,367
Retained earnings
(deficit) (1,883) (5,421) 1,559 (18,415)
-------- -------- -------- --------
TOTAL $ 4,384 $ 4,596 $ 8,560 $ (1,048)
======== ======== ======== ========
</TABLE>
EARNINGS PER SHARE (Earnings on shareholder business, less reserves withheld,
are returned to shareholder patrons as patronage refunds.
Other earnings are retained by the Company.)
DIVIDENDS PER SHARE (Under the Charter, no dividends are payable on any class
of stock.)
See notes to consolidated financial statements.
F-3
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in thousands) Nine months ended
March 31,
-----------------------
1994 1993
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net margins (loss) $ 8,560 $ (1,048)
Reconciliation of net margins (loss) to
net cash provided (used) by operating activities:
Depreciation, depletion and amortization 13,352 10,338
Deferred income tax benefit (17,718) -0-
Accrued gypsum disposal costs 5,922 -0-
Deferred lease expense 2,522 2,521
Loss on sale of property, plant
and equipment 60 53
Net change in operating assets and liabilities 907 (15,618)
Other (1,502) 241
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 12,103 (3,513)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (9,288) (23,420)
National Bank for Cooperatives stock revolved
and patronage refunds 579 444
Proceeds from sale of property, plant and
equipment 227 195
Other (65) 153
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (8,547) (22,628)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt proceeds 161,550 107,368
Debt payments (169,556) (102,665)
Payment of cash patronage (13,405) (22,480)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (21,411) (17,777)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17,855) (43,918)
CASH AND CASH EQUIVALENTS -
BEGINNING OF NINE MONTHS 22,706 46,855
--------- ---------
CASH AND CASH EQUIVALENTS - END OF NINE MONTHS $ 4,851 $ 2,937
========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER-MEMBERS' EQUITY
MARCH 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
---------------------------- Additional Capital
Nitrogen Mixed Potash Paid-in Equity Retained
Series Series Series Capital Credits Deficit Total
-------- ------ ----------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
July 1, 1992 $26,176 $1,460 $199 $65,381 $62,352 $(27,373) $128,195
Net margins - - - - - 4,790 4,790
Cash patronage refunds - - - - - (13,820) (13,820)
Stock issued 100 - - 315 - - 415
Stock retired - - (2) (4) - - (6)
------- ------ ---------- ------- ------- -------- --------
Balances,
June 30, 1993 26,276 1,460 197 65,692 62,352 (36,403) 119,574
Net margins - - - - - 8,560 8,560
Patronage refunds - - - - - (7,001) (7,001)
Stock issued 99 - - 316 - - 415
------- ------ ---------- ------- ------- -------- --------
Balances,
March 31, 1994 $26,375 $1,460 $197 $66,008 $62,352 $(34,844) $121,548
======= ====== ========== ======= ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
The consolidated balance sheet as of March 31, 1994, the consolidated statements
of operations for the three-month and the nine-month periods ended March 31,
1994 and 1993, the consolidated statements of cash flows for the nine-month
periods then ended, and the consolidated statements of shareholder-members'
equity as of March 31, 1994, have been prepared by the Company, without audit.
In the opinion of management, all adjustments necessary to present fairly the
financial position, results of operations and changes in cash flows at March 31,
1994, and for all periods presented have been made. All adjustments made were
of a normal recurring nature with the exception of certain adjustments made
related to the adoption of SFAS No. 109, "Accounting for Income Taxes,"
effective July 1, 1993. The cumulative effect of this accounting change
increased current period margins by $10.3 million. As a result of the adoption
of SFAS No. 109, tax expense for the quarter ended March 31, 1994, decreased by
approximately $1.5 million, and tax expense for the nine month period ended
March 31, 1994, increased by approximately $200,000. The Company has recorded
on its balance sheet deferred tax assets of $17,718,000 related to its adoption
of SFAS No. 109. Based on the earnings history of the Company, it is currently
anticipated that these assets will be realized as temporary differences reverse.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial statements
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's June 30, 1993, audited financial statements.
The usage of fertilizer in the Company's market area is highly seasonal. Spring
fertilizer usage and sales are significantly greater than fall usage and sales
in the Company's market area. The results of operations for the period ended
March 31, 1994, are not necessarily indicative of the operating results for the
full year.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
During July 1990, the Company entered into an agreement granting to a third
party an exclusive four-year option to purchase the Company's undeveloped
phosphate mineral properties. This option will expire in June, 1994, and if it
is not exercised, the Company will realize a gain to the extent of the option
payments received. If the option is exercised, the Company will not realize a
material gain or loss on the sale of the property. These properties are
classified as properties held for sale at
F-6
<PAGE>
June 30, 1993 and March 31, 1994. In December, 1993, the fourth and final option
payment was received by the Company and is included in other long-term
liabilities. Currently, the Company and the option holder are in the process of
negotiating new arrangements with respect to the properties.
The Company's Board of Directors has approved a plan of reorganization whereby
the Company will be converted from a cooperative into a regular, for-profit
business corporation. If the plan is approved by the shareholders, the
conversion will be effected by merging the Company into a newly formed, wholly
owned, noncooperative subsidiary. It is anticipated that tax expense would
increase after the conversion since the distribution of earnings on business
with shareholders would no longer be deductible for income tax purposes.
The majority of the Company's sales of nitrogen fertilizers is made to its
shareholders who purchase such products pursuant to preferred patronage rights
based on their stock ownership and who receive patronage refunds with respect to
such purchases based on the difference between the sales price and the cost of
manufacturing and selling the product. Although the surviving corporation will
grant no preferred patronage rights and will not pay patronage refunds, it is
expected that the Company will retain its current customer base and that
nitrogen sales will not be materially adversely affected by the conversion of
the Company.
Also, if the plan of reorganization is adopted, the Company will no longer be
eligible for new financing from CoBank which has been a traditional source of
financing for the Company. However, the conversion to a non-cooperative
business corporation should provide the Company more cost-effective and
efficient access to capital markets. In addition, the Company has a commitment
letter from a commercial bank to significantly increase its credit facility with
the Company (see Liquidity and Capital Resources).
F-7
<PAGE>
Management's Discussion And Analysis Of Financial
Condition And Results Of Operations As of March 31, 1994
RESULTS OF OPERATIONS
The Company's operations for the first nine months of this fiscal year reflect
the fact that the usage of fertilizer in the Company's market area is highly
seasonal. Results for the first nine months of fiscal 1994 are not indicative
of results expected for the full fiscal year. Spring fertilizer usage and sales
are significantly greater than fall usage and sales in the Company's market
area. Nevertheless, the Company operates its manufacturing plants on a year-
round basis accumulating inventory to meet its seasonal sales demand.
Newsprint South, Inc. ("NSI"), a wholly owned subsidiary of the Company,
experienced a loss for the first nine months of this fiscal year. U.S.
newsprint prices remain extremely depressed and are currently at historical
lows. A significant capacity buildup during the late 1980s coincided with a
decline in newsprint consumption, causing an acute supply/demand imbalance and a
precipitous decline in the price of newsprint. Although newsprint prices
increased modestly during April 1994, NSI is still incurring significant losses.
As a result of these losses and continuing negative industry trends, the
Company's board of directors has authorized management to dispose of a majority
of the company's interest in NSI. The Company and the principal parties to the
leveraged lease transaction pursuant to which the newsprint mill is financed are
discussing a proposed transaction involving the transfer by the Company of a
majority of its interest in NSI. If this proposed transaction is not completed,
the Company will dispose of its interest in an alternate transaction.
In December 1991, Mississippi Phosphates Corporation ("MPC"), a wholly owned
subsidiary of the Company, began the production of diammonium phosphate ("DAP").
Virtually all of MPC's production is sold to a third party which has been
appointed the exclusive distributor of MPC's production. The exclusive
distributor markets MPC's DAP primarily in international markets. During the
current quarter, MPC reserved from earnings $5.9 million relating to the
estimated cost of the closure of the phospho-gypsum disposal facility located at
its Pascagoula facility. This provision resulted in MPC showing a loss for the
current quarter and for the nine months ended March 31, 1994; however, increased
demand has caused DAP prices to rise during the year and, therefore, it is
anticipated that MPC will be profitable in fiscal 1994.
On July 1, 1993, the Company transferred assets in Carlsbad, New Mexico,
consisting of a potash mine and related facilities, to a newly formed, wholly
owned Mississippi subsidiary, Mississippi Potash, Inc.
F-8
<PAGE>
Effective July 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes." The cumulative effect of this accounting change increased current
period margins by $10.3 million. As a result of the adoption of SFAS No. 109,
tax expense for the quarter ended March 31, 1994, decreased by approximately
$1.5 million, and tax expense for the nine month period ended March 31, 1994,
increased by approximately $200,000. The Company has recorded on its balance
sheet deferred tax assets of $17,718,000 related to its adoption of SFAS No.
109. Based on the earnings history of the Company, it is currently anticipated
that these assets will be realized as temporary differences reverse.
COMPARATIVE ANALYSIS OF THE NINE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993
Following is a recap of the Company's total revenues by product lines:
<TABLE>
<CAPTION>
Nine months ended
March 31,
------------------
1994 1993
-------- --------
<S> <C> <C>
Nitrogen fertilizer $137,387 $118,668
DAP 57,249 57,855
Potash 14,319 11,566
Newsprint 70,473 71,040
-------- --------
Total 279,428 259,129
Other 1,794 1,857
-------- --------
Total Revenues $281,222 $260,986
======== ========
</TABLE>
Net sales increased 8% for the nine months ended March 31, 1994, compared with
the same period of the prior year. This increase was largely due to higher
sales volumes and prices for nitrogen fertilizers. Other income decreased
$609,000 for the nine months ended March 31, 1994, primarily due to receipt of
funds from the settlement of certain pending litigation during the nine months
ended March 31, 1993.
Cost of products sold increased 6% for the nine months ended March 31, 1994,
compared with the same period of the prior year. This increase was primarily
due to higher sales volumes and higher production costs for nitrogen fertilizers
partially offset by lower sales volumes and lower production costs for DAP.
Selling, general and administrative expenses increased 11% for the nine months
ended March 31, 1994, primarily due to increased delivery expense due to higher
volumes of nitrogen fertilizer sold.
F-9
<PAGE>
Net interest incurred decreased 3% for the nine months ended March 31, 1994,
and net interest after capitalization increased 27%. The decrease in net
interest is primarily the result of lower levels of borrowings and lower
interest rates paid by the Company. This decrease was partially offset by lower
earnings due to lower levels of investments. Capitalized interest decreased due
to the capitalization of interest related to the construction of a new nitric
acid plant in the prior year.
FERTILIZER
Net sales increased 11% for the nine months ended March 31, 1994. This increase
was due primarily to a 12% increase in nitrogen sales volumes and a 2% increase
in nitrogen sales prices. During the current period, the Company also
experienced a 25% increase in potash tons sold and a 4% increase in DAP sales
prices. These increases were partially offset by a 5% decrease in DAP tons
sold. Potash prices did not change significantly from the prior period.
Cost of products sold increased 8% from the nine months ended March 31, 1993.
The increase in cost of sales resulted primarily from higher sales volumes and
higher per-ton costs for nitrogen fertilizers partially offset by lower sales
volumes and lower per-ton costs for DAP. Also contributing to the increase were
higher sales volumes for potash. During the current period, DAP production
costs per ton declined 15% due to lower raw material costs. Nitrogen fertilizer
costs increased 15% partially due to increased maintenance and labor costs
resulting from a scheduled turnaround at the Company's Yazoo City nitrogen
production facility during the current period. Also contributing to the
increase in costs were higher natural gas costs and increased depreciation
expense related to a new nitric acid plant which began operating in January,
1993.
NEWSPRINT
Net sales did not change significantly for the nine months ended March 31, 1994.
A 3% increase in sales volume was offset by a 3% decrease in sales prices.
Cost of products sold increased 2% for the nine months ended March 31, 1994; the
result of higher sales volumes.
COMPARATIVE ANALYSIS OF THE QUARTERS ENDED MARCH 31, 1994 AND MARCH 31, 1993
Net sales increased 24% for the quarter ended March 31, 1994, compared with the
same quarter of the prior year. This increase was largely due to higher sales
volumes for nitrogen fertilizers and higher sales prices for DAP. Other income
decreased $246,000 for the quarter ended March 31, 1994, primarily due to
receipt of funds from the settlement of certain pending litigation during the
quarter ended March 31, 1993.
F-10
<PAGE>
Cost of products sold increased 15% for the current period due primarily to
higher sales volumes and higher production costs for nitrogen fertilizers.
Selling, general and administrative expenses increased 42% for the quarter ended
March 31, 1994, primarily due to higher transportation expense due to higher
per-ton delivery costs and higher volumes of nitrogen fertilizer sold.
Net interest incurred decreased 16% for the quarter ended March 31, 1994, and
net interest after capitalization decreased 10%. The decrease in net interest
is primarily the result of lower levels of borrowings and higher earnings due to
the receipt of patronage income from the National Bank for Cooperatives during
the current quarter. This decrease was partially offset by higher interest
rates paid by the Company. Capitalized interest decreased due to the
capitalization of interest related to the construction of a new nitric acid
plant in the prior year.
FERTILIZER
Net sales increased 31% for the quarter ended March 31, 1994. This increase was
due primarily to a 24% increase in sales volumes for nitrogen fertilizers and a
21% increase in sales prices for DAP. The Company also experienced a 42%
increase in potash tons sold, a 3% increase in potash sales prices, a 12%
increase in DAP tons sold as well as a 2% increase in nitrogen fertilizer sales
prices during the current quarter.
Cost of products sold increased 22% from the quarter ended March 31, 1993. The
increase in cost of sales resulted primarily from higher sales volumes of
nitrogen fertilizers and a 10% increase in nitrogen fertilizer costs. During
the current quarter, higher sales volumes of DAP were more than offset by an 18%
decrease in DAP production costs, the result of lower costs for phosphate rock
and sulfur partially offset by higher costs for ammonia. The increase in
nitrogen fertilizer costs was due to higher natural gas prices and higher costs
for purchased ammonia. During the current quarter, due to increased demand and
a temporary reduction in supplies, ammonia prices have increased approximately
60%. As seasonal demand pressures subside and supplies increase, it is
anticipated that prices will decline to more moderate levels. Natural gas costs
have increased approximately 10% over the same quarter of the prior year;
however, natural gas is in adequate supply and the Company is confident that
competitively priced natural gas will be available for current and future
operations.
NEWSPRINT
Net sales decreased 2% for the quarter ended March 31, 1994; the result of an
11% decrease in sales prices partially offset by a 9% increase in sales volumes.
F-11
<PAGE>
Cost of products sold did not change significantly for the quarter ended March
31, 1994. Lower production costs per ton were offset by higher sales volumes.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended March 31, 1994, cash provided by operating activities
was $12.1 million, and cash used by investing activities was $8.5 million.
Financing activities consumed $21.4 million, including $8.3 million the Company
paid on long-term debt during the nine-month period and cash patronage refunds
of $13.4 million. At March 31, 1994, the Company had cash and cash equivalents
of $4.9 million, which was a decrease of $17.8 million from June 30, 1993.
At March 31, 1994, the Company had working capital of $28.5 million compared to
$28.2 million at June 30, 1993. The Company's current ratio was 1.36 to 1 at
March 31, 1994, and at June 30, 1993. Short-term borrowings increased to $14.7
million at March 31, 1994, compared to $13.3 million at June 30, 1993. Long-
term debt was $70.7 million at March 31, 1994, which was a decrease of $2.8
million from the June 30, 1993, level of $73.5 million. Shareholder-members'
equity increased to $121.5 million at March 31, 1994, from $119.6 million.
Long-term debt to total capitalization decreased to 36.8% at March 31, 1994,
compared to 38.1% at June 30, 1993. The Company's long-term debt due within one
year is $4.7 million as of March 31, 1994. Cash flows from operations and
presently committed credit facilities should be adequate to meet these
obligations.
On August 6, 1992, the Company obtained a $20 million loan commitment from a
commercial bank. This commitment is a revolving credit facility that converts
any outstanding balance to term debt on June 30, 1994. At March 31, 1994, and
June 30, 1993, the balances outstanding on this loan were $3 million and $5
million, respectively. The Company currently has a commitment letter subject to
approval of final documentation which will extend the current facility for two
additional years and increase the total facility to $50 million. The Company
also has lines of credit totalling $41 million with the National Bank for
Cooperatives available to finance short-term cash requirements; however, after
the reorganization of the Company, these lines of credit will no longer be
available. The Company believes that existing cash, cash generated from
operations, and current and future available lines of credit will be sufficient
to satisfy its short- and long-term financing needs.
Capital expenditures were $9.2 million during the nine months ended March 31,
1994. These expenditures were for normal improvements and modifications to the
Company's facilities, and were financed with internally generated funds. The
Company currently anticipates capital expenditures of approximately $4.2 million
for the remainder of fiscal 1994, which includes expenditures for an emission
control system for its ammonium
F-12
<PAGE>
nitrate prill towers at its Yazoo City nitrogen production facility and the
purchase of a new computer system.
F-13
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and
the Shareholders of
Mississippi Chemical Corporation:
We have audited the accompanying consolidated balance sheets of Mississippi
Chemical Corporation (a Mississippi corporation) and subsidiaries as of June 30,
1993 and 1992, and the related consolidated statements of operations,
shareholder-members' equity and cash flows for each of the three years ended
June 30, 1993. These financial statements and the schedules referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules 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 financial statements referred to above present fairly, in
all material respects, the financial position of Mississippi Chemical
Corporation and subsidiaries as of June 30, 1993 and 1992, and the results of
their operations and their cash flows for each of the three years ended June 30,
1993, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index of
financial statements are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
based on our audits, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Memphis, Tennessee
July 30, 1993.
/s/Arthur Andersen & Co.
F-14
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Dollars in thousands) June 30
1993 1992
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 22,706 $ 46,855
Accounts and notes receivable 39,115 36,414
Inventories 41,703 41,483
Prepaid expenses and other current assets 3,730 5,679
-------- --------
Total Current Assets 107,254 130,431
INVESTMENTS AND OTHER ASSETS:
National Bank for Cooperatives 9,006 9,356
Other 8,039 7,011
-------- --------
Total Investments and Other Assets 17,045 16,367
PROPERTY HELD FOR SALE 66,928 66,928
PROPERTY, PLANT AND EQUIPMENT,
at cost, less accumulated depreciation,
depletion and amortization 129,385 116,801
-------- --------
$320,612 $330,527
======== ========
LIABILITIES AND SHAREHOLDER-MEMBERS' EQUITY
CURRENT LIABILITIES:
Long-term debt due within one year $ 11,237 $ 9,058
Notes payable 13,315 20,040
Accounts payable 29,330 26,507
Accrued interest 1,122 1,605
Accrued liabilities 10,260 10,299
Patronage refunds payable 13,820 22,895
-------- --------
Total Current Liabilities 79,084 90,404
LONG-TERM DEBT 73,526 69,942
OTHER LONG-TERM LIABILITIES 41,238 34,361
DEFERRED GAIN ON SALE OF NEWSPRINT MILL 7,190 7,625
COMMITMENTS AND CONTINGENCIES
(Notes 3, 5, 7, 9, and 11)
SHAREHOLDER-MEMBERS' EQUITY 119,574 128,195
-------- --------
$320,612 $330,527
======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial statements.
F-15
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Dollars in thousands)
Year Ended June 30
REVENUES: 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net sales $386,418 $335,129 $321,063
Other 592 (531) 777
-------- -------- --------
387,010 334,598 321,840
COSTS AND EXPENSES:
Cost of products sold 323,920 262,457 223,404
Selling, general and administrative 54,648 55,620 55,648
Interest - net 5,537 5,086 4,225
Interest capitalized (1,027) (664) (48)
-------- -------- --------
383,078 322,499 283,229
-------- -------- --------
MARGINS BEFORE INCOME TAXES 3,932 12,099 38,611
INCOME TAXES (CREDIT) (858) (904) (773)
-------- -------- --------
NET MARGINS $ 4,790 $ 13,003 $ 39,384
======== ======== ========
NET MARGINS APPLIED TO:
Patronage Refunds -
Cash patronage refunds $ 13,820 $ 22,895 $ 27,672
Capital equity credits - - 18,448
-------- -------- --------
13,820 22,895 46,120
Retained deficit (9,030) (9,892) (6,736)
-------- -------- --------
TOTAL $ 4,790 $ 13,003 $ 39,384
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial statements.
F-16
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER-MEMBERS' EQUITY
<TABLE>
<CAPTION>
(Dollars in thousands) Common Stock Additional Capital
Nitrogen Mixed Potash Paid-in Equity Retained
Series Series Series Capital Credits Deficit Total
-------- ------- ------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
June 30, 1990 $27,047 $1,460 $ 582 $68,104 $51,809 $(10,747) $138,255
Net margins - - - - - 39,384 39,384
Cash patronage refunds - - - - - (27,672) (27,672)
Capital equity
credits issued - - - - 18,448 (18,448) -
Capital equity
credits revolved - - - - (7,785) - (7,785)
Stock issued 84 - - 264 - - 348
Stock retired (1,116) - (14) (2,637) (3) 2 (3,768)
Balances,
June 30, 1991 26,015 1,460 568 65,731 62,469 (17,481) 138,762
Net margins - - - - - 13,003 13,003
Cash patronage refunds - - - - - (22,895) (22,895)
Stock issued 161 - - 511 - - 672
Stock retired - - (369) (861) - - (1,230)
Other - - - - (117) - (117)
Balances,
June 30, 1992 26,176 1,460 199 65,381 62,352 (27,373) 128,195
Net margins - - - - - 4,790 4,790
Cash patronage refunds - - - - - (13,820) (13,820)
Stock issued 100 - - 315 - - 415
Other - - (2) (4) - - (6)
Balances,
June 30, 1993 $26,276 $1,460 $ 197 $65,692 $62,352 $ (36,403) $119,574
======= ====== ===== ======= ======= ========= ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial statements.
F-17
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in thousands)
Year Ended June 30,
1993 1992 1991
---------- ---------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net margins $ 4,790 $ 13,003 $ 39,384
Reconciliation of net margins to net
cash provided by operating activities:
Deferred lease expense 3,362 3,367 3,318
Depreciation, depletion and
amortization 15,605 12,720 11,076
Deferred raw material cost 1,977 - -
Gain on sale of property, plant and
equipment (9) (166) (314)
Net change in operating assets and
liabilities (279) 9,075 4,149
Other 29 (1,459) 132
NET CASH PROVIDED BY OPERATING ACTIVITIES 25,475 36,540 57,745
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (27,663) (25,380) (5,634)
Proceeds from sale of property, plant
and equipment 543 838 930
Other 939 (420) 967
NET CASH USED BY INVESTING ACTIVITIES (26,181) (24,962) (3,737)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt payments (158,516) (35,869) (9,158)
Debt proceeds 157,553 49,925 -
Payment of cash patronage (22,480) (27,120) (12,322)
Payment of capital equity credits - (7,785) (7,270)
Proceeds from issuance of common stock - - 348
Purchase of common stock - (1,230) -
NET CASH USED BY FINANCING ACTIVITIES (23,443) (22,079) (28,402)
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (24,149) (10,501) 25,606
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 46,855 57,356 31,750
CASH AND CASH EQUIVALENTS -
END OF YEAR $ 22,706 $ 46,855 $ 57,356
========= ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated financial statements.
F-18
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1993, 1992 AND 1991
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Financial Statements
The accompanying consolidated financial statements include the accounts of
Mississippi Chemical Corporation, its subsidiaries and its proportionate share
of the assets and liabilities of Triad Chemical, a 50%-owned, unincorporated
joint venture (collectively, the "Company"). All material intercompany
transactions and balances have been eliminated.
Mississippi Chemical Corporation is organized and operated on a cooperative
basis as a manufacturer and distributor of chemical fertilizer primarily to its
shareholder-members. The Company also operates in the newsprint paper
manufacturing industry. The chemical fertilizer products are primarily used as
agricultural fertilizers. Newsprint is manufactured and distributed by the
Company's wholly owned subsidiary, Newsprint South, Inc. ("NSI").
The Company has the right to withdraw, at cost, approximately one-half of the
production of the Triad facilities and is obligated to withdraw certain minimum
quantities as specified by the Production Withdrawal Agreement. The venture's
assets constitute approximately 2.6% of total assets at June 30, 1993 and 1992.
Inventories
Inventories are stated at the lower of cost or market. Cost has been
determined under an average cost method for finished products and raw materials
and under a moving average method for replacement parts.
Investment
Investment in the National Bank for Cooperatives is stated at cost, increased
for the amount of patronage refunds received in the form of stock and allocated
surplus. The investment is reduced by the amounts redeemed. This approximates
the equity method of accounting and is in accordance with industry practice.
Property Held for Sale
Assets are classified as property held for sale if the Company is actively
engaged in trying to dispose of the assets. These assets are valued at cost or
net realizable value, whichever is less.
Property, Plant and Equipment
Depreciation of property, plant and equipment is provided over the estimated
useful lives of the related assets using primarily the declining-
F-19
<PAGE>
balance method.
Interest costs attributable to major construction and other projects under
development are capitalized in the appropriate property account and amortized
over the life of the related asset.
The Company is obligated under certain leases which for accounting purposes
are considered to be equivalent to installment purchases. The costs of such
properties are included in property, plant and equipment. The related lease
obligations, less amounts due within one year, are set forth separately in long-
term debt.
Income Taxes
The provision for income taxes relates to margins from non-member business and
such other earnings as may not be currently taxable to members. A provision for
income taxes is made on margins from member business as they relate to
nonqualified capital equity credits and reserves. No provision for income taxes
has been made on margins from member business distributed as cash patronage
refunds which are deductible in determining taxable income. All newsprint paper
is sold to non-members.
In February 1992, the Financial Accounting Standards Board issued a new
standard on accounting for income taxes which significantly changes the
accounting for deferred income taxes. Adoption is required no later than the
fiscal year ending June 30, 1994, which is when the Company presently expects to
adopt the new standard. The Company anticipates that the adoption of this
standard will have a favorable impact of approximately $4,000,000 on the
financial statements.
Reclassifications
The Company has reclassified the presentation of certain prior year
information to conform with the current year's presentation.
NOTE 2 - INVENTORIES:
Inventories were comprised of the following as of June 30:
<TABLE>
<CAPTION>
(Dollars in thousands)
1993 1992
------- -------
<S> <C> <C>
Finished products $ 9,009 $ 9,710
Raw materials and supplies 5,426 5,550
Replacement parts 27,268 26,223
------- -------
$41,703 $41,483
======= =======
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following as of June 30:
(Dollars in thousands) 1993 1992
------- -------
Mineral properties $19,110 $19,110
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Land 8,759 8,462
Buildings 23,917 22,654
Machinery and equipment 313,027 270,174
Construction in progress 5,888 22,669
-------- --------
370,701 343,069
Less accumulated depreciation,
depletion and amortization (241,316) (226,268)
-------- --------
$129,385 $116,801
======== ========
</TABLE>
The Company leases certain machinery and equipment with a cost of
approximately $9,967,000 and accumulated depreciation of $9,524,000. These
leases have been capitalized and the amortization of these assets is included in
depreciation expense. These assets were financed primarily by industrial
revenue bond issues. The terms of the leases range from 5-25 years. At the
expiration of the leases, the Company has the option to buy the property or
renew the leases at a nominal amount.
NOTE 4 - CREDIT AGREEMENTS AND LONG-TERM DEBT:
The Company has commitments from various banks, primarily the National Bank
for Cooperatives, which allow the Company to borrow up to $55,992,000 on a
short-term basis. Outstanding borrowings under these commitments were
$13,315,000 at June 30, 1993, and $20,040,000 at June 30, 1992. These amounts
are reflected in notes payable on the consolidated balance sheets.
In fiscal 1993, the Company obtained a $20,000,000 loan commitment from a
commercial bank. This commitment is a revolving credit facility that converts
any outstanding balance to term debt on June 30, 1994. Outstanding borrowings
under this commitment were $5,000,000 at June 30, 1993.
An additional $10,000,000 commitment from a commercial finance company is
available for payments of rent under the newsprint mill lease. This commitment
is available only to the extent sales prices do not meet a specified level.
Outstanding borrowings under this commitment were $700,000 at June 30, 1993.
Long-term debt consisted of the following as of June 30:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
--------- ---------
<S> <C> <C>
Mortgage notes payable:
National Bank for Cooperatives (7%) $ 44,769 $30,109
Financial institutions (7.3%) 9,900 15,969
Purchase money mortgages (6%) 839 1,890
Capitalized lease obligations (7%) 17,607 19,384
Subordinated debentures (9.5%) 3,148 3,148
City of Grenada Urban Development
Action Grant (5%) 8,500 8,500
-------- -------
84,763 79,000
Long-term debt due within one year (11,237) (9,058)
-------- -------
$ 73,526 $69,942
======== =======
</TABLE>
Substantially all of the assets of the Company are pledged as
F-21
<PAGE>
collateral under various loan and lease agreements.
Mortgage notes payable to the National Bank for Cooperatives are stated at the
current effective interest rate which is subject to adjustment by the bank. The
net rate charged by the National Bank for Cooperatives is related to the bank's
cost of funds.
The amounts payable to the City of Grenada represent the proceeds of an Urban
Development Action Grant payable beginning in 1995.
The various loan agreements have covenants that require, among other things,
that the Company maintain specified levels of tangible assets to long-term debt,
long-term debt to equity and current assets to current liabilities. In
addition, they place restrictions on the payment of cash patronage refunds.
Loan agreements with the National Bank for Cooperatives require the Company and
its subsidiaries to maintain an investment in varying amounts in the National
Bank for Cooperatives.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Long-Term Capitalized Leases
(Dollars in thousands) Obligations (Including Interest)
----------- --------------------
<S> <C> <C>
Year Ending June 30
1994 $ 9,538 $ 2,832
1995 12,100 2,574
1996 20,180 2,478
1997 9,880 2,022
1998 3,980 1,997
Thereafter 11,478 12,766
------- -------
67,156 24,669
Less interest - 7,062
------- -------
$67,156 $17,607
======= =======
</TABLE>
NOTE 5 - SHAREHOLDER-MEMBERS' EQUITY:
Common stock authorized consisted of the following at June 30:
<TABLE>
<CAPTION>
Authorized
Common Stock Par Value Shares
------------ --------- ----------
<S> <C> <C>
Nitrogen Series I $30 50,000
Nitrogen Series II 15 2,500,000
Nitrogen Series III 2 2,750,000
Mixed Series IV 15 1,500,000
Mixed Series V 15 1,000,000
Potash Series VI 15 150,000
Potash Series VII 15 450,000
(None Issued)
</TABLE>
F-22
<PAGE>
Common stock issued and outstanding consisted of the following:
<TABLE>
<CAPTION>
Potash
Nitrogen Series Mixed Series Series
I II III IV V VI
------- --------- --------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding,
July 1, 1990 12,973 1,438,657 2,539,091 94,537 2,773 38,819
Retirements - (74,400) - - - (941)
Issues - 5,555 - - - -
Transfers (814) - 12,210 - - -
Shares outstanding,
June 30, 1991 12,159 1,369,812 2,551,301 94,537 2,773 37,878
Retirements - - - - - (24,601)
Issues - 10,768 - - - -
Transfers (649) - 9,735 - - -
Shares outstanding,
June 30, 1992 11,510 1,380,580 2,561,036 94,537 2,773 13,277
Retirements - - - - - (122)
Issues - 6,634 - - - -
Transfers (609) - 9,135 - - -
------- --------- --------- ------ ----- -------
Shares outstanding,
June 30, 1993 10,901 1,387,214 2,570,171 94,537 2,773 13,155
======= ========= ========= ====== ===== ========
</TABLE>
F-23
<PAGE>
During June 1993 and 1992, the Board of Directors voted to reserve 50% and
40%, respectively, of the earnings from business with shareholders. This
reserve is reflected in an "Allocated Surplus Account" maintained by the
Company, and amounts set aside in the account are allocated to individual
shareholders in the same proportion that the earnings from business with such
shareholders bears to total earnings from business with all shareholders. The
allocated surplus, which totalled $29,595,000 at June 30, 1993, would receive a
preference in distribution over unallocated surplus in the event of the
liquidation of the Company. The allocated surplus is a component of retained
deficit which is included in the consolidated statements of shareholder-members'
equity.
The Board of Directors authorized the payment of 40% of patronage refunds in
the form of nonqualified capital equity credits in 1991. Nonqualified capital
equity credits are not deductible in computing the Company's income taxes and
are not includable in taxable income of the patron until the year of redemption.
The credits have no fixed maturity date and are subordinate to all debt of the
Company.
Nonqualified capital equity credits issued in 1980 were redeemed in fiscal
1991, and capital equity credits issued in 1981 were redeemed in fiscal 1992.
The redemption of capital equity credits is at the discretion of the Board of
Directors and is based on the financial condition and capital requirements of
the Company, the availability of funds under restrictive covenants in the
Company's financing arrangements, tax considerations, and other factors. The
Board of Directors did not elect to redeem capital equity credits in fiscal year
1993 or fiscal year 1994.
The Company's bylaws prohibit the payment of dividends on any class or series
of common stock and provide for one vote for each share outstanding.
In July 1990, the Executive Committee of the Board of Directors authorized the
purchase of up to 74,400 shares of Nitrogen Series II Common Stock from a major
shareholder at a price of $50 per share. This purchase was completed during
March 1991, and the stock was retired. During the year ended June 30, 1992, the
Company purchased 24,001 shares of Potash Stock from the same shareholder at $50
per share.
NOTE 6 - RETIREMENT PLANS:
The Company maintains non-contributory defined benefit pension plans which
provide benefits to substantially all full-time employees. Under the plans,
retirement benefits are primarily a function of both the average annual
compensation and number of years of credited service. The plans are funded
annually by the Company, subject to the full funding limitation.
Net periodic pension expense includes the following components at June 30:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned during the period $1,803 $1,574 $1,179
Interest cost on projected benefit obligations 3,850 3,556 3,281
Actual gain on plan assets (5,886) (5,154) (5,023)
</TABLE>
F-24
<PAGE>
<TABLE>
<S> <C> <C> <C>
Net amortization and deferral of transition
asset (355) (314) (455)
Unrecognized gain on plan assets 1,172 813 1,029
------ ------ ------
Net periodic pension expense $ 584 $ 475 $ 11
====== ====== ======
</TABLE>
The following table sets forth the plans' funded status and the amounts
included in the Company's consolidated balance sheets at June 30:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $46,347 $42,649
Non-vested benefit obligation 514 699
------- -------
Accumulated benefit obligation 46,861 43,348
Increase in benefits due to future
compensation increases 9,464 9,135
------- -------
Projected benefit obligation 56,325 52,483
Estimated fair value of plan assets 61,553 56,488
------- -------
Plan assets in excess of projected benefit obligation 5,228 4,005
Remaining unrecognized transition assets (4,733) (5,082)
Unrecognized net loss 4,773 4,885
------- -------
Prepaid pension cost at end of year $ 5,268 $ 3,808
======= =======
</TABLE>
The following assumptions were used to measure net periodic pension cost for
the plans for 1993, 1992 and 1991:
<TABLE>
<CAPTION>
<S> <C>
Discount rate 7.5%
Expected long-term rate of return on assets 8.0% to 8.5%
Average increase in compensation levels 4.0% to 6.5%
</TABLE>
The plans' assets consist primarily of guaranteed investment contracts and
marketable equity securities.
The Company also has contributory thrift plans covering substantially all
employees who have completed minimum service requirements. At June 30, 1993,
assets of the plans exceeded the vested benefits. Company contributions
totalled approximately $839,000 in 1993, $766,000 in 1992, and $738,000 in 1991.
NOTE 7 - LEASE COMMITMENTS:
NSI leases a newsprint paper mill under an operating lease with a remaining
term of approximately 16 years (see Note 16). The lease agreement provides for
semi-annual payments which may vary based on current interest rates as compared
to the interest rate implicit in the lease. At June 30, 1993, NSI had an
interest rate swap agreement outstanding which effectively converted $10,000,000
of fixed rate debt underlying the lease to a variable rate. Under the
agreement, which matures in October, 1997, NSI makes payments to a counterparty
at variable rates based on LIBOR and, in return, receives payments based on the
fixed interest rate. Benefits received are recorded as a reduction in lease
expense.
The fair value of the interest rate swap agreement was computed by discounting
to present value the projected payments and receipts under the swap agreement
assuming the same variable swap interest rate in effect at
F-25
<PAGE>
June 30, 1993. Based on these assumptions, the fair value of the benefit related
to this agreement was estimated to approximate $966,000.
At the expiration of the lease, NSI may purchase the mill at its fair market
value. NSI may also elect to renew the lease subject to various fixed rate or
fair market value options. In addition, NSI has commitments under operating
leases for various plant rolling stock items.
The Company has commitments under operating leases for approximately 26
storage warehouses and plant rolling stock items.
The following is a schedule of the future minimum rental payments required
under operating leases that have noncancellable lease terms in excess of one
year as of June 30, 1993:
<TABLE>
<CAPTION>
<S>
Newsprint Warehouses
(Dollars in thousands) Paper Mill and Other Total
---------- ---------- ----------
<C> <C> <C>
Year Ending June 30:
1994 $ 34,491 $ 959 $ 35,450
1995 34,491 678 35,169
1996 34,491 461 34,952
1997 34,491 171 34,662
1998 34,491 6 34,497
Thereafter 473,176 99 473,275
-------- ------ --------
$645,631 $2,374 $648,005
======== ====== ========
</TABLE>
Rental expense for all operating leases was $36,183,000 for 1993, $36,703,000
for 1992, and $39,043,000 for 1991.
NOTE 8 - INCOME TAXES:
A reconciliation, as of June 30, of the benefit for income taxes and the
effective tax rate with the amount computed by applying the statutory federal
income tax rate follows:
<TABLE>
<CAPTION>
1993 1992 1991
% of % of % of
Earnings Earnings Earnings
Before Before Before
(Dollars in thousands) Amount Taxes Amount Taxes Amount Taxes
------ ------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Income taxes computed at statutory
rate $1,337 34.0% $4,114 34.0% $13,128 34.0%
Increase (decrease) in taxes
resulting from:
Deduction for cash patronage
paid (4,873) (123.9) (7,784) (64.3) (9,408) (24.4)
State taxes, net 194 4.9 211 1.7 150 0.4
Other, net 70 1.8 10 0.1 (1,238) (3.2)
------ ------ ------ ----- ------- -----
(3,272) (83.2) (3,449) (28.5) 2,632 6.8
Non-deductible losses of
subsidiaries 2,414 61.4 2,545 21.0 - -
Credit from non-qualified
capital equity credits
revolved - - - - (3,405) (8.8)
------ ------ ------ ----- ------- -----
</TABLE>
F-26
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
$ (858) (21.8%) $ (904) (7.5%) $ (773) (2.0%)
======= ====== ====== ===== ======= ======
</TABLE>
In connection with an Internal Revenue Service audit of fiscal years 1985
through 1987, the Company, on June 11, 1990, received an Examination Report
which proposed adjustments totalling approximately $3,300,000 to the Company's
tax liability for tax years 1983, 1984 and 1985. Interest on the proposed
deficiencies would be approximately $2,920,000 through June 30, 1993. It is the
Service's position that Section 277 of the Internal Revenue Code prohibits non-
exempt cooperatives from carrying back losses incurred on patronage business. It
is the Company's position that, as a matter of law, Section 277 does not apply
to the Company. On July 9, 1990, the Company filed with the District Director of
the Internal Revenue Service its protest of the proposed deficiency. The Company
believes it has meritorious defenses against the claimed assessments and intends
to vigorously defend its position in this matter. If the Company is
unsuccessful, the relevant losses may be carried forward to succeeding tax
years.
At June 30, 1993 and 1992, other long-term liabilities include approximately
$2,669,000 and $2,823,000, respectively, for income taxes not related to current
year's taxable income.
At June 30, 1993, the Company had alternative minimum tax carryforwards of
approximately $3,655,000, and net operating loss carryforwards of approximately
$10,666,000, both of which may be used to offset future income taxes which would
otherwise be payable.
NOTE 9 - RAW MATERIAL CONTRACTS:
During 1987, the Company entered into a contract to purchase natural gas for
the Yazoo City plant. The contract, which is expected to terminate in 1993 or
1994, was effective as of January 1, 1986, and supersedes a contract with the
same supplier which was to expire in 1989. Payments for gas deliveries under
the contract are based on certain fixed and market-related components. Prepaid
expenses include approximately $1,426,000 at June 30, 1993, and $4,013,000 at
June 30, 1992, resulting from previous payments which are recoverable under the
terms of the contract.
Mississippi Phosphates Corporation ("MPC"), a wholly owned subsidiary of the
Company, has entered into a contract to purchase from a third party its full
requirement of phosphate rock. The contract will expire on June 30, 2001. The
purchase price for phosphate rock is based on prevailing market conditions and
the operating performance of MPC. For fiscal 1993, a portion of the purchase
price of phosphate rock is subject to deferred payment. The deferred portion,
which is included in other long-term liabilities, will be due and payable when
payment can be made without materially compromising the viability and economic
competitiveness of the Pascagoula plant. MPC paid approximately $1,204,000 to a
third party in consideration of the third party's facilitating the phosphate
rock contract. These payments were recorded as a deferred cost of acquiring the
contract and are being amortized over the contract's ten-year term. The
unamortized portion of these payments, which are included in other assets at
June 30, 1993 and 1992, are $1,009,000 and $1,134,000, respectively.
NOTE 10 - MAJOR CUSTOMERS AND EXPORT SALES:
F-27
<PAGE>
Sales to the Company's three largest customers were approximately $79,150,000,
$32,957,000, and $17,074,000 for 1993; $36,034,000, $32,080,000 and $13,879,000
for 1992; and $38,261,000, $13,320,000 and $13,178,000 for 1991. Export sales
were less than 10% of sales in 1993, 1992 and 1991.
Substantially all of MPC's sales are made to a third party which has been
appointed the exclusive distributor of diammonium phosphate fertilizer produced
by MPC. Sales to the distributor are recorded net of the distributor's
commission. The agreement with the distributor provides for the payment of a
penalty if MPC terminates the agreement prior to October 31, 1993. The
distributor sells primarily in international markets.
NOTE 11 - COMMITMENTS AND CONTINGENCIES:
A significant portion of the Company's trade receivables are due from entities
which operate in the chemical fertilizer and farm supply industry. A severe
downturn in the agricultural economy could have an adverse impact on the
collectibility of those receivables.
During July 1990, the Company entered into an agreement granting to a third
party the exclusive option to purchase the Company's undeveloped phosphate
mineral properties for a period of four years. If the option is not exercised,
the Company will realize a gain to the extent of the option payments received
(see Note 15). If the option is exercised, the Company will not realize a
material gain or loss on the sale of the property. These properties are
classified as property held for sale at June 30, 1993 and 1992.
On July 15, 1986, the first of seventeen lawsuits was filed in the Twenty-
first Judicial District Court, Parish of Livingston, State of Louisiana, against
Triad Chemical and approximately 90 other named defendants by numerous
plaintiffs. The plaintiffs' claims are based on alleged personal injuries and
property damages as a result of exposure to hazardous waste allegedly
contributed by the defendants to the Combustion, Inc., site in Livingston
Parish, Louisiana. Triad is vigorously defending its position in these
proceedings and considers its defenses meritorious. No provision for claims
being made is included in the accompanying financial statements because
management does not believe that it is probable that a loss will be incurred,
and even if the plaintiffs should be successful, the amount, if any, of the
recovery which may be awarded and any impact on the future earnings of the
Company cannot presently be estimated.
Additionally, the Company, in the ordinary course of its business, is the
subject of, or a party to, other various pending or threatened legal actions.
The Company believes that any ultimate liability arising from these actions will
not have a significant impact on the future earnings of the Company.
NOTE 12 - SALE AND PURCHASE OF FACILITIES:
During the fiscal year ended June 30, 1988, the Company sold its facilities at
Pascagoula, Mississippi, subject to a mortgage held by the Company. In February
1990, the purchaser filed bankruptcy. In December
F-28
<PAGE>
1990, the Bankruptcy Trustee conveyed the Pascagoula plant to the Company in
lieu of foreclosure. The Company transferred the Pascagoula plant and certain
related bond obligations to MPC.
MPC started production at the Pascagoula plant during December, 1991. Prior
to that date, interest, depreciation, maintenance and other expenses related to
holding and maintaining the plant were charged to operations. Such expenses
totalled approximately $6,724,000 through November 30, 1991.
NOTE 13 - QUASI-REORGANIZATION:
A majority of the Company's shareholders approved a plan of quasi-
reorganization effective June 30, 1988. In accordance with the approved plan,
the Company's accumulated deficit of $12,122,000 was transferred to additional
paid-in capital.
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION:
The Company considers its holdings of highly liquid money market debt
instruments to be cash equivalents if the securities mature within 90 days from
the date of acquisition. These short-term investments were $18,347,000 at June
30, 1993, and $44,756,000 at June 30, 1992.
Net refunds of income taxes were $1,144,000 in 1993, $548,000 in 1992, and
$3,086,000 in 1991. Payments of interest (net of amounts capitalized) were
$5,845,000 in 1993, $6,025,000 in 1992, and $6,966,000 in 1991.
The increase in cash due to the changes in operating assets and liabilities
consisted of the following at June 30:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Accounts and notes receivable $(2,701) $ 3,897 $(6,205)
Inventories (589) (5,864) 3,943
Prepaid expenses and other
current assets 1,949 3,412 3,295
Accounts payable 2,823 7,645 2,812
Accrued interest (483) (130) (321)
Accrued liabilities (1,278) 115 625
------- ------- -------
$ (279) $ 9,075 $ 4,149
======= ======= =======
</TABLE>
Supplemental disclosures regarding non-cash financing and investing activities
include the following at June 30:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
------- ------ ------
<S> <C> <C> <C>
Capital expenditures made from
restricted funds $ 1,000 $7,790 $4,934
Net option proceeds deposited in
restricted funds 1,000 2,000 9,967
Capital expenditures financed by issuance of
long-term debt - 980 -
Stock issued for consideration other than cash 411 672 -
Stock acquired by reducing shareholder's trade
accounts receivable - - 3,720
Note payable converted to long-term debt 10,000 - -
</TABLE>
NOTE 15 - OTHER LONG-TERM LIABILITIES:
F-29
<PAGE>
Other long-term liabilities are comprised of the following at June 30:
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Deferred lease payable $21,063 $17,701
Deferred income tax payable 2,669 2,823
Option proceeds 12,967 11,967
Other 4,539 1,870
------- -------
$41,238 $34,361
======= =======
</TABLE>
The newsprint mill lease has higher rent payments over the last half of the
20-year lease. However, rent expense is recorded on a straight-line basis. The
deferred lease payable is the excess of rent expense over amounts actually paid.
NOTE 16 - DEFERRED GAIN ON SALE OF NEWSPRINT MILL:
The deferred gain on the sale of the newsprint mill represents the unamortized
portion of the gain incurred by NSI when selling the mill during 1989. This
gain is being recognized as a reduction of rent expense on a straight-line basis
over the 20-year life of the related lease.
NOTE 17 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity of
those instruments.
Long-Term Debt
The fair value of the Company's long-term debt is estimated based on the
current rates offered to the Company for debt of the same remaining maturities.
The estimated fair values of the Company's financial instruments at June 30
are as follows:
<TABLE>
<CAPTION>
1993
--------------------
<S> <C> <C>
Carrying Fair
Amount Value
-------- -------
Cash and cash equivalents $ 22,706 $22,706
Long-term debt $ 73,526 $72,535
</TABLE>
NOTE 18 - BUSINESS SEGMENTS:
The Company operates in two industries: (1) chemical fertilizer manufacturing
and (2) newsprint paper manufacturing. Sales between segments are not material.
Net sales; net margins; identifiable assets; capital expenditures; and
depreciation, depletion and amortization are as
F-30
<PAGE>
follows as of June 30:
<TABLE>
<CAPTION>
(Dollars in thousands) Net Sales
------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Chemical Fertilizer Manufacturing $289,125 $239,657 $214,990
Newsprint Paper Manufacturing 97,293 95,472 106,073
-------- -------- --------
Total $386,418 $335,129 $321,063
======== ======== ========
Net Margins (Loss)
------------------------------
1993 1992 1991
-------- -------- --------
Chemical Fertilizer Manufacturing $ 22,681 $ 31,349 $ 48,037
Newsprint Paper Manufacturing (17,891) (18,346) (8,653)
-------- -------- --------
Total $ 4,790 $ 13,003 $ 39,384
======== ======== ========
Identifiable Assets
------------------------------
1993 1992 1991
-------- -------- --------
Chemical Fertilizer Manufacturing $286,674 $297,774 $286,642
Newsprint Paper Manufacturing 33,938 32,753 38,468
-------- -------- --------
Total $320,612 $330,527 $325,110
======== ======== ========
Capital Expenditures
------------------------------
1993 1992 1991
-------- -------- --------
Chemical Fertilizer Manufacturing $ 27,448 $ 32,712 $ 10,418
Newsprint Paper Manufacturing 1,215 1,438 1,219
-------- -------- --------
Total $ 28,663 $ 34,150 $ 11,637
Depreciation,
Depletion & Amortization
------------------------------
1993 1992 1991
-------- -------- --------
Chemical Fertilizer Manufacturing $ 14,444 $ 12,094 $ 10,586
Newsprint Paper Manufacturing 1,596 1,061 925
-------- -------- --------
Total $ 16,040 $ 13,155 $ 11,511
======== ======== ========
</TABLE>
NOTE 19 - INTEREST EXPENSE, NET:
Interest expense, net of interest income, consisted of the following at
June 30:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Interest expense $ 6,996 $ 7,193 $ 7,270
Interest income (1,459) (2,107) (3,045)
-------- -------- --------
$ 5,537 $ 5,086 $ 4,225
======== ======== ========
</TABLE>
F-31
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
------------------------------------------
THREE YEARS ENDED JUNE 30, 1993
-------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands)
Balance at Other Balance
Beginning Additions Retirements Charges - at End of
Classification of Period at Cost or Sales Add (Deduct) Period
- -------------- ---------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
1991:
Mineral properties $ 19,194 $ -0- $ -0- $ 78 (1) $ 19,272
Land 5,000 347 36 2,471 (1) 7,782
Buildings 21,219 301 698 1,486 (1) 22,308
Machinery and equipment 253,049 5,116 17,518 19,065 (2) 259,712
Construction in progress 1,710 5,873 -0- (4,642) (1) 2,941
-------- ------- ------- -------- --------
$300,172 $11,637 $18,252 $ 18,458 $312,015
======== ======= ======= ======== ========
1992:
Mineral properties $ 19,272 $ -0- $ 162 $ -0- $ 19,110
Land 7,782 680 -0- -0- 8,462
Buildings 22,308 103 3 246 (1) 22,654
Machinery and equipment 259,712 7,845 2,927 5,544 (1) 270,174
Construction in progress 2,941 25,522 4 (5,790) (1) 22,669
-------- ------- ------- -------- --------
$312,015 $34,150 $ 3,096 $ -0- $343,069
======== ======= ======= ======== ========
1993:
Mineral properties $ 19,110 $ -0- $ -0- $ -0- $ 19,110
Land 8,462 355 58 -0- 8,759
Buildings 22,654 23 -0- 1,240 (1) 23,917
Machinery and equipment 270,174 4,971 973 38,855 (1) 313,027
Construction in progress 22,669 23,314 -0- (40,095) (1) 5,888
-------- ------- ------- -------- --------
$343,069 $28,663 $ 1,031 $ -0- $370,701
======== ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION
- -----------------------------
<S> <C>
The annual provisions to depreciation have been computed (1) Transfer construction in progress.
based on the following estimated useful lives:
Buildings 12 - 33 years (2) Included in this is $18,458
representing the assets of the
Machinery and equipment 3 - 20 years Pascagoula plant conveyed to the
Company in lieu of foreclosure.
</TABLE>
NOTE: Industry segment data relative to certain items in this schedule is
disclosed in greater detail in Note 18 to Consolidated Financial
Statements of the Company which are included herein.
F-32
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
------------------------------------------------------------------
OF PROPERTY, PLANT AND EQUIPMENT
--------------------------------
THREE YEARS ENDED JUNE 30, 1993
-------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions Other
Balance at Charged to Charges - Balance at
Beginning Costs and Add End of
Description of Period Expenses Retirements (Deduct) Period
- ----------- --------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1991:
Mineral properties $ 1,702 $ 116 $ -0- $-0- $ 1,818
Buildings 15,704 518 675 -0- 15,547
Machinery and equipment 204,318 10,877 16,962 -0- 198,233
-------- ------- ------- ---- --------
$221,724 $11,511 $17,637 $-0- $215,598
======== ======= ======= ==== ========
1992:
Mineral properties $ 1,818 $ 118 $ 119 $-0- $ 1,817
Buildings 15,547 776 3 -0- 16,320
Machinery and equipment 198,233 12,199 2,301 -0- 208,131
-------- ------- ------- ---- --------
$215,598 $13,093 $ 2,423 $-0- $226,268
======== ======= ======= ==== ========
1993:
Mineral properties $ 1,817 $ 117 $ 8 $-0- $ 1,926
Buildings 16,320 666 -0- -0- 16,986
Machinery and equipment 208,131 14,772 499 -0- 222,404
-------- ------- ------- ---- --------
$226,268 $15,555 $ 507 $-0- $241,316
======== ======= ======= ==== ========
</TABLE>
NOTE: Industry segment data relative to certain items in this schedule is
disclosed in greater detail in Note 18 to Consolidated Financial
Statements of the Company which are included herein.
F-33
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
SCHEDULE IX - SHORT-TERM BORROWINGS
-----------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Maximum Average Weighted
Amount Amount Average
Balance Weighted Outstanding Outstanding Interest
Category of Aggregate at End Average at any During Rate During
Short-Term Borrowings of Period Interest Rate Month End the Period the Period
- -------------------------- --------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(A) (B)
JUNE 30, 1991
Notes payable to banks $ -0- -0- $ -0- $ -0- -0-
JUNE 30, 1992
Notes payable to banks (C) 20,040 6.58% 20,170 7,813 6.63%
JUNE 30, 1993
Notes payable to banks (C) 13,315 5.74% 19,535 11,847 5.58%
</TABLE>
(A) Average amount outstanding during the period is computed by dividing the
total of daily outstanding principle balances by 365.
(B) Weighted average interest rate during the period is computed by dividing
the actual short-term interest expense by the average short-term debt
outstanding during the period.
(C) Notes payable in 1991-92 and 1992-93 were primarily related to borrowings
for the Company's wholly owned subsidiaries, Newsprint South, Inc. and
Mississippi Phosphates Corporation.
F-34
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
-------------------------------------------------------
(Dollars in thousands)
Column A Column B
- ----------------------------------------- -------------------------------
Charged to Costs and Expenses
Item Year Ended June 30
---- -------------------------------
1993 1992 1991
-------- -------- --------
Maintenance and repairs $ 26,361 $ 24,655 $ 20,614
Depreciation, depletion and amortization
of property, plant and equipment and
other intangible assets 16,040 13,155 11,511
Property taxes 2,868 2,722 2,727
Other taxes -
other than income taxes and payroll taxes 1,443 1,371 1,298
NOTE: Industry segment data relative to certain items in this schedule is
disclosed in greater detail in Note 18 to Consolidated Financial
Statements of the Company which are included herein.
F-35
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of June 30, 1993/1/
Results of Operations
Net margins were $4,800,000 in fiscal year 1993 compared to $13,000,000 in
fiscal 1992. This decrease was primarily attributable to lower prices for
diammonium phosphate ("DAP"), higher natural gas costs and increased
depreciation during fiscal 1993.
Although down from the 1992-93 levels, nitrogen fertilizer operating
margins remained strong. Fall usage was off sharply from historical levels
because of the late harvest resulting from poor weather conditions. The decline
in fall usage, together with a late spring planting season, caused nitrogen
fertilizer consumption to decline. According to industry figures, U.S.
disappearance (determined by adding production to producer beginning inventories
and subtracting therefrom producer ending inventories) decreased by 5% for
nitrogen fertilizer for fiscal year 1993, and therefore, inventory levels at the
end of June 1993 were slightly higher than the prior year. Nitrogen fertilizer
demand for the 1993-94 year should improve over 1992-93 levels as higher prices
for corn and soybeans and lower crop set-aside requirements are expected to
cause an increase in spring 1994 plantings.
U.S. potash consumption declined in fiscal 1993, due largely to the
weather-related delays in the fall harvest and in the spring planting in the
U.S. Midwest. U.S. potash exports also
- ------------------------
/1/Industry segment data relative to certain items in this item is disclosed in
greater detail in Note 18 to Consolidated Financial Statements of the Company
which are included herein.
F-36
<PAGE>
declined from previous levels as a result of increased competition from exports
from the former Soviet Union. According to industry figures, U.S. potash
disappearance decreased by 4% and U.S. potash production decreased approximately
15% during the 1992-93 year. The anticipated increase in spring plantings and a
return of normal weather patterns should boost U.S. potash consumption and
stabilize prices.
In December 1991, Mississippi Phosphates Corporation ("MPC"), a wholly
owned subsidiary of the Company, began the production of DAP. MPC's DAP is sold
primarily in international markets. U.S. DAP exports declined during the 1992-
93 year due to significant decreases in purchases by China and India. The drop
in U.S. exports and declining domestic demand has resulted in excess supplies
and severely depressed prices. As a result, MPC experienced a loss for the year
ended June 30, 1993. The purchase levels of India and China remain the key
variables facing the U.S. phosphate industry. The expected increase in
purchases by these critical consumers would create upward pressure on DAP prices
and improve the 1994 outlook.
U.S. newsprint prices remain extremely depressed. A massive capacity
buildup during the late 1980's coincided with a decline in newsprint
consumption, causing an acute supply/demand imbalance and a precipitous decline
in the price of newsprint. Newsprint prices declined by over thirty percent
(30%) during the period from 1988 to mid-1992, causing record losses for the
newsprint industry. These conditions are driving an industry restructuring
which has witnessed the closure of the highest cost mills and machines. The
pace of this restructuring and domestic and worldwide economic conditions are
the principal factors which will affect future newsprint prices. Industry
analysts believe that newsprint has reached the bottom of its cycle, and that
F-37
<PAGE>
price improvement is necessary if the industry is to remain viable. If the U.
S. recovery accelerates and recessionary conditions elsewhere in the world
abate, price improvement should be more pronounced. Since beginning production,
NSI has been able to lower its costs due to increased production and better
overall mill performance. This optimization process should continue. While an
improved business climate is projected, NSI is expected to experience further
losses in 1993-94.
Following is a recap of the Company's total revenues by product lines:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
<S> <C> <C> <C>
6/30/93 6/30/92 6/30/91
-------- -------- --------
Nitrogen Ferilizers $189,127 $176,835 $188,267
DAP 78,906 36,034 0
Potash 20,149 25,482 25,251
Newsprint 97,293 95,472 106,073
-------- -------- --------
Total 385,475 333,823 319,591
Other 1,535 775 2,249
-------- -------- --------
Total Revenues $387,010 $334,598 $321,840
======== ======== ========
</TABLE>
1993 Compared to 1992
Net sales rose by 15% for the year ended June 30, 1993, as a result of
larger volume sales of DAP, nitrogen fertilizer and newsprint, and higher
nitrogen fertilizer prices. These increases were partially offset by lower
sales prices for potash and DAP and by lower volumes of potash sold.
There was a $1,123,000 increase in other income for the year ended June 30,
1993, which consisted primarily of settlement proceeds from pending litigation
during fiscal 1992-93. In addition, during the 1991-92 fiscal year, expenses
associated
F-38
<PAGE>
with a failed option attempt to purchase the stock of MPC by a third party were
charged against other income.
Cost of products sold increased 23% for the current year, due primarily to
increased sales of DAP. Also contributing to the increase were higher sales
volumes and higher natural gas costs for nitrogen fertilizer. These increases
were partially offset by lower potash sales volumes. For newsprint, the effect
of higher sales volumes was offset by lower production costs.
Selling, general and administrative expenses decreased 2% for the year
ended June 30, 1993, due primarily to the inclusion of overhead costs for the
Company's DAP plant for a portion of fiscal 1991-92 before the facility had
reached full operation. Also contributing to the decrease were lower shipping
costs per ton for newsprint.
Net interest incurred increased 9% for the year ended June 30, 1993, and
net interest after capitalization increased 2%. The increase in net interest
was the result of higher levels of borrowings and lower investment earnings,
which were partially offset by lower interest rates on outstanding debt.
In February 1992, the Financial Accounting Standards Board issued a new
standard on accounting for income taxes which significantly changes the
accounting for deferred income taxes. Adoption is required no later than the
fiscal year ending June 30, 1994, which is when the Company expects to adopt the
new standard. The Company anticipates that the adoption of this standard will
have a favorable impact of approximately $4,000,000 on its financial statements.
F-39
<PAGE>
Business Segment Analysis
Fertilizer
Net sales increased 21% for the year ended June 30, 1993. This increase
resulted primarily from a 163% increase in the volume of DAP sales tons during
the current year, partially offset by a 17% decrease in DAP sales prices per
ton. The Company experienced a 4% increase in nitrogen fertilizer tons sold and
a 3% increase in nitrogen fertilizer sales prices. Partially offsetting these
increases was a 17% decrease in potash tons sold and a 5% decrease in potash
sales prices.
Sales of nitrogen products to nonshareholders were 7% of net sales in
fiscal 1993 and 8% in fiscal 1992. Virtually all DAP and potash sales were to
nonshareholders.
Cost of products sold increased 40% from the year ended June 30, 1992. The
increase in cost of sales resulted from higher sales volumes of DAP and nitrogen
fertilizer partially offset by lower sales volumes of potash. During the
current year, DAP production costs per ton decreased 10% due to higher
production and lower raw material costs. Nitrogen fertilizer costs increased
10% due to higher natural gas costs and increased depreciation.
Net margins were $22,681,000 in fiscal 1993, compared to $31,349,000 in
fiscal 1992. Earnings from business with shareholders decreased to $28,663,000
in fiscal 1993, as compared to $38,158,000 in fiscal 1992. The Company reserved
50% and 40%, respectively, of the fiscal 1993 and fiscal 1992 earnings on
business with shareholders as an allocated surplus. Patronage
F-40
<PAGE>
refunds decreased to $13,820,000 in 1993, as compared to $22,895,000 in fiscal
1992.
Newsprint
Net sales increased 2% for the year ended June 30, 1993, the result of a 3%
increase in tons sold which was partially offset by a 1% decrease in prices.
Increased machine speeds and higher operating efficiencies produced more tons
available for sale in the current fiscal year.
Cost of products sold did not change significantly for the year ended June
30, 1993. The effect of higher sales volumes was offset by a reduction in
production costs per ton, resulting from lower electrical and chemical costs and
increased production in the current year. These decreases were partially offset
by higher wood costs.
NSI's net loss was $17,891,000 in 1993, compared to $18,346,000 in 1992.
1992 Compared to 1991
Net sales increased 4% for the year ended June 30, 1992. This increase was
mainly due to the addition of DAP sales and higher volumes of newsprint sold.
This increase was partially offset by lower prices for fertilizer and newsprint
and lower volumes of nitrogen fertilizer sold.
There was a $1,300,000 decrease in other income for the year ended June 30,
1992. For the 1991 fiscal year, other income included a gain from forfeited
option payments to purchase the stock of MPC. In the 1992 fiscal year, expenses
associated with
F-41
<PAGE>
another failed option attempt for MPC were charged against other income.
Cost of products sold increased 17% for 1991-92, due primarily to adding
the cost of sales for DAP. This increase was partially offset by lower volumes
of nitrogen fertilizer sold and lower newsprint production costs.
Selling, general and administrative expenses did not change significantly
for the year ended June 30, 1992. A recovery of a prior year bad debt expense
was offset by increased delivery costs for newsprint due to higher volumes sold.
Net interest incurred increased 20% for the year ended June 30, 1992, and
net interest after capitalization increased 6%. The effects of lower levels of
long-term borrowing and lower interest rates were offset by lower earnings due
to lower levels of investment and lower interest rates earned. Short-term
borrowings to meet working capital needs at the Company's wholly owned
subsidiaries, MPC and NSI, also contributed to an increase in net interest.
Business Segment Analysis
Fertilizer
Net sales increased 11% for the year ended June 30, 1992. This increase
resulted primarily from the addition of DAP sales and a 2% increase in potash
tons sold during 1991-92. These increases were partially offset by a 2%
decrease in nitrogen fertilizer tons sold. There was also a 4% decrease in
nitrogen fertilizer prices and a 1% decrease in potash prices in 1991-92
compared to the prior year.
F-42
<PAGE>
Sales of nitrogen products to nonshareholders were 8% of net sales in 1992
and 9% in 1991. Sales of potash to nonshareholders increased to 98% in 1992
from 87% in 1991. All DAP sales were to nonshareholders.
Cost of products sold increased 35% from the year ended June 30, 1991. The
effect of higher volumes (primarily DAP) caused a 31% increase in cost of sales.
There was also a 4% increase in average nitrogen production costs which was the
result of higher maintenance costs due to a turnaround at the Company's Yazoo
City nitrogen production facility and increased purchases of finished nitrogen
products. This increase was partially offset by lower natural gas costs for the
year ended June 30, 1992. Increased maintenance costs at the Company's potash
mine resulted in slightly higher potash costs for 1991-92.
Net margins were $31,349,000 in 1992, compared to $48,037,000 in 1991.
Earnings from business with shareholders decreased to $38,158,000 in 1992, as
compared to $46,120,000 in 1991. The Company reserved 40% of the 1992 earnings
on business with shareholders as an allocated surplus. Patronage refunds
decreased to $22,895,000 in 1992, as compared to $46,120,000 in 1991.
Newsprint
Net sales decreased 10% for the year ended June 30, 1992, the result of a
15% decrease in prices which was partially offset by a 5% increase in tons sold.
The decline in prices was due to a significant supply/demand imbalance linked to
the recession in the world economy.
F-43
<PAGE>
Cost of products sold decreased 1% for the year ended June 30, 1992. Lower
production costs reduced cost of sales 5%, while higher volumes sold in 1992
caused cost of sales to increase 4%. The reduction in production costs was
caused primarily by decreased usages and lower costs for purchased kraft pulp
and increased production in 1991-92. These improvements were partially offset
by higher wood costs and paper machine clothing costs.
The net loss was $18,346,000 in 1992, compared to $8,653,000 in 1991.
1991 Compared to 1990
Net sales increased 28% for the year ended June 30, 1991. This was mainly
due to increased prices and higher volumes of both fertilizer and newsprint.
Cost of products sold increased 12% in 1991. Increased volumes of
fertilizer and newsprint sold caused an increase in cost of sales which was
partially offset by lower raw material costs.
Selling, general and administrative expenses were 24% higher during 1991
primarily due to higher delivery costs.
Net interest incurred decreased 63% in 1991 as a result of significantly
lower average borrowings related to the newsprint mill and lower interest rates.
Net interest after capitalization increased 6% for 1991 due to higher levels of
borrowing resulting from the assumption of certain bond obligations related to
the Pascagoula plant and lower earnings on excess funds due to lower interest
rates.
F-44
<PAGE>
Other income decreased 62% for the year ended June 30, 1991. During fiscal
1991, the Company granted an option to a third party to purchase the stock of
MPC. This purchase was not consummated, and the gain on the option payments
received was included in other income for 1991. Another option was subsequently
granted to sell the shares of MPC. A settlement of pending litigation in 1990
increased other income for that year.
Business Segment Analysis
Fertilizer
Net sales increased 19% for the year ended June 30, 1991. This increase
was due to increased volumes sold and higher prices. The average sales price of
nitrogen fertilizer was $120 (9% higher than 1990), and the average price of
potash was $76 (3% higher than in 1990). In 1991, 10% more tons of nitrogen
fertilizer and 18% more tons of potash were sold than in 1990.
The increase in nitrogen fertilizer prices was due largely to the Middle
East crisis since over 10% of the world's nitrogen exports originate from that
area. Late spring planting caused by inclement weather and export prospects
kept nitrogen prices stable in the Company's primary trade area throughout
fiscal year 1991.
Sales of nitrogen products to nonshareholders were 9% of net sales in 1991,
and 10% in 1990. Potash sales to nonshareholders increased to 87% in 1991 from
86% in 1990.
Costs of products sold increased 2% in 1991. Higher volumes sold resulted
in a 9% increase in cost. This was partially
F-45
<PAGE>
offset by a 7% decrease in average production cost per ton caused primarily by
lower gas costs and increased production in 1990-91.
Selling, general and administrative expenses increased 23% during 1991.
Included in selling, general and administrative expenses for fiscal year ended
June 30, 1991, were overhead costs for the Company's phosphate fertilizer plant
at Pascagoula, Mississippi. In addition, higher delivery expense caused
selling, general and administrative expenses to increase as a result of the
increase in tons sold and higher costs per ton for delivery.
Net margins increased 65% to $48,037,000 in 1991 compared to $29,058,000 in
1990.
Patronage refunds increased 125% to $46,120,000 in 1991, as compared to
$20,537,000 in 1990.
Newsprint
Net sales increased 51% for the year ended June 30, 1991, the result of a
44% increase in tons sold and a 7% increase in prices. While prices increased
in 1991, a deterioration in prices occurred during the fourth quarter of the
year. This decline was attributable to the recession in the U.S. economy.
Cost of products sold increased 26% in 1991. Higher volumes sold caused
cost of sales to increase 44%. This was offset by lower production costs per
ton in 1991 caused by increased efficiencies in raw material usages, lower costs
for kraft and electricity and increased production.
F-46
<PAGE>
Selling, general and administrative expenses were 33% higher during 1991.
This increase is mainly attributable to increased delivery costs due to higher
volumes of tons shipped in 1991.
Net losses were $8,653,000 in 1991 compared to $21,833,000 in 1990, a 60%
decrease in losses.
Liquidity and Capital Resources
For the fiscal years ended June 30, 1993, 1992, and 1991, cash provided by
operating activities was $25,475,000, $36,540,000, and $57,745,000,
respectively. Cash flows from operating activities have declined in the two
most recent periods due primarily to the following factors: declines in
operating cash flows at NSI; depressed cash flow at MPC due to start up
operations in the year ended June 30, 1992; reductions in nitrogen cash flows
from 1991 levels when nitrogen results were favorably impacted by increased
prices related to the war in the Persian Gulf. Cash used by investing
activities was $26,181,000, $24,962,000, and $3,737,000; and cash used by
financing activities was $23,443,000, $22,079,000, and $28,402,000,
respectively, for the fiscal years ended June 30, 1993, 1992, and 1991. The
amounts consumed by financing activities included cash patronage refunds of
$22,480,000, $27,120,000, and $12,322,000, respectively, for the fiscal years
ended June 30, 1993, 1992, and 1991. In December 1992, the Company prepaid
$8,869,000 of 9-1/2% secured notes which had maturities scheduled through fiscal
year 1997. In addition, the Company paid $11,068,000 on long-term debt that
matured during fiscal 1993. At June 30, 1993, the Company had cash and cash
equivalents of $22,706,000, which was a decrease of $24,149,000 from June 30,
1992. The June 30, 1992 balance was a decrease of $10,501,000 from the balance
of cash and cash equivalents at June 30, 1991.
F-47
<PAGE>
At June 30, 1993, the Company had working capital of $28,170,000 compared
to $40,027,000 at the beginning of the year. The Company's current ratio
decreased to 1.36 to 1 at June 30, 1993, compared to 1.44 to 1 at June 30, 1992.
The Company and its subsidiaries have commitments from various banks, primarily
CoBank, which allow short-term borrowings of up to $55,992,000. Additional
amounts are available to NSI from a commercial finance company under specified
conditions for payments of rent under the newsprint mill lease. The Company
does not anticipate difficulties in meeting its and its subsidiaries short-term
financing needs. Short-term borrowings outstanding at June 30, 1993 and 1992
were $13,315,000 and $20,040,000, respectively.
Long-term debt increased to $73,526,000 at June 30, 1993, which was an increase
of $3,584,000 from the June 30, 1992, level of $69,942,000. Shareholder-
members' equity decreased to $119,574,000 at June 30, 1993, from $128,195,000.
Long-term debt to total capitalization increased to 38.1% at June 30, 1993,
compared to 35.3% at June 30, 1992.
Historically, most of the Company's financing has been with CoBank. CoBank
can provide sufficient funds to meet the Company's short- and long-term
financing needs. On August 6, 1992, the Company obtained a $20,000,000 loan
commitment from a commercial bank. This commitment is a revolving credit
facility that converts any outstanding balance to term debt on June 30, 1994.
The balance outstanding on this loan as of June 30, 1993, was $5,000,000.
During fiscal year 1993, MPC converted $10,000,000 of short-term debt to long-
term financing with CoBank.
During the year ended June 30, 1993, capital expenditures were $28,663,000.
Of these expenditures, $12,453,000 were for
F-48
<PAGE>
normal improvements and modifications to the Company's facilities. Another
$4,485,000 was spent to purchase new mining equipment for the Company's potash
mine near Carlsbad, New Mexico. Total cost for this equipment is expected to be
$5,000,000 and will be financed with internally generated funds. The remaining
$11,725,000 was spent on the construction of a new nitric acid plant and related
facilities which began production in January 1993. The nitric acid project,
which cost approximately $32,000,000, was financed with internally generated
funds and long-term borrowings.
F-49
<PAGE>
APPENDIX A
----------
PLAN OF REORGANIZATION
PLAN OF REORGANIZATION, made and entered into as of this 23rd day of May,
1994 by and between MCC Sub, Inc., a Mississippi corporation (the "Surviving
Corporation"), and Mississippi Chemical Corporation, a Mississippi corporation
(the "Merging Corporation"). The Merging Corporation and the Surviving
Corporation are sometimes collectively referred to herein as the "Constituent
Corporations."
RECITALS
- --------
The Merging Corporation is a Mississippi corporation having authorized
capital consisting of eight million four hundred thousand (8,400,000) shares of
Common Stock, Series I-VII, of varying par values of which 4,119,068 shares (in
aggregate) of Common Stock are issued and outstanding.
The Surviving Corporation is a Mississippi corporation having authorized
capital consisting of one hundred million (100,000,000) shares of Common Stock,
$.01 par value, of which one hundred (100) shares of Common Stock are issued and
outstanding, all of which are owned by the Merging Corporation, and five hundred
thousand (500,000) shares of Preferred Stock, $.01 par value, none of which are
issued or outstanding.
The Merging Corporation and the Surviving Corporation have determined it to
be advisable for the Merging Corporation to merge with and into the Surviving
Company (the "Merger") pursuant to the applicable provisions of the Mississippi
Business Corporation Act on the terms hereinafter set forth, and the Board of
Directors of the Merging and Surviving Corporations have each approved and
adopted this Plan of Reorganization and authorized the execution hereof.
It is intended that the Plan will constitute a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
THE PLAN OF MERGER
- ------------------
In consideration of the premises, the parties hereto adopt and make this
Plan of Reorganization and prescribe the terms and conditions of the Merger and
the manner of carrying the same into effect, which shall be as follows:
A-1
<PAGE>
1. Effective upon the later of (a) 12:01 am, Mississippi time, on July 1,
1994 or (b) the filing of Articles of Merger with the office of the
Mississippi Secretary of State (the time and date, or filing, as the
case may be, being referred to herein as the "Effective Date"), the
Merging Corporation shall be merged with and into the Surviving
Corporation.
2. The manner and basis of converting the issued and outstanding shares
of the Merging Corporation's stock into shares of common stock of the
Surviving Corporation shall be as follows:
a. At the Effective Date, each of the shares of stock of the Merging
Corporation issued and outstanding or held as treasury shares on
the Effective Date shall, without any action on the part of
either of the Constituent Corporations or any holder of the
shares, be converted into that number of fully paid and
nonassessable shares of the Common Stock of the Surviving
Corporation set forth below:
(1) Each share of the Merging Corporation's Nitrogen Series I
stock will be converted into 24 shares of the Surviving
Corporation's Common Stock;
(2) Each share of the Merging Corporation's Nitrogen Series II
stock will be converted into 8 shares of the Surviving
Corporation's Common Stock;
(3) Each share of the Merging Corporation's Nitrogen Series III
stock will be converted into 1.6 shares of the Surviving
Corporation's stock;
(4) Each share of the Merging Corporation's Mixed Series IV
stock and Mixed Series V stock will be cancelled in exchange
for the right to receive $15 cash (without interest) from
the Surviving Corporation;
(5) Each share of the Merging Corporation's Potash Series VI
stock will be cancelled in exchange for the right to receive
$50 cash (without interest) from the Surviving Corporation;
and
A-2
<PAGE>
(6) Fractional shares will not be issued. Fractional Shares
will be cancelled in exchange for the right to receive $15
in cash (without interest) from the Surviving Corporation.
3. At the Effective Date, the Merging Corporation's Equity Capital
Credits and Allocated Surplus Accounts will be transferred into
similar accounts at face value to be maintained on the books of the
Surviving Corporation.
POST MERGER EXCHANGES
- ---------------------
4. Immediately after the Effective Date, holders of Capital Equity
Credits and Allocated Surplus Accounts which have delivered an
election to exchange such interests will receive one share of the
Surviving Corporation's Common Stock for each $15 in present value of
such interests, such present value calculated as follows:
<TABLE>
<CAPTION>
Year of Issuance % of Face Amount
---------------- ----------------
<S> <C>
1982 100.0000
1983 92.5926
1984 85.7339
1985 79.3832
1988 73.5030
1989 68.0583
1990 63.0170
1991 58.3490
1992 54.0269
1993 50.0249
1994 46.3193
</TABLE>
5. Additionally, persons holding fewer than 100 shares of the Surviving
Corporation's Common Stock after the Effective Date (both as a result
of the Merger and pursuant to the exchange permitted in paragraph 4)
which have delivered an appropriate election shall receive the right
to receive $15 in cash from the Surviving Corporation upon the
surrender of shares of the Surviving Corporation.
6. Until such time as the holders of share certificates of the Merging
Corporation submit such stock certificates (or affidavits of lost
stock certificates in form acceptable to the Surviving Corporation) to
the Surviving Corporation, such certificates shall be
A-3
<PAGE>
deemed to represent the number of shares of the Surviving Corporation
specified herein. The Surviving Corporation shall not be required to
pay dividends to the holder of any Merging Corporation certificate
until such time as such certificate has been exchanged for a
certificate of the Surviving Corporation. No certificates have been
or will be issued with respect to Capital Equity Credits and Allocated
Surplus Accounts.
7. On the Effective Date, all of the shares of stock of the Surviving
Corporation issued and outstanding on the Effective Date shall be
cancelled and returned to the status of authorized but unissued
shares.
8. On the Effective Date, each employee benefit plan and incentive
compensation plan to which the Merging Corporation is then a party
shall be assumed by and continue to be the plan of the Surviving
Corporation.
9. The officers and directors of the Surviving Corporation on the
Effective Date shall be and continue to be the officers and directors
of the Surviving Corporation thereafter, until their successors are
duly appointed or elected.
10. On the Effective Date, the Articles of Incorporation of the Surviving
Corporation shall be amended as follows: Article 1 of the Surviving
Corporation's Articles of Incorporation shall be amended to change the
name of the Surviving Corporation to "Mississippi Chemical
Corporation". The Articles of Incorporation of the Surviving
Corporation, as so amended, shall remain in effect as the Articles of
Incorporation of the Surviving Corporation after the Merger.
11. The Bylaws of the Surviving Corporation, as they exist immediately
prior to the Effective Date, shall remain in effect as the Bylaws of
the Surviving Corporation thereafter, unaffected by the Merger.
12. On the Effective Date, the Merging Corporation shall be merged with
and into the Surviving Corporation, which shall continue its corporate
existence under the laws of the State of Mississippi. The separate
existence and corporate organization of the Merging Corporation shall
cease upon the Effective Date, and the Surviving Corporation shall
possess all of the rights, privileges, immunities and franchises, of a
public as well as of a private nature, of each of the Constituent
A-4
<PAGE>
Corporations; and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and
all other choses in action, and all and every other interest, of or
belonging to or due to each of the Constituent Corporations, shall be
taken and deemed to be transferred to and vested in the Surviving
Corporation without further act or deed; and the title to any real
estate, or any interest therein, vested in either of the Constituent
Corporations shall not revert or be in any was impaired by reason of
the Merger. The Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of each
of the Constituent Corporations, and any claims existing or actions or
proceedings pending by or against the Constituent Corporations may be
prosecuted to judgment as if the Merger had not taken place. Neither
the rights of creditors nor any liens upon the property of either
Constituent Corporation shall be impaired by the Merger.
13. This Plan of Reorganization shall be submitted to the shareholders of
each of the Constituent Corporations hereto in accordance with the
applicable provisions of law, and the consummation of the Merger
herein provided for is conditioned upon the approval and adoption
hereof by the shareholders of the respective parties as provided by
law.
14. This Plan of Reorganization and the Merger herein contemplated may be
abandoned by the Board of Directors of either of the Constituent
Corporations at any time prior to the Effective Date. This Agreement
may be amended, modified or supplemented at any time (before or after
shareholder approval) prior to the Effective Date with the mutual
consent of the Boards of Directors of the Merging Corporation and the
Surviving Corporation; provided, however, that this Agreement may not
be amended, modified or supplemented after it has been approved by the
Merging Corporation's shareholders in any manner which, in the
judgment of the Board of Directors of the Merging Corporation, would
have a material adverse effect on the rights of the Merging
Corporation's shareholders or in any manner not permitted under
applicable law.
IN WITNESS WHEREOF, the parties have caused this Plan of
Reorganization to be executed by their duly authorized officers, all as of the
day and year first above written.
A-5
<PAGE>
MISSISSIPPI CHEMICAL CORPORATION, MCC SUB, INC.,
a Mississippi corporation a Mississippi corporation
By: /s/Charles O. Dunn By: /s/Charles O.Dunn
---------------------------- ---------------------
President President
Attest: /s/ Rosalyn B. Glascoe Attest: /s/Rosalyn B. Glascoe
------------------------ ---------------------
A-6
<PAGE>
APPENDIX B
----------
ARTICLES OF INCORPORATION
OF
MCC SUB, INC.
The undersigned natural persons, having capacity to contract and each being
of the age of twenty-one years or more and acting as incorporators of a
corporation pursuant to Section 79-4-2.02 of the Mississippi Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation:
1. Name. The name of the Company is MCC SUB, INC. (the "Company").
2. Registered Agent. The name and address of the initial registered agent
of the Company is Rosalyn B. Glascoe, Highway 49 East, P. O. Box 388, Yazoo
City, Mississippi 39194-0388.
3. Registered Office. The initial registered office of the Company is:
Highway 49 East, P. O. Box 388, Yazoo City, Mississippi 39194-0388.
4. Board of Directors.
(a) Initial Board. The number of directors constituting the initial Board
of Directors is twelve (12), and the names and addresses of the persons who are
to serve as directors until the first annual meeting of shareholders or until
their successors are elected and shall qualify are:
B-1
<PAGE>
John W. Anderson Woods E. Eastland
P.O. Box 2227 P.O. Box 547
Decatur, Alabama 35609 Greenwood, Mississippi 38930
Coley L. Bailey John Sharp Howie
691 Air Industrial Park Road 23 Woodlawn Drive
Grenada, Mississippi 38901 Yazoo City, Mississippi 39194
Frank R. Burnside, Jr. G. David Jobe
P.O. Box 535 615 Locust Street
Newellton, Louisiana 71357 Columbia, Missouri 65201
Robert P. Dixon George Penick
P.O. Box 5489 138 Highland Hills Lane
North Little Rock, Arkansas 72119 Flora, Mississippi 39071
Charles O. Dunn David M. Ratcliffe
P.O. Box 388 P.O. Box 4079
Yazoo City, Mississippi 39194 Gulfport, Mississippi 39502-4079
W. R. Dyess Wayne Thames
103 North 7th Street Route 2, Box 194-A
Corsicana, Texas 75110 Evergreen, Alabama 36401
(b) Number of Directors. The number of the members of the Board of
Directors of the Company following the initial Board shall be not less than nine
(9) or more than fifteen (15), the exact number to be fixed and determined from
time to time by resolution of a majority of the Board of Directors.
(c) Classification of Board. At the first annual meeting of shareholders,
the directors shall be divided into three classes, as nearly equal in number as
may be, the term of office of those of the first class to expire at the first
annual meeting of shareholders after their election, the term of office of those
in the second class to expire at the second annual meeting of shareholders after
their election, and the term of office of those of the third class to expire at
the third
B-2
<PAGE>
annual meeting of shareholders after their election. At each annual election
held after the initial classification and election, directors chosen to succeed
those whose terms expire shall be elected for a term of office to expire at the
third annual meeting of shareholders after their election.
(d) Vacancies. Any vacancy arising from the earlier retirement of a
director may be filled by vote of the remaining directors or the shareholders
and the term of the new director shall be for the balance of the term of the
retiring director's class.
(e) Increase in the size of the Board. A vote of at least two-thirds of
the outstanding voting power of the Company is required to increase the maximum
number of the members of the Board of Directors if the Board of Directors does
not recommend an increase in the maximum number of members of the Board.
(f) Removal of Directors. Shareholders may remove one or more director(s)
only for "cause," defined for purposes of this Article 4 as final conviction of
a felony, unsound mind, adjudication of bankruptcy or conduct determined by a
majority of the other directors to constitute conduct prejudicial to the
interests of the Company. A director may be removed for cause only at a meeting
called for the purpose of removing the director and the notice of the meeting
must state that the purpose, or one of the purposes, of the meeting is the
removal of the director.
B-3
<PAGE>
(g) Cumulative Voting. Shareholders shall have no right to cumulate their
votes in the election of directors.
5. Authorized Shares. The maximum number of shares which the Company
shall have the authority to issue is:
(a) Common Stock. One hundred million (100,000,000) shares of Common
Stock, $.01 par value per share, with each share entitled to one (1) vote per
share. The shares of Common Stock shall be entitled to receive the remaining
net assets of the Company upon dissolution after all distributions to holders of
Capital Equity Credits and Allocated Surplus Accounts established by the Company
on its books and after all distributions to holders of Preferred Stock having a
liquidation preference over the Common Stock; and
(b) Preferred Stock. Five hundred thousand (500,000) shares of Preferred
Stock which shares shall be entitled to such preferences in the distribution of
dividends and assets, and shall be divided into such series, as the Board of
Directors of the Company shall determine, with full authority in the Board of
Directors to determine, prior to issuance, from time to time, the relative
preferences, limitations and relative rights of the shares of any series of
Preferred Stock, with respect to par value, if any, dividends, redemption,
payments on liquidation, sinking fund provisions, conversion privileges and
voting rights.
6. Preemptive Rights Denied. No holder of any of the shares of any class
of the Company shall be entitled to
B-4
<PAGE>
preemptive rights to subscribe for, purchase or otherwise acquire the Company's
securities.
7. Period of Existence. The period of existence of the Company is
perpetual.
8. Purpose. The purpose of the Company is to engage in any lawful
business permitted by Mississippi law.
9. Liability and Indemnification.
(a) The liability of the directors and officers of the Company 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 Mississippi Business Corporation Act, as the same may be amended and
supplemented (the "Act"); except that liability shall not be eliminated for:
(i) the amount of a financial benefit received by a director or officer to which
he or she is not entitled; (ii) an intentional infliction of harm on the Company
or its shareholders; (iii) a violation of Section 79-4-8.33 of the Act; or (iv)
an intentional violation of criminal law.
(b) The Company shall, to the fullest extent permitted by the provisions of
the Act, 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 Act, and the indemnification provided for herein shall not be
deemed exclusive of any other rights to which those indemnified directors,
officers, employees and/or agents
B-5
<PAGE>
may be entitled under any Bylaw, vote of shareholders or disinterested
directors, or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and the
indemnification provided for herein shall continue as to a person who has ceased
to be a director, officer, employee, or agent and shall inure to the benefit of
the heirs, executors, and administrators of such person.
10. Shareholder Protection Act; Control Share Act. The provisions of the
Mississippi Shareholder Protection Act, Sections 79-25-1 through 79-25-9,
Mississippi Code 1972 Annotated, shall apply to this Company as if the Company
were a "Corporation" as defined in that statute. The Company elects to be
subject to the provisions of the Mississippi Control Share Act, Sections 79-27-1
through 79-27-11, Mississippi Code 1972 Annotated, and that statute shall apply
to this Company as if the Company were an "issuing corporation" as defined in
that statute.
11. Amendments. Any amendments to Articles 4, 9, 10, 11, 12 or 13 of
these Articles of Incorporation shall require the affirmative vote of at least
two-thirds of the outstanding voting power of the Company (in addition to, and
not in lieu of, any other vote required under the Act). All other Articles of
these Articles of Incorporation may be amended by the majority
B-6
<PAGE>
vote of the outstanding voting power of the Company (in addition to, and not in
lieu of, any other vote required under the Act).
12. Special Meetings. The Board of Directors is authorized to adopt, and
amend from time to time, a Bylaw that increases, over the percentage otherwise
required by the Act, the percentage of the outstanding voting power that is
necessary to call a special meeting of shareholders, and the percentage set
forth in that Bylaw shall be deemed to be set forth herein.
13. Approval of Major Transactions. Any merger, consolidation, share
exchange, combination of shares, sale of substantially all of the Company's
assets other than in the regular course of business or adoption of a plan of
dissolution of the Company (a "Major Transaction") shall require 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 unless the Major Transaction has been approved and recommended to the
shareholders by two-thirds of the directors then in office, in which case the
Major Transaction shall require the affirmative vote of a majority of the
outstanding voting power entitled to be cast on the Major Transaction by each
voting group entitled to vote separately thereon.
14. Capital Equity Credits and Allocated Surplus Accounts. If approved by
the Board of Directors, the Company may establish
B-7
<PAGE>
"Capital Equity Credits" and "Allocated Surplus Accounts" ("Special Accounts").
Special Accounts may be established only to represent capital allocations to
shareholders of a portion of earnings on business done with such shareholders
made by a predecessor corporation which is merged into the Company. Any Special
Accounts, if established, shall have a preference upon liquidation over the
Company's Common and Preferred Stock.
Executed on May 23, 1994.
/s/Charles O. Dunn
--------------------------------------
(Incorporator)
Charles O. Dunn
Highway 49 East
P. O. Box 388
Yazoo City, Mississippi 39194-0388
/s/Robert E. Jones
----------------------------------------
(Incorporator)
Robert E. Jones
Highway 49 East
P. O. Box 388
Yazoo City, Mississippi 39194-0388
B-8
<PAGE>
APPENDIX C
----------
BYLAWS
------
OF
MCC SUB, INC.
-------------
(a Mississippi corporation)
----------
ARTICLE I.
----------
Identification
--------------
Section 1.01. Name. The name of this corporation is MCC Sub, Inc. The
corporation may conduct operations under such other names as the Board of
Directors may designate.
Section 1.02. Seal. The corporation shall be authorized, but not
required, to use a corporate seal, which if used shall be circular in form and
contain the name of the corporation and the words "Corporate Seal, Mississippi."
The corporate seal shall be affixed by the Secretary upon such instruments or
documents as may be deemed necessary. The presence or absence of such seal on
any instrument shall not, however, affect its character or validity or legal
effect in any respect.
Section 1.03. Offices. The address of the principal office of the
corporation shall be Highway 49 East, P. O. Box 388, Yazoo City, Mississippi
39194-0388. The corporation may also have offices at such other places as the
Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II.
-----------
Capital Stock
-------------
Section 2.01. Consideration for Shares. Except as otherwise permitted by
law, capital stock of the corporation may be issued for such consideration as
shall be fixed from time to time by the Board of Directors.
C-1
<PAGE>
Section 2.02. Payment for Shares. The consideration for the issuance of
shares may be paid, in whole or in part, in money, in other property, tangible
or intangible, or in other benefit to the corporation, including promissory
notes, labor or services already performed, contracts for services to be
performed or other securities of the corporation. Before the corporation issues
shares, the Board of Directors shall determine that the consideration is
adequate, which determination is conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether the shares are
validly issued, fully paid and nonassessable. When the corporation receives the
consideration for which the Board authorized the issuance of shares, the shares
issued therefor are fully paid and nonassessable. The corporation may place in
escrow shares issued for a contract for future services or benefits or a
promissory note, or make other arrangements to restrict transfer of the shares,
and may credit distributions in respect of the shares against their purchase
price until the services are performed, the note is paid or the benefits
received. Such escrow arrangements may provide that if the services are not
performed, the note is not paid or the benefits are not received, then the
shares escrowed or restricted and the distributions credited may be cancelled in
whole or in part.
Section 2.03. Certificates Representing Shares. The certificates of stock
of the corporation shall be numbered consecutively and entered in the books of
the corporation as they are issued. The Board of Directors may authorize the
issuance of some or all of the shares without certificates. Such authorization
shall not effect shares already represented by certificates. Each certificate
issued shall be signed, either manually or by facsimile, by two officers of the
corporation and may bear the corporate seal or its facsimile. If the corporation
is authorized to issue different classes of shares or different series within a
class, then each certificate shall have noted thereon a summary of the
designations, relative rights, preferences, rights and limitation applicable to
each class and the variations in rights, preferences and limitations determined
for each series. Certificates evidencing shares of the corporation shall set
forth thereon the statements prescribed by Section 79-4-6.25 of the Mississippi
Business Corporation Act and by any other applicable provision of law. If a
person who signed, either manually or in facsimile, a share certificate no
longer holds office when the certificate is issued, the certificate is
nevertheless valid.
Section 2.04. Share Transfers. Upon compliance with any provisions
restricting the transferability of shares that may be set forth in the articles
of incorporation, these Bylaws, or any written agreement in respect thereof,
transfers of shares of the corporation shall be made only on the books of the
corporation by the registered holder thereof, or by his or her attorney
thereunto
C-2
<PAGE>
authorized by power of attorney duly executed and filed with the Secretary of
the corporation, or with a transfer agent or a registrar and on surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon, if any. Except as may be otherwise provided by law or these
Bylaws, the person in whose name shares stand on the books of the corporation
shall be deemed the owner thereof for all purposes as regards the corporation;
provided that whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact, if known to the Secretary of the
corporation, shall be so expressed in the entry of transfer.
ARTICLE III.
------------
Meetings of Shareholders
------------------------
Section 3.01. Place of Meetings. Meetings of the shareholders of the
corporation shall be held at the principal office of the corporation or at such
other place in or out of the State of Mississippi as shall be determined by the
Board of Directors.
Section 3.02. Annual Meetings. The annual meeting of the shareholders
shall be held at such time and place as the Board of Directors shall designate,
at which annual meeting the shareholders shall elect a number of members of the
Board of Directors equal to the number of directors whose terms expire at such
meeting, and transact such other business as may properly come before the
meeting. Failure to hold the annual meeting at the designated time shall not
affect the validity of any corporate action.
Section 3.03. Special Meetings. Special meetings of the shareholders
shall be held on such call as may be specified in the Articles of Incorporation,
on call of the Board of Directors or on call of the holders of at least ten
percent (10%) of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting if such holders sign, date and
deliver to the Secretary one or more written demand(s) for the meeting. Any
written demand for a meeting shall state the purpose(s) of the proposed meeting
and only business within such purpose(s) described in the notice may be
conducted at such meeting.
Section 3.04. Notice of Meetings - Waiver. Written notice stating the
place, date and time of the meeting, and in case of a special meeting, the
purpose(s) for which the meeting is called, shall be delivered not less than ten
(10) days nor more than sixty (60) days before the date of the meeting, either
personally or by mail, to each shareholder entitled to vote at such
C-3
<PAGE>
meeting. Only the shareholders whose names appear on the stock transfer books
at the close of business the day before the first notice is delivered to
shareholders shall be entitled to notice of and to vote at such meeting,
notwithstanding the transfer of shares thereafter.
The corporation shall give notice to shareholders not entitled to vote in
any instance where such notice is required by the provisions of the Mississippi
Business Corporation Act. A shareholder may waive notice before or after the
date and time stated in the notice. The waiver must be in writing, must be
signed by the shareholder entitled to notice and must be delivered to the
corporation for inclusion in the minutes or filing with the corporate records. A
shareholder's attendance at a meeting waives objection to lack of notice or
defective notice of the meeting unless at the beginning of the meeting (or
promptly upon arrival) the shareholder objects to holding the meeting or
transacting business at the meeting. A shareholder's attendance at a meeting
also waives objection to consideration of a particular matter which is not
within the purpose(s) described in the notice unless the shareholder objects
when the matter is presented.
Section 3.05. Record Date. The Board of Directors may fix a record date
for one or more voting groups in order to determine the shareholders entitled to
notice of a shareholders' meeting, to demand a special meeting, to vote, or to
take any other action; provided, that a record date fixed under this sentence
may not be more than seventy days before the meeting or action requiring a
determination of shareholders. The stock transfer books of the corporation need
not be closed. The record date may precede the date on which the record date is
established. A determination of shareholders entitled to notice of or to vote at
a shareholders' meeting is effective for any adjournment of the meeting unless
the Board of Directors fixes a new record date, which it must do if the meeting
is adjourned to a date more than one hundred twenty days after the date fixed
for the original meeting.
Section 3.06. Shares Held by Nominees. The corporation may establish a
procedure by which the beneficial owner of shares that are registered in the
name of a nominee is recognized by the corporation as the shareholder. The
extent of this recognition may be determined in the procedure.
Section 3.07. Shareholders' List. After fixing a record date for a
meeting, the corporation shall prepare an alphabetical list of the names of all
its shareholders who are entitled to notice of shareholders' meeting. The list
shall be arranged by voting group, and within each voting group by class or
series of shares, and show the address of and number of shares held by each
C-4
<PAGE>
shareholder. The shareholders' list must be available for inspection by any
shareholder, beginning two business days after notice of the meeting is given
for which the list was prepared and continuing through the meeting, at the
corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. A shareholder, his or her agent or
attorney is entitled on written demand to inspect and, subject to the
requirements of Section 79-4-16.02(c) of the Mississippi Business Corporation
Act, to copy the list during regular business hours and at his or her expense,
during the period it is available for inspection. The corporation shall make the
shareholders' list available at the meeting, and any shareholder, his or her
agent or attorney, is entitled to inspect the list at any time during the
meeting or any adjournment.
Section 3.08. Quorum. Unless otherwise required by law or the Articles of
Incorporation, a majority of the votes entitled to be cast on the matter by a
voting group, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders for action on that matter. Holders of shares entitled to
vote as a separate voting group may take action on a matter at a meeting only if
a quorum of those shares exists with respect to that matter. Once a share is
represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and any adjournment thereof unless a
new record date is or must be set for the adjourned meeting of shareholders for
action on that matter. The shareholders present at a duly organized meeting may
continue to do business until adjournment, notwithstanding the withdrawal of a
number of shareholders so that less than a quorum remains. A meeting may be
adjourned despite the absence of a quorum.
Section 3.09. Meaning of Certain Terms. As used herein in respect to
the right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "shareholder" or
"shareholders" refers to an outstanding share or shares and to a holder or
holders of record of outstanding shares when the corporation is authorized to
issue only one class of shares, and said reference is also intended to include
any outstanding share or shares and any holder or holders of record of
outstanding shares of any class upon which or upon whom the Articles of
Incorporation confer such rights where there are two or more classes or series
of shares or upon which or upon whom the Mississippi Business Corporation Act
confers such rights notwithstanding that the Articles of Incorporation may
provide for more than one class or series of shares, one or more of which are
limited or denied such rights thereunder.
C-5
<PAGE>
Section 3.10. Proxies and Voting. Except as otherwise provided by law or
the Articles of Incorporation, each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a shareholders' meeting. A
shareholder may vote either in person or by proxy. A shareholder may appoint a
proxy by signing an appointment form, either personally or by his attorney-in-
fact, and delivering it to the Secretary or other officer of the corporation who
is authorized to tabulate votes. An appointment of a proxy is revocable unless
the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest. Such an appointment becomes revocable
when the interest is extinguished. No proxy shall be valid after eleven (11)
months from the date of its execution, unless otherwise provided in the proxy.
Unless the Articles of Incorporation provide otherwise, directors shall be
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting in which a quorum is present.
Section 3.11. Conduct of Meeting. Meetings of the shareholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting - the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, the President, a Vice-President, if any, or, if none of the
foregoing is in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his or her absence, an
Assistant Secretary, shall act as secretary of every meeting, but, if neither
the Secretary nor an Assistant Secretary is present, the chairman of the meeting
shall appoint a secretary of the meeting.
Section 3.12. Action Without a Meeting. Action required or permitted by
the Mississippi Business Corporation Act 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. The corporation must give
any required notice to nonvoting shareholders, if any.
ARTICLE IV.
-----------
Board of Directors
------------------
Section 4.01. Number and Qualifications. A director need not be a
shareholder, a citizen of the United States, or a resident of the State of
Mississippi. The business and affairs of the corporation shall be managed under
the direction of, and all
C-6
<PAGE>
corporate powers shall be exercised by or under the authority of, its Board of
Directors. The Board of Directors of the corporation shall, effective as of the
date of adoption of these Bylaws, consist of twelve (12) members and thereafter
shall consist of such number of members not less than nine (9) nor more than
fifteen (15) as determined from time to time by resolution of a majority of the
Board of Directors.
As long as the size of the Board of Directors shall be fixed at twelve (12)
members, the Board shall be divided in three (3) classes of four (4) directors
each, with the Board of Directors designating nominees for each class and the
shareholders of the Company electing the initial directors serving in such
classes to initial terms expiring in the three successive years following such
initial election (Class I-1995, Class II-1996 and Class III-1997). In the event
a different number of directors is established but is nine (9) or more, the
Board of Directors shall be divided into three (3) classes consisting of equal
numbers of directors to the extent possible. The Board of Directors may fill any
vacancies on the Board of Directors, pursuant to Section 4.04 hereof,
designating new directors to one of the three classes of directors. At each
annual meeting of the shareholders following such initial election, the number
of directors equal to the number of the class whose term expires at the time of
such meeting shall be elected to hold office until the third succeeding annual
meeting after their election or until their earlier retirement form the Board.
Any vacancy arising from the earlier retirement of a director shall be filled by
vote of the Board, and the term of any such director shall be for the balance of
the term of the retiring director.
Section 4.02. Election. At each annual meeting at which Directors are
elected, Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election. Each Director shall hold office for the
term for which he or she is elected and until his or her successor shall be
elected and qualified.
Section 4.03. Removal of Directors. The Directors or the shareholders may
remove one (1) or more Director(s) only for cause as defined in the Articles of
Incorporation. A Director may be removed only if the number of votes cast to
remove the Director exceeds the number of votes cast not to remove the Director.
A Director may be removed by the shareholders or Directors only at a meeting
called for the purpose of removing the Director and the meeting notice must
state that the purpose or one of the purposes of the meeting is the removal of
Directors.
Section 4.04. Vacancies. Unless the Articles of Incorporation provide
otherwise, if a vacancy occurs in the Board
C-7
<PAGE>
of Directors, including a vacancy resulting from an increase in the number of
Directors:
(a) The Board of Directors may fill the vacancy; or
(b) If the Directors may fill the vacancy; or fewer than a quorum of the
Board, they may fill the vacancy by the affirmative vote of a majority
of all the Directors remaining in office.
A decrease in the number of Directors does not shorten an incumbent Director's
term. A vacancy that will occur at a specified later date may be filled before
the vacancy occurs, but the new Director may not take office until the vacancy
occurs.
Section 4.05. Place of Meeting. Meetings of the Board of Directors,
regular or special, may be held either in or out of the State of Mississippi.
Section 4.06. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice of the date, time, place or purpose of the
meeting.
Section 4.07. Special Meetings. Special meetings of the Board of
Directors may be held upon notice. Unless the Articles of Incorporation provide
for a longer or shorter period, special meetings of the Board of Directors must
be preceded by a least two (2) days' notice of the date, time and place of the
meeting. The notice need not describe the purpose of the special meeting unless
required by the Articles of Incorporation. Attendance in person at or
participation in a special meeting waives any required notice of the meeting
unless at the beginning of the meeting (or promptly upon arrival) the Director
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting. Notice of any
meeting of the Board of Directors may be waived before or after the date and
time stated in the notice if in writing, signed by the Director entitled to the
notice, and filed with the minutes or corporate records.
Section 4.08. Quorum and Voting. A quorum of the Board shall consist of a
majority of the Directors in office immediately before the meeting begins. If a
quorum is present when a vote is taken, the affirmative vote of a majority of
Directors present is the act of the Board. A Director who is present at a
meeting of the Board when corporate action is taken is deemed to have assented
to the action taken unless:
C-8
<PAGE>
(a) he or she objects at the beginning of the meeting (or promptly upon
arrival) to holding the meeting or transacting business at the
meeting;
(b) his or her dissent or abstention from the action taken is entered in
the minutes of the meeting; or
(c) he or she delivers written notice of dissent or abstention to the
presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a Director who votes in
favor of the action taken.
Section 4.09. Conduct of Meetings. The Board of Directors may permit any
or all Directors to participate in a regular or special meeting by, or conduct
the meeting through use of, any means of communication by which all Directors
participating may simultaneously hear each other during the meeting. A Director
who so participates in a meeting is deemed to be present in person at the
meeting.
Section 4.10. Committees of the Board. Unless the Articles of
Incorporation provide otherwise, the Board of Directors may create one or more
committees and appoint members of the Board of Directors to serve on them. Each
committee must have two (2) or more members, who shall serve at the pleasure of
the Board of Directors. The creation of a committee and appointment of members
to it must be approved by a majority of all the Directors in office when the
action is taken. The requirements applicable to the Board of Directors with
regard to meetings, action without meetings, notice and waiver of notice, and
quorum and voting requirements apply to committees and their members as well.
The Board of Directors may delegate to such committee(s) all such authority of
the Board that it deems desirable except the authority to:
(a) Authorize distributions;
(b) Approve or propose to the shareholders action required to be approved
by shareholders;
(c) Fill vacancies on the Board of Directors or on any of its committees;
(d) Amend the Articles of Incorporation;
(e) Adopt, amend or repeal Bylaws;
C-9
<PAGE>
(f) Approve a plan of merger not requiring shareholder approval;
(g) Authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the Board of Directors; or
(h) Authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences
and limitations of a class or series of shares, except that the Board
of Directors may authorize a committee to do so within limits
specifically prescribed by the Board of Directors.
Section 4.11. Action Without Meeting. Action required or permitted by the
Mississippi Business Corporation Act to be taken at a Board of Directors'
meeting may be taken without a meeting if the action is taken by all members of
the Board. The action must be evidenced by one or more written consents
describing the action taken, signed by each director, and included in the
minutes or filed with the corporate records reflecting the action taken. Action
taken under this paragraph is effective when the last director signs the
consent, unless the consent specifies a different prior or subsequent effective
date.
ARTICLE V.
----------
Officers
--------
Section 5.01. Officers. The officers of the corporation shall consist of
a Chairman of the Board, Vice Chairman of the Board, President and Secretary
and, as deemed appropriate by the Board of Directors, a Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, General Counsel, Treasurer,
one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and
such other officers and assistant officers and agents as may be deemed necessary
by the Board of Directors. Any two (2) or more offices may be held by the same
person. The Board of Directors shall delegate to one of the officers the
responsibility of preparing minutes of Directors' and shareholders' meetings and
of authenticating records of the corporation. Officers need not be Directors or
shareholders of the corporation.
Section 5.02. Vacancies. Vacancies occurring in any office shall be
filled by the Board of Directors at any regular or special meeting.
C-10
<PAGE>
Section 5.03. The Chairman and Vice Chairman of the Board. The Chairman
of the Board shall preside at all meetings of the Board of Directors. The Vice
Chairman shall act as Chairman in the absence of or incapacity of the
Chairman.
Section 5.04. The President. The President shall be responsible for the
active, executive management and supervision of the operations of the
corporation and shall perform such duties as the Board of Directors may
prescribe or his or her capacity as President by custom may provide.
Section 5.05. The Vice President. Vice Presidents shall perform such
duties as the Board of Directors may prescribe. Each Vice President shall report
to the President or his or her delegate who shall be responsible for the Vice
President's actions.
Section 5.06. The Secretary. The Secretary shall attend all meetings of
the shareholders and of the Board of Directors, and shall keep a true and
complete record of the proceedings of these meetings. The Secretary shall be
custodian of the records of the corporation and shall attend to the giving of
all notices, attest, when requested, to the authority of the President or other
officers, as revealed by the minutes or these Bylaws, to execute legal documents
binding the corporation, and shall perform such other duties as these Bylaws may
provide or the Board of Directors may prescribe.
Section 5.07. The Chief Financial Officer. The Chief Financial Officer
shall keep correct and complete records of account, showing accurately at all
times the financial condition and results of operations of the corporation. The
Chief Financial Officer shall be the legal custodian of all moneys, notes,
securities and other valuables that may from time to time come into the
possession of the corporation. The Chief Financial Officer shall immediately
deposit all funds of the corporation coming into his or her hands in some
reliable bank or other depository to be designated by the Board of Directors,
and shall keep this bank account in the name of the corporation. The Chief
Financial Officer shall furnish at meetings of the Board of Directors, or
whenever requested, a statement of the financial condition and results of
operations of the corporation, and shall perform such other duties as these
Bylaws may provide or the Board of Directors may prescribe. The Chief Financial
Officer may be required to furnish bond in such amount as shall be determined by
the Board of Directors.
Section 5.08. Other Officers. The duties of other officers elected by the
Board of Directors shall be such as are customary to their respective offices
and as shall be assigned to them by the President.
C-11
<PAGE>
Section 5.09. Resignation and Removal. An officer may resign at any time
by delivering notice to the corporation. A resignation is effective when the
notice is delivered unless the notice specifies a later effective date. If a
resignation is made effective at a later date and the corporation accepts the
future effective date, the Board of Directors may fill the pending vacancy
before the effective date provided the successor does not take office until the
effective date. The Board of Directors may remove any officer at any time with
or without cause and any officer or assistant officer, if appointed by another
officer, may likewise be removed by such officer.
ARTICLE VI.
-----------
Registered Office And Agent
---------------------------
The address of the initial registered office of the corporation and the
name of the initial registered agent of the corporation are set forth in the
original Articles of Incorporation.
ARTICLE VII.
------------
Fiscal Year
-----------
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE VIII.
-------------
Amendments
----------
These Bylaws may be altered, amended or repealed and new Bylaws adopted by
the affirmative vote of the holders of a majority of the outstanding stock at
any regular meeting of the shareholders or special meeting called for the
purpose, or by the affirmative vote of a majority of the entire Board of
Directors at any regular or special meeting of the Board, unless the
shareholders in amending or repealing a particular Bylaw provide expressly that
the Board of Directors may not amend or repeal that Bylaw; provided, however,
that the Board of Directors may not amend these Bylaws to take any action which
is reserved exclusively by the shareholders pursuant to the Mississippi Business
Corporation Act. If any shareholder or Director, as the case may be, should
object to the consideration of any proposed amendment, the proposal may not be
voted upon unless notice of the proposed amendment was given at least ten (10)
days prior to the meeting at which such objecting
C-12
<PAGE>
shareholder or Director is entitled to vote. Any amendment, modification, repeal
or addition to these Bylaws adopted by the Board of Directors may be amended or
repealed by the shareholders.
A bylaw that fixes a greater quorum or voting requirement for the Board of
Directors may be amended or repealed:
(a) If originally adopted by the shareholders, only by the shareholders;
(b) If originally adopted by the Board of Directors, either by the
shareholders or the Board of Directors.
Action by the Board of Directors to adopt or amend a bylaw originally
adopted by the Board of Directors fixing a greater quorum or voting requirement
must meet the same quorum requirement and be adopted by the same vote required
to take action under the quorum and voting requirement then in effect or
proposed to be adopted, whichever is greater. The Board is without authority to
amend this Article VIII.
C-13
<PAGE>
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of
the Bylaws of MCC Sub, Inc., a corporation of the State of Mississippi, as in
effect on the date hereof.
Dated: May 23, 1994
/s/ Rosalyn B. Glascoe
------------------------------------
Secretary of MCC Sub, Inc.
(SEAL)
C-14
<PAGE>
APPENDIX D
Article 13
of the Mississippi Business Corporation Act
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 actions:
D-1
<PAGE>
(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;
(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.
D-2
<PAGE>
(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.
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-
10.02 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.
D-3
<PAGE>
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.
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 dissenter's notice pursuant to Section 79-4-13.22(b)(3), and
D-4
<PAGE>
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 dissenter's 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.
D-5
<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 dissenter's 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
D-6
<PAGE>
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.
(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.
D-7
<PAGE>
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.
D-8
<PAGE>
APPENDIX E
[D. L. Johnson & Co.]
March 18, 1994
Mississippi Chemical Corporation
P.O. Box 388
Yazoo City, Mississippi 39194
Attention: Board of Directors
Gentlemen:
On March 22, 1994, the Board of Directors ("Board") of Mississippi Chemical
Corporation ("MCC") will give final consideration to the Plan of Reorganization
(the "Plan") and the Exchange Offer (the "Exchange Offer") that provide for the
conversion of MCC from an agricultural cooperative to a regular for-profit
business corporation. The Plan and the Exchange Offer were developed by the
Special Committee on Capital Structure and Formation ("Special Committee") after
a comprehensive evaluation of the advantages and disadvantages of various
possible corporate structures. The Plan and the Exchange Offer have been
reviewed with the Board at previous Board meetings on a preliminary basis.
Pursuant to the Plan, MCC will incorporate a wholly owned subsidiary ("New
Entity") into which MCC will be merged effective as of the opening of business
on July 1, 1994. In the merger, the Common Stock of MCC will be canceled and
shareholders of Series I, Series II and Series III Common Stock will receive
shares in the New Entity ("New Shares") based upon an appropriate allocation.
Holders of Series IV, Series V and Series VI Common Stock will receive cash.
Pursuant to the Exchange Offer, holders of Capital Equity Credits and
Allocated Surplus will be offered the right to exchange those interests for New
Shares equal in value to the present value of the Capital Equity Credits and
Allocated Surplus.
E-1
<PAGE>
Board of Directors
March 18, 1994
Before approving the Plan and the Exchange Offer, the Board has requested
that I assist them in developing and reviewing the methodology used in valuing
Capital Equity Credits and Allocated Surplus and allocating value to MCC Common
Stock. This review included the following steps: (1) valuing the New Entity,
(2) determining the present value of the Capital Equity Credits and Allocated
Surplus, and (3) allocating the residual value of the New Entity to Series I,
Series II and Series III Common Stock. The residual value of the New Entity is
the value of the New Entity less the present value of the Capital Equity Credits
and Allocated Surplus and amounts to be paid to shareholders of Series IV,
Series V, and Series VI Common Stock.
As a financial advisor to MCC, I have been involved with management, the
Special Committee and the Board in reviewing structuring alternatives for over
one year and am familiar with MCC's operations and the policy objectives of the
Board.
With regard to each valuation and allocation, my review took into
consideration (1) the objectives and expectations of the Board when creating the
various interests and rights, (2) prior practices and transactions relating to
their value, (3) the Board's discretionary authority and the current policy
objectives affecting the valuations, and (4) recognized methods and techniques
for valuing the various interests and rights.
In connection with this assignment, I have reviewed the following: the
Plan, the Exchange offer and other relevant information relating to the
reorganization of MCC; other corporate documents including the Articles of
Incorporation and Bylaws currently in effect and those proposed to be in effect
after the reorganization; and historical and projected financial information
relating to the operations of MCC that will comprise the New Entity. I have
also held discussions with members of senior management of MCC regarding its
past and current business operations, financial condition and future prospects.
I have also conducted an evaluation of the size, operations, capital structure
and financial performance of comparable publicly traded companies and an
analysis of the current public equity market for comparable companies.
The valuations and allocations relating to the Plan and the Exchange Offer
are based on the following policy decisions by the Board: (1) that Allocated
Surplus be treated the same as Capital Equity Credits with assumed redemption
dates subsequent to the
E-2
<PAGE>
Board of Directors
March 18, 1994
payment of Capital Equity Credits, (2) that, but for the Plan and the Exchange
Offer, the date of redemption of Capital Equity Credits and Allocated Surplus
would not be the current date, (3) that the allocation among Series I, Series II
and Series III Common Stock reflect their different preferred patronage rights,
and (4) that Series IV, Series V and Series VI Common Stock be converted to cash
as they are currently inactive and there is no present intention to reactivate
them.
As a result of my review and analysis as described above, it is my
conclusion that the methodology recommended by the Special Committee in
determining the value of the New Entity, the present value of the Capital Equity
Credits and Allocated Surplus and the allocation procedures for Series I, Series
II and Series III Common Stock are reasonable based upon the discretionary
authority of the Board, the policy positions adopted by the Board and recognized
methods of valuation as discussed in further detail in this report.
ESTIMATING THE VALUE OF THE CAPITAL STOCK OF THE NEW ENTITY
In order to reasonably determine the number of New Shares to be offered to
holders of Capital Equity Credits and Allocated Surplus under the Exchange Offer
and to be distributed to Series I, Series II and Series III Common Stock under
the Plan, a number of separate valuations were performed, including an estimate
of the value of the New Entity immediately after the merger. The estimated
value of the New Shares was determined by comparing MCC's historical and
projected financial performance with market multiples of selected publicly
traded companies. However, consideration was given to factors unique to the New
Entity including its lack of trading history and limited market exposure,
potential contingent liabilities and other relevant factors affecting the
trading value.
On the basis of my analysis of these factors, it is estimated that the New
Entity will be valued in a range of between $280 million and $320 million on
July 1, 1994. Considering this analysis and based upon my recommendation, the
Special Committee has determined that an appropriate value for determining the
offer under the Exchange Offer and distribution under the Plan should be the
midpoint of this range or $300 million.
Attached as Exhibit I is a table summarizing market multiples of selected
publicly traded comparable companies used in
E-3
<PAGE>
Board of Directors
March 18, 1994
developing the ranges of estimated values for the New Entity. These market
multiples of comparable companies were then applied to certain financial data
for the New Entity to develop ranges of implied values. These implied ranges
were discounted by approximately 15% because the New Entity will lack trading
history, therefore, not have the market exposure and accompanying support as
compared with the more established comparable companies.
ALLOCATION AMONG SERIES I, SERIES II AND SERIES III COMMON STOCK
Series I, Series II and Series III Common Stock entitle shareholders to
purchase a specific amount of nitrogen fertilizer products pursuant to preferred
patronage rights. The purchase of one ton of nitrogen fertilizer product
requires .533 shares of Series I, 1.6 shares of Series II and 8 shares of Series
III Common Stock. Consequently, each share of Series I Common Stock entitles
its holder to patronage purchases three times the amount of Series II Common
Stock and fifteen times the amount of Series III Common Stock.
Historically, these differences in the preferred patronage rights have been
the primary determinant of value in transactions involving these shares.
Therefore, the Special Committee has recommended that the values of Series I,
Series II and Series III Common Stock directly reflect their differing preferred
patronage rights.
ALLOCATED SURPLUS
In fiscal years ended June 30, 1992 and 1993, the Board reserved earnings
which were allocated to individual shareholders in an Allocated Surplus account
and are included as shareholder-members' equity. This reserve as allocated to
individual shareholders in proportion to the earnings from their nitrogen
fertilizer sales to total earnings, exactly as had been done previously with
Capital Equity Credits.
The decision to issue Allocated Surplus rather than Capital Equity Credits
was based upon MCC's need to increase its permanent equity capital, as the
ability to raise permanent equity as a cooperative was limited. Without this
need to increase permanent equity, the Board would have issued Capital Equity
Credits instead of Allocated Surplus.
E-4
<PAGE>
Board of Directors
March 18, 1994
As the conversion will allow alternatives for raising permanent equity, the
Special Committee is recommending that Allocated Surplus be treated as Capital
Equity Credits under the Exchange Offer. As the Board has the discretion to
consider Allocated Surplus as Capital Equity Credits, the Special Committee
recommends that this be done as part of the Plan and the Exchange Offer.
VALUE OF CAPITAL EQUITY CREDITS
Although discretionary, the Board has historically redeemed Capital Equity
Credits subject to MCC's financial ability to fund these redemptions. Normally,
the Board has delayed redemption of these interests for a 10-year period. But
for the Plan, it would be the Board's intention to continue the policy of
redeeming Capital Equity Credits on the same or a similar basis.
As part of the Exchange Offer, the Special Committee has recommended that
this long-standing policy be recognized as part of the reorganization.
Consequently, the Special Committee is recommending that the holders of Capital
Equity Credits be offered the right to exchange the Capital Equity Credits for
New Shares at a rate intended to recognize an appropriate discount factor. This
discount factor should reflect the approximate interest cost if the New Entity
were to borrow the funds necessary to redeem currently.
After completing my analysis, I recommended, and the Special Committee
approved, a discount rate of 8% which reflects the approximate fixed interest
rate for a term loan to redeem Capital Equity Credits and Allocated Surplus.
This rate reflects a premium over the comparable rate on U.S. Treasury
securities of approximately 200 basis points (two percentage points).
The analysis and recommendations described above will be discussed at your
Board meeting on March 22, 1994, and I would be pleased to answer any questions
you might have regarding these matters at that time.
Yours very truly,
/s/Donald L. Johnson
Donald L. Johnson
DLJ/eas
Attachment
E-5
<PAGE>
Exhibit I
MISSISSIPPI CHEMICAL CORPORATION
Summary Market Multiples of Selected Publicly-Traded Fertilizer Companies
(Amounts in Millions, Except Per Share)
<TABLE>
<CAPTION>
Market Capitalization as Multiple of
---------------------------------------------
Total LTM LTM LTM LTM
% Market Market Net Pretax Common Cash
Company Name LFY End Dividend Capital(a) Capital(b) Income(c) Income Equity Flow(d)
- ------------------ ------- -------- ----------- ---------- --------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Mississippi 6/30/93 2.16 277.2 394.5 158.8 71.3 1.7 7.0
IMC Fertilizer Group 6/30/93 1.27 936.5 1,819.3 NM NM 2.4 18.2
NU West Industries Inc. 6/30/93 0 32.6 85.2 NM NM 11.6 6.5
Scotts Co. 9/30/93 0 338.2 429.1 15.8 9.4 2.4 8.8
Terra Industries Inc. 12/31/93 0 571.3 639.3 28.5 23.0 2.3 18.0
Vigoro Corp 6/30/93 2.15 636.2 804.8 15.0 9.9 4.0 10.0
MARKET MULTIPLES
----------------
Maximum 158.8 71.3 11.6 18.2
Minimum 15.0 9.4 1.7 6.5
Mean 54.5 28.4 4.1 11.1
Median 22.1 16.4 2.4 9.4
LTM ENDED 12/31/93 FOR MCC EXCLUDING NEWSPRINT SOUTH 14.6 24.3 157.0 31.3
IMPLIED VALUE
-------------
Maximum 2,318 1,733 1,822 570
Minimum 219 229 267 204
Mean 796 690 644 348
Median 323 399 377 294
Total Mkt. Capital as a Multiple of
-------------------------------------
LTM Market Price/
LTM Operating ------------------------
Operating Cash LTM CFY NFY
Income(e) Flow(f) Revenue EPS(g) EPS(g)
--------- --------- --------- -------- --------
First Mississippi 28.0 7.6 0.9 17.3 11.6
IMC Fertilizer Group 75.5 19.2 1.9 105.9 14.1
NU West Industries Inc. 15.2 6.3 1.0 NM NM
Scotts Co. 9.4 6.8 0.9 13.4 11.5
Terra Industries Inc. 18.6 12.8 0.6 16.5 12.7
Vigoro Corp 10.8 8.4 1.4 14.5 13.3
MARKET MULTIPLES
- ----------------
Maximum 75.5 19.2 1.9 105.9 14.1
Minimum 9.4 6.3 0.6 13.4 11.5
Mean 26.3 10.2 1.1 33.5 12.6
Median 16.9 8.0 1.0 16.5 12.7
LTM ENDED 12/31/93 FOR
MCC EXCLUDING
NEWSPRINT SOUTH 28.5 45.2 285.8 21.9 26.7
IMPLIED VALUE
- ------------- (h) (h)
Maximum 2,082 799 543 2,321 377
Minimum 199 216 172 294 307
Mean 681 393 314 734 337
Median 413 293 286 362 340
</TABLE>
[FN]
(a) Equal to shares outstanding multiplied by the market price per share
(b) Market value plus total debt and preferred equity less cash Debt 73.123
Cash 4.862
(c) Defined as net income available to common equity. For comparative
purposes, MCC's pretax income tax affected at 40% tax rate
(d) For comparative purposes, defined as net income to common plus depreciation
and amortization
(e) Defined as earnings before net income and taxes
(f) For comparative purposes, defined as operating income plus depreciation and
amortization
(g) Current market price per share divided by I/B/E/S median EPS for the
current and next fiscal year
(h) Adjusted for net debt outstanding at 12/31/93
E-6
<PAGE>
PROXY AND EXCHANGE ELECTION
The undersigned shareholder hereby appoints Charles O. Dunn and Coley L. Bailey,
or either of them, with full power of substitution, to act as proxy for and to
vote the stock of the undersigned at the special meeting of shareholders to be
held at the Owen Cooper Administration Building, Highway 49 East, Yazoo City,
Mississippi, on June 28, 1994, at 9:00 a.m. local time, or any adjournment
thereof, for the purposes stated in the Notice of Special Meeting of
Shareholders.
The undersigned, being the holder of the Common Stock and other interests in
Mississippi Chemical Corporation as described on the attached Schedule of
Ownership (the "Schedule"), hereby directs this proxy to be voted and this
exchange election to be made in accordance with the following directions:
1. PROPOSAL NO. 1 AND EXCHANGE ELECTION NO. 1
PLAN OF REORGANIZATION - RECOMMENDED BY THE BOARD OF DIRECTORS
FOR
[_] The undersigned votes for the Plan of Reorganization (the "Plan"),
and for the election of the classified board of directors which is a
part of the Plan, and in connection therewith makes the following
election if the Plan is approved: The undersigned elects to exchange
its Capital Equity Credits and Allocated Surplus Accounts (as
described in the Schedule) for Common Stock of the New Company in
accordance with the Plan. PLEASE PROCEED DIRECTLY TO EXCHANGE
ELECTION NO. 3.
AGAINST
[_] The undersigned votes against the Plan. If you hold Capital Equity
Credits and Allocated Surplus Accounts (see Schedule), PLEASE PROCEED
TO EXCHANGE ELECTION NO. 2.
2. EXCHANGE ELECTION NO. 2
ADDITIONAL ELECTIONS FOR THOSE VOTING AGAINST THE PLAN WHO HOLD CAPITAL
EQUITY CREDITS OR ALLOCATED SURPLUS ACCOUNTS. DO NOT COMPLETE IF YOU VOTED
FOR THE PLAN.
YES
[_] If the Plan is approved, the undersigned elects to exchange its
Capital Equity Credits and Allocated Surplus Accounts for Common
Stock of the New Company in accordance with the Plan. PLEASE PROCEED
TO EXCHANGE ELECTION NO. 3.
NO
[_] If the Plan is approved, the undersigned elects to retain its Capital
Equity Credits and Allocated Surplus Accounts. PLEASE PROCEED TO
EXCHANGE ELECTION NO. 3.
3. EXCHANGE ELECTION NO. 3
ADDITIONAL ELECTIONS RELATING TO SMALL HOLDERS.
YES
[_] If, after approval and implementation of the Plan, the undersigned
would own fewer than 100 shares of the New Company, the undersigned
elects to exchange its shares of Common Stock in the New Company for
cash at the rate of $15 per share. PLEASE SIGN AND RETURN THIS FORM.
NO
[_] If, after approval and implementation of the Plan, the undersigned
would own fewer than 100 shares of the New Company, the undersigned
elects to retain its shares of Common Stock in the New Company. Those
persons owning fewer than 100 shares may encounter difficulties in
disposing of their shares. PLEASE SIGN AND RETURN THIS FORM.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CONTRARY DIRECTION IS INDICATED,
THIS PROXY WILL BE VOTED FOR THE PLAN AND WILL BE TREATED AS AN AFFIRMATIVE
ELECTION UNDER EXCHANGE ELECTION NO. 1 AND EXCHANGE ELECTION NO. 3.
Dated ___________, 1994 ___________________________________
Signed
(EXACT name as it appears on Stock
Certificate, etc.)
<PAGE>
EXCHANGE ELECTION
-----------------
MISSISSIPPI CHEMICAL CORPORATION
The undersigned, being the holder of Capital Equity Credits and Allocated
Surplus Accounts of MISSISSIPPI CHEMICAL CORPORATION, hereby directs this
exchange election to be made in accordance with the following directions:
1. Exchange Election No. 1.
Yes
[_] If the Plan is approved, the undersigned elects to exchange its
Capital Equity Credits and Allocated Surplus Accounts for Common
Stock of the New Company in accordance with the Plan. Please Proceed
to Exchange Election No. 2
No
[_] If the Plan is approved, the undersigned elects to retain its Capital
Equity Credits and Allocated Surplus Accounts. IN THE EVENT THAT
HOLDERS OF CAPITAL EQUITY CREDITS AND ALLOCATED SURPLUS ACCOUNTS DO
NOT ELECT TO ACCEPT THE EXCHANGE OFFER, THEY MAY NEVER REALIZE VALUE
ON THESE INTERESTS.
2. Exchange Election No. 2.
Additional Elections Relating to Small Holders.
Yes
[_] If, after approval and implementation of the Plan, the undersigned
would own fewer than 100 shares of the New Company both as a result
of the merger and in an exchange as permitted hereunder, the
undersigned elects to exchange its shares of Common Stock in the New
Company for cash at the rate of $15 per share. Please sign and return
this form.
No
[_] If, after approval and implementation of the Plan, the owner would
own fewer than 100 shares of the New Company, the undersigned elects
to retain its shares of Common Stock in the New Company. Those
persons owning fewer than 100 shares may encounter difficulties in
disposing of their shares. Please sign and return this form.
Dated: __________, 1994 _____________________________
(signature)
Please sign exactly as your name
appears on Mississippi Chemical
Corporation's records.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
2 Plan of Reorganization (included as Appendix A to the Proxy
Statement/Prospectus).
3.1 Articles of Incorporation of the New Company (included as Appendix
B to the Proxy Statement/Prospectus).
3.2 Articles of Incorporation of the Cooperative (incorporated herein by
reference to Exhibit 3.1 to the Cooperative's Annual Report on Form
10-K for the fiscal year ended June 30, 1992, File No. 2-7803).
3.3 By-laws of the New Company (included as Appendix C to the Proxy
Statement/Prospectus).
3.4 By-laws of the Cooperative (incorporated herein by reference to
Exhibit 3.2 to the Cooperative's Annual Report on Form 10-K for the
fiscal year ended June 30, 1988, File No. 2-7803).
4.1 Specimen of the Cooperative's Nitrogen Series I Common Stock
Certificate, (incorporated herein by reference to Exhibit 4.1 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
4.2 Specimen of the Cooperative's Nitrogen Series II Common Stock
Certificate, (incorporated herein by reference to Exhibit 4.2 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
4.3 Specimen of the Cooperative's Nitrogen Series III Common Stock
Certificate, (incorporated herein by reference to Exhibit 4.3 to the
Cooperative's Annual Report on Form 10-K for fiscal year ended June
30, 1993, File No. 2-7803).
4.4 Specimen of the Cooperative's Mixed Series IV Common stock
Certificate, (incorporated herein by reference to Exhibit 4.4 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
4.5 Specimen of the Cooperative's Mixed Series V Common Stock Certificate,
(incorporated herein by reference to Exhibit 4.5 to the Cooperative's
Annual Report on Form
<PAGE>
10-K for the fiscal year ended June 30, 1993, File No. 2-7803).
4.6 Specimen of the Cooperative's Standard Potash Series VI Common Stock
Certificate, (incorporated herein by reference to Exhibit 4.6 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
4.7 Specimen of the Cooperative's 9 1/2% Subordinated Note Due July 1,
1999, (incorporated herein by reference to Exhibit 4.7 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
4.8 Term Loan Agreement Number 6420 dated August 25, 1987, between the
Cooperative's subsidiary, Newsprint South, Inc., and Jackson Bank for
Cooperatives (now National Bank for Cooperatives) in an amount not to
exceed $4,700,000, as amended and restated by Amendment to Loan
Agreement Number 6420(A) dated February 2, 1989, (incorporated herein
by reference to Exhibit 4.8 to the Cooperative's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 File No. 2-7803).
4.9 Line of Credit Agreement Number 6899 dated December 13, 1991, between
the Cooperative's subsidiary, Newsprint South, Inc., and National Bank
for Cooperatives, for a revolving line of credit in an amount equal to
the lesser of the Borrowing Base (as defined in Section 6 thereof) or
$10,680,000, as amended by Amendment Number 6899(A) dated June 12,
1992, and Amendment Number 6899(B) dated December 18, 1992, which
increased the line of credit to $10,992,000, (incorporated herein by
reference to Exhibit 4.9 to the Cooperative's Annual Report on Form
10-K for the fiscal year ended on June 30, 1993, File No. 2-7803).
4.10 Term Loan Agreement number 6939 dated October 19, 1992, between the
Cooperative's subsidiary, Mississippi Phosphates Corporation, and
National Bank for Cooperatives and the Company as co-maker in an
aggregate principal amount not to exceed $10,000,000, (incorporated
herein by reference to Exhibit 4.10 to the Cooperative's Annual Report
on Form 10-K for the fiscal year ended June 30, 1993, File No. 2-
7803).
4.11 Line of Credit Agreement Number 6871 dated September 30, 1991, between
the Cooperative and National Bank for Cooperatives for a revolving
line of credit in the amount of $10,000,000, as amended by Amendment
Number 6871(A) dated October 20, 1992, which increases the
II-2
<PAGE>
line of credit to $15,000,000, (incorporated herein by reference to
Exhibit 4.11 to the Cooperative's Annual Report on Form 10-K for the
fiscal year ended June 30, 1993, File No. 2-7803).
4.12 Amendment Number 6392(A) dated November 2, 1987, and Amendment Number
6392(B) dated April 20, 1988, to Loan Agreement Number 6392 dated as
of April 24, 1987, between the Cooperative and the Jackson Bank for
Cooperatives (now the National Bank for Cooperatives), (incorporated
herein by reference to Exhibit 4.12 to the Cooperative's Annual Report
on Form 10-K for the fiscal year ended June 30, 1993, File No. 2-
7803).
4.13 Loan Agreement Number 6392 dated as of April 24, 1987, between the
Cooperative and Jackson Bank for Cooperatives (now the National Bank
for Cooperatives) in a principal amount not to exceed $35,000,000;
(incorporated herein by reference to Exhibit 4.13 to the Cooperative's
Annual Report on Form 10-K for the fiscal year ended June 30, 1987,
File No. 2-7803).
4.14 Revolving Credit/Term Loan Agreement dated August 6, 1992, between the
Cooperative and NationsBank of Tennessee, purchaser of the
Cooperative's Series I Secured Note, Due June 30, 1999, in the
aggregate principal amount of $20,000,000; filed as Exhibit 4.1 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1992, File No. 2-7803, and incorporated herein by reference
thereto.
4.15 Note Purchase Agreement dated as of December 26, 1989, between the
Cooperative and John Hancock Variable Life Insurance Company,
purchaser of the Cooperative's 9.97% Secured Notes, Series H, Due
1999, in the aggregate principal amount of $6,000,000; filed as an
exhibit to Exhibit 4.3 to the Cooperative's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, File No. 2-7803, and
incorporated herein by reference thereto.
4.16 Twelfth Supplemental Indenture dated as of August 6, 1992, between the
Cooperative and Deposit Guaranty National Bank; filed as Exhibit 4.3
to the Cooperative's Annual Report on Form 10-K for the fiscal year
ended June 30, 1992, File No. 2-7803, and incorporated herein by
reference thereto.
4.17 Eleventh Supplemental Indenture dated as of July 16, 1990, between the
Cooperative and Deposit Guaranty National Bank, together with Exhibit
A thereto, being an Agreement for Real Estate Purchase Option dated
July 16, 1990, for the sale of the Cooperative's Hardee
II-3
<PAGE>
County, Florida, property and underlying phosphate reserves; filed as
Exhibit 4.2 to Amendment No. 1 of the Cooperative's Report on Form 8
dated November 7, 1990, File No. 2-7803, and incorporated herein by
reference thereto.
4.18 Tenth Supplemental Indenture dated as of December 26, 1989, between
the Cooperative and Deposit Guaranty National Bank, together with
Exhibit A thereto, being a Note Purchase Agreement dated as of
December 26, 1989, between the Cooperative and John Hancock Variable
Life Insurance Company, purchaser of the Cooperative's 9.97% Secured
Notes, Series H, Due 1999, in the aggregate principal amount of
$6,000,000; filed as Exhibit 4.3 to the Cooperative's Annual Report on
Form 10-K for the fiscal year ended June 30, 1990, File No. 2-7803,
and incorporated herein by reference thereto.
4.19 Ninth Supplemental Indenture dated as of February 23, 1988, between
the Cooperative and Deposit Guaranty National Bank; filed as Exhibit
4.1 to the Cooperative's Annual Report on Form 10-K for the fiscal
year ended June 30, 1988, File No. 2-7803, and incorporated herein by
reference thereto.
4.20 Eighth Supplemental Indenture dated as of May 15, 1983, between the
Cooperative and Deposit Guaranty National Bank; filed as Exhibit 4.1
to Post-Effective Amendment No. 3 to Registration Statement No. 2-
71827 and incorporated herein by reference thereto.
4.21 Seventh Supplemental Indenture dated as of October 1, 1979, between
the Cooperative and Deposit Guaranty National Bank; filed as Exhibit 2
to Post-Effective Amendment No. 3 to Registration Statement No. 2-
57390 and incorporated herein by reference thereto.
4.22 Sixth Supplemental Indenture dated as of September 1, 1979, between
the Cooperative and Deposit Guaranty National Bank, filed as Exhibit 3
to Post-Effective Amendment No. 3 to Registration Statement No. 2-
57390 and incorporated herein by reference thereto.
4.23 Fifth Supplemental Indenture dated as of June 1, 1978, between the
Cooperative and Deposit Guaranty National Bank; filed as Exhibit 7 to
the Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1979, File No. 2-7803, and incorporated herein by reference
thereto.
4.24 Fourth Supplemental Indenture dated as of May 1, 1978, between the
Cooperative and Deposit Guaranty National
II-4
<PAGE>
Bank; filed as Exhibit 9 to Post-Effective Amendment No. 2 to
Registration Statement No. 2-57390 and incorporated herein by
reference thereto.
4.25 Third Supplemental Indenture dated as of June 28, 1977, between the
Cooperative and Deposit Guaranty National Bank; filed as Exhibit 6 to
Post-Effective Amendment No. 1 to Registration Statement No. 2-57390
and incorporated herein by reference thereto.
4.26 Second Supplemental Indenture dated as of September 30, 1976, among
the Cooperative, New Orleans Bank for Cooperatives, John H. Farrelly
and Deposit Guaranty National Bank; filed as Exhibit 6 to Registration
Statement No. 2-57390 and incorporated herein by reference thereto.
4.27 First Supplemental Indenture, dated as of September 7, 1976, among the
Cooperative, New Orleans Bank for Cooperatives, John H. Farrelly and
Deposit Guaranty National Bank; filed as Exhibit 3 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1976, File No. 2-7803, and incorporated herein by reference
thereto.
4.28 Note Purchase Agreement effective as of September 1, 1976, between the
Cooperative and the Purchasers of the Cooperative's 9 1/2% Secured
Notes, Series B, Due 1996, in the aggregate principal amount of
$35,000,000, together with Exhibits A and B thereto; filed as Exhibit
2 to the Cooperative's Annual Report on Form 10-K for the fiscal year
ended June 30, 1976, File No. 2-7803, and incorporated herein by
reference thereto.
4.29 Indenture dated as of May 1, 1989, between the Cooperative and
Sunburst Bank, as Trustee, for the issuance by the Cooperative and 9
1/2% subordinated notes, due July 1, 1999, in the aggregate principal
amount of $11,061,000; filed as Exhibit 4.1 to the Cooperative's
Annual Report on Form 10-K for the fiscal year ended June 30, 1989,
File No. 7-2803, and incorporated herein by reference thereto.
4.30 Specimen of the New Company's Common Stock Certificate.
4.31 Thirteenth Supplemental Indenture dated as of July 16, 1993, between
the Registrant and Deposit Guaranty National Bank, filed as Exhibit
4.1 to the Cooperative's Current Report on Form 8-K dated April 26,
1994, File No. 2-7803, and incorporated herein by reference
thereto.
II-5
<PAGE>
4.32 Amendment Number 6392(C) dated October 22, 1993 to Loan Agreement
Number 6392 dated as of April 24, 1987, between the Registrant and the
Jackson Bank for Cooperatives (now the National Bank for
Cooperatives), filed as Exhibit 4.2 to the Cooperative's Current
Report on Form 8-K dated April 26, 1994, File No. 2-7803, and
incorporated herein by reference thereto.
4.33 Amended and Restated Line of Credit Agreement Number 6899(C) dated
December 17, 1993, between the Registrant's subsidiary Newsprint
South, Inc., and National Bank for Cooperatives, for a revolving line
of credit, filed as Exhibit 4.3 to the Cooperative's Current Report on
Form 8-K dated April 26, 1994, File No. 2-7803, and incorporated
herein by reference thereto.
4.34 Amended and Restated Line of Credit Agreement Number 6872(B) dated
October 22, 1993, between the Registrant and National Bank for
Cooperatives, for a revolving line of credit, filed as Exhibit 4.4 to
the Cooperative's Current Report on Form 8-K dated April 26, 1994,
File No. 2-7803, and incorporated herein by reference thereto.
4.35 Amended and Restated Line of Credit Agreement Number 6871(B) dated
October 22, 1993, between the Registrant and National Bank for
Cooperatives, for a revolving line of credit, filed as Exhibit 4.5 to
the Cooperative's Current Report on Form 8-K dated April 26, 1994,
File No. 2-7803, and incorporated herein by reference thereto.
5. Opinion re Legality.
8. Opinion re Tax Matters.
10.1 First Supplement to Lease Agreement dated as of June 30, 1992, to the
Lease Agreement dated as of September 28, 1989, among Newsprint South,
Inc., The First National Bank of Boston, and G. Patrick McEnroe, as
Trustees, (incorporated herein by reference to Exhibit 10.1 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
10.2 Second Supplement to Lease Agreement dated as of July 15, 1992, to the
Lease Agreement dated as of September 28, 1989, among Newsprint South,
Inc., The First National Bank of Boston, and G. Patrick McEnroe, as
Trustees, (incorporated herein by reference to Exhibit 10.2 to the
Cooperative's Annual Report on Form 10-K
II-6
<PAGE>
for the fiscal year ended June 30, 1993, File No. 2-7803).
10.3 Amendment of Agreement, effective as of July 1, 1993, to the Agreement
entered into as of October 1, 1991, by the Cooperative's subsidiary,
Mississippi Phosphates Corporation, for the exclusive distribution of
diammonium phosphate produced by Mississippi Phosphates Corporation,
(incorporated herein by reference to Exhibit 10.3 to the Cooperative's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993,
File No. 2-7803)./1/
10.4 Amendment to Joint Venture Agreement entered into by the Cooperative
and First Mississippi Corporation effective as of May 28, 1993,
(incorporated herein by reference to Exhibit 10.4 to the Cooperative's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993,
File No. 2-7803).
10.5 Amendment to Products Withdrawal Agreement entered into by the
Cooperative and First Mississippi Corporation effective as of May 28,
1993, (incorporated herein by reference to Exhibit 10.5 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
10.6 Agreement effective as of October 1, 1991, by the Cooperative's
subsidiary, Mississippi Phosphates Corporation for the exclusive
distribution of diammonium phosphate produced by Mississippi
Phosphates Corporation; filed as Exhibit 10.1 to Amendment No. 1 to
the Cooperative's Report on Form 8 dated January 7, 1993, File No. 2-
7803, and incorporated herein by reference thereto./2/
10.7 Agreement made and entered into as of September 15, 1991, between
Office Cherifien des Phosphates and Mississippi Phosphates Corporation
for the sale and purchase of phosphate rock; filed as Exhibit 10.1 to
- ----------
/1/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.3 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/2/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
II-7
<PAGE>
the Cooperative's Annual Report on Form 10-K for the
fiscal year ended June 30, 1991, File No. 2-7803, and incorporated
herein by reference thereto./3/
10.8 Lease Agreement dated as of September 28, 1989, among Newsprint South,
Inc., The First National Bank of Boston, and G. Patrick McEnroe, as
Trustees; filed as Exhibit 10.1 to the Cooperative's Annual Report on
Form 10-K for the fiscal year ended June 30, 1990, File No. 2-7803,
and incorporated herein by reference thereto.
10.9 Agreement for Real Estate Purchase Option dated July 16, 1990, for the
sale of the Cooperative's Hardee County, Florida, property and
underlying phosphate reserves; filed as an exhibit to Exhibit 4.2 to
the Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1990, File No. 2-7803, and incorporated herein by reference
thereto./4/
10.10 Power Contract dated as of June 27, 1988, between the Cooperative's
subsidiary, Newsprint South, Inc., and Tennessee Valley Authority, as
supplemented by letter agreement dated June 27, 1988, filed as Exhibit
10.3 to the Cooperative's Annual Report on Form 10-K for the fiscal
year ended June 30, 1990, File No. 2-7803, and incorporated herein by
reference thereto.
10.11 Gas Purchase and Sale Contract between the Cooperative and Shell
Western E&P Inc., dated as of January 1, 1986; filed as Exhibit 10.6
to Amendment No. 1 of the Cooperative's Report on Form 8 dated January
7, 1993, File No. 2-7803, and incorporated herein by reference
thereto./5/
- ----------
/3/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.7 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/4/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.9 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/5/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.11 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
II-8
<PAGE>
10.12 Triad Chemical Joint Venture Agreement; filed as Exhibit G1 to Post-
Effective Amendment No. 6 to Registration Statement No. 2-25041 and
incorporated herein by reference thereto.
10.13 Products Withdrawal Agreement dated June 3, 1968, between First
Mississippi Corporation and MisCoa covering withdrawal of product from
Triad Chemical; filed as Exhibit H to Post-Effective Amendment No. 7
to Registration Statement No. 2-25041 and incorporated herein by
reference thereto.
10.14 Amendment of Agreement for Real Estate Purchase Option dated July 16,
1993 by and between the Registrant and IMC-Agrico Company, for the
sale of the Registrant's Hardee County, Florida property and
underlying phosphate reserves, filed as Exhibit 10 to the
Cooperative's Current Report on Form 8-K dated April 26, 1994, File
No. 2-7803, and incorporated herein by reference thereto.
18.1 Preferability letter dated July 31, 1992, issued by Arthur Andersen &
Co. to the Cooperative to fulfill the requirements of Regulation S-K
in connection with the Cooperative's change in the method of reporting
patronage refunds; filed as Exhibit 18.1 to the Cooperative's Annual
Report on Form 10-K for the fiscal year ended June 30, 1993, File No.
2-7803, and incorporated herein by reference thereto.
21.1 List of subsidiaries of the Cooperative; filed as Exhibit 21.1 to the
Cooperative's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803, and incorporated herein by reference
thereto.
23.1 Consent of McDermott, Will & Emery (included in Exhibits 5 and 8).
23.2 Consent of Arthur Andersen & Co.
23.3 Consent of D. L. Johnson & Co.
24 Power of Attorney (previously filed).
(b) Financial Statement Schedules.
Schedule V - Property, Plant and Equipment.
Schedule VI - Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment.
Schedule IX - Short-Term Borrowings.
Schedule X - Supplementary Income Statement Information.
II-9
<PAGE>
(c) Not applicable.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to its registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Yazoo, State of
Mississippi, on May 23, 1994.
MISSISSIPPI CHEMICAL CORPORATION
By: /s/ Charles O. Dunn
--------------------------------
Charles O. Dunn
President and Principal
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
II-11
<PAGE>
Signature Title Date
--------- ----- ----
/s/Charles O. Dunn
- ------------------------- President, May 23, 1994
Charles O. Dunn Principal
Executive Officer
and Director
/s/William F. Hawkins
- ------------------------- Principal May 23, 1994
William F. Hawkins Financial and
Chief Accounting
Officer, Senior
Vice President of
Finance and
Administration
/s/W. H. Allen, Jr.*
- ------------------------- Director May 23, 1994
W. H. Allen, Jr.
/s/John W. Anderson*
- ------------------------- Director May 23, 1994
John W. Anderson
/s/Coley L. Bailey*
- ------------------------- Director May 23, 1994
Coley L. Bailey
/s/U. Owen Bibb, Jr.*
- ------------------------- Director May 23, 1994
U. Owen Bibb, Jr.
/s/F. Neal Bolton*
- ------------------------- Director May 23, 1994
F. Neal Bolton
/s/Randon D. Bounds*
- ------------------------- Director May 23, 1994
Randon D. Bounds
/s/Bruce J. Brumfield*
- ------------------------- Director May 23, 1994
Bruce J. Brumfield
/s/Frank R. Burnside,
Jr.*
- ------------------------- Director May 23, 1994
Frank R. Burnside, Jr.
/s/Robert A. Carson*
- ------------------------- Director May 23, 1994
Robert A. Carson
/s/John A. Denton*
- ------------------------- Director May 23, 1994
John A. Denton
/s/Robert P. Dixon*
- ------------------------- Director May 23, 1994
Robert P. Dixon
/s/W. R. Dyess*
- ------------------------- Director May 23, 1994
W. R. Dyess
II-12
<PAGE>
Signature Title Date
--------- ----- ----
/s/A. T. Evans*
- ------------------------- Director May 23, 1994
A. T. Evans
/s/John A. Gaston*
- ------------------------- Director May 23, 1994
John A. Gaston
/s/Thomas H. Gist, Jr.*
- ------------------------- Director May 23, 1994
Thomas H. Gist, Jr.
/s/Carroll F. Harpole*
- ------------------------- Director May 23, 1994
Carroll F. Harpole
/s/John Sharp Howie*
- ------------------------- Director May 23, 1994
John Sharp Howie
/s/G. David Jobe*
- ------------------------- Director May 23, 1994
G. David Jobe
/s/Tom C. Parry*
- ------------------------- Director May 23, 1994
Tom C. Parry
/s/W. A. Percy II*
- ------------------------- Director May 23, 1994
W. A. Percy II
/s/Gene C. Pickens*
- ------------------------- Director May 23, 1994
Gene C. Pickens
/s/E. C. A. Runge*
- ------------------------- Director May 23, 1994
E. C. A. Runge
/s/Wayne Thames*
- ------------------------- Director May 23, 1994
Wayne Thames
________________________
* /s/ Robert E. Jones
-------------------
By: Robert E. Jones
Attorney-in-Fact
II-13
<PAGE>
EXHIBIT INDEX
-------------
Number Description of Exhibit Page
- ------ ---------------------- ----
[C] [S] [C]
2 Plan of Reorganization (included as Appendix [ ]
A to the Proxy Statement/Prospectus).
3.1 Articles of Incorporation of the New Company [ ]
(included as Appendix B to the Proxy
Statement/Prospectus).
3.2 Articles of Incorporation of the Cooperative --
(incorporated herein by reference to Exhibit
3.1 to the Cooperative's Annual Report on
Form 10-K for the fiscal year ended June 30,
1992, File No. 2-7803).
3.3 By-laws of the New Company (included as [ ]
Appendix C to the Proxy
Statement/Prospectus).
3.4 By-laws of the Cooperative (incorporated --
herein by reference to Exhibit 3.2 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1988, File No.
2-7803).
4.1 Specimen of the Cooperative's Nitrogen Series --
I Common Stock Certificate, (incorporated
herein by reference to Exhibit 4.1 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, File No.
2-7803).
4.2 Specimen of the Cooperative's Nitrogen Series --
II Common Stock Certificate, (incorporated
herein by reference to Exhibit 4.2 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, File No.
2-7803).
4.3 Specimen of the Cooperative's Nitrogen Series --
III Common Stock Certificate, (incorporated
herein by reference to Exhibit 4.3 to the
Cooperative's Annual Report on Form 10-K for
fiscal year ended June 30, 1993, File No.
2-7803).
E-1
<PAGE>
4.4 Specimen of the Cooperative's Mixed Series IV --
Common stock Certificate, (incorporated
herein by reference to Exhibit 4.4 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, File No.
2-7803).
4.5 Specimen of the Cooperative's Mixed Series V --
Common Stock Certificate, (incorporated
herein by reference to Exhibit 4.5 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, File No.
2-7803).
4.6 Specimen of the Cooperative's Standard Potash --
Series VI Common Stock Certificate,
(incorporated herein by reference to Exhibit
4.6 to the Cooperative's Annual Report on
Form 10-K for the fiscal year ended June 30,
1993, File No. 2-7803).
4.7 Specimen of the Cooperative's 9 1/2% --
Subordinated Note Due July 1, 1999,
(incorporated herein by reference to Exhibit
4.7 to the Cooperative's Annual Report on
Form 10-K for the fiscal year ended June 30,
1993, File No. 2-7803).
4.8 Term Loan Agreement Number 6420 dated August --
25, 1987, between the Cooperative's
subsidiary, Newsprint South, Inc., and
Jackson Bank for Cooperatives (now National
Bank for Cooperatives) in an amount not to
exceed $4,700,000, as amended and restated by
Amendment to Loan Agreement Number 6420(A)
dated February 2, 1989, (incorporated herein
by reference to Exhibit 4.8 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993 File No.
2-7803).
E-2
<PAGE>
4.9 Line of Credit Agreement Number 6899 dated --
December 13, 1991, between the Cooperative's
subsidiary, Newsprint South, Inc., and
National Bank for Cooperatives, for a
revolving line of credit in an amount equal
to the lesser of the Borrowing Base (as
defined in Section 6 thereof) or $10,680,000,
as amended by Amendment Number 6899(A) dated
June 12, 1992, and Amendment Number 6899(B)
dated December 18, 1992, which increased the
line of credit to $10,992,000, (incorporated
herein by reference to Exhibit 4.9 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended on June 30, 1993, File
no. 2-7803).
4.10 Term Loan Agreement number 6939 dated October --
19, 1992, between the Cooperative's
subsidiary, Mississippi Phosphates
Corporation, and National Bank for
Cooperatives and the Company as co-maker in
an aggregate principal amount not to exceed
$10,000,000, (incorporated herein by
reference to Exhibit 4.10 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, File No.
2-7803).
4.11 Line of Credit Agreement Number 6871 dated --
September 30, 1991, between the Cooperative
and National Bank for Cooperatives for a
revolving line of credit in the amount of
$10,000,000, as amended by Amendment Number
6871(A) dated October 20, 1992, which
increases the line of credit to $15,000,000,
(incorporated herein by reference to Exhibit
4.11 to the Cooperative's Annual Report on
Form 10-K for the fiscal year ended June 30,
1993, File No. 2-7803).
4.12 Amendment Number 6392(A) dated November 2, --
1987, and Amendment Number 6392(B) dated
April 20, 1988, to Loan Agreement Number 6392
dated as of April 24, 1987, between the
Cooperative and the Jackson Bank for
Cooperatives (now the National Bank for
Cooperatives), (incorporated herein by
reference to Exhibit 4.12 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, File No.
2-7803).
E-3
<PAGE>
4.13 Loan Agreement Number 6392 dated as of April --
24, 1987, between the Cooperative and Jackson
Bank for Cooperatives (now the National Bank
for Cooperatives) in a principal amount not
to exceed $35,000,000; (incorporated herein
by reference to Exhibit 4.13 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1987, File No.
2-7803).
4.14 Revolving Credit/Term Loan Agreement dated --
August 6, 1992, between the Cooperative and
NationsBank of Tennessee, purchaser of the
Cooperative's Series I Secured Note, Due June
30, 1999, in the aggregate principal amount
of $20,000,000; filed as Exhibit 4.1 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1992, File No.
2-7803, and incorporated herein by reference
thereto.
4.15 Note Purchase Agreement dated as of December --
26, 1989, between the Cooperative and John
Hancock Variable Life Insurance Company,
purchaser of the Cooperative's 9.97% Secured
Notes, Series H, Due 1999, in the aggregate
principal amount of $6,000,000; filed as an
exhibit to Exhibit 4.3 to the Cooperative's
Annual Report on Form 10-K for the fiscal
year ended June 30, 1990, File No. 2-7803,
and incorporated herein by reference thereto.
4.16 Twelfth Supplemental Indenture dated as of --
August 6, 1992, between the Cooperative and
Deposit Guaranty National Bank; filed as
Exhibit 4.3 to the Cooperative's Annual
Report on Form 10-K for the fiscal year ended
June 30, 1992, File No. 2-7803, and
incorporated herein by reference thereto.
4.17 Eleventh Supplemental Indenture dated as of --
July 16, 1990, between the Cooperative and
Deposit Guaranty National Bank, together with
Exhibit A thereto, being an Agreement for
Real Estate Purchase Option dated July 16,
1990, for the sale of the Cooperative's
Hardee County, Florida, property and
underlying phosphate reserves; filed as
Exhibit 4.2 to Amendment No. 1 of the
Cooperative's Report on Form 8 dated November
7, 1990, File No. 2-7803, and incorporated
herein by reference thereto.
E-4
<PAGE>
4.18 Tenth Supplemental Indenture dated as of --
December 26, 1989, between the Cooperative
and Deposit Guaranty National Bank, together
with Exhibit A thereto, being a Note Purchase
Agreement dated as of December 26, 1989,
between the Cooperative and John Hancock
Variable Life Insurance Company, purchaser of
the Cooperative's 9.97% Secured Notes, Series
H, Due 1999, in the aggregate principal
amount of $6,000,000; filed as Exhibit 4.3 to
the Cooperative's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, File
No. 2-7803, and incorporated herein by
reference thereto.
4.19 Ninth Supplemental Indenture dated as of --
February 23, 1988, between the Cooperative
and Deposit Guaranty National Bank; filed as
Exhibit 4.1 to the Cooperative's Annual
Report on Form 10-K for the fiscal year ended
June 30, 1988, File No. 2-7803, and
incorporated herein by reference thereto.
4.20 Eighth Supplemental Indenture dated as of May --
15, 1983, between the Cooperative and Deposit
Guaranty National Bank; filed as Exhibit 4.1
to Post-Effective Amendment No. 3 to
Registration Statement No. 2-71827 and
incorporated herein by reference thereto.
4.21 Seventh Supplemental Indenture dated as of --
October 1, 1979, between the Cooperative and
Deposit Guaranty National Bank; filed as
Exhibit 2 to Post-Effective Amendment No. 3
to Registration Statement No. 2-57390 and
incorporated herein by reference thereto.
4.22 Sixth Supplemental Indenture dated as of --
September 1, 1979, between the Cooperative
and Deposit Guaranty National Bank, filed as
Exhibit 3 to Post-Effective Amendment No. 3
to Registration Statement No. 2-57390 and
incorporated herein by reference thereto.
4.23 Fifth Supplemental Indenture dated as of June --
1, 1978, between the Cooperative and Deposit
Guaranty National Bank; filed as Exhibit 7 to
the Cooperative's Annual Report on Form 10-K
for the fiscal year ended June 30, 1979, File
No. 2-7803, and incorporated herein by
reference thereto.
E-5
<PAGE>
4.24 Fourth Supplemental Indenture dated as of May --
1, 1978, between the Cooperative and Deposit
Guaranty National Bank; filed as Exhibit 9 to
Post-Effective Amendment No. 2 to
Registration Statement No. 2-57390 and
incorporated herein by reference thereto.
4.25 Third Supplemental Indenture dated as of June --
28, 1977, between the Cooperative and Deposit
Guaranty National Bank; filed as Exhibit 6 to
Post-Effective Amendment No. 1 to
Registration Statement No. 2-57390 and
incorporated herein by reference thereto.
4.26 Second Supplemental Indenture dated as of --
September 30, 1976, among the Cooperative,
New Orleans Bank for Cooperatives, John H.
Farrelly and Deposit Guaranty National Bank;
filed as Exhibit 6 to Registration Statement
No. 2-57390 and incorporated herein by
reference thereto.
4.27 First Supplemental Indenture, dated as of --
September 7, 1976, among the Cooperative, New
Orleans Bank for Cooperatives, John H.
Farrelly and Deposit Guaranty National Bank;
filed as Exhibit 3 to the Cooperative's
Annual Report on Form 10-K for the fiscal
year ended June 30, 1976, File No. 2-7803,
and incorporated herein by reference thereto.
4.28 Note Purchase Agreement effective as of --
September 1, 1976, between the Cooperative
and the Purchasers of the Cooperative's 9
1/2% Secured Notes, Series B, Due 1996, in
the aggregate principal amount of
$35,000,000, together with Exhibits A and B
thereto; filed as Exhibit 2 to the Company's
Annual Report on Form 10-K for the fiscal
year ended June 30, 1976, File No. 2-7803,
and incorporated herein by reference thereto.
4.29 Indenture dated as of May 1, 1989, between --
the Cooperative and Sunburst Bank, as
Trustee, for the issuance by the Cooperative
and 9 1/2% subordinated notes, due July 1,
1999, in the aggregate principal amount of
$11,061,000; filed as Exhibit 4.1 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1989, File No.
7-2803, and incorporated herein by reference
thereto.
E-6
<PAGE>
4.30 Specimen of the New Company's Common Stock [ ]
Certificate.
4.31 Thirteenth Supplemental Indenture dated as of
July 16, 1993, between the Registrant and
Deposit Guaranty National Bank, filed as
Exhibit 4.1 to the Cooperative's Current
Report on Form 8-K dated April 26, 1994, File
No. 2-7803, and incorporated herein by
reference thereto.
4.32 Amendment Number 6392(C) dated October 22,
1993 to Loan Agreement Number 6392 dated as
of April 24, 1987, between the Registrant and
the Jackson Bank for Cooperatives (now the
National Bank for Cooperatives), filed as
Exhibit 4.2 to the Cooperative's Current
Report on Form 8-K dated April 26, 1994, File
No. 2-7803, and incorporated herein by
reference thereto.
4.33 Amended and Restated Line of Credit Agreement
Number 6899(C) dated December 17, 1993,
between the Registrant's subsidiary Newsprint
South, Inc., and National Bank for
Cooperatives, for a revolving line of credit,
filed as Exhibit 4.3 to the Cooperative's
Current Report on Form 8-K dated April 26,
1994, File No. 2-7803, and incorporated
herein by reference thereto.
4.34 Amended and Restated Line of Credit Agreement
Number 6872(B) dated October 22, 1993,
between the Registrant and National Bank for
Cooperatives, for a revolving line of credit,
filed as Exhibit 4.4 to the Cooperative's
Current Report on Form 8-K dated April 26,
1994, File No. 2-7803, and incorporated
herein by reference thereto.
4.35 Amended and Restated Line of Credit Agreement
Number 6871(B) dated October 22, 1993,
between the Registrant and National Bank for
Cooperatives, for a revolving line of credit,
filed as Exhibit 4.5 to the Cooperative's
Current Report on Form 8-K dated April 26,
1994, File No. 2-7803, and incorporated
herein by reference thereto.
5. Opinion re Legality. [ ]
8. Opinion re Tax Matters. [ ]
E-7
<PAGE>
10.1 First Supplement to Lease Agreement dated as --
of June 30, 1992, to the Lease Agreement
dated as of September 28, 1989, among
Newsprint South, Inc., The First National
Bank of Boston, and G. Patrick McEnroe, as
Trustees, (incorporated herein by reference
to Exhibit 10.1 to the Cooperative's Annual
Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
10.2 Second Supplement to Lease Agreement dated as --
of July 15, 1992, to the Lease Agreement
dated as of September 28, 1989, among
Newsprint South, Inc., The First National
Bank of Boston, and G. Patrick McEnroe, as
Trustees, (incorporated herein by reference
to Exhibit 10.2 to the Cooperative's Annual
Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
10.3 Amendment of Agreement, effective as of July --
1, 1993, to the Agreement entered into as of
October 1, 1991, by the Cooperative's
subsidiary, Mississippi Phosphates
Corporation, for the exclusive distribution
of diammonium phosphate produced by
Mississippi Phosphates Corporation,
(incorporated herein by reference to Exhibit
10.3 to the Cooperative's Annual Report on
Form 10-K for the fiscal year ended June 30,
1993, File No. 2-7803)./1/
10.4 Amendment to Joint Venture Agreement entered --
into by the Cooperative and First Mississippi
Corporation effective as of May 28, 1993,
(incorporated herein by reference to Exhibit
10.4 to the Cooperative's Annual Report on
Form 10-K for the fiscal year ended June 30,
1993, File No. 2-7803).
10.5 Amendment to Products Withdrawal Agreement --
entered into by the Cooperative and First
Mississippi Corporation effective as of May
28, 1993, (incorporated herein by reference
to Exhibit 10.5 to the Cooperative's Annual
Report on Form 10-K for the fiscal year ended
June 30, 1993, File No. 2-7803).
E-8
<PAGE>
10.6 Agreement effective as of October 1, 1991, by --
the Cooperative's subsidiary, Mississippi
Phosphates Corporation for the exclusive
distribution of diammonium phosphate produced
by Mississippi Phosphates Corporation; filed
as Exhibit 10.1 to Amendment No. 1 to the
Cooperative's Report on Form 8 dated January
7, 1993, File No. 2-7803, and incorporated
herein by reference thereto./2/
10.7 Agreement made and entered into as of --
September 15, 1991, between Office Cherifien
des Phosphates and Mississippi Phosphates
Corporation for the sale and purchase of
phosphate rock; filed as Exhibit 10.1 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1991, File No.
2-7803, and incorporated herein by reference
thereto./3/
10.8 Lease Agreement dated as of September 28, --
1989, among Newsprint South, Inc., The First
National Bank of Boston, and G. Patrick
McEnroe, as Trustees; filed as Exhibit 10.1
to the Cooperative's Annual Report on Form
10-K for the fiscal year ended June 30, 1990,
File No. 2-7803, and incorporated herein by
reference thereto.
10.9 Agreement for Real Estate Purchase Option --
dated July 16, 1990, for the sale of the
Cooperative's Hardee County, Florida,
property and underlying phosphate reserves;
filed as an exhibit to Exhibit 4.2 to the
Cooperative's Annual Report on Form 10-K for
the fiscal year ended June 30, 1990, File No.
2-7803, and incorporated herein by reference
thereto./4/
10.10 Power Contract dated as of June 27, 1988, --
between the Cooperative's subsidiary,
Newsprint South, Inc., and Tennessee Valley
Authority, as supplemented by letter
agreement dated June 27, 1988, filed as
Exhibit 10.3 to the Cooperative's Annual
Report on Form 10-K for the fiscal year ended
June 30, 1990, File No. 2-7803, and
incorporated herein by reference thereto.
E-9
<PAGE>
10.11 Gas Purchase and Sale Contract between the --
Cooperative and Shell Western E&P Inc., dated
as of January 1, 1986; filed as Exhibit 10.6
to Amendment No. 1 of the Cooperative's
Report on Form 8 dated January 7, 1993, File
No. 2-7803, and incorporated herein by
reference thereto./5/
10.12 Triad Chemical Joint Venture Agreement; filed --
as Exhibit G1 to Post-Effective Amendment No.
6 to Registration Statement No. 2-25041 and
incorporated herein by reference thereto.
10.13 Products Withdrawal Agreement dated June 3, --
1968, between First Mississippi Corporation
and MisCoa covering withdrawal of product
from Triad Chemical; filed as Exhibit H to
Post-Effective Amendment No. 7 to
Registration Statement No. 2-25041 and
incorporated herein by reference thereto.
10.14 Amendment of Agreement for Real Estate
Purchase Option dated July 16, 1993 by and
between the Registrant and IMC-Agrico
Company, for the sale of the Registrant's
Hardee County, Florida property and
underlying phosphate reserves, filed as
Exhibit 10 to the Cooperative's Current
Report on Form 8-K dated April 26, 1994, File
No. 2-7803, and incorporated herein by
reference thereto
18.1 Preferability letter dated July 31, 1992, --
issued by Arthur Andersen & Co. to the
Cooperative to fulfill the requirements of
Regulation S-K in connection with the
Cooperative's change in the method of
reporting patronage refunds; filed as Exhibit
18.1 to the Cooperative's Annual Report on
Form 10-K for the fiscal year ended June 30,
1993, File No. 2-7803, and incorporated
herein by reference thereto.
21.1 List of subsidiaries of the Cooperative; --
filed as Exhibit 21.1 to the Cooperative's
Annual Report on Form 10-K for the fiscal
year ended June 30, 1993, File No. 2-7803 and
incorporated herein by reference thereto.
23.1 Consent of McDermott, Will & Emery (included [ ]
in Exhibits 5 and 8).
23.2 Consent of Arthur Andersen & Co. [ ]
E-10
<PAGE>
23.3 Consent of D. L. Johnson & Co. [ ]
24 Power of Attorney. [* ]
____________________________________
E-11
<PAGE>
/1./ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.3 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/2./ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/3./ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.7 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
/4./ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.9 have been deleted and filled separately with the
Commission pursuant to a request for confidential treatment.
/5./ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.11 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
* Previously filed.
E-12
<PAGE>
EXHIBIT 4.30
[FORM OF CERTIFICATE FOR SHARES OF COMMON STOCK]
-----------------------------------------------
Number Shares
This certifies that ________________________________ is the owner of
_____________________________________________ Shares of the Capital Stock of
MISSISSIPPI CHEMICAL CORPORATION transferable only on the books of the
Corporation by the holder hereof in person or by Attorney upon surrender of this
Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate
to be signed by its duly authorized officers and so be sealed with the Seal of
the Corporation this _______ day of ________ A.D. 19__.
Shares Each
[reverse of certificate]
CERTIFICATE FOR _____ SHARES OF THE CAPITAL STOCK
OF
MISSISSIPPI CHEMICAL CORPORATION
Issued to
-------------------
Dated
-------------------
For Value Received ______ hereby sell, assign and transfer unto
__________________________________________________________ Shares of the Capital
Stock represented by the within Certificate and do hereby irrevocably constitute
and appoint _______________________________________________ to transfer the said
Stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated ______________________, 19__
In presence of
Notice. The signature of this assignment must correspond with the name as
written upon the face of the certificate, in every particular, without
alteration or enhancement or any change whatever.
<PAGE>
EXHIBIT 5
[MWE Letterhead]
May 23, 1994
Mississippi Chemical Corporation
P.O. Box 388
Yazoo City, Mississippi 39194
Re: Mississippi Chemical Corporation
Registration Statement on Form S-4
File No. 33-53119
----------------------------------
Ladies and Gentlemen:
This opinion is rendered in connection with the filing by Mississippi
Chemical Corporation (the "Cooperative") of its Registration Statement on Form
S-4 (the "Registration Statement") with the Securities and Exchange Commission
with respect to the registration under the Securities Act of 1933, as amended,
of 19,641,284 shares of the common stock, $.01 par value (the "Registered
Stock"), of MCC Sub, Inc., a newly created, wholly-owned subsidiary of the
Cooperative (the "New Company"), to be issued in connection with (i) a merger of
the Cooperative into the New Company whereby the outstanding shares of the
Cooperative's common stock will be converted into shares of the Registered Stock
and/or cash and (ii) the offer to exchange the capital equity credits and
allocated surplus accounts of the Cooperative for the shares of the Registered
Stock.
In arriving at the opinion expressed below, we have examined the
Registration Statement and such other documents as we have deemed necessary to
enable us to express the opinion hereinafter set forth. In addition, we have
examined and relied upon, to the extent we deemed proper, certificates of
officers of the Cooperative and the New Company as to factual matters, and on
the originals or copies, certified or otherwise, identified to our satisfaction,
of all such corporate records of the Cooperative and the New Company and such
other instruments and certificates of public officials and other persons as we
have deemed appropriate. In our examination, we have assumed the authenticity
of all documents submitted to us as originals, the conformity to the original
documents of all documents submitted to us as copies, the genuineness of all
signatures on documents reviewed by us and the
<PAGE>
legal capacity of natural persons.
Our opinion herein is limited to United States Federal law, the
internal laws of the State of Illinois and the Mississippi Business Corporation
Act. We express no opinion with respect to the applicability thereto, or the
effect thereon, of any other laws.
Based upon and subject to the foregoing, we are of the opinion that,
upon issuance thereof in accordance with the terms and conditions set forth in
the Plan of Reorganization (which is an exhibit to the Registration Statement),
the Registered Stock will be validly issued, fully paid and non-assessable.
We hereby consent to the reference to our firm under the caption
"Legal Matters" in the Registration Statement and to the use of this opinion as
an exhibit to the Registration Statement.
Very truly yours,
/s/McDermott, Will & Emery
FWA/LMK/KKG
<PAGE>
EXHIBIT 8
[MW&E Letterhead]
May 23, 1994
Mississippi Chemical Corporation
Post Office Box 388
Yazoo City, Mississippi 39194-0388
Gentlemen:
We have acted as special tax counsel to Mississippi Chemical Corporation, a
Mississippi corporation (the "Cooperative") in connection with the proposed
Merger (the "Merger") of the Cooperative with and into a newly created, wholly-
owned subsidiary organized under Mississippi law (the "New Company"). As a
result of the Merger, the outstanding shares of Nitrogen Series I, Nitrogen
Series II and Nitrogen Series III common stock of the Cooperative ("Cooperative
Common Stock") will be converted into common stock of the New Company ("New
Company Common Stock"). Cash will be paid in lieu of fractional shares. The
outstanding shares of Mixed Series IV and Mixed Series V common stock of the
Cooperative will be converted into the right to receive $15 per share, and the
outstanding shares of Potash Series VI common stock of the Cooperative will be
converted into the right to receive $50 per share.
In connection with the Merger each holder of Capital Equity Credits and
Allocated Surplus Accounts, including, but not limited to this year's Capital
Equity Credits and Allocated Surplus Accounts, if any, will be offered the right
to exchange such Credits and Accounts for New Company Common Stock (and cash in
lieu of any fractional share) (the "Exchange Offer"). Finally, in connection
with the Merger and the Exchange Offer, the New Company will offer shareholders
who own less than 100 shares of New Company Common Stock after the Merger and
the Exchange Offer the right to exchange all of their shares of New Company
Common Stock for cash at the rate of $15 per share.
You have requested our opinion regarding the material Federal income tax
consequences of the proposed Merger and the
<PAGE>
Exchange Offer. In formulating our opinion we have examined the Plan of
Reorganization, the Proxy Statement related to the proposed Merger and Exchange
Offer and such other documents and data as we deemed relevant for purposes of
this opinion. In addition, we have assumed that the proposed Merger and
Exchange Offer will be consummated in the manner described in the Plan of
Reorganization and Proxy Statement.
Based upon our review and interpretation of the foregoing and applying the
Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury
Regulations promulgated or proposed thereunder, current published administrative
positions of the Internal Revenue Service contained in Revenue Rulings, and
existing judicial authorities, we are of the opinion that, for Federal income
tax purposes:
1. The Merger of Cooperative with and into the New Company will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Code.
2. Neither the Cooperative nor the New Company will recognize gain or
loss upon consummation of the Merger. The basis of the assets of the
Cooperative in the hands of the New Company will be the same as the basis of
those assets in the hands of the Cooperative immediately prior to the Merger,
and the holding period of the assets of the New Company will include the period
during which the assets were held by the Cooperative.
3. A shareholder of the Cooperative exchanging Cooperative Common Stock
for New Company Common Stock in the Merger will not recognize gain or loss on
the exchange if the shareholder receives no cash in the exchange. If the
shareholder receives cash in the exchange, the shareholder will recognize gain,
if any, realized on the exchange, but only to the extent of cash received.
4. If, for a shareholder receiving cash in the Merger, the exchange has
the effect of the distribution of a dividend, then the amount of gain recognized
will be treated as a dividend. If, for a shareholder receiving cash, the
exchange does not have the effect of the distribution of a dividend, then the
gain recognized will be treated as a gain from the sale or exchange of property.
The determination of whether the exchange has the effect of the distribution of
a dividend will be made on a shareholder basis employing rules similar to those
set forth under Section 302(b) of the Code for determining whether a redemption
of shares of stock held by a taxpayer has the effect of a dividend.
5. Shareholders receiving cash in lieu of fractional shares of New
Company Common Stock in the Merger will be treated as if the fractional shares
had been distributed as part of the
-2-
<PAGE>
exchange and then redeemed by the New Company. Such cash payments should be
treated as having been received as a distribution in full payment in exchange
for the fractional shares deemed redeemed. Gain or loss will be recognized
measured by the difference between the redemption price and the adjusted basis
of the fractional share deemed redeemed, and, for most shareholders, will be
treated as capital gain or loss.
6. The basis of the New Company Common Stock to be received (including
fractional shares deemed received and redeemed) by a shareholder in the Merger
will be the same as the basis of the Cooperative Common Stock surrendered in the
Merger, reduced by the amount of cash received (excluding cash received for
fractional shares) in the Merger and increased by the amount of gain, if any,
recognized on the receipt of cash (other than gain recognized with respect to
fractional shares).
7. The holding period of the New Company Common Stock to be received by a
shareholder in the Merger will include the holding period of the Cooperative
Common Stock surrendered in the Merger.
8. The exchange of Capital Equity Credits and Allocated Surplus Accounts
for New Company Common Stock pursuant to the Exchange Offer will constitute a
reorganization under Sections 368(a)(1)(A) and Section 368(a)(1)(E).
9. A holder exchanging Capital Equity Credits for New Company Common
Stock will recognize no gain or loss on the exchange. If the holder also
receives cash in the exchange in lieu of a fractional share, the holder will be
taxed upon the cash received as an amount received in redemption of a
nonqualified written notice of allocation. Such amount would be includable in
income pursuant to Section 1385(c) of the Code.
10. A holder exchanging its interest in Allocated Surplus Accounts for New
Company Common Stock will recognize no gain or loss on the exchange. If the
holder also receives cash in the exchange in lieu of a fractional share, the
holder will be taxed on the amount received in a manner similar to the treatment
of a shareholder receiving cash in the Merger. Since holders have no basis in
their interests in Allocated Surplus Accounts, they will have no basis in the
shares of New Company Common Stock received in exchange for such interests.
11. A shareholder owning fewer than 100 shares of New Company Common Stock
who elects to exchange those shares for cash will recognize gain on the exchange
equal to the difference between the amount of cash received and the
shareholder's basis in the shares surrendered (determined as described above).
Assuming the shareholder exchanges all of the shares of New Company Common Stock
it owns directly or indirectly, the gain
-3-
<PAGE>
realized should generally be treated as capital gain except to the extent that
it is attributable to New Company Common Stock received in exchange for Capital
Equity Credits (see discussion above).
In addition, we have reviewed the Cooperative's plans to dispose of its
interest in Newsprint South, Inc. ("NSI") as described in the Proxy Statement
related to the Merger and Exchange Offer. We understand that one possible, but
not likely, option being considered for disposing of NSI involves a conveyance
of the Cooperative's interest in NSI to or for the benefit of the current
Cooperative shareholders. While the precise terms of such a transfer have not
been determined, it is our opinion that any such transfer would be taxable to
the shareholders as a dividend pursuant to Sections 316(a) and 301(c)(1) of the
Code. The amount of the dividend taxable to each shareholder would equal the
fair market value of the interest received by the shareholder. Section
301(b)(1). A corporate shareholder and a cooperative shareholder which is
treated as an exempt cooperative under Section 521 of the Code are generally
entitled to a 70 percent dividends-received deduction under Section 243(c) of
the Code. No similar deduction is available to an individual shareholder, and
the Internal Revenue Service has taken the position that Section 277 of the Code
disallows the dividends-received deduction to nonexempt cooperative
shareholders. The applicability of Section 277 of the Code to nonexempt
cooperatives is currently in dispute.
You should note that our opinions expressed above are based upon
consummation of the proposed Merger and Exchange Offer in the manner described
in the Plan of Reorganization and Proxy Statement. New developments in rulings
or regulations of the Internal Revenue Service, court decisions or legislative
changes may have an adverse impact upon the opinions expressed herein.
Except as set forth above, we express no opinion as to the tax consequences
to any party, whether Federal, state, local or foreign, of the Merger or
Exchange Offer or of any transaction related to the Merger or Exchange Offer or
contemplated by the Plan of Reorganization. This opinion letter is provided to
you and is solely for your benefit in connection with the transaction
contemplated by the Plan of Reorganization and the related documents.
We hereby consent to the references to our firm in the Registration
Statement and to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/McDermott, Will & Emery
McDERMOTT, WILL & EMERY
-4-
<PAGE>
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
included herein and to all references to our Firm included in or made a part of
this registration statement.
ARTHUR ANDERSEN & CO.
Memphis, Tennessee
May 23, 1994
<PAGE>
Consent of D.L. Johnson & Co.
-----------------------------
We hereby consent to the use of our valuation opinion included herein and
to all references to our Firm included in or made a part of this registration
statement.
D.L. JOHNSON & CO.
By: /s/Donald L. Johnson
----------------------------------
May 23, 1994
