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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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Commission File Number 2-7803
MISSISSIPPI CHEMICAL CORPORATION
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(Exact name of registrant as specified in its charter)
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MISSISSIPPI 64-0292638
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
Highway 49 East, P.O. Box 388, Yazoo City, MS 39194
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (601) 746-4131
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Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, par value $.01 The Nasdaq Stock Market's National Market
Preferred Stock Purchase Rights The Nasdaq Stock Market's National Market
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Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
At August 31 1996, Mississippi Chemical Corporation had 21,053,450 shares of
common stock, par value $.01, outstanding. The Company estimates that the
aggregate market value of the common stock on August 31, 1996 (based upon the
closing price of these shares on Nasdaq), held by non-affiliates was
approximately $473,702,625.
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DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for annual meeting of shareholders to be held on or about
November 25, 1996 (Items 10, 11, 12 and 13 in Part III).
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PART I
ITEM 1. BUSINESS
Mississippi Chemical Corporation (the "Company") was incorporated in
Mississippi on May 23, 1994, and is the successor by merger, effective July 1,
1994, to a business which was formed in 1948 as the first fertilizer
cooperative in the United States (the "Cooperative"). The address of the
Company's principal executive office is Owen Cooper Administration Building,
Highway 49 East, Yazoo City, Mississippi 39194, and its telephone number is
(601) 746-4131. The term "Company" includes Mississippi Chemical Corporation
and its wholly owned subsidiaries, Mississippi Phosphates Corporation and
Mississippi Potash, Inc. References to the Company's operations prior to July
1, 1994, refer to the Cooperative's operations.
The Cooperative was incorporated in Mississippi in September 1948 and
operated as a cooperative in accordance with the applicable provisions of the
Internal Revenue Code. The principal business of the Cooperative was to
provide fertilizer products to its shareholders pursuant to preferred patronage
rights which gave the shareholders the right to purchase fertilizer products
and receive a patronage refund on fertilizer purchases. On June 28, 1994, the
shareholders of the Cooperative approved a plan of reorganization (the
"Reorganization"), pursuant to which the Cooperative was merged into the
Company. Pursuant to the Reorganization, the capital stock of the Cooperative
was converted into common stock and/or cash. As a result of the
Reorganization, the Company no longer operates as a cooperative, but as a
regular business corporation.
NITROGEN FERTILIZER
Products
The Company produces nitrogen fertilizers at its Yazoo City, Mississippi,
production facility in Yazoo City, Mississippi, and through a 50%-owned
production facility at Donaldsonville, Louisiana. The Louisiana facility
("Triad") is operated as a joint venture by the Company and First Mississippi
Corporation ("First Mississippi"). In fiscal 1996, the Company sold
approximately 1.8 million tons of nitrogen fertilizers to farmers, fertilizer
dealers and distributors located primarily in the southern United States.
Sales of nitrogen fertilizer products by the Company in fiscal 1996 were $255
million, which represented approximately 60% of net sales.
The Company's principal nitrogen products include ammonia;
fertilizer-grade ammonium nitrate, which is sold under the Company's trade name
Amtrate(R); UAN solutions, which are sold under the Company's trade name N-Sol;
and urea.
Although, to some extent, the various nitrogen fertilizers are
interchangeable, each has its own distinct characteristics which produce
agronomic preferences among end-users. Farmers decide which type of nitrogen
fertilizer to apply based on the crop planted, soil and weather conditions,
regional farming practices and relative nitrogen fertilizer prices.
Ammonia. The basic nitrogen product is anhydrous ammonia, which is the
simplest form of nitrogen fertilizer. Anhydrous ammonia, which is 82%
nitrogen, is the most concentrated form of nitrogen fertilizer available. It
is synthesized as a gas under high temperature and pressure. The raw materials
used to produce anhydrous ammonia are natural gas, atmospheric nitrogen and
steam.
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In fiscal 1996, the Company produced approximately 717,000 tons of
anhydrous ammonia at its Yazoo City and Triad facilities and purchased
approximately 62,000 tons. The Company sold approximately 39,000 tons of
anhydrous ammonia for direct-application fertilizer and industrial sales and
used the balance as a raw material to manufacture its other nitrogen fertilizer
products. The Company's subsidiary Mississippi Phosphates Corporation also
purchased 158,000 tons of ammonia for use in its phosphate operations. See
"Phosphate Fertilizer."
In the Company's markets, ammonia is used primarily as a pre-emergent
fertilizer for most row crops. Although anhydrous ammonia is the least
expensive form of nitrogen, its use as a primary fertilizer has gradually
declined because of the difficulties of application and the high cost of
application equipment.
Ammonium Nitrate. The Company is the largest manufacturer and marketer of
ammonium nitrate fertilizer in the United States. Ammonium nitrate, which is
34% nitrogen, is produced by reacting anhydrous ammonia and nitric acid.
Ammonium nitrate is less subject to volatilization (evaporation) losses than
other nitrogen fertilizer forms. Due to its stable nature, ammonium nitrate is
the product of choice for such uses as pastures and no-till row crops where
fertilizer is spread upon the surface and is subject to volatilization losses.
Although the consumption of ammonium nitrate in the U.S. has been stable in
recent years, the use of conservation tillage, which reduces soil erosion, is
increasing in the U.S. and should have a positive impact on ammonium nitrate
demand.
In fiscal 1996, the Company sold approximately 759,000 tons of solid
ammonium nitrate fertilizer, substantially all of which was produced at the
Company's Yazoo City facility. The ammonium nitrate produced at the Company's
Yazoo City facility is sold under the registered trade name Amtrate(R). Due to
its superior shipping and storage characteristics, Amtrate(R) has established
excellent brand name recognition and a reputation as a high-quality product.
In September 1994, the Company and Air Products and Chemicals, Inc. ("Air
Products"), concluded arrangements whereby the Company agreed to purchase all
of the ammonium nitrate fertilizer produced at Air Products' Pace, Florida,
facility (up to 240,000 tons per year). Approximately 2,400 tons of ammonium
nitrate were purchased in fiscal 1996 and approximately 144,000 tons were
purchased in 1995. At the end of fiscal year 1995, Air Products announced its
intention to suspend ammonium nitrate production at its Pace facility due to
sustained high ammonia costs. In February 1996, Air Products and the Company
announced the termination of the agreement.
N-Sol. In fiscal 1996, the Company sold approximately 624,000 tons of
N-Sol, which it produces at its Yazoo City facility. N-Sol is a 32% nitrogen
product that is made by mixing urea liquor and ammonium nitrate liquor. N-Sol
is used in direct application to cotton, corn, grains and pastures as well as
for use in liquid fertilizer blends. Over the past 20 years, there has been a
substantial shift in product preference from directly applied ammonia to UAN
solutions because of the difficulties of applying and the high cost of
application equipment for ammonia.
Urea. In fiscal 1996, the Company sold approximately 231,000 tons of
prilled urea and approximately 83,000 tons of urea melt which it produces at
the Triad facility. Under a long-term contract with Melamine Chemicals, Inc.
("Melamine"), the Company is obligated to sell up to 75,000 tons per year of
urea melt at prevailing market prices to Melamine's facility located adjacent
to the Triad facility. Urea is synthesized by the reaction of ammonia and
carbon dioxide and then solidified in prill form. At 46% nitrogen by weight,
urea is the most concentrated form of dry nitrogen. Because urea undergoes a
complex series of changes within the soil before the nitrogen it contains is
ultimately
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converted into a form which can be used by plants, it is considered a
long-lasting form of nitrogen. As a fertilizer product, urea is acceptable as
both a direct-application material and as an ingredient in fertilizer blends.
Urea consumption has increased modestly in recent years. Most of the Company's
prilled urea is broadcast on rice and winter wheat crops in Arkansas,
Louisiana, Mississippi, Oklahoma and Texas.
Production and Properties
Yazoo City, Mississippi. The Yazoo City facility is a closely integrated,
multi-plant nitrogen fertilizer production complex located on approximately
1,180 acres. The complex includes an anhydrous ammonia plant, four nitric acid
plants, an ammonium nitrate plant and a UAN solutions plant. In 1996, the
Company announced an expansion project at its Yazoo City facility. This
project will include a 500-ton-per-day anhydrous ammonia plant and a
650-ton-per-day nitric acid plant, as well as expansion of the ammonium nitrate
production and product-shipping areas. The project is estimated to cost
approximately $130 million and is scheduled for completion in 1998.
The Yazoo City facility includes a 20.5 megawatt cogeneration facility
which produces significant savings by the sequential generation of electricity
and process steam. The Yazoo City plant has direct access to water, rail and
truck transportation and is strategically located for the purchase of
competitively priced natural gas. See "--Raw Materials--Natural Gas."
Donaldsonville, Louisiana. The Triad facility is a closely integrated,
multi-plant nitrogen fertilizer complex located on approximately 46 acres
fronting the Mississippi River at Donaldsonville, Louisiana. At the Triad
plant, the Company produces anhydrous ammonia and urea. The Company is
entitled to one-half of the production from the Donaldsonville facility as the
co-owner of Triad with First Mississippi Corporation ("First Mississippi").
The Triad ammonia plant has been retrofitted on several occasions to increase
production capacity and to enhance operating efficiency.
Triad has ready access to rail and truck transportation. The plant is
also equipped with a deep-water port facility on the Mississippi River,
allowing access to economical ship and barge transport for its urea and ammonia
products. The Triad facility is well positioned for the purchase of
competitively priced natural gas. See "--Raw Materials--Natural Gas."
In August 1996, the Company announced that it had entered into a
definitive agreement to acquire the fertilizer operations of First Mississippi,
giving the Company full ownership of the Triad facility. Under the terms of
the agreement and subject to certain adjustments, the Company will issue
approximately 6.9 million shares of the Company's common stock to First
Mississippi shareholders. At closing, the fertilizer business of First
Mississippi will have approximately $150 million of debt. This transaction is
subject to both regulatory and shareholder approval. It is anticipated that the
transaction will be completed during December 1996. Also to be acquired in the
transaction is First Mississippi's wholly owned subsidiary AMPRO Fertilizer,
Inc. ("AMPRO"). AMPRO owns and operates an anhydrous ammonia plant with annual
production of approximately 490,000 tons and is in the process of expanding its
capacity by approximately 125,000 tons a year, or 26%. The expansion should be
completed by the end of 1996. AMPRO and Triad are located on adjacent sites in
Donaldsonvillle and share dock facilities capable of receiving oceangoing
vessels. In addition, the Company will acquire in the transaction a 50%
interest in an ammonia storage terminal in Pasadena, Texas, and a 50% interest
in a partnership which owns and operates 11 ammonia barges.
Trinidad. In December 1994, the Company signed a letter of intent with
Farmland Industries, Inc., to enter into a 50-50 joint venture, known as
Farmland MissChem Limited, to construct and operate a
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2,040-short-ton-per-day ammonia plant to be located on the island of Trinidad.
The project is expected to cost approximately $330 million. Construction of the
facility is underway with completion and start-up scheduled for mid-1998.
Marketing and Distribution
The Company sells its nitrogen fertilizer products to farmers, dealers and
distributors located primarily in the southern farming regions of the United
States where its facilities are located. In the three-tiered fertilizer
distribution chain, distributors operate as wholesalers supplying dealers who,
in turn, sell directly to farmers. Larger customers (distributors and large
multi-location dealers) arrange for distribution, storage and financing of
nitrogen fertilizer. The majority of the Company's sales are made to
distributors and large dealers. The ten states which make up the Company's
primary trade area are Mississippi, Texas, Alabama, Louisiana, Tennessee,
Georgia, Kentucky, Arkansas, Oklahoma, and Florida.
The Company maintains a large and experienced field sales force
strategically located throughout the southern United States. This sales force
maintains close communications with the customer base and plays an important
role in the marketing and distribution of the Company's products. Through
regular, personal contact with its customers, the Company is able to ascertain
local demand for fertilizer products and arrange to have those products
available from the most cost-effective source. The Company's field sales force
is also able to identify specific customer service needs which the Company can
meet. Customer service helps differentiate the Company's products and enhance
its position as a preferred supplier.
The Company transports its nitrogen products by barge, rail and truck.
The Company's distribution network is complemented by owned or leased
warehouses and terminals strategically placed in high-consumption areas.
PHOSPHATE FERTILIZER
Products
The Company produces diammonium phosphate fertilizer ("DAP") at its
facility in Pascagoula, Mississippi. In fiscal 1996, the Company sold
approximately 754,000 tons of DAP, primarily into international markets. Sales
of DAP by the Company in fiscal 1996 were $142 million, which represented
approximately 33% of net sales.
DAP is the most common form of phosphate fertilizer. DAP is produced by
reacting phosphate rock with sulfuric acid to produce phosphoric acid, which is
then combined with ammonia. DAP contains 18% nitrogen and 46% phosphate (P205)
by weight. DAP is an important fertilizer product for both direct application
and for use in blended fertilizers applied to all major types of row crops.
Production and Properties
The Company's phosphate production complex in Pascagoula, Mississippi, is
located on approximately 1,500 acres. The Pascagoula facility is a closely
integrated, multi-plant phosphatic fertilizer complex where the primary
facilities are a phosphoric acid plant, two sulfuric acid plants and a DAP
granulation plant. The plant has storage facilities for finished product
(45,000 tons), as well as for the primary raw materials, phosphate rock
(100,000 tons), sulfur (10,000 tons) and ammonia
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(25,000 tons). All of the phosphate rock used by the Company is purchased
pursuant to a single supply contract with Office Cherifien des Phosphates
("OCP"), the national phosphate company of Morocco. See "--Raw
Materials--Phosphate Rock."
The plant site fronts a deep-water channel that provides direct access to
the Gulf of Mexico. The complex contains docks and off-loading facilities for
receiving shipload quantities of phosphate rock, sulfur and ammonia, and for
out- loading DAP. The plant's location on deep water provides the Company
with an outbound freight cost advantage over central Florida DAP producers with
respect to international shipments and domestic shipments along the Mississippi
River system.
The Company has entered into option agreements for the purchase of lands
near the Pascagoula facility for construction of a new phosphogypsum disposal
facility. Engineering design is currently in progress and permit applications
have been filed with the appropriate local, state and federal authorities.
This project, which is expected to cost approximately $16.5 million, is
scheduled for completion in late 1997.
Marketing and Distribution
The Company sells substantially all of its DAP to Atlantic Fertilizer &
Chemical Corporation ("Atlantic"), the primary distributor of its DAP products.
Atlantic maintains a network of sales agents in the major phosphate
fertilizer-consuming nations around the world. Sales to Atlantic are made on
an FOB Pascagoula basis at a price which reflects the price Atlantic charges
its customers, adjusted to reflect Atlantic's commission. Sales to Atlantic
for the export market are backed by standby letters of credit.
In fiscal 1996, over two-thirds of the Company's DAP was sold into
international markets. The largest export markets in fiscal 1996 were China,
India and countries in Central and South America. Most domestic sales are made
in barge-lot quantities to major fertilizer distributors and dealers located on
the Mississippi River system. The vast majority of the Company's DAP is
transported by ship and barge, although truck and rail access is also
available.
POTASH FERTILIZER
Products
The Company produces potash at three mines and related facilities near
Carlsbad, New Mexico. In fiscal 1996, the Company sold approximately 418,000
tons of potash primarily in granular form. These sales were primarily to
customers located west of the Mississippi River. In May 1994, the Company
completed an expansion of its Carlsbad facility for $1.6 million, bringing its
capacity for granular product to approximately 420,000 tons per year. Sales of
potash fertilizer by the Company in fiscal 1996 were $30 million, which
represented approximately 7% of net sales.
The Company's potash is mined from subterranean salt deposits containing a
mixture of potassium chloride and sodium chloride. The Carlsbad, New Mexico,
potash deposits are located from 800 to 1,200 feet below the surface. Potash
is produced in a refining process whereby the potassium chloride is separated
from the sodium chloride.
Prior to the acquisition described below, the Company primarily produced
red granular potash. The three principal grades of potash fertilizer are
granular, coarse and standard, with granular being the
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largest particle size. Granular potash is used as a direct-application
fertilizer and, among the various grades, is particularly well suited for use
in fertilizer blends. Potash is an important fertilizer product for both
direct application and for use in blended fertilizer applied to all major types
of row crops.
Production and Properties
The Company's potash mine and refinery are located approximately 25 miles
east of Carlsbad, New Mexico. In fiscal 1994, the Company completed a $5
million project to modernize its mining equipment, enabling it to extract a
higher grade of ore which improved overall facility efficiencies. The mine
supplies ore to an above-ground refinery which separates the potassium chloride
from the ore. The run-of-mine refined product is then transported to the
Company's nearby compaction plant for conversion to granular form. Located
contiguous to the compaction facility are storage and shipping facilities from
which the finished product is transported by rail and truck into domestic and
export markets.
The Company's existing facility is currently producing approximately
420,000 short tons per year of red potash, primarily in granular form. The
Company's potash reserves are controlled under long-term federal and state
potassium leases on approximately 60,000 acres. In addition, the Company holds
mineral title to approximately 4,400 acres and fee title to approximately
10,000 acres. Revised estimates of potash ore reserves underlying the Carlsbad
properties were compiled in 1981 and 1983. According to these estimates, the
Company's reserves were estimated to contain 346.2 million tons of in situ ore
with an average grade of 15.25% K20 or 297.9 million tons of recoverable ore
with an average grade of 14.88% K20. Since these estimates were made, ore
extracted would indicate remaining reserves of 330 million tons of in situ ore
with an average grade of 15.26% K2O or 281 million tons of recoverable ore with
an average grade of 14.88% K2O. This reserve base is estimated to be
equivalent to 55 million tons of muriate of potash. At current production
rates, the Company's reserves have a remaining life in excess of 100 years.
In August 1996, the Company acquired substantially all the assets of two
New Mexico potash producers--New Mexico Potash Corporation and Eddy Potash,
Inc., from Trans-Resources, Inc., for $45 million, plus an adjustment for
working capital on hand at closing (approximately $10 million). Currently,
these new acquisitions are being operated as subsidiaries of Mississippi
Potash, Inc. These two mines, located near Carlsbad, New Mexico, have a
combined annual production capacity of approximately 870,000 tons. The New
Mexico Potash Corporation mine produces white potash for use by both
agriculture and industry in standard, coarse and granular forms. The Eddy
Potash, Inc., mine produces red potash for agriculture in standard, coarse and
granular forms, and white chemical and soluble grades for industrial users.
Marketing and Distribution
The substantial majority of the Company's agricultural potash sales are in
domestic markets in the southern states west of the Mississippi River where it
and other Carlsbad potash producers enjoy freight cost advantages over Canadian
and overseas potash producers. Consistent with the Company's strategy to
maximize "net backs" (sales less distribution and delivery expense) and
increase profit margins, domestic sales are targeted for locations along the
freight route of the Santa Fe Railroad. Domestic potash marketing is performed
by the Company's sales staff. The Company's export sales are made through
Potash Corporation of Saskatchewan Sales Limited. While the typical primary
export market for the Company's potash is Latin America, the majority of fiscal
1996 export sales were to Mexico and
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Brazil. Potash for export is transported by rail to terminal facilities in
Houston, Texas, where it is loaded onto ocean-going vessels for shipment to
export markets.
RAW MATERIALS
Natural Gas
Natural gas is the primary raw material used by the Company in the
manufacture of nitrogen fertilizer products. Natural gas is used both as a
chemical feedstock and as a fuel to produce anhydrous ammonia which is then
upgraded into other nitrogen fertilizer products. During fiscal 1996, the cost
of natural gas represented approximately 73% of the Company's cost of producing
ammonia. Because there are no commercially feasible alternatives for natural
gas in the production of ammonia, the economic viability of the Company's
nitrogen business depends upon the availability of competitively priced natural
gas.
In today's natural gas market, the Company's total natural gas cost
generally consists of two components--the market price of the natural gas in
the producing area at the point of delivery into a pipeline and the fee charged
by the pipeline for transporting the natural gas to the Company's plants. The
cost of the transportation component can vary substantially depending on
whether or not the pipeline has to compete for the business. Therefore, it is
extremely important to the Company's competitiveness that it have access to
multiple natural gas transportation services. In addition to the impact on
transmission costs, access alternatives enable the Company to benefit from
natural gas price differences that may exist from time to time in the various
natural gas-producing areas. In recent years, the Company has improved the
natural gas purchasing logistics of its nitrogen facilities.
The majority of the 54,000 Mcf per day natural gas requirements of the
Yazoo City facility is currently being furnished by Sonat Marketing Company
("Sonat"), an affiliate of Southern Natural Gas Company ("Southern"). In 1995,
the Company entered into a long-term natural gas purchase agreement with Sonat.
Deliveries under the Sonat agreement began on January 1, 1996. The Sonat
agreement provides for market-sensitive pricing and a firm-delivery supply
commitment. The balance of the natural gas requirements of the Yazoo City
facility is supplied by Pursue Energy Corporation ("Pursue") from its natural
gas reserves located in Rankin County, Mississippi. It is anticipated that
this purchase arrangement will continue for the foreseeable future. The Yazoo
City facility is directly connected to the interstate pipeline system operated
by Southern. In addition, the Company recently purchased a 60-mile, 12-inch
diameter natural gas pipeline which provides the plant with direct access to
the Pursue reserves, an additional interstate pipeline and a large intrastate
gathering and transmission system in southern Mississippi. As a result of this
multiple source access, the Company benefits from competition for the
transportation and supply of natural gas.
The natural gas requirements of the Triad facility are approximately
50,000 Mcf per day. The Triad facility is located in one of the primary
gas-producing regions of the United States. The facility is currently
connected to five intrastate pipeline systems and benefits from intense
competition among those suppliers. Currently, the plant's requirements are
being supplied by three of the intrastate lines under various pricing
arrangements. Generally, these contracts impose firm delivery obligations at
market-sensitive prices. In addition, the Company purchases gas for Triad on
the spot market pursuant to 30-day fixed-price contracts. As a result of
Triad's favorable access to natural gas supplies, the Company believes that the
loss of any particular supplier would not have a material impact on plant
operations. There have been no significant supply interruptions at the Triad
facility.
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Natural gas prices have risen significantly since December 1995. The
harsh winter of 1995-1996 is primarily responsible for much of this increase.
Although long-term natural gas supplies appear adequate to meet projected
demand, gas prices can be significantly influenced by short-term fundamentals
such as weather, storage levels, gas transportation interruptions and competing
fuel prices. The Company uses natural gas futures contracts to hedge against
the risk of short-term market fluctuations in the cost of natural gas.
Phosphate Rock
Phosphate rock is one of the primary raw materials for the manufacture of
DAP. The Pascagoula facility's requirements for phosphate rock are
approximately 1.2 million tons per year. As of September 15, 1991, the Company
entered into a ten-year contract with Office Cherifien des Phosphates ("OCP")
to supply all of the phosphate rock requirements of the Pascagoula facility.
This contract has been amended and its term extended to June 30, 2003. OCP,
the national phosphate company of Morocco, is the world's largest producer and
exporter of phosphate rock and upgraded phosphates as a company. The contract
price for phosphate rock is based on phosphate rock costs incurred by certain
domestic competitors of the Company and on the operating performance of the
Company's phosphate operations. Under this formula, the Company realizes
favorable phosphate rock prices and is afforded significant protection during
periods when market conditions are depressed and its DAP operations are not
profitable. As a result, the Company has been able to sustain its operations
since reopening the Pascagoula facility in December 1991, despite a sustained
period of low prices for phosphate products during fiscal 1993 and 1992.
Conversely, in favorable markets, when the Company's DAP operations are
profitable, the contract price of phosphate rock will escalate based on the
profitability of its DAP operations. Pursuant to this contract, the Company
and OCP are required to negotiate further adjustments as needed to maintain the
viability and economic competitiveness of the Pascagoula plant. The strategic
alliance with OCP has functioned effectively since inception, and the Company
considers its relations with OCP to be good.
Sulfur
Sulfur is used in the manufacture of sulfuric acid at the Pascagoula
plant. Sulfur is in adequate supply and is available on the open market in
quantities sufficient to satisfy the Company's current requirements of 290,000
tons per year. The location of the Company's plant at Pascagoula, Mississippi,
near major oil and gas fields which supply substantial amounts of sulfur,
provides the Company with a strategic advantage in the purchase of sulfur over
its Florida competitors.
Ammonia
Heavy demand for ammonia, which began in 1994, continued into 1995. This
demand is from both the industrial and agricultural markets. However, prices
have declined somewhat from the level reached during spring 1995, but remain at
relatively high levels. The Company expects to become a net seller of ammonia
with the construction of additional ammonia capacity in Yazoo City and Trinidad
and the pending purchase of First Mississippi Corporation's fertilizer
business.
COMPETITION
Since fertilizers are global commodities which are available from multiple
sources, the primary competitive factor is price. Other competitive factors
include product quality, customer service and availability of product. In each
product category, the Company competes with a broad range of domestic
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producers, including farmer cooperatives, subsidiaries of larger companies,
integrated energy companies and independent fertilizer companies. Many of the
Company's domestic competitors have larger financial resources and sales than
the Company. The Company also competes with foreign producers. Foreign
competitors are often owned or subsidized by their governments and, as a
result, may have cost advantages over domestic companies. Additionally,
foreign competitors are frequently motivated by non-market factors such as the
need for hard currency.
The Company produces and sells nitrogen fertilizer products primarily in
the southern United States. Because competition is based largely on price,
maintaining low production costs is critical to competitiveness. The Company
believes it is one of the lowest-cost producers of nitrogen fertilizers in the
United States. Natural gas comprises the majority of the raw materials cost of
nitrogen fertilizers. Competitive natural gas purchasing is essential to
maintaining the Company's low-cost position. Equally important is efficient
use of this gas because of the energy-intensive nature of the nitrogen
fertilizer business. Therefore, cost-competitive production facilities that
allow flexible upgrading of ammonia to other finished products are critical to
a low-cost competitive position. In the highly fragmented nitrogen fertilizer
market, product quality and customer service can also be sources of product
differentiation.
Through Atlantic, the Company sells over two-thirds of its DAP in
international markets. The United States phosphate industry has become more
concentrated as a result of recent consolidations and joint ventures, and the
Company is significantly smaller than most of its competitors in terms of
resources and sales. Most of the Company's principal competitors have captive
sources of some or all of the raw materials, and this may provide them with
cost advantages. The Company's long-term phosphate rock contract with its
flexible pricing mechanism is a key element to the Company's ability to
compete.
Most potash consumed in the United States is provided by large Canadian
producers who have economies of scale and lower variable costs than their U.S.
counterparts. Over 80% of United States potash production capacity is located
in the Carlsbad, New Mexico, area. While the Carlsbad producers have higher
mining costs than the Canadian producers, this disadvantage is offset by
logistical and freight advantages in certain markets in the southwestern United
States and the lower United States corn belt. The Company competes in these
markets primarily with two other Carlsbad potash producers.
RESEARCH AND DEVELOPMENT
The Company has a research and development staff of 12 full-time
professional employees whose activities relate primarily to the improvement of
existing products. The expenditures on research activities sponsored by the
Company during fiscal 1996, 1995 and 1994 were approximately $1.2 million, $1.3
million and $1.4 million, respectively.
EMPLOYEES
As of June 30, 1996, the Company employed approximately 1,008 persons at
all locations. The Company considers its employee relations to be
satisfactory.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company's 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
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Substances Control Act and various state statutes. The Company's facilities
require operating permits that are subject to review by governmental agencies.
The Company 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 Company's
environmental capital expenditures have been in response to the requirements of
the Clean Air Act and the Clean Water Act. Since 1967, the Company has spent
in excess of $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: 1996--$920,000;
1995--$7,750,000; and 1994--$619,000.
Environmental capital expenditures are expected to be approximately $9.0
million for fiscal 1997. These funds relate in large part to the development
of a new gypsum disposal facility at Pascagoula. The estimated cost of this
facility is expected to be $17.0 million, which amount will be expended over an
estimated 32 months. The Company is currently seeking the necessary permits
for its development.
During fiscal 1994, the Company charged to its earnings approximately $6.1
million relating to the estimated cost of the future closure of the existing
gypsum disposal facility located at Pascagoula. The Company charged an
additional $564,000 in 1996 and $562,000 in 1995 toward this estimated cost of
closure. The total accrual of approximately $7.2 million relates to the
portion of the disposal facility utilized to date. In future years, the
Company expects to record additional charges of approximately $1.9 million
related to the anticipated closure costs of the gypsum disposal facility.
These charges will be recorded over the estimated four-year remaining life of
the facility.
In the normal course of its business, the Company is exposed to risks
relating to possible releases of hazardous substances into the environment.
Such releases could cause substantial damage or injuries. Environmental
expenditures have been and will continue to be significant. It is impossible
to predict or quantify the impact of future environmental laws and regulations.
ITEM 2. OTHER PROPERTIES
The Company owns an administration building in Yazoo City which contains
approximately 65,000 square feet of office space.
The Company's plants 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 locations. In addition to the fertilizer storage
facilities at Yazoo City and Pascagoula, Mississippi; Carlsbad, New Mexico; and
Donaldsonville, Louisiana, the Company also owns or leases 15 major fertilizer
storage and distribution facilities at other locations in Alabama, Arkansas,
Georgia, Mississippi, Tennessee and Texas, with a total system-wide storage
capacity of approximately 220,000 tons.
In 1980, the Company completed the purchase of phosphate rock property in
Hardee County, Florida. This property, containing approximately 12,000 acres,
is estimated by the Company to contain approximately 62,000,000 recoverable
tons of phosphate rock of commercial quality. During 1990, the Company entered
into an agreement granting a third party the exclusive option, for a period of
four
11
<PAGE> 12
years, to purchase this undeveloped phosphate rock property. The Company
received an aggregate of $14 million in option payments during this four-year
period. As of July 12, 1994, the Company and the option holder entered into
new agreements with respect to this property whereby (i) the Company conveyed
approximately 2,500 acres of this property to the third party; (ii) for
aggregate additional option payments of $7 million to be paid during the option
period, the Company granted to the third party the exclusive option, for a
period of three and one-half years, to purchase the remaining 9,500 acres;
(iii) the Company was granted a put option pursuant to which the Company has
the right to sell the 9,500 acres to the third party if the third party does
not exercise its prior option to purchase the property; and (iv) the Company
was granted an exclusive option to repurchase the previously conveyed 2,500
acres in the event the third party does not exercise its option to purchase the
9,500 acres and the Company does not exercise its put option on the 9,500
acres.
ITEM 3. LEGAL PROCEEDINGS
Cleve Reber CERCLA Site. 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
the disposal site identified as the Cleve Reber site in Ascension Parish,
Louisiana. It is Triad's position that, based upon available information and
records, Triad did not utilize the Cleve Reber site for the disposition of
hazardous material, and it does not appear that Triad has any responsibility
for investigation and cleanup on this site. It should be noted that the EPA is
contemplating an action under the Resource Conservation and Recovery Act,
Section 7003, as well as the CERCLA action mentioned above. The EPA has issued
Section 106 orders against the major contributors at the site for cleanup.
They are now engaged in negotiations for cleanup. Two years ago, , Triad
received a supplemental 104(e) request for information from the EPA, indicating
the EPA's renewed interest in pursuing Potential Responsible Persons at the
site. Triad filed a Freedom of Information Act request to investigate
allegations that some plant trash from Triad may have been disposed of at the
Cleve Reber site. In the opinion of management, the likelihood of the CERCLA
investigation resulting in a loss in a material amount is remote.
In early 1996, a class action suit was brought against Triad and other
companies allegedly involved in the site based upon toxic torts alleged to have
resulted from the presence of contaminants at the Cleve Reber site. Triad has
not been served with process in the case. In the opinion of management, based
upon available information, the likelihood that these proceedings will result
in a loss in a material amount is remote. Triad is monitoring the case while
awaiting service of process.
Terra International, Inc. On August 31, 1995, the Company filed suit
in federal court in Mississippi against Terra International, Inc. ("Terra")
seeking a declaratory judgment and other relief establishing that certain
technology relating to the design of an ammonium nitrate neutralizer which the
Company licensed to Terra is not defective and was not the cause of an
explosion which occurred in 1994 at Terra's Port Neal, Iowa, fertilizer
facility. The Company is also seeking damages for defamation based on Terra's
public statement related to the Company's alleged role in the explosion. Also,
on August 31, 1995, Terra filed suit in federal court in Iowa against the
Company seeking damages caused by the explosion. Terra alleges that the
Company negligently designed the ammonium nitrate neutralizer technology
licensed to Terra and that that design defect led to the Port Neal explosion.
Discovery in this case is underway and is scheduled to run through December 31,
1997. Trial is tentatively scheduled to begin in the summer of 1998. The
Company intends to vigorously defend itself against Terra's allegations and
plans to fully prosecute its defamation claim.
12
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
13
<PAGE> 14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The following table presents dividends paid per share and the high and low
price range for the Company's common stock for fiscal 1996 and fiscal 1995.
<TABLE>
<CAPTION>
Year Ending June 30, 1996
-----------------------------------------------------------------
1st Q 2nd Q 3rd Q 4th Q
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Dividends paid per share $ 0.08 $ 0.08 $ 0.10 $ 0.10
Common stock price range
- high $23.88 $25.13 $24.75 $22.50
- low $19.88 $21.00 $19.75 $19.25
</TABLE>
<TABLE>
<CAPTION>
Year Ending June 30, 1995
-----------------------------------------------------------------
1st Q 2nd Q 3rd Q 4th Q
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Dividends paid per share $ - $ - $ 0.08 $ 0.08
Common stock price range
- high $19.25 $19.00 $19.88 $20.13
- low $15.00 $14.75 $16.50 $15.38
</TABLE>
The Company's common stock is listed on the Nasdaq Stock Market's National
Market under the symbol "MISS." As of September 18, 1996, shareholders of
record numbered approximately 10,700.
14
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended June 30
----------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(In thousands, except per-share data)
Income Statement Data:
---------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 428,789 $ 388,154 $ 309,360 $ 289,125 $ 239,657
Operating income $ 84,818 $ 80,969 $ 37,905 $ 29,180 $ 40,804
Income from continuing operations
before cumulative effect of
change in accounting principle $ 54,178 $ 52,230 $ 26,912 $ 22,681 $ 31,349
Net income $ 54,178 $ 52,230 $ 36,523 $ 4,790 $ 13,003
Income from continuing operations
assuming conversion from a
cooperative to a regular
business N/A n/a $ 21,415 $ 17,533 $ 22,821
corporation as of July 1, 1991
(1)
Earnings per share (2) $ 2.46 $ 2.34 $ 1.10 $ 0.92 $ 1.23
Weighted average common shares
outstanding (3) 21,980 22,365 19,454 19,035 18,521
<CAPTION>
June 30
----------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(In thousands, except per-share data)
Balance Sheet Data:
------------------
Working capital $ 81,613 $ 70,790 $ 34,931 $ 22,802 $ 35,225
Total assets $ 341,006 $ 302,215 $ 298,430 $ 296,053 $ 303,158
Long-term debt, excluding
long-term debt due within one
year $ - $ 2,478 $ 57,217 $ 52,357 $ 59,333
Shareholders' equity $ 247,825 $ 227,307 $ 142,956 $ 119,574 $ 128,195
Cash dividends declared per
common share (4) $ 0.36 $ 0.16 $ - $ - $ -
</TABLE>
(1) For 1994, 1993 and 1992, the Company operated as a cooperative and
realized deductions for income taxes for amounts paid in cash as
patronage refunds to its shareholder-members. If the conversion from a
cooperative to a regular business corporation had occurred as of July
1, 1991, income taxes would have been increased by the following
approximate amounts: $5.5 million, $5.1 million and $8.5 million for
fiscal 1994, 1993 and 1992, respectively.
(2) For 1994, 1993 and 1992, earnings per share reflect the reorganization
of the Company from a cooperative to a regular business corporation as
if it had occurred July 1, 1991, and is based on income from continuing
operations.
(3) For 1994, 1993 and 1992, weighted average common shares outstanding
reflect the reorganization of the Company from a cooperative to a
regular business corporation as if it had occurred July 1, 1991.
15
<PAGE> 16
(4) For 1994, 1993 and 1992, the Company operated as a cooperative and
paid cash patronage refunds in lieu of cash dividends.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's results of operations have historically been influenced
by a number of factors beyond the Company's control which have, at times, had a
significant effect on the Company's operating results. Fertilizer demand and
prices are highly dependent upon conditions in the agricultural industry and
can be affected by a variety of factors, including planted acreage, United
States government agricultural policies, projected grain stocks, weather and
changes in agricultural production methods. The Company's results can be
affected by such factors as the relative value of the U.S. dollar, foreign
agricultural policies (in particular the policies of the governments of India
and China regarding subsidies of fertilizer imports), and the hard currency
demands of countries such as the former Soviet Union.
The Company's fiscal 1996 results reflect record sales, operating
income and net income. Net sales increased 10.5% to $428.8 million from $388.2
million in 1995. Operating income increased 4.8% to $84.8 million from $81.0
million in 1995, and net income increased 3.7% to $54.2 million from $52.2
million in 1995. These results reflect higher sales prices for nitrogen and
DAP and higher sales volumes for all product groups. Sales volumes were
favorably impacted by a carryover effect caused by slow product movement
resulting from adverse weather conditions in May and June of 1995. These
increases were partially offset by lower ammonium nitrate sales volumes during
the current year due to the absence of tonnage obtained through a contract with
Air Products and Chemicals, Inc. ("Air Products"), in the prior fiscal year,
which is no longer in effect. The Company purchased approximately 144,000 tons
of ammonium nitrate from Air Products in fiscal 1995 compared to 2,400 tons
during fiscal 1996. The average sales price per ton of nitrogen fertilizer
increased to $144 in fiscal 1996 from $138 in fiscal 1995. For fiscal 1996,
the average sales price of DAP was $188 per ton compared to $165 per ton for
fiscal 1995. The average sales price of potash decreased to $71 in fiscal 1996
from $77 in fiscal 1995.
During the current year, a favorable worldwide supply/demand balance
for nitrogen and DAP fertilizers caused sales prices to increase. However,
during the fourth quarter, adverse weather patterns affected spring demand and
resulted in lower than expected sales volumes for the Company's products. In
response, nitrogen prices, particularly ammonia and urea, weakened. Looking
forward, fertilizer market fundamentals remain strong. U.S. and world grain
stocks continue at their lowest level in more than two decades. Total acreage
planted during fiscal 1996 increased more than 15 million acres over last
year's levels, and industry analysts expect a further increase in planted acres
for 1997. This, coupled with rising global food demand, should translate into
high levels of fertilizer consumption for the upcoming fiscal year.
Prices for natural gas, a significant raw material in the production of
nitrogen fertilizers, have risen significantly since December 1995. Much of
the recent increase is attributed to difficulties in replenishing natural gas
inventories following the harsh winter of 1995-1996. Although long-term
natural gas supplies appear adequate to meet projected demand, gas prices can
be significantly influenced by short-term fundamentals such as weather, storage
levels, gas transportation interruptions and competing fuel prices. This price
volatility is expected to continue.
16
<PAGE> 17
RESULTS OF OPERATIONS
Following are summaries of the Company's sales results by product categories:
<TABLE>
<CAPTION>
Fiscal Year Ended June 30
--------------------------------------------------
1996 1995 1994
------------ ------------- -------------
(In thousands)
<S> <C> <C> <C>
Net Sales:
Nitrogen $ 255,195 $ 240,692 $ 199,918
DAP 142,084 117,495 83,367
Potash 29,553 27,433 24,084
Other 1,957 2,534 1,991
------------ ------------- -------------
Net Sales $ 428,789 $ 388,154 $ 309,360
============ ============= =============
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended June 30
--------------------------------------------------
1996 1995 1994
------------ ------------- -------------
(In thousands)
<S> <C> <C> <C>
Tons Sold:
Nitrogen 1,770 1,748 1,643
DAP 754 713 638
Potash 418 357 330
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended June 30
--------------------------------------------------
1996 1995 1994
------------ ------------- -------------
<S> <C> <C> <C>
Average Sales Price
Per ton:
Nitrogen $ 144 $ 138 $ 122
DAP $ 188 $ 165 $ 131
Potash $ 71 $ 77 $ 73
</TABLE>
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales. Net sales increased 10.5% to $428.8 million in fiscal 1996 from
$388.2 million in fiscal 1995, primarily as a result of higher sales prices for
nitrogen and DAP fertilizers and increased sales volumes for all product
groups. Nitrogen fertilizer sales increased 6.0% as a result of a 4.7%
increase in prices and a 1.3% increase in tons sold. During fiscal 1996, the
Company's ammonium nitrate sales decreased 6.1% primarily due to the absence of
tonnage obtained through a contract with Air Products in the prior year which
is no longer in effect. Sales of DAP increased 20.9% as a result of a 14.4%
increase in prices and a 5.7% increase in tons sold. Potash sales increased
7.7% as a result of a 17.1% increase in tons sold partially offset by an 8.0%
decrease in prices.
Cost Of Products Sold. Cost of products sold increased to $291.4 million
in fiscal 1996 from $254.6 million in fiscal 1995. As a percentage of net
sales, cost of products sold increased to 68.0% in fiscal 1996 from 65.6% in
fiscal 1995. This increase, as a percentage of net sales, reflects increases
in the production cost per ton for nitrogen fertilizers and DAP partially
offset by higher sales prices for nitrogen
17
<PAGE> 18
and DAP. During the current fiscal year, the Company incurred higher costs
related to its nitrogen products due to higher natural gas costs, increased
purchases of ammonia used as a raw material and upgraded to other nitrogen
fertilizer products and higher maintenance and labor costs. Maintenance and
labor costs were higher due to a scheduled biennial maintenance turnaround at
the Company's Yazoo City facility in fiscal 1996. Purchases of ammonia also
increased as a result of the scheduled turnaround which reduced supplies of
internally produced ammonia.
DAP costs per ton increased during fiscal 1996 as a result of higher costs
for raw materials, primarily phosphate rock. Phosphate rock costs increased
due to the Company's phosphate rock supply contract which bases the price of
this raw material on the phosphate rock costs incurred by certain domestic
phosphate producers and on the financial performance of the Company's phosphate
operations.
Potash production costs per ton increased 5.5% primarily due to lower
volumes produced at the Carlsbad facility during the current year. Production
levels were lower primarily due to a low ore grade resulting from a salt
deposit that was encountered during January and February of the current year.
Selling Expenses. Selling expenses decreased to $27.9 million in fiscal
1996 from $29.2 million in fiscal 1995. As a percentage of net sales, selling
expenses decreased to 6.5% in fiscal 1996 from 7.5% in fiscal 1995. This
decrease was the result of increased sales prices for DAP and nitrogen
fertilizers and lower delivery costs during the current year due to a product
mix that included a lower percentage of tons sold on a delivered basis. These
decreases were partially offset by higher storage costs during the current
year.
General And Administrative Expenses. General and administrative expenses
increased to $24.7 million in fiscal 1996 from $23.3 million in fiscal 1995.
This increase was primarily due to increased franchise taxes, higher
depreciation expense and decreased service fees received from a former
subsidiary which reduced the Company's general and administrative expenses in
the prior year. As a percentage of net sales, general and administrative
expenses decreased to 5.8% in fiscal 1996 from 6.0% in fiscal 1995. This
decrease was primarily the result of increased sales prices for DAP and
nitrogen fertilizers.
Operating Income. As a result of the above factors, operating income
increased to $84.8 million in fiscal 1996 from $81.0 million in fiscal 1995, a
4.8% increase.
Interest, Net. For fiscal 1996, net interest income was $2.2 million
compared to net interest expense of $52,000 in fiscal 1995. This change is
primarily a reflection of lower interest expense incurred during the current
year resulting from lower levels of borrowings. The Company had no long-term
debt at June 30, 1996. The Company also experienced higher interest income
during the current year due to higher levels of investments.
Income Tax Expense. Income tax expense increased to $34.3 million in
fiscal 1996 from $29.2 million in fiscal 1995. This increase is the result of
the change in earnings during the current year and the utilization of
alternative minimum tax credits during the prior year.
Net Income. As a result of the foregoing, net income increased to $54.2
million in fiscal 1996 from $52.2 million in fiscal 1995.
18
<PAGE> 19
FISCAL 1995 COMPARED TO FISCAL 1994
Net Sales. Net sales increased 25.5% to $388.2 million in fiscal 1995 from
$309.4 million in fiscal 1994, primarily as a result of higher sales prices and
increased sales volumes for nitrogen and DAP fertilizers. Nitrogen fertilizer
sales increased 20.4% as a result of a 6.4% increase in tons sold and a 12.8%
increase in prices. In fiscal 1995, the Company agreed to purchase all of the
ammonium nitrate fertilizer produced by Air Products at its Pace, Florida,
manufacturing facility. The Company purchased approximately 144,000 tons of
ammonium nitrate from Air Products during fiscal 1995. Sales of DAP increased
40.9% as a result of a 26.1% increase in prices and an 11.8% increase in tons
sold. Potash sales increased 13.9% as a result of an 8.2% increase in tons
sold and a 5.2% increase in prices.
Cost Of Products Sold. Cost of products sold increased to $254.6 million
in fiscal 1995 from $216.2 million in fiscal 1994. As a percentage of net
sales, cost of products sold decreased to 65.6% in fiscal 1995 from 69.9% in
fiscal 1994. This decrease reflects increases in sales prices for all products
and a reduction in the production cost per ton for nitrogen fertilizers and
potash offset by increases in the production cost per ton of DAP. During the
current fiscal year, the Company incurred higher costs related to its nitrogen
products due to increased purchases of finished products. Nitrogen fertilizer
production cost per ton decreased due to lower prices paid for natural gas
during the current year and lower maintenance and labor costs due to a
scheduled biennial maintenance turnaround at the Company's Yazoo City facility
during the prior year.
DAP costs per ton increased during fiscal 1995 as a result of higher raw
material costs, primarily for ammonia and sulfur. Phosphate rock costs also
increased during the year due to the operation of the Company's phosphate rock
supply contract which bases the price of phosphate rock on the phosphate rock
costs incurred by certain domestic phosphate producers and on the financial
performance of the Company's phosphate operations.
Potash production costs per ton decreased as a result of increased
production volume during the current fiscal year resulting from an expansion
which was completed in May 1994. This expansion increased potash production
capacity from approximately 300,000 tons to approximately 420,000 tons per
year.
Selling Expenses. Selling expenses decreased to $29.2 million in fiscal
1995 from $29.3 million in fiscal 1994. As a percentage of net sales, selling
expenses decreased to 7.5% in fiscal 1995 from 9.5% in fiscal 1994. Factors
contributing to this decrease were increased sales prices for all products and
an increase in DAP sales which bore no delivery expense. Also, the Company
sold more of its nitrogen products directly from production facilities, thereby
eliminating delivery and storage expense on those sales.
General And Administrative Expenses. General and administrative expenses
increased to $23.3 million in fiscal 1995 from $19.9 million in fiscal 1994.
This increase was primarily due to increased expenses related to the purchase
of a new computer system and an increase in the Company's reserve for
uncollectible accounts. As a percentage of net sales, general and
administrative expenses decreased to 6.0% in fiscal 1995 from 6.4% in fiscal
1994. This decrease was primarily the result of increased sales prices for all
products.
Operating Income. As a result of the above factors, operating income
increased to $81.0 million in fiscal 1995 from $37.9 million in fiscal 1994, a
113.6% increase.
19
<PAGE> 20
Interest, Net. Net interest decreased to $52,000 in fiscal 1995 from $4.0
million in fiscal 1994. This decrease is primarily a reflection of lower
levels of borrowings due to the repayment of debt from the proceeds of a stock
offering in August 1994. The Company also had higher earnings due to higher
levels of investments and higher rates earned on these investments during
fiscal 1995.
Income Tax Expense. Income tax expense increased to $29.2 million in
fiscal 1995 from $6.0 million in fiscal 1994. The Company's effective tax rate
increased significantly in the current fiscal year as a result of the
conversion from a cooperative to a regular business corporation on July 1,
1994. As a cooperative, earnings on business done with shareholders were
distributed to shareholders as patronage refunds which were deductible for
income tax purposes.
Income From Continuing Operations Before Cumulative Effect Of Change In
Accounting Principle. As a result of the foregoing, income from continuing
operations before the cumulative effect of a change in accounting principle
increased to $52.2 million in fiscal 1995 from $26.9 million in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had cash and cash equivalents of $60.2
million, compared to $29.6 million at June 30, 1995, an increase of $30.6
million. At June 30, 1995, cash and cash equivalents had increased to $29.6
million from $23.2 million at June 30, 1994, an increase of $6.4 million.
Operating Activities. For fiscal 1996, 1995 and 1994, net cash provided by
operating activities was $94.6 million, $78.7 million and $39.8 million,
respectively.
Investing Activities. Net cash used by investing activities was $27.1
million, $26.9 million and $25.4 million, respectively, for fiscal 1996, 1995
and 1994, primarily reflecting capital expenditures in those periods. In
fiscal 1996 and 1995, these expenditures were partially offset by the receipt
of option payments related to the Company's Florida phosphate rock properties.
Fiscal 1996 and 1995 also included $12.0 million and $1.1 million,
respectively, related to the Company's investment in Farmland MissChem Limited,
the Company's 50-50 joint venture formed to construct and operate an ammonia
plant in The Republic of Trinidad and Tobago. Cash flows from investing
activities for fiscal 1995 and 1994 combined reflect an aggregate of $13.1
million in payments required under a newsprint purchase contract with its
former subsidiary, Newsprint South, Inc. ("NSI"). In fiscal 1994, the Company
also incurred $10.8 million in payments made to settle certain obligations in
connection with the disposition of NSI.
Capital expenditures were $16.1 million during fiscal 1996. These
expenditures were for normal improvements and modifications to the Company's
facilities.
Financing Activities. Net cash used by financing activities was $36.9
million, $45.4 million, and $13.2 million, respectively, for fiscal 1996, 1995
and 1994. During fiscal 1996, the amounts used by financing activities
included $25.9 million for the purchase of treasury stock and $7.9 million in
cash dividends. The Company also had debt payments of $3.2 million which
included $2.4 million in prepayments. During fiscal 1995, financing activities
included $47.4 million in proceeds received from a stock offering in August
1994. These proceeds were subsequently used to prepay approximately $29.0
million of the Company's long-term debt and a portion of the Company's
revolving credit facility. The Company also paid $5.7 million to its
shareholders related to the reorganization of the Company, $3.7 million in cash
dividends and $4.8 million to purchase treasury stock. In addition, the
Company paid $14.8 million in cash patronage refunds related to fiscal 1994,
when the Company operated as a cooperative. For fiscal 1994, the amounts used
by financing activities included cash patronage payments of
20
<PAGE> 21
$13.4 million and $11.2 million in payments on long-term debt that matured
during the year. Also during fiscal 1994, the Company prepaid $12.2 million of
long-term debt with the National Bank for Cooperatives ("CoBank") which had
maturities through fiscal 1998.
During April 1996, the Company entered into a $125 million credit facility
with NationsBank of Tennessee, N.A. ("NationsBank"), as agent for a syndicate
of commercial banks, replacing all previous lines the Company had with
NationsBank. Under this new facility, the Company has a $40 million short-term
line of credit and an $85 million revolving line of credit with a term of three
years. These lines of credit will bear interest at the Prime Rate or at rates
related to the London Interbank Offered Rate. The Company also has a $5
million short-term line of credit with a financial institution. During fiscal
1996, the Company had no outstanding borrowings under any of its lines of
credit.
The Company has entered into a 50-50 joint venture ("Farmland MissChem
Limited") with Farmland Industries, Inc., to construct and operate a
2,040-short-ton-per-day anhydrous ammonia plant to be located near Point Lisas,
The Republic of Trinidad and Tobago. The project is expected to cost
approximately $330 million. The portion of the project cost in excess of
required equity contributions is to be financed by the joint venture on a
non-recourse project basis. Startup of the facility is scheduled for mid-1998.
In late fiscal 1996, the Company began an expansion at its nitrogen
fertilizer manufacturing facilities at Yazoo City. The project includes the
addition of a 650-ton-per-day nitric acid plant, a new 500-ton-per-day ammonia
plant and modifications to its ammonium nitrate plant to increase production
from approximately 750,000 to 950,000 tons per year. The Company estimates
that the total cost of the expansion will be $130 million. This expansion is
scheduled to be fully operational during the first half of 1998.
In August 1996, two of the Company's indirect subsidiaries acquired
substantially all of the assets of New Mexico Potash Corporation and Eddy
Potash, Inc., subsidiaries of Trans-Resources, Inc., for $45 million, plus an
adjustment for working capital on hand at closing (approximately $10 million).
The assets purchased included the two Trans-Resources mines located near
Carlsbad, New Mexico, with an annual production capacity of approximately
870,000 tons of potash.
The Company anticipates financing all projects, including its equity
contribution to the Farmland MissChem Limited project, with existing cash, cash
generated from operations, and available lines of credit. The Company also
believes that these sources will be sufficient to satisfy any other financing
needs in the foreseeable future.
DISCONTINUED OPERATIONS
On June 30, 1994, the Company disposed of a majority of its interest in
NSI. This action was taken due to substantial losses incurred to date by NSI
and the expectation of continuing losses. The transaction involved a transfer
by the Company of 70% of its economic interest in NSI to various individuals
designated by the lessor of the newsprint facility leveraged lease. The
Company did not retain any voting interest in NSI. The disposition of NSI
allows the Company to focus its attention on its core fertilizer business.
Under the terms of the transaction, the Company paid $19.0 million to NSI
in various forms, including capital contributions, payments in liquidation of
the Company's obligations under a newsprint purchase contract and certain tax-
compensating payments pursuant to a tax-sharing agreement. Prior loans
21
<PAGE> 22
in the amount of approximately $13.7 million made by the Company to NSI
pursuant to a newsprint purchase contract between the Company and NSI were
converted to capital. Pursuant to the transaction, the Company also purchased
from NSI its CoBank common stock for $4.0 million. This stock is being
redeemed at the face amount by CoBank over a four-year period.
Subsequent to this transaction, the Company is accounting for its
continuing interest in NSI using the cost method of accounting for investments.
In connection therewith, the Company wrote up to zero its negative investment
in NSI of $39.7 million as it will have no continuing obligation to fund any of
NSI's future losses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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, 1996 and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for the three years ended June 30, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mississippi Chemical
Corporation and subsidiaries as of June 30, 1996 and 1995, and the results of
their operations and their cash flows for the three years ended June 30, 1996,
in conformity with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements as of July
1, 1993, the Company has given cumulative effect to the change in accounting
for income taxes under Statement of Financial Accounting Standards No. 109.
Arthur Andersen LLP
Memphis, Tennessee,
July 29, 1996
22
<PAGE> 23
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30
----------------------------
1996 1995
----------- ------------
ASSETS (Dollars in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 60,214 $ 29,617
Accounts receivable (less allowances of $1,200 and $1,000) 34,630 30,424
Inventories 40,633 50,315
Prepaid expenses and other current assets 3,956 3,012
Deferred income taxes 2,216 1,929
----------- ------------
Total current assets 141,649 115,297
Investments and other assets:
Investments 15,478 4,087
Other 12,189 10,275
----------- ------------
Total investments and other assets 27,667 14,362
Properties held for sale 52,919 52,919
Property, plant and equipment, at cost, less
accumulated depreciation, depletion and amortization 118,771 119,637
----------- ------------
$ 341,006 $ 302,215
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due within one year $ 78 $ 775
Accounts payable 46,013 31,520
Accrued liabilities 8,707 8,799
Income taxes payable 5,238 3,413
----------- ------------
Total current liabilities 60,036 44,507
Long-term debt - 2,478
Other long-term liabilities and deferred credits 18,218 15,167
Deferred income taxes 14,927 12,756
Commitments and contingencies (see Notes 8 and 13)
Shareholders' equity:
Common stock ($.01 par; authorized 100,000,000 shares;
issued 22,903,450 in 1996 and 22,898,253 in 1995) 229 229
Additional paid-in capital 178,364 178,332
Retained earnings 99,814 53,520
Treasury stock, at cost (1,550,000 shares in 1996 and 300,000 shares in
1995) (30,582) (4,774)
----------- ------------
Total shareholders' equity 247,825 227,307
----------- ------------
$ 341,006 $ 302,215
=========== ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
23
<PAGE> 24
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------------------------------
1996 1995 1994
-------------- --------------- ----------------
(Dollars in thousands, except per-share data)
<S> <C> <C> <C>
Net Sales $ 428,789 $ 388,154 $ 309,360
Operating expenses:
Cost of products sold 291,403 254,629 216,204
Selling 27,856 29,212 29,339
General and administrative 24,712 23,344 19,857
Provision for closure of gypsum disposal area
- - 6,055
-------------- ---------------- ----------------
343,971 307,185 271,455
-------------- ---------------- ----------------
Operating income 84,818 80,969 37,905
Other income (expense):
Interest, net 2,229 (52) (3,991)
Restructuring - - (1,402)
Other 1,446 491 421
-------------- ---------------- ----------------
Income from continuing operations before
income taxes and cumulative effect of
change in accounting principle 88,493 81,408 32,933
Income tax expense 34,315 29,178 6,021
-------------- ---------------- ----------------
Income from continuing operations before
cumulative effect of change in accounting
principle 54,178 52,230 26,912
Discontinued operations:
Loss from discontinued operations (less
applicable income tax credits of $5,314) - - (23,987)
Gain on disposal of discontinued operations
(including applicable income tax credits
of $4,030) - - 39,747
Cumulative effect to July 1, 1993, of change
in accounting for income taxes - - (6,149)
-------------- ---------------- ----------------
Net income $ 54,178 $ 52,230 $ 36,523
============== ================ ================
Earnings per share (see Note 1) $ 2.46 $ 2.34
============== ================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
24
<PAGE> 25
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cooperative Additional Capital Retained
Common Common Paid-in Equity Earnings Treasury
Stock Stock Capital Credits (Deficit) Stock Total
-------- -------- --------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
June 30, 1993 $ 27,933 $ - $ 65,692 $ 62,352 $(36,403) $ - $119,574
Net income - - - - 36,523 - 36,523
Cash patronage - - - - (14,756) - (14,756)
Stock issued 459 - 1,156 - - - 1,615
-------- -------- --------- -------- -------- -------- --------
Balances,
June 30, 1994 28,392 - 66,848 62,352 (14,636) - 142,956
Conversion of
cooperative stock (26,375) 155 26,220 - - - -
Conversion of capital
equity credits
and allocated
surplus accounts - 41 42,723 (62,352) 19,588 - -
Redemptions (2,017) (1) (4,095) - - - (6,113)
-------- -------- --------- -------- -------- -------- --------
Subtotal - 195 131,696 - 4,952 - 136,843
Net income - - - - 52,230 - 52,230
Stock issued - 34 46,636 - - - 46,670
Cash dividends paid - - - - (3,662) - (3,662)
Treasury stock purchased - - - - - (4,774) (4,774)
-------- -------- --------- -------- -------- -------- --------
Balances,
June 30, 1995 - 229 178,332 - 53,520 (4,774) 227,307
Net income - - - - 54,178 - 54,178
Cash dividends paid - - - - (7,884) - (7,884)
Treasury stock, net - - 32 - - (25,808) (25,776)
-------- -------- --------- -------- -------- -------- --------
Balances,
June 30, 1996 $ - $ 229 $ 178,364 $ - $ 99,814 $(30,582) $247,825
======== ======== ========= ======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
25
<PAGE> 26
MISSISSIPPI CHEMICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows form operating activities:
Net income $ 54,178 $ 52,230 $ 36,523
Loss from discontinued operations - - 23,987
Gain on disposal of discontinued operations - - (39,747)
------------ ------------ ------------
Net income from continuing operations 54,178 52,230 20,763
Reconciliation of net income from continuing operations
to net cash provided by operating activities:
Net change in operating assets and liabilities 21,401 (3,241) (5,820)
Depreciation, depletion and amortization 17,798 17,058 16,967
Deferred income taxes 1,884 11,556 3,302
Accrual for closure of gypsum disposal area 564 562 6,055
Other (1,206) 555 (1,455)
------------ ------------ ------------
Net cash provided by operating activities 94,619 78,720 39,812
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property, plant and equipment (16,143) (22,305) (11,232)
Investment in Farmland MissChem Limited (11,993) (1,128) -
Proceeds received from option holder 2,000 3,000 -
Payments for newsprint contract obligations - (8,751) (4,338)
Disposition of Newsprint South, Inc. - - (10,848)
Other (937) 2,260 1,039
------------ ------------ ------------
Net cash used by investing activities (27,073) (26,924) (25,379)
------------ ------------ ------------
Cash flows from financing activities:
Debt payments (3,175) (118,567) (162,183)
Debt proceeds - 54,625 161,160
Purchase of treasury stock (25,890) (4,774) -
Cash dividends paid (7,884) (3,662) -
Cash patronage paid - (14,756) (13,405)
Proceeds from issuance of common stock - 47,401 1,200
Conversion of common stock - (5,665) -
------------ ------------ ------------
Net cash used by financing activities (36,949) (45,398) (13,228)
------------ ------------ ------------
Net increase in cash and cash equivalents 30,597 6,398 1,205
Cash and cash equivalents - beginning of period 29,617 23,219 22,014
------------ ------------ ------------
Cash and cash equivalents - end of period $ 60,214 $ 29,617 $ 23,219
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
26
<PAGE> 27
Mississippi Chemical Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1996
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.
Prior to July 1, 1994, Mississippi Chemical Corporation was organized and
operated as a cooperative to manufacture and distribute chemical fertilizer
primarily to its shareholder-members. On July 1, 1994, Mississippi Chemical
Corporation converted from a cooperative to a regular business corporation (see
Note 2). The Company is a major producer and supplier of nitrogen fertilizers
in the southern United States. The Company also manufactures phosphate and
potash fertilizers, making it a full product line fertilizer supplier. The
Company sells its nitrogen and potash fertilizer products to farmers,
fertilizer dealers and distributors primarily for use in the southern farming
regions of the United States and areas served by the Mississippi River system.
The Company's phosphate fertilizers are sold primarily in international
markets.
The Company has the right to withdraw, at cost, approximately one-half of
the production of Triad Chemical and is obligated to withdraw certain minimum
quantities as specified by the Products Withdrawal Agreement. Triad Chemical's
assets constitute approximately 2.3% and 2.6% of total assets at June 30, 1996
and 1995, respectively.
On June 30, 1994, the Company disposed of a majority of its interest in its
newsprint manufacturing subsidiary, Newsprint South, Inc. ("NSI") (see Note
18).
Inventories
Inventories are stated at the lower of cost or market. Cost has been
determined under a moving average cost method.
Investments
The Company's investments consist of an investment in the National Bank for
Cooperatives ("CoBank") and a 50-50 joint venture ("Farmland MissChem Limited")
with Farmland Industries, Inc. (see Note 13). The investment in CoBank is
stated at its net present value determined by applying a discount factor to an
assumed redemption schedule. The value of this investment will be realized
over a period of approximately four years as CoBank redeems its equity in the
normal course of its operations.
27
<PAGE> 28
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Properties Held for Sale
Assets are classified as properties held for sale if the Company is
actively engaged in trying to dispose of the assets. These assets are valued
at the lower of cost or net realizable value.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated
depreciation, depletion and amortization. Expenditures for major improvements
are capitalized; expenditures for normal maintenance and repairs are charged to
expense as incurred. Upon sale or retirement of properties, the cost and
accumulated depreciation are removed from the accounts, and any gain or loss is
credited or charged to income. Depreciation of property, plant and equipment
is provided over the estimated useful lives of the related assets which range
from 3 to 25 years. The Company uses primarily the declining-balance method
for assets purchased through June 30, 1995. Effective July 1, 1995, the
Company changed its method of depreciating newly acquired, long-lived assets
from the declining-balance method to the straight- line method. This change in
accounting principle did not have a material effect on the Company's financial
statements for the year ended June 30, 1996. Depletion of mineral properties
is provided using the units-of-production method over the estimated life of the
reserves.
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.
Income Taxes
During fiscal 1996 and 1995, the Company operated as a regular business
corporation; therefore, the provision for income taxes was based on earnings
reported in the financial statements. For fiscal 1994, the provision for
income taxes was based on all income not distributed to patrons as patronage
refunds since the Company operated as a cooperative in that year.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
the Company adopted effective July 1, 1993. The cumulative effect of this
change in accounting principle decreased net income by $6,149,000 for fiscal
1994.
Hedging Activities
The Company enters into futures contracts to protect against price
fluctuations of natural gas. At the time the futures contracts are closed and
the related natural gas is purchased, the Company records a gain or loss from
the change in market value of such contracts.
Earnings Per Share
Earnings per share is computed on the basis of the weighted average number
of common shares outstanding during the period plus dilutive common share
equivalents arising from stock options using the treasury stock method. Shares
used in the calculation were 21,980,267 and 22,365,246 for the years ended June
30, 1996 and 1995, respectively. Fully diluted earnings per share are not
significantly different from primary earnings per share.
28
<PAGE> 29
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Earnings per share for fiscal 1994 are not meaningful and are not presented
since the Company operated as a cooperative in that year.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
New Accounting Pronouncements
In 1995, Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," was issued, which is effective for fiscal years
beginning after December 15, 1995. This statement requires footnote disclosure
of the pro forma impact on net earnings and earnings per share of the
compensation cost that would have been recognized if the fair value of all
stock-based awards was recorded in the income statement. The disclosure
provisions of this statement will be adopted in fiscal 1997.
In fiscal 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This pronouncement requires that long-
lived assets be reviewed for impairment upon the occurrence of events or
changes in circumstances that indicate that the carrying value of these assets
may not be recoverable. Recoverability is measured by comparing the assets'
net book value to the estimated future cash flows generated by their use.
Impaired assets are recorded at the lesser of their carrying value or fair
value. The adoption of this statement had no impact on the Company's financial
position or operating results.
Reclassifications
The Company has reclassified certain prior year information to conform with
the current year's presentation.
NOTE 2 - EFFECTS OF REORGANIZATION:
The Company operated as a cooperative during fiscal year 1994. On June 28,
1994, the shareholder-members of the Company voted to adopt a plan of
reorganization (the "Reorganization") which became effective July 1, 1994.
Pursuant to the Reorganization, the Company was merged into a newly created,
wholly owned subsidiary ("New Company") which is a non- cooperative Mississippi
business corporation. In the merger, the common stock of the Company was
converted into New Company common stock and/or cash. In addition, holders of
Capital Equity Credits and Allocated Surplus Accounts of the Company were
offered the right to exchange those interests for New Company common stock.
Pursuant to the Reorganization, New Company changed its name to Mississippi
Chemical Corporation.
29
<PAGE> 30
NOTE 3 - INVENTORIES:
Inventories consisted of the following:
<TABLE>
<CAPTION>
June 30
---------------------------
1996 1995
---------- -----------
(Dollars in thousands)
<S> <C> <C>
Finished products $ 10,278 $ 19,817
Raw materials and supplies 5,096 6,740
Replacement parts 25,259 23,758
---------- -----------
$ 40,633 $ 50,315
========== ===========
</TABLE>
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
June 30
---------------------------
1996 1995
---------- -----------
(Dollars in thousands)
<S> <C> <C>
Mineral properties $ 18,574 $ 18,574
Land 8,152 8,079
Buildings 22,520 22,345
Machinery and equipment 345,595 321,511
Construction in progress 5,041 13,822
---------- -----------
399,882 384,331
Less accumulated depreciation,
depletion and amortization (281,111) (264,694)
---------- -----------
$ 118,771 $ 119,637
========== ===========
</TABLE>
30
<PAGE> 31
NOTE 5 - CREDIT AGREEMENTS AND LONG-TERM DEBT:
During April 1996, the Company entered into a $125,000,000 credit facility
with NationsBank of Tennessee, N.A. ("NationsBank"), and a syndicate of other
commercial banks, replacing all previous lines the Company had with
NationsBank. Under this new facility, the Company has a $40,000,000 short-term
line of credit and an $85,000,000 revolving line of credit with a term of three
years. These lines of credit will bear interest at the prime rate or at rates
related to the London Interbank Offered Rate. At June 30, 1996, there were no
outstanding borrowings under these commitments.
Prior to this new agreement, the Company had $15,000,000 in short-term
lines with NationsBank and a $50,000,000 long-term revolving credit facility
which bore interest at the prime rate or for fixed periods at interest rates
related to the London Interbank Offered Rates or U.S. Treasury notes.
The Company also has a $5,000,000 short-term line of credit with a
financial institution which is not part of the syndicate mentioned above.
There were no outstanding borrowings under this commitment at June 30, 1996 or
1995.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
June 30
-------------------------------
1996 1995
------------ -------------
(Dollars in thousands)
<S> <C> <C>
Note payable to financial institution (9.97%) $ - $ 3,000
Other 78 253
------------ -------------
78 3,253
Long-term debt due within one year (78) (775)
------------ -------------
$ - $ 2,478
============ =============
</TABLE>
The Company's credit facilities have covenants that require, among other
things, that the Company maintain specified levels of tangible net worth and
debt to capitalization. The Company is in compliance with all covenants under
its facilities.
31
<PAGE> 32
NOTE 6 - SHAREHOLDERS' EQUITY:
At June 30, 1996, the Company had 100,000,000 authorized shares of common
stock at a par value of $0.01.
Common stock issued and outstanding consisted of the following:
<TABLE>
<CAPTION>
COOPERATIVE
COMMON COMMON
STOCK STOCK
----------- ----------
<S> <C> <C>
Shares outstanding,
June 30, 1993 4,078,751 -
Issues 30,643 -
Transfers 10,514 -
----------- ----------
Shares outstanding,
June 30, 1994 4,119,908 -
Redemptions (134,466) -
Conversion of cooperative stock (3,985,442) 15,524,746
Conversion of capital equity credits and
allocated surplus accounts - 4,133,628
Redemptions - (158,049)
Stock issued - 3,397,928
Purchase of treasury stock - (300,000)
----------- ----------
Shares outstanding,
June 30, 1995 - 22,598,253
Stock reissued - 5,197
Purchase of treasury stock - (1,250,000)
----------- ----------
Shares outstanding,
June 30, 1996 - 21,353,450
=========== ==========
</TABLE>
As a cooperative, the Company periodically reserved a certain percentage of
earnings from business with its shareholders. These reserves were reflected in
"Allocated Surplus Accounts" as a component of retained earnings. As a
cooperative, the Company also, from time to time, paid a portion of patronage
refunds in the form of Capital Equity Credits. As part of the Reorganization
of the Company (see Note 2), these holders of Allocated Surplus Accounts and
Capital Equity Credits, which totaled $38,920,000 and $62,352,000,
respectively, at June 30, 1994, were offered the right to exchange those
interests for common shares.
32
<PAGE> 33
NOTE 6 - SHAREHOLDERS' EQUITY (CONTINUED):
In May 1995, the Board of Directors authorized the repurchase of up to
1,500,000 shares of the Company's common stock in the open market or in
privately negotiated transactions. As of June 30, 1995, the Company had
repurchased 300,000 shares pursuant to this authorization. In March 1996, the
Board of Directors authorized the Company to repurchase up to 1,500,000
additional shares of the Company's common stock. During fiscal 1996, the
Company repurchased 1,250,000 shares pursuant to these authorizations at prices
that ranged from $19.88 to $23.50 per common share, or approximately
$25,890,000 in the aggregate. These treasury stock repurchases were funded
from cash provided by operations.
On August 2, 1994, the Board of Directors adopted a stock incentive plan
for certain officers and key employees of the Company. This plan was approved
by the Company's shareholders at its annual meeting held on November 14, 1995.
On July 20, 1995, the Board of Directors also adopted a similar plan for
nonemployee directors of the Company. This plan was also approved by the
Company's shareholders at its annual meeting held on November 14, 1995.
Options may be granted, under the provisions of the Company's plans, to
purchase common stock of the Company at a price approximating fair market value
on the date of grant.
During fiscal 1996 and 1995, total options granted were 201,941 and
279,441, respectively, at option exercise prices of $15.00 and $23.96,
respectively. There were no options exercised or canceled during fiscal 1996
or 1995. At June 30, 1996, there were 1,800,000 shares available for future
grants under the above-mentioned stock incentive plans.
The Company's Articles of Incorporation authorize the Board of Directors,
at its discretion, to issue up to 500,000 shares of Preferred Stock, par value
$0.01 per share. The stock is issuable in classes or series which may vary as
to certain rights and preferences. As of June 30, 1996, none of these shares
were outstanding.
NOTE 7 - RETIREMENT PLANS:
The Company maintains non-contributory defined benefit pension plans which
provide benefits to a majority of its 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 Internal Revenue Code funding
limitation.
Net periodic pension expense includes the following components:
<TABLE>
<CAPTION>
Year Ended June 30
---------------------------------------
1996 1995 1994
---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 1,955 $ 1,860 $ 1,532
Interest cost on projected benefit obligations 4,875 4,515 4,035
Actual gain on plan assets (13,260) (5,528) (3,059)
Net amortization and deferral of transition assets (153) (459) (750)
Unrecognized gain (loss) on plan assets 7,778 392 (1,982)
---------- --------- ----------
Net periodic pension expense (credit) $ 1,195 $ 780 $ (224)
========== ========= ===========
</TABLE>
33
<PAGE> 34
NOTE 7 - RETIREMENT PLANS (CONTINUED):
The following table sets forth the plans' funded status and the amounts
included in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
June 30
-----------------------
1996 1995
---------- --------
(Dollars in thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 62,238 $ 54,423
Non-vested benefit obligation 428 74
---------- --------
Accumulated benefit obligation 62,666 54,497
Increase in benefits due to future compensation increases 14,712 11,803
---------- --------
Projected benefit obligation 77,378 66,300
Estimated fair value of plan assets 75,954 65,238
---------- --------
Plan assets less than projected benefit obligation (1,424) (1,062)
Contributions after measurement date 175 289
Remaining unrecognized transition assets (3,174) (3,703)
Unrecognized prior service cost 829 904
Unrecognized net loss 10,766 10,732
---------- --------
Prepaid pension cost at end of period $ 7,172 $ 7,160
========== ========
</TABLE>
The following assumptions were used to measure net periodic pension cost
for the plans for fiscal 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.0% 7.5% 7.5%
Expected long-term rate of return on assets 8.5% 8.5% 8.5%
Average increase in compensation levels 5.0% 5.0% 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. Company
contributions totaled approximately $866,000 in 1996; $812,000 in 1995; and
$811,000 in 1994.
The Company has no material post-retirement benefit obligations.
NOTE 8 - LEASE COMMITMENTS:
The Company has commitments under operating leases for plant rolling stock
items and storage warehouses. The total for these commitments was $3,440,000
at June 30, 1996. Rental expense for all operating leases was $1,476,000 for
1996; $1,332,000 for 1995; and $1,218,000 for 1994.
34
<PAGE> 35
NOTE 9 - INCOME TAXES:
The following is a summary of the components of the provision for income
taxes:
<TABLE>
<CAPTION>
Year Ended June 30
-----------------------------------------------
1996 1995 1994
------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Current:
Federal $ 29,838 $ 16,245 $ 8,862
State 2,592 1,377 223
------------- ------------- -------------
32,430 17,622 9,085
------------- ------------- -------------
Deferred:
Federal 1,734 9,504 (3,423)
State 151 2,052 359
------------- ------------- -------------
1,885 11,556 (3,064)
------------- ------------- -------------
$ 34,315 $ 29,178 $ 6,021
============= ============= =============
</TABLE>
The tax effects of the significant temporary differences and tax credit
carryforwards at June 30, 1996, follow:
<TABLE>
<CAPTION>
Current Non-current
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Employee benefit obligations $ 1,441 $ 107
Reserve for bad debts 472 -
Employee retirement 79 1,011
Accrual for closure of gypsum disposal area - 2,379
Investment in CoBank - 199
Capital less carryforwards - 212
Other 224 -
------------ ------------
Deferred tax assets 2,216 3,908
------------ ------------
Depreciation and amortization - (15,560)
Pension - (3,275)
------------ ------------
Deferred tax liabilities - (18,835)
------------ ------------
Net deferred tax asset (liability) $ 2,216 $ (14,927)
============ ============
</TABLE>
35
<PAGE> 36
NOTE 9 - INCOME TAXES (CONTINUED):
A reconciliation, as of June 30, of the provision for income taxes and the
effective tax rate with the amount computed by applying the statutory federal
income tax rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ------------------------ ------------------------
% OF % of % of
EARNINGS Earnings Earnings
BEFORE Before Before
AMOUNT TAXES Amount Taxes Amount Taxes
---------- ----------- ----------- --------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income taxes computed
at statutory rate $ 30,972 35.0% $ 28,493 35.0% $ 11,427 34.7%
Increase (decrease) in
taxes resulting from:
State taxes, net 2,743 3.1 3,429 4.2 (582) (1.8)
Deduction for cash
patronage refunds - - - - (5,017) (15.2)
Alternative minimum
tax - - (2,822) (3.5) - -
Other, net 600 0.7 78 0.1 193 0.6
---------- ---- ---------- ---- ---------- ----
$ 34,315 38.8% $ 29,178 35.8% $ 6,021 18.3%
========== ==== ========== ==== ========== ====
</TABLE>
NOTE 10 - RAW MATERIAL CONTRACTS:
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, 2003.
The purchase price for phosphate rock is based on the phosphate rock costs
incurred by certain domestic phosphate producers and the operating performance
of MPC.
NOTE 11 - MAJOR CUSTOMERS AND EXPORT SALES:
Sales to the Company's three largest customers were approximately
$136,560,000, $36,499,000 and $20,135,000 for 1996; $117,495,000, $32,270,000
and $16,745,000 for 1995; and $83,366,000, $33,513,000 and $13,696,000 for
1994. Export sales were less than 10% of sales in 1996, 1995 and 1994.
A significant portion of the Company's trade receivables are due from
entities which operate in the chemical fertilizer and farm supply industries.
A severe downturn in the agricultural economy could have an adverse impact on
the collectibility of those receivables.
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 distributor sells primarily in international markets.
36
<PAGE> 37
NOTE 12 - HEDGING ACTIVITIES:
During fiscal 1996, natural gas hedging activities resulted in average cost
decreases of approximately $0.40 per MMBtu on volumes hedged of 5,560,000
MMBtu's. During fiscal 1995 and 1994, natural gas hedging activities resulted
in average cost increases of approximately $0.52 and $0.09 per MMBtu on volumes
hedged of 4,850,000 and 6,150,000 MMBtu's, respectively. As of June 30, 1996,
the Company had no outstanding futures positions.
NOTE 13 - COMMITMENTS AND CONTINGENCIES:
During 1990, the Company entered into an agreement granting a third party
the exclusive option, for a period of four years, to purchase the Company's
undeveloped phosphate rock property of approximately 12,000 acres in Hardee
County, Florida. As of July 12, 1994, the Company and the optionholder entered
into new agreements with respect to this property whereby the Company conveyed
a portion of the property to the third party and granted to the third party the
exclusive option to purchase the remaining portion of the property. In
addition, the Company was granted a put option whereby the Company has the
right and option to sell the remaining portion of the property to the third
party if the third party does not exercise its option to purchase the remaining
property and was granted an exclusive option to repurchase the previously
conveyed portion in the event the third party does not exercise its option and
the Company does not exercise its put option. The third party's option will
expire on January 16, 1998. The Company's put option will expire six months
after the third party's option expires, and its repurchase option will expire
one year after the Company's put option expires. These properties are
classified as properties held for sale at June 30, 1996 and 1995.
The Company has entered into a 50-50 joint venture ("Farmland MissChem
Limited") with Farmland Industries, Inc., to construct and operate a
2,040-short-ton-per-day anhydrous ammonia plant to be located near Point Lisas,
The Republic of Trinidad and Tobago. The project is expected to cost
approximately $330 million. Startup of the facility is scheduled for mid-1998.
The Company intends to use the majority of its portion of the production from
the new facility, expected to be in excess of 350,000 short tons per year,
primarily as a raw material for upgrading into finished fertilizer products at
its existing facilities. The Company is accounting for this investment using
the equity method.
In late fiscal 1996, the Company began an expansion at its nitrogen
fertilizer manufacturing facilities at Yazoo City. The project includes the
addition of a 650-ton-per-day nitric acid plant, a new 500-ton-per-day ammonia
plant and modifications to its ammonium nitrate plant to increase production
from approximately 750,000 to approximately 950,000 tons per year. The Company
estimates total cost of the expansion to be $130 million. The expansion is
scheduled to be fully operational during the first half of 1998.
In August 1996, two of the Company's indirect subsidiaries acquired
substantially all of the assets of New Mexico Potash Corporation and Eddy
Potash, Inc., subsidiaries of Trans-Resources, Inc., for $45 million, plus an
adjustment for working capital on hand at closing (approximately $10 million).
The assets purchased included the two Trans-Resources, Inc., mines located near
Carlsbad, New Mexico, with an annual production capacity of approximately
870,000 tons of potash.
37
<PAGE> 38
NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED):
Additionally, the Company, in the ordinary course of its business, is the
subject of, or a party to, 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 financial position or the future earnings
of the Company.
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION:
The Company considers its holdings of highly liquid money market debt
securities to be cash equivalents if the securities mature within 90 days from
the date of acquisition. These short-term investments were $53,739,000 and
$27,587,000 at June 30, 1996 and 1995, respectively.
The increase (decrease) in cash due to the changes in operating assets and
liabilities consisted of the following:
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------------------
1996 1995 1994
----------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C>
Accounts receivable $ (3,564) $ 9,095 $ (2,265)
Inventories 9,682 (16,325) 754
Prepaid expenses and other current assets (944) 569 (295)
Accounts payable 14,494 2,505 (6,407)
Accrued liabilities 1,733 915 2,393
----------- ------------ -----------
$ 21,401 $ (3,241) $ (5,820)
=========== ============ ===========
</TABLE>
During fiscal 1996 and 1995, the Company had net payments of income taxes
of $31,127,000 and $16,675,000. During fiscal 1994, the Company had net
refunds of $149,000. Payments of interest were $330,000 in 1996; $2,646,000 in
1995; and $4,707,000 in 1994.
Supplemental disclosures regarding non-cash financing and investing
activities include the following:
<TABLE>
<CAPTION>
Year Ended June 30
---------------------------------
1995 1994
--------------- --------------
(Dollars in thousands)
<S> <C> <C>
Conveyance of phosphate rock property $ 14,000 $ -
Conversion of capital equity credits $ 62,352 $ -
Conversion of cooperative stock $ 26,375 $ -
Capital expenditures made from restricted funds $ - $ 1,000
Net option proceeds deposited in restricted funds $ - $ 1,000
</TABLE>
During fiscal 1996, the Company had no material non-cash financing and
investing activities.
38
<PAGE> 39
NOTE 15 - OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS:
Other long-term liabilities and deferred credits are comprised of the
following:
<TABLE>
<CAPTION>
June 30
---------------------------------
1996 1995
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
Option proceeds (see Note 13) $ 4,967 $ 2,967
Accrual for closure of gypsum disposal area 7,181 6,617
Other 6,070 5,583
-------------- --------------
$ 18,218 $ 15,167
============== ==============
</TABLE>
During fiscal 1994, MPC charged to earnings $6,055,000 relating to the
estimated cost of the future closure of the phosphogypsum disposal facility
located at Pascagoula, Mississippi. During fiscal 1996 and 1995, MPC recorded
additional charges of $564,000 and $562,000, respectively, which are reflected
in cost of products sold in the Company's statements of income. The total
amount of the accrual, $7,181,000, relates to the portion of the disposal
facility utilized to date. In future years, MPC expects to record additional
charges of approximately $1,874,000 related to the future closure of the
facility. These charges will be accrued over the estimated four-year remaining
life of the facility.
The Company plans to construct a new phosphogypsum disposal facility. An
option agreement has been secured for land for use in the development of this
facility. Preliminary engineering work has been completed and the
environmental applications have been submitted. The Company anticipates the
permitting will be completed and construction will begin during fiscal 1997 on
the first phase of the facility, which is estimated to cost $15 million. The
facility is expected to be operational by late summer 1997.
NOTE 16 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
At June 30, 1996, the carrying amounts of the Company's financial
instruments approximate fair value because of the short settlement periods of
those instruments.
NOTE 17 - INTEREST, NET:
Interest, net, consisted of the following:
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------
1996 1995 1994
----------- ----------- ------------
(Dollars in thousands)
<S> <C> <C> <C>
Interest expense $ 715 $ 2,021 $ 4,655
Interest capitalized (10) (231) (2)
Interest income (2,934) (1,738) (662)
----------- ----------- ------------
$ (2,229) $ 52 $ 3,991
=========== =========== ============
</TABLE>
39
<PAGE> 40
NOTE 18 - DISCONTINUED OPERATIONS:
On June 30, 1994, the Company disposed of a majority of its interest in
Newsprint South, Inc. ("NSI"). This action was taken due to substantial losses
incurred to date by NSI and the expectation of continuing losses. The
transaction involved a transfer by the Company of 70% of its economic interest
in NSI to various individuals designated by the lessor of the newsprint
facility leveraged lease. The Company did not retain any voting interest in
NSI.
Under the terms of the transaction, the Company paid $19,000,000 to NSI in
various forms, including capital contributions, payments in liquidation of the
Company'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 $13,700,000 made by the Company to NSI pursuant to
a newsprint purchase contract between the Company and NSI were converted to
capital. Pursuant to the transaction, the Company also purchased from NSI its
CoBank common stock for $4,000,000. This stock is scheduled for redemption at
the face amount by CoBank during the next three years.
The disposition of NSI allows the Company to focus its attention on its
core fertilizer business.
Prior to the disposition, the Company had consolidated the financial
results of NSI which had a capital deficit of $39,747,000 at the time of
disposition. Since the Company had no further obligations with respect to NSI,
the previously recorded deficit was eliminated which resulted in a gain on
disposition of $39,747,000. Subsequent to the disposition, the remaining 30%
economic interest will be accounted for at cost which was zero at June 30, 1996
and 1995. In fiscal 1994, NSI had net sales of $94,617,000 and incurred a net
loss of $23,987,000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
40
<PAGE> 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required by this item regarding directors is set forth
in the Company's Proxy Statement for the 1996 annual meeting of shareholders
under the captions "Nominees for Election to Serve Until 1999," "Directors
Continuing to Serve Until 1998," and "Directors Continuing to Serve Until
1997," which information is incorporated herein by reference.
(b) Executive officers of the Registrant as of June 30, 1996, are as
follows: Executive officers are elected for a one-year term by the Board of
Directors.
<TABLE>
<CAPTION>
OFFICE AND EMPLOYMENT DURING THE
NAME OF OFFICER AGE LAST FIVE FISCAL YEARS
---------------------- ------- ---------------------------------------------------------------------
<S> <C> <C>
Charles O. Dunn 48 President and Chief Executive Officer since April 1 1993; Executive
Vice President (1988-1993)
David W. Arnold 59 Senior Vice President-Technical Group since July 1, 1991; Senior
Vice President-Research and Engineering (1987-1991)
C. E. McCraw 48 Senior Vice President-Operations since July 12, 1994; Senior Vice
President-Fertilizer Group (1991-1994); Vice President-Fertilizer
Group (1991); Vice President-Operations (1987-1991)
Robert E. Jones 49 Senior Vice President and General Counsel since January 18, 1996;
Vice President and General Counsel (1989-1996)
John J. Duffy 62 Vice President-Marketing since July 1, 1995; Vice President-Sales
and Marketing (1994-1995); Director of Sales and Marketing (1991-
1994); Director, Field Sales (1988-1991)
Ethel Truly 46 Vice President-Administration since January 18, 1996; Director of
Administrative Services (1995-1996); Assistant General Counsel
(1985-1995)
Timothy A. Dawson 42 Vice President-Finance since January 18, 1996; Director of Finance
(1987-1996); Assistant to Senior Vice President-Finance (1984-1987)
</TABLE>
(c) The information called for with respect to the identification of
certain significant employees is not applicable to the Registrant.
(d) There are no family relationships between the directors and executive
officers listed above. There are no arrangements nor understandings between
any named officer and any other person pursuant to which such person was
selected as an officer.
(e) There are no legal proceedings involving directors, nominees for
directors, or officers.
41
<PAGE> 42
The information required by this item regarding compliance with Section
16(a) of the Exchange Act is set forth in the Company's Proxy Statement for the
1996 annual meeting of shareholders under the caption "Compliance with Section
16(a) of the Exchange Act," which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth in the Company's Proxy
Statement for the 1996 annual meeting of shareholders under the captions
"Compensation of Executive Officers" and "Retirement Program," which
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in the Company's Proxy
Statement for the 1996 annual meeting of shareholders under the captions
"Security Ownership of Certain Beneficial Owners" and "Management Ownership of
the Company's Stock," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in the Company's Proxy
Statement for the 1996 annual meeting of shareholders under the caption
"Compensation Committee Interlocks and Insider Participation," which
information is incorporated herein by reference.
42
<PAGE> 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) FINANCIAL STATEMENTS AND SCHEDULES
Financial statement schedules not included in this Form 10-K have been
omitted because they are not applicable or the required information is shown in
the financial statements or notes thereto. Separate financial statements of
50% or less owned persons accounted for by the equity method which are not
shown herein have been omitted because, if considered in the aggregate, they
would not constitute a significant subsidiary
(i) Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheets, June 30, 1996 and 1995
Consolidated Statements of Income Years Ended June 30, 1996, 1995 and
1994
Consolidated Statements of Shareholders' Equity, Years Ended June 30,
1996, 1995 and 1994
Consolidated Statements of Cash Flows, Years Ended June 30, 1996, 1995
and 1994
Notes to Consolidated Financial Statements
(ii) Exhibits:
Exhibits filed as part of this report are listed below. Certain
exhibits have been previously filed with the Commission and are
incorporated herein by reference.
<TABLE>
<CAPTION>
SEC EXHIBIT
REFERENCE NO. DESCRIPTION
- ------------- -----------
<S> <C>
1 Shareholder Rights Plan; filed as Exhibit 1 to the Company's Form 8-A Registration Statement dated August 15,
1994, SEC File No. 2-7803, and incorporated herein by reference.
2.1 Asset Purchase Agreement, dated as of May 21, 1996, by and among the Company, Mississippi Acquisition I, Inc.,
Mississippi Acquisition II, Inc., Eddy Potash, Inc., and New Mexico Potash Corporation; filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K filed September 3, 1996, SEC File No. 20411, and incorporated herein
by reference.
2.2 Agreement and Plan of Merger and Reorganization dated as of August 27, 1996, by and among the Company, MISS
SUB, INC., and First Mississippi Corporation.
</TABLE>
43
<PAGE> 44
<TABLE>
<S> <C>
3.1 Articles of Incorporation of the Company; filed as Exhibit 3.1 to the Company's Amendment No. 1 to Form S-1
Registration Statement filed August 2, 1994, SEC File No. 33-53119, and incorporated herein by reference.
3.2 Bylaws of the Company; filed as Exhibit 3.2 to the Company's Amendment No. 1 to Form S-1 Registration Statement
filed August 2, 1994, SEC File No. 33-53119, and incorporated herein by reference.
4.1 Mississippi Phosphates Corporation 401(k) Retirement Plan; filed as Exhibit 4.3(a) to the Company's
Post-Effective Amendment No. 1 to Form S-8 Registration Statement filed June 6, 1995, SEC File No. 33-59577,
and incorporated herein by reference.
4.2 Mississippi Chemical Corporation Thrift Plan Plus; filed as Exhibit 4.3(b) to the Company's Post-Effective
Amendment No. 1 to Form S-8 Registration Statement filed June 6, 1995, SEC File No. 33-59577, and incorporated
herein by reference.
4.3 Mississippi Chemical Corporation 1994 Stock Incentive Plan; filed as Exhibit 4.2 to the Company's Form S-8
Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference.
4.4 Mississippi Chemical Corporation 1995 Stock Option Plan for Nonemployee Directors; filed as Exhibit 4.3 to the
Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated
herein by reference.
4.5 Mississippi Chemical Corporation 1995 Restricted Stock Purchase Plan for Nonemployee Directors; filed as
Exhibit 4.4 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209,
and incorporated herein by reference.
4.6 Loan Agreement dated as of April 26, 1996, among the Company, Mississippi Phosphates Corporation, Mississippi
Potash, Inc., and MCC Pipeline, Inc., and NationsBank of Tennessee, N.A., as Agent, and the banks named
therein; filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed September 3, 1996, SEC File
No. 20411, and incorporated herein by reference.
10.1 Agreement effective as of October 1, 1991, entered into by the Company'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 Company's Report on Form 8 dated January 7, 1993,
SEC File No. 2-7803, and incorporated herein by reference.
10.2 Amendment of Agreement, effective as of July 1, 1993, to the Agreement entered into as of October 1, 1991, by
the Company's subsidiary Mississippi Phosphates Corporation for the exclusive distribution of diammonium
phosphate produced by Mississippi Phosphates Corporation; filed as Exhibit 10.3 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1993, SEC File No. 2-7803, and incorporated herein by
reference.
</TABLE>
44
<PAGE> 45
<TABLE>
<S> <C>
10.3 Amendment of Agreement, effective as of August 1, 1994, to the Agreement entered into as of October 1, 1991, by
the Company's subsidiary Mississippi Phosphates Corporation for the exclusive distribution of diammonium
phosphate produced by Mississippi Phosphates Corporation; filed as Exhibit 10.7 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by
reference.
10.4 Agreement made and entered into as of September 15, 1991, between Office Cherifien des Phosphates and the
Company's subsidiary Mississippi Phosphates Corporation for the sale and purchase of phosphate rock; filed as
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991, File No.
2-7803, and incorporated herein by reference.
10.5 Amendment No. 1, effective as of July 1, 1992, to the Agreement effective as of September 15, 1991, between
Office Cherifien des Phosphates and the Company's subsidiary Mississippi Phosphates Corporation for the sale
and purchase of phosphate rock; filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference(1)
10.6 Amendment No. 2, effective as of July 1, 1993, to the Agreement effective as of September 15, 1991, between
Office Cherifien des Phosphates and the Company's subsidiary Mississippi Phosphates Corporation for the sale
and purchase of phosphate rock; filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference(2)
10.7 Amendment No. 3, effective as of January 1, 1995, to the Agreement effective as of September 15, 1991, between
Office Cherifien des Phosphates and the Company's subsidiary Mississippi Phosphates Corporation for the sale
and purchase of phosphate rock; filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference(3)
</TABLE>
- ----------------------------------
(1) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from the first and second paragraphs of
paragraph numbered 1 of Amendment No. 1 and an application for confidential
treatment has been filed separately with the Commission.
(2) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from paragraphs numbered 5 and 8 of
Amendment No. 2; from the first paragraph, paragraph numbered 1, paragraph
numbered 2, and paragraph numbered 3 of Schedule 1, Exhibit A; from Schedule 2,
Exhibit B; from Schedule 3, Exhibit C, and from Schedule 4, Exhibit D; and an
application for confidential treatment has been filed separately with the
Commission.
(3) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from Schedule 1 to Amendment No. 3,
Exhibit B, and an application for confidential treatment has been filed
separately with the Commission.
45
<PAGE> 46
<TABLE>
<S> <C>
10.8 Gas Sales Agreement entered into by the Company and Sonat Marketing Company as of July 13, 1995, for the sale
and purchase of natural gas; filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference.(4)
10.9 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.
10.10 Amendment to Joint Venture Agreement entered into by the Company and First Mississippi Corporation effective as
of May 28, 1993; filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, SEC File No. 2-7803, and incorporated herein by reference.
10.11 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.
10.12 Amendment to Products Withdrawal Agreement entered into by the Company and First Mississippi Corporation
effective as of May 28, 1993; filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1993, SEC File No. 2-7803, and incorporated herein by reference.
10.13 Agreement for Real Estate Purchase Option dated July 16, 1990, for the sale of the Company's Hardee County,
Florida, property and underlying phosphate reserves; filed as an exhibit to Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1990, SEC File No. 2-7803, and incorporated herein by
reference.
10.14 Form of Severance Agreement dated July 29, 1996, by and between the Company and each of its Executive Officers.
21 List of subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
</TABLE>
- ----------------------------------
(4) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from Article IV, Price, and an application
for confidential treatment has been filed separately with the Commission.
46
<PAGE> 47
(b) REPORTS ON FORM 8-K:
The Company's Current Report on Form 8-K dated September 3, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MISSISSIPPI CHEMICAL CORPORATION
By: /s/ Charles O. Dunn
President
Principal Executive Officer
By: /s/ Timothy A. Dawson
Vice President-Finance
Principal Financial Officer
and Chief Accounting Officer
Date: September 20, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Charles O. Dunn Director, September 20, 1996
President and Chief Executive Officer
(principal executive officer)
/s/ Coley L. Bailey Director, Chairman of the Board September 20, 1996
/s/ John Sharp Howie Director, Vice Chairman of the Board September 20, 1996
/s/ John W. Anderson Director September 20, 1996
/s/ Frank R. Burnside, Jr. Director September 20, 1996
/s/ Robert P. Dixon Director September 20, 1996
/s/ W. R. Dyess Director September 20, 1996
/s/ Woods E. Eastland Director September 20, 1996
/s/ G. David Jobe Director September 20, 1996
/s/ George D. Penick, Jr. Director September 20, 1996
/s/ David M. Ratcliffe Director September 20, 1996
/s/ Wayne Thames Director September 20, 1996
</TABLE>
47
<PAGE> 48
MISSISSIPPI CHEMICAL CORPORATION
EXHIBIT INDEX
TO
FORM 10-K
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- --------------------------------------------------------------------------------- ------
<S> <C>
1 Shareholder Rights Plan; filed as Exhibit 1 to the Company's Form 8-A
Registration Statement dated August 15, 1994, SEC File No. 2-7803, and
incorporated herein by reference.
2.1 Asset Purchase Agreement, dated as of May 21, 1996, by and among the Company,
Mississippi Acquisition I, Inc., Mississippi Acquisition II, Inc., Eddy Potash,
Inc., and New Mexico Potash Corporation; filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed September 3, 1996, SEC File No. 20411, and
incorporated herein by reference.
2.2 Agreement and Plan of Merger and Reorganization dated as of August 27, 1996, by
and among the Company, MISS SUB, INC., and First Mississippi Corporation. [ ]
3.1 Articles of Incorporation of the Company; filed as Exhibit 3.1 to the Company's
Amendment No. 1 to Form S-1 Registration Statement filed August 2, 1994, SEC
File No. 33-53119, and incorporated herein by reference.
3.2 Bylaws of the Company; filed as Exhibit 3.2 to the Company's Amendment No. 1 to
Form S-1 Registration Statement filed August 2, 1994, SEC File No. 33-53119, and
incorporated herein by reference.
4.1 Mississippi Phosphates Corporation 401(k) Retirement Plan; filed as
Exhibit 4.3(a) to the Company's Post-Effective Amendment No. 1 to Form S-8
Registration Statement filed June 6, 1995, SEC File No. 33-59577, and
incorporated herein by reference.
4.2 Mississippi Chemical Corporation Thrift Plan Plus; filed as Exhibit 4.3(b) to
the Company's Post-Effective Amendment No. 1 to Form S-8 Registration Statement
filed June 6, 1995, SEC File No. 33-59577, and incorporated herein by reference.
4.3 Mississippi Chemical Corporation 1994 Stock Incentive Plan; filed as Exhibit 4.2
to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC
File No. 33-65209, and incorporated herein by reference.
</TABLE>
48
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- --------------------------------------------------------------------------------- ------
<S> <C>
4.4 Mississippi Chemical Corporation 1995 Stock Option Plan for Nonemployee
Directors; filed as Exhibit 4.3 to the Company's Form S-8 Registration Statement
filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by
reference.
4.5 Mississippi Chemical Corporation 1995 Restricted Stock Purchase Plan for
Nonemployee Directors; filed as Exhibit 4.4 to the Company's Form S-8
Registration Statement filed December 21, 1995, SEC File No. 33-65209, and
incorporated herein by reference.
4.6 Loan Agreement, dated as of April 26, 1996, the Company, Mississippi Phosphates
Corporation, Mississippi Potash, Inc., and MCC Pipeline, Inc., and NationsBank
of Tennessee, N.A., as Agent, and the banks named therein; filed as Exhibit 4.1
to the Company's Current Report on Form 8-K filed September 3, 1996, SEC File
No. 20411, and incorporated herein by reference.
10.1 Agreement effective as of October 1, 1991, entered into by the Company'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 Company's Report on Form 8 dated
January 7, 1993, SEC File No. 2-7803, and incorporated herein by reference.
10.2 Amendment of Agreement, effective as of July 1, 1993, to the Agreement entered
into as of October 1, 1991, by the Company's subsidiary Mississippi Phosphates
Corporation for the exclusive distribution of diammonium phosphate produced by
Mississippi Phosphates Corporation; filed as Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993, SEC File No.
2-7803, and incorporated herein by reference.
10.3 Amendment of Agreement, effective as of August 1, 1994, to the Agreement entered
into as of October 1, 1991, by the Company's subsidiary Mississippi Phosphates
Corporation for the exclusive distribution of diammonium phosphate produced by
Mississippi Phosphates Corporation; filed as Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File
No. 2-7803, and incorporated herein by reference.
</TABLE>
49
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<TABLE>
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EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
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10.4 Agreement made and entered into as of September 15, 1991, between Office
Cherifien des Phosphates and the Company's subsidiary Mississippi Phosphates
Corporation for the sale and purchase of phosphate rock; filed as Exhibit 10.1
to the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1991, File No. 2-7803, and incorporated herein by reference.
10.5 Amendment No. 1, effective as of July 1, 1992, to the Agreement effective as of
September 15, 1991, between Office Cherifien des Phosphates and the Company's
subsidiary Mississippi Phosphates Corporation for the sale and purchase of
phosphate rock; filed as Exhibit 10.12 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and
incorporated herein by reference.(5)
10.6 Amendment No. 2, effective as of July 1, 1993, to the Agreement effective as of
September 15, 1991, between Office Cherifien des Phosphates and the Company's
subsidiary Mississippi Phosphates Corporation for the sale and purchase of
phosphate rock; filed as Exhibit 10.11 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and
incorporated herein by reference.(6)
10.7 Amendment No. 3, effective as of January 1, 1995, to the Agreement effective as
of September 15, 1991, between Office Cherifien des Phosphates and the Company's
subsidiary Mississippi Phosphates Corporation for the sale and purchase of
phosphate rock; filed as Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and
incorporated herein by reference.(7)
</TABLE>
- ----------------------------------
(5) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from the first and second paragraphs of
paragraph numbered 1 of Amendment No. 1 and an application for confidential
treatment has been filed separately with the Commission.
(6) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from paragraphs numbered 5 and 8 of
Amendment No. 2; from the first paragraph, paragraph numbered 1, paragraph
numbered 2, and paragraph numbered 3 of Schedule 1, Exhibit A; from Schedule 2,
Exhibit B; from Schedule 3, Exhibit C, and from Schedule 4, Exhibit D; and an
application for confidential treatment has been filed separately with the
Commission.
(7) Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
business information has been deleted from Schedule 1 to Amendment No. 3,
Exhibit B, and an application for confidential treatment has been filed
separately with the Commission.
50
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF AUGUST 27, 1996
BY AND AMONG
MISSISSIPPI CHEMICAL CORPORATION
MISS SUB, INC.
AND
FIRST MISSISSIPPI CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
THE MERGER
<S> <C> <C>
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5 Articles of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.4 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.5 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.6 Information in Disclosure Documents and Registration Statements . . . . . . . . . . . . 9
Section 3.7 Retained Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.9 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.10 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.11 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.15 Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.16 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.17 State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i
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<TABLE>
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Section 3.18 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.19 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.4 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.5 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.6 Information in Disclosure Documents and Registration Statements . . . . . . . . . . . . 19
Section 4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.8 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.9 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.11 Interim Operations of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.12 Unwanted Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.13 Purchases of Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.14 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.15 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V
COVENANTS PENDING THE EFFECTIVE TIME
Section 5.1 Covenants of the Company with Respect to the Retained Business . . . . . . . . . . . . . 21
Section 5.2 Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.3 Covenants of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.3 Stockholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.4 Legal Conditions to Distribution and Merger . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.5 Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.6 Company Severance Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.7 Employee Matters; Company Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ii
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<TABLE>
<S> <C> <C>
Section 6.9 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.10 No Solicitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.11 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.12 Tax-Free Nature of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.13 Audited Closing Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.14 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.15 AMPRO Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.16 Comfort Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . 33
Section 7.2 Conditions of Obligations of Parent and Sub . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.3 Conditions of Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.3 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 38
Section 9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.5 Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . 40
Section 9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.7 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.10 Attorney-Client Privilege; Work Product . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.11 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
iii
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ANNEXES AND EXHIBITS
Annex I - Distribution Agreement
Exhibit A - Retained Business Financial Statements
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of August 27,
1996, by and among Mississippi Chemical Corporation, a Mississippi corporation
("Parent"), Miss Sub, Inc., a Mississippi corporation and a wholly owned
subsidiary of Parent ("Sub"), and First Mississippi Corporation, a Mississippi
corporation (the "Company").
WHEREAS, Parent desires to acquire the Company's fertilizer business but
does not wish to acquire the other businesses conducted or to be conducted by
the Company;
WHEREAS, the Board of Directors of the Company has approved a plan of
distribution embodied in the form of a draft agreement attached hereto as Annex
I, as may be amended pursuant to the provisions of Section 6.11 hereof (the
"Distribution Agreement"), which will be entered into prior to the Effective
Time (as defined in Section 1.2) pursuant to which all of the Company's assets,
other than those used primarily in the Retained Business (as defined in Section
3.7), will be contributed to a wholly owned subsidiary of the Company ("Newco")
(such contributions, together with all mergers, other intercompany transfers of
assets, and other actions described in Article IV of the Distribution
Agreement, the "Transfer") and shares of capital stock of Newco will be
distributed (the "Distribution") on a pro rata basis to the stockholders of the
Company as provided in the Distribution Agreement in order to divest the
Company of the businesses and operations that Parent is unwilling to acquire;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have determined that, following the Distribution, the merger of Sub with and
into the Company (the "Merger") with the Company surviving as a wholly owned
subsidiary of Parent would be advantageous and beneficial to their respective
corporations and stockholders; and
WHEREAS, for federal income tax purposes, it is intended that (i) the
Distribution shall qualify as a tax-free distribution under Section 355 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the Merger
shall qualify as a reorganization under Section 368(a) of the Code, and this
Agreement is intended to be and is adopted as a plan of reorganization.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof and the Mississippi Business Corporation Act (the "MBCA"), at the
Effective Time, the Company and Sub shall consummate the Merger pursuant to
which (i) Sub shall be merged with and into the Company, (ii) the separate
corporate existence of Sub shall thereupon cease, (iii) the Company
1
<PAGE> 7
shall be the surviving corporation in the Merger (the "Surviving Corporation")
and shall continue to be governed by the laws of the State of Mississippi and
(iv) the corporate existence of the Company with its properties, rights,
privileges, powers and franchises shall continue unaffected by the Merger.
Section 1.2 Effective Time of the Merger. Upon the terms and subject
to the conditions hereof, articles of merger (the "Articles of Merger") shall
be duly prepared, executed and acknowledged by the Company and thereafter
delivered to the Secretary of State of the State of Mississippi, for filing, as
provided in the MBCA, as soon as practicable on or after the Closing Date (as
defined in Section 1.3). The Merger shall become effective immediately
following the Distribution, upon the filing of the Articles of Merger with the
Secretary of State of the State of Mississippi or at such time thereafter as is
provided in the Articles of Merger (the "Effective Time").
Section 1.3 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of the
conditions set forth in Article VII hereof, at the offices of the Company, 700
North Street, Jackson, Mississippi 39202- 3095, unless another date or place is
agreed to in writing by the parties hereto. The date and time at which the
Closing occurs is referred to herein as the "Closing Date."
Section 1.4 Effects of the Merger. The Merger shall have the effects
set forth in the MBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
Section 1.5 Articles of Incorporation and Bylaws.
(a) The Articles of Incorporation of Sub in effect at the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until amended in accordance with the MBCA.
(b) The bylaws of Sub in effect at the Effective Time shall be
the bylaws of the Surviving Corporation until amended in accordance with the
MBCA.
Section 1.6 Directors. The directors of Sub at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold
office from the Effective Time in accordance with the Articles of Incorporation
and bylaws of the Surviving Corporation and until his or her successor is duly
elected and qualified.
Section 1.7 Officers. The officers of Sub at the Effective Time shall
be the initial officers of the Surviving Corporation, each to hold office from
the Effective Time in accordance with the Articles of Incorporation and bylaws
of the Surviving Corporation and until his or her successor is duly appointed
and qualified.
2
<PAGE> 8
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of Common Stock, par value $1.00 per share, of the Company (the "Company
Common Stock") or Parent, as the holder of the capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of the capital stock of Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, par value $1.00 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
All shares of Company Common Stock that are owned by the Company and any shares
of Company Common Stock owned by Parent, Sub or any other wholly-owned
Subsidiary (as hereinafter defined) of Parent shall be cancelled and retired
and shall cease to exist and no stock of Parent or other consideration shall be
delivered in exchange therefor. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party
or any other Subsidiary of such party is a general partner (excluding
partnerships the general partnership interests of which held by such party and
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) securities or other interests having by their terms a
majority of the outstanding voting power with respect to such corporation or
other organization are directly or indirectly owned or controlled by such party
or by any one or more of its Subsidiaries, or by such party and one or more of
its Subsidiaries.
(c) Exchange Ratio for Company Common Stock. Subject to
Section 2.2(e), each issued and outstanding share of Company Common Stock
(other than shares to be cancelled in accordance with Section 2.1(b) and
Dissenting Shares, as defined in Section 2.3) shall be converted into the right
to receive the Merger Consideration Per Share in fully paid and nonassessable
shares of Common Stock, par value $0.01 per share, of Parent ("Parent Common
Stock"). The "Merger Consideration Per Share" shall mean 6,904,762 shares of
Parent Common Stock divided by the number of shares of Company Common Stock
outstanding at the Effective Time as certified to Parent by the Company's
transfer agent and registrar (the "Effective Time Outstanding Shares"), rounded
to the nearest one ten-thousandth of a share; provided, however, if the average
of the Daily Prices, as derived from The Wall Street Journal, for the ten (10)
trading days immediately preceding the trading day prior to the Effective Time
(such number rounded to the nearest one one-hundredth of a cent, the "Average
Parent Price"), is more than $25.00, then the Merger Consideration Per Share
shall be the greater of (i) 6,393,298 shares of Parent Common Stock divided by
the Effective Time Outstanding Shares and (ii) the number (rounded to the
nearest one ten-thousandth of a share) of Parent Common Shares determined by
dividing (A) the product of (x) 6,904,762 multiplied by (y) a fraction, the
numerator of which is $25.00
3
<PAGE> 9
and the denominator of which is the Average Parent Price, by (B) the Effective
Time Outstanding Shares. The term "Daily Price" shall mean for each trading
day the average of the opening price, high price, low price and closing price
for the Parent Common Stock. At the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the shares of Parent Common Stock
and any cash in lieu of fractional shares of Parent Common Stock to be issued
or paid in consideration therefor upon the surrender of such certificate in
accordance with Section 2.2, without interest.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
deposit with KeyCorp Shareholder Services, Inc. or such other bank or trust
company designated by the Company (and reasonably acceptable to Parent) (the
"Exchange Agent"), for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance with this Article II through the Exchange
Agent, certificates representing the shares of Parent Common Stock issuable
pursuant to Section 2.1 in exchange for outstanding shares of Company Common
Stock, together with cash to be paid in lieu of fractional shares (such shares
of Parent Common Stock, together with any dividends or distributions with
respect thereto contemplated by Section 2.2(c) and cash in lieu of fractional
shares, being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") whose shares were converted pursuant
to Section 2.1 into the right to receive shares of Parent Common Stock (i) a
letter of transmittal (which shall be in such form and have such provisions as
Parent and the Company may reasonably specify) and (ii) instructions for
surrendering the Certificates in exchange for certificates representing shares
of Parent Common Stock. Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive pursuant to the provisions of this
Article II and the Certificate so surrendered shall forthwith be cancelled. In
the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a
transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender a certificate
representing shares of Parent Common Stock and cash in lieu of any fractional
shares of Parent Common Stock as contemplated by this Section 2.2.
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(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of Parent Common Stock which such holder is entitled to receive upon
the surrender thereof in accordance with this Section 2.2, and no cash payment
in lieu of fractional shares shall be paid to any such holder pursuant to
Section 2.2(e) until the holder of record of such Certificate shall so
surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of any fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(e)
and the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to surrender payable with respect
to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of shares
of Company Common Stock in accordance with the terms hereof (including any cash
paid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company Common
Stock, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided
in this Article II.
(e) No Fractional Shares. No certificate or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a stockholder of
Parent. In lieu of any such fractional shares, each holder of Company Common
Stock who would otherwise have been entitled to a fraction of a share of Parent
Common Stock upon surrender of Certificates for exchange will be entitled to
receive a cash payment in lieu of such fractional share in an amount equal to
such fraction multiplied by the Average Parent Price.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the stockholders of the Company for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any stockholders of the Company who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of their claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock.
(g) No Liability. Neither Parent nor the Company shall be
liable to any holder of shares of Company Common Stock or Parent Common Stock,
as the case may be, for such shares (or dividends or distributions with respect
thereto) or cash for payment in lieu of fractional
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shares delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 2.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of the Company Common Stock which immediately
prior to the Effective Time are held by stockholders who have properly
exercised and perfected appraisal rights under Section 79-4-13.02 of the MBCA
(the "Dissenting Shares") shall not be converted into the right to receive
shares of Parent Common Stock as provided in Section 2.1 hereof, but the
holders of Dissenting Shares shall be entitled to receive such consideration
from the Surviving Corporation as shall be determined pursuant to Section
79-4-13.02 of the MBCA; provided, however, that, if any such holder shall have
failed to perfect or shall withdraw or lose his right to appraisal and payment
under the MBCA, such holder's shares of Company Common Stock shall thereupon be
deemed to have been converted as of the Effective Time into the right to
receive shares of Parent Common Stock, without any interest thereon, as
provided in Section 2.1 and such shares shall no longer be Dissenting Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization. As used in this Agreement, any reference to
the Company and its Subsidiaries means the Company and each of its
Subsidiaries; any reference to Newco and its Subsidiaries means Newco at the
time of the Distribution and those entities that at or immediately prior to the
Distribution will be direct or indirect Subsidiaries of or merged with or
liquidated into Newco; and references to Subsidiaries of Newco mean those
entities that at or immediately prior to the Distribution will be direct or
indirect Subsidiaries of or merged with or liquidated into Newco. As used in
this Agreement, any reference to any event, change or effect having a material
adverse effect on or with respect to an entity (or group of entities taken as a
whole) means that such event, change or effect is materially adverse to the
business, properties, assets, results of operations or financial condition of
such entity (or, if with respect thereto, of such group of entities taken as a
whole). Each of the Company and its Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or
to have such power and authority would not have a material adverse effect on
the Retained Business taken as a whole. The Company and each of its
Subsidiaries are duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by them or
the nature of the business conducted by them makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
and in good standing would not in the aggregate have a material adverse effect
on the Retained Business taken as a whole or on the ability of the Company and
its Subsidiaries to consummate the transactions contemplated hereby. True,
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accurate and complete copies of the Company's Charter of Incorporation and
bylaws, including all amendments thereto, have heretofore been delivered to
Parent.
Section 3.2 Capitalization. The authorized capital stock of the
Company consists of: (i) 100,000,000 shares of Company Common Stock of which,
as of August 26, 1996, 20,614,491 shares were issued and outstanding, and (ii)
20,000,000 shares of preferred stock (the "Company Preferred Stock"), of which,
as of the date hereof, no shares are issued or outstanding. 250,000 shares of
Company Preferred Stock are designated Series X Junior Participating Preferred
Stock (the "Company Series X Preferred Stock") and are reserved for issuance in
accordance with the Rights Agreement, dated as of February 27, 1996 (the
"Rights Agreement"), by and between the Company and Society National Bank, as
Rights Agent (the "Company Rights Agent"), pursuant to which the Company has
issued rights (the "Company Rights") to purchase shares of Company Series X
Preferred Stock and 249,167 shares of Company Preferred Stock (with the
designations set forth in Section 3.2 of the disclosure schedule delivered by
the Company to Parent on the date hereof (the "Company Disclosure Schedule"))
are reserved for issuance pursuant to the terms of debentures convertible into
Company Preferred Stock (the "Company Convertible Debentures") and debenture
options. As of the date hereof, 926,759 shares of Company Common Stock were
reserved for issuance upon exercise of outstanding stock options and debenture
options (which debenture options are exercisable for Company Convertible
Debentures which are convertible into Company Preferred Stock which is then
convertible into Company Common Stock) and upon conversion of Company
Convertible Debentures pursuant to the Company's 1980 Long-Term Incentive Plan
(the "1980 Plan"), 1988 Long-Term Incentive Plan (the "1988 Plan") and 1995
Long-Term Incentive Plan (the "1995 Plan" and, together with the 1980 Plan and
the 1988 Plan, the "Company Stock Plans"). All the outstanding shares of the
Company's capital stock are, and all shares which may be issued pursuant to
Company Stock Plans will be, when issued in accordance with the terms thereof,
duly authorized, validly issued, fully paid and non-assessable and free of any
preemptive rights in respect thereof. Except as set forth above or in Section
3.2 of the Company Disclosure Schedule, as of the date hereof, there are no
existing options, warrants, calls, subscriptions or other rights or other
agreements, commitments, understandings or restrictions of any character
binding on the Company or any of its Subsidiaries with respect to the issued or
unissued capital stock of the Company or any of its Subsidiaries. Except as
set forth in Section 3.2 of the Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries.
Section 3.3 Authority. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and the Distribution
Agreement and to consummate the transactions contemplated hereby and thereby
other than, with respect to the Merger, the approval and adoption of this
Agreement by the affirmative vote of the holders of at least a majority of the
outstanding shares of Company Common Stock and, with respect to the
Distribution, the declaration of the Distribution by the Company's Board of
Directors. The execution, delivery and performance of this Agreement and the
Distribution Agreement by the Company and the consummation by the Company of
the Distribution and the Merger and of the other transactions contemplated
hereby and thereby have been duly authorized by the Company's Board of
Directors, and no other corporate proceedings on the part of the Company are
necessary
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to authorize this Agreement or the Distribution Agreement or for the Company to
consummate the transactions so contemplated hereby or thereby other than, with
respect to the Merger, the approval and adoption of this Agreement by the
affirmative vote of the holders of at least a majority of the outstanding
shares of Company Common Stock and, with respect to the Distribution,
declaration of the Distribution by the Company's Board of Directors. This
Agreement has been duly executed and delivered by the Company and, assuming
this Agreement constitutes a valid and binding obligation of Parent and Sub,
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms. Prior to the Distribution, the
Distribution Agreement will be duly executed and delivered by each of the
Company and Newco and upon such execution and delivery will constitute a valid
and binding obligation of each of the Company and Newco, enforceable against
each of them in accordance with its terms.
Section 3.4 Consents and Approvals; No Violations. Except (a) as set
forth in Section 3.4 of the Company Disclosure Schedule, (b) for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the New York Stock Exchange (the "NYSE"), the National
Association of Securities Dealers, Inc., the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), filings under state
securities or "blue sky" laws and the filing with the Secretary of State of the
State of Mississippi of the Articles of Merger and articles of merger with
respect to the merger of FirstMiss Fertilizer, Inc. into the Company and (c) as
may be necessary as a result of any facts or circumstances relating solely to
Parent or any of its Subsidiaries, none of the execution, delivery or
performance of this Agreement or the Distribution Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby or
thereby and compliance by the Company with any of the provisions hereof or
thereof will (i) conflict with or result in any breach of any provisions of the
charters or bylaws of the Company or of any of its Subsidiaries, (ii) require
any filing by the Company or any of its Subsidiaries with, or any permit,
authorization, consent or approval to be obtained by the Company or any of its
Subsidiaries of, any court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency (a
"Governmental Entity"), (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, amendment, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument, obligation
or commitment to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound
("Contracts") or (iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of its Subsidiaries,
except, in the case of clause (ii), (iii) or (iv), for failures to file or
obtain, violations, breaches or defaults which would not have a material
adverse effect on the Retained Business taken as a whole or the ability of the
Company to consummate the transactions contemplated hereby.
Section 3.5 SEC Reports and Financial Statements. The Company has
timely filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to
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Parent true and complete copies of, all periodic reports required to be filed
by it since July 1, 1995 under the
Exchange Act (as such documents have been amended since the time of their
filing, together with all such periodic reports to be filed from the date
hereof to the Effective Time, collectively, the "Company SEC Documents").
Except with respect to information concerning the Triad Chemical Joint Venture
("Triad"), as to which the Company makes no representation or warranty for the
purposes of this Section 3.5, the Company SEC Documents, including without
limitation any financial statements or schedules included therein, at the time
filed, (a) did not or will not, as the case may be, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b)
complied or will comply, as the case may be, in all material respects with the
applicable requirements of the Exchange Act. Except with respect to
information concerning Triad, as to which the Company makes no representation
or warranty for purposes of this Section 3.5, the consolidated financial
statements of the Company included in the Company SEC Documents (including the
notes and schedules thereto, the "Company Financial Statements") comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present in all material respects (subject, in
the case of the unaudited financial statements, to normal audit adjustments)
the consolidated financial position of the Company and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
Section 3.6 Information in Disclosure Documents and Registration
Statements. Except with respect to information concerning Triad, as to which
the Company makes no representation or warranty for purposes of this Section
3.6, none of the information supplied or to be supplied by the Company or its
representatives for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger
(the "S-4") will, at the time such registration statement becomes effective
under the Securities Act and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (ii) the joint
proxy statement relating to the meetings of each of the Company's and Parent's
stockholders to be held in connection with the Merger (the "Proxy Statement")
will, at the date mailed to the Company's and Parent's stockholders and at the
time of each of the meetings of the Company's and Parent's stockholders to be
held in connection with the Merger, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or Sub for inclusion in the Proxy
Statement, with respect to information concerning Parent or any of its
Subsidiaries
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incorporated by reference in the Proxy Statement or with respect to information
concerning Triad.
Section 3.7 Retained Business.
(a) Attached hereto as Exhibit A is an unaudited pro forma
consolidated balance sheet of the Retained Business of the Company and its
Subsidiaries at June 30, 1996 (including certain explanatory notes thereto, the
"Retained Business Balance Sheet") and an unaudited pro forma consolidated
statement of operations for the Retained Business of the Company and its
Subsidiaries for the year ended June 30, 1996 (including certain explanatory
notes thereto, the "Retained Business Income Statement" and, together with the
Retained Business Balance Sheet, the "Retained Business Financial Statements").
The "Retained Business" means and includes the assets, liabilities, capital
stock and partnership interests reflected on the Retained Business Balance
Sheet, as such assets and liabilities may have changed since the date of the
Retained Business Balance Sheet, but in any event shall include all of the
Company's direct and indirect right, title and interest (including minority
interests) in the assets used primarily in, and all of the Company's
liabilities and obligations (accrued, absolute, contingent, undisclosed or
otherwise) which are primarily related to or have arisen or will arise from,
the production, distribution, sale and storage of ammonia and urea and purchase
and resale of ammonia and urea (except for those assets and liabilities
identified in Section 3.7 of the Company Disclosure Schedule under the headings
"Excluded Assets" and "Excluded Liabilities," which shall not be included in
the Retained Business and which are referred to herein as the "Excluded Assets"
and "Excluded Liabilities"). The Retained Business shall include the following
entities: FirstMiss Fertilizer, Inc.; AMPRO Fertilizer, Inc.; FMF Barge, Inc.;
FMF, Inc. ("FMF"); a 50% interest in Arcadian/FirstMiss Fertilizer LLC; a 50%
interest in Triad; and the partnership interests currently held by FEC
Marketing, Inc. ("FEC") and FMF in FirstMiss Fertilizer Limited Partnership and
FirstMiss Fertilizer Texas LP (the "Partnerships"). As of the Effective Date,
the interests in the Partnerships currently held by FEC will be held by an
entity other than FEC included in the Retained Business that will be designated
by Parent.
(b) Except with respect to information concerning Triad, as to
which the Company makes no representation or warranty for purposes of this
Section 3.7, the Retained Business Financial Statements have been prepared in
accordance with generally accepted accounting principles on a basis consistent
with the Company Financial Statements, and, except as set forth in Section 3.7
of the Company Disclosure Schedule, fairly present in all material respects
(subject to normal audit adjustments) the consolidated financial position of
the Company and its Subsidiaries as at the date thereof, after giving pro forma
effect to the Distribution (assuming the Distribution occurred on June 30,
1996), and the consolidated results of their operations for the one-year period
then ended, after giving pro forma effect to the Distribution (assuming the
Distribution occurred on July 1, 1995).
(c) At the Effective Time, except for the Excluded Assets and
as contemplated by this Agreement or the Distribution Agreement, neither Newco
nor any of its Subsidiaries will own or have rights to use any of the assets or
property, whether tangible, intangible or mixed, which are necessary for the
conduct of the Retained Business as conducted on the date hereof.
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Except as set forth in Section 3.7 of the Company Disclosure Schedule, at the
Effective Time neither Newco nor any of its Subsidiaries will be a party to any
material agreement or arrangement with the Surviving Corporation or any of its
Subsidiaries (other than the Distribution Agreement and any agreements
contemplated by the Distribution Agreement, including the Tax Disaffiliation
Agreement and the Employee Benefits Agreement).
Section 3.8 Litigation. Except as disclosed in the Company SEC
Documents filed prior to the date hereof or as set forth in Section 3.8 of the
Company Disclosure Schedule and except with respect to information concerning
Triad, as to which the Company makes no representation or warranty for purposes
of this Section 3.8, there is no suit, action, proceeding or investigation
relating to the Retained Business pending or, to the knowledge of the Company,
threatened, against the Company or any of its Subsidiaries before any
Governmental Entity which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on the Retained Business taken as a
whole or the ability of the Company to consummate the transactions contemplated
hereby. Except as disclosed in the Company SEC Documents filed prior to the
date hereof or as set forth in Section 3.8 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is subject to any outstanding
order, writ, injunction or decree relating to the Retained Business which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the Retained Business taken as a whole or a material adverse
effect on the ability of the Company to consummate the transactions
contemplated hereby.
Section 3.9 Employee Benefits.
(a) Other than with respect to Triad, as to which the Company
makes no representation or warranty for purposes of this Section 3.9, Section
3.9 of the Company Disclosure Schedule contains a list of all "employee benefit
plans" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all bonus, stock option, fringe
benefit, vacation, incentive, severance, employment or other benefit plans,
programs, agreements and arrangements (the "Benefit Plans"), which cover
employees or former employees of the Company and its Subsidiaries who are or
were employed in the Retained Business (the "Employees"). True and complete
copies of all Benefit Plans, any trust instruments and/or insurance contracts,
if any, forming a part of any such plans, and all amendments thereto; current
summary plan descriptions; where applicable, the most current determination
letter received from the Internal Revenue Service (the "Service") and most
recent determination letter application; and where applicable, annual reports,
financial statements and actuarial reports for the last three plan years, which
fairly and accurately reflect the financial condition of the plans have been
made available to Parent.
(b) All Benefit Plans are in compliance with ERISA, the Code
and all other applicable laws in all material respects. Each Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Pension Plan") and which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Service, and the Company is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. Neither the Company nor
any of its
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Subsidiaries or any ERISA Affiliate (as defined below) has contributed or been
required to contribute to any Multiemployer Plan (as defined in ERISA) with
respect to any Employees.
(c) No liability under Subtitle C or D of Title IV of ERISA
has been incurred by the Company or any Subsidiary with respect to any ongoing,
frozen or terminated Benefit Plan, currently or formerly maintained by any of
them, or the Plan of any entity which is or has been considered one employer
with the Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate") which would have a material adverse effect on the Retained
Business taken as a whole.
(d) All contributions required to be made or accrued as of
June 30, 1996 under the terms of any Benefit Plan for which the Surviving
Corporation or any of its Subsidiaries may have liability have been timely made
or have been reflected on the Retained Business Balance sheet. Neither any
Pension Plan nor any single-employer plan of an ERISA Affiliate has incurred an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA in an amount which would have a
material adverse effect on the Retained Business taken as a whole. Neither the
Company nor any of its Subsidiaries has provided, or is required to provide,
security to any Pension Plan pursuant to Section 401(a)(29) of the Code.
(e) Neither the Company nor any of its Subsidiaries has any
obligations for retiree health and life benefits for Employees or former
Employees under any Benefit Plan, except as set forth in Section 3.9 of the
Company Disclosure Schedule or as required by Part 6 of Title I of ERISA.
(f) The Company and its Subsidiaries have no unfunded
liabilities with respect to any Pension Plan which covers former Employees in
an amount which would have a material adverse effect on the Retained Business
taken as a whole.
(g) Immediately after the Effective Time, the Surviving
Corporation or its Subsidiaries could terminate each Benefit Plan in accordance
with its terms without incurring any material liability.
(h) With respect to the Company and the Retained Business, the
transactions contemplated by this Agreement and the Distribution Agreement will
not cause any additional payments to be due under any Benefit Plan, nor
accelerate the payment or vesting of any amounts due under any Benefit Plan,
nor result in any excess parachute payment within the meaning of Code Section
280G except for payments which are paid prior to the Effective Time, accrued on
the Audited Closing Balance Sheet (as defined in Section 6.13) or for which
funds have been reserved, or amounts due which are assumed by Newco pursuant to
the Distribution Agreement.
Section 3.10 Absence of Certain Changes or Events. Since June 30,
1996, the Company and its Subsidiaries have conducted the Retained Business
only in the ordinary and usual course consistent with past practice, except as
set forth in Section 3.10 of the Company
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Disclosure Schedule, and there has not been any change or development, or
combination of changes or developments which individually or in the aggregate
have had or are reasonably likely to have a material adverse effect on the
Retained Business taken as a whole.
Section 3.11 No Violation of Law. Except as disclosed in the Company
SEC Documents as filed prior to the date hereof or as set forth in Section 3.11
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is in violation of, or, to the knowledge of the Company, is under
investigation with respect to or has been given notice or been charged by any
Governmental Entity with any violation of, any law, statute, order, rule,
regulation or judgment of any Governmental Entity, except for violations which,
in the aggregate, would not have a material adverse effect on the Retained
Business taken as a whole. The Company and its Subsidiaries have all permits,
licenses, franchises and other governmental authorizations, consents and
approvals necessary to conduct the Retained Business as presently conducted,
except for any such permits, licenses, franchises or other governmental
authorizations, consents and approvals the failure of which to have would not
have a material adverse effect on the Retained Business taken as a whole.
Section 3.12 Taxes.
(a) Except as disclosed in the Company Financial Statements
for the year ended June 30, 1995 or as set forth in Section 3.12 of the Company
Disclosure Schedule:
(i) the Company and its Subsidiaries have (A)
duly filed with the appropriate governmental authorities all Tax Returns
(as hereinafter defined) required to be filed by them on or prior to the
Effective Time, other than those Tax Returns the failure of which to file
would not have a material adverse effect on the Retained Business taken as
a whole, and such Tax Returns are true, correct and complete in all
material respects, and (B) duly paid in full or made provision in
accordance with generally accepted accounting principles for the payment
of, and withheld, all Taxes (as hereinafter defined) required to be shown
on such Tax Returns or required to be withheld by them, respectively;
(ii) as of the date hereof, the Tax Returns for
the Company and its Subsidiaries are not currently the subject of any
audit, investigation or proceeding by the Service or, to the Company's
knowledge, any state or local taxing authority, and the Company and its
Subsidiaries have not received any written notice of deficiency or
assessment from any taxing authority with respect to liabilities for
material Taxes of the Company or its Subsidiaries which have not been paid
or finally settled, other than audits, deficiencies or assessments
disclosed in Section 3.12 of the Company Disclosure Schedule which are
being contested in good faith through appropriate proceedings;
(iii) no waiver of any statute of limitations in respect of Taxes or
any extension of time with respect to a Tax assessment or deficiency
granted by the Company or any of its Subsidiaries is currently in effect;
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(iv) none of the Company and its Subsidiaries is a party to any
Tax allocation or sharing agreement, other than the Tax Disaffiliation
Agreement; and
(v) none of the Company and its Subsidiaries has been a member
of any affiliated group within the meaning of Section 1504(a) of the
Internal Revenue Code of 1986, as amended, or any similar affiliated or
consolidated group for tax purposes under state, local or foreign law
(other than a group the common parent of which is the Company), or has any
liability for the Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 or any similar
provision of state, local or foreign law as a transferee or successor, by
contract or otherwise.
(b) "Taxes" means all taxes, charges, fees, levies, imposts,
duties or other assessments, including, without limitation, income, gross
receipts, excise, personal property, real property, sales, ad valorem,
value-added, leasing, withholding, social security, occupation, use, service,
service use, license, payroll, franchise, transfer and recording taxes, fees
and charges, imposed by the United States or any state, local, or foreign
governmental authority whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest, fines,
penalties or additional amounts attributable or imposed on or with respect to
any such taxes, charges, fees, levies, imposts, duties or other assessments.
"Tax Return" means any return, report or other document or information required
to be supplied to a taxing authority in connection with Taxes.
Section 3.13 Environmental Matters.
(a) Except as disclosed in the Company SEC Documents as filed
prior to the date hereof or as set forth in Section 3.13 of the Company
Disclosure Schedule, except for such matters that, individually or in the
aggregate, would not have a material adverse effect on the Retained Business
taken as a whole and except with respect to information concerning Triad, as to
which the Company makes no representation or warranty for purposes of this
Section 3.13, (i) the Retained Business of the Company and its Subsidiaries is
in compliance in all material respects with all applicable Environmental Laws
(as hereinafter defined); (ii) the properties included in the Retained Business
and presently owned or operated by the Company or its Subsidiaries (the
"Company Properties") do not contain any Hazardous Substance (as hereinafter
defined) other than as permitted under applicable Environmental Laws; (iii)
neither the Company nor any of its Subsidiaries has since July 1, 1994 received
or is aware of any actual claims, notices, demand letters, lawsuits or requests
for information from any Governmental Entity or any private third party
alleging that the Retained Business is in violation of, or liable under, any
Environmental Laws; and (iv) none of the Company, its Subsidiaries or the
Company Properties is subject to any court order, administrative order or
decree relating to the Retained Business arising under any Environmental Law.
(b) "Environmental Law" means any applicable Federal, state or
local law, regulation, permit, judgment or agreement with any Governmental
Entity, relating to (x) the protection, preservation or restoration of the
environment or to human health or safety, or (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing,
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handling, labeling, production, release or disposal of Hazardous Substances.
"Hazardous Substance" means any substance presently listed, defined, designated
or classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law.
Section 3.14 Material Contracts. Other than with respect to Triad,
Section 3.14 of the Company Disclosure Schedule identifies any Contract
included in the Retained Business to which the Company or any of its
Subsidiaries is a party or by which any of its assets or operations may be
bound that is (i) a loan or similar agreement or indebtedness evidenced by a
note or other instrument, or any direct or indirect guarantee of indebtedness
of any other person, in excess of $1,000,000; (ii) any Contract that expressly
limits the right to terminate the Contract without penalty upon less than one
year's notice and such Contract provides for future payments in excess of
$5,000,000 within the next twelve (12) months from the date hereof; (iii) any
Contract for the purchase, sale or transportation of natural gas; (iv) any
Contract related to product purchases or product sales in excess of $500,000;
and (v) any Contract related to capital expenditures, which provides for future
payments in excess of $5,000,000 within the next twelve (12) months from the
date hereof. Except as set forth in Section 3.14 of the Company Disclosure
Schedule and except with respect to Triad, as to which the Company makes no
representation or warranty for purposes of this Section 3.14, (i) each of the
Contracts included in the Retained Business to which the Company or any of its
Subsidiaries is a party or by which any of its assets or operations may be
bound is in full force and effect, except where the failure to be in full force
and effect would not have a material adverse effect on the Retained Business
taken as a whole and (ii) there are no existing defaults by the Company or such
Subsidiary thereunder which default would result in a material adverse effect
on the Retained Business taken as a whole.
Section 3.15 Rights Agreement. As of the Effective Time, the Company
will have taken all necessary action to render the Company Rights inapplicable
to the Merger, the Distribution and the other transactions contemplated hereby.
Section 3.16 Brokers or Finders. Neither the Company nor any of its
Subsidiaries has any liability to any agent, broker, investment banker,
financial advisor or other firm or person for any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement except CS First Boston Corporation, whose fees
and expenses, as previously disclosed to Parent, will be paid by the Company in
accordance with the Company's agreement with such firm.
Section 3.17 State Takeover Statutes. The provisions of the
Mississippi Control Share Act and the Mississippi Shareholder Protection Act
will not apply to the Merger, the Distribution or any of the other transactions
contemplated hereby, and to the Company's knowledge, no other state takeover
statute or similar statute or regulation applies to the Merger, the
Distribution, or any of the other transactions contemplated hereby.
Section 3.18 Opinion of Financial Advisor. The Company has received
the opinion of CS First Boston Corporation to the effect that, as of the date
of such opinion, the terms of the Distribution and Merger, taken together, are
fair, from a financial point of view, to the holders of common stock of the
Company.
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Section 3.19 Title to Assets. The Company has title and/or rights
sufficient to carry-on operations as contemplated by (the AMPRO Retrofit as
defined in Section 6.15) or presently conducted to that portion of the real
property (and the rights, privileges and appurtenances pertaining to such real
property) included in the Retained Business on which the AMPRO ammonia plant
and related operations are located, subject only to the following permitted
exceptions: (i) all highway, roadway, railroad, utility, drainage, pipeline
and other like easements, servitudes and rights of way which an inspection or
survey of the property would show and which do not materially adversely affect
use of the property as a fertilizer manufacturing facility and related
operations, (ii) liens for ad valorem taxes not yet due and payable, (iii)
easements, restrictions and encumbrances which do not materially adversely
affect use of the property as a fertilizer manufacturing facility and related
operations and (iv) all rights, title and interests of (x) Parent and (y)
Triad. Except as otherwise set forth above, except with respect to any other
real property included in the Retained Business, as to which the Company makes
no representation or warranty for purposes of this Section 3.19 and except as
set forth in Section 3.19 of the Company Disclosure Schedule, the Company owns
all of the material assets included in the Retained Business free and clear of
any liens, claims, security interests or encumbrances that, individually or in
the aggregate, are reasonably likely to have a material adverse effect on the
Retained Business taken as a whole.
Section 3.20 Employees. Other than with respect to Triad, the Company
has made available to Parent a list of the employees currently employed in the
Retained Business indicating the positions which they now hold, their current
rates of compensation and which employees, if any, are on short or long term
disability, family and medical, military, workers' compensation, or any other
type of leave of absence; and copies of all employee handbooks, and policy and
procedure manuals. With respect to the Retained Business other than Triad,
neither the Company nor any of its Subsidiaries is a party to, or is bound by,
any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is the Company or
any of its Subsidiaries the subject of any proceeding or organizing activity
asserting that it or any such Subsidiary has committed an unfair labor practice
or seeking to compel it or such Subsidiary to bargain with any labor
organization as to wages and conditions of employment, nor is there any strike,
labor dispute, slow down or stoppage involving the Company or any of its
Subsidiaries pending or, to the knowledge of the Company, threatened that,
individually or in the aggregate, are reasonably likely to have a material
adverse effect on the Retained Business taken as a whole.
Section 3.21 Insurance. Set forth in Section 3.21 of the Company
Disclosure Schedule is a schedule of the insurance coverage (including policy
limits, coverage layers, and named insureds) maintained by the Company on the
assets, properties, premises, operations and personnel of the Company,
including the Retained Business.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted except where the failure to be so organized, existing
and in good standing or to have such power and authority would not have a
material adverse effect on Parent and its Subsidiaries taken as a whole.
Parent and each of its Subsidiaries are duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by them or the nature of the business conducted by them
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not in the aggregate
have a material adverse effect on Parent and its Subsidiaries taken as a whole
or on the ability of Parent or Sub to consummate the transactions contemplated
hereby. True, accurate and complete copies of Parent's and Sub's Articles of
Incorporation and bylaws, including all amendments thereto, have heretofore
been delivered to the Company.
Section 4.2 Capitalization. As of the date hereof, the authorized
capital stock of Parent consists of: (i) 100,000,000 shares of Parent Common
Stock of which, as of June 30, 1996, 21,353,450 shares were issued and
outstanding and 1,550,000 shares were held in treasury, and (ii) 500,000 shares
of preferred stock, par value $0.01 per share, of which, as of the date hereof,
no shares were issued and outstanding ("Parent Preferred Stock"). 250,000
shares of Parent Preferred Stock are designated Preferred Stock, Series A and
are reserved for issuance in accordance with the Rights Agreement, dated as of
August 8, 1994, by and between Parent and Harris Trust and Savings Bank, as
Rights Agent, pursuant to which Parent has issued rights to purchase shares of
Parent Preferred Stock. All the outstanding shares of Parent's capital stock
are, and all shares of Parent Common Stock which are to be issued pursuant to
the Merger will be when issued in accordance with the terms hereof, duly
authorized, validly issued, fully paid and nonassessable and free of any
preemptive rights in respect thereto. Except for Parent Common Stock issuable
to directors, officers and employees pursuant to Parent stock option and other
benefit plans and except for this Agreement, there are no existing options,
warrants, calls, subscriptions or other rights or other agreements,
commitments, understandings or restrictions of any character relating to the
issued or unissued capital stock of Parent or any of its Subsidiaries. As of
the date hereof, the authorized capital stock of Sub consists of 1,000 shares
of Common Stock, par value $0.01 per share, all of which are validly issued,
fully paid and nonassessable and are owned of record and beneficially by
Parent. After June 30, 1996 and prior to the date hereof, no material number
of shares of Parent Common Stock have been issued except issuances of shares
reserved for issuance as described above.
Section 4.3 Authority. Parent and Sub have the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions
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contemplated hereby (other than, with respect to the Merger, the approval of
the issuance of shares of Parent Common Stock to the Company's stockholders
pursuant to this Agreement by an affirmative vote of the holders of at least a
majority of the shares of Parent Common Stock present, in person or by proxy,
and entitled to vote at the meeting of Parent's stockholders referred to in
Section 6.3(b) for which a quorum exists). The execution, delivery and
performance of this Agreement by each of Parent and Sub and the consummation by
Sub of the Merger and by Parent and Sub of the other transactions contemplated
hereby have been duly authorized by the Boards of Directors of Parent and Sub
and Parent as the sole stockholder of Sub, and no other corporate proceedings
on the part of Parent or Sub are necessary to authorize this Agreement or for
Parent and Sub to consummate the transactions so contemplated (other than, with
respect to the Merger, the approval of the issuance of shares of Parent Common
Stock to the Company's stockholders pursuant to this Agreement by an
affirmative vote of the holders of at least a majority of the shares of Parent
Common Stock present, in person or by proxy, and entitled to vote at the
meeting of Parent's stockholders referred to in Section 6.3(b) for which a
quorum exists). This Agreement has been duly executed and delivered by each of
Parent and Sub, and, assuming this Agreement constitutes a valid and binding
obligation of the Company, constitutes a valid and binding obligation of each
of Parent and Sub, enforceable against each of them in accordance with its
terms.
Section 4.4 Consents and Approvals; No Violations. Except (a) as set
forth in Section 4.4 of the disclosure schedule delivered by Parent to the
Company on or prior to the date hereof (the "Parent Disclosure Schedule"), (b)
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, the HSR Act, the NYSE or the NASDAQ National Market, as the case may be,
filings under state securities or "blue sky" laws, and the filing with the
Secretary of State of the State of Mississippi of the Articles of Merger and
(c) as may be necessary as a result of any facts or circumstances relating
solely to the Company and its Subsidiaries, neither the execution, delivery or
performance of this Agreement by Parent and Sub nor the consummation by Parent
and Sub of the transactions contemplated hereby nor compliance by Parent and
Sub with any of the provisions hereof will (i) conflict with or result in any
breach of any provision of the respective charter or bylaws of Parent and Sub,
(ii) require any filing by Parent or its Subsidiaries with, or permit,
authorization, consent or approval to be obtained by Parent or its Subsidiaries
of, any Governmental Entity, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any Contract to which Parent or any
of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, ordinance, rule or regulation applicable to Parent or any of
its Subsidiaries, except, in the case of clause (ii), (iii) or (iv), for
failures to file or obtain, violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse effect on Parent or
Sub or the ability of Parent or Sub to consummate the transactions contemplated
hereby.
Section 4.5 SEC Reports and Financial Statements. Each of Parent and
its Subsidiaries has timely filed with the SEC and has heretofore made
available to the Company true and complete copies of all periodic reports
required to be filed by it since July 1, 1995 under
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the Exchange Act (as such documents have been amended since the time of their
filing, together with all such periodic reports to be filed from the date
hereof to the Effective Time, collectively, the "Parent SEC Documents").
Except with respect to information concerning Triad, as to which Parent makes
no representation or warranty for purposes of this Section 4.5, the Parent SEC
Documents, including without limitation any financial statements or schedules
included therein, at the time filed, (a) did not or will not, as the case may
be, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied or will comply, as the case may be, in all material
respects with the applicable requirements of the Exchange Act. Except with
respect to information concerning Triad, as to which Parent makes no
representation or warranty for purposes of this Section 4.5, the consolidated
financial statements of Parent included in the SEC Documents comply as to form
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited financial statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
the unaudited statements, to normal audit adjustments) the consolidated
financial position of Parent and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended.
Section 4.6 Information in Disclosure Documents and Registration
Statements. Except with respect to information concerning Triad, as to which
Parent makes no representation or warranty for purposes of this Section 4.6,
none of the information supplied by Parent or Sub or their representatives for
inclusion or incorporation by reference in (i) the S-4 will, at the time the
S-4 becomes effective under the Securities Act and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading and
(ii) the Proxy Statement will, at the date mailed to each of the Company's and
Parent's stockholders and at the time of each of the meetings of the Company's
and Parent's stockholders to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The S-4
and the Proxy Statement will comply as to form in all material respects with
the provisions of the Securities Act of 1933, as amended and the rules and
regulations thereunder, except that no representation is made by Parent and Sub
with respect to statements made therein based on information supplied by the
Company for inclusion in the S-4 and the Proxy Statement, with respect to
information concerning the Company incorporated by reference in the S-4 and the
Proxy Statement or with respect to information concerning Triad.
Section 4.7 Litigation. Except as disclosed in the Parent SEC
Documents filed prior to the date of this Agreement and except with respect to
information concerning Triad, as to which Parent makes no representation or
warranty for purposes of this Section 4.7, there is no suit, action, proceeding
or investigation pending or, to the knowledge of Parent, threatened, against
Parent or any of its Subsidiaries before any Governmental Entity which,
individually or
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in the aggregate, might reasonably be expected to have a material adverse
effect on Parent and its Subsidiaries taken as a whole or a material adverse
effect on the ability of Parent or Sub to consummate the transactions
contemplated by this Agreement. Except as disclosed in the Parent SEC
Documents filed prior to the date of this Agreement, neither Parent nor any of
its Subsidiaries is subject to any outstanding order, writ, injunction or
decree which, individually or in the aggregate, might reasonably be expected to
have a material adverse effect on Parent and its Subsidiaries taken as a whole
or a material adverse effect on the ability of Parent or Sub to consummate the
transactions contemplated hereby.
Section 4.8 Absence of Certain Changes or Events. Since June 30,
1996, there has not been any change or development, or combination of changes
or developments which individually or in the aggregate have had or are
reasonably likely to have a material adverse effect on Parent and its
Subsidiaries taken as a whole.
Section 4.9 No Violation of Law. Except as disclosed in the Parent
SEC Documents as filed prior to the date hereof or as set forth in Section 4.9
of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries
is in violation of, or, to the knowledge of Parent, is under investigation with
respect to or has been given notice or been charged by any Governmental Entity
with any violation of, any law, statute, order, rule, regulation or judgment of
any Governmental Entity, except for violations which, in the aggregate, do not
have a material adverse effect on the Parent and its Subsidiaries taken as a
whole. Parent and its Subsidiaries have all permits, licenses, franchises and
other governmental authorizations, consents and approvals necessary to conduct
their businesses as presently conducted, except for any such permits, licenses,
franchises or other governmental authorizations, consents and approvals the
failure of which to have would not have a material adverse effect on Parent and
its Subsidiaries taken as a whole.
Section 4.10 Environmental Matters. Except as disclosed in the Parent
SEC Documents as filed prior to the date hereof or as set forth in Section 4.10
of the Parent Disclosure Schedule, except for such matters that, individually
or in the aggregate, would not have a material adverse effect on Parent and its
Subsidiaries taken as a whole and except with respect to information concerning
Triad, as to which Parent makes no representation or warranty for purposes of
this Section 4.10, (i) Parent and its Subsidiaries are in compliance in all
material respects with all applicable Environmental Laws; (ii) the properties
presently owned or operated by Parent or its Subsidiaries (the "Parent
Properties") do not contain any Hazardous Substance other than as permitted
under applicable Environmental Laws; (iii) neither Parent nor any of its
Subsidiaries has, since July 1, 1994, received any actual claims, notices,
demand letters, lawsuits or requests for information from any Governmental
Entity or any private third party alleging that Parent is in violation of, or
liable under, any Environmental Laws; and (iv) none of Parent, its Subsidiaries
or the Parent Properties is subject to any court order, administrative order or
decree arising under any Environmental Law.
Section 4.11 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
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Section 4.12 Unwanted Businesses. Parent is unwilling to consummate
the Merger unless the Company has divested itself of all of the Company's
assets and Newco has assumed all of the Company's liabilities, other than those
relating to the Retained Business.
Section 4.13 Purchases of Company Stock. Except as set forth in
Section 4.13 of the Parent Disclosure Schedule, neither Parent nor any of its
affiliates has acquired any shares of capital stock of the Company. Section
4.13 of Parent Disclosure Schedule sets forth the amount of Parent Common Stock
repurchased by Parent in the last six (6) months pursuant to its stock
repurchase program (the "Repurchase Program") or otherwise and the amount of
repurchases authorized by Parent's Board of Directors.
Section 4.14 Brokers or Finders. Neither Parent nor any of its
Subsidiaries has any liability to any agent, broker, investment banker,
financial advisor or other firm or person for any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement except Donaldson, Lufkin & Jenrette Securities
Corporation, whose fees and expenses will be paid by Parent in accordance with
the Parent's agreement with such firm.
Section 4.15 Opinion of Financial Advisor. Parent has received the
opinion of Donaldson, Lufkin & Jenrette Securities Corporation to the effect
that the Merger Consideration Per Share is fair to Parent from a financial
point of view.
ARTICLE V
COVENANTS PENDING THE EFFECTIVE TIME
Section 5.1 Covenants of the Company with Respect to the Retained
Business. During the period from the date of this Agreement and continuing
until the Effective Time, the Company agrees as to itself and its Subsidiaries
that except (i) for the Distribution and the other transactions, actions or
events provided for in the Distribution Agreement, including the Employee
Benefits Agreement, (ii) as contemplated or permitted by this Agreement, (iii)
as set forth in Section 5.1 of the Company Disclosure Schedule or (iv) to the
extent that Parent shall otherwise consent in writing (which consent will not
be unreasonably withheld or delayed):
(a) Ordinary Course. The Company and its Subsidiaries shall
carry on the Retained Business in the usual, regular and ordinary course
consistent with past practice and use all reasonable efforts to preserve intact
the present business organization, keep available, consistent with past
practice, the services of the present officers and employees and preserve the
relationships with customers, suppliers and others having business dealings
with the Retained Business, it being understood, however, that (i) certain
employees of the Retained Business will also be engaged in activities for Newco
and its Subsidiaries and certain officers of the Company will resign at the
time of the Distribution and will serve as officers of Newco, and (ii) the
failure of any employees of the Retained Business to remain employees of the
Retained Business or become employees of Parent or any Subsidiary of Parent
shall not constitute a breach of this
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covenant. Without limiting the foregoing, except as set forth in Section 5.1
of the Company Disclosure Schedule and except for "like kind" replacements and
repairs of equipment, the Company will not make or enter into any contracts,
commitments or agreements obligating the Company to make any capital
expenditures primarily relating to, or arising from, the Retained Business in
excess of $1,000,000, in the aggregate.
(b) Dividends; Changes in Stock. The Company shall not (i)
declare or pay any dividends (including dividends in Company Common Stock) on
or make other distributions in respect of any of its capital stock (including
such a distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar
transaction), except for regular quarterly cash dividends consistent with
amounts currently paid and the Distribution, (ii) split (including a reverse
stock split), combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or (iii)
repurchase, redeem or otherwise acquire, or permit any Subsidiary to
repurchase, redeem or otherwise acquire, any shares of capital stock of the
Company or any of its Subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall
the Company permit any of its Subsidiaries included in the Retained Business
to, issue, transfer or sell, or authorize or propose or agree to the issuance,
transfer or sale of, any shares of its capital stock of any class, any other
equity interests or any securities convertible into, or any rights, warrants,
calls, subscriptions, options or other rights or agreements, commitments or
understandings to acquire, any such shares, equity interests or convertible
securities, other than (i) the issuance of shares of Company Common Stock,
Company Preferred Stock and Company Convertible Debentures upon the exercise or
conversion of stock options, debenture options, debentures or stock grants
outstanding on the date of this Agreement pursuant to Company Stock Plans and
in accordance with their present terms (or conversions of Company Preferred
Stock issued upon the exercise of debenture options-outstanding on the date of
this Agreement into Company Common Stock pursuant to the terms thereof), (ii)
issuances by a wholly owned Subsidiary of its capital stock to its parent,
(iii) the authorization and issuance of Company Series X Preferred Stock or
Company Common Stock in connection with the Company Rights and reservation for
issuance of shares of Company Series X Preferred Stock or Company Common Stock
in connection with the Company Rights in addition to those presently reserved
for issuance, and (iv) the granting of stock options, debenture options or
stock grants to employees of the Company other than the Retained Employees (as
defined in Section 6.7) and issuance of securities upon exercise of the
foregoing.
(d) Governing Documents. The Company shall not amend its
Charter of Incorporation or bylaws in a manner adverse to Parent and Sub or
otherwise inconsistent with the transactions contemplated hereby.
(e) Indebtedness. The Company shall not, nor shall it permit
any of its Subsidiaries to, incur (which shall not be deemed to include (i)
entering into credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements or (ii) refinancings of existing
indebtedness) any indebtedness for borrowed money or guarantee any
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such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries or
guarantee any obligations of others other than (v) in the ordinary course
of business consistent with past practice, (w) pursuant to existing credit or
guaranty agreements, (x) Company Convertible Debentures issuable upon exercise
of debenture options, (y) indebtedness incurred solely by, or that will be
assumed and become the obligation solely of Newco or any of its Subsidiaries at
the Time of Distribution (as defined in the Distribution Agreement) or (z) the
Financing (as defined in Section 6.14).
(f) Changes to Benefit Plans. Except as would not increase
the costs of the Retained Business and except for changes in response to any
changes in applicable law, the Company shall not, nor shall it permit any of
its Subsidiaries (other than Newco and its Subsidiaries) to, (i) enter into,
adopt, amend (except as may be required by law and except for immaterial
amendments) or terminate any Benefit Plan or any agreement, arrangement, plan
or policy between the Company or any such Subsidiary and one or more of its
directors, officers or Employees or (ii) except for normal increases in the
ordinary course of business consistent with past practice and the payment of
bonuses to employees in the aggregate not to exceed the amount set forth in
Section 5.1 of the Company Disclosure Schedule, increase in any manner the
compensation or fringe benefits of any director, officer or Employee or pay any
benefit to any director, officer or Employee not required by any plan or
arrangement as in effect as of the date hereof or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing; provided that
the foregoing shall not prohibit the Company from hiring and paying new
employees in the ordinary course of business consistent with past practice.
(g) Filings. The Company shall promptly provide Parent (or
its counsel) copies of all filings (other than those portions of filings under
the HSR Act which Parent has no reasonable interest in obtaining in connection
with the Merger) made by the Company with any Federal, state or foreign
Governmental Entity in connection with this Agreement, the Distribution
Agreement and the transactions contemplated hereby and thereby.
(h) Accounting Policies and Procedures. The Company will not
and will not permit any of its Subsidiaries to change any of its accounting
principles, policies or procedures, except as may be required by generally
accepted accounting principles.
(i) Newco. The Company shall (i) abide and cause Newco to
abide by their respective obligations under the Distribution Agreement, Tax
Disaffiliation Agreement and Employee Benefits Agreement and (ii) not terminate
or amend, or waive compliance with any obligations under, the Distribution
Agreement, Tax Disaffiliation Agreement or Employee Benefits Agreement in any
manner adverse to Parent and Sub.
(j) Sale of Assets. The Company shall not sell, lease,
exchange, mortgage, pledge, transfer or otherwise dispose of, or agree to sell,
lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of the
assets included in the Retained Business, except for dispositions of
inventories and equipment in the ordinary course of the Retained Business and
consistent with past practice.
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(k) Retained Cash. After December 31, 1996, all net cash
generated by the Retained Business after December 31, 1996 shall be retained by
the Company.
Section 5.2 Covenants of the Company. During the period from the date
of this Agreement and continuing to the Effective Time, the Company agrees as
to itself and its Subsidiaries that the Company shall not, and shall not permit
any of its Subsidiaries to, take any action, including, without limitation,
with respect to the terms of the Articles of Incorporation or bylaws of Newco,
that would or is reasonably likely to result in any of the conditions to the
Merger set forth in Article VII not being satisfied or that would materially
impair the ability of the Company to consummate the Distribution in accordance
with the terms of the Distribution Agreement or the Merger in accordance with
the terms hereof or would materially delay such consummation.
Section 5.3 Covenants of Parent. During the period from the date of
this Agreement and continuing until the Effective Time, Parent agrees as to
itself and its Subsidiaries that except (i) as contemplated or permitted by
this Agreement, (ii) as set forth in Section 5.3 of the Parent Disclosure
Schedule or (iii) to the extent that the Company shall otherwise consent in
writing (which consent will not be unreasonably withheld or delayed):
(a) Ordinary Course. Parent and its Subsidiaries shall carry
on their businesses in the usual, regular and ordinary course consistent with
past practice and use all reasonable efforts to preserve intact the present
business organization, keep available, consistent with past practice, the
services of the present officers and employees and preserve the relationships
with customers, suppliers and others having business dealings with them.
(b) Dividends; Changes in Stock. Parent shall not (i) declare
or pay any dividends (including dividends in Parent Common Stock) on or make
other distributions in respect of any of its capital stock (including such a
distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar
transaction), except for regular quarterly cash dividends, (ii) split
(including a reverse split), combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (iii)
repurchase, redeem or otherwise acquire, or permit any Subsidiary to
repurchase, redeem or otherwise acquire, any shares of capital stock of Parent
or any of its Subsidiaries other than repurchases of Parent Common Stock
pursuant to the Repurchase Program and made prior to the ten (10) trading days
prior to the date of the first trading day used in calculating the Average
Parent Price.
(c) Issuance of Securities. Parent shall not, nor shall
Parent permit any of its Subsidiaries to, issue, transfer or sell, or authorize
or propose or agree to the issuance, transfer or sale of, any shares of its
capital stock of any class, any other equity interests or any securities
convertible into, or any rights, warrants, calls, subscriptions, options or
other rights or agreements, commitments or understandings to acquire, any such
shares, equity interests or convertible securities, other than (i) the issuance
of shares of Parent Common Stock upon the exercise of stock options or stock
grants pursuant to existing employee benefit plans,
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(ii) issuances by a wholly owned Subsidiary of its capital stock to its parent,
and (iii) the authorization and issuance of capital stock upon exercise of
Parent's existing rights plan and reservation for issuance of shares of capital
stock in addition to those presently reserved for issuance pursuant to Parent's
existing rights plan.
(d) Governing Documents. Parent shall not amend its Articles
of Incorporation or bylaws in a manner adverse to the Company or otherwise
inconsistent with the transactions contemplated hereby.
(e) Indebtedness. Parent shall not, nor shall it permit any
of its Subsidiaries to, incur (which shall not be deemed to include (i)
entering into credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements or (ii) refinancings of existing
indebtedness) any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of Parent or any of its Subsidiaries or guarantee
any obligations of others other than (w) in the ordinary course of business
consistent with past practice, (x) pursuant to existing credit or guaranty
agreements, (y) the Financing (as defined in Section 6.14) or (z) additional
indebtedness not to exceed $50,000,000 in the aggregate.
(f) Filings. Parent shall promptly provide the Company (or
its counsel) copies of all filings (other than those portions of filings under
the HSR Act which the Company has no reasonable interest in obtaining in
connection with the Merger) made by Parent with any Federal, state or foreign
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby and thereby.
(g) Accounting Policies and Procedures. Parent will not and
will not permit any of its Subsidiaries to change any of its accounting
principles, policies or procedures, except as may be required by generally
accepted accounting principles.
(h) Cooperation. Parent shall not take, nor permit Sub or any
of its other Subsidiaries to take, any action that would or is reasonably
likely to result in any of the conditions to the Merger set forth in Article
VII not being satisfied or that would materially impair the ability of Parent
or Sub to consummate the Merger in accordance with the terms hereof or
materially delay such consummation, and Parent shall promptly advise the
Company orally and in writing of any change in, or event with respect to, the
business or operations of Parent having, or which, insofar as can reasonably be
foreseen, could have, a material adverse effect on Parent and its Subsidiaries
taken as a whole.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Reasonable Efforts. Subject to the terms and conditions
of this Agreement, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under
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applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement including, without limitation, (i)
the prompt preparation and filing with the SEC of the S-4 and the Proxy
Statement, (ii) such actions as may be required to have the S-4 declared
effective under the Securities Act and to have the Proxy Statement cleared by
the SEC, in each case as promptly as practicable, including by consulting with
each other as to, and responding promptly to, any SEC comments with respect
thereto, (iii) the prompt preparation and filing of all necessary documents
under the HSR Act, (iv) such actions as may be required to have the applicable
waiting period under the HSR Act expire or terminate as promptly as
practicable, including by consulting with each other as to, and responding
promptly to any comments or requests for information with respect thereto, (v)
such actions as may be required to be taken under applicable state securities
or "blue sky" laws in connection with the issuance of shares of Parent Common
Stock contemplated hereby, and (vi) the distribution of the prospectus
constituting a part of the S-4 and the Proxy Statement to stockholders of the
Company. Each party shall promptly consult with the other and provide any
necessary information with respect to all filings made by such party with any
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
Section 6.2 Access to Information. Upon reasonable notice, each of
the Company and Parent shall (and shall cause its Subsidiaries to) afford to
the officers, employees, accountants, counsel and other representatives of the
other party, access, during normal business hours during the period prior to
the Effective Time, to all its properties, books, contracts, commitments and
records (with respect to the Company, to the extent relating to the Retained
Business), and, during such period, each of the Company and Parent shall (and
shall cause each of their respective Subsidiaries to) furnish promptly to the
other (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its business,
properties and personnel (with respect to the Company, to the extent related to
the Retained Business) as such other party may reasonably request. After the
Effective Time, upon reasonable notice, Parent shall cause the Surviving
Corporation and its Subsidiaries to afford to the officers, employees,
accountants, counsel and other representatives of Newco access, during normal
business hours, to the Surviving Corporation's and its Subsidiaries' books and
records which Newco may reasonably request in order to complete tax filings or
for other legitimate business purposes. Unless otherwise required by law, the
parties will hold any information made available pursuant to this Section 6.2
which is nonpublic in confidence in accordance with the confidentiality
agreement, dated August 9, 1996 (the "Confidentiality Agreement"), between
Parent and the Company.
Section 6.3 Stockholders Meetings.
(a) The Company shall call a meeting of its stockholders to be
held as promptly as practicable for the purpose of voting upon the approval and
adoption of this Agreement. The Company will, through its Board of Directors,
recommend to its stockholders approval and adoption of this Agreement and, if
the Company determines such approval to be necessary or appropriate, the
Distribution and shall use all reasonable efforts to hold such meeting as soon
as practicable after the date hereof; provided, however, that the Board of
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Directors of the Company may fail to make such a recommendation, or withdraw,
modify or change any such recommendation if it determines after receiving the
advice of outside counsel that making such recommendation, or that the failure
to withdraw, modify or change its recommendation, would be inconsistent with
its fiduciary duties under applicable law.
(b) Parent shall call a meeting of its stockholders to be held
as promptly as practicable for the purpose of voting upon the approval of the
issuance of the shares of Parent Common Stock to the Company's stockholders
pursuant to this Agreement. Parent will, through its Board of Directors,
recommend to its stockholders such approval and shall use all reasonable
efforts to hold such meeting as soon as practicable after the date hereof;
provided, however, that the Board of Directors of Parent may fail to make such
a recommendation, or withdraw, modify or change any such recommendation if it
determines after receiving the advice of outside counsel that making such
recommendation, or that the failure to withdraw, modify or change its
recommendation, would be inconsistent with its fiduciary duties under
applicable law.
Section 6.4 Legal Conditions to Distribution and Merger. Each of the
Company, Parent and Sub will use all reasonable efforts to comply promptly with
all legal requirements which may be imposed on it or its respective
Subsidiaries with respect to the Distribution and the Merger (which actions
shall include, without limitation, furnishing all information required under
the HSR Act and will promptly cooperate with and furnish information to each
other in connection with any such requirements imposed upon any of them or any
of their respective Subsidiaries in connection with the Distribution or the
Merger). Subject to the terms and conditions hereof, each of the Company,
Parent and Sub will, and will cause its Subsidiaries to, promptly use all
reasonable efforts to obtain (and will consult and cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party, required to
be obtained or made by such party in connection with the Distribution or the
Merger or the taking of any action contemplated thereby or by this Agreement or
the Distribution Agreement.
Section 6.5 Stock Exchange Listing. Parent shall use all reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger
to be approved for listing on either the NYSE or the NASDAQ National Market
System, depending on where the Parent Common Stock is listed as of the
Effective Time, and any other securities exchange on which shares of Parent
Common Stock may at such time be listed, subject to official notice of
issuance, prior to the Closing Date.
Section 6.6 Company Severance Obligations. Subject to the proviso in
the following sentence, the Company will pay with the proceeds of the Financing
(as defined in Section 6.14) or Newco will assume the transaction bonus and
severance payments arising out of the transactions contemplated by this
Agreement pursuant to any contract, agreement or arrangement of which the
Company or any of its Subsidiaries is a party, including, without limitation,
payments pursuant to the agreements listed in Section 6.6 of the Company
Disclosure Schedule. In no event shall Parent, any of its Subsidiaries or the
Surviving Corporation be responsible for any such payments, or be under any
obligation to honor or assume any such obligations; provided, however, Parent
and the Surviving Corporation shall assume and retain, with respect to
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the Retained Employees (as defined in Section 6.7), any and all severance
obligations that arise due to events or actions occurring after the Effective
Time.
Section 6.7 Employee Matters; Company Stock Plans.
(a) The Company and Parent agree that Parent will, to the
extent practicable, immediately after the Effective Time and for at least six
(6) months thereafter, permit the operating personnel of the Retained Business
and the other Company employees listed in Section 6.7 to the Parent Disclosure
Schedule who will remain in the employ of the Surviving Corporation after the
Effective Time (collectively, the "Retained Employees") (i) to participate in a
group health plan of Parent, or one of its Subsidiaries that similarly situated
employees of Parent participate, in accordance with the terms of the plan and,
subject to the approval of its stop-loss carrier on reasonable terms and
subject to applicable legal requirements, to waive any pre-existing condition
clause or waiting period requirement in such group health plan and to give
credit for deductible amounts paid by a Retained Employee during the current
deductible year of such group health plan while employed by the Company; (ii)
to participate in and receive credit under tax qualified retirement plans of
Parent or any of its Subsidiaries that similarly situated employees of Parent
participate, for which they are otherwise eligible, solely for eligibility and
vesting purposes, for their service with the Company, to the extent permitted
by applicable tax-qualification requirements; and (iii) to participate in other
benefit plans of Parent which are offered to similarly situated employees.
(b) Effective as of the Effective Time, each outstanding
option to purchase shares of Company Common Stock or to purchase Company
Convertible Debentures (a "Company Option") held by a Retained Employee under
the Company Stock Plans whether vested or unvested, exercisable or
unexercisable, shall be exchanged for an option (a "Parent Option") to purchase
the number of shares of Parent Common Stock equal to the product of (1) the
quotient of (x) the Average Company Stock Price, and (y) the Average Parent
Stock Price (the "Conversion Ratio") and (2) the number of shares of Company
Common Stock that the holder of such option would have been entitled to receive
had such holder exercised such option in full and in the case of a Company
Option exercisable for Company Convertible Debentures, converted such
convertible debentures into Company Preferred Stock and then into Company
Common Stock, (not taking into account whether or not such option or
convertible debenture was in fact exercisable) (rounded to the nearest whole
share) at an exercise price equal to the per share exercise price of such
Company Options divided by the Conversion Ratio (rounded to the nearest cent),
which Parent Option shall be subject to the same terms and conditions
(including the vesting schedule) as the Company Option; provided, however, that
the Parent Option shall be exercisable only for Parent Common Stock. The
obligations of the Company with respect to such Parent Options shall be
transferred to and assumed by Parent. For purposes of this Section 6.7(b), (i)
"Average Parent Stock Price" shall mean the average of the closing prices of
the Parent Common Stock on the New York Stock Exchange Composite Transactions
Reporting System or the NASDAQ National Market System, as the case may be, as
reported by The Wall Street Journal, for the 10 trading days immediately
proceeding the trading day prior to the date that the Company Common Stock
commences trading on an x-dividend basis with respect to the Distribution (the
"Measuring Period") and (ii) "Average Company Stock Price" shall mean the
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average of the closing prices of the Company Common Stock on the New York Stock
Exchange Composite Transactions Reporting System, as reported by The Wall
Street Journal, for the Measuring Period.
(c) As soon as practicable after the Effective Time, Parent
shall deliver to the Retained Employees having options exchanged pursuant to
Section 6.7(b) above appropriate notices setting forth their rights pursuant
thereto.
(d) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery under the options converted in accordance with this Section 6.7. As
soon as practicable after the Effective Time, Parent shall file a registration
statement on Form S-3 or Form S-8, as appropriate (or any successor or other
appropriate forms), or another appropriate form with respect to the shares of
Parent Common Stock subject to such options or, to the extent required by law
or in accordance with past practice, awards and shall use its best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options or awards remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Exchange Act, where
applicable, Parent shall administer the options exchanged pursuant to this
Section 6.7 in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent the applicable options complied with such rule prior
to the Merger.
(e) Nothing in this Agreement shall be construed to require
Parent or the Company to continue the employment of any Retained Employee for
any period of time, or, except as required by Section 6.7(a) above, to offer
any particular type or level of benefits to any employee. Nothing in this
Agreement shall prevent Parent or the Company from disciplining or terminating
any Retained Employee or from amending or terminating any benefit plans at any
time.
Section 6.8 Fees and Expenses. Subject to the Distribution Agreement,
whether or not the Merger is consummated and except as otherwise provided
herein, all fees, costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses; provided, however, that Parent and the Company shall each pay
one-half of the printing costs incurred with respect to the S-4 and the Proxy
Statement.
Section 6.9 Indemnification.
(a) The Company shall, and from and after the Effective Time
the Surviving Corporation shall, indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date of this Agreement
or who becomes prior to the Effective Time, an officer, director or employee of
the Company or any of its Subsidiaries (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses, liabilities or judgments, or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of, or in connection with, any
claim, action, suit, proceeding or
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investigation to the extent related to, or to the extent arising from, the
Retained Business and based in whole or in part on or arising in whole or in
part out of the fact that such person is or was a director, officer or employee
of the Company or any of its Subsidiaries, whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), in each case to the full extent a corporation is permitted under
the MBCA (notwithstanding the bylaws of the Company or the Surviving
Corporation) to indemnify its own directors, officers and employees, as the
case may be (and the Surviving Corporation will pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party to
the full extent permitted by law upon receipt of any affirmation and
undertaking contemplated by Section 8.53 of the MBCA). Without limiting the
foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether arising before
or after the Effective Time), (i) the Indemnified Parties may retain counsel
satisfactory to them with the consent of the Company (or the consent of the
Surviving Corporation after the Effective Time) which consent of the Company
(or, after the Effective Time, the Surviving Corporation) with respect to such
counsel retained by the Indemnified Parties may not be unreasonably withheld,
(ii) the Company (or after the Effective Time, the Surviving Corporation) shall
pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received, and (iii) the Company (or
after the Effective Time, the Surviving Corporation) will use all reasonable
efforts to assist in the vigorous defense of any such matter, provided that
neither the Company nor the Surviving Corporation shall be liable for any
settlement of any claim effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under this Section 6.9, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company or the
Surviving Corporation (but the failure so to notify shall not relieve the
Company or the Surviving Corporation from any liability which it may have under
this Section 6.9 except to the extent such failure materially prejudices such
party), and shall deliver to the Company (or after the Effective Time, the
Surviving Corporation) the affirmation and undertaking contemplated by Section
8.53 of the MBCA. The Indemnified Parties as a group may retain only one law
firm to represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties.
(b) The provisions of this Section 6.9 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives.
Section 6.10 No Solicitations. The Company will immediately cease any
existing discussions or negotiations conducted prior to the date hereof with
respect to any merger, consolidation, business combination, sale of a
significant amount of assets outside of the ordinary course of business, sale
of shares of capital stock outside of the ordinary course of business, tender
or exchange offer, spin-off, recapitalization or similar transaction involving
the sale of the Company or any of its Subsidiaries or divisions but excluding
those potential transactions set forth in Section 6.10 of the Company
Disclosure Schedule (an "Acquisition Transaction"). The Company, its
Subsidiaries and their respective directors and officers shall not, and its or
its Subsidiaries' affiliates, representatives and agents shall not, directly or
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indirectly, solicit any person, entity or group concerning any Acquisition
Transaction (other than the transactions contemplated by this Agreement);
provided that the Company may (i) furnish information or enter into
negotiations to the extent the Company's Board of Directors determines after
receiving the advice of outside counsel that the failure to do so would be
inconsistent with its fiduciary duties under applicable law and prior to
furnishing such information to, or entering into discussions or negotiations
with such person, entity or group the Company (x) provides immediate written
notice to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person, entity or group,
and (y) either enters into with such person, entity or group a confidentiality
agreement in reasonable, customary form on terms not more favorable to such
person, entity or group than the terms contained in the Confidentiality
Agreement or releases Parent from the standstill provisions of the
Confidentiality Agreement not applicable to such person; and (ii) recommend to
its stockholders a bona fide transaction or combination of transactions that
the Board of Directors determines after consulting with its legal and other
advisors is more favorable, from a financial point of view, to the stockholders
of the Company than the Distribution and the Merger (a "Higher Proposal"). The
Company agrees not to release any third party from its obligations, or grant
any consent, under any existing standstill provision relating to any
Acquisition Transaction or otherwise under any confidentiality or other
agreement without similarly releasing or granting a consent to Parent under the
Confidentiality Agreement.
Section 6.11 Distribution. Prior to the Closing, the Company will
enter into the Distribution Agreement in the form attached hereto with such
changes which are not adverse to Parent and Sub and cause Newco to enter into
the Distribution Agreement and the Company will take all action necessary to
effect the Distribution pursuant to the terms of the Distribution Agreement.
Section 6.12 Tax-Free Nature of Transactions. Each party agrees to
report the Transfer as a tax-free transaction under Section 332, 351 or 368(a)
of the Code, the Distribution as a tax-free distribution under Section 355 of
the Code and the Merger as a tax-free reorganization within the meaning of
Section 368(a)(1)(B) of the Code on all Tax Returns and other filings, and take
no position inconsistent therewith. The parties shall not, and shall not
permit any of their respective Subsidiaries to, take or cause or permit to be
taken, any action that would disqualify the Distribution as a tax-free
distribution under Section 355 of the Code, disqualify the Transfer as a
tax-free transaction under Section 332, 351 or 368(a) or disqualify the Merger
as a reorganization within the meaning of Section 368(a)(1)(B) of the Code,
excluding any action to be taken pursuant to this Agreement to effect the
Merger.
Section 6.13 Audited Closing Balance Sheet. No later than 45 days
after the Effective Date, Newco shall deliver to Parent an audited consolidated
balance sheet for the Retained Business at the earlier of the Effective Date or
December 31, 1996 after giving effect to the Distribution (but not to the
Financing (as defined in Section 6.14) or the Merger), which shall be audited
by Newco's independent public accountants as in accordance with generally
accepted auditing standards (the "Audited Closing Balance Sheet"). The Audited
Closing Balance Sheet shall be prepared in accordance with generally accepted
accounting principles on a basis consistent with the Company Financial
Statements. To the extent that the net working capital
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(current assets less current liabilities) of the Retained Business as shown on
the Audited Closing Balance Sheet is more or less than the estimated net
working capital as of the Effective Date certified pursuant to Section 6.14,
the Company shall pay to Newco, or Newco shall pay to the Company, the amount
of such excess or shortfall, respectively, in cash within five days of the
delivery of the Audited Closing Balance Sheet. The Company agrees that
representatives of Parent and Newco shall be given access to all work papers,
books, records and other information related to the preparation of the Audited
Closing Balance Sheet. In addition, the Company will authorize, and will use
all reasonable efforts to provide Parent and Newco with access to all work
papers of the Company's independent public accountants in connection with or
relating to their audit of the Audited Closing Balance Sheet.
Section 6.14 Financing. Parent will use its best efforts to assist the
Company in arranging a customary bank facility for the Company that will be
funded immediately prior to the Time of Distribution (as defined in the
Distribution Agreement) (the "Financing"). The Financing will be in an
aggregate amount equal to $150,000,000 plus (i) the product of (x) the lesser
of (A) $2.00 and (B) the amount, if any, by which the Average Parent Price is
less than $19.00 times (y) 6,904,762, plus (ii) the costs of obtaining the
Financing (including, without limitation, any commitment or agent fees,
reasonable attorney fees or other costs and expenses associated with the
Financing), plus (iii) the product of (x) $56,575 times (y) the number of
calendar days by which the Effective Date is after December 31, 1996, plus (iv)
the net cash used by the Retained Business after December 31, 1996 through the
Effective Date, minus (v) the unpaid balance as of the Effective Date of the
AMPRO Retrofit due under the Kellogg Agreement (as defined in Section 6.15)
(which unpaid balance as of July 31, 1996 is set forth in Section 6.15 of the
Company Disclosure Schedule), plus or minus (vi) the amount by which the
estimated net working capital of the Retained Business as of the earlier of the
Effective Date or December 31, 1996 as certified by the chief financial officer
of the Company is more or less, respectively, than $8,000,000. Without
qualifying Parent's obligations pursuant to the last sentence of this Section
6.14, the Financing will be on terms that are acceptable to Parent. The
parties agree that the proceeds of the Financing will be used to refinance in
full all outstanding debt of the Retained Business (other than accounts payable
incurred in the ordinary course of the Retained Business), as well as any and
all transaction, severance and other costs payable by the Company in connection
with the transactions contemplated by this Agreement. To the extent that the
proceeds of the Financing are not fully applied as set forth above, any
remaining proceeds may be contributed to Newco at the discretion of the
Company. The Company shall be responsible for the costs of obtaining the
Financing (including, without limitation, any commitment or agent fees,
reasonable attorney fees or other costs and expenses associated with the
Financing), although the parties recognize that Parent will incur costs related
to the Financing in connection with satisfying itself as to the terms and
conditions of the Financing. In the event that the Company's stockholders do
not approve the Merger, the Distribution and the other transactions
contemplated by this Agreement, the Company and Parent will reimburse each
other for one-half of any costs incurred by them in connection with the
Financing. In the event this Agreement is terminated for any other reason,
Parent shall be responsible for and reimburse the Company for any costs
reasonably incurred in connection with the Financing. In the event that the
Company is unable to arrange a bank facility for the Financing, Parent will be
responsible for arranging alternative funds from an independent, unrelated
third party for the Financing.
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Section 6.15 AMPRO Facility. The Company shall use all reasonable
efforts to cause the capital improvements to the Company's AMPRO Facility
currently in progress (the "AMPRO Retrofit") as set forth in that certain
contract dated September 7, 1995 between the Company and M.W. Kellogg (the
"Kellogg Agreement") to be completed (including plant shutdowns, tie-ins and
resumption of operations) by December 31, 1996 (with performance testing to be
completed after December 31, 1996) on the terms and conditions set forth in the
Kellogg Agreement. Section 6.15 of the Company Disclosure Schedule sets forth
the unpaid balance of the cost of completion of the AMPRO Retrofit as of July
31, 1996 under the Kellogg Agreement. If despite the Company's reasonable
efforts, the AMPRO Retrofit is not mechanically complete and ready for tie-ins
to be made during the time of turnaround scheduled for December 1, 1996 through
December 15, 1996 then the turnaround shall be delayed until such time as the
AMPRO Retrofit can be mechanically completed and made ready for tie-ins during
the turnaround period.
Section 6.16 Comfort Letters.
(a) The Company shall use all reasonable efforts to cause KPMG
Peat Marwick LLP, the Company's independent public accountants, to deliver a
letter dated as of the date of the Proxy Statement, and addressed to itself and
Parent and their respective Boards of Directors, in form and substance
reasonably satisfactory to Parent, and customary in scope and substance for
agreed-upon procedures letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to the S-4
and the Proxy Statement.
(b) Parent shall use all reasonable efforts to cause Arthur
Andersen & Co., the Parent's independent public accountants, to deliver a
letter dated as of the date of the Proxy Statement, and addressed to itself and
the Company and their respective Boards of Directors, in form and substance
reasonably satisfactory to the Company, and customary in scope and substance
for agreed-upon procedures letters delivered by independent public accountants
in connection with registration statements and proxy statements similar to the
S-4 and the Proxy Statement.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of the parties to effect the Merger are
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) Stockholder Approvals. This Agreement shall have been
approved and adopted by (i) the affirmative vote of the holders of at least a
majority of the outstanding shares of Company Common Stock and (ii) the
affirmative vote of the holders of at least a majority of
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the shares of Parent Common Stock present, in person or by proxy, and entitled
to vote at the meeting of stockholders of Parent referred to in Section 6.3(b)
for which a quorum exists.
(b) Stock Exchange Listing. The shares of Parent Common Stock
issuable to the Company's stockholders pursuant to this Agreement shall have
been authorized for listing on the NYSE or the NASDAQ National Market System,
if Parent Common Stock has not been listed on the NYSE, upon official notice of
issuance.
(c) Other Approvals. Other than the filing of the Articles of
Merger provided for by Section 1.2, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity or other public or private third
party, the failure of which to obtain would have a material adverse effect on
Parent and its Subsidiaries or the Surviving Corporation and its Subsidiaries,
in each case taken as a whole, shall have been filed, occurred or been
obtained. Parent shall have received all state securities or "blue sky"
permits and other authorizations necessary to issue the Parent Common Stock
pursuant to this Agreement.
(d) Registration Statement. The S-4 shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceeding by the SEC seeking a stop order.
(e) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or the Distribution shall be in effect (each
party agreeing to use all reasonable efforts to have any such order reversed or
injunction lifted).
(f) HSR Approval. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
(g) Consummation of the Distribution. The Distribution shall
have become effective in accordance with the Distribution Agreement.
Section 7.2 Conditions of Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions
unless waived by Parent and Sub:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the Closing Date as though made on and as of the
Closing Date, except to the extent such representations and warranties speak as
of an earlier date (in which case, such representations and warranties shall be
true and correct in all material respects as of such earlier date) and except
as otherwise contemplated by this Agreement, and Parent shall have received a
certificate signed on behalf of the Company by the chief financial officer of
the Company to such effect.
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(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement and the Distribution Agreement at or prior
to the Closing Date, and Parent shall have received a certificate signed on
behalf of the Company by the chief financial officer of the Company to such
effect.
(c) Opinion of Counsel. Parent shall have received the
opinion of Skadden, Arps, Slate, Meagher & Flom or Baker, Donelson, Bearman &
Caldwell substantially to the effect set forth in Section 7.2(c) of the Company
Disclosure Schedule.
(d) Opinion of Tax Counsel. Parent shall have received the
opinion of Hughes & Luce, L.L.P. to the effect the Merger qualifies as a
tax-free reorganization within the meaning of Section 368(a) of the Code.
(e) Opinion of Counsel Regarding the Distribution. Parent
shall have received the opinion of Skadden, Arps, Slate, Meagher & Flom to the
effect that the Transfer qualifies as one or more tax-free transactions under
one or more of Sections 332, 351, and 368(a)(1)(D) of the Code and that the
Distribution qualifies as a tax-free distribution under Section 355 of the
Code.
(f) Indebtedness of the Retained Business. As of the
Effective Time, the Retained Business shall have no outstanding Indebtedness,
other than the Financing. The term "Indebtedness" shall mean any indebtedness
for borrowed money, indebtedness evidenced by a note or other instrument,
capitalized lease obligations, obligations for the deferred purchase price of
assets or direct or indirect guarantees of any of the foregoing.
(g) Company Options. At the Effective Time, all Company
Options, other than Company Options held by Retained Employees, shall have been
terminated or exchanged for Newco Options or shall have been fully assumed by
Newco.
Section 7.3 Conditions of Obligations of the Company. The obligation
of the Company to effect the Merger is subject to the satisfaction of the
following conditions, on or prior to the Closing Date, unless waived by the
Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub contained in this Agreement shall be true and
correct in all material respects as of the Closing Date as though made on and
as of the Closing Date, except to the extent such representations and
warranties speak as of an earlier date (in which case, such representations and
warranties shall be true and correct in all material respects as of such
earlier date) and except as otherwise contemplated by this Agreement, and the
Company shall have received a certificate signed on behalf of Parent and Sub by
the chief financial officer of Parent and Sub, respectively, to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and
Sub shall have performed in all material respects all obligations required to
be performed by them under this
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Agreement at or prior to the Closing Date, and the Company shall have received
a certificate signed on behalf of Parent by the chief financial officer of
Parent to such effect.
(c) Opinion of Counsel. The Company shall have received the
opinion of Hughes & Luce, L.L.P. substantially to the effect set forth in
Section 7.3 of the Parent Disclosure Schedule. In giving such opinion, Hughes
& Luce, L.L.P. may rely as to matters of Mississippi law on opinions of local
counsel reasonably satisfactory to the Company.
(d) Opinion of Tax Counsel. The Company shall have received
an opinion of Skadden, Arps, Slate, Meagher & Flom to the effect that the
Merger qualifies as a tax-free reorganization within the meaning of Section
368(a) of the Code, that the Transfer qualifies as one or more tax-free
transactions under one or more of Sections 332, 351, and 368(a)(1)(D) of the
Code and that the Distribution qualifies as a tax-free distribution under
Section 355 of the Code.
(e) Financing. The Financing shall have been obtained by the
Company; the Financing shall have been funded; and the proceeds of the
Financing shall have been applied pursuant to Section 6.14 and the Distribution
Agreement.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Merger and
this Agreement by the stockholders of the Company:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not
have been consummated before March 31, 1997 (unless the failure to so
consummate the Merger by such date shall be due to the action or failure to act
of the party seeking to terminate this Agreement);
(c) by either Parent or the Company if the Average Parent
Price is less than $17.00;
(d) by Parent, upon a material breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue in any material respect, in either case such that the conditions
set forth in Section 7.2(a) or Section 7.2(b) of this Agreement, as the case
may be, would be incapable of being satisfied by March 31, 1997; provided, that
in any case, a willful breach shall be deemed to cause such conditions to be
incapable of being satisfied for purposes of this Section 8.1(c) if such
willful breach shall not
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have been remedied within ten (10) days after receipt by the Company of written
notice from Parent specifying the nature of such willful breach and requesting
that it be remedied;
(e) by the Company, upon a material breach of any
representation, warranty, covenant or agreement on the part of Parent set forth
in this Agreement, or if any representation or warranty of Parent shall have
become untrue in any material respect, in either case such that the conditions
set forth in Section 7.3(a) or Section 7.3(b) of this Agreement, as the case
may be, would be incapable of being satisfied by March 31, 1997; or provided,
that in any case, a willful breach shall be deemed to cause such conditions to
be incapable of being satisfied for purposes of this Section 8.1(d) if such
willful breach shall not have been remedied within ten (10) days after receipt
by Parent of written notice from the Company, specifying the nature of such
willful breach and requesting that it be remedied;
(f) by Parent if (i) the Company's stockholders do not approve
the Merger and this Agreement at the meeting required under Section 6.3(a)
hereof, (ii) Parent's stockholders do not approve the issuance of the shares of
Parent Common Stock to the Company's stockholders pursuant to this Agreement at
the meeting required under Section 6.3(b) or (iii) the Company withdraws,
amends or modifies in a manner adverse to Parent its favorable recommendation
of the Merger; or
(g) by the Company if (i) the Company's stockholders do not
approve the Merger and this Agreement at the meeting required under Section
6.3(a) hereof, (ii) Parent's stockholders do not approve the issuance of the
shares of Parent Common Stock to the Company's stockholders pursuant to this
Agreement at the meeting required under Section 6.3(b), (iii) the Company has
received a proposal for an Acquisition Transaction that it advises Parent in
writing the Company wishes to accept or (iv) the Financing has not been
arranged by December 31, 1996.
Section 8.2 Effect of Termination. In the event of a termination of
this Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their affiliates or
respective officers or directors, other than the provisions of Section 8.3;
provided, however, that any such termination shall not relieve any party from
liability for willful breach of this Agreement (including, without limitation,
a willful breach of Section 6.14 by Parent) or from its obligations under the
Confidentiality Agreement.
Section 8.3 Termination Fee. If (a)(i) Parent terminates this
Agreement pursuant to Section 8.1(f)(iii) or (ii) the Company terminates this
Agreement pursuant to 8.1(g)(iii) and (b) within one year after such
termination, the Company enters into an agreement, letter of intent or binding
arrangement with respect to an Acquisition Transaction or an Acquisition
Transaction occurs (provided, however, that in the case of an Acquisition
Transaction involving only Newco or any of its Subsidiaries (a "Newco
Acquisition Transaction"), payment hereunder will be due only if the Company
began discussions or negotiations, received a proposal or indication of
interest or entered into an agreement, letter of intent or binding arrangement
with respect to such Newco Acquisition Transaction prior to the termination of
this Agreement), the Company will
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pay to Parent within one business day following the execution and delivery of
such agreement or letter of intent or the entering into of such an arrangement
or the occurrence of such Acquisition Transaction, as the case may be, a fee,
in cash, of $8,000,000; provided, however, that the Company in no event will be
obligated to pay more than one such $8,000,000 fee with respect to all such
agreements and occurrences and such termination and such fee shall be the
exclusive remedy of Parent for the transactions contemplated hereby upon
termination of this Agreement pursuant to Section 8.1(f)(iii) or Section
8.1(g)(iii) and shall be deemed inclusive of expenses incurred by Parent. Upon
the payment of the $8,000,000 to Parent in accordance with this Section 8.3,
the Company shall have no further liability with respect to the transactions
contemplated hereby.
Section 8.4 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection
with the Merger by the stockholders of the Company or of Parent; provided that
(i) after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval and (ii)
after the Effective Time, this Agreement may be amended only with the written
consent of Newco. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 8.5 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by the respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions contained here. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations and Warranties. None of
the representations or warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.1 shall not limit any covenant or agreement of the parties set forth
in this Agreement or in any instrument delivered pursuant to the terms hereof.
Section 9.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given on the date delivered if
delivered personally (including by reputable overnight courier), on the date
transmitted if sent by facsimile (which is confirmed) or mailed by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
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(a) if to Parent or Sub, to
Mississippi Chemical Corporation
Owen Cooper Administration Building
Highway 49 East
Yazoo City, Mississippi 39194
Attn: Robert E. Jones
Facsimile: (601) 751-2912
Confirmation: (601) 751-2930
with a copy to
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attn: Alan J. Bogdanow
Facsimile: (214) 939-6100
Confirmation: (214) 939-5500
and
(b) if to the Company, to
First Mississippi Corporation
700 North Street
Jackson, Mississippi 39215-1249
Attn: Michael Summerford
Facsimile: 601) 948-7550
Confirmation: (601) 949-9876
with a copy to
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
Attn: Charles W. Mulaney, Jr.
Facsimile: (312) 407-0411
Confirmation: (312) 407-0700
Section 9.3 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
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followed by the words "without limitation." The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available. The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 27, 1996.
Section 9.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when a counterpart has been signed by each of the
parties and delivered to each of the other parties, it being under stood that
all parties need not sign the same counterpart.
Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein,
including the Distribution Agreement) and the Confidentiality Agreement (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof, and (b) except as provided in Section 6.9,
are not intended to confer upon any person other than the parties hereto and
thereto any rights or remedies hereunder or thereunder; provided that after the
Effective Time, Newco may enforce the obligations of Parent, Sub or the Company
under this Agreement.
Section 9.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Mississippi without
regard to any applicable conflicts-of-law principles.
Section 9.7 Specific Performance. The parties hereto agree that if
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would
occur, no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or equity.
Section 9.8 Publicity. Except as otherwise required by law or the
rules of the NYSE or the NASDAQ National Market System, for so long as this
Agreement is in effect and then with as much advance notice to the other party
as is practicable under the circumstances, neither the Company nor Parent
shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the consent of the
other party, which consent shall not be unreasonably withheld or delayed.
Section 9.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights hereunder to any direct or indirect wholly
owned Subsidiary of Parent, and after the Effective Time, Newco shall be
entitled to enforce the obligations of Parent, Sub and the Company pursuant to
this Agreement (including the documents and instruments referred to herein) and
the Confidentiality Agreement. Subject to the
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preceding sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.
Section 9.10 Attorney-Client Privilege; Work Product. Anything herein
or in the Distribution Agreement notwithstanding, except with respect to
matters addressed in the opinion referred to in Section 7.3(d) hereof, the
transactions contemplated hereby and by the Distribution Agreement shall not be
deemed to transfer to Parent, Sub or the Surviving Corporation any right to
waive, nor shall they be deemed to waive, any attorney-client privilege between
the Company, the present officers and directors of the Company or Newco and
their legal counsel with respect to legal advice concerning the transactions
contemplated hereby and by the Distribution Agreement, in either case
concerning privileged communications (or work product related thereto) at any
time prior to the Closing Date. Parent, Sub and the Surviving Corporation and
their successors and assigns shall not be entitled to waive or have access, nor
shall they attempt to waive or seek access, to any privileged communication (or
work product related thereto) between the Company, the present officers and
directors of the Company or Newco and their legal counsel relating to the
Merger or the Distribution or matters relating to Newco, its subsidiaries and
their respective businesses.
Section 9.11 Other. Except as otherwise provided for herein and the
other agreements to be entered into in connection herewith as to which Parent
and the Company agree that neither of them has a cause of action against the
other for violation of the parties rights with respect to Triad, it is
expressly understood and agreed that this Agreement and any other agreement to
be entered into in connection herewith shall not affect in any way and shall be
without prejudice to and with full reservation of Parent's and the Company's
rights with respect to Triad. Nothing in this Agreement or any other agreement
to be entered into in connection herewith shall constitute an acknowledgment by
either Parent or the Company of the existence and enforceability of any such
rights.
Section 9.12 Further Assurances. Subject to the terms and conditions
hereof and, as applicable, of the Distribution Agreement, the Company and
Parent will, and will cause their respective Subsidiaries to, do such
additional things as are necessary or proper to carry out and effectuate the
intent of this Agreement or any part hereof or the transactions contemplated
hereby, including, without limitation, the providing of reasonable transition
assistance services by Newco at cost to the Surviving Corporation for a period
not to exceed one year after the Effective Time.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
and Plan of Merger and Reorganization to be signed by their respective officers
thereunto duly authorized as of the date first written above.
MISSISSIPPI CHEMICAL CORPORATION
By: /s/ Robert E. Jones
--------------------------------
Name: Robert E. Jones
Title: Senior Vice President and
General Counsel
MISS SUB, INC.
By: /s/ Robert E. Jones
--------------------------------
Name: Robert E. Jones
Title: Vice President
FIRST MISSISSIPPI CORPORATION
By: /s/ R. Michael Summerford
--------------------------------
Name: R. Michael Summerford
Title: Vice President and Chief
Financial Officer
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EXHIBIT 10.14
SEVERANCE AGREEMENT
AGREEMENT made and effective as of the 29th day of July, 1996, by
and between MISSISSIPPI CHEMICAL CORPORATION (the "Company") and
______________________ (the "Executive").
The Company has determined that the Executive's performance, the
Company's ability to retain Executive as an employee, and the Executive's
impartial assistance to the Company's Board of Directors in the evaluation of
any potential mergers, acquisitions, sales or similar transactions will be
significantly enhanced if Executive is provided with fair and reasonable
protection from the risks of a termination of employment following a Change in
Control of the Company. Accordingly, the Company and Executive agree as
follows:
1. Defined Terms.
Unless otherwise indicated, capitalized terms used in this
Agreement shall have the meanings set forth herein or in Schedule A.
2. Effective Date; Term.
This Agreement shall be effective on the date hereof and
shall remain in effect until the Company terminates this Agreement by giving
Executive at least one (1) year advance written notice of termination.
Notwithstanding the foregoing, this Agreement shall, if in effect on the date
of a Change of Control, remain in effect for at least three (3) years following
such Change of Control, and such additional time as may be necessary to give
effect to the terms of the Agreement.
3. Change-of-Control Benefits.
Subject to Sections 5 and 8 below, if Executive's
employment with the Company is terminated (i) at any time within the three (3)
years following a Change of Control by the Company without Cause, (ii) by
Executive for any reason within ninety (90) days following any Change of
Control, or (iii) at any time within three (3) years following a Change in
Control by Executive for Good Reason (the effective date of any such
termination hereafter referred to as the "Termination Date"), Executive shall
be entitled to the benefits provided hereunder. If Executive's employment by
the Company is terminated prior to a Change of Control at the request of any
party acquiring control of the Company or in contemplation of a Change of
Control, Executive's Termination Date shall be deemed to have occurred
immediately following the Change of Control, and the Executive shall be
entitled to the benefits provided herein.
(a) Severance Payments. Subject to Sections 5
and 8 below, within two (2) business days after the Termination
Date, Company shall pay Executive a lump sum amount, equal to:
(i) three (3) times Executive's per
annum base salary in effect on the date of the Change of
Control or the Termination Date, whichever is higher
("Base Salary");
(ii) Executive's Target Bonus for the
current fiscal year multiplied by a fraction, the
numerator of which shall be the number of days Executive
was employed by the Company in the fiscal year in which
the Termination Date occurs and the denominator of which
shall be 365, and
(iii) Thirty-six (36) months of
premiums (determined by the Company in accordance with its
Consolidated Omnibus Budget Reconciliation Act ("COBRA")
continuation procedures) under the Company's group medical
and dental plans at the highest level provided to
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Executive during the period beginning immediately prior to
the Change of Control and ending on the Termination Date.
(b) Continued Benefits. Until the earlier of
the third anniversary of the Termination Date or the date on which
Executive becomes covered under another group health plan with no
preexisting condition exclusion, Company shall allow Executive and
his/her spouse and dependents to purchase medical and/or dental
coverage under Company's group health plan's and dental COBRA
continuation coverage procedures (without regard to whether the
Executive and his/her spouse and dependents would be entitled to
such continuation coverage for such period of time by law or under
the plan). Provided, however, that if Executive becomes employed
by a new employer which maintains a major medical plan (or dental
plan) that either (i) does not cover Executive with respect to a
preexisting condition which was covered under the Company's major
medical plan, or (ii) does not cover Executive for a designated
waiting period, Executive's coverage under the Company's major
medical plan (or dental plan) shall continue (but shall be limited
in the event of noncoverage due to a preexisting condition, to the
preexisting condition itself) until the earlier of the end of the
applicable period of noncoverage under the new employer's plan or
the third anniversary of the Termination Date. Until July 28,
2006, the Company, at its own expense, shall provide Executive
with life insurance, disability and accidental death and
dismemberment benefits at the highest level provided to Executive
during the period beginning immediately prior to the Change of
Control and ending on the Termination Date.
(c) Payment of Accrued But Unpaid Amounts.
Within two (2) business days after the Termination Date, Company
shall pay Executive any unpaid portion of compensation previously
earned by Executive.
(d) Effect of Existing Plans. All
Change-of-Control provisions applicable to Executive and contained
in any plan, program, agreement or arrangement maintained on or
after the date hereof by the Company (including, but not limited
to, the Company's Supplemental Benefit Plan and any stock option,
restricted stock or pension plan) shall remain in effect for such
period after the date of a Change of Control as is necessary to
carry out such provisions and provide the benefits payable
thereunder, and may not be altered in a manner which adversely
affects Executive without Executive's prior written approval. No
benefits shall be paid to Executive, however, under any severance
plan maintained generally for the employees of the Company if
Executive is eligible to receive benefits under this Section 3.
(e) Outplacement Counseling. The Company
shall reimburse all reasonable expenses incurred by Executive for
professional outplacement services by qualified consultants
selected by Executive.
4. Mitigation.
Executive shall not be required to seek other employment
after termination and any compensation earned from other employment shall not
reduce the amounts otherwise payable under this Agreement.
5. Limitation on Payments.
(a) Notwithstanding Section 3 above or any other
provision of this Agreement or any other agreement, arrangement or
plan, in no event shall the Company pay or be obligated to pay the
Executive an amount which would be an Excess Parachute Payment
except as provided in Section 5(f) below. For purposes of this
Agreement, the term "Excess Parachute Payment" shall mean any
payment or any portion thereof which would be an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Internal
Revenue Code of 1986, as amended ("Code"), and would result in the
imposition of an excise tax under Section 4999 of the Code, in the
opinion of tax counsel selected by the Company, which counsel is
reasonably acceptable to the Executive ("Tax Counsel"). In the
event it is determined that an Excess Parachute Payment would
result if the full payments provided in Section 3 above were made
(when added to any other payments or benefits contingent on a
change of control under any other agreement,
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arrangement or plan), the payments due under Section 3(a) shall be
reduced to the minimum extent necessary to prevent an Excess
Parachute Payment; then, if necessary to prevent an Excess
Parachute Payment, benefits or payments under any other plan,
agreement or arrangement shall be reduced, and then benefits
payable under Section 3(b). If it is established pursuant to a
final determination of a court or an Internal Revenue Service
administrative appeals proceeding that, notwithstanding the good
faith of the Executive and the Company in applying the terms of
this Section 5(a), a payment (or portion thereof) made is an
Excess Parachute Payment, then, the Company shall pay to the
Executive an additional amount in cash (a "Gross-Up Payment")
equal to the amount necessary to cause the amount of the aggregate
after-tax compensation and benefits received by the Executive
hereunder (after payment of the excise tax under Section 4999 of
the Code with respect to any Excess Parachute Payment, and any
state and federal income taxes with respect to the Gross-Up
Payment) to be equal to the aggregate after-tax compensation and
benefits he would have received as if Sections 280G and 4999 of
the Code had not been enacted.
(b) Subject to the provisions of Section 5(c), the
amount of any Gross-Up Payment and the assumptions to be utilized
in arriving at such amount, shall be determined by a nationally
recognized certified public accounting firm designated by the
Company (the "Accounting Firm"). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to Section 5(a), shall be paid by
the Company to the Executive within five (5) days after the
receipt of the Accounting Firm's determination. Any determination
by the Accounting Firm shall be binding upon the Company and
Executive.
(c) Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by Company of a Gross-Up Payment. Such
notification shall be given no later than ten (10) business days
after Executive is informed in writing of such claim and shall
apprise the Company of the nature of the claim and the date of
requested payment. Executive shall not pay the claim prior to the
expiration of the thirty (30) day period following the date on
which it gives notice to the Company. If the Company notifies
Executive in writing prior to the expiration of the period that it
desires to contest such claim, Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to such
claim;
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney selected by the Company and
reasonably acceptable to Executive;
(iii) cooperate with the Company in good faith
in order to effectively contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim.
Without limitation on the foregoing provisions of this Section
5(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Executive to
pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such
contest to a determination before any administration tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold
Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of the contest; provided, further, that if the
Company directs Executive to pay any claim and sue for a refund,
the Company shall advance the amount of the payment to Executive,
on an interest-free basis, and shall
3
<PAGE> 4
indemnify and hold Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to the
advance or with respect to any imputed income with respect to
the advance.
(d) In the event that the Company exhausts its
remedies pursuant to Section 5(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Gross-Up Payment
required and such payment shall be promptly paid by the
Company to or for the benefit of Executive.
(e) If, after the receipt of Executive of an
amount advanced by the Company pursuant to Section 5(c),
Executive becomes entitled to receive any refund with respect
to such claim, Executive shall promptly after receiving such
refund pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 5(c), a
determination is made that Executive shall not be entitled to
any refund with respect to such claim and the Company does not
notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
(f) Notwithstanding the foregoing, the limitation
set forth in Section 5(a) shall not apply to a Participant if
in the opinion of Tax Counsel or the Accounting Firm (i) the
total amounts payable to the Participant hereunder and under
any other agreement, arrangement or plan as a result of a
change of control (calculated without regard to the limitation
of Section 5(a)), reduced by the amount of excise tax imposed
on the Executive under Code Section 4999 with respect to all
such amounts and reduced by the state and federal income taxes
on amounts paid in excess of the limitation set forth in
Section 5(a), would exceed (ii) such total amounts payable
after application of the limitation of Section 5(a). No
Gross-Up Payment shall be made in such case.
6. Termination for Cause.
Nothing in this Agreement shall be construed to
prevent the Company from terminating Executive's employment for Cause. If
Executive is terminated for Cause, Company shall have no obligation to make any
payments under this Agreement, except for payments that may otherwise be
payable under then-existing employee benefit plans, programs and arrangements
of the Company.
7. Indemnification; Director's and Officer's Liability
Insurance.
Executive shall, after the Termination Date, retain
all rights to indemnification under applicable law, under the terms of any
other written plan or agreement, or under the Company's Articles of
Incorporation or Bylaws, as they may be amended or restated from time to time.
In addition, the Company shall maintain continuing directors' and officers'
liability coverage (tail coverage) for Executives who have served as directors
and officers prior to the Termination Date, with respect to acts or failures to
act prior to the Termination Date, at the level in effect immediately prior to
the Termination Date for a three (3) year period following the Termination Date
or until expiration of applicable limitations periods, if later.
8. Executive Covenants.
(a) Confidential Information. During the twelve
(12) month period following the Termination Date, Executive
shall not disclose to any person, or use to the significant
disadvantage of any of the Company or its subsidiaries
(hereinafter collectively the "Company" for purposes of this
Section 8), any nonpublic information relating to business
plans, marketing plans, customers or employees of the Company
other than information the disclosure of which cannot
reasonably be expected to adversely affect the business of the
Company ("Confidential Information"), provided, that nothing
contained in this Section
4
<PAGE> 5
8 shall prevent Executive from being employed by a competitor
of the Company or utilizing Executive's general skills,
experience, and knowledge, including those developed while
employed by the Company.
(b) Release. In consideration for the protection
and benefits provided for under this Agreement, Executive
hereby agrees to execute a release substantially in the form
of Schedule B. Payment of a portion of the benefits under
Section 3(a) (after any reduction in benefits under Section 5)
equal to two times Executive's Base Salary is expressly
conditioned on Executive's execution of such release. In the
event the Executive fails or refuses to execute such release,
the amount payable to the Executive under Section 3(a) shall
be reduced (after any reduction in benefits under Section 5)
by an amount equal to two times the Executive's Base Salary.
9. Disputes.
Any disputes or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Jackson, Mississippi, or, at the option of Executive, in the county where
Executive then resides, in accordance with the Rules of the American
Arbitration Association then in effect. Judgment may be entered on an
arbitrator's award relating to this Agreement in any court having jurisdiction.
10. Costs of Proceedings.
The Company shall pay all costs and expenses,
including reasonable attorneys' fees and disbursements, at least monthly, of
Executive in connection with any arbitration or legal proceeding related
hereto, whether or not instituted by the Company or Executive, relating to the
interpretation or enforcement of any provision of this Agreement, except that
if Executive instituted the proceeding and the judge, arbitrator or other
individual presiding over the proceeding affirmatively finds that Executive
instituted the proceeding in bad faith, Executive shall pay all costs and
expenses, including attorneys' fees and disbursements, of Executive.
11. Assignment.
Except as otherwise provided herein, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the
Company and Executive and their respective heirs, legal representatives,
successors and assigns. If the Company shall be merged into or consolidated
with another entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the entity surviving such merger or resulting from such
consolidation. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
The provisions of this Section 11 shall continue to apply to each successive
employer of Executive hereunder in the event of any merger, consolidation or
transfer of assets of a successor employer.
12. Withholding.
Notwithstanding the provisions of Sections 4 and 5
hereof, Company may, to the extent required by law, withhold applicable
federal, state and local income and other taxes from any payments due to
Executive hereunder.
13. Applicable Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Mississippi applicable to contracts
made and to be performed therein.
5
<PAGE> 6
14. Entire Agreement.
This Agreement constitutes the entire agreement
between the parties and, except as expressly provided herein, supersedes all
other prior agreements concerning the effect of a Change of Control on the
relationship between the Company and Executive. This Agreement may be changed
only by a written agreement executed by the Company and Executive.
* *
The parties have executed this Agreement as of the 29th day of
July, 1996.
MISSISSIPPI CHEMICAL CORPORATION
By:
-------------------------------------
Chairman, Compensation Committee
---------------------------------------
("Executive")
6
<PAGE> 7
SCHEDULE A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a different
meaning, the following terms, when capitalized, have the meaning indicated:
"Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company (other than
any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered
to the Executive by the Board which specifically identifies the manner in
which the Board believes that the Executive has not substantially performed
the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The
termination of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good-faith opinion of the Board, the Executive
is guilty of the conduct described in subparagraph (i) or (ii) above and
specifying the particulars thereof in detail.
"Change of Control" shall mean the first to occur of any of the following
dates:
(1) (A) any consolidation or merger of the Company in
which the Company is not the continuing or
surviving corporation or pursuant to which shares
of the Company's common stock would be converted
into cash, securities or other property, other
than any consolidation or merger of the Company
in which the holders of the Company's common
stock immediately prior to the consolidation or
merger own at least sixty percent (60%) of the
outstanding voting securities of the surviving
corporation immediately after the consolidation
or merger;
(B) any sale, or other transfer of all, or
substantially all, of the assets of the Company,
other than any sale, lease, or other transfer to
any corporation where the Company or the holders
of the Company's common stock immediately prior
to such, lease or other transfer owns, directly
or indirectly, at least eighty percent (80%) of
the outstanding voting securities of the
corporation after the transfer; or
(C) the Company's Board of Directors votes to approve
any plan or proposal for the liquidation or
dissolution of the Company.
(2) the date any person (as such term as used in Section 13(d)
of the Securities Exchange Act of 1934, hereinafter the "1934 Act"), other
than one or more trusts established by the Company for the
A-1
<PAGE> 8
benefit of employees of the Company or its subsidiaries, shall become the
beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act) of
twenty-five percent (25%) or more of the Company's outstanding common
stock; or
(3) the date, during any period of twenty-four (24)
consecutive months, on which individuals who at the beginning of such
period constitute the entire Board of Directors of the Company shall cease
for any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new director
comprising the majority was approved by a vote of at least a majority of
the Continuing Directors in office on the date of such election or
nomination for election of the new director. For purposes hereof, a
"Continuing Director" shall mean:
(A) any member of the Board of Directors at the close
of business on July 17, 1996;
(B) any member of the Board who succeeds any
Continuing Director described in subparagraph (A)
above if such successor was elected, or nominated
for election by the Company's stockholders, by a
majority of the Continuing Directors then still
in office; or
(C) any director elected, or nominated for election
by the Company's stockholders to fill any vacancy
or newly created directorship on the Board of
Directors of the Company by a majority of the
Continuing Directors then still in office.
"Good Reason" shall mean any of the following actions, without Executive's
express prior written approval, other than due to Executive's permanent
disability;
(1) any diminution in Executive's titles, duties,
responsibilities or status from the positions, duties, responsibilities or
status existing immediately prior to a Change of Control;
(2) the removal of Executive from, or any failure to re-elect
Executive to, any of the offices Executive held immediately prior to a
Change of Control;
(3) the failure of the Company to pay Executive any
compensation when due;
(4) any reduction of Executive's base salary or Target Bonus;
(5) any material reduction in Executive's employee or fringe
benefits; or
(6) the change of Executive's principal place of employment to
a location more than fifty (50) miles from Executive's principal place of
employment immediately prior to the Change of Control.
For purposes of this Severance Agreement, the term "permanent disability" shall
mean a disability which results in the Executive's entitlement to long-term
disability benefits under the Company's Long Term Disability Plan.
"Target Bonus" shall mean the amount which the Executive would have
received pursuant to the Company's Officer Incentive Plan ("Plan") following
the end of the fiscal year in which the Termination Date occurs if (a) the
Executive had remained employed through the end of such fiscal year, (b)
Operating Income as a Percent of Capital for such fiscal year had exceeded the
Weighted Average Cost of Capital by an amount sufficient to permit the maximum
discretionary bonus pursuant to the Plan, and (c) the Executive had been
granted the maximum discretionary bonus pursuant to the Plan.
A-2
<PAGE> 9
SCHEDULE B
COMPLETE RELEASE
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, I do hereby irrevocably and unconditionally release,
acquit and forever discharge Mississippi Chemical Corporation (the "Company")
and each of its owners, partners, stockholders, predecessors, successors,
assigns, agents, directors, officers, employees, representatives, attorneys,
parent companies, holding companies, divisions, subsidiaries, affiliates,
related entities (and agents, directors, officers, employees, representatives,
fiduciaries and attorneys of such parent companies, holding companies,
divisions, subsidiaries, affiliates, employee benefit plans and related
entities), past or present, and all persons acting by, through, under or in
concert with any of them (collectively "Releasees"), or any of them, from any
and all charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts, and expenses (including attorneys' fees and
costs actually incurred), of any nature whatsoever, known or unknown, suspected
or unsuspected, I have, might have or might claim to have against the Releasees
or any of them. This Complete Release includes, but is not limited to, a
release of any rights arising out of alleged violations of any contract,
express or implied, any covenant of good faith and fair dealing, express or
implied, any tort, including any claim for negligence or gross negligence on
the part of any of the Releasees, or any federal, state or other governmental
statute, regulation, or ordinance, including, without limitation, the Age
Discrimination in Employment Act, which prohibits discrimination on the basis
of age, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1991, 42 U.S.C. o 1981, the Americans With Disabilities Act, the Fair Labor
Standards Act, the Employee Retirement Income Security Act, or the Occupational
Safety and Health Act. Provided, however, that this Complete Release does not
waive or release: (1) any rights or claims that I may have under the Age
Discrimination in Employment Act which may arise after the date I sign this
Agreement; (2) me or the Company from our respective obligations under that
certain Severance Agreement between me and the Company dated as of July 29,
1996, pursuant to which this Complete Release is being executed and delivered;
(3) any rights to indemnification that I may have under applicable corporate
law, the bylaws or articles of incorporation of any of the Releasees, or any
indemnification agreement, or plan or trust agreement, or as an insured under
any D & O or liability insurance policy now or previously in force; (4) any
rights that I may have to amounts payable under the MCC Stock Incentive Plan,
the MCC Supplemental Benefit Plan, and generally applicable employee pension or
welfare benefit plans of the Company (other than severance pay plans); and (5)
any right to reimbursement of expenses incurred in accordance with Company
policies and procedures.
I agree never to file a lawsuit, a grievance, administrative charges, or
other proceedings asserting any claims that are released above. I agree that if
I break this promise, I will pay for all costs incurred by the Company, any
related companies or any employees or directors of any of them, including
reasonable attorneys' fees, in defending against such claim.
I understand that the Company has provided the consideration referenced
above solely to resolve any claims that may exist between the Company and me
and to avoid the cost of possible lawsuits and that the Company does not admit
any wrongdoing.
I agree that this Complete Release will be binding upon me and the Company
and upon our respective heirs, administrators, trustees, representatives,
executors, successors and assigns.
I agree that if any portion of this Complete Release is held to be invalid
or unenforceable, the other portions shall remain valid and enforceable.
I understand that I have twenty-one (21) days from ____[date agreement
presented for signature]___ in which to review and consider this Complete
Release before signing it, and that I may use
B-1
<PAGE> 10
as much of this twenty-one (21) day period as I wish. I further understand that
I am encouraged to consult an attorney before signing this Complete Release.
I understand that after signing this Complete Release, I have seven (7) days in
which to revoke that part of this Complete Release which releases claims under
the Age Discrimination in Employment Act. I further understand that any such
revocation will not be effective unless I deliver a written notice of such
revocation to the Company c/o ______[identify particular individual]________,
no later than the close of business on the seventh day after I sign the
release. I also understand that, in the event that I revoke that part of this
Complete Release which releases claims under the Age Discrimination in
Employment Act, I must return ______[identify a portion of the consideration
that must be refunded, leaving enough consideration to support the release of
the remaining claims] of the consideration provided to me by the Company.
I UNDERSTAND THAT I HAVE THE RIGHT TO DISCUSS ALL ASPECTS OF THIS COMPLETE
RELEASE WITH A PRIVATE ATTORNEY OF MY CHOICE OR A REPRESENTATIVE OF A FEDERAL,
STATE OR LOCAL AGENCY, AND AFFIRM THAT I HAVE AVAILED MYSELF OF THIS RIGHT TO
THE FULL EXTENT, IF ANY, THAT I DESIRED. I HAVE READ THIS COMPLETE RELEASE,
FULLY UNDERSTAND ALL OF ITS PROVISIONS AND AM VOLUNTARILY EXECUTING IT. IN THE
EVENT I REVOKE THAT PORTION OF THIS RELEASE COVERING CLAIMS UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT BUT FAIL TO RETURN THE CONSIDERATION GIVEN TO
ME BY THE COMPANY, I UNDERSTAND AND ACKNOWLEDGE THAT THIS RELEASE WILL REMAIN
BINDING IN ITS ENTIRETY, INCLUDING THE RELEASE OF CLAIMS UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT.
-----------------------------------
Signature
-----------------------------------
Printed Name
B-2
<PAGE> 11
STATE OF MISSISSIPPI )
) ss.
COUNTY OF YAZOO )
Personally appeared before me, the undersigned notary public, in and
for said County and State, the within named _________________________________,
who acknowledged that (s)he signed and delivered the above and foregoing
instrument on the day and date therein mentioned.
GIVEN under my hand and official seal this ___ day of ___________,
1996.
----------------------------------
Notary Public
My commission expires:
----------------------------------
Printed or Stamped Name of Notary
B-3
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Subsidiaries of the Company as of September 19, 1996, are as follows:
<TABLE>
<CAPTION>
State of Percentage of Voting
Name of Company Incorporation Securities Owned
- --------------------------------------------------- ----------------------------- -------------------------
<S> <C> <C>
Mississippi Phosphates Corporation Delaware 100%
NSI Land Corporation Delaware 100%
Mississippi Chemical Management Company Delaware 100%
MISS SUB, INC. Mississippi 100%
Mississippi Potash, Inc. Mississippi 100%
Eddy Potash, Inc. Mississippi 100%
(a subsidiary of Mississippi Potash, Inc.)
New Mexico Potash Corporation Mississippi 100%
(a subsidiary of Mississippi Potash, Inc.)
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated July 29, 1996 included in this Mississippi Chemical
Corporation Form 10-K for the year ended June 30, 1996, into the Company's
previously filed Form S-8 Registration Statement filed May 24, 1995 (Commission
File No. 33-59577).
/s/ ARTHUR ANDERSEN LLP
September 19, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 1996 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY TO
SUCH ANNUAL REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 60,214
<SECURITIES> 0
<RECEIVABLES> 35,830
<ALLOWANCES> 1,200
<INVENTORY> 40,633
<CURRENT-ASSETS> 141,649
<PP&E> 399,882
<DEPRECIATION> 281,111
<TOTAL-ASSETS> 341,006
<CURRENT-LIABILITIES> 60,036
<BONDS> 0
<COMMON> 229
0
0
<OTHER-SE> 247,596
<TOTAL-LIABILITY-AND-EQUITY> 341,006
<SALES> 428,789
<TOTAL-REVENUES> 430,235
<CGS> 291,403
<TOTAL-COSTS> 343,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> (2,229)
<INCOME-PRETAX> 88,493
<INCOME-TAX> 34,315
<INCOME-CONTINUING> 54,178
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,178
<EPS-PRIMARY> 2.46
<EPS-DILUTED> 0
</TABLE>
