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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
ChemFirst Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
CHEMFIRST INC.
Jackson, Mississippi
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
May 21, 2002
To the Stockholders:
Notice is hereby given that the Annual Meeting of the Stockholders of
ChemFirst Inc. will be held at the Hilton Jackson, 1001 East County Line Road,
Jackson, Mississippi, on Tuesday, May 21, 2002, at 1:30 p.m. (CDT), for the
following purposes:
1. To elect three (3) directors to serve for the terms specified in this
proxy statement and until their successors are elected and qualified;
and
2. To act upon a proposal to amend the ChemFirst Inc. 1998 Long-Term
Incentive Plan; and
3. To transact such other business as may be properly brought before the
meeting.
Stockholders of record on March 13, 2002, are entitled to notice of and to
vote at the Annual Meeting or any adjournment thereof.
You are urged to consider the enclosed materials and to sign and return
your proxy promptly in the enclosed, postage prepaid envelope, even if you
plan to attend the meeting. Any stockholder giving a proxy has a right to
revoke it at any time before it is voted.
*PLEASE DATE AND SIGN YOUR NAME EXACTLY AS IT APPEARS ON THE PROXY.
By order of the Board of Directors.
/s/ JAMES L. McARTHUR
JAMES L. McARTHUR, Secretary
ChemFirst Inc.
P. O. Box 1249
Jackson, Mississippi 39215-1249
March 31, 2002
* NOTICE: Stockholders receiving more than one proxy because of shares
registered in different names or addresses must complete and
return each proxy in order to vote all shares to which such
stockholder is entitled.
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CHEMFIRST INC.
PROXY STATEMENT
----------------
SOLICITATION
The enclosed proxy is being SOLICITED BY THE BOARD OF DIRECTORS of
ChemFirst Inc., P. O. Box 1249, Jackson, Mississippi 39215-1249, a Mississippi
corporation ("ChemFirst" or the "Company"), for use at the 2002 Annual Meeting
of the Stockholders of ChemFirst (the "Annual Meeting") to be held at the
Hilton Jackson, 1001 East County Line Road, Jackson, Mississippi at 1:30 p.m.
(CDT), on Tuesday, May 21, 2002, and at any adjournments thereof. Stockholders
may revoke their proxies by written notice to ChemFirst at any time prior to
the exercise thereof, by the execution of a later proxy with respect to the
same shares, or by voting their shares in person. The solicitation will be
primarily by mail but may also include telephone or oral communications by
officers or employees of the Company. Officers and employees will receive no
additional compensation in connection with the solicitation of proxies.
Georgeson Shareholder, 111 Commerce Road, Carlstadt, New Jersey 07072-2586,
has been retained for advice and consultation and to solicit proxies for the
Annual Meeting at an approximate fee of $6,000 plus expenses. All costs of
soliciting proxies will be borne by ChemFirst. The approximate mailing date of
the proxy statements and proxies to stockholders is March 31, 2002.
All proxies will be voted as specified. IN THE ABSENCE OF SPECIFIC
INSTRUCTIONS, PROXIES WILL BE VOTED: (1) FOR THE ELECTION OF THREE (3)
DIRECTORS OF CHEMFIRST TO SERVE FOR THE TERMS SPECIFIED IN THIS PROXY
STATEMENT AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED; (2) FOR THE
APPROVAL OF THE AMENDMENT TO THE CHEMFIRST INC. 1998 LONG-TERM INCENTIVE PLAN;
AND (3) ON ALL OTHER MATTERS BY THE PERSONS NAMED IN THE PROXIES IN ACCORDANCE
WITH THEIR JUDGMENT.
VOTING SECURITIES
Record Date. Stockholders of record at the close of business on March 13,
2002, are entitled to notice of and to vote at the Annual Meeting.
Shares Outstanding. As of March 13, 2002, a total of 14,071,824 shares of
Common Stock were outstanding. Each share is entitled to one vote per share on
each matter submitted to a vote at the Annual Meeting.
Shareholder Matters. Rule 14a-8 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") requires that a stockholder proposal intended to
be included in the Company's proxy statement for the 2003 Annual Meeting must
be received at the Company's executive offices no later than December 1, 2002.
The proposal may be omitted if the submitting stockholder does not meet
certain requirements.
Stockholder proposals for new business or suggestions for nominees
submitted outside of Rule 14a-8 must be received at the Company's executive
offices no earlier than January 11, 2003 and no later than February 20, 2003.
Stockholder suggestions for nominees must include appropriate detailed
biographical information. Further, if a stockholder proposal is submitted
outside of Rule 14a-8, the Company can confer discretionary voting on that
proposal if the proposal is received by the Company after February 15, 2003.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following persons or entities beneficially own (as specified in Rule
13d-3 of the Exchange Act) more than 5% of the Common Stock of the Company as
of the dates indicated. The Company made this determination based upon review
of Schedules 13D and 13G filings by or on behalf of such stockholders with the
Securities and Exchange Commission (the "SEC"). See also "Security Ownership
of Management" for information as to J. Kelley Williams, Chairman and Chief
Executive Officer of the Company, who is also a greater than 5% holder of
Common Stock of the Company. Except as may otherwise be indicated, each of the
stockholders below has sole voting and investment power with respect to all
shares of Common Stock beneficially owned.
Percent
Title of Amount and nature of of
class Name and address of beneficial owner beneficial ownership class
-------- ------------------------------------ -------------------- -------
Common Stock Franklin Mutual Advisers, LLC 1,117,500(1) 7.5%
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Common Stock Franklin Resources, Inc. ("Franklin") 564,700(2) 4.0%
Charles B. Johnson
Rupert H. Johnson, Jr.
Franklin Advisers, Inc.
One Franklin Parkway
San Mateo, CA 94403-1906
Common Stock Deutsche Bank AG ("DBAG") 846,100(3) 6.0%
Taunusanlage 12, D-60325
Frankfurt am Main
Federal Republic of Germany
Common Stock Private Capital Management, L.P. ("PCM") 1,249,100(4) 8.9%
Bruce S. Sherman
Gregg J. Powers
8889 Pelican Bay Blvd.
Naples, FL 34108
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(1) According to a Schedule 13G filed by Franklin Mutual Advisers LLC with the
SEC on January 23, 2001.
(2) According to a Schedule 13G filed by Franklin, Charles B. Johnson and
Rupert H. Johnson, Jr. with the SEC on February 13, 2002, voting and
investment power with respect to these shares are shared by Franklin,
direct and indirect investment advisory subsidiaries of Franklin, as well
as with Charles B. Johnson and Rupert H. Johnson, Jr., the principal
stockholders of Franklin.
(3) According to a Schedule 13G filed by DBAG with the SEC on February 1,
2002.
(4) According to a Schedule 13G filed with the SEC on February 19, 2002, PCM,
Bruce S. Sherman and Gregg J. Powers share voting and investment power
with respect to 1,249,100 shares beneficially owned by PCM. Mr. Sherman
and Mr. Powers, the Chief Executive Officer and President, respectively,
of PCM, disclaim beneficial ownership for the shares held by PCM's
clients.
2
BOARD OF DIRECTORS
The Board of Directors (the "Board") represents the interests of all
stockholders and is responsible for setting policy and objectives for the
Company in accord with its charter, bylaws, Mississippi laws and other
applicable governmental regulations. The Board is currently composed of eleven
non-employee directors and one employee, the Chief Executive Officer. The
Board is divided into three groups, typically elected for three-year terms.
The Board held four meetings during 2001. All directors of the Company
attended all of the Company's Board meetings which were held during 2001. All
directors other than Mr. Speed attended at least 75% of all meetings of
committees on which they serve which were held during 2001.
The COMMITTEE ON DIRECTOR AFFAIRS is composed of four non-employee
directors and is responsible for recommendations for nominating new Board
members, recommending appointments of members to Board committees, assessing
Chief Executive Officer and Board performance, and recommending Board
compensation for action by the Board. The Chairman of this committee also
chairs executive sessions of the outside members of the Board. The Committee
on Director Affairs considers suggestions for director nominations from all
sources. Stockholder suggestions for nominees for the 2003 Annual Meeting,
together with appropriate detailed biographical information, should be
submitted to the Corporate Secretary no earlier than January 11, 2003, and no
later than February 20, 2003. The Committee on Director Affairs met three
times during 2001. Members of this committee are Richard P. Anderson, John F.
Osborne, Leland R. Speed and R. Gerald Turner (Chairman).
The AUDIT COMMITTEE is composed of four non-employee directors with broad
latitude for inquiry into all operations of the Company. Its primary
responsibilities include making a recommendation to the Board on the selection
of independent auditors; reviewing audit reports prepared by independent
auditors, internal auditors, insurance auditors and other consultants engaged
by the Company to examine specific areas of corporate operations; and
reviewing compliance with various governmental regulations and corporate
policies and procedures. The Audit Committee met five times during 2001.
Members of this committee are Paul A. Becker, Robert P. Guyton (Chairman),
Paul W. Murrill and Dan F. Smith. The Audit Committee's report is presented
below. Its written charter, adopted May 2000, was included in the Company's
proxy statement for the 2001 Annual Meeting as Appendix A. The information
contained in the Audit Committee report shall not be deemed to be "soliciting
material" or to be "filed" with the SEC nor shall such information be
incorporated by reference into any future filing under the Securities Act of
1933, as amended (the "Securities Act") or the Exchange Act, except to the
extent that the Company specifically incorporates it by reference into such
filing.
The Audit Committee Report.
The Audit Committee of the ChemFirst Inc. Board of Directors (the
Committee) assists the Board of Directors in fulfilling its responsibility
for oversight of the quality and integrity of the accounting, auditing, and
financial reporting practices of the Company in accordance with its written
charter. The Committee is composed of four directors, each of whom are
independent as defined by the New York Stock Exchange listing standards.
During fiscal 2001, the Committee met five times, and the Committee chair,
as representative of the Committee, discussed the interim financial
information contained in each quarterly earnings announcement with the
controller and independent auditors prior to public release.
Management is responsible for the Company's internal controls and
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and to issue a report thereon. The Audit
Committee's responsibility is to monitor and oversee these processes.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company
that might bear on the auditors' independence consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," discussed with the auditors any
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relationships that may impact their objectivity and independence and
satisfied itself as to the auditors' independence.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management
present, discussed and reviewed the results of the independent auditors'
examination of the financial statements.
The Committee reviewed the audited financial statements of the Company
as of and for the fiscal year ended December 31, 2001, with management and
the independent auditors. Based on the above-mentioned review and
discussions with management and the independent auditors, the Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in its Annual Report on Form 10-K for the fiscal
year ended December 31, 2001, for filing with the Securities and Exchange
Commission.
March 11, 2002 Robert P. Guyton, Chair
Paul A. Becker
Paul W. Murrill
Dan F. Smith
The COMPENSATION AND HUMAN RESOURCES COMMITTEE is composed of four non-
employee directors and is charged with the responsibility of recommending to
the Board a program of overall compensation for the Company and its
subsidiaries, including executive officers and other key employees. These
responsibilities include administration of the Company's 1995 Long-Term
Incentive Plan and 1998 Long-Term Incentive Plan (collectively, the "Long-Term
Incentive Plans") and other benefit plans. The Compensation and Human
Resources Committee (the "Compensation Committee") met three times during
2001. Members of this committee are Richard P. Anderson (Chairman), Michael J.
Ferris, James E. Fligg and William A. Percy, II. The report of this Committee
is presented below. The information contained in such report shall not be
deemed to be "soliciting material" or to be "filed" with the SEC nor shall
such information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
The Compensation and Human Resources Committee Report on Executive
Compensation.
Philosophy. The Company's compensation philosophy is designed to
maximize stockholder value and serve the best interest of stockholders and
employees. The philosophy incorporates the following principles:
(a) Compensation should attract and retain qualified employees and
stimulate their useful and profitable efforts on behalf of the
Company;
(b) Compensation should be internally equitable and externally
competitive; and
(c) Compensation should be defined broadly and comprehensively.
Committee Members. The Compensation Committee is a committee of the
Board composed of not less than three directors who are not officers or
regular employees of the Company or of any subsidiary of the Company. The
Compensation Committee selects and is advised by independent outside
consultants as considered appropriate.
Charter. The Compensation Committee operates under a charter approved by
the Board, which formally defines responsibilities, authorities and
procedures. The charter provides for members to be elected annually by the
Board. The chairman is elected annually by the Compensation Committee. The
primary responsibility of the Compensation Committee is to assure
development, implementation and maintenance of competitive compensation and
benefits to attract, motivate and retain qualified officers, management and
employees.
4
Overall compensation and benefits are targeted at the median or mid-
market of peer companies. Compensation includes base pay and annual and
long-term performance incentives. Incentives are tied to the Company's
financial results versus peer companies and/or to specific performance
objectives linked to stockholder value. Peer companies are public companies
with products and markets and other characteristics comparable to the
Company and/or its subsidiaries.
Duties. The Compensation Committee's duties include the following:
(a) To recommend to the Board compensation policies for the
Company and its subsidiaries;
(b) To recommend to the Board the base salary and annual incentive
awards for Executive Officers;
(c) To review and report to the Board base salaries and annual
incentive awards for other highly compensated officers and
employees; and
(d) To designate participants and grant awards under the Long-Term
Incentive Plan.
Components of Executive Compensation.
(a) Base Salary. The Compensation Committee annually reviews and
compares base salaries and salary ranges for similar positions in other
companies in relevant markets defined by company size, industry and
location. Executive, technical and other highly compensated positions are
valued in the national market using data developed by nationally recognized
compensation consulting firms. The published compensation data used by the
Compensation Committee to establish base salary ranges is not necessarily
comprised of the same peer group of companies included in the Performance
Graph. Salary ranges and actual salaries are adjusted annually, taking into
consideration position value, market pricing, operating results, individual
performance and other relevant factors.
The Compensation Committee recommended and the Board approved merit
increases to the four named Executive Officers, other than the Chief
Executive Officer, which averaged 3.9% in 2001.
(b) Annual Incentive Awards. Annual incentive awards, in the form of
cash payments, are designed to achieve specific short-term results and to
further long-term objectives. Financial and other objectives for the
Company, its subsidiaries and program participants are set at the beginning
of each fiscal year. This process involves the Board, the Compensation
Committee, the Chief Executive Officer and program participants. The
Compensation Committee annually reviews and recommends to the Board
participation and award opportunity. Award opportunity is based on
guidelines developed by nationally recognized compensation consultants. At
fiscal year end, incentives are awarded following review of Company and
subsidiary results and performance versus objectives, and peer results and
personal performance of participants versus objectives. As a general rule,
no awards are made unless the Company is profitable.
In February 2002, the Compensation Committee recommended and the Board
approved annual incentive awards in the total amount of $266,700 for the
four named Executive Officers other than the Chief Executive Officer based
on a review of Company and subsidiary results and performance for 2001.
(c) Long-Term Incentive Awards. Participation in the Long-Term Incentive
Plan is limited to officers and key managers based on responsibility,
authority, potential impact on the Company and competitive practice for
similar positions in peer companies. The Compensation Committee annually
reviews and approves participation and potential award ranges. Award ranges
are based on guidelines developed by nationally recognized compensation
consultants. At fiscal year end, the Compensation Committee reviews Company
condition and performance versus long-term goals and recommends awards
under the Long-Term Incentive Plan. Awards may be in the form of stock
options, debenture options, restricted stock, stock appreciation rights,
performance shares or units, supplemental cash or other such forms as
appropriate.
The Company also has three Performance Unit Plans outside of the Long-
Term Incentive Plans for certain of its non-public subsidiaries in which
subsidiary executive officers participate, and in which awards
5
are payable in cash only based on the subsidiary's profits and price
earning multiples of a group of publicly held peer companies. No grants are
currently awarded under these plans, but some units remain unexercised.
The Compensation Committee granted 123,212 nonqualified stock options to
the four named Executive Officers excluding the Chief Executive Officer in
2001.
(d) Chief Executive Officer Compensation. At fiscal year end, the
Committee on Director Affairs (which is composed of independent directors)
evaluates the Chief Executive Officer's performance versus objectives
established at the beginning of the year. The Compensation Committee
considers this evaluation and compensation at peer companies in its review
and makes a recommendation to the Board regarding Chief Executive Officer
compensation. This performance evaluation includes an assessment of total
return to stockholders versus peers, return on equity, operating earnings
compared to budget and prior year, financial performance versus peers,
restructuring and dispositions, balance sheet improvements and market
capitalization. Mr. Williams received no base salary increase during 2001.
In February 2002, the Compensation Committee recommended and the Board
approved an annual incentive award of $202,200 for Mr. Williams based on
2001 results. During 2001, Mr. Williams recommended and the Committee
approved allocating his grant of 76,650 nonqualified stock options priced
at fair market value on date of grant to select key managers within the
Company.
February 19, 2002 Richard P. Anderson, Chair
Michael J. Ferris
James E. Fligg
William A. Percy, II
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Chief Executive Officer serves as a member ex-officio of the
Compensation Committee, but may not serve as Chairman or vote or participate
in or be present for Committee decisions regarding his own compensation. He
does not make recommendations about or participate in decisions regarding any
aspect of his compensation. During the last completed fiscal year, the members
of the Compensation Committee were Richard P. Anderson, Michael J. Ferris,
James E. Fligg and William A. Percy, II.
See also the information regarding Mr. Ferris described below under
"RELATED TRANSACTIONS".
RELATED TRANSACTIONS
During 2001, First Chemical Corporation, a subsidiary of the Company,
purchased a total of $790,429 in products from Pioneer Chlor Alkali Company,
Inc., a subsidiary of Pioneer Companies, Inc. Michael J. Ferris, a director of
the Company, is President, Chief Executive Officer and a director of Pioneer.
During 2001, First Chemical Corporation purchased in the normal course of
business a total of $1,372,047 in products from Lyondell Chemical Company
and/or its affiliate Equistar Chemicals, L.P. Dan F. Smith, a director of the
Company, is President, Chief Executive Officer and a director of Lyondell, and
Chief Executive Officer of Equistar.
6
PROPOSAL I: ELECTION OF DIRECTORS
Section 3(a) of the Company's bylaws specifies in part that the directors
of the Company shall be divided into three groups which shall be as nearly
equal as may be possible, and that directors typically serve three-year terms.
Section 3(c) of the Company's bylaws and Section 3.4 of the Company's
Corporate Governance Guidelines provide that each director who was, on August
22, 1995, a director of First Mississippi Corporation and who had completed
less than nine consecutive years of service on the board of First Mississippi
on that date will offer a written resignation upon the completion of nine
consecutive years of service on either the board of First Mississippi or the
Company if under age 65 at that time. In addition, all such directors who were
under age 65 on August 22, 1995 will offer a written resignation upon reaching
age 65. All other directors will offer resignations upon completion of nine
consecutive years of service on either the Board of First Mississippi or the
Company prior to age 65 and again upon reaching age 65. In each case, the
Committee on Director Affairs (or any successor committee) will make a
recommendation with respect to such director for his continued service to the
Board. Pursuant to the bylaws, directors will retire at age 70, unless asked
by the Board to serve longer. In accordance with these bylaw provisions,
Richard P. Anderson, who would have retired upon reaching age 70 on April 10,
1999, was asked by the Board to serve the remainder of his elected term. At
the May 2000 and May 2001 Annual Meetings, Mr. Anderson was elected to one-
year terms to expire the following year. He has been asked by the Board to
stand for re-election and has been nominated for a three-year term to expire
in 2005. The Committee on Director Affairs and the Board will review Mr.
Anderson's continuing service on an annual basis. Leland R. Speed, who would
retire in accordance with bylaw provisions upon reaching age 70 on September
13, 2002, has been asked by the Board to serve the remainder of his elected
term. His continued service will be reviewed annually by the Committee on
Director Affairs and the Board. James E. Fligg and Paul W. Murrill have chosen
to retire from the Board upon expiration of their terms on May 21, 2002. Upon
their retirement, the bylaws will be amended to reduce the number of directors
to 10.
Set forth below is certain information for each nominee who has consented
to be named for election as a director and for each continuing director who is
not a nominee, including age as of the date of the Annual Meeting. See the
note following the directors' information regarding the 1996 distribution of
ChemFirst shares for the definition of "Distribution Date."
NOMINEES FOR ELECTION AS DIRECTORS
TO SERVE A THREE-YEAR TERM TO EXPIRE IN 2005
RICHARD P. ANDERSON Term Expires: 2002
Mr. Anderson, 73, a director of the Company since
November 1996, is Chairman of the Board of The
Andersons, Inc., an agribusiness company in
Maumee, Ohio. He was Chairman and Chief Executive
Officer from September 1996 through 1998. He was
a director of First Mississippi from 1987 until
the Distribution Date. As stated under "Election
of Directors", the Board has asked Mr. Anderson
to stand for election for an additional term of
three years.
ROBERT P. GUYTON Term Expires: 2002
Mr. Guyton, 65, a director of the Company since
November 1996, has been self-employed as a
financial consultant since October 1996. He was
Vice President and Financial Consultant for
Raymond James & Associates, Inc., an asset
management and investment banking company in
Atlanta, Georgia, from August 1993 to July 1996.
He was Chairman and Chief Executive Officer of
Bank South Corporation from 1990 to 1991, and was
President and Chief Executive Officer of Bank
South from 1980 to 1990. He is a director of
Piccadilly Cafeterias, Inc.,
7
a restaurant chain. He was a director of First
Mississippi from 1969 until the Distribution
Date.
J. KELLEY WILLIAMS Term Expires: 2002
Mr. Williams, 68, has been Chairman of the Board
and Chief Executive Officer of the Company since
November 1996. He was Chairman and Chief
Executive Officer of First Mississippi from
August 1995 through the Distribution Date, and
was Chairman, Chief Executive Officer and
President from 1988 until August 1995. Mr.
Williams was a director of First American
Corporation from May 1998 through September 1999,
and was a director of Placer Dome Corporation
until May 2001. He is Chairman of the Board of
EKC Technology, Inc. and First Chemical
Corporation, and a director of ChemFirst
Electronic Materials L.P., subsidiaries of the
Company.
CONTINUING DIRECTORS
PAUL A. BECKER Term Expires: 2004
Mr. Becker, 63, a director of the Company since
November 1996, is a private investor and general
partner of Summit Investors, Vero Beach, Florida.
He was Managing Director of Mitchell Hutchins
Asset Management, Inc., an investment management
company in New York City, and wholly owned by
Paine Webber Group, Inc., from 1978 to February
1999. Mr. Becker was a director of First
Mississippi from 1985 until the Distribution
Date.
MICHAEL J. FERRIS Term Expires: 2003
Mr. Ferris, 57, a director of the Company since
November 1996, has been President, Chief
Executive Officer, and a director of Pioneer
Companies, Inc. of Houston, Texas since January
1997. Pioneer manufactures chlorine, caustic
soda, muriatic acid and related products. He was
formerly the Executive Vice President, Chemicals
Group, of Vulcan Materials Company, a chemical
manufacturer located in Birmingham, Alabama.
JOHN F. OSBORNE Term Expires: 2003
Mr. Osborne, 58, a director of the Company since
May 2000, is an engineer and President of
Competitive Customer Support, Twin Bridges,
Montana, which provides advisory services to
companies that make or use semiconductors. From
1988 to November 1997, he was a corporate senior
manager of Lam Research, Fremont, California, a
manufacturer of microchip fabricating equipment.
He was a director of CFM Technologies, Exton,
Pennsylvania, a publicly-held manufacturer of
capital equipment for semiconductor processing,
from 1998 to December 2000. He has been a
director of EKC Technology, Inc., a subsidiary of
the Company, since May 2000.
WILLIAM A. PERCY, II Term Expires: 2003
Mr. Percy, 62, a director of the Company since
November 1996, is President and Chief Executive
Officer of Greenville Compress Co.,
8
Greenville, Mississippi, a commercial real estate
company. He has been the Chairman of the Board of
Staple Cotton Cooperative Association in
Greenwood, Mississippi, since 1992. Through
December 2001, he was a partner of Trail Lake
Enterprises, a cotton and soybean farming
operation in Arcola, Mississippi. He is a
director of Mississippi Chemical Corporation and
Entergy Corporation. He was a director of First
Mississippi from 1988 until the Distribution
Date. He is Chairman of the ChemFirst Foundation,
Inc. Board of Trustees.
DAN F. SMITH Term Expires: 2004
Mr. Smith, 56, a director of the Company since
November 1996, has been President and Chief
Executive Officer of Lyondell Chemical Company of
Houston, Texas, since December 1996. From August
1994 until December 1996, he was President and
Chief Operating Officer of Lyondell. He has been
a director of Lyondell since November 1988.
Lyondell manufactures and sells petrochemicals
and refinery products. He has been Chief
Executive Officer of Equistar Chemicals, L.P.,
Houston, Texas, since its formation in December
1997. Equistar is a joint venture of Lyondell,
Occidental Petroleum Corporation and Millennium
Chemicals Inc. and manufactures polymers and
polymer feedstocks. He has been a director of
Cooper Industries, Inc. since August 1998. He is
a director of First Chemical Corporation, a
subsidiary of the Company.
LELAND R. SPEED Term Expires: 2004
Mr. Speed, 69, a director of the Company since
November 1996, is Chairman of the Board of
Parkway Properties, Inc., and Chairman and
Trustee of EastGroup Properties, Inc., real
estate investment companies, both of Jackson,
Mississippi. From April 1993 through September
1997, he was also Chief Executive Officer of
Parkway Properties and EastGroup Properties. He
is Chairman and director of Delta Industries,
Inc., a construction materials manufacturer, and
a director of Farm Fish, Inc. and Mississippi
Valley Gas Company, all of Jackson, Mississippi.
From 1995 to July 2000, he was a director of KLLM
Transport Services, Inc., of Jackson,
Mississippi. He was a director of First
Mississippi from 1965 until the Distribution
Date. He is a director of EKC Technology, Inc., a
subsidiary of the Company, and a member of the
ChemFirst Foundation, Inc. Board of Trustees.
R. GERALD TURNER Term Expires: 2003
Dr. Turner, 56, a director of the Company since
November 1996, has been President of Southern
Methodist University in Dallas, Texas since June
1995. He has been a director of JC Penney Co.,
Inc. since 1995; a director of California Federal
Preferred Capital Corporation since January 2001;
and a trustee of American AAdvantage Funds since
August 2001. He was a director of AMFM, Inc.
(formerly Capstar Broadcasting), indirect owner
and operator of radio stations, from 1997 to mid-
2000. He was a director of SkyTel Communications,
Inc., a provider of nationwide paging and voice
messaging services, from 1996 to 1999. He was a
director of First Mississippi from 1987 until the
Distribution Date. He is a member of the
ChemFirst Foundation, Inc. Board of Trustees.
9
Definition of "Distribution Date": On December 23, 1996 (the "Distribution
Date"), First Mississippi Corporation contributed all of its assets and
subsidiaries, other than those relating to its fertilizer business, to the
Company, which at that time was a wholly owned subsidiary of First
Mississippi. First Mississippi then spun off the Company in a tax-free
distribution of the Company's common stock to First Mississippi stockholders
(the "ChemFirst Distribution") on the Distribution Date. The ChemFirst
Distribution occurred immediately prior to and in connection with the merger
of First Mississippi with a wholly owned subsidiary of Mississippi Chemical
Corporation on December 24, 1996, pursuant to an Agreement and Plan of Merger
and Reorganization dated as of August 27, 1996.
THE BOARD RECOMMENDS A VOTE FOR ALL OF THE DIRECTOR NOMINEES.
Voting Procedures on Election of Directors. Stockholders have the right to
vote "For" or "Withhold Authority" to vote for some or all of the nominees for
directors. Pursuant to the Company's bylaws and Mississippi law, the presence,
in person or by proxy, of a majority of the outstanding shares of Common Stock
entitled to vote shall constitute a quorum to convene the Annual Meeting.
Therefore, any proxy authorized to be voted at the Annual Meeting on any
matter, whether or not marked to "Withhold Authority" or to effect a broker
non-vote, will be counted in establishing a quorum. The election of directors
will require the affirmative vote of a plurality of the shares voted at the
Annual Meeting in person or by proxy. Votes withheld and broker non-votes will
not be included in vote totals for director nominees and will have no effect
on the outcome of the vote. In the absence of specific instructions, proxies
will be voted FOR the nominees. Stockholders do not have cumulative voting.
DIRECTOR COMPENSATION
Directors who are not employees are compensated for their services with a
retainer of $16,000 per year. In addition, non-employee directors receive fees
for attendance at duly called Board and committee meetings. The fees paid are
$1,000 per day for attendance at duly called Board and committee meetings or a
fee of $500 for half-day committee meetings, except for committee chairmen,
who receive a fee of $1,250 per day for meetings and $625 for half-day
meetings. These fees are recommended by the Committee on Director Affairs to
align Board compensation with peer companies. Travel expenses to and from
meetings are reimbursed to all directors. No fees are paid for informal
meetings. Directors who attend meetings by telephone conference call are paid
at the half-day rate. Directors performing special services at the request of
the Chief Executive Officer are paid a per diem of $1,000 per day, except for
committee chairmen, who are paid a per diem of $1,250 per day.
Under the Company's Long-Term Incentive Plans, each non-employee director
is entitled to receive awards which may be in the form of stock options,
restricted stock, stock appreciation rights, performance shares or units,
supplemental cash or other such forms as appropriate. The Compensation
Committee annually reviews and the Board annually approves potential award
ranges for the directors based on, among other criteria, condition and
performance of the Company versus long-term goals. In March 2001, each non-
employee director received an option pursuant to the 1998 Long-Term Incentive
Plan to purchase 1,500 shares of Common Stock at an exercise price of $25.55
per share and which vested in full on September 6, 2001.
In addition, under the Long-Term Incentive Plans, directors are permitted
to make an irrevocable election to receive share units ("Share Units") in
exchange for deferring all or some portion of their annual retainer at a per
Share Unit exchange price that is equal to 85% of the fair market value of
Company Common Stock determined as of the first day of the year during which
all or a portion of the deferred retainer was to be paid. Dividends earned
pursuant to the Share Units are reinvested in the form of additional Share
Units. Share Units may be paid in cash or Common Stock at the election of the
Compensation Committee and are subject to vesting and rollover provisions set
forth in the Long-Term Incentive Plans.
In fiscal 1986, First Mississippi established a Deferred Income Plan for
Directors, Officers and Key Employees ("Plan A") pursuant to which deferral
opportunities in any given year, up to a maximum of three
10
years, were offered at the discretion of the Board. In connection with the
ChemFirst Distribution, the Company assumed the obligations of First
Mississippi under Plan A. Effective January 1, 1994, Plan A was amended to
change the interest rate prospectively to 120% of the applicable annual
federal long-term rate as specified in the Internal Revenue Code. At the same
time, the Board closed Plan A for any new participants or deferral
opportunities, subject to the existing rights and obligations thereunder. Plan
A was further amended effective September 15, 1997, to allow participating
directors to invest existing account balances in Share Units in lieu of the
interest-bearing investment alternative set forth in the original plan. Share
Units purchased under Plan A were acquired at a price equal to the fair market
value of a share of Company Common Stock on the date of valuation and were
subject to other terms and conditions similar to those which are applicable to
Share Units purchased under Plan B, as discussed below. In February 1998, the
Board further amended Plan A to remove the Share Unit investment alternative
and replace it with a new crediting option which allows participating
directors to invest existing account balances at an annual crediting rate
which is based on total stockholder return on the Company's Common Stock.
In fiscal 1989, First Mississippi established a successor Deferred
Compensation Plan for Outside Directors ("Plan B") to insure continuation of
deferral opportunities for directors. Plan B was amended effective January 1,
1994, to change the interest rate prospectively to 120% of the applicable
annual federal long-term rate as specified in the Internal Revenue Code. Plan
B was further amended effective July 1, 1997, to allow participating directors
to invest existing account balances and future compensation deferrals in Share
Units in lieu of the interest-bearing investment alternative of the original
plan. Except for certain conversions of existing balances within two years of
termination of Board service that are converted at fair market value of the
Company's Common Stock, Share Units purchased in Plan B are acquired at a
price equal to 85% of the fair market value of a share of Company Common Stock
on the date of valuation. Except for the initial election to convert existing
account balances, which had a valuation date of July 1, 1997, the valuation
date for all elections to purchase or convert to Share Units under Plan B is
the first trading date in the calendar year immediately following the year of
election. In distributing a participating director's account balance at
termination of Board service, each Share Unit in such account is valued at the
fair market value of a share of the Company's Common Stock on the date of
valuation.
The deferrals under both Plan A and Plan B are held by the Company until
retirement, resignation or other termination of service as a director.
Director J. Kelley Williams participates as an employee in Plan A but does not
participate in Plan B. Directors Anderson, Becker, Ferris, Fligg, Smith, Speed
and Turner currently participate in Plan B. During 2001, directors purchased
Share Units under Plan B in the following amounts: Mr. Anderson, 1,672; Mr.
Ferris, 1,350; Mr. Fligg, 1,240; Mr. Smith, 1,348; Mr. Speed, 282; and Dr.
Turner, 916.
The Company furnishes directors with $100,000 accidental death and
dismemberment and $250,000 of business travel accident protection. The Company
also has a Retirement Plan for its non-employee directors under which all
directors who have served at least one three-year term will, under certain
conditions, receive an annual retirement benefit equal to their annual
retainer at retirement for each year of service, not to exceed fifteen years.
The amount of the retainer to be received after retirement shall be fixed at
the time of retirement. The plan also provides for a lump sum payment to a
director under certain conditions in the event of a change of control and to
his beneficiary upon his death.
11
SECURITY OWNERSHIP OF MANAGEMENT
As of March 13, 2002, Common Stock of the Company is beneficially owned by
the Company's directors, the Company's executive officers named in the Summary
Compensation Table, and all of the Company's directors and executive officers
as a group, as follows:
Common Stock Percent
Director/Officer Beneficially Owned(1) of Class
---------------- --------------------- --------
Richard P. Anderson
Common Stock 9,450(2)
NQSOs 11,250
------
Total 20,700 *
Paul A. Becker
Common Stock 10,000
NQSOs 11,250
------
Total 21,250 *
Michael J. Ferris
Common Stock 500(3)
NQSOs 9,375
------
Total 9,875 *
James E. Fligg(4)
Common Stock 3,610
NQSOs 9,375
------
Total 12,985 *
Robert P. Guyton
Common Stock 23,000
NQSOs 11,250
------
Total 34,250 *
Paul W. Murrill
Common Stock 11,952(5)
NQSOs 11,250
Convertible Subordinated Debentures 2,013
------
Total 25,215 *
John F. Osborne
Common Stock 6,000
NQSOs 3,000
------
Total 9,000 *
William A. Percy, II
Common Stock 12,351
NQSOs 11,250
Convertible Subordinated Debentures 2,013
------
Total 25,614 *
Dan F. Smith
Common Stock 1,000(6)
NQSOs 9,375
------
Total 10,375 *
12
Common Stock Percent
Director/Officer Beneficially Owned(1) of Class
---------------- --------------------- --------
Leland R. Speed
Common Stock 20,772
NQSOs 11,250
Convertible Subordinated Debentures 2,013
---------
Total 34,035 *
R. Gerald Turner
Common Stock 7,900(7)
NQSOs 11,250
---------
Total 19,150 *
J. Kelley Williams
Common Stock 1,188,237(8)
NQSOs 452,900
---------
Total 1,641,137 11.3%
R. Michael Summerford
Common Stock 71,796
NQSOs 294,503
---------
Total 366,299 2.5%
George M. Simmons
Common Stock 6,320
NQSOs 124,256
---------
Total 130,576 0.9%
P. Jerry Coder
Common Stock 1,142
NQSOs 102,975
---------
Total 104,117 0.7%
J. Steve Chustz
Common Stock 2,382(9)
NQSOs 143,383
---------
Total 145,765 1.0%
All directors and executive officers as a group
(22 persons)
Common Stock 1,399,538(10)
NQSOs 1,500,911
Convertible Subordinated Debentures 6,039
---------
Total 2,906,488 18.7%
--------
* Represents less than 1% of class.
(1) Beneficial ownership is calculated under Rule 13d-3(d)(1)(i) of the
Exchange Act. Certain numbers represent shares of Common Stock of the
Company underlying the Convertible Subordinated Debentures and
Nonqualified Stock Options ("NQSOs") beneficially owned by the directors
and executive officers. The Debentures are immediately convertible into
the specified number of shares of Convertible Preferred Stock of the same
series and then immediately convertible into the specified number of
shares of Common Stock of the Company. NQSOs are exercisable no earlier
than six months from date of grant for shares of Common Stock of the
Company.
(2) Shared voting and investment power of 3,700 shares with Mrs. Anderson.
(3) Shared voting and investment power with Mrs. Ferris.
(4) Mr. Fligg will retire from the Board upon expiration of his term on May
21, 2002.
(5) Includes 775 shares owned by Mrs. Murrill, as to which Dr. Murrill has no
voting and investment power and disclaims beneficial ownership. Dr.
Murrill will retire from the Board upon expiration of his term on May 21,
2002.
13
(6) Shared voting and investment power with Mrs. Smith.
(7) Shared voting and investment power of 7,800 shares with Mrs. Turner.
(8) Excludes 61,750 shares held in the Jean P. Williams Revocable Trust, as to
which Mr. Williams has no voting and investment power and disclaims
beneficial ownership.
(9) Shared voting and investment power of 100 shares with Mrs. Chustz.
(10) Includes 446 shares for which an executive officer not named in the table
above has shared voting and investment power. Except as otherwise
indicated in these notes, each person indicated in the table above has
sole voting and investment power with respect to all shares of Common
Stock beneficially owned.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers and directors of the Company and persons who own more than
10% of a registered class of the Company's equity securities to file reports
of ownership and changes in their ownership with the SEC and the New York
Stock Exchange. The Company's General Counsel monitors compliance and acts as
the Compliance Officer for such filings of its directors and executive
officers listed below, and prepares and files reports for such persons based
on information supplied by them. Based solely on its review of such
information and certain written representations of its executive officers and
directors with respect to the filing of annual reports of changes in
beneficial ownership, the Company believes that each filing required to be
made under Section 16(a) during fiscal 2001 was filed in a timely manner. Any
such filings during previous fiscal years that were not made in a timely
manner were reported in the Company's proxy statement for the respective
fiscal year.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to the Company's
executive officers, including age as of the date of the Annual Meeting,
positions held with the Company, and business experience for the previous five
years. Except as otherwise noted, all executive officers of the Company were
elected to their current terms effective May 22, 2001, to serve at the
pleasure of the Board for a term of one year and thereafter until their
successors are elected and qualified.
Daniel P. Anderson. Mr. Anderson, 49, is Vice President, Health, Safety and
Environmental Affairs of the Company and has been since 1996. Prior to that,
he was Vice President, Health, Safety and Environmental Affairs of First
Mississippi.
Max P. Bowman. Mr. Bowman, 41, is Vice President and Chief Financial
Officer of the Company, and has been since May 2001. He was Vice President,
Finance and Treasurer of the Company from November 1998 until May 2001. He was
Treasurer and Corporate Risk Manager of the Company from 1996 to November
1998. Prior to that, he was Internal Audit/Corporate Risk Manager of First
Mississippi.
Troy B. Browning. Mr. Browning, 49, is Controller of the Company and has
been since 1996. Prior to that, he was Controller of First Mississippi.
J. Steve Chustz. Mr. Chustz, 53, is General Counsel of the Company and has
been since 1996. Prior to that, he was General Counsel of First Mississippi.
P. Jerry Coder. Mr. Coder, 59, is President of EKC Technology, Inc., a
subsidiary of the Company, and has been since December 1992.
William B. Kemp. Mr. Kemp, 53, is Vice President, Human Resources of the
Company, and has been since June 1997. Prior to joining the Company, he was
Vice President, Human Resources of Rust Environmental and Infrastructure, an
engineering consulting firm.
14
James L. McArthur. Mr. McArthur, 58, is Secretary and Manager, Investor
Relations of the Company and has been since 1996. Prior to that, he was
Secretary and Manager, Investor Relations of First Mississippi.
George M. Simmons. Mr. Simmons, 59, is President of First Chemical
Corporation, a subsidiary of the Company, and has been since July 1995.
R. Michael Summerford. Mr. Summerford, 53, is President and Chief Operating
Officer of the Company, and has been since September 1998. He was Vice
President and Chief Financial Officer of the Company from 1996 until September
1998. Prior to that, he was Vice President and Chief Financial Officer of
First Mississippi.
William W. Wilkison. Mr. Wilkison, 58, is President of ChemFirst Electronic
Materials L.P. (formerly TriQuest, L.P.), a limited partnership subsidiary of
the Company, a position he has held since October 2001. From January 1998
through September 2001, he was Vice President, Sales and Marketing of
ChemFirst Electronic Materials L.P. From July 1997 through December 1997, he
was Manager of New Business Development of Clariant Corp. Until July 1997, he
was Manager of New Business Development of Hoechst Celanese.
J. Kelley Williams. Mr. Williams, 68, is Chairman of the Board and Chief
Executive Officer of the Company, and has been since 1996. He was Chairman and
Chief Executive Officer of First Mississippi from August 1995 until 1996, and
served as Chairman, Chief Executive Officer and President of First Mississippi
from 1988 until August 1995.
15
SUMMARY COMPENSATION TABLE
The following table shows compensation for fiscal years 1999, 2000 and 2001
for the Chief Executive Officer and the other four most highly compensated
executive officers of the Company.
Long-Term
Compensation
Annual Compensation Awards
---------------------------- --------------
Other Annual Securities All Other
Name and Principal Salary Bonus Compensation Underlying Compensation
Position Year ($) ($) (1) ($) Options(2) (#) (3) ($)
------------------ ---- ------- ------- ------------ -------------- ------------
J. Kelley Williams 2001 512,629 202,200 -0- -0- 66,117
Chairman and 2000 512,629 369,300 621,049 83,300 65,260
Chief Executive Officer 1999 501,923 299,600 560,993 100,000 64,236
R. Michael Summerford 2001 360,135 110,300 -0- 47,950 29,459
President and 2000 349,650 201,500 -0- 52,050 24,882
Chief Operating Officer 1999 301,154 163,500 -0- 100,000 23,636
George M. Simmons 2001 198,800 103,000 -0- 28,506 51,429
President, 2000 193,000 91,220 -0- 20,900 40,421
First Chemical 1999 188,121 108,000 435,305 30,750 43,092
Corporation
P. Jerry Coder 2001 205,000 25,800 31,460 19,550 19,876
President, 2000 190,000 110,725 -0- 19,150 23,940
EKC Technology, Inc. 1999 176,000 74,700 -0- 29,025 22,271
J. Steve Chustz 2001 185,338 34,000 -0- 27,206 7,875
General Counsel 2000 179,942 61,300 -0- 19,500 9,678
1999 175,365 49,900 -0- 28,650 10,414
--------
(1) Other Annual Compensation includes payouts under Performance Option
arrangements and direct cash payments related to long-term incentive tax
reimbursements. Aggregate perquisites and other personal benefits were
less than either $50,000 or 10% of the total annual salary and bonus
reported for the named officers and are excluded from the table.
Tax reimbursement payments are made to eligible employees equal to 37% of
the Company's federal income tax deduction resulting from the exercise of
Convertible Subordinated Debenture Options, NQSOs, Incentive Stock Options
and Performance Options. Tax reimbursement payments are not applicable for
options granted after August 21, 1995. There were no tax reimbursement
payments to the named officers in 2001. The tax reimbursement payment in
2000 to Mr. Williams was $621,049. Tax reimbursement payments in 1999 to Mr.
Williams and Mr. Simmons were $560,993 and $57,102, respectively.
Performance Option payouts in 2001 were $31,460 to Mr. Coder. Performance
Option payouts in 1999 were $378,203 to Mr. Simmons.
(2) NQSOs were granted to officers and certain key employees of the Company in
2001, 2000 and 1999. The share amounts for a particular fiscal year under
this column reflect only the shares underlying options which were granted
during the respective fiscal year.
(3) All Other Compensation is comprised of the following:
Above-market interest under the Deferred Income Plan A. The above-market
portion of interest earned under Plan A in 2001 was $9,497 and $17,866 for
Mr. Summerford and Mr. Simmons, respectively. See "Director Compensation"
for a description of Plan A.
Company's contributions to the ChemFirst Inc. 401(k) and Employee Stock
Ownership Plan and Trust ("401(k)/ESOP"). Company contributions in 2001 to
the 401(k) portion of this plan were $6,800, $6,800, $6,159, $6,800 and
$5,368 for Mr. Williams, Mr. Summerford, Mr. Simmons, Mr. Coder and Mr.
Chustz, respectively. Company contributions in 2001 to the ESOP portion of
this plan were $850, $850, $770, $850 and $850 for Mr. Williams, Mr.
Summerford, Mr. Simmons, Mr. Coder and Mr. Chustz, respectively.
Company's contributions to the ChemFirst Inc. Benefits Restoration Plan
("BRP"). The Company's BRP permits the Company to make contributions to the
401(k) portion and the ESOP portion of the 401(k)/ESOP in amounts permitted
by that plan, but that would otherwise be in excess of those permitted by
certain Internal Revenue Code limitations. 401(k)-related accruals under the
BRP in 2001 were $12,505, $7,605, $593, $1,400 and $0 for Mr. Williams, Mr.
Summerford, Mr. Simmons, Mr. Coder and Mr. Chustz, respectively. ESOP-
related accruals under the BRP in 2001 were $1,254, $931, $0, $74 and $77
for Mr. Williams, Mr. Summerford, Mr. Simmons, Mr. Coder and Mr. Chustz,
respectively.
Cash subsidies related to the executive life insurance program. Cash
subsidies in 2001 were $19,450, $3,075, $2,918, $3,099, and $1,581 for Mr.
Williams, Mr. Summerford, Mr. Simmons, Mr. Coder and Mr. Chustz,
respectively.
16
Dollar value difference between the purchase price and fair market value
of Share Units purchased under the BRP and the Long-Term Incentive Plans.
The BRP and Long-Term Incentive Plans permit officers to defer certain
salary and bonus amounts in the form of Share Units. The price paid by the
officers for each Share Unit pursuant to these plans in 2001 was $18.62 for
salary deferrals (85% of the fair market value of the Company's Common
Stock on January 2, 2001) and $21.31 for bonus deferrals (85% of the fair
market value of the Company's Common Stock on February 19, 2002). The
dollar value of amounts earned on deferred compensation during 2001 is
calculated by comparing the difference between the applicable Share Unit
purchase price and the fair market value of the Company's Common Stock on
the date the deferred compensation is earned by the officer. Because these
amounts are calculated at the time the compensation is earned, the actual
value of such compensation received by the officers will vary in accordance
with fluctuations in the per share price of the Company's Common Stock. For
2001, the aggregate preferential amount for the named executive officers
was $25,258, $701, $23,123, $7,172, and $0 for Mr. Williams, Mr.
Summerford, Mr. Simmons, Mr. Coder and Mr. Chustz, respectively.
OPTION GRANTS IN 2001
The following table shows NQSOs granted on March 6, 2001 to the executive
officers named in the Summary Compensation Table under the 1998 Long-Term
Incentive Plan. No other awards were granted to these individuals pursuant to
the Long-Term Incentive Plans.
Potential
Realizable Value
at Assumed Annual
Individual Grants Rates of Stock
---------------------------------------------- Price
Number of % of Total Appreciation for
Securities Options Ten-Year Option
Underlying Granted to Exercise Term ($)(1)
Options all Employees Price Expiration -----------------
Name Granted in Fiscal Year ($/share) Date 5% 10%
---- ---------- -------------- --------- ---------- ------- ---------
J. Kelley Williams -0- n/a n/a n/a n/a n/a
R. Michael Summerford 47,950 13.8% 25.55 03/07/11 770,473 1,952,530
George M. Simmons 28,506 8.2% 25.55 03/07/11 458,042 1,160,767
P. Jerry Coder 19,550 5.6% 25.55 03/07/11 314,134 796,078
J. Steve Chustz 27,206 6.1% 25.55 03/07/11 340,743 863,511
--------
(1) The dollar amounts under these columns represent the potential realizable
value of each grant assuming that the market value of the Company's Common
Stock appreciates from the date of grant to the expiration of the option
at annualized rates of 5% and 10%. These assumed rates of appreciation
have been specified by the SEC for illustrative purposes only and are not
intended to forecast future financial performance or possible future
appreciation in the price of Company Common Stock. Optionees will only
realize value from this grant if the price of Company Common Stock
appreciates, which would benefit all stockholders commensurately.
AGGREGATED 2001 OPTION EXERCISES AND YEAR END VALUES
Aggregate Value of Unexercised,
Shares Securities Underlying Unexercised In-the-Money Options at
Acquired on Options at 12/31/01 12/31/01(2)
Exercise Value --------------------------------- ---------------------------------
Name (#) (1) Realized ($) Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
---- ----------- ------------ --------------- ----------------- --------------- -----------------
J. Kelley Williams -0- -0- 452,900 -0- 1,731,571 -0-
R. Michael Summerford -0- -0- 294,503 15,000 1,068,660 -0-
George M. Simmons -0- -0- 124,256 -0- 313,889 -0-
P. Jerry Coder -0- -0- 102,975 -0- 282,303 -0-
J. Steve Chustz -0- -0- 143,383 -0- 695,113 -0-
--------
(1) No options were exercised during 2001 by the executive officers named in
the above table.
(2) Value was computed as the difference between the individual option price
and the per share closing price of Company Common Stock on December 31,
2001, as reported by the New York Stock Exchange. Only options with fair
market values in excess of the exercise price are reflected in this
column.
17
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2001 about the
Company's Common Stock that may be issued upon the exercise of options,
warrants and rights under all of the Company's existing equity compensation
plans, including the 1988 Long-Term Incentive Plan, the 1995 Long-Term
Incentive Plan, the 1998 Long-Term Incentive Plan and the 1997 Employee Stock
Purchase Plan:
Number of securities
Number of remaining available
securities to be for future issuance
issued upon Weighted-average under equity
exercise of exercise price of compensation plans
outstanding outstanding (excluding securities
options, warrants options, warrants reflected in
Plan Category and rights (a) and rights (b) column (a)) (c)
------------- ----------------- ----------------- ---------------------
Equity compensation
plans approved by
security holders(1):
1988 Long-Term
Incentive Plan 116,131(2) $13.95 -0-
1995 Long-Term
Incentive Plan 672,679(3) $21.74 211,105(5)
1998 Long-Term
Incentive Plan 1,456,002(4) $21.74 186,598(6)
1997 Employee Stock
Purchase Plan -0- n/a 79,160
Equity compensation
plans not approved by
security holders: -0-(7) n/a n/a
Total 2,244,812 $21.34 476,863
--------
(1) The 1995 Long-Term Incentive Plan and the 1998 Long-Term Incentive Plan
include awards consisting of Share Units which are payable in cash or
Common Stock at the option of the Company. None of the units have been
exchanged for stock, and the Company has no current intention to pay in
stock. The 1988 Long-Term Incentive Plan and the 1995 Long-Term Incentive
Plan were approved by the stockholders of First Mississippi and were
assumed by the Company in the ChemFirst Distribution.
(2) Includes debenture options to purchase (through the conversion of
debentures and shares of preferred stock underlying such debenture
options) 6,039 shares of Common Stock, and options to purchase 110,092
shares of Common Stock assumed in the ChemFirst Distribution.
(3) Includes options to purchase 370,178 shares of Common Stock, and options
to purchase 302,501 shares assumed in the ChemFirst Distribution.
(4) Includes options to purchase 1,456,002 shares of Common Stock.
(5) The Company will not make any further awards under the 1995 Long-Term
Incentive Plan.
(6) Excludes 35,000 restricted shares previously issued.
(7) The Company's Benefits Restoration Plan and 1989 Deferred Compensation
Plan for Outside Directors include awards consisting solely of Share Units
which are payable in cash or Common Stock at the option of the Company.
None of the units have been exchanged for stock, and the Company has no
current intention to pay in stock.
18
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return
on the Company's Common Stock during the five-year period ended December 31,
2001 to that of (i) the Standard and Poor's 500 Stock Index and (ii) the S&P
Supercomposite Chemicals (Specialty) Index (the "SCCHMS"). The graph assumes a
$100 investment on December 31, 1996 and the reinvestment of all dividends.
The information contained in this section shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
[CHART APPEARS HERE]
Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01
------- ------- ------- ------- ------- -------
CEM 100.000 124.118 88.386 99.532 102.268 112.977
S&P 500 100.000 133.355 171.462 207.528 188.638 166.237
SCCHMS(1) 100.000 122.062 102.969 106.528 100.569 106.097
--------
(1) The SCCHMS Index commenced in July 1996.
19
RETIREMENT AND OTHER COMPENSATION
In 1970, First Mississippi stockholders authorized a noncontributory
retirement plan for the employees of First Mississippi. In connection with the
ChemFirst Distribution, the Company assumed the obligations of First
Mississippi under this retirement plan. Employees become 100% vested after
five years of employment. The retirement plan provides for normal retirement
at age 65 with actuarially adjusted provisions for early and postponed
retirement dates. Retirement benefits are based on years of service and
average compensation (wages and salary) of the five highest consecutive years
during employment. The benefits listed in the table below are not subject to
any reduction for social security or other offset amounts.
The following table shows the estimated annual retirement benefit payable
to participating employees including executive officers on earnings and years
of service classifications as indicated.
Estimated Annual Benefits for Years of Credited
Average Service ($)
Annual Compensation ------------------------------------------------------------------
($) (5 Highest 15 20 25 30 35
Consecutive Years) Years Years Years Years Years
------------------- ------- ------- ------- ------- -------
100,000 26,568 35,424 44,280 53,136 61,992
150,000 40,068 53,424 66,780 80,136 93,492
200,000 53,568 71,424 89,280 107,136 124,992
300,000 80,568 107,424 134,280 161,136 187,992
400,000 107,568 143,424 179,280 215,136 250,992
450,000 121,068 161,424 201,780 242,136 282,492
500,000 134,568 179,424 224,280 269,136 313,992
The table includes amounts that exceed limitations allowed under Section
415 of the Internal Revenue Code. The Company's BRP provides that if an
individual's retirement benefits calculated under the retirement plan exceed
the maximum allowed under the Code, the Company may supplement such employee's
benefits under certain conditions to the extent such benefit is in excess of
the limitation.
Years of service for the executive officers listed in the Summary
Compensation Table are: Mr. Williams, 34.7 years; Mr. Summerford, 23.4 years;
Mr. Simmons, 17.0 years; Mr. Coder, 9.6 years; and Mr. Chustz, 24.7 years.
Termination Agreements
During fiscal 1996, the Board of Directors of First Mississippi approved
Termination Agreements for the officers of First Mississippi, including Mr.
Williams, Mr. Summerford, Mr. Simmons, Mr. Coder and Mr. Chustz. Pursuant to
the Agreement and Plan of Distribution between First Mississippi and the
Company dated as of December 18, 1996, the Company assumed the obligations of
First Mississippi under the Termination Agreements. The Termination Agreements
are contingent upon a Change of Control, as defined in the Agreements, and
originally provide for two three-year terms which are automatically extended
unless the Company determines not to renew or there is a Change of Control of
the Company during any three-year term. Each officer, other than the Chief
Executive Officer, would be paid upon termination of employment for reasons
other than cause, death or disability or upon resignation for good reason,
subsequent to a Change of Control during the term of the Termination
Agreement, three times the sum of the five-year average of his annual base
salary and bonus. The Company's Chief Executive Officer is entitled to the
same termination benefit as described above for all other officers, except
that the Chief Executive Officer may resign for any reason, as opposed to
"good reason", within 36 months of a Change of Control and still be entitled
to the termination benefit. Upon termination, the individual would have the
option, unless he notifies the Company otherwise, to receive a cash payment
equal to the cash value of all his NQSOs, Debenture Options and Convertible
Debentures, whether then exercisable or not. Following termination, the
Company may pay amounts due to individuals for stock disposition of grants
issued in 1994 and earlier under the Company's tax sharing plan. No individual
would receive payments in the event of death, disability or termination for
cause. In addition, the Chief Executive Officer's Termination
20
Agreement provides for an additional payment to be made by the Company to him
if any of the severance payments provided for by the Termination Agreement or
any other payments made pursuant to a Change of Control of the Company (the
"Total Payments") become subject to an additional tax (the "Excise Tax")
imposed by Section 4999 of the Code, such that the net of all of the payments
received by him after the imposition of the Excise Tax on the Total Payments
and any federal income tax on the additional payment shall be equal to the
Total Payments. In February 2002, the Board amended each Termination Agreement
to extend the term for two additional years, with automatic renewal for one-
year terms thereafter, unless the Board gives notice no later than June 30 of
any year that it will not extend the term of that agreement.
PROPOSAL II: APPROVAL OF THE AMENDMENT
TO THE 1998 LONG-TERM INCENTIVE PLAN
An amendment to the Company's 1998 Long-Term Incentive Plan was adopted by
the Board on February 19, 2002, subject to approval by the Company's
stockholders at the Annual Meeting. The purpose of the Plan Amendment is to
increase the number of shares of the Company's Common Stock authorized to be
awarded under the Plan by 600,000, so that 2,300,000 total shares would be
authorized pursuant to the Plan, as amended (the "Plan Amendment"). The 1998
Long-Term Incentive Plan was previously amended by stockholder approval in May
2000 to add 750,000 shares to the 950,000 shares originally authorized under
the Plan. (Hereafter, the Company's 1998 Long-Term Incentive Plan, as amended
by the Plan Amendment, shall be referred to as the "Plan".) The purpose of the
Plan is to further the growth in earnings and market appreciation of the
Company by providing long-term incentives to directors and employees of the
Company and its subsidiaries, partnerships and joint ventures. The Company
exhausted all the shares originally authorized under the Plan by stock options
granted on February 19, 2002, and also approved certain conditional grants of
stock options to be effective and priced on May 21, 2002 subject to
stockholder approval of the Plan Amendment. (See "Grants Under the Plan"
below.) The Plan Amendment will allow the Company to make the awards in 2002
and in the future, which will further the Company's ability to attract, retain
and motivate officers, directors and key employees of high caliber and good
potential and promote the alignment of the participant's interests with that
of the Company's stockholders. The Plan provides for the granting from time to
time of incentive compensation in the form of stock options, stock
appreciation rights, performance shares and performance units, restricted
stock, supplemental payments and conversion awards ("Awards").
Set forth below is a brief description of the material features of the
Plan, which description does not purport to be complete and is qualified in
all respects by the terms of the Plan, a copy of which is attached as
Appendix A. Capitalized terms not otherwise defined in this Proxy Statement
have the meanings ascribed to them in the Plan.
Administration
The Plan is administered by the Board or a committee of at least two (2)
members appointed by the Board, as the Board shall determine in its sole
discretion from time to time. The Board has determined that the Committee
shall administer the Plan, but it retains the discretion to administer any
aspect of the Plan. Each member of the Committee must be a member of the Board
and a "non-employee" director within the meaning of Rule 16b-3 ("Rule 16b-3")
as promulgated under the Exchange Act. The Board has full and final authority
to interpret the provisions of the Plan and to grant Awards pursuant to the
Plan, provided, however, that the Company's Chief Executive Officer (or some
other officer designated by the Board) has the authority to grant Awards to
newly hired employees who are not subject to Section 16 of the Exchange Act at
the time such Award is granted, subject to approval by the Board.
Eligibility for Participation
All Employees, Directors and Advisors of the Company or any subsidiary are
eligible to participate in the Plan. The Board has the sole discretion to
determine and designate those Employees, Directors and Advisors
21
that are to receive Awards. Since designation of participants is subject to
the discretion of the Board, the approximate number of eligible participants
in the Plan is impossible to estimate at this time.
Shares Subject to the Plan
Presently, up to a maximum of 1,700,000 shares of Common Stock may be
issued under the Plan. If the proposal to amend the Plan to add 600,000 shares
authorized pursuant to the Plan is approved by the Company's stockholders,
then a maximum of 2,300,000 shares of the Company's $1.00 par value common
stock (the "Common Stock") may be issued pursuant to the Plan, provided,
however, that no more than 50,000 shares may be granted in the form of
restricted stock Awards. Shares issued pursuant to the Plan shall be either
shares of authorized but unissued Common Stock or shares of Common Stock held
as treasury shares. Any shares cancelled or forfeited, or any unissued shares
subject to an Award that terminates, expires or lapses for any reason pursuant
to the terms of the Plan, shall again be available for grant under the Plan.
The maximum number of shares with respect to which any Employee may be awarded
stock options, restricted stock or stock appreciation rights in any calendar
year is limited to an aggregate amount of 100,000 shares.
Awards
Participants. The Board may grant any of the Awards described below to
Employees, Directors or Advisors. These Awards are not transferable, except by
will or the laws of descent or distribution, provided that the Board may, in
its sole discretion, when and if permitted by Rule 16b-3, establish guidelines
providing for the irrevocable transfer, without payment of consideration, of
any Stock Option, other than Incentive Stock Options, by the Participant to a
member of the Participant's immediate family or to a trust, partnership or
other pass-through entity whose beneficiaries are members of the Participant's
immediate family.
Stock Options. Options granted pursuant to the Plan may be either in the
form of incentive stock options (which are options that meet the requirements
of Section 422 of the Internal Revenue Code (the "Code")) or in the form of
nonqualified stock options. A stock option gives the holder the right to
purchase, during the term of the option, a number of shares of Common Stock at
a price determined on the date the option is granted. The option exercise
price and the time or times at which the option may be exercised are
determined by the Board at the time of grant, except that the option price may
not be less than one hundred percent of the fair market value of the Common
Stock on the date of grant. The market price of a share of the Company's
Common Stock as of February 19, 2002, as reported by the New York Stock
Exchange, was $25.06. The option price may be paid in cash, or in the form of
Common Stock owned by the option holder at least six months prior to exercise,
based on the fair market value of such Common Stock on the date of exercise,
or a combination of cash and Common Stock. In addition, an option holder may
exercise an option by providing assurance from a broker registered under the
Exchange Act of delivery of the proceeds of an imminent sale of the stock to
be issued pursuant to the exercise. Stock options may be exercised at such
time or times as may be specified at the time of grant, but in no event more
than ten years after the date of grant.
Stock Appreciation Rights ("SARs"). SARs may be granted in connection with
all or any part of a previously or contemporaneously granted stock option or
unrelated to any option. SARs entitle the holder, upon exercise of the SAR, to
receive an amount equal to the difference between the fair market value of
shares of Common Stock with respect to which the SAR is being exercised and
the price specified by the Board. Payment may be made in cash, in shares of
Common Stock, or a combination of the two, as the Board determines. A SAR may
be exercised at such times as may be specified by the Board provided that no
SAR shall be exercisable earlier than six months after grant and no later than
ten years after grant.
Performance Shares and Performance Units. Performance Shares or Units give
the holder the right to receive shares of Common Stock or a cash payment
specified by the Board at the end of a specified performance period if
specified performance goals are met. Performance goals are related to the
performance of the Company or one or more subsidiaries or a combination
thereof. When circumstances occur that cause predetermined
22
performance objectives to become an inappropriate measure of performance, the
Board, in its discretion, may adjust the performance goals, except for an
Award intended to qualify under Section 162(m) of the Code.
Restricted Stock. Restricted stock Awards are grants of shares of Common
Stock to an Employee for no consideration, but are subject to such conditions,
terms and restrictions for such period or periods as shall be determined by
the Board or as expressly stated in the Plan. During the restricted period,
the participants shall be entitled to vote the shares but shall not assign,
transfer, pledge or otherwise encumber such shares. The Board has the power to
accelerate the termination of the applicable restricted period with respect to
part or all of any restricted stock Award.
Supplemental Payments. The Board has the discretion to determine that any
Award may provide for a supplemental payment to a participant after the
exercise, lapse of restrictions or payment for such Award. The Board shall set
the terms and conditions of such supplemental payments; provided however, that
the amount of the payment may not exceed, in the case of a stock option, the
excess of fair market value on the date of exercise over the option exercise
price multiplied by the number of shares for which such option is exercised,
and in the case of a SAR, performance unit, performance share or restricted
stock Award, the value of the shares and other consideration issued in payment
of such Award.
Conversion Awards
Employees designated by the Board may make an irrevocable election to
receive Share Units in exchange for some portion of their cash compensation
(base salary or annual incentives). The maximum amount of cash compensation
which may be exchanged for Share Units is the lesser of 30% or $30,000 of a
year's base salary and the lesser of 50% or $50,000 of an annual incentive
award. The Share Unit may be acquired at a per share exchange price of 85% of
the fair market value of the Company's Common Stock determined as of the first
business day in January in the year of election if base salary is deferred or
the day the annual incentive award is approved by the Board if an annual
incentive is deferred (the "Exchange Date"). All Share Units are subject to
certain conditions, terms and restrictions set by the Board and vest three
years from the Exchange Date or, in the event of a Rollover Election (as
defined below), two years from the effective date of the most recent Rollover
Election. An Employee has the option to elect (a "Rollover Election") to defer
the vesting of any share unit for an additional period of two years by making
an irrevocable Rollover Election at least six months prior to the vesting date
of such Share Unit. There is no limit to the number of Rollover Elections an
Employee may make with respect to a particular Share Unit. An Employee is also
entitled to receive additional Share Units equal in value to the amount of
cash dividends such Employee would have received had the Employee owned one
share of the Company's Common Stock for each Share Unit owned by the Employee
on each record dividend date.
At such time as a Share Unit vests, such Share Unit will be returned to the
Company and in exchange thereof the Employee is entitled to receive an amount
equal to the average of the highest and lowest price for the Company's Common
Stock on the date of exchange. Such payment in exchange for a Share Unit will
be made in the form of cash or Company Common Stock as the Board shall
determine in its sole discretion. In the event an Employee owns unvested Share
Units at the time such Employee's employment with the Company is terminated,
each unvested Share Unit will be forfeited and in substitution thereof the
Employee is entitled to receive a cash payment, the amount of which is
determined by the circumstances under which the Employee's employment with the
Company is terminated.
Adjustments
In the event of any change in the capitalization of the Company by reason
of a dividend, stock split or combination or any similar change or a merger,
consolidation, recapitalization, reclassification of shares or similar
reorganization, the Plan provides that the Board may make certain adjustments,
if any, to (a) the number of shares of stock which may be issued under the
Plan, (b) the number of shares issuable and the exercise price per share
pursuant to an outstanding Award theretofore granted under this Plan and, (c)
the number and kind of shares which may underlie an Award granted.
23
Duration of Plan; Amendment or Termination
The Plan shall remain in effect until all Awards have been satisfied, but
no Award shall be granted more then ten years after the date of approval of
the Plan by the stockholders. The Board may at any time suspend, terminate,
modify or amend the Plan, but any amendment that requires shareholder approval
in order for the Plan to continue to comply with Rule 16b-3, Section 162(m) of
the Code or any other applicable law, rule or regulation shall not be
effective unless approved by the requisite shareholder vote. In addition, no
such action by the Board may adversely affect any previously granted Award
without the consent of the Award recipient.
Change in Control
In the event of a "change in control" (as defined in the Plan), all
outstanding stock options, SARs and other awards shall automatically become
fully vested and exercisable in full.
Federal Income Tax Consequences
The following is a brief and general discussion of the principal federal
income tax rules applicable to Plan Awards:
Stock Options. There is no tax incurred by the participant (or expense
deduction for the Company) upon the grant. At the time of exercise of a
nonqualified stock option, the difference between the exercise price and the
fair market value of Common Stock on the date of exercise will constitute
ordinary income to the participant. The Company will be allowed a deduction
equal to the amount of ordinary income realized by the participant. In the
case of incentive stock options, although no income is realized upon exercise
and the Company is not entitled to a deduction, the excess of the fair market
value on the date of exercise over the exercise price is treated by the
participant as an adjustment for alternative minimum tax purposes. If the
participant does not dispose of the shares acquired on the exercise of an
incentive stock option within one year after their receipt or within two years
after the grant of the stock option, gain or loss realized on the subsequent
disposition of the shares will be treated as long-term capital gain or loss.
Under current law, long-term capital gains are taxed at a maximum tax rate of
20%. In the event of a disposition of shares within one year after exercise or
within two years after the grant of the stock option, the participant may
realize ordinary income, and the Company will be entitled to a deduction,
equal to the amount of such income, at the time such income is realized by the
participant.
SARs. The participant will not realize any income at the time of grant of a
SAR. Upon the exercise of a SAR, any cash received and the fair market value
on the exercise date of any shares of Common Stock received will constitute
ordinary income to the participant. The Company will be entitled to a
deduction in the amount of such income at the time of exercise.
Restricted Stock. A participant normally will not realize taxable income
upon an award of restricted stock, and the Company will not be entitled to a
deduction, until the termination of the restrictions, except with respect to
the dividends, or dividend equivalents, received by the participant. Upon
termination of restrictions, the participant will realize ordinary income in
an amount equal to the fair market value of the Common Stock at that time and
the Company will be entitled to a deduction in the same amount. However, a
participant may elect to realize ordinary income in the year the restricted
stock is awarded in an amount equal to the fair market value of the Common
Stock at the time of the Award, determined without regard to the restrictions.
In this event, the Company will be entitled to a deduction in such year in the
same amount, and any gain or loss realized by the participant upon subsequent
disposition of the stock will be capital gain or loss. If, after making this
election, any restricted stock is forfeited, the participant cannot then claim
an ordinary deduction, but may claim a capital loss. If the market value of
the stock at vesting is lower than the amount on which the participant was
taxed, the participant may claim a capital loss on the sale of the stock at
the lower value.
Performance Shares and Performance Units. A participant normally will not
realize taxable income upon the award of performance units or performance
shares. Subsequently, when conditions and requirements
24
established with respect to grants made in shares of Common Stock have been
satisfied so that the shares are no longer subject to a substantial risk of
forfeiture, then an amount equal to the fair market value of any shares of
Common Stock received will constitute ordinary income to the participant in
the year in which such event occurs, and the Company will be entitled to a
deduction in the same amount. Recipients of Performance Awards made in shares
of Common Stock may make an election to realize ordinary income in the year of
receipt in the same manner as described above for recipients of restricted
stock Awards. A Participant normally will not realize taxable income on
Performance Units, which represent a contingent unfunded promise to pay cash
or property in the future, until all conditions or requirements applicable to
such Performance Units have been satisfied and the promised amount has become
immediately payable. At the time, the cash amount or fair market value of
property payable will constitute ordinary income and the Company will be
entitled to a deduction in the same amount.
Conversion Awards. A Participant normally will not realize taxable income
upon the award of Share Units, and the Company will not be entitled to a
deduction until the conditions and requirements placed on the award have
lapsed. The Company will also not be entitled to a deduction for any
additional Share Units awarded to the participant on account of dividends paid
on the Company's Common Stock until the conditions and requirements placed on
such additional Share Units have lapsed. Subsequently, when all conditions and
requirements established with respect to the share unit have lapsed, any cash
or Common Stock received in exchange thereof will constitute ordinary income
to the participant in the year in which paid in the case of cash payments and
when no longer subject to a substantial risk of forfeiture in the case of
payments in the form of Common Stock, and the Company will be entitled to a
deduction in the same amount.
Withholding. The Company shall have the right to reduce the number of
shares of Common Stock deliverable pursuant to the Plan by an amount which
would have a fair market value equal to the amount of all federal, state, or
local taxes required to be withheld, or to deduct the amount of such taxes
from any cash payment to be made to the participant, pursuant to the Plan or
otherwise.
Grants Under the Plan
Because a Participant's eligibility for Awards under the Plan and the
amount of any such Awards are determined by the Board, the nature and amounts
of future benefits under the Plan are not currently determinable, except for
the Awards of 186,598 NQSOs described below. All Awards thereunder will be
made at the discretion of the Board, in accordance with policies and
guidelines in effect from time to time.
On February 19, 2002, the Board granted a total of 186,598 NQSOs under the
Plan. These options will vest and become exercisable on August 19, 2002, and
will expire on February 19, 2012. Each option has a per share exercise price
of $25.06, which was the fair market value of the Company's Common Stock on
the date of grant. After these grants were made, there were no shares
remaining under the Plan for future Awards. Also on February 19, 2002, the
Board approved the grant of 138,402 additional NQSOs, which grants are subject
to stockholder approval of the Plan Amendment at the Annual Meeting. If the
Company's stockholders approve the Plan Amendment, these options would be
effective May 21, 2002 and would have a per share exercise price equal to the
fair market value of the Company's Common Stock on that date. These options
would vest and become exercisable on November 21, 2002 and would expire on May
21, 2012. If the Company's stockholders do not approve the Plan Amendment, the
options to be granted effective May 21, 2002 will be void and treated as if
the Board never approved such Awards.
25
The following table sets forth for the following persons the number of
shares relating to the options which the Board approved effective May 21, 2002
subject to stockholder approval of the Plan Amendment: the executive officers
included in the Summary Compensation Table on page 16, all current executive
officers as a group, all non-executive officer directors as a group, and all
other employees as a group. The executive officers included in the Summary
Compensation Table are the only persons receiving 5% or more of the total
options approved. Mr. Anderson, Mr. Guyton and Mr. Williams, the nominees for
election as a director, received options to purchase 639 shares, 639 shares
and 31,790 shares, respectively.
Number of
Dollar Shares
Value ($) (1)
--------- ---------
Executive Officers Listed
in Summary Compensation
Table:
J. Kelley Williams,
Chairman & Chief
Executive Officer (2) 31,790
R. Michael Summerford,
President & Chief
Operating Officer (2) 19,887
George M. Simmons,
President of First
Chemical Corporation (2) 7,985
P. Jerry Coder,
President of EKC
Technology, Inc. (2) 8,347
J. Steve Chustz, General
Counsel (2) 7,431
All Executive Officers as
a Group (11 persons) (2) 93,986
All Non-Executive Officer
Directors as a Group (11
persons) (2) 7,029
All Non-Executive Officer
Employees as a Group (33
persons) (2) 35,687
--------
(1) The shares reflected in this column represent shares underlying the
options approved by the Board on February 19, 2002 and which will be
effective on May 21, 2002 if the Plan Amendment is approved by the
stockholders at the Annual Meeting.
(2) Since the per share exercise price will be equal to the fair market value
of a share of Company Common Stock on May 21, 2002, such price is not
currently known and thus the dollar value cannot be determined.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT
TO THE 1998 LONG-TERM INCENTIVE PLAN.
Voting Procedures for Approval of the Plan Amendment. Stockholders have the
right to vote "For", "Against" or "Abstain" when voting on the adoption of the
Plan Amendment. Pursuant to the Company's bylaws and Mississippi law, the
presence, in person or by proxy, of a majority of the outstanding shares of
Common Stock entitled to vote shall constitute a quorum to convene the Annual
Meeting. Therefore, any proxy authorized to be voted at the Annual Meeting on
any matter, whether or not marked to "Abstain" or to effect a broker non-vote,
will be counted in establishing a quorum. Approval of the Plan Amendment will
require the affirmative vote of the holders of a majority of the shares
represented at the Annual Meeting and entitled to vote for approval of the
Plan Amendment, in person or by proxy. Consequently, abstentions will have the
effect of a vote against the Plan Amendment, but broker non-votes will not
affect the outcome of the vote. In the absence of specific instructions,
proxies will be voted FOR the approval of the Plan Amendment.
AUDITORS
Upon recommendation by the Audit Committee, the accounting firm of KPMG LLP
("KPMG") was approved by the Board to serve as independent auditor of the
Company for 2002.
KPMG has served as independent auditor of the Company for the past six
years, and served as First Mississippi's independent auditor for 33 years
prior to the ChemFirst Distribution. The Company has been advised that neither
KPMG nor any of its associates has a material interest in the Company or any
affiliate thereof. Representatives of KPMG are expected to be present at the
Annual Meeting and will be afforded an opportunity to make a statement, if
they desire, and will be available to respond to appropriate questions from
stockholders.
26
PRINCIPAL ACCOUNTING FIRM FEES
The Company incurred the following fees for services performed by KPMG in
fiscal 2001:
Audit Fees. Fees billed for the fiscal year 2001 audit and the review of the
financial statements filed with the quarterly Form 10-Qs for the fiscal year
ended December 31, 2001 were $185,500.
Financial Information Systems Design and Implementation Fees. KPMG did not
render any services related to financial information systems design and
implementation for the fiscal year ended December 31, 2001.
Other Fees. Fees billed for audit-related services rendered by KPMG for the
fiscal year ended December 31, 2001 were $90,602. Fees billed for all other
non-audit services rendered by KPMG for the fiscal year ended December 31, 2001
were $4,178.
FORM 10-K
Stockholders may obtain without charge a copy of the Company's Form 10-K for
the fiscal year ended December 31, 2001 filed with the SEC by calling or
writing the Company's Investor Relations Department, 700 North Street, Jackson,
Mississippi 39202, telephone (601) 948-7550, or by emailing to
IR@chemfirst.com.
OTHER MATTERS
The management of the Company knows of no other matter which may come before
the Annual Meeting. However, if any matter other than those referred to herein
should properly come before the meeting, the proxies will be voted with respect
thereto in accordance with the judgment of the proxy holder.
Please sign the enclosed proxy and return it promptly in the return
envelope.
/s/ JAMES L. McARTHUR
JAMES L. McARTHUR
Secretary
27
APPENDIX A
(Marked to show amendment to Section 5)
ChemFirst Inc.
1998 Long-Term Incentive Plan
(as amended May 21, 2002)
1. Purpose
The purpose of this Plan is to further the growth in earnings and market
appreciation of ChemFirst Inc. by providing long-term incentives to directors,
officers, advisors and employees of the Company and its subsidiaries,
partnerships and joint ventures. The Company intends that the Plan will help
attract, retain and motivate officers, directors, advisors and key employees of
high caliber and good potential and promote the alignment of the participants'
interests with that of the Company's shareholders.
2. Definitions
For purposes of this Plan, the following terms shall have the meanings set
forth below:
"Advisor" means a non-employee consultant to the Board of Directors of the
Company or a Subsidiary.
"Annual Incentive" means an amount payable pursuant to any short term
incentive compensation plan or sales incentive plan of the Company.
"Award" means an award granted under this Plan.
"Base Salary" means the regular salary paid to an employee. Base Salary
shall not include bonuses or other forms of compensation which are not
considered regular earnings by the Company.
"Board" means the Board of Directors of the Company.
"Change in Control" shall have the meaning set forth in Paragraph 18.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the committee appointed by the Board to administer the
Plan as a whole or certain aspects of the Plan. The Committee shall consist of
two or more members of the Board who are "nonemployee directors" within the
meaning of Rule 16b-3.
"Company" means ChemFirst Inc.
"Conversion Award" means an Award issued in place of cash compensation,
pursuant to Paragraph 7 of the Plan.
"Director" means a member of the Board of Directors of the Company or a
Subsidiary.
"Employee" means any officer or other employee of the Company or a
Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Exchange Date" means the date upon which the replacement of cash
compensation with a Conversion Award is to take effect. For purposes of:
(a) Base salary, that date shall be the first business day of January in
the calendar year for which an election has been made to replace cash
compensation with a Conversion Award.
(b) Annual incentives, that date shall be the date on which the
incentive award is approved by the Board of Directors.
A-1
"Fair Market Value" means, as of any date, the average of the highest and
lowest prices at which the Stock is traded on such date on the principal
market on which the Stock is traded, or if the Stock is not traded on such
date, on the immediately preceding date on which the Stock is traded.
"Incentive Stock Option" means an option meeting the requirements of
Section 422 of the Code.
"Nonqualified Stock Option" means an option that is not an Incentive Stock
Option.
"Participant" means an Employee, Director or Advisor who has been selected
by the Committee to receive an Award under the Plan.
"Performance Period" means the period of time designated by the Committee
in which an Award may be earned.
"Performance Shares" means shares of Stock that may be earned under the
Plan, subject to the satisfaction of certain performance criteria over a
Performance Period.
"Performance Units" means a dollar denominated unit that may be earned
under the Plan, subject to the satisfaction of performance criteria over a
Performance Period.
"Plan" means this ChemFirst Inc. 1998 Long-Term Incentive Plan, as amended
from time to time.
"Restricted Stock" means shares of stock that may be earned under the Plan,
subject to continued employment or other vesting criteria.
"Rollover Election" means election to defer vesting of share units for an
additional Restricted Period beyond the existing Vesting Date of Record. The
effective date of a Rollover Election shall be the day on which the applicable
share unit would have vested absent such election.
"Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange
Commission pursuant to the Exchange Act, as amended from time to time.
"Share Unit" is the right to receive an amount of cash or Stock equal to
the value of a share of Stock at a future date in exchange for a vested Share
Unit.
"Stock" means the common stock of the Company.
"Stock Option" means an option granted pursuant to the Plan, whether an
Incentive Stock Option or a Nonqualified Stock Option.
"Subsidiary" means any corporation, partnership, joint venture or other
entity in which the Company has at least a fifty percent beneficial ownership
interest.
"Vesting Date of Record" means the date on which a Share Unit fully vests.
3. Administration
The Plan shall be administered by the Board and/or the Committee, as the
Board shall determine in its sole discretion from time to time. In exercising
its discretion with respect to the administration of the Plan, the Board shall
have the option of administrating only certain aspects of the Plan, such as
the determination and approval of Awards to be granted under the Plan, and
delegating the administration of the remaining aspects of the Plan to the
Committee. The Board and/or the Committee, as the case may be, shall have full
and final authority in its discretion to conclusively interpret the provisions
of the Plan and to decide all questions of fact arising in its application; to
determine the Participants to whom Awards shall be made under the Plan; to
determine the type of Award to be made and the amount, size and terms of each
such Award; to determine the time when Awards
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will be granted to Participants; and to make all other determinations
necessary or advisable for the administration of this Plan. Notwithstanding
the above, the Company's Chief Executive Officer or some other officer
designated by the Board or the Committee, as the case may be, shall have the
authority to grant Awards to newly hired employees who are not subject to
Section 16 of the Exchange Act at the time such Award is granted, subject to
such limitations as may be established by the Board or the Committee, as the
case may be. All provisions elsewhere in this Plan dealing with administration
of and decisions under this Plan which refer to the Committee shall be deemed
to refer to the Board whenever the Board is administrating, pursuant to this
Section 3, the aspect of the Plan to which said provision relates.
4. Participation
The Committee, in its discretion, may grant Awards to any Participant,
subject to the provisions of the Plan. No Participant shall be entitled as a
matter of right to receive an Award, nor shall the grant of an Award entitle a
Participant to receive any future Award.
5. Shares Subject to the Plan
(a) A maximum of 2,300,000 shares of Stock (including 950,000 shares
originally authorized by the Plan, 750,000 shares added by Amendment No. 1 to
the Plan, and 600,000 shares added by Amendment No. 2 to the Plan), may be
issued in satisfaction of any type of Award pursuant to the Plan provided,
however, that no more than 50,000 shares may be granted in the form of
Restricted Stock Awards. The total number of shares authorized and the number of
shares which may be granted in the form of Restricted Stock Awards are subject
to adjustment pursuant to Paragraph 15. Shares issued pursuant to the Plan shall
be either authorized but unissued shares of Stock or shares of Stock held as
treasury stock.
(b) To the extent that any Award is canceled or forfeited, or terminates,
expires, or lapses for any reason, any unissued shares of Stock subject to
such Award shall again be available for grant under the Plan.
(c) Any Awards granted in substitution for awards or rights issued by a
company that is acquired by the Company or a Subsidiary shall not reduce the
number of Shares available for grant under the Plan.
(d) Subject to adjustment pursuant to Paragraph 15, the maximum number of
shares of Stock with respect to which any Employee may be awarded Stock
Options, Restricted Stock or Stock Appreciation Rights in any calendar year
under Paragraph 6 shall total no more than 100,000 shares.
6. Awards to Participants
As the Committee may determine, the following types of Awards may be
granted under the Plan to Participants, either alone, in combination or an
alternative basis:
(a) Stock Options: Stock Options shall be Incentive Stock Options or
Nonqualified Stock Options, as determined by the Committee. Stock Options
shall be granted with an exercise price which shall not be less than one
hundred percent of Fair Market Value on the date of grant, or, if in
substitution for a stock option previously granted an employee of an entity
acquired by the Company or by a Subsidiary, with an exercise price that
reflects the relative values of Company Stock and stock of the acquired entity
and the employee's exercise price under such previously granted option.
Incentive Stock Options shall comply with the provisions of Section 422 of
the Code and to the extent the aggregate fair market value (determined as of
the time the Incentive Stock Option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first time by any
individual during any calendar year under all plans of the Company and its
Subsidiaries exceeds $100,000, such options shall be treated as Nonqualified
Stock Options.
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A Stock Option may be exercised at such times as may be specified by the
Committee at the time of grant, provided that no Stock Option granted under
this Paragraph 6 shall be exercisable later than ten years after grant, or, in
the case of Participants subject to Section 16 of the Exchange Act, earlier
than six months after grant and provided further that the Committee may at any
time before complete termination of a stock option, accelerate the time or
times at which such option may be exercised, in whole or in part.
(b) Stock Appreciation Rights: Stock Appreciation Rights shall entitle a
Participant to receive upon exercise, for each stock appreciation right
exercised, (i) the excess of the Fair Market Value of a share of Stock at the
time of exercise, over a price specified by the Committee, multiplied by (ii)
the number of Stock Appreciation Rights exercised. The price specified by the
Committee shall not be less than one hundred percent of Fair Market Value at
the time the Stock Appreciation Right was granted, or, if connected with a
previously issued stock option, the Fair Market Value at the time such
previously issued stock option was granted, or, if in substitution for a stock
appreciation right previously granted an employee of an entity acquired by the
Company or by a Subsidiary, a price that reflects the relative values of
Company Stock and stock of the acquired entity and the employee's price under
such previously granted stock appreciation right. A Stock Appreciation Right
may be granted in tandem with all or any portion of a previously or
contemporaneously granted stock option (including, in addition to Stock
Options granted under the Plan, options granted under other plans of the
Company), or not in connection with a stock option.
Payment pursuant to a Stock Appreciation Right may be made in the form of
Stock, cash or a combination thereof, as the Committee may determine. A Stock
Appreciation Right may be exercised at such times as may be specified by the
Committee, either at the time of grant or thereafter, provided that no Stock
Appreciation Right shall be exercisable earlier than six months after grant
(except that earlier exercise may be permitted in the case of a Stock
Appreciation Right substituted for a stock appreciation right previously
issued by an acquired entity) nor later than ten years after grant.
(c) Performance Shares and Performance Units: An Award of Performance
Shares or Performance Units shall entitle a Participant to receive Stock or a
cash payment specified by the Committee, depending upon the attainment of
performance criteria over a Performance Period. The Performance Period and
performance criteria shall be specified by the Committee and may relate to the
performance of the Company or one or more Subsidiaries or a combination
thereof. Other than an Award intended to qualify under Section 162(m) of the
Code, the Committee may adjust previously established performance criteria and
other terms and conditions of an Award, at any time prior to the determination
of the payment amount, to reflect major unforeseen events such as changes in
laws, regulations or accounting policies or procedures, mergers, acquisitions
or divestitures or extraordinary, unusual or non-recurring items or events, in
each case in order to prevent dilution or enlargement of rights.
Payment pursuant to an Award of Performance Shares or Performance Units
shall be made following the Committee's determination of the extent to which
the performance criteria were satisfied, and shall be made in the form of
Stock, cash or a combination thereof, as the Committee may determine. Payment
shall be made as promptly as practicable following the end of the Performance
Period unless deferred subject to such terms and conditions as may be
prescribed by the Committee. The Committee may authorize payments in Stock (in
the form of any Award available under the Plan) under any previously existing
performance unit or performance share plans of the Company or any Subsidiary.
(d) Restricted Stock: Awards of Restricted Stock shall be issued in the
name of a Participant as soon as practicable following the date of grant by
the Committee. Such Awards shall be subject to such conditions, terms and
restrictions (including performance-based or employment-based vesting,
forfeiture conditions and transfer restrictions) and shall be for such period
or periods as shall be determined by the Committee or as expressly stated in
the Plan. The Committee shall have the power to permit an acceleration of the
expiration of the applicable restriction period with respect to all or part of
the shares awarded to a Participant pursuant to a Restricted Stock Award.
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During the restricted period, a Participant holding shares of Restricted
Stock shall have all the rights of a shareholder, including the right to vote
and receive dividends, but shall not sell, assign, transfer, exchange, pledge,
hypothecate or otherwise encumber such shares. Shares of Restricted Stock
shall bear such legends as the Company may specify, until such time as the
restrictions on the shares shall lapse, as determined by the Committee.
(e) Supplemental Payments: Subject to the Committee's discretion, any Award
under this Paragraph 6 may provide for a supplemental payment by the Company
or a Subsidiary to a Participant after the exercise, payment or lapse of
restrictions under the Award. Such supplemental payments shall be subject to
such terms and conditions as shall be provided by the Committee at the time of
grant, provided that in no event shall the amount of each payment exceed:
(i) In the case of a Stock Option, the excess of Fair Market Value on
the date of exercise over the Stock Option exercise price, multiplied by
the number of shares for which such Stock Option is exercised, or
(ii) In the case of a Stock Appreciation Right, Performance Unit,
Performance Share or Restricted Stock Award, the value of the shares and
other consideration issued in payment of such Award.
(f) Performance-Based Payments: Any Awards, grants, or other payments
described or referenced in this Plan and designed to provide incentives to
participants for whom the Committee determines that compensation deductible by
the Company would be subject to limitation under Section 162(m) of the Code
may be made in a form intended to constitute "performance-based compensation"
deductible under Section 162(m) (4) (C). The payment of any amounts in such
form (other than amounts payable under Stock Options or Stock Appreciation
Rights, granted in either case with an exercise price or SAR price equal to at
least Fair Market Value at grant, or associated Supplemental Payments under
subparagraph 6(e) included in such grant) shall be contingent on attainment of
objective performance goals pre-established by the Committee and based,
subject to such further definition and adjustments as the Committee may
specify in establishing such goals, on one or more of the following business
criteria: earnings per share, total shareholder return, net income, cash flow,
performance against budget targets, return on equity, or return on capital.
When establishing such performance goals, the Committee shall
contemporaneously prescribe the Performance Period during which such goals are
to be attained and the maximum amount payable (subject to Committee discretion
to decrease but not to increase such amount) on their attainment. The maximum
amount that the Committee may prescribe as payable to any "covered employee"
within the meaning of Section 162(m) (excluding amounts payable under Stock
Options, Stock Appreciation Rights or associated Supplemental Payments) shall
not exceed (i) $500,000 in the case of a Performance Period of one year or
less and (ii) $400,000 multiplied by the number of years in the Performance
Period in the case of a Performance Period of more than one year. In
determining whether an amount payable is within the maximum amounts described
in the preceding sentence, the amount payable shall be valued at the date
following completion of the Performance Period during which such amount would
be initially payable absent any elective deferral to a future date.
Any Awards, grants or other payments of performance-based compensation
pursuant to this subparagraph 6(f), and any grants of Stock Options or Stock
Appreciation Rights or associated Supplemental Payments intended to be exempt
from the limitations of Section 162(m) of the Code, shall be made by a
Committee consisting solely of two or more "outside directors" within the
meaning of Section 162(m).
7. Conversion Awards--Employees
(a) Employees designated by the Committee may elect, subject to the
following provisions and such terms and conditions as shall be determined by
the Committee, to receive Share Units in exchange for cash compensation
otherwise payable to such individuals by the Company:
(i) Share Units may be acquired by an Employee at a per share exchange
price of eighty-five percent of the Fair Market Value of a share of stock
determined as of the Exchange Date.
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(ii) Share Units issued to Employees shall be subject to those
conditions, terms and restrictions as the Committee may require and shall
vest three (3) years from Exchange Date or in the event of a Rollover
Election by Employee, two (2) years from effective date of last Rollover
Election. For purposes of this Agreement, this three (3) year vesting
period, plus any extensions thereof pursuant to a Rollover Election, shall
be hereinafter referred to as the "Employee Restricted Period", the initial
three (3) year vesting period shall be hereinafter referred to as the
"Initial Employee Restricted Period" and any two (2) year extension of the
Employee Restricted Period pursuant to a Rollover Election shall be
hereinafter referred to as a "Rollover Employee Restricted Period".
Employee shall have the option to defer the vesting of any Share Unit
issued hereunder for an additional period of two (2) years by making an
irrevocable Rollover Election at least six (6) months prior to the date on
which such Share Unit vests under the terms of Section 7. There is no limit
to the number of Rollover Elections Employee may make with respect to a
particular Share Unit.
(iii) With respect to annual incentives, it is expressly understood that
Employees have no right to any annual incentive award if terminated for any
reason prior to the end of the Performance Period. Further, Employees who
are employed at the end of the Performance Period will not be entitled to
any award unless the Board determines in its sole and absolute discretion
to grant such award.
(iv) In addition, no cash or other property will be set aside in a trust
or other account to secure the Company's performance under this Plan.
Assets to be paid to Employees under this Plan will be subject to the
claims of the Company's general creditors.
(v) Employees cannot transfer, pledge, or assign any of the benefits
under this Plan.
(vi) No interest will accrue or be paid with respect to any amounts
deferred under the Plan.
(b) At a time specified by the Committee which is prior to the Exchange
Date for base salary and at least six (6) months prior to the end of the
applicable fiscal year for annual incentives, Employee may make an irrevocable
election to defer up to the lesser of 30% or $30,000 of a year's base salary
and/or up to the lesser of 50% or $50,000 of an annual incentive award (for
purposes of this Agreement, the "Deferral Amount") and exchange it for Share
Units in accordance with the following provisions and such other terms,
conditions and limitations as shall be determined by the Committee from time
to time:
An Employee's base salary or annual incentive award may be exchanged for
Share Units in the following manner:
(1) If an Employee elects to receive Share Units, he or she shall
receive that number of units equal in value to the Deferral Amount, as
determined pursuant to Subparagraph (a)(i) above. The Deferral Amount shall
be deducted from the Employee's base salary in equal installments beginning
the month of the Exchange Date, or, in the case of annual incentive, the
full Deferral Amount shall be deducted from the applicable annual incentive
award at the time of payment.
(2) Except as otherwise determined by the Committee, if the Employee's
employment with the Company or a Subsidiary is terminated by the Company or
Subsidiary for cause during the Employee Restricted Period or the Employee
voluntarily terminates his employment during the Initial Employee
Restricted Period with respect to a Share Unit, such non-vested Share Unit
shall be forfeited and returned to the Company and in substitution thereof
the Employee shall receive a cash payment equal to, (x) the lower of the
Fair Market Value of the Share Unit (for purposes of this Agreement, Fair
Market Value of a Share Unit shall be the average of the highest and lowest
company stock price on the day of valuation or, if the Company's stock is
not traded on such date, on the immediately preceding trading date) on the
date of termination or the Deferral Amount, multiplied by (y) the
percentage of the Deferral Amount collected by the Company prior to the
date of termination.
In the event Employee voluntarily terminates his or her employment with
the Company or a Subsidiary during a Rollover Employee Restricted Period
with respect to a Share Unit, such non-vested Share Unit shall be forfeited
and returned to the Company and in substitution thereof, the Employee shall
receive a cash payment equal to (i) the Fair Market Value of the Share Unit
on the effective date of the most recent
A-6
Rollover Election if the Fair Market Value of such Share Unit on the date
of termination is higher than the Fair Market Value of such Share Unit on
the effective date of the most recent Rollover Election or (ii) the lower
of the Fair Market Value of the Share Unit on the date of termination or
the Deferral Amount if the Fair Market Value of such Share Unit on the date
of termination is lower than the Fair Market Value of such Share Unit on
the effective date of the most recent Rollover Election.
In the event Employee's employment with the Company is terminated by the
Company without cause or Employee's employment is terminated due to
Employee's Death, Disability, or Normal Retirement (which for purposes of
this Section 7 shall be defined as retirement at age 65 or older) or
termination is for any reason not specified elsewhere in this Subparagraph
(b)(2) during an Employee Restricted Period with respect to a Share Unit,
each such non-vested Share Unit shall be forfeited and returned to the
Company and in substitution thereof Employee shall receive a cash payment
equal to (x) the higher of the Fair Market Value of the Share Unit on the
date of termination or the Deferral Amount, multiplied by (y) the
percentage of the Deferral Amount collected by the Company prior to the
date of termination.
(c) During any Employee Restricted Period, Employee shall be entitled to
receive additional Share Units equal in value (based on the Fair Market Value
of a Share Unit on the record dividend date) to the amount of cash dividends
said Employee would have received had he or she owned one (1) share of the
Company's Common Stock for each Share Unit owned by such Employee on each
record dividend date during such Employee Restricted Period.
(d) Once a Share Unit becomes vested, each Share Unit shall be returned to
the Company in exchange for payment in the form of cash or stock, as
determined by the Committee, in an amount equal to the Fair Market Value of
the Share Unit on the Vesting Date of Record. Payment shall be made within
ninety (90) days of vesting.
8. Stock Option Exercise
(a) The exercise price for Stock Options issued under the Plan shall be
paid in full when the Stock Option is exercised. The exercise price may be
paid (i) in cash, (ii) in whole shares of Stock owned by the option holder at
least six months prior to exercise, valued at Fair Market Value on the date of
exercise, or (iii) by a combination of such methods of payment. In addition, a
Stock Option holder may exercise the Stock Option by providing assurance from
a broker registered under the Exchange Act of the delivery of the proceeds of
an imminent sale of the Stock to be issued pursuant to the exercise of the
Stock Option, such sale to be made at the direction of the Stock Option
holder. In the case of Participants, the foregoing shall be subject to such
terms, conditions and limitations as the Committee may specify from time to
time.
(b) The holder of a Stock Option shall have none of the rights of a
shareholder until exercise of the Option and the issuance of shares of Stock
pursuant to it.
9. General Restrictions
The Committee may, in its sole discretion, elect to defer the exercise,
vesting or payment of an Award (or any part thereof) granted under the Plan,
if necessary to avoid the loss of a deduction by the Company under Section
162(m) of the Code.
10. Rights of a Participant
A Participant receiving any Award under the Plan, unless otherwise provided
by the Plan or decided by the Committee, shall have no rights as a shareholder
unless and until certificates for shares of stock are issued to him.
A-7
11. Termination of Employment or Service
(a) Except as provided in Paragraph 7, the effect of termination of a
Participant's employment with the Company upon any outstanding Awards shall be
determined by the Committee in its sole discretion as specified in the
documentation evidencing a particular award.
(b) Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any Participant the right to continue in the employment
or service of the Company or its Subsidiaries as a Participant, or affect any
right which the Company or such Subsidiaries may have to terminate the
employment or service of such Participant. For purposes of this Plan and
notwithstanding anything to the contrary contained elsewhere in this Plan, no
termination of a Participant's employment, Board service, or consulting
service with the Company within the meaning of this Plan shall be deemed to
have occurred by virtue of the Company entering into any agreement with
respect to, the public announcement of, the approval by the Company's
shareholders or directors of, or the consummation of, any transaction or
series of integrated transactions, if, prior to the occurrence of such
transaction or series of integrated transactions, a majority of the Continuing
Directors (as defined in Section 18 hereof) then in office determine that such
transaction or series of integrated transactions should not be treated as a
termination of a Participant's employment or Board service or consulting
service with the Company within the meaning of this Plan.
12. Withholding
The Company shall have the right to withhold from any payments made under
this Plan, or to collect as a condition of payment, any taxes required by law
to be withheld. At any time when a Participant is required to pay to the
Company an amount required to be withheld under applicable income tax laws in
connection with a distribution of shares of Stock pursuant to this Plan, the
Participant may satisfy this obligation in whole or in part by electing to
have the Company withhold from such distribution shares of Stock having a
value equal to the amount required to be withheld. The value of the shares of
Stock to be withheld shall be based on the Fair Market Value of the Stock on
the date that the amount of tax to be withheld shall be determined. The rules
governing such withholding elections, including the date or dates by which
such an election must be made, shall be determined by the Committee as
necessary and in compliance with Rule 16b-3.
13. Restrictions on Transfer
Except as otherwise provided in this Paragraph 13, no Stock Option or other
Award under the Plan shall be assignable or transferable by the Participant
other than by will or by the laws of descent and distribution and all Stock
Options shall be exercisable during the Participant's lifetime only by the
Participant. The Committee may, in its sole discretion, when and if permitted
by Rule 16b-3, establish guidelines providing for the irrevocable transfer,
without payment of consideration, of any Stock Option, other than Incentive
Stock Options, by the Participant to a member of the Participant's immediate
family or to a trust, partnership or other pass-through entity, whose
beneficiaries are members of the Participant's immediate family. For purposes
of this Paragraph 14, the term "immediate family" shall include the
Participant's spouse, children and grandchildren.
14. Non-Uniform Determinations
The Committee's determinations under the Plan (including without limitation
determinations of the Participants to receive Awards, the form, amount and
timing of such Awards, the terms and provisions of such Awards and the
agreements evidencing same, and the establishment of values and performance
targets) need not be uniform and may be made by the Committee selectively
among Participants who receive, or are eligible to receive, Awards under the
Plan, whether or not such Participants are similarly situated.
15. Adjustments in Stock and Related Adjustments
In the event of a reclassification, recapitalization, merger,
consolidation, reorganization, issuance of warrants or other rights, stock
dividend, stock split or reverse stock split, cash dividend, property
dividend, including,
A-8
without limitation, a distribution of the stock of a Subsidiary, combination
or exchange of shares, repurchase of shares, or any other change in the
capital structure of the Company in order to prevent dilution or enlargement
of rights, the Committee shall determine the appropriate adjustments, if any,
to (a) the number of shares of stock which may be issued under the Plan, (b)
the number of shares issuable and the exercise price per share pursuant to an
outstanding Award theretofore granted under this Plan and, (c) the number and
kind of shares which may underlie an Award granted pursuant to Paragraph 5(d).
16. Amendment or Termination
The Committee at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that an amendment which requires
stockholder approval in order for the Plan to continue to comply with Rule
16b-3, Section 162(m), or Section 422 of the Code or any other law, regulation
or stock exchange requirement shall not be effective unless approved by the
requisite vote of stockholders. No suspension, termination, modification or
amendment of the Plan may adversely affect any Award previously granted
without the written consent of the Participant.
17. Duration of the Plan
The Plan shall remain in effect until all Awards under the Plan have been
satisfied by the issuance of Stock or the payment of cash, but no Award shall
be granted more than ten years after the date the Plan is approved by the
shareholders of the Company, which shall be the Plan's effective date.
18. Change in Control
For purposes of the Plan, a "Change of Control" shall have occurred if:
(a) Any corporation, person or other entity (other than the Company)
makes a tender or exchange offer for shares of Stock and shares are
purchased pursuant thereto ("Offer");
(b) More than fifty percent of the Company Stock is acquired by any
person or group;
(c) During the period of two consecutive years, individuals who at the
beginning of such period were members of the Board cease for any reason to
constitute at least a majority thereof (unless the election, or the
nomination for election by the Company's shareholders, of each new Director
was approved by a vote of at least two-thirds of the Directors then still
in office who were Directors at the beginning of the period); or
(d) The shareholders of the Company approve a definitive agreement to
merge the Company with another corporation where the Company is not the
surviving corporation or survives only as a subsidiary of another
corporation, to consolidate the Company with another corporation, or sell
or otherwise dispose of substantially all of the Company's assets.
In the event of the occurrence of a Change of Control, then from and
after the date of the first purchase of Stock pursuant to the Offer, or the
date on which public announcement of the acquisition of such percentage of
stock shall have been made, or the date on which such change in the
composition of the Board shall have occurred, or the date of any such
shareholder approval, all Stock Options and Stock Appreciation Rights and
other Awards granted pursuant to the Plan which remain outstanding shall
automatically become exercisable in full, whether or not otherwise
exercisable, and all other Awards under the Plan shall be vested as
determined by the Committee. Notwithstanding the foregoing, no "Change of
Control" shall be deemed to have occurred by virtue of any of the events
set forth above if, prior to the occurrence of such event, a majority of
the Continuing Directors then in office determine that such event should
not be treated as a "Change of Control" for purposes of this Plan.
"Continuing Director" shall mean any member of the Board of Directors of
the Company who is a member of the Board of Directors as of the date of
this Agreement and any person who subsequently becomes a member of the
Board of Directors, if such person's nomination for election or election to
the Board of Directors is recommended or approved by a majority of the
Continuing Directors.
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19. Intent; Separability
All Incentive Stock Options granted hereunder are intended to comply with
Section 422 of the Code and, to the extent applicable, Section 424 of the
Code, and all provisions of this Plan and all Incentive Stock Options granted
hereunder shall be construed in such manner as to effectuate that intent. This
Plan and all Stock Options, stock appreciation rights, and other awards and
rights granted hereunder are intended to satisfy the conditions of Rule 16b-3,
as amended, and all provisions of this Plan and all Stock Options, Stock
Appreciation Rights, and other awards and rights granted hereunder shall be
construed in such manner as to effectuate that intent. If any of the terms or
provisions of this Plan conflict with the requirements of Rule 16b-3 (as it
may be amended from time to time) or Sections 422 and 424 of the Code (as they
may be amended from time to time), then such terms or provisions shall be
deemed inoperative to the extent that they so conflict with such requirements.
20. Governing Law
To the extent that Federal laws do not otherwise control, this Plan shall
be construed in accordance with and governed by the law of the state of
Mississippi.
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[LOGO] ChemFirst Inc.(R) 2002 ANNUAL MEETING
You are cordially invited to attend the annual meeting of stockholders of
ChemFirst Inc. The meeting will be held Tuesday, May 21, 2002, 1:30 p.m. (CDT)
at the Hilton Jackson, 1001 East County Line Rd., Jackson, Mississippi.
Please mark the boxes on the proxy card to indicate how your shares should
be voted. Sign and return your proxy as soon as possible in the enclosed
postpaid envelope. To vote in accordance with the Board of Directors'
recommendations, just sign and date the proxy card where indicated - no boxes
need be checked.
Votes are tabulated by American Stock Transfer & Trust Co. Any comments
noted on the proxy card or an attachment will be forwarded to the Corporate
Secretary by American Stock Transfer. Please indicate if you have any comments
by marking the appropriate box.
James L. McArthur
Secretary
--------------------------------------------------------------------------------
CHEMFIRST INC.
This Proxy is Solicited on Behalf of the Board of Directors
for the Annual Meeting on May 21, 2002
The undersigned hereby appoints Michael J. Ferris, John F. Osborne, William
A. Percy and R. Gerald Turner and each of them with the power of substitution
and revocation, as attorneys and proxies to appear and vote all shares of Common
Stock held by the undersigned, at the Annual Meeting of ChemFirst Inc. to be
held on May 21, 2002 and at any and all adjournments thereof, and the
undersigned hereby instructs said proxies to vote as indicated on all matters
referred to on the reverse side and described in the proxy statement for the
meeting, and in accordance with their judgement on all other matters that may
properly come before the meeting.
All proxies will vote as specified on the reverse side. IN THE ABSENCE OF
SPECIFIC INSTRUCTIONS, PROXIES WILL VOTE (1) FOR the election of the director
nominees; (2) FOR the Amendment to the 1998 Long-Term Incentive Plan; and (3) on
all other matters that may properly come before the meeting in accordance with
their judgement. To vote FOR the Board of Directors' recommendations, just sign
and date the reverse side - no boxes need be checked.
(To Be Signed on Reverse Side)
--------------------------------------------------------------------------------
Please date, sign and mail your
proxy card back as soon as possible.
Annual Meeting of Stockholders
CHEMFIRST INC.
May 21, 2002
. Please Detach and Mail in the Envelope Provided .
--------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
FOR all nominees WITHHOLD AUTHORITY
(except as marked to to vote for all nominees
the contrary below) listed below
1. Election of [ ] [ ]
Directors
Nominees:
Three year term to expire 2005
Richard P. Anderson
Robert P. Guyton
J. Kelley Williams
(Instructions: To withhold authority to vote for any individual nominee(s),
print their name(s) in the space provided below.)
--------------------------------------------------
2. Amendment to the 1998 Long-Term Incentive Plan FOR[ ] AGAINST[ ] ABSTAIN[ ]
3. In their discretion upon such other matters as may properly come before the
meeting. (Cross out this no. 3 if vote is withheld.)
Mark box at right if an address change [ ]
or comment has been made
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
Signature(s) Date:
----------------------------------------- --------------
Note: Please sign name(s) exactly as appearing hereon. When signing as attorney,
executor, administrator, or other fiduciary, please give your full title
as such. Joint owners should each sign personally.
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