-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PNrpDlYSgZJEeKKtECeWxcXQ4ogg+4e/Sg0xm1q1OBSfAw200oCwKBoZuxXkPp+2 8oiJXItfk8sTk+JLyLkBzw== 0000899243-98-001804.txt : 19980928 0000899243-98-001804.hdr.sgml : 19980928 ACCESSION NUMBER: 0000899243-98-001804 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980925 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI CHEMICAL CORP /MS/ CENTRAL INDEX KEY: 0000066895 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 640292638 STATE OF INCORPORATION: MS FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12217 FILM NUMBER: 98714817 BUSINESS ADDRESS: STREET 1: P O BOX 388 CITY: YAZOO CITY STATE: MS ZIP: 39194 BUSINESS PHONE: 6017464131 MAIL ADDRESS: STREET 1: P O BOX 388 CITY: YAZOO CITY STATE: MS ZIP: 39194 FORMER COMPANY: FORMER CONFORMED NAME: MISSISSIPPI CHEMICAL CORP DATE OF NAME CHANGE: 19920703 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 0-20411 MISSISSIPPI CHEMICAL CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) MISSISSIPPI 64-0292638 - ------------------------------- ---------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) Highway 49 East, P.O. Box 388, Yazoo City, MS 39194 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (601) 746-4131 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ------------------------------- ----------------------------------------- Common Stock, par value $.01 New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] At September 2, 1998, Mississippi Chemical Corporation had 26,999,785 shares of common stock, par value $0.01, outstanding. The Company estimates that the aggregate market value of the common stock on September 2, 1998 (based upon the closing price of the common stock on the New York Stock Exchange), held by nonaffiliates was approximately $345,134,735. - -------------------------------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Shareholders for fiscal year ended June 30, 1998 (Item 1 in Part I; Items 5, 6, 7, 7A and 8 in Part II; and Item 14 in Part IV). Proxy Statement for Annual Meeting of Shareholders to be held on November 10, 1998 (Items 10, 11, 12 and 13 in Part III). 1 PART I ITEM 1. BUSINESS Mississippi Chemical Corporation (the "Company") was incorporated in Mississippi on May 23, 1994, and is the successor by merger, effective July 1, 1994, to a business which was incorporated in Mississippi in September 1948 as the first fertilizer cooperative in the United States (the "Cooperative"). The address of the Company's principal executive office is Owen Cooper Administration Building, Highway 49 East, Yazoo City, Mississippi 39194, and its telephone number is (601) 746-4131. The Company maintains a site on the World Wide Web at www.misschem.com. The term "Company" includes Mississippi Chemical Corporation and its wholly owned subsidiaries, Mississippi Phosphates Corporation; Mississippi Potash, Inc.; Eddy Potash, Inc.; Triad Nitrogen, Inc.; Triad Fertilizer, Inc.; TNI, Inc.; Triad Barge, Inc.; TNI Barge, Inc.; MCC Investments, Inc.; NSI Land Corporation; Mississippi Chemical Management Company; and Mississippi Chemical Company, L.P. References to the Company's operations prior to July 1, 1994, refer to the Cooperative's operations. The principal business of the Cooperative was to provide fertilizer products to its shareholders pursuant to preferred patronage rights that gave the shareholders the right to purchase fertilizer products and receive a patronage refund on those purchases. On June 28, 1994, the shareholders of the Cooperative approved a plan of reorganization (the "Reorganization"), pursuant to which the Cooperative was merged into the Company. As a result of the Reorganization, the capital stock of the Cooperative was converted into common stock and/or cash, and the Company began to operate as a regular business corporation. In August 1996, the Company entered into an agreement to acquire the fertilizer businesses of First Mississippi Corporation ("First Mississippi") in an all-stock merger transaction. The transaction was completed on December 24, 1996. The First Mississippi fertilizer operations primarily included AMPRO Fertilizer, Inc. ("AMPRO"), and a 50 percent interest in Triad Chemical, both located on contiguous property at Donaldsonville, Louisiana. The Company already held the remaining 50 percent interest in Triad Chemical. Since closing of the transaction, the Company merged AMPRO into, and contributed its 50 percent interest in Triad Chemical to, First Mississippi and changed the name of First Mississippi to Triad Nitrogen, Inc. ("Triad Nitrogen"). In August 1996, the Company, through two subsidiaries of its wholly owned subsidiary Mississippi Potash, Inc., acquired substantially all of the assets (including the right to use the corporate names) of New Mexico Potash Corporation and Eddy Potash, Inc. ("Eddy Potash"), from Trans-Resources, Inc. Since the acquisition, New Mexico Potash Corporation has been merged into Mississippi Potash, Inc. Eddy Potash, which operated as a wholly owned subsidiary of Mississippi Potash, Inc., suspended its mining and production operations on December 3, 1997. The Company is currently evaluating alternative methods of mining the Eddy Potash reserves. The original mine and refinery owned by Mississippi Potash, Inc., is now known as the "West Facility," and the former New Mexico Potash Corporation mine is known as the "East Facility." NITROGEN Products The Company produces nitrogen products at its production facilities in Yazoo City, Mississippi, and Donaldsonville, Louisiana. The Company's principal nitrogen products include ammonia; fertilizer-grade ammonium nitrate, which is sold under the Company's trade name Amtrate(R); UAN 2 solutions, which are sold under the Company's trade name N-Sol; urea; and nitric acid. In fiscal 1998, the Company sold approximately 2.5 million tons of nitrogen products to farmers, fertilizer dealers and distributors, and industrial users located primarily in the southern United States. Sales of nitrogen products by the Company in fiscal 1998 were $298.6 million, which represented approximately 57 percent of net sales. Although, to some extent, the Company's various nitrogen products are interchangeable for agricultural purposes, each has its own distinct characteristics that produce agronomic preferences among end-users. Farmers determine which nitrogen product to apply based on the crop planted, soil and weather conditions, regional farming practices, and relative prices for nitrogen products. AMMONIA. The basic nitrogen product is anhydrous ammonia, which is a necessary raw material for the production of the Company's other nitrogen products. Anhydrous ammonia, which is 82 percent nitrogen, is the most concentrated nitrogen product available. It is synthesized as a gas under high temperature and pressure. The raw materials used to produce anhydrous ammonia are natural gas, atmospheric nitrogen, and steam. In fiscal 1998, the Company produced approximately 1,543,000 tons of anhydrous ammonia at its Yazoo City and Donaldsonville facilities. The Company sold approximately 644,000 tons of anhydrous ammonia as a raw material for industrial users and 4,000 tons as a primary fertilizer for direct application to crops. The balance of the anhydrous ammonia was consumed by the Company as a raw material to manufacture its other nitrogen products. AMMONIUM NITRATE. The Company is the largest manufacturer and marketer of high-density ammonium nitrate fertilizer in the United States. Ammonium nitrate, which is 34 percent nitrogen, is produced by reacting anhydrous ammonia and nitric acid. Ammonium nitrate is less subject to volatilization (evaporation) losses than other nitrogen products. Due to its stable nature, ammonium nitrate is the product of choice for such uses as pastures and no-till row crops where fertilizer is spread upon the surface and is subject to volatilization losses. Although the consumption of ammonium nitrate in the United States has been stable in recent years, the use of conservation tillage, which reduces soil erosion, is increasing in the United States and should have a positive impact on ammonium nitrate demand. In fiscal 1998, the Company sold approximately 765,000 tons of solid ammonium nitrate fertilizer, all of which was produced at the Company's Yazoo City facility. The ammonium nitrate produced at the Company's Yazoo City facility is sold under the registered trade name Amtrate(R). Due to its superior shipping and storage characteristics, Amtrate(R) has established excellent brand name recognition and a reputation as a high-quality product. UAN SOLUTIONS. In fiscal 1998, the Company sold approximately 485,000 tons of UAN solutions, which it produced at its Yazoo City facility and sold under the trade name N-Sol. N-Sol is a 32 percent nitrogen product that is made by mixing urea liquor and ammonium nitrate liquor. N-Sol is used as a direct application product for cotton, corn, grains, and pastures, as well as for use in liquid fertilizer blends. Over the past 20 years, there has been a substantial increase in the use of UAN solutions as a part of the overall growth in the agricultural consumption of nitrogen products in the United States. UREA. In fiscal 1998, the Company sold approximately 366,000 tons of prilled urea and approximately 149,000 tons of urea melt, which it produced at its Donaldsonville facility. Urea is synthesized by the reaction of ammonia and carbon dioxide and then solidified in prill form. At 3 46 percent nitrogen by weight, urea is the most concentrated form of dry nitrogen. Because urea undergoes a complex series of changes within the soil before the nitrogen it contains is ultimately converted into a form that can be used by plants, it is considered a long-lasting form of nitrogen. As a fertilizer product, urea is acceptable as both a direct-application material and as an ingredient in fertilizer blends. Urea consumption has increased modestly in recent years. Most of the Company's prilled urea that is sold to the agricultural market is broadcast on rice and winter wheat crops in Arkansas, Louisiana, Mississippi, Oklahoma, and Texas. Approximately 44 percent of the Company's prilled urea sales are to industrial users and manufacturers of animal feeds. Under a long-term contract with Melamine Chemicals, Inc. ("Melamine"), that became effective on July 1, 1997, and replaced a previous long-term commitment with Melamine, the Company is obligated to sell up to 210,000 tons per year of urea melt at a market-related price to Melamine's facility located adjacent to the Triad Nitrogen facility. Melamine's urea melt requirements, coupled with the Donaldsonville facility's ability to only prill 460,000 tons on an annual basis, determine the Company's annual production figures for prilled urea and urea melt. NITRIC ACID. In fiscal 1998, the Company sold 57,000 tons of nitric acid produced at its Yazoo City facility to industrial users and used the balance of nitric acid produced in fiscal 1998 as a raw material for the production of Amtrate(R). The Yazoo City facility produces more nitric acid than any other U.S. facility. Nitric acid is used to produce end products such as nylon fibers, polyurethane foams, rubber chemicals and specialty fibers. Because of the addition of a new 650-ton-per-day nitric acid plant at the Yazoo City facility, completed in March 1998, the Company expects to sell a greater amount of nitric acid in fiscal 1999. PRODUCTION AND PROPERTIES YAZOO CITY, MISSISSIPPI. The Yazoo City facility is a closely integrated, multiplant production complex located on approximately 1,180 acres. The complex includes two anhydrous ammonia plants, five nitric acid plants, an ammonium nitrate plant, two urea plants, and a UAN solutions plant. One of the nitric acid plants and the second ammonia plant were added through an ongoing expansion project which is estimated to cost approximately $130 million. The 650-ton-per- day nitric acid plant became operational in March 1998, while the 500-ton-per- day ammonia plant is scheduled to be operational in October 1998. The addition of the new nitric acid plant has increased the Company's annual nitric acid production capacity to approximately 1,025,000 tons and its annual ammonium nitrate production capacity to approximately 900,000 tons. The Company is also planning to make certain modifications to the ammonium nitrate plant, which are estimated to be completed by the end of fiscal 2000, and are expected to add an additional 50,000 tons of capacity. The addition of the new ammonia plant will increase the annual ammonia production capacity of the Yazoo City facility to 710,000 tons, while the Company's annual UAN solution production capacity will remain at 550,000 tons. The Yazoo City facility includes a 20.5 megawatt cogeneration facility that produces significant savings by the sequential generation of electricity and steam. The Yazoo City plant has direct access to water, rail, and truck transportation and is strategically located for the purchase of competitively priced natural gas. See "Raw Materials--Natural Gas." DONALDSONVILLE, LOUISIANA. The Triad Nitrogen facility is a closely integrated, multiplant nitrogen complex located on approximately 740 acres fronting the Mississippi River at Donaldsonville, Louisiana, which produces anhydrous ammonia and urea. The facility includes two anhydrous ammonia plants with a combined annual production capacity of 1,080,000 tons and a urea plant with an annual production capacity of approximately 560,000 tons. 4 The Triad Nitrogen facility has ready access to rail, truck, and ammonia pipeline transportation. The plant also is equipped with a deep-water port facility on the Mississippi River, allowing access to economical oceangoing vessel and barge transportation for its urea and ammonia products. The facility is well-positioned for the purchase of competitively priced natural gas. See "Raw Materials--Natural Gas." TRINIDAD. In December 1994, the Company entered into a 50-50 joint venture with Farmland Industries, Inc., known as Farmland MissChem Limited ("Farmland MissChem") to construct and operate a 2,040-short-ton-per-day ammonia plant to be located near Point Lisas, The Republic of Trinidad and Tobago. Construction of the facility is complete, and the ammonia plant began producing commercial quantities in July 1998. The Company is obligated by contract to purchase one- half of the ammonia (approximately 350,000 tons per year) produced by the plant at a purchase price that approximates market price, but is subject to an agreed- upon floor price. The Company is currently using its portion of the production from the new facility as a raw material for upgrading into finished fertilizer products at its existing facilities and to meet its contractual commitments to certain industrial customers. OTHER. The Company also owns 11 ammonia barges and a 50 percent interest in an ammonia storage terminal in Pasadena, Texas. MARKETING AND DISTRIBUTION The Company sells its nitrogen products to farmers, dealers, and distributors, as well as industrial users, located primarily in the southern region of the United States where its facilities are located. Although the Company has traditionally sold the great majority of its nitrogen products through the agricultural fertilizer distribution chain, an increasing amount of nitrogen product is being sold to industrial users in order to reduce the Company's exposure to the seasonal nature of the agricultural fertilizer markets. In the fertilizer distribution chain, distributors operate as wholesalers supplying dealers who, in turn, sell directly to farmers. Larger customers (distributors and large multilocation dealers) arrange for distribution, storage, and financing of nitrogen products. The majority of the Company's sales are made to distributors and large dealers in the Company's primary trade area. The ten states that make up the Company's primary trade area are Mississippi, Texas, Alabama, Louisiana, Tennessee, Georgia, Kentucky, Arkansas, Missouri and Florida. The Company maintains a field sales force strategically located throughout the southern United States. The sales force attempts to maintain close communications with the customer base and plays an important role in the marketing and distribution of the Company's products. Through regular, personal contact with its customers, the Company believes it is able to ascertain local demand for fertilizer products and supply the customer's fertilizer requirements in the most cost-effective manner. The Company's sales force is also able to identify specific customer service needs that the Company can meet. Customer service and support helps differentiate the Company's products and enhance its position as a preferred supplier. The Company transports its nitrogen products by barge, rail, pipeline, truck and oceangoing vessels. The Company's distribution network includes the recently purchased 11 ammonia barges, numerous trucks and a pipeline that pumps UAN solution from its Yazoo City plant to its Yazoo River port facility, along with owned or leased warehouses and terminals that are strategically placed in high-consumption areas. The Company's distribution network has been recently strengthened through 5 the establishment with Farmland Industries, Inc., of a 50-50 joint venture, FMCL Limited Liability Company ("FMCL"), to arrange for the transportation of ammonia from the Farmland MissChem Trinidad facility to the United States and other world markets. FMCL has executed two long-term time charter agreements for oceangoing vessels with a European shipowner. Both agreements establish a fixed charter rate for the vessels during the entire time that the agreements are in effect. The Company believes that the time charter agreements provide a hedge against unfavorable fluctuations in shipping rates and will be a cost-effective method of transporting its Trinidad product. PHOSPHATE PRODUCTS The Company produces diammonium phosphate fertilizer ("DAP") at its facility in Pascagoula, Mississippi. In fiscal 1998, the Company sold approximately 726,000 tons of DAP. Sales of DAP by the Company in fiscal 1998 were $127.7 million, which represented approximately 25 percent of net sales. DAP is the most common form of phosphate fertilizer. DAP is produced by reacting phosphate rock with sulfuric acid to produce phosphoric acid, which is then combined with ammonia. DAP contains 18 percent nitrogen and 46 percent phosphate (P205) by weight. DAP is an important fertilizer product both for direct application and for use in blended fertilizers applied to all major types of row crops. PRODUCTION AND PROPERTIES The Company's phosphate production complex in Pascagoula, Mississippi, is located on approximately 1,500 acres. The Pascagoula facility is a closely integrated, multiplant phosphatic fertilizer complex where the primary facilities are a phosphoric acid plant, two sulfuric acid plants, and a DAP granulation plant. The plant has storage facilities for finished product (80,000 tons), as well as for the primary raw materials, phosphate rock (100,000 tons), sulfur (10,000 tons), and ammonia (25,000 tons). All of the phosphate rock used by the Company is purchased pursuant to a single supply contract with Office Cherifien des Phosphates ("OCP"), the national phosphate company of Morocco. See "Raw Materials--Phosphate Rock." The plant site fronts a deep-water channel that provides direct access to the Gulf of Mexico. The complex contains docks and off-loading facilities for receiving shipload quantities of phosphate rock, sulfur, and ammonia and for out-loading DAP. The plant's location on deep water provides the Company with an outbound freight cost advantage over central Florida DAP producers with respect to international shipments and domestic shipments along the Mississippi River system. Construction of a new phosphogypsum disposal facility at Pascagoula was substantially completed on June 30, 1998 at an estimated cost of $18 million. In April 1998, an expansion of the Company's diammonium phosphate manufacturing facilities at Pascagoula was completed at an estimated cost of $13 million. This project increased annual production capacity from approximately 720,000 to approximately 900,000 tons per year and increased DAP storage capacity from approximately 40,000 to 80,000 tons. MARKETING AND DISTRIBUTION On September 30, 1997, the Company terminated its exclusive DAP marketing arrangement with Atlantic Fertilizer & Chemical Corporation ("Atlantic") and became a member of the Phosphate 6 Chemicals Export Association, Inc., a Webb-Pomerene corporation known as PhosChem, effective October 1, 1997. Since October 1, 1997, all of the Company's export sales of DAP have been made through PhosChem, and all domestic sales of DAP have been made through the Company's sales staff. In fiscal 1998, approximately 70 percent of the Company's DAP was sold into international markets through Atlantic and PhosChem. The largest export markets in fiscal 1998 were China, India and countries in Central and South America. Most domestic sales are made in barge-lot quantities to major fertilizer distributors and dealers located on the Mississippi River system. The vast majority of the Company's DAP is transported by ship and barge, although truck and rail access is also available. POTASH Products The Company produces potash at two mines and related facilities near Carlsbad, New Mexico. In fiscal 1998, the Company sold approximately 1,022,000 tons of potash, primarily in granular form. These sales were predominately to customers located west of the Mississippi River. Sales of potash products by the Company in fiscal 1998 were $91.7 million, which represented approximately 18 percent of net sales. The Company's potash is mined from subterranean salt deposits containing a mixture of potassium chloride and sodium chloride. The Carlsbad, New Mexico, potash deposits are located from 800 to 1,200 feet below the surface. Potash is produced in a refining process by which the potassium chloride is separated from the sodium chloride. The three principal grades of potash fertilizer are granular, coarse, and standard, with granular being the largest particle size. Potash is an important fertilizer product for both direct application and for use in blended fertilizers applied to all types of crops. Granular potash is used as a direct- application fertilizer and, among the various grades, is particularly well suited for use in fertilizer blends. In addition, the Company produces several grades of potash that are purchased as a raw material by industrial users. PRODUCTION AND PROPERTIES Prior to the August 1996 acquisition, the Company operated only the West Facility, consisting of a potash mine and refinery located approximately 25 miles east of Carlsbad, New Mexico. This mine supplies ore to an above-ground refinery that separates the potassium chloride from the ore. The run-of-mine refined product is then transported to the Company's nearby compaction plant for conversion to granular form. Located contiguous to the compaction facility are storage and shipping facilities from which the finished product is transported by rail and truck into domestic and export markets. The West Facility produced approximately 440,000 tons of red granular potash in fiscal 1998. In April 1998, the Company announced its plans for an expansion project that will increase the West Facility's annual red granular production capacity from approximately 445,000 tons to approximately 545,000 tons, as well as increase potash storage capacities by 30,000 tons. The Company estimates total cost of the expansion to be $8.2 million and expects the project to be completed by the end of fiscal 1999. 7 The East Facility, located near Carlsbad, New Mexico, produced approximately 467,000 tons of white potash in fiscal 1998 that was ultimately sold in standard, coarse and granular forms to both agricultural and industrial users. On December 3, 1997, the Company suspended the plant operations of Eddy Potash due to the fact that the depletion of the higher-grade ore zone rendered the continued operation of conventional mining methods at Eddy Potash uneconomical. The Company continues to evaluate alternative mining methods for the Eddy Potash reserves. Upon completion of the West Facility expansion project, the Company will have in excess of 1.1 million tons of combined potash capacity annually from its two operating mines. At current production rates, the Company's combined reserves at the East and West Facilities have a remaining life of several decades. The Company's potash reserves are controlled under long-term federal and state potassium leases on approximately 138,000 acres. The estimates of potash ore reserves are calculated using the latest bore hole data and sophisticated modeling programs. According to the latest model completed in August 1998, the Company's total reserves are estimated to be 600 million tons with an average grade of 15.33% K2O. The recoverable reserves are estimated to be 538 million tons at a grade of 15.07% K2O. This reserve base is estimated to be equivalent to approximately 105 million tons of muriate of potash. Eddy Potash's reserves are excluded since these estimates include only the reserves which can be economically recovered by conventional mining techniques. MARKETING AND DISTRIBUTION The majority of the Company's agricultural potash sales are in domestic markets in the states west of the Mississippi River where it and other Carlsbad potash producers enjoy freight cost advantages over Canadian and overseas potash producers. Consistent with the Company's strategy to maximize "net backs" (sales less distribution and delivery expense) and increase profit margins, domestic sales are targeted for locations along the freight route of the Burlington Northern Santa Fe Railroad. Domestic potash marketing is coordinated from a sales office located in Dallas, Texas, with a field sales force located in Texas, Louisiana, Arkansas, Mississippi and California. Approximately 22 percent of the Company's fiscal 1998 potash sales were to international markets. The Company's export sales are made through Potash Corporation of Saskatchewan Sales Limited. The majority of fiscal 1998 export sales were to Latin America, Mexico, and Brazil. Potash for export is transported by rail to terminal facilities on the Texas Gulf Coast, where it is loaded onto ocean-going vessels for shipment. RAW MATERIALS Natural Gas Natural gas is the primary raw material used by the Company in the manufacture of nitrogen products. Natural gas is used both as a chemical feedstock and as a fuel to produce anhydrous ammonia that is then upgraded into other nitrogen products. During fiscal 1998, the cost of natural gas represented approximately 75 percent of the Company's cost of producing ammonia. Because there are no commercially feasible alternatives for natural gas in the production of ammonia, the economic success of the Company's nitrogen business depends upon the availability of competitively priced natural gas. In today's natural gas market, the Company's total delivered natural gas cost generally consists of two components--the market price of the natural gas in the producing area at the point of delivery into a 8 pipeline and the fee charged by the pipeline for transporting the natural gas to the Company's plants. The cost of the transportation component can vary substantially depending on whether or not the pipeline has to compete for the business. Therefore, it is extremely important to the Company's competitiveness that it have access to multiple natural gas sources and transportation services. In addition to the impact on transmission costs, access alternatives enable the Company to benefit from natural gas price differences that may exist from time to time in the various natural gas-producing areas. In recent years, the Company has improved the natural gas-purchasing logistics of its nitrogen facilities. The natural gas requirements of the Yazoo City facility will increase from approximately 57,000 Mcf per day to approximately 72,000 Mcf per day upon the start-up of the new ammonia plant. Since 1996, the Company has received the majority of its natural gas requirements for the Yazoo City facility from Sonat Marketing Company ("Sonat"), an affiliate of Southern Natural Gas Company ("Southern"). In order to secure the incremental gas requirements created by the addition of the new ammonia plant, the Company renegotiated its agreement with Sonat. The new agreement with Sonat, which became effective on May 15, 1998, allows for the firm delivery of gas, at market-related prices, through the Yazoo City facility's direct connections to the interstate pipeline systems operated by Southern and Texas Eastern Transmission Corporation ("TETCO"). The TETCO connection was completed in November 1997, and Sonat began to flow gas through the connection in April 1998. Pursue Energy Corporation ("Pursue") continues to be another major natural gas supplier of the Yazoo City facility from its reserves located in Rankin County, Mississippi. In addition, the Company's 60-mile, 12-inch-diameter natural gas pipeline provides the plant with direct access to the Pursue reserves, along with low-cost transportation of the Pursue gas; direct access to an additional interstate pipeline; and direct access to a large intrastate gathering and transmission system in southern Mississippi. As a result of this access to multiple sources, the Company benefits from competition for the transportation and supply of natural gas. Natural gas requirements for the Triad Nitrogen facility are approximately 107,000 Mcf per day. The Triad Nitrogen facility is located in one of the primary gas-producing regions of the United States. The facility is currently connected to five intrastate pipeline systems and benefits from intense competition among the many suppliers that have transport capabilities on the intrastate lines. The majority of current natural gas requirements are being supplied under fixed-term contracts with Louisiana Gas Marketing Company, a subsidiary of Enron Corp.; Amoco Energy Trading Corporation; Noble Gas Marketing, Inc.; NorAm Energy Services, Inc.; and Coral Energy Resources, L.P. These contracts provide for market sensitive pricing and firm delivery supply commitments. The remaining requirements continue to be supplied via spot market 30-day purchases. As a result of favorable access to natural gas supplies at the Yazoo City and Triad Nitrogen facilities, the Company believes that the loss of any particular supplier would not have a material impact on plant operations at either location. There have been no significant supply interruptions at either location. Relative to fiscal 1997 levels, the Company's delivered cost of natural gas decreased approximately 1.5 percent. Although long-term natural gas supplies appear adequate to meet projected demand, gas prices can be influenced significantly by short-term fundamentals such as weather, storage levels, gas transportation interruptions, and competing fuel prices. The Company uses natural gas futures contracts to hedge against the risk of market fluctuations in the cost of natural gas. 9 PHOSPHATE ROCK Phosphate rock is one of the primary raw materials used in the manufacture of DAP. The Pascagoula facility's requirements for phosphate rock after its recent production expansion are approximately 1.5 million tons per year. On September 15, 1991, the Company entered into a ten-year contract with OCP to supply all of the phosphate rock requirements of the Pascagoula facility. The term of this contract has been extended to June 30, 2016. OCP, the national phosphate company of Morocco, is the world's largest producer and exporter of phosphate rock and upgraded phosphates as a company. The contract price for phosphate rock is based on phosphate rock costs incurred by certain domestic competitors of the Company and on the operating performance of the Company's phosphate operations. Under this formula, the Company realizes favorable phosphate rock prices and is afforded significant protection during periods when market conditions are depressed. Conversely, in favorable markets, when the Company's DAP operations are profitable, the contract price of phosphate rock will escalate based on the profitability of its DAP operations. Pursuant to this contract, the Company and OCP are required to negotiate further adjustments as needed to maintain the viability and economic competitiveness of the Pascagoula plant. The strategic alliance with OCP has functioned effectively since inception, and the Company considers its relations with OCP to be good. SULFUR Sulfur is used in the manufacture of sulfuric acid at the Pascagoula plant. Sulfur is in adequate supply and is available on the open market in quantities sufficient to satisfy the Company's current requirements, which have increased to approximately 330,000 tons per year as a result of the Pascagoula plant expansion. The location of the Company's plant at Pascagoula, Mississippi, near major oil and gas fields that supply substantial amounts of sulfur, provides the Company with a strategic advantage in the purchase of sulfur over its Florida competitors. AMMONIA Ammonia is a necessary raw material for production of the Company's other nitrogen products and DAP. The Company supplied the great majority of its ammonia requirements in fiscal 1998. Third-party ammonia purchases by the Company in fiscal 1998 were only 118,000 tons. It is anticipated that the Company's third-party ammonia purchases in fiscal 1999 will be even less due to the addition of the Trinidad plant and the new ammonia plant at the Yazoo City facility. COMPETITION Since fertilizers are global commodities available from numerous sources, fertilizer suppliers compete primarily on the basis of delivered price. Other competitive factors include product quality, customer service, and availability of product. In each product category, the Company competes with a broad range of domestic producers, including farmer cooperatives, subsidiaries of larger companies, integrated energy companies, and independent fertilizer companies. Many of the Company's domestic competitors have larger financial resources and sales than the Company. The Company also competes with foreign producers. Foreign competitors are often owned or subsidized by their governments and, as a result, may have cost advantages over domestic companies. Additionally, foreign competitors are frequently motivated by nonmarket factors such as the need for hard currency. The Company produces and sells its nitrogen products primarily in the southern United States. However, dealers and distributors located in this region re- market a substantial quantity of these nitrogen products to end-users outside of the southern United States. Because competition is based largely on the 10 delivered price, maintaining low production costs is critical to competitiveness. Natural gas comprises the vast majority of the raw materials cost of its nitrogen products. Competitive natural gas purchasing is essential to maintaining the Company's low-cost position. Equally important is efficient use of this gas because of the energy-intensive nature of the nitrogen business. Therefore, cost-competitive production facilities that allow flexible upgrading of ammonia to other finished products are critical to a low-cost competitive position. In the highly fragmented nitrogen market, product quality and customer service also can be sources of product differentiation. The Company sells over two-thirds of its DAP in international markets. The U.S. phosphate industry has become more concentrated as a result of recent consolidations and joint ventures, and the Company is smaller than most of its competitors in terms of resources and sales. Most of the Company's principal competitors have captive sources of some or all of the raw materials, and this may provide them with cost advantages. The Company's long-term phosphate rock contract with its flexible pricing mechanism is a key element to the Company's ability to compete. Most potash consumed in the United States is provided by large Canadian producers who have economies of scale and lower variable costs than their U.S. counterparts. Over 80 percent of U.S. potash production capacity is located in the Carlsbad, New Mexico, area. While the Carlsbad producers have higher mining costs than the Canadian producers, this disadvantage may be offset by logistical and freight advantages in certain markets in the southwestern United States and the lower United States corn belt. RESEARCH AND DEVELOPMENT The Company has a research and development staff of 13 full-time professional employees whose activities relate primarily to the improvement of existing products. The expenditures on research activities sponsored by the Company during fiscal 1998, 1997 and 1996 were approximately $1.6 million, $1.3 million and $1.2 million, respectively. EMPLOYEES As of June 30, 1998, the Company employed approximately 1,600 persons throughout all of its locations. The Company considers its employee relations to be satisfactory. COMPLIANCE WITH ENVIRONMENTAL REGULATIONS The Company's operations are subject to federal, state, and local laws and regulations pertaining to the environment, among which are the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Emergency Response Compensation and Liability Act, the Toxic Substances Control Act, and various other federal and state statutes. The Company's facilities require operating permits that are subject to review by governmental agencies. The Company believes that its policies and procedures now in effect are generally in compliance with applicable laws and with the permits relating to the facilities. Since 1967, the Company has spent in excess of $60 million on its fertilizer production facilities in order to meet applicable federal and state pollution standards. The majority of the Company's environmental capital expenditures have been in response to the requirements of the Clean Air Act and the Clean Water Act. Capital expenditures related to environmental obligations for the past three fiscal years were approximately as follows: 1998 -- $8,800,000; 1997--$8,400,000; and 1996--$920,000. 11 Environmental capital expenditures are expected to be approximately $1.0 million for fiscal 1999. These funds relate to environmental aspects of the production expansion project at the Carlsbad facilities and a groundwater monitoring project at the Pascagoula facility. The Company is currently accruing costs for the future closure of the west gypsum disposal facility located at Pascagoula, Mississippi. The balance of the accrual at June 30, 1998, of $9.3 million relates to the portion of the disposal facility utilized to date. In future years, the Company expects to record additional charges of approximately $2.0 million related to the future closure of the facility. These charges will be recorded over the estimated remaining life of the west storage facility. The accrual of closure costs for the new east facility will begin when it is placed in service. In the normal course of its business, the Company is exposed to risks relating to possible releases of hazardous substances into the environment. Such releases could cause substantial damage or injuries. Environmental expenditures have been and will continue to be significant. It is impossible to predict or quantify the impact of future environmental laws and regulations. OUTLOOK AND UNCERTAINTIES Except for the historical statements and discussions, statements set forth in this report may constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, forward-looking statements can be identified by the use of terminology such as "may," "will," "expects," "plans," "anticipates," "estimates," "potential," or "continue," the negatives thereof or other comparable terminology. Since these forward-looking statements rely on a number of assumptions concerning future events, risks and other uncertainties that are beyond the Company's ability to control, actual results may differ materially from such forward-looking statements. Future events, risks and uncertainties that could cause a material difference in such results include, but are not limited to: Factors Affecting Fertilizer Demand and Prices. With virtually all of its nitrogen net sales and approximately 79 percent of its total net sales in fiscal 1998 derived from domestic markets, the Company's operating results are highly dependent upon conditions in the U.S. agricultural industry. A variety of factors beyond the Company's control can materially affect domestic fertilizer demand and pricing. These factors include, but are not limited to futures prices for crops that require significant fertilizer application, U.S. planted acreage, government agricultural policies, projected grain stocks, crop failure, weather, changing or unpredictable crop choices by farmers and changes in agricultural production methods. Since fertilizers, particularly anhydrous ammonia, are also used for industrial applications, industrial markets and the general economy can also affect fertilizer demand and prices. International market conditions also significantly influence the Company's operating results. The market for fertilizers is influenced by such factors as the relative value of the U.S. dollar and its impact upon the cost of importing or exporting fertilizers; foreign agricultural policies; the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets; changes in the hard currency demands of certain countries; and other regulatory policies of foreign governments, as well as the laws and policies of the United States affecting foreign trade and investment. The Company is also subject to general risks of doing business abroad, including risks associated with economic or political instability. In the past, fertilizer prices have been extremely volatile, with significant price changes from one growing season to the next. Fertilizers are global commodities and can be subject to intense price 12 competition from domestic and foreign sources. No assurance can be given that average realized prices paid for the Company's fertilizer products will be at any level. Seasonality. The usage of fertilizer for agricultural application is highly seasonal, and the Company's quarterly results reflect the fact that, in its markets, significantly more fertilizer is purchased in the spring. Substantial portions of the Company's net sales and operating income are generated in the last four months of its fiscal years (March through June). Quarterly results can vary significantly from one year to the next due primarily to weather- related shifts in planting schedules and purchase patterns. The Company incurs appreciable expenditures for fixed costs throughout the year and for inventory in advance of the spring planting season. Dependence on Natural Gas. Natural gas is the primary raw material used in the manufacture of nitrogen products. Natural gas is used as both a chemical feedstock and a fuel to produce anhydrous ammonia, which is then used in the production of all other nitrogen products. Anhydrous ammonia is also a raw material in the production of DAP. Accordingly, the Company's profitability is dependent upon the price and availability of natural gas. A significant increase in the price of natural gas that is not recovered through an increase in the price of the Company's nitrogen products, or an extended interruption in the supply of natural gas to its production facilities, could have a material adverse effect on its results of operations and financial condition. Environmental Regulations. The Company is subject to various environmental laws and regulations of federal, state and local governments. Significant capital expenditures and operating costs have been incurred and will continue to be incurred as a result of these laws and regulations. The Company cannot predict or quantify the impact of new or changed laws or regulations. In the normal course of business, the Company is exposed to risks such as possible release of hazardous substances into the environment. Such releases could cause substantial damage or injuries and result in material costs to the Company. Competition. Fertilizer products are global commodities and customers base their purchasing decisions principally on the delivered price of the product. As a result, markets for the Company's products are highly competitive. A number of U.S. producers compete with the Company in domestic and export markets, and producers in other countries, including state-owned and government- subsidized entities, compete with the Company in the United States and in foreign markets to which the Company exports. Many of the Company's competitors are larger and have greater financial resources than the Company. Year 2000 Issues. The Company has formed a Year 2000 Committee (the "Committee") that is responsible for addressing all Year 2000 issues that could affect the Company. The Year 2000 discussion in Management's Discussion and Analysis section of its 1998 Annual Report to Shareholders, which is incorporated herein by reference, details the Committee's efforts to date on Year 2000 issues. As of September 1, 1998, the Company has spent approximately $100,000 addressing both its information technology ("IT") and non-IT systems. Although no one can accurately predict how many Year 2000 related failures will occur or the severity, duration or financial consequences of such failures, it is possible that the Company could sustain what is expected to be nonmaterial operational inconveniences and inefficiencies and be involved in nonmaterial business disputes related to the Company or one of its vendor's or customer's inability to carry out certain contractual obligations. The Committee is working with an outside consultant to oversee its efforts on Year 2000 issues and assist in developing a contingency plan by the end of calendar 1998 to be implemented if its efforts to identify and correct Year 2000 problems are not successful. 13 ITEM 2. PROPERTIES The Company owns an administration building in Yazoo City that contains approximately 65,000 square feet of office space. The Company owns the production plants in Yazoo City and Pascagoula, Mississippi; Donaldsonville, Louisiana; and Carlsbad, New Mexico, which are complete with necessary support facilities, such as roads, railroad tracks, storage, offices, laboratories, warehouses, machine shops, and loading facilities. Adequate supplies of water and electric power are available at all locations. In addition to the fertilizer storage facilities at Yazoo City and Pascagoula, Mississippi; Carlsbad, New Mexico; and Donaldsonville, Louisiana, the Company also owns or leases 23 major fertilizer storage and distribution facilities at other locations in Alabama, Arkansas, California, Georgia, Louisiana, Mississippi, Missouri, Tennessee, and Texas, with a total system-wide storage capacity of approximately 267,000 tons. During 1990, the Company entered into an agreement granting a third party the exclusive option, for a period of four years, to purchase the Company's undeveloped phosphate rock property, consisting of approximately 12,000 acres, in Hardee County, Florida. As of July 12, 1994, the Company and the option holder entered into new agreements with respect to this property whereby the Company conveyed a portion of the property to the third party and granted to the third party the exclusive option to purchase the remaining portion of the property. In January 1998, the third party exercised its option, and on April 16, 1998, the sale to the third party was consummated with the $57.0 million purchase price being paid in the form of an initial cash payment of $2.4 million and a note for $54.6 million. The note was paid in full by the third party and canceled on August 19, 1998. ITEM 3. LEGAL PROCEEDINGS Cleve Reber CERCLA Site. Triad Nitrogen has received and responded to letters issued by the U.S. Environmental Protection Agency ("EPA") under Section 104 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") relative to the possible disposition of Triad waste at the disposal site identified as the Cleve Reber site in Ascension Parish, Louisiana. It is Triad's position that, based upon available information and records, Triad did not utilize the Cleve Reber site for the disposition of hazardous material, and it does not appear that Triad has any responsibility for investigation and cleanup on this site. It should be noted that the EPA is contemplating an action under the Resource Conservation and Recovery Act, Section 7003, as well as the CERCLA action mentioned above. The EPA has issued Section 106 orders against the major contributors at the site for cleanup. They are now engaged in negotiations for cleanup. In 1994, Triad received a supplemental 104(e) request for information from the EPA, indicating the EPA's renewed interest in pursuing Potential Responsible Persons at the site. Triad filed a Freedom of Information Act request to investigate allegations that some plant trash from Triad may have been disposed of at the Cleve Reber site. Terra International, Inc. On August 31, 1995, the Company filed suit in federal court in Mississippi against Terra International, Inc. ("Terra"), seeking a declaratory judgment and other relief, establishing that certain technology relating to the design of an ammonium nitrate neutralizer which the Company licensed to Terra is not defective and was not the cause of an explosion which occurred in 1994 at Terra's Port Neal, Iowa, fertilizer facility. The Company is also seeking damages for defamation based on Terra's public statement related to the Company's alleged role in the explosion. Also, on August 31, 1995, Terra filed suit in federal court in Iowa against the Company seeking to recover property damage, lost profits and other out-of-pocket expenses caused by the explosion. Terra alleges that the ammonium nitrate neutralizer technology licensed to Terra was defectively designed by the Company and that the design defect caused the 14 Port Neal explosion. It has been conclusively determined that the Mississippi federal district court is the proper venue to resolve all issues between the parties relating to the Port Neal explosion. Discovery has commenced and a trial date of August 1999 has been set by the court. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is set forth in the Company's 1998 Annual Report to Shareholders under the caption "Quarterly Results," contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations," which information is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is set forth in the Company's 1998 Annual Report to Shareholders under the caption "Financial Highlights," which information is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is set forth in the Company's 1998 Annual Report to Shareholders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," which information is incorporated herein by reference. ITEM 7A. MARKET RISK The information required by this item is set forth in the Company's 1998 Annual Report to Shareholders under the caption "Market Risk," which information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements, together with the report thereon of Arthur Andersen LLP dated July 22, 1998, appearing in the Company's 1998 Annual Report to Shareholders, are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 15 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) The information required by this item regarding directors is set forth in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders under the captions "Nominees for Election to Serve Until 2001," "Directors Continuing to Serve Until 2000," and "Directors Continuing to Serve Until 1999," which information is incorporated herein by reference. (b) Executive officers are elected for a one-year term by the Board of Directors. The Company's executive officers are as follows:
OFFICE AND EMPLOYMENT DURING THE NAME OF OFFICER AGE LAST FIVE FISCAL YEARS - ---------------- --- --------------------------------------------------------------------- Charles O. Dunn 50 President and Chief Executive Officer since April 1, 1993; Executive Vice President (1988-1993) C. E. McCraw 50 Senior Vice President-Operations since July 12, 1994; Senior Vice President-Fertilizer Group (1991-1994) Robert E. Jones 50 Senior Vice President-Corporate Development effective October 1, 1997; Senior Vice President and General Counsel (1996-1997); Vice President and General Counsel (1989-1996) David W. Arnold 61 Senior Vice President-Technical Group since July 1, 1991 Timothy A. Dawson 44 Vice President-Finance and Chief Financial Officer since January 18, 1996; Director of Finance (1987-1996) John J. Duffy 64 Vice President-Marketing and Distribution since November 1, 1996; Vice President-Marketing (1995-1996); Vice President-Sales and Marketing (1994-1995); Director of Sales and Marketing (1991-1994) Ethel Truly 48 Vice President-Administration since January 18, 1996; Director of Administrative Services (1995-1996); Assistant General Counsel (1985-1995) Larry W. Holley 50 Vice President-Nitrogen Production since July 17, 1997; Director of Nitrogen Production (1997); Director of Energy (1991-1997) William L. Smith 48 General Counsel since October 1, 1997; partner in the law firm of Brunini, Grantham, Grower & Hewes, PLLC (1982-1997)
(c) The information called for with respect to the identification of certain significant employees is not applicable to the Registrant. (d) There are no family relationships between the directors and executive officers listed above. There are no arrangements or understandings between any named officer and any other person pursuant to which such person was selected as an officer. 16 The information required by this item regarding compliance with Section 16(a) of the Exchange Act is set forth in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders under the caption "Compliance with Section 16(a) of the Exchange Act," which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is set forth in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders under the captions "Compensation Committee Report on Executive Compensation" and "Executive Compensation," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is set forth in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders under the caption "Management Ownership of the Company's Stock," which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is set forth in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders under the caption "Board of Directors and Committees," which information is incorporated herein by reference. 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) FINANCIAL STATEMENTS AND SCHEDULES The consolidated financial statements, together with the report thereon of Arthur Andersen LLP dated July 22, 1998, appearing in the 1998 Annual Report to Shareholders, are incorporated by reference in this Form 10-K. With the exception of the aforementioned information and information incorporated by reference in Items 5, 6, 7, 7A and 8, the 1998 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K. The following financial statement schedule also should be read in conjunction with the financial statements in such 1998 Annual Report to Shareholders. Financial statement schedules not included in this Form 10-K have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Separate financial statements of 50 percent or less owned persons accounted for by the equity method that are not shown herein have been omitted because, if considered in the aggregate, they would not constitute a significant subsidiary. (i) Financial Statements: Report of Independent Public Accountants Consolidated Balance Sheets, June 30, 1998 and 1997 Consolidated Statements of Income, Years Ended June 30, 1998, 1997 and 1996 Consolidated Statements of Shareholders' Equity, Years Ended June 30, 1998, 1997 and 1996 Consolidated Statements of Cash Flows, Years Ended June 30, 1998, 1997 and 1996 Notes to Consolidated Financial Statements (B) EXHIBITS: Exhibits filed as part of this report are listed below. Certain exhibits have been filed previously with the Commission and are incorporated herein by reference. 18 SEC EXHIBIT REFERENCE NO. DESCRIPTION - ------------- ----------- 2.1 Asset Purchase Agreement, dated as of May 21, 1996, by and among the Company, Mississippi Acquisition I, Inc., Mississippi Acquisition II, Inc., Eddy Potash, Inc., and New Mexico Potash Corporation; filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed September 3, 1996, SEC File No. 0-20411, and incorporated herein by reference. 2.2 Agreement and Plan of Merger and Reorganization, dated as of August 27, 1996, by and among the Company, MISS SUB, INC., and First Mississippi Corporation; filed as Exhibit 2.2 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996, SEC File No. 0-20411, and incorporated herein by reference. 3.1 Articles of Incorporation of the Company; filed as Exhibit 3.1 to the Company's Amendment No. 1 to Form S-1 Registration Statement filed August 2, 1994, SEC File No. 33-53119, and incorporated herein by reference. 3.2 Bylaws of the Company; filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997, SEC File No. 0-20411, and incorporated herein by reference. 4.1 Shareholder Rights Plan; filed as Exhibit 1 to the Company's Form 8-A Registration Statement dated August 15, 1994, SEC File No. 2-7803, and incorporated herein by reference. 4.2 Indenture dated as of November 25, 1997, between the Company and Harris Trust and Savings Bank, as Trustee, for the issuance of up to $300 million of debt securities; filed as Exhibit 4(a) to the Company's Current Report on Form 8-K filed November 25, 1997, SEC File No. 001-12217, and incorporated herein by reference. 4.3 Indenture of Trust dated as of March 1, 1998, between Mississippi Business Finance Corporation and Deposit Guaranty National Bank, for the issuance of bonds in the aggregate principal amount of $14.5 million to assist the Company in financing and refinancing the cost of construction and equipping of solid waste disposal facilities at its Pascagoula, Mississippi, facility. 10.1 Agreement made and entered into as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991, File No. 2-7803, and incorporated herein by reference. 19 10.2 Amendment No. 1, effective as of July 1, 1992, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference /1/ 10.3 Amendment No. 2, effective as of July 1, 1993, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference. /2/ 10.4 Amendment No. 3, effective as of January 1, 1995, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference. /3/ 10.5 Amendment No. 4, effective as of January 1, 1997, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997, SEC File No. 0-20411, and incorporated herein by reference. 10.6 Credit Agreement dated as of November 25, 1997, among the Company; the Lenders Party Thereto; Harris Trust and Savings Bank, as Administrative Agent; Bank of Montreal, Chicago Branch, as Syndication Agent; and Credit Agricole Indosuez, as Co-Agent, establishing the Company's $200 million revolving line of credit. 10.7 Form of Severance Agreement dated July 29, 1996, by and between the Company and each of its Executive Officers; filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996, SEC File No. 2-7803, and incorporated herein by reference. 10.8 Mississippi Chemical Corporation Officer and Key Employee Incentive Plan. - ------------------- /1/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential business information has been deleted from the first and second paragraphs of paragraph numbered 1 of Amendment No. 1, and an application for confidential treatment has been filed separately with the Commission. /2/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential business information has been deleted from paragraphs numbered 5 and 8 of Amendment No. 2; from the first paragraph, paragraph numbered 1, paragraph numbered 2, and paragraph numbered 3 of Schedule 1, Exhibit A; from Schedule 2, Exhibit B; from Schedule 3, Exhibit C, and from Schedule 4, Exhibit D; and an application for confidential treatment has been filed separately with the Commission. /3/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential business information has been deleted from Schedule 1 to Amendment No. 3, Exhibit B, and an application for confidential treatment has been filed separately with the Commission. 20 10.9 Mississippi Chemical Corporation Executive Deferred Compensation Plan. 10.10 Mississippi Chemical Corporation Nonemployee Directors' Deferred Compensation Plan. 10.11 Mississippi Chemical Corporation Supplemental Benefit Plan, as amended and restated as of July 1, 1996. 10.12 Mississippi Chemical Corporation 1994 Stock Incentive Plan; filed as Exhibit 4.2 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference. 10.13 Mississippi Chemical Corporation 1995 Stock Option Plan for Nonemployee Directors; filed as Exhibit 4.3 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference. 10.14 Mississippi Chemical Corporation 1995 Restricted Stock Purchase Plan for Nonemployee Directors; filed as Exhibit 4.4 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference. 13.1 Portions of the Company's 1998 Annual Report to Shareholders as referenced in this Form 10-K for the fiscal year ending June 30, 1998. 21 List of subsidiaries of the Company. 23 Consent of Arthur Andersen LLP. 27 Financial Data Schedule. (c) REPORTS ON FORM 8-K: No reports were filed on Form 8-K during the three months ended June 30, 1998. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MISSISSIPPI CHEMICAL CORPORATION By: /s/ Charles O. Dunn ------------------- Charles O. Dunn President Principal Executive Officer By: /s/ Timothy A. Dawson --------------------- Timothy A. Dawson Vice President-Finance Principal Financial Officer and Chief Accounting Officer Date: September 25, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE /s/ Charles O. Dunn Director, September 25, 1998 - ------------------------------------ President and Chief Executive Officer Charles O. Dunn (principal executive officer) /s/ Coley L. Bailey Director, Chairman of the Board September 25, 1998 - ------------------------------------ Coley L. Bailey /s/ John Sharp Howie Director, Vice Chairman of the Board September 25, 1998 - ------------------------------------ John Sharp Howie /s/ John W. Anderson Director September 25, 1998 - ------------------------------------ John W. Anderson /s/ Haley Barbour Director September 25, 1998 - ------------------------------------ Haley Barbour /s/ Frank R. Burnside, Jr. Director September 25, 1998 - ------------------------------------ Frank R. Burnside, Jr. /s/ Robert P. Dixon Director September 25, 1998 - ------------------------------------ Robert P. Dixon /s/ W. R. Dyess Director September 25, 1998 - ------------------------------------ W. R. Dyess /s/ Woods E. Eastland Director September 25, 1998 - ------------------------------------ Woods E. Eastland /s/ George D. Penick, Jr. Director September 25, 1998 - ------------------------------------ George D. Penick, Jr. /s/ W. A. Percy II Director September 25, 1998 - ------------------------------------ W. A. Percy II /s/ David M. Ratcliffe Director September 25, 1998 - ------------------------------------ David M. Ratcliffe /s/ Wayne Thames Director September 25, 1998 - ------------------------------------ Wayne Thames
22 MISSISSIPPI CHEMICAL CORPORATION EXHIBIT INDEX TO FORM 10-K
EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- --------------------------------------------------------------------------- ------- 2.1 Asset Purchase Agreement, dated as of May 21, 1996, by and among the Company, Mississippi Acquisition I, Inc., Mississippi Acquisition II, Inc., Eddy Potash, Inc., and New Mexico Potash Corporation; filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed September 3, 1996, SEC File No. 0-20411, and incorporated herein by reference. 2.2 Agreement and Plan of Merger and Reorganization, dated as of August 27, 1996, by and among the Company, MISS SUB, INC., and First Mississippi Corporation; filed as Exhibit 2.2 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996, SEC File No. 0-20411, and incorporated herein by reference. 3.1 Articles of Incorporation of the Company; filed as Exhibit 3.1 to the Company's Amendment No. 1 to Form S-1 Registration Statement filed August 2, 1994, SEC File No. 33-53119, and incorporated herein by reference. 3.2 Bylaws of the Company; filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997, SEC File No. 0-20411, and incorporated herein by reference. 4.1 Shareholder Rights Plan; filed as Exhibit 1 to the Company's Form 8-A Registration Statement dated August 15, 1994, SEC File No. 2-7803, and incorporated herein by reference. 4.2 Indenture dated as of November 25, 1997, between the Company and Harris Trust and Savings Bank, as Trustee, for the issuance of up to $300 million of debt securities; filed as Exhibit 4(a) to the Company's Current Report on Form 8-K filed November 25, 1997, SEC File No. 001-12217, and incorporated herein by reference. 4.3 Indenture of Trust dated as of March 1, 1998, between Mississippi Business [ ] Finance Corporation and Deposit Guaranty National Bank, for the issuance of bonds in the aggregate principal amount of $14.5 million to assist the Company in financing and refinancing the cost of construction and equipping of solid waste disposal facilities at its Pascagoula, Mississippi, facility.
23 10.1 Agreement made and entered into as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991, File No. 2-7803, and incorporated herein by reference. 10.2 Amendment No. 1, effective as of July 1, 1992, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference /4/ 10.3 Amendment No. 2, effective as of July 1, 1993, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference. /5/ 10.4 Amendment No. 3, effective as of January 1, 1995, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, SEC File No. 2-7803, and incorporated herein by reference. /6/ 10.5 Amendment No. 4, effective as of January 1, 1997, to the Agreement effective as of September 15, 1991, between Office Cherifien des Phosphates and the Company for the sale and purchase of phosphate rock; filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997, SEC File No. 0-20411, and incorporated herein by reference.
- -------------------- /4/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential business information has been deleted from the first and second paragraphs of paragraph numbered 1 of Amendment No. 1, and an application for confidential treatment has been filed separately with the Commission. /5/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential business information has been deleted from paragraphs numbered 5 and 8 of Amendment No. 2; from the first paragraph, paragraph numbered 1, paragraph numbered 2, and paragraph numbered 3 of Schedule 1, Exhibit A; from Schedule 2, Exhibit B; from Schedule 3, Exhibit C, and from Schedule 4, Exhibit D; and an application for confidential treatment has been filed separately with the Commission. /6/ Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential business information has been deleted from Schedule 1 to Amendment No. 3, Exhibit B, and an application for confidential treatment has been filed separately with the Commission. 24 10.6 Credit Agreement dated as of November 25, 1997, among the Company; the [ ] Lenders Party Thereto; Harris Trust and Savings Bank, as Administrative Agent; Bank of Montreal, Chicago Branch, as Syndication Agent; and Credit Agricole Indosuez, as Co-Agent, establishing the Company's $200 million revolving line of credit. 10.7 Form of Severance Agreement dated July 29, 1996, by and between the Company and each of its Executive Officers; filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996, SEC File No. 2-7803, and incorporated herein by reference. 10.8 Mississippi Chemical Corporation Officer and Key Employee Incentive Plan. [ ] 10.9 Mississippi Chemical Corporation Executive Deferred Compensation Plan. [ ] 10.10 Mississippi Chemical Corporation Nonemployee Directors' Deferred [ ] Compensation Plan. 10.11 Mississippi Chemical Corporation Supplemental Benefit Plan, as amended and [ ] restated as of July 1, 1996. 10.12 Mississippi Chemical Corporation 1994 Stock Incentive Plan; filed as Exhibit 4.2 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference. 10.13 Mississippi Chemical Corporation 1995 Stock Option Plan for Nonemployee Directors; filed as Exhibit 4.3 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference. 10.14 Mississippi Chemical Corporation 1995 Restricted Stock Purchase Plan for Nonemployee Directors; filed as Exhibit 4.4 to the Company's Form S-8 Registration Statement filed December 21, 1995, SEC File No. 33-65209, and incorporated herein by reference. 13.1 Portions of the Company's 1998 Annual Report to Shareholders as referenced [ ] in this Form 10-K for the fiscal year ending June 30, 1998. 21 List of subsidiaries of the Company. [ ] 23 Consent of Arthur Andersen LLP. [ ] 27 Financial Data Schedule. [ ]
25 EX-4.3 2 INDENTURE OF TRUST EXHIBIT 4.3 MISSISSIPPI BUSINESS FINANCE CORPORATION TO DEPOSIT GUARANTY NATIONAL BANK, As Trustee _________________________ INDENTURE OF TRUST _________________________ Dated as of March 1, 1998 INDENTURE OF TRUST (This Table of Contents is not a part of this Indenture of Trust and is only for convenience of reference) TABLE OF CONTENTS PAGE ---- Preamble.................................................................. 1 Bond Form................................................................. 3 ARTICLE I DEFINITIONS AND RULES OF INTERPRETATION Section 1.1. Definitions. 13 Section 1.2. Rules of Interpretation 16 ARTICLE II THE BONDS Section 2.1. Authorized Amount of Bonds 16 Section 2.2. Issuance of Bonds 16 Section 2.3. Execution; Limited Obligation 17 Section 2.4. Authentication 18 Section 2.5. Form of Bonds 18 Section 2.6. Delivery of Bonds 18 Section 2.7. Mutilated, Lost, Stolen or Destroyed Bonds 19 Section 2.8. Registration and Exchange of Bond; Persons Treated as Owners 19 Section 2.9. Cancellation of Bonds 20 Section 2.10. Book Entry System 20 ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY Section 3.1. Redemption Dates and Prices 20 Section 3.2. Notice of Redemption 22 Section 3.3. Deposit of Funds 22 Section 3.4. Partial Redemption of Bonds 23 Section 3.5. Selection of Bonds for Redemption 23 ARTICLE IV GENERAL COVENANTS Section 4.1. Payment of Principal and Interest 23 Section 4.2. Performance of Covenants; Issuer 23 Section 4.3. Right to Payments under Agreement and Guaranty; Instruments of Further Assurance 24 Section 4.4. Recordation and Other Instruments 24 Section 4.5. Inspection of Project Books 25 Section 4.6. List of Bondholders 25 Section 4.7. Rights Under Agreement and Guaranty 25 Section 4.8. Prohibited Activities 25 ARTICLE V REVENUES AND FUNDS Section 5.1. Source of Payment of Bonds 25 Section 5.2. Creation of Bond Fund 25 Section 5.3. Payments into Bond Fund 26 Section 5.4. Use of Moneys in Bond Fund 26 Section 5.5. Custody of Bond Fund 26 Section 5.6. Construction Fund 26 Section 5.7. Payments into Construction Fund; Disbursements 26 Section 5.8. Completion of Project 27 Section 5.9. Transfer of Construction Fund 27 Section 5.10. Creation of Refunding Fund 27 Section 5.11. Payments into the Refunding Fund 27 Section 5.12. Use of Moneys in the Refunding Fund 27 Section 5.13. Non-presentment of Bonds 28 Section 5.14. Moneys to be Held in Trust 28 Section 5.15. Repayment to the Company from Bond Fund 28 Section 5.16. Additional Payments Under the Agreement 28 Section 5.17. Arbitrage Requirements 29 Section 5.18. Rebate Fund; Tax Agreement 29 ARTICLE VI INVESTMENT OF MONEYS Section 6.1. Investment of Moneys 29 ARTICLE VII DISCHARGE OF LIEN Section 7.1. Discharge of Lien 30 ARTICLE VIII DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS Section 8.1. Defaults; Events of Default 31 Section 8.2. Acceleration 32 Section 8.3. Other Remedies; Rights of Bondholders 32 Section 8.4. Right of Bondholders to Direct Proceedings 32 Section 8.5. Appointment of Receivers 33 Section 8.6. Reserved 33 Section 8.7. Application of Moneys 33 Section 8.8. Remedies Vested in Trustee 34 Section 8.9. Rights and Remedies of Bondholders 34 Section 8.10. Termination of Proceedings 35 Section 8.11. Waivers of Events of Default 35 Section 8.12. Notice of Defaults under Section 8.1(c); Opportunity of the Issuer and the Company to Cure Such Defaults 36 Section 8.13. Notice to Bondholders; Defaults; Acceleration 36 ARTICLE IX THE TRUSTEE Section 9.1. Acceptance of Trusts 36 Section 9.2. Fees, Charges and Expenses of the Trustee 39 Section 9.3. Trustee as Paying Agent and Registrar 39 Section 9.4. Intervention by the Trustee 39 Section 9.5. Successor Trustee 40 Section 9.6. Resignation by the Trustee 40 Section 9.7. Removal of the Trustee 40 Section 9.8. Appointment of Successor Trustee by Bondholders or Issuer 40 Section 9.9. Concerning Any Successor Trustee 41 Section 9.10. Appointment of Co-Trustee 41 Section 9.11. Representations, Warranties and Covenants of the Trustee 42 Section 9.12. Required Reporting to Issuer 42 ARTICLE X SUPPLEMENTAL INDENTURES Section 10.1. Supplemental Indentures Not Requiring Consent of Bondholders 43 Section 10.2. Supplemental Indentures Requiring Consent of Bondholders 44 Section 10.3. Consent of Company 44 Section 10.4. Opinion of Bond Counsel 45 ARTICLE XI AMENDMENT OF AGREEMENT AND GUARANTY Section 11.1. Amendments, etc., to Agreement and Guaranty Not Requiring Consent of Bondholders 45 Section 11.2. Amendments, etc., to Agreement and Guaranty Requiring Consent of Bondholders 45 Section 11.3. Opinion of Bond Counsel 46 ARTICLE XII MISCELLANEOUS Section 12.1. Consents, etc., of Bondholders 46 Section 12.2. Limitation of Rights 47 Section 12.3. Severability 47 Section 12.4. Notices 47 Section 12.5. Payments Due on Saturdays, Sundays and Holidays 48 Section 12.6. Action by Company and Issuer 48 Section 12.7. Counterparts 48 Section 12.8. Applicable Provisions of Law 48 Section 12.9. No Recourse 48 INDENTURE OF TRUST THIS INDENTURE OF TRUST dated as of March 1, 1998, by and between the MISSISSIPPI BUSINESS FINANCE CORPORATION, a public corporation created under the laws of the State of Mississippi, including the Act, party of the first part (hereinafter sometimes referred to as the "Issuer"), and DEPOSIT GUARANTY NATIONAL BANK, a national banking association duly organized, existing and authorized to accept and execute trusts of the character herein set out under and by virtue of the laws of the United States, with its principal corporate trust office located in Jackson, Mississippi, as trustee (hereinafter sometimes referred to as the "Trustee"), party of the second part, W I T N E S S E T H: WHEREAS, pursuant to the authority set forth in Section 57-10-201 et seq., Mississippi Code of 12972, as amended (the "Act"), and Indenture of Trust dated as of July 1, 1997 (the "Series 1997A Indenture"), between the Issuer and the Trustee, the Issuer has hitherto issued its Solid Waste Disposal Revenue Bonds (Mississippi Phosphates Corporation Project) Series 1997A (the "Series 1997A Bonds") in the principal amount of $6,000,000, the proceeds of which were loaned to Mississippi Phosphates Corporation, a Delaware corporation (the "Company"), and used to finance a portion of the costs of the Project (as hereinafter defined); and WHEREAS, the proceeds of the Series 1997A Bonds were loaned to the Company pursuant to the terms of a Loan Agreement dated as of July 1, 1997 (the "Series 1997A Loan Agreement") between the Issuer and the Company; and WHEREAS, pursuant to the Act and an Indenture of Trust dated as of July 1, 1997 (the "Series 1997B Indenture"), between the Issuer and the Trustee, the Issuer has hitherto issued its Solid Waste Disposal Revenue Bonds (Mississippi Phosphates Corporation Project) Series 1997B (the "Series 1997B Bonds") in the principal amount of $8,500,000, the proceeds of which were loaned to the Company and used to finance a portion of the costs of the Project; and WHEREAS, the proceeds of the Series 1997B Bonds were loaned to the Company pursuant to the terms of a Loan Agreement dated as of July 1, 1997 (the "Series 1997B Loan Agreement") between the Issuer and the Company; and WHEREAS, the Issuer is authorized and empowered by the provisions of the Act to issue its limited obligation revenue bonds in accordance with the Act and to make secured or unsecured loans for the purpose of refunding the outstanding Series 1997A Bonds and the Series 1997B Bonds (collectively, the "Series 1997 Bonds"), and to pledge the proceeds of any loan agreements as security for the payment of the principal of, premium, if any, and interest on such revenue bonds; and WHEREAS, the Issuer is entering into a Loan Agreement of even date herewith with the Company in which the Issuer has agreed to loan the proceeds of its Solid Waste Disposal Revenue Refunding Bonds (Mississippi Phosphates Corporation Project) Series 1998 (the "Bonds") to the Company to defray the cost of refunding the outstanding principal amount of the Series 1997 Bonds and pursuant to which the Company has agreed to repay the loan in an amount sufficient to pay the principal of, premium, if any, and interest on the Bonds when due; and WHEREAS, the Issuer has determined that the Bonds in the aggregate principal amount of $14,500,000 should be issued, sold and delivered pursuant to the Act and this Indenture to provide proceeds for loan to the Company to provide for the refunding of the Series 1997 Bonds; and WHEREAS, the Issuer has contracted for the sale and delivery of the Bonds to be issued in the aggregate principal amount of $14,500,000 as herein provided; and WHEREAS, all Bonds issued under this Indenture will be secured by a pledge and assignment of the aforesaid Loan Agreement (except as otherwise herein provided); and WHEREAS, the Bonds and the Trustee's certificate of authentication to be endorsed on the Bonds are to be in substantially the following form, with appropriate variations, omissions and insertions as permitted or required by this Indenture, to-wit: (FORM OF BONDS) UNITED STATES OF AMERICA STATE OF MISSISSIPPI MISSISSIPPI BUSINESS FINANCE CORPORATION SOLID WASTE DISPOSAL REVENUE REFUNDING BOND (MISSISSIPPI PHOSPHATES CORPORATION PROJECT) SERIES 1998 Registered Registered No. R-__________ $_______________ Interest Rate: Maturity Date: CUSIP No.: - ------------- ------------- --------- 5.80% March 1, 2022 ________________ Registered Owner: Principal Amount: KNOW ALL MEN BY THESE PRESENTS that the MISSISSIPPI BUSINESS FINANCE CORPORATION (the "Issuer"), a public corporation created under the laws of the State of Mississippi, for value received, promises to pay (but only out of the sources and in the manner as hereinafter provided) to the Registered Owner identified above, or registered assigns as hereinafter provided, on the Maturity Date identified above, except as the provisions set forth in the Indenture with respect to redemption prior to maturity may become applicable hereto, the Principal Amount identified above, and in like manner to pay interest on said Principal Amount from the date hereof at the Interest Rate per annum identified above, payable semiannually on March 1 and September 1 of each year, commencing September 1, 1998 (each, an "Interest Payment Date"), until said Principal Amount is paid. The principal of this Bond shall be payable in lawful money of the United States of America at the principal corporate trust office of Deposit Guaranty National Bank, a national banking association organized under the laws of the United States, as Trustee, or its successor in trust (the "Trustee"). Payment of interest on any Interest Payment Date shall be made in lawful money of the United States of America to the Registered Owner hereof as of the close of business on the Record Date with respect to such Interest Payment Date and shall be paid (i) by check or draft mailed to such Registered Owner at his address as it appears on the registration books of the Issuer maintained by the Trustee or (ii) at the option of any Registered Owner of at least $1,000,000 in aggregate principal amount of the Bonds, by wire transfer or other means acceptable to the Trustee at an address within the United States upon written instructions filed by such Registered Owner with the Trustee not later than the close of business on such Record Date (which instructions shall remain in effect until revoked by subsequent written instructions). THIS BOND AND THE OBLIGATION TO PAY INTEREST HEREON ARE LIMITED OBLIGATIONS OF THE ISSUER, SECURED AS AFORESAID AND PAYABLE SOLELY OUT OF THE REVENUES AND INCOME DERIVED FROM THE HEREINAFTER DEFINED AGREEMENT AND AS OTHERWISE PROVIDED IN THE HEREINAFTER DEFINED INDENTURE AND AGREEMENT. THIS BOND AND THE OBLIGATION TO PAY INTEREST HEREON SHALL NOT BE DEEMED TO CONSTITUTE AN INDEBTEDNESS OR AN OBLIGATION OF THE ISSUER, THE STATE OF MISSISSIPPI OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE PURVIEW OF ANY CONSTITUTIONAL LIMITATION OR PROVISION OR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS, IF ANY, OF ANY OF THEM. THE ISSUER HAS NO TAXING POWER. NO OWNER OF THIS BOND SHALL HAVE THE RIGHT TO COMPEL ANY EXERCISE OF THE TAXING POWER, IF ANY, OF THE ISSUER, THE STATE OF MISSISSIPPI OR ANY POLITICAL SUBDIVISION THEREOF TO PAY ANY PRINCIPAL INSTALLMENT OF, OR INTEREST ON, THIS BOND. _________________________ REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. _________________________ This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the certificate of authentication hereon shall have been manually executed by the Trustee. This Bond is issued with the intent that the laws of the State of Mississippi will govern its construction. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to and in the execution and delivery of the Indenture and the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law; and that the issuance of this Bond and the series of which it forms a part does not exceed or violate any constitutional or statutory limitation. IN WITNESS WHEREOF, the MISSISSIPPI BUSINESS FINANCE CORPORATION has caused this Bond to be executed in its name by the manual or facsimile signature of its Executive Director, and its corporate seal to be impressed or imprinted hereon, attested by the manual or facsimile signature of its Secretary, all as of the 1st day of March, 1998. MISSISSIPPI BUSINESS FINANCE CORPORATION By: ____________________________________ Executive Director ATTEST: ______________________ Secretary [SEAL] [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This Bond is one of the Bonds of the issue described in the within mentioned Indenture of Trust. Date of Authentication: DEPOSIT GUARANTY NATIONAL BANK, as Trustee By: ______________________________ Authorized Signatory (FORM OF REVERSE OF BONDS) This Bond is one of an authorized series of Bonds in the aggregate principal amount of $14,500,000 (the "Bonds") issued for the purpose of funding a loan by the Issuer to Mississippi Phosphates Corporation, a Delaware corporation (the "Company"), for the purpose of refunding those certain Mississippi Business Finance Corporation Solid Waste Disposal Revenue Bonds (Mississippi Phosphates Corporation Project) Series 1997A (the "Series 1997A Bonds") and those certain Mississippi Business Finance Corporation Solid Waste Disposal Revenue Bonds (Mississippi Phosphates Corporation Project) Series 1997B (the "Series 1997B Bonds"), the proceeds of which Series 1997A Bonds and Series 1997B Bonds (collectively, the "Series 1997 Bonds") have been used to provide financing for the cost of land, buildings and equipment to be acquired, constructed and installed by the Company (the "Project") for the disposal of solid waste which solid waste is generated by the Company's chemical fertilizer manufacturing plant in Jackson County, Mississippi (the "Plant"). The Bonds are all issued under and are equally and ratably secured by and entitled to the protection of an Indenture of Trust dated as of March 1, 1998 (which indenture, as from time to time amended and supplemented, is herein referred to as the "Indenture"), duly executed and delivered by the Issuer to the Trustee. Reference is hereby made to the Indenture for a description of the rights, duties and obligations of the Issuer, the Trustee and the owners of the Bonds and the terms upon which the Bonds are issued and secured. The terms and conditions of the loan of the proceeds of the Bonds to the Company to provide for the refunding of the principal of the Series 1997 Bonds and to provide for the payment of a portion of the costs of issuance of the Bonds, and the repayment of said loan, are contained in a Loan Agreement dated as of March 1, 1998, between the Issuer and the Company (which agreement, as from time to time amended and supplemented, is herein referred to as the "Agreement"). The Project is not pledged as security for the Bonds. This Bond is issued pursuant to and in full compliance with the Constitution and laws of the State of Mississippi, and particularly the Act, and pursuant to a resolution duly adopted by the Issuer authorizing, among other things, the execution and delivery of the Indenture. The Bonds are limited obligations of the Issuer payable solely from certain payments provided to be made by the Company under the Agreement, which payments are designed to be sufficient to pay the principal of, premium, if any and interest on the Bonds as the same become due and payable. The Bonds are further secured by the unlimited guaranty of Mississippi Chemical Corporation, the corporate parent of the Company, pursuant to a Guaranty Agreement dated as of March 1, 1998. The principal of, premium, if any and interest on the Bonds are payable solely from the funds pledged for their payment in accordance with the proceedings authorizing their issuance and the Indenture. All payments under the Agreement are to be paid to the Trustee for the account of the Issuer and deposited in a special trust fund created by the Issuer, maintained by the Trustee and designated "Mississippi Business Finance Corporation Solid Waste Disposal Revenue Refunding Bonds (Mississippi Phosphates Corporation Project) Series 1998 Bond Fund," and, in addition, the rights of the Issuer under the Agreement (except the right to receive certain fee, expense and indemnification payments and to receive notices) have been assigned and pledged to the Trustee to secure the payment of such principal and interest under the Indenture. This Bond is transferable by the Registered Owner hereof in person or by his attorney duly authorized in writing at the principal corporate trust office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new registered Bond or Bonds of an Authorized Denomination or Authorized Denominations, for the same aggregate principal amount, will be issued to the transferee in exchange therefor. Subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation thereof, Bonds may be exchanged for a like aggregate principal amount of Bonds of another Authorized Denomination or Authorized Denominations. The Trustee shall not be required to transfer or exchange any Bond from the fifteenth day of the month next preceding an Interest Payment Date and such Interest Payment Date, nor to transfer or exchange any Bond after the mailing of notice calling such Bond or a portion thereof for redemption, nor during the period of fifteen days next preceding the giving of such notice of redemption. The Issuer and the Trustee may deem and treat the Registered Owner hereof as the absolute owner hereof for the purpose of receiving payment of or on account of principal hereof and interest due hereon and for all other purposes and neither the Issuer nor the Trustee shall be affected by any notice to the contrary. The Bonds are subject to extraordinary optional redemption at any time in whole, but not in part, at a redemption price equal to 100% of the principal amount thereof plus accrued interest, if any, to the redemption date, upon the exercise by the Company of its option to prepay loan repayment installments under the Agreement, if any of the following shall have occurred: (a) The Project or the Plant shall have been damaged or destroyed (in whole or in part) by fire or other casualty to such extent that, in the opinion of the Company, it is not practicable or desirable to rebuild, repair or restore the Project or the Plant; or (b) Title to, or the temporary use of, all or substantially all the Project or Plant shall have been taken under the exercise of the power of eminent domain by any governmental authority, or person, firm or corporation acting under governmental authority; or (c) Changes in the economic availability of raw materials, operating supplies or facilities necessary for the operation of the Project or Plant shall have occurred or such technological or environmental or other changes shall have occurred which, in the Company's judgment, render the continued operation of the Project or Plant uneconomic. The Bonds are subject to optional redemption prior to maturity at the election of the Corporation on March 1, 2008, and thereafter, either as a whole or in part on any date from any moneys that may be made available for such purpose, at the following redemption prices (expressed as a percentage of principal amount or portion thereof to be redeemed), plus accrued interest to the redemption date: Redemption Dates (Inclusive) Redemption Price ---------------------------- ---------------- March 1, 2008 through February 28, 2009 102% March 1, 2009 through February 28, 2010 101% March 1, 2010 and thereafter 100% The Bonds are subject to mandatory redemption at any time in whole (or in the case of the events stated in (b) or (c) of this paragraph, in whole or in part as provided in the Indenture), at a redemption price equal to 100% of the principal amount thereof plus accrued interest, if any, to the redemption date, if any of the following shall have occurred: (a) As a result of any changes in the Constitution of the State of Mississippi or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) or by final decree, judgment or order of any court or administrative body (whether state or federal) the Agreement shall have become void or unenforceable or impossible to perform in accordance with the intent and purposes of the parties as expressed in the Agreement; or (b) A final determination by the Internal Revenue Service or a court of competent jurisdiction as a result of a proceeding in which the Company participates to the degree it deems sufficient, which determination the Company, in its discretion, does not contest by an appropriate proceeding, that, as a result of failure by the Company to observe any covenant, agreement or representation by the Company in the Agreement, the interest payable on the Bonds or any of them is includable for federal income tax purposes in the gross income of any owner of a Bond (other than an owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147 of the Code and the applicable regulations thereunder); or (c) Proceeds of the Series 1997 Bonds, including income from the investment thereof, in an amount equal to or greater than $100,000 shall remain after completion of the Project and the payment of all costs of the Project. In the event any of the Bonds or portions thereof (in Authorized Denominations) are called for redemption as aforesaid, notice thereof identifying the Bonds or portions thereof to be redeemed will be given by the Trustee by mailing a copy of the redemption notice by first-class mail at least thirty (30) days prior to the date fixed for redemption to the Registered Owner of each Bond to be redeemed in whole or in part at the address shown on the registration books; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of any proceeding for the redemption of any Bond with respect to which no such failure or defect has occurred. Any notice mailed in such manner shall be conclusively presumed to have been duly given whether or not the Registered Owner receives such notice. If less than all of the Bonds are to be redeemed, Bonds or portions thereof (in Authorized Denominations) shall be selected by lot in the manner provided in the Indenture. All Bonds or portions thereof so called for redemption will cease to bear interest on and after the specified redemption date provided funds for the redemption thereof are on deposit with the Trustee at that time. The Registered Owner of this Bond shall have no right to enforce the provisions of the Indenture or the Agreement or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Indenture or the Agreement, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all the Bonds issued under the Indenture and then outstanding may become or may be declared due and payable before the stated maturity thereof, together with interest accrued thereon. The Indenture prescribes the manner in which it may be discharged, including a provision that under certain circumstances the Bonds shall be deemed to be paid if Governmental Obligations, maturing as to principal and interest in such amounts and at such times as will, without reinvestment, provide sufficient funds to pay the principal of, premium, if any and interest on the Bonds, shall have been deposited with the Trustee, and all fees and expenses of the Trustee and all other liabilities of the Company under the Agreement are paid or provided for, after which the Bonds shall no longer be secured by or entitled to the benefits of the Indenture or the Agreement, except for purposes of exchange and transfer and payment from such Governmental Obligations on the date or dates specified at the time of such deposit. The Indenture permits the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the owners of the Bonds at any time by the Issuer with the consent of the owners of not less than a majority, or in certain instances 100%, in aggregate principal amount of the Bonds at the time outstanding, as defined in the Indenture. Any such consent or waiver by the owner of this Bond shall be conclusive and binding upon such owner and upon all future owners of this Bond and of any Bond issued upon the transfer or exchange of this Bond, whether or not notation of such consent or waiver is made upon this Bond. The Indenture also contains provisions permitting the Trustee to enter into certain supplemental indentures without the consent of the owners of the Bonds and to waive certain past defaults under the Indenture and their consequences. No supplemental indenture will become effective without the consent of the Company. No recourse shall be had for the payment of the principal of, premium, if any and interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Indenture or the Agreement contained, against any past, present or future member, officer, agent or employee of the Issuer, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such member, officer, employee, director or agent as such is hereby expressly waived and released as a condition of and consideration for the execution of the Indenture or the Agreement and the issuance of any of the Bonds. Terms which are used herein as defined terms and which are not otherwise defined herein shall have the meanings assigned to them in the Indenture. (FORM OF ASSIGNMENT) The following abbreviations, when used in the inscription on the face of this Bond, shall be construed as though they were written out in full according to applicable laws or regulations: UNIF GIFT MIN ACT-- TEN COM __as tenants in common _____________________________ TEN ENT __as tenants by the (Custodian) entireties under Uniform Gifts to Minors JT TEN __as joint tenants with right Act of of survivorship and not as _____________________________ tenants in common (State) Additional abbreviations may also be used though not in the above list. FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Name and Address of Assignee) the within Bond of the Mississippi Business Finance Corporation and does hereby irrevocably constitute and appoint to transfer said Bond on the books kept for registration thereof with full power of substitution in the premises. Dated: __________________ Signature Guaranteed: __________________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever; and NOTICE: Signature(s) must be guaranteed by a member firm of the Securities Transfer Agent Medallion Program. VALIDATION CERTIFICATE The issue of the Bonds of which this Bond is one has been validated and confirmed by decree of the Chancery Court of the First Judicial District of Hinds County, Mississippi, rendered on the ____day of _______, 1998. (END OF FORM OF BONDS) WHEREAS, all things necessary to make the Bonds, when authenticated by the Trustee and issued as in this Indenture provided, the valid, binding and legal obligations of the Issuer according to the import thereof, and to constitute this Indenture a valid assignment and pledge of the amounts assigned and pledged to the payment of the principal of, premium, if any and interest on the Bonds and a valid assignment of certain rights of the Issuer under the Agreement have been done and performed, and the creation, execution and delivery of this Indenture, and the creation, execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized; GRANTING CLAUSES NOW, THEREFORE, THIS INDENTURE OF TRUST WITNESSETH; That the Issuer in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the owners thereof, and for other good and valuable considerations, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of, premium, if any and interest on the Bonds according to their tenor and effect and to secure the performance and observance by the Issuer of all the covenants expressed or implied herein and in the Bonds, does hereby grant, bargain, sell, convey, assign and pledge, and grant a security interest in, to Deposit Guaranty National Bank, as Trustee, and its successors in trust and assigns forever, to the extent provided in this Indenture: GRANTING CLAUSE FIRST All of the rights and interest of the Issuer in and to the Loan Agreement dated as of March 1, 1998, between the Issuer and Mississippi Phosphates Corporation, except for the rights of the Issuer to receive notices thereunder and the rights of the Issuer under Sections 4.2(c), 5.2 and 6.3 of said Loan Agreement, and all rights of the Issuer in and to the Guaranty Agreement dated as of March 1, 1998, delivered by Mississippi Chemical Corporation. GRANTING CLAUSE SECOND All moneys and securities from time to time held by the Trustee under the terms of this Indenture and any and all other real or personal property of every name and nature from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred, as and for additional security hereunder by the Issuer or by anyone in its behalf, or with its written consent to the Trustee which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its respective successors in said trust and assigns forever: IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future owners of the Bonds from time to time issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds (except as herein otherwise expressly provided); PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of, premium, if any and interest on the Bonds due or to become due, at the times and in the manner mentioned in the Bonds according to the true intent and meaning thereof, and shall cause the payments to be made on the Bonds as required under Article IV hereof, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon (or Governmental Obligations sufficient for that purpose as provided in Article VII hereof), and shall pay or cause to be paid to the Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then upon the final payment thereof or provision therefor this Indenture and the rights hereby granted shall cease, determine and be void; otherwise this Indenture to be and remain in full force and effect. THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is expressly declared that, all Bonds issued and secured hereunder are to be issued, authenticated and delivered and all property, rights and interest, including, without limitation, the amounts hereby assigned and pledged, are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and Issuer has agreed and covenanted, and does hereby agree and covenant with the Trustee and with the respective owners of the Bonds as follows (subject, however, to the provisions of Section 2.3 hereof): ARTICLE I DEFINITIONS AND RULES OF INTERPRETATION SECTION 1.1. DEFINITIONS. All words and phrases defined in the Recitals hereof and in Article I of the Agreement shall have the same meaning in this Indenture. All words when capitalized herein but not defined shall have the meaning provided in the Agreement. In addition, the following words and phrases shall have the following meanings: "Act" means the Mississippi Small Business Financing Act, appearing as Section 57-10-201 et seq., Mississippi Code of 1972, as amended. "Affiliate" means any person directly or indirectly controlling or controlled by or under direct or indirect common control with another person. For the purposes of this definition, "control" when used with respect to a person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" means the Loan Agreement of even date herewith, between the Issuer and the Company, and any amendments and supplements thereto. "Authorized Denominations" means $100,000 and any integral multiple thereof. "Bondholder" or "holder" or "owner" means the Registered owner of any Bond. "Bonds" means the $14,500,000 aggregate principal amount of Bonds authorized to be issued by the Issuer pursuant to the terms and conditions of Sections 2.1 and 2.2 hereof. "Default" or "event of default" means any occurrence or event specified in and defined by Section 8.1 hereof. "Governmental Obligations" means noncallable direct general obligations of, or obligations the payment of the principal and interest of which are unconditionally guaranteed by, the United States of America. "Interest Payment Date" means March 1 and September 1 of each year, commencing September 1, 1998. "Outstanding" or "Bonds outstanding" means all Bonds which have been authenticated and delivered by the Trustee under this Indenture, except: (a) Bonds canceled after purchase or because of payment at, or redemption prior to, maturity; (b) Bonds or portions thereof (of Authorized Denominations) for the payment or redemption of which cash funds or Governmental Obligations shall have been theretofore deposited with the Trustee (whether upon or prior to the maturity or redemption date of any such Bonds or portions thereof); provided that, if such Bonds or portions thereof are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Trustee shall have been filed with the Trustee; and (c) Bonds in lieu of which others have been authenticated under Section 2.7 hereof. If this Indenture shall have been discharged pursuant to the provisions of Article VII hereof, no Bonds shall be deemed to be outstanding within the meaning of this provision. "Paying Agent" means the Trustee. "Plant" means the chemical fertilizer manufacturing plant operated by the Company in Pascagoula, Mississippi. "Project" means the land and those items of machinery, equipment, structures and related property purchased or to be purchased, acquired, constructed or installed with proceeds from the sale of the Series 1997 Bonds or the proceeds of any payment by the Company pursuant to Section 3.4 of the Agreement, as more particularly described in Exhibit A to the Agreement. "Project Site" means the real property upon which the Company is constructing its solid waste disposal facilities in Jackson County, Mississippi, as it may at any time exist and as it currently exists. "Record Date" means the fifteenth day of the month next preceding an Interest Payment Date. "Registered owner" shall mean the person or persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Trustee for that purpose in accordance with the terms of this Indenture. "Registrar" means the Trustee. "Revenues" means all amounts payable pursuant to Section 4.2(a) of the Agreement. "Series 1997A Bonds" means the Mississippi Business Finance Corporation Solid Waste Disposal Revenue Bonds (Mississippi Phosphates Corporation Project) Series 1997A issued in the principal amount of $6,000,000. "Series 1997B Bonds" means the Mississippi Business Finance Corporation Solid Waste Disposal Revenue Bonds (Mississippi Phosphates Corporation Project) Series 1997B issued in the principal amount of $8,500,000. "Series 1997A Indenture" means the Indenture of Trust dated as of July 1, 1997, between the Issuer and the Trustee pertaining to the Series 1997A Bonds. "Series 1997B Indenture" means the Indenture of Trust dated as of July 1, 1997, between the Issuer and the Trustee pertaining to the Series 1997B Bonds. "Tax Agreement" means the Tax Exemption Certificate and Agreement with respect to the Bonds, dated the date of the delivery of the Bonds, among the Company, the Issuer and the Trustee, as it may hereafter be amended or supplemented. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses hereof. "Trustee" means Deposit Guaranty National Bank and its successors and any corporation resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee and/or co-trustee at the time serving as such hereunder. "Underwriter" means BancAmerica ROBERTSON STEPHENS. SECTION 1.2. RULES OF INTERPRETATION. The following rules of interpretation shall govern the interpretation of this Indenture unless the context clearly indicates otherwise: The words "hereof", "herein", "hereunder" and other words of similar import refer to this Indenture as a whole. References to Articles, Sections and other subdivisions of this Indenture are to the designated Articles, Sections and other subdivisions of this Indenture as originally executed. The plural includes the singular, and the singular includes the plural. The headings of this Indenture are for convenience only and shall not define or limit the provisions hereof. ARTICLE II THE BONDS SECTION 2.1. AUTHORIZED AMOUNT OF BONDS. No Bonds may be issued under the provisions of this Indenture except in accordance with this Article. The total principal amount of Bonds that may be issued is hereby expressly limited to $14,500,000, except as provided in Section 2.7 hereof. SECTION 2.2. ISSUANCE OF BONDS. The Bonds shall be designated "Mississippi Business Finance Corporation Solid Waste Disposal Revenue Refunding Bonds (Mississippi Phosphates Corporation Project) Series 1998," and shall be issuable only as fully registered Bonds without coupons in Authorized Denominations. Unless the Issuer shall otherwise direct, the Bonds shall be numbered separately from 1 upward. The Bonds shall be dated as of March 1, 1998 and shall mature, subject to prior redemption, upon the terms and conditions hereinafter set forth, on March 1, 2022. The Bonds shall bear interest at the rate of five and eight-tenths percent (5.80%) per annum from and including the date thereof until payment of the principal or redemption price thereof shall have been made or provided for in accordance with the provisions hereof, whether at maturity, upon redemption or otherwise. Interest on the Bonds shall be computed upon the basis of a 360- day year, consisting of twelve (12) thirty (30) day months. Each Bond shall bear interest on overdue principal and, to the extent permitted by law, on overdue interest at the rate of interest borne by the Bonds. The principal of the Bonds shall be payable in lawful money of the United States of America at the principal corporate trust office of the Trustee. Payment of interest on any Bond on any Interest Payment Date shall be made in lawful money of the United States of America to the Registered owner as of the close of business on the Record Date immediately prior thereto and shall be paid (i) by check or draft mailed on the applicable Interest Payment Date to the Registered owner at his address as it appears on the registration books of the Issuer maintained by the Trustee or (ii) at the option of any Registered owner of at least $1,000,000 in aggregate principal amount of the Bonds, by wire transfer or other means acceptable to the Trustee at an address within the United States upon written instructions filed by such Registered owner with the Trustee not later than the close of business on the Record Date immediately prior thereto (which instructions shall remain in effect until revoked by subsequent written instructions). Interest on each Bond shall be computed from the Interest Payment Date to which interest has been paid or duly provided for next preceding its date of authentication, unless (i) such date shall be prior to the first Interest Payment Date, in which case such interest shall be computed from the date of the Bonds, or (ii) such date of authentication shall be an Interest Payment Date to which interest on the Bonds has been paid in full or duly provided for, in which case interest on such Bond shall be computed from such date of authentication; provided, however, that if, as shown by the records of the Trustee, interest on the Bonds shall be in default, interest on Bonds issued in exchange for Bonds surrendered for transfer or exchange shall be computed from the last date to which interest has been paid in full or duly provided for on the Bonds, or if no interest has been paid or duly provided for on the Bonds, from the date thereof. SECTION 2.3. EXECUTION; LIMITED OBLIGATION. The Bonds shall be executed on behalf of the Issuer with the manual or facsimile signature of its Executive Director, and shall have impressed or imprinted thereon the official seal of the Issuer or a facsimile thereof, attested by the manual or facsimile signature of its Secretary. All authorized facsimile signatures shall have the same force and effect as if manually signed. In case any official whose signature or a facsimile of whose signature shall appear on the Bonds shall cease to be such official before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such official had remained in office until delivery. The Bonds may be signed on behalf of the Issuer by such persons who, at the time of the execution of such Bonds, are duly authorized or hold the appropriate offices of the Issuer, although on the date of the Bonds such persons were not so authorized or did not hold such offices. The Bonds, together with interest thereon, are limited obligations of the Issuer payable solely from the Revenues (except to the extent paid out of moneys attributable to the proceeds of the Bonds or the income from the temporary investment thereof) and shall be a valid claim of the respective owners thereof only against the Bond Fund and other moneys held by the Trustee and the Revenues, which Revenues shall be used for no other purpose than to pay the principal of, premium, if any and interest on the Bonds, except as may be otherwise expressly authorized in this Indenture or the Agreement. The Bonds and the obligation to pay interest thereon do not now and shall never constitute an indebtedness or obligation of the Issuer, the State of Mississippi or any political subdivision thereof, within the purview of any constitutional limitation or provision, or a charge against the general credit or taxing powers, if any, of any of them, but shall be secured as aforesaid, and shall be payable solely from the Revenues. No owner of the Bonds shall have the right to compel the exercise of the taxing power, if any, of the Issuer, the State of Mississippi or any political subdivision thereof to pay the principal of, premium, if any or interest on the Bonds. The Issuer has no taxing power. SECTION 2.4. AUTHENTICATION. No Bond shall be valid or obligatory for any purpose or entitled to any security or benefit under this Indenture unless and until a certificate of authentication on such Bond substantially in the form hereinabove set forth shall have been duly executed by the Trustee, and such executed certificate of the Trustee by duly authorized signatory upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered under this Indenture. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if manually signed by an authorized signatory of the Trustee, but it shall not be necessary that the same signatory sign the certificate of authentication on all of the Bonds issued hereunder. The Trustee shall insert the date of authentication of each Bond in the place provided for such purpose in the form of certificate of authentication of the Trustee to appear on each Bond. SECTION 2.5. FORM OF BONDS. The Bonds issued under this Indenture shall be substantially in the form hereinabove set forth with such variations, omissions and insertions as are permitted or required by this Indenture. SECTION 2.6. DELIVERY OF BONDS. Upon the execution and delivery of this Indenture, the Issuer shall execute and deliver to the Trustee and the Trustee shall authenticate the Bonds and deliver them to the Underwriter as directed in writing by the Issuer as hereinafter in this Section provided. Prior to the delivery by the Trustee of any of the Bonds there shall be filed with the Trustee: (a) A copy, duly certified by the Secretary of the Issuer, of the proceedings of the Issuer authorizing the execution and delivery of the Agreement and this Indenture and the issuance of the Bonds. (b) Original executed counterparts of this Indenture, the Agreement, the Tax Agreement and the Guaranty. (c) A request and authorization to the Trustee on behalf of the Issuer and signed by its Executive Director to authenticate and deliver the Bonds to or as directed by the Underwriter upon payment to the Trustee, but for the account of the Issuer, of a sum specified in such request and authorization. The proceeds of such payment shall be deposited in accordance with Sections 5.3 and 5.7 hereof. SECTION 2.7. MUTILATED, LOST, STOLEN OR DESTROYED BONDS. In the event any Bond is mutilated, lost, stolen, or destroyed, the Issuer may execute and the Trustee may authenticate a new Bond of like denomination as that mutilated, lost, stolen or destroyed; provided that, in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Issuer, and in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the Issuer and the Trustee and the Company evidence of such loss, theft or destruction satisfactory to the Issuer, the Trustee and the Company, together with any indemnity satisfactory to them. In the event any such Bond shall have matured, instead of issuing a duplicate Bond, the Issuer may pay the same without surrender thereof. The Issuer and the Trustee may charge the owner of such Bond with their reasonable fees and expenses in this connection. SECTION 2.8. REGISTRATION AND EXCHANGE OF BOND; PERSONS TREATED AS OWNERS. The Issuer shall cause books for the registration and for the transfer of the Bonds as provided in this Indenture to be kept by the Trustee which is hereby constituted and appointed the Registrar of the Issuer. Upon surrender for transfer of any Bond at the principal corporate trust office of the Trustee, duly endorsed for transfer or accompanied by an assignment duly executed by the Registered owner or his attorney duly authorized in writing, the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds duly executed by the Issuer of an Authorized Denomination or Authorized Denominations for a like aggregate principal amount. Any Bond or Bonds may be exchanged at the principal corporate trust office of the Trustee for a new Bond or Bonds of like principal amount of another Authorized Denomination or Authorized Denominations. Upon surrender of any Bond or Bonds for exchange, the Trustee shall authenticate and deliver a new Bond or Bonds duly executed by the Issuer which the Bondholder making the exchange is entitled to receive. The Trustee shall not be required to transfer or exchange any Bond during the period of fifteen days next preceding any Interest Payment Date, nor to transfer or exchange any Bond after the mailing of notice calling such Bond or portion thereof for redemption has been given as herein provided, nor during the period of fifteen days next preceding the giving of such notice of redemption. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of, premium, if any or interest on any such Bond shall be made only to or upon the written order of the Registered owner thereof or his legal representative, but such registration may be changed as hereinabove provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. In each case the Trustee shall require the payment by the Bondholder requesting exchange or transfer of any tax or other governmental charge required to be paid with respect to such exchange or transfer, but otherwise no charge shall be made to the Bondholder for such exchange or transfer. SECTION 2.9. CANCELLATION OF BONDS. Whenever any outstanding Bond shall be delivered to the Trustee for cancellation pursuant to this Indenture, upon payment of the principal amount represented thereby, or for replacement pursuant to Section 2.7 hereof, such Bond shall be promptly canceled and destroyed by the Trustee and counterparts of a certificate of destruction evidencing such cancellation and destruction shall be furnished by the Trustee to the Issuer and the Company. SECTION 2.10. BOOK ENTRY SYSTEM. The Trustee and the Issuer, at the direction of the Company, may from time to time enter into, and discontinue, an agreement with a "clearing agency" (securities depository) registered under Section 17A of the Securities Exchange Act of 1934, as amended (the "Securities Depository"), which is the owner of the Bonds, to establish procedures with respect to the Bonds not inconsistent with the provisions of this Indenture; provided, however, that any such agreement may provide: (a) that such Securities Depository is not required to present a Bond to the Trustee in order to receive a partial payment of principal; (b) that a legend shall appear on each Bond so long as the Bonds are subject to such agreement; and (c) that different provisions for notice to such Securities Depository may be set forth therein. So long as any such agreement with a Securities Depository is in effect, the term "owner", as it appears in Section 3.1(b) and the second paragraph of Article VII hereof (but not for any other provision of this Indenture, except only as specifically provided herein) and in Sections 5.3 and 7.1(b) of the Agreement, shall be deemed to include the Beneficial Owner. "Beneficial Owner" shall mean the owner of a Bond or portion thereof for federal income tax purposes. ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY SECTION 3.1. REDEMPTION DATES AND PRICES. (a) The Bonds shall be subject to extraordinary optional redemption at any time in whole, but not in part, at a redemption price equal to 100% of the principal amount thereof plus accrued interest, if any, to the redemption date, upon the exercise by the Company of its option to prepay loan repayment installments under Section 7.2 of the Agreement, if any of the following shall have occurred: (1) The Project or the Plant shall have been damaged or destroyed (in whole or in part) by fire or other casualty to such extent that, in the opinion of the Company, it is not practicable or desirable to rebuild, repair or restore the Project or Plant; or (2) Title to, or the temporary use of, all or substantially all the Project or Plant shall have been taken under the exercise of the power of eminent domain by any governmental authority, or person, firm or corporation acting under governmental authority; or (3) Changes in the economic availability of raw materials, operating supplies or facilities necessary for the operation of the Project or Plant shall have occurred or such technological or environmental or other changes shall have occurred which, in the Company's judgment, render the continued operation of the Project or Plant uneconomic. (b) The Bonds are subject to optional redemption prior to maturity at the election of the Corporation on March 1, 2008, and thereafter, either as a whole or in part on any date from any moneys that may be made available for such purpose, at the following redemption prices (expressed as a percentage of principal amount or portion thereof to be redeemed), plus accrued interest to the redemption date: Redemption Dates (Inclusive) Redemption Price ---------------------------- ---------------- March 1, 2008 through February 28, 2009 102% March 1, 2009 through February 28, 2010 101% March 1, 2010 and thereafter 100% (c) The Bonds shall be subject to mandatory redemption at any time in whole (or in the case of the events stated in (2) or (3) of this paragraph in whole or in part as provided below), at a redemption price equal to 100% of the principal amount thereof plus accrued interest, if any, to the redemption date, if any of the following shall have occurred: (1) As a result of any changes in the Constitution of the State of Mississippi or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) or by final decree, judgment or order of any court or administrative body (whether state or federal) the Agreement shall have become void or unenforceable or impossible to perform in accordance with the intent and purposes of the parties as expressed in the Agreement; or (2) A final determination by the Internal Revenue Service or a court of competent jurisdiction as a result of a proceeding in which the Company participates to the degree it deems sufficient, which determination the Company, in its discretion, does not contest by an appropriate proceeding, that, as a result of failure by the Company to observe any covenant, agreement or representation by the Company in the Agreement, the interest payable on the Bonds or any of them is includable for federal income tax purposes in the gross income of any owner of a Bond (other than an owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147 of the Code and the applicable regulations thereunder); or (3) Proceeds of the Series 1997 Bonds, including income from the investment thereof, in an amount equal to or greater than $100,000 shall remain after completion of the Project and the payment of all costs of the Project. Upon the occurrence of the event stated in Section 3.1(c)(2) hereof, the Bonds will be redeemed in whole unless the Company delivers to the Trustee, at the Company's expense, an opinion of Bond Counsel upon which the Trustee may rely to the effect that redemption of a portion of the Bonds outstanding would have the result that interest payable on the Bonds remaining outstanding after such redemption would not be includable for federal income tax purposes in the gross income of any owner of a Bond (other than an owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147 of the Code and the applicable regulations thereunder), and in such event the Bonds or portions thereof (in Authorized Denominations) shall be redeemed at such times and in such amounts as Bond Counsel shall so direct in such opinion. Upon the occurrence of the event stated in Section 3.1(c)(3) hereof, the principal amount of the Bonds to be redeemed will be a principal amount equal to the highest integral multiple of $100,000 equal to or less than the remaining proceeds of the Bonds. Any of such remaining proceeds which are not utilized for such mandatory redemption of Bonds shall be applied to the debt service coming due on the Bonds on the next Interest Payment Date. SECTION 3.2. NOTICE OF REDEMPTION. Upon receipt of written notice given by the Company pursuant to Section 7.4 of the Agreement not less than forty (40) days prior to the date of redemption (or such later date as is acceptable to the Issuer and the Trustee), notice of the call for any redemption of Bonds or any portions thereof pursuant to Section 3.1 hereof identifying the Bonds or portions thereof to be redeemed, specifying the redemption date, the redemption price, the place and manner of payment and that from the redemption date interest will cease to accrue on the Bonds provided that funds for the redemption thereof are on deposit with the Trustee, shall be given by the Trustee by mailing a copy of the redemption notice by first-class mail at least thirty (30) days prior to the date fixed for redemption to the Registered owner of each Bond to be redeemed in whole or in part at the address shown on the registration books; provided, however, that failure to duly give such notice, or any defect therein, shall not affect the validity of any proceeding for the redemption of Bonds with respect to which no such failure or defect occurred. Any notice mailed as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Registered owner receives the notice. SECTION 3.3. DEPOSIT OF FUNDS. For the redemption of any of the Bonds, the Issuer shall cause to be deposited in the Bond Fund out of the Revenues (or out of maturing principal and interest, if any, of Governmental Obligations in which Revenues for such purpose are required to be invested) moneys sufficient to pay when due the principal of, premium, if any and interest on the Bonds or portions thereof to be redeemed on the redemption date. Moneys in the Bond Fund which are available therefor shall be credited against any moneys which the Issuer is required to cause to be so deposited in the Bond Fund. SECTION 3.4. PARTIAL REDEMPTION OF BONDS. In case a Bond is of a denomination larger than the minimum Authorized Denomination, all or a portion of such Bond may be redeemed in an Authorized Denomination. Upon surrender of any Bond for redemption in part only, the Trustee shall authenticate and deliver to the owner thereof, without cost to the owner, a new Bond or Bonds duly executed by the Issuer of an Authorized Denomination or Authorized Denominations in aggregate principal amount equal to the unredeemed portion of the Bond surrendered. SECTION 3.5. SELECTION OF BONDS FOR REDEMPTION. If less than all of the Bonds are called for redemption, the Trustee shall select the Bonds or portions thereof (in Authorized Denominations) to be redeemed from the Bonds outstanding not previously called for redemption by lot in such manner as the Trustee in its discretion may deem proper, and each $100,000 of face value of each Bond shall be treated as a separate Bond for the purpose of selection by lot. If it is determined that a portion but not all of the principal amount of any Bond is to be called for redemption, then, upon notice of intention to redeem such portion, the Registered owner of such Bond shall surrender such Bond to the Trustee for (a) payment to such owner of the redemption price of the portion of principal amount called for redemption, and (b) delivery to such owner of a new Bond or Bonds in the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. New Bonds representing the unredeemed portion of the principal amount of such Bond shall be issued to the Registered owner thereof without charge therefor. If the Registered owner of any such Bond shall fail to present such Bond to the Trustee for payment and exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the date fixed for redemption to the extent of the portion of principal amount called for redemption (and to that extent only) and interest with respect to such portion will cease to accrue. ARTICLE IV GENERAL COVENANTS SECTION 4.1. PAYMENT OF PRINCIPAL, PREMIUM, AND INTEREST. The Issuer covenants that it will promptly pay the principal of, premium, if any and interest on, every Bond issued under this Indenture at the place, on the dates and in the manner provided herein and in said Bonds according to the true intent and meaning thereof. The principal and interest are payable by the Issuer solely from the Revenues (except to the extent paid out of moneys attributable to the Bond proceeds or the income from the temporary investment thereof) and nothing in the Bonds or this Indenture should be considered as assigning or pledging any other funds or assets of the Issuer other than such Revenues and the right, title and interest of the Issuer in the Agreement in the manner and to the extent herein specified. SECTION 4.2. PERFORMANCE OF COVENANTS; ISSUER. The Issuer covenants that it will faithfully perform on its part at all times any and all covenants, undertakings, stipulations and provisions contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder and in all of its proceedings pertaining thereto; provided, however, that except for the matters set forth in Section 4.1 hereof, the Issuer shall not be obligated to take any action or execute any instrument pursuant to any provision hereof until it shall have been requested to do so by the Company or by the Trustee, or shall have received the instrument to be executed, and at the Issuer's option shall have received from the Company assurance satisfactory to the Issuer that the Issuer shall be reimbursed for its reasonable expenses incurred or to be incurred in connection with taking such action or executing such instrument. The Issuer covenants that it is duly authorized under the Constitution and laws of the State of Mississippi, including particularly the Act and the resolution of the Issuer pursuant to which the Bonds were issued, to issue the Bonds authorized hereby and to execute this Indenture, to grant the security interest herein provided, to assign and pledge the Agreement (except as otherwise provided herein) and the Guaranty (to the extent of its interest therein) and to assign and pledge the amounts hereby assigned and pledged in the manner and to the extent herein set forth; that all action on its part for the issuance of the Bonds and the execution and delivery of this Indenture has been duly and effectively taken, and that the Bonds in the hands of the owners thereof are and will be valid and enforceable obligations of the Issuer according to the terms thereof and hereof. Anything contained in this Indenture to the contrary notwithstanding, it is hereby understood that none of the covenants of the Issuer contained in this Indenture are intended to create a general or primary obligation of the Issuer. SECTION 4.3. RIGHT TO PAYMENTS UNDER AGREEMENT AND GUARANTY; INSTRUMENTS OF FURTHER ASSURANCE. The Issuer covenants that it will defend its right to the payment of amounts due from the Company under the Agreement or the Guarantor under the Guaranty (to the extent of its interest therein) to the Trustee for the benefit of the owners of the Bonds against the claims and demands of all persons whomsoever. The Issuer covenants that it will do, execute, acknowledge and deliver such indentures supplemental hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, conveying, pledging, assigning and confirming unto the Trustee all and singular the rights assigned hereby and the amounts pledged and assigned hereby to the payment of the principal of, premium, if any and interest on the Bonds. The Issuer covenants and agrees that, except as herein and in the Agreement provided, it will not sell, convey, mortgage, encumber or otherwise dispose of any part of the Revenues or its rights under the Agreement. SECTION 4.4. RECORDATION AND OTHER INSTRUMENTS. The Trustee covenants that it will cause, at the Company's expense and as provided in Section 5.13 of the Agreement, and the Issuer, to the extent permitted by law, covenants that it will cooperate with the Trustee in causing, such security agreements, financing statements and all supplements thereto and other instruments as may be required hereunder or under the Agreement from time to time to be kept, recorded and filed in such manner and in such places as may be required by law in order to fully preserve and protect the security of the Trustee on behalf of the owners of the Bonds and the rights of Trustee hereunder, and to perfect the security interest of the Trustee. SECTION 4.5. INSPECTION OF PROJECT BOOKS. The Issuer and the Trustee covenant and agree that all books and documents in their possession relating to the Project and the Revenues shall at all reasonable times be open to inspection by such accountants or other agencies as the other party may from time to time designate in writing. SECTION 4.6. LIST OF BONDHOLDERS. The Trustee will keep on file a list of the names and addresses of all registered owners of Bonds on the registration books of the Issuer maintained by the Trustee as Registrar, together with the principal amount and numbers of such Bonds. At reasonable times and under reasonable regulations established by the Trustee, said list may be inspected and copied by the Company. SECTION 4.7. RIGHTS UNDER AGREEMENT AND GUARANTY. The Agreement and the Guaranty, duly executed counterparts of which have been filed with the Trustee, set forth the covenants and obligations of the Issuer, the Company and the Guarantor, including provisions that subsequent to the issuance of Bonds and prior to their payment in full or provision for payment thereof in accordance with the provisions hereof the Agreement and the Guaranty may not be effectively amended, changed, modified, altered or terminated without the written consent of the Trustee, and reference is hereby made to the same for a detailed statement of said covenants and obligations of the Company and the Guarantor thereunder, and the Issuer agrees that the Trustee in its name or in the name of the Issuer may enforce all rights of the Issuer and all obligations of the Company under and pursuant to the Agreement or the obligations of the Guarantor under the Guaranty for and on behalf of the Bondholders, whether or not the Issuer is in default hereunder. SECTION 4.8. PROHIBITED ACTIVITIES. Subject to the limitations on its liability as stated herein, the Issuer covenants and agrees that it has not knowingly engaged and will not knowingly engage in any activities and that it has not knowingly taken and will not knowingly take any action which might result in its income becoming taxable to it or any interest on the Bonds becoming includable in the gross income of the owners thereof for federal income tax purposes. ARTICLE V REVENUES AND FUNDS SECTION 5.1. SOURCE OF PAYMENT OF BONDS. The Bonds herein authorized and all payments to be made by the Issuer hereunder are not general obligations of the Issuer but are limited obligations payable solely from the Revenues (except to the extent paid out of moneys attributable to the Bond proceeds or the income from the temporary investment thereof), and as authorized by the Act and provided in the Agreement, the Guaranty and in this Indenture. The Revenues are to be remitted directly to the Trustee for the account of the Issuer and deposited in the Bond Fund (hereinafter created). The entire amount of the Revenues is hereby pledged and assigned to the payment of the principal of, premium, if any and interest on the Bonds. SECTION 5.2. CREATION OF BOND FUND. There is hereby created by the Issuer and ordered established with the Trustee a trust fund to be designated "Mississippi Business Finance Corporation Solid Waste Disposal Revenue Refunding Bonds (Mississippi Phosphates Corporation Project) Series 1998 Bond Fund," which is pledged and shall be used to pay the principal of, premium, if any and interest on the Bonds. SECTION 5.3. PAYMENTS INTO BOND FUND. There shall be deposited into the Bond Fund, as and when received, (a) accrued interest received upon the delivery of the Bonds to the Underwriter; (b) any amount in the Construction Fund directed to be paid into the Bond Fund under Section 5.8 or 5.9 hereof; (c) all Revenues; and (d) all other moneys received by the Trustee under and pursuant to any of the provisions of the Agreement or the Guaranty which are required or which are accompanied by directions that such moneys are to be paid into the Bond Fund. The Issuer hereby covenants and agrees that so long as any of the Bonds issued hereunder are outstanding it will deposit, or cause to be paid to the Trustee for deposit in the Bond Fund for its account, sufficient sums from revenues and receipts derived from the Agreement promptly to meet and pay the principal of, premium, if any and interest on the Bonds as the same become due and payable. SECTION 5.4. USE OF MONEYS IN BOND FUND. Except as provided in Sections 5.18 and 9.2 hereof, moneys in the Bond Fund shall be used solely for the payment of the principal of, premium, if any and interest on the Bonds. SECTION 5.5. CUSTODY OF BOND FUND. The Bond Fund shall be in the custody of the Trustee but in the name of the Issuer, and the Issuer hereby authorizes and directs the Trustee to withdraw sufficient funds from the Bond Fund to pay the principal of, premium, if any and interest on the Bonds as the same become due and payable and to make payments and reimbursements pursuant to Section 9.2 hereof, which authorization and direction the Trustee hereby accepts. SECTION 5.6. CONSTRUCTION FUND. There is hereby created and established with the Trustee a trust fund in the name of the Issuer to be designated "Mississippi Business Finance Corporation Solid Waste Disposal Revenue Refunding Bonds (Mississippi Phosphates Corporation Project) Series 1998 Construction Fund," which shall be expended in accordance with the provisions of the Agreement. SECTION 5.7. PAYMENTS INTO CONSTRUCTION FUND; DISBURSEMENTS. The Issuer hereby notifies and directs the Trustee that amounts on deposit in the Mississippi Business Finance Corporation Solid Waste Disposal Revenue Bonds Construction Fund-Mississippi Phosphates Corporation Project-Series 1997A established pursuant to the provisions of the Series 1997A Indenture and on deposit in the Mississippi Business Finance Corporation Solid Waste Disposal Revenue Bonds Construction Fund-Mississippi Phosphates Corporation Project- Series 1997B established pursuant to the provisions of the Series 1997B Indenture shall be transferred to and deposited in the Construction Fund. Moneys in the Construction Fund shall be expended for the purposes set forth in Section 3.3 of the Agreement pursuant to requisitions signed by an Authorized Company Representative and delivered to the Trustee stating, with respect to each payment to be made: (a) The requisition number; (b) The name and address of the person, firm or corporation to whom payment is due or has been made, which may include the Company; (c) The amount to be or which has been paid; and (d) That each obligation mentioned therein has been properly incurred, is a proper charge against the Construction Fund in accordance with the provisions hereof and of the Agreement and has not been the basis of any previous requisition from the Construction Fund or from the proceeds (including investment income) of any other obligations issued by or on behalf of any state or political subdivision, including authorities, agencies, departments or other similar issuers. The Trustee is hereby authorized and directed to make the disbursement pursuant to each such requisition and to issue its checks therefor. In making any such disbursement, the Trustee may rely on any such requisition. The Trustee shall keep and maintain adequate records pertaining to the Construction Fund and all disbursements therefrom and shall provide monthly statements of transactions and investments pertaining to the Construction Fund to the Company so long as any Bonds remain outstanding. SECTION 5.8. COMPLETION OF PROJECT. The completion of the Project and payment or provision made for payment of the full Cost of the Project shall be evidenced by the filing with the Trustee of a certificate required by the provisions of Section 3.4 of the Agreement. Any balance remaining in the Construction Fund on the Completion Date shall be used in accordance with Section 3.4 of the Agreement. SECTION 5.9. TRANSFER OF CONSTRUCTION FUND. If all of the Bonds are paid or deemed to be paid as herein provided, then, notwithstanding anything herein to the contrary, any balance then remaining in the Construction Fund shall, without further authorization, be deposited in the Bond Fund by the Trustee. SECTION 5.10. CREATION OF REFUNDING FUND. There is hereby created by the Issuer and ordered established with the Trustee a trust fund to be designated "Mississippi Business Finance Corporation Solid Waste Disposal Revenue Refunding Bonds (Mississippi Phosphates Corporation Project) Series 1998 Refunding Fund." SECTION 5.11. PAYMENTS INTO THE REFUNDING FUND. There shall be deposited into the Refunding Fund as and when received, $14,500,000 of the proceeds of the sale of the Bonds. SECTION 5.12. USE OF MONEYS IN REFUNDING FUND. Of the amount deposited in the Refunding Fund, $6,000,000 shall be transferred immediately to the trustee under the Series 1997A Indenture and used and applied to the redemption, at the earliest practicable time, of all of the Series 1997A Bonds, and $8,500,000 shall be transferred immediately to the trustee under the Series 1997B Indenture and used and applied to the redemption, at the earliest practicable time, of all of the Series 1997B Bonds. Payment of interest on the Series 1997A Bonds and the Series 1997B Bonds shall be paid from a draw on the respective Letters of Credit applicable to such Bonds. SECTION 5.13. NON-PRESENTMENT OF BONDS. In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for redemption thereof, or in the event any check for the payment of interest shall not be cashed or any wire transfer for interest shall be returned, then if funds sufficient to pay such Bond or interest shall have been made available to the Trustee, all liability of the Issuer for the payment of such Bond or interest shall forthwith cease, terminate and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds uninvested, without liability for interest thereon, for the benefit of the owner of such Bond, who shall thereafter be restricted exclusively to such funds, for any claim of whatever nature on his part under this Indenture or on, or with respect to, said Bond or interest. The Trustee shall hold such funds until required to pay such funds to the State Treasurer under the Mississippi Uniform Disposition of Unclaimed Property Act. Thereafter, the Bondholders shall be entitled to look only to the State Treasurer for payment, and then only to the extent of the amount so repaid, and the State Treasurer shall not be liable for any interest thereon to the Bondholders and shall not be regarded as a trustee of such money. SECTION 5.14. MONEYS TO BE HELD IN TRUST. All moneys required to be deposited with or paid to the Trustee for account of the Bond Fund, the Construction Fund and the Refunding Fund under any provision of this Indenture shall be held by the Trustee in trust, and except for moneys deposited with or paid to the Trustee for the redemption of Bonds, notice of the redemption of which has been duly given, and moneys referred to in Section 5.13 hereof held by the Trustee for the payment of Bonds or interest, shall, while held by the Trustee, constitute part of the Trust Estate and be subject to the lien or security interest created hereby. SECTION 5.15. REPAYMENT TO THE COMPANY FROM BOND FUND. Any amounts remaining in the Bond Fund after payment in full of the Bonds (or provision therefor having been made in accordance herewith), the fees, charges and expenses (including reasonable attorneys' fees and expenses) of the Trustee, and all other amounts required to be paid hereunder or under the Agreement, shall be paid to the Company as provided in Section 8.5 of the Agreement. SECTION 5.16. ADDITIONAL PAYMENTS UNDER THE AGREEMENT. Pursuant to Section 4.2(b) of the Agreement, the Company has agreed to pay as provided therein fees and expenses (including reasonable attorneys' fees and expenses) of the Trustee and to indemnify and hold harmless the Trustee for and against certain losses, liabilities and expenses. Such additional payments received by the Trustee shall not be paid into the Bond Fund but shall be for the account of the Trustee. SECTION 5.17. ARBITRAGE REQUIREMENTS. Anything in the Agreement or this Indenture to the contrary notwithstanding, the Trustee is hereby authorized to deposit moneys in the Construction Fund, the Bond Fund and the Refunding Fund and to withdraw moneys from such Funds upon the written direction of the Company in order to comply with the provisions of the Tax Agreement. SECTION 5.18. REBATE FUND; TAX AGREEMENT. The Trustee agrees to establish a trust fund to be designated the "Mississippi Business Finance Corporation Solid Waste Disposal Revenue Refunding Bonds Rebate Fund - Mississippi Phosphates Corporation Project - Series 1998", if so requested by the Issuer or the Company, and will hold amounts in the Rebate Fund in trust as provided herein and as directed by the Issuer and the Company pursuant hereto and pursuant to the Tax Agreement. Moneys in the Rebate Fund shall not be considered moneys held under the Indenture and shall not constitute a part of the Trust Estate held for the benefit of the Bondholders, or, except as otherwise provided herein or as provided in the Tax Agreement, for the benefit of the Issuer or the Company. Moneys in the Rebate Fund (including earnings and deposits therein) shall be held in trust by the Trustee and held for future payment to the United States Government as required by Section148(f) of the Code and as contemplated under the provisions of the Tax Agreement and shall be paid out by the Trustee to such persons, in such amounts and at such times as shall be set forth in written instructions delivered to the Trustee by an Authorized Company Representative. Notwithstanding anything in the Agreement or this Indenture to the contrary, the Trustee is hereby authorized, at the written direction of an Authorized Company Representative, to transfer moneys from the Rebate Fund to the Construction Fund and the Bond Fund and to transfer moneys from the Bond Fund to the Rebate Fund, in order to comply with the provisions of the Tax Agreement. ARTICLE VI INVESTMENT OF MONEYS SECTION 6.1. INVESTMENT OF MONEYS. Any moneys held as part of the Construction Fund or the Bond Fund shall be invested and reinvested by the Trustee in accordance with the provisions of Section 3.5 of the Agreement. The Trustee may make any and all such investments through its own or any of its Affiliate's trust investment department. Any such investments shall be held by or under the control of the Trustee and shall be deemed at all times a part of the fund for which they were made. The interest accruing thereon and any profit realized from such investments shall be credited to such fund, and any net loss resulting from such investments shall be charged to such fund. The Trustee shall sell and reduce to cash a sufficient amount of such investments of the Construction Fund whenever the cash balance in the Construction Fund is insufficient to pay a requisition when presented or of the Bond Fund whenever the cash balance in the Bond Fund is insufficient to pay the principal of, premium, if any, and interest on the Bonds when due. The Trustee shall have no responsibility with respect to the compliance by the Company or the Issuer with any covenant herein or in the Tax Agreement regarding the yield on investments made in accordance with this Section, other than to use its best reasonable efforts to comply with instructions from the Company regarding such investments and the Trustee shall bear no responsibility for losses incurred from such investments. Since the investments permitted by this Section have been made at the request of the Company and the making of such investments from time to time will be subject to the Company's direction, the Issuer and the Trustee specifically disclaim any obligation to the Company for any loss arising from, or tax consequences of, investments pursuant to the provisions of this Section. The Trustee shall not be responsible for any depreciation of the value of any investment made pursuant to this Section or for losses incurred in the redemption, sale or other disposal of any investments made in accordance with this Section. ARTICLE VII DISCHARGE OF LIEN If the Issuer shall pay or cause to be paid, or there shall be otherwise paid or provision for payment made to or for the owners of the Bonds, of the principal and interest due or to become due on the Bonds at the times and in the manner stipulated therein, and shall pay or cause to be paid to the Trustee all sums of money due or to become due according to the provisions hereof, and if all other liabilities of the Company under the Agreement shall have been paid or the payment thereof provided for, then these presents and the estate and rights hereby granted shall cease, determine and be void, whereupon the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to the Issuer such instruments in writing as shall be requisite to cancel and discharge the lien hereof, and reconvey, release, assign and deliver unto the Issuer any and all the estate, right, title and interest in and to any and all property conveyed, assigned or pledged to the Trustee or otherwise subject to the lien of this Indenture, except (i) amounts in the Bond Fund required to be paid to the Company under Section 5.18 hereof and (ii) moneys or securities held by the Trustee for the payment of the principal of, premium, if any and interest on the Bonds. Any Bond shall be deemed to be paid within the meaning of this Article when payment of the principal of, premium, if any, plus interest thereon to the due date thereof (whether such due date be by reason of maturity or upon redemption as provided in this Indenture, or otherwise), either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided by irrevocably depositing with the Trustee, in trust and irrevocably set aside exclusively for such payment, (1) moneys sufficient to make such payment or (2) Governmental Obligations (provided that the Company delivers to the Trustee, at the Company's expense, an opinion of Bond Counsel upon which the Trustee may rely to the effect that all conditions with respect to such deposit specified in this Article VIII have been satisfied or provision therefor made and that such deposit will not cause interest on any of the Bonds to be includable for federal income tax purposes in the gross income of any owner thereof (other than an owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code and the applicable regulations thereunder) or cause any of the Bonds to be classified as arbitrage bonds (within the meaning of Section 148 of the Code and the applicable regulations thereunder)) maturing as to principal and interest in such amount and at such times as will, without reinvestment, provide sufficient moneys to make such payment, as verified by a report prepared by a firm of certified public accountants, and all necessary and proper fees, compensation and expenses (including reasonable attorneys' fees and expenses) of the Trustee pertaining to the Bonds with respect to which such deposit is made shall have been paid or provided for to the satisfaction of the Trustee. At such time as a Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefits of this Indenture, except for the purposes of transfer and exchange and of payment from such moneys or Governmental Obligations on the date or dates specified at the time of such deposit. Notwithstanding the foregoing, in the case of Bonds which by their terms may be redeemed prior to the stated maturities thereof, no deposit under clause (ii) of the immediately preceding paragraph shall be deemed a payment of such Bonds as aforesaid until the deposit shall have been made under the terms of an escrow deposit arrangement in form and substance satisfactory to the Trustee and consistent herewith and until the Company, on behalf of the Issuer, shall have given the Trustee, in form satisfactory to the Trustee, irrevocable instructions in writing: (a) stating the date when principal of each such Bond is to be paid, whether at maturity or on a redemption date (which may be any redemption date permitted by this Indenture); (b) to call for redemption pursuant to the Indenture any Bonds to be redeemed prior to maturity pursuant to (a) hereof; and (c) to mail, as soon as practicable, in the manner prescribed by Article III hereof, a notice to the owners of such Bonds that the deposit required by (ii) above has been made with the Trustee and that said Bonds are deemed to have been paid in accordance with this Article and stating the maturity or redemption date upon which moneys are to be available for the payment of the principal or redemption price, as applicable, on said Bonds as specified in (a) hereof. Anything in Article X hereof to the contrary notwithstanding, if moneys or Governmental Obligations have been deposited or set aside with the Trustee pursuant to this Article for the payment of Bonds and the interest thereon and such Bonds and the interest thereon shall not have in fact been actually paid in full, no amendment to the provisions of this Article shall be made without the consent of the owner of each of the Bonds affected thereby. ARTICLE VIII DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS SECTION 8.1. DEFAULTS; EVENTS OF DEFAULT. If any of the following events occur, it is hereby declared to constitute an "event of default": (a) Failure to pay interest on any Bond as and when such interest shall have become due and payable, and the continuation of such failure for one business day; (b) Failure to pay any principal of any Bond, as and when due, whether at the stated maturity thereof or upon proceedings for redemption thereof, and the continuation of such failure for one business day; (c) Failure to perform or observe any other of the covenants, agreements or conditions on the part of the Issuer in this Indenture or in the Bonds contained and failure to remedy the same after notice thereof pursuant to Section 8.12 hereof; or (d) The occurrence of an "Event of Default" under the Agreement or the Guaranty. SECTION 8.2. ACCELERATION. Upon the occurrence of an event of default the Trustee may, and upon the written request of the owners of not less than a majority in aggregate principal amount of Bonds then outstanding shall, by notice in writing delivered to the Issuer, declare the principal of all Bonds then outstanding and the interest accrued thereon to the date of such declaration immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. Upon any declaration of acceleration hereunder the Trustee shall immediately declare an amount equal to all amounts then due and payable on the Bonds to be immediately due and payable under Section 4.2(a) of the Agreement. SECTION 8.3. OTHER REMEDIES; RIGHTS OF BONDHOLDERS. Upon the occurrence of an event of default the Trustee may, in addition or as an alternative, pursue any available remedy by suit at law or in equity to enforce the payment of the principal of, premium, if any and interest on the Bonds then outstanding, including making claim under or enforcing the Guaranty. If an event of default shall have occurred, and if requested so to do by the owners of a majority in aggregate principal amount of Bonds then outstanding and upon being indemnified as provided in Section 9.1(1) hereof, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Section 8.3 as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bondholders. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to the Bondholders) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bondholders hereunder or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default or event of default shall impair any such right or power or shall be construed to be a waiver of any such default or event of default or acquiescence therein; and such right and power may be exercised from time to time as often as may be deemed expedient. No waiver of any default or event of default hereunder, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent default or event of default or shall impair any rights or remedies consequent thereon. SECTION 8.4. RIGHT OF BONDHOLDERS TO DIRECT PROCEEDINGS. Subject to the provisions of Section 9.1(1) hereof, anything in this Indenture to the contrary notwithstanding, the owners of a majority in aggregate principal amount of the Bonds then outstanding shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, or for the appointment of a receiver or any other proceedings hereunder; provided, that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture. SECTION 8.5. APPOINTMENT OF RECEIVERS. Upon the occurrence of an event of default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bondholders under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate and of the revenues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer. SECTION 8.6. RESERVED. SECTION 8.7. APPLICATION OF MONEYS. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article shall, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee, be deposited in the Bond Fund and, subject to the provisions of Section 9.2 hereof, all moneys held or deposited in the Bond Fund during the continuation of the Event of Default shall be applied as follows: (a) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied: FIRST - To the payment to the persons entitled thereto of all interest then due on the Bonds (other than interest due on Bonds for the payment of which moneys are held pursuant to the provisions of this Indenture), and, if the amount available shall not be sufficient to pay said amount in full, then to the payment ratably, according to the amounts due, to the persons entitled thereto, without any discrimination or privilege; SECOND - To the payment to the persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than Bonds matured or called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), and, if the amount available shall not be sufficient to pay in full such unpaid principal, then to the payment ratably to the persons entitled thereto without any discrimination or privilege; and THIRD - To the payment to the persons entitled thereto of interest on overdue principal of any Bonds and, to the extent permitted by law, interest on overdue interest on any Bonds, without preference or priority as between principal or interest one over the others, or any installment of interest over any other installment of interest, or of any Bond over any other Bond, and if the amount available shall not be sufficient to pay such amounts in full, then ratably, without any discrimination or privilege. (b) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Bonds (other than Bonds matured or called for redemption or interest due on Bonds for the payment of which moneys are held pursuant to the provisions of this Indenture), without preference or priority of principal or interest one over the other, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or privilege. (c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article then, subject to the provisions of Section 8.7(b) hereof in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of Section 8.7(a) hereof. Subject to the provisions of Section 9.2 hereof, whenever moneys are to be applied pursuant to the provisions of this Section 8.7, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Whenever the principal of, premium, if any and interest on all Bonds has been paid under the provisions of this Section 8.7 and all expenses, charges and fees of the Trustee and the Issuer have been paid, any balance remaining in the Bond Fund shall be paid to the Company as provided in Section 5.18 hereof. SECTION 8.8. REMEDIES VESTED IN TRUSTEE. All rights of action (including the right to file proofs of claim) under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceeding relating thereto and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any owners of the Bonds, and any recovery of judgment shall be for the equal and ratable benefit of the owners of the outstanding Bonds. SECTION 8.9. RIGHTS AND REMEDIES OF BONDHOLDERS. No owner of any Bond shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of this Indenture or the Agreement or for the execution of any trust hereof or for the appointment of a receiver or any other remedy hereunder or thereunder, unless also a default has occurred of which the Trustee has been notified as provided in Section 9.1(h) hereof, or of which by said subsection it is deemed to have notice, nor unless also such default shall have become an event of default and the owners of a majority in aggregate principal amount of Bonds then outstanding shall have made written request to the Trustee and shall have offered it reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name, nor unless also they have offered to the Trustee indemnity as provided in Section 9.1(1), nor unless the Trustee shall thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such action, suit or proceeding in its own name; and such notification, request and offer of indemnity are hereby declared in every case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of this Indenture, and to any action or cause of action for the enforcement of this Indenture or the Agreement, or for the appointment of a receiver or for any other remedy hereunder or thereunder; it being understood and intended that no one or more owners of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture by its, his or their action or to enforce any right hereunder or thereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal and ratable benefit of the owners of all Bonds then outstanding. However, nothing contained in this Indenture shall affect or impair the right of any Bondholder to enforce the payment of the principal of, premium, if any and interest on any Bond at and after the maturity thereof, or the obligation of the Issuer to pay the principal of, premium, if any and interest on each of the Bonds issued hereunder to the respective owners thereof at the time, place, from the source and in the manner in the Bonds expressed. SECTION 8.10. TERMINATION OF PROCEEDINGS. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case the Issuer, the Trustee and the Bondholders shall be restored to their former positions and rights hereunder respectively with regard to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. SECTION 8.11. WAIVERS OF EVENTS OF DEFAULT. The Trustee may, in its discretion, waive any event of default hereunder and its consequences and rescind any declaration of acceleration of principal, and shall do so upon the written request of the owners of (1) a majority in principal amount of all the Bonds then outstanding in respect of which default in the payment of principal and interest, or either of them, exists, or (2) a majority in principal amount of all Bonds then outstanding in the case of any other default; provided, however, that there shall not be waived (a) any event of default in the payment of the principal of any outstanding Bonds or (b) any default in the payment when due of the interest on any such Bonds, unless prior to such waiver or rescission all arrears of principal, with interest thereon as in the Bonds provided, and all arrears of interest with interest thereon to the extent permitted by law as in the Bonds provided, and all expenses of the Trustee in connection with such default, shall have been paid or provided for, and in case of any such waiver or rescission, or in case any proceeding taken by the Trustee on account of any such default shall have been discontinued or abandoned or determined adversely, then and in every such case the Issuer, the Trustee and the Bondholders shall be restored to their former positions and rights hereunder respectively, but no such waiver or rescission shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 8.12. NOTICE OF DEFAULTS UNDER SECTION 8.1(C); OPPORTUNITY OF THE ISSUER AND THE COMPANY TO CURE SUCH DEFAULTS. Anything herein to the contrary notwithstanding, no default under Section 8.1(c) hereof shall constitute an event of default until actual notice of such default by registered or certified mail, return receipt requested, shall be given to the Issuer, the Company and the Guarantor by the Trustee or by the owners of not less than a majority in aggregate principal amount of all Bonds outstanding, and the Issuer, the Company and the Guarantor shall have had thirty days after receipt of such notice to correct said default or cause said default to be corrected within the applicable period; provided, however, if said default be such that it cannot be corrected within the applicable period, it shall not constitute an event of default if corrective action is instituted within the applicable period and diligently pursued until the default is corrected. With regard to any default concerning which notice is given to the Issuer, the Company and the Guarantor under the provisions of this Section, the Issuer hereby grants the Company and the Guarantor full authority for account of the Issuer to perform any covenant or obligation alleged in said notice to constitute a default, in the name and stead of the Issuer with full power to do any and all things and acts to the same extent that the Issuer could do and perform any such things and acts and with power of substitution. SECTION 8.13. NOTICE TO BONDHOLDERS; DEFAULTS; ACCELERATION. If a default occurs of which the Trustee is by Section 9.1(h) hereof required to take notice or if notice of default be given as therein provided, then the Trustee shall promptly give written notice thereof by first-class mail to the owner of each Bond. If the Trustee declares the principal of all Bonds then outstanding and the interest accrued thereon to the date of such declaration immediately due and payable pursuant to Section 8.2 hereof, then the Trustee shall promptly give written notice thereof by first-class mail to the owner of each Bond. ARTICLE IX THE TRUSTEE SECTION 9.1. ACCEPTANCE OF TRUSTS. The Trustee hereby accepts the trusts imposed upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions to which the Issuer, the owners of the Bonds and the Company agree: (a) The Trustee, prior to the occurrence of an event of default and after curing of all events of default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an event of default has occurred (which has not been cured or waived) of which the Trustee has notice or is deemed to have notice, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through Affiliates, attorneys, accountants and other experts, agents or receivers and shall not be answerable for the conduct of the same appointed in good faith in accordance with the standard specified above, and shall be entitled to advice of counsel concerning its duties hereunder, and may in all cases pay such reasonable compensation to all such attorneys, accountants and other experts, agents and receivers as may reasonably be employed in connection with the trusts hereof. (c) The Trustee shall not be responsible for any recital herein, or in the Bonds, or for the recording or filing of any instrument required to secure the Bonds, or for the validity of the execution by the Issuer of this Indenture, or of any instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby; but the Trustee shall be responsible for the filing of any continuation statements which may from time to time be required to be filed under the Mississippi Uniform Commercial Code in order to continue the perfection of the lien of this Indenture and, in filing such continuation statements, the Trustee shall be entitled to rely on an opinion of counsel. The Trustee shall not be responsible for insuring the Project or collecting any insurance moneys, or for the validity of the execution by the Issuer of this Indenture or of any supplements thereto or instruments of further assurance, or for the sufficiency of documents relating to the security for the Bonds issued hereunder or intended to be secured hereby, and the Trustee shall not be bound to ascertain or inquire as to the observance or performance of any covenants, conditions or agreements on the part of the Issuer or on the part of the Company under the Agreement except as herein set forth. (d) The Trustee shall not be accountable for the use of any Bonds authenticated or delivered hereunder. The Trustee may become the owner of Bonds secured hereby with the same rights which it would have if not the Trustee. (e) The Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document believed to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the owner of any Bond, shall be conclusive and binding upon all future owners of the same Bond and upon Bonds issued in exchange therefor or in place thereof. (f) As to the existence or non-existence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a certificate signed by the Executive Director or an authorized officer of the Issuer or an Authorized Company Representative under the Agreement as sufficient evidence of the facts therein contained and prior to the occurrence of a default of which the Trustee has been notified as provided in Section 9.1(h) hereof, or of which by Section 9.1(h) it is deemed to have notice, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or expedient, but may at its discretion secure such further evidence deemed by it to be necessary or advisable, but shall in no case be bound to secure the same. The Trustee may accept a certificate of the Executive Director or an authorized officer of the Issuer under the seal of the Issuer to the effect that an authorization in the form therein set forth has been adopted by the Issuer as conclusive evidence that such authorization has been duly adopted and is in full force and effect. (g) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and it shall not be answerable for other than its negligence or willful default. (h) The Trustee shall not be required to take notice or be deemed to have notice of any default hereunder except failure by the Issuer to cause to be made any of the payments to the Trustee required to be made by Article IV hereof, unless the Trustee shall be specifically notified in writing of such default by the Issuer or by an owner of Bonds, and all notices or other instruments required by this Indenture to be delivered to the Trustee, must, in order to be effective, be delivered at the principal corporate trust office of the Trustee (or such other office designated in writing by the Trustee to the Issuer), and in the absence of such notice so delivered the Trustee may conclusively assume there is no default except as aforesaid. (i) At any and all reasonable times the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right fully to inspect any and all of the property herein conveyed, including all books, papers and records of the Issuer pertaining to the Project and the Bonds, and to take such memoranda from and with regard thereto as may be desired. (j) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. (k) Notwithstanding anything elsewhere in this Indenture with respect to the authentication of any Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Indenture, the Trustee shall have the right, but shall not be required, to demand any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, in addition to that by the terms hereof required as a condition of such action, by the Trustee deemed desirable for the purpose of establishing the right to the authentication of any Bonds, the withdrawal of any cash, or the taking of any other action by the Trustee. (l) Before taking any action referred to in Section 8.3, 8.4, 8.8 or 9.4 hereof the Trustee may require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its failure to comply with the standard of care prescribed by Section 9.1(a) and (g) hereof by reason of any action so taken. (m) All moneys received by the Trustee shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received but need not be segregated from other funds except to the extent required by law. (n) The Trustee may rely upon advice of counsel chosen by the Trustee with due care and shall not be responsible for any loss or damage resulting from any action or non-action by it taken or omitted to be taken in good faith in reliance upon advice of such counsel. The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and the Trustee shall not be answerable for the exercise of any discretion or power under this Indenture or for anything whatsoever in connection with the trusts created hereby, except only for its own negligence or willful misconduct, including that of its directors, officer, employees or agents. (o) None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise to incur financial liability in the performance of any of its duties or the exercise of any of its rights or powers hereunder, except as expressly provided herein. The Trustee shall not be required to give any bond or surety in respect to the execution of its rights and obligations hereunder. SECTION 9.2. FEES, CHARGES AND EXPENSES OF THE TRUSTEE. The Trustee shall be entitled to payment and reimbursement for reasonable fees for its services rendered hereunder and all advances, counsel fees and expenses (including the allocated costs and expenses of its in-house counsel and legal staff) and other expenses reasonably made or incurred by the Trustee in connection with such services and in connection with entering into this Indenture, including any such fees and expenses incurred in connection with action taken hereunder. Upon an event of default, but only upon an event of default, the Trustee shall have a first lien with right of payment prior to payment on account of principal of, premium, if any and interest on any Bond upon the Trust Estate for the foregoing fees, charges and expenses incurred by it. SECTION 9.3. TRUSTEE AS PAYING AGENT AND REGISTRAR. The Trustee shall also serve as the Paying Agent and the Registrar for the Bonds, and all references to fees, charges and expenses of the Trustee in this Indenture, including without limitation such references in Section 9.2 hereof, shall be deemed also to refer to the fees, charges and expenses of the Paying Agent and the Registrar. SECTION 9.4. INTERVENTION BY THE TRUSTEE. In any judicial proceeding to which Issuer is a party which, in the opinion of the Trustee and its counsel, has a substantial bearing on the interests of owners of the Bonds, the Trustee may intervene on behalf of Bondholders and shall do so if requested in writing by the owners of at least a majority of the aggregate principal amount of Bonds then outstanding, provided that the Trustee shall first have been offered such indemnification in accordance with Section 9.1(1) hereof against such liability as it may incur in or by reason of such proceeding. The rights and obligations of the Trustee under this Section are subject to the approval of a court of competent jurisdiction. SECTION 9.5. SUCCESSOR TRUSTEE. Any corporation or association into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer, to which it is a party, shall be and become successor trustee hereunder and vested with all of the title to the Trust Estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Any such successor trustee shall give notice thereof to the Issuer and the Company. SECTION 9.6. RESIGNATION BY THE TRUSTEE. The Trustee and any successor trustee may at any time resign from the trusts hereby created by giving at least thirty days written notice by registered or certified mail, return receipt requested, to the Issuer, the Company and the owner of each Bond, and such resignation shall take effect upon the appointment of a successor trustee pursuant to the provisions of Section 9.8 hereof and the acceptance by the successor trustee of such appointment. SECTION 9.7. REMOVAL OF THE TRUSTEE. The Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Trustee at least thirty days prior to the successor trustee's acceptance of its appointment, to the Issuer and to the Company, and signed by the owners of a majority in aggregate principal amount of Bonds then outstanding, or (so long as no event of default is then existing under Section 6.1(a), (b), (c) or (d) of the Agreement) signed by the Company and delivered to the Trustee and the Issuer, and such removal shall take effect upon the appointment of a successor trustee pursuant to the provisions of Section 9.8 hereof and the acceptance by the successor trustee of such appointment. SECTION 9.8. APPOINTMENT OF SUCCESSOR TRUSTEE BY BONDHOLDERS OR ISSUER. In case the Trustee hereunder shall resign or be removed, or be dissolved, or shall be in the course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the Issuer (at the direction of the Company so long as no event of default is then existing under Section 6.1(a), (b), (c) or (d) of the Agreement), or if no successor trustee is so appointed by the Issuer, then by the owners of a majority in aggregate principal amount of Bonds then outstanding, by an instrument or concurrent instruments in writing signed by such owners, or by their duly authorized attorneys in fact, a copy of which shall be delivered personally or sent by registered mail, return receipt requested, to the Issuer and the Company; provided, that if a successor trustee is not so appointed and accepts such appointment within thirty days of such resignation, removal or other action, then the Trustee may petition a court of competent jurisdiction for the appointment of a successor trustee. Every such Trustee appointed pursuant to the provisions of this Section shall be a trust company or bank in good standing having a reported capital and surplus of not less than $100,000,000, if there be such an institution willing, qualified and able to accept the trust upon customary terms, and (unless the Company shall then be in default under Section 6.1(a), (b), (c) or (d) of the Agreement) shall be satisfactory to the Company. SECTION 9.9. CONCERNING ANY SUCCESSOR TRUSTEE. Every successor trustee appointed hereunder shall execute, acknowledge and deliver to its or his predecessor and also to the Issuer and the Company an instrument in writing accepting such appointment hereunder and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trust, duties and obligations of its predecessors; but such predecessor shall, nevertheless, on the written request of the Issuer, or of its successor, execute and deliver an instrument transferring to such successor all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and moneys held by it as Trustee hereunder to its successor. Should any instrument in writing from the Issuer be required by any successor trustee for more fully and certainly vesting in such successor the estate, rights, power and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer. The resignation of any Trustee and the instrument or instruments removing any Trustee and appointing a successor hereunder, together with all other instruments provided for in this Article, shall be filed or recorded by the successor trustee in each recording office, if any, where the Indenture shall have been filed or recorded. SECTION 9.10. APPOINTMENT OF CO-TRUSTEE. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction (including particularly the law of Mississippi) denying or restricting the right of banking corporations or associations to transact business as Trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture or the Agreement, and in particular in case of the enforcement of either on default, or in case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an additional individual or institution as a separate or co-trustee. The following provisions of this Section 9.10 are adapted to these ends. In the event that the Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, obligation, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be imposed upon, exercised by or vested in or conveyed to the Trustee with respect thereto shall be imposed upon, exercisable by and vest in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them. Such separate or co-trustee shall deliver an instrument in writing acknowledging and accepting its appointment hereunder to the Issuer, the Trustee and the Company. Should any instrument in writing from the Issuer be required by the separate trustee or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer. In case any separate trustee or co-trustee, or a successor to either, shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co- trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate trustee or co-trustee. The appointment of a co-trustee hereunder shall not in any way change the Trustee's fiduciary duties and obligations hereunder. SECTION 9.11. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE TRUSTEE. All federal, state and local governmental, public and regulatory authority approvals, consents, notices, authorizations, registrations, licenses, exemptions, and filings that are required to have been obtained or made by Trustee with respect to the authorization, execution, delivery and performance by, or the enforcement against or by, the Trustee of this Indenture have been obtained and are in full force and effect and all conditions of such approvals, consents, notices, authorizations, registrations, licenses, exemptions, and filings have been fully complied with. The Trustee is qualified to do business in the State of Mississippi. The Trustee has a combined capital and surplus of at least $50,000,000 or, alternatively, a liability policy having the type of coverage and in an amount acceptable to the Issuer and the Company. The Trustee has an operations group of at least four experienced trust officers, with primary responsibility for municipal bond issues. The Trustee administers at least 25 municipal bond indentures aggregating at least $25,000,000 under its administration. SECTION 9.12. REQUIRED REPORTING TO ISSUER. The Trustee shall keep, or cause to be kept, proper books of record and account in which complete and accurate entries shall be made of all funds and accounts established by or pursuant to this Indenture, which shall at all reasonable times be subject to the inspection by the Issuer or the owners (or a designated representative thereof) of not less than 10% in aggregate principal amount of the Bonds then outstanding. If requested in writing by the Issuer, the Trustee shall furnish to the Issuer within five days after each date on which principal of, premium, if any or interest on, any of the Bonds is due, a written certificate setting forth the following: (i) the designated name of the Bonds; (ii) the date on which such interest on any of the Bonds was due, the rate of interest borne by such Bonds and the amount of such interest due; (iii) the date on which such interest on any of the Bonds was paid and the amount of such interest paid; (iv) the date on which such principal of any of the Bonds was due (whether at maturity, upon call for redemption or acceleration) and the amount of such principal due; (v) the date on which such principal of any of the Bonds was paid and the amount of such principal paid; and (vi) the name of the Trustee. Not later than 30 days after the end of each calendar year commencing with the calendar year 1998, the Trustee will prepare and file with the Issuer a statement setting forth, with respect to the preceding year, (l) amounts withdrawn from and deposited in each fund and account relating to the Bonds hereunder, (2) the balance on deposit in each such fund or account relating to the Bonds at the end of each year for which such statement is prepared, (3) a brief description of all obligations held as investments in each such fund or account relating to the Bonds, (4) the amount, if any, applied to the redemption of the Bonds, a description of the Bonds or portions of Bonds so redeemed, and an accounting of the Bonds of each maturity outstanding, and (5) any other information that the Issuer may reasonably request or that the Trustee may from time to time deem appropriate. ARTICLE X SUPPLEMENTAL INDENTURES SECTION 10.1. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF BONDHOLDERS. The Issuer and the Trustee may, without consent of, or notice to, any of the Bondholders enter into an indenture or indentures supplemental to this Indenture for any one or more of the following purposes: (a) To cure any ambiguity or formal defect or omission in this Indenture; (b) To grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders or the Trustee; (c) To evidence the appointment of a separate trustee or a co-trustee or the succession of a new trustee hereunder; (d) To provide for an uncertificated book-entry system of registration for the Bonds; (e) To preserve the tax exempt status of interest on the Bonds as required in an opinion of Bond Counsel delivered to the Trustee; (f) To obtain or maintain an appropriate rating or ratings on the Bonds; and (g) To make any other change which, in the judgment of the Trustee, is not to the prejudice of the Bondholders. SECTION 10.2. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDHOLDERS. Exclusive of supplemental indentures covered by Section 10.1 hereof and subject to the terms and provisions contained in this Section, and not otherwise, the owners of not less than a majority in aggregate principal amount of the Bonds then outstanding shall have the right, from time to time, anything contained in this Indenture to the contrary notwithstanding, to consent to and approve the execution by the Issuer and the Trustee of such other indenture or indentures supplemental hereto as shall be deemed necessary and desirable by the Issuer for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture or in any supplemental indenture; provided, however, that nothing in this Section or in Section 10.1 hereof contained shall permit, or be construed as permitting, without the consent of the owners of 100% in aggregate principal amount of the Bonds then outstanding, (a) an extension of the maturity (or mandatory redemption date) of the principal of, or the interest on, any Bond issued hereunder, or (b) a reduction in the principal amount of, or rate of interest on, any Bond issued hereunder, or (c) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the aggregate principal amount of the Bonds the owners of which are required to consent to such supplemental indenture, or (e) the creation of any lien ranking prior to or on a parity with the lien of this Indenture on the Trust Estate or any part thereof, or (f) deprivation of the owner of any Bond then outstanding of the lien hereby created on the Trust Estate. If at any time the Issuer shall request the Trustee to enter into any such supplemental indenture for any of the purposes of this Section, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed by first class mail to all Bondholders. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the corporate trust office of the Trustee for inspection by all Bondholders. If, within sixty days or such longer period as shall be prescribed by the Issuer following the mailing of such notice, the owners of not less than a majority or 100%, as the case may be, in aggregate principal amount of the Bonds then outstanding shall have consented to and approved the execution thereof as herein provided, no owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture as in this Section permitted and provided, this Indenture shall be and be deemed to be modified and amended in accordance therewith. SECTION 10.3. CONSENT OF COMPANY. Anything herein to the contrary notwithstanding, a supplemental indenture under this Article shall not become effective unless and until the Company shall have consented to the execution and delivery of such supplemental indenture. In this regard, the Trustee shall cause notice of the proposed execution of any such supplemental indenture together with a copy of the proposed supplemental indenture to be mailed by certified or registered mail, return receipt requested, to the Company at least fifteen days prior to the proposed date of execution and delivery of any such supplemental indenture. The Company shall be deemed to have consented to the execution and delivery of any such supplemental indenture if the Trustee does not receive a letter of protest or objection thereto signed by or on behalf of the Company by an Authorized Company Representative on or before 4:30 o'clock P.M. local time at the principal corporate trust office or other designated corporate trust office of the Trustee, on the fifteenth day after the mailing of said notice. SECTION 10.4. OPINION OF BOND COUNSEL. The Trustee may require that the Company deliver to the Trustee at the Company's expense an opinion of Bond Counsel upon which the Trustee may rely to the effect that a supplemental indenture is permitted by applicable law and will not adversely affect the tax- exempt status of the interest on the Bonds and that such supplemental indenture complies with the terms and provisions of this Indenture. ARTICLE XI AMENDMENT OF AGREEMENT AND GUARANTY SECTION 11.1. AMENDMENTS, ETC., TO AGREEMENT AND GUARANTY NOT REQUIRING CONSENT OF BONDHOLDERS. The Trustee shall without the consent of or notice to the Bondholders consent to any amendment, change or modification of the Agreement or the Guaranty which does not adversely affect the Bondholders (i) as may be required by the provisions of the Agreement, the Guaranty or this Indenture, (ii) for the purpose of curing any ambiguity or formal defect or omission therein, (iii) to describe more fully or to amplify or correct the description of any property financed under the Agreement or intended so to be, (iv) to preserve the tax exempt status of interest on the Bonds, (v) to obtain or maintain an appropriate rating or ratings on the Bonds, or (vi) in connection with any other change therein which, in the judgment of the Trustee, is not to the prejudice of the Bondholders. SECTION 11.2. AMENDMENTS, ETC., TO AGREEMENT AND GUARANTY REQUIRING CONSENT OF BONDHOLDERS. Except for the amendments, changes or modifications as provided in Section 11.1 hereof, the Trustee shall not consent to any other amendment, change or modification of the Agreement or the Guaranty without the giving of notice and the written approval or consent of the owners of not less than a majority in aggregate principal amount of the Bonds at the time outstanding given as in this Section provided; provided, however, that nothing in this Section or in Section 11.1 herein contained shall permit or be construed as permitting, without the consent of the owners of 100% in aggregate principal amount of the Bonds then outstanding, (a) an extension of time for the payment of an amount due pursuant to Section 4.2(a) of the Agreement or an extension of time for an amount due under the Guaranty, (b) a reduction in the total amount due pursuant to Section 4.2(a) of the Agreement or under the Guaranty, (c) a reduction in the aggregate principal amount of the Bonds the owners of which are required to consent to such amendment, change or modification of the Agreement or the Guaranty, or (d) any release or modification of the obligation of a Guarantor under the Guaranty. If at any time the Issuer, the Company or the Guarantor shall request the consent of the Trustee to any such proposed amendment, change or modification of the Agreement or Guaranty, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change or modification to be given in the same manner as provided by Section 10.2 hereof with respect to supplemental indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the principal corporate trust office of the Trustee for inspection by all Bondholders. SECTION 11.3. OPINION OF BOND COUNSEL. The Trustee may require that the Company deliver to the Trustee at the Company's expense an opinion of Bond Counsel upon which the Trustee may rely to the effect that any amendment, change or modification of the Agreement is permitted by applicable law and will not adversely affect the tax-exempt status of interest on the Bonds and that such amendment, change or modification complies with the terms and provisions of the Agreement and this Indenture. ARTICLE XII MISCELLANEOUS SECTION 12.1. CONSENTS, ETC., OF BONDHOLDERS. Any consent, request, direction, approval, objection or other instrument required by this Indenture to be signed and executed by the Bondholders may be in any number of concurrent documents and may be executed by such Bondholders in person or by agent appointed in writing. Proof of the execution of any such consent, request, direction, approval, objection or other instrument or of the writing appointing any such agent and of the ownership of Bonds, if made in the following manner, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor of the Trustee with regard to any action taken by it under such request or other instrument, namely: (a) The fact and date of the execution by any person of any such writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such writing acknowledged before him the execution thereof, or by an affidavit of any witness to such execution. (b) The fact of ownership of Bonds and the amount or amounts, numbers and other identification of such Bonds, and the date of owning the same shall be proved by the registration books of the Issuer maintained by the Trustee pursuant to Section 2.8 hereof. For all purposes of this Indenture and of the proceedings for the enforcement hereof, such person shall be deemed to continue to be the owner of such Bond until the Trustee shall have received notice in writing to the contrary. In determining whether the owners of the requisite principal amount of Bonds outstanding have given any request, demand, authorization, direction, notice, consent or waiver under this Indenture, Bonds owned by the Company or any affiliate of the Company shall be disregarded and deemed not to be Outstanding under this Indenture, except that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned shall be so disregarded. For purposes of this paragraph (a) an "affiliate" means any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company; and for the purposes of this definition (b) "control", means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, Bonds so owned which have been pledged in good faith shall not be disregarded as aforesaid if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Bonds and that the pledgee is not the Company or any affiliate of the Company. Notwithstanding the foregoing paragraph, Bonds owned by the Company or any affiliate of the Company shall be deemed to be Outstanding under the Indenture if all the Bonds Outstanding at the time are owned by the Company or an affiliate of the Company; provided, however, that in such event the Company or such affiliate may not consent to any supplement to this Indenture that would affect the validity of the Bonds or the tax-exempt status of the interest on the Bonds; and provided further that if a supplement to this Indenture is executed at a time when the Company or any affiliate is the owner of all the Outstanding Bonds, Bond Counsel shall render an opinion that the execution of the supplement to this Indenture does not adversely affect the validity of the Bonds or the tax-exempt status of the interest thereon. SECTION 12.2. LIMITATION OF RIGHTS. With the exception of rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be construed to give to any person or company other than the parties hereto and the Company, the Guarantor and the owners of the Bonds, any legal or equitable right, remedy or claim under or with respect to this Indenture or any covenants, conditions and provisions herein contained; this Indenture and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and the Company, the Guarantor and the owners of the Bonds as herein provided. SECTION 12.3. SEVERABILITY. If any provisions of this Indenture shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatever. SECTION 12.4. NOTICES. Unless otherwise specifically provided herein, any notice, request, complaint, demand, communication or other paper shall be sufficiently given and shall be deemed given (i) on the fourth day following the day on which the same has been mailed by first class mail, postage prepaid, or (ii) when the same are delivered, in each case to the parties at the following addresses: if to the Issuer, at Mississippi Business Finance Corporation, 1300 Walter Sillers Building, P.O. Box 849, Jackson, Mississippi 39205-0849 Attention: Executive Director; if to the Trustee, at Deposit Guaranty National Bank, One Deposit Guaranty Plaza-DGP#8, P.O. Box 23100, Jackson, Mississippi 39225-3100 Attention: Corporate Trust Department; if to the Company, at Mississippi Phosphates Corporation, c/o Mississippi Chemical Corporation, 3622 Highway 49 East, Yazoo City, Mississippi 39199-0388 Attention: Chief Financial Officer; and if to the Guarantor at Mississippi Chemical Corporation, 3622 Highway 49 East, Yazoo City, Mississippi 39199-0388 Attention: Chief Financial Officer. A duplicate copy of each notice, certificate or other communication given hereunder by either the Issuer, the Guarantor or the Company shall also be given to the Trustee. The Issuer, the Company, the Guarantor and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 12.5. PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. In any case where the date of maturity of interest on or principal of the Bonds or the date fixed for redemption of any Bonds shall be at the principal corporate trust office of the Trustee, a Saturday, a Sunday or a legal holiday or a day on which banking institutions are required or authorized by law to close (and the principal corporate trust office of the Trustee is in fact closed), then payment of principal or interest need not be made on such date but may be made on the next succeeding business day with the same force and effect as if made on the date of maturity or the date fixed for redemption. SECTION 12.6. ACTION BY COMPANY AND ISSUER. Wherever it is herein provided or permitted for any action to be taken by the Company, such action may be taken by an Authorized Company Representative under the Agreement unless the context clearly indicates otherwise. Whenever it is herein provided or permitted for any action to be taken by the Issuer, such action may be taken by an Authorized Issuer Representative under the Agreement unless the context clearly indicates otherwise. SECTION 12.7. COUNTERPARTS. This Indenture may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 12.8. APPLICABLE PROVISIONS OF LAW. This Indenture shall be governed by and construed in accordance with the laws of the State of Mississippi applicable to contracts performed wholly therein. SECTION 12.9. NO RECOURSE. No recourse shall be had for the payment of the principal of, premium, if any and interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in this Indenture or the Agreement against any past, present or future member, officer, agent or employee of the Issuer, or any incorporator, member, officer, employee, director or trustee of any successor corporation, as such, either directly or through the Issuer or any successor corporation, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such incorporator, member, officer, employee, director, agent or trustee as such is hereby expressly waived and released as a condition of and consideration for the execution of this Indenture or the Agreement and the issuance of the Bonds. [Remainder of page left intentionally blank] IN WITNESS WHEREOF, the Mississippi Business Finance Corporation and Deposit Guaranty National Bank, have caused this Indenture of Trust to be executed in their respective corporate names and the Mississippi Business Finance Corporation has caused its corporate seal to be hereunto affixed and attested by its duly authorized officer, all as of the day first above written. MISSISSIPPI BUSINESS FINANCE CORPORATION By: ______________________________ Executive Director ATTEST: By: ________________________ Secretary (SEAL) DEPOSIT GUARANTY NATIONAL BANK, as Trustee By: ______________________________ Authorized Officer ATTEST: By: _______________________ Title: EX-10.6 3 CREDIT AGREEMENT EXHIBIT 10.6 Credit Agreement Among Mississippi Chemical Corporation And The Lenders Party Hereto And Harris Trust and Savings Bank, as Administrative Agent And Bank of Montreal, Chicago Branch, as Syndication Agent And Credit Agricole Indosuez as Co-Agent Dated as of November 25, 1997 TABLE OF CONTENTS MISSISSIPPI CHEMICAL CORPORATION CREDIT AGREEMENT Section 1. The Revolving Credit and Swing Line.............................................. 1 Section 1.1. The Revolving Credit............................................................. 1 Section 1.2. Swingline Loans under the Revolving Credit....................................... 4 (a) Swingline Commitment............................................................. 4 (b) Refunding Loans.................................................................. 4 (c) Participations................................................................... 5 Section 1.3. Interest Rates................................................................... 5 (a) Base Rate Loans.................................................................. 5 (b) Eurodollar Loans................................................................. 5 (c) Fed Funds Rate Loans............................................................. 5 (d) Default Rate..................................................................... 5 Section 1.4. Conversion and Continuation of Loans............................................. 6 Section 1.5. Letters of Credit................................................................ 6 Section 1.6. Reimbursement Obligation......................................................... 8 Section 1.7. Manner of Borrowing Revolving Credit Loans and Swingline Loans................... 8 Section 1.8. Participation in L/Cs............................................................ 10 Section 1.9. Capital Adequacy................................................................. 10 Section 2. The Bid Facility................................................................. 11 Section 2.1. The Bid Loans.................................................................... 11 Section 2.2. Requests for Bid Loans........................................................... 11 (a) Requests and Confirmations....................................................... 11 (b) Invitation to Bid................................................................ 12 (c) Bids............................................................................. 12 Section 2.3. Notice of Bids................................................................... 12 Section 2.4. Acceptance or Rejection of Bids.................................................. 13 Section 2.5. Notice of Acceptance or Rejection of Bids........................................ 13 (a) Notice to Banks Making Successful Bids........................................... 13 (b) Notice to all Banks.............................................................. 14 (c) Disbursement of Bid Loans........................................................ 14 (d) Interest on Bid Loans............................................................ 14 Section 2.6. Telephonic Notice................................................................ 14 Section 3. The Notes, Fees, Prepayments, Terminations and Application of Payments........... 15 Section 3.1. The Notes........................................................................ 15 Section 3.2. Facility Fee..................................................................... 15
Section 3.3. Agent's Fees..................................................................... 16 Section 3.4 ................................................................................. 16 (a) Optional Prepayments of Base Rate Loans.......................................... 16 (b) Optional Prepayments of Swingline Loans.......................................... 16 (c) Optional Prepayments of Eurodollar Loans......................................... 16 (d) Mandatory Prepayments of Excess Borrowings....................................... 16 Section 3.5. Revolving Credit Termination..................................................... 17 Section 3.6. Place and Application of Payments................................................ 17 Section 4. Definitions...................................................................... 17 Section 4.1. Certain Definitions.............................................................. 17 Section 4.2. Accounting Terms................................................................. 28 Section 5. Representations and Warranties................................................... 28 Section 5.1. Organization and Qualification; Non-Contravention................................ 28 Section 5.2. Financial Reports................................................................ 29 Section 5.3. Litigation; Tax Returns; Approvals............................................... 29 Section 5.4. Regulation U..................................................................... 29 Section 5.5. No Default....................................................................... 30 Section 5.6. ERISA............................................................................ 30 Section 5.7. Debt and Security Interests...................................................... 30 Section 5.8. Subsidiaries..................................................................... 30 Section 5.9. Accurate Information............................................................. 30 Section 5.10. Enforceability................................................................... 30 Section 5.11. Restrictive Agreements........................................................... 30 Section 5.12. No Violation of Law.............................................................. 31 Section 5.13. No Default Under Other Agreements................................................ 31 Section 5.14. Status Under Certain Laws........................................................ 31 Section 5.15. Pari Passu....................................................................... 31 Section 6. Conditions Precedent............................................................. 31 Section 6.1. Initial Extension of Credit...................................................... 31 Section 6.2. Each Extension of Credit......................................................... 32 Section 6.3. Legal Matters.................................................................... 33 Section 6.4. Documents........................................................................ 33 Section 7. Covenants........................................................................ 33 Section 7.1. Maintenance of Property.......................................................... 33 Section 7.2. Taxes............................................................................ 34 Section 7.3. Maintenance of Insurance......................................................... 34 Section 7.4. Financial Reports................................................................ 34 Section 7.5. Inspection....................................................................... 35 Section 7.6. Consolidation and Merger......................................................... 35 Section 7.7. Transactions with Affiliates..................................................... 36
Section 7.8. Dividends and Certain Other Restricted Payments.................................. 36 Section 7.9. Liens............................................................................ 36 Section 7.10. Borrowings and Guaranties........................................................ 38 Section 7.11. Investments, Loans, Advances and Acquisitions.................................... 39 Section 7.12. Sale of Property................................................................. 40 Section 7.13. Notice of Suit or Adverse Change in Business or Default.......................... 41 Section 7.14. ERISA............................................................................ 41 Section 7.15. Use of Proceeds.................................................................. 41 Section 7.16. Compliance with Laws, etc........................................................ 42 Section 7.17. Sale and Leaseback Transactions.................................................. 42 Section 7.18. Fiscal Quarters.................................................................. 42 Section 7.19. New Subsidiaries................................................................. 42 Section 7.20. Maximum Leverage Ratio........................................................... 42 Section 7.21. Minimum Interest Coverage Ratio.................................................. 42 Section 7.22. Minimum Tangible Net Worth....................................................... 42 Section 7.23. Operating Leases................................................................. 43 Section 7.24. No Restrictions on Subsidiaries.................................................. 43 Section 8. Events of Default and Remedies................................................... 43 Section 8.1. Definitions...................................................................... 43 Section 8.2. Remedies for Non-Bankruptcy Defaults............................................. 45 Section 8.3. Remedies for Bankruptcy Defaults................................................. 45 Section 8.4. L/Cs............................................................................. 45 Section 9. Change in Circumstances Regarding Fixed Rate Loans............................... 45 Section 9.1. Change of Law.................................................................... 45 Section 9.2. Unavailability of Deposits or Inability to Ascertain the Adjusted Eurodollar Rate 46 Section 9.3. Taxes and Increased Costs........................................................ 46 Section 9.4. Funding Indemnity................................................................ 47 Section 9.5. Lending Branch................................................................... 48 Section 9.6. Discretion of Bank as to Manner of Funding....................................... 48 Section 9.7. Mitigation of Circumstances...................................................... 48 Section 10. The Agents....................................................................... 49 Section 10.1. Appointment and Powers........................................................... 49 Section 10.2. Powers........................................................................... 49 Section 10.3. General Immunity................................................................. 49 Section 10.4. No Responsibility for Loans, Recitals, etc....................................... 50 Section 10.5. Right to Indemnity............................................................... 50 Section 10.6. Action Upon Instructions of Banks................................................ 50 Section 10.7. Employment of Agents and Counsel................................................. 50 Section 10.8. Reliance on Documents; Counsel................................................... 50
Section 10.9. May Treat Payee as Owner......................................................... 50 Section 10.10. Agents' Reimbursement............................................................ 51 Section 10.11. Rights as a Bank................................................................. 51 Section 10.12. Bank Credit Decision............................................................. 51 Section 10.13. Resignation of Agent............................................................. 51 Section 10.14. Duration of Agency............................................................... 51 Section 10.15. Syndication Agent and Co-Agent.................................................. 52 Section 11. Miscellaneous.................................................................... 52 Section 11.1. Amendments and Waivers........................................................... 52 Section 11.2. Waiver of Rights................................................................. 52 Section 11.3. Several Obligations.............................................................. 53 Section 11.4. Non-Business Day................................................................. 53 Section 11.5. Documentary Taxes................................................................ 53 Section 11.6. Representations.................................................................. 53 Section 11.7. Notices.......................................................................... 53 Section 11.8. Costs and Expenses; Indemnity.................................................... 53 Section 11.9. Counterparts..................................................................... 55 Section 11.10. Successors and Assigns........................................................... 55 Section 11.11. No Joint Venture................................................................. 55 Section 11.12. Severability..................................................................... 55 Section 11.13. Table of Contents and Headings................................................... 55 Section 11.14. Sharing of Payments.............................................................. 55 Section 11.15. Jurisdiction..................................................................... 56 Section 11.16. Participants and Note Assignees.................................................. 56 Section 11.17. Assignment of Commitments by Banks............................................... 56 Signature Page.......................................................................................... 58 Exhibit A Revolving Credit Note Exhibit B Application and Agreement for Letter of Credit Exhibit C Bid Loan Request Confirmation Exhibit D Invitation to Bid Exhibit E Confirmation of Bid Exhibit F Notice of Acceptance of Bid Exhibit G Schedule of Subsidiaries Exhibit H Compliance Certificate Exhibit I Form of Legal Opinion of Borrowers' Counsel Exhibit J Farmland MissChem Project Contingent Obligations Exhibit K Pricing Ratio Certificate Exhibit L Existing Letters of Credit Schedule 5.3. Litigation Schedule 7.24. Existing Restrictions
MISSISSIPPI CHEMICAL CORPORATION CREDIT AGREEMENT Harris Trust and Savings Bank Chicago, Illinois The from time to time lenders parties hereto Ladies and Gentlemen: The undersigned Mississippi Chemical Corporation, a Mississippi corporation (the "Borrower"), applies to you for your several commitments, subject to all the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, to make a revolving credit (the "Revolving Credit"), a swing line credit (the "Swing Line") and a competitive bid facility (the "Bid Facility") available to the Borrower, all as more fully hereinafter set forth. Each of you is hereinafter referred to individually as "Bank" and collectively as "Banks." Harris Trust and Savings Bank in its individual capacity is sometimes referred to herein as "Harris", and in its capacity as Administrative Agent for the Banks is hereinafter in such capacity called the "Administrative Agent." Bank of Montreal in its capacity as Syndication Agent for the Banks is hereinafter in such capacity called the "Syndication Agent." Credit Agricole Indosuez, in its capacity as Co-Agent for the Banks is hereinafter in such capacity collectively called the "Co-Agent." All capitalized terms not defined in the text of this Agreement are defined in Section 4 hereof. Section 1. The Revolving Credit and Swing Line. Section 1.1. The Revolving Credit. (a) Subject to all of the terms and conditions hereof, the Banks agree, severally and not jointly, to extend a Revolving Credit to the Borrower which may be utilized by the Borrower in the form of loans (individually a "Revolving Credit Loan" and collectively the "Revolving Credit Loans") and L/Cs (as hereinafter defined). The aggregate principal amount of all Loans (as hereinafter defined) plus the maximum amount available for drawing under all L/Cs and the aggregate principal amount of all unpaid Reimbursement Obligations (as hereinafter defined) at any time outstanding (collectively the "Revolving Credit Obligations") may not exceed the sum of the Revolving Credit Commitments (as hereinafter defined) at any time. The Revolving Credit shall be available to the Borrower, and may be availed of by the Borrower from time to time, be repaid (subject to the restrictions on prepayment set forth herein) and used again, during the period from the date hereof to and including November 25, 2002 (as the same may be extended from time to time in accordance with the provisions of Section 1.1(d) hereof, the "Termination Date"), at which time the entire outstanding principal amount of all Revolving Credit Obligations, together with all accrued and unpaid interest thereon, shall be due and payable. (b) The respective maximum aggregate principal amounts of the Revolving Credit at any one time outstanding and the percentage (the "Commitment Percentage") of the Revolving Credit available at any time which each Bank by its acceptance hereof severally agrees to make available to the Borrower are as follows (collectively, the "Revolving Credit Commitments" and individually, a "Revolving Credit Commitment"): Harris Trust and Savings Bank $ 35,000,000.00 17.5% - --------------------------------------------------------------------------------------------------------- Credit Agricole Indosuez 32,500,000.00 16.25% - --------------------------------------------------------------------------------------------------------- Banque Nationale de Paris, Houston Agency 20,000,000.00 10% - --------------------------------------------------------------------------------------------------------- The Fuji Bank, Limited 20,000,000.00 10% - --------------------------------------------------------------------------------------------------------- Bank of America National Trust and Savings 17,500,000.00 8.75% Association - --------------------------------------------------------------------------------------------------------- The Bank of Nova Scotia, Atlanta Agency 15,000,000.00 7.5% - --------------------------------------------------------------------------------------------------------- SunTrust Bank, Atlanta 15,000,000.00 7.5% - --------------------------------------------------------------------------------------------------------- First Union National Bank 15,000,000.00 7.5% - --------------------------------------------------------------------------------------------------------- ABN AMRO Bank N.V. 10,000,000.00 5% - --------------------------------------------------------------------------------------------------------- The Dai-Ichi Kangyo Bank, Ltd. 10,000,000.00 5% - --------------------------------------------------------------------------------------------------------- Deposit Guaranty National Bank 10,000,000.00 5% --------------- - --------------------------------------------------------------------------------------------------------- Total $200,000,000.00 100% - ---------------------------------------------------------------------------------------------------------
(c) Loans under the Revolving Credit may be Eurodollar Loans or Base Rate Loans. Each Borrowing under the Revolving Credit shall be made by each Bank in an amount equal to its Commitment Percentage of the amount of such Borrowing. Each Borrowing of Base Rate Loans under the Revolving Credit shall be in an amount not less than $5,000,000 or such greater amount which is an integral multiple of $1,000,000 and each Borrowing of Eurodollar Loans shall be in an amount not less than $10,000,000 or such greater amount which is an integral multiple of $1,000,000. (d) At any time not earlier than 120 days prior to, nor later than 90 days prior to, each annual anniversary of the date hereof (each an "Anniversary Date"), the Borrower may request that the Banks extend the then scheduled Termination Date to the date one year from such Termination Date. Each such request by the Borrower shall be deemed to be a representation and warranty by the Borrower to the Banks that no material adverse change in the financial condition of the Borrower and its Subsidiaries, taken as a whole, has occurred since the date of the most recent financial reports delivered to the Banks in accordance with Section 7.4(b) hereof. If such request is made by the Borrower each Bank shall inform the Administrative Agent of its willingness to extend the Termination Date no later than 30 days after the Banks receive such request. Any Bank's failure to respond by such date shall indicate its unwillingness to agree to such requested extension. At any time more than 30 days before such Anniversary Date Banks having aggregate Commitment Percentages of at least 80% of the Revolving Credit Commitments then in effect (the "Extending Banks") may propose, by written notice to the Borrower, an extension of this Agreement to the date one year from the applicable Termination Date on such terms and conditions as the Extending Banks may then require. If the extension of this Agreement to the date one year from the Applicable Termination Date is acceptable to the Borrower on the terms and conditions proposed by the Extending Banks, the Borrower shall notify the Extending Banks of its acceptance of such terms and conditions no later than the Anniversary Date, and such later date will become the Termination Date hereunder and this Agreement shall otherwise be amended in the manner described in the Extending Banks' notice proposing the extension of this Agreement upon the Agent's receipt of (i) an amendment to this Agreement signed by the Borrower and all of the Extending Banks, (ii) resolutions of the Borrower's Board of Directors authorizing such extension and (iii) an opinion of counsel to the Borrower equivalent in form and substance to the form of opinion attached hereto as Exhibit I and otherwise acceptable to the Extending Banks. If the Borrower and the Extending Banks agree upon the terms of an extension of the Termination Date, the Borrower may elect either (i) to terminate the Revolving Credit Commitments of each Bank that is not an Extending Bank (each a "Nonextending Bank") in whole on such Anniversary Date, at which time all Loans and other amounts payable under the Loan Documents to the Nonextending Banks shall become immediately due and payable, or (ii) to replace such Nonextending Banks with one or more financial institutions acceptable to the Borrower and the Administrative Agent (each a "Replacement Bank"). If the Borrower elects to replace a Nonextending Bank, such replacement shall become effective as of the date the Nonextending Banks' Revolving Credit Commitments terminate (which shall be no later than the Anniversary Date) and all of the following conditions are satisfied: (A) the unpaid principal amount of all Loans and Reimbursement Obligations made by each Nonextending Bank whose Revolving Credit Commitment is to terminate, together with accrued interest thereon and all other amounts payable under the Loan Documents to such Nonextending Bank, including any facility fee accrued through the date of such termination, shall have been paid in full and all of such Nonextending Banks' participations in L/Cs shall have been reallocated among the Extending Banks; (B) such Replacement Bank shall agree in writing to be bound by all of the terms and provisions of this Agreement, such agreement to specify the amount of the Revolving Credit Commitment of such Replacement Bank and to be otherwise in form and substance satisfactory to the Administrative Agent, and shall make Loans to the Borrower in principal amounts which bear the same ratio to the amounts of the Loans made by the other Extending Banks then outstanding as the Revolving Credit Commitment of such Replacement Bank bears to the then Revolving Credit Commitments of all other Extending Banks; and (C) a copy of such agreement and of evidence satisfactory to the Administrative Agent of the making of such Loans shall be furnished to the Administrative Agent and the Extending Banks. Section 1.2. Swingline Loans under the Revolving Credit. (a) Swingline Commitment. Subject to the terms and conditions hereof and in reliance on the obligations of the Banks to Harris under this Section 1.2, Harris agrees to advance one or more swingline loans (each a "Swingline Loan") to the Borrower from time to time before the Termination Date on a revolving basis up to $25,000,000 in aggregate principal amount at any time outstanding; provided that Harris shall have no obligation to advance any Swingline Loan if the Total Outstandings would thereby exceed the sum of the Revolving Credit Commitments then in effect. All Swingline Loans will be Fed Funds Rate Loans or Offered Rate Loans and will be in an amount not less than $250,000 or an integral multiple of $100,000 in excess thereof. Swingline Loans may be repaid and their principal amount reborrowed before the Termination Date, subject to the terms and conditions hereof. Each Swingline Loan shall have a maturity of up to the seventh day after such Swingline Loan was made. No more than 5 Swingline Loans may be outstanding at any time. The Borrower may elect that each Swingline Loan shall bear interest (computed on the basis of a year of 365/366 days and actual days elapsed) on the unpaid principal amount thereof from the date such Swingline Loan is made until the last day of the Interest Period applicable thereto at the rate per annum quoted to the Borrower by Harris for the Interest Period applicable thereto, billable on the last day of each month (each such Swingline Loan is hereinafter referred to as an "Offered Rate Loan"); provided, however, that the Borrower understands and agrees that Harris has no obligation to quote rates or to make any such Offered Rate Loan and may refuse to make any such Offered Rate Loan after receiving a request therefor from the Borrower. The Borrower acknowledges and agrees that the interest rate quoted by Harris for any Offered Rate Loan may not be the best or lowest rate offered to other customers of Harris and may not be the same rate offered to other customers of Harris for loans of similar amounts and maturities, but is the rate at which Harris in its sole and exclusive discretion is willing to make such Loan to the Borrower for the specified amount and maturity. (b) Refunding Loans. In its sole and absolute discretion, Harris may at any time, on behalf of the Borrower (which hereby irrevocably authorizes Harris to act on its behalf for such purpose), request each Bank to make a Base Rate Loan under the Revolving Credit in an amount equal to such Bank's Commitment Percentage of the amount of the Swingline Loans outstanding on the date such notice is given. Unless any of the conditions of Section 6.2 are not fulfilled on such date, each Bank shall make the proceeds of its requested Base Rate Loan available to Harris, in immediately available funds, at the principal office of Harris in Chicago, Illinois, before 12:00 Noon (Chicago time) on the Business Day following the day such notice is given. The proceeds of such Base Rate Loans shall be immediately applied to repay the outstanding Swingline Loans. The Borrower authorizes Harris to charge the Borrower's accounts with Harris (up to the amount available in such accounts) to pay the amount of any such outstanding Swingline Loans to the extent amounts received from the Banks are not sufficient to repay in full such Swingline Loans. (c) Participations. If any Bank refuses or otherwise fails to make a Revolving Credit Loan when requested by Harris pursuant to Section 1.2(b) above (because the conditions in Section 6.2 are not satisfied or otherwise), such Bank will, by the time and in the manner such Revolving Credit Loan was to have been funded to Harris, purchase from Harris an undivided participating interest in the outstanding Swingline Loans in an amount equal to its Commitment Percentage of the aggregate principal amount of Swingline Loans that were to have been repaid with such Revolving Credit Loans. Each Bank that so purchases a participation in a Swingline Loan shall thereafter be entitled to receive its Commitment Percentage of each payment of principal received on the Swingline Loan and of interest received thereon accruing from the date such Bank funded to Harris its participation in such Loan. The obligation of the Banks to Harris shall be absolute and unconditional and shall not be affected or impaired by any Event of Default or Potential Default which may then be continuing hereunder. Section 1.3. Interest Rates. (a) Base Rate Loans. Each Base Rate Loan shall bear interest (computed on the basis of a year of 365/366 days and actual days elapsed) on the unpaid principal amount thereof from the date such Loan is made until maturity (whether by acceleration, upon prepayment or otherwise) at a rate per annum equal to the sum of the Applicable Margin and the Base Rate from time to time in effect, payable monthly in arrears on the last day of each calendar month, commencing on the first of such dates occurring after the date hereof and at maturity (whether by acceleration, upon prepayment or otherwise). (b) Eurodollar Loans. Each Eurodollar Loan under the Revolving Credit shall bear interest (computed on the basis of a year of 360 days and actual days elapsed) on the unpaid principal amount thereof from the date such Loan is made until the last day of the Interest Period applicable thereto or, if earlier, until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable Margin and the Adjusted Eurodollar Rate, payable on the last day of each Interest Period applicable thereto or at maturity (whether by acceleration or otherwise) and, with respect to Eurodollar Loans with an Interest Period in excess of three months, on the date occurring every three months from the first day of the Interest Period applicable thereto. (c) Fed Funds Rate Loans. Each Fed Funds Rate Loan shall bear interest (computed on the basis of a year of 365/366 days and actual days elapsed) on the principal amount thereof from the date such Loan is made until maturity (whether by acceleration, upon prepayment or otherwise) at a rate per annum equal to the sum of the Applicable Margin and the Fixed Fed Funds Rate from time to time in effect, billable on the last day of each month. (d) Default Rate. If any Event of Default shall have occurred, all Loans and Reimbursement Obligations shall bear interest from the date such Event of Default occurred, payable on demand, at a rate per annum equal to: (i) with respect to any Base Rate Loan, the sum of 2% plus the Base Rate (computed on the basis of a year of 365/366 days and actual days elapsed) from time to time in effect; and (ii) with respect to any Fixed Rate Loan, the sum of 2% plus the rate of interest in effect thereon at the time of such default (computed on the basis of a year of 360 days and actual days elapsed) until the end of the Interest Period then applicable thereto, and, thereafter, at a rate per annum equal to the sum of 2% plus the Base Rate (computed on the basis of a year of 365/366 days and actual days elapsed) from time to time in effect. Section 1.4. Conversion and Continuation of Loans. (a) Provided that no Event of Default or Potential Default has occurred and is continuing, the Borrower shall have the right, subject to the other terms and conditions of this Agreement, to continue in whole or in part (but, if in part, in the minimum amount specified for Eurodollar Loans in Section 1.1 hereof) any Eurodollar Loan from any current Interest Period into a subsequent Interest Period, provided that the Borrower shall give the Administrative Agent notice of the continuation of any such Loan as provided in Section 1.7 hereof. (b) In the event that the Borrower fails to give notice pursuant to Section 1.7 hereof of the continuation of any Eurodollar Loan or fails to specify the Interest Period applicable thereto, or an Event of Default or Potential Default has occurred and is continuing at the time any such Loan is to be continued hereunder, then such Loan shall be automatically converted as (and the Borrower shall be deemed to have given notice requesting) a Base Rate Loan, subject to Sections 8.2 and 8.3 hereof, unless paid in full on the last day of the then applicable Interest Period. (c) Provided that no Event of Default or Potential Default has occurred and is continuing, the Borrower shall have the right, subject to the terms and conditions of this Agreement, to convert Revolving Credit Loans of one type (in whole or in part) into Revolving Credit Loans of another type from time to time provided that: (i) the Borrower shall give the Administrative Agent notice of each such conversion as provided in Section 1.7 hereof, (ii) the principal amount of any Revolving Credit Loan converted hereunder shall be in an amount not less than the minimum amount specified for the type of Loan in Section 1.1 hereof, (iii) after giving effect to any such conversion in part, the principal amount of any Eurodollar Loan then outstanding shall not be less than the minimum amount specified for a Eurodollar Loan in Section 1.1 hereof, (iv) any conversion of a Loan hereunder shall only be made on a Business Day, and (v) any Eurodollar Loan may be converted only on the last day of the Interest Period then applicable thereto. Section 1.5. Letters of Credit. (a) Subject to all the terms and conditions hereof, satisfaction of all conditions precedent to borrowing under this Agreement and so long as no Potential Default or Event of Default is in existence, at the Borrower's request Harris may in its discretion issue letters of credit (an "L/C" and collectively the "L/Cs") for the account of the Borrower subject to availability under the Revolving Credit, and the Banks hereby agree to participate therein as more fully described in Section 1.8 hereof. Each L/C shall be issued pursuant to an application for letter of credit (the "L/C Agreement") in the form of Exhibit B hereto. The L/Cs shall consist of standby and commercial letters of credit in an aggregate face amount not to exceed $30,000,000. Each L/C shall have an expiry date not more than one year from the date of issuance thereof (but in no event later than the Termination Date). The amount available to be drawn under each L/C issued pursuant hereto shall be deducted from the credit otherwise available under the Revolving Credit. In consideration of the issuance of L/Cs the Borrower agrees to pay Harris for the benefit of the Banks a fee (the "L/C Participation Fee") in the amount per annum equal to the Applicable Margin for Eurodollar Loans (computed on the basis of a 360-day year and actual days elapsed) of the face amount for each L/C issued for the account of the Borrower hereunder. In addition, the Borrower shall pay Harris (x) a fee (the "L/C Issuance Fee") in the amount per annum equal to (i) for standby L/Cs, eight- hundredths of one percent (0.08%) of the stated amount of each standby L/C issued hereunder and (ii) for commercial L/Cs, the customary issuance fee for commercial L/Cs as may be established by Harris from time to time, and (y) such drawing, negotiation, amendment and other administrative fees in connection with each L/C as may be established by Harris from time to time (the "L/C Administrative Fee"). All L/C Issuance Fees and L/C Participation Fees shall be payable quarterly in arrears on the last day of each March, June, September and December commencing December 31, 1997 and on the Termination Date, and all L/C Administrative Fees shall be payable on the date of issuance of each L/C hereunder and on the date required by Harris. Upon satisfaction of all conditions precedent to the initial Loan hereunder, without any further action on the part of the Borrower, Harris, the Administration Agent or any Bank, (i) each of the letters of credit listed on Exhibit L hereto (the "Existing L/Cs") previously issued by Harris for the account of the Borrower or Triad Nitrogen, Inc. under the Existing Agreements shall be deemed for all purposes of this Agreement to be an L/C issued hereunder, (ii) each application and agreement for a letter of credit pursuant to which each Existing L/C was issued shall be deemed for all purposes of this Agreement to be an L/C Agreement, and (iii) all of the Borrower's or Triad Nitrogen, Inc.'s indebtedness, obligations and liabilities to Harris with respect to the Existing L/Cs shall be deemed to be Reimbursement Obligations of the Borrower for all purposes of this Agreement. (b) Notwithstanding anything contained in any L/C Agreement to the contrary: (i) the Borrower shall pay fees in connection with each L/C as set forth in Section 1.5(a) hereof, (ii) except as otherwise provided in Section 3.4(c) hereof, before the occurrence of a Potential Default or an Event of Default, Harris will not call for the funding by the Borrower of any amount under an L/C issued for the Borrower's account, or for any other form of collateral security for the Borrower's obligations in connection with such L/C, before being presented with a drawing thereunder, and (iii) if Harris is not timely reimbursed for the amount of any drawing under an L/C on the date such drawing is paid, the Borrower's obligation to reimburse Harris for the amount of such drawing shall bear interest as specified in Section 1.6 hereof. If Harris issues any L/C with an expiration date that is automatically extended unless Harris gives written notice that the expiration date will not so extend beyond its then scheduled expiration date, Harris will give such written notice of non-renewal before the time necessary to prevent such automatic extension if before such required notice date (i) the expiration date of such L/C if so extended would be more than one year from the then scheduled expiration date of such L/C or after the Termination Date, (ii) the Revolving Credit Commitments have been terminated, or (iii) an Event of Default exists and the Required Banks have given Harris instructions not to so permit the extension of the expiration date of such L/C. (c) The Administrative Agent shall give prompt telephone, telex, or telecopy notice to each Bank of each issuance of, or amendment to, an L/C specifying the effective date of the L/C or amendment, the amount, the beneficiary, and the expiration date of the L/C, in each case as established originally or through the relevant amendment, as applicable, the account party or parties for the L/C, each Bank's pro rata participation in such L/C and whether the Administrative Agent has classified the L/C as a commercial, performance, or financial letter of credit for regulatory reporting purposes. Section 1.6. Reimbursement Obligation. The Borrower is obligated, and hereby unconditionally agrees, to pay in immediately available funds to Harris for the account of Harris and the Banks who are participating in L/Cs pursuant to Section 1.8 hereof the face amount of each draft drawn and presented under an L/C issued by Harris hereunder for the Borrower's account (the obligation of the Borrower under this Section 1.6 with respect to any L/C is a "Reimbursement Obligation"). If at any time the Borrower fails to pay any Reimbursement Obligation when due, the Borrower shall be deemed to have automatically requested a Revolving Credit Loan from the Banks hereunder, as of the maturity date of such Reimbursement Obligation, the proceeds of which Loan shall be used to repay such Reimbursement Obligation. Such Loan shall only be made if all of the conditions precedent set forth in Section 6.2 of this Agreement have been satisfied. If such Loan is not made by the Banks for any reason, the unpaid amount of such Reimbursement Obligation shall be due and payable to Harris for the pro rata benefit of the Banks upon demand and shall bear interest at the rate of interest specified in Section 1.3(a), unless an Event of Default has occurred then the rate of interest specified in Section 1.3(d)(i) hereof. Section 1.7. Manner of Borrowing Revolving Credit Loans and Swingline Loans. (a) The Borrower shall give telephonic, telex or telecopy notice to the Administrative Agent (which notice, if telephonic, shall be promptly confirmed in writing) no later than (i) 12:00 Noon (Chicago time) on the date the Banks are requested to make each Borrowing of Base Rate Loans, (ii) 12:00 Noon (Chicago time) on the date at least three (3) Business Days prior to the date of (A) each Borrowing of Eurodollar Loans which the Banks are requested to make or continue, and (B) the conversion of any Borrowing of Base Rate Loans into a Borrowing of Eurodollar Loans, and (iii) 12:00 Noon (Chicago time) on the date the Borrower requests the Administrative Agent to make a Swingline Loan hereunder. Each such notice shall be irrevocable and shall specify the date of the Borrowing requested (which shall be a Business Day), the amount of such Borrowing, whether the Borrowing is to be made available by means of Base Rate Loans or Eurodollar Loans and, with respect to a Borrowing of Eurodollar Loans, the Interest Period applicable thereto; provided, that in no event shall the principal amount of any requested Revolving Credit Loan plus the aggregate principal or face amount, as appropriate, of all Loans, L/Cs, and unpaid Reimbursement Obligations outstanding hereunder exceed the Revolving Credit Commitments as such amounts may be reduced pursuant to Section 3.5 of this Agreement. The Borrower agrees that the Administrative Agent may rely on any such telephonic, telex or telecopy notice given by any person who the Administrative Agent reasonably believes is authorized to give such notice without the necessity of independent investigation and in the event any notice by such means conflicts with the written confirmation, such notice shall govern if the Administrative Agent or any Bank has acted in reliance thereon. The Administrative Agent shall, on the day any such notice is received by it, give prompt telephonic, telex or telecopy (if telephonic, to be confirmed in writing within one Business Day) notice of the receipt of notice from the Borrower hereunder to each of the Banks. (b) Subject to the provisions of Section 6 hereof, the proceeds of each Borrowing of Revolving Credit Loans and of each Swingline Loan shall be made available to the Borrower at the principal office of the Administrative Agent in Chicago, Illinois, by depositing immediately available funds into an account maintained by the Borrower with the Administrative Agent, on the date such Borrowing is requested to be made, except to the extent such Borrowing represents (i) a refinancing of a Reimbursement Obligation, in which case the proceeds of such Borrowing shall be applied to the payment of the relevant unpaid Reimbursement Obligation, or (ii) a refunding loan, in which case the proceeds of such Borrowing shall be applied to the payment of the relevant Swingline Loans pursuant to Section 1.2(b) hereof. Not later than 3:00 p.m. Chicago time, on the date specified for any Borrowing of Revolving Credit Loans to be made hereunder, each Bank shall make its Loan comprising part of such Borrowing available to the Borrower in immediately available funds at the principal office of the Administrative Agent, except as otherwise provided above with respect to paying any outstanding Reimbursement Obligation or Swingline Loan. (c) Unless the Administrative Agent shall have been notified by a Bank prior to the date of a Revolving Credit Loan to be made by such Bank (which notice shall be effective upon receipt) that such Bank does not intend to make the proceeds of such Revolving Credit Loan available to the Administrative Agent, the Administrative Agent may assume that such Bank has made such proceeds available to the Administrative Agent on such date and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Bank, the Administrative Agent shall be entitled to receive such amount on demand from such Bank (or, if such Bank fails to pay such amount forthwith upon such demand, to recover such amount, together with interest thereon at the rate otherwise applicable thereto under Section 1.3 hereof, from the Borrower) together with interest thereon in respect of each day during the period commencing on the date such amount was made available to the Borrower and ending on the date the Administrative Agent recovers such amount, at a rate per annum equal to the effective rate charged to the Administrative Agent for overnight Federal funds transactions with member banks of the Federal Reserve System for each day, as determined by the Administrative Agent (or, in the case of a day which is not a Business Day, then for the preceding Business Day) (the "Fed Funds Rate"). Nothing in this Section 1.7(c) shall be deemed to permit any Bank to breach its obligations to make Revolving Credit Loans under the Revolving Credit, or to limit the Borrower's claims against any Bank for such breach. Section 1.8. Participation in L/Cs. (a) Each of the Banks will acquire, without recourse, representation or warranty, a risk participation in each L/C upon the issuance thereof ratably in accordance with its Commitment Percentage. In the event any Reimbursement Obligation is not immediately paid by the Borrower pursuant to Section 1.6 hereof, each Bank will pay to Harris funds in an amount equal to such Bank's Commitment Percentage of the unpaid amount of such Reimbursement Obligation. If the Banks fund Harris with respect to any Reimbursement Obligation that is not paid when due by the Borrower as described above, all of the Banks may elect to treat such funding as additional Revolving Credit Loans to the Borrower hereunder rather than a purchase of participations by the Banks in the related L/Cs held by Harris. The obligation of the Banks to Harris under this Section 1.8 shall be absolute and unconditional and shall not be affected or impaired by any Event of Default or Potential Default which may then be continuing hereunder. Harris shall notify each Bank by telephone of its Commitment Percentage of such unpaid Reimbursement Obligation. If such notice has been given to each Bank by 12:00 Noon, Chicago time, each Bank agrees to put Harris in immediately available and freely transferable funds on the same Business Day. Funds shall be so made available at the account designated by Harris in such notice to the Banks. Upon the election by the Banks to treat such funding as additional Revolving Credit Loans hereunder and payment by each Bank, such Loans shall bear interest in accordance with Section 1.3(a) hereof. Harris shall share with each Bank its Commitment Percentage of each payment of a Reimbursement Obligation (whether of principal or interest) and any L/C Participation Fee payable by the Borrower. Any such amount shall be promptly remitted to the Banks when and as received by Harris from the Borrower. The L/C Issuance Fee and L/C Administration Fee shall be solely for Harris' account and shall not be shared by the other Banks. (b) The Banks shall, ratably in accordance with their respective Commitment Percentages, indemnify Harris (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from Harris' gross negligence or willful misconduct) that Harris may suffer or incur in connection with any L/C. The obligations of the Banks under this Section 1.8(b) and all other parts of this Section 1.8 shall survive termination of this Agreement and of all L/C Agreements, and all drafts or other documents presented in connection with drawings thereunder. Section 1.9. Capital Adequacy. If, after the date hereof, any Bank or the Administrative Agent shall have determined in good faith that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein (including, without limitation, any revision in the Final Risk-Based Capital Guidelines of the Board of Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225, Appendix A) or of the Office of the Comptroller of the Currency (12 CFR Part 3, Appendix A), or in any other applicable capital rules heretofore adopted and issued by any governmental authority), or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's capital, or on the capital of any corporation controlling such Bank, in each case as a consequence of its obligations hereunder, to a level below that which such Bank would have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time if such Bank is generally imposing payments for such reduction on its similarly situated customers, within thirty (30) days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. Section 2. The Bid Facility. Section 2.1. The Bid Loans. At any time before the Termination Date, the Borrower may request the Banks to offer to make uncommitted loans (each such loan being hereinafter referred to as a "Bid Loan" and collectively as the "Bid Loans") in the manner set forth in Sections 2.1 through 2.6 hereof and in amounts such that the aggregate principal amount of the Total Outstandings hereunder shall not exceed the sum of the Revolving Credit Commitments then in effect after taking into account any Loans to be paid with such Bid Loans. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in Sections 2.1 through 2.6 hereof. Each Bank may offer to make Bid Loans in any amount (whether greater than, equal to, or less than its Revolving Credit Commitment), subject to the limitation that the aggregate principal amount of the Total Outstandings under this Agreement may not at any time exceed the sum of the Revolving Credit Commitments then in effect. Bid Loans may either bear interest at a stated rate per annum ("Stated Rate Bid Loans") or at a margin (the "Bid Margin") over or under the Adjusted Eurodollar Rate ("Eurodollar Bid Loans"); provided that there may be no more than five different Interest Periods for Bid Loans outstanding at the same time and that no Bid Loan may mature after the Termination Date. Section 2.2. Requests for Bid Loans. (a) Requests and Confirmations. In order to request a Borrowing of Bid Loans (a "Bid Loan Request") the Borrower shall give telephonic, telex or telecopy notice to the Administrative Agent by no later than 1:00 p.m. (Chicago time) on the date at least one Business Day in the case of Stated Rate Bid Loans, and three Business Days in the case of Eurodollar Bid Loans, before the date of the requested Bid Borrowing (the "Borrowing Date"). Each such request shall be followed on the same day by a duly completed Bid Loan Request Confirmation, delivered by telecopier or other means of facsimile communication, substantially in the form of Exhibit C hereto or otherwise containing the information required by this Section, to be received by the Administrative Agent no later than 1:30 p.m. (Chicago time). Bid Loan Request Confirmations that do not conform substantially to the format of Exhibit C may be rejected by the Administrative Agent, and the Administrative Agent shall give telephonic notice to the Borrower of such rejection promptly after it determines that the Bid Loan Request Confirmation does not substantially conform to the format of Exhibit C. Bid Loan Requests shall in each case refer to this Agreement and specify (i) the proposed Borrowing Date (which must be a Business Day), (ii) the aggregate principal amount thereof (which shall not be less than $5,000,000 and thereafter in integral multiples of $1,000,000) and (iii) the proposed Interest Period thereof. (b) Invitation to Bid. Upon receipt by the Administrative Agent of a Bid Loan Request Confirmation that conforms substantially to the format of Exhibit C hereto or is otherwise acceptable to the Administrative Agent, the Administrative Agent shall, by telephone, promptly confirmed by a telecopy or other form of facsimile communication in the form of Exhibit D hereto, invite each Bank to bid, on the terms and conditions of this Agreement, to make Bid Loans pursuant to the Bid Loan Request no later than 3:00 p.m. (Chicago time) on the date the Administrative Agent receives such Bid Loan Request. (c) Bids. Each Bank may, in its sole discretion, offer to make a Bid Loan or Bid Loans (a "Bid") to the Borrower responsive to the Bid Loan Request. Each Bid by a Bank must be received by the Administrative Agent by telephone not later than 8:45 a.m. (Chicago time) on the Business Day following the date the Administrative Agent receives a Bid Loan Request from the Borrower (the "Auction Date"), promptly confirmed in writing by a duly completed Confirmation of Bid delivered by telecopier or other means of facsimile communication substantially in the form of Exhibit E hereto, to be received by the Administrative Agent on the same day; provided, however, that any Bid made by the Administrative Agent must be made by telephone to the Borrower by no later than fifteen minutes prior to the time that Bids from the other Banks are required to be received. Each Bid and each Confirmation of Bid shall refer to this Agreement and specify (i) the principal amount of each Bid Loan that the Bank is willing to make to the Borrower and the type of Bid Loan (i.e., Stated Rate or Eurodollar), (ii) the interest rate (which shall be computed on the basis of a 360-day year and actual days elapsed and, in the case of a Eurodollar Bid Loan, shall be expressed in terms of the Bid Margin to be added to or subtracted from the Adjusted Eurodollar Rate for the Interest Period to be applicable to such Eurodollar Bid Loan) at which the Bank is prepared to make each Bid Loan and (iii) the Interest Period applicable thereto. The Administrative Agent shall reject any Bid if such Bid (i) does not specify all of the information specified in the immediately preceding sentence, (ii) contains any qualifying, conditional, or similar language, (iii) proposes terms other than or in addition to those set forth in the Bid Loan Request to which it responds, or (iv) is received by the Administrative Agent later than the times provided for above. Any Bid submitted by a Bank pursuant to this Section 2.2 shall be irrevocable and shall be promptly confirmed by a telecopy or other form of facsimile communication in the form of Exhibit E, provided that in all events the telephone Bid received by the Administrative Agent shall be binding on the relevant Bank and shall not be altered, modified, or in any other manner affected by any inconsistent terms contained in, or terms missing from, the Bank's Confirmation of Bid. Each offer contained in a Bid to make a Bid Loan in a certain amount, at a certain interest rate, and for a certain Interest Period is referred to herein as an "Offer". Section 2.3. Notice of Bids; Advice of Rate. The Administrative Agent shall give telephonic notice to the Borrower of the number of Bids made, the terms of the Offers contained in such Bids (including the interest rate(s) and Interest Period(s) applicable to each Bid, the maximum principal amount bid at each interest rate for each Interest Period, and the identity of the Bank making such Bid), such notice to be given by 9:15 a.m. (Chicago time) on the Auction Date. The Administrative Agent shall send a written summary of all Bids received by it to the Borrower by 2:00 p.m. (Chicago time) on the same day. The interest rates quoted for Eurodollar Bid Loans shall be expressed in terms of the Bid Margin to be added to or subtracted from the Adjusted Eurodollar Rate to be applicable to such Bid Loan. Section 2.4. Acceptance or Rejection of Bids. The Borrower may in its sole and absolute discretion, subject only to the provisions of this Section, irrevocably accept or reject any Offer contained in a Bid. No later than the later of 9:45 a.m. (Chicago time) or 30 minutes after receipt of telephonic notice of bids on the Auction Date, the Borrower shall give telephonic notice to the Administrative Agent of whether and to what extent it has decided to accept or reject any or all of the Offers contained in the Bids made in response to the related Bid Loan Request, which notice shall be promptly confirmed by telecopier or other form of facsimile communication to be received by the Administrative Agent on the proposed Borrowing Date; provided, however, that (a) the Borrower shall accept Offers for any of the maturities specified by the Borrower in the related Bid Loan Request Confirmation solely on the basis of ascending interest rates for each such Interest Period for each Stated Rate Bid Loan or Eurodollar Bid Loan as the case may be for such Interest Period, (b) if the Borrower declines to borrow, or if it is restricted by any other condition hereof from borrowing, the maximum principal amount of Bid Loans in respect of which Offers at a particular interest rate for a particular Interest Period have been made, then the Borrower shall accept a pro rata portion of each such Offer, based as nearly as possible on the ratio of the maximum aggregate principal amounts of Bid Loans for which each such Offer was made by each Bank (provided that, if the available principal amount of Bid Loans to be so allocated is not sufficient to enable Bid Loans to be so allocated to each relevant Bank in integral multiples of $1,000,000, then the Borrower may round allocations up or down in integral multiples not less than $100,000 as it shall deem appropriate), (c) the aggregate principal amount of all Offers accepted by the Borrower shall not exceed the maximum amount contained in the related Bid Loan Request Confirmation, and (d) no Offer of a Bid Loan shall be accepted in a principal amount less than $1,000,000 and thereafter in integral multiples of $500,000 (provided that such Offer may be rounded up or down as provided for in (b) above). Any telephone notice given by the Borrower pursuant to this Section shall be irrevocable and shall not be altered, modified, or in any other manner affected by any inconsistent terms contained in, or terms missing from, any written confirmation of such notice. Section 2.5. Notice of Acceptance or Rejection of Bids. (a) Notice to Banks Making Successful Bids. The Administrative Agent shall give telephonic notice to each Bank if any of the Offers contained in its Bid have been accepted (including the amount, the applicable interest rate and Interest Period for each accepted Offer) no later than 10:15 a.m. (Chicago time) on the Auction Date, and each successful bidder will thereupon become bound, subject to Section 6 and the other applicable conditions hereof, to make the Bid Loan(s) in respect of which its Offer has been accepted. As soon as practicable thereafter the Administrative Agent shall send a Notice of Acceptance of Bid substantially in the form of Exhibit F hereto to each such successful bidder; provided, however, that failure to give such Notice of Acceptance shall not affect the obligation of such successful bidder to disburse its Bid Loans as herein required. (b) Notice to all Banks. As soon as practicable after each Borrowing Date for Bid Loans, the Administrative Agent shall notify each Bank (whether or not its Bid or its Bids were successful) of the aggregate amount of Bid Loans advanced pursuant to the relevant Bid Loan Request on such Borrowing Date, the maturities thereof, and the lowest and highest interest rates at which Bid Loans were made for each maturity. (c) Disbursement of Bid Loans. Not later than 1:30 p.m. (Chicago time) on the Borrowing Date for each Borrowing of a Bid Loan(s), each Bank bound to make a Bid Loan(s) in accordance with Section 2.5(a) shall, subject to Section 6 and the other applicable conditions hereof, make available to the Administrative Agent the principal amount of each such Bid Loan in immediately available funds at the Administrative Agent's principal office in Chicago, Illinois. The Administrative Agent shall promptly thereafter make available to the Borrower like funds as received from each Bank, at such office of the Administrative Agent in Chicago, Illinois. (d) Interest on Bid Loans. The Borrower shall pay interest on the unpaid principal amount of each Bid Loan from the applicable Borrowing Date to the maturity thereof at the rate of interest applicable to such Bid Loan as determined pursuant to the above provisions (calculated on the basis of a 360 day year and the actual number of days elapsed) payable on the last day of the Interest Period applicable to such Bid Loan and at maturity (whether by acceleration or otherwise), and, if the applicable Interest Period is longer than 90 days, on each day occurring every 90 days after the date such Loan is made. Section 2.6. Telephonic Notice. Each Bank's telephonic notice to the Administrative Agent of its Bid pursuant to Section 2.2(c) hereof, and the Borrower's telephonic acceptance of any Offer contained in a Bid pursuant to Section 2.4 hereof, shall be irrevocable and binding on such Bank and the Borrower and shall not be altered, modified, or in any other manner affected by any inconsistent terms contained in, or missing from, any telecopy or other confirmation of such telephonic notice. It is understood and agreed by the parties hereto that the Administrative Agent shall be entitled to act (or to fail to act) hereunder in reasonable reliance on its records of any telephonic notices provided for herein and that the Administrative Agent shall not incur any liability to any Person in so doing if its records conflict with any telecopy or other confirmation of a telephone notice or otherwise, provided that the Administrative Agent has acted (or failed to act) in good faith. It is further understood and agreed by the parties hereto that the times of day as set forth in this Section 2.6 are for the convenience of all the parties for providing notices and that no party shall incur any liability or other responsibility for any failure to provide such notices within the specified times; provided, however, that the Administrative Agent shall have no obligation to notify the Borrower of any Bid received by it later than 8:45 a.m. (Chicago time) on the Auction Date, and no acceptance by the Borrower of any Offer contained in such a Bid shall be effective to bind any Bank to make a Bid Loan, nor shall the Administrative Agent be under any obligation to notify any Person of an acceptance, if notice of such acceptance is received by the Administrative Agent later than the later of 9:45 a.m. (Chicago time) or 30 minutes after receipt of telephonic notice of bids on the Auction Date. Section 3. The Notes, Fees, Prepayments, Terminations and Application of Payments. Section 3.1. The Notes. All Loans made by each Bank to the Borrower hereunder shall be evidenced by a single Revolving Credit Note of the Borrower substantially in the form of Exhibit A hereto (individually, a "Revolving Note" or "Note" and together, the "Revolving Notes" or "Notes") payable to the order of such Bank, but the aggregate principal amount of indebtedness evidenced by such Revolving Note at any time shall be, and the same is to be determined by, the aggregate principal amount of all Loans made by such Bank to the Borrower pursuant hereto on or prior to the date of determination less the aggregate amount of principal repayments on such Loans received by or on behalf of such Bank on or prior to such date of determination. Each Revolving Note shall be dated as of the execution date of this Agreement, shall be delivered concurrently herewith, and shall be expressed to mature on the Termination Date and to bear interest as provided in Sections 1.2, 1.3 and 2 hereof. Each Bank shall record on its books or records or on a schedule to its Revolving Note the amount of each Loan made by it hereunder and all payments of principal and interest and the principal balance from time to time outstanding, provided that prior to any transfer of such Revolving Note all such amounts shall be recorded on a schedule to such Revolving Note. The record thereof, whether shown on such books or records or on a schedule to the Revolving Note, shall be prima facie evidence as to all such amounts; provided, however, that the failure of any Bank to record any of the foregoing shall not limit or otherwise affect the obligation of the Borrower to repay all Loans made hereunder together with accrued interest thereon. Upon the request of any Bank, the Borrower will furnish a new Revolving Note to such Bank to replace its outstanding Revolving Note and at such time the first notation appearing on the schedule on the reverse side of, or attached to, such Revolving Note shall set forth the aggregate unpaid principal amount of all Loans then outstanding from such Bank. Such Bank will cancel the outstanding Revolving Credit Note upon receipt of the new Revolving Note. Section 3.2. Facility Fee. For the period from the date hereof to and including the Termination Date, or such earlier date on which the Revolving Credit is terminated in whole pursuant to Section 3.5 hereof, the Borrower shall pay to the Administrative Agent for the account of the Banks a facility fee with respect to the Revolving Credit at the rate per annum (computed on a basis of a year of 365/366 days for the actual number of days elapsed) equal to the Applicable Margin in effect from time to time of the maximum amount of the Revolving Credit Commitments, calculated without regard to whether any credit is available or outstanding under the Revolving Credit (determined in each case after giving effect to any reductions thereof as specified in Section 3.5 hereof). Such fee shall be payable quarterly in arrears on the last day of each March, June, September and December commencing on the last day of December, 1997, and on the Termination Date, unless the Revolving Credit is terminated in whole on an earlier date, in which event the fees for the period from the date of the last payment made pursuant to this Section 3.2 through the effective date of such termination in whole shall be paid on the date of such earlier termination in whole. Section 3.3. Agent's Fees. The Borrower shall pay to and for the sole account of the appropriate Agent such fees as the Borrower and such Agent may agree upon in writing from time to time. Such fees shall be in addition to any fees and charges the Agents may be entitled to receive under the other Loan Documents. Section 3.4. (a) Optional Prepayments of Base Rate Loans. The Borrower shall have the privilege of prepaying without premium or penalty and in whole or in part (but if in part, then in a minimum principal amount of $5,000,000 or such greater amount which is an integral multiple of $1,000,000) any Borrowing of Base Rate Loans at any time upon prior telecopy or telephonic notice from the Borrower to the Administrative Agent on or before 11:00 a.m. (Chicago time) on the Business Day of such prepayment. Any amount prepaid under the Revolving Credit may, subject to the terms and conditions of this Agreement, be borrowed, repaid and borrowed again. (b) Optional Prepayments of Swingline Loans. The Borrower may prepay any borrowing of Swingline Loans, upon telephonic notice (which shall be promptly confirmed in writing by facsimile communication, telex or telegraph) by no later than 11:00 a.m. (Chicago time) on the date of such prepayment from the Borrower to the Administrative Agent, such prepayment to be made by the payment of the principal amount to be prepaid and accrued interest thereon and any compensation required by Section 9.4 hereof, if applicable; provided, however, that any such prepayment shall be in a principal amount of no less than $250,000 or such greater amount which is an integral multiple of $100,000, and after giving effect to any such prepayment the outstanding principal amount of any such borrowing of Swingline Loans prepaid in part shall not be less than $250,000 or such greater amount which is an integral multiple of $100,000. (c) Optional Prepayments of Eurodollar Loans. The Borrower may prepay any borrowing of Eurodollar Loans, upon telephonic notice (which shall be promptly confirmed in writing by facsimile communication, telex or telegraph) by no later than 11:00 a.m. (Chicago time) on the date of such prepayment from the Borrower to the Administrative Agent, such prepayment to be made by the payment of the principal amount to be prepaid and accrued interest thereon and any compensation required by Section 9.4 hereof, if applicable; provided, however, that any such prepayment shall be in a principal amount of no less than $10,000,000 or such greater amount which is an integral multiple of $1,000,000, and after giving effect to any such prepayment the outstanding principal amount of any such borrowing of Eurodollar Loans prepaid in part shall not be less than $10,000,000 or such greater amount which is an integral multiple of $1,000,000. (d) Mandatory Prepayments of Excess Borrowings. If at any time the Total Outstandings hereunder shall exceed the Revolving Credit Commitments, the Borrower shall immediately prepay Loans and Reimbursement Obligations outstanding for the Borrower's account and, if necessary, pledge cash collateral to the Administrative Agent to secure outstanding L/Cs issued for the Borrower's account, in an amount equal to such excess. Section 3.5. Revolving Credit Termination. The Borrower shall have the right at any time upon 5 days' prior notice to the Banks to terminate the Revolving Credit in whole or in part (but if in part in a minimum principal amount of $10,000,000 or such greater amount which is an integral multiple of $5,000,000); provided, however, that the Borrower may not terminate any portion of the Revolving Credit which represents outstanding Revolving Credit Obligations unless the Borrower contemporaneously prepays the same or, with respect to any outstanding L/Cs, pledges cash collateral to the Administrative Agent to secure the same. Section 3.6. Place and Application of Payments. All payments by the Borrower hereunder shall be made to the Administrative Agent at its office at 111 West Monroe Street, Chicago, Illinois 60690 and in immediately available funds, prior to 12:00 noon on the date of such payment. All such payments shall be made without setoff or counterclaim and without reduction for, and free from, any and all present and future levies, imposts, duties, fees, charges, deductions withholdings, restrictions or conditions of any nature imposed by any government or any political subdivision or taxing authority thereof. Any payments received after 12:00 noon Chicago time (or after any later time the Banks may otherwise direct) shall be deemed received upon the following Business Day. The Administrative Agent shall remit to each Bank its proportionate share of each payment of principal, interest and facility fees received by the Administrative Agent by 3:00 P.M. Chicago time on the same day of its receipt and its proportionate share of each such payment received by the Administrative Agent after 12:00 noon on the Business Day following its receipt by the Administrative Agent. In the event the Administrative Agent does not remit any amount to any Bank when required by the preceding sentence, the Administrative Agent shall pay to such Bank interest on such amount until paid at a rate per annum equal to the Fed Funds Rate. The Borrower hereby authorizes the Administrative Agent to automatically debit its designated account with Harris for any principal, interest and fees when due under the Notes, any L/C Agreements or this Agreement and to transfer the amount so debited from such account to the Administrative Agent for application as herein provided. Section 4. Definitions. Section 4.1. Certain Definitions. The terms hereinafter set forth when used herein shall have the following meanings: "Adjusted Eurodollar Rate" means a rate per annum determined pursuant to the following formula: Adjusted Eurodollar Rate = Eurodollar Rate ----------------------------------- 100% - Reserve Percentage "Administrative Agent" shall have the meaning specified in the first paragraph of this Agreement. "Affiliate" shall mean, for any Person, any other Person (including all directors and officers of such Person) that directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" means the power, directly or indirectly, to direct or cause the direction of management or policies of a Person (through ownership of voting securities, by contract or otherwise), provided that, in any event for purposes of the definition any Person that owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors of a corporation or 10% or more of the partnership or other ownership interests of any other Person will be deemed to control such corporation or other Person. "Agents" shall mean the Administrative Agent and the Syndication Agent. "Agreement" shall mean this Credit Agreement as supplemented and amended from time to time. "Annualized Average EBIT" shall mean with reference to any fiscal quarter, an amount equal to the EBIT of the Borrower and its Subsidiaries, each calculated on a consolidated basis in accordance with generally accepted accounting principles, for the eight consecutive fiscal quarters ending with such fiscal quarter divided by two; provided, that if the Borrower or any of its Subsidiaries shall have acquired any business, Property or Person during such eight fiscal quarters (whether before, on or after the date hereof), EBIT shall, to the extent the Borrower shall have delivered audited financial statements (or, if audited financial statements are not available to the Borrower, unaudited financial statements in form reasonably satisfactory to the Administrative Agent) for the acquired business, Property or Person for such period, be adjusted to reflect on a pro forma basis EBIT for such business, Property or Person as if such business, Property or Person had been acquired at the beginning of such period. "Applicable Margin" shall mean, with respect to the Facility Fee and each type of Loan described below, the rate of interest per annum shown below for the range of Pricing Ratio specified below:
Level I Level II Level III Level IV Level V - -------------------------------------------------------------------------------------------------------------------------- Pricing *0.75x ***0.75x and ***1.50x and ***2.25x and **3.00x Ratio *1.50x *2.25x ***3.00x - -------------------------------------------------------------------------------------------------------------------------- Fed Funds Rate .15% .25% .475% .675% 1.00% Loans - -------------------------------------------------------------------------------------------------------------------------- Base Rate Loans 0% 0% 0% 0% .25% - -------------------------------------------------------------------------------------------------------------------------- Eurodollar Loans .15% .25% .475% .675% 1.00% - -------------------------------------------------------------------------------------------------------------------------- Facility Fee .10% .12% .15% .20% .25% - --------------------------------------------------------------------------------------------------------------------------
- ------------------------------ * Less than ** More than *** Less than or equal to The Applicable Margins will be adjusted upon receipt of the Borrower's quarterly Compliance Certificate or Pricing Ratio Certificate for the fiscal quarter ended December 31, 1997 and at the close of every fiscal quarter thereafter. Not later than 5 Business Days after receipt by the Administrative Agent of the certificates called for by Section 7.4(c) or (f) hereof for each fiscal quarter, the Administrative Agent shall determine the Pricing Ratio for the applicable period and shall promptly notify the Borrower and the Banks of such determination and of any change in the Applicable Margins resulting therefrom. Any such change in the Applicable Margins shall be effective as of the forty-fifth (45th) day following the close of each fiscal quarter with respect to all Revolving Credit Loans and Swingline Loans outstanding on such date, and such new Applicable Margins shall continue in effect until the forty-fifth (45th) day following the close of the next succeeding fiscal quarter. Each determination of the Pricing Ratio and Applicable Margins by the Administrative Agent in accordance with this Section shall be conclusive and binding on the Borrower and the Banks absent manifest error. From the date hereof until the Applicable Margins are first adjusted pursuant hereto, the Applicable Margins shall be those set forth in Level III above. "Bank" and "Banks" shall have the meanings specified in the first paragraph of this Agreement. "Base Rate" means for any day the rate of interest announced by Harris from time to time as its prime commercial rate in effect on such day, with any change in the Base Rate resulting from a change in said prime commercial rate to be effective as of the date of the relevant change in said prime commercial rate (the "Harris Prime Rate"), provided that if the rate per annum determined by adding 1/2 of 1% to the rate at which Harris would offer to sell federal funds in the interbank market on or about 10:00 A.M. (Chicago time) on any day (the "Adjusted Fed Funds Rate") shall be higher than the Harris Prime Rate on such day, then the Base Rate for such day and for the succeeding day which is not a Business Day shall be such Adjusted Fed Funds Rate. The determination of the Adjusted Fed Funds Rate by the Administrative Agent shall be final and conclusive provided it has acted in good faith in connection therewith. "Base Rate Loan" shall mean a Revolving Credit Loan which bears interest as provided in Section 1.3(a) hereof. "Bid Loan" shall have the meaning specified in Section 2.1 hereof. "Borrower" shall have the meaning specified in the first paragraph of this Agreement. "Borrowing" means the total of Loans (other than Swingline Loans) of a single type made by the Banks to the Borrower on a single date and for a single Interest Period. Borrowings of Revolving Credit Loans are made ratably from the Banks according to their Revolving Credit Commitments. Borrowings of a Bid Loan or Bid Loans are made from a Bank or Banks in accordance with the procedures of Section 2 hereof. "Business Day" shall mean any day except Saturday or Sunday on which banks are open for business in Chicago, Illinois, and, with respect to Eurodollar Loans and Eurodollar Bid Loans, dealing in United States dollar deposits in London, England and Nassau, Bahamas. "Capitalized Lease" shall mean any lease or obligation for rentals which is required to be capitalized on a consolidated balance sheet of a Person and its Subsidiaries in accordance with generally accepted accounting principles, consistently applied. "Capitalized Lease Obligation" shall mean the present discounted value of the rental obligations under any Capitalized Lease. "Change of Control" shall mean the occurrence, after the date hereof, of (i) any Person or two or more Persons acting in concert acquiring beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Borrower (or other securities convertible into such securities) representing more than 20% of the combined voting power of all securities of the Borrower entitled to vote in the election of directors; or (ii) commencing after the date hereof, individuals who as of the date hereof were directors of the Borrower ceasing for any reason to constitute a majority of the Board of Directors of the Borrower unless the Persons replacing such individuals were nominated by the Board of Directors of the Borrower; or (iii) any Person or two or more Persons acting in concert acquiring by contract or otherwise, or entering into a contract or arrangement which upon consummation will result in its or their acquisition of, or control over, securities of the Borrower (or other securities convertible into such securities) representing more than 20% of the combined voting power of all securities of the Borrower entitled to vote in the election of directors. "Commitment Percentage" shall have the meaning set forth in Section 1.1(b) hereof. "Compliance Certificate" shall mean a Compliance Certificate in the form of Exhibit H attached hereto. "Debt" of any Person shall mean as of any time the same is to be determined, the aggregate (without duplication) of: (a) all indebtedness, obligations and liabilities with respect to borrowed money; (b) all guaranties, endorsements (other than any liability arising out of the endorsement of items for deposit or collection in the ordinary course of business) and other contingent obligations in respect of, or any obligations to purchase or otherwise acquire, indebtedness or securities of others or to purchase Property of others at the request or demand of any creditor of such Person; (c) all reimbursement and other obligations with respect to letters of credit (whether drawn or undrawn), banker's acceptances, customer advances and other extensions of credit whether or not representing obligations for borrowed money; (d) the aggregate amount of Capitalized Lease Obligations; (e) all indebtedness and liabilities secured by any lien or any security interest on any Property or assets of such Person, whether or not the same would be classified as a liability on a balance sheet; and (f) all indebtedness, obligations and liabilities representing the deferred purchase price of Property, excluding trade payables incurred in the ordinary course of business not more than 90 days past due; all computed and determined on a consolidated basis for such Person and its Subsidiaries after the elimination of intercompany items in accordance with generally accepted accounting principles consistent with those used in the preparation of the audit report referred to in Section 5.2 hereof. "EBIT" means, for any Person and with reference to any period, Net Income for such period plus all amounts deducted in arriving at such Net Income amount in respect of (i) Interest Expense for such period, plus (ii) federal, state and local income taxes for such period. "EBITDA" means, for any Person and with reference to any period, Net Income for such period plus all amounts deducted in arriving at such Net Income amount in respect of (i) Interest Expense for such period, plus (ii) federal, state and local income taxes for such period, plus (iii) all amounts properly charged for depreciation of fixed assets and amortization of intangible assets during such period on the books of such Person and its Subsidiaries. "Environmental Laws" shall mean all federal, state and local environmental, health and safety statutes and regulations, including without limitation all statutes and regulations establishing quality criteria and standards for air, water, land and toxic or hazardous wastes and substances. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Eurodollar Bid Loan" shall have the meaning specified in Section 2.1 hereof. "Eurodollar Loan" shall mean a Revolving Credit Loan which bears interest as provided in Section 1.3(b) hereof. "Eurodollar Rate" shall mean for each Interest Period applicable to a Eurodollar Loan or Eurodollar Bid Loan, (a) the LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate cannot be determined, the arithmetic average of the rates of interest per annum (rounded upwards, if necessary, to nearest one hundred-thousandth of a percentage point) at which deposits in U.S. dollars in immediately available funds are offered to the Administrative Agent at 11:00 a.m. (London, England time) two (2) Business Days before the beginning of such Interest Period by three (3) or more major banks in the interbank eurodollar market selected by the Administrative Agent for a period equal to such Interest Period and in an amount equal or comparable to the principal amount of the Eurodollar Loan or Eurodollar Bid Loan scheduled to be made by the Administrative Agent or, in the case of a Eurodollar Bid Loan, the applicable Bank (if other than the Administrative Agent) during such Interest Period. "Event of Default" shall mean any event or condition identified as such in Section 8.1 hereof. "Existing Agreements" shall have the meaning specified in Section 7.15 hereof. "Existing Banks" shall mean the lenders under each of the Existing Agreements. "Farmland MissChem, Ltd." means that certain Trinidad limited liability company equally owned by the Borrower and Farmland Industries, Inc. which was formed to develop the Farmland MissChem Project. "Farmland MissChem Project" means that certain project commenced by Farmland MissChem, Ltd. to develop an ammonia plant in Trinidad. "Farmland MissChem Project Contingent Obligations" means the contingent obligations described on Exhibit J hereto. "Fed Funds Rate" shall have the meaning specified in Section 1.7(c) hereof. "Fed Funds Rate Loan" shall mean a Swingline Loan that bears interest as provided in Section 1.3(c) hereof. "Fixed Fed Funds Rate" means with respect to each Interest Period applicable to a Fed Funds Loan, the rate of interest per annum as determined by the Administrative Agent at which term federal funds would be offered by the Administrative Agent on the first day of such Interest Period to major banks in the interbank market upon request by such major banks for a period equal to such Interest Period and in an amount equal to the principal amount of the Fed Funds Loan scheduled to be outstanding during such Interest Period. Each determination of the Fed Funds Rate made by the Administrative Agent in accordance with this paragraph shall be conclusive and binding on the Borrower except in the case of manifest error or willful misconduct. "Fixed Rate Loan" shall mean any Offered Rate Loan, Eurodollar Loan, Bid Loan or Fed Funds Rate Loan. "Harris" shall have the meaning specified in the first paragraph of this Agreement. "Interest Coverage Ratio" shall mean, with reference to each fiscal quarter of the Borrower and its Subsidiaries, the ratio of (x) Annualized Average EBIT to (y) Interest Expense for the preceding four fiscal quarters. "Interest Expense" shall mean, for any Person and with reference to any period, the sum of all interest charges (including imputed interest charges with respect to Capitalized Lease Obligations, all amortization of debt discount and expense and all fees relating to letters of credit accrued and all net obligations pursuant to interest rate hedging agreements) of such Person and its Subsidiaries for such period determined on a consolidated basis in accordance with generally accepted accounting principles, consistently applied; provided, that if the Borrower or any of its Subsidiaries shall have acquired any business, Property or Person during such period (whether before, on or after the date hereof), Interest Expense shall, to the extent the Borrower shall have delivered audited financial statements (or, if audited financial statements are not available to the Borrower, unaudited financial statements in form reasonably satisfactory to the Administrative Agent) for the acquired business, Property or Person for such period, be adjusted to reflect on a pro forma basis Interest Expense for such business, Property or Person as if such business, Property or Person had been acquired at the beginning of such period. "Interest Period" shall mean with respect to (a) any Eurodollar Loan, the period used for the computation of interest commencing on the date the relevant Eurodollar Loan is made, continued or effected by conversion and concluding on the date one, two, three, six or twelve months thereafter as selected by the Borrower in its notice as provided herein, (b) any Eurodollar Bid Loan, the period used for the computation of interest commencing on the date the relevant Eurodollar Bid Loan is made, continued or effected by conversion and concluding on the date one, two, three, four, five or six months thereafter as selected by the Borrower in its notice as provided herein, (c) any Offered Rate Loan, the period used for the computation of interest commencing on the date of the relevant Offered Rate Loan is made and concluding on the date 1 to 7 days thereafter as agreed by the Administrative Agent and the Borrower, (d) any Fed Funds Rate Loan, the period used for the computation of interest commencing on the date of the relevant Fed Funds Rate Loan and concluding on the date 1 to 7 days thereafter as agreed by the Administrative Agent and the Borrower, and (e) any Stated Rate Bid Loan, the period commencing on, as the case may be, the creation, continuation or conversion date with respect to such Stated Rate Bid Loan and ending one (1) to one hundred eighty (180) days thereafter as selected by the Borrower in its notice as provided herein; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day, unless in the case of an Interest Period for a Eurodollar Loan or Eurodollar Bid Loan the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) no Interest Period may extend beyond the Termination Date; and (iii) the interest rate to be applicable to each Loan for each Interest Period shall apply from and including the first day of such Interest Period to but excluding the last day thereof. For purposes of determining an Interest Period, a month means a period starting on one day in a calendar month and ending on a numerically corresponding day in the next calendar month, provided, however, if an Interest Period begins on the last day of a month or if there is no numerically corresponding day in the month in which an Interest Period is to end, then such Interest Period shall end on the last Business Day of such month. "Inventory" shall mean all raw materials, work in process, finished goods, and goods held for sale or lease or furnished or to be furnished under contracts of service in which any Borrower or any Subsidiary now has or hereafter acquires any right. "L/C" shall have the meaning set forth in Section 1.5 hereof. "L/C Agreement" shall have the meaning set forth in Section 1.5 hereof. "L/C Administrative Fee" has the meaning specified in Section 1.5(a) hereof. "L/C Issuance Fee" has the meaning specified in Section 1.5(a) hereof. "L/C Participation Fee" shall have the meaning specified in Section 1.5(a) hereof. "Leverage Ratio" shall mean, as of any date of determination, the ratio of (x) the sum of all Debt of the Borrower and its Subsidiaries (determined on a consolidated basis) to (y) an amount equal to the EBITDA of the Borrower and its Subsidiaries, each calculated on a consolidated basis in accordance with generally accepted accounting principles, for the eight consecutive fiscal quarters ending with such fiscal quarter divided by two; provided, that if the Borrower or any of its Subsidiaries shall have acquired any business, Property or Person during such eight fiscal quarters (whether before, on or after the date hereof), EBITDA shall, to the extent the Borrower shall have delivered audited financial statements (or, if audited financial statements are not available to the Borrower, unaudited financial statements in form reasonably satisfactory to the Administrative Agent) for the acquired business, Property or Person for such period, be adjusted to reflect on a pro forma basis EBITDA for such business, Property or Person as if such business, Property or Person had been acquired at the beginning of such period. "LIBOR Index Rate" shall mean, for any Interest Period applicable to a Eurodollar Loan, the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a period equal to such Interest Period, which appears on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the day two Business Days before the commencement of such Interest Period. "Loan" shall mean Revolving Credit Loans, Swingline Loans and Bid Loans, and each of them singly, and the term "type" of Loan refers to its status as a Fed Funds Rate Loan, an Offered Rate Loan, a Eurodollar Loan, Eurodollar Bid Loan, a Base Rate Loan or Stated Rate Bid Loan. "Loan Documents" shall mean this Agreement and any and all exhibits hereto, the Notes and the L/C Agreements. "Net Income" means, for any Person and with reference to any period, the net income of such Person and its Subsidiaries for such period determined on a consolidated basis in accordance with generally accepted accounting principles, consistently applied, but excluding in any event any items of extraordinary gain or loss. "Net Tangible Assets" of the Borrower means, at any date, the gross book value as shown by the accounting books and records of the Borrower of all Property both real and personal of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with generally accepted accounting principles, (including appropriate deductions for any minority interests in property of Subsidiaries of the Borrower) less (a) the gross book value of all its licenses, patents, patent applications, copyrights, trademarks, trade names, goodwill, non-compete agreements or organizational expenses and other like intangibles, (b) unamortized Debt discount and expense, (c) all reserves for depreciation, obsolescence, depletion and amortization of its Properties, and (d) all other proper reserves against assets which in accordance with generally accepted accounting principles should be provided in connection with the business conducted by the Borrower or its Subsidiaries. "Note" and "Notes" shall have the meanings specified in Section 3.1 hereof. "Offered Rate Loan" shall mean a Swingline Loan that bears interest as provided in Section 1.2(a) hereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation. "Person" shall mean and include any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, county, city, municipal, or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Plan" shall mean any employee benefit plan covering any officers or employees of a Borrower or any Subsidiary, any benefits of which are, or are required to be, guaranteed by the PBGC. "Potential Default" shall mean any event or condition specified in Section 8.1 hereof which, with the lapse of time, or giving of notice, or both, would constitute an Event of Default. "Pricing Ratio" shall mean, as of any date or determination, the ratio of (x) the sum of all Debt of the Borrower and its Subsidiaries (determined on a consolidated basis) to (y) EBITDA of the Borrower and its Subsidiaries, each determined on a consolidated basis in accordance with generally accepted accounting principles, for the four fiscal quarters ending on such date of determination; provided, that if the Borrower or any of its Subsidiaries shall have acquired any business, Property or Person during such four fiscal quarters (whether before, on or after the date hereof), EBITDA shall, to the extent the Borrower shall have delivered audited financial statements (or, if audited financial statements are not available to the Borrower, unaudited financial statements in form reasonably satisfactory to the Administrative Agent) for the acquired business, Property or Person for such period, be adjusted to reflect on a pro forma basis EBITDA for such business, Property or Person as if such business, Property or Person had been acquired at the beginning of such period. "Pricing Ratio Certificate" has the meaning specified in Section 7.4(f) hereof. "Property" shall mean all assets and properties of any nature whatsoever, whether real or personal, tangible or intangible, including without limitation intellectual property. "Reimbursement Obligations" has the meaning specified in Section 1.6 hereof. "Rentals" shall mean and include all fixed rents (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the Property to the extent such termination or surrender occurs during the relevant period) payable by the Borrower or a Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Borrower or a Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. Capitalized Lease Obligations shall be excluded from the definition of Rentals for all purposes hereunder other than the use of the term "rentals" in the definitions of Capitalized Lease and Capitalized Lease Obligations. "Required Banks" shall mean any Bank or Banks which in the aggregate have more than 50% of the Revolving Credit Commitments or, if at the time no Revolving Credit Commitments are in effect, any Bank or Banks which in the aggregate hold more than 50% of the aggregate unpaid principal balance of the Loans and Reimbursement Obligations then outstanding. "Reserve Percentage" means the daily arithmetic average maximum rate at which reserves (including, without limitation, any supplemental, marginal and emergency reserves) are imposed on member banks of the Federal Reserve System during the applicable Interest Period by the Board of Governors of the Federal Reserve System (or any successor) under Regulation D on "eurocurrency liabilities" (as such term is defined in Regulation D), subject to any amendments of such reserve requirement by such Board or its successor, taking into account any transitional adjustments thereto. For purposes of this definition, the Eurodollar Loans shall be deemed to be eurocurrency liabilities as defined in Regulation D without benefit or credit for any prorations, exemptions or offsets under Regulation D. As of the date hereof, the Reserve Percentage is zero. "Restricted Payments" shall have the meaning specified in Section 7.8 hereof. "Revolving Credit" shall have the meaning specified in the first paragraph of this Agreement. "Revolving Credit Commitment" and "Revolving Credit Commitments" shall have the meanings specified in Section 1.1(b) hereof. "Revolving Credit Loan" and "Revolving Credit Loans" shall have the meanings specified in Section 1.1(a) hereof. "Revolving Credit Obligations" shall have the meaning specified in Section 1.1(a) hereof. "Revolving Note" or "Revolving Notes" shall have the meanings specified in Section 3.1 hereof. "Senior Notes" shall mean the Borrower's 7.25% Senior Notes due 2017 in the original aggregate principal amount of $200,000,000, and Borrower's Senior Notes to be hereafter issued in the original aggregate principal amount of up to $100,000,000, to be governed by the same Indenture as the other Senior Notes herein described. "Subsidiary" shall mean, for any Person, any corporation or other entity of which more than fifty percent (50%) of the outstanding stock or comparable equity interests having ordinary voting power for the election of the Board of Directors of such corporation or similar governing body in the case of a non- corporation (irrespective of whether or not, at the time, stock or other equity interests of any other class or classes of such corporation or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by such Person or by one or more of its Subsidiaries. "Syndication Agent" shall have the meaning specified in the first paragraph of this Agreement. "Tangible Net Worth" means, for any Person and at any time the same is to be determined, the total shareholders' equity (including capital stock, additional paid-in capital and retained earnings after deducting treasury stock and excluding minority interests in Subsidiaries) which would appear on the balance sheet of such Person and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles, consistently applied, less the sum of the aggregate book value of all assets which would be classified as intangible assets under generally accepted accounting principles, consistently applied, including, without limitation, goodwill, patents, trademarks, trade names, copyrights, franchises and deferred charges (including, without limitation, unamortized debt discount and expense, organization costs and deferred research and development expense, but excluding deferred taxes) and similar assets and the write-up of assets above cost. "Telerate Page 3750" shall mean the display designated as "Page 3750" on the Telerate Service (or such other page as may replace Page 3750 on that service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for U.S. Dollar deposits). "Termination Date" shall have the meaning set forth in Section 1.1(a) hereof. "Total Assets" shall mean, at any time the same is to be determined, the aggregate of all items which would be listed as an asset on a balance sheet of a Person and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. "Total Outstandings" shall mean the aggregate principal amount of all Loans plus the aggregate principal amount of all unpaid Reimbursement Obligations plus the maximum amount available to be drawn under all L/Cs outstanding under this Agreement. Section 4.2. Accounting Terms. Any accounting term not otherwise specifically defined in this Agreement shall have the meaning customarily given to such term in accordance with generally accepted accounting principles, consistently applied. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purpose of this Agreement, it shall be done in accordance with generally accepted accounting principles, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. Section 5. Representations and Warranties. The Borrower represents and warrants to the Banks as follows: Section 5.1. Organization and Qualification; Non-Contravention. The Borrower is duly organized, validly existing and in good standing under the laws of the state of its incorporation, has full and adequate corporate power to carry on its business as now conducted, is duly licensed or qualified in all jurisdictions wherein the nature of its activities requires such licensing or qualifying, except where the failure to be so licensed or qualified would not result in a material adverse change in the Properties, business or operations of the Borrower and its Subsidiaries taken as a whole, has full right, power and authority to enter into this Agreement and the other Loan Documents to which it is a party, to make the borrowings herein provided for, to execute and issue its Notes in evidence thereof, and to perform each and all of the matters and things herein and therein provided for; and this Agreement and the other Loan Documents do not, nor does the performance or observance by the Borrower of any of the matters or things provided for in the Loan Documents, contravene any provision of law or any charter or by-law provision or any material covenant, indenture or agreement of or affecting the Borrower or its Properties. Section 5.2. Financial Reports. The Borrower has heretofore delivered to each Bank a copy of the annual audit report as of June 30, 1997, and the accompanying financial statements of the Borrower and its Subsidiaries and unaudited financial statements of the Borrower and its Subsidiaries as of, and for the interim period ending September 30, 1997. Such financial statements have been prepared in accordance with generally accepted accounting principles (except for the omission of footnotes and subject to normal year-end audit adjustments with respect to such unaudited statements) on a basis consistent, except as otherwise noted therein, with that of the previous fiscal year or period and fairly reflect in all material respects the financial position of the Borrower and its Subsidiaries as of the dates thereof, and the results of its operations for the periods covered thereby. The Borrower and its Subsidiaries have no material contingent liabilities other than as indicated on said financial statements and since said date of September 30, 1997, there has been no material adverse change in the condition, financial or otherwise, of the Borrower or any Subsidiary, except those disclosed in writing to the Banks prior to the date of this Agreement. Section 5.3. Litigation; Tax Returns; Approvals. Except as disclosed on Schedule 5.3 hereto, there is no litigation, labor controversy or governmental proceeding pending, nor to the knowledge of the Borrower threatened, against the Borrower or any Subsidiary which could reasonably be expected to result in any material adverse change in the Properties, business or operations of the Borrower and its Subsidiaries taken as a whole. All federal, state and local income tax returns for the Borrower and its Subsidiaries required to be filed have been filed on a timely basis, and all amounts required to be paid as shown by said returns have been paid. There are no pending or, to the Borrower's knowledge, material threatened objections to or controversies in respect of the United States federal, state or local income tax returns of the Borrower and its Subsidiaries for any fiscal year. No authorization, consent, license, exemption or filing or registration with any court or governmental department, agency or instrumentality, is or will be necessary to the valid execution, delivery or performance by the Borrower of the Loan Documents to which it is a party, except such as have been previously obtained or where the failure to obtain such authorization, consent, license, exemption or make such filing or registration would not result in a material adverse change in the Properties, business or operations of the Borrower and its Subsidiaries taken as a whole. Section 5.4. Regulation U. Neither the Borrower nor any Subsidiary is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan or other extension of credit hereunder will be used to purchase or carry any margin stock (other than the Borrower's common stock) or to extend credit to others for such a purpose. Section 5.5. No Default. The Borrower is in full compliance with all of the terms and conditions of this Agreement, and no Potential Default or Event of Default is existing under this Agreement. Section 5.6. ERISA. The Borrower and its Subsidiaries are in compliance in all material respects with ERISA to the extent applicable to it and neither the Borrower nor any Subsidiary has received any notice to the contrary from the PBGC or any other governmental entity or agency. No steps have been taken to terminate any Plan, and no contribution failure has occurred with respect to any Plan sufficient to give rise to a lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Plan which might result in the incurrence by the Borrower or any Subsidiary of any material liability, fine or penalty. Neither the Borrower nor any Subsidiary has any contingent liability with respect to any post-retirement benefit under a Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA. Section 5.7. Debt and Security Interests. The Borrower and its Subsidiaries have no Debt except Debt permitted by Section 7.10 hereof, and there are no security interests, liens or encumbrances on any of the assets or Property of the Borrower or any Subsidiary except for those permitted by Section 7.9 hereof. Section 5.8. Subsidiaries. The Borrower's only Subsidiaries as of the date hereof are identified on Exhibit G hereof. Each of said Subsidiaries is duly organized and validly existing under the laws of the state or country of its incorporation or formation, has full and adequate corporate power to carry on its business as now conducted, and is duly licensed or qualified to do business in all jurisdictions wherein the nature of its activities requires such licensing or qualification, except where the failure to be so licensed or qualified would not result in a material adverse change in the Properties, business or operations of the Borrower and its Subsidiaries taken as a whole. Section 5.9. Accurate Information. No information, exhibit or report furnished by the Borrower or any Subsidiary to the Banks in connection with the negotiation or performance of the Loan Documents contains any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading in light of the circumstances in which made. Section 5.10. Enforceability. This Agreement is and the other Loan Documents to which the Borrower is a party are the legal, valid and binding agreements of the Borrower, enforceable against it in accordance with its terms, except as may be limited by (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws or judicial decisions for the relief of debtors or the limitation of creditors' rights generally; and (b) any equitable principles relating to or limiting the rights of creditors generally or any equitable remedy which may be granted to cure any defaults. Section 5.11. Restrictive Agreements. The Borrower is not a party to any contract or agreement, or subject to any charge or other corporate restriction, which affects its ability to execute, deliver and perform the Loan Documents to which it is a party and repay its indebtedness, obligations and liabilities under the Loan Documents or which materially and adversely affects the financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole, or would materially and adversely affect the Borrower's legal ability to repay the indebtedness, obligations and liabilities under the Loan Documents, or any Bank's or the Agent's rights under the Loan Documents to which the Borrower is a party. Section 5.12. No Violation of Law. Neither the Borrower nor any Subsidiary is in violation of any law, statute, regulation, ordinance, judgment, order or decree applicable to it which violation would materially and adversely affect any Bank's or any Agent's rights under the Loan Documents or the financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole. Section 5.13. No Default Under Other Agreements. Neither the Borrower nor any Subsidiary is in default with respect to any note, indenture, loan agreement, mortgage, lease, deed, or other agreement to which it is a party or by which it or its Property is bound, which default would materially and adversely affect any Bank's or any Agent's rights under the Loan Documents or the financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole. Section 5.14. Status Under Certain Laws. Neither the Borrower nor any of its Subsidiaries is an "investment company" or a person directly or indirectly controlled by or acting on behalf of an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding Company," or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 5.15. Pari Passu. All payment obligations of the Borrower arising under or pursuant to this Agreement and the Notes will at all times rank pari passu with the Borrower's indebtedness evidenced by the Senior Notes. Section 6. Conditions Precedent. The obligation of the Banks or the Administrative Agent to make any Loan pursuant hereto shall be subject to the following conditions precedent: Section 6.1. Initial Extension of Credit. Prior to the initial Loan hereunder, the following conditions precedent shall have been satisfied: (a) the Borrower shall have delivered to the Administrative Agent for the benefit of the Banks in sufficient counterparts for distribution to the Banks: (i) the Notes (one for each Bank); (ii) good standing certificates for the Borrower issued by the states of Louisiana, New Mexico and Mississippi, as applicable, issued not more than 30 days before the date of this Agreement; (iii) copies of the Articles of Incorporation, and all amendments thereto, of the Borrower, certified by the Secretary of State of its state of incorporation not more than 30 days before the date of this Agreement; (iv) copies of the By-Laws, and all amendments thereto, of the Borrower, certified as true, correct and complete on the date hereof by the Secretary or Assistant Secretary of the Borrower; (v) copies, certified as true, correct and complete by the Secretary or Assistant Secretary of the Borrower, of resolutions regarding the transactions contemplated by this Agreement, duly adopted by the Board of Directors of the Borrower and satisfactory in form and substance to the Agents; (vi) a pay-off letter from the Existing Banks under each of the Existing Agreements; (vii) an incumbency and signature certificate for the Borrower satisfactory in form and substance to the Agents; and (viii) copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Agreement and the other Loan Documents to the extent the Administrative Agent may reasonably request. (b) the Agents shall have received all fees payable to them in connection with the execution and delivery of this Agreement and the transactions contemplated hereby; (c) the Administrative Agent shall have received evidence of insurance required by Section 7.3 hereof; and (d) the Administrative Agent shall have received copies, certified as true, correct and complete by the secretary or assistant secretary of the Borrower, of the indenture, prospectus and underwriting agreement relating to the Borrower's Senior Notes. Section 6.2. Each Extension of Credit. As of the time of the making of each Loan hereunder (including the initial Loan): (a) each of the representations and warranties set forth in Section 5 hereof shall be and remain true and correct as of said time, except that the representations and warranties made under Section 5.2 shall be deemed to refer to the most recent financial statements furnished to the Banks pursuant to Section 7.4 hereof; (b) the Borrower shall be in full compliance with all of the terms and conditions hereof, and no Potential Default or Event of Default shall have occurred and be continuing; (c) with respect to each Loan requested by the Borrower, the aggregate amount of the Total Outstandings shall not exceed the Revolving Credit Commitments; (d) immediately after giving effect thereto, not more than 25% of the value of the Borrower's and its Subsidiaries' assets that are subject to Sections 7.9 and 7.12 hereof shall constitute margin stock (as defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System); and (e) with respect to each Swingline Loan requested by the Borrower, the aggregate principal amount of all Swingline Loans outstanding after giving effect to the requested Swingline Loans shall not exceed $25,000,000; and the request by the Borrower, for any Loan pursuant hereto shall be and constitute a warranty to the foregoing effects. Section 6.3. Legal Matters. Legal matters incident to the execution and delivery of the Loan Documents shall be satisfactory to each of the Banks and their legal counsel; and prior to the initial Loan hereunder, the Administrative Agent shall have received the favorable written opinion of Hughes & Luce, L.L.P., counsel for the Borrower, substantially in the form of Exhibit I, in substance satisfactory to each of the Banks and their respective legal counsel. Section 6.4. Documents. The Administrative Agent shall have received copies (executed or certified, as may be appropriate) of all documents or proceedings taken in connection with the execution and delivery of the Loan Documents to the extent the Required Banks or their respective legal counsel reasonably request. Section 7. Covenants. It is understood and agreed that so long as credit is in use or available under this Agreement or any amount remains unpaid on any Note, Reimbursement Obligation or L/C except to the extent compliance in any case or cases is waived in writing by the Required Banks: Section 7.1. Maintenance of Property. The Borrower will, and will cause each Subsidiary to, keep and maintain all of its Properties necessary or useful in its business in good condition, and make all necessary renewals, replacements, additions, betterments and improvements thereto; provided, however, that nothing in this Section shall prevent the Borrower or any Subsidiary from discontinuing the operating and maintenance of any of its properties if such discontinuance is, in the judgment of the Borrower, desirable in the conduct of its business and not disadvantageous in any material respect to the Banks as holders of the Notes. Section 7.2. Taxes. The Borrower will, and will cause each Subsidiary to, duly pay and discharge all taxes, rates, assessments, fees and governmental charges upon or against the Borrower or any Subsidiary or against its Properties in each case before the same becomes delinquent and before penalties accrue thereon unless and to the extent that the same is being contested in good faith and by appropriate proceedings and for which adequate reserves have been established in accordance with generally accepted accounting principles, consistently applied. Section 7.3. Maintenance of Insurance. The Borrower will, and will cause each Subsidiary to, maintain insurance with insurers recognized as financially sound and reputable by prudent business persons in such forms and amounts and against such risks as is usually carried by companies engaged in similar business and owning similar Properties in the same general areas in which the Borrower or such Subsidiary operates. The Borrower shall provide the Administrative Agent with evidence of insurance maintained by it upon the Administrative Agent's request. Section 7.4. Financial Reports. The Borrower will, and will cause each Subsidiary to, maintain a system of accounting in accordance with sound accounting practice and will furnish promptly to each of the Banks and their duly authorized representatives such information respecting the business and financial condition of the Borrower and its Subsidiaries as may be reasonably requested and, without any request, will furnish each Bank: (a) as soon as available, and in any event within 45 days after the close of the first three fiscal quarters of each fiscal year of the Borrower a copy of consolidated and consolidating balance sheets and income statements and consolidated cash flow statements for the Borrower and its Subsidiaries for such quarterly period and the year to date and for the corresponding periods of the preceding fiscal year, all in reasonable detail, prepared by the Borrower and certified by the chief financial officer of the Borrower; (b) as soon as available, and in any event within 90 days after the close of each fiscal year of the Borrower, a copy of the audit report for such year and accompanying financial statements, including consolidated balance sheets and statements of income for the Borrower and its Subsidiaries showing in comparative form the figures for the previous fiscal year of the Borrower, all in reasonable detail, prepared and certified by Arthur Andersen LLP or other independent public accountants of nationally recognized standing selected by the Borrower and reasonably satisfactory to the Administrative Agent and copies of unaudited consolidating balance sheets and statements of income for the Borrower and its Subsidiaries; (c) together with the financial statements required by (a) and (b) above, a Compliance Certificate in the form of Exhibit H attached hereto, prepared and signed by the President or Chief Financial Officer of the Borrower; (d) promptly upon their becoming available, copies of all registration statements and regular periodic reports, if any, which the Borrower shall have filed with the Securities and Exchange Commission or any governmental agency substituted therefor, or any national securities exchange, including copies of the Borrower's form 10-K annual report, including financial statements audited by Arthur Andersen LLP or other independent public accountants of nationally recognized standing selected by the Borrower and reasonably satisfactory to the Required Banks, its form 10-Q quarterly report to the Securities and Exchange Commission and any Form 8-K filed by the Borrower with the Securities and Exchange Commission; (e) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; and (f) as soon as available, and in any event within 45 days after the close of the last fiscal quarter of each fiscal year of the Borrower and its Subsidiaries either (i) a Compliance Certificate in the form required by subsection (c) above or (ii) a certificate in the form of Exhibit K attached hereto (the "Pricing Ratio Certificate") prepared and signed by the President or Chief Financial Officer of the Borrower showing the calculation of the Pricing Ratio as of the last day of the fiscal quarter of the Borrower and its Subsidiaries then ended. Section 7.5. Inspection. The Borrower shall, and shall cause each Subsidiary to, permit each of the Banks, by their representatives and Administrative Agents, to inspect any of the Properties, corporate books and financial records of the Borrower, and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and its Subsidiaries and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with, and to be advised as to the same by, its officers at such reasonable times and reasonable intervals as the Required Banks may reasonably request. The Borrower shall pay the reasonable costs and expenses of the Administrative Agent in connection with any inspection of the Borrower's and its Subsidiaries' books and records. Section 7.6. Consolidation and Merger. The Borrower will not, and will not permit any Subsidiary to, consolidate with or merge into any Person, or permit any other Person to merge into it, except that: (a) any Person may merge into the Borrower or any Subsidiary so long as: (i) the Borrower or Subsidiary shall be the surviving entity; provided, however, that the Borrower or Subsidiary is not required to be the surviving entity if the Borrower's or Subsidiary's board of directors becomes a majority of the board of directors of the surviving entity immediately upon completion of such transaction and such surviving Person shall agree to assume each and every obligation of the Borrower or Subsidiary pursuant to this Agreement and any other Loan Document; (ii) the Person merging with or into the Borrower or a Subsidiary of a Borrower shall be in the same line or a related line of business as the Borrower or a Subsidiary of the Borrower; (iii) the board of directors (or equivalent governing body) of such Person shall have given its prior effective written consent or approval of such merger; and (iv) no Potential Default or Event of Default shall exist before or after giving effect to such merger; and (b) any Subsidiary may be merged or consolidated with or into: (i) the Borrower, if the Borrower should be the continuing or surviving corporation, or (ii) any other Subsidiary. Section 7.7. Transactions with Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction, including without limitation, the purchase, sale, lease or exchange of any Property, or the rendering of any service, with any Affiliate of the Borrower except in the ordinary course of, and pursuant to the reasonable requirements of, the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate of the Borrower, provided that the Borrower may continue to engage in the following practices: (i) allocation of overhead expenses among the Borrower and its Subsidiaries, (ii) special product pricing among the Borrower and one or more Subsidiaries and Mississippi Chemical Company, L.P., and (iii) the floor price provision of the ammonia purchase agreements between the Borrower and Farmland MissChem Limited. Section 7.8. Dividends and Certain Other Restricted Payments. The Borrower will not (a) declare or pay any dividends or make any distribution on any class of its capital stock (other than dividends payable solely in its capital stock) or (b) directly or indirectly purchase, redeem or otherwise acquire or retire any of its capital stock (except out of the proceeds of, or in exchange for, a substantially concurrent issue and sale of capital stock) or (c) make any other distributions with respect to its capital stock (collectively, "Restricted Payments"); unless no Potential Default or Event of Default shall exist before and after giving effect thereto. Section 7.9. Liens. The Borrower will not, and will not permit any Subsidiary to, pledge, mortgage or otherwise encumber or subject to or permit to exist upon or be subjected to any lien, charge or security interest of any kind (including any conditional sale or other title retention agreement and any lease in the nature thereof), on any of its Properties of any kind or character at any time owned by the Borrower or any Subsidiary, other than: (a) liens, pledges or deposits for worker's compensation, unemployment insurance, old age benefits or social security obligations, taxes, assessments, statutory obligations or other similar charges, good faith deposits made in connection with tenders, contracts or leases to which the Borrower or any Subsidiary is a party or other deposits required to be made in the ordinary course of business, provided in each case the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate proceedings and adequate reserves have been provided therefor in accordance with generally accepted accounting principles and that the obligation is not for borrowed money, customer advances, trade payables, or obligations to agricultural producers; (b) the pledge of assets for the purpose of securing an appeal or stay or discharge in the course of any legal proceedings, provided that the aggregate amount of liabilities of the Borrower or any Subsidiary so secured by a pledge of property permitted under this subsection (b) including interest and penalties thereon, if any, shall not be in excess of $10,000,000 at any one time outstanding; (c) liens, pledges, mortgages, security interests or other charges existing on the date hereof and disclosed in the audited financial statements referred to in Section 5.2 hereof; (d) liens for property taxes and assessments or governmental charges or levies which are not yet due and payable; (e) liens incidental to the conduct of business or the ownership of properties and assets (including warehousemen's and attorneys' liens and statutory landlords' liens) or other liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money, provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings and adequate reserves have been provided therefor in accordance with generally accepted accounting principles, consistently applied; (f) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Borrower and its Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Borrower and its Subsidiaries; (g) the interests of lessors under Capitalized Leases; (h) liens (including the owner's interest in Property involved in Sale and Leaseback transactions permitted by Section 7.17 of this Agreement to which the Borrower or any Subsidiary is a party) not otherwise permitted under this Section 7.9 on Property of the Borrower and its Subsidiaries securing Debt and the indebtedness, obligations and liabilities of the Borrower and its Subsidiaries under Sale and Leaseback transactions to which they are a party that is in an aggregate outstanding principal amount not exceeding 15% of the amount (determined in accordance with generally accepted accounting principles consistently applied as shown on the most recent financial statements delivered pursuant to Section 7.4 hereof) of the Borrower's Net Tangible Assets, provided that the aggregate amount of all such indebtedness, obligations and liabilities secured by liens and security interests on the Borrower's Subsidiaries' Property shall not exceed $10,000,000 at any time; (i) liens upon tangible personal property acquired after the date hereof (by purchase, construction or otherwise), or upon other Property acquired after the date hereof as a capital expenditure, by the Borrower or any of its Subsidiaries, each of which liens either (A) existed on such Property before the time of its acquisition and was not created in anticipation thereof or (B) was created solely for the purpose of securing indebtedness representing, or incurred to finance, refinance or refund, the cost of such Property; provided that (I) no such lien shall extend to or cover any Property of the Borrower or any of its Subsidiaries other than the Property so acquired, (II) the principal amount of indebtedness secured by any such lien shall not exceed the fair market value of such Property at the time of acquisition, and (C) the aggregate principal amount of all indebtedness secured by such liens shall not at any one time exceed $10,000,000; and (j) liens, mortgages and security interests securing the Borrower's and its Subsidiaries' indebtedness, obligations and liabilities in connection with industrial revenue bonds issued for their account which are permitted by Section 7.10(b), provided such liens, mortgages and security interests attach only to the Property financed by such industrial revenue bonds. Section 7.10. Borrowings and Guaranties. The Borrower will not, and will not permit any Subsidiary to, issue, incur, assume, create or have outstanding any Debt, nor be or remain liable, whether as endorser, surety, guarantor or otherwise, for or in respect of any Debt of any other Person, other than: (a) indebtedness of the Borrower arising under or pursuant to this Agreement or the other Loan Documents; (b) indebtedness of the Borrower or the Borrower's Subsidiaries relating to industrial revenue bonds issued for their account, and any indebtedness issued or incurred to refinance such indebtedness, provided that the aggregate principal amount of all such indebtedness shall not exceed $14,500,000 at any time; (c) the liability of the Borrower and its Subsidiaries arising out of the endorsement for deposit or collection of commercial paper received in the ordinary course of business; (d) indebtedness of the Borrower and its Subsidiaries existing on the date hereof and disclosed to the Banks in the financial statements referred to in Section 5.2 hereof, except indebtedness outstanding under the Existing Agreements, and any indebtedness issued or incurred to refinance any of the foregoing permitted indebtedness, provided that the principal amount of such refinancing indebtedness does not exceed the principal amount of the indebtedness being refinanced; (e) the liability of the Borrower with respect to the Farmland MissChem Project Contingent Obligations disclosed on Exhibit J hereto; (f) indebtedness of the Borrower evidenced by the Senior Notes; (g) indebtedness for borrowed money or Capitalized Lease Obligations of the Borrower and its Subsidiaries not otherwise permitted by this Section 7.10; provided that (i) the Borrower is in compliance with Section 7.20 hereof, and (ii) the aggregate principal amount of all such indebtedness of the Borrower's Subsidiaries permitted hereby shall not exceed $10,000,000 at any time; (h) the indebtedness of any Subsidiary to the Borrower or any other Subsidiary; and (i) indebtedness of the Borrower to Deposit Guaranty National Bank in an aggregate principal amount not to exceed $5,000,000 outstanding at any time. Section 7.11. Investments, Loans, Advances and Acquisitions. The Borrower will not, and will not permit any Subsidiary to, make or retain any investment (whether through the purchase of stock, obligations or otherwise) in or make any loan or advance to, any other Person, or acquire substantially as an entirety the Property or business of any other Person, other than: (a) investments in direct obligations of the United States of America or of any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America, provided that any such obligations shall mature within one year of the date of issuance thereof; (b) investments in commercial paper rated either P-1 by Moody's Investors Services, Inc. or A-1 by Standard & Poor's Corporation maturing within 270 days of the date of issuance thereof; (c) investments in certificates of deposit issued by any United States commercial bank or a branch located in the United States of a foreign commercial bank in each case having capital and surplus of not less than $500,000,000 which have a maturity of one year or less; (d) investments in repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in subsection (a) above entered into with any bank meeting the qualifications specified in subsection (c) above, provided all such agreements require physical delivery of the securities securing such repurchase agreement, except those delivered through the Federal Reserve Book Entry System; (e) investments in money market funds that invest solely, and which are restricted by their respective charters to invest solely, in investments of the type described in the immediately preceding subsections (a), (b), (c) and (d) above; (f) marketable general obligations of a state, a territory or a possession of the United States, or any political subdivision of any of the foregoing, or the District of Columbia, unconditionally secured by the full faith and credit of such state, territory, possession, political subdivision or district provided that such state, territory, possession, political subdivision or district has general taxing authority and the power to levy such taxes as may be required for the payment of principal and interest thereof; provided that such obligations are rated in either of the two top rating categories established by the national rating agencies for such obligations; (g) marketable corporate debt securities having an A credit rating or better by Standard & Poor's Corporation or Moody's Investors Service; (h) investments shown on the financial statements referred to in Section 5.2; (i) investments by the Borrower or any Subsidiary in, and loans and advances from the Borrower or any Subsidiary to, any Subsidiary; (j) other investments by the Borrower in and acquisitions (other than by merger or consolidation) by the Borrower of the Property or business of any Person or a majority of the capital stock or other equity interests of any other Person, provided that: (i) such Person shall be in the same or a related line of business as the Borrower or one or more Subsidiaries; (ii) the board of directors (or equivalent governing body) of such Person shall have given its prior effective written consent or approval of such acquisition; and (iii) no Potential Default or Event of Default shall exist before or after giving effect to such acquisition; (k) investments in or loans to Farmland MissChem Ltd. in connection with the Farmland MissChem Project in an aggregate amount not exceeding $100,000,000 at any one time outstanding; (l) investments, loans and advances by the Borrower not otherwise permitted under this Section 7.11 in an aggregate amount not exceeding 10% of the Tangible Net Worth of the Borrower at any one time outstanding; and (m) loans and advances to employees in the ordinary course of business, provided the aggregate principal amount of all such loans and advances made by the Borrower's Subsidiaries shall not exceed $500,000 at any time. Section 7.12. Sale of Property. The Borrower will not and will not permit any Subsidiary to, sell, lease, assign, transfer or otherwise dispose of (whether in one transaction or in a series of related transactions) all or a material part of its Property to any other Person during each fiscal year of the Borrower; provided, however, that the Borrower and its Subsidiaries may make: (a) sales of its Inventory in the ordinary course of business, (b) sales or leases of its machinery and equipment that is obsolete, unusable or not needed for the Borrower's or such Subsidiary's operations in the ordinary course of its business, (c) Sale and Leaseback transactions permitted by Section 7.17 hereof; and (d) during each fiscal year, sales of Property having a fair market value up to 10% of the Total Assets of the Borrower; provided, however, sales of Property having a fair market value greater than 10% and up to 15% of the Total Assets of the Borrower shall be permitted, so long as the amount of the net proceeds of such sale in excess of 10% of the Total Assets of the Borrower are applied to the payment of Debt or reinvested in a line of business of the Borrower or one or more of its Subsidiaries. For purposes of this Section, "material part" shall mean Property having a fair market value in excess of an amount equal to 5% of the Total Assets of the Borrower. Section 7.13. Notice of Suit or Adverse Change in Business or Default. The Borrower shall, as soon as possible, and in any event within five (5) days after the Borrower learns of the following, give written notice to the Banks of (a) any material proceeding(s) being instituted or threatened to be instituted by or against the Borrower or any Subsidiary in any federal, state, local or foreign court or before any commission or other regulatory body (federal, state, local or foreign), (b) any material adverse change in the business, Property or condition, financial or otherwise of the Borrower and (c) the occurrence of any Potential Default or Event of Default. Section 7.14. ERISA. The Borrower will, and will cause each Subsidiary to, promptly pay and discharge all obligations and liabilities arising under ERISA of a character which if unpaid or unperformed is likely to result in the imposition of a lien against any of its Property and will promptly notify the Administrative Agent of (a) the occurrence of any reportable event (as defined in ERISA) which might result in the termination by the PBGC of any Plan, (b) receipt of any notice from PBGC of its intention to seek termination of any such Plan or appointment of a trustee therefor, and (c) its intention to terminate or withdraw from any Plan. The Borrower will not, and will not permit any Subsidiary to, terminate any such Plan or withdraw therefrom unless it shall be in compliance with all of the terms and conditions of this Agreement after giving effect to any liability to PBGC resulting from such termination or withdrawal. Section 7.15. Use of Proceeds. The Borrower shall use the proceeds of the initial Revolving Credit Loans to pay all or part of the indebtedness, obligations and liabilities of the Borrower and the other obligors under the Credit Agreement dated as of December 23, 1996 by and among the Borrower, Mississippi Phosphates Corporation, Mississippi Potash, Inc., Harris Trust and Savings Bank, as Administrative Agent and the banks named therein, and that certain agreement dated as of December 23, 1996, by and among Triad Nitrogen, Inc. (formerly known as First Mississippi Corporation), Harris Trust and Savings Bank, as administrative Agent, and the lenders named therein (collectively, the "Existing Agreements"), and of all other Loans made hereunder and of all L/C's issued hereby for general corporate purposes, including, without limitation, financing acquisitions, capital expenditures, refinancing existing debt and providing for ongoing working capital needs. Section 7.16. Compliance with Laws, etc. The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders, including Environmental Laws, such compliance to include (without limitation) the maintenance and preservation of its corporate or partnership existence and qualification as a foreign corporation or partnership. Section 7.17. Sale and Leaseback Transactions. Neither the Borrower nor any of its Subsidiaries shall, directly or indirectly, enter into any arrangement with any Person providing for the Borrower or a Subsidiary to lease or rent Property that the Borrower or a Subsidiary has or will sell or otherwise transfer to such Person (a "Sale and Leaseback"), unless the aggregate net cash proceeds of any such sales in any 12-month period are less than 10% of the fair market value of the Borrower's Total Assets; provided, that (a) the Borrower may enter into Sale and Leaseback transactions in which the aggregate net cash proceeds of such sales, together with the net cash proceeds of all sales permitted by Section 7.12(d) of this Agreement, in any 12-month period exceeds 10% but not 15% of the fair market value of the Borrower's Total Assets so long as the amount of the net proceeds of such sales in excess of 10% of the Borrower's Total Assets are reinvested in a line of business of the Borrower or any of its Subsidiaries, and (b) no Subsidiary may be a party to any Sale and Leaseback transaction entered into after the date of this Agreement if the net cash proceeds of such sales, together with the net cash proceeds of all sales of such Subsidiaries' Property permitted by Section 7.12(d) of this Agreement, would exceed $10,000,000. Section 7.18. Fiscal Quarters. The Borrower shall not change its fiscal quarters. Section 7.19. New Subsidiaries. Neither the Borrower nor any Subsidiary shall, directly or indirectly, organize or acquire any Subsidiary not listed on Exhibit G attached hereto, except as permitted by Section 7.11(j) hereof. Section 7.20. Maximum Leverage Ratio. The Borrower will, as of the last day of each fiscal quarter of the Borrower maintain a Leverage Ratio less than or equal to 4.00 to 1.0. Section 7.21. Minimum Interest Coverage Ratio. The Borrower will, as of the last day of each fiscal quarter of the Borrower, maintain an Interest Coverage Ratio of not less than 2.50 to 1.0. Section 7.22. Minimum Tangible Net Worth. The Borrower will, as of the last day of each fiscal quarter of the Borrower specified below, maintain its Tangible Net Worth in an amount not less than: (a) for the fiscal quarter ending September 30, 1997, $188,112,500; and (b) for each fiscal quarter ending thereafter, the sum of (i) the minimum amount of Tangible Net Worth the Borrower was required to maintain during the immediately preceding fiscal quarter, plus (ii) 50% of the Borrower's Net Income (but not less than zero) for such fiscal quarter then ended. Section 7.23. Operating Leases. The Borrower will not, and will not permit any Subsidiary to, enter into any rental agreement or lease as lessee of real or personal property, which is not a Capitalized Lease if the aggregate of Rentals payable in any fiscal year under all such rental agreements or leases would exceed the greater of 4% of the Borrower's Total Assets at the beginning of such fiscal year or $25,000,000. Section 7.24. No Restrictions on Subsidiaries. The Borrower shall not and shall not permit any of its Subsidiaries directly or indirectly to create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary (or the Borrower, in the case of subsection (e) of this Section) to: (a) pay dividends or make any other distribution on any of such Subsidiary's capital stock or other equity interests owned by the Borrower or any Subsidiary of the Borrower; (b) pay any indebtedness owed to the Borrower or any other Subsidiary; (c) make loans or advances to the Borrower or any other Subsidiary; (d) transfer any of its Property or assets to the Borrower or any other Subsidiary; or (e) merge or consolidate with or into the Borrower or any other Subsidiary of the Borrower; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by this Agreement, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 7.24 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, and (iv) clause (d) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof. Section 8. Events of Default and Remedies. Section 8.1. Definitions. Any one or more of the following shall constitute an Event of Default: (a) Default in the payment when due of (i) any principal of any Note or any Reimbursement Obligation (ii) any interest on any Note or any Reimbursement Obligation which continues unremedied for 5 Business Days, whether at the stated maturity thereof or at any other time provided in this Agreement, or default in the payment when due of any fee or other amount payable by the Borrower pursuant to this Agreement, which continues unremedied for 5 Business Days; (b) Default in the observance or performance of any covenant set forth in Sections 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.15, 7.16, 7.18, 7.19, 7.20, 7.21, 7.22, 7.23 or 7.24 hereof; (c) Default in the observance or performance of any other covenant, condition, agreement or provision hereof or any of the other Loan Documents and such default shall continue for 30 days after written notice thereof to the Borrower by any Bank; (d) Default shall occur under any evidence of Debt in a principal amount exceeding $10,000,000 issued or assumed or guaranteed by the Borrower or any Subsidiary, or under any mortgage, agreement or other similar instrument under which the same may be issued or secured and such default shall continue for a period of time sufficient to permit the acceleration of maturity of any indebtedness evidenced thereby or outstanding or secured thereunder; (e) Any representation or warranty made by the Borrower herein or in any Loan Document or in any statement or certificate furnished by it pursuant hereto or thereto, proves untrue in any material respect as of the date made or deemed made pursuant to the terms hereof; (f) Any judgment or judgments, writ or writs, or warrant or warrants of attachment, or any similar process or processes in an aggregate amount in excess of $10,000,000 shall be entered or filed against the Borrower or any Subsidiary or against any of their respective Property or assets and remain unstayed and undischarged for a period of 30 days from the date of its entry; (g) Any reportable event (as defined in ERISA) which constitutes grounds for the termination of any Plan or for the appointment by the appropriate United States District Court of a trustee to administer or liquidate any such Plan, shall have occurred and be continuing thirty (30) days after written notice to such effect shall have been given to the Borrower by any Bank; or any such Plan shall be terminated; or a trustee shall be appointed by the appropriate United States District Court to administer any such Plan; or the Pension Benefit Guaranty Corporation shall institute proceedings to administer or terminate any such Plan; (h) The Borrower or any Subsidiary shall (i) have entered involuntarily against it an order for relief under the Bankruptcy Code of 1978, as amended, (ii) admit in writing its inability to pay, or not pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, conservator, liquidator or similar official for it or any substantial part of its property, (v) file a petition seeking relief or institute any proceeding seeking to have entered against it an order for relief under the Bankruptcy Code of 1978, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, marshaling of assets, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, or (vi) fail to contest in good faith any appointment or proceeding described in Section 8.1(i) hereof; (i) A custodian, receiver, trustee, conservator, liquidator or similar official shall be appointed for the Borrower or any Subsidiary of the Borrower or any substantial part of its respective Property, or a proceeding described in Section 8.1(i)(v) shall be instituted against the Borrower or any Subsidiary of the Borrower and such appointment continues undischarged or any such proceeding continues undismissed or unstayed for a period of 90 days; or (j) a Change of Control shall occur. Section 8.2. Remedies for Non-Bankruptcy Defaults. When any Event of Default, other than an Event of Default described in subsections (h) and (i) of Section 8.1 hereof, has occurred and is continuing, the Administrative Agent, if directed by the Required Banks, shall give written notice to the Borrower and take any or all of the following actions: (a) terminate the remaining Revolving Credit Commitments hereunder on the date (which may be the date thereof) stated in such notice, (b) declare the principal of and the accrued interest on the Notes and Reimbursement Obligations to be forthwith due and payable and thereupon the Notes and Reimbursement Obligations including both principal and interest, shall be and become immediately due and payable without further demand, presentment, protest or notice of any kind, and (c) take any action or exercise any remedy under any of the Loan Documents or exercise any other action, right, power or remedy permitted by law. Any Bank may exercise the right of set off with regard to any deposit accounts or other accounts or investments maintained by the Borrower with any of the Banks. Section 8.3. Remedies for Bankruptcy Defaults. When any Event of Default described in subsections (h) or (i) of Section 8.1 hereof has occurred and is continuing, then the Notes and Reimbursement Obligations shall immediately become due and payable without presentment, demand, protest or notice of any kind, and the obligation of the Banks to extend further credit pursuant to any of the terms hereof shall immediately terminate. Section 8.4. L/Cs. Promptly following the acceleration of the maturity of the Notes pursuant to Section 8.2 or 8.3 hereof, the Borrower shall immediately pay to the Administrative Agent for the benefit of the Banks the full aggregate amount of all outstanding L/Cs issued for the Borrower's account hereunder. The Administrative Agent shall hold all such funds and proceeds thereof as additional collateral security for the obligations of the Borrower to the Banks under the Loan Documents. The amount paid under any of the L/Cs for which the Borrower has not reimbursed the Banks shall bear interest from the date of such payment at the default rate of interest specified in Section 1.3(d)(i) hereof. Section 9. Change in Circumstances Regarding Fixed Rate Loans. Section 9.1. Change of Law. Notwithstanding any other provisions of this Agreement or any Note to the contrary, if at any time after the date hereof with respect to Fixed Rate Loans, any Bank shall determine in good faith that any change in applicable law or regulation or in the interpretation thereof makes it unlawful for such Bank to make or continue to maintain any Fixed Rate Loan or to give effect to its obligations as contemplated hereby, such Bank shall promptly give notice thereof to the Borrower describing in reasonable detail the basis for such Bank's determination and to the Administrative Agent to such effect, and such Bank's obligation to make, relend, continue or convert any such affected Fixed Rate Loans under this Agreement shall terminate until it is no longer unlawful for such Bank to make or maintain such affected Loan. The Borrower shall prepay the outstanding principal amount of any such affected Fixed Rate Loan made to it, together with all interest accrued thereon and all other amounts due and payable to the Banks under Section 9.4 of this Agreement, on the earlier of the last day of the Interest Period applicable thereto and the first day on which it is illegal for such Bank to have such Loans outstanding; provided, however, the Borrower may borrow a principal amount equal to the principal amount of such affected Loan by means of another type of Loan available hereunder, subject to all of the terms and conditions of this Agreement. Section 9.2. Unavailability of Deposits or Inability to Ascertain the Adjusted Eurodollar Rate. Notwithstanding any other provision of this Agreement or any Note to the contrary, if prior to the commencement of any Interest Period any Bank shall determine (i) that deposits in the amount of any Eurodollar Loan scheduled to be outstanding are not available to it in the relevant market by reason of circumstances affecting the interbank Eurodollar market generally or (ii) by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Adjusted Eurodollar Rate, then such Bank shall promptly give telephonic or telex notice thereof to the Borrower, the Administrative Agent and the other Banks (such notice to be confirmed in writing), and the obligation of the Banks to make, continue or convert any such Fixed Rate Loan in such amount and for such Interest Period shall terminate until deposits in such amount and for the Interest Period selected by the Borrower shall again be readily available in the relevant market and adequate and reasonable means exist for ascertaining the Adjusted Eurodollar Rate. Upon the giving of such notice, the Borrower may elect to either (i) pay or prepay, as the case may be, such affected Loan or (ii) reborrow such affected Loan as another type of Loan available hereunder, subject to all terms and conditions of this Agreement. Section 9.3. Taxes and Increased Costs. With respect to the Fixed Rate Loans, if any Bank shall determine in good faith that any change in any applicable law, treaty, regulation or guideline (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System) or any new law, treaty, regulation or guideline, or any interpretation of any of the foregoing by any governmental authority charged with the administration thereof or any central bank or other fiscal, monetary or other authority having jurisdiction over such Bank or its lending branch or the Fixed Rate Loans contemplated by this Agreement (whether or not having the force of law) ("Change in Law") shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirements against assets held by, or deposits in or for the account of, or Loans by, or any other acquisition of funds or disbursements by, such Bank (other than reserves included in the determination of the Adjusted Eurodollar Rate); (ii) subject such Bank, any Fixed Rate Loan or any Note to any tax (including, without limitation, any United States interest equalization tax or similar tax however named applicable to the acquisition or holding of debt obligations and any interest or penalties with respect thereto), duty, charge, stamp tax, fee, deduction or withholding in respect of this Agreement, any Fixed Rate Loan or any Note except such taxes as may be measured by the overall net income of such Bank or its lending branch and imposed by the jurisdiction, or any political subdivision or taxing authority thereof, in which such Bank's principal executive office or its lending branch is located; (iii) change the basis of taxation of payments of principal and interest due from the Borrower to such Bank hereunder or under any Note (other than by a change in taxation of the overall net income of such Bank); or (iv) impose on such Bank any penalty with respect to the foregoing or any other condition regarding this Agreement, any Fixed Rate Loan or any Note; and such Bank shall determine that the result of any of the foregoing is to increase the cost (whether by incurring a cost or adding to a cost) to such Bank of making or maintaining any Fixed Rate Loan hereunder or to reduce the amount of principal or interest received by such Bank, then, if such Bank is generally imposing payments for increased costs on its similarly situated customers, the Borrower shall pay to such Bank from time to time as specified by such Bank such additional amounts as such Bank shall reasonably determine are sufficient to compensate and indemnify it for such increased cost or reduced amount. If any Bank makes such a claim for compensation, it shall provide to the Borrower a certificate setting forth such increased cost or reduced amount as a result of any event mentioned herein specifying such Change in Law, and such certificate shall be conclusive and binding on the Borrower as to the amount thereof except in the case of manifest error. Upon the imposition of any such cost, the Borrower may prepay any affected Loan, subject to the provisions of Sections 3.4 and 9.4 hereof. Section 9.4. Funding Indemnity. (a) In the event any Bank shall incur any loss, cost, expense or premium (including, without limitation, any loss, cost, expense or premium incurred by reason of the liquidation or re-employment of deposits or other funds acquired by such Bank to fund or maintain any Fixed Rate Loan or the relending or reinvesting of such deposits or amounts paid or prepaid to such Bank) as a result of: (i) any payment or prepayment of a Fixed Rate Loan on a date other than the last day of the then applicable Interest Period; (ii) any failure by the Borrower to borrow, continue or convert any Fixed Rate Loan on the date specified in the notice given pursuant to Sections 1.7 or 2.4 hereof; or (iii) the occurrence of any Event of Default; then, upon the demand of such Bank, the Borrower shall pay to such Bank such amount as will reimburse such Bank for such actual loss, cost or expense (the calculation of such loss or expense shall include a credit (not in excess of such loss or expense) for the interest to be earned by such Bank as a result of redepositing such amount in the relevant interbank market). (b) If any Bank makes a claim for compensation under this Section 9.4, it shall provide to the Borrower a certificate setting forth the amount of such loss, cost or expense in reasonable detail and such certificate shall be conclusive and binding on the Borrower as to the amount thereof except in the case of manifest error. Section 9.5. Lending Branch. Each Bank may, at its option, elect to make, fund or maintain its Eurodollar Loans hereunder at the branch or office specified opposite its signature on the signature page hereof or such other of its branches or offices as such Bank may from time to time elect, subject to the provisions of Section 1.7(b) hereof. Section 9.6. Discretion of Bank as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood however, that for the purposes of this Agreement all determinations hereunder shall be made as if the Banks had actually funded and maintained each Fixed Rate Loan during each Interest Period for such Loan through the purchase of deposits in the relevant interbank market having a maturity corresponding to such Interest Period and bearing an interest rate equal to the interest rate applicable thereto (exclusive of the Applicable Margin) for such Interest Period. Section 9.7. Mitigation of Circumstances; Replacement of Affected Banks. (a) Banks' Duty to Mitigate. Each Bank agrees that, as promptly as practicable after it becomes aware of the occurrence of an event or the existence of a condition that would cause it to be affected under Section 1.9, 9.1, 9.2 or 9.3 hereof, such Bank will, after written notice to the Borrower, to the extent not inconsistent with such Bank's internal policies and customary business practices, use its best efforts to make, fund or maintain the affected Fixed Rate Loan or issue or participate in the affected L/C, as the case may be, through another lending office of such Bank if as a result thereof the unlawfulness which would otherwise require payment of such Fixed Rate Loan pursuant to Section 9.1 or 9.2 hereof would cease to exist or the circumstances which would otherwise terminate such Bank's obligation to make such Fixed Rate Loan under Section 9.1 or 9.2 hereof would cease to exist or the increased costs which would otherwise be required to be paid in respect of such Fixed Rate Loan or L/C pursuant to Section 1.9 or 9.3 hereof would be materially reduced, and if, as determined by such Bank, in its sole discretion, the making, funding or maintaining of such Fixed Rate Loan, or issuance or participation in such L/C, as the case may be, through such other lending office would not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. The Borrower hereby agrees to pay all reasonable expenses incurred by each such Bank in utilizing another lending office pursuant to this Section 9.7(a). (b) Replacement of Affected Banks. At any time any Bank is affected by any condition or circumstance set forth in Section 1.9, 9.1, 9.2 or 9.3, and so long as no Event of Default, or Potential Default exists, (i) the Borrower may replace such affected Bank as a party to this Agreement with one or more other banks or financial institutions reasonably acceptable to the Administrative Agent, (and upon notice from the Borrower such affected Bank shall assign, pursuant to Section 11.17, without recourse or warranty, its Commitment, its Loans, its Notes and all of its other rights and obligations hereunder to such replacement banks or other financial institutions for a purchase price equal to the sum of the principal amount of the Loans so assigned, all accrued and unpaid interest thereon, its ratable share of all accrued and unpaid facility fees and its ratable share of the remaining unpaid Reimbursement Obligations owed to the affected Bank and all other amounts owed to such Bank under the Loan Documents) and/or (ii) the Borrower may (and, if the Borrower replaces any affected Bank in part as provided in clause (i) above, concurrently with such replacement the Borrower shall) cause such affected Bank to cease to be a party hereto by terminating the Commitment of such Bank, paying the principal amount of such affected Bank's Loans, all accrued and unpaid interest thereon, all accrued and unpaid facility fees owed to such affected Bank and the remaining unpaid Reimbursement Obligations owed to such affected Bank and any other amounts due to such affected Bank under the Loan Documents, in each case to the extent not assigned and purchased pursuant to clause (i) above, and such affected Bank shall thereupon cease to be a party hereto. Section 10. The Agents. Section 10.1. Appointment and Powers. (a) Harris is hereby appointed by the Banks as Administrative Agent under the Loan Documents and each of the Banks hereby irrevocably authorizes the Administrative Agent to act as the Administrative Agent of such Bank. The Administrative Agent agrees to act as such upon the express conditions contained in the Loan Documents. (b) Bank of Montreal is hereby appointed by the Administrative Agent as Syndication Agent under the Loan Documents and the Administrative Agent hereby irrevocably authorizes the Syndication Agent to act as the Syndication Agent for the Banks. The Syndication Agent agrees to act as such upon the express conditions contained in the Loan Documents. Section 10.2. Powers. The Agents shall have and may exercise such powers hereunder as are specifically delegated to the Agents by the terms of the Loan Documents, together with such powers as are incidental thereto. The Agents shall have no implied duties to the Banks nor any obligation to the Banks to take any action under the Loan Documents except any action specifically provided by the Loan Documents to be taken by the Agents. Section 10.3. General Immunity. Neither any Agent nor any of such Agent's directors, officers, agents or employees shall be liable to the Banks or any Bank for any action taken or omitted to be taken by it or them under the Loan Documents or in connection therewith except for its or their own gross negligence or willful misconduct. Section 10.4. No Responsibility for Loans, Recitals, etc. No Agent shall (i) be responsible to the Banks for any recitals, reports, statements, warranties or representations contained in the Loan Documents or furnished pursuant thereto, (ii) be responsible for any Loans by any other Bank hereunder, or (iii) be bound to ascertain or inquire as to the performance or observance of any of the terms of the Loan Documents. In addition, no Agent nor such Agent's counsel shall be responsible to the Banks for the enforceability or validity of any of the Loan Documents. Section 10.5. Right to Indemnity. The Banks hereby indemnify each Agent for any actions taken in accordance with this Section 10, and each Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be indemnified to its satisfaction by the Banks pro rata against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action, other than any liability which may arise out of such Agent's gross negligence or willful misconduct. Section 10.6. Action Upon Instructions of Banks. Each Agent agrees, upon the written request of the Required Banks, to take any action of the type specified in the Loan Documents as being within such Agent's rights, duties, powers or discretion. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with written instructions signed by the Required Banks (or all of the Banks, as applicable), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Banks and on all holders of the Notes. In the absence of a request by the Required Banks, each Agent shall have authority, in its sole discretion, to take or not to take any action, unless the Loan Documents specifically require the consent of the Required Banks or all of the Banks. Section 10.7. Employment of Agents and Counsel. Each Agent may execute any of its duties as Agent hereunder by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Banks, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it in good faith and with reasonable care. Each Agent shall be entitled to advice and opinion of legal counsel concerning all matters pertaining to the duties of the agencies hereby created. Section 10.8. Reliance on Documents; Counsel. Each Agent shall be entitled to rely upon any note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of legal counsel selected by such Agent. Section 10.9. May Treat Payee as Owner. Each Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with such agent. Any request, authority or consent of any person, firm or corporation who at the time of making such request or giving such authority or consent is the holder of any such Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note issued in exchange therefor. Section 10.10. Agents' Reimbursement. Each Bank agrees to reimburse each Agent pro rata in accordance with its Commitment Percentage for any reasonable out-of-pocket expenses (including fees and charges for inspections) not reimbursed by the Borrower (a) for which such Agent is entitled to reimbursement by the Borrower under the Loan Documents and (b) for any other reasonable expenses incurred by such Agent on behalf of the Banks, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents. Section 10.11. Rights as a Bank. With respect to its commitment, Loans made by it, L/Cs issued by it, and the Notes issued to it, each Agent shall have the same rights and powers hereunder as any Bank and may exercise the same as though it were not such Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include each Agent in its individual capacity to the extent, if any, of its Revolving Credit Commitment. Each Agent may accept deposits from, lend money to, and generally engage in any kind of banking or trust business with the Borrower as if it were not such Agent. Section 10.12. Bank Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon any Agent or any other Bank and based on the financial statements referred to in Section 5.2 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into the Loan Documents. Each Bank also acknowledges that it will, independently and without reliance upon any Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents. Section 10.13. Resignation of Agent. Subject to the appointment of a successor Agent, each Agent may resign as Agent for the Banks under this Agreement and the other Loan Documents at any time by thirty days' notice in writing to the Banks. Such resignation shall take effect upon appointment of such successor. The Required Banks shall have the right to appoint a successor Agent, subject to the prior consent of the Borrower (which consent shall not be unreasonably withheld or delayed), who shall be entitled to all of the rights of, and vested with the same powers as, the original Agent under the Loan Documents. In the event a successor Agent shall not have been appointed within the sixty day period following the giving of notice by any Agent, such Agent may appoint its own successor. Resignation by any Agent shall not affect or impair the rights of such Agent under Sections 10.5 and 10.10 hereof with respect to all matters preceding such resignation. Any successor Agent must be either a Bank or a national banking association or a bank chartered in any State of the United States, in each case having capital and surplus of not less than $500,000,000. Section 10.14. Duration of Agency. The agency established by Section 10.1 hereof shall continue, and Sections 10.1 through and including this Section 10.14 shall remain in full force and effect, until the Notes and all other amounts due hereunder and thereunder shall have been paid in full and the Banks' commitments to extend credit to or for the benefit of the Borrower shall have terminated or expired. Section 10.15. Syndication Agent and Co-Agent. Nothing in this Agreement shall impose any obligation on Bank of Montreal in its capacity as Syndication Agent or on Credit Agricole Indosuez as Co-Agent. Section 11. Miscellaneous. Section 11.1. Amendments and Waivers. Any term, covenant, agreement or condition of this Agreement and the other Loan Documents may be amended only by a written amendment executed by the Borrower, the Required Banks and, if the rights or duties of the Administrative Agent are materially affected thereby, the Administrative Agent, or compliance therewith only may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Borrower shall have obtained the consent in writing of the Required Banks and, if the rights or duties of the Administrative Agent are materially affected thereby, the Administrative Agent, provided, however, that without the consent in writing of the holders of all outstanding Notes and unpaid Reimbursement Obligations, or all Banks if no Notes or Obligations are outstanding, no such amendment or waiver shall (a) change the amount or postpone the date of payment of any scheduled payment or required prepayment of principal of the Notes or Reimbursement Obligations or extend the term of any L/C at a time that the Borrower would not be able to obtain a Loan or L/C hereunder or reduce the rate or extend the time of payment of interest on the Notes or Reimbursement Obligations, or reduce the amount of principal thereof, or modify any of the provisions of the Notes with respect to the payment or prepayment thereof, (b) give to any Note or Reimbursement Obligations any preference over any other Notes or Reimbursement Obligations, (c) amend the definition of Required Banks, (d) alter, modify or amend the provisions of this Section 11.1, (e) change the amount or term of any of the Banks' Revolving Credit Commitments or the fees required under Section 3.2 or the L/C Participation Fee required under Section 1.5(a) hereof, or (f) alter, modify or amend any Bank's right hereunder to consent to any action, make any request or give any notice. Any such amendment or waiver shall apply equally to all Banks and the holders of the Notes and Reimbursement Obligations and shall be binding upon them, upon each future holder of any Note and Reimbursement Obligation and upon the Borrower, whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived. Section 11.2. Waiver of Rights. No delay or failure on the part of the Administrative Agent or any Bank or on the part of the holder or holders of any Note or Reimbursement Obligation in the exercise of any power or right shall operate as a waiver thereof, nor as an acquiescence in any Potential Default or Event of Default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies hereunder of the Administrative Agent, the Banks and of the holder or holders of any Notes are cumulative to, and not exclusive of, any rights or remedies which any of them would otherwise have. Section 11.3. Several Obligations. The commitments of each of the Banks hereunder shall be the several obligations of each Bank and the failure on the part of any one or more of the Banks to perform hereunder shall not affect the obligation of the other Banks hereunder, provided that nothing herein contained shall relieve any Bank from any liability for its failure to so perform. In the event that any one or more of the Banks shall fail to perform its commitment hereunder, all payments thereafter received by the Administrative Agent on the principal of Loans and Reimbursement Obligations hereunder, shall be distributed by the Administrative Agent to the Banks making such additional Loans ratably as among them in accordance with the principal amount of additional Loans made by them until such additional Loans shall have been fully paid and satisfied. All payments on account of interest shall be applied as among all the Banks ratably in accordance with the amount of interest owing to each of the Banks as of the date of the receipt of such interest payment. Section 11.4. Non-Business Day. If any payment of principal or interest on any Loan shall fall due on a day which is not a Business Day, interest at the rate such Loan bears for the period prior to maturity shall continue to accrue on such principal from the stated due date thereof to and including the next succeeding Business Day on which the same is payable. Section 11.5. Documentary Taxes. The Borrower agrees to pay any documentary or similar taxes with respect to the Loan Documents, including interest and penalties, in the event any such taxes are assessed irrespective of when such assessment is made and whether or not any credit is then in use or available hereunder. Section 11.6. Representations. All representations and warranties made herein or in certificates given pursuant hereto shall survive the execution and delivery of this Agreement and of the Notes, and shall continue in full force and effect with respect to the date as of which they were made and as reaffirmed on the date of each borrowing, request for L/C and as long as any credit is in use or available hereunder. Section 11.7. Notices. Unless otherwise expressly provided herein, all communications provided for herein shall be in writing or by telecopy and shall be deemed to have been given or made when served personally, when an answer back is received in the case of notice by telecopy or 3 Business Days after the date when deposited in the United States mail addressed if to the Borrower to P.O Box 388, Yazoo City, Mississippi, 39194, Attention: Corporate Secretary; if to the Administrative Agent or Harris at 111 West Monroe Street, Chicago, Illinois 60690, Attention: Agribusiness Group; and if to any of the Banks, at the address for each Bank set forth under its signature hereon; or at such other address as shall be designated by any party hereto in a written notice to each other party pursuant to this Section 11.7. Section 11.8. Costs and Expenses; Indemnity. (a) The Borrower agrees to pay on demand and upon receipt of supporting statements, all reasonable costs and expenses of the Administrative Agent, in connection with the negotiation, preparation, execution and delivery of this Agreement, the Notes and the other instruments and documents to be delivered hereunder or in connection with the transactions contemplated hereby, including the reasonable fees and expenses of Messrs. Chapman and Cutler, special counsel to the Administrative Agent (such fees and expenses of such special counsel shall not exceed the amount previously agreed to by the Borrower and the Administrative Agent); all reasonable costs and expenses of the Administrative Agent, the Banks and any other holder of any Note or any Reimbursement Obligation (including reasonable attorneys' fees) incurred while any Potential Default or Event of Default shall have occurred and be continuing, all reasonable costs and expenses incurred by the Administrative Agent in connection with any consents or waivers hereunder or amendments hereto, and all reasonable costs and expenses (including reasonable attorneys' fees), if any, incurred by the Administrative Agent, the Banks or any other holders of a Note or any Reimbursement Obligation in connection with the enforcement of this Agreement or the Notes and the other instruments and documents to be delivered hereunder. The Borrower agrees to indemnify and save harmless the Banks and the Administrative Agent from any and all liabilities, losses, reasonable costs and expenses incurred by the Banks or the Administrative Agent in connection with any action, suit or proceeding brought against the Administrative Agent or any Bank by any Person which arises out of the transactions contemplated or financed hereby or by the Notes, or out of any action or inaction by the Administrative Agent or any Bank hereunder or thereunder, except for such thereof as is caused by the gross negligence or willful misconduct of the party indemnified. (b) Without limiting the generality of the foregoing, the Borrower unconditionally agrees to forever indemnify, defend and hold harmless, the Agent and each Bank, and covenant not to sue for any claim for contribution against, the Agent or any Bank for any damages, reasonable costs, loss or reasonable expense, including without limitation, response, remedial or removal costs, arising out of any of the following: (i) any presence, release, threatened release or disposal of any hazardous or toxic substance or petroleum by the Borrower or any Subsidiary or otherwise occurring on or with respect to its Property, (ii) the operation or violation of any Environmental Law, whether federal, state, or local, and any regulations promulgated thereunder, by the Borrower or any Subsidiary or otherwise occurring on or with respect to its Property, (iii) any claim for personal injury or property damage in connection with the Borrower or any Subsidiary or otherwise occurring on or with respect to its Property, and (iv) the inaccuracy or breach of any environmental representation, warranty or covenant by the Borrower made herein or in any loan agreement, promissory note, mortgage, deed of trust, security agreement or any other instrument or document evidencing or securing any indebtedness, obligations or liabilities of the Borrower owing to the Agent or any Bank or setting forth terms and conditions applicable thereto or otherwise relating thereto, except for damages arising from the Agent's or such Bank's willful misconduct or gross negligence. This indemnification shall survive the payment and satisfaction of all indebtedness, obligations and liabilities of the Borrower owing to the Agent and the Banks and the termination of this Agreement, and shall remain in force beyond the payment or satisfaction in full of any single claim under this indemnification. This indemnification shall be binding upon the successors and assigns of the Borrower and shall inure to the benefit of Agent and the Banks and their respective directors, officers, employees, agents, and collateral trustees, and their successors and assigns. (c) The provisions of this Section 11.8 shall survive payment of the Notes and Reimbursement Obligations and the termination of the Revolving Credit Commitments hereunder. Section 11.9. Counterparts. This Agreement may be executed in any number of counterparts and all such counterparts taken together shall be deemed to constitute one and the same instrument. One or more of the Banks may execute a separate counterpart of this Agreement which has also been executed by the Borrower, and this Agreement shall become effective as and when all of the Banks have executed this Agreement or a counterpart thereof and lodged the same with the Administrative Agent. Section 11.10. Successors and Assigns; Governing Law; Entire Agreement. This Agreement shall be binding upon the Borrower, the Administrative Agent and the Banks and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Administrative Agent and each of the Banks and the benefit of their respective successors and assigns, including any subsequent holder of any Note or Reimbursement Obligation. This Agreement and the rights and duties of the parties hereto shall be construed and determined in accordance with the internal laws of the State of Illinois. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and any prior agreements, whether written or oral, with respect thereto are superseded hereby. The Borrower may not assign any of its rights or obligations hereunder without the written consent of the Banks. Section 11.11. No Joint Venture. Nothing contained in this Agreement shall be deemed to create a partnership or joint venture among the parties hereto. Section 11.12. Severability. In the event that any term or provision hereof is determined to be unenforceable or illegal, it shall be deemed severed herefrom to the extent of the illegality and/or unenforceability and all other provisions hereof shall remain in full force and effect. Section 11.13. Table of Contents and Headings. The table of contents and section headings in this Agreement are for reference only and shall not affect the construction of any provision hereof. Section 11.14. Sharing of Payments. Each Bank agrees with each other Bank that if such Bank shall receive and retain any payment, whether by set-off or application of deposit balances or otherwise ("Set-Off"), on any Loan, Reimbursement Obligation or other amount outstanding under this Agreement or the other Loan Documents in excess of its ratable share of payments on all Loans, Reimbursement Obligations and other amounts then outstanding to the Banks, then such Bank shall purchase for cash at face value, but without recourse (except for defects in title), ratably from each of the other Banks such amount of the Loans held by each such other Bank (or interest therein) as shall be necessary to cause such Bank to share such excess payment ratably with all the other Banks; provided, however, that if any such purchase is made by any Bank, and if such excess payment or part thereof is thereafter recovered from such purchasing Bank, the related purchases from the other Banks shall be rescinded ratably and the purchase price restored as to the portion of such excess payment so recovered, but without interest. Each Bank's ratable share of any such Set-Off shall be determined by the proportion that the aggregate principal amount of Loans and Reimbursement Obligations and other amounts then due and payable to such Bank bears to the total aggregate principal amount of Loans and Reimbursement Obligations and other amounts then due and payable to all the Banks. Section 11.15. Jurisdiction; Venue. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Northern District of Illinois and of any Illinois court sitting in Chicago for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Section 11.16. Participants and Note Assignees. Each Bank shall have the right at its own cost to grant participations (to be evidenced by one or more agreements or certificates of participation) in the Loans made, and/or Reimbursement Obligations, participations in L/Cs and Revolving Credit Commitment held, by such Bank at any time and from time to time, and to assign its rights under such Reimbursement Obligations, participations, Loans or the Notes evidencing such Loans to one or more other Persons; provided that (i) no such participation or assignment shall relieve any Bank of any of its obligations under this Agreement, (ii) no such assignee or participant shall have any rights under this Agreement except as provided in this Section 11.16, and (iii) the Administrative Agent shall have no obligation or responsibility to such participant or assignee, except that nothing herein is intended to affect the rights of an assignee of a Note to enforce the Note assigned. Any party to which such a participation or assignment has been granted shall have the benefits of Section 1.9 and Section 9.3, but shall not be entitled to receive any greater payment under either such Section than the Bank granting such participation or assignment would have been entitled to receive in connection with the rights transferred. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement that would (A) increase any Revolving Credit Commitment of such Bank if such increase would also increase the participant's obligations, (B) forgive any amount of or postpone the date for payment of any principal of or interest on any Loan or Reimbursement Obligation or of any fee payable hereunder in which such participant has an interest or (C) reduce the stated rate at which interest or fees in which such participant has an interest accrue hereunder. Section 11.17. Assignment of Commitments by Banks. Each Bank shall have the right at any time, with the written consent of the Borrower and the Administrative Agent (which consent will not be unreasonably withheld) to assign all or any part of its Revolving Credit Commitment to one or more other Persons; provided that (i) each such assignment shall be of a constant, and not a varying, percentage of all such rights and obligations, (ii) unless both parties to the assignment are Banks immediately prior to giving effect to the assignment, the amount of the Revolving Credit Commitment of the assigning Bank being assigned pursuant to each such assignment (determined as of the date of such assignment) shall not be less than $10,000,000 (or if less, the entire amount of such Bank's Revolving Credit Commitment, or $1,000,000 if such assignment is from one Bank to another) and shall be an integral multiple of $1,000,000, (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording, an assignment and acceptance, together with any Notes subject to such assignment, and (iv) neither the consent of the Borrower nor of the Administrative Agent shall be required for any Bank to assign all or part of its Revolving Credit Commitment to any affiliate of the assigning Bank or to any Bank; provided further, however, that each such assigning Bank, unless assigning all of its Revolving Credit Commitment hereunder, maintains a minimum Revolving Credit Commitment hereunder in an amount not less than $10,000,000. Upon any such assignment (except any assignment made pursuant to Sections 1.1(d) or 9.7(b) hereof), its notification to the Administrative Agent and the payment of a $3,000 recordation fee to the Administrative Agent, the assignee shall become a Bank hereunder, all Loans and the Revolving Credit Commitment it thereby holds shall be governed by all the terms and conditions hereof, and the Bank granting such assignment shall have its Revolving Credit Commitment, and its obligations and rights in connection therewith, reduced by the amount of such assignment and Section 1.1(b) hereof shall be automatically amended, without further action, to reflect the addition of such assignee as a Bank and the reduction of the Revolving Credit Commitment of the assignor as described in such assignment. Upon your acceptance hereof in the manner hereinafter set forth, this Agreement shall be a contract between us for the purposes hereinabove set forth. Dated as of November 25, 1997. Mississippi Chemical Corporation By /s/ Timothy A. Dawson Its Accepted and Agreed to as of the day and year last above written. Harris Trust And Savings Bank individually and as Administrative Agent By /s/ Brian J. Moeller Its Senior Vice President Address: 111 West Monroe Street Chicago, Illinois 60690 Attention: Agribusiness Division Eurodollar Lending Office: Nassau Branch 111 West Monroe Street Chicago, Illinois 60603 Credit Agricole Indosuez By /s/ Dean Balice Its Senior Vice President Branch Manager By /s/ David Bouhl, F.V.P. Its Head of Corporate Banking Chicago Address: 55 East Monroe Chicago, Illinois 60603-5702 Attention: Mr. Ted Tice Eurodollar Lending Office: _______________________ _______________________ Banque Nationale de Paris, Houston Agency By /s/ David P. Camp Its Banking Officer Address: 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: David P. Camp Eurodollar Lending Office: 333 Clay Street, Suite 3400 Houston, Texas 77002 The Fuji Bank, Limited By /s/ Toshihiro Mitsui Its Senior Vice President & Senior Manager Address: Suite 2100 The Marquis One Tower 245 Peachtree Center Ave. NE Atlanta, Georgia 30303 Attention: ____________________ Eurodollar Lending Office: _______________________ _______________________ Bank of America National Trust and Savings Association By /s/ W. Thomas Barnett Its Managing Director Address: 231 South LaSalle Street Chicago, Illinois 60697 Attention: W. Tom Barnett Eurodollar Lending Office: 231 South LaSalle Street Chicago, Illinois 60697 The Bank of Nova Scotia, Atlanta Agency By /s/ F. C. H. Asby Its Senior Manager Loan Operations Address: Suite 2700 600 Peachtree St., N.E. Atlanta, Georgia 30308 Attention: _____________________ Eurodollar Lending Office: Suite 2700 600 Peachtree St., N.E. Atlanta, Georgia 30308 SunTrust Bank, Atlanta By /s/ Gregory L. Cannon Its Vice President By /s/ William McCaleb Its Banking Officer Address: 25 Park Place 25th Floor Atlanta, Georgia 30303 Attention: Greg Cannon Eurodollar Lending Office: _______________________ _______________________ First Union National Bank By /s/ David Hall Its SVP/Credit Address: 301 South College Street Fifth Floor Charlotte, North Carolina 28288-0745 Attention: Mr. David Hall Eurodollar Lending Office: _______________________ _______________________ ABN AMRO Bank N.V. By /s/ Scott D. Austensen Its VP By L. K. Kelley Its GVP Address: 1 Ravinia Drive Suite 1200 Atlanta, Georgia 30346 Attention: Michael VanCranenburgh Eurodollar Lending Office: _______________________ _______________________ The Dai-Ichi Kangyo Bank, Ltd. By /s/ T. Kurita Its Address: ____________________ 1100 Louisiana Street Suite 4940 Houston, Texas 77002 Attention: Warren Ross Eurodollar Lending Office: One World Trade Center Suite 4911 New York, New York 10048 Deposit Guaranty National Bank By /s/ Stanley A. Herran Its Senior Vice President Address: 210 East Capital Suite 1180 Jackson, Mississippi 39201 Attention: Stanley A. Herren Eurodollar Lending Office: _______________________ _______________________ EXHIBIT A MISSISSIPPI CHEMICAL CORPORATION REVOLVING CREDIT NOTE November 25, 1997 For Value Received, the undersigned, Mississippi Chemical Corporation, a Mississippi corporation (the "Borrower"), hereby promises to pay to the order of ________________ (the "Bank") on the Termination Date (as defined in the Credit Agreement hereinafter referred to), at the principal office of Harris Trust and Savings Bank in Chicago, Illinois, the aggregate unpaid principal amount of all Loans made by the Bank to the Borrower under the Credit Agreement hereinafter mentioned and remaining unpaid on the Termination Date, together with interest on the principal amount of each Loan from time to time outstanding hereunder at the rates, and payable in the manner and on the dates specified in said Credit Agreement. The Bank shall record on its books or records or on a schedule to this Note which is a part hereof the principal amount of each Loan made to the Borrower under the Credit Agreement, all payments of principal and interest thereon and the principal balances from time to time outstanding; provided that prior to the transfer of this Note all such amounts shall be recorded on the schedule attached to this Note. The record thereof, whether shown on such books or records or on a schedule to this Note, shall be prima facie evidence as to all such amounts; provided, however, that the failure of the Bank to record any of the foregoing shall not limit or otherwise affect the obligation of the Borrower to repay all Loans made to it under the Credit Agreement, together with accrued interest thereon. This Note is one of the Revolving Credit Notes referred to in and issued under that certain Credit Agreement dated as of November 25, 1997, among the Borrower, Harris Trust and Savings Bank, as Administrative Agent, and the Banks named therein, as amended from time to time (the "Credit Agreement") and shall be subject to the terms and conditions thereof. All defined terms used in this Note, except terms otherwise defined herein, shall have the same meaning as such terms have in said Credit Agreement. Prepayments may be made, and are sometimes required to be made, on any Loan evidenced hereby and this Note (and the Loans evidenced hereby) may be declared due prior to the expressed maturity thereof, all in the events, on the terms and in the manner as provided for in said Credit Agreement. The undersigned hereby waives presentment for payment and demand. This Note is governed by and shall be construed in accordance with the internal laws of the State of Illinois. Mississippi Chemical Corporation By Its EXHIBIT B APPLICATION AND AGREEMENT FOR LETTERS OF CREDIT EXHIBIT C BID LOAN REQUEST CONFIRMATION [Date] Harris Trust and Savings Bank, as Administrative Agent for the Banks party to the Credit Agreement referred to below Attention: __________________ Dear ________________: The undersigned, Mississippi Chemical Corporation (the "Borrower") refers to the Credit Agreement dated as of November 25, 1997, as amended (the "Credit Agreement"), among the Borrower, the Banks named therein, Harris Trust and Savings Bank, as Administrative Agent for the Banks and Bank of Montreal, as Syndication Agent. Capitalized terms used and not defined herein have the meanings assigned to them in the Credit Agreement. The Borrower hereby confirms that it has, on the date hereof, given you notice pursuant to Section 2.2 of the Credit Agreement that it requests a Bid Loan Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Bid Loan Borrowing is requested to be made: (A) Type of Bid Loan Borrowing/1/ ________________ - -------------------------------------------------------------------------------- (B) Date of Bid Loan Borrowing/2/ ________________ - -------------------------------------------------------------------------------- (C) Aggregate Principal Amount of Bid Stated Rate Eurodollar Loan Borrowing/3/ ----------- ---------- _______________ ______________ - -------------------------------------------------------------------------------- - --------------- /1/ Stated Rate or Eurodollar. /2/ The Bid Loan Request Confirmation must be received on a Business Day by the Agent not later than 2:30 p.m. on the Business Day preceding the proposed Auction Date. /3/ Not less than $5,000,000 and in integral multiples of $1,000,000. (D) Maturities/4/ _______________ _______________ _______________ _______________ _______________ _______________ - ------------------------------------------------------------------------------- (E) If applicable, maximum amount _______________ _______________ requested for each maturity _______________ _______________ _______________ _______________ - ------------------------------------------------------------------------------- Upon acceptance of any or all of the Bids offered by Banks in response to this request, the Borrower shall be deemed to affirm as of such date the representations and warranties made in the Credit Agreement. Mississippi Chemical Corporation By Its - --------------- /4/ 1 to 180 days in the case of Stated Rate Bid Loans and one, two, three, four, five or six months in the case of Eurodollar Bid Loans, but never beyond the Termination Date. EXHIBIT D INVITATION TO BID [Name of Bank] [Date] [Address] Attention: Reference is made to the Credit Agreement dated as of November 25, 1997 (the "Credit Agreement") among Mississippi Chemical Corporation (the "Borrower"), the Banks named therein, Harris Trust and Savings Bank, as Administrative Agent for the Banks. Capitalized terms used and not defined herein have the meanings assigned to them in the Credit Agreement. The Borrower made a Bid Loan Request on __________, ________ pursuant to Section 2.2(a) of the Credit Agreement, and in that connection you are invited to submit a Bid by [Date]/1/. Your Bid must comply with Section 2.2(c) of the Credit Agreement and the terms set forth below on which the Bid Loan Request was made. (A) Type (Stated or Eurodollar) ______________ (B) Date of Proposed Bid Loan Borrowing ______________ Stated Eurodollar ------ ---------- (C) Aggregate Principal Amount of Bid Loan ____________ ______________ (D) Maturities and maximum amount, if different from (C), for any maturity ____________ ______________ Very truly yours, Harris Trust and Savings Bank, as Administrative Agent By Its - --------------- /1/ The Bid must be received by the Administrative Agent by telephone not later than 8:45 a.m. Chicago time, on the Auction Date. EXHIBIT E CONFIRMATION OF BID Harris Trust and Savings Bank, as [Date] Administrative Agent for the Banks party to Credit Agreement referred to below Attention: The undersigned [Name of Bank], refers to the Credit Agreement dated as of November 25, 1997 (the "Credit Agreement") among Mississippi Chemical Corporation (the "Borrower"), the Banks named therein, Harris Trust and Savings Bank, as Administrative Agent for the Banks. Capitalized terms used and not defined herein have the meanings assigned to them in the Credit Agreement. The undersigned hereby confirms that on the date hereof it has made a Bid pursuant to Section 2.2 of the Credit Agreement, in response to the Bid Loan Request made by the Borrower on __________, 199____, and in that connection sets forth below the terms on which such Bid is made: Type (Stated Rate or Eurodollar): _____________________ Date of proposed Bid Loan Borrowing: ____________________/2/ Interest Rate or spread Principal Amount/3/ Maturity/4/ over Adjusted LIBOR/5/ ------------------- ----------- ---------------------- Very truly yours, [Name of Bank] By Its - --------------- /2/ As specified in the related Invitation to Bid. /3/ Principal amount of bid for each maturity may not exceed the principal amount requested by the Company or the maximum amount requested for that maturity, if less. /4/ 1 to 180 days in the case of Stated Rate Bid Loans and one, two, three, four, five or six months in the case of Eurodollar Bid Loans. /5/ Specify rate of interest per annum computed on the basis of a year of 360 days and actual days elapsed for Stated Rate Bid Loans and percentage to be added to Adjusted LIBOR for Eurodollar Bid Rate Loans. EXHIBIT F NOTICE OF ACCEPTANCE OF BID [Name of Bank] [Date] [Address] Attention: Reference is made to the Credit Agreement dated as of November 25, 1997 (the "Credit Agreement") among Mississippi Chemical Corporation (the "Borrower"), the Banks named therein, Harris Trust and Savings Bank, as Administrative Agent for the Banks. Capitalized terms used and not defined herein have the meanings assigned to them in the Credit Agreement. The Borrower made a Bid Loan Request on __________, ______ pursuant to Section 2.2 of the Credit Agreement, and in that connection you have submitted a Bid. Your Bid has been accepted as set forth below. (A) Type of Bid Loan _______________ (B) Date of Bid Loan Borrowing _______________ (C) Aggregate principal Principal amount of each Bid Amount Maturity Interest Rate maturity and interest rate --------- -------- ------------- __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Very truly yours, Harris Trust and Savings Bank, as Administrative Agent By Its EXHIBIT G SUBSIDIARIES Name of Company State of Incorporation --------------- ---------------------- Mississippi Phosphates Corporation Delaware Mississippi Potash, Inc. Mississippi NSI Land Corporation Delaware Mississippi Chemical Management Company Delaware Mississippi Chemical Company, L.P. Delaware MCC Investments, Inc. Delaware Eddy Potash, Inc. Mississippi Triad Nitrogen, Inc. Delaware Triad Fertilizer, Inc. Mississippi (a subsidiary of Triad Nitrogen, Inc.) TNI, Inc. Mississippi (a subsidiary of Triad Nitrogen, Inc.) Triad Barge, Inc. Mississippi (a subsidiary of Triad Nitrogen, Inc.) TNI Barge, Inc. Delaware (a subsidiary of Triad Barge, Inc.) EXHIBIT H COMPLIANCE CERTIFICATE This Compliance Certificate is furnished to Harris Trust and Savings Bank and the other Banks (collectively, the "Banks") and Harris Trust and Savings Bank as Administrative Agent (the "Administrative Agent") for the Banks, pursuant to that certain Credit Agreement dated as of November 25, 1997, by and among Mississippi Chemical Corporation, a Mississippi corporation (the "Borrower"), the Administrative Agent and the Banks (the "Agreement"). Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement. The Undersigned Hereby Certifies That: 1. I am the duly elected [President] or [Chief Financial Officer] of the Borrower; 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a review of the transactions and conditions of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements sufficient for me to provide this Certificate; 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Potential Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below; and 4. If attached financial statements are being furnished pursuant to Section 7.4(a) of the Agreement, Schedule I attached hereto sets forth financial data and computations evidencing the Borrower's compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking or proposes to take with respect to each such condition or event: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this _____ day of __________________, 19___. [President] or [Chief Financial Officer of The Borrower] SCHEDULE 1 TO COMPLIANCE CERTIFICATE MISSISSIPPI CHEMICAL CORPORATION COMPLIANCE CALCULATIONS FOR CREDIT AGREEMENT DATED AS OF NOVEMBER 25, 1997 CALCULATIONS AS OF ____________________, 19__ I. Section 7.21 Maximum Leverage Ratio. (a) ____________________.......................... $___________ (b) ____________________.......................... $___________ (c) ____________________.......................... $___________ (d) Leverage Ratio ((a) divided by (c)).......................... ______ to 1* *Required to be not more than ___ to 1 Compliance.................. Yes____ No_____ II. Section 7.22 Minimum Interest Coverage Ratio. (a) ____________________.......................... $___________ (b) ____________________.......................... $___________ (c) Interest Coverage Ratio ((a) divided by (b)).......................... ______ to 1* *Required to be not less than ________ to 1 Compliance................... Yes____ No_____ III. Section 7.23 Minimum Tangible Net Worth. (a) ____________________.......................... $___________ (b) ____________________.......................... $___________ (c) Net Worth ((a) plus (b))...................... $__________* *Required to be not less than $_______________ Compliance................... Yes____ No_____ IV. Pricing Ratio. (a) ____________________.......................... $___________ (b) ____________________.......................... $___________ (c) ____________________.......................... $___________ (d) Pricing Ratio ((a) divided by (b)).......................... _________ to 1 EXHIBIT I [HUGHES & LUCE, L.L.P. LETTERHEAD] November 25, 1997 Harris Trust and Savings Bank SunTrust Bank, Atlanta Chicago, Illinois Atlanta, Georgia Credit Agricole Indosuez First Union National Bank Chicago, Illinois Charlotte, North Carolina Banque Nationale de Paris, Houston Agency ABN AMRO Bank N.V. Dallas, Texas Atlanta, Georgia The Fuji Bank, Limited The Dai-Ichi Kangyo Bank, Ltd. Atlanta, Georgia Houston, Texas Bank of America National Trust and Savings Deposit Guaranty National Bank Association Jackson, Mississippi Chicago, Illinois The Bank of Nova Scotia, Atlanta Agency Atlanta, Georgia Ladies and Gentlemen: We have served as counsel to Mississippi Chemical Corporation, a Mississippi corporation (the "Company"), in connection with a revolving credit facility being made available by you to the Company. As such counsel, we have reviewed the corporate proceedings taken to authorize the execution and delivery of, and have examined executed originals of, the instruments and documents identified on Exhibit A to this letter (collectively, the "Loan Documents", individual Loan Documents hereinafter referred to by the designations appearing on Exhibit A). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Documents. We have also reviewed the articles of incorporation, charter, by-laws and any other agreements under which the Company is organized. We have also reviewed such other instruments and records and inquired into such other factual matters and matters of law as we deem necessary or pertinent to the formulation of the opinions hereinafter expressed. In our examination, we have assumed the genuineness of all signatures (other than those of the Company), the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon representations made in or pursuant to the Loan Documents and certificates of appropriate representatives of the Company. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that (except, to the extent set forth in the opinions expressed below, as to the Company); (i) such documents have been duly authorized by, have been duly executed and delivered by, and constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate or other) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that: 1. The Company is a corporation validly existing and in good standing under the laws of its state of incorporation with full and adequate corporate power and authority to carry on its business as now conducted and the Company is duly licensed or qualified to do business and in good standing in each jurisdiction listed on Exhibit B. 2. The Company has full right, power and authority to borrow from you, to execute and deliver the Loan Documents executed by it and to observe and perform all the matters and things therein provided for. The execution and delivery of the Loan Documents executed by the Company does not, nor will the observance or performance of any of the matters or things therein provided for, contravene any provision of applicable law, except where such contravention would not have a material adverse effect on the properties, business, operations or financial condition of the Company and its Subsidiaries taken as a whole, or of the articles of incorporation, charter or by-laws of the Company (there being no other agreements under which the Company is organized) or, to our knowledge, of any material covenant, indenture or agreement binding upon or affecting the Company or any of its properties or assets. 3. The Loan Documents executed by the Company have been duly authorized by all necessary corporate action, have been executed and delivered by the proper officers of the Company and constitute valid and binding agreements of the Company enforceable against it in accordance with their respective terms, subject to bankruptcy, insolvency and other similar laws affecting creditors' rights generally and to principles of equity. 4. Based solely upon our review of those statutes, rules and regulations which in our experience are normally applicable to transactions of the type provided for by the Loan Documents, no order known to us, authorization, consent, license or exemption of, or filing or registration with, any court or governmental department, agency, instrumentality or regulatory body, whether local, state or federal, is or will be required in connection with the lawful execution and delivery of the Loan Documents or the observance and performance by the Company of any of the terms thereof, except such as have been previously obtained or where the failure to obtain such order, authorization, consent, license, exemption or make such filing or registration would not result in a material adverse change in the properties, business, operations or financial condition of the Company and its Subsidiaries taken as a whole. 5. Except as set forth in Schedule 5.3 of the Credit Agreement, to our knowledge, there is no action, suit, proceeding or investigation at law or in equity before or by any court or public body pending or threatened against or affecting the Company or any of its assets and properties which, if adversely determined, would result in any material adverse change in the properties, business, operations or financial condition of the Company and its Subsidiaries taken as a whole. November 25, 1997 Page 3 The foregoing opinions are subject to the following comments and qualifications: (A) The enforceability of Section 11.8 of the Credit Agreement (and any similar provisions in any of the other Loan Documents) may be limited by laws rendering unenforceable: (i) indemnification contrary to Federal or state securities laws and the public policy underlying such laws and (ii) the release of a party from, or the indemnification of a party against, liability for its own wrongful or negligent acts under certain circumstances. (B) The enforceability of provisions in the Loan Documents to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (C) We express no opinion as to (i) the effect of the laws of any jurisdictions in which any Bank is located that limit the interest, fees or other charges such Bank may impose, (ii) Section 11.14 of the Credit Agreement, (iii) Section 11.15 of the Credit Agreement (and any similar provisions in any of the other Loan Documents), insofar as such section relates to the subject matter jurisdiction of the United States District Court for the Northern District of Illinois to adjudicate any controversy related to the Loan Documents, and (iv) the waiver of inconvenient forum set forth in Section 11.15 of the Credit Agreement (and any similar provisions in any of the other Loan Documents) with respect to proceedings in the United States District Court for the Northern District of Illinois. (D) We express no opinion as to the applicability to the obligations of the Company (or the enforceability of such obligations) of Section 548 of the Bankruptcy Code or any other provision of law relating to fraudulent conveyances, transfers or obligations. (E) We express no opinion as to usury laws. The entirety of the foregoing opinion is limited in all respects to the existing laws of the State of Texas and the federal laws of the United States. To the extent that the matters covered hereby are governed by laws of states other than the State of Texas, for purposes of this opinion, we have assumed with your consent that those laws are identical to the laws of the State of Texas. Our opinions are limited to the specific issues addressed herein and are limited in all respects to documents, laws and facts existing on the date hereof. By rendering our opinions, we do not undertake and hereby disavow any obligation to advise you of any changes in such documents, laws or facts which may occur after the date hereof. At the request of our clients, this opinion letter is, pursuant to Section 6.3 of the Credit Agreement, provided to you by us in our capacity as counsel to the Company and may not be relied upon by any Person (other than a transferee of the Revolving Credit Commitments in accordance with Section 11.17 of the Credit Agreement) for any purpose other than in connection with the transactions contemplated by the Credit Agreement without, in each instance, our prior written consent. Very truly yours, EXHIBIT A --------- The Loan Documents ------------------ All Loan Documents are dated as of November 25, 1997. 1. Credit Agreement among the Company, Harris Trust and Savings Bank, individually ("Harris") and as Administrative Agent (the "Administrative Agent"), and Bank of Montreal, as Syndication Agent, and Credit Agricole Indosuez, as Co-Agent (the "Credit Agreement"). 2. Revolving Credit Note of the Company payable to the order of Harris. 3. Revolving Credit Note of the Company payable to the order of Credit Agricole Indosuez. 4. Revolving Credit Note of the Company payable to the order of Banque Nationale de Paris, Houston Agency. 5. Revolving Credit Note of the Company payable to the order of The Fuji Bank, Limited. 6. Revolving Credit Note of the Company payable to the order of Bank of America National Trust and Savings Association. 7. Revolving Credit Note of the Company payable to the order of The Bank of Nova Scotia, Atlanta Agency. 8. Revolving Credit Note of the Company payable to the order of SunTrust Bank, Atlanta. 9. Revolving Credit Note of the Company payable to the order of First Union National Bank. 10. Revolving Credit Note of the Company payable to the order of ABN AMRO Bank N.V. 11. Revolving Credit Note of the Company payable to the order of The Dai-Ichi Kangyo Bank, Ltd. 12. Revolving Credit Note of the Company payable to the order of Deposit Guaranty National Bank. EXHIBIT B --------- Jurisdictions in which Company is Qualified ------------------------------------------- Louisiana Mississippi New Mexico EXHIBIT J FARMLAND MISSCHEM PROJECT CONTINGENT OBLIGATIONS 1. Cost Overrun Guarantee As a condition precedent to the making of any disbursements by the lenders, ABN AMRO Bank, N.V., as agent for the lenders, has required the execution and delivery of a limited guaranty agreement whereby the Borrower agrees to provide to the project, Farmland MissChem Limited, the amount necessary to complete the construction of the project, up to $15 million (U.S.). In the event that the conversion to the Ex-Im Bank loan does not occur, the Borrower will provide up to an additional $10 million, if necessary to complete the project conversion, if there are not sufficient funds remaining under the Guaranty. The obligation begins at Funding and terminates at Conversion to either the Ex-Im facility or the commercial facility. Under the EPC Contract with The M.W. Kellogg Company, the sponsors have agreed to provide up to $30 million ($15 million each) in cost overrun guaranties. The $15 million committed by the Borrower to cover cost overrun guaranties provides satisfaction of the obligations created under both the credit documents and the EPC Contract. 2. Floor Price Obligation Under Offtake Agreement Each sponsor has agreed, pursuant to the terms of the Offtake Agreement, to pay for each ton of ammonia produced by the project at either (a) market price (determined by reference to an index) less 5 percent, or (b) a floor price of $120 per ton (years 1-5) and $115 per ton (years 6-12). If the conversion to the Ex-Im financing does not occur, the floor price is based on the projected cash cost per ton of ammonia from the project at an assumed operating rate. The obligation continues for two years beyond the expiration of the term facility for 12 years to allow for any delays in the retirement of the Term debt. 3. Take or Pay Obligation Under the Offtake Agreement The Offtake Agreement requires that the sponsors take 100% (50% by each sponsor) of all ammonia produced by the project. In the event that the Borrower does not take its allocation of product when scheduled, the Offtake Agreement requires that payment be made at the then-prevailing price. Should the project temporarily stop producing product as a consequence of the Borrower's failure to take product, the Borrower is obligated to pay for the product and receive a credit against future production. 4. Interest Rate Swap Guaranty Under Contingent Term Facility (Facility 2) In the event that the project fails to convert to the Ex-Im facility, then the commercial lenders will require of the project the execution of new notes in substitution for the Facility 1 notes of each commercial lender. During Facility 2, the interest rate increases to LIBOR plus a Eurodollar margin ranging from 2% per annum in years 1-3, 2.25% per annum in years 4- 7, and 2.5% per annum in years 8-10. The lenders have required that the project participate in an interest rate hedging program in order to reduce the interest rate risk to the project. The Borrower is obligated to participate as a swap counterparty in any interest rate hedging arrangement that may be required by the lenders of the project. The Borrower's liability is limited to its pro rata share of its participation as a swap counterparty. 5. Cost Overrun and Termination Payment Obligations Under EPC Contract Under the EPC Contract, the sponsors have agreed to provide up to $30 million ($15 million each) in cost overrun guaranties. This obligation is identical to the obligation created in the cost overrun guaranty to be entered into by the Borrower for the benefit of the lenders. In addition, the Borrower has agreed that in the event of a termination of the EPC Contract, this $15 million guaranty will provide funds to pay termination damages which may be due to Kellogg under the terms and conditions of the EPC Contract. 6. Obligation to Pay Lender's Expenses The sponsors have agreed to pay the expenses of the lenders in connection with the financing of the project, which include, but are not limited to, lenders' attorneys' fees, the fees for the independent engineer, the environmental consultant and the economic analyst. 7. Debt Service Reserve The sponsors have agreed to fund the project's debt service reserve account with the posting of a letter of credit in an amount equal to nine months' debt service. The obligation continues until the project's debt service reserve account has been fully funded with cash and is equal to nine months' debt service. The Borrower's obligation is 50% of the debt service reserve account. EXHIBIT K PRICING RATIO CERTIFICATE This Pricing Ratio Certificate is furnished to Harris Trust and Savings Bank and the other Banks (collectively, the "Banks") and Harris Trust and Savings Bank as Administrative Agent (the "Administrative Agent") for the Banks, pursuant to that certain Credit Agreement dated as of November 25, 1997, by and among Mississippi Chemical Corporation, a Mississippi corporation (the "Borrower") and the Banks (the "Agreement"). Unless otherwise defined herein, the terms used in this Pricing Ratio Certificate have the meanings ascribed thereto in the Agreement. The Undersigned Hereby Certifies That: 1. I am the duly elected [President] or [Chief Financial Officer] of the Borrower; 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a review of the transactions and conditions of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements sufficient for me to provide this Certificate; and 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Potential Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower and its Subsidiaries have taken, is taking or proposes to take with respect to each such condition or event: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The foregoing certifications, together with the computations set forth in Schedule I hereto are made and delivered this _____ day of __________________, 19___. [President] or [Chief Financial Officer of the Borrower] SCHEDULE 1 TO PRICING RATIO CERTIFICATE MISSISSIPPI CHEMICAL CORPORATION PRICING RATIO CALCULATION FOR CREDIT AGREEMENT DATED AS OF NOVEMBER 25, 1997 CALCULATION AS OF ____________________, 19__ Pricing Ratio. (a) __________________.......................$___________ (b) __________________.......................$___________ (c) __________________.......................$___________ (d) Pricing Ratio ((a) divided by (b)) _________ to 1 EXHIBIT L EXISTING LETTERS OF CREDIT Number Amount Expiry Date ------ ------ ----------- 35690 $157,334 July 1, 1999 SCHEDULE 5.3 LITIGATION DISCLOSURES 1. Cleve Reber CERCLA Site Triad has received and responded to letters issued by the United States Environmental Protection Agency ("EPA") under Section 104 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") relative to the possible disposition of Triad waste at the disposal site identified as the Cleve Reber site in Ascension Parish, Louisiana. It is Triad's position that, based upon available information and records, Triad did not utilize the Cleve Reber site for the disposition of hazardous material, and it does not appear that Triad has any responsibility for investigation and cleanup on this site. It should be noted that the EPA is contemplating an action under the Resource Conservation and Recovery Act, Section 7003, as well as the CERCLA action mentioned above. The EPA has issued Section 106 orders against the major contributors at the site for cleanup. They are now engaged in negotiations for cleanup. Two years ago, Triad received a supplemental 104(e) request for information from the EPA, indicating the EPA's renewed interest in pursuing Potential Responsible Person at the site. Triad filed a Freedom of Information Act request to investigate allegations that some plant trash from Triad may have been disposed of at the Cleve Reber site. In the opinion of management, the likelihood of the CERCLA investigation resulting in a loss in a material amount is remote. In early 1996, a class action suit was brought against Triad and other companies allegedly involved in the site based upon toxic torts alleged to have resulted from the presence of contaminants at the Cleve Reber site. Triad has not been served with process in the case. In the opinion of management, based upon available information, the likelihood that these proceedings will result in a loss in a material amount is remote. The Borrower is monitoring the case while awaiting service of process. 2. Terra International, Inc. On August 31, 1995, the Company filed suit in federal court in Mississippi against Terra International, Inc. ("Terra"), seeking a declaratory judgment and other relief establishing that certain technology relating to the design of an ammonium nitrate neutralizer which the Company licensed to Terra is not defective and was not the cause of an explosion which occurred in 1994 at Terra's Port Neal, Iowa, fertilizer facility. The Company is also seeking damages for defamation based on Terra's public statement related to the Company's alleged role in the explosion. Also, on August 31, 1995, Terra filed suit in federal court in Iowa against the Company seeking damages caused by the explosion. Terra alleges that the Company negligently designed the ammonium nitrate neutralizer technology licensed to Terra and that design defect led to the Port Neal explosion. Discovery in this case is underway and is scheduled to run through December 31, 1997. Trial is tentatively scheduled to begin in the summer of 1998. The Company intends to vigorously defend itself against Terra's allegations and plans to fully prosecute its defamation claim. SCHEDULE 7.24 CERTAIN EXISTING RESTRICTIONS ON SUBSIDIARIES Restrictions contained in documents evidencing or governing industrial revenue bonds issued for the benefit of Mississippi Phosphates Corporation which restrict the use of the proceeds of such industrial revenue bonds. EX-10.8 4 EMPLOYEE INCENTIVE PLAN EXHIBIT 10.8 MISSISSIPPI CHEMICAL CORPORATION OFFICER AND KEY EMPLOYEE INCENTIVE PLAN EFFECTIVE JULY 1, 1997 TABLE OF CONTENTS
SECTION PAGE I. Establishment and Purposes...................................... 1 1.1 Establishment.......................................... 1 1.2 Purpose................................................ 1 II. Definitions..................................................... 1 2.1 Definitions............................................ 1 III. Eligibility..................................................... 2 3.1 Eligibility............................................ 2 IV. Entitlement to and Amount of Incentive Compensation............. 3 4.1 Performance Goal....................................... 3 4.2 Eligibility to Receive Amount of Incentive Compensation 3 4.3 Form and Time of Payment............................... 4 4.4 Payment of Bonuses in the Event of Death............... 4 4.5 Source of Payment...................................... 4 4.6 Shareholder Approval................................... 4 V. Plan Administration............................................. 5 5.1 Committee.............................................. 5 5.2 Indemnification........................................ 5 VI. General......................................................... 5 6.1 Offset and Withholding................................. 5 6.2 Facility of Payment.................................... 5 6.3 Gender and Number...................................... 5 6.4 Controlling Law........................................ 5 6.5 Successors............................................. 6 6.6 Not an Employment Contract............................. 6 6.7 Amendment and Termination.............................. 6 VII. Execution of Plan............................................... 6
I. ESTABLISHMENT AND PURPOSES 1.1 Establishment. Mississippi Chemical Corporation, acting through its Compensation Committee, has established this Mississippi Chemical Corporation Officer and Key Employee Incentive Plan, effective July 1, 1997, subject to shareholder approval in accordance with Section 4.6 below. The Plan supersedes and replaces the Company's prior "Officer Incentive Plan," effective with respect to amounts accruing on and after July 1, 1997. 1.2 Purpose. The purpose of the Plan is to align the interests of officers and key employees of the Company and certain of its affiliates and subsidiaries with those of the Company's shareholders, to enhance the profitability of the Company, to facilitate the Employers' ability to recruit and retain valued officers and key employees, and to provide officers and key employees with annual incentives competitive with the median level of such incentives among companies of a similar size and industry, by providing to such officers and key employees annual incentive compensation. Incentive compensation granted to Covered Employees is intended to qualify as qualified performance-based compensation under Code Section 162(m)(4)(C) and related Treasury regulations, and the Plan shall be interpreted accordingly. II. DEFINITIONS 2.1 Definitions. The following capitalized terms appearing in this Plan have the following meanings, unless the context clearly indicates otherwise: a. "Code" means the Internal Revenue Code of 1986, as amended. b. "Committee" and "Compensation Committee" mean the Compensation Committee of the Board of Directors of the Company. c. "Company" means Mississippi Chemical Corporation or its successors. d. "Consolidated Performance" means the financial performance of the Company and its consolidated subsidiaries as expressed by Operating Income as a percentage of Total Capital for the Plan Year being considered. e. "Covered Employee" means an officer of the Company described in Code Section 162(m)(3). f. "Deferred Compensation Plan" means the Mississippi Chemical Corporation Executive Deferred Compensation Plan, as amended from time to time. g. "Employers" means the Company, Mississippi Chemical Management Company, and Mississippi Chemical Company, L.P., and any other subsidiary or affiliate of the Company that adopts the Plan with the approval of the Committee. h. "Extraordinary Bonus" for any particular Participant with respect to a particular Plan Year shall be the percentage of such Participant's base salary designated by the Compensation Committee to be paid to such Participant if the Company's Consolidated Performance equals or exceeds Extraordinary Performance. 1 i. "Extraordinary Performance" for any Plan Year means that the Company's Consolidated Performance equaled its Weighted Average Cost of Capital plus 20 percent. j. "Hay Points" means the number of points assigned to an employment position in accordance with the Employers' compensation system developed by the HayGroup. k. "Participant" means an officer or key employee of an Employer who is eligible or selected to participate pursuant to Article III below and is eligible to receive a bonus payment pursuant to Section 4.2 below. l. "Plan" means this Mississippi Chemical Corporation Officer and Key Employee Incentive Plan, as amended from time to time. m. "Plan Year" means the period commencing on July 1 and ending on the following June 30. n. "Superior Bonus" for any particular Participant with respect to a particular Plan Year shall be the percentage of such Participant's base salary designated by the Compensation Committee to be paid to such Participant if the Company's Consolidated Performance equals Superior Performance. o. "Superior Performance" for any Plan Year means that the Company's Consolidated Performance equaled its Weighted Average Cost of Capital plus 8 percent. p. "Threshold Bonus" for any particular Participant with respect to a particular Plan Year shall be the percentage of such Participant's base salary designated by the Compensation Committee to be paid to such Participant if the Company's Consolidated Performance equals Threshold Performance. q. "Threshold Performance" for any Plan Year means that the Company's Consolidated Performance equaled its Weighted Average Cost of Capital. Additional terms are defined and/or illustrated in Exhibits A and B attached hereto and incorporated herein. III. ELIGIBILITY 3.1 Eligibility. The Compensation Committee, in its sole discretion, shall, no later than the 90th day of each Plan Year (or, in the case of an employee other than a Covered Employee who first becomes an officer or a key employee in accordance with this Section 3.1 during a Plan Year, within 90 days thereafter) (i) designate in writing the officers and key employees of the Employers eligible to participate in the Plan for that Plan Year, each of whom shall be in a position with at least the minimum number of Hay Points designated by the Committee, and (ii) designate in writing the Threshold, Superior and Extraordinary Bonuses for each Participant. 2 IV. ENTITLEMENT TO AND AMOUNT OF INCENTIVE COMPENSATION 4.1 Performance Goal. Incentive compensation payments will be made under the Plan with respect to a Plan Year as follows: a. if the Company's Consolidated Performance equals Threshold Performance, each Participant shall receive his Threshold Bonus; b. if the Company's Consolidated Performance falls between Threshold Performance and Superior Performance, each Participant shall receive his Threshold Bonus and shall, subject to any reduction by the Compensation Committee pursuant to Section 4.2 below, receive an additional payment determined by (i) dividing the difference between the Company's Consolidated Performance and Threshold Performance by the difference between Superior Performance and Threshold Performance, times (ii) the difference between the Participant's Superior Bonus and Threshold Bonus; c. if the Company's Consolidated Performance equals Superior Performance, each Participant shall receive his Threshold Bonus and shall, subject to any reduction by the Compensation Committee pursuant to Section 4.2 below, receive an additional amount which, when added to his Threshold Bonus, equals the amount of his Superior Bonus; d. if the Company's Consolidated Performance falls between Superior Performance and Extraordinary Performance, each Participant shall receive his Threshold Bonus and shall, subject to any reduction by the Compensation Committee pursuant to Section 4.2 below, receive (i) an additional payment equal to the difference between his Threshold Bonus and his Superior Bonus and (ii) an additional payment determined by (a) dividing the difference between the Company's Consolidated Performance and Superior Performance by the difference between Extraordinary Performance and Superior Performance, times (b) the difference between the Participant's Extraordinary Bonus and his Superior Bonus; or e. if the Company's Consolidated Performance equals or exceeds Extraordinary Performance, each Participant shall receive his Threshold Bonus and shall, subject to any reduction by the Compensation Committee pursuant to Section 4.2 below, receive an additional amount which, when added to his Threshold Bonus, equals the amount of his Extraordinary Bonus. As soon as practicable after the end of each Plan Year, the Committee shall certify in writing the Company's Consolidated Performance and the extent to which the Company has achieved Threshold Performance, Superior Performance or Extraordinary Performance for the year. The Committee's determination shall be final and binding. 4.2 Eligibility to Receive Amount of Incentive Compensation. To be eligible to receive an incentive compensation payment with respect to a Plan Year under the Plan, an individual (i) must be eligible to participate in the Plan pursuant to Article III above; and (ii) must remain employed by an Employer through the last day of such Plan Year. Notwithstanding the foregoing, a prorated amount of incentive compensation (determined by the Committee) will be paid to any individual who is otherwise eligible who, during the Plan Year, dies, becomes disabled, or terminates employment for reasons other than willful misconduct, and to any 3 individual other than a Covered Employee who first becomes otherwise eligible to participate in the Plan during the Plan Year. The maximum amount of incentive compensation payable to any Participant shall not exceed 90 percent of his annual salary. For this purpose, annual salary is determined as of the first day of the Plan Year, and in the case of any employee other than a Covered Employee who first becomes a Participant during the Plan Year, annual salary is determined as of the first day of the Plan Year such employee became a Participant; and annual salary is the Participant's base salary (before salary reduction or salary deferral contributions under Code Sections 125 or 401(k) and without regard to the value of any benefit other than base salary). The Committee shall have the discretionary authority, based on individual performance and such other factors as the Committee deems appropriate, to reduce the Bonus payable to a particular Participant by up to 100 percent of the excess, if any, over such Participant's Threshold Bonus. 4.3 Form and Time of Payment. Any incentive compensation shall be paid in a cash lump sum as soon as practicable after the Committee's certification of the Company's Consolidated Performance pursuant to Section 4.1 above and any reductions in accordance with Section 4.2 above. Notwithstanding the foregoing, a Participant who is entitled to incentive compensation under this Plan and who is a participant in the Mississippi Chemical Corporation Executive Deferred Compensation Plan may elect to defer payment of his incentive compensation and to have deferred stock credited to him, in accordance with said Deferred Compensation Plan. Once a Participant elects to participate in said Deferred Compensation Plan, his benefits, rights, and entitlements will be determined solely under the Mississippi Chemical Corporation Executive Deferred Compensation Plan. 4.4 Payment of Bonuses in the Event of Death. If a Participant dies before receiving all amounts payable hereunder, the entire unpaid amount shall be paid in one lump sum to the beneficiary designated by such Participant. No beneficiary designation shall be valid unless it is in writing, signed by the Participant, dated and filed with the Committee prior to death. If the Participant is married and designates a primary beneficiary other than his spouse, the beneficiary designation must include the written consent of the spouse in such form as the Committee requires. Any beneficiary designation may be revoked and a new designation may be made, as long as the new designation is in writing, signed by the Participant, dated and filed with the Committee prior to death. If no beneficiary has been designated, or no designated beneficiary survives the Participant, any unpaid amounts will be paid to the Participant's surviving spouse, or if the Participant does not have a surviving spouse, to the Participant's estate, as soon as administratively possible. 4.5 Source of Payment. All payments under this Plan shall be paid from the general funds of the Employer. The Employer shall be under no obligation to segregate any assets in connection with the award of any bonus hereunder, nor shall anything contained in this Plan or any action taken pursuant to the Plan create or be construed to create a trust of any kind or a fiduciary relationship between the Employer and Participant. 4.6 Shareholder Approval. Payment of incentive compensation under this Plan to Covered Employees is contingent upon shareholder approval of certain material terms of the Plan, in accordance with Code Section 162(m)(4)(C). 4 V. PLAN ADMINISTRATION 5.1 Committee. The Committee shall have complete authority and discretion to control and manage the operation and administration of the Plan. The Committee shall construe and interpret the Plan, reconcile inconsistencies, resolve ambiguities and supply omissions in the Plan, and shall determine all questions arising in the administration and interpretation of the Plan; however, all such interpretations and decisions shall be applied in a uniform manner to all similarly situated Participants. All decisions and interpretations of the Committee made in good faith pursuant to the Plan shall be final, conclusive and binding on all persons. 5.2 Indemnification. In the event and to the extent not insured under any contract of insurance with an insurance company, the Employers shall indemnify and hold harmless each "Indemnified Person," as defined below, against any and all claims, demands, suits, proceedings, losses, damages, interest, penalties, fines, expenses (specifically including, but not limited to, counsel fees to the extent approved by the Board of Directors of the Company or otherwise provided by law, court costs and other reasonable expenses of litigation), and liability of every kind, including amounts paid in settlement with the approval of the Board of Directors, arising from any action or cause of action related to the Indemnified Person's act or acts or failure to act. Such indemnity shall apply regardless of whether such claims, demands, suits, proceedings, losses, damages, interest, penalties, fines, expenses, and liability arise in whole or in part from the negligence or other fault of the Indemnified Person, except when the same is judicially determined to be due to gross negligence, fraud, recklessness, or willful or intentional misconduct of such Indemnified Person. The indemnification provided in this Section 5.2 shall not be construed to limit or supersede any other indemnity provided by the Employer. "Indemnified Person" shall mean the Committee and each employee, officer, or director of the Employers acting in a decision-making or administrative role with respect to the Plan. VI. GENERAL 6.1 Offset and Withholding. The Committee shall have the discretion and sole authority to determine the amount and timing of any withholding or employment taxes with respect to amounts otherwise payable under the Plan. In the event a Participant is indebted to an Employer for any reason at the time payment becomes due hereunder, the Employer, in its discretion, may offset the payments due hereunder against such indebtedness. 6.2 Facility of Payment. Any amounts payable hereunder to any person under legal disability or who, in the judgment of the Committee, is unable to properly manage his financial affairs may be paid to the legal representative of such person or may be applied for the benefit of such person in any manner which the Committee may select. 6.3 Gender and Number. Where the context admits, words in the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural. 6.4 Controlling Law. The laws of Mississippi (without regard to its conflicts of laws rules) shall be controlling in all matters relating to the Plan. 5 6.5 Successors. This Plan is binding on the Employers and will be binding on and inure to the benefit of any successor of any Employer, whether by way of purchase, merger, consolidation or otherwise. 6.6 Not an Employment Contract. This Plan does not constitute a contract of employment and shall not be construed to give any Participant the right to be retained in the Employer's service. 6.7 Amendment and Termination. The Committee must necessarily reserve and hereby does reserve the right to amend or terminate the Plan at any time. VII. EXECUTION OF PLAN 7.1 To record the establishment of the Plan, the undersigned, being duly authorized to act on behalf of the Compensation Committee of the Board of Directors of the Company, have executed this document at Yazoo City, Mississippi, in one or more counterparts, each of which shall be considered an original, and all but one instrument. Dated: September 16, 1997 MISSISSIPPI CHEMICAL CORPORATION By: /s/John Sharp Howie ------------------- Chairman, Compensation Committee By: /s/ Ethel Truly --------------- Vice President - Administration 6 EXHIBIT A DEFINITIONS INCORPORATED INTO THE MISSISSIPPI CHEMICAL CORPORATION OFFICER AND KEY EMPLOYEE INCENTIVE PLAN (LINE REFERENCES TO SAMPLE CALCULATION IN EXHIBIT B)
LINE TERM DEFINITION - ---- ------------------------------ ------------------------------------------------------------------------------------ 1 Debt Average consolidated debt for the Plan Year (sum of debt at each month's end divided by 12). 2 Equity Average equity for the Plan Year (sum of equity at each month's end divided by 12). 3 Total Capital Sum of lines 1 and 2. 4 Percent Debt Debt as a percent of Total Capital (line 1 divided by line 3). 5 Percent Equity Equity as a percent of Total Capital (line 2 divided by line 3). 6 Total 100 percent. 7 Actual Interest Rate Actual Interest Rate on Debt for the Plan Year (provided by Finance). on Debt 8 Assigned Add-On to Equity 6 percent or such other percentage set by the Compensation Committee within 90 days of the beginning of the Plan Year. 9 Assumed Cost of Equity Actual Interest Rate on Debt plus Add-On For Equity (line 7 plus line 8). 10 Weighted Average Cost Weighted Average Cost of Capital for the Plan Year of Capital [(line 7 times line 4) plus (line 9 times line 5)]. 11 Operating Income Net revenues less operating expenses on a consolidated basis (provided by Finance). 12 Consolidated Performance Operating Income divided by Total Capital expressed as a percentage (line 11 divided by line 3). 13 Weighted Average Cost Same as line 10. of Capital 14 Excess (Deficit) Consolidated Performance above (below) Weighted Average Cost of Capital (line 12 less line 13). 15 Threshold Bonus The percentage of a Participant's base salary designated by the Compensation Committee to be paid to him if the Company's Consolidated Performance for the Plan Year equals Threshold Performance. 16 Superior Bonus The percentage of a Participant's base salary designated by the Compensation Committee to be paid to him if the Company's Consolidated Performance for the Plan Year equals Superior Performance. 17 Extraordinary Bonus The percentage of a Participant's base salary designated by the Compensation Committee to be paid to him if the Company's Consolidated Performance for the Plan Year equals or exceeds Extraordinary Performance. 18 Actual Bonus Calculated in accordance with Section 4.1 of the Plan.
7 EXHIBIT B TO THE MISSISSIPPI CHEMICAL CORPORATION OFFICER AND KEY EMPLOYEE INCENTIVE PLAN SAMPLE CALCULATION FOR HYPOTHETICAL EMPLOYEE WITH SALARY OF $75,000 CALCULATED FOR PLAN YEAR ENDED 6/30/97 AS IF PLAN HAD BEEN EFFECTIVE
FISCAL YEAR 1997 ---------------------------------- 1 Debt $155,057,000 2 Equity $353,814,000 3 Total Capital (sum of lines 1 and 2) $508,871,000 4 Percent Debt 30.47% 5 Percent Equity 69.53% 6 Total (sum of lines 4 and 5) 100.00% 7 Actual Interest Rate on Debt 6.15% 8 Assigned Add-On to Equity 6.00% 9 Assumed Cost of Equity (sum of lines 7 and 8) 12.15% 10 Weighted Average Cost of Capital 10.32% 11 Operating Income $91,209,000 12 Consolidated Performance 17.92% 13 Weighted Average Cost of Capital 10.32% 14 Excess (Deficit) (line 12 less line 13) 7.60% 15 Threshold Bonus (sample) 5% of Base Salary or $3,750 16 Superior Bonus (sample) 10% of Base Salary or $7,500 17 Extraordinary Bonus (sample) 15% of Base Salary or $11,250 18 ACTUAL BONUS FOR PLAN YEAR ENDED 6/30/97 9.75% OF BASE SALARY OR $7,312.50
8 EX-10.9 5 DEFERRED COMPENSATION PLAN EXHIBIT 10.9 MISSISSIPPI CHEMICAL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN EFFECTIVE AUGUST 26, 1997 TABLE OF CONTENTS
SECTION PAGE 1. Introduction.................................................... 1 1.1 Plan...................................................... 1 1.2 Effective Date............................................ 1 1.3 Purpose................................................... 1 2. Participation and Supplemental Benefits......................... 1 2.1 Eligibility............................................... 1 2.2 Election to Defer......................................... 1 2.3 Amount of Deferral........................................ 2 2.4 Time of Election.......................................... 2 2.5 Establishment and Adjustment of Deferred Stock Accounts... 2 3. Payment of Deferred Compensation................................ 3 3.1 Payment of Deferred Compensation.......................... 3 3.2 Installment Election; Further Deferrals................... 3 3.3 Death..................................................... 3 3.4 Hardship Distribution..................................... 4 3.5 Source of Payment......................................... 4 3.6 Limitations on Issuance of Stock.......................... 4 4. Plan Administration............................................. 4 4.1 Committee................................................. 4 4.2 Indemnification........................................... 5 5. General......................................................... 5 5.1 Interests not Transferable; Taxes......................... 5 5.2 Facility of Payment....................................... 5 5.3 Gender and Number......................................... 5 5.4 Controlling Law........................................... 5 5.5 Successors................................................ 5 5.6 Not a Contract............................................ 6 6. Amendment, Termination and Cessation of Trading................. 6 6.1 Amendment and Termination................................. 6 6.2 Cessation of Trading in Employer Stock.................... 6 7. Execution of Plan............................................... 6
SECTION 1 INTRODUCTION ------------ 1.1 Plan. This plan has been established by Mississippi Chemical Corporation for the benefit of eligible employees of Mississippi Chemical Corporation, Mississippi Chemical Management Company and Mississippi Chemical Company, L.P. (hereinafter collectively referred to as the "Employer"), and shall be known as the Mississippi Chemical Corporation Executive Deferred Compensation Plan (the "Plan"). Other subsidiaries and affiliates of Mississippi Chemical may adopt the Plan for the benefit of their executive officers and key employees, subject to the approval of the Committee (as defined in Section 4.1 below). 1.2 Effective Date. The "Effective Date" of the Plan is August 26, 1997, subject to shareholder approval of the material terms of the Plan in accordance with Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended (the "Code"). 1.3 Purpose. The Plan has been established to provide incentives to a select group of the Employer's executive officers and key employees to more closely align their interests with those of the shareholders of Mississippi Chemical Corporation and to work towards growth in the Employer's shareholder value, by risking certain payments otherwise payable to them for deferred compensation based on future growth in the value of Mississippi Chemical Corporation common stock ("Stock"). The Plan is intended to permit such executive officers and key employees to elect to defer certain incentive payments that would otherwise be payable pursuant to the Employer's Officer and Key Employee Incentive Plan, any payment that would otherwise be made under any "all-employee" profit-sharing plan of the Employer or of a subsidiary or affiliate of Mississippi Chemical Corporation which has adopted the Plan with the approval of the Committee, and under any other bonus, profit-sharing or incentive plan of the Employer or of a subsidiary or affiliate of Mississippi Chemical Corporation which has adopted the Plan with the approval of the Committee (hereinafter collectively referred to as "Incentive Payments"). The Plan is intended to be unfunded for purposes of the Code and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Amounts deferred under this Plan that would otherwise be payable under the Officer and Key Employee Incentive Plan are intended to qualify as qualified performance-based compensation under Code Section 162(m)(4)(C) and related Treasury regulations, and the Plan shall be interpreted accordingly. SECTION 2 PARTICIPATION AND SUPPLEMENTAL BENEFITS --------------------------------------- 2.1 Eligibility. Each executive officer and key employee of the Employer who is named in writing by the Committee ("Executive") will be eligible to become a Participant in the Plan. Eligibility shall be limited to a select group of management or highly compensated employees in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. 2.2 Election to Defer. An Executive may elect to defer all or a portion of his Incentive Payments by filing a written election with the Committee on forms to be prescribed by the Committee at the time prescribed in Section 2.4 below. Such election must include a designation of beneficiary. Upon making such election, the Executive shall become a "Participant" in the Plan. 1 2.3 Amount of Deferral. The amount of Incentive Payments to be deferred in any calendar year shall be designated by the Participant in dollar or percentage terms on forms to be prescribed by the Committee. 2.4 Time of Election. A separate election to defer must be filed for each calendar year in which a Participant desires to defer any Incentive Payments and must be received by the end of the calendar year preceding the calendar year in which the Incentive Payments would otherwise be paid. Any election by a Participant with respect to Incentive Payments in a given calendar year will not preclude a different action with respect to Incentive Payments in any subsequent calendar year. Notwithstanding the foregoing, any eligible Executive may, within 30 days of first becoming eligible to participate in the Plan, elect to defer any Incentive Payments earned subsequent to such election for the balance of the calendar year in which he first becomes eligible. 2.5 Establishment and Adjustment of Deferred Stock Accounts. The Committee shall cause a "Deferred Stock Account" to be created for each Participant. The Deferred Stock Account shall be a mere bookkeeping account reflecting the Employer's future obligation to make payments under the Plan and shall not confer on any Participant any of the rights of a stockholder of Mississippi Chemical Corporation. A Participant's Deferred Stock Account shall be credited with "deferred shares" effective as of the date payment of a cash Incentive Payment would have been made, absent the Participant's election to defer such Incentive Payment pursuant to this Plan. The number of "deferred shares" to be credited shall be determined by dividing (i) 150 percent of the dollar amount of the cash Incentive Payment the Participant has elected to defer by (ii) the fair market value of one share of Stock as of the July 1 immediately prior to the calendar year in which payment of the Incentive Payment would otherwise have occurred. Notwithstanding the foregoing, in no event shall the number of deferred shares credited be less than (i) 150 percent of the dollar amount of the cash Incentive Payment the Participant has elected to defer, divided by (ii) the fair market value of one share of Stock as of the date such Incentive Payment would otherwise have been paid in cash. The result of such division shall be rounded up to the nearest whole share. A Participant's Deferred Stock Account shall be credited, effective as of the payment date of any dividend on the Stock, with additional shares of deferred stock, calculated by dividing (i) the dollar amount of the dividend per share times the number of deferred shares then credited to the Participant's Deferred Stock Account by (ii) the fair market value of one share of Stock. The Committee shall cause each Participant's Deferred Stock Account to be adjusted to reflect stock splits, stock dividends, exchange of stock in connection with a merger, and similar transactions to produce the same number of deferred shares as the holder of an equal number of shares of Stock would have following such a transaction. Whenever payment of all or any portion of a Participant's Deferred Stock Account is to be made in cash hereunder, the amount of cash to be paid to the Participant is to be determined by multiplying the number of deferred shares to be distributed by the fair market value of such shares. For purposes of this Section 2.5, "fair market value" of a share of Stock shall equal the average of the closing prices of a share as reported on the New York Stock Exchange for the last 20 trading days prior to the date in question. 2 SECTION 3 PAYMENT OF DEFERRED COMPENSATION -------------------------------- 3.1 Payment of Deferred Compensation. Subject to the provisions of Section 3.2 below, a Participant shall be entitled to receive shares of Stock equal to the number of deferred shares then credited to the Participant's Deferred Stock Account, computed in accordance with Section 2.5 above, on the first to occur of (i) 30 days following the end of the calendar year in which such Participant ceases to be an employee of the Employer due to separation of employment, retirement, Total Disability (as defined below), or death or (ii) the payment date that he elected at the time of his deferral election, which date shall be equal to or more than 18 months after the date of such deferral election. The shares issued to the Participant may be authorized but unissued shares, Treasury shares or shares purchased with general funds of the Employer. For purposes of this Plan, the term "Total Disability" shall mean inability of a Participant to perform the normal functions of his current position with the Company due to a physical or mental condition, disease, or injury that is anticipated to last at least 12 months. The Committee shall determine whether Total Disability has occurred based on such evidence as it deems satisfactory. 3.2 Installment Election; Further Deferrals. Subject to the approval of the Committee, in lieu of receiving the lump-sum issuance of Stock to which the Participant may be entitled pursuant to the provisions of Section 3.1 above at the time specified therein, a Participant may elect to receive installment payments by delivering to the Committee at any time prior to December 31 of the calendar year preceding the calendar year in which payment would otherwise occur hereunder, written notice of the Participant's election to receive the amount credited to his Deferred Stock Account in such number of annual installments (not to exceed installments extending over 10 years) and commencing on such date (which date shall be no earlier than the date on which the balance in the Participant's Deferred Stock Account would otherwise be paid to the Participant) as is specified in the written notice. Subject to the approval of the Committee, a Participant may also elect, no later than December 31 of the calendar year preceding the calendar year in which issuance of shares of Stock would otherwise occur under Section 3.1 above, to defer issuance of such shares of Stock until a later date specified in such election. A Participant may modify or rescind an installment election or further deferral election in its entirety at any time prior to the December 31 date referred to in this Section 3.2, but on such December 31 the election shall become irrevocable. 3.3 Death. If a Participant dies before receiving all amounts credited to his Deferred Stock Account, the entire unpaid amount shall be paid in one lump sum in accordance with Section 3.1 above to the beneficiary designated by such Participant. No beneficiary designation shall be valid unless it is in writing, signed by the Participant, dated and filed with the Committee prior to death. If the Participant is married and designates a primary beneficiary other than his spouse, the beneficiary designation must include the written consent of the spouse in such form as the Committee requires. Any beneficiary designation may be revoked and a new designation may be made, as long as the new designation is in writing, signed by the Participant, dated and filed with the Committee prior to death. If no beneficiary has been designated, or no designated beneficiary survives the Participant, any unpaid amounts will be paid to the Participant's surviving spouse, or if the Participant does not have a surviving spouse, to the Participant's estate as soon as administratively possible. 3 3.4 Hardship Distribution. A Participant or beneficiary may request acceleration of the payment terms hereunder only in the event of severe financial hardship resulting from an Unforeseeable Emergency (as defined below). The amount of any hardship distribution is limited to the amount necessary to meet the emergency. Such request shall specify in detail the grounds for the requested modification and shall be referred to the Committee. The decision of the Committee with respect to the requested modification shall be solely at the discretion of the Committee and in accordance with its evaluation of the exigencies of the situation. Such decision shall be binding on the Employer and Participant. For purposes of this Plan, the term "Unforeseeable Emergency" means an unanticipated emergency that is caused by an event beyond the control of the Participant or beneficiary that would result in severe financial hardship to the individual if early withdrawal were not permitted and that otherwise meets the requirements of such term in any applicable statute or regulation. 3.5 Source of Payment. All payments under this Plan in cash pursuant to Section 3.6 below shall be paid from the general funds of the Employer or from such other funding vehicle as the Committee shall provide, and all distributions of Stock under this Plan shall be made from authorized but unissued shares, Treasury shares or shares purchased with general funds of the Employer, or from such other funding vehicle as the Committee shall provide, provided that all assets paid into any funding vehicle shall, at all times prior to payment to a Participant or beneficiary, be subject to the general creditors of the Employer. The Employer shall be under no obligation to segregate any assets in connection with the maintenance of any Deferred Stock Account, nor shall anything contained in this Plan or any action taken pursuant to the Plan create or be construed to create a trust of any kind or a fiduciary relationship between the Employer and Participant. Title to the beneficial ownership of any assets, whether cash or investments, which the Employer may designate to pay the amounts credited to the Deferred Stock Accounts shall at all times remain in the Employer, and Participants shall not have any property interest whatsoever in any specific assets of the Employer. Each Participant's interest in his Deferred Stock Account shall be limited to the Employer's promise to make payment of such Account in the future pursuant to the terms of this Plan, and such right to receive future payment shall be no greater than the right of any other unsecured general creditor of the Employer. 3.6 Limitations on Issuance of Stock. Notwithstanding anything to the contrary in the Plan, in lieu of delivering Stock of the Employer to a Participant, the Employer reserves the right to pay a Participant in cash equal to the fair market value (determined in accordance with Section 2.5 above) of the deferred shares credited to his Deferred Stock Account, if the Employer, in its sole discretion, determines that it is necessary or desirable to do so to comply with any provision of federal or state law, stock exchange listing rules, or its articles or bylaws. SECTION 4 PLAN ADMINISTRATION ------------------- 4.1 Committee. The terms "Committee" and "Compensation Committee" mean the Compensation Committee established by Mississippi Chemical Corporation's Board of Directors. The Committee shall have complete authority to control and manage the operation and administration of the Plan. The Committee shall interpret the Plan and shall determine all questions arising in the administration and interpretation of the Plan; however, all such interpretations and decisions shall be applied in a uniform manner to all similarly situated Participants. All decisions and interpretations of the Committee made in good faith pursuant to 4 the Plan shall be final, conclusive and binding on all persons, subject only to the claims review procedures required by ERISA. 4.2 Indemnification. In the event and to the extent not insured under any contract of insurance with an insurance company, the Employer shall indemnify and hold harmless each "Indemnified Person," as defined below, against any and all claims, demands, suits, proceedings, losses, damages, interest, penalties, fines, expenses (specifically including, but not limited to, counsel fees to the extent approved by the Board of Directors of Mississippi Chemical Corporation or otherwise provided by law, court costs and other reasonable expenses of litigation), and liability of every kind, including amounts paid in settlement with the approval of the Board of Directors, arising from any action or cause of action related to the Indemnified Person's act or acts or failure to act. Such indemnity shall apply regardless of whether such claims, demands, suits, proceedings, losses, damages, interest, penalties, fines, expenses, and liability arise in whole or in part from (i) the negligence or other fault of the Indemnified Person or (ii) the imposition on such Indemnified Person of any civil penalties or excise tax pursuant to ERISA or the Code, except when the same is judicially determined to be due to gross negligence, fraud, recklessness, or willful or intentional misconduct of such Indemnified Person. The indemnification provided in this Section 4.2 shall not be construed to limit or supersede any other indemnity provided by the Employer. "Indemnified Person" shall mean the Committee and each employee, officer, or director of the Employer acting in a decision-making or administrative role with respect to the Plan. SECTION 5 GENERAL ------- 5.1 Interests Not Transferable; Taxes. Except as to any withholding of federal, state or local tax and except with respect to assignment of amounts currently due and payable hereunder to an alternate payee pursuant to a "qualified domestic relations order" as defined in ERISA, the interest of any Participant or his spouse or his beneficiary under the Plan is not subject to the claims of creditors and may not be voluntarily or involuntarily sold, transferred, assigned, alienated or encumbered. The Committee shall have the discretion and sole authority to determine the amount and timing of any withholding or employment taxes with respect to amounts accrued or paid under the Plan. 5.2 Facility of Payment. Any amounts payable hereunder to any person under legal disability or who, in the judgment of the Committee, is unable to properly manage his financial affairs may be paid to the legal representative of such person or may be applied for the benefit of such person in any manner which the Committee may select. 5.3 Gender and Number. Where the context admits, words in the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural. 5.4 Controlling Law. To the extent not superseded by the laws of the United States, the laws of Mississippi shall be controlling in all matters relating to the Plan. 5.5 Successors. This Plan is binding on the Employer and will be binding on, and inure to the benefit of, any successor of the Employer, whether by way of purchase, merger, consolidation or otherwise. 5 5.6 Not a Contract. This Plan does not constitute a contract of employment and shall not be construed to give any Participant the right to be retained in the Employer's service. SECTION 6 AMENDMENT, TERMINATION AND CESSATION OF TRADING ------------------------ 6.1 Amendment and Termination. While the Employer expects to continue the Plan indefinitely, the Compensation Committee must necessarily reserve, and hereby reserves, the right to terminate the Plan at any time and to amend the Plan at any time, but no more than once in any six-month period except to comport with changes in the Code, provided that in no event shall any Participant's Deferred Stock Account accrued to the date of such amendment or termination be reduced by such action without the specific written agreement of the Participant to such modification or reduction. In the event the Committee elects to terminate the Plan, the Employer reserves the right to settle all liabilities under the Plan by paying each Participant a lump-sum payment in cash or in Stock, determined at the Committee's sole election, in full satisfaction of his benefits hereunder. Such lump sum shall equal the value of his Deferred Stock Account valued through the date of Plan termination pursuant to Section 2.5 above. 6.2 Cessation of Trading in Employer Stock. Notwithstanding anything to the contrary in this Plan, in the event the Stock permanently ceases to be traded on a national stock exchange or over the counter for any reason other than a merger with another publicly traded entity, or ceases to exist for any reason other than a merger (whether due to liquidation or other event), the Employer (or its successor) shall, within 60 days of such event, distribute to each Participant (or beneficiary) the value of the entire balance of his Deferred Stock Account in cash, based on the fair market value as calculated under Section 2.5 above, as of the last date the Stock was traded. SECTION 7 EXECUTION OF PLAN ----------------- 7.1 To record the establishment of the Plan, the undersigned, being duly authorized to act on behalf of the Compensation Committee of the Board of Directors of Mississippi Chemical Corporation, have executed this document at Yazoo City, Mississippi. Dated: September 16, 1997 MISSISSIPPI CHEMICAL CORPORATION By: /s/ John Sharp Howie -------------------------------------- Chairman, Compensation Committee By: /s/ Ethel Truly -------------------------------------- Vice President - Administration 6 EX-10.10 6 NONEMPLOYEE DEFERRED COMPENSATION PLAN EXHIBIT 10.10 MISSISSIPPI CHEMICAL CORPORATION NONEMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN EFFECTIVE AUGUST 29, 1997 TABLE OF CONTENTS
SECTION PAGE 1. Introduction..................................................... 1 1.1 Plan....................................................... 1 1.2 Effective Date............................................. 1 1.3 Purpose.................................................... 1 2. Participation and Supplemental Benefits.......................... 1 2.1 Eligibility................................................ 1 2.2 Automatic Awards........................................... 1 2.3 Election to Defer.......................................... 1 2.4 Amount of Deferral......................................... 1 2.5 Time of Election........................................... 1 2.6 Establishment and Adjustment of Deferred Stock Accounts... 2 3. Payment of Deferred Compensation................................. 2 3.1 Payment of Deferred Compensation........................... 2 3.2 Installment Election; Further Deferrals.................... 3 3.3 Death...................................................... 3 3.4 Hardship Distribution...................................... 3 3.5 Source of Payment.......................................... 4 3.6 Limitations on Issuance of Stock........................... 4 4. Plan Administration.............................................. 4 4.1 Committee.................................................. 4 4.2 Indemnification............................................ 5 5. General.......................................................... 5 5.1 Interests not Transferable................................. 5 5.2 Facility of Payment........................................ 5 5.3 Gender and Number.......................................... 5 5.4 Controlling Law............................................ 5 5.5 Successors................................................. 5 6. Amendment, Termination and Cessation of Trading.................. 5 6.1 Amendment and Termination.................................. 5 6.2 Cessation of Trading in Company Stock...................... 6 7. Execution of Plan................................................ 6
SECTION 1 INTRODUCTION 1.1 Plan. This plan has been established by Mississippi Chemical Corporation for the benefit of nonemployee directors of Mississippi Chemical Corporation (the "Company"), and shall be known as the Mississippi Chemical Corporation Nonemployee Directors' Deferred Compensation Plan (the "Plan"). 1.2 Effective Date. The "Effective Date" of the Plan is August 29, 1997, subject to shareholder approval of the Plan. 1.3 Purpose. The Plan has been established to provide additional incentives to the Company's nonemployee directors to more closely align their interests with those of the shareholders of the Company and to work towards growth in the Company's shareholder value, by risking cash retainer payments otherwise payable to them for deferred compensation based on future growth in the value of Mississippi Chemical Corporation common stock ("Stock"). The Plan is intended to permit such directors to elect to defer certain cash retainer payments that would otherwise be payable to them and to provide that a portion of their retainer will automatically be deferred. The Plan is intended to be unfunded for purposes of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 2 PARTICIPATION AND SUPPLEMENTAL BENEFITS 2.1 Eligibility. Each director of the Company who is not an employee or officer of the Company or any of its subsidiaries or affiliates ("Nonemployee Director") will be a Participant in the Plan. 2.2 Automatic Awards. Effective for retainer periods beginning on and after January 1, 1998, one-half of each Nonemployee Director's annual retainer from the Company shall automatically be provided in the form of "deferred shares" pursuant to Section 2.6 below. The Participant shall designate the deferred payment date for such portion, which must be at least 18 months after the date of the deferral election. The Participant shall have no option to receive this portion of his retainer in cash. 2.3 Election to Defer. A Nonemployee Director may elect to defer all or a part of the remaining one-half of his annual retainer that would otherwise be payable to him in cash by filing a written election with the Committee (as defined below) on forms to be prescribed by the Committee at the time prescribed in Section 2.5 below. Such election must include a designation of beneficiary. 2.4 Amount of Deferral. The amount of retainer to be deferred in any calendar year shall be designated by the Participant in dollar or percentage terms on forms to be prescribed by the Committee. 2.5 Time of Election. A separate election to defer must be filed with respect to each calendar year for which a Participant desires to defer any retainer and must be received by the 1 end of the calendar year preceding the calendar year in which the retainer would otherwise be paid. Any election by a Participant with respect to his retainer in a given calendar year will not preclude a different action with respect to his retainer in any subsequent calendar year. Notwithstanding the foregoing, any eligible Nonemployee Director may, within 30 days of first becoming eligible to participate in the Plan, elect to defer any retainer earned subsequent to such election for the balance of the calendar year in which he first becomes eligible. 2.6 Establishment and Adjustment of Deferred Stock Accounts. The Committee shall cause a "Deferred Stock Account" to be created for each Participant. The Deferred Stock Account shall be a mere bookkeeping account reflecting the Company's future obligation to make payments under the Plan and shall not confer on any Participant any of the rights of a stockholder of the Company. A Participant's Deferred Stock Account shall be credited with "deferred shares" effective as of the first day of the retainer period in question. The number of deferred shares to be credited shall be determined by dividing (i) 150 percent of the dollar amount of the Participant's retainer for the year which is automatically deferred pursuant to Section 2.2 above, plus 150 percent of the dollar amount that otherwise would have been payable to the Participant and that has been deferred pursuant to Section 2.3 above by (ii) the fair market value of one share of Stock as of the July 1 immediately prior to the calendar year in which payment of the retainer would otherwise have occurred. Notwithstanding the foregoing, in no event shall the number of deferred shares credited be less than (i) 150 percent of the total dollar amount of the Participant's retainer for the applicable year that is deferred under Sections 2.2 and 2.3 above, divided by (ii) the fair market value of one share of Stock as of the first day of the retainer period. The result of such division shall be rounded up to the nearest whole share. A Participant's Deferred Stock Account shall be credited, effective as of the payment date of any dividend on the Stock, with additional shares of deferred stock, calculated by dividing (i) the dollar amount of the dividend per share times the number of deferred shares then credited to the Participant's Deferred Stock Account by (ii) the fair market value of one share of Stock. The Committee shall cause each Participant's Deferred Stock Account to be adjusted to reflect stock splits, stock dividends, exchange of stock in connection with a merger, and similar transactions to produce the same number of deferred shares as the holder of an equal number of shares of Stock would have following such a transaction. In the event a Participant ceases serving as a Nonemployee Director before the end of a retainer year, his Deferred Stock Account shall be reduced by the product of (i) the number of shares previously credited to his account for the current retainer year, adjusted to take into account any prior dividends, stock splits, or similar adjustments with respect to such shares, multiplied by (ii) the ratio of (a) the number of months he has served as a Nonemployee Director in the current retainer year to (b) 12. Whenever payment of all or any portion of a Participant's Deferred Stock Account is to be made in cash hereunder, the amount of cash to be paid to the Participant is to be determined by multiplying the number of deferred shares to be distributed by the fair market value of such shares. For purposes of this Section 2.6, "fair market value" of a share of the Company's Stock shall equal the average of the closing prices of a share as reported on the New York Stock Exchange for the last 20 trading days prior to the date in question. SECTION 3 PAYMENT OF DEFERRED COMPENSATION 3.1 Payment of Deferred Compensation. Subject to the provisions of Section 3.2 below, a Participant shall be entitled to receive shares of Stock equal to the number of deferred 2 shares then credited to the Participant's Deferred Stock Account, computed in accordance with Section 2.6 above, on the first to occur of (i) 30 days following the end of the calendar year in which such Participant ceases to be a director of the Company due to resignation, expiration of term, retirement, Total Disability (as defined below), or death, (ii) the payment date that he elected at the time of his deferral election, which date shall be 18 months or more after the date of the deferral election, or (iii) if (and only if) the Participant so specifies in his initial deferral election, 30 days following a change of control of the Company (as defined in deferral election forms prescribed by the Committee). The shares issued to the Participant may be authorized but unissued shares, Treasury shares or shares purchased with general funds of the Company. In lieu of shares of Stock, a Participant may elect, in accordance with any procedures and deadlines prescribed by the Committee, to receive in cash, at the time issuance of shares of Stock would otherwise occur hereunder, the "fair market value" (calculated in accordance with Section 2.6 above) of that portion of his Deferred Stock Account attributable to deferrals under Section 2.3 above. For purposes of this Plan, the term "Total Disability" shall mean inability to perform the normal functions of a director of the Company due to a physical or mental condition, disease, or injury that is anticipated to last at least 12 months. The Committee shall determine whether Total Disability has occurred based on such evidence as it deems satisfactory. 3.2 Installment Election; Further Deferrals. Subject to the approval of the Committee, in lieu of receiving the lump-sum issuance of Stock or cash to which the Participant may be entitled pursuant to the provisions of Section 3.1 above at the time specified therein, a Participant may elect to receive installment payments by delivering to the Committee at any time prior to December 31 of the calendar year preceding the calendar year in which payment would otherwise occur hereunder, written notice of the Participant's election to receive the amount credited to his Deferred Stock Account in such number of annual installments (not to exceed installments extending over 10 years) and commencing on such date (which date shall be no earlier than the date on which the balance in the Participant's Deferred Stock Account would otherwise be paid to the Participant) as is specified in the written notice. Subject to the approval of the Committee, a Participant may also elect, no later than December 31 of the calendar year preceding the calendar year in which delivery of shares of Stock or cash would otherwise occur under Section 3.1 above, to defer issuance of such shares of Stock until a later date specified in such election. A Participant may modify or rescind an installment election or further deferral election in its entirety at any time prior to the December 31 date referred to in this Section 3.2, but on such December 31 the election shall become irrevocable. 3.3 Death. If a Participant dies before receiving all amounts credited to his Deferred Stock Account, the entire unpaid amount shall be paid in one lump sum in accordance with Section 3.1 above to the beneficiary designated by such Participant. No beneficiary designation shall be valid unless it is in writing, signed by the Participant, dated and filed with the Committee prior to death. If the Participant is married and designates a primary beneficiary other than his spouse, the beneficiary designation must include the written consent of the spouse in such form as the Committee requires. Any beneficiary designation may be revoked and a new designation may be made, as long as the new designation is in writing, signed by the Participant, dated and filed with the Committee prior to death. If no beneficiary has been designated, or no designated beneficiary survives the Participant, any unpaid amounts will be paid to the Participant's surviving spouse, or if the Participant does not have a surviving spouse, to the Participant's estate as soon as administratively possible. 3 3.4 Hardship Distribution. A Participant or beneficiary may request acceleration of the payment terms hereunder only in the event of severe financial hardship resulting from an Unforeseeable Emergency (as defined below). The amount of any hardship distribution is limited to the amount necessary to meet the emergency. Such request shall specify in detail the grounds for the requested modification and shall be referred to the Committee. The decision of the Committee with respect to the requested modification shall be solely at the discretion of the Committee and in accordance with its evaluation of the exigencies of the situation. Such decision shall be binding on the Company and Participant. For purposes of this Plan, the term "Unforeseeable Emergency" means an unanticipated emergency that is caused by an event beyond the control of the Participant or beneficiary that would result in severe financial hardship to the individual if early withdrawal were not permitted and that otherwise meets the requirements of such term in any applicable statute or regulation. 3.5 Source of Payment. All payments under this Plan in cash shall be paid from the general funds of the Company or from such other funding vehicle as the Committee shall provide, and all distributions of Stock under this Plan shall be made from authorized but unissued shares, Treasury shares or shares purchased with general funds of the Company, or from such other funding vehicle as the Committee shall provide, provided that all assets paid into any funding vehicle shall, at all times prior to payment to a Participant or beneficiary, be subject to the general creditors of the Company. The Company shall be under no obligation to segregate any assets in connection with the maintenance of any Deferred Stock Account, nor shall anything contained in this Plan or any action taken pursuant to the Plan create or be construed to create a trust of any kind or a fiduciary relationship between the Company and Participant. Title to the beneficial ownership of any assets, whether cash or investments, which the Company may designate to pay the amounts credited to the Deferred Stock Accounts shall at all times remain in the Company, and Participants shall not have any property interest whatsoever in any specific assets of the Company. Each Participant's interest in his Deferred Stock Account shall be limited to the Company's promise to make payment of such Account in the future pursuant to the terms of this Plan, and such right to receive future payment shall be no greater than the right of any other unsecured general creditor of the Company. 3.6 Limitations on Issuance of Stock. Notwithstanding anything to the contrary in the Plan, in lieu of delivering Stock of the Company to a Participant, the Company reserves the right to pay a Participant in cash equal to the fair market value (determined in accordance with Section 2.6 above) of the deferred shares credited to his Deferred Stock Account, if the Company, in its sole discretion, determines that it is necessary or desirable to do so to comply with any provision of federal or state law, stock exchange listing rules, or its articles or bylaws. SECTION 4 PLAN ADMINISTRATION 4.1 Committee. The terms "Committee" and "Compensation Committee" mean the Compensation Committee established by the Company's Board of Directors. The Committee shall have complete authority to control and manage the operation and administration of the Plan. The Committee shall interpret the Plan and shall determine all questions arising in the administration and interpretation of the Plan; however, all such interpretations and decisions shall be applied in a uniform manner to all such similarly situated Participants. All decisions and interpretations of the Committee made in good faith pursuant to the Plan shall be final, conclusive and binding on all persons. Notwithstanding the foregoing, no Participant who is a 4 member of the Committee shall vote on any decision solely affecting his own benefits under the Plan (such as whether the Participant has suffered Total Disability or is eligible for a hardship withdrawal). 4.2 Indemnification. In the event and to the extent not insured under any contract of insurance with an insurance company, the Company shall indemnify and hold harmless each "Indemnified Person," as defined below, against any and all claims, demands, suits, proceedings, losses, damages, interest, penalties, fines, expenses (specifically including, but not limited to, counsel fees to the extent approved by the Board of Directors of the Company or otherwise provided by law, court costs and other reasonable expenses of litigation), and liability of every kind, including amounts paid in settlement with the approval of the Board of Directors, arising from any action or cause of action related to the Indemnified Person's act or acts or failure to act. Such indemnity shall apply regardless of whether such claims, demands, suits, proceedings, losses, damages, interest, penalties, fines, expenses, and liability arise in whole or in part from the negligence or other fault of the Indemnified Person, except when the same is judicially determined to be due to gross negligence, fraud, recklessness, or willful or intentional misconduct of such Indemnified Person. The indemnification provided in this Section 4.2 shall not be construed to limit or supersede any other indemnity provided by the Company. "Indemnified Person" shall mean the Committee and each employee, officer, or director of the Company acting in a decision-making or administrative role with respect to the Plan. SECTION 5 GENERAL 5.1 Interests Not Transferable. The interest of any Participant or his spouse or his beneficiary under the Plan is not subject to the claims of creditors and may not be voluntarily or involuntarily sold, transferred, assigned, alienated or encumbered. 5.2 Facility of Payment. Any amounts payable hereunder to any person under legal disability or who, in the judgment of the Committee, is unable to properly manage his financial affairs may be paid to the legal representative of such person or may be applied for the benefit of such person in any manner which the Committee may select. 5.3 Gender and Number. Where the context admits, words in the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural. 5.4 Controlling Law. To the extent not superseded by the laws of the United States, the laws of Mississippi shall be controlling in all matters relating to the Plan. 5.5 Successors. This Plan is binding on the Company and will be binding on, and inure to the benefit of, any successor of the Company, whether by way of purchase, merger, consolidation or otherwise. SECTION 6 AMENDMENT, TERMINATION AND CESSATION OF TRADING 5 6.1 Amendment and Termination. While the Company expects to continue the Plan indefinitely, the Compensation Committee must necessarily reserve, and hereby reserves, the right to terminate the Plan at any time, and to amend the Plan, but no more than once in any six-month period except to comport with changes in the Code; provided that in no event shall any Participant's Deferred Stock Account accrued to the date of such amendment or termination be reduced by such action without the specific written agreement of the Participant to such modification or reduction. In the event the Committee elects to terminate the Plan, the Company reserves the right to settle all liabilities under the Plan by paying each Participant a lump-sum payment in cash or in Stock, determined at the Committee's sole election, in full satisfaction of his benefits hereunder. Such lump sum shall equal the value of his Deferred Stock Account valued through the date of Plan termination pursuant to Section 2.5 above. 6.2 Cessation of Trading in Company Stock. Notwithstanding anything to the contrary in this Plan, in the event the Stock permanently ceases to be traded on a national stock exchange or over the counter for any reason other than a merger with another publicly traded entity, or ceases to exist for any reason other than a merger (whether due to liquidation or other event), the Company (or its successor) shall, within 60 days of such event, distribute to each Participant (or beneficiary) the value of the entire balance of his Deferred Stock Account in cash, based on the fair market value as calculated under Section 2.5 above, as of the last date the Stock was traded. SECTION 7 EXECUTION OF PLAN 7.1 To record the establishment of the Plan, the undersigned, being duly authorized to act on behalf of the Board of Directors of the Company, have executed this document at Yazoo City, Mississippi. Dated: a/o August 29, 1997 MISSISSIPPI CHEMICAL CORPORATION By: /s/ Coley L. Bailey --------------------------------- Chairman, Board of Directors By: /s/ John Sharp Howie --------------------------------- Chairman, Compensation Committee 6 EX-10.11 7 SUPPLEMENTAL BENEFIT PLAN EXHIBIT 10.11 MISSISSIPPI CHEMICAL CORPORATION SUPPLEMENTAL BENEFIT PLAN AS AMENDED AND RESTATED AS OF JULY 1, 1996 TABLE OF CONTENTS
SECTION PAGE 1. Introduction.............................................. 1 1.1 Plan................................................. 1 1.2 Effective Date....................................... 1 1.3 Purpose.............................................. 1 2. Participation and Supplemental Benefits................... 2 2.1 Eligibility.......................................... 2 2.2 Supplemental Pension Benefits........................ 2 2.3 Supplemental Thrift Benefits......................... 2 2.4 Payment of Supplemental Pension Benefits............. 3 2.5 Payment Modification................................. 3 2.6 Payment of Supplemental Thrift Benefits.............. 4 2.7 Benefits Provided by Employer........................ 4 3. Other Employment.......................................... 5 4. General................................................... 6 4.1 Administrator........................................ 6 4.2 Interests Not Transferable........................... 6 4.3 Facility of Payment.................................. 6 4.4 Gender and Number.................................... 6 4.5 Controlling Law...................................... 6 4.6 Successors........................................... 6 4.7 Not a Contact........................................ 6 5. Amendment and Termination................................. 7 6. Execution of Plan......................................... 8
SECTION 1 INTRODUCTION 1.1 PLAN. This plan has been established by Mississippi Chemical Corporation (the "Employer") for the benefit of eligible employees of the Employer, and shall be known as the Mississippi Chemical Corporation Supplemental Benefit Plan (the "Plan"). Subsidiaries and affiliates of the Employer may not, however, adopt the Plan for the benefit of any of their employees. 1.2 EFFECTIVE DATE. The "Effective Date" of the Plan is July 1, 1984. The Effective Date of this amendment and restatement of the Plan is July 1, 1996. 1.3 PURPOSE. The Plan has been established to supplement retirement benefits provided by the Employer's qualified defined benefit pension plan, entitled the Mississippi Chemical Corporation Retirement Plan ("Pension Plan"). To the extent that benefits under such plan are limited by Sections 415 and 401(a)(17) of the Internal Revenue Code of 1986, as amended ("Code"), and the regulations thereunder (the "Pension Limiting Provisions"), supplemental benefits are provided under terms and conditions of this Plan. The plan is also intended to supplement benefits provided by the Employer's qualified 401(k) savings plan, entitled the Mississippi Chemical Corporation Thrift Plan Plus ("Thrift Plan"). To the extent that Employer matching contributions under such plan are limited by Sections 415, 401(a)(17) and 402(g) of the Code, and the regulations thereunder (the "Thrift Limiting Provisions"), supplemental benefits are provided under the terms and conditions of this Plan. The Plan is intended to be unfunded for purposes of the Code and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). For purposes of calculating benefits under this Plan, the Pension Limiting Provisions and the Thrift Limiting Provisions shall be deemed to be not less than the dollar and/or percentage limits in effect as of January 1, 1996. 1 SECTION 2 PARTICIPATION AND SUPPLEMENTAL BENEFITS 2.1 ELIGIBILITY. Each employee of the Employer who is covered by the Pension Plan or by the Thrift Plan, whose benefits thereunder are or were limited by the Pension Limiting Provisions or the Thrift Limiting Provisions, and who is specifically named and nominated in writing by the Administrator for participation hereunder, will be a Participant under this Plan and, upon retirement on or after the Effective Date, will be eligible for benefits in accordance with subsections 2.2 and 2.3 hereof. Eligibility shall be limited to a select group of management or highly compensated employees. 2.2 SUPPLEMENTAL PENSION BENEFITS. Upon a Participant's termination of employment, retirement or death on or after the Effective Date, any benefits which otherwise would have been provided to him or his beneficiary under the Pension Plan, but which have not been provided to him or his beneficiary because of the Pension Limiting Provisions shall be calculated and, if appropriate, shall be valued by an actuary selected by the Employer. Such benefits ("Supplemental Pension Benefits") shall be the full amount of retirement benefit produced for the Participant by the Pension Plan's formula without regard to the Pension Limiting Provisions, less the maximum amount of retirement benefits that can be provided under the Pension Plan in accordance with the Pension Limiting Provisions. 2.3 SUPPLEMENTAL THRIFT BENEFITS. Upon a Participant's termination of employment, retirement or death on or after the Effective Date, the accumulated value of any Employer matching contributions which otherwise would have been credited to him under the Thrift Plan, but which were not credited to him because of the operation of the Thrift Limiting Provisions, shall be calculated as hereinafter provided: (a) Employer matching contributions to be credited for a particular year under this Plan shall be equal to the excess of (i) the Employer matching contributions that would have been credited under the Thrift Plan for the year without regard to the Thrift Limiting Provisions over (ii) the actual Employer matching contributions that were credited under the Thrift Plan for the year. (b) If a Participant has made salary deferred contributions in the maximum amount allowed by Section 402(g) of the Internal Revenue Code and the regulations thereunder, it shall be assumed that the Participant would have made salary deferral contributions at a level that would have produced the maximum Employer matching contributions permitted pursuant to the matching formula in the Thrift Plan. (c) The accumulated value of such Employer matching contributions shall be determined using an interest rate of eight percent (8%) per annum. 2 Such accumulated value shall be the Participant's "Supplemental Thrift Benefits." 2.4 PAYMENT OF SUPPLEMENTAL PENSION BENEFITS. Supplemental Pension Benefits, subject to the further provisions of the Plan, shall be payable to or on account of the Participant as follows: (a) on a monthly basis beginning at the same time and under the same terms and conditions as would have applied if such benefits were payable on a monthly basis from the Pension Plan. (b) on a monthly basis to the Participant's surviving spouse or other beneficiary in the event of the Participant's death (before or after retirement) beginning at the same time and under the same terms and conditions as would have applied if such benefits were payable on a monthly basis from the Pension Plan. Benefits to the surviving spouse or other beneficiary shall be based upon the difference between the full amount of retirement benefit produced for the Participant by the Pension Plan's formula, multiplied by the percentage of such benefit payable to the surviving spouse or other beneficiary under the Pension Plan, less the amount of benefits being provided to the surviving spouse or other beneficiary under the Pension Plan after application of the Pension Limiting Provisions. In no event will any payments be made hereunder to or on account of a surviving spouse or other beneficiary after the month in which the surviving spouse's death occurs. All elections made, beneficiaries designated and payment options selected under the Pension Plan by the Participant, his spouse or his beneficiary shall be deemed to have been so made, designated or selected for purposes of this Section 2.4. No later than the last day of the calendar year immediately prior to the year payments are to begin hereunder, the Participant shall irrevocably elect the form of payment of benefits hereunder from among the payment options available under the Pension Plan. Such election shall be made in writing and delivered to the Administrator. Such election shall not affect the Participant's right to select his payment option under the Pension Plan within the time periods established by the Pension Plan and applicable law. In the event the Participant fails to make such an irrevocable election, the Administrator, in its sole discretion, shall determine the form of payment hereunder. 2.5 PAYMENT MODIFICATIONS. Regardless of any other provisions of this Plan, the period during which any monthly installments hereunder are to be paid to a Participant or to his surviving spouse or other beneficiary may, at any time after such person(s) is entitled to payments hereunder, be modified by mutual agreement between the Administrator and the person(s) to whom such monthly installments are to be paid. Notwithstanding anything to the contrary in the Plan, the Administrator, in its sole discretion, may cause a lump-sum payment to be made to a Participant in full satisfaction of all amounts payable hereunder, if the present value 3 of all amounts payable hereunder does not exceed $50,000. The amount of such lump-sum payment and such present value shall be determined in accordance with the procedures and assumptions specified in Section 5 below. 2.6 PAYMENT OF SUPPLEMENTAL THRIFT BENEFITS. Supplemental Thrift Benefits, subject to the further provisions of this Plan and to the payout provisions of the Thrift Plan, shall be payable to or on account of the Participant at the time and in the form as elected by the Participant, or if applicable the Participant's beneficiary. All beneficiaries designated under the Thrift Plan by the Participant shall be deemed to have been designated for purposes of this Section 2.6. No later than the last day of the calendar year immediately prior to the year payments are to begin hereunder, the Participant shall irrevocably elect the form of payment of benefits hereunder from among the payment options available under the Thrift Plan. Such election shall be made in writing and delivered to the Administrator. Such election shall not affect the Participant's right to select his payment option under the Thrift Plan within the time periods established by the Thrift Plan and applicable law. In the event the Participant fails to make such an irrevocable election, the Administrator, in its sole discretion, shall determine the form of payment hereunder. 2.7 BENEFITS PROVIDED BY EMPLOYER. Benefits payable under this Plan to a Participant or his spouse or other beneficiary shall be the obligation of the Employer. The Employer may, but shall not be required to, sequester any assets to be applied for the payment of benefits under this Plan. In the event the Employer elects to establish a grantor trust for the payment of benefits hereunder, the Employer shall be relieved of liability to the extent of any payments actually made to Participants by such trust. Participants shall have the status of unsecured creditors of the Employer with respect to their benefits hereunder in all events. 4 SECTION 3 OTHER EMPLOYMENT A Participant or his spouse or other beneficiary receiving Supplemental Pension Benefits or Supplemental Thrift Benefits will continue to be entitled thereto regardless of other employment or self-employment. 5 SECTION 4 GENERAL 4.1 ADMINISTRATOR. This Plan will be administered by the Employer or by one or more officers of the Employer who are designated as "Administrator" by the Board of Directors of the Employer. 4.2 INTERESTS NOT TRANSFERABLE; TAXES. Except as to any withholding of tax under the laws of the United States or any State and except with respect to a "qualified domestic relations order" as defined in ERISA, the interest of any Participant or his spouse, minor children of beneficiary under the Plan is not subject to the claims of creditors and may not be voluntarily or involuntarily sold, transferred, assigned, alienated or encumbered. The Administrator shall have the discretion and sole authority to determine the amount and timing of any withholding or employment taxes with respect to amounts accrued or paid under the Plan. The Employer shall reimburse the Participant for, or pay, any tax imposed on the Participant under the Federal Insurance Contributions Act with respect to the Participant's interest in this Plan; however, the Participant shall be responsible for any taxes resulting from the Employer's payment of such tax. 4.3 FACILITY OF PAYMENT. Any amounts payable hereunder to any person under legal disability or who, in the judgment of the Administrator, is unable to properly manage his financial affairs may be paid to the legal representative of such person or may be applied for the benefit of such person in any manner which the Administrator may select. 4.4 GENDER AND NUMBER. Where the context admits, words in the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural. 4.5 CONTROLLING LAW. To the extent not superseded by the laws of the United States, the laws of Mississippi shall be controlling in all matters relating to the Plan. 4.6 SUCCESSORS. This Plan is binding on the Employer and will be binding on and inure to the benefit of any successor of the Employer, whether by way of purchase, merger, consolidation or otherwise. 4.7 NOT A CONTRACT. This Plan does not constitute a contract of employment and shall not be construed to give any Participant the right to be retained in the Employer's service. 6 SECTION 5 AMENDMENT AND TERMINATION While the Employer expects to continue the Plan indefinitely, the Board of Directors of the Employer must necessarily reserve and hereby reserves the right to amend the Plan at any time, provided that in no event shall any Participant's Supplemental Pension Benefits or Supplemental Thrift Benefits accrued to the date of such amendment or termination be modified or reduced by such action, without the specific written agreement of the Participant to such modification or reduction. Notwithstanding the foregoing, in the event the Board elects to terminate the Plan, the Employer reserves the right to settle all liabilities under the Plan by paying each Participant a lump-sum payment in full satisfaction of his benefits hereunder. Such lump sum shall equal (1) the present value of the Participant's Supplemental Pension Benefits, determined by an actuary selected by the Employer, plus (2) the accumulated value of his Supplemental Thrift Benefits with interest credited through the date of termination pursuant to Section 2.3 above. The present value of the Participant's Supplemental Pension Benefits shall be determined in accordance with the assumptions designated in Section 1.34 of the Pension Plan, entitled "Present Value of Accrued Benefit." 7 SECTION 6 EXECUTION OF PLAN To record the amendment and restatement of the Plan, the undersigned, being duly authorized to act on behalf of the Board of Directors of Mississippi Chemical Corporation, have executed this document at Yazoo City, Mississippi. Dated: June 26, 1996 MISSISSIPPI CHEMICAL CORPORATION By: Plan Administrator /s/ Ethel Truly ------------------------------------- /s/ Robert E. Jones ------------------------------------- 8 EX-13.1 8 1998 ANNUAL REPORT EXHIBIT 13.1 MISSISSIPPI CHEMICAL CORPORATION 1998 ANNUAL REPORT MISSISSIPPI CHEMICAL CORPORATION FINANCIAL HIGHLIGHTS
INCOME STATEMENT DATA: Fiscal Years Ended June 30 - ------------------------------------------------------------------------------------------------------------------ (In thousands, except per share data) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------ Net sales $519,911 $520,569 $428,789 $388,154 $309,360 Operating income $ 37,936 $ 91,209 $ 84,818 $ 80,969 $ 37,905 Income from continuing operations before cumulative effect of change in accounting principle $ 22,974 $ 55,815 $ 54,178 $ 52,230 $ 26,912 Net income $ 22,974 $ 55,815 $ 54,178 $ 52,230 $ 36,523 Income from continuing operations assuming conversion from a cooperative to a regular business corporation as of July 1, 1993 (1) n/a n/a n/a n/a $ 21,415 Earnings per share - basic (2) $ 0.84 $ 2.29 $ 2.47 $ 2.34 $1.10 Earnings per share - diluted (2) $ 0.84 $ 2.29 $ 2.46 $ 2.34 $1.10 Weighted average common shares outstanding - basic (3) 27,355 24,329 21,975 22,337 19,454 Weighted average common shares outstanding - diluted (3) 27,390 24,404 22,039 22,364 19,454 BALANCE SHEET DATA: June 30 - ------------------------------------------------------------------------------------------------------------------ (In thousands, except per share data) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------ Working capital $ 64,086 $ 53,910 $ 81,613 $ 70,790 $ 34,931 Total assets $912,332 $858,545 $341,006 $302,215 $298,430 Long-term debt, excluding long-term debt due within one year $304,705 $244,516 $ - $ 2,478 $ 57,217 Shareholders' equity $448,525 $439,429 $247,825 $227,307 $142,956 Cash dividends declared per common share (4) $ 0.40 $ 0.40 $ 0.36 $ 0.16 $ -
(1) For 1994, the Company operated as a cooperative and realized deductions for income taxes for amounts paid in cash as patronage refunds to its shareholder-members. If the conversion from a cooperative to a regular business corporation had occurred as of July 1, 1993, income taxes would have been increased by $5.5 million for fiscal 1994. (2) For 1994, earnings per share reflect the reorganization of the Company from a cooperative to a regular business corporation as if it had occurred July 1, 1993 and is based on income from continuing operations. (3) For 1994, weighted average common shares outstanding reflect the reorganization of the Company from a cooperative to a regular business corporation as if it had occurred July 1, 1993. (4) For 1994, the Company operated as a cooperative and paid cash patronage refunds in lieu of cash dividends MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company's fiscal 1998 results reflect depressed prices for all of its nitrogen products due to a persistent world supply and demand imbalance. Net income decreased to $23.0 million in fiscal 1998 from $55.8 million in fiscal 1997. Net sales decreased to $519.9 million in fiscal 1998 from $520.6 million in fiscal 1997, and operating income decreased to $37.9 million in fiscal 1998 from $91.2 million in fiscal 1997. The Company's weighted average nitrogen sales price decreased 21% during the current year as compared to the prior year. The average selling prices for ammonia, ammonium nitrate, urea and nitrogen solutions were down 25%, 18%, 27% and 21%, respectively, in fiscal 1998 as compared to fiscal 1997. The lower sales prices experienced during the current year offset the benefits derived from a 22% increase in nitrogen sales volumes during the current year. This increase was primarily the result of increased ammonia and urea volumes attributable to the acquisition of the fertilizer production facilities of First Mississippi Corporation ("First Mississippi") in December 1996. During the current year, diammonium phosphate ("DAP") sales prices did not change significantly while sales prices for the Company's potash products increased 12%. During the current year, nitrogen costs per ton increased 3%, primarily as a result of higher maintenance and labor costs associated with turnarounds at the Company's nitrogen facilities and higher depreciation costs related to the Company's acquisition of the First Mississippi fertilizer assets. These costs were partially offset by slightly lower natural gas costs and lower prices paid for purchased ammonia. DAP costs per ton increased 2% during the current year, primarily because of higher conversion costs associated with scheduled turnarounds and increased water treatment costs associated with abnormally high rainfall levels experienced during the current year. The Company experienced a 3% decrease in its potash costs per ton, which was primarily the result of the suspension of operations of the higher cost mining and production facilities at Eddy Potash, Inc. ("Eddy") in December 1997. Looking forward to fiscal 1999, the key issue is the direction of nitrogen pricing which will be driven by supply and demand. Three of the most significant factors affecting pricing of nitrogen products will be Chinese purchasing practices, Russian production and pricing policies, and the impact of recent global capacity expansions. Farmland MissChem Limited, the Company's 50-50 joint venture anhydrous ammonia plant located in Point Lisas, The Republic of Trinidad and Tobago, achieved mechanical completion during the current year and produced interim revenues as of June 30, 1998. The plant produced sporadically during the Company's fourth fiscal quarter, but did not reach operational status by the end of fiscal 1998. In late July 1998, the plant achieved operational status. In March and April of the current year, the Company experienced lost production at its DAP facility due to a shutdown associated with a production expansion. This expansion increased production rates in the fourth quarter which allowed the Company to make up the lost production. By year end, sales volumes were comparable to the prior year. In fiscal 1999 and thereafter, this expansion should allow the Company to increase its DAP production by approximately 180,000 tons annually. The Company's results of operations have historically been influenced by a number of factors beyond the Company's control, which have, at times, had a significant effect on the Company's operating results. Fertilizer demand and prices are highly dependent upon a variety of conditions in the agricultural industry such as planted acreage, United States government agricultural policies, projected grain stocks, weather and changes in agricultural production methods. The Company's results can also be affected by such factors as the volatility of natural gas prices, construction delays in completing and obtaining production from new or expanded facilities, the relative value of the U.S. dollar, foreign agricultural policies (in particular the policies of the governments of India and China regarding fertilizer imports), capacity expansions by competitors, the pricing policies of domestic and foreign (especially Russian) competitors, and the unpredictable nature of international and local economies. RESULTS OF OPERATIONS Following are summaries of the Company's sales results by product categories:
Fiscal Year Ended June 30 ------------------------------ 1998 1997 1996 -------- -------- -------- (in thousands) Net Sales: Nitrogen $298,595 $308,441 $255,195 DAP 127,734 128,076 142,084 Potash 91,708 81,945 29,553 Other 1,874 2,107 1,957 -------- -------- -------- Net Sales $519,911 $520,569 $428,789 ======== ======== ======== Fiscal Year Ended June 30 ----------------------------- 1998 1997 1996 --------- ------- ------- Tons Sold: (in thousands) Nitrogen: Ammonia 648 379 39 Ammonium nitrate 765 725 759 Urea 515 425 313 Nitrogen solutions 485 458 624 Nitric acid 57 36 35 -------- -------- -------- Total Nitrogen 2,470 2,023 1,770 DAP 726 723 754 Potash 1,022 1,020 418 Fiscal Year Ended June 30 --------------------------- 1998 1997 1996 ------ ------ ------ Average Sales Price Per Ton: Nitrogen $121 $152 $144 DAP $176 $177 $188 Potash $ 90 $ 80 $ 71
FISCAL 1998 COMPARED TO FISCAL 1997 NET SALES. Net sales decreased to $519.9 million in fiscal 1998 from $520.6 million in fiscal 1997, primarily as a result of lower sales prices for nitrogen, partially offset by increased sales volumes for nitrogen and higher sales prices for potash. During the current year, the Company's sales prices for its anhydrous ammonia, ammonium nitrate, urea and nitrogen solutions decreased 25%, 18%, 27% and 21%, respectively. This resulted in a 21% reduction in the weighted average sales price per ton of nitrogen. Nitrogen fertilizer sales volumes increased 22% during the current year due to increased ammonia and urea volumes attributable to the acquisition of the fertilizer production facilities of First Mississippi in December 1996. Potash sales increased 12% as a result of a 12% increase in sales prices. The higher sales prices are the result of increased domestic and international demand during the current year. Potash sales volumes did not change significantly during the current year. Production efficiency gains at the Company's two remaining operating mines and a reduction in inventories offset the lost production associated with the suspension of operations at the Eddy facilities in December 1997. Sales of DAP did not change significantly during the current year, as sales prices decreased 1% while volumes remained relatively unchanged. The Company experienced some lost DAP production due to a shutdown associated with the Company's production expansion during March and April of the current year. This expansion increased DAP production rates in the fourth quarter which allowed the Company to make up the lost production. By year end, sales volumes were comparable to the prior year. TRADING LOSS ON BROKERED PRODUCT. The Company began brokering ammonia in the open market following the First Mississippi acquisition in December 1996. During the current year, brokered ammonia sales of $18.5 million and purchases of $19.3 million resulted in an $800,000 net trading loss. During the prior year, brokered ammonia sales of $32.3 million and purchases of $33.2 million resulted in a $57,000 net trading loss after considering certain purchase price adjustments associated with the acquisition. The Company brokered approximately 142,000 short tons during the current year compared to 177,000 short tons during the prior year. COST OF PRODUCTS SOLD. For fiscal 1998, cost of products sold increased to $412.5 million from $367.0 million for fiscal 1997. As a percentage of net sales, cost of products sold increased to 79% from 70%. The increase in cost of products sold, as a percentage of net sales, is primarily the result of decreases in the average sales price for each of the Company's nitrogen products. The Company's cost per ton for its nitrogen products increased 3% in the current year, primarily the result of higher maintenance and labor costs associated with scheduled maintenance turnarounds at the Company's nitrogen facilities in Yazoo City, Mississippi, and Donaldsonville, Louisiana, and higher depreciation associated with the acquisition of the First Mississippi fertilizer assets. These costs were partially offset by slightly lower natural gas costs as well as lower prices paid for purchased ammonia. DAP costs per ton increased 2% during the current year as compared to the prior year, resulting primarily from higher conversion costs incurred due to scheduled turnarounds of its sulfuric acid plants and increased water treatment costs due to abnormally high rainfall levels experienced during the current year. These higher costs were partially offset by lower raw material costs, primarily ammonia and phosphate rock. Phosphate rock costs decreased due to the pricing formula in the Company's phosphate rock supply contract that is based on the phosphate rock costs incurred by certain other domestic phosphate producers and the financial performance of the Company's phosphate operations. Potash cost per ton decreased 3% during the current year as compared to the prior year, primarily the result of the Company's suspension of operations at its higher cost mining and production facilities at Eddy in early December 1997. SELLING EXPENSES. For fiscal 1998, selling expenses increased to $33.3 million from $30.7 million in fiscal 1997. This increase was primarily the result of the Company's incurring higher delivery cost for its potash products as well as higher storage costs for its potash and nitrogen products resulting from increased tonnage placed into the Company's outlying storage facilities. During the current year, the Company also experienced increased costs for sales administration as a result of the acquisitions made during the prior year. As a percentage of net sales, selling expenses were 6% for fiscal 1998 and 1997. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased to $35.3 million in fiscal 1998 from $31.7 million in fiscal 1997. This increase was primarily the result of increased goodwill amortization during the current year associated with the acquisition of First Mississippi in the prior year and idle plant costs associated with the suspension of operations at the Eddy facility in December 1997. As a percentage of net sales, general and administrative expenses increased to 7% in fiscal 1998 from 6% in fiscal 1997. OPERATING INCOME. As a result of the above factors, operating income decreased to $37.9 million for fiscal 1998 from $91.2 million in fiscal 1997, a 58% decrease. INTEREST, NET. For fiscal 1998, net interest expense was $10.9 million compared to $4.3 million in fiscal 1997. This increase was primarily the reflection of higher interest expense resulting from higher levels of borrowings during the current year. Also, the Company capitalized $9.0 million and $3.9 million of its interest costs during fiscal 1998 and 1997, respectively, related to major construction projects at its nitrogen and phosphates operations as well as its investment in Farmland MissChem Limited. OTHER. Other income increased to $12.3 million in fiscal 1998 from $3.7 million in fiscal 1997. This increase was primarily the result of the Company's sale of its phosphate rock properties. During 1990, the Company entered into an agreement granting a third party the exclusive option, for a period of four years, to purchase the Company's undeveloped phosphate rock property in Hardee County, Florida. On July 12, 1994, the Company and the option holder entered into new agreements with respect to this property whereby the Company conveyed a portion of the property to the third party for $14.0 million and granted to the third party the exclusive option to purchase the remaining portion of the property. In January 1998, the third party exercised its option, and on April 16, 1998, the sale to the third party was completed. These remaining properties had a carrying value of $52.9 million, and were classified in the consolidated balance sheet at June 30, 1997, as properties held for sale. The $57.0 million purchase price of the remaining property was paid in the form of an initial cash payment of $2.4 million and a note for $54.6 million. In addition to the purchase price, the Company has received $7.0 million in option payments since 1994. The note, which is subject to prepayment, matures over a six-year period and requires quarterly principal payments totaling $9.5 million each year. At June 30, 1998, the note carried an interest rate of 6.07%, subject to adjustment, and was secured by a mortgage on the property. As a result of this transaction, the Company has recorded a net pre-tax gain of $10.9 million as a component of other income in its 1998 consolidated statement of income. INCOME TAX EXPENSE. For fiscal 1998, income tax expense decreased to $16.3 million from $34.8 million in fiscal 1997, which is primarily the result of a decrease in earnings during fiscal 1998. The Company also incurred an increase in the effective tax rate during fiscal 1998 due to the nondeductible amortization of goodwill associated with the acquisition of First Mississippi in December 1996. NET INCOME. As a result of the foregoing, net income decreased to $23.0 million in fiscal 1998 from $55.8 million in fiscal 1997. FISCAL 1997 COMPARED TO FISCAL 1996 NET SALES. Net sales increased 21% to $520.6 million in fiscal 1997 from $428.8 million in fiscal 1996, primarily as a result of increased sales volumes for nitrogen and potash fertilizers. Nitrogen fertilizer sales increased 21% through an increase in tons sold of 14% and a 6% increase in sales prices. The volume increase is attributable to an increase in anhydrous ammonia and urea sales due to the acquisition of the fertilizer operations of First Mississippi which was partially offset by lower sales volumes for nitrogen solutions and ammonium nitrate. During fiscal 1997, the weighted average nitrogen sales price increased by 6% over fiscal 1996 primarily due to a 340,000-ton increase in anhydrous ammonia sales and an 111,000-ton increase in urea sales. Prices for individual nitrogen products during fiscal 1997 were similar to those in fiscal 1996 with the exception of urea, which was down approximately 5%. Sales of DAP decreased 10% as a result of a 6% decrease in the average sales price and a 4% decrease in tons sold. The decrease in the average sales price was the result of aggressive competition for non-Chinese DAP sales during fiscal 1997. Potash sales increased 177% as a result of a 144% increase in tons sold and a 14% increase in the average sales price. This increase in volume is the result of increased tonnage made available through an acquisition completed during fiscal 1996. In August 1996, the Company acquired substantially all of the assets of New Mexico Potash Corporation and Eddy (the "Potash Acquisitions") from Trans-Resources, Inc. Potash prices increased due to strengthening in both the domestic and international markets and the inclusion of value added industrial grades of potash in the Company's product mix. TRADING LOSS ON BROKERED PRODUCT. Following the acquisition of the fertilizer operations of First Mississippi, the Company began brokering ammonia in the open market. During fiscal 1997, the Company brokered approximately 177,000 short tons of ammonia. Brokered ammonia sales of approximately $32.3 million and purchases of approximately $33.2 million resulted in a $57,000 net loss after considering certain purchase price adjustments associated with the acquisition. COST OF PRODUCTS SOLD. For fiscal 1997, the Company's cost of products sold increased to $367.0 million from $291.4 million in fiscal 1996. As a percentage of net sales, cost of products sold increased to 70% from 68%. This increase in cost of products sold, as a percentage of net sales, is the result of the Company incurring higher costs per ton for nitrogen and potash partially offset by lower costs per ton for DAP. Through the Potash Acquisitions, the Company's fiscal 1997 sales also included a higher proportion of potash sales which have a higher percentage of cost to sales. This increase, as a percentage of net sales, was partially offset by higher weighted average sales prices for nitrogen and potash. For fiscal 1997, nitrogen fertilizer cost per ton increased primarily as a result of higher natural gas costs and higher depreciation associated with the First Mississippi acquisition. These higher costs were partially offset by reduced purchases of ammonia and lower maintenance and labor costs during fiscal 1997. During fiscal 1996, the Company incurred higher maintenance and labor costs and increased purchases of ammonia due to a scheduled biennial maintenance turnaround at the Company's Yazoo City facility. For fiscal 1997, DAP cost per ton decreased as a result of lower costs for phosphate rock and sulfur, partially offset by higher ammonia costs. Phosphate rock costs decreased due to the pricing formula in the Company's phosphate rock supply contract that is based on the phosphate rock costs incurred by certain other domestic phosphate producers and the financial performance of the Company's phosphate operations. SELLING EXPENSES. For fiscal 1997, selling expenses increased to $30.7 million from $27.9 million in fiscal 1996. As a percentage of net sales, selling expenses decreased to 5.9% for fiscal 1997, from 6.5% in fiscal 1996. This decrease, as a percentage of net sales, was primarily the result of the Company's sales including less tonnage sold on a delivered basis and higher weighted average sales prices for nitrogen and potash. This decrease was partially offset by higher transportation expenses for the Company's nitrogen products. The Company also experienced increased costs for sales administration and storage during fiscal 1997 due to its Potash Acquisitions and the acquisition of First Mississippi. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased to $31.7 million in fiscal 1997 from $24.7 million in fiscal 1996. As a percentage of net sales, general and administrative expenses increased to 6.1% in fiscal 1997 from 5.8% in fiscal 1996. This increase is primarily the result of the amortization of goodwill associated with the acquisition of First Mississippi in December 1996. In addition, the Company experienced increased royalties and other administrative costs associated with the Potash Acquisitions. OPERATING INCOME. As a result of the above factors, operating income increased to $91.2 million for fiscal 1997 from $84.8 million in fiscal 1996, an 8% increase. INTEREST, NET. For fiscal 1997, net interest expense was $4.3 million compared to net interest income of $2.2 million in fiscal 1996. This increase in net interest expense was primarily the reflection of higher interest expense resulting from higher levels of borrowings and lower interest income earned due to lower levels of investments during fiscal 1997. This increase was partially offset by interest income received on income tax refunds related to a prior period. Also, during fiscal 1997, the Company capitalized $3.9 million of its interest costs. INCOME TAX EXPENSE. For fiscal 1997, income tax expense increased to $34.8 million from $34.3 million in fiscal 1996, which is primarily the result of an increase in earnings during fiscal 1997. The Company also incurred an increase in the effective tax rate during fiscal 1997 due to the nondeductible amortization of goodwill associated with the acquisition of First Mississippi in December 1996. This increase was offset by a decrease in the Company's effective state income tax rate. NET INCOME. As a result of the foregoing, net income increased to $55.8 million in fiscal 1997 from $54.2 million in fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1998, the Company had cash and cash equivalents of $3.9 million, compared to $8.2 million at June 30, 1997, a decrease of $4.3 million. At June 30, 1997, cash and cash equivalents had decreased to $8.2 million from $60.2 million at June 30, 1996, a decrease of $52.0 million. OPERATING ACTIVITIES. For fiscal 1998, 1997 and 1996, net cash provided by operating activities was $53.0 million, $72.6 million and $94.6 million, respectively. INVESTING ACTIVITIES. Net cash used in investing activities was $98.3 million, $195.5 million, and $27.1 million for fiscal 1998, 1997 and 1996, respectively, primarily reflecting capital expenditures in those periods. Fiscal 1998 capital expenditures were $96.5 million, which included approximately $40.7 million related to the Company's nitrogen expansion project at its Yazoo City, Mississippi facility, and $9.6 million for the development of a new phosphogypsum disposal facility and approximately $12.7 million related to the expansion of its manufacturing facilities in Pascagoula, Mississippi. The remaining $33.5 million was utilized in normal improvements and modifications to the Company's facilities. Capital expenditures for fiscal 1997 and 1996 were $93.8 million and $16.1 million, respectively. Fiscal 1998, 1997 and 1996, included $4.5 million, $45.2 million, and $12.0 million, respectively, related to the Company's investment in Farmland MissChem Limited. FINANCING ACTIVITIES. Net cash provided by financing activities was $41.0 million for fiscal 1998, $70.9 million for fiscal 1997, and net cash used in financing activities was $36.9 million for fiscal 1996. During the current year, the amounts provided by financing activities included $60.2 million in net proceeds from borrowings. These amounts were partially offset by $3.0 million paid for the purchase of treasury stock and $10.9 million paid in cash dividends. During the prior year, the amounts provided by financing activities included $99.3 million in net proceeds from borrowings partially offset by $18.9 million paid for the purchase of treasury stock and $9.8 million paid in cash dividends. During fiscal 1996, the amounts used in financing activities included $25.9 million for the purchase of treasury stock, $7.9 million paid in cash dividends and $3.2 million in debt payments, which included $2.4 million in prepayments. On November 25, 1997, the Company issued $200.0 million of 7.25% Senior Notes ("Notes"), due November 15, 2017. The holders may elect to have the Notes repaid on November 15, 2007. The Notes were issued under a $300.0 million shelf registration statement filed with the Securities and Exchange Commission in November 1997. The net proceeds from the issuance totaled $194.8 million and were used to repay a portion of the outstanding indebtedness under the Company's unsecured revolving credit facilities with Harris Trust and Savings Bank and a syndicate of other commercial banks. Also on November 25, 1997, the Company modified these unsecured revolving credit facilities to extend the maturity date and to reduce the facilities to $200.0 million. These modified facilities are five-year facilities which mature on November 25, 2002, and bear interest at the Prime Rate or at rates related to the London Interbank Offered Rate or Federal Funds Rate. At June 30, 1998, the Company had $90.7 million outstanding under these facilities. The Company also has available a separate $5.0 million short- term line of credit which is not part of the facilities mentioned above. There were no outstanding borrowings under this commitment at June 30, 1998. In August 1997, the Company issued $14.5 million in industrial revenue bonds, a portion of which were tax-exempt, to finance the development of a new phosphogypsum disposal facility at its Pascagoula, Mississippi, DAP manufacturing plant. On April 1, 1998, the Company issued $14.5 million in fully tax-exempt industrial revenue bonds, the proceeds of which were used to redeem the initial industrial revenue bonds issued in August 1997. The bonds issued on April 1, 1998, mature on March 1, 2022, and carry a 5.80% fixed rate of interest. The bonds may be redeemed at the Company's option at a premium from March 1, 2008, to February 28, 2010, and may be redeemed at face value at any time after February 28, 2010, through the maturity date. CAPITAL PROJECTS. In late fiscal 1996, the Company began an expansion at its nitrogen fertilizer manufacturing facilities at Yazoo City. The project includes the addition of a 650 ton-per-day nitric acid plant, a new 500 ton-per- day ammonia plant and modifications to its ammonium nitrate plant to increase production from approximately 750,000 to approximately 950,000 tons per year at an estimated total cost of $130.0 million, and is scheduled for a phased completion. The nitric acid plant was completed and placed in service in March 1998. The Company anticipates the anhydrous ammonia and substantially all of the ammonium nitrate capacity being added by the end of calendar 1998. In April 1998, the Company announced its plans for an expansion project to increase its potash production capacity. This expansion will increase the Company's red granular capacity from 445,000 to 545,000 tons-per-year, as well as increase storage capacities by 30,000 tons. Upon completion of the project, the Company will have approximately 1,100,000 tons of combined potash production capacity from its two operating mines. The Company estimates total cost of the expansion to be $8.2 million and is scheduled to be fully operational by the end of fiscal 1999. The Company believes that existing cash, cash generated from operations, and current lines of credit will be sufficient to satisfy its financing requirements for its operations and its capital projects through fiscal 1999 and the foreseeable future. The Company estimates its capital expenditure requirements for fiscal 1999 to be approximately $62.0 million. QUARTERLY RESULTS The Company's quarterly results reflect the fact that significantly more fertilizer is marketed in the spring. As a result, significant portions of the Company's net sales and operating income are generated in the last four months of the Company's fiscal year (March through June). Since quarterly results are affected by the seasonal nature of the Company's business, they are not indicative of results expected for the full fiscal year. Quarterly results can also vary significantly from one year to the next primarily due to weather- related shifts in planting schedules and purchase patterns. The Company incurs substantial expenditures for fixed costs throughout the year and substantial expenditures for inventory in advance of the spring planting season. The following tables present selected unaudited quarterly results of operations for fiscal 1998, 1997 and 1996.
Year Ending June 30, 1998 ----------------------------------------- (In thousands, except per share data) 1st Q 2nd Q 3rd Q 4th Q -------- -------- -------- -------- Net sales $110,912 $118,035 $125,773 $165,191 Operating income $ 8,910 $ 3,725 $ 3,675 $ 21,626 Net income $ 4,297 $ 435 $ 443 $ 17,799 Earnings per share - basic (1) $ 0.16 $ 0.02 $ 0.02 $ 0.65 Earnings per share - diluted (1) $ 0.16 $ 0.02 $ 0.02 $ 0.65 Weighted average common shares outstanding - basic 27,410 27,373 27,335 27,306 Weighted average common shares outstanding - diluted 27,457 27,409 27,366 27,328 Dividends paid per share $ 0.10 $ 0.10 $ 0.10 $ 0.10 Common stock price range - high $ 22.19 $ 20.13 $ 20.19 $ 20.06 - low $ 18.75 $ 16.75 $ 16.94 $ 15.06
Year Ending June 30, 1997 -------------------------------------------- (In thousands, except per share data) 1st Q 2nd Q 3rd Q 4th Q -------- --------- --------- --------- Net sales $91,290 $113,196 $142,583 $173,500 Operating income $14,740 $ 18,600 $ 20,093 $ 37,776 Net income $ 9,295 $ 12,093 $ 10,599 $ 23,828 Earnings per share - basic (1) $ 0.44 $ 0.56 $ 0.38 $ 0.86 Earnings per share - diluted (1) $ 0.44 $ 0.56 $ 0.38 $ 0.86 Weighted average common shares outstanding - basic 21,242 21,506 27,926 27,613 Weighted average common shares outstanding - diluted 21,293 21,598 28,022 27,673 Dividends paid per share $ 0.10 $ 0.10 $ 0.10 $ 0.10 Common stock price range - high $ 23.38 $ 26.00 $ 27.25 $ 24.38 - low $ 17.75 $ 23.00 $ 23.13 $ 19.50 Year Ending June 30, 1996 -------------------------------------------- (In thousands, except per share data) 1st Q 2nd Q 3rd Q 4th Q -------- --------- --------- --------- Net sales $96,570 $ 99,857 $107,740 $124,622 Operating income $16,885 $ 18,400 $ 23,528 $ 26,005 Net income $ 9,704 $ 11,874 $ 15,648 $ 16,952 Earnings per share - basic (1) $ 0.43 $ 0.54 $ 0.71 $ 0.79 Earnings per share - diluted (1) $ 0.43 $ 0.53 $ 0.71 $ 0.79 Weighted average common shares outstanding - basic 22,380 22,145 21,895 21,479 Weighted average common shares outstanding - diluted 22,443 22,218 21,962 21,535 Dividends paid per share $ 0.08 $ 0.08 $ 0.10 $ 0.10 Common stock price range - high $ 23.88 $ 25.13 $ 24.75 $ 22.50 - low $ 19.88 $ 21.00 $ 19.75 $ 19.25
(1) Quarterly amounts do not add to the annual earnings per share because of changes in the number of outstanding shares during the year. Effective October 10, 1996, the Company's common stock began trading on the New York Stock Exchange under the symbol "GRO." The Company's shares had previously traded on the NASDAQ Stock Market's National Market under the symbol "MISS." As of August 4, 1998, shareholders of record numbered approximately 15,048. NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes new standards for reporting comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This statement is effective for fiscal years beginning after December 15, 1997, and will require additional disclosures by the Company beginning in fiscal 1999. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on accounting for these costs and requires that certain related expenses be capitalized. This statement is effective for fiscal years beginning after December 15, 1998. The Company does not expect the adoption of SOP 98-1 to have a material effect on its financial statements. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 will require companies to expense as incurred, all costs associated with start-up activities. This pronouncement is effective for fiscal years beginning after December 15, 1998. The Company does not expect the adoption of SOP 98-5 to have a material effect on its financial statements. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards which require derivative instruments to be recorded in the balance sheet as either an asset or liability and measured at fair value. This statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires companies to formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This statement is effective for fiscal years beginning after June 15, 1999, and must be applied to all derivative instruments. The Company anticipates that the primary impact of adoption will be the recognition of unrealized gains or losses on open gas futures contracts as a component of equity and comprehensive income. MARKET RISK The Company is exposed to market risk, including changes in interest rates and commodity prices. To manage the volatility relating to these exposures, the Company enters into derivative transactions. The Company does not hold or issue derivative financial instruments for trading purposes. The Company maintains formal policies and a systematic approach with respect to entering and monitoring derivative transactions, and Company policy precludes management from entering into derivative transactions that would be deemed speculative positions. The Company's derivative transactions are intended to hedge the future production and interest costs of the Company. For more information about how the Company manages specific risk exposures, see Note 14 - Hedging Activities, and Note 7 - Credit Agreements and Long-Term Debt, in the Company's Notes to Consolidated Financial Statements. The table below provides information about the Company's derivative instruments and other financial instruments that are sensitive to changes in interest rates.
(Dollars in thousands, except interest rates) Maturity Date -------------------------------------------------------------------------------- Fair 1999 2000 2001 2002 2003 Thereafter Total Value ------- ------- ------- ------- ------- ------------- -------- --------- Long-term debt - ----------------------------------- Fixed rate Principal amount (1) $ 114 - - - - $214,005 $214,119 $202,131 Weighted average interest rate 7.36% - - - - 7.15% 7.15% Variable rate Principal amount (1) - - - - $90,700 - $ 90,700 $ 90,700 Average interest rate (2) - - - - 6.66% - 6.66% Interest rate swaps - ----------------------------------- Weighted average notional principal amount outstanding (3) $47,085 $36,570 $ (704) Fixed weighted average pay rate 6.57% 6.57% Receive rate - 3 month LIBOR Note receivable - ----------------------------------- Principal amount $ 9,500 $ 9,500 $9,500 $9,500 $ 9,500 $ 7,125 $ 54,625 $ 54,625 Interest rate 6.07% 6.07% 6.07% 6.07% 6.07% 6.07% 6.07%
(1) The fair values of the Company's long-term debt and note receivable represent the discounted future cash flows of the instruments using current market rates. (2) The average interest rate was based on June 30, 1998 variable rates. Actual rates could differ. (3) The fair value of the Company's interest rate swaps represents the amount that would have to be paid by the Company as of June 30, 1998, to terminate the swap agreements. The Company uses natural gas futures contracts to reduce the impact of changes in gas prices. A sensitivity analysis has been prepared to estimate the Company's market risk exposure arising from these instruments. The fair value of open contracts is calculated by valuing each position using quoted market prices. Market risk is the potential loss in fair value as a result of a 10% adverse change in such prices. The Company estimates this change in prices would reduce the fair value of open contracts by $6.3 million at June 30, 1998. YEAR 2000 The Company is currently assessing its computer systems, including the systems involved in the operation of its manufacturing facilities, to identify to what extent the Company could be affected by the "Year 2000" issue. The Company expects to complete the assessment prior to the end of the 1998 calendar year and to have any Year 2000 conversion projects completed on a timely basis. The total cost of any such projects is as yet undetermined but, based upon facts known to date, is not expected to be material to the Company because of previous significant capital expenditures made by the Company to update computer software and hardware. The Company is also assessing Year 2000 issues in relation to its customers, suppliers and creditors to determine whether Year 2000 problems of any such third parties may materially affect the Company. This assessment should also be completed by the end of the 1998 calendar year. The ability of third parties with which the Company transacts business to adequately address their Year 2000 issues is outside the Company's control. There can be no assurance that the failure of such third parties to adequately address their respective Year 2000 issues will not have a material adverse effect on the Company's business operations and financial condition. FORWARD LOOKING STATEMENTS Except for the historical statements and discussion contained herein, statements set forth in this report constitute "forward looking statements." Since these forward looking statements rely on a number of assumptions concerning future events, risks and other uncertainties that are beyond the Company's ability to control, readers are cautioned that actual results may differ materially from such forward-looking statements. Future events, risks and uncertainties that could cause a material difference in such results, include, but are not limited to, the relative unpredictability of international and local economic conditions, changes in matters which affect the supply and demand of fertilizer products, weather, the volatility of the natural gas market, environmental regulation, price competition from both domestic and international competitors, possible delays in completing and obtaining production from new or expanded facilities, and other important factors affecting the fertilizer industry and the Company as detailed under "Outlook and Uncertainties" and elsewhere in the Company's most recent annual report on Form 10-K which is on file with the Securities and Exchange Commission. MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 1998, 1997 AND 1996 TOGETHER WITH AUDITORS' REPORT REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and the Shareholders of Mississippi Chemical Corporation: We have audited the accompanying consolidated balance sheets of Mississippi Chemical Corporation (a Mississippi corporation) and subsidiaries (collectively, the "Company") as of June 30, 1998 and 1997, and the related consolidated statements of income, shareholders' equity and cash flows for the three years ended June 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mississippi Chemical Corporation and subsidiaries as of June 30, 1998 and 1997, and the results of their operations and their cash flows for the three years ended June 30, 1998, in conformity with generally accepted accounting principles. Memphis, Tennessee, July 22, 1998 MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) June 30 ------------------- ASSETS 1998 1997 -------- -------- CURRENT ASSETS: Cash and cash equivalents $ 3,857 $ 8,159 Accounts receivable (less allowances of $1,989 and $1,767) 51,532 63,095 Note receivable due within one year 9,500 - Inventories 65,429 69,310 Prepaid expenses and other current assets 6,636 4,873 Deferred income taxes 3,767 3,596 -------- -------- Total current assets 140,721 149,033 INVESTMENTS IN AFFILIATES 73,073 69,230 NOTE RECEIVABLE 45,125 - PROPERTIES HELD FOR SALE - 52,919 OTHER ASSETS 16,227 14,039 PROPERTY, PLANT AND EQUIPMENT, AT COST, LESS ACCUMULATED DEPRICIATION, DEPLETION AND AMORTIZATION 460,841 392,395 GOODWILL, NET OF ACCUMULATED AMORTIZATION 176,345 180,929 -------- -------- $912,332 $858,545 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Long-term debt due within one year $ 114 $ 140 Accounts payable 58,089 74,534 Accrued liabilities 15,156 14,476 Income taxes payable 3,276 5,973 -------- -------- Total current liabilities 76,635 95,123 LONG-TERM DEBT 304,705 244,516 OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS 17,481 20,620 DEFERRED INCOME TAXES 64,986 58,857 COMMITMENTS AND CONTINGENCIES (SEE NOTES 14, 18, 19 AND 20) SHAREHOLDERS' EQUITY: Common stock ($.01 par; authorized 100,000,000 shares; issued 27,975,936) 280 280 Additional paid-in capital 305,901 305,901 Retained earnings 157,800 145,827 Treasury stock, at cost (735,719 and 565,809 shares) (15,456) (12,579) -------- -------- Total shareholders' equity 448,525 439,429 -------- -------- $912,332 $858,545 ======== ========
The accompanying notes to consolidated financial statements are an integral part of these financial statements. MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) Years Ended June 30 ---------------------------------- 1998 1997 1996 --------- --------- --------- REVENUES: Net sales $519,911 $520,569 $428,789 Trading loss on brokered product (820) (57) - -------- -------- -------- 519,091 520,512 428,789 OPERATING EXPENSES: Cost of products sold 412,500 366,961 291,403 Selling 33,316 30,670 27,856 General and administrative 35,339 31,672 24,712 -------- -------- -------- 481,155 429,303 343,971 -------- -------- -------- OPERATING INCOME 37,936 91,209 84,818 OTHER INCOME (EXPENSE): Interest, net (10,948) (4,331) 2,229 Other 12,315 3,709 1,446 -------- -------- -------- INCOME BEFORE INCOME TAXES 39,303 90,587 88,493 INCOME TAX EXPENSE 16,329 34,772 34,315 -------- -------- -------- NET INCOME $ 22,974 $ 55,815 $ 54,178 ======== ======== ======== EARNINGS PER SHARE - BASIC $0.84 $ 2.29 $2.47 ======== ======== ======== EARNINGS PER SHARE - DILUTED $0.84 $ 2.29 $2.46 ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these financial statements. MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands) Additional Common Paid-in Retained Treasury Stock Capital Earnings Stock Total ------ ---------- -------- --------- --------- BALANCES, JUNE 30, 1995 $229 $178,332 $ 53,520 $ (4,774) $227,307 Net income - - 54,178 - 54,178 Cash dividends paid - - (7,884) - (7,884) Treasury stock, net - 32 - (25,808) (25,776) ------ -------- -------- -------- -------- BALANCES, JUNE 30, 1996 229 178,364 99,814 (30,582) 247,825 Net income - - 55,815 - 55,815 Cash dividends paid - - (9,802) - (9,802) Treasury stock, net - 56 - (18,753) (18,697) Stock options exercised - 203 - - 203 Stock issued for business acquired 51 127,278 - 36,756 164,085 ------ -------- --------- -------- -------- BALANCES, JUNE 30, 1997 280 305,901 145,827 (12,579) 439,429 Net income - - 22,974 - 22,974 Cash dividends paid - - (10,948) - (10,948) Treasury stock, net - - (53) (2,877) (2,930) ------ -------- -------- -------- -------- BALANCES, JUNE 30, 1998 $280 $305,901 $157,800 $(15,456) $448,525 ====== ======== ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these financial statements. MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) Years Ended June 30 ----------------------------------- 1998 1997 1996 ---------- ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 22,974 $ 55,815 $ 54,178 Reconciliation of net income to net cash provided by operating activities: Net change in operating assets and liabilities (4,781) (9,423) 21,401 Depreciation, depletion and amortization 37,228 27,980 17,798 Deferred income taxes 5,958 562 1,885 Gain on sale of phosphate rock property (10,867) - - Other 2,506 (2,322) (643) --------- --------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 53,018 72,612 94,619 --------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (96,496) (93,816) (16,143) Investment in Farmland MissChem Limited (4,508) (45,165) (11,993) Acquisition of potash businesses - (56,098) - Other 2,727 (449) 1,063 --------- --------- -------- NET CASH USED IN INVESTING ACTIVITIES (98,277) (195,528) (27,073) --------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Debt payments (564,742) (390,945) (3,175) Debt proceeds 624,905 490,290 - Purchase of treasury stock (3,027) (18,885) (25,890) Cash dividends paid (10,948) (9,802) (7,884) Bond issuance costs (5,231) - - Proceeds from issuance of common stock - 203 - --------- --------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 40,957 70,861 (36,949) --------- --------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,302) (52,055) 30,597 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 8,159 60,214 29,617 --------- --------- -------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,857 $ 8,159 $ 60,214 ========= ========= ========
The accompanying notes to consolidated financial statements are an integral part of these financial statements. MISSISSIPPI CHEMICAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF FINANCIAL STATEMENTS The accompanying consolidated financial statements include the accounts of Mississippi Chemical Corporation and its subsidiaries (collectively, the "Company"). All material intercompany transactions and balances have been eliminated. The Company produces and supplies a full product line of fertilizers, including nitrogen, phosphate and potash fertilizers. The Company's principal nitrogen products include ammonia, fertilizer-grade ammonium nitrate, UAN solutions, and urea. The Company currently produces nitrogen products at its production facilities in Yazoo City, Mississippi, and Donaldsonville, Louisiana, and produces ammonia at its 50-50 joint venture in The Republic of Trinidad and Tobago. The Company distributes its nitrogen products primarily in the southern farming regions of the United States. The Company produces diammonium phosphate at its facility in Pascagoula, Mississippi, and through the Phosphate Chemicals Export Association, Inc. ("PhosChem"), exports the majority of its production. The Company's mines and related facilities near Carlsbad, New Mexico, produce the Company's potash products. The majority of the Company's agricultural potash sales are in domestic markets in states west of the Mississippi River. The Company also markets its nitrogen and potash products into industrial markets where such products are used for a broad range of industrial applications. In August 1996, the Company, through two subsidiaries of its wholly owned subsidiary, Mississippi Potash, Inc., acquired substantially all of the assets of New Mexico Potash Corporation and Eddy Potash, Inc. ("Eddy") from Trans- Resources, Inc. (see Note 2). Since the acquisition, New Mexico Potash Corporation has been merged into Mississippi Potash, Inc. Eddy, a wholly owned subsidiary of Mississippi Potash, Inc., suspended its production operations in December 1997. In December 1996, the Company acquired the fertilizer operations of First Mississippi Corporation ("First Mississippi") in an all-stock merger transaction (see Note 2). The fertilizer operations primarily included AMPRO Fertilizer, Inc. ("AMPRO") and a 50% interest in Triad Chemical; the Company already held the remaining 50% interest. Prior to this acquisition, the Company had the right to withdraw, at cost, approximately one-half of the production of Triad Chemical and was obligated to withdraw certain minimum quantities. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. INVENTORIES Inventories are stated at the lower of cost or market. Cost has been determined under a moving average cost method. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Investments in Affiliates The Company's investments in affiliates primarily consist of an investment in a 50-50 ammonia production joint venture, Farmland MissChem Limited ("Farmland MissChem"), with Farmland Industries, Inc. (see Note 4). During fiscal 1998, the Company and Farmland Industries also formed a separate 50-50 joint venture which is responsible for the transportation of the ammonia produced at Farmland MissChem Limited. The Company also has a 50% interest in an ammonia storage terminal in Pasadena, Texas (see Note 2), acquired as part of its acquisition of the fertilizer assets of First Mississippi in December 1996. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost, less accumulated depreciation, depletion and amortization. Expenditures for major improvements are capitalized; expenditures for normal maintenance and repairs are charged to expense as incurred. Upon the sale or retirement of properties, the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is recognized in income. The Company uses primarily the declining-balance method of depreciation for assets purchased through June 30, 1995. Effective July 1, 1995, the Company changed its method of depreciating newly acquired long-lived assets from the declining-balance method to the straight-line method. Depletion of mineral properties is provided using the units-of-production method over the estimated life of the reserves. Depreciation of property, plant and equipment is provided over the estimated useful lives of the related assets as follows: Buildings 3-45 years Machinery and equipment 2-30 years Interest costs attributable to major construction projects under development are capitalized in the appropriate property account and amortized over the life of the related asset. The Company maintains spare parts at its production facilities in order to minimize downtime in the event of a part failure. All parts that exceed a minimum value and are repairable are capitalized as property, plant and equipment and are depreciated over their estimated useful lives. Parts that do not exceed the minimum value or are not repairable are maintained as replacement parts and are included as inventory in the Company's current assets. These replacement parts are charged to cost of products sold as they are installed in the facility. GOODWILL Goodwill represents the excess of cost over the fair value of the net assets acquired by the Company in its December 1996, acquisition of the fertilizer operations of First Mississippi. Goodwill is amortized on a straight-line basis over 40 years. Accumulated amortization was approximately $6,973,000 and $2,389,000 at June 30, 1998 and 1997, respectively. REVENUE RECOGNITION Revenues are recognized as product is sold and title transfers to the customer. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): HEDGING ACTIVITIES The Company enters into futures contracts to protect future production costs against price fluctuations of natural gas. At the time the futures contracts are closed and the related natural gas is purchased, the Company records a gain or loss from the change in market value of such contracts as a component of cost of products sold. INCOME TAXES Deferred tax assets and liabilities are recorded based on the difference between the financial statement and income tax basis of assets and liabilities using existing tax rates. USE OF ESTIMATES The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes new standards for reporting comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This statement is effective for fiscal years beginning after December 15, 1997, and will require additional disclosure by the Company beginning in fiscal 1999. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on accounting for these costs and requires that certain related expenses be capitalized. This statement is effective for fiscal years beginning after December 15, 1998. The Company does not expect the adoption of SOP 98-1 to have a material effect on its financial statements. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 will require companies to expense as incurred, all costs associated with start-up activities. This pronouncement is effective for fiscal years beginning after December 15, 1998. The Company does not expect the adoption of SOP 98-5 to have a material effect on its financial statements. NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards which require derivative instruments to be recorded in the balance sheet as either an asset or liability and measured at fair value. This statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires companies to formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This statement is effective for fiscal years beginning after June 15, 1999, and must be applied to all derivative instruments. The Company anticipates that the primary impact of adoption will be the recognition of unrealized gains or losses on open gas futures contracts as a component of equity and comprehensive income. RECLASSIFICATIONS The Company has reclassified certain prior year information to conform with the current year's presentation. NOTE 2 - ACQUISITIONS: NITROGEN On December 24, 1996, the Company acquired the fertilizer businesses of First Mississippi in an all-stock merger transaction. This transaction was accounted for by the purchase method of accounting. According to the terms of the merger, the Company issued approximately 6,902,000 shares of its common stock to former First Mississippi shareholders. Additionally, at closing, First Mississippi's fertilizer businesses had $150,500,000 in outstanding debt which was assumed by the Company. The fertilizer operations of First Mississippi included AMPRO and a 50% interest in Triad Chemical. Prior to the transaction, the Company held the remaining 50% interest in Triad Chemical, which owned and operated an anhydrous ammonia plant with an annual production of approximately 465,000 tons, and a urea plant with an annual production of approximately 560,000 tons. AMPRO owned and operated an anhydrous ammonia plant with annual production of approximately 615,000 tons. AMPRO and Triad are located on adjacent sites in Donaldsonville, Louisiana. In the transaction, the Company also acquired a 50% interest in an ammonia storage terminal in Pasadena, Texas, and a 50% interest in a company which owns and operates eleven ammonia barges. In March 1997, the Company purchased the other 50% interest in the barge company for $3,824,000. Subsequent to closing, the Company merged AMPRO into and contributed its 50% interest in Triad Chemical to First Mississippi and changed the name of First Mississippi to Triad Nitrogen, Inc. ("Triad Nitrogen"). NOTE 2 ACQUISITIONS (Continued): Allocation of the purchase price is as follows:
(Dollars in thousands) Property, plant and equipment $151,407 Goodwill 180,655 Other assets/liabilities acquired, net 19,189 Deferred income taxes (41,931) -------- $309,320 ========
Additionally, the Company incurred approximately $2,663,000 in transaction costs and other related fees associated with the acquisition. The Company recorded these amounts as goodwill. POTASH In August 1996, the Company, through two subsidiaries of its wholly owned subsidiary, Mississippi Potash, Inc., acquired substantially all of the assets of New Mexico Potash Corporation and Eddy (the "Potash Acquisitions") from Trans-Resources, Inc. for $45,000,000, plus an adjustment for working capital of approximately $11,000,000. This acquisition was accounted for by the purchase method of accounting with the purchase price being principally allocated to property, plant and equipment. In December 1996, New Mexico Potash Corporation was merged into Mississippi Potash, Inc. Eddy operates as a wholly owned subsidiary of Mississippi Potash, Inc. At the time of the acquisition, the two potash mines, both located near Carlsbad, New Mexico, had a combined annual production capacity of approximately 850,000 tons of potash. In December 1997, the Eddy mine, which had an annual production capacity of approximately 300,000 tons, suspended its production operations. This suspension of operations did not have a material impact on the financial position or results of operations of the Company. Prior to this acquisition, Mississippi Potash, Inc. produced approximately 420,000 tons of potash per year. The Company's consolidated statement of income for fiscal 1997 includes Triad Nitrogen's results of operations for the period December 24, 1996 through June 30, 1997, and the Potash Acquisitions' results of operations for the period August 16, 1996 through June 30, 1997. The unaudited pro forma summary financial information includes Triad Nitrogen's and the Potash Acquisitions' results of operations, assuming the acquisitions had occurred on July 1, 1996, and also on July 1, 1995. These pro forma results of operations are not necessarily indicative of what would have occurred had the acquisitions actually been consummated at the beginning of the periods presented, or of future results of the combined companies.
Years Ended June 30 ------------------- (Dollars in thousands, except per share data) 1997 1996 -------- -------- Net sales $643,159 $698,404 ======== ======== Net income $ 68,151 $ 80,712 ======== ======== Earnings per share - basic and diluted $ 2.44 $ 2.79 ======== ========
NOTE 3 - INVENTORIES: Inventories consisted of the following:
(Dollars in thousands) June 30 ----------------- 1998 1997 ------- ------- Finished products $24,959 $28,308 Raw materials and supplies 5,894 4,636 Replacement parts 34,576 36,366 ------- ------- $65,429 $69,310 ======= =======
NOTE 4 - INVESTMENT IN FARMLAND MISSCHEM LIMITED: The Company's 50-50 joint venture, Farmland MissChem, has constructed a 2,040 short-ton-per-day anhydrous ammonia plant located near Point Lisas, The Republic of Trinidad and Tobago. The plant was placed in service in late July 1998. The Company has a contractual obligation to purchase one-half of the ammonia, approximately 350,000 short tons per year, produced by Farmland MissChem at a purchase price which approximates market price, but is subject to an agreed-upon floor price. The Company will use its portion of the production from the new facility as a raw material for upgrading into finished fertilizer products at its existing facilities and for sales into world markets. The Company is accounting for its investment in Farmland MissChem using the equity method. At June 30, 1998, the Company's investment in Farmland MissChem amounted to $62,794,000 which included $6,846,000 of capitalized interest. At June 30, 1997, the Company's investment in Farmland MissChem amounted to $58,286,000 and included $2,864,000 of capitalized interest. Farmland MissChem's financial position for the year ended June 30, 1998, is summarized below:
Condensed Balance Sheet Information: (Dollars in thousands) - ----------------------------------- ---------------------- Current assets $ 6,295 Non-current assets $306,939 Current liabilities $ 6,226 Non-current liabilities $195,111 Stockholders' equity $111,897
NOTE 5 - NOTE RECEIVABLE: During 1990, the Company entered into an agreement granting a third party the exclusive option, for a period of four years, to purchase the Company's undeveloped phosphate rock property in Hardee County, Florida. On July 12, 1994, the Company and the option holder entered into new agreements with respect to this property whereby the Company conveyed a portion of the property to the third party for $14,000,000 and granted to the third party the exclusive option to purchase the remaining portion of the property. In January 1998, the third party exercised its option, and on April 16, 1998, the sale to the third party was completed. These remaining properties had a carrying value of $52,919,000, and were classified in the consolidated balance sheet at June 30, 1997, as properties held for sale. The $57,000,000 purchase price of the remaining property was paid in the form of an initial cash payment of $2,375,000 and a note for $54,625,000. In addition to the purchase price, the Company has received $7,000,000 in option payments since 1994. The note, which is subject to prepayment, matures over a six-year period and requires quarterly principal payments totaling $9,500,000 each year. At June 30, 1998, the note carried an interest rate of 6.07%, subject to adjustment, and was secured by a mortgage on the property. At June 30, 1998, the carrying value of the NOTE 5 NOTE RECEIVABLE (Continued): note receivable approximated its fair value. As a result of this transaction, the Company has recorded a net pre-tax gain of $10,867,000 as a component of other income in the accompanying fiscal 1998 consolidated statement of income. NOTE 6 - PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consisted of the following:
(Dollars in thousands) June 30 ----------------------- 1998 1997 ---------- ---------- Mineral properties $ 41,233 $ 40,668 Land 8,822 8,609 Buildings 48,091 46,904 Machinery and equipment 599,355 519,940 Construction in progress 97,831 80,980 --------- --------- 795,332 697,101 Less accumulated depreciation, depletion and amortization (334,491) (304,706) --------- --------- $ 460,841 $ 392,395 ========= =========
NOTE 7 - CREDIT AGREEMENTS AND LONG-TERM DEBT: In December 1996, the Company and its subsidiaries obtained unsecured credit facilities with Harris Trust and Savings Bank ("Harris") and a syndicate of other commercial banks totaling $300,000,000. In November 1997, the Company modified these unsecured revolving credit facilities to extend the maturity date and to reduce the facilities to $200,000,000. These modified facilities are five year facilities which mature on November 25, 2002, and bear interest at the prime rate or at rates related to the London Interbank Offered Rate or Federal Funds Rate. At June 30, 1998 and 1997, there were outstanding borrowings of $90,700,000 and $244,400,000, respectively, under these facilities. On November 25, 1997, the Company issued $200,000,000 of 7.25% Senior Notes (the "Notes"), due November 15, 2017. The holders may elect to have the Notes repaid on November 15, 2007. The Notes were issued under a $300,000,000 shelf registration statement filed with the Securities and Exchange Commission in November 1997. The net proceeds from the issuance totaled $194,800,000 and were used to repay a portion of the outstanding indebtedness under the Company's unsecured revolving credit facilities. In August 1997, the Company issued $14,500,000 in industrial revenue bonds, a portion of which were tax-exempt, to finance the development of a new phosphogypsum disposal facility at its Pascagoula, Mississippi, diammonium phosphate manufacturing plant. On April 1, 1998, the Company issued $14,500,000 in fully tax-exempt industrial revenue bonds, the proceeds of which were used to redeem the initial industrial revenue bonds issued in August 1997. The bonds issued on April 1, 1998, mature on March 1, 2022, and carry a 5.8% fixed rate. The bonds may be redeemed at the Company's option at a premium from March 1, 2008, to February 28, 2010, and may be redeemed at face value at any time after February 28, 2010, through the maturity date. NOTE 7 CREDIT AGREEMENTS AND LONG-TERM DEBT (Continued): The Company also has a separate $5,000,000 short-term line of credit which is not part of the facilities mentioned above. There were no outstanding borrowings under this commitment at June 30, 1998 or 1997. Long-term debt consisted of the following:
(Dollars in thousands) June 30 --------------------- 1998 1997 --------- --------- Unsecured revolving credit facilities (1998 - 6.66%; 1997 - 6.26%) $ 90,700 $244,400 Senior notes, net of unamortized discount of $495 (7.25%) 199,505 - Industrial revenue bonds (5.8%) 14,500 - Other 114 256 -------- -------- 304,819 244,656 Long-term debt due within one year (114) (140) -------- -------- $304,705 $244,516 ======== ========
The estimated fair value of the Company's long-term debt, including current maturities at June 30, 1998, was $292,831,000 and was computed using an interest rate equal to 2% above the effective yield on U.S. Treasury Notes with similar maturities. At June 30, 1997, the Company's carrying value approximated its market value. The Company's credit facilities with Harris have covenants that require, among other things, that the Company maintain specified levels of tangible net worth, debt to cash flow, and cash flow to interest expense. As of June 30, 1998, the Company was in compliance with all covenants under its facilities. The Company has entered into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate long-term debt. At June 30, 1998 and 1997, the Company had two outstanding interest rate swap agreements (the "Agreements") with commercial banks having total notional principal amounts of $50,000,000 and $40,000,000, respectively. Those Agreements effectively change the Company's interest rate exposure on a portion of its unsecured revolving credit facilities from a variable rate to a fixed rate. The Agreements mature in fiscal 2000, and provide for notional amounts varying from a minimum of $33,650,000 to a maximum of $50,000,000. The fair value of these agreements amounted to a liability of $704,000 and $300,000, respectively, at June 30, 1998 and 1997. NOTE 8 - OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS: Other long-term liabilities and deferred credits are comprised of the following:
(Dollars in thousands) June 30 ----------------- 1998 1997 ------- ------- Accrual for closure of gypsum disposal area $ 9,330 $ 8,051 Option proceeds (see Note 5) - 5,967 Other 8,151 6,602 ------- ------- $17,481 $20,620 ======= =======
The Company is currently accruing costs for the future closure of the phosphogypsum disposal facility located at Pascagoula, Mississippi. These closure costs are accrued over the estimated life of the disposal facility using the units-of-production method. Amounts accrued are recorded as a component of cost of products sold in the accompanying consolidated statements of income. Additional charges of $2,017,000 will be accrued over the remaining life of the facility which is estimated to be fourteen months. In June 1998, the Company substantially completed the construction of a new phosphogypsum disposal facility at a cost of approximately $18,000,000. NOTE 9 - SHAREHOLDERS' EQUITY: At June 30, 1998, the Company had 100,000,000 authorized shares of common stock at a par value of $.01. Common stock issued and outstanding consisted of the following:
(Shares in thousands) Common Stock ---------------------- Shares outstanding, June 30, 1995 22,598 Stock reissued 5 Purchase of treasury stock (1,250) ------ Shares outstanding, June 30, 1996 21,353 Treasury stock issued for business acquired 1,545 Stock issued for business acquired 5,357 Stock options exercised 12 Stock reissued 8 Purchase of treasury stock (865) ------ Shares outstanding, June 30, 1997 27,410 Stock reissued 6 Purchase of treasury stock (176) ------ Shares outstanding, June 30, 1998 27,240 ======
NOTE 9 - SHAREHOLDERS' EQUITY (CONTINUED): In May 1995, the Board of Directors authorized the repurchase of up to 1,500,000 shares of the Company's common stock in the open market or in privately negotiated transactions. In March 1996, the Board of Directors authorized the Company to repurchase up to 1,500,000 additional shares. During fiscal 1998, the Company repurchased 175,900 shares bringing the total shares repurchased pursuant to these authorizations to 2,591,709 at June 30, 1998. These treasury stock repurchases were funded from cash provided by operations and from borrowings under the Company's revolving credit facilities. The Company's Articles of Incorporation authorize the Board of Directors, at its discretion, to issue up to 500,000 shares of Preferred Stock, par value $.01 per share. The stock is issuable in classes or series which may vary as to certain rights and preferences. As of June 30, 1998, none of these shares were outstanding. NOTE 10 - STOCK OPTIONS: On August 2, 1994, the Board of Directors adopted a stock incentive plan for certain officers and key employees of the Company. On July 20, 1995, the Board of Directors adopted a stock option plan for nonemployee directors of the Company. Both the stock incentive plan and the stock option plan for nonemployee directors were approved by the Company's shareholders at its annual meeting held on November 14, 1995. Options may be granted under the provisions of the Company's plans to purchase common stock of the Company at a price not less than the fair market value on the date of grant. Stock options for officers and key employees are exercisable six months from the date of grant. Stock options for nonemployee directors become exercisable in installments beginning one year after the date of grant and become fully exercisable six years after the date of grant. All options expire 10 years from the date of grant. At June 30, 1998, 1997 and 1996, exercisable options were 676,180; 490,489 and 334,104, respectively. There were approximately 929,000 shares available for option plan grants at June 30, 1998. The summary of stock option activity is shown below:
Options Weighted Average Outstanding Exercise Price ------------ ---------------- July 1, 1995 201,941 $15.00 Options granted 220,404 $23.96 Stock options exercised - - Stock options canceled (26,241) $15.00 ------- June 30, 1996 396,104 $19.99 Options granted 174,576 $20.00 Stock options exercised (12,091) $16.68 Stock options canceled - - ------- June 30, 1997 558,589 $20.06 Options granted 200,625 $20.82 Stock options exercised - - Stock options canceled - - ------- June 30, 1998 759,214 $20.26 =======
NOTE 10 - STOCK OPTIONS (Continued): The following table summarizes information about stock options outstanding at June 30, 1998:
Weighted Average Weighted Average Exercise Price Range Options Outstanding Remaining Contractual Life Exercise Price - ----------------------- ------------------- -------------------------- --------------- $15.00 - $16.44 177,014 6.3 $15.07 $18.22 - $21.00 361,796 8.7 $20.55 $23.96 220,404 7.4 $23.96
During fiscal 1997, the Company adopted SFAS No. 123, "Accounting for Stock- Based Compensation," which requires companies to estimate the fair value for stock options on the date of grant. Under SFAS No. 123, the Company is required to record the estimated fair value of stock options issued as compensation expense in its consolidated statements of income over the related service periods or, alternatively, continue to apply accounting methodologies as prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and disclose the pro forma effects of the estimated fair value of stock options issued in the accompanying footnotes to its financial statements. The determination of fair value is only required for stock options issued beginning in fiscal 1996. In adopting SFAS No. 123, the Company decided to continue to follow the accounting methodologies as prescribed by APB Opinion No. 25. The pro forma effects of the total compensation expense that would have been recognized under SFAS No. 123 are as follows:
(Dollars in thousands, except per share data) June 30 --------------------------- 1998 1997 1996 ------- ------- ------- Net income As reported $22,974 $55,815 $54,178 Pro forma $22,141 $55,015 $52,925 Earnings per share - basic As reported $ 0.84 $ 2.29 $ 2.47 Pro forma $ 0.81 $ 2.26 $ 2.41 Earnings per share - diluted As reported $ 0.84 $ 2.29 $ 2.46 Pro forma $ 0.81 $ 2.25 $ 2.40
Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. NOTE 10 - STOCK OPTIONS (Continued): In adopting SFAS No. 123, the Company utilized the Black-Scholes Option Pricing Model to estimate the fair value of stock options granted using the following assumptions:
1998 1997 1996 -------- ---------- ---------- Expected dividend yield 1.99% 1.94% 1.49% Expected option lives 6 years 6 years 6 years Expected volatility 33% 33% 33% Risk-free interest rates 5.47% 6.06% 6.13%
Based on the results of the model, the fair value of the stock options issued on the date of grant are as follows: Weighted Average Number Grant Date Years Issued Fair Value per Option - ---------- -------- --------------------- 1998 200,625 $6.64 1997 174,576 $7.35 1996 220,404 $9.14 NOTE 11 - EARNINGS PER SHARE: In December 1997, the Company adopted SFAS No. 128, "Earnings per Share," which changes the methodology by which companies compute earnings per share. Under SFAS No. 128, basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period, including the dilutive common share equivalents arising from stock options using the treasury stock method. For the Company, diluted earnings per share are not significantly different from basic earnings per share. In the accompanying financial statements, all prior periods have been restated to reflect the impact of adopting SFAS No. 128. The number of shares used in the Company's basic and diluted earnings per share computations are as follows:
Years Ended June 30 ------------------------ (Shares in thousands) 1998 1997 1996 ------ ------ ------ Weighted average common shares outstanding, net of treasury shares, for basic earnings per share 27,355 24,329 21,975 Common stock equivalents for employee stock options 35 75 64 ------ ------ ------ Weighted average common shares outstanding for diluted earnings per share 27,390 24,404 22,039 ====== ====== ======
NOTE 12 - MAJOR CUSTOMERS: Sales to the Company's three largest customers were approximately $65,946,000, $32,199,000 and $23,177,000 for fiscal 1998; $119,412,000, $26,590,000 and $23,526,000 for fiscal 1997; and $136,560,000, $36,499,000 and $20,135,000 for fiscal 1996. Effective October 1, 1997, the Company became a member of PhosChem, a Webb- Pomerene corporation. Since becoming a member, all of the Company's sales of diammonium phosphate fertilizer into export markets are made through PhosChem, while domestic sales are made through the Company's internal sales staff. The Company ended its exclusive diammonium phosphate marketing agreement with Atlantic Fertilizer & Chemical Corporation, who was the exclusive distributor of diammonium phosphate fertilizer produced by the Company's Pascagoula, Mississippi, facility prior to October 1, 1997. During fiscal 1998, approximately 70% of the Company's diammonium phosphate sales were made in international markets through the Company's distributors. A significant portion of the Company's trade receivables is due from entities which operate in the chemical fertilizer and farm supply industry. A severe downturn in the agricultural economy could have an adverse impact on the collectibility of those receivables. NOTE 13 - TRADING LOSS ON BROKERED PRODUCT: The Company began brokering ammonia in the open market following the First Mississippi acquisition in December 1996. During fiscal 1998 and 1997, the Company brokered approximately 142,000 and 177,000 short tons of ammonia, respectively. Fiscal 1998 brokered ammonia sales of approximately $18,494,000 and purchases of approximately $19,314,000 resulted in an $820,000 net trading loss. Fiscal 1997 brokered ammonia sales of approximately $32,287,000 and purchases of approximately $33,210,000 resulted in a $57,000 net loss after certain purchase price adjustments associated with the First Mississippi acquisition. These trading losses have been reflected in the accompanying consolidated statements of income. NOTE 14 - HEDGING ACTIVITIES: During fiscal 1998, 1997 and 1996, natural gas hedging activities resulted in average cost decreases of approximately $0.23, $0.30 and $0.40 per MMBTU on volumes hedged of 23,730,000, 15,880,000 and 5,560,000 MMBTU's, respectively. At June 30, 1998, the Company had open futures contracts covering a total volume of 25,120,000 MMBTU's with some contracts extending through December 1999. The net unrealized gain on these contracts at June 30, 1998, was approximately $4,878,000. The risk associated with outstanding futures positions is directly related to increases or decreases in the prices of natural gas in relation to the contract prices. NOTE 15 - INTEREST, NET: Interest, net, consisted of the following:
(Dollars in thousands) Years Ended June 30 --------------------------------- 1998 1997 1996 --------- ---------- -------- Interest expense $(21,518) $(8,942) $ (715) Interest capitalized 8,975 3,858 10 Interest income 1,595 753 2,934 -------- ------- ------ $(10,948) $(4,331) $2,229 ======== ======= ======
NOTE 16 - INCOME TAXES: The following is a summary of the components of the provision for income taxes:
(Dollars in thousands) Years Ended June 30 ----------------------------------- 1998 1997 1996 ----------- ----------- ------- Current: Federal $ 9,350 $ 30,379 $29,838 State 1,021 3,831 2,592 ------- -------- ------- 10,371 34,210 32,430 ------- -------- ------- Deferred: Federal 5,345 503 1,734 State 613 59 151 ------- -------- ------- 5,958 562 1,885 ------- -------- ------- $16,329 $ 34,772 $34,315 ======= ======== =======
The tax effect of the significant temporary differences and tax credit carryforwards at June 30 follows:
(Dollars in thousands) 1998 1997 ------------------------ ---------------------- Current Non-current Current Non-current ---------- ----------- ------- ------------ Employee benefit obligations $ 2,237 $ 88 $ 2,137 $ 101 Reserve for bad debts 726 - 691 - Employee post retirement 69 950 78 1,041 Deferred income on affiliate sales 600 - 1,658 - Accrual for closure of gypsum disposal area - 2,294 - 2,397 Other 135 279 240 331 ------- -------- ------- ------------ Deferred tax assets 3,767 3,611 4,804 3,870 Depreciation and amortization - (65,978) (1,208) (59,688) Pension - (2,102) - (3,039) Other - (517) - - Deferred tax liabilities (68,597) (1,208) (62,727) ------- -------- ------- -------- Net deferred tax asset (liability) $ 3,767 $(64,986) $ 3,596 $(58,857) ======= ======== ======= ========
NOTE 16 - INCOME TAXES (Continued): A reconciliation, as of June 30, of the statutory rate for income taxes and the effective tax rate follows:
(Dollars in thousands) 1998 1997 1996 -------------------- ------------------ ------------------- % of % of % of Earnings Earnings Earnings Before Before Before Amount Taxes Amount Taxes Amount Taxes -------- --------- -------- -------- -------- --------- Income taxes computed at statutory rate $13,756 35.0% $31,705 35.0% $30,972 35.0% Increase (decrease) in taxes resulting from: State taxes, net 1,149 2.9% 2,263 2.5% 2,743 3.1% Non-deductible goodwill 1,604 4.1% 836 0.9% - - Other, net (180) (0.5%) (32) - 600 0.7% ------- ----- ------- ---- ------- -------- $16,329 41.5% $34,772 38.4% $34,315 38.8% ======= ===== ======= ==== ======= ========
Income taxes have been settled with the Internal Revenue Service ("IRS") for all years through June 30, 1993. The IRS has concluded its field examination of the Company's U.S. income tax returns for fiscal years 1994-1996 and has assessed certain taxes that the Company is contesting. The Company believes any adjustments that might be required will not be material to the Company's financial position or results of operations. NOTE 17 - RETIREMENT PLANS: The Company maintains non-contributory defined benefit pension plans which provide benefits to a majority of its full-time employees. Under the plans, retirement benefits are primarily a function of both the average annual compensation and number of years of credited service. The plans are funded annually by the Company, subject to the Internal Revenue Code funding limitation. Net periodic pension expense includes the following components:
(Dollars in thousands) Years Ended June 30 --------------------------------- 1998 1997 1996 --------- --------- --------- Service cost - benefits earned during the period $ 3,708 $ 2,297 $ 1,955 Interest cost on projected benefit obligations 6,888 5,294 4,875 Actual gain on plan assets (25,540) (10,094) (13,260) Net amortization (274) (240) (153) Unrecognized gain on plan assets 17,763 3,734 7,778 -------- -------- -------- Net periodic pension expense $ 2,545 $ 991 $ 1,195 ======== ======== ========
NOTE 17 - RETIREMENT PLANS (Continued): The following table sets forth the plans' funded status and the amounts included as a component of other assets in the Company's consolidated balance sheets:
(Dollars in thousands) June 30 ----------------------- 1998 1997 ---------- ---------- Actuarial present value of benefit obligations: Vested benefit obligation $ 77,532 $64,016 Non-vested benefit obligation 275 464 -------- -------- Accumulated benefit obligation 77,807 64,480 Increase in benefits due to future compensation increases 23,842 17,084 -------- -------- Projected benefit obligation 101,649 81,564 Estimated fair value of plan assets 115,162 83,521 -------- -------- Plan assets greater than projected benefit obligation 13,513 1,957 Remaining unrecognized transition assets (3,072) (2,645) Unrecognized prior service cost 6,135 5,291 Unrecognized net (gain) loss (11,005) 3,129 -------- -------- Prepaid pension cost at end of period $ 5,571 $ 7,732 ======== ========
The following assumptions were used to measure net periodic pension cost for the plans for fiscal 1998, 1997 and 1996:
1998 1997 1996 ------ ------ ------ Discount rate 7.25% 7.50% 7.00% Expected long-term rate of return on assets 8.50% 8.50% 8.50% Average increase in compensation levels 5.00% 5.00% 5.00%
The plans' assets consist primarily of guaranteed investment contracts and marketable equity securities. The Company also has contributory thrift plans covering substantially all regular full-time employees who have elected to participate in the plans. Under the plans, the Company matches a certain percentage of each employee's contributions to the plan up to a maximum percentage of the employee's base compensation. Company contributions totaled approximately $1,529,000 in fiscal 1998, $1,353,000 in fiscal 1997 and $794,000 in fiscal 1996. The Company has no material post-retirement benefit obligations. NOTE 18 - LEASE COMMITMENTS: The Company has commitments under operating leases for equipment and storage warehouses. The following is a schedule of the future minimum rental payments required under operating leases that have noncancellable lease terms in excess of one year as of June 30, 1998:
(Dollars in thousands) Amount ------ 1999 $2,843 2000 2,017 2001 737 2002 303 2003 163 ------ $ 6,063 =======
Rental expense for all operating leases was $3,876,000 for fiscal 1998, $3,417,000 for fiscal 1997 and $1,476,000 for fiscal 1996. NOTE 19 - COMMITMENTS AND CONTINGENCIES: In late fiscal 1996, the Company began an expansion at its nitrogen fertilizer manufacturing facilities at Yazoo City. The project includes the addition of a 650 ton-per-day nitric acid plant, a new 500 ton-per-day ammonia plant and modifications to its ammonium nitrate plant to increase production from approximately 750,000 to approximately 950,000 tons-per-year at an estimated total cost of $130,000,000, and is scheduled for a phased completion. The nitric acid plant was completed and placed in service during March 1998. The Company anticipates the anhydrous ammonia and substantially all of the ammonium nitrate capacity being added by the end of calendar 1998. In April 1998, the Company announced its plans for an expansion project to increase its production capacity at the Company's potash facilities in Carlsbad, New Mexico. This expansion will increase the Company's red granular capacity from 445,000 to 545,000 tons-per-year as well as increase storage capacities by 30,000 tons. Upon completion of the project, the Company will have approximately 1,100,000 tons of combined potash production capacity from its two operating mines. The Company estimates total cost of the expansion to be $8,200,000 and is scheduled to be fully operational by the end of fiscal 1999. The Company is currently assessing its computer systems, including the systems involved in the operation of its manufacturing facilities, to identify to what extent the Company could be affected by the "Year 2000" issue. The Company expects to complete the assessment prior to the end of the 1998 calendar year and to have any Year 2000 conversion projects completed on a timely basis. The total cost of any such projects is as yet undetermined but, based upon facts known to date, is not expected to be material to the Company because of previous significant capital expenditures made by the Company to update computer software and hardware. The Company is also assessing Year 2000 issues in relation to its customers, suppliers and creditors to determine whether Year 2000 problems of any such third parties may materially affect the Company. This assessment should also be completed by the end of the 1998 calendar year. The ability of third parties with which the Company transacts business to adequately address their Year 2000 issues is outside the Company's control. There can be no assurance that the failure of such third parties to adequately address their respective Year 2000 issues will not have a material adverse effect on the Company's business operations and financial condition. NOTE 19 - COMMITMENTS AND CONTINGENCIES (Continued): Additionally, the Company, in the ordinary course of its business, is the subject of, or a party to, various pending or threatened legal actions. The Company believes that any ultimate liability arising from these actions will not have a significant impact on the financial position or the future earnings of the Company. NOTE 20 - RAW MATERIAL CONTRACTS: Mississippi Phosphates Corporation ("MPC"), a wholly owned subsidiary of the Company, has contracted with Office Cherifien des Phosphates to import its full requirement of phosphate rock through June 30, 2016. The purchase price for phosphate rock is based on the estimated phosphate rock costs incurred by certain domestic phosphate producers and the operating performance of MPC. NOTE 21 - SUPPLEMENTAL CASH FLOW INFORMATION: The Company considers its holdings of highly liquid money market debt securities to be cash equivalents if the securities mature within 90 days from the date of purchase. These short-term investments were $1,600,000 at June 30, 1998, and $53,739,000 at June 30, 1996. The Company had no short-term investments at June 30, 1997. The increase (decrease) in cash due to the changes in operating assets and liabilities consisted of the following:
(Dollars in thousands) Years Ended June 30 --------------------------------- 1998 1997 1996 -------- ---------- --------- Accounts receivable $ 11,563 $ (2,048) $(3,564) Inventories 3,881 (11,378) 9,682 Prepaid expenses and other current assets (1,763) 3,443 (944) Accounts payable (16,445) (4,504) 14,494 Accrued liabilities (2,017) 5,064 1,733 -------- -------- ------- $ (4,781) $ (9,423) $21,401 ======== ======== =======
During fiscal 1998, 1997 and 1996, the Company paid income taxes of $11,242,000, $30,451,000 and $31,127,000, respectively. Payments of interest, net of amounts capitalized, were $10,021,000 in fiscal 1998, $3,819,000 in fiscal 1997 and $320,000 in fiscal 1996. NOTE 21 - SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED): Supplemental disclosures regarding non-cash financing and investing activities include the following:
(Dollars in thousands) Years Ended June 30 ------------------------------- 1998 1997 1996 ---------- --------- ------- Property held for sale converted to note receivable $54,625 $ - $ - Land option transferred to land $ - $ 941 $ -
Other material non-cash activities include the Company's December 1996 acquisition of the fertilizer businesses of First Mississippi in an all-stock merger transaction (see Note 2). EX-21 9 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Subsidiaries of the Company as of June 30, 1998, are as follows:
State of PERCENTAGE OF VOTING NAME OF COMPANY Incorporation SECURITIES OWNED - --------------- ------------- -------------------- Mississippi Phosphates Corporation Delaware 100% NSI Land Corporation Delaware 100% Mississippi Chemical Management Company Delaware 100% Mississippi Chemical Company, L.P. Delaware 100% MCC Investments, Inc. Delaware 100% Mississippi Potash, Inc. Mississippi 100% Eddy Potash, Inc. Mississippi 100% (a subsidiary of Mississippi Potash, Inc.) Triad Nitrogen, Inc. Delaware 100% Triad Fertilizer, Inc. Mississippi 100% (a subsidiary of Triad Nitrogen, Inc.) TNI, Inc. Mississippi 100% (a subsidiary of Triad Nitrogen, Inc.) Triad Barge, Inc. Mississippi 100% (a subsidiary of Triad Nitrogen, Inc.) TNI Barge, Inc. Delaware 100% (a subsidiary of Triad Barge, Inc.)
EX-23 10 CONSENT OF ARTHUR ANDERSEN EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report, dated July 22, 1998, incorporated by reference in this Form 10-K, into the Company's previously filed SEC File No. 333-13069 and File No. 333-38619. /s/ Arthur Andersen LLP Memphis, Tennessee, September 18, 1998 EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S 1998 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY TO SUCH ANNUAL REPORT. YEAR JUN-30-1998 JUN-30-1998 3,857 0 63,021 1,989 65,429 140,721 795,332 334,491 912,332 76,635 214,005 0 0 280 448,245 912,332 519,911 531,406 412,500 481,155 0 222 10,948 39,303 16,329 22,974 0 0 0 22,974 0.84 0.84
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