-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ZRmOcPmkWf7pfDhtQ5cT9NNQlkvIvbGDJ03f8aRbdK4yJHk7hQVdnwIfKZ60S2x6 a3tkqZbmD1fgqQAA4ORmKA== 0000950131-94-001544.txt : 19941014 0000950131-94-001544.hdr.sgml : 19941014 ACCESSION NUMBER: 0000950131-94-001544 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19941013 SROS: NASD SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TERRA INDUSTRIES INC CENTRAL INDEX KEY: 0000722079 STANDARD INDUSTRIAL CLASSIFICATION: 5190 IRS NUMBER: 521145429 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-52493 FILM NUMBER: 94552507 BUSINESS ADDRESS: STREET 1: TERRA CENTRE 600 4TH ST STREET 2: P.O. BOX 6000 CITY: SIOUX CITY STATE: IA ZIP: 51102-6000 BUSINESS PHONE: 7122771340 MAIL ADDRESS: STREET 1: TERRA CENTER STREET 2: 600 4TH ST P O BOX 6000 CITY: SIOUX CITY STATE: IA ZIP: 51102-6000 FORMER COMPANY: FORMER CONFORMED NAME: INSPIRATION RESOURCES CORP DATE OF NAME CHANGE: 19920517 S-3/A 1 AMEND. NO. 3 TO FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 13, 1994 REGISTRATION NO. 33-52493 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- AMENDMENT NO. 3 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- TERRA INDUSTRIES INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------------- MARYLAND 52-1145429 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) TERRA CENTRE 600 FOURTH STREET, P.O. BOX 6000 SIOUX CITY, IOWA 51102-6000 (712) 277-1340 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) GEORGE H. VALENTINE, ESQ. VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY TERRA CENTRE 600 FOURTH STREET, P.O. BOX 6000 SIOUX CITY, IOWA 51102-6000 (712) 277-7302 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPY TO: CARTER W. EMERSON, ESQ. MARK ZVONKOVIC, ESQ. KIRKLAND & ELLIS ANDREWS & KURTH L.L.P. 200 EAST RANDOLPH DRIVE 425 LEXINGTON AVENUE CHICAGO, ILLINOIS 60601 NEW YORK, NEW YORK 10017 (312) 861-2052 (212) 850-2828 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [_] ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED OCTOBER 13, 1994 PROSPECTUS October , 1994 9,700,000 TERRA INDUSTRIES INC. LOGO COMMON SHARES LOGO All common shares, no par value (the "Common Shares"), offered hereby are being sold by Terra Industries Inc. ("Terra" or the "Company"). The Company will close this offering simultaneously with the consummation of its acquisition of Agricultural Minerals and Chemicals, Inc. and the proceeds of this offering will be used to finance, in part, such acquisition. Minorco (U.S.A.) Inc. has agreed with the Underwriters that it or an affiliate will purchase directly from the Underwriters 5.4 million or approximately 55.7% of the Common Shares offered hereby at a price equal to the Price to Public less the Underwriting Discount. The Common Shares are listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbol "TRA". On October 7, 1994, the last reported sale price of the Common Shares as reported on the New York Stock Exchange Composite Tape was $11.50 per share. SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON SHARES OFFERED HEREBY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC(/1/) DISCOUNT(/1/)(/2/) COMPANY(/3/) - ------------------------------------------------------------------------------- Per Share.......................... $ $ $ - ------------------------------------------------------------------------------- Total(/4/)......................... $ $ $
- -------------------------------------------------------------------------------- (1) Minorco (U.S.A.) Inc. or an affiliate will pay the Underwriters the Price to Public less the Underwriting Discount for any Common Shares purchased. (2) The Company has agreed to indemnify the Underwriters against certain liabilities under the Securities Act of 1933, as amended. See "Underwriting." (3) Before deducting expenses payable by the Company estimated at $1,097,000. (4) The Company has granted the Underwriters an option, exercisable within 30 days after the date of this Prospectus, to purchase up to an additional 650,000 Common Shares on the same terms as set forth above to cover over- allotments, if any. If the option is exercised in full, the Price to Public, Underwriting Discount and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." The Common Shares are offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by the Underwriters, subject to approval of certain legal matters by counsel for the Underwriters. The Underwriters reserve the right to withdraw, cancel or modify such offer and reject orders in whole or in part. It is expected that delivery of the certificates for the Common Shares will be made in New York, New York on or about October , 1994. S.G.WARBURG & CO. INC. [MAP APPEARS HERE] IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S COMMON SHARES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OPEN MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 2 SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the more detailed information and consolidated financial statements (and notes thereto) included elsewhere or incorporated by reference in this Prospectus. Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." Except as otherwise indicated, all financial information is presented on the basis of generally accepted accounting principles. Unless otherwise referred to herein or the context otherwise requires, references to the "Company" or "Terra" shall mean Terra Industries Inc., including, where the context so requires, its direct and indirect subsidiaries. Terms defined in this Summary shall have the same meanings when used elsewhere in this Prospectus. Prospective investors are urged to read this Prospectus in its entirety. See "Investment Considerations" for a discussion of certain factors that should be considered carefully in evaluating an investment in the Common Shares. THE COMPANY The Company is a leading producer of nitrogen fertilizer and marketer of fertilizer, crop protection products and seed. The Company recently announced that it has entered into an agreement to acquire Agricultural Minerals and Chemicals Inc., a Delaware corporation ("AMCI"), a leading producer of nitrogen fertilizer and methanol. The Company will close this offering simultaneously with the consummation of the acquisition of AMCI and the proceeds of this offering will be used to finance, in part, such acquisition. See "The Acquisition." After giving effect to the acquisition of AMCI, the Company will be the third largest producer of anhydrous ammonia and one of the two largest producers of nitrogen solutions in the United States and Canada. Nitrogen fertilizer is a basic crop nutrient which is applied seasonally by farmers to improve crop yield and quality. Nitrogen fertilizer is produced by combining gaseous nitrogen with hydrogen to form anhydrous ammonia, the simplest form of nitrogen fertilizer, which can be further processed into other fertilizer products such as urea and nitrogen solutions. The Company presently operates three nitrogen fertilizer facilities and believes that, with the addition of AMCI's two nitrogen fertilizer facilities, it will be among the most efficient nitrogen fertilizer manufacturers in the markets it serves. The Company also believes that it will benefit from favorable transportation logistics and other operating synergies and current prices in the nitrogen fertilizer industry, which is operating near capacity. Through the AMCI acquisition, the Company will also substantially increase its participation in the methanol production industry. It will have approximately 320 million gallons per year of methanol production capacity, representing approximately 16% of the total United States rated capacity. AMCI's methanol facility in Beaumont, Texas is the largest such facility in the U.S. Methanol is used primarily as a feedstock in the production of other chemicals such as formaldehyde, acetic acid and chemicals used in the building products industry, and is also a feedstock in MTBE, an additive in oxygenated gasoline. Demand in the United States for oxygenated gasoline has been growing as a result of current federally-mandated standards for gasoline. Increased general economic activity in the U.S. and abroad, the phase-in of such standards and a large number of plant shutdowns and turnarounds in the industry created a tight market for methanol thus far in 1994. A published index of contract prices for methanol increased from $0.495 per gallon in January 1994 to $0.98 per gallon in August 1994. The Company owns and operates the largest independent farm service center network in the United States and Canada and is the second largest supplier of crop production inputs in the United States. The Company's distribution network for fertilizer, crop protection products and seed has grown over the last several years to include approximately 350 farm service centers, 58 fertilizer storage facilities and 770 affiliated dealer locations serving the United States and the eastern region of Canada. This growth generally 3 has been the result of a healthy farm economy, acquisitions, additional facilities and aggressive marketing. The Company's distribution network is served by independent suppliers and the Company's own production facilities, which presently include one crop protection chemical dry flowable formulation plant and seven liquid chemical formulation facilities in addition to three nitrogen fertilizer plants. The production from AMCI's nitrogen fertilizer plants will also be available for the Company's distribution network. The Company's long-term strategy for growth is to (i) acquire and upgrade production and distribution facilities, (ii) increase distribution volumes by expanding sales from Company-operated locations and its affiliated dealer network, (iii) change its product mix to include more profitable products and (iv) continue to build customer loyalty by providing value-added services. Towards this strategy, the Company made two significant acquisitions in 1993. In April, the Company added a manufactured fertilizer facility and 32 farm service centers in Canada and in December the Company added 12 farm service centers in Florida. The acquisition of AMCI is a major element in the continuation of this strategy. As of the date hereof, approximately 52.4% of the outstanding Common Shares are owned by Minorco (U.S.A.) Inc., a Colorado corporation ("Minorco USA"). Since the Company became publicly-owned in 1983, Minorco USA and its affiliates have owned a majority of the Company's outstanding equity securities. Minorco USA is involved in mining and natural resource-related activities in North America. Minorco USA is indirectly wholly-owned by Minorco, a company incorporated under the laws of Luxembourg as a societe anonyme ("Minorco"). Minorco is an international natural resources company with operations in gold, base metals, industrial minerals, paper and packaging and agribusiness. Six of the Company's ten directors are also officers and/or directors of Minorco USA or its affiliates. Minorco USA has agreed with the Underwriters that it or an affiliate will purchase directly from the Underwriters 5.4 million or approximately 55.7% of the Common Shares offered hereby at a price equal to the price to the public less the underwriting discount. See "Underwriting." The Company's principal executive offices are located at Terra Centre, 600 Fourth Street, P. O. Box 6000, Sioux City, Iowa 51102-6000 and its telephone number is (712) 277-1340. THE ACQUISITION The Company has agreed to acquire AMCI (the "Acquisition") pursuant to a Merger Agreement dated as of August 8, 1994 (the "Merger Agreement") between the Company, AMCI and AMCI Acquisition Corporation, a wholly-owned subsidiary of the Company ("Merger Sub"). The Acquisition is to be accomplished by merging Merger Sub with and into AMCI, whereupon the present stockholders and option holders of AMCI will receive cash in an aggregate amount of approximately $400 million (subject to adjustment as described herein) and AMCI will become a wholly-owned subsidiary of the Company. Immediately following the consummation of the Acquisition, AMCI will be merged with and into the Company. See "The Acquisition." At the closing of the Acquisition, a subsidiary of AMCI will enter into a methanol hedging agreement pursuant to which it will receive $4 million in exchange for agreeing to make payments based on the market prices of methanol and natural gas through 1997. For an example of the calculation of payments due under the Methanol Hedging Agreement based on certain price assumptions, see "The Acquisition--The Methanol Hedging Agreement." AMCI owns and operates its nitrogen fertilizer facilities through Agricultural Minerals Company, L.P., a Delaware limited partnership ("AMCLP"). Senior Preference Units representing a 39.8% partnership interest in AMCLP are publicly traded on the New York Stock Exchange. See "Description of Certain Indebtedness and Other Obligations" and "Investment Considerations--Holding Company Structure and AMCLP." THE PUT OPTION The Company is offering the Common Shares as described herein in lieu of exercising its rights under a put option agreement dated as of August 8, 1994 (the "Put Option Agreement") between the Company 4 and Minorco USA, pursuant to which Minorco USA granted to the Company the right to sell to Minorco USA and cause Minorco USA to purchase 13,333,333 Common Shares, at a purchase price of $7.50 per Common Share, payable in cash, for aggregate proceeds to the Company of $100 million. Under applicable rules of the New York Stock Exchange, the Company's issuance of Common Shares upon exercise of its rights under the Put Option Agreement must be approved by an affirmative majority vote of stockholders. If this offering is consummated, the Company will not exercise its rights under the Put Option Agreement. THE REFINANCING The Company will apply the net proceeds of this offering, available cash of the Company and AMCI and their subsidiaries and funds borrowed by the Company and such subsidiaries under the Credit Agreement (the "Credit Agreement") to be entered into in connection with the Acquisition to (a) the payment of the Acquisition consideration to the holders of AMCI common stock and stock options, (b) the retirement of bank loans to Terra International Inc., a wholly-owned subsidiary of the Company ("Terra International"), under a 1992 revolving credit agreement, of which there were approximately $56 million outstanding on June 30, 1994, (c) the retirement of an additional $40 million in bank loans of the Company and its subsidiaries, (d) the retirement of a $35 million term loan, a $20 million term loan and a $50 million revolving credit facility of AMCI's subsidiaries and (e) the payment of fees and expenses related to the Acquisition and the related financing transactions. In addition, as a result of the merger of AMCI into the Company, the Company will assume AMCI's obligations under $175 million in aggregate principal amount of 10.75% Senior Notes due 2003 (the "Senior Notes"). The borrowings under the Credit Agreement (includes borrowings to repurchase any Senior Notes required to be repurchased as described herein and working capital facilities), the assumption of the Senior Notes and the retirement of the loans as described above are referred to collectively herein as the "Refinancing." See "The Refinancing." After consummation of the Acquisition and the Refinancing, the primary obligor with respect to the Credit Agreement will be Terra Capital, Inc. ("Terra Capital"), a new subsidiary of the Company to which the capital stock of Terra International and AMCI's two directly-owned subsidiaries will be contributed. Terra Capital will be wholly-owned by Terra Capital Holdings, Inc. ("Terra Holdings"), another new subsidiary of the Company, and Terra Holdings will be wholly-owned by the Company. See "Post-Acquisition Company Structure" below. Also, Terra International, which is currently the Company's principal operating subsidiary, and one of its subsidiaries, Terra International (Canada) Inc. ("Terra Canada"), will continue to have other obligations outstanding. Capitalized lease obligations of a subsidiary of AMCI will also continue after the closing of the Acquisition and the Refinancing. See "Capitalization," "Liquidity and Capital Resources After the Acquisition and the Refinancing" and "Description of Certain Indebtedness and Other Obligations." THE OFFERING Common Shares being offered........ 9,700,000 shares(1) Common Shares to be outstanding after the Offering................ 80,589,246 shares(1)(2) Use of Proceeds.................... To finance, in part, the Company's acquisition of AMCI. See "Use of Proceeds." New York Stock Exchange and Toronto Stock Exchange symbol............. TRA
- -------- (1) Does not include up to 650,000 Common Shares that may be sold pursuant to the Underwriters' over-allotment option. See "Underwriting." (2) Based on Common Shares outstanding at September 30, 1994. Does not include outstanding stock options with respect to 1,256,550 Common Shares as of such date. 5 CERTAIN HISTORICAL AND PRO FORMA FINANCIAL DATA THE COMPANY The following table sets forth certain historical financial data of the Company as of and for each of the fiscal years in the five-year period ended December 31, 1993 and as of and for each of the six-month periods ended June 30, 1993 and 1994. See "Index to Financial Statements" and "Incorporation of Certain Documents by Reference." The following table also sets forth summary unaudited pro forma combined financial data of the Company after giving effect to the Acquisition, the sale of Common Shares in this offering, the Refinancing and the Company's 1993 Canada and Florida acquisitions. See footnote (a) below. The unaudited pro forma combined financial data have been derived from, and should be read in conjunction with, the historical consolidated financial statements of the Company and AMCI, including the respective notes thereto, which are included elsewhere in this Prospectus and incorporated herein by reference. See "Index to Financial Statements" and "Pro Forma Combined Financial Statements of the Company." THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL DATA ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY AND ARE NOT NECESSARILY INDICATIVE OF THE RESULTS THAT ACTUALLY WOULD HAVE OCCURRED HAD THE ACQUISITION, THE REFINANCING AND THIS OFFERING BEEN CONSUMMATED ON THE DATES INDICATED OR THE RESULTS THAT MAY OCCUR OR BE OBTAINED IN THE FUTURE. 6 TERRA INDUSTRIES INC. SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30 (UNAUDITED), -------------------------------------------------------------------- -------------------------------- PRO FORMA PRO FORMA 1989 1990 1991 1992 1993 1993(A) 1993 1994 1994(A) -------- --------- ---------- ---------- ---------- ----------- -------- ---------- ---------- (UNAUDITED) INCOME STATEMENT DATA: Total revenues....... $949,458 $ 962,202 $1,022,597 $1,082,191 $1,238,001 $1,716,332 $820,341 $1,077,756 $1,309,632 Cost of sales........ 798,407 806,772 849,684 904,246 1,021,187 1,372,161 681,611 897,685 1,034,690 Depreciation and amortization........ 14,242 14,997 14,399 14,994 15,470 59,730 7,757 9,060 30,884 Selling, general and administrative expenses............ 124,628 138,315 132,845 137,232 161,791 191,199 84,137 100,172 111,418 Equity in earnings of unconsolidated affiliates.......... -- -- -- -- (2,275) (2,051) (940) (36) (438) -------- --------- ---------- ---------- ---------- ---------- -------- ---------- ---------- Income before interest, minority interest and income taxes............... 12,181 2,118 25,669 25,719 41,828 95,293 47,776 70,875 133,078 Net interest expense. 17,134 17,056 12,563 7,533 9,683 44,655 4,784 3,858 26,002 Minority interest.... -- -- -- -- -- 19,789 -- -- 15,526 -------- --------- ---------- ---------- ---------- ---------- -------- ---------- ---------- Income (loss) from continuing operations before income taxes........ (4,953) (14,938) 13,106 18,186 32,145 30,849 42,992 67,017 91,550 Income tax (provision) benefit. 316 816 (1,073) (7,757) (9,300) (17,280) (12,155) (25,400) (36,851) -------- --------- ---------- ---------- ---------- ---------- -------- ---------- ---------- Income (loss) from continuing operations.......... (4,637) (14,122) 12,033 10,429 22,845 $ 13,569 30,837 41,617 $ 54,699 ========== ========== Income (loss) from discontinued operations.......... 29,808 (94,379) (168,808) (1,665) -- -- -- -------- --------- ---------- ---------- ---------- -------- ---------- Income (loss) before extraordinary items and cumulative effect of accounting changes............. 25,171 (108,501) (156,775) 8,764 22,845 30,837 41,617 Extraordinary gain (loss).............. -- -- 5,115 -- -- -- (2,614) Cumulative effect of accounting changes.. -- -- -- 22,265 -- -- -- -------- --------- ---------- ---------- ---------- -------- ---------- Net income (loss).... $ 25,171 $(108,501) $ (151,660) $ 31,029 $ 22,845 $ 30,837 $ 39,003 ======== ========= ========== ========== ========== ======== ========== Per Common Share: Income (loss) from continuing operations.......... $ (0.07) $ (0.21) $ 0.18 $ 0.15 $ 0.33 $ 0.17 $ 0.45 $ 0.59 $ 0.68 ========== ========== Income (loss) from discontinued operations.......... 0.45 (1.43) (2.51) (0.02) -- -- -- -------- --------- ---------- ---------- ---------- -------- ---------- Income (loss) before extraordinary items. 0.38 (1.64) (2.33) 0.13 0.33 0.45 0.59 Extraordinary gain (loss).............. -- -- 0.07 -- -- -- (0.04) Cumulative effect of accounting changes.. -- -- -- 0.32 -- -- -- -------- --------- ---------- ---------- ---------- -------- ---------- Net income (loss).... $ 0.38 $ (1.64) $ (2.26) $ 0.45 $ 0.33 $ 0.45 $ 0.55 ======== ========= ========== ========== ========== ======== ========== Dividends............ $ 0.09 $ 0.12 $ -- $ -- $ 0.02 $ 0.02 $ -- $ 0.04 $ 0.04
AT JUNE 30, 1994 -------------------- ACTUAL PRO FORMA(A) -------- ----------- (UNAUDITED) BALANCE SHEET DATA: Working capital........................................... $205,836 $ 235,746 Net property, plant and equipment......................... 124,786 550,619 Excess of purchase price over net assets acquired......... -- 317,170 Total assets.............................................. 876,895 1,750,415 Minority interest......................................... -- 155,645 Long-term debt (excluding current maturities)............. 45,782 529,012 Total stockholders' equity................................ 287,956 391,916
7 - -------- (a) The summary unaudited pro forma balance sheet data combines the financial position of the Company as of June 30, 1994 with that of AMCI as if the Acquisition, the Refinancing, and this offering had been consummated as of June 30, 1994. The summarized unaudited pro forma income statement data combines the statements of income of the Company for the year ended December 31, 1993 and for the six months ended June 30, 1994 with those of AMCI and its predecessors as if the Acquisition, the Refinancing and this offering had been consummated as of January 1, 1993. Pro forma adjustments include the write-up of property, plant and equipment to fair value, recording of the Refinancing and related interest costs, decrease in cash and related interest income used to consummate the Acquisition, recording of purchase price in excess of net assets acquired and related amortization, and the issuance of 9,700,000 Common Shares at an assumed price of $11.50 per share (for aggregate net proceeds of approximately $105.7 million) in the offering described herein. The summary unaudited 1993 pro forma income statement data also gives effect to the Company's (i) March 31, 1993 acquisition of assets from ICI Canada Inc. and (ii) December 31, 1993 acquisition of assets from Asgrow Florida Company. See "Pro Forma Combined Financial Statements of the Company." AMCI AMCI and its wholly-owned subsidiary, Agricultural Minerals Corporation ("AMC"), were formed in connection with the February 1990 acquisition of the nitrogen fertilizer business of Freeport-McMoRan Resource Partners, Limited Partnership ("FMRP") by The Morgan Stanley Leveraged Equity Fund II, L.P., a Delaware limited partnership that is now the principal stockholder of AMCI ("MSLEF II"), and certain other investors. AMC serves as the general partner of both AMCLP and Agricultural Minerals, Limited Partnership, a Delaware limited partnership ("AMLP" or the "Operating Partnership"). AMC is also a limited partner in AMCLP, holding all of the limited partnership interests in AMCLP, except the Senior Preference Units. AMCLP, in turn, holds a 99% limited partnership interest in the Operating Partnership. All of AMCI's operating assets relating to its nitrogen fertilizer business are owned by the Operating Partnership. AMCI also owns 100% of the capital stock of BMC Holdings Inc., a Delaware corporation ("BMCH"), which in turn owns 100% of the capital stock of Beaumont Methanol Corporation, a Delaware corporation ("BMC"). BMCH and BMC were formed in connection with the December 1991 acquisition of the methanol business of E. I. du Pont de Nemours and Company ("DuPont") by MSLEF II and certain other investors. All of AMCI's operating assets relating to its methanol business are owned by BMC. The businesses of BMC and AMC were consolidated under AMCI and combined under common ownership in October 1993 after operating under common management since December 1991. 8 The following table sets forth certain historical and pro forma financial data for AMCI and BMCH and their predecessor operations on a combined basis for the periods indicated. This information is qualified in its entirety by, and should be read in conjunction with, the consolidated financial statements of AMCI, including the notes thereto, included elsewhere herein. Information presented for the predecessor operations for the periods prior to the years ended December 31, 1990, 1991 and 1992 is not comparable to subsequent periods as explained in footnotes (b), (c) and (e). AGRICULTURAL MINERALS AND CHEMICALS INC. SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ---------------------------------------------- ----------------- COMBINED PREDECESSOR COMBINED OPERATIONS OPERATIONS ---------------------------- ----------------- PRO FORMA 1989(E) 1990(C)(D) 1991(B) 1992(A) 1993(A) 1993 1994 -------- ---------- -------- -------- -------- -------- -------- (UNAUDITED) INCOME STATEMENT DATA: Revenues................ $352,768 $324,940 $367,729 $324,953 $365,786 $193,579 $231,782 Gross profit............ 61,746 61,524 110,929 90,416 81,878 45,783 80,742 Income before extraordinary expense.. 28,230 11,549 44,559 20,612 8,544 7,228 26,825 Income before extraordinary expense per share.............. $ 2.56 $ 1.18 $ 0.49 $ 0.41 $ 1.54 BALANCE SHEET DATA: Net property, plant and equipment.............. $140,919 $235,237 $364,366 $347,012 $326,899 $337,782 $319,383 Total assets............ 195,254 348,459 506,590 505,913 506,395 492,178 530,805 Long-term debt and capitalized lease obligations, including current maturities..... 142,270 135,119 219,418 127,820 217,029 Stockholders' equity.... 135,437 112,244 45,053 107,744 65,065 Cash dividends declared per share.............. $ 5.72 $ 3.18 $ 7.58 $ 1.17 $ 0.39
- -------- (a) The financial data for the years ended December 31, 1992 and 1993, have been derived from the audited financial statements of AMCI included elsewhere herein. (b) The financial data for the year ended December 31, 1991, have been derived from (i) the audited financial statements of DuPont's methanol business for the period January 1, 1991, to December 12, 1991, which are not included herein and (ii) the audited financial statements of AMCI for the year ended December 31, 1991. BMCH information prior to December 12, 1991, is at DuPont's historical cost and is not comparable to subsequent periods. Common costs incurred by DuPont on behalf of the methanol operations have been allocated to the operations using assumptions and methods which AMCI management believes are reasonable. (c) The pro forma financial data for the year ended December 31, 1990, have been derived from (i) the audited financial statements of DuPont's methanol business for the year ended December 31, 1990, which are not included herein, (ii) the audited financial statements of FMRP's nitrogen fertilizer business for the two months ended February 28, 1990, which are not included herein, and (iii) the audited financial statements of AMCI for the 10 months ended December 31, 1990, which are not included herein. This information includes pro forma adjustments to reflect the 1990 acquisition of the AMC business from FMRP as if it had occurred on January 1, 1990. As a result of purchase accounting adjustments as well as other factors, including FMRP's accounting policies relating to transfer pricing on intercompany sales and freight costs, divisional accounting for operating expenses prior to acquisition, capital costs related to the acquisition and differences in taxable status, the 1990 financial data is not comparable to earlier periods. Common costs incurred by DuPont on behalf of the methanol operations have been allocated to the operations using assumptions and methods which AMCI management believes are reasonable. (d) Results for 1990 include the impact of a fire in the lubricating oil unit which caused minor structural damage to BMC's methanol production facility in Beaumont, Texas. The 1990 results include a $5.6 million charge for repair costs. (e) The financial data for the year ended December 31, 1989 have been derived from the audited financial statements of FMRP's nitrogen fertilizer business and the audited financial statements of DuPont's methanol business for such period, which are not included herein, and are presented at FMRP's and DuPont's historical cost (without giving retroactive effect to purchase accounting adjustments in subsequent years). Combined results include a pro forma tax provision of $15.7 million for the year ended December 31, 1989 for FMRP, a partnership, based on statutory corporate rates in effect during the periods. Common costs incurred by FMRP and DuPont on behalf of the fertilizer and methanol operations, respectively, have been allocated to the operations using assumptions and methods which AMCI management believes are reasonable. 9 POST-ACQUISITION COMPANY STRUCTURE The following chart represents the anticipated organization of the Company and certain of its subsidiaries after the consummation of the Acquisition, the merger of AMCI into the Company and the Refinancing. Shaded areas represent entities to be acquired pursuant to the Acquisition. (LOGO) 10 INVESTMENT CONSIDERATIONS Prospective investors should consider carefully, in addition to the other information in this Prospectus, the following factors before purchasing the Common Shares offered hereby. HOLDING COMPANY STRUCTURE AND AMCLP Since the operations of the Company are currently conducted through subsidiaries and the Company's assets consist primarily of investments in its subsidiaries (which, after the consummation of the Acquisition, will include AMCI's subsidiaries), the Company's ability to pay dividends on Common Shares is dependent upon the earnings of its subsidiaries and the distribution of those earnings to the Company (through loans, dividends or other payments). Moreover, the limited partnership agreement governing AMCLP requires the quarterly distribution to the partners of AMCLP of all "Available Cash," which is generally defined to mean all cash receipts from all sources, less the sum of all cash disbursements, adjusted for changes in certain reserves established as AMC determines to be necessary or appropriate in its reasonable discretion to provide for the proper conduct of the business of AMCLP or the Operating Partnership (including reserves for future capital expenditures) or to provide funds for distributions with respect to any of the next four calendar quarters. The publicly-held Senior Preference Units (which represent a 39.8% interest in AMCLP) are entitled to receive a minimum quarterly distribution of $0.605 per unit, plus arrearages, before any amounts are paid to AMC as distributions on its junior preference and common units. The nature of the businesses of the Company and AMCLP may give rise to conflicts of interest between the two. Conflicts could arise, for example, with respect to transactions involving purchases, sales and transportation of fertilizer and natural gas and potential acquisitions of businesses or properties. See "Description of Certain Indebtedness and Other Obligations--AMCLP Senior Preference Units and Other Obligations." LEVERAGE As a result of the Acquisition, the Refinancing and this offering, the Company will become more leveraged. The Company's long-term debt to total capitalization ratio will increase substantially and fixed charges will require a greater percentage of available cash flow. See "Liquidity and Capital Resources After the Acquisition and the Refinancing," "Unaudited Pro Forma Combined Financial Statements of the Company" and "Capitalization." The degree to which the Company is leveraged could have important consequences to holders of the Common Shares, including the following: (i) a substantial portion of the Company's cash flow from operations must be dedicated to the payment of the principal of and interest on indebtedness; (ii) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate purposes will be limited; (iii) the Company's ability to pay dividends is and will be limited by financing agreements of it and its subsidiaries (see "Price Range of Common Shares and Dividend Data" and "Description of Certain Indebtedness and Other Obligations"); (iv) the agreements governing the Company's long-term indebtedness contain certain restrictive financial and operating covenants, including limitations on the amount of acquisitions (which have been an important part of the Company's growth strategy over the last several years); (v) the Company will be more leveraged than certain of its competitors, which might place the Company at a competitive disadvantage; (vi) upon consummation of the Refinancing, a substantial portion of the Company's borrowings will be at floating rates of interest, causing the Company to be sensitive to increases in interest rates; and (vii) the Company could be more sensitive to a downturn in general economic conditions or in the agricultural or methanol industries. VOTING CONTROL BY PRINCIPAL STOCKHOLDER AND RELATED MATTERS As of the date hereof, Minorco USA owns approximately 52.4% of the outstanding Common Shares. Since the Company became publicly-owned in 1983, Minorco and its affiliates have owned a majority of the Company's outstanding equity securities. As a result of its beneficial ownership of Common Shares, Minorco and Minorco USA are able to control the election of the Company's directors and the 11 management and policies of the Company. As of the date hereof, six of the Company's ten directors are also officers and/or directors of Minorco USA or its affiliates. Any future sale of all or a portion of the Common Shares owned by Minorco USA could adversely affect the market price of the Common Shares. Minorco USA has agreed with the Underwriters that it or an affiliate will purchase directly from the Underwriters 5.4 million or approximately 55.7% of the Common Shares offered hereby at a price equal to the price to the public less the underwriting discount. See "Underwriting." DEPENDENCE ON NATURAL GAS; INDUSTRY CONSIDERATIONS The principal raw material used to produce nitrogen fertilizer is natural gas. The Company estimates that natural gas costs comprised nearly 50% of the total costs and expenses associated with the Company's manufactured fertilizer operations in 1993. Natural gas is also the primary raw material used in the production of methanol. The Company estimates that natural gas represents over 50% of the costs and expenses associated with methanol operations. A significant increase in the price of natural gas that could not be recovered through an increase in nitrogen fertilizer or methanol prices could have a material adverse effect on the Company's profitability and cash flow. The Company's policy is to fix the unit cost for 40% to 80% of its natural gas requirements for the upcoming 12-month period using supply contracts and various hedging techniques. See "Factors Affecting Demand For Methanol and MTBE" and "Business--Raw Materials." The Company's future operating results are also subject to other external factors which are beyond the Company's control, including the number of planted acres; the types of crops planted; the effects of general weather patterns on the timing and duration of field work for crop planting and harvesting; the supply of crop inputs; the relative balance of supply and demand for nitrogen fertilizers; the U.S. government's agricultural policy; and market prices of methanol. SEASONALITY AND VOLATILITY The agricultural products business is seasonal, based upon the planting, growing and harvesting cycles. Inventories must be accumulated in the first few months of the calendar year to be available for seasonal sales, requiring significant storage capacity. Inventory accumulations are financed by suppliers or short-term borrowings, which are retired with the proceeds of the sales of such inventory. In times of lower demand, the Company can reduce purchases, thereby decreasing inventory carrying costs. In the past, over half of the Company's sales generally occurred during the second quarter of each year. This seasonality also generally results in higher fertilizer prices during peak periods, with prices typically reaching their highest point in the spring, dropping in the summer, increasing in the fall (as depleted inventories are restored) and through the spring. The agricultural products business can also be volatile as a result of a number of other factors, the most important of which, for U. S. markets, are weather patterns and field conditions (particularly during periods of high fertilizer consumption), current and projected grain stocks and prices and the U.S. government's agricultural policy. Among the governmental policies that influence the markets for fertilizer are those directly or indirectly influencing the number of acres planted, the level of grain stocks, the mix of crops planted and crop prices. As with any commodity chemical, the price of methanol is volatile. The industry has experienced cycles of oversupply resulting in depressed prices and idled capacity, followed by periods of shortage and rapidly rising prices. In part, future demand for methanol will depend on the regulatory environment with respect to oxygenated gasoline. During 1994 to date, increased world demand for methanol combined with a large number of plant shutdowns and turnarounds in the industry and the phase-in of federally-mandated standards for oxygenated gasoline to create a tight market and dramatically increased prices over 1993 levels. There can be no assurances that such conditions will continue. See "Factors Affecting Demand For Methanol and MTBE." 12 FACTORS AFFECTING DEMAND FOR METHANOL AND MTBE Methanol is used as a feedstock in the production of MTBE, an oxygenate and octane enhancer used in reformulated gasoline. Reformulated gasoline has lower volatility and is less aromatic than gasoline. Future MTBE demand is dependent on a number of market and regulatory forces that are beyond the control of the Company and difficult to predict. Federally-mandated standards (the "Clean Air Act Amendments") mandate numerous comprehensive specifications for motor vehicle fuel, including increased oxygenate content and lower volatility. Beginning in 1992, the first phase of the Clean Air Act Amendments required that over thirty metropolitan areas having the highest concentration of carbon monoxide pollution implement an oxygenated gasoline program (specifying a minimum oxygen content of 2.7%) during the portion of the year, generally the winter months, when maximum allowable carbon monoxide pollution levels are most likely to be exceeded. In 1995, the second phase of the Clean Air Act Amendments will require the year- round use of reformulated gasoline (with a minimum of 2% oxygen) in the nine metropolitan areas having the highest concentration of ozone pollution throughout the year and in any non-attainment area in a state whose Governor elects to enter the reformulated gasoline program. To date, the areas in which reformulated gasoline will be required to be sold beginning in 1995 represent approximately 35% of total U.S. gasoline demand. Future demand for MTBE (and therefore methanol) will depend on, among other things, the degree to which the Clean Air Act Amendments are implemented and enforced, the possible adoption of additional legislation, the willingness of the regulatory authorities to grant waivers for specific cities or regions, the difficulties in isolating non-attainment areas from attainment areas and the demand for oxygenated or reformulated gasolines in areas where its use is not required. Certain of the areas subject to the Clean Air Act Amendments have already requested waivers from the United States Environmental Protection Agency (the "EPA") alleging either conflicts with other pollution control requirements or that they are no longer non-attainment areas. Representatives of such areas are in discussions with the EPA with respect to these matters. Currently, MTBE is the oxygenate most used by the U.S. refining industry. However, there are alternative oxygenates, principally ethanol, ethyl tertiary butyl ether, an ethanol derivative, and tertiary amyl methyl ether, a methanol derivative. Recently, the EPA mandated that, in 1995, at least 15% of reformulated gasoline use an oxygenating additive made from a renewable source, which for all practical purposes is ethanol, and that such percentage increase to 30% in 1996. This mandate, however, has been temporarily stayed by a U.S. Circuit Court of Appeals pending the outcome of legal challenges. Although the Company expects there will be a continued market preference for MTBE, there can be no assurance that MTBE will not be replaced by alternative oxygenates as a result of price or regulatory changes. COMPETITION Nitrogen fertilizer is a global commodity, and customers, including end- users, dealers and other fertilizer producers and distributors, base their purchasing decisions principally on the delivered price of the product. The Company competes with a number of U.S. producers, and producers in other countries, including state-owned and government-subsidized entities. Some of the Company's principal competitors may have greater total resources and may be less dependent on earnings from nitrogen fertilizer sales than the Company. Some foreign competitors may have access to lower cost or government- subsidized natural gas supplies. The Company believes that it competes with other manufacturers of nitrogen fertilizer on the basis of delivery terms and availability of products as well as on price. The market for the fertilizer, crop protection products and seed distributed by the Company is highly competitive. In 1993, sales attributable to the Company's farm service centers accounted for less than 10% of total crop production products sold in the U. S. Within the specific market areas served by its farm service centers, however, the Company's share of the market was substantially higher in most instances. The Company's competitors include cooperatives, divisions of diversified agribusiness companies, regional distributors and independent dealers, some of which have substantially greater financial and other resources than the Company. The Company competes primarily by providing a comprehensive line of products and by providing what the Company believes to be superior services to growers and dealers. 13 The methanol industry, like the fertilizer industry, is highly competitive and such competition is based largely on price, reliability and deliverability. The relative cost and availability of natural gas and the efficiency of production facilities are important competitive factors. Significant determinants of a plant's competitive position are the natural gas acquisition and transportation contracts that a plant negotiates with its major suppliers. Domestic competitors for methanol include a number of large integrated petrochemical producers, many of which are better capitalized than the Company. In addition, the production and trade of methanol has become increasingly global, and a number of foreign competitors produce methanol primarily for the export market. See "Factors Affecting Demand for Methanol and MTBE" and "Business--Competition." DAMAGE TO FACILITIES; NATURAL HAZARDS The operations of the Company may be subject to significant interruption if one or more of its facilities were to experience a major accident or were damaged by severe weather or other natural disaster. However, the Company currently maintains, and expects that it will, to the extent economically feasible, continue to maintain, insurance (including business interruption insurance) in an amount which the Company believes is sufficient to allow the Company to withstand major damage to any of its facilities. ENVIRONMENTAL REGULATION The Company's and AMCI's business activities are subject to stringent environmental regulation by federal, provincial, state and local governmental authorities. The Company and AMCI are also involved in the manufacture, handling, transportation and storage of materials that are or may be classified as hazardous or toxic by Federal, state, provincial or other regulatory agencies. If such materials have been or are disposed at sites that are targeted for cleanup by federal or state regulatory authorities, the Company or AMCI (or subsidiaries thereof), as applicable, may be among those responsible under such laws for all or part of the costs of such cleanup. Each of the Company and AMCI has been designated as a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act of 1976, as amended ("CERCLA"), and analogous state laws with respect to one or more sites. There can be no assurance that existing environmental regulations will not be revised or that new regulations will not be adopted or become applicable so as to have a material and adverse affect on the Company's business or financial condition. See "Business--Environmental and Other Regulatory Matters." The Company endeavors to comply (and has incurred substantial costs in connection with such compliance) in all material respects with applicable environmental, safety and health regulations. The Company does not expect its continued operation in compliance with such regulations (including operation of the businesses acquired from AMCI) to have a material adverse effect on its earnings or competitive position. THE ACQUISITION OVERVIEW On August 8, 1994, the Company agreed to acquire AMCI pursuant to the Merger Agreement between the Company, AMCI and Merger Sub. The Company will finance the Acquisition, in part, through the net proceeds of this offering. THE MERGER AGREEMENT The Merger. Pursuant to the Merger Agreement, subject to the terms and conditions described therein, Merger Sub will merge with and into AMCI (the "Merger"). At the effective time of the Merger (the "Effective Time"), (i) AMCI will become a wholly-owned subsidiary of the Company and the separate corporate existence of Merger Sub will cease, (ii) each share of AMCI common stock outstanding immediately prior to the Effective Time (other than those held in the treasury of AMCI or owned by a subsidiary of AMCI and those with respect to which dissenters rights have been perfected, if any) will be converted into the right to receive $21.2066 in cash and (iii) each share of AMCI common stock subject to a stock option outstanding immediately prior to the Effective Time will be cancelled and converted into 14 the right to receive $10.4765 in cash (calculated as $21.2066 less the exercise price of $10.73 per share under each such option). Assuming no dissenting shares, the aggregate consideration payable in the Merger with respect to all such shares and options will be approximately $400 million. The aggregate purchase price payable in the Merger is subject to adjustment based on the working capital of AMCI at the Effective Time as described below. Immediately following the Effective Time, AMCI will be merged into the Company and the separate corporate existence of AMCI will cease. Adjustment to the Merger Consideration. Pursuant to the Merger Agreement, AMCI will be required to deliver to the Company a good faith estimate (the "Estimate") of AMCI's Consolidated Working Capital (as defined) as of the Effective Time prior to the closing of the Merger. In the event that such estimate exceeds $86 million, AMCI shall pay to MSLEF II, on behalf of the stockholders of AMCI (in such capacity, the "Sellers' Representative") an amount equal to such excess. Such payment shall generally be made at the Effective Time. In the event that the Estimate is less than $86 million, the Sellers' Representative shall pay to AMCI such deficit at the Effective Time. The Merger Agreement does not include a restriction on the ability of AMCI to pay dividends. Thus, subject to such Consolidated Working Capital requirement and the closing condition requiring a minimum level of cash as described below, cash generated from the operation of AMCI through the closing of the Merger will be for the benefit of the stockholders of AMCI. Within 60 days following the Effective Time, the Sellers' Representative shall be required to deliver to the Company a statement of the Consolidated Working Capital of AMCI as of the Effective Time. After review by the Company and resolution of any disputes pursuant to the procedures set forth in the Merger Agreement, if the Consolidated Working Capital as finally determined is less than the Estimate, the Sellers' Representative shall be required to pay to the Company an amount equal to such deficit and if such Consolidated Working Capital exceeds the Estimate, the Company shall be required to pay to the Sellers' Representative an amount equal to such excess. Any amounts payable after the Effective Time will be paid together with interest from the Effective Time. "Consolidated Working Capital" is defined to mean the excess of the consolidated current assets of AMCI over the consolidated current liabilities of AMCI, calculated in accordance with AMCI's accounting policies. For purposes of calculating Consolidated Working Capital, (i) all fees and expenses of financial, accounting, legal and other advisors to AMCI relating to services in respect of the Merger billed or to be billed to AMCI and remaining unpaid at the Effective Time will be deemed to be consolidated current liabilities and (ii) all amounts expended by AMCI to purchase directors' and officers' liability insurance to cover its directors and officers for two years after the consummation of the Merger will be deemed to be a current receivable from the Company. Conditions to the Merger. The obligations of the Company and AMCI to consummate the Merger are subject to the satisfaction or waiver at or prior to the Effective Time of a number of conditions, including that (i) the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or been terminated (which condition has been satisfied); (ii) no antitrust action or proceeding shall be pending against the Company or AMCI to restrain, prohibit or invalidate the Merger or that could reasonably be expected, if adversely determined, to materially adversely affect the ability of the Company or AMCI to own or operate any of the three principal facilities of either the Company or AMCI after the Effective Time; (iii) no statute, rule, injunction or other order (whether temporary, preliminary or permanent) shall be in effect which makes the Merger illegal or otherwise prohibits consummation of the Merger; (iv) no lawsuits or other litigation or proceedings shall be pending against AMCI or any of its subsidiaries that, individually or in the aggregate, could reasonably be expected, if adversely determined, to have a material adverse effect on AMCI and its subsidiaries, considered as a whole; (v) the Methanol Hedging Agreement (as defined below) shall have been executed by the parties thereto; and (vi) the representations and warranties made by the other party in the Merger Agreement shall be true and the other party shall have complied with its covenants in the Merger Agreement. 15 The obligation of the Company to effect the Merger is further conditioned on, among other things, (i) dissenters' rights under Delaware law shall not have been perfected with respect to more than 5% of AMCI's common stock; (ii) there shall not have occurred any physical damage, destruction or catastrophic loss to any of the physical assets (including software) of AMCI and its subsidiaries that could, individually or in the aggregate, reasonably be expected to have a material adverse effect on AMCI and its subsidiaries, considered as a whole; (iii) there shall not have been any emissions, discharges, spills or releases, or any use, treatment, storage, disposal, handling, manufacture, transportation or shipment, of any substance by AMCI or any of its subsidiaries which could reasonably be expected to give rise to liabilities, claims or costs pursuant to environmental and safety requirements, and AMCI shall not have received any written notice from any regulatory agency asserting any claim or requiring any investigatory or remedial action under applicable environmental and safety requirements, that, in either case, individually or in the aggregate, could reasonably be expected to have a material adverse effect on AMCI and its subsidiaries, considered as a whole; (iv) Robert B. Gwyn and Harvey E. O'Neill, AMCI's President and CEO and Senior Vice President--Marketing, respectively, shall have executed and delivered agreements with respect to confidentiality and non-solicitation of AMCI employees in the form attached to the Merger Agreement; (v) the aggregate amount of cash and cash equivalents of AMCI and its subsidiaries (other than AMCLP and AMLP) shall be at least $36 million. If the offering described herein is consummated, no further approvals of the Merger or the Merger Agreement are required from the stockholders of the Company or the stockholders of AMCI. See "The Put Option." THE PUT OPTION The Company is offering the Common Shares as described herein in lieu of exercising its rights under the Put Option Agreement between the Company and Minorco USA, pursuant to which Minorco USA granted to the Company the right to sell to Minorco USA and cause Minorco USA to purchase 13,333,333 Common Shares, at a purchase price of $7.50 per Common Share, payable in cash, for aggregate proceeds to the Company of $100 million. Under applicable rules of the New York Stock Exchange (the "NYSE"), the Company's issuance of Common Shares upon exercise of its rights under the Put Option Agreement must be approved by an affirmative majority vote of stockholders. If this offering is consummated, the Company will not exercise its rights under the Put Option Agreement. THE METHANOL HEDGING AGREEMENT As described above, the obligations of the parties to the Merger Agreement to consummate the Merger are conditioned upon the execution at the closing of the Merger of a methanol hedging agreement (the "Methanol Hedging Agreement") between BMC and MSLEF II, as agent (in such capacity, the "Counterparty"). Pursuant to the Methanol Hedging Agreement, the Counterparty will pay to BMC $4.0 million in cash concurrently with the execution and delivery of the Methanol Hedging Agreement. In consideration of this payment, BMC will be obligated, subject to the occurrence of certain events of force majeure, to make payments to the Counterparty for the period from the closing of the Merger to December 31, 1995, calendar year 1996 and calendar year 1997 in an amount equal to the product of: (1) the excess, if any, over $0.65 per gallon of the remainder of (a) the yearly average of the midpoint of the high and low transaction prices for domestic barge methanol contracts in cents per gallon for each month during such period over (b) 0.113 times the average spot price index (large packages only), in cents per MMBtu, for natural gas, multiplied by (2) a number of gallons equal to (i) for the period through December 31, 1995, 10.833 million multiplied by the number of whole months and fraction thereof during such period; (ii) for calendar 1996, 140 million; and (iii) for calendar 1997, 130 million. BMC's methanol production facility in Beaumont, Texas has a production capability of approximately 280 million gallons of methanol per year. 16 The Company expects that BMC will be required to make payments to the Counterparty under the Methanol Hedging Agreement only if methanol prices increase relative to natural gas prices as compared to historical price levels. The Company expects that, through BMC's Beaumont facility and the Company's other methanol production capabilities, it will be benefiting from such market price movements at any time at which it is required to make payments under the Methanol Hedging Agreement. As a result of making such payments, BMC will not benefit fully from increases in the price of methanol during the term of the Methanol Hedging Agreement. The following table sets forth a calculation of the payment, if any, that would be due under the Methanol Hedging Agreement for any year based on the applicable price for methanol being equal to (i) $0.51 per gallon, the price calculated over the 12 months ended June 30, 1994, and (ii) $0.98 per gallon, the price calculated for the month of August 1994. In both examples, the assumed quantity of methanol is 140 million gallons and the applicable price for natural gas is equal to the price calculated over the 12 months ended June 30, 1994. Assumed methanol price............................... $0.51 $0.98 Natural gas price times .113......................... 0.24 0.24 ----- ------------- Remainder.......................................... 0.27 0.74 Threshold price...................................... 0.65 0.65 ----- ------------- Excess............................................. None $0.09 Assumed hedge quantity (gallons)..................... 140 million ------------- Payment by BMC..................................... $12.6 million =============
Methanol prices are volatile. There can be no assurances as to the actual prices of methanol and natural gas during the term of the Methanol Hedging Agreement. THE REFINANCING The Company will apply the net proceeds of this offering, available cash of the Company and AMCI and their subsidiaries and funds borrowed by the Company and such subsidiaries under the Credit Agreement to be entered into in connection with the Acquisition to (a) the payment of the Acquisition consideration to the holders of AMCI common stock and stock options, (b) the retirement of bank loans to Terra International under a 1992 revolving credit agreement, of which there were approximately $56 million outstanding on June 30, 1994, (c) the retirement of an additional $40 million in bank loans of the Company and its subsidiaries, (d) the retirement of a $35 million term loan, a $20 million term loan and a $50 million revolving credit facility of AMCI's subsidiaries and (e) the payment of fees and expenses related to the Acquisition and the Refinancing. In addition, as a result of the merger of AMCI into the Company, the Company will assume AMCI's obligations under $175 million in aggregate principal amount of the Senior Notes. The indenture governing the Senior Notes provides that holders may require repurchase of the Senior Notes at a price equal to 101% of their principal amount plus accrued interest under certain circumstances, including the Merger. The Company will have available under the Credit Agreement funds to make any repurchase payments so required. The Credit Agreement will also include working capital facilities for the Company and its subsidiaries. After consummation of the Acquisition and the Refinancing, the primary obligor with respect to the Credit Agreement will be Terra Capital, a new subsidiary of the Company to which the capital stock of Terra International, AMC and BMCH will be contributed. Terra Capital will be wholly-owned by Terra Holdings, another new subsidiary of the Company, and Terra Holdings will be wholly-owned by the Company. See "Summary--Post-Acquisition Company Structure." Also, Terra International, which is currently the Company's principal operating subsidiary, and one of its subsidiaries, Terra Canada, will continue to have other obligations outstanding. Capitalized leases of the Operating Partnership will also 17 continue after the closing of the Acquisition and the Refinancing. See also "Capitalization," "Liquidity and Capital Resources After the Acquisition and the Refinancing" and "Description of Certain Indebtedness and Other Obligations." USE OF PROCEEDS The Company estimates the net proceeds of this offering to be approximately $105.7 million (approximately $112.9 million if the Underwriters' over- allotment option is exercised in full), assuming an Offering price to the public of $11.50 per Common Share. The Company intends to use such net proceeds to finance, in part, the Acquisition. See "The Acquisition" and "The Refinancing." PRICE RANGE OF COMMON SHARES AND DIVIDEND INFORMATION The Common Shares are listed on the NYSE and the Toronto Stock Exchange under the symbol "TRA". On October 7, 1994, the last reported sale price of the Common Shares as reported on the New York Stock Exchange Composite Tape was $11.50 per share. Potential investors are encouraged to obtain current trading price information. On September 30, 1994, the Common Shares were held by 5,721 stockholders of record. The following table sets forth the range of high and low sales prices for the Common Shares on the NYSE Composite Tape and the amount of dividends declared for the periods indicated.
DIVIDENDS DECLARED PER COMMON HIGH LOW SHARE ------ ------ ------------------ 1992 First quarter................................ $ 6 $4 3/8 $ -- Second quarter............................... 5 7/8 5 -- Third quarter................................ 6 3/4 4 1/2 -- Fourth quarter............................... 5 1/4 4 1/4 -- 1993 First quarter................................ $4 7/8 $3 7/8 $ -- Second quarter............................... 4 1/4 3 1/2 -- Third quarter................................ 5 3 5/8 -- Fourth quarter............................... 7 7/8 4 1/2 0.02 1994 First quarter................................ $8 3/4 $6 1/4 $0.02 Second quarter............................... 8 1/4 6 5/8 0.02 Third quarter................................ 13 1/8 5 7/8 0.02 Fourth quarter (through October 7, 1994)..... 13 11 1/4 --
While the Company intends to continue to pay regular cash dividends on its Common Shares in the future, the decision to do so will be made quarterly by its Board of Directors based upon the Company's earnings, financial position, capital requirements and prospects and such other factors as the Board of Directors deems relevant. The Company's ability to pay cash dividends will be affected by the covenants and other terms of the financing agreements of the Company and its subsidiaries, including the Credit Agreement and the indenture under which the Senior Notes were issued. As a holding company, the Company's ability to pay dividends will depend on its receipt of funds from its subsidiaries which, in turn, will be affected by the Credit Agreement and other obligations of such subsidiaries. See "Description of Certain Indebtedness and Other Obligations," "Liquidity and Capital Resources After the Acquisition and the Refinancing" and "Investment Considerations--Holding Company Structure and AMCLP" and "--Leverage." 18 CAPITALIZATION Set forth below is the capitalization and short-term debt of the Company at June 30, 1994, and as adjusted to reflect the Acquisition, this offering, the merger of AMCI into the Company and the Refinancing. This table should be read in conjunction with the consolidated financial statements of the Company and the related notes and other financial information included or incorporated by reference herein.
AT JUNE 30, 1994 ---------------------- (UNAUDITED) ACTUAL AS ADJUSTED --------- ----------- (IN THOUSANDS) Short-term debt: Borrowings under revolving credit agreements (a)...... $ 67,320 $ 67,320 Bank loans............................................ 40,000 -- Current maturities of long-term debt.................. 2,351 46,150 --------- ---------- Total short-term debt............................... $ 109,671 $ 113,470 ========= ========== Long-term debt (excluding current maturities): 10 3/4% Senior Notes Due 2003 (b)..................... $ -- $ 175,000 Operating Partnership term loan (a)................... -- 35,000 Operating Partnership capitalized lease obligations due 2000............................................. -- 5,659 New senior secured term loans (a)(c).................. -- 267,571 Other long-term debt.................................. 45,782 45,782 --------- ---------- Total long-term debt (excluding current maturities)... 45,782 529,012 --------- ---------- Minority interest....................................... -- 155,645 --------- ---------- Common stockholders' equity: Common Shares, 114,375,000 authorized, 70,553,045 (80,253,045 as adjusted) outstanding (d)(e)(f)....... 123,550 133,250 Paid-in capital....................................... 523,915 619,915 Cumulative translation adjustment..................... (795) (795) Accumulated deficit................................... (358,714) (360,454) --------- ---------- Total stockholders' equity.......................... 287,956 391,916 --------- ---------- Total capitalization.............................. $ 333,738 $1,076,573 ========= ==========
- -------- (a) Adjusted amount reflects borrowings under the Credit Agreement. See "Description of Certain Indebtedness and Other Obligations." (b) As a result of the merger of AMCI into the Company, the Company will assume AMCI's obligations under the Senior Notes. The indenture governing the Senior Notes provides that holders may require repurchase of the Senior Notes at a price equal to 101% of their principal amount plus accrued interest under certain circumstances, including upon consummation of the Merger. The Company will have available as part of the Refinancing funds to make any repurchase payments so required. (c) Included in this amount is the refinancing of $40 million of short-term debt. (d) Does not include 1,663,600 Common Shares subject to outstanding stock options as of June 30, 1994, of which options with respect to 1,256,550 Common Shares were outstanding as of September 30, 1994. (e) Adjusted amount reflects the sale of 9,700,000 Common Shares in this offering at an assumed price of $11.50 per share (for aggregate net proceeds of $105.7 million). (f) Does not include 19,125,000 authorized but unissued Class A Shares, without par value, which were reclassified into an equal number of Common Shares in connection with the offering. 19 PRO FORMA COMBINED FINANCIAL STATEMENTS OF THE COMPANY The pro forma combined financial statements of the Company have been prepared to give effect to (1) the Acquisition, (2) the Refinancing, (3) the sale of 9,700,000 Common Shares in this offering at an assumed price to the public of $11.50 per share (for aggregate net proceeds of $105.7 million), (4) the purchase of assets from Asgrow Florida Company ("Asgrow") on December 31, 1993 by the Company's Florida operations ("Terra Asgrow Florida"), and (5) the acquisition, effective March 31, 1993, of certain assets of ICI Canada Inc. ("ICI Canada") by Terra Canada. These pro forma combined financial statements have been derived from, and should be read in conjunction with, the historical financial statements and related notes of the Company and AMCI incorporated by reference and/or included herein. The Pro Forma Combined Statement of Financial Position assumes that the Acquisition, the Refinancing and this offering occurred as of June 30, 1994. The Pro Forma Combined Statements of Income assume that all such transactions occurred on January 1, 1993. The pro forma adjustments are based on available financial information and certain estimates and assumptions. Therefore, it is likely that actual results will differ from the pro forma adjustments. Management of the Company believes that any differences between the actual results and the pro forma adjustments will not have a material effect on the pro forma combined financial statements as presented herein. THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL DATA ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY AND ARE NOT NECESSARILY INDICATIVE OF THE RESULTS THAT ACTUALLY WOULD HAVE OCCURRED HAD THE ACQUISITION, THE REFINANCING AND THIS OFFERING BEEN CONSUMMATED ON THE DATES INDICATED OR THE RESULTS THAT MAY OCCUR OR BE OBTAINED IN THE FUTURE. 20 TERRA INDUSTRIES INC. PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION JUNE 30, 1994 (IN THOUSANDS)
THE PRO FORMA COMPANY AMCI ADJUSTMENTS PRO FORMA -------- -------- ----------- ---------- ASSETS Cash and short-term investments................... $ 40,520 $ 88,718 $(67,613)(a) $ 61,625 Accounts receivable, net....... 352,464 41,866 -- 394,330 Inventories.................... 268,357 25,382 -- 293,739 Deferred tax asset--current.... 27,338 -- -- 27,338 Other current assets........... 25,459 15,673 (10,086)(b) 31,046 -------- -------- -------- ---------- Total current assets....... 714,138 171,639 (77,699) 808,078 -------- -------- -------- ---------- Property, plant and equipment, net........................... 124,786 319,383 106,450 (b) 550,619 Deferred tax asset--non- current....................... 5,772 -- -- 5,772 Net assets of discontinued operations.................... 3,522 -- -- 3,522 Excess of purchase price over net assets acquired........... -- -- 317,170 (b) 317,170 Distribution reserve fund...... -- 18,480 -- 18,480 Other assets................... 28,677 21,303 (3,206)(d) 46,774 -------- -------- -------- ---------- Total assets............... $876,895 $530,805 $342,715 $1,750,415 ======== ======== ======== ========== LIABILITIES Debt due within one year....... $109,671 $ 1,370 $ 2,429 (a) $ 113,470 Accounts payable............... 293,361 28,531 -- 321,892 Accrued and other liabilities.. 105,270 24,625 7,075 (b) 136,970 -------- -------- -------- ---------- Total current liabilities.. 508,302 54,526 9,504 572,332 -------- -------- -------- ---------- Long-term debt................. 45,782 215,659 267,571 (a) 529,012 Deferred income taxes.......... 2,383 25,231 31,860 (b)(d) 59,474 Other liabilities.............. 32,472 4,179 5,385 (a)(b) 42,036 Minority interest.............. -- 161,798 (6,153)(b) 155,645 Common stock and options with liquidity rights.............. -- 4,347 (4,347)(b) -- -------- -------- -------- ---------- Total liabilities.......... 588,939 465,740 303,820 1,358,499 -------- -------- -------- ---------- STOCKHOLDERS' EQUITY Capital stock.................. 123,550 172 9,528 (c) 133,250 Paid-in capital................ 523,915 40,472 55,528 (c) 619,915 Cumulative translation adjustment.................... (795) -- -- (795) Accumulated deficit............ (358,714) 24,421 (26,161)(c)(d) (360,454) -------- -------- -------- ---------- Total stockholders' equity. 287,956 65,065 38,895 391,916 -------- -------- -------- ---------- Total liabilities and stockholders' equity...... $876,895 $530,805 $342,715 $1,750,415 ======== ======== ======== ==========
See accompanying Notes to the Pro Forma Combined Financial Statements. 21 TERRA INDUSTRIES INC. PRO FORMA COMBINED STATEMENT OF INCOME SIX MONTHS ENDED JUNE 30, 1994 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THE PRO FORMA COMPANY AMCI ADJUSTMENTS PRO FORMA ---------- -------- ----------- ---------- REVENUES Net sales...................... $1,059,475 $231,552 $ -- $1,291,027 Other income, net.............. 18,281 324 -- 18,605 ---------- -------- -------- ---------- Total.......................... 1,077,756 231,876 -- 1,309,632 ---------- -------- -------- ---------- COST AND EXPENSES Cost of sales.................. 897,685 137,005 -- 1,034,690 Selling, general and administrative expense........ 100,172 13,104 (1,858)(e) 111,418 Depreciation and amortization.. 9,060 14,269 7,555 (f) 30,884 Equity in earnings of affiliates.................... (36) (402) -- (438) Interest income................ (1,983) (1,971) 1,223 (g) (2,731) Interest expense............... 5,841 12,622 10,270 (h) 28,733 ---------- -------- -------- ---------- Total.......................... 1,010,739 174,627 17,190 1,202,556 ---------- -------- -------- ---------- Income before minority interest, income taxes and extraordinary item............ 67,017 57,249 (17,190) 107,076 Minority interest.............. -- (15,526) -- (15,526) ---------- -------- -------- ---------- Income before income taxes and extraordinary item............ 67,017 41,723 (17,190) 91,550 Income tax provision........... 25,400 14,898 (3,447)(o) 36,851 ---------- -------- -------- ---------- INCOME BEFORE EXTRAORDINARY ITEM.......................... $ 41,617 $ 26,825 $(13,743) $ 54,699 ========== ======== ======== ========== Weighted average shares outstanding................... 70,336 9,700 80,036 ========== ======== ========== Income per share before extraordinary item............ $ 0.59 $ 0.68 ========== ==========
See accompanying Notes to the Pro Forma Combined Financial Statements. 22 TERRA INDUSTRIES INC. PRO FORMA COMBINED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1993 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
TERRA PRO FORMA THE ASGROW PRO FORMA TERRA PRO FORMA COMPANY FLORIDA ADJUSTMENTS CANADA AMCI ADJUSTMENTS PRO FORMA ---------- ------- ----------- --------- -------- ----------- ---------- REVENUES Net sales............... $1,212,510 $90,607 $(3,644) $24,565 $365,436 $ -- $1,689,474 Other income, net....... 25,491 1,470 (637) 140 394 -- 26,858 ---------- ------- ------- ------- -------- -------- ---------- Total................... 1,238,001 92,077 (4,281)(i) 24,705 365,830 -- 1,716,332 COST AND EXPENSES Cost of sales........... 1,021,187 74,108 (357)(i)(j) 19,775(n) 257,448 -- 1,372,161 Selling, general and administrative......... 161,791 9,815 (2,347)(i)(k) 1,965 30,531 (10,556)(e) 191,199 Depreciation and amortization........... 15,470 573 782 (i)(l) 77(n) 26,876 15,952 (f) 59,730 Equity in earnings of affiliates............. (2,275) -- -- 1,242(n) (1,018) -- (2,051) Interest income......... (3,261) -- 1,418 (m) -- (1,820) 2,468(g) (1,195) Interest expense........ 12,944 15 -- 300 17,759 14,832(h) 45,850 ---------- ------- ------- ------- -------- -------- ---------- Total................... 1,205,856 84,511 (504) 23,359 329,776 22,696 1,665,694 ---------- ------- ------- ------- -------- -------- ---------- Income before minority interest and income taxes.................. 32,145 7,566 (3,777) 1,346 36,054 (22,696) 50,638 Minority interest....... -- -- -- -- (19,789) -- (19,789) ---------- ------- ------- ------- -------- -------- ---------- Income before income taxes and extraordinary item................... 32,145 7,566 (3,777) 1,346 16,265 (22,696) 30,849 Income tax provision.... 9,300 2,924 (1,450)(o) 1,006 7,721 (2,221)(o) 17,280 ---------- ------- ------- ------- -------- -------- ---------- INCOME BEFORE EXTRAORDINARY ITEMS.... $ 22,845 $ 4,642 $(2,327) $ 340 $ 8,544 $(20,475) $ 13,569 ========== ======= ======= ======= ======== ======== ========== Weighted average shares outstanding............ 69,064 9,700 78,764 ========== ======== ========== Income per share before extraordinary item..... $ 0.33 $ 0.17 ========== ==========
See accompanying Notes to the Pro Forma Combined Financial Statements. 23 The pro forma adjustments necessary to present the combined financial position are as follows: (a) The adjustment to cash and short-term investments is determined as follows (in thousands): Issuance of long-term debt...................................... $ 310,000 Refinance short- to long-term debt.............................. (40,000) Proceeds from sale of stock (Note (c)).......................... 105,700 Proceeds from sale of call under Methanol Hedging Agreement..... 4,000 Payment of finance fees--other assets........................... (11,200) Payment of purchase price and working capital adjustment........ (431,113) Payment of Acquisition related costs............................ (5,000) --------- Net cash adjustment............................................. $ (67,613) =========
Bank loans totaling $40 million used by the Company to repurchase its convertible subordinated debentures in March 1994 will be repaid with borrowings under the Credit Agreement. The proceeds from the sale of the call under the Methanol Hedging Agreement were recorded as a long-term deferred credit. In the event that BMC is required to make payments under this agreement, the first $4 million in payments will be charged against the long-term deferred credit. The liability, if any, of BMC under this agreement over $4 million will be expensed in the period to which such payment relates, which will also be the period in which the Company realizes increased gross profit on methanol sales. (b) Adjustments to the net assets of AMCI to reflect fair values under purchase accounting are as follows (in thousands): Equity purchase price of $400,000............................. $400,000 Working capital adjustment as of June 30, 1994 based on actual working capital of $117,113............... $(31,113) AMCI net assets at June 30, 1994..................... 65,065 Adjustments to conform AMCI's accounting for plant turnaround costs to that used by the Company: Other current assets............................... (10,086) Other assets....................................... (3,994) Accrued liabilities ............................... (7,075) Write-up of property, plant & equipment to fair value............................................... 106,450 Fair value adjustment to AMCI Senior Notes........... (7,512) Record liability for underfunded pension plan........ (1,385) Minority interest in purchase accounting adjustments. 6,153 Adjust accrual for common stock and options with liquidity rights.................................... 4,347 Record payment of merger related costs............... (5,000) Provide deferred income taxes on basis differences... (33,020) -------- Total............................................... 82,830 (82,830) -------- -------- Excess of purchase price over net assets acquired.... $317,170 ========
The adjustment for plant turnaround costs is to conform AMCI's accounting policy of capitalizing costs related to the periodic scheduled maintenance of production facilities and amortization of such costs over generally two years to the Company's policy of accruing for such costs over the two-year period preceding the next scheduled maintenance of the production facilities. The adjustment for the accrual for common stock and options with liquidity rights is to reflect the fact that the Company will settle all such outstanding stock and options for cash as part of the Acquisition, and AMCI will no longer be obligated to redeem such stock or options. (c) The pro forma adjustment reflects the elimination of the AMCI equity accounts and the issuance of 9,700,000 Common Shares in this offering for aggregate net proceeds of $105.7 million. 24 (d) The pro forma adjustment reflects the following (in thousands): Fair value adjustments to the Senior Notes of AMCI............... $(7,512)
Payment of finance fees for new financing........................ 11,200 Adjustment of other assets to conform accounting methods......... (3,994) Write-off of deferred finance fees related to refinanced credit lines............................................................. (2,900) ------- $(3,206) =======
The write-off of $2.9 million of deferred finance fees related to the refinancing of credit lines, less the income tax benefit of $1.2 million, resulted in a net charge to retained earnings of $1.7 million. The pro forma adjustments necessary to present the results of operations for the six months ended June 30, 1994 and the year ended December 31, 1993 are as follows: (e) Reduce AMCI executive incentive plan expense that will not exist after the Merger totaling approximately $1.2 million in 1994 and $10.6 million in 1993 and defer $0.7 million of AMCI acquisition related costs expensed in the second quarter of 1994. (f) Amortization of excess purchase price over net assets acquired net of reduced depreciation expense on assets acquired of $7.6 million in 1994 and $16 million in 1993 based on an extended 18.5 year useful life for assets acquired. (g) Reduce interest income by $1.2 million in 1994 and $2.5 million in 1993 for cash utilized in purchase. (h) Increase interest expense $10.3 million in 1994 and $14.8 million in 1993, net of adjusted amortization of loan finance fees. The pro forma combined interest expense for new long-term debt is based upon an assumed blend of 50% variable and 50% fixed interest rates on $270 million of debt. The blended interest rate assumed for 1993 was 7.3% and for 1994 was 7.8%. These are added to the historical interest expense of the Company and AMCI. (i) Certain operations of Asgrow, principally a retail location in southern Georgia and the seed distribution business to vegetable markets in North Carolina, were not acquired. Revenues, costs of sales, selling expenses and depreciation are reduced $4.3 million, $2.3 million, $0.5 million and $0.1 million respectively, to reflect operations not acquired. Pro forma adjustments do not include expense recognition for $2.9 million ($1.7 million net of income taxes) of deferred finance fees that would have been incurred as a result of refinancing certain AMCI credit lines in connection with the Acquisition. These nonrecurring charges have not been included because they will result from the Acquisition and will not affect recurring future operations. (j) Asgrow had purchased proprietary seed from Asgrow Seed Company ("Asgrow Seed") at Asgrow Seed's cost. Terra Asgrow Florida will purchase seed from Asgrow Seed at prices that represent wholesale market value. The increase in seed purchase costs is estimated to increase pro forma cost of sales by $1.9 million. (k) Asgrow was charged a total of $1.8 million by its parent for allocations of research and development costs and general administrative services. These expenses will not continue. (l) The acquisition price included approximately $13 million of unassigned cost which will be charged against operations $0.9 million per year for 15 years. (m) Interest income is reduced to reflect use of available cash to fund the purchase from Asgrow. (n) Terra Canada depreciation expense of $0.9 million for the three months ended March 31, 1993 is eliminated and replaced with lease expense computed from $3.3 million annual lease payments and amortization of lease finance costs. In addition, as a condition of the acquisition, certain employees were terminated subject to varying transition periods averaging six months. Pro forma costs of sales is reduced for the full effect of workforce reductions resulting in cost savings of $0.3 million for the three months ended March 31, 1993. (o) Income taxes are provided at an assumed rate of 40% for pro forma adjustments. No reduction in tax expense will result from charges related to amortization of excess purchase price over net assets acquired. 25 LIQUIDITY AND CAPITAL RESOURCES AFTER THE ACQUISITION AND THE REFINANCING The Company's primary uses for cash after the Acquisition and the Refinancing will be to fund its working capital needs, make payments on its indebtedness and other obligations, make quarterly distributions on AMCLP's Senior Preference Units and make capital expenditures. Its principal sources of funds will be cash flow from operations and borrowings under the Credit Agreement. See "Pro Forma Combined Financial Statements of the Company." The Company's working capital requirements will be greater with the addition of AMCI's businesses and will continue to be seasonal. Net cash used by operating activities of the Company was $1 million and $17.8 million, respectively, for the year ended December 31, 1993 and the six months ended June 30, 1994, and net cash provided by operations for AMCI was $65.9 million and $66.3 million, respectively for the same periods. The fertilizer business is highly seasonal and volatile due to a number of factors. The Company's greatest need for working capital generally occurs in the spring and fall months, as the inventory built by the Company during the summer and winter months is converted into receivables from customers, but not yet collected. The Company's lowest working capital need occurs in the summer, as receivables are collected. See "Business--Seasonality and Volatility." Because of the increase in the Company's indebtedness and other obligations resulting from the Acquisition, the Company's need for cash to service such obligations, as well as quarterly distributions on AMCLP's Senior Preference Units, will substantially increase. On a pro forma basis, for the year ended December 31, 1993, the Company's interest expense was $45.9 million, compared with actual interest expense of $12.9 million for the Company and $17.8 million for AMCI (and AMCLP paid $18.5 million on the Senior Preference Units in quarterly distributions in such year.) See "Description of Certain Indebtedness and Other Obligations--AMCLP Senior Preference Units and Other Obligations." The Company intends to continue to make capital expenditures after the Acquisition to maintain the operating efficiency of its manufacturing facilities. Capital expenditures for the combined businesses are currently estimated to be approximately $30 million in 1994 and 1995. Combined capital expenditures of the Company and AMCI were $27.5 million in 1992 and $28.6 million in 1993. In addition to operating cash flows, the Company will fund its working capital needs through the Credit Agreement, which permits revolving borrowings of up to $175 million and an additional $50 million in revolving borrowings by AMLP, and Terra Canada's revolving credit agreement, which permits borrowings of up to $35 million (Cdn.), in each case subject to compliance with various financial ratios and other covenants. The Company will also utilize borrowings under the Credit Agreement to pay for any Senior Notes which the Company is required to repurchase. See "Description of Certain Indebtedness and Other Obligations." Depending on market and other conditions, the Company may issue debt or equity securities, including preferred stock and securities convertible into Common Shares, in public or private offerings in the future in order to repay portions of its indebtedness under the Credit Agreement. The Company's leverage after the Acquisition and Refinancing may restrict the Company's ability to take various actions and respond to circumstances in the future. See "Investment Considerations-- Leverage." The Company believes, however, that cash from operations and available financing sources will be sufficient to meet its cash requirements for the next several years. BUSINESS GENERAL The Company is a leading producer of nitrogen fertilizer and marketer of fertilizer, crop protection products and seed. After giving effect to the Acquisition, the Company will be the third largest producer of anhydrous ammonia and one of the two largest producers of nitrogen solutions in the United States and 26 Canada. Through the acquisition of AMCI, the Company will also substantially increase its participation in the methanol production industry. The Company owns and operates the largest independent farm service center network in the United States and Canada and is the second largest supplier of crop production inputs in the United States. The Company's production facilities are currently comprised of: . 3 nitrogen fertilizer plants, which are located in Oklahoma (the "Woodward Facility"), Iowa (the "Port Neal Facility") and Ontario (the "Courtright Facility"); . 1 crop protection chemical formulation plant located in Arkansas (the "Blytheville Formulation Facility"); and . 7 additional liquid chemical formulation facilities. The Company's distribution network serves the United States and the eastern region of Canada and has grown over the last several years to include approximately: . 350 farm service centers; . 58 fertilizer storage facilities; and . 770 affiliated dealer locations. AMCI's principal facilities are comprised of: . a facility, located in Rogers County, Oklahoma, which produces primarily ammonia and urea ammonium nitrate solution ("UAN") solutions and which consists of two ammonia plants, two nitric acid plants and two UAN solution plants (the "Verdigris Facility"); . a facility, located in Mississippi County, Arkansas, which produces ammonia and urea and which consists of an ammonia plant and a granular urea plant (the "Blytheville Facility"); . approximately 60 fertilizer storage facilities; and . a facility located in Beaumont, Texas, for the production of methanol (the "Beaumont Facility"). MANUFACTURED FERTILIZER Nitrogen is one of three primary nutrients essential for plant growth. Nitrogen fertilizer needs to be reapplied each year in areas of extensive agricultural usage because of absorption by crops and its tendency to escape from the soil. There are no substitutes for nitrogen fertilizer in the cultivation of high-yield crops. Ammonia is the simplest form of nitrogen fertilizer and is the primary raw material for the production of upgraded nitrogen fertilizers. Ammonia is a gas under normal conditions and requires special handling and application equipment and procedures. Ammonia is reacted with other compounds to produce solid and liquid fertilizers, primarily urea and UAN, which are easier to transport, store and apply than ammonia. The Company is a major producer and distributor of nitrogen fertilizers and will gain significant additional capacity with the acquisition of AMCI. The Company's and AMCI's principal products are ammonia, urea and UAN. After giving effect to the acquisition of AMCI, the Company will be the third largest producer of anhydrous ammonia and one of the two largest producers of UAN in the United States. A significant portion of the Company's and AMCI's ammonia production is used to produce other nitrogen fertilizer products such as urea and UAN, which are higher value-added products. Products. Although, to some extent, the various nitrogen fertilizers are interchangeable, each has its own distinct characteristics which produce agronomic preferences among end users. Farmers decide which 27 type of nitrogen fertilizer to apply based on the crop planted, soil and weather conditions, regional farming practices and relative nitrogen fertilizer prices. Ammonia. Anhydrous ammonia is the simplest form of nitrogen fertilizer and is the feedstock for the production of most other nitrogen fertilizers, including urea and UAN. It is produced by reacting natural gas with steam and air at high temperatures and pressures in the presence of catalysts. It has a nitrogen content of 82% by weight and is generally the least expensive form of fertilizer per unit of nitrogen. Urea. Solid urea is produced for both the feed and fertilizer market by converting ammonia into liquid urea, which can then be turned into a solid which is either prilled or granulated. Urea has a nitrogen content of 46% by weight, the highest level for any solid nitrogen product. Granular urea is generally sold as fertilizer and prilled urea is generally sold as a feed supplement. The Company produces both granular and prilled urea. AMCI produces granular urea. UAN Solution. The Company produces UAN at all three of its manufacturing facilities. AMCI's Verdigris Facility in Oklahoma is the largest UAN production facility in the United States. UAN is produced by combining liquid urea and ammonium nitrate in water. The nitrogen content of UAN is typically 28% to 32% by weight. UAN is a liquid fertilizer and, unlike ammonia, is generally odorless and does not need to be refrigerated or pressurized for transportation or storage. UAN may be applied uniformly and may be mixed with various herbicides, permitting the application of several materials simultaneously, and thus reducing energy and labor costs. In addition, UAN may be applied from ordinary tanks and trucks and can be sprayed or injected into the soil, or applied through irrigation systems, throughout the growing season. UAN is relatively expensive to transport and store because of its high water content. Due to its stable nature, UAN may be used for no-till row crops where fertilizer is spread upon the surface and is subject to volatilization losses. The use of conservation tilling, which reduces erosion, is increasing in the United States, and the Company believes this trend, if continued, should have a positive impact on UAN demand. The Company's and AMCI's nitrogen fertilizer sales mixes for the years ended December 31, 1991, 1992 and 1993 were as follows (based on tons sold):
THE COMPANY -------------- 1991 1992 1993 ---- ---- ---- Ammonia.......................................................... 28% 30% 31% Urea............................................................. 11% 11% 11% UAN.............................................................. 61% 59% 58%
AMCI -------------- 1991 1992 1993 ---- ---- ---- Ammonia.......................................................... 18% 16% 16% Urea............................................................. 16% 16% 16% UAN.............................................................. 66% 68% 68%
Plants. The Company's Woodward Facility, Port Neal Facility and Courtright Facility are integrated facilities for the production of ammonia, liquid urea and UAN and other nitrogen fertilizer solutions. In addition, the Port Neal Facility and the Courtright Facility produce solid urea. The Courtright Facility's liquid urea and granulation capacity are expected to increase as a result of a plant upgrade project, announced in February 1994. The project is expected to be completed in 1995 and will enable the replacement of 65,000 tons of annual ammonia sales with urea and nitrogen solution sales. The project cost is estimated to be approximately $20 million and is expected to be funded through lease financing. Each of the Company's three manufacturing facilities is designed to operate continuously, except for planned biennial shutdowns for maintenance and installation of efficiency improvements. Capacity utilization (gross tons produced divided by capacity tons at expected operating rates and on stream factors) 28 of the Company's manufacturing facilities for the years ended December 31, 1993, 1992 and 1991, in the aggregate, was approximately 102%, 99% and 100%, respectively. AMCI's Verdigris Facility and Blytheville Facility are also integrated facilities. The Verdigris Facility produces primarily ammonia and UAN and the Blytheville Facility produces primarily ammonia and urea. Capacity utilization of AMCI's manufacturing facilities for the years ended December 31, 1993, 1992, and 1991, in the aggregate, was approximately 101%, 107%, and 104%, respectively. Marketing and Distribution. The Company's principal customers for its manufactured nitrogen fertilizer products are large independent dealers, national retail chains, cooperatives and industrial customers. Approximately 10% of the Company's fertilizer production is sold through its farm service center locations to retail customers, while the rest is sold to outside customers. In 1993, no customer accounted for greater than 10% of total manufactured nitrogen fertilizer sales. After giving effect to the acquisition of AMCI, the Company will have production facilities and significant storage capacity nearby major fertilizer consuming regions which should allow it to continue to be a major supplier of nitrogen solutions to its customers. DISTRIBUTION The Company's distribution business manages a distribution and marketing system for a comprehensive line of fertilizer, crop protection products and seed. It also provides crop protection and other services to its customers. The Company's customers are primarily farmers and dealers located in the Midwestern, southern, southwestern and southeastern regions of the United States, and the eastern region of Canada. Products. The Company markets a comprehensive line of crop protection products (herbicides, insecticides, fungicides, adjuvants, plant growth regulators, defoliants, desiccants and other agricultural chemicals), fertilizer (nitrogen, phosphates, potash and micronutrients) and seed. The Company markets several major seed brands and, in its United States marketing area, is the largest independent seed distributor. The Company focuses particular marketing efforts on its proprietary brand of corn hybrids, soybean and cotton seed varieties, which provide higher margins. These products represented approximately 20% of total seed sales in 1993. The Company also has an exclusive retail storefront marketing and distribution agreement for dekalb brand seed in the Midwest, which accounted for approximately 7.5% of total 1993 seed sales. Although most crop protection products marketed by the Company are manufactured by unaffiliated suppliers, the Company also markets its own Riverside(R) brand products. Riverside products represented approximately 16% of total crop protection product sales in 1993. The Riverside line includes over 100 products, nine of which were added in 1993, and consists of herbicides, insecticides, fungicides, adjuvants, seed treatments, plant growth regulators, defoliants and desiccants. The majority of Riverside products are formulated and packaged in facilities owned by the Company. The Riverside line includes several formulations produced exclusively by the Company, but does not include proprietary agricultural chemicals. Riverside products generally provide higher gross margins for the Company than products manufactured by unaffiliated suppliers. The sale of such products, however, involves additional indirect costs, including the cost of maintaining and disposing of excess inventory and potentially greater liability for product defects. For Riverside pesticide products, the Company possesses and processes the registrations required by the EPA. Services. In addition to selling products required to grow crops, the Company's farm service centers offer a wide variety of services to grower customers. These services include soil and plant tissue analysis and crop production program recommendations, custom blending of fertilizers, field application services and field inspections for pest control and crop program performance follow-up. The farm service centers 29 utilize the Company's Ag Analytical Services laboratory in Elida, Ohio to analyze nutrient levels in soil and plant tissue samples. The results of these tests are analyzed by the Company's proprietary CropMaster(R) program, which provides specific, localized soil fertility recommendations for specific crops on a field-by-field basis. Crop input recommendations are provided through computer terminals at most farm service center locations, which are linked to a mainframe computer located at the Company's headquarters in Sioux City, Iowa. Recommendations can be made for substantially all crops grown in the Company's markets. The program also provides "least cost" nutrient blending formula recommendations, makes seed variety recommendations based on hybrid characteristics and other factors important to the individual grower, and maintains crop input records for grower customers. In connection with product sales to dealers, the Company provides warehousing and delivery services. For selected dealer customers, the Company offers a service package called MarketMaster(TM). The package includes environmental and safety audits, special training courses, access to the Company's Ag Analytical Services laboratory, use of the CropMaster program and other services. There were approximately 475 MarketMaster dealer sites at December 31, 1993. Marketing and Distribution. The Company markets its products primarily to agricultural customers, including both dealers and growers. For 1993, approximately 60% of the Company's distribution revenues were attributable to retail sales through farm service center locations and approximately 40% were attributable to wholesale sales to dealers. The Company also markets its products through its Professional Products group to non-farm customers, including turf growers, nurseries, golf courses, parks and athletic facilities. The Company offers these customers herbicides, insecticides, fungicides, fertilizer, adjuvants, plant growth regulators, seed and agronomic services. The Professional Products personnel generally work through the Company's farm service centers, using established delivery systems and product lines. The Company's distribution operations are organized into the Northern and Southern Divisions, which include 13 separate regions. Field personnel receive regular training through Terra University, a series of courses designed to develop skills in agronomy, management, sales, environmental and personal safety, and field application. The field salespeople are supported by the Ag Analytical Services laboratory, a staff of agronomists and a research station where the efficacy of various crop protection products and the performance of numerous seed varieties are tested. METHANOL Through the acquisition of AMCI, the Company will substantially increase its participation in the methanol production industry. After giving effect to such acquisition, the Company will have approximately 320 million gallons of methanol production capacity, representing approximately 16% of the total United States rated capacity. Product. Methanol is a liquid petrochemical made primarily from natural gas. It is used primarily as a feedstock in the production of other chemical products such as formaldehyde, acetic acid and chemicals used in the building products industry. Methanol is also used as a feedstock in the production of MTBE, an oxygenate and octane enhancer used as an additive in reformulated gasoline. Reformulated gasoline has lower volatility and is less aromatic than gasoline. The methanol manufacturing process involves heating the natural gas feedstock, mixing it with steam and passing it over a nickel-based catalyst, which breaks it down into carbon monoxide, carbon dioxide and hydrogen. This reformed gas is then cooled, compressed and passed over a copper-zinc based catalyst to produce crude methanol. Crude methanol consists of approximately 80% methanol and 20% water. In order to convert it to high-purity chemical grade methanol suitable for sale, the crude methanol is distilled in a series of distillation towers to remove the water and other impurities. 30 Plants. During the first half of 1994, the Company completed the capital improvements necessary to produce methanol instead of ammonia for a portion of the Woodward Facility's capacity. The project cost approximately $15 million and gives the Company 40 million gallons of annual methanol capacity at the Woodward Facility. After the Acquisition, the Company will own, through BMC, the Beaumont Facility, which is the largest methanol production facility in the United States, with approximately 280 million gallons of annual methanol capacity. The plant and processing equipment are owned by BMC and the land is leased from DuPont for a nominal annual rental under a lease agreement which expires in 2090. Because the Beaumont Facility is entirely contained in a complex owned and operated by DuPont (the "Beaumont Complex"), BMC depends on DuPont for access to the Beaumont Facility. BMC also relies on DuPont for access and certain essential services relating to the wharf located at the Beaumont Complex through which most of the finished product methanol is shipped to customers and the pipelines used to transport finished product methanol and to obtain natural gas, as well as for certain utilities and waste water treatment facilities and other essential services. Marketing and Distribution. The marketing of BMC's methanol is conducted on an exclusive basis by Trammochem, a division of Transammonia, Inc., pursuant to a Marketing Services Agreement between BMC and Trammochem. Trammochem is one of the largest international traders and marketers of bulk petrochemicals, including methanol. Affiliates of Transammonia, Inc. are currently stockholders of AMCI and will receive a portion of any payments made to the Counterparty under the Methanol Hedging Agreement. Pursuant to the Marketing Services Agreement, Trammochem provides BMC with marketing services in connection with the sale of BMC's methanol on a worldwide basis. These services include analysis of market conditions for methanol, marketing and sales on a contract basis and sales on a spot basis, arrangement of transportation of methanol to customers and customer relations activities. BMC retains responsibility for the invoicing and collection of payments from customers and is responsible for loading transportation equipment in accordance with customer requirements. BMC pays Trammochem an annual fee and a monthly fee based on BMC's earnings and deliveries, respectively. The Marketing Services Agreement continues until December 31, 1996 and from year to year thereafter unless terminated by either party on not less than 180 days' written notice in advance of the end of any year. The agreement may also be terminated in the event of a material default by either party or at the option of BMC. The Company has no current intention to terminate the Marketing Services Agreement. BMC's customers are primarily large chemical or MTBE producers located in the U.S. Some sales have been made to Central and South America. Methanol Contracts. BMC has a number of long-term methanol sales contracts, the most significant of which is with DuPont (the "DuPont Contract"). Through August 31, 1994, BMC had sold over 85% of its 1994 production under such contracts. For the remainder of 1994 and 1995, BMC has contracted to sell nearly 100% of its production at prices indexed to published sources. Most of BMC's sales contracts (other than the DuPont Contract) cover fixed volumes and have terms of up to three years. Under the DuPont Contract, DuPont has agreed to purchase 108 million gallons of methanol each year until 2001 (representing 39% of the Beaumont Facility capacity). The DuPont Contract will continue in effect after the initial term unless terminated by either party on two years' notice. Commencing in 1998, each of BMC and DuPont will have the unilateral right (exercisable one time only for the remaining term of the contract) to permanently reduce the contract quantity required to be delivered by BMC to DuPont in any contract year by up to 54 million gallons. The price for the methanol delivered under the DuPont Contract is generally indexed to certain published sources. PRODUCT FORMULATIONS The Company's Blytheville Formulation Facility formulates dry flowable ("DF") crop protection products and liquid crop protection chemicals in separate production lines at the same location. DF formulations are small, dry, water-dispersible granules that are mixed with water before application. 31 Because of their dry form, the granules have several benefits compared with liquid formulations, including: easier package disposal; easier cleanup of accidental spills; absence of toxic solvents; no fumes; less weight; less space required for storage; and no product loss from freezing temperatures or settling. Because of these benefits, the Company expects more agricultural chemicals will be offered to growers in DF form in the future. The Blytheville Formulation Facility is one of 13 known DF plants in the U.S. and formulates eight DF products and six liquid products. Approximately 40% of the plant's volume in 1993 was attributable to the Company's own Riverside brand product line. The Company has developed several DF formulations not available from any other producer or formulator. The Company has also developed DF formulations for a number of companies that contract all or portions of their production at the Blytheville Formulation Facility. CREDIT A substantial portion of the Company's sales to its grower and dealer customers is made on credit terms customary in the industry. During the third quarter of 1992, the Company established a grower financing program to provide crop input financing to certain grower customers for all operating requirements on extended payment terms. In 1993, the Company provided approximately $25 million in financing to grower customers under this program and, in 1994, the Company expects to finance approximately $60 million to $65 million. The Refinancing is designed to allow the Company to continue such program. SEASONALITY AND VOLATILITY The agricultural products business is seasonal, based upon the planting, growing and harvesting cycles. Inventories must be accumulated in the first few months of the calendar year to be available for seasonal sales, requiring significant storage capacity. Inventory accumulations are financed by suppliers or short-term borrowings, which are retired with the proceeds of the sales of such inventory. In times of lower demand, the Company can reduce purchases, thereby decreasing inventory carrying costs. In the past, over half of the Company's sales generally occurred during the second quarter of each year. This seasonality also generally results in higher fertilizer prices during peak periods, with prices typically reaching their highest point in the spring, dropping in the summer, increasing in the fall (as depleted inventories are restored) through the spring. The agricultural products business can also be volatile as a result of a number of other factors, the most important of which, for U.S. markets, are weather patterns and field conditions (particularly during periods of high fertilizer consumption), current and projected grain stocks and prices and the U.S. government's agricultural policy. Among the governmental policies that influence the markets for fertilizer are those directly or indirectly influencing the number of acres planted, the level of grain stocks, the mix of crops planted and crop prices. As with any commodity chemical, the price of methanol is volatile. The industry has experienced cycles of oversupply resulting in depressed prices and idled capacity, followed by periods of shortage and rapidly rising prices. During 1994 to date, increased world demand for methanol combined with a large number of plant shutdowns and turnarounds in the industry and the phase-in of federally-mandated standards for oxygenated gasoline to create a tight market and dramatically increased prices over 1993 levels. There can be no assurances that such conditions will continue. In part, future demand for methanol will depend on the regulatory environment with respect to oxygenated gasoline. See "Investment Considerations--Factors Affecting Demand For Methanol and MTBE." Most methanol sold in the U.S. is sold pursuant to long-term contracts based on market index pricing and a fixed volume. See "Methanol--Methanol Contracts." RAW MATERIALS The principal raw material used to produce nitrogen fertilizer is natural gas. The Company estimates that natural gas costs comprised nearly 50% of the total costs and expenses associated with the Company's manufactured fertilizer operations in 1993. Natural gas is also the primary raw material used in the production of methanol. Following the completion of the Acquisition, the Company, through BMC, will 32 own the largest methanol facility in the U.S. The Company estimates that natural gas represents over 50% of the costs and expenses associated with methanol operations. A significant increase in the price of natural gas that could not be recovered through an increase in nitrogen fertilizer or methanol prices could have a material adverse effect on the Company's profitability and cash flow. The Company's policy is to fix the unit cost for 40% to 80% of its natural gas requirements for the upcoming 12-month period using supply contracts and various hedging techniques. See "Factors Affecting Demand For Methanol and MTBE." Reliable sources for supply of crop inputs at competitive prices are critical to the distribution portion of the Company's business. The Company's sources for fertilizer, agricultural chemicals and seed are typically manufacturers of the products without an internal capability to distribute products to the North American grower. TRANSPORTATION The Company uses several modes of transportation to receive and distribute products to customers and its own locations, including railroad and tank cars, common carrier trucks, barges, common carrier pipelines and Company-owned or leased vehicles. The Company operates 35 liquid, 21 dry and one anhydrous ammonia fertilizer terminal storage facilities in 18 states and Ontario, Canada. The Company also has varying amounts of warehouse space at each of its farm service centers. AMCI operates 45 liquid, 7 dry and 11 anhydrous ammonia fertilizer storage facilities (some of which are in the same locations) in 21 states and one methanol storage facility in Beaumont, Texas. Through Terra Express, Inc. and Terra Express of Oklahoma, Inc., wholly- owned truck transportation subsidiaries of Terra International (together, "Terra Express"), the Company provides transportation services to its own facilities and customers as a contract carrier. Terra Express uses approximately 90 owner-operated trucks and twenty Company-owned trucks to deliver fertilizer, crop protection products, seed, feed ingredients and other products to its own facilities and customers. At its manufacturing facilities, its Blytheville Formulation Facility and liquid fertilizer storage locations, the Company utilizes railcars as the major method of transportation. All of the Company's approximately 1,100 railcars are leased. Purchased natural gas is transported to the Port Neal Facility via an interstate pipeline operating as an open access natural gas transporter. Under a Federal Energy Regulatory Commission order, the Company maintains facilities for direct access to its interstate pipeline shipper, avoiding additional costs of local utility services. The Company transports purchased natural gas for its Woodward Facility through an intrastate pipeline that is not an open access carrier; however, the Company is able to transport gas supplies from any in-state source connected to the widespread pipeline system. The Courtright Facility utilizes local gas storage service provided by a local utility, and purchased gas is transported from western Canada through the TransCanada Pipeline under various delivery contracts. AMCLP transports product primarily via barge and rail car. Additionally, AMCLP uses trucks to transport smaller quantities of product, and the Verdigris Facility distributes ammonia through the MAPCO pipeline. As of December 31, 1993, AMCLP's transportation equipment included 104 leased ammonia rail cars, and 818 leased UAN rail cars. AMCI transports purchased natural gas for its facilities through several natural gas pipeline companies under agreements with various terms. BMC transports methanol primarily by marine transport via the Neches River to the Intercoastal Canal and the Gulf of Mexico and via pipeline to selected customers. Access to the wharf and pipeline use at the Beaumont Facility is provided through BMC's agreements with DuPont. RESEARCH AND DEVELOPMENT The Company operates a 70-acre Agronomy Research Station near its Port Neal Facility for product and program development and testing, and routinely conducts product evaluation and testing with growers and universities. The Company also develops DF and other chemical formulations for its Riverside product line and for basic chemical products at its product development laboratory located in Blytheville, Arkansas. 33 COMPETITION Nitrogen fertilizer is a global commodity and customers, including end- users, dealers and other fertilizer producers, base their purchasing decisions principally on the delivered price of the product. The Company competes with a number of U.S. producers, and producers in other countries, including state- owned and government-subsidized entities. Some of the Company's principal competitors may have greater total resources and may be less dependent on earnings from nitrogen fertilizer sales than is the Company. Some foreign competitors may have access to lower cost or government-subsidized natural gas supplies. The Company believes that it competes with other manufacturers of nitrogen fertilizer on the basis of delivery terms and availability of products as well as on price. The market for the fertilizer, crop protection products and seed distributed by the Company is highly competitive. In 1993, sales attributable to the Company's farm service centers accounted for less than 10% of total crop production products sold in the U.S. Within the specific market areas served by its farm service centers, however, the Company's share of the market was substantially higher in most instances. The Company's competitors include cooperatives, divisions of diversified agribusiness companies, regional distributors and independent dealers, some of which have substantially greater financial and other resources than the Company. The Company competes primarily by providing a comprehensive line of products and by providing what the Company believes to be superior services to growers and dealers. The methanol industry, like the fertilizer industry, is highly competitive and such competition is based largely on price, reliability and deliverability. The relative cost and availability of natural gas and the efficiency of production facilities are important competitive factors. Significant determinants of a plant's competitive position are the natural gas acquisition and transportation contracts that a plant negotiates with its major suppliers. Domestic competitors for methanol include a number of large integrated petrochemical producers, many of which are better capitalized than the Company. In addition, the production and trade of methanol has become increasingly global, and a number of foreign competitors produce methanol primarily for the export market. See "Investment Considerations--Factors Affecting Demand for Methanol and MTBE". ENVIRONMENTAL AND OTHER REGULATORY MATTERS The Company's and AMCI's operations are subject to various federal, state and local environmental, safety and health laws and regulations, including laws relating to air quality, hazardous and solid wastes and water quality. Terra Canada's operations are subject to various federal and provincial regulations regarding such matters, including the Canadian Environmental Protection Act administered by Environment Canada, and the Ontario Environmental Protection Act administered by the Ontario Ministry of the Environment. The Company and AMCI are also involved in the manufacture, handling, transportation and storage of materials that are or may be classified as hazardous or toxic by federal, state, provincial or other regulatory agencies. Precautions are taken to reduce the likelihood of accidents involving these materials. If such materials have been or are disposed of at sites that are targeted for cleanup by federal or state regulatory authorities, the Company or AMCI may be among those responsible under CERCLA or analogous state laws for all or part of the costs of such cleanup. Terra International has been designated as a PRP under CERCLA or its state analogues with respect to various sites. Under CERCLA, all PRPs may be held jointly and severally liable for the costs of investigation and remediation of an environmentally damaged site. After consideration of such factors as the number and levels of financial responsibility of other PRPs, the existence of contractual indemnities, the availability of defenses and the speculative nature of the costs involved, the Company's management believes that its liability with respect to these matters will not be material. 34 AMCLP has been named as a PRP at the Glenn Wynn Lagoon portion of the Sand Springs, Oklahoma, Superfund site. Soil remediation has been completed at the site, and a long-term ground water monitoring program is in place. FMRP entered into and paid a de minimis settlement relating to this site in 1991 and has agreed to indemnify AMCLP for any further liability, if any, incurred by AMCLP. AMCI believes that such agreement will provide a full indemnity for any further liability, if any, incurred by the Operating Partnership in connection with such Superfund site. Except for AMCLP's involvement at the Glenn Wynn Lagoon portion of the Sand Springs Superfund site, AMCI has not been named as a PRP by any regulatory agency or other party. Certain state regulatory agencies have enacted requirements to provide secondary containment for bulk agricultural chemical storage facilities present at the Company's farm service centers and AMCI's terminals. It is expected that other states will adopt similar requirements pursuant to federal mandate. The Company and AMCI have commenced construction of these facilities at their farm service centers and terminals, respectively, and estimate that the future cost of complying with these regulations in 1994 and beyond will be approximately $6.5 million. On September 27, 1993, Region 6 of the EPA filed a complaint, compliance order and notice of opportunity for hearing against BMC in connection with the Beaumont Facility's past management of an ignitable alcohol-containing waste stream pursuant to the Resource Conservation and Recovery Act, as amended ("RCRA"), and the Texas Solid Waste Disposal Act. In its complaint, U.S. EPA proposed to assess a civil penalty of $583,950 against BMC for violations of hazardous waste treatment, storage and disposal, and management and record- keeping requirements. AMCI has implemented modifications to ensure that its alcohol-containing stream is non-hazardous under RCRA. AMCI filed its answers to the complaint, is in negotiations with the EPA and expects to reach a settlement for less than the proposed civil penalty. Except for this matter, minor exceedances of permit limitations and AMCI's involvement at the Sand Springs Superfund site, AMCI is not currently a party to any regulatory proceeding or litigation relating to environmental matters. With respect to the Verdigris Facility and Blytheville Facility, FMRP retains liability for certain environmental matters. With respect to the Beaumont Facility, DuPont retains responsibility for certain environmental costs and liabilities stemming from conditions or operations at the Beaumont Plant to the extent such conditions or operations existed or occurred prior to the 1991 acquisition of BMC from DuPont. AMCI does not believe that any such environmental matters, whether or not retained by FMRP or DuPont, will have a material effect on AMCI's financial condition or results of operations. Insulation and other construction or building materials at AMCI's plants contain asbestos. Over 400 suits have been filed by contractors' employees against DuPont based on exposure to asbestos-containing material at the complex in which the Beaumont Facility is located. At least nine of these are directly related to the Beaumont Facility. An estimate of potential liability associated with these suits is not available. DuPont will retain responsibility for all claims based on exposure to hazardous materials, including asbestos, prior to the 1991 acquisition of BMC from DuPont. Although no suits relating to asbestos exposure have been filed against BMC to date, the possibility exists that liability could be incurred in the future for claims based on exposure to asbestos-containing material after such acquisition. AMCI and the Company may be required to install additional air and water quality control equipment, such as low NOx burners, scrubbers, ammonia sensors and continuous emission monitors, at certain of its facilities in order to maintain compliance with Clean Air Act and Clean Water Act requirements. These equipment requirements are also typically applicable to competitors as well. The Company estimates that the cost of complying with these requirements will be approximately $11 million to $13 million through 1997. 35 The Company endeavors to comply (and has incurred substantial costs in connection with such compliance) in all material respects with applicable environmental, safety and health regulations. The Company does not expect its continued operation in compliance with such regulations (including operation of the business acquired from AMCI) to have a material adverse effect on its earnings or competitive position. EMPLOYEES The Company had approximately 2,390 full-time employees at December 31, 1993, none of whom were covered by a collective bargaining agreement. In addition, the Company, which annually hires temporary employees on a seasonal basis, hired approximately 1,500 temporary employees during its spring selling season in 1993. As of December 31, 1993, AMCI had 398 employees. None of AMCI's employees are subject to collective bargaining agreements. DESCRIPTION OF CAPITAL STOCK GENERAL The total number of shares of stock of all classes which the Company has authority to issue is 133,500,000 shares of capital stock (without par value), all of which are classified as Common Shares. A stockholder of the Company has no preemptive rights to subscribe for additional shares of stock or other securities of the Company except as may be granted by the Board of Directors. COMMON SHARES A holder of Common Shares is entitled to one vote for each share held on all matters submitted generally to a vote of stockholders and, subject to the voting rights of the holders of preferred shares, if any, the exclusive voting power for all purposes is vested in the holders of the Common Shares. Holders of Common Shares do not have the right of cumulative voting in connection with the election of directors. The Common Shares have no conversion rights and are not subject to redemption. Subject to the rights of the holders of preferred shares, if any, the holders of Common Shares of the Company are entitled to receive, pro rata, dividends when, as and if declared by the Board of Directors from funds legally available therefor. In the event of any liquidation, dissolution or winding up of the Company, after payment or providing for the payment of all liabilities and amounts due the holders of preferred shares, if any, the holders of Common Shares are entitled to share ratably in all the remaining assets. All of the outstanding Common Shares are, and the Common Shares offered hereby will be, validly issued, fully paid and nonassessable. The Transfer Agent for the Common Shares is First Chicago Trust Company of New York in the United States and Montreal Trust Company in Canada. OTHER CLASSES AND SERIES OF STOCK The Board of Directors may classify and reclassify any unissued shares of capital stock into other classes and series, including one or more series of preferred shares, by setting or changing in any one or 36 more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of such shares of stock. Such stock may rank senior to the Common Shares in one or more respects. CERTAIN PROVISIONS OF MARYLAND LAW The Company is incorporated under the laws of the State of Maryland. The following paragraphs summarize certain provisions of Maryland General Corporation Law (the "MGCL") and the Company's Articles of Incorporation (the "Charter") and By-Laws. The summary does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland law and the Company's Charter and By-Laws for complete information. Business Combinations. The MGCL prohibits certain "business combinations" (including a merger, consolidation, share exchange, or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an "Interested Stockholder." An Interested Stockholder is any person (a) who beneficially owns 10% or more of the voting power of the corporation's shares or (b) an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was an Interested Stockholder or an affiliate or an associate thereof. Such business combinations are prohibited for five years after the most recent date on which the Interested Stockholder became an Interested Stockholder. Thereafter, any such business combination must be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (a) 80% of the votes entitled to be cast by all holders of voting shares of the corporation, and (b) 66 2/3% of the votes entitled to be cast by all holders of voting shares of the corporation other than voting shares held by the Interested Stockholder or an affiliate or associate of the Interested Stockholder, with whom the business combination is to be effected, unless, among other things, the corporation's stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the Interested Stockholder for its shares. These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by the board of directors of the corporation prior to the time that the Interested Stockholder becomes an Interested Stockholder. A Maryland corporation may adopt an amendment to its charter or by-laws electing not to be subject to the special voting requirements of the foregoing legislation. Any such amendment would have to be approved by the affirmative vote of at least 80% of the votes entitled to be cast by all holders of outstanding shares of voting stock and 66 2/3% of the votes entitled to be cast by holders of outstanding shares of voting stock who are not Interested Stockholders. The Company has not adopted such an amendment to its Charter. These provisions of the MGCL also do not apply to certain corporations (including the Company) which had an Interested Stockholder on May 31, 1983 unless a resolution is passed by the directors of such corporation electing to have these provisions apply. The directors of the Company have not passed such a resolution and, thus, such provisions of the MGCL do not currently apply to the Company. Control Share Acquisitions. The MGCL provides that "control shares" of a Maryland corporation acquired in a "control share acquisition" have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares of stock owned by the acquiror or by officers or directors who are employees of the corporation. Control shares are voting shares of stock which, if aggregated with all other shares of stock previously acquired by such a person, would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power: (a) 20% or more but less than 33 1/3%; (b) 33 1/3% or more but less than a majority; or (c) a majority of all voting power. Control shares do not include shares of stock an acquiring person is entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means, subject to certain exceptions, the acquisition of, ownership of or the power to direct the exercise of voting power with respect to, control shares. 37 A person who has made or proposed to make a "control share acquisition," upon satisfaction of certain conditions (including an undertaking to pay expenses), may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand therefor to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders' meeting. If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as permitted by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to voting rights, as of the date of the last control share acquisition or of any meeting of stockholders at which the voting rights of such shares are considered and not approved. If voting rights for "control shares" are approved at a stockholders' meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the stock as determined for purposes of such appraisal rights may not be less than the highest price per share paid in the control share acquisition, and certain limitations and restrictions otherwise applicable to the exercise of dissenters' rights do not apply in the context of a "control share acquisition." The control share acquisition statute does not apply to stock acquired in a merger, consolidation or stock exchange if the corporation is a party to the transaction, or to acquisitions previously approved or exempted by a provision in the articles of incorporation or by-laws of the corporation. The By-Laws of the Company contain an exception from the control share acquisition statute for shares held by Minorco, any affiliate, associate or immediate transferee of Minorco, or any associate or affiliate of such immediate transferee of Minorco. DESCRIPTION OF CERTAIN INDEBTEDNESS AND OTHER OBLIGATIONS The following is a brief description of the basic terms of and instruments governing certain indebtedness and other obligations of the Company and its subsidiaries which will be in existence after the consummation of the Acquisition and the Refinancing. Capitalized terms used in such instruments but not defined herein have the meaning ascribed to them in such instruments. These summaries do not purport to be complete and are subject to, and qualified in their entirety by reference to, the instruments governing such indebtedness and other obligations. SENIOR NOTES AMCI presently has outstanding, and the Company will assume by virtue of the merger of AMCI into the Company, $175 million in aggregate principal amount of the Senior Notes. The Senior Notes are issued under an Indenture dated as of October 15, 1993 (the "Indenture"), between AMCI and Society National Bank, as trustee and will mature on September 30, 2003. Following such merger, the Senior Notes will be senior, unsecured obligations of the Company and will rank pari passu in right of payment with any other senior indebtedness of the Company. Because the Company is a holding company, all existing and future liabilities of the Company's subsidiaries, including those under the Credit Agreement, will be effectively senior to the Senior Notes. In addition, the Senior Preference Units of AMCLP described below will be effectively senior to the Senior Notes. The Senior Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after September 30, 1998, initially at 105.375% of their principal amount, plus accrued interest, declining to 100% of their principal amount on September 30, 2000. In addition, at any time prior to September 30, 1996, the Company may, at its option, redeem up to $61.25 million aggregate principal amount of Senior Notes out of the proceeds of one or more underwritten public offerings of equity securities at a redemption price of 110% of their principal amount, plus accrued interest. 38 The Indenture provides that upon a Change of Control each holder may require the repurchase of its Senior Notes in cash at a purchase price of 101% of the principal amount thereof, plus accrued interest, pursuant to an offer to repurchase which must be mailed within 45 days after the Change of Control. Because the Acquisition will constitute a Change of Control, the Company will be required to make such a repurchase offer after consummation of the Acquisition. The Company will have funds available under the Credit Agreement to make such repurchases. The Senior Notes are publicly-held and the Company presently does not know the extent to which Noteholders may accept such offer. The Indenture contains certain covenants which will limit various actions by the Company and its subsidiaries, including the incurrence of indebtedness, the payment of dividends and other distributions, the extent to which the Company and its subsidiaries may agree to consensual restrictions on the ability of subsidiaries to pay dividends and indebtedness owed to the Company and other subsidiaries, the sale of subsidiary stock to third parties, transactions with affiliates and shareholders, the incurrence of liens, participation in sale-leaseback transactions, sales of assets and mergers. In general, the Indenture will permit the Company and certain subsidiaries to incur indebtedness if, after giving effect to the incurrence of such indebtedness and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio of the Company and its consolidated subsidiaries would be greater than 2:1. CREDIT AGREEMENT The following description is based upon the draft Credit Agreement available on the date hereof. The Credit Agreement will be entered into concurrently with the consummation of this offering and the Acquisition by the Company and certain lenders with Citibank, N.A. to act as agent for the ultimate lenders thereunder. The form of Credit Agreement is attached as an exhibit to the Registration Statement of which this Prospectus is a part. The terms of the final Credit Agreement are not anticipated to differ materially from those described below. The Facilities. The Credit Agreement will establish the following credit facilities: a $150 million five-year term loan facility ("Terra Facility A"), a $80 million seven-year term loan facility ("Terra Facility B"), a $177 million seven-year term loan facility ("Terra Facility C"), a $80 million seven-year term loan facility ("Terra Facility D"), a $175 million five-year revolving credit facility ("Terra Facility E"), a $35 million five-year term facility ("AMLP Facility A") and a $50 million five-year revolving credit facility ("AMLP Facility B"). To the extent that the net proceeds of this offering exceed $100 million, the Company expects it will reduce its borrowings with respect to Terra Facility D by such amount. Based on net proceeds to the Company from this offering of $105.7 million, the Company would expect to borrow only $74.3 million with respect to Terra Facility D, and the Company's right to borrow the remaining amount would be terminated. Terra Facilities A, B and D will be used to finance the consummation of the Acquisition and to refinance certain outstanding indebtedness of the Company and Terra International. Terra Facility C will be available to finance any required repurchase of the Senior Notes. Terra Facility E will be available to provide for the on-going working capital needs of Terra Capital, Terra International and BMC. AMLP Facility A will be used to refinance existing indebtedness of the Operating Partnership and AMLP Facility B will be available to provide for the on-going working capital needs of the Operating Partnership. After consummation of the Acquisition and the Refinancing, the primary obligor with respect to the Credit Agreement will be Terra Capital, which will own Terra International, AMC and BMCH. Terra Capital will be wholly-owned by Terra Holdings, another new subsidiary of the Company, and Terra Holdings will be wholly-owned by the Company. See "Summary--Post Acquisition Company Structure." Interest and Commitment Fees. Loans under the Credit Agreement will bear interest at one, three or six-month LIBOR, plus the Applicable Margin. The Applicable Margin will be 2% for all of the Facilities except Terra Facility B until loans under Terra Facility D are paid in full; thereafter the Applicable Margin for such Facilities will be 1.5%; provided that such Applicable Margin will be subject to adjustment up to 2% and down to 1% depending on the Company's consolidated ratio of debt to cash flow. The Applicable 39 Margin for Terra Facility B will be 2.5%. Comparable interest rates based on Citibank's Base Rate will also be available. Commitment fees of 0.5% per year (subject to reduction if the ratio of debt to cash flow falls to a certain level) will be charged for unused facilities. Amortization. Subject to prepayment as summarized below, the loans under the Facilities will be due as follows: Terra Facility A--semiannual payments over the first five years after closing of the Merger, Terra Facility B--semiannual payments over the seven years after closing of the Merger, Terra Facility C-- semiannual payments beginning one year following the first anniversary of the required repurchase of the Senior Notes, if any, and continuing over the following six years, Terra Facility D--semiannual payments over the first seven years after closing of the Merger, Terra Facility E--five years after closing, AMLP Facilities A and B--five years after closing. Prepayments will be required in an amount equal to 75% of Terra Capital's consolidated annual Excess Cash Flow (earnings before interest, taxes, depreciation and amortization less the sum of cash interest expense, minority interest payments, capital expenditures, "Specified Payments" (meaning all interest due on the Senior Notes, dividends on the Common Shares not exceeding $10 million in 1995, $13 million in 1996, $17 million in 1997, $20 million in 1998 and $23 million thereafter, dividends on equity securities issued to retire loans under the Credit Agreement and ordinary expenses of the Company plus up to $5 million per year for other pre- existing obligations), scheduled payments of principal on indebtedness and cash payments of taxes), reducing to 50% after $20 million has been so paid in any year; 100% of the net proceeds over $10 million per year of non-ordinary course asset sales, reducing to 75% after Terra Facilities C and D have been retired; 100% of the net proceeds of any equity security issuances until Terra Facilities C and D have been retired; and 100% of the net insurance and condemnation proceeds from casualty events (net of expenses, liens and repair and replacement costs), reducing to 75% after the Terra Facilities C and D have been retired. Collateral. Loans under the Credit Agreement will be guaranteed by the Company, Terra Holdings, Terra Capital, AMC, BMHC and BMC and will be secured by pledges of the stock of Terra Capital, Terra International, AMC and BMCH and security interests in substantially all of the personal property of BMCH and BMC and the Operating Partnership, provided that the security interest granted in the Operating Partnership's assets will only secure the AMLP Facilities A and B. Covenants. The Credit Agreement will contain covenants customary for financings of this type including: (a) a limitation on annual capital expenditures to $40 million, (b) a prohibition on optional redemptions and repurchases of subordinated indebtedness, (c) limitations on additional debt, liens, receivables sales, investments, changes in lines of business and transactions with affiliates and (d) an annual limitation on acquisitions of $15 million (increasing to $50 million when Terra Facilities C and D have been retired, Terra Facilities A and B have been paid down to $100 million or less and the debt to cash flow ratio has reached 2.5 to 1 or better), subject to a 50% carryover for one year of any unused amount. The Credit Agreement will also include financial covenants requiring the Company to meet and maintain certain financial tests. These include requirements that the Company maintain, on a consolidated basis, ratios of earnings before interest, taxes, amortization and depreciation to interest charges of greater than 4.0 to 1 increasing to 4.50 in 1998 and thereafter and debt to cash flow of less than 3.75 to 1 until 1996 and 3.0 thereafter (to be replaced by a ratio of debt to capital once Terra Facilities C and D are retired), a current ratio of at least 1.25 to 1 through 1997 and 1.50 thereafter and a minimum net worth of $375 million plus increases in capital stock and 50% of net income. Events of Default and Other Matters. The Credit Agreement will also contain customary events of default, including those relating to failure to pay amounts due, misrepresentation, failure to perform covenants, bankruptcy or insolvency, litigation and unsatisfied judgments, violations of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and environmental laws and changes in control or ownership (except that after Terra Facilities C and D have been retired, it will not be an event of default if Minorco's ownership is at least 20% of the outstanding number of Common Shares and Minorco remains the single largest holder of Common Shares). In addition, if dividends and other 40 payments with respect to the capital stock of Terra Capital exceed the sum of Specified Payments plus 50% of the portion of Excess Cash Flow from the previous year that is not required to be used to prepay the facilities, the lenders under the Credit Agreement may choose to terminate their commitments to lend or cause the Company to repurchase their loans. OTHER OBLIGATIONS OF THE COMPANY'S SUBSIDIARIES The following briefly describes certain indebtedness and other obligations of Terra International and Terra Canada that will remain outstanding after the consummation of the Acquisition and the Refinancing. See the Company's financial statements and the notes thereto included herein and incorporated by reference. Terra International is a party to a receivables purchase agreement dated as of March 31, 1994, which expires March 31, 1996, allowing for the sale of an undivided interest in a designated revolving pool of accounts receivable up to $50 million in proceeds. As of June 30, 1994, $50 million of proceeds were received. Terra International also has outstanding $9.2 million Industrial Development Revenue Bonds dated April 1, 1992 which bear interest at an average of 6.8% and are subject to sinking fund requirements of $145,000 in 1994 and increasing to $1,240,000 for the final payment in 2011. The bonds are secured by a first mortgage on the Company's headquarters building in Sioux City, Iowa. Terra International has $37.5 million unsecured notes outstanding as of June 30, 1994 with various institutional investors. Such notes bear interest at rates between 8.48% and 9.625% and mature between 1996 and 2005. Terra International is also a party to various non-cancelable operating leases for agricultural equipment, rail cars and office, production and storage facilities expiring on various dates through 2001. In addition, it is a party to various letters of credit and swap agreements and financial derivatives to manage exposure to interest rates and natural gas prices. Terra Canada has a $37 million lease arrangement covering certain assets of the Courtright Facility, which will be increased by approximately $20 million to provide for an expanded urea plant. Current annual lease payments are approximately $4 million (Cdn.). The lease expires April 8, 1997, but can be extended for up to an additional five years with the consent of the lessor and is guaranteed by Terra International. Terra Canada also has a $35 million (Cdn.) revolving credit facility used to provide for working capital needs which expires May 31, 1995 and is renewable every 120 days for a 360 day term. Terra International provides a guarantee for this facility. Terra Canada has various foreign exchange forward and option contracts to manage exposure to currency fluctuations. These agreements are entered as designated hedges of fixed obligations and hedges of net foreign currency transaction exposures. It also has various swap agreements to manage exposure to interest rates. AMCLP SENIOR PREFERENCE UNITS AND OTHER OBLIGATIONS AMC holds a 2% interest as general partner in AMCLP and the Operating Partnership on a combined basis. AMCLP's limited partnership interests are divided into publicly held Senior Preference Units with a 39.8% interest and Junior Preference Units and Common Units with a 58.2% interest, both of which are owned by AMC. The Senior Preference Units are entitled to receive the minimum quarterly distribution of $0.605 per unit, plus arrearages, before any amounts are paid to AMC as limited partner. In addition, the limited partnership agreement requires that 100% of any excess available cash after payment of the minimum quarterly distribution on Senior Preference Units be used to fund an $18.5 million reserve fund for the payment of future distributions on the Senior Preference Units. This reserve was fully funded at June 30, 1994. After payment of the minimum quarterly distribution on the Senior Preference Units, assuming the reserve is fully funded, the Junior Preference Units are entitled to receive the minimum 41 quarterly distribution, plus arrearages, and after the Junior Preference Units are paid, the Common Units are entitled to receive the minimum quarterly distribution, plus arrearages other than arrearages outstanding on June 30 of any year on or prior to the Junior Conversion Date (as defined in AMCLP's limited partnership agreement), which shall be eliminated. Available cash remaining after the Common Units have received the minimum quarterly distribution is distributed to all unit holders pro rata, except that the right of the Senior Preference Units to participate in any such additional distribution terminates on the Senior Conversion Date, which is generally defined as the date (but no sooner than December 31, 1996) on which cash distributions of at least $2.64 per Senior Preference Unit have been paid for three consecutive 12-month periods. AMC, as general partner, also receives 2% of all distributions of Available Cash and is entitled, as an incentive, to larger percentage interests to the extent that distributions significantly exceed the minimum quarterly distributions. For a description of the capitalized lease obligations of the Operating Partnership that will continue after the consummation of the Acquisition and the Refinancing, see Note 6 to the Consolidated Financial Statements of AMCI included herein. UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement, the underwriters named below (the "Underwriters") have severally agreed to purchase from the Company, and the Company has agreed to sell to them, the respective numbers of shares set forth opposite the names of such Underwriters below.
NUMBER OF UNDERWRITERS SHARES ------------ --------- S. G. Warburg & Co. Inc......................................... --------- Total....................................................... 9,700,000 =========
Subject to the terms and conditions set forth in the Underwriting Agreement, the Underwriters are committed to purchase all of the Common Shares, if any are so purchased. Such conditions include that the Merger shall have been consummated. The Company has agreed in the Underwriting Agreement to use its best efforts to consummate the Merger concurrently with the closing of the offering described herein. The Underwriters propose to offer such Common Shares to the public initially at the offering price per share as set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share on sales to certain other dealers. This offering of the Common Shares is made for delivery when, as, and if accepted by the Underwriters and subject to prior sale and withdrawal, cancellation, or modification of the offer without notice. The Underwriters reserve the right to reject any order for the purchase of the shares. After this offering of the Common Shares, the public offering price and the concessions may be changed by the Underwriters. Each Underwriter has represented and agreed that: (a) it has not offered or sold and will not offer or sell in the United Kingdom, by means of any document, any Common Shares other than to persons whose ordinary business it is to buy or sell shares or debentures (whether as principal or agent) or in circumstances which do not constitute an offer to the public within the meaning of the Companies Act of 1985, as amended; (b) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Common Shares in, from or otherwise involving 42 the United Kingdom; and (c) it has issued or passed on and will issue or pass on in the United Kingdom any document received by it in connection with the issue of the Common Shares only to a person who is of a kind described in Article 9(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988 or is a person to whom the document may otherwise lawfully be issued or passed on. The Company has granted to the Underwriters an option for 30 days from the date of this Prospectus to purchase up to 650,000 additional Common Shares. The Underwriters may exercise such option only to cover over-allotments of the Common Shares offered hereby. To the extent the Underwriters exercise this option, each Underwriter will be obligated, subject to certain conditions, to purchase the number of additional Common Shares proportionate to such Underwriter's initial commitment. Subject to the closing of this offering, Minorco USA has agreed with the Underwriters that it or an affiliate will purchase 5.4 million or approximately 55.7% of the Common Shares offered hereby at a price equal to the price to the public less the underwriting discount. Minorco USA has not agreed to purchase any Common Shares that may be purchased by the Underwriters upon exercise of the over-allotment option. The Underwriter's obligations under the Underwriting Agreement are conditioned upon the consummation of such sale of Common Shares to Minorco USA or one of its affiliates contemporaneously with the closing of this offering. The Company has agreed to indemnify the Underwriters against certain liabilities, including any liabilities under the Securities Act of 1933, as amended (the "Securities Act"). Each of the Company, certain of the Company's executive officers and Minorco USA has agreed not to offer, sell or contract to sell any Common Shares, or securities convertible into or exchangeable for Common Shares, except in limited circumstances, for a period of 90 days from the date of this Prospectus without the prior written consent of S.G.Warburg & Co. Inc. S. G. Warburg & Co. Inc. has provided financial advisory services to the Company in connection with the Acquisition for which it will receive customary fees and also has provided financial advisory services to Minorco and its affiliates for which it received customary fees. LEGAL MATTERS Certain legal matters regarding the issuance of the Common Shares pursuant to this offering will be passed upon for the Company by Kirkland & Ellis, Chicago, Illinois (who will rely upon Piper & Marbury, Baltimore, Maryland, with respect to certain matters of Maryland law), and Piper & Marbury, Baltimore, Maryland, and for the Underwriters by Andrews & Kurth L.L.P. (who will rely upon Piper & Marbury with respect to certain matters of Maryland law). EXPERTS The consolidated financial statements and schedules of the Company as of December 31, 1992 and 1993, and for each of the two years in the period ended December 31, 1993, included and incorporated by reference in this Prospectus and in the Registration Statement in which this Prospectus is included have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports, which are included and incorporated by reference herein, and have been so included and incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The consolidated financial statements and schedules of the Company as of December 31, 1991 and for the year then ended included elsewhere and incorporated by reference in this Prospectus and in the Registration Statement in which this Prospectus is included have been audited by Price Waterhouse LLP, 43 independent certified public accountants, as indicated in their reports thereon, which are incorporated by reference herein. The financial statements and schedules audited by Price Waterhouse LLP have been included herein in reliance on their reports given their authority as experts in accounting and auditing. The consolidated financial statements of AMCI at December 31, 1992 and 1993, and for each of the three years in the period ended December 31, 1993, appearing in this Prospectus have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at 13th Floor, Seven World Trade Center, New York, New York 10048 and 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can be obtained by mail from the Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy statements and other information concerning the Company may be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the Toronto Stock Exchange, Exchange Tower, 2 First Canadian Place, Toronto, Ontario M5X 1J2 Canada. Additional information regarding the Company and the Common Shares offered hereby is contained in the registration statement on Form S-3 (together, with all exhibits and amendments, the "Registration Statement") filed with the Commission under the Securities Act. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the Commission's rules. For further information pertaining to the Company and the Common Shares offered hereby, reference is made to the Registration Statement (including the exhibits thereto), which may be inspected without charge at the office of the Commission at 450 Fifth Street N.W., Washington, D.C. 20549, and copies thereof may be obtained from the Commission at prescribed rates. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission (File No. 1-8520) are incorporated herein by reference: (i) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, as amended by its Form 10-K/A filed on October 13, 1994; (ii) the Company's Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 1994 and June 30, 1994; (iii) the Company's Current Report on Form 8-K dated August 9, 1994; and (iv) the description of the Common Shares, set forth in the Registration Statement on Form 8-A dated May 2, 1988. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the Offering of the Common Shares offered hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. 44 The Company will provide without charge to each person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy of any or all of the documents incorporated herein by reference (other than exhibits, unless such exhibits are specifically incorporated by reference in such documents). Written requests for such copies should be directed to George H. Valentine, Vice President, General Counsel and Corporate Secretary, Terra Industries Inc., Terra Centre, 600 Fourth Street, P.O. Box 6000, Sioux City, Iowa 51102-6000, telephone: (712) 277-1340. INFORMATION WITH RESPECT TO AMCI AMCI and AMCLP are subject to certain of the informational requirements of the Exchange Act and, in accordance therewith, file reports and other information with the Commission. Information herein with respect to AMCI and its subsidiaries, including the AMCI consolidated financial statements (and related notes) included herewith, have been derived from AMCI's and AMCLP's Annual Reports on Form 10-K for the year ended December 31, 1993 and Quarterly Reports on Form 10-Q for the quarter ended June 30, 1994. Copies of all such reports filed by AMCI and AMCLP are available from the Commission as described under "Available Information." 45 INDEX TO FINANCIAL STATEMENTS
PAGE ---- TERRA INDUSTRIES INC. CONSOLIDATED FINANCIAL STATEMENTS: Independent Auditors' Report............................................ F-2 Consolidated Statement of Financial Position--June 30, 1994 (unaudited) and December 31, 1993 and 1992......................................... F-3 Consolidated Statements of Income--Six Months Ended June 30, 1994 and 1993 (unaudited), Year Ended December 31, 1993, 1992 and 1991.......... F-4 Consolidated Statements of Changes in Stockholders' Equity--Six Months Ended June 30, 1994 (unaudited), Year Ended December 31, 1993, 1992 and 1991................................................................... F-5 Consolidated Statements of Cash Flows--Six Months Ended June 30, 1994 and 1993 (unaudited), Year Ended December 31, 1993, 1992 and 1991...... F-6 Notes to Consolidated Financial Statements.............................. F-7 AGRICULTURAL MINERALS AND CHEMICALS INC. CONSOLIDATED FINANCIAL STATEMENTS: Report of Independent Auditors.......................................... F-21 Consolidated Balance Sheets--June 30, 1994 (unaudited) and December 31, 1993 and 1992.......................................................... F-22 Consolidated Statements of Income--Six Months Ended June 30, 1994 and 1993 (unaudited), and Years Ended December 31, 1993, 1992 and 1991..... F-23 Consolidated Statements of Stockholders' Equity--Six Months Ended June 30, 1994 (unaudited), and Years Ended December 31, 1993, 1992 and 1991. F-24 Consolidated Statements of Cash Flows--Six Months Ended June 30, 1994 and 1993 (unaudited), and Years Ended December 31, 1993, 1992 and 1991. F-25 Notes to Consolidated Financial Statements.............................. F-26
F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Terra Industries Inc. We have audited the accompanying consolidated statement of financial position of Terra Industries Inc. and its subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, cash flows and changes in stockholders' equity for the years then ended. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of the Corporation for the year ended December 31, 1991 were audited by other auditors whose report, dated February 13, 1992, expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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, such 1993 and 1992 consolidated financial statements present fairly, in all material respects, the financial position of the Corporation at December 31, 1993 and 1992, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in Note 3 to the financial statements, the Corporation changed its method of accounting for post-retirement medical benefits and income taxes effective January 1, 1992 to conform with Statements of Financial Accounting Standards No. 106 and 109. DELOITTE & TOUCHE LLP Omaha, Nebraska February 1, 1994 F-2 TERRA INDUSTRIES INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT SHARE AND PER-SHARE AMOUNTS)
DECEMBER 31, JUNE 30, -------------------- 1994 1993 1992 ----------- --------- --------- (UNAUDITED) ASSETS Cash and short-term investments.............. $ 40,520 $ 65,102 $ 121,789 Accounts receivable, less allowance for doubtful accounts of $7,348, $5,788 and $6,427...................................... 352,464 122,774 71,995 Inventories.................................. 268,357 244,995 198,621 Deferred tax asset--current.................. 27,338 26,011 22,660 Other current assets......................... 25,459 10,586 7,611 --------- --------- --------- Total current assets..................... 714,138 469,468 422,676 --------- --------- --------- Equity and other investments................. -- 2,218 480 Property, plant and equipment, net........... 124,786 110,670 91,969 Deferred tax asset--non-current.............. 5,772 24,742 23,599 Net assets of discontinued operations........ 3,522 3,488 32,369 Other assets................................. 28,677 23,896 9,099 --------- --------- --------- Total assets............................. $ 876,895 $ 634,482 $ 580,192 ========= ========= ========= LIABILITIES Debt due within one year..................... $ 109,671 $ 9,636 $ 12,508 Accounts payable............................. 293,361 99,886 86,941 Accrued and other liabilities................ 105,270 128,659 107,410 --------- --------- --------- Total current liabilities................ 508,302 238,181 206,859 --------- --------- --------- Long-term debt............................... 45,782 119,061 121,171 Deferred tax liability--non-current.......... 2,383 451 -- Other liabilities............................ 32,472 33,809 30,686 Commitments and contingencies (Note 11)...... -- -- -- --------- --------- --------- Total liabilities........................ 588,939 391,502 358,716 --------- --------- --------- STOCKHOLDERS' EQUITY Capital stock Common Shares, authorized 114,375 shares; outstanding 70,553, 69,455 and 65,346 shares.................................... 123,550 122,257 83,931 Trust Shares, authorized 16,500 shares; outstanding none, none and 4,010 shares... -- -- 22,312 Paid-in capital.............................. 523,915 516,128 531,609 Cumulative translation adjustment............ (795) (488) -- Accumulated deficit.......................... (358,714) (394,917) (416,376) --------- --------- --------- Total stockholders' equity............... 287,956 242,980 221,476 --------- --------- --------- Total liabilities and stockholders' equity.................................. $ 876,895 $ 634,482 $ 580,192 ========= ========= =========
See accompanying Notes to the Consolidated Financial Statements. F-3 TERRA INDUSTRIES INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
SIX MONTHS YEARS ENDED ENDED JUNE 30, DECEMBER 31, -------------------- ---------------------------------- 1994 1993 1993 1992 1991 ---------- -------- ---------- ---------- ---------- (UNAUDITED) REVENUES Net sales............. $1,059,475 $807,153 $1,212,510 $1,062,045 $1,003,766 Other income, net..... 18,281 13,188 25,491 20,146 18,831 ---------- -------- ---------- ---------- ---------- 1,077,756 820,341 1,238,001 1,082,191 1,022,597 ---------- -------- ---------- ---------- ---------- COST AND EXPENSES Cost of sales......... 897,685 681,611 1,021,187 904,246 849,684 Depreciation and amortization......... 9,060 7,757 15,470 14,994 14,399 Selling, general and administrative expense.............. 100,172 84,137 161,791 137,232 132,845 Equity in earnings of unconsolidated affiliates........... (36) (940) (2,275) -- -- Interest income....... (1,983) (1,868) (3,261) (3,084) (1,789) Interest expense...... 5,841 6,652 12,944 10,617 14,352 ---------- -------- ---------- ---------- ---------- 1,010,739 777,349 1,205,856 1,064,005 1,009,491 ---------- -------- ---------- ---------- ---------- Income from continuing operations before income taxes and extraordinary items.. 67,017 42,992 32,145 18,186 13,106 Income tax provision.. 25,400 12,155 9,300 7,757 1,073 ---------- -------- ---------- ---------- ---------- Income from continuing operations before extraordinary items.. 41,617 30,837 22,845 10,429 12,033 Loss from discontinued operations: (Loss) income from operations, net of taxes.............. -- -- -- (4,025) 1,192 Gain (loss) on disposition, net of taxes.............. -- -- -- 2,360 (170,000) ---------- -------- ---------- ---------- ---------- Income (loss) before extraordinary items and cumulative effect of accounting changes.............. 41,617 30,837 22,845 8,764 (156,775) Extraordinary gain (loss) on early retirement of debt... (2,614) -- -- -- 5,115 Cumulative effect of accounting changes... -- -- -- 22,265 -- ---------- -------- ---------- ---------- ---------- NET INCOME (LOSS)....... $ 39,003 $ 30,837 $ 22,845 $ 31,029 $ (151,660) ========== ======== ========== ========== ========== Weighted average number of shares outstanding.. 70,336 69,033 69,064 69,103 67,103 ========== ======== ========== ========== ========== EARNINGS (LOSS) PER SHARE: Continuing operations. $ 0.59 $ 0.45 $ 0.33 $ 0.15 $ 0.18 Discontinued operations........... -- -- -- (0.02) (2.51) ---------- -------- ---------- ---------- ---------- Income (loss) before extraordinary items.. 0.59 0.45 0.33 0.13 (2.33) Extraordinary gain (loss) on early retirement of debt... (0.04) -- -- -- 0.07 Cumulative effect of accounting changes... -- -- -- 0.32 -- ---------- -------- ---------- ---------- ---------- Net Earnings (Loss)..... $ 0.55 $ 0.45 $ 0.33 $ 0.45 $ (2.26) ========== ======== ========== ========== ==========
See accompanying Notes to the Consolidated Financial Statements. F-4 TERRA INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS)
CUMULATIVE COMMON CLASS A TRUST PAID-IN TRANSLATION ACCUMULATED SHARES SHARES SHARES CAPITAL ADJUSTMENT DEFICIT TOTAL -------- ------- ------- -------- ----------- ----------- -------- December 31, 1990....... $ 52,203 $17,898 $28,821 $527,607 $(8,823) $(295,745) $321,961 Exchange of HBMS Special Shares........ 1,366 -- (796) (570) -- -- -- Translation adjustment. -- -- -- -- 8,823 -- 8,823 Retirement of convertible debentures............ 2,626 -- -- 8,533 -- 5,115 16,274 Conversion of Class A Shares................ 17,898 (17,898) -- -- -- -- -- Stock Incentive Plan... 4 -- -- 9 -- -- 13 Net Loss............... -- -- -- -- -- (156,775) (156,775) -------- ------- ------- -------- ------- --------- -------- December 31, 1991....... 74,097 -- 28,025 535,579 -- (447,405) 190,296 Exchange of HBMS Special Shares........ 9,791 -- (5,713) (4,078) -- -- -- Exercise of stock options............... 36 -- -- 95 -- -- 131 Stock Incentive Plan... 7 -- -- 13 -- -- 20 Net Income............. -- -- -- -- -- 31,029 31,029 -------- ------- ------- -------- ------- --------- -------- December 31, 1992....... 83,931 -- 22,312 531,609 -- (416,376) 221,476 Exchange of HBMS Special Shares........ 38,213 -- (22,312) (15,901) -- -- -- Exercise of stock options............... 213 -- -- 767 -- -- 980 Stock repurchase....... (107) -- -- (360) -- -- (467) Translation adjustment. -- -- -- -- (488) -- (488) Stock Incentive Plan... 7 -- -- 13 -- -- 20 Dividends.............. -- -- -- -- -- (1,386) (1,386) Net Income............. -- -- -- -- -- 22,845 22,845 -------- ------- ------- -------- ------- --------- -------- December 31, 1993....... 122,257 -- -- 516,128 (488) (394,917) 242,980 Stock Incentive Plan... 120 -- -- 847 -- -- 967 Exercise of stock options............... 442 -- -- 1,764 -- -- 2,206 Conversion of convertible debentures............ 731 -- -- 5,176 -- -- 5,907 Translation adjustment. -- -- -- -- (307) -- (307) Dividends.............. -- -- -- -- -- (2,800) (2,800) Net Income............. -- -- -- -- -- 39,003 39,003 -------- ------- ------- -------- ------- --------- -------- June 30, 1994 (unaudited)............ $123,550 $ -- $ -- $523,915 $ (795) $(358,714) $287,956 ======== ======= ======= ======== ======= ========= ========
See accompanying Notes to the Consolidated Financial Statements. F-5 TERRA INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS YEARS ENDED ENDED JUNE 30, DECEMBER 31, -------------------- ------------------------------ 1994 1993 1993 1992 1991 --------- --------- -------- -------- ---------- (UNAUDITED) OPERATING ACTIVITIES Net income (loss)....... $ 39,003 $ 30,837 $ 22,845 $ 31,029 $ (151,660) Adjustments to reconcile net income from continuing operations to net cash (used in) provided by operating activities: Depreciation and amortization......... 9,060 7,757 15,470 14,994 14,399 Income taxes.......... 20,902 5,494 5,500 6,313 (345) (Gain) loss on early retirement of debt... 2,614 -- -- -- (5,115) Cumulative effect of accounting changes... -- -- -- (22,265) -- Loss from discontinued operations........... -- -- -- 1,665 168,808 Unfunded retiree medical costs........ -- -- 723 1,161 -- Equity in earnings of unconsolidated affiliates........... (36) -- (2,275) -- -- Other................. 533 508 713 -- -- Change in current assets and liabilities, excluding working capital purchased/sold: Accounts receivable... (241,589) (223,463) (24,540) (1,764) (30,847) Inventories........... (22,032) 20,160 (6,718) (32,136) (30,452) Other current assets.. (1,214) 2,241 (2,893) (875) 917 Accounts payable...... 193,442 134,573 (9,945) (2,071) 12,693 Accrued and other liabilities.......... (16,945) (5,887) 2,452 38 20,048 Other................... (1,526) (1,001) (2,354) 684 (4,891) --------- --------- -------- -------- ---------- NET CASH USED IN OPERATING ACTIVITIES... (17,788) (28,781) (1,022) (3,227) (6,445) --------- --------- -------- -------- ---------- INVESTING ACTIVITIES Proceeds from asset sales................ -- 5,773 24,391 23,065 124,983 Discontinued operations........... (1,794) (3,337) 5,630 (5,504) (42,755) Purchase of property, plant and equipment.. (20,978) (13,431) (21,620) (17,620) (12,728) Acquisitions.......... (13,833) (17,160) (58,260) -- -- Proceeds from investments.......... 582 -- -- -- -- Dividends of unconsolidated affiliates........... -- -- 537 -- -- --------- --------- -------- -------- ---------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES............. (36,023) (28,155) (49,322) (59) 69,500 --------- --------- -------- -------- ---------- FINANCING ACTIVITIES Net short-term borrowings........... 100,007 42,628 7,313 -- -- Retirement of convertible debentures........... -- -- -- -- (14,430) Premium paid on retirement of convertible debentures........... (2,533) -- -- -- -- Proceeds from issuance of long-term debt.... -- -- 250 30,000 -- Principal payments on long-term debt....... (67,344) (6,468) (12,545) (5,842) (5,832) Dividends............. (2,800) -- (1,386) -- -- Stock issuance/repurchase-- net.................. 2,206 -- 513 -- -- --------- --------- -------- -------- ---------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES............. 29,536 36,160 (5,855) 24,158 (20,262) --------- --------- -------- -------- ---------- Foreign exchange effect on cash and short-term investments............ (307) -- (488) -- -- --------- --------- -------- -------- ---------- (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS............ (24,582) (20,776) (56,687) 20,872 42,793 CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD.... 65,102 121,789 121,789 100,917 58,124 --------- --------- -------- -------- ---------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD................. $ 40,520 $ 101,013 $ 65,102 $121,789 $ 100,917 ========= ========= ======== ======== ========== INTEREST PAID........... $ 11,800 $ 10,400 $ 14,700 ======== ======== ========== TAXES PAID.............. $ 3,800 $ 6,000 $ 1,100 ======== ======== ==========
See accompanying Notes to the Consolidated Financial Statements. F-6 TERRA INDUSTRIES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation: The Consolidated Financial Statements include the accounts of Terra Industries Inc., formerly Inspiration Resources Corporation, and all majority- owned subsidiaries ("the Corporation"). Operating results and, where appropriate, other data presented for prior years have been reclassified to reflect discontinued operations described in Note 4. Business segment: The Corporation operates in the agribusiness industry through its wholly owned subsidiary, Terra International, Inc., a marketer and producer of fertilizer, crop protection products, seed and services for agriculture. Foreign Exchange: Results of operations for the Canadian subsidiary are translated using average currency exchange rates during the period, while assets and liabilities are translated using current rates. Resulting translation adjustments are recorded as currency translation adjustments in stockholders' equity. Cash and short-term investments: The Corporation considers short-term investments with an original maturity of three months or less to be cash equivalents which are reflected at their approximate fair value. Financial instruments: The Corporation enters into foreign exchange forward and option contracts to manage exposure to currency fluctuations. These agreements are entered as designated hedges of fixed obligations and hedges of net foreign currency transaction exposure. Contract maturities are consistent with the settlement dates of items being hedged. Fair value of foreign exchange forward contracts is based on information received from a quotation service and computations by the Corporation which are based on current rates of exchange. Gains and losses on these contracts are deferred until maturity and included as a component of the related transaction, primarily manufacturing costs. The Corporation enters into financial contracts to manage its cost of natural gas, the primary material used in production of nitrogen fertilizers. These contracts include futures contracts, option contracts and swap agreements. The futures and option contracts require maintenance of cash balances generally 10% to 20% of the contract value, while option contracts also require initial premiums payments ranging from 2% to 5% of contract value. Contract settlement dates are consistent with natural gas purchases throughout the year and gains or losses resulting from movement in the price of natural gas futures contracts traded on the NYMEX are deferred and credited or charged to manufacturing cost in the month to which the hedged transaction relates. The Corporation has entered into interest rate swap agreements to manage exposure to interest rate fluctuations. Under provisions of the agreements, the Corporation and another party exchange fixed and floating interest rate payments periodically over the life of the agreements. The differential to be paid or received under these agreements is recorded as interest expense consistent with provisions of the agreement. F-7 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Inventories: Inventories are stated at the lower of cost or estimated net realizable value. The cost of inventories is determined using the first-in, first-out method. Property, plant and equipment: Expenditures for plant and equipment additions, replacements and major improvements are capitalized. Related depreciation is charged to expense on a straight-line basis over estimated useful lives. Maintenance and repair costs are expensed as incurred. Reclassifications: Certain reclassifications have been made to prior years' financial statements to conform with current year presentation. Per-share results: Earnings-per-share data are based on the weighted average number of Common Shares that would become outstanding after allowing for the full exchange of Hudson Bay Mining and Smelting Co., Limited Special Shares held by the public and exercise of outstanding stock options. All previously unexchanged Special Shares were automatically exchanged for Common Shares of the Corporation on July 6, 1993. The dilutive effect of the Corporation's outstanding restricted shares, stock options and convertible debentures was not significant. Interim Financial Information: The unaudited consolidated financial statements as of June 30, 1994 contain all adjustments necessary to summarize fairly the financial position of Terra Industries Inc. and all majority-owned subsidiaries and the results of the Corporation's operations for the six months ended June 30, 1994 and 1993. All such adjustments are of a normal recurring nature. Because of the seasonal nature of the Corporation's operations and effects of weather-related conditions in several of its marketing areas, earnings of any single reporting period should not be considered as indicative of results for a full year. 2. ACQUISITIONS On April 8, 1993, a wholly owned subsidiary of the Corporation, Terra International (Canada) Inc. ("Terra Canada") acquired rights to an anhydrous ammonia manufacturing plant and related upgrading facilities ("the nitrogen plant") located at Courtright, Ontario effective as of March 31, 1993. In addition, Terra Canada purchased working capital associated with the nitrogen plant and interests in 32 farm service centers operating under the trademark, Agromart(TM). All but two of the Agromarts(TM) are owned by corporations in which Terra Canada has a 50% interest, and the remaining 50% interests are owned by local management and other investors. The remaining two Agromarts(TM) are wholly owned by Terra Canada. The amount paid in connection with the transaction was approximately $73 million (Cdn) of which approximately $47 million (Cdn) was provided through lease financing and the remainder was funded by a working capital line of credit and cash. On December 31, 1993, Terra International, Inc. purchased net assets of certain operations of Asgrow Florida Company, Inc. ("Terra Asgrow Florida"), a distributor of fertilizer, chemicals and seed, for $39 million. Terra Asgrow Florida operates 12 distribution centers and is a supplier to the vegetable and ornamental markets, mostly in Florida. The amount paid at closing was approximately $31 million which was provided from available cash. F-8 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Terra Canada's operating results from the date of acquisition are included in the Consolidated Statements of Income. The following represents unaudited pro forma summary results of operations as if both acquisitions had occurred at the beginning of 1992:
YEAR ENDED DECEMBER SIX MONTHS 31, ENDED --------------------- JUNE 30, 1994 1993 1992 ------------- ---------- ---------- (IN THOUSANDS, EXCEPT PER-SHARE DATA) Revenues................................... $887,700 $1,351,000 $1,282,800 Income before extraordinary items and cumulative effect of accounting changes... $ 31,847 $ 25,500 $ 14,300 Net income................................. $ 31,847 $ 25,500 $ 36,600 Net income per share....................... $ 0.46 $ 0.37 $ 0.53
The pro forma operating results were adjusted to include lease expense rather than depreciation for the nitrogen plant, increased costs of seed sales, amortization of intangibles, interest expense on the acquisition borrowings and the effect of income taxes. The pro forma information listed above does not purport to be indicative of the results that would have been obtained if the operations were combined during the above period. In addition, they are not intended to be a projection of future operating results or trends. 3. ACCOUNTING CHANGES In 1992, the Corporation adopted Statement of Financial Accounting Standard ("SFAS") 106, "Employers Accounting for Post-Retirement Benefits Other than Pensions" and SFAS 109, "Accounting for Income Taxes." In connection with the adoption of SFAS 106, the Corporation elected to recognize immediately the prior service cost of providing post-retirement medical benefits during the active service of the employee. This resulted in a one-time charge of $5.7 million, net of income taxes of $3.5 million. Net income from continuing operations for 1992 was reduced $0.7 million from that which would have been reported under the Corporation's previous accounting method. The pro forma effect of the change on prior years is not determinable. Prior to 1992, the Corporation recognized expense in the period the benefits were paid. These benefit costs were not significant in 1991. Accounting for income taxes under SFAS 109 requires recognition of deferred tax assets and liabilities for the effect of future tax consequences of events recognized in the Corporation's financial statements or tax returns. SFAS 109 requires the Corporation to recognize the income tax benefit of operating loss and tax credit carryforwards expected to be realized; such recognition was prohibited under SFAS 96, the Corporation's previous method of accounting for income taxes. A $28.0 million credit was recorded as the effect at January 1, 1992 of a change in accounting principle. Income tax expense from continuing operations was increased $6.5 million for 1992 pursuant to SFAS 109. 4. DISCONTINUED OPERATIONS During 1993, the Corporation sold the leasing business and the construction materials businesses, discontinued in 1992. As of December 31, 1992, the Corporation's Board of Directors approved plans to sell the leasing and construction materials businesses as well as equity interests in a copper alloy producer, an undeveloped beryllium mine property and its gold mining affiliate. As a result of this decision and a gain on the sale of remaining coal properties, discontinued in 1990, the Corporation realized a $2.4 million gain on disposition of discontinued operations during 1992. F-9 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) During the 1991 third quarter, the Corporation sold its interests in its base metals segment consisting of Hudson Bay Mining and Smelting Co., Limited ("HBMS") and related metals marketing and trading operations. The base metals segment was sold to Minorco, the Corporation's majority stockholder, for $87 million. The Corporation recognized a $170 million loss on the disposal of the base metals segment. Financial results of the base metals, coal, leasing and other discontinued businesses for 1993 have been applied against their respective reserves and 1992 and 1991 amounts have been included in discontinued operations and are as follows:
1992 1991 ----- ------ (IN MILLIONS) Revenues: Base metals................................................... $ -- $176.8 Leasing....................................................... 5.9 8.3 Construction materials........................................ 27.8 29.4 ----- ------ $33.7 $214.5 ===== ====== Income (loss) from operations, net of income taxes: Base metals................................................... $ -- $ (4.8) Leasing....................................................... (2.8) 3.8 Construction materials........................................ (0.8) (0.2) Other......................................................... (0.4) 2.4 ----- ------ $(4.0) $ 1.2 ===== ======
5. RELATIONSHIP WITH MAJORITY STOCKHOLDER Minorco, through its beneficial ownership of Common Shares, owns approximately 53 percent of the equity of the Corporation. In 1992, the Corporation discontinued its remaining operations in the gold mining business conducted through its 50 percent interest in Western Gold Exploration and Mining Company, Limited Partnership ("WestGold"). The remaining 50 percent interest is owned by Minorco. During 1991, the Corporation sold its base metals segment to Minorco as described in Note 4. The Corporation subleases office space to Minorco, procures certain insurance coverages for Minorco and related companies and shares the cost of an executive of both organizations. Payments in settlement of these services are made on an ongoing basis. 6. INVENTORIES Inventories consisted of the following:
JUNE 30, 1994 DECEMBER 31, ----------- ----------------- 1993 1992 (IN THOUSANDS) (UNAUDITED) -------- -------- Raw materials..................................... $ 28,751 $ 22,983 $ 14,770 Finished goods.................................... 239,606 222,012 183,851 -------- -------- -------- Total......................................... $268,357 $244,995 $198,621 ======== ======== ========
F-10 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consisted of the following:
JUNE 30, 1994 DECEMBER 31, ----------- -------------------- 1993 1992 (IN THOUSANDS) (UNAUDITED) --------- --------- Land and buildings........................... $ 75,359 $ 66,343 $ 59,589 Plant and equipment.......................... 190,582 179,095 152,766 --------- --------- --------- 265,941 245,438 212,355 Less accumulated depreciation and amortization................................ (141,155) (134,768) (120,386) --------- --------- --------- Total.................................... $ 124,786 $ 110,670 $ 91,969 ========= ========= =========
8. DEBT DUE WITHIN ONE YEAR Debt due within one year consisted of the following:
JUNE 30, 1994 DECEMBER 31, ----------- -------------- 1993 1992 (IN THOUSANDS) (UNAUDITED) ------ ------- Short-term borrowings............................... $107,320 $7,313 $ -- Current maturities of long-term debt................ 2,351 2,323 12,508 -------- ------ ------- Total........................................... $109,671 $9,636 $12,508 ======== ====== =======
The Corporation has short-term domestic bank lines of credit consisting of a $130 million revolving credit facility, which is used primarily to provide for domestic seasonal working capital needs, a $26.2 million ($35 million Cdn) revolving credit facility used to provide for working capital needs for its Canadian operations, and a $15 million uncommitted line for working capital needs. There was $7.3 million outstanding at December 31, 1993 under the Canadian facility at an average rate of 4.6%. Interest on borrowings under these lines is charged at current market rates. Under both the domestic and Canadian facility, the Corporation has agreed, among other things, to maintain certain levels of working capital and net worth, adhere to maximum debt leverage limitations and restrict payments to the Corporation from operating subsidiaries. The Corporation's $130 million revolving credit agreement expires December 31, 1995. A commitment fee of 1/4 percent is paid on the unused portion of the facility, and no borrowings were outstanding at December 31, 1993. The Corporation's $35 million (Cdn) revolving credit agreement expires January 5, 1995 and is renewable every 120 days for a 360-day term. A commitment fee of 1/8 percent is paid on the facility. The Corporation's $15.0 million line is subject to periodic review and may be withdrawn by the bank at any time. 9. ACCRUED AND OTHER LIABILITIES Accrued and other liabilities consisted of the following:
JUNE 30, 1994 DECEMBER 31, ----------- ----------------- 1993 1992 (IN THOUSANDS) (UNAUDITED) -------- -------- Customer deposits................................. $ 7,751 $ 50,714 $ 41,714 Payroll and benefit costs......................... 24,085 17,072 15,167 Income taxes...................................... 16,983 17,025 9,551 Other............................................. 56,451 43,848 40,978 -------- -------- -------- Total......................................... $105,270 $128,659 $107,410 ======== ======== ========
F-11 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 10. LONG-TERM DEBT Long-term debt consisted of the following:
JUNE 30, 1994 DECEMBER 31, ----------- ------------------ 1993 1992 (IN THOUSANDS) (UNAUDITED) -------- -------- 8.5% Convertible Subordinated Debentures, due 2012.......................................... $ -- $ 72,057 $ 72,057 Unsecured Senior Notes, 8.48%, due 2005........ 30,000 30,000 30,000 Industrial Development Revenue Bonds bearing interest at an average 6.78% with increasing payments from 1994 to 2011.................... 9,210 9,355 9,485 Industrial Development Revenue Bonds bearing a variable interest rate repaid December, 1993.. -- -- 5,000 Unsecured Notes, 8.75% to 9.63%, due 1996 to 1998.......................................... 7,500 8,500 10,500 Bank Note, floating rate repaid January, 1993.. -- -- 5,258 Other.......................................... 1,423 1,472 1,379 ------- -------- -------- 48,133 121,384 133,679 Less current maturities........................ (2,351) (2,323) (12,508) ------- -------- -------- Total...................................... $45,782 $119,061 $121,171 ======= ======== ======== Estimated Fair Value........................... $45,800 $121,500 $121,000 ======= ======== ========
Scheduled principal payments for each of the five years 1994 through 1998 are $2.3 million, $2.3 million, $2.8 million, $1.3 million and $6.5 million, respectively. See Note 19 for subsequent events. The Corporation's 8.5 percent Convertible Subordinated Debentures ("Debentures") are convertible into Common Shares any time prior to maturity, unless previously redeemed, at a conversion price of $8.083 per share. The Debentures are subject to redemption, upon not less than 20 days notice by mail, at any time, as a whole or in part, at the election of the Corporation. The redemption price, expressed as a percent of the principal amount of the Debentures to be redeemed, is 103.40% until May 31, 1994, 102.55% until May 31, 1995 and decreasing yearly thereafter to 100% at June 1, 1997. During 1992, the Corporation entered into a long-term note purchase agreement of $30 million in 8.48 percent Senior Notes requiring semi-annual payments through May 1, 2005. The Corporation has executed interest rate swap agreements to convert one-half of these notes to LIBOR-based floating rate instruments. The interest rate agreements became effective on April 15, 1993 and terminates on April 15, 2003. At December 31, 1993, the interest rate spread, in the Company's favor, amounted to 1.5% on the underlying instruments and resulted in an effective interest rate of 7.0% on the $30 million Senior Notes. The debt agreement includes covenants similar to the Revolving Credit Agreement described in Note 8 and a requirement for rental and interest obligations coverage. The Industrial Development Revenue Bonds due in 2011 are secured by a letter of credit guaranteed by the Corporation and, along with other long-term debt due in 2003, by the Corporation's headquarters building located in Sioux City, Iowa. The fair value of long-term debt was established by reference to the public exchange market for the publicly traded long-term securities of the Corporation and consideration of redemption provisions. Estimates of fair value developed by the Corporation were utilized for other long-term debt. F-12 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 11. COMMITMENTS AND CONTINGENCIES The Corporation and its subsidiaries are committed to various non-cancelable operating leases for agricultural equipment, and office, production, and storage facilities expiring on various dates through 2001. Total minimum rental payments are as follows:
(IN THOUSANDS) 1994.............................................................. $25,178 1995.............................................................. 21,329 1996.............................................................. 16,998 1997.............................................................. 11,244 1998 and thereafter............................................... 5,061 ------- Total......................................................... $79,810 =======
The Corporation entered a lease financing agreement in connection with the purchase of an ammonia manufacturing plant and related upgrading facilities located near Sarnia, Ontario. The agreement is for a four-year term requiring annual lease payments of approximately $4.0 million (Cdn). Terra Canada has an option to purchase the nitrogen plant during the term of the lease and at expiration for approximately $47 million (Cdn). If, at the end of the lease term, Terra Canada elects not to exercise its purchase option, the Corporation must pay to the lessor approximately $40 million (Cdn), subject to reimbursement based on the proceeds realized upon the sale of the nitrogen plant by the lessor. Terra Canada has entered into certain agreements in order to convert its obligations with respect to the nitrogen plant set forth above from Canadian dollar and fixed rental obligations to U.S. dollar and variable rental obligations based on interest rate changes tied to LIBOR. Total rental expense under all leases, including short-term cancelable operating leases, was approximately $24.7 million, $19.4 million and $18.9 million for the years ended December 31, 1993, 1992 and 1991, respectively. In 1988, the Corporation formulated a fungicide for E. I. DuPont de Nemours and Company ("DuPont") at the Blytheville facility. The fungicide was recalled and claims in excess of $90 million, plus punitive damages, have been filed by third parties alleging damages from product use. During 1993, the Corporation reached a settlement with DuPont whereby DuPont will assume responsibility for all related pending product claims and will reimburse the Corporation for claims previously settled and not reimbursed by insurers. As a result of this settlement, reserves established in 1989 to cover expected recall and claims costs will not be required. Accordingly, the Corporation reduced 1993 costs in the fourth quarter by $4.2 million, the remaining amount of such reserves. A subsidiary of the Corporation has been notified by the United States Environmental Protection Agency ("EPA") that it is a potentially responsible party ("PRP") in the Matter of Valley Chemical Site, Greenville, Mississippi. Ten other companies have also been named as PRPs. Based on discussions with the EPA and review of information from other PRPs, the Corporation believes its responsibility is limited to a portion of material removal costs which should not be significant to its operating results. The Corporation is contingently liable for retiree medical benefits of employees of coal mining operations sold on January 12, 1993. Under the purchase agreement, the purchaser agreed to indemnify the Corporation against its obligations under certain employee benefit plans. Due to the Coal Industry Retiree Health Benefit Act of 1992, certain retiree medical benefits of union coal miners have become statutorily mandated, and all companies owning 50 percent or more of any company liable for such benefits as of certain specified dates becomes liable for such benefits if the company directly liable is unable to pay them. As a result, if the purchaser becomes unable to pay its retiree medical obligations assumed pursuant to the sale, the Corporation may have to pay such amount. The Corporation has estimated that the present F-13 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) value of liabilities for which it retains contingent responsibility approximates $12 million at December 31, 1993. In the event the Corporation would be required to assume this liability, mineral reserves associated with the sold coal subsidiary would revert to the Corporation. The Corporation and certain of its subsidiaries are involved in the above mentioned and various other legal actions and claims, including environmental matters, arising from the normal course of business. Although it is not possible to predict with any certainty the outcome of such matters, it is the opinion of management that these matters will not have a material adverse effect on either the financial position or results of operations of the Corporation. 12. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK Financial Instruments--The Corporation enters into foreign exchange forward and option contracts to manage exposure to currency fluctuations. These agreements are entered as designated hedges of fixed obligations and hedges of net foreign currency transaction exposures. At December 31, 1993, the notional amounts for all foreign exchange forward and foreign currency option contracts totaled $98.2 million. These amounts are a reflection of the extent of such activity and are disclosed for informational purposes only. They do not indicate the significantly smaller credit or economic risks involved in these agreements. These contracts had a carrying amount of $0.1 million and a fair value of $0.9 million. Fair value of foreign exchange forward contracts is based on quotations received from a quotation service and on computations prepared by the Corporation which are based on current rates of exchange. Maturities, which are consistent with the settlement dates of items being hedged, extend through April 1997. The gains and losses on these contracts are deferred and included as a component of the related transaction. The Corporation fixes some natural gas supply prices through the use of swap agreements and financial derivatives. The Corporation had gas contracts with a computed value of $24.7 million and a fair value of $24.2 million based on contract prices and rates in effect at December 31, 1993. Gains and losses on futures contracts and swap agreements are credited or charged to manufacturing cost in the month to which the hedged transaction relates. At December 31, 1993, the Corporation had letters of credit outstanding totaling $19.5 million, guaranteeing various insurance and financing activities. Short-term investments of $13.0 million at December 31, 1993 and 1992 are restricted to collateralize certain of the letters of credit. The Corporation enters into the above agreements with a limited number of major international financial institutions. The Corporation does not expect any losses from credit exposure due to review and control procedures established by corporate policy. Concentrations of Credit Risk--The Corporation is subject to credit risk through trade receivables and short-term investments. Although a substantial portion of its debtors' ability to pay is dependent upon the agribusiness economic sector, credit risk with respect to trade receivables is minimized due to a large customer base and its geographic dispersion. Short-term cash investments are placed with well capitalized, high quality financial institutions and in short duration corporate and government debt securities funds. By policy, the Corporation limits the amount of credit exposure in any one type of investment instrument. 13. STOCKHOLDERS' EQUITY The Corporation allocates $1.00 per share upon the issuance of Common Shares to the Common Share capital account. On July 6, 1993, the outstanding HBMS Special Exchangeable Non-Voting Shares ("HBMS Special Shares") were each automatically exchanged for one Common Share of the Corporation. Through the F-14 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Corporation's Trust Shares, each HBMS Special Share had a vote equivalent to one Common Share of the Corporation. For Common Shares issued upon the exchange of HBMS Special Shares subsequent to August 31, 1986, the Corporation allocated $9.53 per share to the Common Share capital account, representing the average historical capitalization of the HBMS Special Shares. In 1992, the Corporation issued 375,500 restricted Common Shares under its 1992 Stock Incentive Plan to certain key employees of the Corporation. During 1993 an additional 38,500 shares were issued and 45,500 shares were forfeited. At December 31, 1993, 368,500 of the unvested shares remain outstanding. Under terms of the issuance, vesting of stock granted is contingent upon the attainment, prior to March 1999, of pre-established market price objectives for the Corporation's shares and/or, for approximately 31 percent of participants, specified regional or divisional three-year operating profit objectives. In 1991, the Corporation issued 33,300 restricted Common Shares under its 1987 Stock Incentive Plan. The agreement restricts the shares to vesting in equal annual installments over five years. The shares issued are entitled to normal voting rights and earn dividends as declared during the performance periods. Compensation expenses are accrued on ratable bases through the performance periods. The Corporation has authorized 16,500,000 Trust Shares for issuance. All Trust Shares previously outstanding were cancelled in July 1993. In addition to the Common and Trust Shares, the Corporation has authorized 19,125,000 Class A Shares for issuance. All Class A Shares previously outstanding were converted to Common Shares in 1991. A summary of changes in the Corporation's outstanding capital stock follows:
COMMON CLASS A TRUST TOTAL SHARES SHARES SHARES SHARES (IN THOUSANDS) ------ ------- ------ ------ December 31, 1990.............................. 43,207 17,898 5,181 66,286 Exchanges of HBMS Special Shares............. 144 -- (144) -- Retirement of Convertible Debentures......... 2,626 -- -- 2,626 Conversion of Class A Shares................. 17,898 (17,898) -- -- Stock Incentive Plan......................... 33 -- -- 33 ------ ------- ------ ------ December 31, 1991.............................. 63,908 -- 5,037 68,945 Exchange of HBMS Special Shares.............. 1,027 -- (1,027) -- Exercise of stock options.................... 36 -- -- 36 Stock Incentive Plan......................... 375 -- -- 375 ------ ------- ------ ------ December 31, 1992.............................. 65,346 -- 4,010 69,356 Exchange of HBMS Special Shares.............. 4,010 -- (4,010) -- Exercise of stock options.................... 213 -- -- 213 Repurchase of shares......................... (107) -- -- (107) Stock Incentive Plan......................... (7) -- -- (7) ------ ------- ------ ------ December 31, 1993.............................. 69,455 -- -- 69,455 ====== ======= ====== ======
At December 31, 1993, 12.5 million Common Shares were reserved for issuance upon award of restricted shares, exercise of employee stock options and conversion of convertible debentures. 14. STOCK OPTIONS The Corporation's 1992 Stock Incentive Plan authorized granting key employees options to purchase Common Shares at not less than fair market value on the date of grant and also authorizes the award of performance units and restricted shares. The Corporation's 1983 Stock Option Plan and 1987 Stock Incentive Plan authorized granting key employees similar options to purchase Common Shares. No further F-15 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) options may be granted under the 1983 and 1987 Plan. Awards to a maximum of 2.5 million Common Shares may be granted under the 1992 Plan. Options generally may not be exercised prior to one year or more than ten years from the date of grant. At December 31, 1993, 1,763,500 Common Shares were available for grant under the 1992 Plan. A summary of activity under the 1992, 1987 and 1983 Plans follows:
SHARES PRICE RANGE UNDER OPTION PER SHARE (IN THOUSANDS) ------------ ---------------- Balance at December 31, 1990..................... 2,603 $4.13 to $13.11 Granted........................................ 356 3.38 Expired/terminated............................. 505 3.38 to 13.11 Exercised...................................... -- -- ----- ---------------- Balance at December 31, 1991..................... 2,454 $3.38 to $13.11 Granted........................................ 328 5.00 Expired/terminated............................. 163 3.38 to 11.15 Exercised...................................... 36 3.38 to 4.13 ----- ---------------- Balance at December 31, 1992..................... 2,583 $3.38 to $13.11 Granted........................................ 41 5.00 Expired/terminated............................. 266 4.125 to 13.11 Exercised...................................... 213 3.38 to 6.75 ----- ---------------- Balance at December 31, 1993..................... 2,145 $3.38 to $11.38 ===== ================
The number of options exercisable at December 31 for each of the past three years follows:
PRICE RANGE OPTIONS PER SHARE (IN THOUSANDS) ------- --------------- 1991............................................ 2,101 $4.13 to $13.11 1992............................................ 2,255 3.38 to 13.11 1993............................................ 1,777 3.38 to 11.38 ===== ===============
15. RETIREMENT PLANS The Corporation and its subsidiaries maintain non-contributory pension plans that cover substantially all salaried and hourly employees. Benefits are based on a final pay formula for the salaried plans and a flat benefit formula for the hourly plans. The plans' assets consist principally of equity securities and corporate and government debt securities. The Corporation and its subsidiaries also have certain non-qualified pension plans covering executives, which are unfunded. The Corporation accrues pension costs based upon annual independent actuarial valuations for each plan and funds these costs in accordance with statutory requirements. The components of net periodic pension expense (credit) were as follows:
1993 1992 1991 (IN THOUSANDS) ------ ------ ------ Current service cost.................................... $2,627 $2,019 $1,914 Interest on projected benefit obligation................ 3,539 2,322 2,077 Actual return on assets................................. (4,629) (2,290) (4,251) Net amortization and other.............................. 853 28 2,395 ------ ------ ------ Pension expense......................................... $2,390 $2,079 $2,135 ====== ====== ======
F-16 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table reconciles the plans' funded status to amounts included in the Consolidated Statements of Financial Position at December 31:
1993 1992 ----------------------- ----------------------- PLANS WITH PLANS WITH PLANS WITH PLANS WITH ASSETS IN ACCUMULATED ASSETS IN ACCUMULATED EXCESS OF BENEFITS IN EXCESS OF BENEFITS IN ACCUMULATED EXCESS OF ACCUMULATED EXCESS OF BENEFITS PLAN ASSETS BENEFITS PLAN ASSETS (IN THOUSANDS) ----------- ----------- ----------- ----------- Actuarial present value of: Vested benefit obligations... $(32,550) $(1,532) $(21,764) $(1,069) Accumulated benefit obligations................. $(36,213) $(1,680) $(24,376) $(1,109) Projected benefit obligations................. $(51,173) $(1,993) $(33,558) $(1,155) Plan assets at fair value...... 45,626 -- 30,732 -- -------- ------- -------- ------- Funded status.................. (5,547) (1,993) (2,826) (1,155) Unrecognized net experience loss (gain)................... 4,061 295 1,673 (386) Unrecognized prior service cost.......................... 636 107 667 116 Unrecognized net transition (asset) obligation............ (3,469) 645 (3,835) 705 Additional minimum liability... -- (734) -- (389) -------- ------- -------- ------- Pension liability included in the Consolidated Statements of Financial Position............ $ (4,319) $(1,680) $ (4,321) $(1,109) ======== ======= ======== =======
Under the terms of the Canadian purchase agreement, the Corporation established a pension plan for transferring employees, whereby the seller will transfer assets, which approximate the projected benefit obligations of $9.8 million. The assumptions used to determine the actuarial present value of benefit obligations and pension expense during each of the years in the three- year period ended December 31, 1993 were as follows:
1993 1992 1991 ---- ---- ---- Weighted average discount rates to determine: Pension expense................................................ 7.5% 8.5% 8.5% Present value of benefit obligations........................... 7.5% 8.5% 8.5% Long-term per annum compensation increase........................ 5.0% 6.0% 6.0% Long-term return on plan assets.................................. 9.5% 9.5% 9.5% ==== ==== ====
The Corporation also sponsors a qualifying savings plan covering most full- time employees. Contributions made by participating employees are matched based on a specified percentage of employee contributions to 6% of the employees' pay base. The cost of the Corporation's matching contribution to the savings plan totaled $1.4 million in 1993, and $1.1 million in 1992 and 1991. 16. POST-RETIREMENT BENEFITS The Corporation also provides health care benefits for eligible retired employees of its agribusiness subsidiary. Participants generally become eligible after reaching retirement age with ten years of service. The plan pays a stated percentage of most medical expenses reduced for any deductible and payments made by government programs. The plan is unfunded. Employees hired prior to January 1, 1990 are eligible for participation in the plan. Participant contributions and co-payments are subject to escalation. F-17 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table indicates the components of the post-retirement medical benefits obligation included in the Corporation's Consolidated Statement of Financial Position at December 31, 1993:
1993 1992 (IN THOUSANDS) -------- -------- Accumulated post-retirement medical benefit obligation: Retirees................................................. $ 2,054 $ 2,168 Fully eligible active plan participants.................. 1,946 2,075 Other active participants................................ 5,305 6,205 -------- -------- Funded status............................................ (9,305) (10,448) Unrecognized net (gain) loss............................. 149 37 Unrecognized prior service (benefit)..................... (2,040) -- -------- -------- (Accrued) post-retirement benefit cost..................... $(11,196) $(10,411) ======== ========
Net periodic post-retirement medical benefit cost consisted of the following components:
1993 1992 (IN THOUSANDS) ------ ------ Service cost of benefits earned................................. $ 526 $ 723 Interest cost on accumulated post-retirement medical benefit obligation..................................................... 614 730 Net amortization and other...................................... (127) -- ------ ------ Net periodic post-retirement medical benefit cost............... $1,013 $1,453 ====== ======
The Corporation limits its future obligation for post-retirement medical benefits by capping at 5% the annual rate of increase in the cost of claims it assumes under the Plan. The weighted average discount rate used in determining the accumulated post-retirement medical benefit obligation is 7.5% and was 8.0% in 1992. The determination of the Corporation's accumulated post- retirement benefit obligation as of December 31, 1993 utilizes the annual limit of 5% for increases in claims costs. 17. OTHER INCOME, NET Other income consisted of the following:
1993 1992 1991 (IN THOUSANDS) ------- ------- ------- Fertilizer service revenue.............................. $13,531 $10,354 $ 9,743 Service charge income................................... 3,930 3,963 3,833 Other, net.............................................. 8,030 5,829 5,255 ------- ------- ------- Total............................................... $25,491 $20,146 $18,831 ======= ======= =======
18. INCOME TAXES Components of the income tax provision (benefit) applicable to continuing operations are as follows:
1993 1992 1991 (IN THOUSANDS) ------- ------ ------ Current: Federal............................................... $ 4,884 $ 640 $ 600 Foreign............................................... 3,750 -- -- State................................................. 4,709 804 818 ------- ------ ------ 13,343 1,444 1,418 ------- ------ ------ Deferred: Federal............................................... (4,126) 6,288 (119) Foreign............................................... 451 -- -- State................................................. (368) 25 (226) ------- ------ ------ (4,043) 6,313 (345) ------- ------ ------ Total income tax provision.......................... $ 9,300 $7,757 $1,073 ======= ====== ======
F-18 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Effective January 1, 1992, the Corporation adopted SFAS 109 to account for income taxes as described in Note 3 above. The Corporation has accumulated net operating loss ("NOL") carryforwards and, in prior years under provisions of its previous accounting method, the benefits from loss carryforwards had been included as a reduction of income tax expense in the year utilized. The income tax provision differs from the federal statutory provision for the following reasons:
1993 1992 1991 (IN THOUSANDS) ------- ------- ------- Income (loss) from continuing operations before taxes: U.S............................................... $19,046 $18,186 $13,106 Canada............................................ 13,099 -- -- ------- ------- ------- $32,145 $18,186 $13,106 ======= ======= ======= Statutory income tax: U.S............................................... $ 6,666 $ 6,183 $ 4,456 Canada............................................ 4,978 -- -- ------- ------- ------- 11,644 6,183 4,456 Non-deductible expenses............................. 698 710 705 State and local income taxes........................ 3,061 547 391 Benefit of loss carryforwards....................... (4,494) -- (5,036) Change in federal tax rates......................... (1,233) -- -- Undistributed equity earnings....................... (865) -- -- Other............................................... 489 317 557 ------- ------- ------- Income tax provision................................ $ 9,300 $ 7,757 $ 1,073 ======= ======= =======
Deferred tax assets totaled $50.8 million and $46.3 million at December 31, 1993 and 1992, respectively. At December 31, 1993, undistributed earnings of the Canadian subsidiary, considered permanently invested, for which deferred income taxes have not been provided, was $8.9 million. The tax effect of NOL and tax credit carryforwards and significant temporary differences between reported and taxable earnings that gave rise to net deferred tax assets were as follows:
1993 1992 (IN THOUSANDS) -------- ------- NOL, capital loss and tax credit carryforwards............... $ 28,937 $31,209 Discontinued business costs.................................. 7,295 8,992 Unfunded employee benefits................................... 8,146 8,354 Accrued liabilities.......................................... 8,658 5,705 Inventory valuation.......................................... 4,059 3,418 Account receivable allowances................................ 2,176 2,286 Depreciation................................................. (6,297) (4,020) Valuation allowance.......................................... (2,765) (9,554) Other........................................................ 93 (131) -------- ------- $ 50,302 $46,259 ======== =======
Remaining unutilized NOL carryforwards were approximately $55 million and $51 million at December 31, 1993 and 1992, respectively. NOL carryforwards that have not been utilized expire in 2005. Investment tax credits of approximately $1.7 million expire in varying amounts from 1998 through 2000. Alternative minimum taxes paid of $5.2 million are available to offset future tax liabilities and have an indefinite life. The Corporation's capital loss carryforwards totalled $7.9 million and $28.1 million at F-19 TERRA INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) December 31, 1993 and 1992, respectively. Capital loss carryforwards that are not utilized will expire in 1997. The change in the valuation allowance reflects current utilization of capital losses against capital gains and changes in tax rates. A valuation allowance is provided since the realization of tax benefits of capital loss carryforwards is not assured. Components of income tax provision (benefit) included in net income other than from continuing operations are as follows:
1993 1992 1991 (IN THOUSANDS) ------- -------- ------ Current: Federal............................................. $ -- $ 120 $2,496 State and local..................................... -- 5,479 1,992 ------- -------- ------ -- 5,599 4,488 ------- -------- ------ Deferred: Federal............................................. -- (18,887) 554 State and local..................................... -- (2,001) (629) ------- -------- ------ -- (20,888) (75) ------- -------- ------ $ -- $(15,289) $4,413 ======= ======== ======
19. SUBSEQUENT EVENTS Subsequent to June 30, 1994 the following events occurred: On August 9, 1994, the Corporation announced it had signed a definitive agreement to acquire Agricultural Minerals and Chemicals Inc. ("AMCI"). AMCI has annual sales of approximately $366 million and operates two fertilizer and one methanol manufacturing facilities. The acquisition will be accounted for under the purchase method of accounting. The Corporation will obtain additional funds from a combination of debt financing, offering of equity securities and utilization of available cash. See Pro Forma Condensed Consolidated Financial Statements appearing elsewhere in this Prospectus. F-20 REPORT OF INDEPENDENT AUDITORS The Board of Directors Agricultural Minerals and Chemicals Inc. We have audited the accompanying consolidated balance sheets of Agricultural Minerals and Chemicals Inc. as of December 31, 1993 and 1992, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Agricultural Minerals and Chemicals Inc. at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Tulsa, Oklahoma February 11, 1994 F-21 AGRICULTURAL MINERALS AND CHEMICALS INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER-SHARE AMOUNTS)
DECEMBER 31, JUNE 30, ----------------- 1994 1993 1992 ---------- -------- -------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents..................... $ 88,718 $ 60,653 $ 44,367 Receivables: Trade--net of allowance for doubtful accounts of $630 at December 31, 1993 and $500 at December 31, 1992.................. 37,534 24,893 18,722 Other, including related party (Note 9)..... 4,332 5,017 3,922 Inventory--finished products.................. 14,546 21,262 32,435 Inventory--materials and supplies............. 10,836 10,365 14,998 Prepaid expenses.............................. 15,673 15,399 8,555 -------- -------- -------- Total current assets...................... 171,639 137,589 122,999 Net property, plant and equipment (Notes 4 and 6)............................................. 319,383 326,899 347,012 Deferred finance charges, net of accumulated amortization of $2,338 and $3,734 at December 31, 1993 and 1992, respectively................ 10,412 11,450 7,297 Distribution reserve fund (Note 10)............. 18,480 18,480 18,480 Other assets.................................... 10,891 11,977 10,125 -------- -------- -------- Total assets.............................. $530,805 $506,395 $505,913 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.............................. $ 28,531 $ 35,379 $ 30,549 Accrued liabilities........................... 24,197 15,491 11,974 Customer prepayments.......................... 428 2,928 4,377 Revolving credit borrowings (Note 6).......... -- 9,000 24,000 Current portion of long-term debt (Note 6).... 1,370 726 14,691 -------- -------- -------- Total current liabilities................. 54,526 63,524 85,591 Long-term debt and capital lease obligations (Note 6)....................................... 215,659 218,692 120,428 Other liabilities............................... 4,179 2,055 2,999 Deferred income taxes........................... 25,231 16,425 13,816 Minority interest............................... 161,798 156,352 155,043 Common stock and options with liquidity rights (Note 5)....................................... 4,347 4,294 15,792 Stockholders' equity: Agricultural Minerals and Chemicals Inc. common stock, par value $.01 per share (Notes 1 and 8): Class A: 25,000,000 and 15,000,000 shares authorized, 16,951,630 and 9,717,080 shares issued and outstanding at December 31, 1993 and 1992, respectively..................... 170 170 97 Class B: 25,000,000 and 15,000,000 shares authorized, 207,000 and 1,067,000 shares issued and outstanding at December 31, 1993 and 1992, respectively..................... 2 2 11 BMC Holdings Inc. common stock, par value $.01 per share (Note 1): Class A: 15,000,000 shares authorized, 5,775,000 shares issued and outstanding.... -- -- 58 Class B: 15,000,000 shares authorized, 1,050,000 shares issued and outstanding.... -- -- 10 Capital in excess of par value................ 40,472 40,485 106,005 Retained earnings............................. 24,421 4,396 6,063 -------- -------- -------- Total stockholders' equity................ 65,065 45,053 112,244 -------- -------- -------- Total liabilities and stockholders' equity................................... $530,805 $506,395 $505,913 ======== ======== ========
See accompanying notes. F-22 AGRICULTURAL MINERALS AND CHEMICALS INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
SIX MONTHS YEARS ENDED ENDED JUNE 30, DECEMBER 31, ------------------ ---------------------------- 1994 1993 1993 1992 1991 -------- -------- -------- -------- -------- (UNAUDITED) Revenues..................... $231,782 $193,579 $365,786 $324,953 $252,729 Cost of goods sold........... 151,040 147,796 283,908 234,537 173,500 -------- -------- -------- -------- -------- Gross profit................. 80,742 45,783 81,878 90,416 79,229 Operating expenses........... (12,973) (11,657) (27,775) (25,033) (18,231) Other operating income....... 37 34 299 230 795 -------- -------- -------- -------- -------- Operating income............. 67,806 34,160 54,402 65,613 61,793 Interest income.............. 1,971 798 1,820 2,317 3,252 Interest expense............. (12,622) (7,368) (17,759) (14,870) (21,448) Other income (expense)....... 94 316 (2,409) 486 (29) -------- -------- -------- -------- -------- Income before income taxes, minority interest and extraordinary expense....... 57,249 27,906 36,054 53,546 43,568 Income taxes (Note 3)........ (14,898) (6,868) (7,721) (12,484) (16,484) Minority interest............ (15,526) (13,810) (19,789) (20,450) (1,325) -------- -------- -------- -------- -------- Income before extraordinary expense..................... 26,825 7,228 8,544 20,612 25,759 Extraordinary expense--early retirement of debt, net of income tax benefit of $1,313 in 1993 and $3,616 in 1991.. -- -- (2,550) -- (5,899) -------- -------- -------- -------- -------- Net income................... $ 26,825 $ 7,228 $ 5,994 $ 20,612 $ 19,860 ======== ======== ======== ======== ======== Weighted average shares outstanding................. 17,435 17,438 17,438 17,438 11,402 ======== ======== ======== ======== ======== EARNINGS PER SHARE: Income before extraordinary expense..................... $ 1.54 $ 0.41 $ 0.49 $ 1.18 $ 2.26 Extraordinary expense........ -- -- (0.15) -- (0.52) -------- -------- -------- -------- -------- Net income................... $ 1.54 $ 0.41 $ 0.34 $ 1.18 $ 1.74 ======== ======== ======== ======== ========
See accompanying notes. F-23 AGRICULTURAL MINERALS AND CHEMICALS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARES AND PER-SHARE AMOUNTS)
AGRICULTURAL MINERALS AND CHEMICALS INC. BMC HOLDINGS INC. CAPITAL COMMON STOCK COMMON STOCK IN ------------------ ------------------ EXCESS OF RETAINED SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS ---------- ------ ---------- ------ --------- -------- Balance at December 31, 1990................... 10,900,000 $109 -- $-- $108,891 $ 3,015 Capital contributed at BMCH formation....... -- -- 7,000,000 70 69,930 -- Net income............ -- -- -- -- -- 19,860 Capital contribution from Equity Incentive Plan compensation.... -- -- -- -- 1,560 -- Dividends paid (AMCI-- $5.72 per share)..... -- -- -- -- (46,074) (16,274) Issuance of liquidity rights on shares and options.............. (115,920) (1) -- -- (5,649) -- ---------- ---- ---------- ---- -------- ------- Balance at December 31, 1991................... 10,784,080 108 7,000,000 70 128,658 6,601 Net income............ -- -- -- -- -- 20,612 Capital contribution from Equity Incentive Plan compensation.... -- -- -- -- 1,000 -- Dividends paid (AMCI-- $3.18 per share)..... -- -- -- -- (13,512) (21,150) Issuance of liquidity rights on shares and options.............. -- -- (175,000) (2) (1,858) -- Change in value of liquidity rights on shares and options... -- -- -- -- (8,283) -- ---------- ---- ---------- ---- -------- ------- Balance at December 31, 1992................... 10,784,080 108 6,825,000 68 106,005 6,063 Net income............ -- -- -- -- -- 5,994 Capital contribution from Equity Incentive Plan compensation.... -- -- -- -- (2,061) -- Dividends paid (AMCI-- $7.58 per share)..... -- -- -- -- (74,961) (7,661) Change in value of liquidity rights on shares and options... -- -- -- -- 11,498 -- Exchange of BMCH shares for AMCI shares (Note 1)...... 6,374,550 64 (6,825,000) (68) 4 -- ---------- ---- ---------- ---- -------- ------- Balance at December 31, 1993................... 17,158,630 172 -- -- 40,485 4,396 Net income (unaudited).......... -- -- -- -- -- 26,825 Dividends paid (AMCI- $0.39 per share (unaudited))......... -- -- -- -- -- (6,800) Repurchase of Common Shares (unaudited)... (3,248) -- -- -- (37) -- Capital contribution from Equity Incentive Plan Compensation (unaudited).......... -- -- -- -- 77 -- Change in value of liquidity rights on shares and options (unaudited).......... -- -- -- -- (53) -- ---------- ---- ---------- ---- -------- ------- Balance at June 30, 1994 (unaudited)............ 17,155,382 $172 -- $-- $ 40,472 $24,421 ========== ==== ========== ==== ======== =======
See accompanying notes. F-24 AGRICULTURAL MINERALS AND CHEMICALS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, ---------------- -------------------------- 1994 1993 1993 1992 1991 ------- ------- ------- ------- -------- (UNAUDITED) OPERATING ACTIVITIES Net income...................... $26,825 $ 7,228 $ 5,994 $20,612 $ 19,860 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization. 14,269 13,285 26,876 26,713 16,168 Amortization and write-off of deferred finance charges..... 1,042 1,315 6,448 2,816 5,416 Provision for deferred income taxes........................ 8,806 468 2,609 5,782 6,119 Minority interest in earnings. 15,526 13,810 19,789 20,450 1,325 Changes in operating assets and liabilities: Receivables................. (9,172) (10,506) (7,266) 2,614 (2,678) Inventories................. 6,245 20,368 15,806 (13,600) (336) Prepaid expenses............ (274) (4,564) (6,844) (1,648) (151) Accounts payable, accrued liabilities and customer prepayments................ (642) 3,491 6,898 (1,313) 14,409 Other....................... 3,650 (2,001) (4,370) 181 (2,193) ------- ------- ------- ------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES..................... 66,275 42,894 65,940 62,607 57,939 INVESTING ACTIVITIES Purchase of methanol assets... -- -- -- -- (164,869) Capital expenditures.......... (5,576) (4,261) (6,968) (9,878) (3,163) Proceeds from sale of assets.. -- -- -- 1,100 -- ------- ------- ------- ------- -------- NET CASH USED IN INVESTING ACTIVITIES..................... (5,576) (4,261) (6,968) (8,778) (168,032) FINANCING ACTIVITIES Borrowings under revolving line of credit............... 2,500 35,000 80,000 37,000 5,000 Repayments of revolving line of credit.................... (17,500) (45,500) (89,000) (18,000) -- Proceeds from issuance of long-term obligations........ -- -- 175,000 -- 140,000 Repayment of long-term debt... (315) (7,299) (96,701) (9,085) (170,567) Capital contribution.......... -- -- -- -- 70,000 Proceeds from public offering. -- -- -- -- 153,033 Financing fees and transaction costs paid................... (439) (545) (10,883) (7,469) (8,792) Distribution reserve funding.. -- -- -- (18,480) -- Partnership distributions to minority interests........... (10,080) (9,240) (18,480) (15,265) -- Dividends to shareholders..... (6,800) (12,752) (82,622) (34,662) (62,348) ------- ------- ------- ------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES........... (32,634) (40,336) (42,686) (65,961) 126,326 ------- ------- ------- ------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... 28,065 (1,703) 16,286 (12,132) 16,233 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 60,653 44,367 44,367 56,499 40,266 ------- ------- ------- ------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD...................... $88,718 $42,664 $60,653 $44,367 $ 56,499 ======= ======= ======= ======= ========
See accompanying notes. F-25 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) 1. ORGANIZATION AND BUSINESS Agricultural Minerals and Chemicals Inc. ("AMCI"), a holding company incorporated in the State of Delaware, owns 100% of the common stock of both BMC Holdings Inc. ("BMCH") and Agricultural Minerals Corporation ("AMC"), the general partner of Agricultural Minerals Company, L.P. ("AMCLP"). AMCLP is a Delaware limited partnership which owns a 99% limited partner interest as the sole limited partner in Agricultural Minerals, Limited Partnership (the "Operating Partnership"). The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"), is majority owner of AMCI, formerly AMC Holdings Inc. MSLEF II, which owns AMCI common stock representing 74.2% of all the AMCI common equity on a fully diluted basis as of June 30, 1994, is a Delaware limited partnership whose general partner, MSLEF II, Inc., is a wholly owned subsidiary of Morgan Stanley Group Inc. In October 1993, AMCI completed the following principal elements of a recapitalization (the "1993 AMCI Recapitalization"): (a) the transfer to AMCI of all the outstanding shares of common stock of BMCH by the equity holders of BMCH in exchange for shares of AMCI common stock, and the exchange of all the outstanding options to purchase shares of common stock of BMCH for options to purchase shares of AMCI common stock, at a rate of .934 of a share of AMCI common stock for each share of common stock of BMCH (the "BMCH Transfer"), including the exchange by MSLEF II of all the outstanding shares of voting common stock of BMCH for shares of common stock of AMCI, resulting in BMCH becoming a wholly owned subsidiary of AMCI; (b) the public offering of $175 million aggregate principal amount of 10 3/4% Senior Notes due 2003 of AMCI (the "Notes"), the net proceeds of which ($169.8 million) were used to (i) prepay the entire $85.5 million principal amount of a term loan outstanding under the then existing credit agreement of Beaumont Methanol Corporation ("BMC"), (ii) pay dividends or dividend equivalents in an aggregate amount of $75 million to the holders (prior to the BMCH Transfer) of the outstanding common equity of AMCI, and (iii) for general corporate purposes; (c) the execution and delivery of a credit agreement among BMCH, BMC and certain lenders and the agent named therein, providing for the establishment of (i) a $20 million revolving credit facility, which was used to repay all revolving loans outstanding under BMC's existing $20 million revolving credit facility and to provide for BMC's ongoing working capital requirements and for other general corporate purposes, (ii) a $50 million letter of credit facility (for the account of BMC and for the benefit of AMCI) to support the payment of interest on the Notes for a period not to extend beyond December 31, 1996, and (iii) a guaranty by BMCH of BMC's obligations thereunder. In addition, the holders of shares of AMCI Class B common stock exchanged their shares for AMCI Class A common stock. The BMCH Transfer was accounted for as a merger of entities under common control. Accordingly, the assets and obligations of BMCH were recorded at their historical cost as of the date of the BMCH Transfer. The Operating Partnership was organized by AMC, the general partner, to succeed to and acquire the nitrogen fertilizer business of AMC on December 4, 1991. AMC, as the general partner, conducts, directs, manages and exercises full control over all business and affairs of AMCLP. The Operating Partnership is in the business of manufacturing, distributing and selling fertilizer products, including ammonia, urea and urea ammonium nitrate solution which are principally used by farmers to improve the yield and quality of their crops. Customers vary in size and are primarily related to the agriculture industry. The Operating Partnership sells products throughout the United States and internationally. The Partnership's customers vary in size and are primarily related to the agricultural industry. Credit is extended based on an evaluation of the customer's financial condition, and generally collateral is not required. Expected credit losses have been provided for in the financial statements. F-26 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) On December 4, 1991, AMCLP completed a public offering of 7,636,364 Senior Preference Units at $21.50 per unit. Immediately prior to the closing, AMC conveyed substantially all its assets (except for $107.6 million in cash plus certain assets necessary to provide general and administrative services) and operations to the Operating Partnership, and the Operating Partnership assumed substantially all its liabilities (excluding income tax liabilities) in exchange for a 99% limited partnership interest and a 1% general partnership interest in the Operating Partnership. The contributed net assets and assumed obligations of the Operating Partnership were recorded at AMC's historical cost as of December 4, 1991. AMC then contributed all of its limited partner interest in the Operating Partnership to AMCLP in exchange for (i) 6,000,000 Junior Preference Units and 5,172,414 Common Units and (ii) 1.0101% or 1/99th general partnership interest in AMCLP. Thereafter, AMCLP contributed the net proceeds of the offering to the Operating Partnership. The $148.5 million net proceeds from the sale of the units, after deducting underwriting discounts and offering expenses of $15.6 million, were used, along with other available funds, to repay $150.5 million of long-term debt. Following these transactions, the Senior Preference Unitholders, which are reported as minority interests in these consolidated financial statements, have a 39.8% limited partnership interest in the combined Partnership (AMCLP and the Operating Partnership). AMC has a 58.2% limited partnership interest in the combined Partnership through its ownership of Junior Preference Units and Common Units. In addition, AMC owns a 2% general partnership interest in the combined Partnership. BMCH, a holding company, owns 100% of BMC. BMCH was incorporated in the State of Delaware on November 27, 1991. Prior to the acquisition discussed below, BMCH did not have significant operations. BMC is in the business of manufacturing, distributing and selling methanol, which is principally used as a raw material in the production of a variety of chemical derivatives and in the production of MTBE, an oxygenate and an octane enhancer for gasoline. BMC sells methanol produced at its facility located in Beaumont, Texas. BMC's customers are primarily large chemical or MTBE producers. On December 12, 1991, BMCH invested $70 million in BMC to provide funding for BMC's acquisition of certain assets of E. I. du Pont de Nemours and Company's ("DuPont") methanol business in Beaumont, Texas for a purchase price of approximately $165 million and to provide start-up capital. The balance of the acquisition was financed by BMC with $105 million of bank term notes which were subsequently repaid in connection with the 1993 AMCI Recapitalization discussed above. The acquisition was accounted for as a purchase, and the purchase price was allocated to the assets and liabilities based upon their estimated fair values at the date of the acquisition as follows (in millions):
Property, plant and equipment...................................... $ 158 Receivables........................................................ 2 Other assets and obligations (net)................................. 5 ----- $ 165 =====
Concurrent with the acquisition, BMC entered into several agreements with DuPont, including the DuPont Services Agreement, whereby DuPont provides certain operating services to the facility on substantially the same terms and conditions as it provides services and allocates costs to the other manufacturing processes at the Beaumont complex. Under the Interim Operating Agreement, which ended November 30, 1992, DuPont operated the facility, assisted BMC in training new employees and provided consulting and advisory services. The DuPont carbon dioxide Supply Agreement provides that DuPont will supply carbon dioxide to the Beaumont facility at agreed quantities and prices. Under the methanol purchase and sale agreement, BMC sells methanol to DuPont for a term of ten years from the date of F-27 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) acquisition at agreed quantities and prices. Under this agreement, DuPont must purchase a minimum of 108 million gallons of methanol per year at market-based prices. For the years ended December 31, 1993, 1992 and 1991, sales to DuPont were $41.3 million, $46.6 million and $5.3 million, respectively. BMC also has an exclusive marketing services agreement with Trammochem, a division of Transammonia, Inc., to provide marketing services for the methanol produced at the Beaumont facility. Trammochem is a major marketer of chemicals, including methanol, throughout the world (see Note 8). 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation: These financial statements present the consolidated financial position, results of operations and cash flows of AMCI. As discussed in Note 1, the BMCH Transfer completed in October 1993 resulted in BMCH becoming a wholly owned subsidiary of AMCI. Subsequent to its formation in late 1991 and until the BMCH Transfer, the financial statements of BMCH have been combined and presented as a single entity with those of AMCI because of common ownership, management and control. Accordingly, the consolidated financial statements of AMCI for all periods presented include the account balances of that company, AMC, AMCLP and the Operating Partnership and BMCH and BMC subsequent to their formation. AMCLP's income is allocated to AMC in accordance with the provisions of the Agreement of Limited Partnership. All significant intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents: AMCI considers liquid debt instruments with a maturity of three months or less to be cash equivalents. At December 31, 1993, substantially all cash and cash equivalents ($60.7 million) is placed with three high credit quality financial institutions. Cash on hand includes $27.8 million maintained at AMC (see Note 10 for AMC minimum net worth requirements). Inventories: Product inventories are stated at the lower of average cost or market. Cost includes labor, materials, depreciation and other production costs. Materials and supplies inventories are stated at the lower of average cost or market. Property, Plant and Equipment: Property, plant and equipment are stated at cost. Depreciation of plant and equipment is provided over the estimated useful lives of the respective assets, principally on the straight-line basis. Expenditures for additions, major renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to income as incurred. When properties are retired or otherwise disposed of, the cost thereof and the applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is reflected in income. Deferred Finance Charges: Deferred finance charges consist of debt issuance costs related to the issuance of debt securities and are amortized using the interest method over the term of the related debt. F-28 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) Plant Turnaround and Catalyst Replacement Costs: Costs related to the periodic scheduled maintenance of production facilities (plant turnarounds) and catalyst replacement are capitalized when incurred and amortized on a straight-line basis, generally over one or two years, until the next scheduled turnaround for plant turnarounds and over the life of the catalyst for catalyst replacements. Included in prepaid expenses and other assets at December 31, 1993 and 1992 are $17.5 million and $8.4 million, respectively, of unamortized plant turnaround and catalyst replacement costs incurred by the Operating Partnership and BMC. Prior to 1993, BMC had not incurred any plant turnaround or catalyst replacement costs. Hedging Transactions: BMC and the Operating Partnership enter into both physical and financial contracts to manage the cost of natural gas, the primary material used in production of methanol and nitrogen fertilizers. The financial contracts include both futures contracts and swap agreements. The futures contracts require maintenance of cash balances that are generally 10% to 20% of the contract value. Contract settlement dates are scheduled to coincide with the dates of natural gas purchases that are made throughout the year. Realized gains and losses from swap agreements and gains or losses resulting from changes in the price of natural gas futures contracts traded on the NYMEX are deferred and either credited or charged to manufacturing cost in the month in which the related natural gas is actually purchased. BMC and the Operating Partnership have entered into interest rate swap agreements to manage exposure to interest rate fluctuations. Under provisions of the agreements, BMC and the Operating Partnership and the counterparty exchange fixed and floating interest rate payments periodically over the life of the agreements. The differential paid or received under these agreements is recorded as a charge or reduction to interest expense in the periods in which the interest on the related debt is accrued. Income Taxes: Subsequent to the BMCH Transfer discussed in Note 1, BMCH will be included in the consolidated tax return of AMCI. Prior to the BMCH Transfer, AMCI and BMCH filed separate consolidated tax returns. Deferred income taxes are computed using the liability method and are provided on all temporary differences between the financial reporting basis and the tax basis of AMCI's assets and liabilities. Earnings Per Share: Earnings per share are calculated based on the weighted average number of shares of AMCI common stock outstanding, including shares subject to put rights, retroactively adjusted for the BMCH Transfer. Shares issuable upon exercise of outstanding stock options have been excluded from the calculation since the effect would be antidilutive. Dividends Per Share: Dividends per share, prior to the 1993 AMCI Recapitalization, are calculated based on 10,900,000 shares of common stock issued and outstanding for AMCI, including 115,920 shares subject to put rights. Distributions to participants in the 1993 AMCI Management Equity Plan and the 1990 AMCI Equity Incentive Plan resulting from their right to participate in AMCI dividends are not included in dividends or the computation of dividends per share. These dividend equivalent payments are classified as compensation expense. Environmental Liabilities: Environmental liabilities are recognized when it is probable that a loss has been incurred and the amount of that loss is reasonably estimable. Environmental liabilities are accrued based upon estimates of F-29 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) expected future costs without discounting to present value the estimated costs to be paid in the future, and without consideration of possible recoveries from third parties. 3. INCOME TAXES AMCI follows the provisions of FASB Statement No. 109, "Accounting for Income Taxes." The provision for income taxes consists of the following:
YEARS ENDED DECEMBER 31, ---------------------- 1993 1992 1991 (IN THOUSANDS) ------ ------- ------- Current tax expense: Federal......................................... $3,537 $ 6,526 $ 7,096 State........................................... 262 176 230 ------ ------- ------- 3,799 6,702 7,326 Deferred tax expense: Federal......................................... 3,235 4,070 6,925 State........................................... 687 1,712 2,233 ------ ------- ------- 3,922 5,782 9,158 ------ ------- ------- Total income taxes............................ $7,721 $12,484 $16,484 ====== ======= =======
Effective with the 1993 AMCI Recapitalization, BMCH became part of the consolidated AMCI federal tax return. Operating losses generated by BMCH prior to the 1993 AMCI Recapitalization can only be used to offset BMCH taxable income. Operating losses generated by BMCH after the 1993 AMCI Recapitalization can be used by AMCI to offset any taxable income reported on the consolidated return. At December 31, 1993, AMCI has net operating losses of $8.3 million and BMCH has a net operating loss of $87.6 million and an Alternative Minimum Tax net operating loss of $24.4 million available to carry forward to future periods for federal tax purposes which, if not utilized, will expire beginning in 2005 and 2007, respectively. AMCI's current federal tax expense results from the application of the Alternative Minimum Tax. As of December 31, 1993, deferred taxes have been reduced by AMCI's Alternative Minimum Tax Credit carryover of $13.6 million and the benefit of AMCI's and BMCH's net operating loss carry forwards. Significant components of AMCI's deferred tax assets and liabilities are as follows:
DECEMBER 31, --------------- 1993 1992 (IN THOUSANDS) ------- ------- Deferred tax liabilities: Investment in AMCLP.................................... $30,852 $31,583 Tax over book depreciation............................. 29,788 17,660 Other.................................................. 612 -- ------- ------- Total deferred tax liabilities........................... 61,252 49,243 Deferred tax assets: Net operating loss carryover........................... 30,962 18,945 Alternative Minimum Tax credit carryover............... 13,630 12,577 Overhead allocations to inventory...................... 235 2,508 Other.................................................. -- 1,397 ------- ------- Total deferred tax assets................................ 44,827 35,427 ------- ------- Net deferred tax liability............................... $16,425 $13,816 ======= =======
F-30 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) The provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate of 35% (34% for 1992 and 1991) to income before income taxes and extraordinary expense for the following reasons:
YEARS ENDED DECEMBER 31, ------------------------- 1993 1992 1991 (IN THOUSANDS) ------- ------- ------- Tax at U.S. statutory rates.................. $12,619 $18,204 $14,812 Minority interest in consolidated partnership................................. (6,926) (6,953) (450) Change in federal tax rates.................. 628 -- -- BMCH losses not benefited.................... 782 -- -- State income taxes, net of federal benefit... 618 1,233 1,694 Other........................................ -- -- 428 ------- ------- ------- Total income taxes....................... $ 7,721 $12,484 $16,484 ======= ======= =======
During the six months ended June 30, 1994 and the years ended December 31, 1993, 1992 and 1991, income taxes paid were $6.1 million, $4.9 million, $6.5 million and $7.1 million, respectively. 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are summarized as follows:
DECEMBER 31, ----------------- JUNE 30, 1994 1993 1992 ----------- -------- -------- (UNAUDITED) (IN THOUSANDS) Land and improvements...................... $ 5,223 $ 5,223 $ 5,092 Plant and equipment........................ 404,351 397,624 391,285 Terminals and transportation equipment..... 5,887 5,882 5,866 -------- -------- -------- 415,461 408,729 402,243 Less accumulated depreciation and amortization.............................. 96,078 81,830 55,231 -------- -------- -------- $319,383 $326,899 $347,012 ======== ======== ========
Included in the amounts above are assets under capital leases, principally two terminals and certain processing equipment, amounting to approximately $3.4 million at both December 31, 1993 and 1992. Accumulated amortization of such assets was $576,000 and $371,000 at December 31, 1993 and 1992, respectively. Amortization of these assets has been included in depreciation and amortization expense. 5. EMPLOYEE BENEFIT PLANS PENSION PLANS-- Effective July 1, 1990 and January 1, 1992, AMC and BMC, respectively, adopted noncontributory defined benefit pension plans covering substantially all employees. Benefits are based on years of service and average final compensation. Pension costs are funded to satisfy minimum requirements prescribed by the Employee Retirement Income Security Act of 1974. F-31 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) Net periodic pension cost of the plans consists of the following:
YEARS ENDED DECEMBER 31, ---------------------- 1993 1992 1991 (IN THOUSANDS) ------ ------ ------ Service cost...................................... $1,026 $ 926 $ 778 Interest cost..................................... 304 228 182 Return on plan assets............................. (166) (109) -- Net amortization and deferrals.................... 71 73 72 ------ ------ ------ Net periodic pension cost......................... $1,235 $1,118 $1,032 ====== ====== ======
The following table reconciles the funded status of the plans to the amount included in the balance sheets:
DECEMBER 31, -------------- 1993 1992 (IN THOUSANDS) ------ ------ Actuarial present value of benefit obligations: Vested benefit obligation.............................. $2,806 $1,263 Nonvested benefit obligation........................... 700 544 ------ ------ Accumulated benefit obligation........................... 3,506 1,807 Effect of salary projection.............................. 2,136 1,782 ------ ------ Projected benefit obligation............................. 5,642 3,589 Fair value of plan assets (which are substantially publicly traded mutual funds)........................... (2,308) (1,495) Unrecognized amount for prior service cost............... (1,081) (1,109) Unrecognized net gain.................................... (304) 328 ------ ------ Pension liability........................................ $1,949 $1,313 ====== ======
Included in the vested benefit obligation is $250,000 for former DuPont employees. An equal amount of assets were transferred from DuPont to the BMC pension plans. The discount rate used to measure the present value of benefit obligations is 7.0% and 8.5% and the assumed rate of increase in future compensation levels is 4.0% and 5.5% at December 31, 1993 and 1992, respectively. The expected long-term rate of return on the plans' assets is 9.0% at December 31, 1993 and 1992. OTHERS BENEFIT PLANS-- AMC and BMC have defined contribution plans under which employees who meet specified service requirements may contribute a percentage of their total compensation, up to a maximum defined by the plan. Each employee's contribution, up to a specified maximum, may be matched in full by the respective company at its discretion. Employee contributions vest immediately, while company contributions vest over five years. The companies' contributions to the plans were $800,000, $700,000 and $500,000 for the years ended December 31, 1993, 1992 and 1991, respectively. AMC and BMC also have incentive compensation plans covering substantially all of their employees. Incentive compensation is paid to employees under the plans based on specified levels of earnings before F-32 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) interest, taxes, depreciation and amortization generated during the 12 month period ended June 30. Incentive compensation expense under AMC's plan for the years ended December 31, 1993, 1992 and 1991 was $3.4 million, $3.6 million and $3.6 million, respectively. There was no such compensation under the BMC plan for 1993, 1992 or 1991. As a part of the 1993 AMCI Recapitalization, AMCI adopted the 1993 AMCI Management Equity Plan, pursuant to which the Compensation Committee granted options ("AMCI Options") to purchase shares of AMCI common stock and granted the right to purchase restricted shares of AMCI common stock ("AMCI Restricted Shares") to officers and key employees of AMCI and its subsidiaries, including AMC and BMC. Each AMCI Option represents the right to purchase one share of AMCI common stock. All AMCI Options are nonqualified options. The maximum number of shares of AMCI common stock that may be issued in connection with AMCI Options or as AMCI Restricted Shares is 3,056,838, constituting 15.0% of the fully diluted common equity of AMCI following the 1993 AMCI Recapitalization. Following the 1993 AMCI Recapitalization, the officers and key employees of AMC and BMC own 279,370 AMCI Restricted Shares and 1,729,367 AMCI Options. Such AMCI Options have an exercise price of $10.73 per share. The AMCI Options generally vest and become exercisable on September 30, 1998. The 1993 AMCI Management Equity Plan provides for accelerated vesting of all AMCI Options in the event of the holder's death, and for partial accelerated vesting (based on the number of years elapsed from the date of grant) in the event of the holder's disability, retirement, involuntary termination without cause or resignation for good reason. In the event that cash dividends are paid on the outstanding AMCI common stock, each holder of an outstanding AMCI Option is entitled, pursuant to the 1993 AMCI Management Equity Plan, to receive in cash a dividend equivalent payment in respect of the shares subject to such AMCI Option and an additional dividend equivalent payment in respect of a pro rata portion of the shares, if any, available at such time for future awards of AMCI Options or AMCI Restricted Shares under the 1993 AMCI Management Equity Plan. Dividend equivalent payments are made at the same rate as cash dividends are paid on outstanding shares. As of December 31, 1993, no payments have been made under this plan. Prior to the 1993 AMCI Recapitalization, both AMCI and BMCH sponsored an Equity Incentive Plan which, among other things, provided for the sale of restricted Class B common stock and the granting of options to purchase one share of Class B common stock of the respective holding company (AMCI or BMCH) per option to officers and key employees of AMC and BMC. The total number of AMCI options authorized was 1,787,153, of which 1,598,000 had been granted as of December 31, 1992. The total number of BMCH options authorized was 175,000 of which 134,150 had been granted as of December 31, 1992. Holders of the options received dividend equivalent payments based on AMCI and BMCH dividends, respectively. The AMCI and BMCH Equity Incentive Plans were terminated as part of the 1993 AMCI Recapitalization. The restricted shares of common stock and options to purchase shares of common stock under the 1993 AMCI Management Equity Plan (as previously under the Equity Incentive Plans) are subject to liquidity rights under which the officers and key employees may require the companies to redeem such shares and options at prices based on the fair value of the shares and underlying options at specified future dates. The liquidity rights may be exercised with respect to 25% of such shares and options per year on September 30, 1998, 1999, 2000 and 2001. F-33 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) Shares and options subject to liquidity rights are as follows:
DECEMBER 31, -------------------------------- 1993 1992 ---------- --------------------- AMCI AMCI BMCH ---------- ---------- ---------- Restricted shares subject to liquidity rights................................ 279,370 115,920 175,000 Redemption value per share............. $ 11.47 $ 17.50 $ 10.63 Redemption value (in thousands)........ $ 3,204 $ 2,029 $ 1,860 Options subject to liquidity rights.... 1,729,367 1,407,000 175,000 Redemption value per option............ $ 0.63 $ 8.46 $ -- Redemption value (in thousands)........ $ 1,090 $ 11,903 $ --
The redemption value of the restricted shares of common stock and options has been reported as a reduction in common stock and capital in excess of par value and as a separate component outside of stockholders' equity. Both the AMCI and BMCH Equity Incentive Plans were combination plans comprised of options with fixed exercise prices and a liquidity right. Normally, a combination plan with a liquidity right would be accounted for as a variable plan, under the presumption that the optionholder would elect to exercise the liquidity right. However, prior to the 1993 AMCI Recapitalization, AMCI management estimated the likelihood that the optionholders would elect to exercise their liquidity rights based on current economic conditions and expected future dividend payout levels, concluding that it was more likely that optionholders would elect to hold or exercise their options rather than exercise their liquidity right. Accordingly, no compensation expense was recorded for changes in the redemption value of the options subsequent to the measurement date of December 31, 1991, at which time, as a result of a $3.67 per share reduction in the exercise price of AMCI options, AMCI measured compensation of $4.0 million, representing the aggregate excess of fair value over the exercise price of the granted options, which was being recognized over the service period. The fair value of BMCH shares was less than the exercise price of the options, and, accordingly, no compensation had been recorded. In connection with the 1993 AMCI Recapitalization and certain resulting covenants in the indenture for the Notes which restrict the payment of dividends, management has concluded that the presumption that the previously existing AMCI optionholders would not elect to exercise their liquidity rights no longer exists and, accordingly, are accounting for the 1993 AMCI Management Equity Plan as a variable plan. Compensation expense related to these plans was $10.5 million, including $12.6 million of dividend equivalent payments, $7.6 million, including $6.6 million of dividend equivalent payments, and $5.2 million, including $3.6 million of dividend equivalent payments, for the years ended December 31, 1993, 1992 and 1991, respectively. It is anticipated that certain of BMC's employee benefit plans, including the pension plan and the defined contribution plan, will be merged into the corresponding AMC plans effective December 31, 1993. These new AMC plans will be renamed, amended and restated as plans of AMCI effective January 1, 1994, subject to the review and approval of the Internal Revenue Service. F-34 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) 6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS Long-term obligations are summarized as follows:
DECEMBER 31, JUNE 30, ----------------- 1994 1993 1992 ----------- -------- -------- (UNAUDITED) (IN THOUSANDS) 10 3/4% Senior Notes due 2003.......... $175,000 $175,000 $ -- BMC term loan at LIBOR plus 2.5%....... -- -- 96,000 BMC Revolver........................... -- 6,000 -- Operating Partnership term loan at LIBOR plus 2.0%....................... 35,000 35,000 35,000 Operating Partnership capitalized lease obligations due through 2000.......... 7,029 3,418 4,119 -------- -------- -------- 217,029 219,418 135,119 Less current maturities................ 1,370 726 14,691 -------- -------- -------- $215,659 $218,692 $120,428 ======== ======== ========
During October 1993, in conjunction with the 1993 AMCI Recapitalization discussed in Note 1, AMCI issued $175 million of unsecured 10 3/4% Senior Notes. The Senior Notes are due in full on September 30, 2003, and interest is payable semiannually at the stated rate. The AMCI Senior Notes rank senior to all other indebtedness of AMCI in right of payment; however, the Senior Preference Units of AMCLP are effectively senior to the Senior Notes. The Senior Notes are redeemable at AMCI's option at any time on or after September 30, 1998, upon 30 to 60 days' prior written notice. The following table sets forth the redemption price if the Senior Notes are redeemed during the 12- month period beginning September 30, of the years indicated:
REDEMPTION YEAR PRICE ---- ---------- 1998........................................................... 105.375% 1999........................................................... 102.688% 2000 and thereafter............................................ 100.000%
In addition, at any time prior to September 30, 1996, AMCI may, at its option, redeem up to $61.25 million of the Senior Notes in connection with one or more public equity offerings following which there is a public market at a redemption price of 110% plus accrued interest. The aggregate principal amount of the Senior Notes so redeemed may not exceed the aggregate proceeds of such public equity offering. The Senior Note Indenture, under which the Senior Notes were issued, contains certain financial tests, as well as other limitations and covenants, each of which would only be measured in the event that AMCI or a restricted subsidiary engages in certain activities, including the issuance of additional debt, payment of certain dividends, issuance of capital stock, certain transactions with affiliates, incurrence of liens, sale of assets, other than in the ordinary course of business, and sale-leaseback transactions. Dividend payments are effectively restricted to an amount not to exceed fifty percent of AMCI's Adjusted Consolidated Net Income, as defined in the Indenture. In conjunction with the 1993 AMCI Recapitalization discussed in Note 1, AMCI contributed $85.5 million to BMCH and BMCH loaned $85.5 million to BMC to prepay its entire outstanding term loan balance. BMC also amended and restated its credit agreement which provides for (a) a new $20 million revolving credit facility, that will mature on December 31, 1996 and which was used to repay all revolving F-35 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) loans outstanding under BMC's previously existing $20 million revolving credit facility, (b) a $50 million letter of credit facility (for the account of BMC and the benefit of AMCI) to support the payment of interest on the Notes for a period not to extend beyond December 31, 1996, (c) a guaranty by BMCH of BMC's obligations thereunder. The indebtedness is secured by a lien on all of BMC's assets and the guarantee is secured by a pledge by BMCH of BMC's capital stock. AMCI has the right to terminate the letter of credit established under the letter of credit facility at any time. As a result of the debt retirement discussed above, the interest rate swap agreement BMC has with Chemical Bank is no longer associated with outstanding debt. Under the interest rate swap agreement, BMC makes 6.1% fixed rate payments and receives variable-rate interest payments (3.375% at December 31, 1993). At December 31, 1993, the notional amount of the swap agreement was $41 million and the obligation assumed and recorded for the uncovered swap was $1.1 million. The agreements expire March 31, 1995. BMC is exposed to favorable or unfavorable market risk to the extent LIBOR increases or decreases, respectively. As of December 31, 1993, BMC had no drawings on the letter of credit facility. Borrowings under the revolving credit facility were $6.0 million and $7.0 million at December 31, 1993 and 1992, respectively. Interest on the letter of credit and revolving credit facility is based on the Eurodollar lending rate plus 3.5% and 2.5%, respectively, or a prime commercial rate plus 2.5% and 1.5%, respectively, at BMC's option, selected at the start of each interest period. The effective interest rate was 7.5% at December 31, 1993. BMC incurs certain fees in connection with the borrowings discussed above, including a commitment fee equal to 1/2 of 1% of the unused amount of the revolving credit facility, and a letter of credit exposure fee of 3% on the outstanding unused amount. The Operating Partnership has a credit agreement (the "Agreement") with a syndicate of banks which provides for a nonamortizing $35 million term loan and a $50 million revolving credit facility. Borrowings outstanding under the revolving credit facility were $9 million and $17 million at December 31, 1993 and 1992, respectively. The $35 million term loan is due in full and the revolving credit facility expires on December 4, 1996. Subject to certain exceptions, borrowings under the revolving credit facility must be repaid for a 30-day period between July 1 and September 30 each year. Interest on both the term loan and revolving credit facility is based on the prime commercial lending rate plus 1%, or a Eurodollar rate plus 2%, at AMC's option. The Operating Partnership Agreement contains financial tests, as well as other restrictive covenants relating to the use of proceeds of borrowings. Borrowings under the Operating Partnership Agreement are secured by substantially all of the Operating Partnership's assets. At December 31, 1993, the term loan and the outstanding borrowings under the revolving credit facility bore interest at the rate of 5.4% and 6.3%, respectively. The Operating Partnership incurs a commitment fee equal to 1/2 of 1% of the unused amount of the revolving credit facility. Future minimum payments and sinking fund requirements under long-term debt and capital lease obligations at December 31, 1993 are (in thousands): Year ending December 31: 1994........................................................... $ 726 1995........................................................... 763 1996........................................................... 41,386 1997........................................................... 386 1998........................................................... 386 Later years.................................................... 175,771 -------- $219,418 ========
In conjunction with its long-term debt, the Operating Partnership had obligations under two interest rate swap agreements at December 31, 1992 with an aggregate notional amount of $103 million. The swap F-36 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) agreements, which effectively converted the variable interest rates on the borrowings under the Agreement to fixed interest rates, expired on March 12, 1993 and April 23, 1993. At December 31, 1992, $68 million of the notional amount of the swap agreements was no longer associated with outstanding debt, and accordingly, an obligation was assumed and recorded for such uncovered swaps in the amount of $1.9 million. The Operating Partnership had no such obligation outstanding at December 31, 1993. Interest paid, including payments under the interest rate swap agreements, was $10.3 million, $11.8 million, $15.9 million and $20.3 million for the six months ended June 30, 1994 and the years ended December 31, 1993, 1992 and 1991, respectively. 7. LEASES The Operating Partnership leases certain land, buildings and equipment. Minimum rental commitments under capital and noncancellable operating leases as of December 31, 1993 are as follows:
CAPITAL OPERATING LEASES LEASES (IN THOUSANDS) ------- --------- Year ending December 31: 1994.................................................. $ 973 $6,261 1995.................................................. 966 1,880 1996.................................................. 559 774 1997.................................................. 525 610 1998.................................................. 490 301 Later years........................................... 876 70 ------ ------ Total minimum lease payments............................ 4,389 9,896 Less amount representing interest....................... 971 -- ------ ------ Net minimum lease payments.............................. $3,418 $9,896 ====== ======
Rent expense under noncancellable operating leases, including contingent rentals of $2.7 million in 1993, $2.6 million in 1992 and $1.6 million in 1991 based primarily on throughput, amounted to approximately $9.6 million, $6.3 million and $5.4 million for 1993, 1992 and 1991, respectively. 8. COMMON STOCK AMCI has two classes of common stock, Class A common voting stock and Class B common nonvoting stock. The rights and privileges to which the holders of Class A and Class B common stock are entitled, other than voting privileges, are essentially the same. 9. RELATED PARTY TRANSACTIONS During the six months ended June 30, 1994 and the years ended December 31, 1993, 1992 and 1991, the Operating Partnership and AMC sold $18.0 million, $21.2 million, $23.0 million and $28.7 million, respectively, of nitrogen fertilizer products to Transammonia, Inc. ("Transammonia"). A key executive and principal owner of Transammonia is a general partner of two partnerships which own common stock representing approximately 7.4% of the common equity of AMCI on a fully diluted basis. Additionally, one of the members of the board of directors of AMC and AMCI is an executive of both Transammonia and Trammochem, Inc. ("Trammochem") a division of Transammonia. Accounts receivable from Transammonia are $3.6 million, $2.5 million and $1.7 million at June 30, 1994, December 31, 1993 and 1992, respectively. F-37 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) Trammo Partners II is a major shareholder in AMCI. The partners in Trammo Partners II include the principal shareholder and employees of Transammonia. In addition, a key executive and principal owner of Transammonia serves as a director of BMCH. Trammochem has exclusive marketing rights to the methanol produced at the Beaumont facility. Trammochem's compensation for the marketing of methanol is based on the quantity of methanol sold and the earnings before depreciation interest and taxes of BMCH. This agreement began December 12, 1991 and continues until December 31, 1996, and from year to year thereafter, unless terminated by either party. Compensation under this agreement began January 1, 1992. Compensation for the six months ended June 30, 1994 and for the years ended December 31, 1993 and 1992 was $1.4 million, $1.2 million and $2.2 million, respectively. Transammonia holds an option to purchase 163,450 shares of common stock of AMCI which is initially exercisable in 1998 at a price of $10.73 per share. 10. AGREEMENTS OF LIMITED PARTNERSHIP In accordance with the Agreement of Limited Partnership of AMCLP, AMCLP makes quarterly distributions to Unitholders and the General Partner in an amount equal to 100% of its Available Cash, as defined, unless Available Cash is required to fund a reserve amount. AMCLP must fund and maintain a reserve of $18.5 million to support Minimum Quarterly Distributions on the Senior Preference Units (the "Reserve Amount"). Such Reserve Amount was fully funded during 1992 and is invested in Eurodollars at a financial institution. During the period commencing December 4, 1991, and not ending prior to December 31, 1996 (the "Preference Period"), Senior Preference, Junior Preference and Common Units participate equally in distributions after each class of units has received its Minimum Quarterly Distribution, subject to the General Partner's right to receive cash distributions. The General Partner receives a combined minimum 2% of total cash distributions, and as an incentive, the General Partner's participation increases if cash distributions exceed specified target levels. During the Preference Period, distributions are subject to the rights of Senior Preference Units to receive the Minimum Quarterly Distribution of $.605 per unit plus any arrearages, before any other distributions. After such amounts have been paid, the Reserve Amount must be funded before distributions to Junior or Common Unitholders. Distributions to Common Unitholders are subject to the preferential rights of the Junior Preference Units to receive Minimum Quarterly Distributions plus arrearages. Subject to certain conditions, the Junior Preference Units will become Senior Preference Units on December 31, 1995. As a result of this conversion, distributions on the converted Junior Preference Units will be made with, and not after, distributions on the Senior Preference Units and payment of the Minimum Quarterly Distributions on the converted Junior Preference Units will also be supported by the Reserve Amount. In addition, the converted Junior Preference Units will be entitled to receive Minimum Quarterly Distributions before funds are set aside, if necessary, to restore the Reserve Amount to its required level. After the Preference Period the Senior Units will still be entitled to the Minimum Quarterly Distribution, but will not participate with the Common Units in any distributions above the Minimum Quarterly Distribution. For a 90-day period after the end of the Preference Period, the holders of Senior Preference Units will have the right, subject to fulfillment of certain stock exchange listing requirements, to convert their Senior Preference Units into fully participating Common Units. F-38 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) In order for AMCLP and the Operating Partnership to continue to be classified as partnerships for federal income tax purposes, AMC, as general partner, must maintain a minimum level of net worth without regard to its interest in AMCLP. In order to meet this requirement, AMC has maintained a cash balance ($27.8 million at December 31, 1993) since it does not have material assets other than its partnership interests. However, AMC is not required to maintain a cash balance to meet this requirement if other assets of equivalent value are acquired in order to satisfy the substantial net worth requirement. 11. OTHER FINANCIAL INFORMATION FAIR VALUES OF FINANCIAL INSTRUMENTS-- The following methods and assumptions were used by AMCI in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Distribution reserve fund: The carrying amount reported in the balance sheet for the distribution reserve fund approximates its fair value. Accrued interest rate swap obligation: The fair value of the interest rate swap obligation is based on current settlement prices, taking into account remaining terms of the agreement. Revolving credit borrowings and long-term debt: The carrying amounts of the borrowings under revolving credit and long-term debt agreements approximate fair value. Off-balance-sheet instruments: Fair values of the off-balance-sheet instruments (natural gas swaps) are based on contract prices in effect at December 31, 1993. Financial instruments with a carrying value different from fair value at December 31 are as follows:
1993 1992 ----------------- ----------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE (IN THOUSANDS) -------- ------- -------- ------- Natural gas swaps..................... $ -- $(4,849) $ -- $(3,827) Interest rate swaps................... (1,096) (1,096) (2,096) (4,634)
The Operating Partnership and BMC enter into natural gas swap agreements and futures contracts to cover approximately 50% of their natural gas requirements to effectively maintain fixed prices for natural gas to be purchased. The agreements and contracts vary in length from one month to eighteen months. Gains and losses on futures contracts and swap agreements are credited or charged to production cost in the month to which the hedged transaction relates. The Operating Partnership and BMC are exposed to favorable or unfavorable market risk to the extent that natural gas prices increase or decrease, respectively. INDUSTRY SEGMENT DATA-- AMCI operates in two principal industries--nitrogen fertilizer and methanol, respectively. The nitrogen fertilizer business produces and distributes ammonia, urea and urea ammonium nitrate solution which are principally used by farmers to provide crops with nitrogen, an essential nutrient for plant growth. The methanol business manufactures, distributes, and sells methanol, which is principally used as a raw F-39 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) material in the production of a variety of chemical derivatives and in the production of MTBE, an oxygenate and an octane enhancer for gasoline. The following summarizes additional information about the reported industry segments:
YEARS ENDED DECEMBER 31, ---------------------------- 1993 1992 1991 (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) -------- -------- -------- Revenues: Nitrogen fertilizer....................... $259,782 $243,397 $247,209 Methanol.................................. 106,004 81,556 5,520 -------- -------- -------- Total revenues.......................... $365,786 $324,953 $252,729 ======== ======== ======== Operating profit: Nitrogen fertilizer....................... $ 46,090 $ 53,350 $ 60,374 Methanol.................................. 8,312 12,263 1,419 -------- -------- -------- Total operating income.................. 54,402 65,613 61,793 Interest expense............................ (17,759) (14,870) (21,448) Interest and other income (expense)......... (589) 2,803 3,223 -------- -------- -------- Income before income taxes, minority interests and extraordinary expense........ $ 36,054 $ 53,546 $ 43,568 ======== ======== ======== Depreciation and amortization expense: Nitrogen fertilizer....................... $ 16,045 $ 15,709 $ 15,587 Methanol.................................. 10,831 11,004 581 -------- -------- -------- $ 26,876 $ 26,713 $ 16,168 ======== ======== ======== Capital expenditures: Nitrogen fertilizer....................... $ 6,524 $ 9,262 $ 3,085 Methanol.................................. 444 616 78 -------- -------- -------- $ 6,968 $ 9,878 $ 3,163 ======== ======== ======== DECEMBER 31, ------------------ 1993 1992 -------- -------- Identifiable assets: Nitrogen fertilizer....................... $330,169 $317,035 Methanol.................................. 176,226 188,878 -------- -------- Total assets............................ $506,395 $505,913 ======== ========
12. CONTINGENCIES On September 27, 1993, U.S. EPA Region 6 filed a complaint, compliance order and notice of opportunity for hearing against BMC in connection with the Beaumont facility pursuant to the Resource Conservation and Recovery Act, as amended ("RCRA"), and the Texas Solid Waste Disposal Act. Among other things, the complaint requires BMC to cease disposing of its waste alcohol stream by burning the waste in its furnace, and prohibits any such further disposal except under an operating permit issued pursuant to RCRA. In its complaint, U.S. EPA proposes to assess a civil penalty of $583,950 against BMC for violations of hazardous waste treatment, storage and disposal, and management and recordkeeping F-40 AGRICULTURAL MINERALS AND CHEMICALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (Information pertaining to the six months ended June 30, 1994 and 1993 is unaudited) requirements. The Company has implemented modifications to ensure that its waste alcohol stream is nonhazardous under RCRA. The Company intends to contest such allegations vigorously and to request a hearing at the time it files its answer. The Company expects the ultimate amount of such loss to be less than the proposed penalty. Based on current knowledge, the Company does not expect this matter, or any other known environmental matter, to have a material adverse effect on its results of operations, financial condition or cash flow. BMCH has protested the 1994, 1993 and 1992 assessed value of its plant in Jefferson County, Texas. Jefferson County has assessed the 1993 value of the plant at an amount which, if it prevails, would increase 1993 property taxes by approximately $800,000 over the current amount recorded by BMCH. Management believes that it has adequately provided for property taxes and does not expect this matter to have a material adverse effect on the Company's financial position or future results of operations. F-41 [This page left intentionally blank] [Inside back Cover Page.] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN- TATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU- THORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITA- TION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PRO- SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. ------------- TABLE OF CONTENTS
PAGE ---- Summary................. 3 Investment Considerations......... 11 The Acquisition......... 14 The Refinancing......... 17 Use of Proceeds......... 18 Price Range of Common Shares and Dividend Information............ 18 Capitalization.......... 19 Pro Forma Combined Financial Statements of the Company............ 20 Liquidity and Capital Resources After the Acquisition and the Refinancing............ 26 Business................ 26 Description of Capital Stock.................. 36 Description of Certain Indebtedness and Other Obligations............ 38 Underwriting............ 42 Legal Matters........... 43 Experts................. 43 Available Information... 44 Incorporation of Certain Documents by Reference. 44 Information With Respect To AMCI................ 45 Index to Financial Statements............. F-1
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 9,700,000 TERRA INDUSTRIES INC. LOGO COMMON SHARES ------------------ P R O S P E C T U S ------------------ S.G.WARBURG & CO. INC. OCTOBER , 1994 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth an estimate (except for the Securities and Exchange Commission Registration Fee and NYSE Fee) of all expenses, other than the underwriting discount, payable by the Company in connection with the issuance and sale of securities being registered. SEC Registration Fee.......................................... $ 45,504 NYSE Filing Fee............................................... 66,525 TSE Filing Fee................................................ 11,877 NASD Filing Fee............................................... 13,696 Printing Costs................................................ 200,000 Accounting Fees and Expenses.................................. 125,000 Legal Fees and Expenses (not including Blue Sky).............. 400,000 Blue Sky Fees and Expenses.................................... 20,000 Miscellaneous................................................. 214,348 ---------- Total..................................................... $1,097,000 ==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Maryland General Corporate Law provides the following with respect to the indemnification of directors, officers, employees and agents: (a) Any director made a party to any proceeding in its capacity as a director, may be indemnified by registrant against certain liabilities unless it is established that: (i) the act or omission of the director was material to such proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; or (ii) the director actually received an improper benefit in money, property or services, or (iii) in the case of criminal proceedings, the director had reasonable cause to believe that the act or omission was unlawful. (b) A director who performs his duties in accordance with the standard of care required of directors by Maryland law has no liability by reason of being or having been director of a corporation. The indemnification provided by Maryland General Corporate Law and the registrant's By-Laws is not exclusive of any other rights to which a director or officer of the registrant may be entitled. The registrant also carries directors' and officers' liability insurance. The Company's Articles of Incorporation provide that the Company shall indemnify (i) its directors to the fullest extent provided by the general laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures provided by such laws; (ii) its officers to the same extent as it shall indemnify its directors; and (iii) its officers who are not directors to such further extent as shall be authorized by the Board of Directors and be consistent with law. The foregoing shall not limit the authority of the Company to indemnify other employees and agents consistent with law. The proposed form of Underwriting Agreement for the Common Shares to be sold in the offering contains provisions under which the Underwriters agree to indemnify the Company's directors and officers against certain liabilities, including liabilities under the Securities Act of 1933, as amended. II-1 ITEM 16. EXHIBITS 1 Form of Underwriting Agreement 2 Merger Agreement dated as of August 8, 1994 among Terra Industries Inc., AMCI Acquisition Corporation and Agricul- tural Minerals and Chemicals Inc. without exhibits or schedules* 4.1.1 Articles of Restatement of the Company filed with the State of Maryland on September 11, 1990, filed as Exhibit 3.1 to the Company's Form 10-K for the year ended December 31, 1990, is incorporated herein by reference. 4.1.2 Articles of Amendment of the Company filed with the State of Maryland on May 6, 1992, filed as Exhibit 3.1.2 to the Company's Form 10-K for the year ended December 31, 1992, is incorporated herein by reference. 4.2 By-Laws of the Company, as amended through August 7, 1991, filed as Exhibit 3 to the Company's Form 8-K dated Septem- ber 30, 1991, is incorporated herein by reference. 5 Opinion re Legality 23.1 Consent of Deloitte & Touche LLP 23.2 Consent of Price Waterhouse LLP 23.3 Consent of Ernst & Young LLP 23.4 Consent of Kirkland & Ellis 23.5 Consent of Piper & Marbury (included in Exhibit 5) 24 Power of Attorney* 99.1 Form of Methanol Hedging Agreement among Beaumont Methanol Corp. and The Morgan Stanley Leveraged Equity Fund II, L.P. as Counterparty 99.2 Indenture dated as of October 15, 1993 among Agricultural Minerals and Chemicals Inc. and Society National Bank 99.3 Agreement of Limited Partnership of Agricultural Minerals Company, L.P. dated as of December 4, 1991 99.4 Agreement of Limited Partnership of Agricultural Minerals, L.P. dated as of December 4, 1991 99.5 Form of Credit Agreement among Terra Industries Inc., Terra Capital, Inc., Agricultural Minerals, L.P., Certain Guarantors, Certain Lenders, Certain Issuing Banks and Citibank, N.A. without exhibits or schedules
- -------- *Filed previously in connection with Amendment No. 2. ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 13(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it is declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions described under Item 15, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SIOUX CITY AND THE STATE OF IOWA, ON OCTOBER 13, 1994. Terra Industries Inc. /s/ GEORGE H. VALENTINE By: _________________________________ George H. Valentine Its: Vice President, General Counsel and Corporate Secretary PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO REGISTRATION STATEMENT HAS BEEN SIGNED ON THE DATE OR DATES INDICATED, BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
SIGNATURE TITLE DATE(S) --------- ----- ------- * Chairman of the Board October 13, 1994 ____________________________________ Reuben F. Richards * Chief Executive Officer, October 13, 1994 ____________________________________ President and Director Burton M. Joyce (Principal Executive Officer) * Vice President, Chief October 13, 1994 ____________________________________ Financial Officer Francis G. Meyer (Principal Financial Officer and Principal Accounting Officer) * Director October 13, 1994 ____________________________________ Edward G. Beimfohr * Director October 13, 1994 ____________________________________ Carol L. Brookins * Director October 13, 1994 ____________________________________ Edward M. Carson * Director October 13, 1994 ____________________________________ David E. Fisher * Director October 13, 1994 ____________________________________ Basil T.A. Hone * Director October 13, 1994 ____________________________________ Anthony W. Lea * Director October 13, 1994 ____________________________________ John R. Norton III * Director October 13, 1994 ____________________________________ Henry R. Slack
/s/ GEORGE H. VALENTINE By: ______________________________________ George H. Valentine Attorney-in-Fact II-4 INDEX TO EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE ------- ----------- ------------ 1 Form of Underwriting Agreement....................... 2 Merger Agreement dated as of August 8, 1994 among Terra Industries Inc., AMCI Acquisition Corp. and Ag- ricultural Minerals and Chemicals Inc. without exhib- its or schedules*.................................... 4.1.1 Articles of Restatement of the Company filed with the State of Maryland on September 11, 1990, filed as Exhibit 3.1 to the Company's Form 10-K for the years ended December 31, 1990, is incorporated herein by reference............................................ 4.1.2 Articles of Amendment of the Company filed with the State of Maryland on May 6, 1992, filed as Exhibit 3.1.2 to the Company's Form 10-K for the year ended December 31, 1992, is incorporated herein by refer- ence................................................. 4.2 By-Laws of the Company, as amended through August 7, 1991, filed as Exhibit 3 to the Company's Form 8-K dated September 30, 1991, is incorporated herein by reference............................................ 5 Opinion re Legality.................................. 23.1 Consent of Deloitte & Touche LLP..................... 23.2 Consent of Price Waterhouse LLP...................... 23.3 Consent of Ernst & Young LLP......................... 23.4 Consent of Kirkland & Ellis.......................... 23.5 Consent of Piper & Marbury (included in Exhibit 5) .. 24 Power of Attorney*................................... 99.1 Form of Methanol Hedging Agreement among Beaumont Methanol Corp. and The Morgan Stanley Leveraged Eq- uity Fund II, L.P. as Counterparty................... 99.2 Indenture dated as of October 15, 1993 among Agricul- tural Minerals and Chemicals Inc. and Society Na- tional Bank.......................................... 99.3 Agreement of Limited Partnership of Agricultural Min- erals Company, L.P. dated as of December 4, 1991..... 99.4 Agreement of Limited Partnership of Agricultural Min- erals, L.P. dated as of December 4, 1991............. 99.5 Form of Credit Agreement among Terra Industries Inc., Terra Capital, Inc., Agricultural Minerals, L.P., Certain Guarantors, Certain Lenders, Certain Issuing Banks and Citibank, N.A. without exhibits or sched- ules.................................................
- -------- *Filed previously in connection with Amendment No. 2. II-5 Graphic Material Cross-Reference Page Appearing on page 2 is a map of the principal manufacturing facilities and storage terminals for Terra Industries Inc. ("TRA"), including the principal manufacturing facilities and storage terminals of the operations to be acquired from Agricultural Minerals and Chemicals Inc. ("AMCI"). The map includes locations of the following facilities: TRA UAN terminals; TRA dry terminals; TRA anhydrous ammonia storage; TRA manufacturing plants; AMCI terminals; AMCI manufacturing plants; and the AMCI methanol plant. Underneath the map is a caption containing the following text: "The map is not intended to represent the entire operations of Terra Industries Inc. or those to be acquired through the acquisition of Agricultural Minerals and Chemicals Inc." Appearing on page 10 is a chart representing the anticipated organization of the Company and certain of its subsidiaries after the consummation of the Acquisition, the Merger of AMCI into the Company and the Refinancing. Appearing on the inside back cover page of the prospectus is a graphical representation, including textual description, of the Company's business cycle. The graphical image is separated into four quadrants, labeled: "First Quarter", "Second Quarter", "Third Quarter", and "Fourth Quarter". The quadrant containing the heading "First Quarter" appears in the upper left section of the page; the quadrant containing the heading "Second Quarter" appears in the upper right section of the page; the quadrant containing the heading "Third Quarter" appears in the lower right section of the page; and the quadrant containing the heading "Fourth Quarter" appears in the lower left section of the page. In the quadrant labeled "First Quarter", the following textual items appear as bullet points: "Wholesale sales of fertilizer and chemicals occur to fill storage and build inventory."; Crop input planning with growers continues."; Dealer program sign- ups continue."; and "Planting in the Southwest begins." In the quadrant labeled "Second Quarter", the following textual items appear in the form of bullet points: "Planting in the Corn Belt and mid-South begins."; "Custom application of fertilizer and chemicals occurs in the Corn Belt and mid-South."; and "Over half of the year's sales occur." Under the quadrant labeled "Third Quarter", the following textual items appear in the form of bullet points: "Fields inspected; insecticides and late, post-emergent herbicides applied."; "Side dressing and winter wheat fertilizer applied."; "Majority of turf and nursery sales occur."; "Seed ordering begins in Midwest."; and "Planning/budgeting for next year take place." Under the quadrant labeled "Fourth Quarter", the following textual items appear in the form of bullet points: "Harvesting continues."; "Soil tested; crop input plans developed with growers."; Fall fertilizer applied."; "Supplier programs negotiated; sales strategies developed."; "Dealer program sign-ups begin."; and "Seed sales begin nationwide." EX-1 2 UNDERWRITING AGREEMENT Draft dated 10/11/94 EXHIBIT 1 FORM OF UNDERWRITING AGREEMENT 9,700,000 Shares TERRA INDUSTRIES INC. Common Shares UNDERWRITING AGREEMENT ---------------------- October ____, 1994 S.G. Warburg & Co. Inc. As representative of the several underwriters named in Schedule I hereto 787 Seventh Avenue New York, New York 10019 Dear Sirs: Terra Industries Inc., a Maryland corporation (the "Company"), proposes to sell 9,700,000 common shares, no par value per share, of the Company (the "Firm Shares"), to the several underwriters named in Schedule I hereto (the "Underwriters"). The Company also proposes to sell to the several Underwriters not more than 650,000 additional common shares, no par value per share, of the Company (the "Additional Shares"), if requested by the Underwriters as provided in Section 2 hereof. The Firm Shares and the Additional Shares are herein collectively called the "Shares". The common shares of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the "Common Shares". 1. Registration Statement and Prospectus. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities and Exchange Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a registration statement on Form S-3 under the Act (the "registration statement"), including prospectus subject to completion relating to the Shares. The term "Registration Statement" as used in this Agreement means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective, and as thereafter amended by post- effective amendment. The term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement, or, if the prospectus included in the Registration Statement omits information in reliance on Rule 430A under the Act and such information is included in prospectuses filed with the Commission pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement as supplemented by the addition of the Rule 430A information contained in the prospectuses filed with the Commission pursuant to Rule 424(b). The term "Preliminary Prospectus" as used in this Agreement means the prospectus, dated September 22, 1994 and subject to completion, in the form included in Amendment No. 2 to the registration statement at the time of the filing on September 22, 1994 of Amendment No. 2 to the registration statement with the Commission, and as such prospectus shall have been amended from time to time prior to the date of the Prospectus. Any reference in this Agreement to the registration statement, the Registration Statement, any Preliminary Prospectus or any Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of the registration statement, the Registration Statement, such Preliminary Prospectus or any Prospectus, as the case may be, and any reference to any amendment or supplement to the registration statement, the Registration Statement, any Preliminary Prospectus or any Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), which, upon filing, are incorporated by reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated Documents" means the documents which at the time are incorporated by reference in the registration statement, the Registration Statement, any Preliminary Prospectus, any Prospectus, or any amendment or supplement thereto, but does not include any documents incorporated by reference in the Registration Statement, any Prospectus, or any amendment or supplement thereto subsequent to the Closing Date (as defined in Section 4 hereof). 2. Agreements to Sell and Purchase. On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, (i) the Company agrees to issue and sell 9,700,000 Firm Shares, and (ii) each Underwriter agrees, severally and not jointly, to purchase from the Company at a price per share of $_______ (the "Purchase Price") the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I. On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, (i) the Company agrees to issue and sell up to 650,000 Additional Shares and (ii) the Underwriters shall have the right to purchase, severally and not jointly, up to an aggregate of 650,000 Additional Shares from the Company at the Purchase Price. Additional Shares may be purchased solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. The Underwriters may exercise their right to purchase any Additional Shares by giving written notice thereof to the Company at any time and from time to time within 30 days after the date of this Agreement. You shall give such notice on behalf of the Underwriters and the notice shall specify the aggregate number of Additional Shares to be purchased and the date for payment and delivery thereof. The date specified in the notice shall be a business day (i) no earlier than the Closing Date (as hereinafter defined), (ii) no later than ten business days after such notice has been given and (iii) no earlier than two business days after such notice has been given. If any Additional Shares are to be purchased, each Underwriter, severally and not jointly, agrees to purchase from the Company the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) which bears the same proportion to the total number of Additional Shares to be purchased from the Company as 2 the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I bears to the total number of Firm Shares. The Company shall, concurrently with the execution of this Agreement, deliver agreements executed by (i) the Company, (ii) certain directors and executive officers of the Company and (iii) Minorco (U.S.A.) Inc., a Colorado corporation ("Minorco U.S.A."), pursuant to which each such person agrees not to offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares, except to the Underwriters pursuant to this Agreement, for a period of 90 days after the date of the Prospectus (the "Lock- up Period") without your prior written consent, subject to the exceptions set forth therein. 3. Terms of Public Offering. The Company is advised by you that the Underwriters propose (i) to make a public offering of their respective portions of the Shares as soon after the effective date of the Registration Statement as in your judgment is advisable and (ii) initially to offer the Shares upon the terms set forth in the Prospectus. 4. Delivery and Payment. Delivery to the Underwriters of and payment for the Firm Shares shall be made at 10:00 A.M., New York City time on the fifth business day (the "Closing Date") following the date of the public offering, at such place as you shall designate. The Closing Date and the location of delivery of and the form of payment for the Firm Shares may be varied by agreement between you and the Company. Delivery to the Underwriters of and payment for any Additional Shares to be purchased by the Underwriters shall be made at such place as you shall designate at 10:00 A.M., New York City time, on the date specified in the exercise notice given by you pursuant to Section 2 (the "Option Closing Date"). The Option Closing Date and the location of delivery of and the form of payment for the Additional Shares may be varied by agreement between you and the Company. Certificates for the Shares shall be registered in such names and issued in such denominations as you shall request in writing not later than two full business days prior to the Closing Date or the Option Closing Date, as the case may be. Such certificates shall be made available to you for inspection not later than 9:30 A.M., New York City time on the business day next preceding the Closing Date or the Option Closing Date, as the case may be. Certificates in definitive form evidencing the Shares shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, with any transfer taxes thereon duly paid by the Company, for the respective accounts of the several Underwriters, against payment of the Purchase Price therefor by wire transfer of immediately available funds to the order of the Company. 5. Agreements of the Company. The Company agrees with you: (a) If, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, to use its best efforts to cause the Registration Statement or such post- effective amendment to become effective at the earliest possible time. The Company 3 will comply in a timely manner with the applicable provisions of Rules 424 and 430A under the Act prior to the Closing Date. (b) To advise you promptly and, if requested by you, to confirm such advice in writing, (i) when the Registration Statement has become effective and when any post-effective amendment to it becomes effective, (ii) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information with respect thereto, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Shares for offering or sale in any jurisdiction, or the initiation of any proceeding for such purposes, and (iv) of the happening of any event during the period referred to in paragraph (e) below which makes any statement of a material fact made in the Registration Statement or the Prospectus untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances under which made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal or lifting of such order at the earliest possible time. (c) To furnish to you, without charge, (i) two signed copies of Amendment No. 2 to the Registration Statement as first filed with the Commission and of each subsequent amendment to the Registration Statement, including all exhibits, and to furnish to you and each Underwriter designated by you, (ii) such number of conformed copies of the Registration Statement as so filed and of each such amendment to it, without exhibits, as you may reasonably request, (iii) such number of the Incorporated Documents, and the exhibits thereto, as you may reasonably request. (d) Not to file (i) any amendment or supplement to the Registration Statement (other than an amendment or supplement made through the filing of Incorporated Documents), whether before or after the time when it becomes effective, or to make any amendment or supplement to the Prospectus of which you shall not previously have been advised or to which you shall reasonably object, or (ii) so long as, in the reasonable opinion of counsel to the Underwriters, a prospectus is required to be delivered in connection with sales by any Underwriter or dealer, any document which, upon filing, becomes an Incorporated Document without delivering a copy of such documents to you, as Representative of the Underwriters, prior to or concurrently with such filing. (e) Promptly after the Registration Statement becomes effective, and from time to time thereafter for such period as in the reasonable opinion of counsel for the Underwriters a prospectus is required by law to be delivered in connection with sales by an Underwriter or a dealer, to furnish to each Underwriter and dealer as many copies of the Prospectus (and of any 4 amendment or supplement to the Prospectus) as such Underwriter or dealer may reasonably request. (f) If during the period specified in paragraph (e) any event shall occur as a result of which, in the reasonable opinion of counsel for the Underwriters, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Prospectus to comply with any law, forthwith to prepare and file with the Commission an appropriate amendment or supplement to the Prospectus so that the statements in the Prospectus, as so amended or supplemented, will not in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with law, and to furnish to each Underwriter and to such dealers as you shall specify, such number of copies thereof as such Underwriter or dealers may reasonably request. (g) Prior to any public offering of the Shares, to cooperate with you and counsel for the Underwriters in connection with the registration or qualification of the Shares for offer and sale by the several Underwriters and by dealers under the state securities or Blue Sky laws of such jurisdictions as you may request, to continue such qualification in effect so long as required for distribution of the Shares and to file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification; provided, however, that the Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to service of process in suits other than as to matters relating to the offer and sale of the Shares or subject itself to taxation in respect of doing business, in any jurisdiction where it is not now so subject. (h) To make generally available to its stockholders as soon as reasonably practicable a consolidated earnings statement covering a period of at least twelve months beginning after the "effective date" (as defined in Rule 158 under the Act) of the Registration Statement (but in no event commencing later than 90 days after such effective date) which shall satisfy the provisions of Section 11(a) of the Act (including, at the option of the Company, Rule 158 promulgated thereunder). (i) During the period of five years hereafter, to furnish to you as soon as available a copy of each report or other publicly available information of the Company mailed to the holders of Common Shares and a copy of each report (including related financial statements) filed with the Commission, the New York Stock Exchange or The Toronto Stock Exchange and such other publicly available information concerning the Company and its subsidiaries as you may reasonably request. (j) To pay all costs, expenses, fees and taxes incident to (i) the preparation, printing, filing and distribution under the Act of the Registration 5 Statement (including financial statements and exhibits), each Preliminary Prospectus and all amendments and supplements to any of them prior to or during the period specified in paragraph (e), (ii) the printing and delivery of the Prospectus and all amendments or supplements to it during the period specified in paragraph (e), (iii) the copying and delivery of this Agreement, the Preliminary and Supplemental Blue Sky Memoranda (including in each case any reasonable disbursements of counsel for the Underwriters relating to such copying and delivery), (iv) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of the several states (including in each case the reasonable fees and disbursements of counsel for the Underwriters relating to such registration or qualification and memoranda relating thereto), (v) filings and clearance with the National Association of Securities Dealers, Inc. (the "NASD") in connection with the offering, (vi) the listing of the Shares on the New York Stock Exchange and The Toronto Stock Exchange, (vii) furnishing such copies of the Registration Statement, the Prospectus and all amendments and supplements thereto as may be requested for use in connection with the offering or sale of the Shares by the Underwriters or by dealers to whom Shares may be sold as described herein and (viii) the performance by the Company of its other obligations under this Agreement. (k) To use its best efforts to have the Shares listed, subject to official notice of issuance, on the New York Stock Exchange and The Toronto Stock Exchange concurrently with the effectiveness of the Registration Statement. (l) To use its best efforts to consummate, concurrently with closing of the public offering of the Firm Shares, the merger (the "Merger") of AMCI Acquisition Corporation, a Delaware corporation ("Merger Sub"), with and into Agricultural Minerals and Chemicals Inc., a Delaware corporation ("AMCI"), pursuant to the Merger Agreement, dated as of August 8, 1994 (the "Merger Agreement"), among the Company, AMCI and Merger Sub. (m) To apply its net proceeds from the sale of the Shares in accordance with the description set forth in the Prospectus under "Use of Proceeds." 6. Representations and Warranties of the Company. The Company represents and warrants to each Underwriter that: (a) (i) The Company and the offering and sale of Shares contemplated by this Agreement meet the requirements for using Form S- 3 under the Act. The Registration Statement and any amendments thereto will comply in all material respects with the provisions of the Act and will not, as of the applicable effective date of the Registration Statement and any amendment thereto, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (ii) the Prospectus and any supplements thereto will 6 comply in all material respects with the provisions of the Act and will not, as of the applicable filing date of the Prospectus and any amendment thereto, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties contained in this paragraph (a) shall not apply to statements or omissions in the Registration Statement or the Prospectus (or any supplement or amendment to them) based upon information furnished to the Company in writing by or on behalf of any Underwriter through you expressly for use therein. (b) Each Preliminary Prospectus filed as part of Amendment No. 2 to the Registration Statement as part of any subsequent amendment thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in all material respects with the Act, and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. (c) All of the Company's subsidiaries are listed, to the extent such listing is required under the Act and the rules and regulations promulgated thereunder, in an exhibit to the Company's Annual Report on Form 10-K which is incorporated by reference into the Registration Statement. The Company and each of its subsidiaries has been duly incorporated, is validly existing and, in the case of each Material Subsidiary (as defined below), is in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as it is currently being conducted and to own, lease and operate its properties, and is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. A "Material Subsidiary" shall mean a subsidiary material to the business of the Company and its subsidiaries, taken as a whole. The Company's only Material Subsidiaries are Terra International, Inc., Terra International (Canada) Inc., Riverside/Terra Corporation, Terra Real Estate Corporation and Terra Capital, Inc. (d) The Incorporated Documents heretofore filed, when they were filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), conformed in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; any further Incorporated Documents so filed will, when they are filed, conform in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; no such document when it was filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), contained an untrue statement of a material fact or 7 omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances when made, not misleading; and no such further document, when it is filed, will contain an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances when made, not misleading. (e) All of the outstanding shares of capital stock of, or other ownership interests in, each of the Company's Material Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable, and are owned by the Company, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature (collectively, "Encumbrance"), except pursuant to, or in connection with, the Credit Agreement, to be dated as of the Closing Date (the "Credit Agreement"), by and among the Company, Citibank, N.A., as agent, and the lenders signatory thereto. All the outstanding shares of capital stock of AMCI have been duly and validly authorized and issued are fully paid and non-assessable and, upon consummation of the Merger, will be owned indirectly by the Company, free and clear of any Encumbrance, except pursuant to, or in connection with, the Credit Agreement. (f) All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid, non- assessable and not subject to any preemptive rights; and the Shares to be issued and sold by the Company hereunder have been duly authorized and, when issued and delivered to the Underwriters against payment therefor as provided by this Agreement, will have been validly issued and will be fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive rights. (g) The authorized, and outstanding capital stock of the Company is as set forth in the Prospectus under the caption "Capitalization"; and the authorized capital stock of the Company, including the Common Shares, conforms in all material respects as to legal matters to the description thereof contained in the Prospectus under the caption "Description of Capital Stock." (h) Neither the Company nor any of its subsidiaries is in violation of its respective charter or by-laws or in default in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any other agreement, indenture or instrument to which the Company or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective property is bound, except for those violations and defaults that are not reasonably expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole. (i) This Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company enforceable in accordance with its terms (except as rights to 8 indemnity and contribution hereunder may be limited by applicable law). The Company has the corporate power and authority necessary to enter into and perform its obligations under this Agreement and to issue, sell and deliver the Shares to be sold by it. The execution, delivery and performance of this Agreement, compliance by the Company with all the provisions hereof and the consummation of the transactions contemplated hereby will not require any consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body (except as such may be required under the securities or Blue Sky laws of the various states, foreign securities laws, and the by-laws of the NASD) and will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company or any of its subsidiaries or any agreement, indenture or other instrument to which it or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective property is bound, or violate or conflict with any laws, administrative regulations or rulings or court decrees applicable to the Company, any of its subsidiaries or their respective property. (j) Except as otherwise set forth in the Prospectus, there are no legal, governmental, regulatory or administrative proceedings pending to which the Company or any of its subsidiaries is a party or of which any of their respective property is the subject, which, if adversely determined, would have a material adverse effect on the Company and its subsidiaries, taken as a whole, and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated. No contract or document of a character required to be described in the Registration Statement, the Prospectus or any Incorporated Documents or to be filed as an exhibit to the Registration Statement is not so described or filed as required. The descriptions of the terms of any such contracts or documents contained in the Registration Statement, the Prospectus or any Incorporated Documents are correct in all material respects. (k) Except as described in the Registration Statement or the Prospectus, neither the Company nor any of its subsidiaries (i) has violated any environmental, safety, health or similar law or regulation applicable to its business relating to the protection of human health and safety or the environment from hazardous or toxic substances or wastes, pollutants or contaminants, including, without limitation, the Clean Air Act, as amended, the Clean Water Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Federal Water Pollution Control Act, as amended, the Resource Conservation and Recovery Act, as amended, the Toxic Substances Control Act, as amended, the Oil Pollution Act, as amended, the Occupational Safety and Health Act, as amended, and comparable state and local laws, including, without limitation, the Texas Solid Waste Disposal Act ("Environmental Laws"), the effect of which violation would reasonably be expected to, individually or in the aggregate, have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, (ii) has failed 9 to obtain any permits, licenses or other approvals required of them under applicable Environmental Laws or is violating any terms and conditions of any such notice, permit, license or approval, the effect of which failure or violation would reasonably be expected to, individually or in the aggregate, have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole As of the date hereof, no litigation or action is pending or, to the best knowledge of the Company, threatened against the Company or any of its subsidiaries relating to any violation of any Environmental Laws with respect to the assets or business of the Company or any of its subsidiaries which is required to be in the Registration Statement or which would reasonable be expected to, individually or in the aggregate, have a material adverse effect on the business, prospectus, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. (l) Deloitte & Touche, Price, Waterhouse and Ernst & Young, who have certified or shall certify the applicable consolidated financial statements and supporting schedules of the Company (in the case of Deloitte & Touche and Price, Waterhouse) and AMCI (in the case of Ernst & Young), filed or to be filed with the Commission as part of the Registration Statement and the Prospectus are independent public accountants with respect to the Company and its subsidiaries or AMCI and its subsidiaries, as applicable, as required by the Act. (m) The consolidated historical and pro forma financial statements of the Company and AMCI, together with the related schedules and notes, set forth in the Prospectus and the Registration Statement comply as to form in all material respects with the requirements of the Act. Such historical financial statements fairly present the consolidated financial position of the Company and its subsidiaries and AMCI and its subsidiaries, as the case may be, at the respective dates indicated and the results of their operations and their cash flows for the respective periods indicated, subject, in the case of unaudited financial statements, to normal recurring year-end adjustments, in accordance with generally accepted accounting principles ("GAAP") consistently applied throughout such periods. Such pro forma financial statements have been prepared on a basis consistent with such historical statements, except for the pro forma adjustments specified therein, have been properly compiled on the bases stated therein and give effect to assumptions made on a reasonable basis. The other financial and statistical information and data included in the Prospectus and in the Registration Statement, historical and pro forma, are, in all material respects, accurate and prepared on a basis consistent with such financial statements and the books and records of the Company and AMCI. (n) the Company has complied and will comply with all the provisions of Florida H.B. 171, codified as Section 517.075 of the Florida statutes, and all regulations promulgated thereunder relating to issuers doing business in Cuba. 10 (o) Neither the Company nor any of its subsidiaries is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or (b) a "holding company" or a "subsidiary company" of a holding company, or an "affiliate" thereof within the meaning of the Public Utility Company Act of 1935, as amended. (p) Except as described in the Prospectus under "Underwriting" and on the cover page, there are no claims, payments, issuances, arrangements or understandings for services in the nature of a finder's or origination fee with respect to the sale of the Shares hereunder. (q) No holder of any security of the Company has or will have any right to require the registration of such security by virtue of any transaction contemplated by this Agreement. (r) To the best of the Company's knowledge, after its due diligence inquiries in connection with the Merger, each of the representations and warranties of AMCI contained in the Merger Agreement (i) in the case of any thereof that are expressly qualified by any materiality qualification are true and correct, and (ii) in the case of all other representations and warranties, are true and correct in all material respects, in each case as of the Effective Time (as defined in the Merger Agreement) as though made on and as of the Effective Time, and except that those representations and warranties that address matters only as of a particular date shall remain true and correct, subject to such materiality qualifications or in all material respects, as the case be, as of such date. (s) The Company has not taken and will not take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Shares to facilitate the sale or resale of the Shares, and the Company has not distributed and will not distribute prior to the Closing Date or Option Closing Date, as the case may be, any offering material in connection with the offering and sale of the Shares other than the Registration Statement, the Prospectus or other material, if any, permitted by the Act. (t) Any certificate signed by any officer of the Company and delivered to the Underwriters or counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to each Underwriter as to the matters covered thereby. Any certificate delivered by the Company to its counsel for purposes of enabling such counsel to render the opinions referred to in Section 8 will also be furnished to you and counsel for the Underwriters and shall be deemed to be additional representations and warranties by the Company to the Underwriters as to the matters covered thereby. 11 7. Indemnification. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) and each director, officer, employee or agent of such Underwriter and such controlling person from and against any and all losses, claims, damages, liabilities and judgments, and any action in respect thereof, caused by or which arises as a result of, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or the Preliminary Prospectus, or caused by or which arises as a result of, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall promptly reimburse each Underwriter, and each such controlling person, director, officer, employee or agent for any legal or other expenses reasonably incurred by that Underwriter, controlling person, director, employee or agent in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such losses, claims, damages, liabilities, and judgments or actions as such expenses are incurred, except insofar as such losses, claims, damages, liabilities or judgments are caused by, any such untrue statement or omission or alleged untrue statement or omission or alleged omission based upon information furnished in writing to the Company by or on behalf of any Underwriter through you expressly for use therein, provided, however, that the Company shall not be liable to any Underwriter or any controlling person, director, officer, employee or agent of such Underwriter under the indemnity agreement in this subsection (a) with respect to any Preliminary Prospectus to the extent that any such loss, claim, damage or liability of results from the fact that such Underwriter sold Shares to a person to whom that there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus (excluding documents incorporated by reference) or of the Prospectus as then amended or supplemented (excluding documents incorporated by reference) if the Company has previously furnished the requisite number of copies thereof to such Underwriter on a timely basis and the loss, claim, damage or liability results form an untrue statement or omission of a material fact (or alleged untrue statement or omission) contained in the Preliminary Prospectus which was corrected in the Prospectus (excluding documents incorporated by reference) or in the Prospectus as then amended (excluding documents incorporated by reference), as the case may be. Notwithstanding the foregoing, the aggregate liability of the Company pursuant to the provisions of this paragraph shall be limited to an amount equal to the aggregate purchase price received by the Company from the sale of Shares hereunder. The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have. (b) In case any action shall be brought against any Underwriter or any person controlling such Underwriter, based upon any Preliminary Prospectus, the Registration Statement or the Prospectus or any amendment or supplement thereto and with respect to which indemnity may be sought against the Company, such Underwriter shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses. Any Underwriter or any such controlling person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the employment of such counsel has been specifically authorized 12 in writing by the Company, (ii) the Company has failed to reasonably and promptly assume the defense and employ counsel or (iii) the named parties to any such action (including any impleaded parties) include both such Underwriter or such controlling person and the Company, as the case may be, and such Underwriter or such controlling person shall have been advised by such counsel that representation of such indemnified party and the Company by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interest between them, (in which case the Company shall not have the right to assume the defense of such action on behalf of such Underwriter or such controlling person, it being understood, however, that the Company shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel, if required) for all such Underwriters and controlling persons, which firm shall be designated in writing by S.G. Warburg & Co. Inc. and that all such fees and expenses shall be reimbursed as they are incurred). The Company shall not be liable for any settlement of any such action effected without the written consent of the Company, but, if settled with the written consent of the Company, the Company agrees to indemnify and hold harmless any Underwriter and any such controlling person from and against any loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 10 business days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or reasonably could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement, and any person controlling the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to information furnished in writing by or on behalf of such Underwriter through you expressly for use in the Registration Statement, the Prospectus or any preliminary prospectus. In case any action shall be brought against the Company, any of its directors, any such officer or any person controlling the Company based on the Registration Statement, the Prospectus or any preliminary prospectus and in respect of which indemnity may be sought against any Underwriter, the Underwriter shall have the rights and duties given to the Company (except that if the Company shall have assumed the defense thereof, such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter), and the Company, its directors, any such officers and any person controlling the Company shall have the rights and 13 duties given to the Underwriter, by Section 7(b) hereof. The foregoing indemnity agreement is in addition to any liability which any Underwriter may otherwise have. (d) If the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an indemnified party under Section 7(a) or 7(c) in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of the Company and the Underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company, and the total underwriting discounts and commissions received by the Underwriters, bear to the total price to the public of the Shares, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public was offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 7 (d) are several in proportion to the respective number of Shares purchased by each of the Underwriters hereunder and not joint. 14 8. Conditions of Underwriters' Obligations. The several obligations of the Underwriters to purchase the Firm Shares under this Agreement are subject to the satisfaction of each of the following conditions: (a) All the representations and warranties of the Company contained in this Agreement shall be true and correct on the Closing Date with the same force and effect as if made on and as of the Closing Date. (b) If, at the time this Agreement is executed and delivered, it is necessary for the registration statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, the Registration Statement shall have become effective not later than 5:00 P.M., New York City time, on the date of this Agreement or at such later date and time as you may approve in writing, and all filings, if any, required by Rules 424 and 430A under the Act shall have been timely made; and at the Closing Date no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been commenced or shall be pending before or contemplated by the Commission. (c) (i) Since the date of the latest balance sheets of the Company and AMCI included in the Registration Statement and the Prospectus, there shall not have been any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, affairs or business prospects, whether or not arising in the ordinary course of business, of the Company and its subsidiaries taken as a whole (including AMCI and its subsidiaries after consummation of the Merger), other than as set forth in the Registration Statement and Prospectus and (ii) since the date of the latest balance sheets of the Company and AMCI included in the Registration Statement and the Prospectus there shall not have been any material change, or any development involving a prospective material adverse change, in the capital stock or in the long-term debt of the Company or AMCI, other than as set forth from that set forth in the Registration Statement and Prospectus. On the Closing Date you shall have received a certificate dated the Closing Date, signed by Burton M. Joyce and Francis G. Meyer, in their capacities as the Chief Executive Officer, President and Director and Vice President and Chief Financial Officer, respectively, of the Company, confirming the matters set forth in paragraphs (a), (b), (c) and (m) of this Section 8. (d) You shall have received on the Closing Date the opinion (reasonably satisfactory to you and counsel for the Underwriters), dated the Closing Date, of Kirkland & Ellis, counsel for the Company, to the effect that: (i) the Company is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which, to the knowledge of such counsel, after due inquiry, the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have 15 a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) relying as to matters of Maryland law upon the opinion of Piper & Marbury the Shares to be issued and sold by the Company hereunder have been duly authorized and, when issued and delivered to the Underwriters against payment therefor as provided by this Agreement, will have been validly issued and will be fully paid and non-assessable, and the issuance of such Shares is not subject to any preemptive rights; (iii) relying as to matters of Maryland law upon the opinion of Piper & Marbury the Company has the requisite corporate power and authority to enter into this Agreement and consummate the transaction contemplated hereby, and this Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company enforceable in accordance with its terms (except as rights to indemnity and contribution hereunder may be limited by applicable law); (iv) relying as to matters of Maryland law upon the opinion of Piper & Marbury The authorized and outstanding capital stock of the Company is as set forth in the Prospectus under the caption "Capitalization"; and the authorized capital stock of the Company as of the Closing Date, including the Common Shares, conforms in all material respects as to legal matters to the description thereof contained in the Prospectus under the caption "Description of Capital Stock"; (v) the Registration Statement has become effective under the Act, no stop order suspending its effectiveness has been issued and no proceedings for that purpose are, to the knowledge of such counsel, pending before or contemplated by the Commission; (vi) the execution, delivery and performance of this Agreement by the Company, compliance by the Company with all the provisions hereof and the consummation of the transactions contemplated hereby and will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company or any of its Material Subsidiaries (other than Terra Canada) or any agreement listed on Schedule II hereto, or violate or conflict with any laws, administrative regulations or rulings or court decrees known to such counsel, after due inquiry, applicable to the Company or any of its Material Subsidiaries (other than Terra Canada) or their respective properties; (vii) after due inquiry, such counsel does not know of any legal, governmental, regulatory or administrative proceeding pending or 16 threatened to which the Company or any of its subsidiaries is a party or to which any of their respective property is subject which is required to be described in the Registration Statement or the Prospectus and is not so described, or of any contract or other document which is required to be described in the Registration Statement or the Prospectus or is required to be filed as an exhibit to the Registration Statement which is not described or filed as required; (viii) except for the order of the Commission making the Registration Statement effective and permits and similar authorizations required under the securities or Blue Sky laws of certain states and foreign securities laws, no consent, approval, authorization or other order of any regulatory body, administrative agency or other governmental body is legally required for the valid issuance and sale of the Shares to the Underwriters as contemplated by this Agreement or the public offering of the Shares contemplated by the Prospectus; and (ix) The Registration Statement and the Prospectuses and any supplements or amendments thereto (except for the financial statements, schedules and notes thereto and other financial and statistical data included therein or omitted therefrom, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act. In addition, such counsel shall state that such counsel participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants and representatives of the Underwriters at which the contents of the Registration Statement and Prospectus were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and Prospectus (except as otherwise indicated above) on the basis of the foregoing (relying as to materiality to a large extent upon the opinions of officers and representatives of the Company), no facts have come to the attention of such counsel which lead them to believe that either the Registration Statement or any amendment thereto, at the time the Registration Statement or amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading or that the Prospectus as of its date or any supplement thereto as of its date, or the Registration Statement or the Prospectus and any amendment or supplement thereto as of the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and schedules and other financial and statistical data included in or omitted from the Registration Statement or Prospectus). The opinion of such counsel may be limited to the laws of the State of New York, the General Corporation Law of the State of Delaware, the Federal laws of the United States and to laws which in the experience of counsel are normally applicable to transactions 17 of the type contemplated by this Agreement. In rendering their opinion as aforesaid, counsel may, as to factual matters, rely upon written certificates or statements of officers of the Company and, as indicated above, with respect to certain matters of Maryland law upon Piper & Marbury. (e) You shall have received on the Closing Date the opinion (reasonably satisfactory to you and counsel for the Underwriters), dated the Closing Date, of Piper & Marbury, local counsel for the Company, to the effect that: (i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority required to carry on its business as it is currently being conducted and to own its properties; (ii) all the outstanding Common Shares have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive rights; (iii) the Shares to be issued and sold by the Company hereunder have been duly authorized and, when issued and delivered to the Underwriters against payment therefor as provided by this Agreement, will have been validly issued and will be fully paid and non-assessable, and the issuance of such Shares is not subject to any preemptive rights; (iv) the Company has the requisite corporate power and authority to enter into this Agreement and consummate the transaction contemplated hereby, and this Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company enforceable in accordance with its terms (except as rights to indemnity and contribution hereunder may be limited by applicable law); (v) The authorized and outstanding capital stock of the Company is as set forth in the Prospectus under the caption "Capitalization"; and the authorized capital stock of the Company as of the Closing Date, including the Common Shares, conforms in all material respects as to legal matters to the description thereof contained in the Prospectus under the caption "Description of Capital Stock"; and (vi) the execution, delivery and performance of this Agreement by the Company, compliance by the Company with all the provisions hereof and the consummation of the transactions contemplated hereby and will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company, or violate or conflict with any laws, administrative regulations or rulings 18 or court decrees known to such counsel, after due inquiry, which are applicable to the Company or its properties; The opinion of such counsel may be limited to the laws of the State of Maryland and the General Corporation Law of the State of Maryland. In rendering their opinion as aforesaid, counsel may, as to factual matters, rely upon written certificates or statements of officers of the Company. (f) You shall have received on the Closing Date the opinion (reasonably satisfactory to you and counsel for the Underwriters), dated the Closing Date, of Osler, Hoskin & Harcourt, Canadian counsel for the Company, to the effect that: (i) Terra Canada has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority required to carry on its business as it is currently being conducted and to own its properties; (ii) Terra Canada is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) all the outstanding shares of capital stock of Terra Canada have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive rights; and (iv) the execution, delivery and performance of this Agreement by the Company, compliance by the Company with all the provisions hereof and the consummation of the transactions contemplated hereby and will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of Terra Canada or any agreement, indenture or other instrument to which Terra Canada is a party or by which the Terra Canada or its properties are bound, or violate or conflict with any laws, administrative regulations or rulings or court decrees known to such counsel after due inquiry which are applicable to the Terra Canada or its properties; The opinion of such counsel may be limited to the laws of the Province of Ontario, Canada and the Federal laws of Canada. In rendering their opinion as aforesaid, counsel may, as to factual matters, rely upon written certificates or statements of officers of the Company. 19 (g) You shall have received on the Closing Date the opinion (satisfactory to you and counsel for the Underwriters), dated the Closing Date, of George H. Valentine, Esq., to the effect set forth in the last sentence of Section (d), and to the further effect that: (i) Each of the Company's Material Subsidiaries have been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority required to carry on its business as it is currently being conducted and to own its properties; (ii) Each of the Company's Material Subsidiaries (other than Terra Canada) is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) all of the outstanding shares of capital stock of, or other ownership interests in, each of the Company's Material Subsidiaries (other than Terra Canada) have been duly and validly authorized and issued and are fully paid and non- assessable, and are owned by the Company, free and clear of any Encumbrance, except pursuant to, or in connection with, the Credit Agreement; (iv) all outstanding shares of capital stock of AMCI have been duly and validly authorized and issued and are fully paid and non-assessable and, upon consummation of the Merger pursuant to the Merger Agreement, will be indirectly owned by the Company, free and clear of any Encumbrance, except pursuant to, or in connection with the Credit Agreement; (v) neither the Company nor any of its subsidiaries is in violation of its respective charter or by-laws and, to the best of such counsel's knowledge after due inquiry, neither the Company nor any of its subsidiaries is in default in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any other agreement, indenture or instrument material to the conduct of the business of the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which it or any of their respective subsidiaries or their respective properties is bound; and (vi) each of the Incorporated Documents (except for the financial statements, schedules and notes thereto and other financial and statistical data, as amended, included therein, as to which counsel need not express any opinion), when they were filed (or, if an 20 amendment with respect to any Incorporated Document was filed, when such amendment was filed) complied as to form in all material respects with the Exchange Act. The opinion of such counsel may be limited to the General Corporation Law of the State of Delaware and the Federal laws of the United States. In rendering his opinion as aforesaid, counsel may, as to factual matters, rely upon written certificates or statements of officers of the Company or AMCI, as applicable. (h) You shall have received on the Closing Date an opinion, dated the Closing Date, of Andrews & Kurth L.L.P., counsel for the Underwriters, as to the matters referred to in clauses (ii), (iii), (iv) and (v) and the paragraph immediately following clause (ix) of the foregoing paragraph (d) and such other related matters as you may request. The opinion of such counsel may be limited to the laws of the State of New York, and the Federal laws of the United States. In rendering their opinion as aforesaid, counsel may, as to factual matters, rely upon written certificates or statements of officers of the Company and with respect to certain matters of Maryland law upon Piper & Marbury. (i) You shall have received on the Closing Date a certificate dated the Effective Time from the Chief Financial Officer of AMCI, stating that you may rely on the certificates delivered by him to the Company pursuant to Section 7.02(a) and (b) of the Merger Agreement. (j) You shall have received letters on and as of the Closing Date, in form and substance satisfactory to you, from each of Deloitte & Touche and Ernst & Young, independent public accountants to the Company and AMCI, respectively, with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus relating to the Company and AMCI, respectively, and each substantially in the form and substance of the letters delivered to you by Deloitte & Touche and Ernst & Young, respectively, on the date of this Agreement. (k) On or prior to the closing of the public offering of the Firm Shares, the Merger shall have been consummated pursuant to the terms of the Merger Agreement. (l) Concurrently with the execution of this Agreement, the Underwriters shall have entered into an agreement satisfactory to the Underwriters with Minorco U.S.A., (the "Minorco U.S.A. Purchase Agreement") pursuant to which Minorco U.S.A. shall be obligated to purchase from the Underwriters (i) on the Closing Date, that number of Firm Shares, as shall be equal to 53% of the Firm Shares purchased by the Underwriters and (ii) on the Option Closing Date, that number of Additional Shares as shall be equal to 53% of the Additional Shares purchased by the Underwriters. 21 (m) On or prior to the Closing Date, the Shares shall have been listed, subject to official notice of issuance, on the New York Stock Exchange. (n) On or prior to the Closing Date, the Company shall have delivered the agreements of each of (i) the Company, (ii) certain directors and executive officers of the Company and (iii) Minorco U.S.A., referred to in the final paragraph of Section 2 hereof. (o) The Company shall not have failed on or prior to the Closing Date to perform or comply in all material respects with any of the agreements herein contained and required to be performed or complied with by the Company on or prior to the Closing Date. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to you on the Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares and other matters related to the issuance of the Additional Shares. 9. Effective Date of Agreement and Termination. This Agreement shall become effective upon the later of (i) execution of this Agreement and (ii) when notification of the effectiveness of the Registration Statement has been released by the Commission. This Agreement may be terminated at any time prior to the Closing Date by you by written notice to the Company if any of the following has occurred: (i) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any adverse change or development involving a prospective adverse change in the condition, financial or otherwise, of the Company or any of its subsidiaries or the earnings, affairs, or business prospects of the Company or any of its subsidiaries, whether or not arising in the ordinary course of business, which would, in your judgment, make it impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus, (ii) any outbreak or escalation of hostilities or other national or international calamity or crisis or material change in economic conditions, if the effect of such outbreak, escalation, calamity, crisis or change on the financial markets of the United States or elsewhere would, in your judgment, make it impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus, (iii) the suspension or material limitation of trading in securities on the New York Stock Exchange or The Toronto Stock Exchange or limitation on prices for securities on any such exchange or (v) the declaration of a banking moratorium by federal or New York State authorities. If on the Closing Date or on the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase the Firm Shares or Additional Shares, as the case may be, which it or they have agreed to purchase hereunder on such date and the aggregate number of Firm Shares or Additional Shares, as the case may be, which such defaulting Underwriter or Underwriters, as the case may be, agreed but failed or refused to purchase is not more than one-tenth of the total number of Shares to be purchased on such date by all Underwriters, each nondefaulting Underwriter shall be obligated severally, in the proportion which the number of Firm Shares set forth opposite its name in Schedule 22 I bears to the total number of Firm Shares which all the non-defaulting Underwriters have agreed to purchase, or in such other proportion as you may specify, to purchase the Firm Shares or Additional Shares, as the case may be, which such defaulting Underwriter or Underwriters, as the case may be, agreed but failed or refused to purchase on such date; provided that in no event shall the number of Firm Shares or Additional Shares, as the case may be, which any Underwriter has agreed to purchase pursuant to Section 2 hereof be increased pursuant to this Section 9 by an amount in excess of one-ninth of such number of Firm Shares or Additional Shares, as the case may be, without the written consent of such Underwriter. If on the Closing Date or on the Option Closing Date, as the case may be, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares, or Additional Shares, as the case may be, and the aggregate number of Firm Shares or Additional Shares, as the case may be, with respect to which such default occurs is more than one-tenth of the aggregate number of Shares to be purchased on such date by all Underwriters in the event of a default by a Underwriter and arrangements satisfactory to you and the Company for purchase of such Shares are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any non- defaulting Underwriter and the Company. In any such case which does not result in termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date or the Option Closing Date, as the case may be, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of any such Underwriter under this Agreement. 10. Miscellaneous. Notices given pursuant to any provision of this Agreement shall be addressed as follows: (a) if to the Company, to Terra Industries Inc., Terra Centre, 600 Fourth Street, P.O. Box 6000, Sioux City, Iowa 51102-6000, Attention: General Counsel and (b) if to any Underwriter or to you, to you c/o S.G. Warburg & Co. Inc., 787 Seventh Avenue, New York, New York 10019, Attention: Syndicate Department, or in any case to such other address as the person to be notified may have requested in writing. The respective indemnities, contribution agreements, representations, warranties and other statements of the Company, its officers and directors and of the several Underwriters set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive delivery of and payment for the Shares, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter or by or on behalf of the Company or the officers or directors of the Company or any controlling person of the Company, (ii) acceptance of the Shares and payment for them hereunder and (iii) termination of this Agreement. If this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, the Company agrees to reimburse the several Underwriters for all out-of-pocket expenses (including the fees and disbursements of counsel) reasonably incurred by them. Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Underwriters, any controlling 23 persons referred to herein and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Shares from any of the several Underwriters merely because of such purchase. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to applicable principles of conflicts of laws to the extent that the application of the law of another jurisdiction would be required thereby. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. 24 Please confirm that the foregoing correctly sets forth the agreement between the Company and the several Underwriters. Very truly yours, Terra Industries Inc. By -------------------------------- Title: The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written: S.G. Warburg & Co. Inc. Acting on behalf of itself and the several Underwriters named in Schedule I hereto S.G. Warburg & Co. Inc. By -------------------------------- Title: 25 SCHEDULE I ---------- Number of Firm Name Shares To be Purchased ---- ---------------------- S.G. Warburg & Co. Inc. ............... Total .............................. 26 SCHEDULE II ----------- Credit Agreement, to be dated as of the Closing Date, among the Company, certain of its Subsidiaries, Citibank, N.A. as agent, and the lenders signatory thereto. Indenture dated as of May 31, 1987, from Terra Industries to Mellon Bank, N.A., as Trustee. Asset Sale and Purchase Agreement among Inspiration Consolidated Copper Company and Cyprus Miami Mining Corporation and Cyprus Christmas Mine Corporation dated as of June 30, 1989. Stock Purchase Agreement, dated as of June 14, 1991, among Minorco, Kirkdale Investments Limited, Terra Industries and Hudson Holdings Corporation. Amended and Restated Stock Purchase Agreement, dated as of July 31, 1991, among Minorco, Kirkdale Investments Limited, Terra Industries and Hudson Holdings Corporation. Option Agreement, dated as of June 14, 1991, among Kirkdale Investments Limited and Terra Industries. Amendment to Stock Option Agreement, dated July 31, 1991, among Minorco, Kirkdale Investments Limited and Terra Industries. Asset and Sale Purchase Agreement, dated as of April 8, 1993, by and between Terra International, Inc., Terra International (Canada) Inc. and ICI Canada Inc. Asset Purchase Agreement, dated as of December 30, 1993, by and between Terra International, Inc., The Upjohn Company and Asgrow Florida Company. Lease, dated as of April 8, 1993, between W. Patrick Moroney and Terra International (Canada) Inc. 27 EX-5 3 OPINION RE LEGALITY EXHIBIT 5 [LETTERHEAD OF PIPER & MARBURY] October 12, 1994 Terra Industries Inc. Terra Centre 600 Fourth Street Sioux City, Iowa 51102-6000 Dear Ladies and Gentlemen: As counsel to Terra Industries Inc., a Maryland corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended (the "Act"), pursuant to a Registration Statement on Form S-3 of the Company (Registration No. 33-52493) (as amended, the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission"), of up to 10,350,000 Common Shares, without par value (the "Shares"), of the Company to be sold to the underwriters named in the Registration Statement for resale to the public (including 650,000 shares issuable upon exercise of an over-allotment option granted to the underwriters), we have examined the Charter and By-Laws of the Company, minutes of the proceedings of the Company's Board of Directors authorizing the issuance of the Shares, and such other documents as we have considered necessary. We have also examined the Certificate of Secretary dated October 12, 1994 (the "Certificate"). In rendering our opinion, we are relying on the Certificate and have made no independent investigation or inquiries as to the matters set forth therein. We are of the opinion and so advise you that, upon issuance and delivery of the Shares upon the terms set forth in the Registration Statement, assuming the Board of Directors of the Company adopts resolutions substantially in the form of Exhibit A hereto prior to the issuance of the Shares, the Shares will have been duly and validly authorized and will be legally issued and fully-paid and non-assessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading "Legal Matters" in the Prospectus included in the Registration Statement. In giving our consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder. Very truly yours, /s/Piper & Marbury PROPOSED RESOLUTIONS OF THE BOARD OF DIRECTORS OF TERRA INDUSTRIES INC. OCTOBER 13, 1994 WHEREAS, at a meeting duly held on August 26, 1994, the Board of Directors (the "Board") of Terra Industries Inc. (the "Company") adopted resolutions which, among other things, (a) authorized the officers of the Company to take certain actions in connection with the proposed issuance and sale by the Company of its common shares, without par value (the "Common Shares"), in a public offering and (b) provided for the Board to determine at a later date (i) the advisability of proceeding with such public offering in lieu of exercising its rights under the Put Option Agreement dated as of August 8, 1994 (the "Put Option Agreement") between the Company and Minorco (U.S.A.) Inc. and (ii) if necessary, the price at which Common Shares would be sold in such public offering; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Company as follows: Election of Public Offering --------------------------- 1. It is hereby determined that it is advisable for the Company to, and the Company shall, proceed with the public offering of Common Shares as described below in lieu of exercising the Company's rights under the Put Option Agreement. Ratification of Prior Actions with Respect to the Offering ---------------------------------------------------------- 2. The actions heretofore taken by the officers of the Company in connection with the proposed issuance and public sale by the Company of up to 10,350,000 Common Shares (including up to 650,000 Common Shares subject to the underwriters' over-allotment option) are hereby ratified, confirmed and approved, including, without limitation, (a) the appointment of S. G. Warburg Co., Inc. ("Warburg") as the managing underwriter for the public offering (Warburg and any other underwriters with respect to the public offering being referred to collectively as the "Underwriters"), (b) the filing of a Registration Statement on Form S-3 (File No. 33-52493) and amendments thereto with the Securities and Exchange Commission (the "SEC") for the registration of such Common Shares under the Securities Act of 1933, as amended, and (c) the execution and delivery or filing of such other documents, and the taking of such other actions, as may have been deemed appropriate or desirable in the judgment of the officers of or counsel to the Company. Approval of Sale of Common Shares --------------------------------- 3. The Company is hereby authorized to issue and sell 9,700,000 Common Shares (plus up to an additional 650,000. Common Shares to be issued and sold pursuant to the underwriters' over-allotment option). The price to the public shall be $_________ per share and the underwriters' discount shall be ___%, for a net price payable to the Company by the Underwriters of $____ per Common Share. 4. The Chairman of the Board, the President or any Vice President of the Company is hereby authorized and directed to execute and deliver on behalf of the Company an Underwriting Agreement (the "Underwriting Agreement"), between the Company and Warburg on behalf of itself and the other Underwriters named therein, providing for the issuance and sale by the Company and the purchase by Warburg and the other Underwriters of the Common Shares described above; such Underwriting Agreement shall be in substantially the form of the Underwriting Agreement presented at this meeting, which is hereby approved, but with such changes, if any, therein as the officer of the Company executing such Underwriting Agreement on behalf of the Company may approve, such approval to be conclusively evidenced by his execution thereof. 5. The Company shall issue and sell the Common Shares described above at the price to the Company stated above and in accordance with and subject to the terms and conditions set forth in the Underwriting Agreement as executed by the Company. The Company's performance of its obligations under the Underwriting Agreement (including indemnification obligations) is hereby approved and authorized. 6. Upon the payment of the purchase price therefor set forth in the Underwriting Agreement, the shares of Common Stock sold pursuant to the Underwriting Agreement shall be deemed duly authorized, validly issued, fully paid and non-assessable. 7. Of the net proceeds received by the Company, $1.00 for each Common Share issued and sold shall be assigned to stated capital and the remainder shall be assigned to surplus. Reclassification of Class A Shares ---------------------------------- 8. The Company is hereby authorized to reclassify as Common Shares all of the authorized but unissued Class A Shares of the Company. For the purposes of effecting such reclassification, the officers of the Company, pursuant to Section 2-208 of the Maryland General Corporation Law, are hereby authorized and directed to execute Articles Supplementary to the Articles of Incorporation of the Company and under its corporate seal or otherwise, and to cause such Articles Supplementary to be filed with the Maryland State Department of Assessments and Taxation. 9. The authorization for reclassification of certain unissued Class A Shares and Common Shares of the Company into Convertible Preferred Shares of the Company contained in resolutions approved on July 20, 1994 at Paragraph 4(d) is hereby rescinded. The Acquisition --------------- 10. The actions heretofore taken by the officers of the Company in connection with the acquisition of Agricultural Minerals and Chemicals Inc. ("AMCI") and the financing transactions to be entered into in connection therewith, including the financing arrangements with the various lenders for whom Citibank, N.A., is acting as agent, all as previously approved by this Board, are hereby ratified, confirmed and approved. The officers of the Company are hereby authorized and directed to take all such further actions, and execute or deliver all such further documents and instruments, contemplated by the agreements providing for such acquisition and financing transactions or otherwise described in the preliminary prospectus dated September 22, 1994 with respect to the public offering of Common Shares described above (which preliminary prospectus has been reviewed by the members of the Board), including, without limitation, (a) immediately following the consummation of the acquisition of AMCI by merger of AMCI into a wholly-owned subsidiary of the Company, the merger of AMCI with and into the Company (the "Second Step Merger"), with the Company being the surviving corporation of the Second Step Merger and all the outstanding shares of AMCI being cancelled as of the effective time of the Second Step Merger, (b) the assumption by the Company of AMCI's obligations under AMCI's 10.75% Senior Notes due 2003 in the initial principal amount of $175 million, and (c) following the consummation of the Second Step Merger, the contribution by the Company of its shares of Terra International, Inc. and Terra International (Canada) Inc. to one or more wholly- owned subsidiaries of the Company. Further Authority ----------------- 11. The appropriate officers of the Company are hereby authorized for, on behalf of and in the name of the Company to take or cause to be taken all such actions, and to execute or cause to be executed all such other documents, as may be deemed by them necessary or desirable to carry out the purposes of the foregoing, the taking of any such action and the execution of any such document by any such officer shall constitute conclusive evidence of the authority of such officer; and any and all actions taken or caused to be taken, and any and all documents executed or caused to be executed, by the officers of the Company heretofore or hereafter, consistent with the tenor and purport of the foregoing, is hereby ratified, confirmed and approved in all respects. EX-23.1 4 CONSENT DELOITTE & TOUCHE Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- We consent to the incorporation by reference in this Amendment No. 3 to Registration Statement No. 33-52493 of Terra Industries Inc. on Form S-3 of our reports dated February 1, 1994, appearing in and incorporated by reference in the Annual Report on Form 10-K of Terra Industries Inc. for the year ended December 31, 1993, and to the use of our report dated February 1, 1994, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ DELOITTE & TOUCHE LLP - ------------------------- DELOITTE & TOUCHE LLP Omaha, Nebraska October 10, 1994 EX-23.2 5 CONSENT OF PRICE WATER Exhibit 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- We hereby consent to the incorporation by reference in the Prospectus constituting part of this Amendment No. 3 to the Registration Statement on Form S-3 (33-52493) of our report dated February 13, 1992 appearing on page S-3 of Terra Industries, Inc. Annual Report on Form 10-K for the year ended December 31, 1993. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ PRICE WATERHOUSE LLP - ------------------------ PRICE WATERHOUSE LLP New York, New York October 10, 1994 EX-23.3 6 CONSENT OF ERNST & YOUNG Exhibit 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 11, 1994, in Amendment No. 3 to the Registration Statement (Form S-3 No. 33-52493) and the related Prospectus of Terra Industries Inc. /s/ Ernst & Young LLP ________________________ Ernst & Young LLP Tulsa, Oklahoma October 11, 1994 EX-23.4 7 CONSENT OF KIRKLAND & EL EXHIBIT 23.4 Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 To call writer direct: Facsimile (312) 861-2000 (312) 861-2200 October 12, 1994 Terra Industries, Inc. Terra Centre 600 Fourth Street Sioux City, Iowa 51102-6000 Re: Registration Statement on Form S-3 File No. 33-52493 ----------------------------------------------------- Ladies and Gentlemen: We hereby consent to the reference to Kirkland & Ellis under the heading "Legal Matters" in the Prospectus included in the Registration Statement on Form S-3, File No. 33-52493. In giving our consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /S/Kirkland & Ellis Kirkland & Ellis EX-99.1 8 FORM OF METHANOL HEDGING EXHIBIT 99.1 Form of Methanol Hedging Agreement METHANOL HEDGING AGREEMENT dated as of ____________, 1994, between BEAUMONT METHANOL CORPORATION, a Delaware corporation ("BMC"), and THE MORGAN STANLEY LEVERAGED EQUITY FUND II, L.P., a Delaware limited partnership, as agent under an agency agreement dated as of the date hereof (the "Counterparty"). WHEREAS, BMC is engaged in the manufacture and sale of methanol; WHEREAS, BMC's revenues from sales of methanol during calendar year 1995, 1996 and 1997 are expected to vary depending on the market price of methanol at the time of sale, with such revenues increasing if methanol prices increase and declining if methanol prices decline; WHEREAS, BMC's revenues, net of costs of production, from sales of methanol during calendar year 1995, 1996 and 1997 are expected to vary depending on the relationship of the market price of methanol at the time of sale to the market price of natural gas at the time of production, with such net revenues increasing if methanol prices increase and/or natural gas prices decline and declining if methanol prices decline and/or natural gas prices increase; and WHEREAS, BMC is desirous of reducing its risk with respect to future changes in the market prices of methanol and natural gas by receiving a fixed cash payment from the Counterparty in exchange for undertaking an obligation to make future payments to the Counterparty in the event that methanol prices exceed natural gas prices by more than a specified amount during the calendar year 1995, 1996 and 1997; NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows: 1. Purchase of Rights. Concurrent with the execution and delivery of this Agreement, the Counterparty is paying to BMC the sum of $4 million. 2. Grant of Rights. Subject to paragraph 3, BMC will pay to the Counterparty, on the fifth business day after the end of each Rights Period specified below (or, in the case of the final Rights Period, not later than the last day of such Rights Period), the amount, if any, computed to be due for such Rights Period in accordance with this paragraph. D-1
Rights Period Gallons of Methanol ------------- ------------------- First: Date hereof to 10.833 million multiplied by the number December 31, 1995 of whole months and any fraction thereof (such fraction to be calculated based on actual days elapsed and a year of 365 days) between the date hereof and December 31, 1995. Second: Year ended 140 million December 31, 1996 Third: Year ended 130 million December 31, 1997
For each Rights Period, the amount, if any, due to the Counterparty shall be equal to the product of: (a) the gallons of methanol specified above for such Rights Period, multiplied by, (b) the excess, if any, over $0.65 per gallon of the remainder of (i) the Tecnon Price (defined below) for such Rights Period, minus (ii) 0.113 times the Natural Gas Price (as defined below) for such Rights Period. For any Rights Period, the "Tecnon Price" means the average for such Rights Period of the midpoint of the high and low transaction prices for domestic barge methanol contracts, U.S. Gulf Coast in cents per gallon appearing in the Methanol Price Monitor section of TECNON (U.K.) Ltd.'s Monthly Newsletter - -Methanol for each month during such Rights Period. For any Rights Period, the "Natural Gas Price" means the average for such Rights Period of the spot price index (large packages only), in cents per MMBtu, for natural gas delivered in the Houston Ship Channel/Beaumont, Texas area appearing in the first edition for each month during such Rights Period of Inside Ferc, a McGraw-Hill publication. If BMC so elects, by written notice to the Counterparty, and the Counterparty agrees in writing, BMC may, in lieu of making any portion or all of the foregoing payment for any Rights Period, deliver to the Counterparty, F.O.B. Beaumont, Texas, a pro rata portion of the gallons of methanol for such Rights Period against payment in cash at a per gallon price equal to the sum of (i) the Natural Gas Price for such Rights Period multiplied by 0.113 plus (ii) $0.65. BMC shall pay all amounts due hereunder solely to the Counterparty. BMC shall not be liable to any person or responsible in any manner for the distribution by the Counterparty or the Counterparty's failure to distribute any amount paid hereunder to any person who has or may have any beneficial interest in any such payment. 3. Force Majeure. If any Event of Force Majeure (as defined below) occurs during any Rights Period, the gallons of methanol used pursuant to paragraph 2 hereof for such Rights Period shall be reduced by 50% of the number of gallons of methanol that could not be produced by BMC during such Rights Period due to such Event of Force Majeure. If BMC receives business interruption insurance proceeds for lost profits with respect to Events of Force Majeure that occurred during any Rights Period for which the payments hereunder were reduced due to such Events of Force Majeure, as described in the next preceding sentence, then BMC shall pay to the Counterparty the lesser of 50% of such proceeds or the amount by which such payment was reduced. "Event of Force Majeure" has the meaning specified in the Methanol Purchase and Sale Agreement dated as of September 16, 1993, between BMC and E.I. DuPont de Nemours and Company. 4. Governing Laws. This agreement shall be governed by, and construed and interpreted in accordance with the laws of the State of New York (excluding principles of conflicts of laws). D-2 5. Notices. Any notice, request, instruction, correspondence or other document to be given hereunder by either party to the other shall be in writing and shall be delivered in person or by confirmed facsimile transmission as follows: BMC: 600 Fourth Street Terra Centre Sioux City, Iowa 51101 Facsimile No. (712) 279-8703 Attention: George H. Valentine, Esquire Counterparty: 1221 Avenue of the Americas (33rd Floor) New York, N.Y. 10020 Attention: Alan E. Goldberg Notice given by personal delivery shall be effective upon actual receipt. Notice given by facsimile transmission shall be effective at 5:00 p.m., local time, at the place of receipt on the next business day after transmission of confirmation of receipt by the sending party. Either party may change any address to which notices are required to be given by giving notice thereof as provided above. 6. Miscellaneous. (a) The section headings contained in this Agreement are for the convenience of the parties only and shall not be interpreted as part of this Agreement. (b) Waiver by one party of the other party's breach of any provision of this Agreement shall not be deemed a waiver of any subsequent or continuing breach of such provision or of the breach of any other provision or provisions hereof. (c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (d) All amounts of money referred to in this Agreement shall be construed to mean money which at the time is lawful money of the United States of America. (e) If the publication used to determine the Tecnon Price or the Natural Gas Price as described above (an "Existing Publication") ceases publishing the referenced data or if one party notifies the other party in writing that an Existing Publication no longer fairly reflects (i) in the case of the Tecnon Price the range of actual market prices for the purchase of methanol in barge quantities F.O. B. the U.S. Gulf Coast under large contracts, the term of which is one year or more, or (ii) in the case of the Natural Gas Price, the actual spot prices (large packages only) of natural gas delivered in the Houston Ship Channel/Beaumont, Texas area ("Actual Market Prices"), then the parties shall meet in good faith to determine whether such Existing Publication fairly reflects Actual Market Prices, or, if they conclude that such Existing Publication does not fairly reflect Actual Market Prices or such Existing Publication has ceased publishing the referenced data, to select a replacement publication that fairly reflects Actual Market Prices (a "Replacement Publication"), or, if they conclude that such Existing Publication does not fairly reflect actual Market Prices or such Existing Publication has ceased publishing the referenced data and no Replacement Publication exists, to select an alternative pricing formula that fairly reflects Actual Market Prices. D-3 (f) This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof and shall not be modified except by written instrument executed by duly authorized representatives of the parties. (g) Each party hereto represents and warrants that this Agreement has been duly authorized, executed and delivered and constitutes a legal, valid and binding agreement enforceable against it in accordance with its terms. (h) The Counterparty shall have the right to terminate this Agreement at any time. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. BEAUMONT METHANOL CORPORATION By:_______________________________________ Name: Title: THE MORGAN STANLEY LEVERAGED EQUITY FUND II, L.P. By: Morgan Stanley Leveraged Equity Fund II, Inc., as general partner By:_______________________________________ Name: Title: D-4 EX-99.2 9 AGRI, CHEM,SOCIETY INDENT EXHIBIT 99.2 - -------------------------------------------------------------------------------- AGRICULTURAL MINERALS AND CHEMICALS INC. and SOCIETY NATIONAL BANK, Trustee Indenture Dated as of October 15, 1993 10-3/4% Senior Notes Due 2003 - -------------------------------------------------------------------------------- CROSS-REFERENCE TABLE --------------------- TIA SECTIONS INDENTURE SECTIONS - ------------ ------------------ (S) 310(a)(1)................................................. 7.09 (a)(2)................................................. 7.09 (b).................................................... 7.08; 10.02 (S) 313(c).................................................... 7.05; 10.02 (S) 314(a).................................................... 4.17; 10.02 (a)(4)................................................. 4.15 (c)(1)................................................. 10.03 (c)(2)................................................. 10.03 (e).................................................... 10.04 (S) 315(b).................................................... 7.04; 10.02 (S) 316(a) (last sentence).................................... 2.09 (a)(1)(A).............................................. 6.05 (a)(1)(B).............................................. 6.04 (b).................................................... 6.07 (S) 317(a)(1)................................................. 6.08 (a)(2)................................................. 6.09 (S) 318(a).................................................... 10.01 (c).................................................... 10.01 Note: The Cross-Reference Table shall not for any purpose be deemed to be a part of the Indenture. TABLE OF CONTENTS
Page ---- RECITALS OF THE COMPANY ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01 Definitions................................... 1 SECTION 1.02 Incorporation by Reference of Trust Indenture Act......................... 24 SECTION 1.03 Rules of Construction......................... 24 ARTICLE 2 The Securities SECTION 2.01 Form and Dating............................... 25 SECTION 2.02 Execution, Authentication and Denominations............................... 25 SECTION 2.03 Registrar and Paying Agent.................... 26 SECTION 2.04 Paying Agent to Hold Money in Trust........... 27 SECTION 2.05 Transfer and Exchange......................... 28 SECTION 2.06 Replacement Securities........................ 28 SECTION 2.07 Outstanding Securities........................ 29 SECTION 2.08 Temporary Securities.......................... 29 SECTION 2.09 Cancellation.................................. 29 SECTION 2.10 CUSIP Numbers................................. 29 SECTION 2.11 Defaulted Interest............................ 30 ARTICLE 3 Redemption SECTION 3.01 Right of Redemption........................... 30 SECTION 3.02 Notices to Trustee............................ 31 SECTION 3.03 Selection of Securities to Be Redeemed........ 31 SECTION 3.04 Notice of Redemption.......................... 32 SECTION 3.05 Effect of Notice of Redemption................ 33 SECTION 3.06 Deposit of Redemption Price................... 33 SECTION 3.07 Payment of Securities Called for Redemption.................................. 33 SECTION 3.08 Securities Redeemed in Part................... 33
(ii)
Page ---- ARTICLE 4 Covenants SECTION 4.01 Payment of Securities......................... 34 SECTION 4.02 Maintenance of Office or Agency............... 34 SECTION 4.03 Limitation on Indebtedness.................... 34 SECTION 4.04 Limitation on Restricted Payments............. 39 SECTION 4.05 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries..................... 43 SECTION 4.06 Limitation on the Issuance of Capital Stock of Restricted Subsidiaries............ 45 SECTION 4.07 Limitation on Transactions with Shareholders and Affiliates................. 46 SECTION 4.08 Limitation on Liens........................... 47 SECTION 4.09 Limitation on Sale-Leaseback Transactions................................ 48 SECTION 4.10 Limitation on Asset Sales..................... 49 SECTION 4.11 Repurchase of Securities upon Change of Control........................... 52 SECTION 4.12 Corporate Existence........................... 54 SECTION 4.13 Payment of Taxes and Other Claims............. 54 SECTION 4.14 Notice of Defaults and Other Events........... 55 SECTION 4.15 Maintenance of Properties and Insurance............................... 55 SECTION 4.16 Amendments to Limited Partnership Agreements.................................. 56 SECTION 4.17 Compliance Certificates....................... 56 SECTION 4.18 Commission Reports and Reports to Holders.................................. 57 SECTION 4.19 Waiver of Stay, Extension or Usury Laws....... 57 ARTICLE 5 Successor Corporation SECTION 5.01 When Company May Merge, Etc. ................. 57 SECTION 5.02 Successor Corporation Substituted............. 59 ARTICLE 6 Default and Remedies SECTION 6.01 Events of Default............................. 59 SECTION 6.02 Acceleration.................................. 61 SECTION 6.03 Other Remedies................................ 62 SECTION 6.04 Waiver of Past Defaults....................... 63
(iii)
Page ---- SECTION 6.05 Control by Majority........................... 63 SECTION 6.06 Limitation on Suits........................... 63 SECTION 6.07 Rights of Holders to Receive Payment.......... 64 SECTION 6.08 Collection Suit by Trustee.................... 64 SECTION 6.09 Trustee May File Proofs of Claim.............. 64 SECTION 6.10 Priorities.................................... 65 SECTION 6.11 Undertaking for Costs......................... 66 SECTION 6.12 Restoration of Rights and Remedies............ 66 SECTION 6.13 Rights and Remedies Cumulative................ 66 SECTION 6.14 Delay or Omission Not Waiver.................. 66 ARTICLE 7 Trustee SECTION 7.01 Rights of Trustee............................. 67 SECTION 7.02 Individual Rights of Trustee.................. 68 SECTION 7.03 Trustee's Disclaimer.......................... 68 SECTION 7.04 Notice of Default............................. 68 SECTION 7.05 Reports by Trustee to Holders................. 68 SECTION 7.06 Compensation and Indemnity.................... 69 SECTION 7.07 Replacement of Trustee........................ 69 SECTION 7.08 Successor Trustee by Merger, Etc. ............ 71 SECTION 7.09 Eligibility................................... 71 ARTICLE 8 Discharge of Indenture SECTION 8.01 Termination of Company's Obligations.......... 71 SECTION 8.02 Defeasance and Discharge of Indenture......... 72 SECTION 8.03 Defeasance of Certain Obligations............. 75 SECTION 8.04 Application of Trust Money.................... 77 SECTION 8.05 Repayment to Company.......................... 77 SECTION 8.06 Reinstatement................................. 78 ARTICLE 9 Amendments, Supplements and Waivers SECTION 9.01 Without Consent of Holders.................... 78 SECTION 9.02 With Consent of Holders....................... 79 SECTION 9.03 Revocation and Effect of Consent.............. 80 SECTION 9.04 Notation on or Exchange of Securities......... 81 SECTION 9.05 Trustee to Sign Amendments, Etc. ............. 81 SECTION 9.06 Conformity with Trust Indenture Act........... 81
(iv)
Page ---- ARTICLE 10 Miscellaneous SECTION 10.01 Trust Indenture Act of 1939................... 81 SECTION 10.02 Notices....................................... 82 SECTION 10.03 Certificate and Opinion as to Conditions Precedent........................ 82 SECTION 10.04 Statements Required in Certificate or Opinion.................................. 83 SECTION 10.05 Rules by Trustee, Paying Agent or Registrar................................... 83 SECTION 10.06 Payment Date Other Than a Business Day........ 83 SECTION 10.07 Governing Law................................. 84 SECTION 10.08 No Adverse Interpretation of Other Agreements.................................. 84 SECTION 10.09 No Recourse Against Others.................... 84 SECTION 10.10 Successors.................................... 84 SECTION 10.11 Duplicate Originals........................... 84 SECTION 10.12 Separability.................................. 84 SECTION 10.13 Table of Contents, Headings, Etc. ............ 84
INDENTURE dated as of October 15, 1993, between AGRICULTURAL MINERALS AND CHEMICALS INC., a Delaware corporation (the "Company"), and SOCIETY NATIONAL BANK, a national banking association, Trustee (the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of up to $175 million principal amount of the Company's 10-3/4% Senior Notes Due 2003 (the "Securities") issuable as provided in this Indenture. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done and the Company has done all things necessary to make the Securities, when executed by the Company and authenticated and delivered by the Trustee hereunder and duly issued by the Company, the valid obligations of the Company as hereinafter provided. This Indenture is subject, and shall be governed by, the provisions of the Trust Indenture Act of 1939, as amended, that are required to be a part of and to govern indentures qualified under the Trust Indenture Act of 1939, as amended. AND THIS INDENTURE FURTHER WITNESSETH For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders, as follows. ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01 Definitions. "Acquired Indebtedness" is defined to mean Indebtedness of a Person existing at the time such Person became a Subsidiary and not Incurred in connection with, or in contemplation of, such Person becoming a Subsidiary. "Adjusted Consolidated Net Income" is defined to mean, for any period, the aggregate net income (or loss) of any Person and its consolidated Subsidiaries for such period determined in conformity with GAAP; provided, however, that the following items shall be excluded in computing Adjusted 2 Consolidated Net Income (without duplication): (a) the net income (or loss) of such Person (other than net income (or loss) attributable to a Subsidiary of such Person) in which any other Person (other than such Person or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to such Person or any of its Subsidiaries by such other Person during such period; (b) solely for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (iii) of the first paragraph of Section 4.04 of this Indenture (and in such cases, except to the extent includible pursuant to clause (a) above), the net income (or loss) of such Person accrued prior to the date it becomes a Subsidiary of any other Person or is merged into or consolidated with such other Person or any of its Subsidiaries or all or substantially all of the property and assets of such Person are acquired by such other Person or any of its Subsidiaries; (c) the net income (or loss) of any Subsidiary of any Person to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary; (d) any gains or losses (on an after-tax basis) attributable to Asset Sales; (e) except for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (iii) of the first paragraph of Section 4.04 of this Indenture, any amounts paid or accrued as dividends on Preferred Stock of such Person or Preferred Stock of any Subsidiary (other than the Partnerships) of such Person owned by Persons other than such Person or any of its Subsidiaries; (f) all extraordinary gains and extraordinary losses; and (g) all noncash charges reducing net income of such Person that relate to stock options or stock appreciation rights and all cash payments reducing net income of such Person that relate to stock options or stock appreciation rights; provided, however, that, solely for the purpose of calculating the Interest Coverage Ratio (and in such case, except to the extent includable pursuant to clause (a) above), "Adjusted Consolidated Net Income" of such Person shall include the amount of all cash dividends or other cash distributions received by such Person or any Subsidiary of such Person from an Unrestricted Subsidiary. "Affiliate" is defined to mean, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms 3 "controlling", "controlled by" and "under common control with"), as applied to any Person, is defined to mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" is defined to mean any Registrar, Paying Agent, authenticating agent or co-registrar. "AMC" is defined to mean Agricultural Minerals Corporation, a Delaware corporation, and its successors. "AMC Credit Facility" is defined to mean the Second Amended and Restated Credit Agreement dated as of November 25, 1991, as amended, among AMLP and the lenders and the agent named therein, together with all other documents related thereto (including, without limitation, any Guarantees and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented, extended, renewed, replaced or otherwise modified from time to time, including, without limitation, any agreement increasing the amount of, extending the maturity of, refinancing or otherwise restructuring (including, but not limited to, the inclusion of additional borrowers or Guarantors thereunder that are Subsidiaries of the Company and whose obligations are Guaranteed by the Company thereunder) all or any portion of the Indebtedness under such agreements or any successor agreements. "AMCLP" is defined to mean Agricultural Minerals Company, L.P., a Delaware limited partnership, and its successors. "AMCLP Limited Partnership Agreement" is defined to mean the Agreement of Limited Partnership of Agricultural Minerals Company, L.P., dated as of December 4, 1991, among AMC, the Company and any other persons who become partners in AMCLP as provided therein, as such agreement may be amended, supplemented, or otherwise modified from time to time as permitted by the Indenture. "AMLP" is defined to mean Agricultural Minerals, Limited Partnership, a Delaware limited partnership, and its successors. "AMLP Limited Partnership Agreement" is defined to mean the Agreement of Limited Partnership of Agricultural Minerals, Limited Partnership, dated as of December 4, 1991, 4 among AMC, the Company and AMCLP, as such agreement may be amended, supplemented or otherwise modified from time to time as permitted by the Indenture. "Asset Acquisition" is defined to mean (a) an investment by the Company or any of its Susidiaries in any other Person, pursuant to which such Person shall become a Subsidiary of the Company or any of its Subsidiaries or shall be merged into or consolidated with the Company or any of its Subsidiaries; or (b) an acquisition by the Company or any of its Subsidiaries of the assets of any Person other than the Company or any of its Subsidiaries that constitutes substantially all of a division or line of business of such Person. "Asset Disposition" is defined to mean the sale or other disposition by the Company or any of its Subsidiaries (other than to the Company or another Subsidiary of the Company) of (a) all or substantially all the Capital Stock of any Subsidiary of the Company or (b) all or substantially all the assets that constitute a division or line of business of the Company or any of its Subsidiaries. "Asset Sale" is defined to mean, with respect to any Person, any sale, transfer or other disposition (including by way of merger, consolidation or sale-leaseback transaction) in one transaction or a series of related transactions by such Person or any of its Subsidiaries to any Person other than the Company or any of its Subsidiaries of (a) all or any of the Capital Stock of any Subsidiary of such Person; (b) all or substantially all the assets of an operating unit or business of such Person or any of its Subsidiaries; or (c) any other assets of such Person or any of its Subsidiaries outside the ordinary course of business of such Person or such Subsidiary and, in each case, that is not governed by the provisions of Article 5 of this Indenture; provided, however, that for purposes of determining the restrictions under Section 4.10 of this Indenture, sales, transfers or other dispositions of inventory, receivables and other current assets shall not be included within the meaning of "Asset Sale". "Attributable Indebtedness" is defined to mean, when used in connection with a sale-leaseback transaction referred to in Section 4.09 of this Indenture, at any date of determination, the product of (a) the net proceeds from such sale-leaseback transaction; and (b) a fraction, the numerator of which is the number of full years of the term of the lease relating to the property involved in such sale-leaseback transaction (without regard to any options to renew or extend 5 such term) remaining at the date of the making of such computation, and the denominator if which is the number of full years of the term of such lease (without regard to any options to renew or extend such term) measured from the first day of such term. "Average Life" is defined to mean, at any date of determination with respect to any debt security, the quotient obtained by dividing (a) the sum of the product of (i) the number of years from such date of determination to the dates of each successive scheduled principal payment of such debt security multiplied by (ii) the amount of such principal payment, by (b) the sum of all such principal payments. "Bank Credit Facility" is defined to mean either an AMC Credit Facility of a BMC Credit Facility. "BMC" is defined to mean Beaumont Methanol Corporation, a Delaware corporation, and its successors. "BMC Credit Facility" is defined to mean the Amended and Restated Credit Agreement, dated as of October 19, 1993, among BMC, BMC Holdings Inc., a Delaware corporation, and the lenders and the agent named therein, together with all the other documents related thereto (including, without limitation, any Guarantees and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented, extended, renewed, replaced or otherwise modified form time to time, including, without limitation, any agreement increasing the amount of, extending the maturity of, refinancing or otherwise restructuring (including, but not limited to, the inclusion of additional borrowers or Guarantors thereunder that are Subsidiaries of the Company and whose obligations are Guaranteed by the Company thereunder) all or any portion of the Indebtedness under such agreements or any successor agreements. "Board of Directors" is defined to mean the Board of Directors of the Company or any committee of such Board of Directors duly authorized to act under this Indenture. "Board Resolution" is defined to mean a copy of a resolution, certified by the Secretary or an Assistant Secretary of the Company, to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" is defined to mean any day except a Saturday, Sunday or other day on which commercial banks in The City of New York, or in the city of the Corporate Trust 6 Office of the Trustee, are authorized or obligated to be closed. "Capital Stock" is defined to mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or nonvoting) of such Person's capital stock or equity interests in a partnership, joint venture, limited liability company or other equity that is outstanding or issued on or after the date of this Indenture, including, without limitation, all Common Stock and Preferred Stock. "Capitalized Lease" is defined to mean, as applied to any Person, any lease of any property (whether real, personal or mixed) the discounted present value of the rental obligations of such Person as lessee of which, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person; and "Capitalized Lease Obligation" is defined to mean the rental obligations, as aforesaid, under such lease. "Change of Control" is defined to mean such time as (a) (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than MSLEF II or any of its Affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than thirty-five percent (35%) of the total voting power of the then outstanding Voting Stock of the Company and (ii) MSLEF II or any of its Affiliates beneficially owns (as so defined), directly or indirectly, less than twenty-five percent (25%) of the total voting power of the then outstanding Voting Stock of the Company; (b) individuals who at the beginning of any period of two consecutive calendar years constituted the Company's board of directors (together with any new directors whose election by the Company's board of directors or whose nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the members of the board of directors of the Company then still in office who either were members of the board of directors of the Company at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the board of directors of the Company then in office; or (c) the Company shall not beneficially own (as so defined), directly or indirectly, a majority of the issued and outstanding Voting Stock of the general partner of the Partnerships (or such other Person that may own all or substantially all the operating assets owned by the Partnerships on the Closing Date) other than as a result of a merger or consolidation of the Company with such general partner (or such other Person). 7 "Closing Date" is defined to mean the date on which the Securities are originally issued under this Indenture. "Common Stock" is defined to mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or nonvoting) of such Person's common stock, whether now outstanding or issued after the date of this Indenture, or common equity interests in a partnership, including, without limitation, all series and classes of such common stock, all the Common Units and the general partnership interests in the Partnerships. "Common Unit" is defined to mean a Common Unit as defined in the AMCLP Limited Partnership Agreement. "Company" is defined to mean Agricultural Minerals and Chemicals Inc., a Delaware corporation, and its successors. "Consolidated EBITDA" is defined to mean, with respect to any Person for any period, the sum of the amounts for such period of (a) Adjusted Consolidated Net Income, (b) Consolidated Interest Expense, (c) income taxes (other than income taxes (either positive or negative) attributable to extraordinary and nonrecurring gains or losses or sales of assets), (d) depreciation expense, (e) amortization expense, (f) minority interest and (g) all other noncash items reducing Adjusted Consolidated Net Income, less all noncash items increasing Adjusted Consolidated Net Income, all as determined on a consolidated basis for such Person and its Subsidiaries in conformity with GAAP; provided, however, that, if a Person has any Subsidiary (other than the Partnerships) that is not a Wholly Owned Subsidiary of such Person, Consolidated EBITDA of such Person shall be reduced (to the extent not otherwise excluded by the definition of Adjusted Consolidated Net Income) by an amount equal to (i) the Adjusted Consolidated Net Income of such Subsidiary multiplied by (ii) the quotient of (A) the number of shares of outstanding Common Stock of such Subsidiary not owned on the last day of such period by such Person or any Subsidiary of such Person divided by (B) the total number of shares of outstanding Common Stock of such Subsidiary on the last day of such period; and provided further, however, that Consolidated EBITDA of such Person shall be reduced by amounts paid as distributions on limited partnership interests of either Partnership owned by Persons other than the Company or any of its Subsidiaries. 8 "Consolidated Interest Expense" is defined to mean, with respect to any Person for any period, the aggregate amount of interest in respect of Indebtedness (including amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, excluding, without limitation, amounts deferred by trade creditors until the occurrence of certain events, calculated in accordance with the effective interest method of accounting; all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; the net costs associated with Interest Rate Agreements; and Indebtedness that is Guaranteed by such Person) and all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be accrued by such Person and its consolidated Subsidiaries during such period; excluding, however, (a) any amount of such interest of any Subsidiary of such Person if the net income (or loss) of such Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income for such Person pursuant to clause (c) of the proviso in the definition thereof (but only in the same proportion as the net income (or loss) of such Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income for such Person pursuant to clause (c) of the proviso in the definition thereof) and (b) any premiums, fees and expenses (and any amortization thereof) payable in connection with the 1993 Recapitalization, all as determined on a consolidated basis in conformity with GAAP. "Consolidated Net Tangible Assets" is defined to mean the total amount of assets of the Company and its Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (a) all current liabilities of the Company and its consolidated Subsidiaries (excluding intercompany items) and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recently available quarterly or year-end consolidated balance sheet of the Company and its consolidated Subsidiaries, prepared in conformity with GAAP. "Consolidated Net Worth" is defined to mean, at any date of determination, shareholders' equity as set forth on the most recently available quarterly or year-end consolidated balance sheet of the Company and its consolidated Subsidiaries, less any amounts attributable to Redeemable Stock or any equity security convertible into or 9 exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any Subsidiary of the Company, each item to be determined in accordance with GAAP (excluding the effects of foreign currency exchange adjustments under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 52). "Corporate Trust Office" is defined to mean the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date of this Indenture, located at 127 Public Square, 15th Floor, Cleveland, Ohio 44114. "Currency Agreement" is defined to mean any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any of its Subsidiaries against fluctuations in currency values to or under which the Company or any of its Subsidiaries is a party or a beneficiary on the date of this Indenture or becomes a party or a beneficiary thereafter. "Default" is defined to mean any event that, after the giving of notice or the passage of time or both, would constitute an Event of Default. "Event of Default" has the meaning provided in Section 6.01 of this Indenture. "Excess Proceeds" has the meaning provided in Section 4.10 of this Indenture. "Excess Proceeds Offer" has the meaning provided in Section 4.10 of this Indenture. "Excess Proceeds Payment" has the meaning provided in Section 4.10 of this Indenture. "Excess Proceeds Payment Date" has the meaning provided in Section 4.10 of this Indenture. "Exchange Act" is defined to mean the Securities Exchange Act of 1934, as amended. "GAAP" is defined to mean generally accepted accounting principles in the United States of America as in effect as of the date of this Indenture, including, without limitation, those set forth in the opinions and 10 pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP, except that calculations made for purposes of determining compliance with the terms of the covenants set forth in Articles 4 and 5 and with other provisions of this Indenture shall be made without giving effect to (a) the amortization of any expenses incurred in connection with the 1993 Recapitalization; and (b) except as otherwise provided, the amortization of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and 17. "Guarantee" is defined to mean any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (b) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" or "Securityholder" is defined to mean the registered holder of any Security. "Incur" is defined to mean, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or to extend the maturity of or become responsible for, the payment of, contingently or otherwise, such Indebtedness; provided however, that neither the accrual of interest (whether such interest is payable in cash or in kind) nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. "Indebtedness" is defined to mean, with respect to any Person at any date of determination (without duplication), (a) all indebtedness of such Person for 11 borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of such Person in respect of letters of credit, bankers' acceptances or other similar instruments (including reimbursement obligations with respect thereto); (d) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables; (e) all obligations of such Person as lessee under Capitalized Leases; (f) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided however, that the amount of such Indebtedness shall be the lesser of (i) the fair market value of such asset at such date of determination and (ii) the amount of such Indebtedness; (g) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person; (h) all obligations in respect of borrowed money under either Bank Credit Facility and any Guarantees thereof; and (i) to the extent not otherwise included in this definition, obligations under Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability determined by such Person's board of directors, in good faith as reasonably likely to occur, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date; provided, however, that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP; and provided further, however, that Indebtedness shall not include (x) any liability for Federal, state, local or other taxes, (y) obligations of the Company of any of its Restricted Subsidiaries pursuant to Receivables Programs, or (z) obligations of the Company or any of its Restricted Subsidiaries pursuant to contracts for, or options, puts or similar arrangements relating to, the purchase of raw materials or the sale of inventory at a time in the future. "Indenture" is defined to mean this Indenture as originally executed or as it may be amended, supplemented or otherwise modified from time to time pursuant to the applicable provisions of this Indenture. 12 "Interest Coverage Ratio" is defined to mean, with respect to any Person on any Transaction Date, the ratio of (x) the aggregate amount of Consolidated EBITDA of such Person for the four fiscal quarters for which financial information in respect thereof is available immediately prior to such Transaction Date to (y) the aggregate Consolidated Interest Expense of such Person during such four fiscal quarters. In making the foregoing calculation, (a) pro forma effect shall be given to (i) any Indebtedness Incurred subsequent to the end of the four-fiscal-quarter period referred to in clause (x) and prior to the Transaction Date (other than Indebtedness Incurred under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any predecessor revolving credit or similar arrangement) on the last day of such period), (ii) any indebtedness Incurred during such period to the extent such Indebtedness is outstanding at the Transaction Date, and (iii) any Indebtedness to be Incurred on the Transaction Date, in each case as if such Indebtedness had been Incurred on the first day of such four-fiscal-quarter period and after giving pro forma effect to the application of the proceeds thereof as if such application had occurred on such first day; (b) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months) had been the applicable rate for the entire period; (c) there shall be excluded from Consolidated Interest Expense any Consolidated Interest Expense related to any amount of Indebtedness that was outstanding during such four-fiscal-quarter period or thereafter but that is not outstanding or is to be repaid on the Transaction Date, except for Consolidated Interest Expense accrued (as adjusted pursuant to clause (b)) during such four-fiscal-quarter period under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any successor revolving credit or similar arrangement) on the Transaction Date; (d) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such four-fiscal-quarter period or thereafter and prior to the Transaction Date as if they had occurred and such proceeds had been applied on the first day of such four-fiscal-quarter period; (e) with respect to any such four-fiscal-quarter period commencing prior to the Closing Date shall be deemed to have taken place on the first day of such period; and (f) 13 pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Subsidiary of the Company or has been merged with or into the Company or any Subsidiary of the Company during the four-fiscal-quarter period referred to above or subsequent to such period and prior to the Transaction Date and that would have been Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Subsidiary of the Company as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such period; provided, however, that, to the extent that clause (d) or (f) of this sentence requires that pro forma effect be given to an Asset Acquisition or an asset acquisition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired for which financial information is available. "Interest Payment Date" is defined to mean each semiannual interest payment date on March 31 and September 30 of each year, commencing March 31, 1994. "Interest Rate Agreement" is defined to mean any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement designed to protect the Company or any of its Subsidiaries against fluctuations in interest rates to or under which the Company or any of its Subsidiaries is a party or a beneficiary on the date of this Indenture or becomes a party or a beneficiary hereafter. "Investment" is defined to mean, with respect to any Person, any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person or its Subsidiaries) or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by, any other Person. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04 of this Indenture, (a) the designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed an "Investment" by the Company in such newly 14 designated Unrestricted Subsidiary in an amount (the "Investment Amount") equal to the fair market value of the net assets of such Subsidiary that are required to be reflected on such Subsidiary's balance sheet in accordance with GAAP, less the total liabilities of such Subsidiary that are required to be reflected on such Subsidiary's balance sheet in accordance with GAAP, in each case on a consolidated basis, at the time that such Subsidiary is designated an Unrestricted Subsidiary, (b) the designation of an Unrestricted Subsidiary as a Restricted Subsidiary shall be deemed a reduction of Investments by the Company in Unrestricted Subsidiaries in an amount equal to the Investment Amount with respect to such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary of the Company and (c) any property, other than cash or services, transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, with such value to be determined by the Board of Directors in good faith (whose determination shall be conclusive and evidenced by a Board Resolution) in any case in which the value of the properties transferred individually or in a series of related transactions exceeds $10 million. "Junior Preference Unit" is defined to mean a Junior Preference Unit as defined in the AMCLP Limited Partnership Agreement. "Lien" is defined to mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof, any sale with recourse against the seller or any Affiliate of the seller, or any agreement to give any security interest). "Limited Partnership Agreement" is defined to mean either the AMCLP Limited Partnership Agreement or the AMLP Limited Partnership Agreement. "MSLEF II" is defined to mean The Morgan Stanley Leveraged Equity Fund II, L.P., a Delaware limited partnership. "Net Cash Proceeds" is defined to mean, with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are 15 financed or sold with recourse to the Company or any Subsidiary of the Company) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of (a) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale; (b) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Subsidiaries, taken as a whole; (c) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (i) is secured by a Lien on the property or assets sold or (ii) is required to be paid as a result of such sale; and (d) appropriate amounts to be provided by the Company or any Subsidiary of the Company as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post- employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP. "1993 Recapitalization" is defined to mean the "1993 Recapitalization" as defined in the Company's Prospectus and relating to the Securities. "Officer" is defined to mean, with respect to the Company, the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary. "Officers' Certificate" is defined to mean a certificate signed by two Officers. Each Officers' Certificate (other than certificates provided pursuant to TIA Section 314(a)(4)) shall include the statements provided for in TIA Section 314(e). "Operating Lease" is defined to mean, as applied to any Person, any lease of any property (whether real, personal or mixed) that is not a Capitalized Lease. "Opinion of Counsel" is defined to mean a written opinion signed by legal counsel who is acceptable to the Trustee. Such counsel may be an employee of or counsel to the Company or the Trustee. Each such Opinion of Counsel shall include the statements provided for in TIA Section 314(e). "Partnership" is defined to mean either AMCLP or AMLP. 16 "Paying Agent" has the meaning provided in Section 2.03, except that, for the purposes of Article B, the Paying Agent shall not be the Company or a Subsidiary of the Company or an Affiliate of any of them. The term "Paying Agent" includes any additional Paying Agent. "Permitted Distribution" is defined to mean (a) the declaration and payment of any dividend or distribution by either Partnership on any of the Capital Stock of either thereof pursuant to the terms of either Limited Partnership Agreement; or (b) the purchase, redemption, retirement or other acquisition for value of outstanding Senior Preference Units. "Permitted Investment" is defined to mean (a) the making of an Investment by the Company or any Restricted Subsidiary (other than the general partner of AMCLP or AMLP) in a Restricted Subsidiary that is not a Wholly Owned Subsidiary of the Company, so long as such Investment is for a valid business purpose and not for the primary purpose of making distributions on the Senior Preference Units from the proceeds of such Investment to any Person other than the Company or any of its Restricted Subsidiaries (as determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution); (b) the making of an Investment by the general partner of AMCLP or AMLP in either thereof; or (c) the making of an Investment by AMCLP in AMLP or by AMLP in AMCLP. "Permitted Liens" is defined to mean (a) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (b) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (c) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (d) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds 17 and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (e) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of the Company or any of its Subsidiaries; (f) Liens (including extensions and renewals thereof) upon real or tangible personal property acquired after the Closing Date; provided, however, that (i) such Lien is created solely for the purpose of securing Indebtedness Incurred (A) to finance the cost (including the cost of improvement or construction) of the item of property or assets subject thereto and such Lien is created prior to, at the time of or within 12 months after the later of the acquisition, the completion of construction or the commencement of full operation of such property or (B) to refinance any Indebtedness previously so secured, (ii) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such cost and (iii) any such Lien shall not extend to or cover any property or assets other than such item of property or assets and any improvements on such item; (g) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company or any of its Subsidiaries; (h) Liens encumburing property or assets under construction arising from progress or partial payments by a customer of the Company or any of its Subsidiaries relating to such property or assets; (i) any interest or title of a lessor in the property subject to any Capitalized Lease or Operating Lease; provided, however, that any sale-leaseback transaction related thereto complies with Section 4.09 of this Indenture; (j) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (k) Liens on property of, or on Capital Stock or Indebtedness of, any entity existing at the time such entity becomes, or becomes a part of, any Restricted Subsidiary; (l) Liens in favor of the Company or any Restricted Subsidiary; (m) Liens securing any real property or other assets of the Company or any Subsidiary of the Company in favor of the United States of America or any State, or any department, agency, instrumentality or political subdivision thereof, in connection with the financing of industrial revenue bond facilities or of any equipment or other property designed primarily for the purpose of air or water pollution control; provided, however, that any such Lien on such facilities, equipment or other property shall not apply to any other assets of the Company or such Subsidiary of the Company; (n) Liens arising from the rendering of a final judgment or order against the Company or any Subsidiary of the Company that does not give rise to an Event of Default; (o) Liens securing 18 reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (p) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (q) Liens encumbering customary initial deposits and margin deposits, and other Liens that are either within the general parameters customary in the industry and incurred in the ordinary course of business or otherwise permitted under the terms of either Bank Credit Facility, in each case securing Indebtedness under Interest Rate AGreements and Currency Agreements and forward contracts, options, futures contracts, futures options or similar agreements or arrangements designed to protect the Company or any of its Subsidiaries from fluctuations in the price of commodities; (r) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Subsidiaries prior to the closing Date; and (s) Liens on or sales of receivables. "Person" is defined to mean an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" is defined to mean any employee benefit plan, pension plan, management equity plan, stock option plan or similar plan or arrangement of the Company or any Subsidiary of the Company, or any successor plan thereof. "Preferred Stock" is defined to mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or nonvoting) of such Person's preferred or preference stock, or preference equity interests in a partnership, whether now outstanding or issued after the date of this Indenture, including, without limitation, all series and classes of such preferred or preference stock, all the Senior Preference Units and all the Junior Preference Units. "Principal" of a debt security, including the Securities, is defined to mean the principal amount due on the Stated Maturity as shown on such debt security. 19 "Principal Property" is defined to mean any real property (including related fixtures), plant or equipment owned or leased by the Company or any Restricted Subsidiary, other than real property, plant or equipment that, in the good faith determination of the Board of Directors (whose determination shall be conclusive and evidenced by a Board Resolution), is not of material importance to the respective businesses conducted by the Company or any Restricted Subsidiary as of the date of such determination; provided, however, that, unless otherwise specified by the Board of Directors, any real property (including related fixtures), plant or equipment with a fair market value of less than $1 million shall not be a "Principal Property". "Prospectus" is defined to mean the Company's prospectus related to the offering of the Securities, dated October 19, 1993. "Public Equity Offering" is defined to mean an underwritten primary public offering of equity securities of the Company, pursuant to an effective registration statement under the Securities Act. "Public Market" is defined to mean any time after (a) a Public Equity Offering has been consummated; and (b) at least 15% of the total issued and outstanding Common Stock of the Company has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "Receivables Program" is defined to mean, with respect to any Person, obligations of such Person or its Subsidiaries pursuant to accounts receivable securitization programs, to the extent that the proceeds received pursuant to a pledge, sale or other encumbrance of accounts receivable pursuant to such programs does not exceed 91% of the total book value of such accounts receivable (determined on a consolidated basis in accordance with GAAP as of the end of the most recent fiscal quarter for which financial information is available), and any extension, renewal, modification or replacement of such programs, including, without limitation, any agreement increasing the amount of, extending the maturity of, refinancing or otherwise restructuring all or any portion of the obligations under such programs or any successor agreement or agreements. "Redeemable Stock" is defined to mean any class or series of Capital Stock of any Person that by its terms or otherwise is (a) required to be redeemed prior to the Stated Maturity of the Securities, (b) redeemable at the option of 20 the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Securities or (c) convertible into or exchangeable for Capital Stock referred to in clause (a) or (b) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Securities; provided, however, that any Capital Stock that would not constitute Redeemable Stock but for provisions thereof giving holders thereof the right to require the Company to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to Stated Maturity of the Securities shall not constitute Redeemable Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable (except with respect to any premium payable) to the holders of such Capital Stock than the provisions contained in Sections 4.10 and 4.11 of this Indenture and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provisions prior to such Person's repurchase of such Securities as are required to be repurchased pursuant to the provisions of Sections 4.10 and 4.11 of this Indenture. "Redemption Date", when used with respect to any Security to be redeemed, is defined to mean the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, is defined to mean the price at which such Security is to be redeemed pursuant to this Indenture. "Registrar" has the meaning provided in Section 2.03 of this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date is defined to mean the March 15 or September 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Responsible Officer", when used with respect to the Trustee, is defined to mean the chairman or any vice-chairman of the Board of Directors, the chairman or any vice-chairman of the executive committee of the Board of Directors, the chairman of the trust committee, the president, any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the 21 above designated officers and also is defined to mean, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of an familiarity with the particular subject. "Restricted Payments" has the meaning specified in Section 4.04 of this Indenture. "Restricted Subsidiary" is defined to mean any Subsidiary of the Company other than an Unrestricted Subsidiary. "Securities" is defined to mean any of the securities, as defined in the first paragraph of the recitals hereof, that are authenticated and delivered under this Indenture. "Security Registrar" has the meaning provided in Section 2.03 of this Indenture. "Senior Preference Units" is defined to mean a Senior Preference Unit as defined in the AMCLP Limited Partnership Agreement. "Significant Subsidiary" is defined to mean, at any date of determination, any Subsidiary of the Company that together with its Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated revenues of the Company; or (b) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company, in each case as reflected on the most recently available quarterly or year end consolidated financial statements of the Company for such fiscal year. "Special Dividend" is defined to mean the "Special Dividend" as defined in the Company's Prospectus. "Stated Maturity" is defined to mean, with respect to any debt security or any installment of interest thereon, the date specified in such debt security as the fixed date on which any principal of such debt security or any such installment of interest is due and payable. "Stockholder Agreement" is defined to mean the Stockholder Agreement dated as of October 25, 1993, among the Company and each of the other parties signatory thereto, as the same may be amended (including any amendment and restatement thereof), supplemented, replaced or otherwise modified from time to time. 22 "Subsidiary" is defined to mean, with respect to any Person, any corporation of which more than 50% of the outstanding Voting Stock is owned, directly or indirectly, by the Company or by one or more other Subsidiaries of the Company, or by such Person and one or more other Subsidiaries of such Person, and any partnership, association, joint venture, limited liability company or other entity in which the Corporation or one or more other Subsidiaries of AMCI, or such Person and one or more other Subsidiaries of such Person owns a general partnership interest or more than 50% of the equity interests; provided, however, that, except as the term "Subsidiary" is used in the definitions of "Significant Subsidiary" and "Unrestricted Subsidiary" set forth below, an Unrestricted Subsidiary shall not be deemed to be a direct or indirect Subsidiary of the Company for purposes of this Indenture . "TIA" or "Trust Indenture Act" is defined to mean the Trust Indenture Act of 1939, as amended (15 U.S. Code 77aaa-77bbb), as in effect on the date this Indenture was executed, except as provided in Section 9.06 of this Indenture. "Trade Payables" is defined to mean, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services and shall specifically include amounts owed to but deferred by trade creditors until the occurrence of certain events. "Transaction Date" is defined to mean, with respect to the Incurrence of any Indebtedness by the Company or any of its Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "Trustee" is defined to mean the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of Article 7 of this Indenture and thereafter is defined to mean such successor. "United States Bankruptcy Code" is defined to mean Title 11 of the United States Code, as amended from time to time hereafter, or any successor federal bankruptcy law. "Units" is defined to mean any of the Senior Preference Units, Junior Preference Units or Common Units. 23 "Unrestricted Subsidiary" is defined to mean (a) any Subsidiary of the Company that, at the time of determination, shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (b) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary, unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (i) the Subsidiary to be so designated has total assets of $1,000 or less at the time of designation or (ii) if such Subsidiary has assets greater than $1,000 at the time of designation, that such designation would be permitted under Section 4.04 of this Indenture. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided, however, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under the first paragraph of Section 4.03(a) of this Indenture and (y) no Default or Event of Default shall have occurred and be continuing. All such designations by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" is defined to mean securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof at any time prior to the Stated Maturity of the Securities, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligations evidenced by such depository receipt. 24 "Voting Stock" is defined to mean, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors or other governing body of such Person, or any general partnership interest in any partnership. "Wholly Owned Subsidiary" is defined to mean, with respect to any Person, any Subsidiary of such Person if all of the Common Stock or other similar equity ownership interests (but not including Preferred Stock) in such Subsidiary (other than any director's qualifying shares or Investments by foreign nationals mandated by applicable law) is owned directly or indirectly by such Person. SECTION 1.02 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Securities; "indenture security holder" means a Holder or a Securityholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a rule of the commission and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03 Rules of Construction. Unless the context otherwise requires; (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) words in the singular include the plural, and words in the plural include the singular; 25 (e) provisions apply to successive events and transactions; (f) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (g) all ratios and computations based on GAAP contained in this Indenture shall be computed in accordance with the definition of GAAP set forth above; and (h) all references to Sections or Articles refer to Sections or Articles of this Indenture unless otherwise indicated. ARTICLE 2 The Securities SECTION 2.01 Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the form annexed hereto as Exhibit A. The Securities may have notations, legends or endorsements required by law, stock exchange agreements to which the Company is subject or usage. The Company shall approve the form of the Securities and any notation, legend or endorsement on the Securities. Each Security shall be dated the date of its authentication. The terms and provisions contained in the form of the Securities annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a part of this Indenture. To the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. The definitive Securities shall be printed, lithographed, engraved or produced by any combination of these methods on a steel engraved border or steel engraved borders or may be produced in any other manner, all as determined by the Officers executing such Securities, as evidenced by their execution of such Securities. SECTION 2.02 Execution, Authentication and Denominations. Two Officers shall execute the Securities for the Company by facsimile or manual signature in the name and on behalf of the Company. 26 If an Officer whose signature is on a Security no longer holds that office at the time the Trustee or authenticating agent authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee or an authenticating agent shall authenticate for original issue Securities in the aggregate principal amount of up to $175 million, upon a written order of the Company signed by at least one Officer; provided, however, that the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company that it may reasonably request in connection with such authentication of Securities. Such order shall specify the amount of Securities to be authenticated and the date on which the original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed the amount set forth above except as provided in Sections 2.06 and 2.07 of this Indenture. The Trustee may appoint an authenticating agent to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such authenticating agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 in original principal amount and any integral multiple thereof. SECTION 2.03 Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar"), an office or agency where Securities may be presented for payment (the "Payment Agent") and an office or agency where notices and demands to or upon the Company in respect of the securities and this Indenture may be served. The Company shall cause the Registrar to keep a register of the Securities and of their transfer and exchange (the "Security Register"). The Company may have on or more co-registrars and or more additional Paying Agents. 27 The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall give prompt written notice to the Trustee of the name and address of any such Agent and any change in the address of such Agent. If the company fails to maintain a Registrar, Paying Agent and/or agent for service of notices and demands, the Trustee shall act as such Registrar, Paying Agent and/or agent for service of notices and demands. The Company may remove any Agent upon written notice to such Agent and the Trustee; provided, however, that no such removal shall become effective until (a) the acceptance of an appointment by a successor Agent to such Agent as evidenced by an appropriate agency agreement entered into by the Company and such successor Agent and delivered to the Trustee or (b) notification to the Trustee that the Trustee shall serve as such Agent until the appointment of a successor Agent in accordance with clause (a) of this proviso. The Company, any Subsidiary of the Company, or any Affiliate of any of them may act as Paying Agent, Registrar or co-registrar, and/or agent for service of notice and demands. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notice and demands. If, at any time, the Trustee is not the Registrar, the Registrar shall make available to the Trustee on or before each Interest Payment Date and at such other times as the Trustee may reasonably request the names and addresses of the Holders as they appear in the Security Register. SECTION 2.04 Paying Agent to Hold Money in Trust. No later than each due date of the principal of, premium, if any, and interest on any Securities, the Company shall deposit with the Paying Agent money sufficient to pay such principal, premium, if any, and interest so becoming due. The Company shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Securities (whether such money has been paid to it by the Company or any other obligor on the Securities), and such paying Agent shall promptly notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed, and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to pay all money 28 held by it to the Trustee and to account for any funds disbursed. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If the Company or any Subsidiary of the Company or any Affiliate of any of them acts as Paying Agent, it will, on or before each due date of any principal of, premium, if any, or interest on the Securities, segregate and hold in a separate trust fund for the benefit of the Holders a sum sufficient to pay such principal of, premium, if any, or interest so becoming due until such sums shall be paid to such Holders or otherwise disposed of as provided in this Indenture, and will promptly notify the Trustee of its action or failure to act. SECTION 2.05 Transfer and Exchange. When Securities are presented to the Registrar or a co-registrar with a request to register the transfer or to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's request. No service charge shall be made for any registration of transfer or exchange of the Securities, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therwith (other than any such transfer taxes or other similar governmental charge payable upon exchanges pursuant to Section 2.08, 3.08 or 9.04 of this Indenture). The Registrar need not register the transfer or exchange of Securities for a period of fifteen (15) days before a selection of Securities to be redeemed. SECTION 2.06 Replacement Securities. If a mutilated Security is surrendered to the Trustee or if the Holder claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security of like tenor and principal amount. If required by the Trustee or the Company, an indemnity bond must be furnished that is sufficient in the judgment of both the Trustee and the Company to protect the Company, the Trustee or any Agent from any loss that any of them may suffer if a Security is replaced. The Company may charge such Holder for its expenses in replacing a Security. In case any such mutilated, lost, destroyed or wrongfully taken Security has become or is about to become due and payable, the Company in its discretion may pay such Security instead of issuing a new Security in replacement thereof. 29 Every replacement Security is an additional obligation of the Company and shall be entitled to the benefits of this Indenture. SECTION 2.07 Outstanding Securities. Securities outstanding at any time are all Securities that have been authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.07 as not outstanding. A Security does not cease to be outstanding because the Company or one of its Affiliates holds the Security. If a Security is replaced pursuant to Section 2.06, it ceases to be outstanding unless and until the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent (other than the Company or an Affiliate of the Company) holds on a maturity date money sufficient to pay Securities payable on that date, then on and after that date such Securities cease to be outstanding and interest on them shall cease to accrue. SECTION 2.08 Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have insertions, substitutions, omissions and other variations determined to be appropriate by the Officers executing the temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. Until so exchanged, the temporary Securities shall be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.09 Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any securities surrendered to them for transfer, exchange or payment. The Trustee shall cancel all Securities surrendered for transfer, exchange, payment or cancellation and shall destroy them in accordance with its normal procedure. The Company may not issue new Securities to replace Securities it has paid in full or delivered to the Trustee for cancellation. SECTION 2.10 CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and the Company, or the Trustee on behalf of the Company, shall use CUSIP numbers in notices of redemption or 30 exchange as a convenience to Holders; provided, however, that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice or redemption or exchange and that reliance may be placed only on the other identification numbers printed on the Securities; and provided further, however, that failure to use CUSIP numbers in any notice of redemption or exchange shall not affect the validity or sufficiency of such notice. SECTION 2.11 Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay, or shall deposit with the Paying Agent money in immediately available funds sufficient to pay, the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest in any lawful manner. The Company may pay the defaulted interest to the Persons who are Holders on a subsequent special record date. A special record date, as used in this Section 2.11 with respect to the payment of any defaulted interest, shall mean the fifteenth (15th) day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not such day is a Business Day. At least fifteen (15) days before the subsequent special record date, the Company shall mail to each Holder and to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest to be paid. ARTICLE 3 Redemption SECTION 3.01 Right of Redemption. (a) The Company may redeem all the securities at any time or any portion of the Securities from time to time, on or after September 30, 1998, at the following Redemption Prices (expressed as percentages of the principal amount) if redeemed during the 12-month period beginning September 30 of the years indicated:
Year Redemption Price ---- ---------------- 1998 105.375% 1999 102.688%
and thereafter at 100% of the principal amount, plus accrued interest (if any) to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date). 31 (b) The Company may redeem up to $61.25 million aggregate principal amount of the Securities at any time prior to September 30, 1996 in connection with one or more Public Equity Offerings following which there is Public Market at 110% of the then outstanding principal amount thereof, plus accrued interest (if any) to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date); provided, however, that the aggregate principal amount of Securities so redeemed may not exceed the aggregate proceeds of such Public Equity Offerings. SECTION 3.02 Notices to Trustee. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the Redemption Date and the principal amount of Securities to be redeemed. The Company shall give each notice provided for in this Section 3.02 in an Officers' Certificate at least forty-five (45) days before the Redemption Date (unless a shorter period shall be satisfactory to the Trustee). SECTION 3.03 Selection of Securities to Be Redeemed. If less than all the Securities are to be redeemed at any time, the Trustee shall select the Securities to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities are not listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee in its sole discretion shall deem fair and appropriate; provided, however, that no Securities of $1,000 in original principal amount or less shall be redeemed in part. The Trustee shall make the selection from the Securities outstanding and not previously called for redemption. Securities in denominations of $1,000 in original principal amount may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 in original principal amount or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000 in original principal amount. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company and the Registrar promptly in writing of the Securities or portions of Securities to be called for redemption. 32 SECTION 3.04 Notice of Redemption. At least thirty (30) days but not more than sixty (60) days before a Redemption Date, the Company shall mail a notice of redemption by first class mail to each Holder whose Securities are to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price; (c) the name and address of the Paying Agent; (d) that Securities called for redemption must be surrendered to the Paying Agent in order to collect the Redemption Price; (e) that, unless the Company defaults in making the redemption payment, interest on Securities called for redemption ceases to accrue on the Redemption Date and the only remaining right of the Holders is to receive payment of the Redemption Price plus accrued interest to the Redemption Date upon surrender of the Securities to the Paying Agent; (f) that, if any Security is being redeemed in part, the portion of the principal amount (equal to $1,000 in original principal amount or any integral multiple thereof) of such Security to be redeemed and that, on and after the Redemption Date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion thereof will be reissued; and (g) that, if any Security contains a CUSIP number as provided in Section 2.10 of this Indenture, no representation is being made as to the correctness of the CUSIP number either as printed on the Securities or as contained in the notice of redemption and that reliance may be placed only on the other identification numbers printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the name and at the expense of the Company. Concurrently with the giving of such notice by the Company to the Holders, the Company shall deliver to the Trustee an Officers' Certificate stating that such notice has been given. 33 SECTION 3.05 Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender of any Securities to the Paying Agent, such Securities shall be paid at the Redemption Price, plus accrued interest through the Redemption Date. Notice of redemption shall be deemed to be given when mailed, whether or not the Holder receives the notice. In any event, failure to give such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of the Securities. SECTION 3.06 Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Paying Agent (or, if the Company is acting as its own Paying Agent, shall segregate and hold in trust as provided in Section 2.04 of this Indenture) money sufficient to pay the Redemption Price of and accrued interest on all Securities to be redeemed on that date other than Securities or portions thereof called for redemption on that date that have been delivered by the Company to the Trustee for cancellation. SECTION 3.07 Payment of Securities Called for Redemption. If notice of redemption has been given in the manner provided above, the Securities or portion of Securities specified in such notice to be redeemed shall become due and payable on the Redemption Date at the Redemption Price stated therein, together with accrued interest to such Redemption Date, and from such date (unless the Company shall default in the payment of such Securities at the Redemption Price and accrued interest to the Redemption Date, in which case the principal, until paid, shall bear interest from the Redemption Date at the rate prescribed in the Securities), such Securities shall cease to accrue interest. Upon surrender of any Security for redemption in accordance with a notice of redemption, such Security shall be paid and redeemed by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders registered as such at the close of business on the relevant Record Date. SECTION 3.08 Securities Redeemed in Part. Upon surrender of any Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unredeemed portion of such surrendered Security. 34 ARTICLE 4 Covenants SECTION 4.01 Payment of Securities. The Company shall pay the principal of, premium, if any, and interest on the Securities on the dates and in the manner provided in the Securities and this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company, a Subsidiary of the Company, or any Affiliate of any of them) holds on that date money designated for and sufficient to pay the installment. If the Company, any Subsidiary of the Company, or any Affiliate of any of them acts as Paying Agent, an installment of principal, premium, if any, or interest shall be considered paid on the due date if the entity acting as Paying Agent complies with the last sentence of Section 2.04 of this Indenture. The Company shall pay interest on overdue principal, premium, if any, and interest on overdue installments of interest, to the extent lawful, at the rate per annum borne by the Securities. SECTION 4.02 Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, the City of New York a Registrar and a Paying Agent and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. SECTION 4.03 Limitation on Indebtedness. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness (other than the Securities and Indebtedness exiting on the Closing Date); provided, however, that the Company and its Restricted Subsidiaries may Incur Indebtedness if after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio of the Company would be greater than 2:1. Notwithstanding the foregoing, except as expressly provided otherwise below,the Company and any Restricted Subsidiary may Incur each and all of the following: 35 (i) (A) Indebtedness outstanding at any time under any Bank Credit Facility; provided, however, that the aggregate principal amount of such Indebtedness under all Bank Credit Facilities outstanding at any time of the Company and any Restricted Subsidiaries under this clause (i)(A) shall not exceed $155 million, and (B) additional Indebtedness outstanding at any time in an aggregate principal amount not to exceed $30 million; (ii) Indebtedness of the Company to any of its Restricted Subsidiaries, or of a Restricted Subsidiary to the Company or to any other Restricted Subsidiary; (iii) Indebtedness the net proceeds of which are used to refinance outstanding Indebtedness of the Company or any of its Restricted Subsidiaries, other than Indebtedness Incurred under clause (i), (iv) or (vi) of this Section 4.03(a) and any refinancings thereof, in an amount (or, if such new Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, with an original issue price) not to exceed the amount so refinanced (plus premiums, accrued interest, fees and expenses); provided, however, that Indebtedness the proceeds of which are used to refinance the Securities or other Indebtedness of the Company that is subordinated in right of payment to the Securities shall only be permitted under this clause (iii) if (A) in case the Securities are refinanced in part, such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is expressly made pari passu with, or subordinate in right of payment to, the remaining Securities, (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Securities, such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant, to which such Indebtedness is issued, is expressly made subordinate in right of payment to the Securities, at least to the extent that the Indebtedness to be refinanced is subordinated to the Securities, and (C) in case the Securities are refinanced in part or the Indebtedness to be refinanced is subordinated in right of payment to the Securities, such Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to six months after the Stated Maturity of the Securities and the Average Life of such Indebtedness is six months greater than the remaining time before the Stated Maturity of the Securities; and provided further, however, that in no event may Indebtedness of the Company that is pari passu with, or 36 subordinated in right of payment to, the Securities be refinanced by means of Indebtedness of any Restricted Subsidiary of the Company pursuant to this clause (iii); (iv) Indebtedness directly or indirectly Incurred to finance capital expenditures of the Company or any of its Restricted Subsidiaries in an aggregate principal amount not to exceed $10 million in any fiscal year of the Company, and any refinancing of any such Indebtedness; provided, however, that the amount of Indebtedness that may be Incurred in any fiscal year of the Company pursuant to this clause (iv) shall be increased by the amount of Indebtedness that could have been Incurred in the prior fiscal year (including by reason of this proviso) of the Company pursuant to this clause (iv) but was not so Incurred; (v) Indebtedness of AMC or any Restricted Subsidiary that is a Subsidiary thereof if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio of AMC would be greater than 2:1; (vi) Indebtedness of the Company outstanding at any time in an aggregate amount not to exceed $20 million; provided, however, that such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, (A) is expressly made subordinate in right of payment to the Securities and (B) provides that no payments of principal of such Indebtedness by way of sinking fund, mandatory redemption or otherwise (including defeasance) may be made by the Company (including, without limitation, at the option of the holder thereof, other than an option given to such holder pursuant to an "asset sale" or "change of control" provision that is no more favorable (except with respect to any premium payable) to the holders of such Indebtedness than the provisions contained in Sections 4.10 and 4.11 of this Indenture and such Indebtedness specifically provides that the Company will not repurchase or redeem such Indebtedness pursuant to such provisions prior to the Company's repurchase of the Securities required to be repurchase by the Company under Sections 4.10 and 4.11 of this Indenture) at any time prior to the Stated Maturity of the Securities; (vii) Indebtedness Incurred by the Company in connection with the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, options on any such shares 37 or related stock appreciation rights or similar securities, or the satisfaction of put, call, liquidity or other similar rights with respect to any such securities, held by officers,directors or employees or former officers, directors or employees (or their estates or beneficiaries under their estates or their permitted transferees) or by any Plan, upon death, disability, retirement, termination of employment or pursuant to the terms of such Plan or any other agreement under which such shares of stock or related rights were issued or otherwise exist or pursuant to the Stockholder Agreement; provided, however, that (A) such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is expressly made subordinate in right of payment to the Securities, (B) such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, provides that no payments of principal of such Indebtedness by way of sinking fund, mandatory redemption or otherwise (including defeasance) may be made by the Company at any time prior to the Stated Maturity of the Securities, and (C) the scheduled maturity of all principal of such Indebtedness is after the Stated Maturity of the Securities; and provided further, however, that any such Indebtedness may provide for payment or prepayment of principal and interest which when aggregated with all principal and interest payable or prepayable on all other such Indebtedness (plus all cash payments permitted to be made under clause (d) of the second paragraph of Section 4.04 of this Indenture) does not exceed $10 million in any fiscal year; (viii) Indebtedness (A) in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds provided in the ordinary course of business, (B) under Currency Agreements and Interest Rate Agreements; provided, however, that, in the case of Currency Agreements that relate to other Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company outstanding any time other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder, and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any Subsidiary of the Company pursuant to such agreements, in any case Incurred in connection with the acquisition or disposition of any business, assets or Subsidiary of the 38 Company, other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Subsidiary of the Company for the purpose of financing such acquisition; (ix) Indebtedness under Guarantees Incurred by the Company or any of its Restricted Subsidiaries in respect of obligations of Unrestricted Subsidiaries outstanding at any time in an aggregate amount not to exceed $5 million; (x) Indebtedness of the Company or any of its Restricted Subsidiaries the net proceeds of which are used to pay Federal, state or local taxes arising as a result of any recharacterization of either Partnership as an association taxable as a corporation; and (xi) Acquired Indebtedness; provided, however, that, at the time of the Incurrence thereof, the Company could Incur at least $1.00 of Indebtedness under the first paragraph of this Section 4.03(a), or, in the case of Acquired Indebtedness with respect to either Partnership or any Restricted Subsidiary that is a Subsidiary of either thereof, such Partnership or Restricted Subsidiary could Incur at least $1.00 of Indebtedness under clause (v) of the second paragraph of this Section 4.03(a), and refinancings of any thereof; provided, however, that such refinancing Indebtedness may not be Incurred by any Person other than the Company or the Restricted Subsidiary that is the obligor on such Acquired Indebtedness. (b) Notwithstanding any other provision of this Section 4.03, (i) the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded due solely to the result of fluctuations in the exchange rates of currencies; (ii) the Company shall not Incur any Indebtedness that is expressly subordinated to any other Indebtedness of the Company, unless such Indebtedness, by its terms or the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is also expressly made subordinate to the Securities at least to the extent it is subordinated to such other Indebtedness; and (iii) upon any refinancing of any Indebtedness permitted to be Incurred under clause (iii) or (xi) of the second paragraph of Section 4.03(a) of this Indenture, the amount of Indebtedness permitted to be Incurred pursuant to such clause shall be increased by the amount of premiums, fees and expenses incurred in connection with such refinancing and by the amount of accrued interest on such Indebtedness at the time of such refinancing. 39 (c) For purposes of determining any particular amount of Indebtedness under this Section 4.03, the following amounts shall not be included; (1) Guarantees of, contingent obligations (including obligations of a general partner for liabilities of a partnership) with respect to, or obligations with respect to letters of credit supporting, Indebtedness otherwise included in the determination of such particular amount; and (2) any Liens granted pursuant to the equal and ratable provisions referred to in the first paragraph of Section 4.08 of this Indenture. For purposes of determining compliance with this Section 4.03, (x) in the event than an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses, the Company, in its sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses; (y) Indebtedness permitted under this Section 4.03 need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by reference to one such provision and in part by reference to one or more other provisions of this Section 4.03 permitting such Indebtedness; and (z) the amount of Indebtedness issued at a price that is less than the principal amount thereof shall be equal to the amount of the liability in respect thereof determined in conformity with GAAP. SECTION 4.04 Limitation on Restricted Payments. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, (a) declare or pay any dividend or make any distribution on its Capital Stock (other than (i) on the Capital Stock of Restricted Subsidiaries that are Wholly Owned Subsidiaries of the Company and (ii) dividends or distributions payable solely in shares of its, or its Restricted Subsidiary's, Capital Stock (other than Redeemable Stock) of the same class held by such holders or in options, warrants or other rights to acquire such shares of Capital Stock) held by Persons other than the Company or another Restricted Subsidiary, (b) purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of the Company, any Restricted Subsidiary or any Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by Persons other than the Company or another Restricted Subsidiary, (c) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness of the Company that is subordinated in right of payment to the Securities, (d) make any Investment in any Restricted Subsidiary that is not a Wholly Owned Subsidiary of the Company, other than a Permitted Investment; or (e) make any 40 Investment in any Unrestricted Subsidiary (such payments or other actions described in clauses (a) through (e) being collectively "Restricted Payments") if, at the time of, and after giving effect to, the proposed Restricted Payment: (i) a Default or Event of Default shall have occurred and be continuing, (ii) the Company could not Incur at least $1.00 of Indebtedness under the first paragraph of Section 4.03(a) of this Indenture, or (iii) the aggregate amount expended for all Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) after the Closing Date shall exceed the sum of (A) 50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of such amount) of the Company (determined by excluding income resulting from the transfers of assets received by the Company or a Restricted Subsidiary from an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the month immediately following the Closing Date and ending on the last day of the last fiscal quarter preceding the Transaction Date, plus (B) the aggregate net proceeds (including the fair market value of noncash proceeds as determined in good faith by the Board of Directors) received by the Company or any of its Restricted Subsidiaries from the issuance and sale permitted by this Indenture of its Capital Stock (not including Redeemable Stock) to a Person that is not a Subsidiary of the Company, including an issuance or sale permitted by this Indenture for cash or other property upon the conversion of any Indebtedness of the Company or any of its Restricted Subsidiaries subsequent to the Closing Date, or from the issuance of any options, warrants or other rights to acquire Capital Stock of the Company or any of its Restricted Subsidiaries (in each case, exclusive of any Redeemable Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of the Securities), plus (C) an amount equal to the net reduction in Investments in Unrestricted Subsidiaries (other than Unrestricted Securities so designated pursuant to clause (h) of the second paragraph of this Section 4.04 and other than Investments made in Unrestricted Subsidiaries pursuant to such clause (b)) resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed in the case of 41 any Unrestricted Subsidiary the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, plus (D) $1 million. The foregoing provision shall not take into account, and shall not be violated by reason of: (a) the payment of any dividend within 120 days after the date of declaration thereof if, at such date of declaration, such payment would comply with the foregoing provision; (b) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Securities, including premium, if any, and accrued and unpaid interest, with the proceeds of Indebtedness Incurred under the first paragraph of Section 4.03(a) of this Indenture or clause (iii) or (vi) of the second paragraph of such Section 4.03(a); (c) the payment of dividends on the Capital Stock of the Company, following any Public Equity Offering, in amounts equal to up to 6% per annum of the net proceeds received by the Company from such Pubic Equity Offering; (d) the repurchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, any Restricted Subsidiary or any Unrestricted Subsidiary, options on any such shares or related stock appreciation rights or similar securities, or the satisfaction of put, call, liquidity or other similar rights with respect to any such securities, held by officers, directors or employees or former officers, directors or employees (or their estates or beneficiaries under their estates or their permitted transferees) or by any Plan, upon death, disability, retirement, termination of employment or pursuant to the terms of such Plan or any other agreement under which such shares of stock or related rights were issued or otherwise exist or pursuant to the Stockholder Agreement; provided, however, that the aggregate cash payments made for all such repurchases, redemptions, acquisitions, cancellations, retirements or other satisfactions of or with respect to such shares, options or other rights after the Closing Date (plus payments or prepayments of principal and interest permitted on Indebtedness Incurred under clause (vii) of the second paragraph of Section 4.03(a) of this Indenture does not exceed $10 million in any fiscal year and that any consideration in excess of 42 such $10 million is in the form of Indebtedness that would be permitted to be Incurred under clause (vii) of the second paragraph of Section 4.03(a) of this Indenture; (e) the repurchase, redemption or other acquisition of Capital Stock of the Company in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock of the Company (other than Redeemable Stock); (f) the acquisition of Indebtedness of the Company that is subordinated in right of payment to the Securities in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock of the Company (other than Redeemable Stock); (g) payments or distributions pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of Article 5 of this Indenture; (h) the making of (i) up to $10 million of Investments in Unrestricted Subsidiaries plus the amount of any reduction in such Investments in such Unrestricted Subsidiaries made pursuant to this clause (b) resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary pursuant to this clause (h), (ii) Investments in the Company, Unrestricted Subsidiaries or Restricted Subsidiaries with the proceeds of any sale of Capital Stock of the Company or (in the case of Investments in the Company or any Restricted Subsidiaries) of any Restricted Subsidiary permitted by this Indenture, and (iii) Investments in Unrestricted Subsidiaries in the form of loans or advances from the Company or any Restricted Subsidiary representing capitalized labor costs for services performed by the Company or any Restricted Subsidiary to such Unrestricted Subsidiaries in the ordinary course of business; 43 (i) the purchase, redemption, acquisition, cancellation or other retirement for a nominal value per right of any rights granted to all the holders of Common Stock of the Company pursuant to any shareholders' rights plan adopted for the purpose of protecting shareholders from unfair takeover tactics; provided, however, that any such purchase, redemption, acquisition, cancellation or other retirement of such rights shall not be for the purpose of evading the limitations of this Section 4.04 (all as determined in good faith by the Board of Directors); (j) any Permitted Distribution; (k) payments by the Company or any Restricted Subsidiary in respect of Indebtedness of the Company or any Restricted Subsidiary owned to the Company or another Restricted Subsidiary; (l) the application of proceeds as provided in Section 4.10 of this Indenture; (m) the application of proceeds as provided in clause (c) of Section 4.06 of this Indenture; or (n) the declaration and payment of the Special Dividend; provided, however, that, in the case of clauses (b) (other than with respect to Indebtedness of either Partnership), (c), (d) (except with respect to the Incurrence of Indebtedness complying with the first proviso of clause (vii) of the second paragraph of Section 4.03(a) of this Indenture), (e), (f), (g) (other than with respect to either Partnership), or (h) (other than Investments in Unrestricted Subsidiaries any of the Capital Stock of which is held by either Partnership, the general partner of either thereof or any Unrestricted Subsidiary of either Partnership), no Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof. SECTION 4.05 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of the Restricted Subsidiary to (a) pay dividends or make any other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted 44 Subsidiary; (b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary; (c) make loans or advances to the Company or any other Restricted Subsidiary; or (d) transfer any of its property or assets to the Company or any other Restricted Subsidiary. The foregoing provision shall not restrict or prohibit any encumbrances or restrictions existing: (a) in any Bank Credit Facility or in any other agreements in effect on the Closing Date, including extensions, refinancings, renewals or replacements thereof; provided, however, that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced; (b) under any Receivables Program or any other agreement providing for the Incurrence of Indebtedness; provided, however, that the encumbrances and restrictions in any such agreement are no less favorable in any material respect to the Holders than those encumbrances and restrictions contained in the agreement referred to in clause (a) above that is least favorable to the Holders as of the Closing Date; (c) under or by reason of applicable law; (d) with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary that existed at the time of such acquisition and were not created in connection with or in contemplation of such acquisition, so long as such encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired; (e) in the case of clause (d) of the first paragraph of this Section 4.05, (i) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, (ii) by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture, or (iii) arising 45 or agreed to in the ordinary course of business and that do not, individually or in the aggregate, materially detract from the value of property or assets of the Company or any Restricted Subsidiary; (f) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all the Capital Stock of, or property and assets of, such Restricted Subsidiary; or (g) in either Limited Partnership Agreement. Nothing contained in this Section 4.05 shall prevent the Company or any Restricted Subsidiary from (x) entering into any agreement permitting the incurrence of Liens otherwise permitted in Section 4.08 of this Indenture or (y) restricting the sale or other disposition of property or assets of the Company or any of its Restricted Subsidiaries that secure Indebtedness of the Company or any of its Restricted Subsidiaries. SECTION 4.06 Limitation on the Issuance of Capital Stock of Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Capital Stock (including options, warrants or other rights to purchase shares of such Capital Stock) except: (a) to the Company or another Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company; (b) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary; (c) if the Net Cash Proceeds from such issuance or sale are applied, to the extent required to the applied, pursuant to Section 4.10 of this Indenture; (d) in the case of AMLP, to AMCLP; or (e) in the case of either Partnership, as otherwise permitted by either Limited Partnership Agreement, so long as any such issuance or sale is for a valid business purpose and not for the primary purpose of making distributions on the Senior Preference Units from the Net Cash Proceeds of such issuance or sale to any Person other than the Company or any of its Restricted Subsidiaries (as determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board of Resolution). 46 SECTION 4.07 Limitation on Transactions with Shareholders and Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of the Company or any Restricted Subsidiary or with any Affiliate of the Company or any Restricted Subsidiary, except upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than could be obtained in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate of such a holder. The foregoing limitation does not limit, and shall not apply to: (a) any transaction or series of related transactions the aggregate amount of which exceeds $3 million in value (i) approved by a majority of the disinterested members of the Board of Directors or (ii) for which the Company or a Restricted Subsidiary delivers to the Trustee a written opinion of a nationally recognized investment banking firm stating that the transaction is fair to the Company or such Restricted Subsidiary from a financial point of view; (b) any transaction between the Company and any Restricted Subsidiary or between Restricted Subsidiaries; (c) the payment of reasonable and customary regular fees to directors of the Company who are not employees of the Company; (d) any Restricted Payments not prohibited by Section 4.84 of this Indenture; (e) any payments or other transactions pursuant to any tax sharing agreement between the Company or any Restricted Subsidiary and any other Person with which the Company or such Restricted Subsidiary is required or permitted to file a consolidated tax return or with which the Company or such Restricted Subsidiary is or could be part of a consolidated group for tax purposes; (f) any transaction between the Company or any Restricted Subsidiary and any holder of any Senior Preference Units (or any Affiliate thereof) that would be restricted by this Section 4.07 as a result of such holder's ownership of Units; or 47 (g) the provision of management, financial and operational services by the Company and its Subsidiaries to Affiliates of the Company in which the Company or its Subsidiaries have Investments and the payment of compensation for such services; provided, however, that the Board of Directors has determined that the provision of such services is in the best interests of the Company and its Subsidiaries. Notwithstanding the foregoing, any transaction or series of related transactions covered by the first paragraph of this Section 4.07 the aggregate amount of which does not exceed $3 million in value need not be approved in the manner provided for in clause (a) above. SECTION 4.08 Limitation on Liens. The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on any Principal Property, or any shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without making effective provision for all the Securities and all other amounts due under this Indenture to be directly secured equally and ratably with (or prior to) the obligation or liability secured by such Lien unless, after giving effect thereto, the aggregate amount of any Indebtedness so secured, plus the Attributable Indebtedness for all sale-leaseback transactions restricted as described in Section 4.09 of this Indenture, does not exceed 10% of Consolidated Net Tangible Assets. If the Company shall hereafter be required to secure the Securities and all other amounts due hereunder equally and ratably with any other Indebtedness pursuant to this Section 4.09, (x) the Company will promptly deliver to the Trustee as Officers' Certificate stating that such covenant has been complied with, and an Opinion of Counsel stating that in the opinion of such counsel such covenant has been complied with and that any instruments executed by the Company or any Restricted Subsidiary in the performance of such covenant comply with the requirements of such covenant, and (y) the Trustee is hereby authorized to enter into a supplement hereto and to take such action, if any, as it may deem advisable to enable it to enforce the rights of the Holders so secured. The foregoing limitation does not apply to, and any computation of Indebtedness secured under such limitation shall exclude: (a) Liens securing obligations under any Bank Credit Facility up to the amount of Indebtedness permitted to be Incurred under clause (i) of the second paragraph of Section 4.03(a) of this Indenture; 48 (b) other Liens existing on the Closing Date; (c) Liens securing Indebtedness of Restricted Subsidiaries (other than Acquired Indebtedness and refinancings thereof); (d) Receivables Programs; (e) Liens securing Indebtedness (other than subordinated Indebtedness) Incurred under clause (viii) of the second paragraph of Section 4.03(a) of this Indenture; (f) Liens granted in connection with the extension, renewal or refinancing, in whole or in part, of any Indebtedness described in clause (a) through (e) above; provided, however, that the amount of Indebtedness secured by such Lien is not increased thereby (except to the extent that Indebtedness under clause (a) above is increased to the maximum amount permitted to be outstanding under clause (i) of the second paragraph of Section 4.03(a) of this Indenture); and provided further, however, that the extension, renewal or refinancing of Indebtedness of the Company may not be secured by Liens on assets of any Restricted Subsidiary other than to the extent the Indebtedness being extended, renewed or refinanced was at any time previously secured by Liens on assets of such Restricted Subsidiary; (g) Liens with respect to Acquired Indebtedness and refinancings thereof permitted under clause (xi) of the second paragraph of Section 4.03(a) of this Indenture; provided, however, that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets of the Subsidiary acquired; or (h) Permitted Liens. SECTION 4.09 Limitation on Sale-Leaseback Transactions. The Company will not, and will not permit any Restricted Subsidiary to, enter into any sale-leaseback transaction involving any Principal Property, unless the aggregate amount of all Attributable Indebtedness with respect to such transactions, plus all Indebtedness secured by Liens on Principal Properties (excluding secured Indebtedness that is excluded as described in Section 4.08 of this Indenture), does not exceed 10% of Consolidated Net Tangible Assets. 49 The foregoing restriction does not apply to, and any computation of Attributable Indebtedness under such limitation shall include, any sale-leaseback transaction, if: (a) the lease is for a period, including renewal rights, of not in excess of three years; (b) the sale or transfer of the Principal Property is entered into prior to, at the time of, or within 12 months after the later of the acquisition of the Principal Property or the completion of construction thereof; (c) the lease secures or relates to industrial revenue or pollution control bonds; (d) the transaction is between the Company and any Restricted Subsidiary or between Restricted Subsidiaries; or (e) the Company or such Restricted Subsidiary, within 12 months (24 months in the case of sales of plants or facilities) after the sale of any Principal Property is completed, applies an amount not less than the net proceeds received from such sale to the retirement of unsubordinated Indebtedness, to Indebtedness of a Restricted Subsidiary, or to the purchase of other property that will constitute a Principal Property or improvements thereto, or, in the case of either Partnership, to such investment, reinvestment or other use as shall be permitted or required by either Limited Partnership Agreement. SECTION 4.10 Limitation Asset Sales. In the event and to the extent that the Net Cash Proceeds received by the Company or any of its Restricted Subsidiaries from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months (other than Asset Sales by the Company or any Restricted Subsidiary to the Company or another Restricted Subsidiary) exceed 10% of Consolidated Net Tangible Assets in any one fiscal year (determined as of the date closest to the commencement of such 12-month period for which a balance sheet of the Company and its Subsidiaries has been prepared), then the Company will, or will cause such Restricted Subsidiary to, (a) within 12 months (or, in the case of Asset Sales of plants or facilities, 24 months) after the date Net Cash Proceeds so received exceed 10% of Consolidated Net Tangible Assets in any one fiscal year (determined as of the date closest to the commencement of such 12-month period for which a balance sheet of the Company 50 and its Subsidiaries has been prepared) (i) apply an amount equal to such excess Net Cash Proceeds, or the amount not applied pursuant to clause (ii) or (iii), to repay unsubordinated Indebtedness or Indebtedness of any Restricted Subsidiary, in each case owing to a Person other than the Company or any of its Subsidiaries; (ii) invest an equal amount, or the amount not so applied pursuant to clause (i) or (iii) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets that are of a nature or type or are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Subsidiaries existing on the date thereof (as determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution); or (iii) in the case of either Partnership, apply an equal amount, or the amount not applied pursuant to clause (i) or (ii), to such investment, reinvestment or other use as shall be permitted or required by either Limited Partnership Agreement, and (b) apply such excess Net Cash Proceeds (to the extent not applied pursuant to clause (a)) as provided in the following paragraphs of this Section 4.10. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period or 24-month period, as the case may be, as set forth in clause (i), (ii) or (iii) of the next preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds". If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined below) totals at least $10 million, the Company must, not later than the fifteenth Business Day of such month, make an offer (an "Excess Proceeds Offer") to purchase from the Holders on a pro rata basis an aggregate principal amount of Securities equal to the Excess Proceeds on such date, at a purchase price equal to 101% of the principal amount thereof, plus accrued interest (if any) to the date of purchase (the "Excess Proceeds Payment"). The Company shall commence an Excess Proceeds Offer by mailing a notice to the Trustee and each Holder stating: (a) that the Excess Proceeds Offer is being made pursuant to this Section 4.10 and that all Securities validly tendered will be accepted for payment on a pro rata basis; 51 (b) the purchase price and the date of purchase (which shall be a Business Day no earlier that 30 days nor later than 40 days from the date such notice is mailed) (the "Excess Proceeds Payment Date"); (c) that any Security not tendered will continue to accrue interest pursuant to its terms; (d) that, unless there shall be a default in the payment of the Excess Proceeds Payment, any Security accepted for payment pursuant to the Excess Proceeds Offer shall cease to accrue interest on the Excess Proceeds Payment Date; (e) that Holders electing to have a Security purchased pursuant to the Excess Proceeds Offer will be required to surrender the Security, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Security completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Excess Proceeds Payment Date; (f) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Excess Proceeds Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased); and (g) that Holders whose Securities are being purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered; provided, however, that each Security purchased and each new Security issued shall be in an original principal amount of $1,000 or integral multiples thereof. On the Excess Proceeds Payment Date, the Company will: (a) accept for payment on a pro rata basis Securities or portions thereof tendered pursuant to the Excess Proceeds Offer; 52 (b) deposit with the Paying Agent money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (c) deliver, or cause to be delivered, to the Trustee all Securities or portions thereof so accepted together with an Officers' certificate specifying the Securities or portions thereof accepted for payment by the Company. The Paying Agent will promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered; provided,however, that each Security purchased and each new Security issued shall be in an original principal amount of $1,000 or integral multiples thereof. The Company will publicly announce the results of the Excess Proceeds Offer as soon as practicable after the Excess Proceeds Payment Date. For purposes of this Section 4.10, the Trustee shall act as the Paying Agent. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that such Excess Proceeds are received by the Company under this Section 4.10 and the Company is required to repurchase Securities as described above. The Company may modify any of the foregoing provisions of this Section 4.10 to the extent it is advised by independent counsel that such modification is necessary or appropriate in order to ensure such compliance. SECTION 4.11 Repurchase of Securities upon Change of Counsel. (a) Upon the occurrence of a Change of Counsel, each Holder shall have the right to require the repurchase of its Securities by the Company in cash pursuant to the offer described below (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof, plus accrued interest (if any) to the date of purchase (the "Change of Control Payment"). Prior to the mailing of the notice to Holders provided for in the next succeeding paragraph, but in any event within 30 days following any Change of Control, the Company will agree to (i) repay in full all indebtedness of the Company that would prohibit the repurchase of the Securities as provided for in the next succeeding paragraph; or (ii) obtain any requisite consents under instructions providing any such indebtedness of 53 the Company to permit the repurchase of the Securities as provided for in the next succeeding paragraph. The Company shall comply with the covenant in the next preceding sentence before it shall be required to repurchase Securities pursuant to this Section 4.11. (b) Within 45 days following any Change of Control, the Company shall mail a notice to the Trustee and each Holder stating: (i) that a Change of Control has occurred, that the Change of Control Offer is being made pursuant to this Section 4.11 and that all Securities validly tendered will be accepted for payment; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Change of Control Payment Date"); (iii) that any Security not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless there shall be a default in the payment of the Change of Control Payment, any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest on the Change of Control Payment Date; (v) that Holders electing to have any Security purchased pursuant to the Change of Control Offer will be required to surrender such Security, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of such Security completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and (vii) that Holders whose Securities are being purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered; provided, however, that each Security purchased and each new Security issued shall be in an original principal amount of $1,000 or integral multiples thereof. (c) On the Change of Control Payment Date, the Company will: (i) accept for payment Securities or portions thereof tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Securities or portions thereof so accepted 54 together with an Officers' Certificate specifying the Securities or portions thereof accepted for payment by the Company. The Paying Agent will promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee will promptly authenticate and mail to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered; provided, however, that each Security purchased and each new Security issued shall be in an original principal amount of $1,000 or integral multiples thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. For purposes of this Section 4.11, the Trustee shall act as Paying Agent. (d) The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in the event that a Change of Control occurs under this Section 4.11 and the Company is required to repurchase Securities as described above. The Company may modify any of the foregoing provisions of this Section 4.11 to the extent it is advised by independent counsel that such modification is necessary or appropriate in order to ensure such compliance. SECTION 4.12 Corporate Existence. Subject to Articles 4 and 5 of this Indenture, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each Subsidiary in accordance with the respective organizational documents of the Company and of each Subsidiary of the Company and the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate existence of any Subsidiary of the Company, if the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole; and provided further, however, that any Subsidiary of the Company may consolidate with, merge into, or sell, convey, transfer, lease or otherwise dispose of all or part of its property and assets to the Company or any Wholly Owned Subsidiary of the Company. SECTION 4.13 Payment of Taxes and Other Claims. The Company will pay or discharge, or cause to be paid or discharged before any penalty accrues thereon (i) all material taxes, assessments and governmental charges levies or imposed upon the Company or any Subsidiary of the Company 55 or upon the income, profits or property of the Company or any Subsidiary of the Company and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Company or any Subsidiary of the Company; provided, however, that the Company shall not be required to pay or discharge, or cause to be paid or discharged, any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been made. SECTION 4.14 Notice of Defaults and Other Events. In the event that any Indebtedness of the Company or any Subsidiary of the Company having an outstanding principal amount of $100,000 or more has been or could be declared due and payable before its maturity because of the occurrence of any event of default (i.e., following any required notice or passage of time or both) under such Indebtedness (including, without limitation, any Default or Event of Default under this Indenture), the Company, promptly after it becomes aware thereof, will give written notice thereof to the Trustee. SECTION 4.15. Maintenance of Properties and Insurance. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary of the Company and material to the Company and its Subsidiaries taken as a whole to be maintained and kept in normal condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provide, however, that nothing in this Section 4.15 shall prevent the Company or any Subsidiary of the Company from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors or the Board of Directors of such Subsidiary of the Company having managerial responsibility for any such property, desirable in the conduct of the business of the Company or such Subsidiary of the Company. The Company will provide or cause to be provided, for itself and its Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including but not limited to, products liability insurance and public liability insurance with reputable insurers or with the government of 56 the United States of America, or an agency or instrumentality thereof, in such amounts, with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry. SECTION 4.16 Amendments to Limited Partnership Agreements. The Company will not permit the general partner of either Partnership to make or propose any amendment, supplement or other modification to either Limited Partnership Agreement that would have a material adverse effect on the interests of the Holders, except as shall be required by either Limited Partnership Agreement. SECTION 4.17 Compliance Certificates. (a) The Company shall deliver to the Trustee not more than 90 days after the end of each fiscal year an Officers' Certificate stating that a review has been conducted of the activities of the Company and its Subsidiaries and the Company's performance under this Indenture and that the Company has fulfilled all obligations under this Indenture. For purposes of this Section 4.17, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. If there has been a default in the fulfillment of any such obligation, the certificate shall describe any such default and the nature and status thereof. (b) The Company shall deliver to the Trustee, within 90 days after the end of the Company's fiscal year, a certificate signed by the Company's independent certified public accountants stating (i) that their audit examination has included a review of the terms of this Indenture and the Securities as they relate to accounting matters, (ii) that they have read the most recent Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of this Section 4.17, and (iii) whether, in connection with their audit examination, anything came to their attention that caused them to believe that the Company was not in compliance with any of the terms, covenants, provisions or conditions of Article 4 and Section 5.01 of this Indenture as they pertain to accounting matters and, if any Default or Event of Default has come to their attention, specifying the nature and period of existence thereof; provided, however, that such independent certified public accountants shall not be liable in respect of such statement by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with generally accepted auditing standards in effect at the date of such examination. 57 SECTION 4.18 Commission Reports and Reports to Holders. The Company shall file with the Commission the annual, quarterly and other reports required by Section 13 or 15(d) of the Exchange Act, regardless of whether such Sections of the Exchange Act are applicable to the Company, and shall provide such reports to Holders and the Trustee within 15 days of the date it would have been required to file such reports with the Commission had it bee subject to such Sections. The Company also shall comply with the other provisions of TIA Section 314(a). SECTION 4.19 Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 5 Successor Corporation SECTION 5.01 When Company May Merge, Etc. The Company will not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person (other than a Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company with a positive net worth; provided, however, that, in connection with any merger of the Company with a Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company, no consideration (other than Common Stock in the surviving Person or the Company) shall be issued or distributed to the shareholders of the Company), or permit any Person to merge with or into the Company, unless: (a) the Company shall be the continuing Person, or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or that 58 acquired or leased such property and assets of the Company shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company on all of the Securities and under this Indenture; (b) immediately after giving effect to such transaction, no Event of Default and no Default shall have occurred and be continuing; (c) immediately after giving effect to such transaction on a pro forma basis, the Interest Coverage Ratio of the Company (or any Person becoming the successor obligor of the Securities) is at least 1.10:1, or, if less, at least equal to the Interest Coverage Ratio of the Company immediately prior to such transaction; provided, however, that, if the Interest Coverage Ratio of the Company before giving effect to such transaction is within the range set forth in column (A) below, then the pro forma Interest Coverage Ratio of the Company (or any Person becoming the successor obligor of the Securities) shall be at least equal to the lesser of (i) the ratio determined by multiplying the percentage set forth in column (B) below by the Interest Coverage Ratio of the Company prior to such transaction and (ii) the ratio set forth in column (C) below:
(A) (B) (C) --- --- --- 1.11:1 to 1.99:1 90% 1.6:1 2.00:1 to 2.99:1 80% 2.1:1 3.00:1 to 3.99:1 70% 2.4:1 4.00:1 or more 60% 2.5:1
and provided further, however, that, if the pro forma Interest Coverage Ratio of the Company (or any Person becoming the successor obligor of the Securities) is 3:1 or more, the calculation in the next preceding proviso shall be inapplicable and such transaction shall be deemed to have complied with the requirements of this clause (c); (d) immediately after giving effect to such transaction on a pro forma basis, the Company (or any Person that becomes the successor obligor of the Securities) shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction; and 59 (e) the Company delivers to the Trustee an Officers' Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (c) and (d)) and an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture comply with this Section 5.01 and that all conditions precedent provided for herein relating to such transaction have been complied with; provided, however, that clauses (c) and (d) above do not apply if, in the good faith determination of the Board of Directors, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of incorporation of the Company; and provided further, however, that any such transaction shall not have as one of its purposes the evasion of the limitations of this Section 5.01. SECTION 5.02 Successor Corporation Substituted. Upon any consolidation or merger, or any sale, conveyance, transfer, lease or other disposition of all or substantially all of the property and assets of the Company in accordance with Section 5.01 of this Indenture, the successor corporation formed by such consolidation or into which the Company is merged or to which such sale, conveyance, transfer, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein. ARTICLE 6 Default and Remedies SECTION 6.01 Events of Default. An "Event of Default" occurs with respect to the Securities if: (a) the Company defaults in the payment of the principal of, or premium, if any, on, any Security when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) the Company defaults in the payment of interest on any Security when the same is due and payable, and such default continues for a period of 30 days; (c) the Company defaults in the performance of or breaches any other covenant or agreement of the Company in this Indenture or under the Securities and such 60 default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Securities; (d) there occurs with respect to any issue or issues of Indebtedness of the Company and/or one or more Significant Subsidiaries having an outstanding principal amount of $10 million or more in the aggregate, whether such Indebtedness now exists or shall hereafter be created, an event of default that has caused the holder or holders thereof, or representatives of such holder or holders, to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration; (e) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company or any Significant Subsidiary and shall not be discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (f) a court having jurisdiction in the premises enters a decree or order for (i) relief in respect of the Company or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all the property and assets of the Company or any Significant Subsidiary or (iii) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; (g) the Company or any Significant Subsidiary (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order 61 for relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all the property and assets of the Company or any Significant Subsidiary or (iii) effects any general assignment for the benefit of creditors; (h) the Company and/or one or more Significant Subsidiaries fails to make (i) at the final (but not any interim) fixed maturity of any issue of Indebtedness a principal payment of $10 million or more or (ii) at the final (but not any interim ) fixed maturity of more than one issue of such Indebtedness principal payments aggregating $10 million or more and, in the case of clause (i), such defaulted payment shall not have been made, waived or extended within 30 days of the payment default and, in the case of clause (ii), all such defaulted payments shall not have been made, waived or extended within 30 days of the payment default that causes the amount described in clause (ii) to exceed $10 million; or (i) the nonpayment of any two or more items of Indebtedness that would constitute at the time of such nonpayments, but for the individual amounts of such Indebtedness, an Event of Default under clause (d) or clause (h) above, or both, and which items of Indebtedness aggregate $10 million or more. A Default under clause (c) is not an Event of Default until the Trustee notifies the Company in writing, or the Holders of at least 25% of the principal amount of the Securities then outstanding notify the Company and the Trustee in writing, of the Default and the Company does not cure the Default within 30 days after receipt of the notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." Such notice shall be given by the Trustee if so requested in writing by the Holders of 25% of the principal amount of the Securities then outstanding. SECTION 6.02 Acceleration. If an Event of Default (other than an Event of Default specified in clause (f) or (g) of Section 6.01 of this Indenture that occurs with respect to the Company) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding, by written notice to the Company (and to the 62 Trustee if such notice is given by the Holders (the "Acceleration Notice")), may, and the Trustee at the request of the Holders will, declare the entire unpaid principal of, premium, if any, and accrued interest on, the Securities to be immediately due and payable, as specified below. Upon a declaration of acceleration, such principal, premium, if any, and accrued interest shall become and be immediately due and payable without presentment, demand, protest or further notice or act (all of which are expressly waived by the Company). In the event of a declaration of acceleration because an Event of Default set forth in clause (d) or (h) of Section 6.01 of this Indenture has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (d) or (h) shall be remedied, cured by the Company and/or such Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (f) or (g) of Section 6.01 of this Indenture occurs with respect to the Company, all unpaid principal of, premium, if any, and accrued interest on, the Securities then outstanding shall become and be immediately due and payable automatically, without any declaration, presentment, demand, protest, notice or other act on the part of the Trustee or any Holder (all of which are expressly waived by the Company). The Holders of at least a majority in principal amount of the outstanding Securities, by written notice to the Company and to the Trustee, may waive all past defaults or Defaults and rescind and annul a declaration of acceleration and its consequences if (a) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and accrued interest on the Securities that have become due solely by such declaration of acceleration, have been cured or waived and (b) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. SECTION 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any, or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. 63 The Holders and the Trustee may exercise their rights and remedies under this Indenture and under the Notes against the capital stock of AMC or the assets of AMC and its subsidiaries only in a manner consistent with the fiduciary obligations of AMC and the Company associated with the general partnership interests in the Partnerships (including, without limitation, the interests of the Partnerships and the partners thereof); provided that the foregoing shall not require the Holders or the Trustee to take any action with respect to BMCH. SECTION 6.04 Waiver of Past Defaults. Subject to Sections 6.02, 6.07 and 9.02 of this Indenture, the Holders of at least a majority in aggregate principal amount of the outstanding Securities, by notice to the Trustee, may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of, premium, if any, or interest on any Security as specified in clause (a) or (b) of Section 6.01 of this Indenture. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 6.05 Control by Majority. The Holders of at least a majority in aggregate principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of the Holders not joining in the giving of such direction. SECTION 6.06 Limitation on Suits. A Holder may not pursue any remedy with respect to this Indenture or the Securities unless: (a) the Holder gives the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in aggregate principal amount of outstanding Securities make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; 64 (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (e) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Securities do not give the Trustee a direction that is inconsistent with the request. For purposes of Section 6.05 of this Indenture and this Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any determination of whether the Holders of the required aggregate principal amount of outstanding Securities have concurred in any request or direction of the Trustee to pursue any remedy available to the Trustee or the Holders with respect to this Indenture or the Securities or otherwise under the law. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. SECTION 6.07 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of the principal of, premium, if any, or interest on, such Holder's Security or to bring suit for the enforcement of any such payment, on or after the respective due dates expressed in the Securities, shall not be impaired or affected without the consent of the Holder. SECTION 6.08 Collection Suit by Trustee. If an Event of Default in payment of principal, premium or interest specified in clause (a) or (b) of Section 6.01 of this Indenture occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor of the Securities for the whole amount of principal, premium, if any, and accrued interest, if any, remaining unpaid, together with interest on overdue principal, premium, if any, and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate borne by the Securities, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the trustee, its agents and counsel. SECTION 6.09 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have 65 the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.06 of this Indenture) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor of the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any custodian in any judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.06 of this Indenture. To the extent that such payment of reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel out of the estate in any such judicial proceeding shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all dividends, distributions, monies, securities and other property that the Holders may be entitled to receive in such judicial proceedings, whether in liquidation or under any plan of reorganization, arrangement or otherwise. Nothing herein contained shall be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 7.06 of this Indenture; Second: to Holders for amounts then due and unpaid for principal of, premium, if any, and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium, if any, and interest, respectively; and Third: to the Company or any other obligors of the Securities, as their interests may appear, or as a court of competent jurisdiction may direct. 66 The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 of this Indenture, or a suit by Holders of more than 10% in principal amount of the outstanding Securities. SECTION 6.12 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then, and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 6.13 Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or wrongfully taken Securities in Section 2.06 of this Indenture, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.14 Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every 67 right and remedy given by this Article 6 or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient by the Trustee or by the Holders, as the case may be. ARTICLE 7 Trustee SECTION 7.01 Rights of Trustee. Subject to TIA Sections 315(a) though (d): (a) the Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document; (b) before the Trustee acts or refrains from acting, it may require an Officers' Certificate or any Opinion of Counsel, which shall conform to Section 10.04 of this Indenture. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on any such certificate or opinion; (c) the Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (e) the Trustee or Paying Agent shall not be liable for interest on any money recovered by it except as the Trustee or Paying Agent may agree in writing with the Company. Money held in trust by the Trustee or Paying Agent need not be segregated from other funds except to the extent required by law and except under Article 8 of this Indenture; and (f) the Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute negligence or bad faith. 68 SECTION 7.02 Individual Rights of Trustee. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to TIA Sections 310(b) and 311. SECTION 7.03 Trustee's Disclaimer. The Trustee (a) makes no representation as to the validity or adequacy of this Indenture or the Securities, (b) shall not be accountable for the Company's use of the proceeds from the Securities and (c) shall not be responsible for any statement in the Securities other than its certificate of authentication. SECTION 7.04 Notice of Default. If any Default or any Event of Default occurs and is continuing and if such Default or Event of Default is known to the Trustee, the Trustee shall mail to each Holder in the manner and to the extent provided in TIA Section 313(c) notice of the Default or Event of Default within 30 days after it occurs, unless such Default or Event of Default has been cured; provided, however, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the Board of Directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders. The Trustee shall not be deemed to have knowledge of any Default or Event of Default except (a) any Event of Default occuring pursuant to clause (a) or (b) of Section 6.01 of this Indenture if the Trustee is then acting as Paying Agent or (b) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge, and such notification shall not be deemed to include receipt of information obtained in any report or other documents furnished under Section 4.17 of this Indenture, which reports and documents the Trustee shall have no duty to examine. SECTION 7.05 Reports by Trustee to Holders. Within 60 days after each May 15, beginning with May 15, 1994, the Trustee shall mail to each Holder as provided in TIA Section 313(c) a brief report dated as of such May 15, if required by TIA Section 313(a). 69 SECTION 7.06 Compensation and Indemnity. The Company shall pay to the Trustee such compensation as shall be agreed upon in writing for its services. The compensation of the Trustee shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses and advances incurred or made by it. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss or liability or expense incurred by it without negligence or bad faith on its part in connection with the administration of this Indenture and its duties under this Indenture and the Securities, including the costs and expenses of defending itself against any claim or liability and of complying with any process served upon it or any of its officers in connection with the exercise or performance of any of its powers or duties under this Indenture and the Securities. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay reasonable fees and expenses of such counsel. The Company need not pay for any settlements made without its consent; provided, however, that such consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. If the Trustee incurs expenses or renders services after the occurence of an Event of Default specified in clause (f) or (g) of Section 6.01 of this Indenture, the expenses and the compensation for the services will be intended to constitute expenses of administration under the United States Bankruptcy Code or any applicable federal or state law for the relief of debtors. SECTION 7.07 Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.07. The Trustee may resign by so notifying the Company in writing at least 30 Business Days prior to the date of the proposed resignation. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Trustee in writing and may appoint a 70 successor Trustee with the consent of the Company. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.09 of this Indenture; (b) the Trustee is adjudged a bankrupt or an insolvent; (c) a receiver or other public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the outstanding Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If the successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after the delivery of such written acceptance, subject to the lien provided in Section 7.06 of this Indenture, (a) the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, (b) the resignation or removal of the retiring Trustee shall become effective and (c) the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. If the Trustee fails to comply with Section 7.09 of this Indenture, any Holder who satisfies the requirements of TIA Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.07, the Company's obligations under Section 7.06 of this Indenture shall continue for the benefit of the retiring Trustee. 71 SECTION 7.08 Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee herein. SECTION 7.09 Eligibility. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. ARTICLE 8 Discharge of Indenture SECTION 8.01 Termination of Company's Obligations. Except as otherwise provided in this Section 8.01, the Company may terminate its obligations under the Securities and this Indenture if: (a) all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities that have been replaced or Securities that are paid pursuant to Section 4.01 of this Indenture or Securities for whose payment money or securities have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 8.05 of this Indenture) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or (b) (i) the Securities mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (ii) the Company irrevocably deposits in trust with the Trustee during such one-year period, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds solely for the benefit of the Holders for that purpose, money or U.S. Government Obligations sufficient (in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee), without consideration of any reinvestment 72 of any interest thereon, to pay principal and interest on the Securities to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, (iii) no Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit, (iv) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound and (v) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with. With respect to the foregoing clause (a), the Company's obligations under Section 7.06 shall survive. With respect to the foregoing clause (b), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01, 4.02, 7.06, 7.07, 8.04, 8.05 and 8.06 of this Indenture shall survive until the Securities are no longer outstanding. Thereafter, only the Company's obligations in Sections 7.06 and 8.06 of this Indenture shall survive. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations specified above. SECTION 8.02 Defeasance and Discharge of Indenture. The Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Securities and the provisions of this Indenture will no longer be in effect with respect to the Securities on the one hundred twenty-third day after the deposit referred to in clause (i) of this Section 8.02, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same, except as to (a) rights of registration of transfer and exchange, (b) substitution of apparently mutilated, defaced, destroyed, lost or stolen Securities, (c) rights of Holders to receive payments of principal thereof and interest thereon, (d) the Company's obligations under Section 4.02, (e) the rights, obligations and immunities of the Trustee hereunder and (f) the rights of the Holders as beneficiaries of this Indenture with respect to the property so deposited with the Trustee payable to all or any of them; provided, however, that the following conditions shall have been satisfied: 73 (i) with reference to this Section 8.02, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 7.09) and conveyed all right, title and interest for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Securities, and dedicated solely to, the benefit of the Holders, in and to (A) money in an amount, (B) U.S. Government Obligations that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (i), an amount or (C) a combination thereof in an amount, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and accrued interest on the outstanding Securities on the Stated Maturity of such principal or interest; provided, however, that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Securities; (ii) the Company shall have delivered to the Trustee (A) either (1) an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for Federal income tax purposes as a result of the Company's exercise of its option under this Section 8.02 and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, which Opinion of Counsel must be accompanied by a ruling of the Internal Revenue Service to the same effect unless there has been a change in applicable Federal income tax law after the date of this Indenture such that a ruling from the Internal Revenue Service is no longer required or (2) a ruling directed to the Company or the Trustee received from the Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel, and (B) an Opinion of Counsel to the effect that (1) the creation of the defeasance trust does 74 not violate the Investment Company Act of 1940 and (2) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the United States Bankruptcy Code, after one year following the deposit), the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Company under either such statute, and either (x) the trust funds will no longer remain the property of the Company (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (y) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, (I) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute and (II) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding; (iii) immediately after giving effect to such deposit on a pro forma basis, no Event of Default or Default shall have occurred and be continuing on the date of such deposit or during the period ending on the one hundred twenty-third day after such date of deposit; (iv) such deposit shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which the Company is bound; (v) if at such time the Securities are listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Securities will not be delisted as a result of such deposit, defeasance and discharge; and (vi) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02 have been complied with. 75 Notwithstanding the foregoing clause (i), prior to the end of the 123-day period referred to in clause (ii)(B)(2) above, none of the Company's obligations under this Indenture shall be discharged. Subsequent to the end of such 123-day period with respect to this Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01, 4.02, 7.06, 7.07, 8.05, and 8.06 of this Indenture shall survive until the Securities are no longer outstanding. Thereafter, only the Company's obligations in Sections 7.06, 8.05 and 8.06 of this Indenture shall survive. If and when a ruling from the Internal Revenue Service or an Opinion of Counsel referred to in clause (ii)(A) above is able to be provided specifically without regard to, and not in reliance upon, the continuance of the Company's obligations under Section 4.01 of this Indenture, then the Company's obligations under such Section 4.01 of this Indenture shall cease upon delivery to the Trustee of such ruling or Opinion of Counsel and compliance with the other conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02. After any such irrevocable deposit, the Trustee upon request, shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations in the immediately preceding paragraph. SECTION 8.03 Defeasance of Certain Obligations. The Company may omit to comply with any term, provision or condition set forth in clauses (c) and (d) of Section 5.01 and Section 4.03 through 4.17 of this Indenture, clause (c) of Section 6.01 of this Indenture with respect to Sections 4.03 through 4.17 of this Indenture and clauses (c) and (d) of Section 5.01 of this Indenture, and clauses (d), (e), (h) and (i) of Section 6.01 of this Indenture shall be deemed not to be Events of Default, in each case with respect to the outstanding Securities if: (a) with reference to this Section 8.03, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 7.09 of this Indenture) and conveyed in and to all right, title and interest to the Trustee for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee as security for payment of the principal of, premium, if any, and interest, if any, on the Securities for, and dedicated solely to, the benefit of the Holders, 76 in and to (i) money in an amount, (ii) U.S. Government Obligations that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (a), money in an amount or (iii) a combination thereof in an amount, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and accrued interest on, the outstanding Securities on the Stated Maturity of such principal or interest; provided, however, that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Securities; (b) the Company has delivered to the Trustee an Opinion of Counsel to the effect that (i) the creation of the defeasance trust does not violate the Investment Company Act of 1940, (ii) the Holders have a valid first- priority security interest in the trust funds, (iii) the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain convenants and Events of Default and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred and (iv) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the United States Bankruptcy Code, after one year following the deposit), the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Company under either such statute, and either (A) the trust funds will no longer remain the property of the Company (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors rights generally) or (B) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, (i) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to 77 the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute and (2) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding; (c) immediately after giving effect to such deposit on a pro forma basis, no Event of Default or Default shall have occurred and be continuing on the date of such deposit or during the period ending on the one hundred twenty-third day after the date of such deposit; (d) such deposit shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which the Company is bound; (e) if at such time the Securities are listed on a national securities exchange, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securities will not be delisted as a result of such deposit, defeasance and discharge; and (f) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.03 have been complied with. SECTION 8.04 Application of Trust Money. Subject to Sections 8.05 and 8.06 of this Indenture, the Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03 of this Indenture, as the case may be, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with the Securities and this Indenture to the payment of principal of, premium if any, and interest on the Securities; but such money need not be segregated from other funds except to the extent required by law. SECTION 8.05 Repayment to Company. Subject to Sections 7.06, 8.01, 8.02 and 8.03 of this Indenture, the Trustee and the Paying Agent shall promptly pay to the Company upon request set forth in an Officers' Certificate 78 any excess money held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years; provided, however, that the Trustee or such Paying Agent before being required to make any payment may cause to be published at the expense of the Company once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money at such Holder's address (as set forth in the Security Register) notice that such money remains unclaimed and that after a date specified therein (which shall be at least 30 days from the date of such publication or mailing) any unclaimed balance of such money then remaining will be repaid to the Company; and provided further, however, that the Trustee may comply with any applicable escheat or abandoned property law. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. SECTION 8.06 Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03 of this Indenture, as the case may be, by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or 8.03 of this Indenture, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03 of this Indenture, as the case may be; provided, however, that, if the Company has made any payment of principal of, premium, if any, or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 Amendments, Supplements and Waivers SECTION 9.01 Without Consent of Holders. The Company, when authorized by a resolution of its Board of 79 Directors, and the Trustee may amend or supplement this Indenture or the Securities without notice to or the consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to comply with Article 5 of this Indenture; (c) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; (d) to provide for uncertificated Securities in addition to or in place of certificated Securities; or (e) to make any change that does not adversely affect the rights of any Holder. SECTION 9.02 With Consent of Holders. Subject to Sections 6.04 and 6.07 of this Indenture and without prior notice to the Holders, the Company, when authorized by its Board of Directors (as evidenced by a Board Resolution), and the Trustee may amend this Indenture and the Securities with the written consent of the Holders of not less than a majority in aggregate principal amount of the Securities then outstanding, and the Holders of not less than a majority in principal amount of the Securities then outstanding by written notice to the Trustee may waive future compliance by the Company with any provision of this Indenture or the Securities. Notwithstanding the provisions of this Section 9.02, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.04, may not: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount of, or premium, if any, or interest on, any Security, or adversely affect any right of repayment at the option of any Holder of any Security, or change the place or currency of payment of principal of, premium, if any, or interest on, any Security, or impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or in the case of a redemption, on or after the Redemption Date) of any Security; (b) reduce the percentage in principal amount of the outstanding Securities required for any such supplemental indenture, for any waiver of compliance with certain provisions of this Indenture or certain defaults and their consequences provided for in this Indenture; 80 (c) waive a default in the payment of principal of, premium, if any, or interest on, any Security; or (d) modify any of the provisions of this Section 9.02, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Security affected thereby. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. The Company will mail supplemental indentures to Holders upon request. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. SECTION 9.03 Revocation and Effect of Consent. Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the Security of the consenting Holder; even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to its Security or portion of its Security. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver shall become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the outstanding Securities. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then, notwithstanding the last two sentences of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies) and only those Persons shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No 81 such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it is of the type described in any of clauses (a) through (d) of Section 9.02 of this Indenture. In case of an amendment or waiver of the type described in clauses (a) through (d) of Section 9.02 of this Indenture, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder of a Security that evidences the same indebtedness as the Security of the consenting Holder. SECTION 9.04 Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Security thereafter authenticated. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. SECTION 9.05 Trustee to Sign Amendments, Etc. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article 9 is authorized or permitted by this Indenture. Subject to the preceding sentence, the Trustee shall sign such amendment, supplement or waiver if the same does not adversely affect the rights of the Trustee. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 9.06 Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article 9 shall conform to the requirements of the TIA as then in effect. ARTICLE 10 Miscellaneous SECTION 10.01 Trust Indenture Act of 1939. This Indenture is subject to the provisions of the TIA that are required to be a part of this Indenture and shall, to the extent applicable, be governed by such provisions. 82 SECTION 10.02 Notices. Any notice or communication shall be sufficiently given if in writing and delivered in person or mailed by first class mail addressed as follows: if to the Company: Agricultural Minerals and Chemicals Inc. 5100 East Skelly Drive Suite 800 Tulsa, Oklahoma 74135 Attention: Chief Financial Officer if to the Trustee: Society National Bank 127 Public Square 15th Floor Cleveland, Ohio 44114 Attention: Corporate Trust Division The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Holder shall be mailed to him at his address as it appears on the Security Register by first class mail and shall be sufficiently given to him if so mailed within the time prescribed. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee and each Agent at the same time. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed given only when received, and except as otherwise provided in this Indenture, if a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 10.03 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and 83 (b) an Opinion of Counsel stating that, in the opinion of such Counsel, all such conditions precedent have been complied with. SECTION 10.04 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in the Indenture shall include: (a) a statement that the person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with, and such other opinions as the Trustee may reasonably request; provided, however, that, with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 10.05 Rules by Trustee, Paying Agent or Registrar. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 10.06 Payment Date Other Than a Business Day. If an Interest Payment Date, Redemption Date, Stated Maturity or date of maturity of any Security shall not be a Business Day at any place of payment, then payment of principal of, premium, if any, or interest on such Security, as the case may be, need not be made on such date, but may be made on the next succeeding Business Day at such place of payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity or date of maturity of such Security; provided, however, that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or date of maturity, as the case may be. 84 SECTION 10.07 Governing Law. The laws of the State of New York shall govern this Indenture and the Securities. The Trustee, the Company and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Indenture or the Securities. SECTION 10.08 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any Subsidiary or the Company. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 10.09 No Recourse Against Others. No recourse for the payment of the principal of, premium, if any, or interest on, any of the Securities or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any of the Securities or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, shareholder, officer, director, employee or controlling person of the Company or of any successor Person thereof. Each Holder, by accepting such Securities, waives and releases all such liability. SECTION 10.10 Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 10.11 Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 10.12 Separability. In case any provision in this Indenture or in the Securities shall be invalid, illegal or enforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.13 Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been included for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof. 85 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. AGRICULTURAL MINERALS AND CHEMICALS INC. BY: /s/ John Molenaar ------------------------------------ Chief Financial Officer SOCIETY NATIONAL BANK BY: /s/ R. Barker ------------------------------------ Vice President STATE OF NEW YORK ) ) SS: COUNTY OF NEW YORK ) On this 26th day of October, 1993, before me personally came John Molenaar, to me known, who, being by me duly sworn, did depose and say that he resides in Tulsa, Oklahoma, that he is Chief Financial Officer of AGRICULTURAL MINERALS AND CHEMICALS INC., one of the corporations described in and that executed the above instrument; and that he signed his name thereto by authority of the Board of Directors of said corporation. /s/ Elisa M. Swann ----------------------------------------- Notary Public (Notarial Seal) STATE OF NEW YORK ) ) SS: COUNTY OF NEW YORK ) On this 26th day of October, 1993, before me personally came Robert Barker, to me known, who being by me duly sworn, did depose and say that he resides in Cleveland, Ohio, that he is Vice President of SOCIETY NATIONAL BANK, one of the entities described in and that executed the above instrument; and that he signed his name thereto by authority of the by-laws of said trust company. /s/ Elisa M. Swann ----------------------------------------- Notary Public (Notarial Seal) EXHIBIT A --------- (FACE OF NOTE) AGRICULTURAL MINERALS AND CHEMICALS INC. 10-3/4% Senior Notes Due 2003 NO. CUSIP NO. 008522AA2 AGRICULTURAL MINERALS AND CHEMICALS INC., a Delaware corporation (the "Company," which term includes any successor corporation) under the Indenture hereinafter referred to, for value received, promises to pay to _______________, or its registered assigns, the principal sum of ______________ ($_____________), on September 30, 2003. Interest Payment Dates: March 31 and September 30, commencing March 31, 1994. Regular Record Dates: March 15 and September 15. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. AGRICULTURAL MINERALS AND CHEMICALS INC. By:_____________________________________ Title:__________________________________ By:_____________________________________ Title:__________________________________ A-2 (Form of Trustee's Certificate of Authentication) This is one of the 10-3/4% Senior Notes Due 2003 described in the within-mentioned Indenture. Date: __________, ____ SOCIETY NATIONAL BANK, as Trustee By:____________________________ Authorized Signature A-3 (REVERSE SIDE OF NOTE) AGRICULTURAL MINERALS AND CHEMICALS INC. 10-3/4% Senior Notes Due 2003 1. Principal and Interest. The Company will pay the principal of this Note on September 30, 2003. The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate per annum shown above. Interest will be payable semiannually (to the holders of record of the Notes at the close of business on March 15 or September 15 immediately preceding the applicable Interest Payment Date) on each Interest Payment Date, commencing March 31, 1994. Interest on the Notes will accrue from the most recent date to which interest has been paid, or, if no interest has been paid, from October 26, 1993; provided, however, that, if there is no existing default in the payment of interest and if this Note is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at the rate of 10-3/4% per annum. 3. Method of Payment. The Company will pay interest (except defaulted interest) on the principal amount of the Notes on each March 31 and September 30, commencing March 31, 1994, to the persons who are Holders (as reflected in the Security Register) at the close of business on such March 15 and A-4 September 15 immediately preceding the Interest Payment Date, in each case, even if the Note is cancelled on registration of transfer or registration of exchange after such payment date; provided, however, that, with respect to the payment of principal, the Company will make payment to the Holder that surrenders this Note to a Paying Agent on or after September 30, 2023. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by its check payable in such money. It may mail an interest check to a Holder's registered address (as reflected in the Security Register). If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. Paying Agent and Registrar. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice. The Company, any Subsidiary of the Company, or any Affiliate of any of them may act as Paying Agent, Registrar or co-registrar. 4. Indenture; Limitations. The Company issued the Notes under an Indenture dated as of October 15, 1993 (the "Indenture"), between the Company and Society National Bank (the "Trustee"). Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control. The Notes are general obligations of the Company. The Indenture limits the original aggregate principal amount of the Notes to $175,000,000. A-5 5. Optional Redemption. The Company may redeem all the Notes at any time or any portion of the Notes from time to time, on or after September 30, 1998, at the following Redemption Prices (expressed as percentages of the principal amount) if redeemed during the 12-month period beginning September 30 of the years indicated:
Year Redemption Price ---- ---------------- 1998 105.375% 1999 102.688%
and thereafter at 100% of the principal amount, plus accrued interest (if any) to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date). In addition, the Company may redeem up to $61.25 million aggregate principal amount of Notes at any time prior to September 30, 1996, in connection with one or more Public Equity Offerings following which there is a Public Market at 110% of the then outstanding principal amount thereof, plus accrued interest (if any) to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date); provided,however, that the aggregate principal amount of Notes so redeemed may not exceed the aggregate proceeds of such Public Equity Offerings. 6. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder to be redeemed at his last address as it appears in the Security Register. Notes in original denominations larger than $1,000 may be redeemed in part. On the Redemption Date, interest ceases to accrue on Notes or portions of Notes called for redemption, unless the Company defaults in the payment of the Redemption Price. 7. Denominations; Transfer; Exchange. The Notes are in registered form without coupons in denominations in original principal amount of $1,000 and multiples in original principal amount of $1,000. A Holder A-6 may register the transfer or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Notes selected for redemption. Also, it need not register the transfer or exchange of any Notes for a period of 15 days before a selection of Notes to be redeemed is made. 8. Persons Deemed Owners. A Holder may be treated as the owner of a Note for all purposes. 9. Unclaimed Money. If money for the payment of principal, premium, if any, or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment, unless an abandoned property law designates another person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 10. Discharge Prior to Redemption or Maturity. If the Company deposits with the Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes (a) to redemption or maturity, the Company will be discharged from the Indenture and the Notes, except in certain circumstances for certain sections thereof, and (b) to the Stated Maturity, the Company will be discharged from certain covenants set forth in the Indenture. 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for A-7 uncertificated Notes in addition to or in place of certificated Notes and make any change that does not adversely affect the rights of any Holder. 12. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to pay dividends, create Liens, enter into sale-leaseback transactions, sell assets, engage in transactions with Affiliates or incur Indebtedness. At the end of each fiscal year, the Company must report to the Trustee on compliance with such limitations. 13. Successor Corporations. When a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations. 14. Defaults and Remedies. An Event of Default is: a default in payment of principal of or premium, if any, on the Notes; default in the payment of interest on the Notes for 30 days; failure by the Company for 30 days after notice to it to comply with any of its other agreements in the Indenture; certain events of bankruptcy or insolvency; certain final judgments which remain undischarged; and certain events of default on other Indebtedness of the Company and/or one or more of its Significant Subsidiaries. If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes may declare all the Notes to be due and payable. If a bankruptcy or insolvency default with respect to the Company occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. A-8 15. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for the Company or its Affiliates and may otherwise deal with the Company or its Affiliates as if it were not the Trustee. 16. No Recourse Against Others. No stockholder, director, officer, employee or incorporator as such, past, present or future, of the Company or any successor corporation shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 17. Authentication. This Note shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on the other side of this Note. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to Agricultural Minerals and Chemicals Inc., 5100 Each Skelly Drive, Suite 800, Tulsa, Oklahoma 74135, Attention: Chief Financial Officer. A-9 I or we assign and transfer this Note to: Please insert social security or other identifying number of assignee _______________________________________________________________________________ _______________________________________________________________________________ Print or type name, address and zip code of assignee and irrevocably appoint _________________________________________________________________. [Agent], to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated____________________________ Signed____________________________ _______________________________________________________________________________ (Sign exactly as name appears on the other side of this Note) A-10 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 4.10 or Section 4.11, as applicable, of the Indenture, check the Box: [_]. If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.10 or Section 4.11 as applicable, of the Indenture, state the amount (in original principal amount): $___________________. Date:______________________ Your Signature:___________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee:__________________________________ EX-99.3 10 AGREEMENT OF PARTNERSHIP EXHIBIT 99.3 AGREEMENT OF LIMITED PARTNERSHIP OF AGRICULTURAL MINERALS COMPANY, L.P. TABLE OF CONTENTS Page ---- ARTICLE I--ORGANIZATIONAL MATERIALS....................................... A-4 1.1 Formations....................................................... A-4 1.2 Name............................................................. A-4 1.3 Registered Office; Principal Office.............................. A-4 1.4 Power of Attorney................................................ A-4 1.5 Term............................................................. A-5 1.6 Possible Restrictions on Transfer................................ A-5 ARTICLE II--DEFINITIONS................................................... A-6 ARTICLE III--PURPOSE...................................................... A-17 3.1 Purpose and Business............................................. A-17 3.2 Powers........................................................... A-17 ARTICLE IV--CAPITAL CONTRIBUTIONS......................................... A-17 4.1 Initial Contributions............................................ A-17 4.2 Return on Initial Contributions.................................. A-17 4.3 Contributions by the General Partner And the Initial Limited Partners........................................................ A-17 4.4 Issuances of Additional Units, APIs and Other Securities......... A-18 4.5 Limited Preemptive Rights........................................ A-19 4.6 Capital Accounts................................................. A-19 4.7 Interest......................................................... A-21 4.8 No Withdrawal.................................................... A-21 4.9 Loans from Partners.............................................. A-21 4.10 No Fractional Units.............................................. A-22 4.11 Splits and Combinations.......................................... A-22 ARTICLE V--ALLOCATIONS AND DISTRIBUTIONS.................................. A-22 5.1 Allocations for Capital Account Purposes......................... A-22 (a) Net Income................................................... A-22 (b) Net Losses................................................... A-23 (c) Net Termination Gains and Losses............................. A-24 (d) Special Allocations.......................................... A-25 (i) Partnership Minimum Gain Chargeback........................ A-25 (ii) Chargeback of Minimum Gain Attributable to Partner Nonrecourse Debt......................................... A-26 (iii) Qualified Income Offset.................................. A-26 (iv) Priority Allocation....................................... A-26 (v) Gross Income Allocations................................... A-26 (vi) Nonrecourse Deductions.................................... A-27 (vii) Partner Nonrecourse Deductions........................... A-27 (viii) Nonrecourse Liabilities................................. A-27 (ix) Code Section 754 Adjustments.............................. A-27 (x) Curative Allocation........................................ A-27 5.2 Allocations for Tax Purposes..................................... A-28 5.3 Requirements as to, and Characterization of, Distributions....... A-29 5.4 Distributions and Reserve Amount Funding......................... A-30 5.5 Conversion of Units.............................................. A-31 5.6 Distributions of Cash from Interim Capital Transactions.......... A-32 5.7 Reserve Amount; Letter of Credit................................. A-32 5.8 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels............................................. A-32 ARTICLE VI--MANAGEMENT AND OPERATION OF BUSINESS.......................... A-33 6.1 Management....................................................... A-33 6.2 Certificate of Limited Partnership............................... A-34 6.3 Restrictions on General Partner's Authority...................... A-35 6.4 Reimbursement of the General Partner............................. A-35 6.5 Outside Activities............................................... A-36 A-1
PAGE ---- 6.6 Loans to and from the General Partner; Contracts with Affiliates................ A-36 6.7 Indemnification................................................................. A-37 6.8 Liability of Indemnitees........................................................ A-39 6.9 Resolution of Conflicts of Interest............................................. A-39 6.10 Other Matters Concerning the General Partner.................................... A-40 6.11 Title to Partnership Assets..................................................... A-40 6.12 Purchase or Sale of Units....................................................... A-40 6.13 Reliance by Third Parties....................................................... A-41 6.14 Registration Rights of AMC and Its Affiliates................................... A-41 ARTICLE VII--Rights and Obligations of Limited Partners.................................. A-43 7.1 Limitation of Liability......................................................... A-43 7.2 Management of Business.......................................................... A-43 7.3 Outside Activities.............................................................. A-43 7.4 Return of Capital............................................................... A-43 7.5 Rights of Limited Partners Relating to the Partnership.......................... A-43 ARTICLE VIII--Books, Records, Accounting and Reports..................................... A-44 8.1 Records and Accounting.......................................................... A-44 8.2 Fiscal Year..................................................................... A-44 8.3 Reports......................................................................... A-44 ARTICLE IX--Tax Matters.................................................................. A-44 9.1 Preparation of Tax Returns...................................................... A-44 9.2 Tax Elections................................................................... A-45 9.3 Tax Controversies............................................................... A-45 9.4 Organizational Expenses......................................................... A-45 9.5 Withholding..................................................................... A-45 9.6 Entity-Level Arrearage Collections.............................................. A-45 9.7 Opinions of Counsel............................................................. A-46 ARTICLE X--Unit Certificates and Depositary Receipts..................................... A-46 10.1 Unit Certificates and Depositary Receipts....................................... A-46 10.2 Registration, Registration of Transfer and Exchange............................. A-46 10.3 Mutilated, Destroyed, Lost or Stolen Unit Certificates and Depositary Receipts.. A-46 10.4 Record Holder................................................................... A-47 10.5 Withdrawal of Units from and Redeposit of Units in Depositary Account........... A-47 10.6 Amendment of Deposit Agreement.................................................. A-48 ARTICLE XI--Transfer of Interests........................................................ A-48 11.1 Transfer........................................................................ A-48 11.2 Transfer of General Partner's Partnership Interest.............................. A-48 11.3 Transfer of Units............................................................... A-49 11.4 Restrictions on Transfers....................................................... A-49 11.5 Citizenship Certificates; Non-citizen Assignees................................. A-49 11.6 Redemption of Interests......................................................... A-50 ARTICLE XII--Admission of Partners....................................................... A-51 12.1 Admission of Initial Limited Partners........................................... A-51 12.2 Admission of Substituted Limited Partners....................................... A-51 12.3 Admission of Successor General Partner.......................................... A-52 12.4 Admission of Additional Limited Partners........................................ A-52 12.5 Amendment of Agreement and Certificate of Limited Partnership................... A-52 ARTICLE XIII--Withdrawal or Removal of Partners.......................................... A-52 13.1 Withdrawal of the General Partner............................................... A-52 13.2 Removal of the General Partner.................................................. A-53 13.3 Interest of Departing Partner and Successor General Partner..................... A-54 13.4 Redemption of APIs.............................................................. A-55 13.5 Withdrawal of Limited Partners.................................................. A-55
A-2 PAGE ---- ARTICLE XIV-DISSOLUTION AND LIQUIDATION................................. A-55 14.1 Dissolution................................................... A-55 14.2 Continuation of the Business of the Partnership After Dissolution................................................... A-55 14.3 Liquidation................................................... A-56 14.4 Distributions in Kind......................................... A-57 14.5 Cancellation of Certificate of Limited Partnership............ A-57 14.6 Reasonable Time for Winding Up................................ A-57 14.7 Return of Capital............................................. A-57 14.8 No Capital Account Restoration................................ A-57 14.9 Waiver of Partition........................................... A-57 ARTICLE XV-AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE.... A-57 15.1 Amendment to Be Adopted Solely by General Partner............. A-57 15.2 Amendment Procedures.......................................... A-58 15.3 Amendment Requirements........................................ A-59 15.4 Meetings...................................................... A-59 15.5 Notice of a Meeting........................................... A-59 15.6 Record Date................................................... A-59 15.7 Adjournment................................................... A-59 15.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.... A-60 15.9 Quorum........................................................ A-60 15.10 Conduct of Meeting............................................ A-60 15.11 Voting and Other Rights....................................... A-60 ARTICLE XVI-MERGER...................................................... A-61 16.1 Authority..................................................... A-61 16.2 Procedure for Merger or Consolidation......................... A-61 16.3 Approval by Limited Partners of Merger or Consolidation....... A-61 16.4 Certificate of Merger......................................... A-62 16.5 Effect of Merger.............................................. A-62 ARTICLE XVII-RIGHT TO REDEEM OR ACQUIRE UNITS........................... A-62 17.1 Right to Redeem Senior Preference Units....................... A-62 17.2 Right to Call or Acquire Units of Any Class................... A-62 17.3 Notice of Election to Redeem or Acquire Units................. A-63 17.4 Surrender of Depositary Receipts or Unit Certificates......... A-64 ARTICLE XVIII-GENERAL PROVISIONS........................................ A-64 18.1 Addresses and Notices......................................... A-64 18.2 Titles and Captions........................................... A-65 18.3 Pronouns and Plurals.......................................... A-65 18.4 Further Action................................................ A-65 18.5 Binding Effect................................................ A-65 18.6 Integration................................................... A-65 18.7 Creditors..................................................... A-65 18.8 Waiver........................................................ A-65 18.9 Counterparts.................................................. A-65 18.10 Applicable Law................................................ A-65 18.11 Invalidity of Provisions...................................... A-65 A-3 AGREEMENT OF LIMITED PARTNERSHIP OF AGRICULTURAL MINERALS COMPANY, L.P. This Agreement of Limited Partnership of Agricultural Minerals Company, L.P., dated as of December 4, 1991, is entered into by and among Agricultural Minerals Corporation, a Delaware corporation ("AMC"), as the General Partner and AMC Holdings Inc., a Delaware corporation ("AMCH"), as the Organizational Limited Partner, together with any other Persons who become Partners in the Partnership as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I Organizational Matters 1.1 Formation. The General Partner and the Organizational Limited Partner have formed this Partnership as a limited partnership pursuant to the provisions of the Delaware Act, and hereby amend and restate the original Agreement of Limited Partnership in its entirety. Except as expressly provided to the contrary in this Agreement, the rights and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Act. The Partnership Interest of each Partner shall be personal property for all purposes. 1.2 Name. The name of the Partnership shall be "Agricultural Minerals Company, L.P." The Partnership's business may be conducted under any other name or names deemed necessary or appropriate by the General Partner, including, without limitation, the name of the General Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be included in the Partnership's name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to Limited Partners. Notwithstanding the foregoing, unless otherwise permitted by AMC, the Partnership shall change its name to a name not including "AMC" or "Agricultural Minerals Corporation" and shall cease using the name "AMC," "Agricultural Minerals Corporation" or other names or symbols associated therewith at such time as neither Agricultural Minerals Corporation nor any Affiliate thereof is or has been within three months the general partner of the Partnership. 1.3 Registered Office; Principal Office. Unless and until changed by the General Partner, the registered office of the Partnership in the State of Delaware shall be located at The Corporation Trust Center, 1209 Orange Street, New Castle County, Wilmington, Delaware 19801 and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership and the address of the General Partner shall be 5100 East Skelly Drive, Suite 800, Tulsa, Oklahoma 74135, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable. 1.4 Power of Attorney. (a) Each Limited Partner and each Assignee hereby constitutes and appoints each of the General Partner and, if a Liquidator shall have been selected pursuant to Section 14.3, the Liquidator severally (and any successor to either thereof by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, with full power of substitution, as his true and lawful agent and attorney-in- fact, with full power and authority in his name, place and stead, to: (i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate of Limited Partnership and all amendments or restatements thereof) that the General Partner or the Liquidator deems necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator deems necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or A-4 restatement of this Agreement; (C) all certificates, documents and other instruments (including, without limitation, conveyances and a certificate of cancellation) that the General Partner or the Liquidator deems necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article XI, XII, XIII or XIV or the Capital Contribution of any Partner; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Units or other securities issued pursuant to Section 4.4; and (F) all certificates, documents and other instruments (including, without limitation, agreements and a certificate of merger) relating to a merger or consolidation of the Partnership pursuant to Article XVI; and (ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates and other instruments necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or is necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided that when required by Section 15.3 or any other provision of this Agreement that establishes a percentage of the Limited Partners or of the Limited Partners of any class or series required to take any action, the General Partner or the Liquidator may exercise the power of attorney made in this Section 1.4(a)(ii) only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series. Nothing contained in this Section 1.4 shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XV, or as may be otherwise expressly provided for in this Agreement. (b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner's or Assignee's Partnership Interest and shall extend to such Limited Partner's or Assignee's heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within fifteen days after receipt of the General Partner's or the Liquidator's request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership. 1.5 Term. The Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until the close of Partnership business on December 31, 2041, or until the earlier termination of the Partnership in accordance with the provisions of Article XIV. 1.6 Possible Restrictions on Transfer. Notwithstanding anything to the contrary contained in this Agreement, in the event of (i) the enactment (or imminent enactment) of any legislation, (ii) the publication of any temporary or final regulation by the Treasury Department ("Treasury Regulation"), (iii) any ruling by the Internal Revenue Service or (iv) any judicial decision, that, in any such case, in the Opinion of Counsel, would result in the taxation of the Partnership for federal income tax purposes as a corporation, then, either (a) the General Partner may impose such restrictions on the transfer of Units or Partnership Interests as may be required, in the Opinion of Counsel, to prevent the Partnership from being taxed as a corporation or otherwise as an association taxable as a corporation for federal income tax purposes, including, without limitation, making any amendments to this Agreement as the General Partner in its sole discretion may determine to be necessary or appropriate to impose such restrictions, provided that any such amendment to this Agreement that would result in the delisting or suspension of trading of any class of Units on any National Securities Exchange on A-5 which such class of Units is then traded must be approved by the Record Holders of at least a majority of interest of the Outstanding Units of such class of Units (excluding for purposes of any such determination during the Preference Period Units of such class owned by the General Partner and its Affiliates unless the General Partner and its Affiliates own all of the Units of such class of Units) or (b) upon the recommendation of the General Partner and the approval of the Record Holders of a majority of interest of the Outstanding Units of such class of Units (excluding for purposes of any such determination during the Preference Period Units of such class owned by the General Partner and its Affiliates unless the General Partner and its Affiliates own all of the Units of such class of Units), the Partnership may be converted into and reconstituted as a trust or any other type of legal entity (the "New Entity") in the manner and on other terms so recommended and approved. In such event, the business of the Partnership shall be continued by the New Entity and the Units shall be converted into equity interests of the New Entity in the manner and on the terms so recommended and approved. Notwithstanding the foregoing, no such reconstitution shall take place unless the Partnership shall have received an Opinion of Counsel to the effect that the liability of the Limited Partners for the debts and obligations of the New Entity shall not, unless such Limited Partners take part in the control of the business of the New Entity, exceed that which otherwise had been applicable to such Limited Partners as limited partners of the Partnership under the Delaware Act. ARTICLE II Definitions The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. "Additional Limited Partner" means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.4 and who is shown as such on the books and records of the Partnership. "Adjusted Capital Account" means the Capital Account maintained for each Partner as of the end of each taxable year of the Partnership (a) increased by any amounts that such Partner is obligated to restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation Sections 1.704-1T(b)(4)(iv)(f) and 1.704- 1T(b)(4)(iv)(h)(5)), and (b) decreased by (i) the amount of all losses and deductions that, as of the end of such taxable year, are reasonably expected to be allocated to such Partner in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end of such taxable year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner's Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases as a result of a minimum gain chargeback pursuant to Section 5.1(d)(i) or 5.1(d)(ii) hereof). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704-(b)(2)(ii)(d) and shall be interpreted consistently therewith. The "Adjusted Capital Account" in respect of a Senior Preference Unit, Junior Preference Unit, Common Unit, API, or any other specified interest in the Partnership shall be the amount which such Adjusted Capital Account would be if such Senior Preference Unit, Junior Preference Unit, Common Unit, API, or other interest in the Partnership were the only interest in the Partnership held by a Partner. "Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Section 4.6(d)(i) or 4.6(d)(ii) hereof. "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, the Person in question. "Agreed Allocation" means any allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of Section 5.1 including, without limitation, a Curative Allocation (if appropriate to the context in which the term "Agreed Allocation" is used). "Agreed Value" of any Contributed Property means the fair market value of such property or other consideration at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, that the Agreed Value of any property deemed contributed to the Partnership for federal income tax purposes upon termination and A-6 reconstitution thereof pursuant to Section 708 of the Code shall be determined in accordance with Section 4.6(c). Subject to Section 4.6(c), the General Partner shall, in its sole discretion, use such method as it deems reasonable and appropriate to allocate the aggregate Agreed Value of Contributed Properties conveyed to the Partnership in a single or integrated transaction among each separate property on a basis proportional to the fair market value of each Contributed Property. "Agreement" means this Agreement of Limited Partnership of Agricultural Minerals Company, L.P., as it may be amended, supplemented or restated from time to time. "API" means a Partnership Interest issued (at a rate of contribution of $100 per API) pursuant to Section 4.4, which Partnership Interest shall confer upon the holder thereof only the rights and obligations specifically provided in this Agreement with respect to APIs (and no other rights otherwise available to holders of a Partnership Interest). "Assignee" means a Non-citizen Assignee or a Person to whom one or more Units have been transferred in a manner permitted under this Agreement and who has executed and delivered a Transfer Application as required by this Agreement, but who has not become a Substituted Limited Partner. "Available Cash" means, with respect to any calendar quarter, (i) the sum of (A) all cash receipts of the Partnership during such quarter from all sources (including distributions of cash received from the Operating Partnership) and (B) any reduction in reserves established in prior quarters, (ii) less the sum of (AA) all cash disbursements of the Partnership during such quarter (excluding cash distributions to Partners and to holders of APIs, but including, for example, disbursements for taxes of the Partnership as an entity, debt service and capital expenditures) and (BB) any reserves (excluding the Reserve Amount) established in such quarter in such amounts as the General Partner determines to be necessary or appropriate in its reasonable discretion (x) to provide for the proper conduct of the business of the Partnership or the Operating Partnership (including reserves for future capital expenditures) or (y) to provide funds for distributions with respect to any of the next four calendar quarters and (CC) any other reserves established in such quarter in such amounts as the General Partner determines in its reasonable discretion to be necessary because the distribution of such amounts would be prohibited by applicable law or by any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Partnership or the Operating Partnership is a party or by which it is bound or its assets are subject. Taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners shall not be considered cash disbursements of the Partnership which reduce "Available Cash," but the payment or withholding thereof shall be deemed to be a distribution of Available Cash to such Partners. Alternatively, in the discretion of the General Partner, such taxes (if pertaining to all Partners) may be considered to be cash disbursements of the Partnership which reduce "Available Cash," but the payment or withholding thereof shall not be deemed to be a distribution of Available Cash to such Partners. Notwithstanding the foregoing, "Available Cash" shall not include any cash receipts or reductions in reserves or take into account any disbursements made or reserves established after commencement of the dissolution and liquidation of the Partnership. "Book-Tax Disparity" means with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner's Capital Account balance as maintained pursuant to Section 4.6 and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. "Business Day" means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States or the States of Oklahoma or New York shall not be regarded as a Business Day. A-7 "Capital Account" means the capital account maintained for a Partner, Assignee or Special Limited Partner pursuant to Section 4.6. "Capital Contribution" means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership pursuant to Section 4.1, 4.3, 4.4, 4.6(c) or 13.3(c). "Carrying Value" means (a) with respect to a Contributed Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, amortization and cost recovery deductions charged to the Partners' and Assignees' Capital Accounts, and (b) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Sections 4.6(d)(i) and 4.6(d)(ii) and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner. "Cash from Interim Capital Transactions" means, at any date, such amounts of Available Cash as are deemed to be Cash from Interim Capital Transactions pursuant to Section 5.3. "Cash from Operations" means, at any date but prior to commencement of the dissolution and liquidation of the Partnership, on a cumulative basis, (i) the sum of (A) the cash balance of the Partnership and the Operating Partnership at the time of the closing of the Initial Offering plus (B) any amount received upon exercise of the Underwriters' over-allotment option pursuant to the Underwriting Agreement, plus all cash receipts of the Partnership and the Operating Partnership from their operations (excluding any cash proceeds from any Interim Capital Transactions or Termination Capital Transactions) during the period since the Partnership Inception through such date (ii) less the sum of (AA) all cash operating expenditures of the Partnership and the Operating Partnership during such period, including, without limitation, taxes imposed on the Partnership or the Operating Partnership as an entity, (BB) all cash debt service payments of the Partnership and the Operating Partnership during such period (other than payments or prepayments of principal and premium required by reason of loan agreements (including covenants and default provisions therein) or by lenders, in each case in connection with sales or other dispositions of assets or made in connection with refinancings or refundings of indebtedness, provided that any payment or prepayment of principal, whether or not then due, shall be determined at the election and in the discretion of the General Partner, to be refunded or refinanced by any indebtedness incurred or to be incurred by the Partnership or the Operating Partnership simultaneously with or within 180 days prior to or after such payment or prepayment to the extent of the principal amount of such indebtedness so incurred), (CC) all cash capital expenditures of the Partnership and the Operating Partnership during such period (other than (X) all cash capital expenditures made solely for the purpose of increasing the production capacity of any of the Partnership's nitrogen fertilizer production facilities (Verdigris ammonia, Blytheville ammonia, Verdigris UAN or Blytheville urea) by 15% or more (assuming normal operating conditions, including downtime and maintenance), and not in connection with scheduled maintenance activities, from the production capacity of any of such facilities existing immediately prior to such capital expenditure, and (Y) cash expenditures made in payment of transaction expenses relating to Interim Capital Transactions), (DD) any reserves outstanding as of such date which the General Partner determines in its reasonable discretion to be necessary or appropriate to provide for the future cash payment of items of the type referred to in clauses (AA) through (CC) of this sentence and (EE) any reserves outstanding as of such date that the General Partner determines to be necessary or appropriate in its reasonable discretion to provide funds for distributions with respect to any one or more of the next four calendar quarters, all as determined on a consolidated basis and after elimination of intercompany items and the General Partner's general partner interest in the Operating Partnership. Taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners shall not be considered cash operating expenditures of the Partnership which reduce "Cash from Operations," but the payment or withholding thereof shall be deemed to be a distribution of Available Cash to such Partners. Alternatively, in the discretion of the General Partner, such taxes (if pertaining to all Partners) may be considered to be cash disbursements of the Partnership which reduce "Cash from Operations," but the payment or withholding thereof shall not be deemed to be a distribution of Available Cash to such Partners. A-8 "Certificate of Limited Partnership" means the Certificate of Limited Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 6.2 hereof, as such Certificate may be amended and/or restated from time to time. "Citizenship Certification" means a properly completed certificate in such form as may be specified by the General Partner by which an Assignee or a Limited Partner certifies that he (and if he is a nominee holding for the account of another Person, that to the best of his knowledge such other Person) is an Eligible Citizen. "Closing Date" means the date on which the "First Closing Date" occurs as such term is defined in the Underwriting Agreement. "Closing Price" has the meaning assigned to such term in Section 17.2. "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. "Combined Interest" has the meaning assigned to such term in Section 13.3(a). "Common Unit" means one of that certain class of Units with those special rights and obligations specified in this Agreement as being appurtenant to a "Common Unit." 5,172,414 Common Units are to be initially issued by the Partnership pursuant to the Conveyance Agreement. "Common Unit Deficiency" means, with respect to any Common Unit and as to any calendar quarter, the excess, if any, of (a) the Minimum Quarterly Distribution over (b) the sum of all Available Cash distributed in such calendar quarter with respect to such Common Unit pursuant to paragraph "Seventh" of Section 5.4; provided, however, that on or prior to the Junior Conversion Date, if the Common Unit Deficiency outstanding with respect to a quarter ending on June 30th of any year cannot be paid on the Distribution Date for such June 30th quarter, it shall be eliminated and shall thereafter cease to constitute a Common Unit Deficiency for purposes of any determination of the Cumulative Common Unit Deficiency. "Contributed Property" means each property or other asset, in such form as may be permitted by the Delaware Act, but excluding cash, contributed to the Partnership (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 4.6(d)(i), such property shall no longer constitute a Contributed Property, but shall be deemed an Adjusted Property. "Contributing Partner" means each Partner contributing (or deemed to have contributed on termination and reconstitution of the Partnership pursuant to Section 708 of the Code or otherwise) a Contributed Property. "Conveyance Agreement" means the Conveyance Agreement dated as of December 4, 1991, among AMC, the Partnership and the Operating Partnership. "Cumulative Common Unit Deficiency" means, with respect to any Common Unit and as to any calendar quarter, the excess, if any, of (a) the sum resulting from adding together with Common Unit Deficiency as to a Common Unit for each of the quarters ending prior to such quarter over (b) the sum of any distributions theretofore made with respect to a Common Unit pursuant to paragraph "Eighth" of Section 5.4. "Cumulative Deficiencies" means, collectively, the Cumulative Senior Preference Unit Deficiency, the Cumulative Junior Preference Unit Deficiency and the Cumulative Common Unit Deficiency. "Cumulative Junior Preference Unit Deficiency" means, with respect to any Junior Preference Unit and as to any calendar quarter, the excess, if any, of (a) the sum resulting from adding together the Junior Preference Unit Deficiency as to a Junior Preference Unit for each of the quarters ending prior to such quarter over (b) the sum of any distributions theretofore made with respect to a Junior Preference Unit pursuant to paragraph "Sixth" of Section 5.4. "Cumulative Senior Preference Unit Deficiency" means, with respect to any Senior Preference Unit and as to any calendar quarter, the excess, if any, of (a) the sum resulting from adding together the Senior Preference Unit Deficiency as to a Senior Preference Unit for each of the quarters ending prior A-9 to such quarter over (b) the sum of any distributions theretofore made with respect to a Senior Preference Unit pursuant to paragraph "Second" of Section 5.4. "Curative Allocation" means any allocation of an item of income, gain, deduction, loss or credit pursuant to the provisions of Section 5.1(d)(x). "Current Market Price" has the meaning assigned to such term in Section 17.1(a). "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. (S)17-101, et seq., as amended, supplemented or restated from time to time, and any successor to such statute. "Departing Partner" means a former General Partner, from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Section 13.1 or Section 13.2. "Deposit Account" means the account established by the Depositary pursuant to the Deposit Agreement. "Deposit Agreement" means the Deposit Agreement among the General Partner in its capacity both as General Partner and as attorney-in-fact for the Limited Partners, the Partnership and the Depositary, as it may be amended or restated from time to time. "Depositary" means the bank or other institution appointed by the General Partner in its sole discretion to act as depositary for the Depositary Units pursuant to the Deposit Agreement, or any successor to it as depositary. "Depositary Receipt" means a depositary receipt, issued by the Depositary or agents appointed by the Depositary in accordance with the Deposit Agreement, evidencing ownership of one or more Depositary Units. "Depositary Unit" means a depositary unit representing a Unit on deposit with the Depositary pursuant to the Deposit Agreement. "Distribution Date" means, with respect to any quarter during the term of this Partnership, the date on which the distribution for such quarter is paid. "Economic Risk of Loss" has the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(1). "Eligible Citizen" means a Person qualified to own interests in real property in jurisdictions in which the Partnership or the Operating Partnership does business or proposes to do business from time to time, and whose status as a Limited Partner or Assignee does not or would not subject the Partnership or the Operating Partnership to a substantial risk of cancellation or forfeiture of any of its properties or any interest therein. "Event of Withdrawal" has the meaning assigned to such term in Section 13.1(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time, and any successor to such statute. "First Liquidation Target Amount" means, an amount, determined with respect to any Unit, which equals, as of the date of its determination, the sum of (a) the Unrecovered Capital, if any, attributable to such Unit, plus (b) (i) in the case of a Senior Preference Unit, the Cumulative Senior Preference Unit Deficiency, (ii) in the case of a Junior Preference Unit, the Cumulative Junior Preference Unit Deficiency or (iii) in the case of a Common Unit, the Cumulative Common Unit Deficiency plus (c) $0.715. "First Target Distribution" means $0.715 per Unit per calendar quarter (or with respect to the period commencing on the Closing Date and ending on December 31, 1991 the product of $0.715 multiplied by a fraction, of which the numerator is the number of days in such period and of which the denominator is 92), subject to adjustment in accordance with Sections 5.8 and 9.6. "General Partner" means Agricultural Minerals Corporation, a Delaware corporation, and its successors as general partner of the Partnership. "General Partner Equity Value" means, as of any date of determination, the fair market value of the General Partner's Partnership Interest (exclusive of any APIs owned by the General Partner), as determined by the General Partner using whatever reasonable method of valuation it may adopt. A-10 "Indemnitee" means the General Partner, any Departing Partner, any Person who is or was an Affiliate of the General Partner or any Departing Partner, any Person who is or was an officer, director, employee, partner or agent of the General Partner or any Departing Partner or any such Affiliate, or any Person who is or was serving at the request of the General Partner or any Departing Partner or any such Affiliate as a director, officer, employee, partner, member or agent of another corporation, partnership, joint venture, trust, committee or other enterprise. "Initial Limited Partners" means the Organizational Limited Partner, the General Partner, as the initial holder of the Units acquired by the General Partner pursuant to the Conveyance Agreement, and the Underwriters, unless the context shall otherwise require. "Initial Offering" means the initial offering of Senior Preference Units to the public, as described in the Registration Statement. "Initial Unit Price" means with respect to Senior Preference Units, 11.26% Series, Junior Preference Units, 11.26% Series, and Common Units, the initial price per Senior Preference Unit, 11.26% Series, at which the Underwriters will offer the Senior Preference Units to the public for sale as set forth on the cover page of the prospectus first issued at or after the time the Registration Statement filed in connection with the sale of Senior Preference Units contemplated by the Underwriting Agreement first became effective (or, if the Partnership elected to rely on Rule 430A of the rules and regulations promulgated under the Securities Act, filed with the Securities and Exchange Commission in accordance with Rule 424(b) of such rules and regulations) and, with respect to any other class or series of Units, the price per Unit at which such class or series of Units is initially sold by the Partnership, as determined by the General Partner. "Interim Capital Transactions" means (i) borrowings, refinancings or refundings of indebtedness and sales of debt securities (other than for working capital purposes and for items purchased on open account in the ordinary course of business) by the Partnership or the Operating Partnership, (ii) sales of equity interests by the Partnership or the Operating Partnership (other than sales of APIs) and (iii) sales or other voluntary or involuntary dispositions of any assets of the Partnership or the Operating Partnership (other than (x) sales or other dispositions of inventory in the ordinary course of business, (y) sales or other dispositions of other current assets including accounts receivable or (z) sales or other dispositions of assets as a part of normal retirement or replacements), in each case prior to the commencement of the dissolution and liquidation of the Partnership. The General Partner shall have the right to determine in its reasonable discretion whether any inventory reductions due to sales or other dispositions in connection with a sale or other disposition of other assets of the Partnership shall be considered to be in the ordinary course of business or such a normal retirement. "Issue Price" means the price at which a Unit is purchased from the Partnership, less any sales commission or underwriting discount charged to the Partnership. "Junior Conversion Date" means December 31, 1995 or, if any arrearages in the payment of the Minimum Quarterly Distribution exist with respect to any Outstanding Junior Preference Units on such date, as soon thereafter as no such arrearages are outstanding on the Junior Preference Units. "Junior Preference Unit" means one of that certain class of Units with those special rights and obligations specified in this Agreement as being appurtenant to a "Junior Preference Unit." The Junior Preference Units may be issued in series. The 6,000,000 Junior Preference Units to be initially issued by the Partnership pursuant to the Conveyance Agreement, shall be designated the "11.26% Series." "Junior Preference Unit Deficiency" means, with respect to any Junior Preference Unit and as to any calendar quarter, the excess of (a) the Minimum Quarterly Distribution over (b) the sum of all Available Cash distributed in such calendar quarter with respect to a Junior Preference Unit pursuant to paragraph "Fifth" of Section 5.4. "Letter of Credit" means a letter of credit obtained for the Partnership by AMC from Chemical Bank, or such other bank or banks as the General Partner in its reasonable judgment may approve from time to time, in an amount equal to the lesser of (i) $18,480,000 and (ii) the amount representing four quarters of Minimum Quarterly Distributions on all Senior Preference Units Outstanding from time to time, less any amounts previously set aside by the Partnership to fund the Reserve Amount. A-11 "Limited Partner" means such Initial Limited Partner, each Substituted Limited Partner, each Additional Limited Partner and any Departing Partner upon the change of its status from General Partner to Limited Partner pursuant to Section 13.3 and, solely for purposes of Articles IV, V and VI and Sections 14.3 and 14.4, shall include an Assignee and, solely for purposes of Articles VI and VII and Section 5.2(b), shall include a Special Limited Partner. "Limited Partner Equity Value" means, as of any date of determination, the amount equal to the product obtained by multiplying (a) the total number of Units Outstanding (immediately prior to an issuance of Units or distribution of cash or Partnership property), other than Units held by the General Partner by (b) (i) in the case of a valuation required by Section 4.6(d)(i) (other than valuations caused by sales of a de minimis quantity of Units), the Issue Price of the additional Units referred to in Section 4.6(d)(i) or (ii) in the case of a valuation required by Section 4.6(d)(ii) (or a valuation required by Section 4.6(d)(i) caused by sales of a de minimis quantity of Units), the Closing Price. "Liquidator" means the General Partner or other Person approved pursuant to Section 14.3 who performs the functions described therein. "Merger Agreement" has the meaning assigned to such term in Section 16.1. "Minimum Gain Attributable to Partner Nonrecourse Debt: means that amount determined in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(6). "Minimum Quarterly Distribution" means, with respect to the Senior Preference, Junior Preference and Common Units $0.605 per calendar quarter (or with respect to the period commencing on the Closing Date and ending on December 31, 1991, the product of $0.605 multiplied by a fraction, of which the numerator is the number of days in such period and of which the denominator is 92), subject to adjustment in accordance with Sections 5.8 and 9.6 and with respect to any other class or series of Partnership Interest such amount as may be designated as the Minimum Quarterly Distribution by the General Partner in accordance with Section 4.4. "National Securities Exchange" means an exchange registered with the Securities and Exchange Commission under Section 6(a) of the Exchange Act. "Net Agreed Value" means, (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed, and (b) in the case of any property distributed to a Partner or Assignee by the Partnership, the Partnership's Carrying Value of such property (as adjusted pursuant to Section 4.6(d)(ii)) at the time such property is distributed, reduced by any indebtedness either assumed by such Partner or Assignee upon such distribution or to which such property is subject at the time of distribution, in either case, as determined under Section 752 of the Code. "Net Income" means, for any taxable period, the excess, if any, of the Partnership's items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership's items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Section 4.6(b) and shall not include any items allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to a Required Allocation or a Curative Allocation, the applicable Net Income or Net Loss shall be recomputed without regard to such item. "Net Loss" means, for any taxable period, the excess, if any, of the Partnership's items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership's items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Section 4.6(b) and shall not include any items allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to a Required Allocation or a Curative Allocation, the applicable Net income or Net Loss shall be recomputed without regard to such item. A-12 "Net Termination Gain" means, for any taxable period, the sum, if positive, of all items of income, gain or loss recognized by the Partnership (including, without limitation, such amounts recognized through the Operating Partnership) from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Gain shall be determined in accordance with Section 4.6(b) and shall not include any items of income, gain or loss allocated under Section 5.1(d). Once an item of income, gain or loss that has been included in the initial computation of Net Termination Gain is subjected to a Required Allocation or a Curative Allocation, the applicable Net Termination Gain or Net Termination Loss shall be recomputed without regard to such item. "Net Termination Loss" means, for any taxable period, the sum, if negative, of all items of income, gain or loss recognized by the Partnership (including, without limitation, such amounts recognized through the Operating Partnership) from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Loss shall be determined in accordance with Section 4.6(b) and shall not include any items of income, gain or loss allocated under Section 5.1(d). Once an item of gain or loss that has been included in the initial computation of Net Termination Loss is subjected to a Required Allocation or a Curative Allocation, the applicable Net Termination Gain or Net Termination Loss shall be recomputed without regard to such item. "New Entity" has the meaning assigned to such term in Section 1.6. "Non-citizen Assignee" means a Person who the General Partner has determined in its sole discretion does not constitute an Eligible Citizen and as to whose Partnership Interest the General Partner has become the Substituted Limited Partner, pursuant to Section 11.5. "Nonrecourse Built-in Gain" means with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Section 5.2(b)(i)(A), 5.2(b)(ii)(A) or 5.2(b)(iii) if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration. "Nonrecourse Deductions" means any and all items of loss, deduction or expenditure (described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(b), are attributable to a Nonrecourse Liability. "Nonrecourse Liability" has the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(3). "Notice of Election to Purchase" has the meaning assigned to such term in Section 17.3(b). "Notice of Election to Redeem" has the meaning assigned to such term in Section 17.3(a). "Operating Partnership" means Agricultural Minerals, Limited Partnership, a Delaware limited partnership established pursuant to the Operating Partnership Agreement. "Operating Partnership Agreement" means the Agreement of Limited Partnership of Agricultural Minerals, Limited Partnership, as it may be amended, supplemented or restated from time to time. "Opinion of Counsel" means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner) acceptable to the General Partner. "Organizational Limited Partner" means AMCH in its capacity as the organizational limited partner of the Partnership pursuant to this Agreement. "Outstanding" means, with respect to the Units or other Partnership Securities, as the case may be, all Units or other Partnership Securities, as the case may be, that are issued by the Partnership and reflected as outstanding on the Partnership's books and records as of the date of determination and includes Units or other Partnership Securities held by the General Partner and its Affiliates. "Participating Unit" means any Unit, provided that, with respect to any time after the Preference Period, such term means any Unit Outstanding other than a Senior Preference Unit. "Partner" means a General Partner, a Limited Partner or a Special Limited Partner and, solely for purposes of Articles IV, V and VI and Sections 14.3 and 14.4, shall include an Assignee. A-13 "Partner Nonrecourse Debt" has the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(4). "Partner Nonrecourse Deductions" means any and all items of loss, deduction or expenditure (including any expenditure described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(3), are attributable to a Partner Nonrecourse Debt. "Partnership" means Agricultural Minerals Company, L.P., a Delaware limited partnership established pursuant to this Partnership Agreement, and any successor thereto. "Partnership Assets" initially means the assets of AMC, as described in the Registration Statement, to be transferred to the Partnership and the Operating Partnership and, thereafter, means all assets of the Partnership whether tangible or intangible and whether real, personal or mixed. "Partnership Inception" means the Closing Date. "Partnership Interest" means the interest of a Partner in the Partnership, which, in the case of a Limited Partner, a Special Limited Partner or an Assignee, shall be expressed in terms of Units, APIs, or other Partnership Securities or a combination thereof, as the case may be. "Partnership Minimum Gain" means the amount determined in accordance with the principles of Treasury Regulation Sections 1.704-1T(b)(4)(iv)(a) and 1.704-1T(b)(4)(iv)(c). "Partnership Securities" has the meaning assigned to such term in Section 4.4(a). "Partnership Year" means the taxable year of the Partnership, which shall be the calendar year. "Per Unit Capital Amount" means, as of any date of determination, the Capital Account, stated on a per Unit basis, underlying any Unit held by a Unitholder. "Percentage Interest" means as of the date of such determination (a) as the General Partner, 1/99th and (b) as to any Limited Partner or Assignee holding Units, the product of (i) 98/99ths multiplied by (ii) the quotient of (x) the number of Units held by such Limited Partner or Assignee divided by (y) the total number of all Units then Outstanding; provided, however, that following any issuance of additional Units by the Partnership in accordance with Section 4.4 hereof, proper adjustment shall be made to the Percentage Interest represented by each Unit. "Person" means an individual or a corporation, partnership, trust, unincorporated organization, association or other entity. "Preference Period" means the period from Partnership Inception to the Senior Conversion Date. "Purchase Date" means the date determined by the General Partner as the date for purchase of all Outstanding Common Units (other than Common Units owned by the General Partner and its Affiliates) pursuant to Article XVII. "Recapture Income" means any sign recognized by the Partnership (computed without regard to any adjustment required by Section 734 or 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. "Record Date" means the date established by the General Partner for determining (a) the identity of Limited Partners (or Assignees if applicable) entitled to notice of, or to vote at, any meeting of Limited Partners or entitled to vote by ballot or entitled to exercise rights in respect of any lawful action of Limited Partners, or (b) the identity of Record Holders entitled to receive any report or distribution. "Record Holder" means the Person in whose name a Unit is registered on the books of the Transfer Agent as of the close of business on a particular Business Day. "Redeemable Units" means any Units for which a redemption notice has been given, and has not been withdrawn, under Section 11.6. "Redemption Date" means the date determined by the General Partner as the date for redemption of any Outstanding Units pursuant to Article XVII. A-14 "Registration Statement" means the Registration Statement on Form S-1 (Registration No. 33-43007), as it has been and as it may be amended or supplemented from time to time, filed by the Partnership with the Securities and Exchange Commission under the Securities Act to register the offering and sale of the Senior Preference Units in the Initial Offering. "Required Allocations" means any allocation (or limitation imposed on any allocation) of an item of income, gain, deduction or loss pursuant to (a) the proviso-clauses of Sections 5.1(b)(ii), 5.1(b)(iii) and 5.1(b)(iv) or (b) Sections 5.1(d)(i), 5.1(d)(ii), 5.1(d)(iii), 5.1(d)(v), 5.1(d)(vi), 5.1(d)(vii), 5.1(d)(viii) and 5.1(d)(ix), such allocations (or limitations thereon) being directly or indirectly required by the Treasury Regulations promulgated under Section 704(b) of the Code. "Reserve Amount" means a reserve, funded and maintained by the Partnership, of up to the lesser of (i) $18.48 million or (ii) the amount equal to four quarters of Minimum Quarterly Distributions on all Senior Preference Units Outstanding from time to time. "Residual Gain" or "Residual Loss" means any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of a Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 5.2(b)(i)(A) or 5.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities. "Second Liquidation Target Amount" means an amount determined with respect to any Unit which equals, as of the date of its determination, the sum of (a) the First Liquidation Target Amount plus (b) $0.11. "Second Target Distribution" means $0.825 per Unit (or, with respect to the period commencing on the Closing Date and ending on December 31, 1991, the product of $0.825 multiplied by a fraction, of which the numerator is equal to the number of days in such period and of which the denominator is 92), subject to adjustment in accordance with Sections 5.6 and 5.8. "Securities Act" means the Securities Act of 1933, as amended, supplemented or restated from time to time, and any successor to such statute. "Senior Conversion Date" means the end of the first calendar quarter occurring on or after December 31, 1996 as to which the Partnership shall have distributed in respect of each of the Senior Preference Units, Junior Preference Units and Common Units in respect of each of the three preceding consecutive non-overlapping years Available Cash that constitutes Cash from Operations in an amount at least equal to the Minimum Quarterly Distribution without giving effect to the payment of any Cumulative Deficiencies during such period multiplied by the product of (a) four times (b) the quotient of twelve divided by eleven; provided that, as of such date, there is no Cumulative Common Unit Deficiency; and provided further that, for purposes of this definition, "year" shall mean any twelve month period. "Senior Preference Unit" means one of that certain class of Units with those special rights and obligations specified in this Agreement as being appurtenant to a "Senior Preference Unit." The Senior Preference Units may be issued in series. The Senior Preference Units being initially issued pursuant to the Underwriting Agreement shall be designated the "11.26% Series." "Senior Preference Unit Deficiency" means, with respect to any Senior Preference Unit and as to any calendar quarter, the excess of (a) the Minimum Quarterly Distribution over (b) the sum of all Available Cash distributed in such calendar quarter with respect to a Senior Preference Unit pursuant to paragraph "Second" of Section 5.4. "Special Limited Partner" means each holder of an Outstanding API. "Special Limited Partner Book Capital" means, as of any date of determination, the amount equal to the sum of the balances of the Capital Accounts of all Special Limited Partners attributable to APIs, determined pursuant to Section 4.6 (taking into account any adjustment pursuant to Section 4.6(d) arising upon the present event requiring a valuation of the Partnership's assets). "Substituted Limited Partner" means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 12.2 in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership. A-15 "Surviving Business Entity" has the meaning assigned to such term in Section 16.2(b). "Termination Capital Transaction" means any sale, transfer or other disposition of assets of the Partnership or the Operating Partnership following commencement of the dissolution and liquidation of the Partnership or the Operating Partnership. "Third Liquidation Target Amount" means an amount, determined with respect to any Unit, which equals, as of the date of its determination, the sum of (a) the Second Liquidation Target Amount plus (b) $.022. "Third Target Distribution" means $1.045 per Unit (or, with respect to the period commencing on the Closing Date and ending on December 31, 1991, the product of $1.045 multiplied by a fraction, of which the numerator is equal to the number of days in such period and of which the denominator is 92), subject to adjustment in accordance with Sections 5.8 and 9.6. "Trading Day" has the meaning assigned to such term in Section 17.1(a). "Transfer Agent" means the Depositary or any other bank, trust company or other Person (including, without limitation, the General Partner or one of its Affiliates) as shall be appointed from time to time by the Partnership to act as registrar and transfer agent for the Units. "Transfer Application" means an application and agreement for transfer of Units in the form set forth on the back of a Unit Certificate or a Depositary Receipt or in a form substantially to the same effect in a separate instrument. "Underwriter" means each Person named as an underwriter in the Underwriting Agreement who purchases Senior Preference Units pursuant thereto. "Underwriting Agreement" means the Underwriting Agreement dated November 26, 1991 among the Underwriters, the Partnership and the General Partner providing for the purchase of Senior Preference Units by such Underwriters. "Unit" means a Partnership Interest of a Limited Partner or Assignee in the Partnership (other than APIs) representing a fractional part of the Partnership Interests of all Limited Partners and Assignees and shall include Senior Preference Units, Junior Preference Units, Common Units and such other units of limited partner interest as may be issued from time to time by the Partnership. "Unit Certificate" means a certificate or certificates in such form as may be hereafter adopted by the General Partner in its sole discretion issued by the Partnership evidencing ownership of one or more Units. "Unitholder" means a Person who holds Units. "Unrealized Gain" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under Section 4.6(d)) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to section 4.6(d) as of such date). "Unrealized Loss" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.6(d) as of such date) over (b) the fair market value of such property as of such date (as determined under Section 4.6(d)). "Unrecovered API Capital" means, at any time, with respect to an API, the excess, if any, of (i) the cash amount of the Capital Contribution made pursuant to Section 4.4 in exchange for such API over (ii) any amount previously distributed pursuant to Section 5.4 or 13.4 towards the redemption of such API. "Unrecovered Capital" means, at any time, (a) with respect to a Unit, the Unrecovered Initial Unit Price and (b) with respect to an API, the Unrecovered API Capital. A-16 "Unrecovered Initial Unit Price" means, at any time, with respect to a Unit of any class or series, the Initial Unit Price, less the sum of all distributions theretofore made in respect of such Unit constituting, and which for purposes of determining the priority of such distribution is treated as constituting, Cash from Interim Capital Transactions and of any distributions of cash (or the Net Agreed Value of any distributions in kind) in connection with the dissolution and liquidation of the Partnership theretofore made in respect of a Unit that was sold in the initial offering of such class or series of Units. ARTICLE III PURPOSE 3.1 Purpose and Business. The purpose and nature of the business to be conducted by the Partnership shall be (i) to serve as a partner in the Operating Partnership and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership as a partner in the Operating Partnership pursuant to the Operating Partnership Agreement or otherwise, (ii) to engage directly in, or to enter into any partnership, joint venture or similar arrangement to engage in, the production and distribution of nitrogen fertilizers and any activities necessarily incidental or ancillary thereto and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity and (iii) to do anything necessary or appropriate to the foregoing (including, without limitation, the making of capital contributions or loans to the Operating Partnership or in connection with its involvement in the activities referred to in clause (ii) of this sentence). 3.2 Powers. The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described in Section 3.1 and for the protection and benefit of the Partnership. ARTICLE IV CAPITAL CONTRIBUTIONS 4.1 Initial Contributions. To form the Partnership under the Delaware Act, the General Partner has made an initial Capital Contribution to the Partnership in the amount of $10 for an interest in the Partnership and has been admitted as the general partner of the Partnership, and the Organizational Limited Partner has made a Capital Contribution to the Partnership in the amount of $980 for an interest in the Partnership and has been admitted as a limited partner of the Partnership. 4.2 Return of Initial Contributions. As of the Closing Date, after giving effect to (i) the transactions contemplated by Section 4.3 and (ii) the admission to the Partnership of the Initial Limited Partners in accordance with this Agreement, the interest in the Partnership of the Organizational Limited Partner shall be terminated, the $10 Capital Contribution by the General Partner and the $980 Capital Contribution by the Organizational Limited Partner as initial Capital Contributions shall be refunded and the Organizational Limited Partner shall withdraw as a limited partner of the Partnership. 98/99ths of any interest or other profit that may have resulted from the investment or other use of such initial Capital Contributions shall be allocated and distributed to the Organizational Limited Partner, and the balance thereof shall be allocated and distributed to the General Partner. 4.3 Contribution by the General Partner and the Initial Limited Partners. (a) On the Closing Date, the General Partner shall, as more fully provided in the Conveyance Agreement, convey, contribute and deliver to the Partnership, as a Capital Contribution, its limited partner interest in the Operating Partnership in exchange for a Partnership Interest as general partner in the Partnership representing a 1/99th Partnership Interest, 6,000,000 Junior Preference Units which shall be convertible into Senior Preference Units on a one-for-one basis as provided herein and 5,172,414 Common Units. (b) Subject to completion of the Capital Contributions referred to in Section 4.3(a), on the Closing Date, each Underwriter shall contribute and deliver to the Partnership cash in an amount equal to the Issue Price per Unit, multiplied by the number of Senior Preference Units specified in the Underwriting A-17 Agreement to be purchased by such Underwriter at the "First Closing Date" as such term is used in the Underwriting Agreement. In exchange for such Capital Contribution, the Partnership shall issue Senior Preference Units to each Underwriter on whose behalf such Capital Contribution is made in an amount equal to the quotient obtained by dividing (x) the cash contribution to the Partnership by or on behalf of such Underwriter by (y) the Issue Price per Unit. Upon receipt of such Capital Contribution, each Underwriter shall be admitted to the Partnership as an Initial Limited Partner in respect of the Senior Preference Units so issued to it. 4.4 Issuances of Additional Units, APIs and Other Securities. (a) Subject to Section 4.4(c), the General Partner is hereby authorized to cause the Partnership to issue, in addition to the Senior Preference Units, Junior Preference Units and Common Units issued pursuant to Section 4.3, such additional Units, or classes or series thereof, or options, rights, warrants or appreciation rights relating thereto, or APIs or any other type of equity security that the Partnership may lawfully issue, any unsecured or secured debt obligations of the Partnership or debt obligations of the Partnership convertible into any class or series of equity securities of the Partnership (collectively, "Partnership Securities"), for any Partnership purpose, at any time or from time to time, to the Partners or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole discretion, all without the approval of any Limited Partners. The Partnership shall issue to AMC or its assignee or nominee APIs in an aggregate face amount equal to any amount drawn by the Partnership on the Letter of Credit from time to time. The General Partner shall have sole discretion, subject to the guidelines set forth in this Section 4.4 and the requirements of the Delaware Act, in determining the consideration and terms and conditions with respect to any future issuance of Partnership Securities. The additional Senior Preference Units to be issued pursuant to this Section 4.4 may include Senior Preference Units issuable pursuant to the Underwriters' over-allotment option in accordance with the Underwriting Agreement. (b) Notwithstanding any provision of this Agreement to the contrary, additional Partnership Securities to be issued by the Partnership pursuant to this Section 4.4 shall be issuable from time to time in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including, without limitation, rights, powers and duties senior to existing classes and series of Partnership Securities (except as provided in Section 4.4(c)), all as shall be fixed by the General Partner in the exercise of its sole and complete discretion, subject to Delaware law and Section 4.4(c), including, without limitation, (i) the allocation of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Securities; (ii) the right of each such class or series of Partnership Securities to share in Partnership distributions; (iii) the rights of each such class or series of Partnership Securities upon dissolution and liquidation of the Partnership; (iv) whether such class or series of additional Partnership Securities is redeemable or callable by the Partnership and, if so, the price at which, and the terms and conditions upon which, such class or series of additional Partnership Securities may be redeemed or called by the Partnership; (v) whether such class or series of additional Partnership Securities is issued with the privilege of conversion and, if so, the rate at which, and the terms and conditions upon which, such class or series of Partnership Securities may be converted into any other class or series of Partnership Securities; (vi) the terms and conditions upon which each such class or series of Partnership Securities will be issued, evidenced by Unit Certificates and assigned or transferred; and (vii) the right, if any, of each such class or series of Partnership Securities to vote on Partnership matters, including, without limitation, matters relating to the relative rights, preferences and privileges of each such class or series. (c) Notwithstanding the terms of Sections 4.4(a) and 4.4(b), the issuance by the Partnership of any Partnership Securities shall be subject to the following restrictions and limitations: (i) During the Preference Period, the Partnership shall not issue any additional Units or other classes of Partnership Interests other than Junior Preference Units, Common Units, APIs, and additional Senior Preference Units with an aggregate offering price of up to $85 million (excluding Senior Preference Units issued upon conversion of Junior Preference Units or pursuant to the exercise of the over-allotment option accorded the Underwriters in the Underwriting Agreement); A-18 (ii) After the Preference Period, the Partnership shall not issue additional Units or other classes of Partnership Interests having rights to distributions or in liquidation ranking prior or senior to the Senior Preference Units without the approval of the holders of at least a majority of the Senior Preference Units Outstanding (excluding for purposes of such determination Senior Preference Units held by the General Partner and its Affiliates); and (iii) Upon the issuance of any Units by the Partnership, the General Partner shall be required to make additional Capital Contributions to the Partnership such that the General Partner shall at all times have a balance in its Capital Account equal to 1/99th of the total positive Capital Account balances of all Partners. (d) The General Partner is hereby authorized and directed to take all actions that it deems necessary or appropriate in connection with each issuance of Units, APIs or other Partnership Securities pursuant to Section 4.4(a) and to amend this Agreement in any manner that it deems necessary or appropriate to provide for each such issuance, to admit Additional Limited Partners in connection therewith and to specify the relative rights, powers and duties of the holders of the Units, APIs or other Partnership Securities being so issued. (e) Subject to the terms of Section 4.4(c), the General Partner is authorized to cause the issuance of Partnership Securities pursuant to any employee benefit plan for the benefit of employees responsible for the operations of the Partnership or the Operating Partnership maintained or sponsored by the General Partner, the Partnership, the Operating Partnership or any Affiliate of any of them. (f) The General Partner shall do all things necessary to comply with the Delaware Act and is authorized and directed to do all things it determines to be necessary or advisable in connection with any future issuance of Partnership Securities, including, without limitation, compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency or any National Securities Exchange on which the Units or other Partnership Securities are listed for trading. 4.5 Limited Preemptive Rights. Except as provided in Section 4.4(c)(iii), no Person shall have any preemptive, preferential or other similar right with respect to (a) additional Capital Contributions; (b) issuance or sale of any class or series of Units, APIs or other Partnership Securities, whether unissued, held in the treasury or hereafter created; (c) issuance of any obligations, evidences or indebtedness or other securities of the Partnership convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase or subscribe to, any such Units, APIs or other Partnership Securities; (d) issuance of any right of subscription to or right to receive, or any warrant or option for the purchase of, any such Units, APIs or other Partnership Securities; or (e) issuance or sale of any other securities that may be issued or sold by the Partnership. 4.6 Capital Accounts. (a) The Partnership shall maintain for each Partner (or a beneficial owner of Units held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the General Partner in its sole discretion) owning Units a separate Capital Account with respect to such Units, in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Partnership with respect to such Units pursuant to this Agreement and (ii) all items of Partnership income and gain (including, without limitation, income and gain exempt from tax) computed in accordance with Section 4.6(b) and allocated with respect to such Units, pursuant to Section 5.1 and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made with respect to such Units, pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 4.6(b) and allocated with respect to such Units pursuant to Section 5.1. The Partnership shall maintain for the General Partner a separate Capital Account with respect to its Partnership Interest, held in its capacity as a general partner, in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Partnership with respect to such Partnership Interest pursuant to this Agreement and (ii) all items of Partnership income and gain (including, without limitation, income and gain exempt from tax) computed in accordance with Section 4.6(b) and allocated A-19 with respect to such Partnership Interest pursuant to Section 5.1, and decreased by (x) the cash amount or the Net Agreed Value of all actual and deemed distributions of cash or property made with respect to such Partnership Interest pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 4.6(b) and allocated with respect to such Partnership Interest pursuant to Section 5.1. The Partnership shall maintain a separate Capital Account with respect to APIs issued to any Special Limited Partner in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (v) all Capital Contributions made to the Partnership by such Special Limited Partner in exchange for such APIs, (w) all amounts drawn by the Partnership on the Letter of Credit from time to time to the extent not included in (v), each of which shall be deemed to be a contribution of capital in such amount by the General Partner and (x) all items of Partnership income and gain (including, without limitation, income and gain exempt from tax) computed in accordance with Section 4.6(b) and allocated to such Partner pursuant to Section 5.1, and decreased by (y) the cash amount or the Net Agreed Value of any property distributed by the Partnership to such Special Limited Partner in redemption of such APIs and (z) all items of Partnership deduction and loss computed in accordance with Section 4.6(b) and allocated to such Special Limited Partner pursuant to Section 5.1. (b) For purposes of computing the amount of any item of income, gain, loss or deduction to be reflected in the Partners' Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including, without limitation, any method of depreciation, cost recovery or amortization used for that purpose), provided that: (i) Solely for purposes of this Section 4.6, the Partnership shall be treated as owning directly its proportionate share (as determined by the General Partner based upon the provisions of the Operating Partnership Agreement) of all property owned by the Operating Partnership. (ii) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under Section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such fees and other expenses are incurred and shall be allocated among the Partners pursuant to Section 5.1. (iii) Except as otherwise provided in Treasury Regulation Section 1.704- 1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. (iv) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership's Carrying Value with respect to such property as of such date. (v) In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any Contributed Property shall be determined as if the adjusted basis of such property on the date it was acquired by the Partnership were equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 4.6(d) to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (A) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (B) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided, however, that, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, A-20 cost recovery or amortization deductions shall be determined using any reasonable method that the General Partner may adopt. (c) A transferee of a Partnership Interest shall succeed to a pro rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred; provided, however, that, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's properties shall be deemed to have been distributed in liquidation of the Partnership to the Partners (including any transferee of a Partnership Interest that is a party to the transfer causing such termination) pursuant to Sections 14.3 and 14.4 and recontributed by such Partners in reconstitution of the Partnership. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution pursuant to Section 4.6(d)(ii) and such Carrying Values shall then constitute the Agreed Values of such properties upon such deemed contribution to the reconstituted Partnership. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Section 4.6. (d) (i) Consistent with the provisions of Treasury Regulation Section 1.704- 1(b)(2)(iv)(f), on an issuance of additional Units for cash or Contributed Property or the conversion of the General Partner's Partnership Interest to Units pursuant to Section 13.3(b), the Capital Accounts of all Partners and the Carrying Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to the Partners at such time pursuant to Section 5.1. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to the issuance of Partnership Interests shall be determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, the General Partner, in arriving at such valuation, must take into account the Limited Partner Equity Value, the General Partner Equity Value, and the Special Limited Partner Book Capital, at such time. The General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its sole discretion to be reasonable) to arrive at a fair market value for individual properties. (ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Partner of any Partnership property (other than a distribution of cash that is not in redemption or retirement of a Partnership Interest), the Capital Accounts of all Partners and the Carrying Value of each Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value, and had been allocated to the Partners, at such time, pursuant to Section 5.1. Any Unrealized Gain or Unrealized Loss attributable to such property shall be allocated in the same manner as Net Termination Gain or Net Termination Loss pursuant to Section 5.1(c); provided, however, that, in making any such allocation, Net Termination Gain or Net Termination Loss actually realized shall be allocated first. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to a distribution shall (A) in the case of a deemed distribution occurring as a result of a termination of the Partnership pursuant to Section 708 of the Code, be determined and allocated in the same manner as that provided in Section 4.6(d)(i) or (B) in the case of a liquidating distribution pursuant to Section 14.3 or 14.4, be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt. 4.7 Interest. No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners' Capital Accounts. 4.8 No Withdrawal. No Partner shall be entitled to withdraw any part of its Capital Contributions (including, without limitation, with respect to APIs) or its Capital Account or to receive any distribution from the Partnership, except as provided herein. 4.9 Loans from Partners. Loans by a Partner to the Partnership shall not constitute Capital Contributions. In any Partner shall advance funds to the Partnership in excess of the amounts required A-21 hereunder to be contributed by it to the capital of the Partnership, the making of such excess advances shall not result in any increase in the amount of the Capital Account of such Partner. The amount of any such excess advances shall be a debt obligation of the Partnership to such Partner and shall be payable or collectible only out of the Partnership Assets in accordance with the terms and conditions upon which such advances are made. 4.10 No Fractional Units. No fractional Units shall be issued by the Partnership. 4.11 Splits and Combinations. (a) Notwithstanding Section 4.4(c) and subject to Section 4.11(d), the General Partner may make a pro rata distribution of Units or other Partnership Securities to all then current Record Holders of such class or series of Units or other Partnership Securities distributed or may effect a subdivision or combination of Units or other Partnership Securities; provided, however, that after any such distribution, subdivision or combination, each Partner shall have the same Percentage Interest in the Partnership as before such distribution, subdivision or combination. The General Partner shall make such corresponding adjustments as it deems necessary and appropriate to the ratio of conversion with respect to such Units or Partnership Securities, if applicable, and to the price at which such Units may be redeemed or purchased pursuant to Article XVII. (b) Whenever such a distribution, subdivision or combination of Units or other Partnership Securities is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice of the distribution, subdivision or combination at least twenty days prior to such Record Date to each Record Holder as of the date not less than ten days prior to the date of such notice. The General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Units to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation. (c) Promptly following any such distribution, subdivision or combination, the General Partner may cause Unit Certificates or Depositary Receipts, as the case may be, to be issued to the Record Holders of Units as of the applicable Record Date representing the new number of Units held by such Record Holders, or the General Partner may adopt such other procedures as it may deem appropriate to reflect such distribution, subdivision or combination; provided, however, if any such distribution, subdivision or combination results in a smaller total number of Units Outstanding, the General Partner shall require, as a condition to the delivery to a Record Holder of such new Unit Certificate or Depositary Receipt, the surrender of any Unit Certificate or Depositary Receipt, as the case may be, held by such Record Holder immediately prior to such Record Date. (d) The Partnership shall not issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provision of Section 4.10 and this Section 4.11(d), each fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next higher Unit). ARTICLE V Allocations and Distributions 5.1 Allocations for Capital Account Purposes. For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership's items of income, gain, loss and deduction (computed in accordance with Section 4.6(b)) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below. (a) Net Income. After giving effect to the allocations set forth in Section 5.1(d), Net Income for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable period shall be allocated as follows: (i) First, 100% to the General Partner until the aggregate Net Income allocated to the General Partner pursuant to this Section 5.1(a)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the General Partner pursuant to Section 5.1(b)(v) for all previous taxable years; A-22 (ii) Second, after the Senior Conversion Date 98/99ths to all Limited Partners holding Senior Preference Units in the proportion that the respective number of Senior Preference Units held by them bears to the total number of Senior Preference Units then Outstanding and 1/99th to the General Partner, until the aggregate Net Income allocated to holders of Senior Preference Units pursuant to this Section 5.1(a)(ii) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to such holders in respect of their then Outstanding Senior Preference Units pursuant to Section 5.1(b)(iv) for all previous taxable years; (iii) Third, 98/99ths to all Special Limited Partners in the proportion that the respective number of APIs held by them bears to the total number of APIs then outstanding and 1/99th to the General Partner, until the aggregate Net Income allocated to the Special Limited Partners pursuant to this Section 5.1(a)(iii) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the Special Limited Partners in respect of their then outstanding APIs pursuant to Section 5.1(b)(iii) for all previous taxable years; (iv) Fourth, 1/99th to the General Partner and 98/99ths to the Limited Partners holding Participating Units in proportion to their respective Percentage Interests that are solely attributable to Participating Units, until the aggregate Net Income allocated to such Partners pursuant to this Section 5.1(a)(iv) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to such Limited Partners and the General Partner pursuant to Section 5.1(b)(ii) for all previous taxable years; and (v) Fifth, the balance, if any, shall be allocated between the General Partner, in its capacity as general partner, and the Limited Partners in each taxable year in the same proportion as Available Cash for such taxable year (including, for this purpose, distributions of Available Cash made in a subsequent taxable year (including, for this purpose, distributions of Available Cash made in a subsequent taxable year with respect to the last quarter of the Partnership year for which the item of income, gain, loss, deduction or credit as the case may be, is being allocated, but excluding any portion of any distribution of Available Cash with respect to which a priority allocation has been made pursuant to Section 5.1(d)(iv)) was distributed to the General Partner and the Limited Partners. If the Partnership does not distribute any Available Cash in respect of a taxable year, the balance, if any, shall be allocated among the Partners in accordance with their respective Percentage Interests. Except as otherwise provided in this Section 5.1, each item of income, gain, loss, deduction or credit (computed in accordance with Section 4.6(b)) allocated to the Limited Partners, in the aggregate, shall be allocated to each Limited Partner pro rata in accordance with the number of Units held by such Limited Partner. (b) Net Losses. After giving effect to the allocations set forth in Section 5.1(d), Net Losses for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated as follows: (i) First, 100% to the General Partner and the Limited Partners until the aggregate Net Losses allocated pursuant to this Section 5.1(b)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Income allocated to such Partners pursuant to Section 5.1(a)(v) for all previous taxable years. For purposes of this Section 5.1(b)(i), Net Losses for any taxable year shall be allocated to the General Partner and the Limited Partners in the same proportion as any Net Income was allocated to such Partners pursuant to Section 5.1(a)(v) in any previous taxable years (beginning with the first such taxable year in which Net Income was allocated to the Partners pursuant to Section 5.1(a)(v) up to an amount equal to the amount of Net Income allocated to the Partners in any such taxable year); (ii) Second, 1/99th to the General Partner and 98/99ths to the Limited Partners holding Participating Units in proportion to their respective Percentage Interests that are solely attributable to Participating Units, provided that Net Losses shall not be allocated pursuant to this Section 5.1(b)(ii) to the extent that such allocation would cause any Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); (iii) Third, 98/99ths to all Special Limited Partners in the proportion that the respective number of APIs held by them bears to the total number of APIs then outstanding and 1/99th to the General A-23 Partner; provided that Net Losses shall not be allocated pursuant to this Section 5.1(b)(iii) to the extent that such allocation would cause any Special Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); (iv) Fourth, after the Senior Conversion Date, 98/99ths to all Limited Partners holding Senior Preference Units in the proportion that the respective number of Senior Preference Units held by them bears to the total number of Senior Preference Units then outstanding and 1/99th to the General Partner; provided that Net Losses shall not be allocated pursuant to this Section 5.1(b)(iv) to the extent that such allocation would cause any such limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); and (v) Fifth, the balance, if any, 100% to the General Partner. (c) Net Termination Gains and Losses. After giving effect to the allocations set forth in Section 5.1(d), all items of gain and loss taken into account in computing Net Termination Gain or Net Termination Loss for such taxable period shall be allocated in the same manner as such Net Termination Gain or Net Termination Loss is allocated hereunder. All allocations under this Section 5.1(c) shall be made after Capital Account balances have been adjusted by all other allocations provided under this Section 5.1 and after all distributions of Available Cash provided under Sections 5.4 and 5.6 have been made with respect to the taxable period ending on the date of the Partnership's liquidation pursuant to Section 14.3. References in this Section to the Minimum Quarterly Distribution and the Target Distributions are to such items as adjusted from time to time. (i) if a Net Termination Gain is recognized (or deemed recognized pursuant to Section 4.6(d)) from Termination Capital Transactions, such Net Termination Gain shall be allocated between the General Partner and the Limited Partners in the following manner (and the Capital Accounts of the Partners shall be increased by the amount so allocated in each of the following subclauses, in the order listed, before an allocation is made pursuant to the next succeeding subclause): (A) First, to each Partner having a deficit balance in such Partner's Capital Account to the extent of and in proportion to such deficit balance; (B) Second, 98/99ths to all Limited Partners holding Senior Preference Units in the proportion that the respective number of Senior Preference Units held by them bears to the total number of Senior Preference Units Outstanding and 1/99th to the General Partner until each such Limited Partner's Capital Account in respect of each Senior Preference Unit (determined on a per Senior Preference Unit basis) is equal to the sum of (1) its Unrecovered Capital in respect of such Senior Preference Unit plus (2) any then existing Cumulative Senior Preference Unit Deficiency; (C) Third, 98/99ths to all Special Limited Partners in the proportion that the respective number of APIs held by them bears to the total number of APIs Outstanding and 1/99th to the General Partner until each such Special Limited Partner's Capital Account in respect of each API (determined on a per API basis) is equal to its Unrecovered API Capital in respect of such API; (D) Fourth, during the Preference Period, 98/99ths to all Limited Partners holding Junior Preference Units in the Proportion that the respective number of Junior Preference Units held by them bears to the total number of Junior Preference Units Outstanding and 1/99th to the General Partner until each such Limited Partner's Capital Account in respect of each Junior Preference Unit (determined on a per Junior Preference Unit basis) is equal to the sum of (1) its Unrecovered Capital plus (2) any then existing Cumulative Junior Preference Unit Deficiency; (E) Fifth, during the Preference Period, 98/99ths to all Limited Partners holding Common Units in the proportion that the respective number of Common Units held by them bears to the total number of Common Units Outstanding and 1/99th to the General Partner until each such Limited Partner's Capital Account in respect of each Common Unit (determined on a per A-24 Common Unit basis) is equal to sum of (1) its Unrecovered Capital plus (2) any then existing Cumulative Common Unit Deficiency; (F) Sixth, 98/99ths to all Limited Partners holding Participating Units in proportion to their respective Percentage Interests in respect of Participating Units and 1/99th to the General Partner until each such Limited Partner's Capital Account in respect of each Participating Unit (determined on a per Participating Unit basis) is equal to the First Liquidation Target Amount; (G) Seventh, 85/99ths to all Limited Partners holding Participating Units in proportion to their respective Percentage Interests in respect of Participating Units and 14/99ths to the General Partner until each such Limited Partner's Capital Account in respect of each Participating Unit (determined on a per Participating Unit basis) is equal to the Second Liquidation Target Amount; (H) Eighth, 75/99ths to all Limited Partners holding Participating Units in proportion to their respective Percentage Interests in respect of Participating Units and 24/99ths to the General Partner until each such Limited Partner's Capital Account in respect of each Participating Unit (determined on a per Participating Unit basis) is equal to the Third Liquidation Target Amount; and (I) Thereafter, 50/99ths to all Limited Partners holding Participating Units in proportion to their respective Percentage Interests in respect of Participating Units and 49/99ths to the General Partner. (ii) If a Net Termination Loss is recognized (or deemed recognized pursuant to Section 4.6(d)) from Termination Capital Transactions, such Net Termination Loss shall be allocated to the Partners in the following manner: (A) First, 1/99th to the General Partner and 98/99ths to the Limited Partners holding Common Units in proportion to, and to the extent of, the positive balances in their respective Capital Accounts until all such balances are reduced to zero; (B) Second, 1/99th to the General Partner and 98/99ths to the Limited Partners holding Junior Preference Units in proportion to, and to the extent of, the positive balances in their respective Capital Accounts until all such balances are reduced to zero; (C) Third, if such Termination Capital Transaction occurs (or is deemed to occur) prior to the redemption of all APIs then Outstanding, 98/99ths to all Special Limited Partners in the proportion that the respective number of APIs held by them bears to the total number of APIs then outstanding and 1/99th to the General Partner, to the extent of, the positive balance in such Special Limited Partner's respective Capital Account maintained with respect to its APIs; (D) Fourth, 98/99ths to all Limited Partners holding Senior Preference Units in proportion to, and the extent of, the positive balances in their respective Capital Accounts until all such balances are reduced to zero and 1/99th to the General Partner; and (E) Fifth, the balance, if any, 100% to the General Partner. (d) Special Allocations. Notwithstanding any other provision of this Section 5.1, the following allocations shall be made for such taxable period: (i) Partnership Minimum Gain Chargeback. Notwithstanding any other provision of this Section 5.1, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable period, each Partner shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the greater of (A) the portion of such Partner's share of the net decrease in Partnership Minimum Gain during such taxable period that is allocable (in accordance with the principles set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(e)(2)) to the disposition of Partnership property subject to one or more Nonrecourse Liabilities of the Partnership, or (B) the deficit balance in such Partner's Adjusted Capital Account at the end of such taxable period (modified, as appropriate, by Treasury Regulation Section 1.704-1T(b)(4)(iv)(e)(2)). The items to be so allocated shall be determined in accordance with Treasury Regulation Section 1.704-1T(b)(4)(iv)(e) and, for purposes of this A-25 Section 5.1(d), each Partner's Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d) with respect to such taxable period. This Section 5.1(d)(i) is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-1T(b)(iv)(4)(e) and shall be interpreted consistently therewith. (ii) Chargeback of Minimum Gain Attributable to Partner Nonrecourse Debt. Notwithstanding the other provisions of this Section 5.1 (other than Section 5.1(d)(i)), if there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any Partnership taxable period, any Partner with a share of Minimum Gain Attributable to Partner Nonrecourse Debt at the beginning of such taxable period shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the greater of (A) the portion of such Partner's share of the net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt that is allocable (in accordance with the principles set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4)) to the disposition of Partnership property subject to such Partner Nonrecourse Debt or (B) the deficit balance in such Partner's Adjusted Capital Account at the end of such taxable period (modified, as appropriate, by Treasury Regulation Section 1.704- 1T(b)(4)(iv)(h)(4)). The items to be so allocated shall be determined in a manner consistent with the principles of Treasury Regulation Section 1.704- 1T(b)(4)(iv)(e) and, for purposes of this Section 5.1(d), each Partner's Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d), other than Section 5.1(d)(i), with respect to such taxable period. This Section 5.1(d)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4) and shall be interpreted consistently therewith. (iii) Qualified Income Offset. Except as provided in Sections 5.1(d)(i) and 5.1(d)(ii), in the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704- 1(b)(2)(ii)(d)(6) (modified, as appropriate, by Treasury Regulation Section 1.704-1T(b)(4)(iv)(e)(3) and 1.704-1T(b)(4)(iv)(h)(4)), items of Partnership income and gain shall be allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible; provided that an allocation pursuant to this Section 5.1(d)(iii) shall be made only if and to the extent that such Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 5.1 have been tentatively made as if this Section 5.1(d)(iii) were not in this Agreement. (iv) Priority Allocation. If the amount of cash distributed (except cash distributed pursuant to Section 14.3) with respect to a class or series of Units is disproportionately greater (on a per Unit basis), than the amount of cash distributed with respect to any other class or series of Units (on a per Unit basis), then before the allocation of Net Income or Net Loss, as the case may be, pursuant to the other provisions of this Section 5.1, (A) first, each Limited Partner holding Units with respect to which such disproportionately greater cash distribution was made shall be allocated gross income in an amount equal to the product of (X) the amount by which the distribution with respect to such class or series of Units exceeds (on a per Unit basis) the distribution (on a per Unit basis), if any, on the class or series of Units receiving the smallest distribution and (Y) the number of Units of such class or series held by such Limited Partner receiving the disproportionately greater distribution, (B) the General Partner shall be allocated gross income in an amount equal to 1/98th of the gross income allocated pursuant to the immediately preceding clause (A) and (C) the Net Income or Net Loss otherwise allocable to the Partners under the other provisions of this Agreement shall be recomputed by excluding the gross income allocated pursuant to the immediately preceding clauses (A) and (B). (v) Gross Income Allocations. In the event any Partner has a deficit balance in its Capital Account at the end of any Partnership taxable period that is in excess of the sum of (A) the amount such Partner is obligated to restore pursuant to any provision of this Agreement and (B) A-26 the amount such Partner is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulation Sections 1.704- 1T(b)(4)(iv)(f) and 1.704-1T(b)(4)(iv)(h)(5), such Partner shall be allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided that an allocation pursuant to this Section 5.1(d)(v) shall be made only if and to the extent that such Partner would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Section 5.1 have been tentatively made as if Section 5.1(d)(iii) and this Section 5.1(d)(v) were not in this Agreement. (v) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Partners in the same ratios that Net Income or Net Losses, as the case may be, is allocated for the taxable year. If the General Partner determines in its good faith discretion that the Partnership's Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio to the numerically closest ratio that does satisfy such requirements. (vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-1T(b)(4)(iv)(h). If more than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss. (viii) Nonrecourse Liabilities. For purposes of Treasury Regulation Section 1.752-1T(e)(ii)(C), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests. (ix) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations. (x) Curative Allocation. (A) Notwithstanding any other provision of this Section 5.1, other than the Required Allocations provisions, the Required Allocations shall be taken into account in making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss and deduction allocated to each Partner pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Partner under the Agreed Allocations had the Required Allocations and this Curative Allocation not otherwise been provided in this Section 5.1. Notwithstanding the preceding sentence, Required Allocations relating to (1) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Minimum Gain Attributable to Partner Nonrecourse Debt. Allocations pursuant to this Section 5.1(d)(x)(A) shall only be made with respect to Required Allocations to the extent the General Partner reasonably determines that such allocations will otherwise be inconsistent with the economic agreement among the Partners. Further, allocations pursuant to this Section 5.1(d)(x)(A) shall be deferred with respect to allocations pursuant to clauses (1) and (2) hereof to the extent the General Partner reasonably determines that such allocations are likely to be offset by subsequent Required Allocations. (B) The General Partner shall have reasonable discretion, with respect to each taxable period, to (1) apply the provisions of Section 5.1(d)(x)(A) in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations, and (2) divide all A-27 allocations pursuant to Section 5.1(d)(x)(A) among the Partners in a manner that is likely to minimize such economic distortions. 5.2 Allocations for Tax Purposes. (a) Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to Section 5.1. (b) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, depreciation, amortization and cost recovery deductions shall be allocated for federal income tax purposes among the Partners as follows: (i) (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted tax basis at the time of contribution; and (B) except as otherwise provided in Section 5.2(b)(iii), any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of "book" gain or loss is allocated pursuant to Section 5.1 (ii) (A) In the case of an Adjusted Property, such items shall (1) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 4.6(d)(i) or (ii), and (2) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 5.2(b)(i)(A); and (B) except as otherwise provided in Section 5.2(b)(iii), any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner as its correlative item of "book" gain or loss is allocated pursuant to Section 5.1. (iii) Any items of income, gain, loss or deduction otherwise allocable under Section 5.2(b)(i)(B) or 5.2(b)(ii)(B) shall be subject to allocation by the General Partner in a manner designed to eliminate, to the maximum extent possible, Book-Tax Disparities in a Contributed Property or Adjusted Property otherwise resulting from the application of the "ceiling" limitation (under Section 704(c) of the Code or Section 704(c) principles) to the allocations provided under Section 5.2(b)(i)(A) or 5.2(b)(ii)(A). (c) For the proper administration of the Partnership and for the preservation of uniformity of the Units (or any class or classes thereof), the General Partner shall have sloe discretion to (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions; (ii) make special allocations for federal income tax purposes of income (including, without limitation, gross income) or deductions; (iii) amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of the Units (or any class or classes thereof); and (iv) treat any payment of tax by the Partnership on behalf of fewer than all of the Partners as an item of Partnership expense. The General Partner may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this Section 5.2(c) only if such conventions, allocations or amendments would not have a material adverse effect on the Partners, the holders of any class or classes of Units issued and Outstanding or the Partnership, and if such allocations are consistent with the principles of Section 704 of the Code. (d) The General Partner in its sole discretion may determine to depreciate the portion of an adjustment under Section 743(b) of the Code attributable to unrealized appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax Disparity) using a predetermined rate derived from the depreciation method and useful life applied to the Partnership's common basis of such property, despite the inconsistency of such approach with Proposed Treasury Regulation Section 1.168-2(n) and Treasury Regulation Section 1.167(c)-1(a)(6). If the General Partner determines that such reporting position cannot reasonably be taken, the General Partner may adopt a depreciation convention under which all purchasers acquiring Units in the same month would receive depreciation, A-28 based upon the same applicable rate as if they had purchased a direct interest in the Partnership's property. If the General Partner chooses not to utilize such aggregate method, the General Partner may use any other reasonable depreciation convention to preserve the uniformity of the intrinsic tax characteristics of any Units that would not have a material adverse effect on the Limited Partners or the Record Holders of any class or classes of Units. (e) Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 5.2 be characterized as Recapture Income in the same proportions and to the same extent as such Partners (or their predecessors in interest) have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. (f) All items of income, gain, loss, deduction and credit recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code which may be made by the Partnership; provided, however, that such allocations, once made, shall be adjusted as necessary or appropriate to take into account those adjustments permitted or required by Sections 734 and 743 of the Code. (g) Each item of Partnership income, gain, loss and deduction attributable to a transferred Partnership Interest of the General Partner or to transferred Units shall, for federal income tax purposes, be determined on an annual basis and prorated on a monthly basis and shall be allocated to the Partners as of the close of the New York Stock Exchange on the last day of the preceding month; provided, however, that (i) except as otherwise provided in clause (ii), such items for the period beginning on the Closing Date and ending on the last day of the month in which the Closing Date occurs shall be allocated to Partners as of the close of the New York Stock Exchange on the last day of that month or (ii) if the Underwriters' over-allotment option is exercised, such items for the period beginning on the Closing Date and ending on the last day of the month in which the "Optional Closing Date" (as defined in the Underwriting Agreement) occurs shall be allocated to the Partners as of the close of the New York Stock Exchange on the last day of that month; and provided further that gain or loss on a sale or other disposition of any assets of the Partnership other than in the ordinary course of business shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of the month in which such gain or loss is recognized for federal income tax purposes. The General Partner may revise, alter or otherwise modify such methods of allocation as it determines necessary, to the extent permitted or required by Section 706 of the Code and the regulations or rulings promulgated thereunder. (h) Allocations that would otherwise be made to a Limited Partner under the provisions of this Article V shall instead be made to the beneficial owner of Units held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the General Partner in its sole discretion. (i) The General Partner shall amend or supplement this Article V to provide for the allocation of any item of income, gain, loss, deduction or credit for federal, state or local income tax purposes for which provision is not otherwise made herein in the manner that the General Partner determines to be reasonable, taking into account the requirements of the Code. (j) Notwithstanding any other provision of this Section 5.2, if the Internal Revenue Service is successful in asserting an adjustment to the taxable income of the General Partner and, as a result of any such adjustment, the Partnership is entitled to a deduction for federal income tax purposes with respect to any portion of such adjustment, such deduction shall be allocated to the General Partner. 5.3 Requirements as to, and Characterization of, Distributions. (a) Within sixty days following the end of each calendar quarter (or following the period from the Closing Date through December 31, 1991), an amount equal to 100% of Available Cash with respect to such quarter (or period) shall be distributed in accordance with this Article V by the Partnership to the Partners, as of the Record Date selected by the General Partner in its reasonable discretion, or set aside to fund the Reserve Amount. The immediately preceding sentence shall not modify in any respect the provisions of Section 4.2 A-29 regarding the distribution of any interest or other profit on the initial contributions referred to therein. All amounts of Available Cash distributed by the Partnership on any date from any source (other than amounts paid or distributed pursuant to Section 4.2) shall be deemed to be Cash from Operations until the sum of all amounts of Available Cash theretofore distributed by the Partnership to Partners pursuant to Sections 5.4 and 5.5 and in respect of the redemption of APIs equals the aggregate amount of all Cash from Operations of the Partnership from the Partnership Inception through the end of the calendar quarter prior to such distribution. Any remaining amounts of Available Cash distributed by the Partnership on such date (other than amounts paid or distributed pursuant to Section 4.2) shall, except as otherwise provided in Section 5.6, be deemed to be Cash from Interim Capital Transactions; provided that if (i) all or any portion of Available Cash with respect to any calendar quarter distributed by the Partnership would otherwise be deemed to be Cash from Interim Capital Transactions and (ii) the Letter of Credit was drawn on in respect of such quarter and the amount so drawn was distributed to the Limited Partners holding Senior Preference Units, then the Available Cash so distributed that would otherwise be deemed to be Cash from Interim Capital Transactions shall be deemed to be Cash from Operations to the extent of the amount so distributed. (b) Notwithstanding the definitions of Available Cash and Cash from Operations contained herein, cash receipts of the Partnership from the Letter of Credit shall be deemed to be received, for purposes of determining Available Cash and Cash from Operations, during the quarter in respect of which the Letter of Credit was drawn upon, even if such cash is received by the Partnership after the last day of such quarter. Notwithstanding the foregoing, in the event of the dissolution and liquidation of the Partnership, all proceeds of such liquidation shall be applied and distributed in accordance with, and subject to the terms and conditions of, Sections 14.3 and 14.4. 5.4 Distributions and Reserve Amount Funding. Available Cash with respect to any calendar quarter that constitutes or, for purposes of determining the priority of distributions of Available Cash, is treated as if it constitutes Cash from Operations pursuant to the provisions of Section 5.3 or 5.7, shall be distributed or set aside as follows: (A) First, 98/99ths to the Limited Partners holding Senior Preference Units in the proportion that the respective number of Senior Preference Units held by them bears to the total number of Senior Preference Units Outstanding and 1/99th to the General Partner until there has been distributed in respect of each such Outstanding Senior Preference Unit an amount equal to the Minimum Quarterly Distribution for such quarter. (B) Second, 98/99ths to Limited Partners holding Senior Preference Units, in the proportion that the respective number of Senior Preference Units held by them bears to the total number of Senior Preference Units Outstanding and 1/99th to the General Partner until there has been distributed in respect of each such Outstanding Senior Preference Unit an amount equal to any Cumulative Senior Preference Unit Deficiency; (C) Third, 100% to be set aside by the Partnership to fund in full the Reserve Amount; (D) Fourth, 100% to the Special Limited Partners, in proportion to the Unrecovered API Capital attributable to the respective APIs held by them, to the extent necessary to reduce to zero the Unrecovered API Capital of any and all APIs then outstanding; (E) Fifth, 98/99ths to Limited Partners holding Junior Preference Units, in the proportion that the respective number of Junior Preference Units held by them bears to the total number of Junior Preference Units Outstanding and 1/99th to the General Partner until there has been distributed in respect of each such Outstanding Junior Preference Unit an amount equal to the Minimum Quarterly Distribution for such quarter; (F) Sixth, 98/99ths to Limited Partners holding Junior Preference Units, in the proportion that the respective number of Junior Preference Units held by them bears to the total number of Junior Preference Units Outstanding and 1/99th to the General Partner until there has been distributed in respect of each such Outstanding Junior Preference Unit an amount equal to any Cumulative Junior Preference Unit Deficiency; (G) Seventh, 98/99ths to Limited Partners holding Common Units, in the proportion that the respective number of Common Units held by them bears to the total number of Common Units A-30 Outstanding and 1/99th to the General Partner until there has been distributed in respect of each such Outstanding Common Unit an amount equal to the Minimum Quarterly Distribution for such quarter; (H) Eighth, 98/99ths to Limited Partners holding Common Units, in the proportion that the respective number of Common Units held by them bears to the total number of Common Units Outstanding and 1/99th to the General Partner until there has been distributed in respect of each such Outstanding Common Unit an amount equal to any Cumulative Common Unit Deficiency; (I) Ninth, 98/99ths to all Limited Partners holding Participating Units in proportion to their respective Percentage Interests in respect of Participating Units and 1/99th to the General Partner until there has been distributed in respect of each Participating Unit Outstanding an amount equal to the excess of the First Target Distribution over the Minimum Quarterly Distribution; (J) Tenth, 85/99ths to all Limited Partners holding Participating Units in proportion to their respective Percentage Interests in respect of Participating Units and 14/99ths to the General Partner until there has been distributed in respect of each Participating Unit Outstanding an amount equal to the excess of the Second Target Distribution over the First Target Distribution; (K) Eleventh, 75/99ths to all Limited Partners holding Participating Units in proportion to their respective Percentage Interests in respect of Participating Units and 24/99ths to the General Partner until there has been distributed in respect of each Participating Unit Outstanding an amount equal to the excess of the Third Target Distribution over the Second Target Distribution; and (L) Thereafter, 50/99ths to all Limited Partners holding Participating Units in proportion to their respective Percentage Interests in respect of Participating Units and 49/99ths to the General Partner. 5.5 Conversion of Units. (a) On the Junior Conversion Date, all Outstanding Junior Preference Units (the "Converted Amount") shall, without any action on the part of any Record Holder thereof, be converted into Senior Preference Units; thereafter, all distinctions between Senior Preference Units and such converted Junior Preference Units shall automatically cease and such converted Junior Preference Units shall thereafter be designated "Senior Preference Units." In the event of a distribution, combination or subdivision of the Senior Preference Units pursuant to Section 4.11, the "Converted Amount" shall be adjusted to and become that amount which bears the same ratio to the number of Outstanding Junior Preference Units after giving effect to such distribution, combination or subdivision as the Converted Amount bears to the number of Outstanding Junior Preference Units immediately prior to such distribution, combination or subdivision. In the event of a distribution, combination or subdivision of the Senior Preference Units, the number of Senior Preference Units into which each Junior Preference Unit is convertible (the "Conversion Factor") shall be adjusted to and become that amount which bears the same ratio to the number of Outstanding Senior Preference Units after giving effect to such distribution, combination or subdivision as the Conversion Factor immediately prior to such distribution, combination or subdivision bears to the number of Outstanding Senior Preference Units after giving effect to such distribution, combination or subdivision. (b) On the Senior Conversion Date, the Senior Preference Units will cease to participate with the Common Units in any distributions of Available Cash constituting Cash from Operations in excess of the Minimum Quarterly Distribution. (c) For a 90-day period commencing on the date the General Partner mails notice to the Unitholders that the Senior Conversion Date has occurred, Unitholders will have the right to elect to convert their Senior Preference Units into Common Units, effective as of the Senior Conversion Date, on a one- for-one basis, subject to adjustment, by delivering a Conversion Notice to the General Partner; provided, however, that any Units as to which a Conversion Notice is not received during such 90-day period shall remain Senior Preference Units; and provided further that in the event that the Common Units are not approved for listing on the New York Stock Exchange or the American Stock Exchange at such time, only those Senior Preference Units as to which a Conversion Notice has been delivered by the General Partner and its Affiliates shall be converted into Common Units and Senior Preference Units held by all other holders shall not be converted into Common Units, but shall remain Senior Preference Units. On or before the Senior Conversion Date, the Partnership shall file an application to list the Common Units on the New York Stock Exchange or the American Stock A-31 Exchange and shall pursue such application in good faith; provided that upon termination of the 90-day conversion period the Partnership and its Common Units meet the applicable listing requirements. 5.6 Distributions of Cash from Interim Capital Transactions. Distributions by the Partnership of Available Cash that constitutes Cash from Interim Capital Transactions shall be distributed, unless the provisions of Section 5.3 require otherwise, 98/99ths to all Limited Partners in proporation to the respective number of Units held by them and 1/99th to the General Partner, until there has been distributed in respect of each class of Outstanding Units distributions of Available Cash that are deemed to be Cash from Interim Capital Transactions in an aggregate amount equal to Unrecoverred Capital plus accrued arrearages, if any. All series of each class shall be on a parity with respect to distributions of Cash from Interim Capital Transactions and all such parity securities shall share pro rata with respect to distributions of Cash from Intermim Capital Transactions. Thereafter, all Available Cash shall be distributed as if it were Cash from Operations and shall be distributed in accordance with Section 5.4. However, after the Senior Conversion Date, Senior Preference Units that have not been converted into Common Units and that have received distributions of Cash from Interim Capital Transactions equal to their Unrecovered Capital plus accrued arrearages, if any, shall receive no further distributions, shall be treated as if they have been redeemed, and shall cease to be Outstanding for all purposes. 5.7 Reserve Amount; Letter of Credit. (a) The Partnership shall maintain the Reserve Amount, funded in accordance with the provisions set forth in Section 5.4, to support the Partnership's ability to make quarterly cash distributions in the amount of the Minimum Quarterly Distribution on all Senior Preference Units Outstanding from time to time. The Reserve Amount shall be an asset of the Partnership and shall not be maintained apart from any other reserves, accounts or assets of the Partnership. The Reserve Amount shall be supported by the Letter of Credit, as provided in Section 5.7(b). The maximum amount of the Reserve Amount shall be adjusted to reflect changes in the number of Senior Preference Units Outstanding from time to time and adjustments made to the Minimum Quarterly Distribution on the Senior Preference Units pursuant to Section 5.8 so that the Reserve Amount remains equal to the four quarters of Minimum Quarterly Distributions on the Senior Preference Units Outstanding from time to time, but the Reserve Amount shall not exceed $18.48 million. (b) AMC shall establish with Chemical Bank, or such other bank or banks as the General Partner in its reasonable judgment shall approve, the Letter of Credit to support the Reserve Amount. Until sufficient Available Cash constituting Cash from Operations accumulates to fully fund the Reserve Amount, the Partnership shall have the right to draw, to the extent that any portion of the Reserve Amount has not yet been funded, on the Letter of Credit. Pursuant to the Letter of Credit, the Partnership may draw amounts in any quarter (i) to the extent that both Available Cash constituting Cash from Operations and the Reserve Amount are insufficient to pay the Minimum Quarterly Distribution for such quarter on all Outstanding Senior Preference Units or (ii) if AMC is unable to renew or replace the Letter of Credit. Concurrent with each draw by the Partnership on the Letter of Credit, the Partnership shall issue to AMC APIs in an aggregate face amount equal to the amount so drawn. APIs shall not participate with other Units in any distributions and shall have no voting rights, but shall be entitled to be redeemed at their face amount after payment of the Minimum Quarterly Distribution and accrued arrearages, if any, on the Senior Preference Units and after the Reserve Amount is fully funded, in accordance with the provisions of Section 5.4. The Partnership shall not be liable to the General Partner for the reimbursement or payment of any fees, indemnities, interest, expenses, charges or other costs (other than the issuance and redemption of APIs) in connection with the Letter of Credit. 5.8 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels. (a)(i) The Minimum Quarterly Distribution, First Target Distribution, Second Target Distribution and Third Target Distribution shall be proportionately adjusted in the event of any combination or subdivision (whether effected by a distribution payable in Units or otherwise) of Units or other Partnership Securities in accordance with Section 4.11. (ii) In the event of a distribution of Available Cash that is deemed to be Cash from Interim Capital Transactions, the Minimum Quarterly Distribution, First Target Distribution, Second Target Distribu- A-32 tion and Third Target Distribution shall be adjusted proportionately downward to equal the product obtained by multiplying the otherwise applicable Minimum Quarterly Distribution, First Target Distribution, Second Target Distribution and Third Target Distribution, as the case may be, by a fraction of which the numerator is the Unrecovered Initial Unit Price immediately after giving effect to such distribution and of which the denominator is the Unrecovered Initial Unit Price immediately prior to giving effect to such distribution. (b) The Minimum Quarterly Distribution and the First, Second and Third Target Distributions shall be adjusted if legislation is enacted that causes the Partnership to become taxable as a corporation or otherwise treated as an association taxable as a corporation for federal income tax purposes. In such event, the Minimum Quarterly Distribution and the First, Second and Third Target Distributions for each quarter thereafter would be reduced to an amount equal to the product of (i) each of the Minimum Quarterly Distribution and the First, Second and Third Target Distributions multiplied by (ii) 1 minus the sum of (x) the maximum marginal federal corporate income tax rate to which the Partnership is subject (expressed as a fraction) plus (y) any increase that results from such legislation in the effective overall state and local income tax rate to which the Partnership is subject (expressed as a fraction) for the taxable year in which such quarter occurs (after taking into account the benefit of any deduction allowable for federal income tax purposes with respect to the payment of state and local income taxes). Such effective overall state and local income tax rate shall be determined for the calendar year next preceding the first calendar year during which the Partnership is taxable for federal income tax purposes as a corporation or otherwise treated as an association taxable as a corporation by determining such rate as if the Partnership had been subject to such state and local taxes during such preceding calendar year. ARTICLE VI MANAGEMENT AND OPERATION OF BUSINESS 6.1 Management. (a) The General Partner shall conduct, direct and exercise full control over all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and no Limited Partner or Assignee shall have any right of control or management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner to a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 6.3, shall have full power and authority to do all things and on such terms as it, in its sole discretion, may deem necessary or desirable to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1, including, without limitation, (A) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness and the incurring of any other obligations and the securing of same by mortgage, deed of trust or other lien or encumbrance; (B) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership; (C) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership or the merger or other combination of the Partnership with or into another Person (the matters described in this clause (C) being subject, however, to any prior approval that may be required by Section 6.3); (D) the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement, including, without limitation, the financing of the conduct of the operations of the Partnership or the Operating Partnership, the lending of funds to other Persons (including, without limitation, the Operating Partnership) and the repayment of obligations of the Partnership and the Operating Partnership and the making of capital contributions to the Operating Partnership; (E) the negotiation, execution and performance of any contracts, conveyances or other instruments (including, without limitation, instruments that limit the liability of the Partnership under contractual arrangements to all or particular assets of the Partnership, with the other party to the contract to have no recourse against the General Partner or its assets other than its interest in the Partnership, even if same results in A-33 the terms of the transaction being less favorable to the Partnership than would otherwise be the case); (F) the distribution of Partnership cash; (G) the selection and dismissal of employees and agents (including, without limitation, employees having titles such as "president," "vice president," "secretary" and "treasurer") and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring; (H) the procurement and maintenance by the Partnership or the General Partner of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate; (I) the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, joint ventures or other relationships (including, without limitation, the acquisition of interests in, and the contributions of property to, the Operating Partnership from time to time); (J) the control of any matters affecting the rights and obligations of the Partnership, including, without limitation, the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation and the incurring of legal expense and the settlement of claims and litigation; (K) the indemnification of any person against liabilities and contingencies to the extent permitted by law; (L) the entering into of listing agreements with the New York Stock Exchange and any other securities exchange and the delisting of some or all of the Units from, or requesting that trading be suspended on, any such exchange (subject to any prior approval that may be required under Section 1.6); (M) the purchase, sale or other acquisition or disposition of Units and other Partnership Securities; and (N) the undertaking of any action in connection with the Partnership's participation in the Operating Partnership as the limited partner (including, without limitation, contributions or loans of funds by the Partnership to the Operating Partnership). (b) Notwithstanding any other provision of this Agreement, the Operating Partnership Agreement, the Delaware Act or any applicable law, rule or regulation, each of the Partners and Assignees and each other Person who may acquire an interest in Units hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of the Second Amended and Restated Credit Agreement of the Operating Partnership, the Operating Partnership Agreement, the Underwriting Agreement, the Deposit Agreement, the Conveyance Agreement and the other agreements described in or filed as part of the Registration Statement; (ii) agrees that the General Partner is authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in the Registration Statement on behalf of the Partnership without any further act, approval or vote of the Partners or the Assignees or the other Persons who may acquire an interest in APIs and Units; and (iii) agrees that none of the execution, delivery or performance by the General Partner and its officers and directors, the Partnership, any Operating Partnership or any Affiliate thereof of any agreement authorized or permitted under this Agreement (including, without limitation, the exercise by the General Partner or any Affiliate of the General Partner of the rights accorded pursuant to Article XVII and Section 6.5) shall constitute a breach by the General Partner and its officers and directors of any duty that the General Partner and its officers and directors may owe the Partnership or the Limited Partners or the Assignees or any other Persons under this Agreement or of any duty stated or implied by law or equity. 6.2 Certificate of Limited Partnership. The General Partner has caused the Certificate of Limited Partnership to be filed with the Secretary of State of the State of Delaware as required by the Delaware Act and shall use all reasonable efforts to cause to be filed such other certificates or documents as may be determined by the General Partner in its sole discretion to be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business or own property. To the extent that such action is determined by the General Partner in its sole discretion to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware or of any other state in which the Partnership may elect to do business or own property. Subject to the terms of Section 7.5(a), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership, any qualification document or any amendment thereto to any Limited Partner or Assignee. A-34 6.3 Restrictions on General Partner's Authority. (a) The General Partner may not, without written approval of the specific act by all of the Limited Partners or by other written instrument executed and delivered by all of the Limited Partners subsequent to the date of this Agreement, take any action in contravention of this Agreement, including, without limitation, (i) any act that would make it impossible to carry on the ordinary business of the Partnership, except as otherwise provided in this Agreement; (ii) possess Partnership property, or assign any rights in specific Partnership property, for other than a Partnership purpose; (iii) admit a Person as a Partner, except as otherwise provided in this Agreement; (iv) amend this Agreement in any manner, except as otherwise provided in this Agreement; or (v) transfer its interest as general partner of the Partnership, except as otherwise provided in this Agreement. (b) Except as provided in Article XIV, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the Partnership's assets in a single transaction or a series of related transactions (including by way of merger, consolidation or other combination with any other Person) or approve on behalf of the Partnership the sale, exchange or other disposition of all or substantially all of the assets of the Operating Partnership (including by way of merger, consolidation or other combination with any other Person), during the Preference Period, without the approval of the holders of at least a majority of the Outstanding Units (excluding for purposes of any such determination Units held by the General Partner and its Affiliates) and thereafter without the approval of the holders of at least a majority of the Outstanding Units; provided, however, that this provision shall not preclude or limit the General Partner's ability to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the Partnership's assets or the Operating Partnership's assets and shall not apply to any forced sale of any or all of the Partnership's assets or the Operating Partnership's assets pursuant to the foreclosure of, or other realization upon, any such encumbrance, or in any way limit the right of any holder of the capital stock of the General Partner to sell, exchange or otherwise dispose of such capital stock. Without the approval of the holders of at least a majority of the Outstanding Units (excluding for purposes of any such determination Units held by the General Partner and its Affiliates), the General Partner shall not, on behalf of the Partnership, (i) consent to any amendment to the Operating Partnership Agreement or, except as expressly permitted by Section 6.9(d), take any action permitted to be taken by the limited partner of the Operating Partnership, in either case, that would adversely affect the Partnership by limiting its rights, preferences or privileges as the limited partner of the Operating Partnership or (ii) except as permitted under Sections 11.2 and 13.1, elect or cause the Partnership to elect a successor general partner of the Operating Partnership. (c) The General Partner shall not take any action or refuse to take any reasonable action the effect of which, if taken or not taken, as the case may be, would be to cause the Partnership or the Operating Partnership to be taxable as a corporation or otherwise treated as an association taxable as a corporation for federal income tax purposes, without the approval of the holders of a majority of each class of Outstanding Units, including the vote of a majority of the Outstanding Senior Preference Units (excluding for purposes of any such determination Senior Preference Units held by the General Partner and its Affiliates). (d) At all times while serving as the general partner of the Partnership, the General Partner shall not make any dividend or distribution on, or repurchase any shares of, its stock or take any other action within its control if the effect of such dividend, distribution, repurchase or other action would be to reduce its net worth below an amount necessary to receive an Opinion of Counsel that the Partnership will be treated as a partnership for federal income tax purposes. 6.4 Reimbursement of the General Partner. (a) Except as provided in this Section 6.4 and elsewhere in this Agreement or in the Operating Partnership Agreement, the General Partner shall not be compensated for its services as general partner of the Partnership or the Operating Partnership. (b) The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole discretion, for (i) all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership (including, without limitation, amounts paid to any Person to perform services for the Partnership) and (ii) that portion of the General Partner's or its Affiliates' legal, accounting, investor communications, utilities, telephone, secretarial, travel, entertainment, bookkeeping, reporting, data processing, office rent and other office expenses (including, without A-35 limitation, overhead charges), salaries, fees and other compensation and benefit expenses of employees, officers and directors, insurance, other administrative or overhead expenses and all other expenses, in each such case, necessary or appropriate to the conduct of the Partnership's business and reasonably allocable to the Partnership or otherwise incurred by the General Partner in connection with operating the Partnership's business (including, without limitation, expenses allocated to the General Partner by its Affiliates). The General Partner shall determine the fees and expenses that are allocable to the Partnership in any reasonable manner determined by the General Partner in its sole discretion. Such reimbursements shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 6.7. (c) Subject to Section 4.4(c), the General Partner in its sole discretion and without the approval of the Limited Partners may propose and adopt on behalf of the Partnership employee benefit plans (including, without limitation, plans involving the issuance of Units), for the benefit of employees of the General Partner, the Partnership, the Operating Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership or the Operating Partnership. 6.5 Outside Activities. (a) After the Closing Date, the General Partner shall limit its activities to those required or authorized by the Operating Partnership Agreement. AMC may provide general and administrative services to AMCH and its Affiliates. Certain officers, directors and employees of AMC are also officers, directors or employees of AMCH or its Affiliates. AMCH and its Affiliates are engaged in the business of making investments in various types of businesses, which may include businesses in the agricultural minerals industry, and managing such investments. Such officers, directors and employees of AMC may spend a substantial amount of time managing the business and affairs of AMCH and its Affiliates and may face conflicts regarding the allocation of their time between the Partnership and such other business interests. The General Partner shall cause its employees to devote as much time to the management of the Partnership as is necessary for the proper conduct of its business and affairs. The General Partner shall manage the Partnership for the benefit of its Partners and the General Partner. In the event that AMC is no longer owned by AMCH, any new owner may engage in other businesses, or in the business of making investments in businesses, which may include businesses in the agricultural minerals industry, and managing such investments. The officers, directors and employees of AMC may also be officers, directors or employees of such new owners and may spend a substantial amount of time managing the business and affairs of such new owner and its Affiliates and may face conflicts regarding the allocation of their time between the Partnership and such other business interests. The new owners shall cause their employees to devote as much time to the management of the Partnership as is necessary for the proper conduct of its business and affairs. None of such other investment or management activities shall constitute a breach of fiduciary duty owed by AMC. (b) Except as provided in Section 6.5(a), each Indemnitee (other than AMC) is free to engage in any business, including any business that is in competition with the business of the Partnership. The General Partner and any other Persons affiliated with the General Partner may acquire Units or other Partnership Securities, in addition to those acquired by any of such Persons on the Closing Date, and shall be entitled to exercise all rights of an Assignee or Limited Partner, as applicable, relating to such Units or Partnership Securities, as the case may be. (c) Without limiting Sections 6.5(a) and 6.5(b), but notwithstanding anything to the contrary in this Agreement, the ability of Indemnitees (other than AMC) to enter into competitive activities is hereby approved by all Partners, and it shall not be deemed to be a breach of the General Partner's fiduciary duty for the General Partner to permit an Indemnitee to engage in a business opportunity in preference to or to the exclusion of the Partnership. 6.6 Loans to and from the General Partner; Contracts with Affiliates. (a) The General Partner or any Affiliate thereof may lend to the Partnership or the Operating Partnership, and the Partnership and the Operating Partnership may borrow, funds needed or desired by the Partnership and the Operating Partnership for such periods of time as the General Partner may determine; provided, however, that the General Partner or any of its Affiliates may not charge the Partnership or the Operating Partnership interest at a rate greater than the rate that would be charged the Partnership or the Operating A-36 Partnership, as the case may be (without reference to the General Partner's financial abilities or guarantees), and the terms of such loan shall be no less favorable to the Partnership than those required by unrelated lenders on comparable loans. The Partnership or the Operating Partnership, as the case may be, shall reimburse the General Partner or any of its Affiliates, as the case may be, for any costs (other than any additional interest costs) incurred by it in connection with the borrowing of funds obtained by the General Partner or any of its Affiliates and loaned to the Partnership or the Operating Partnership. (b) The Partnership may lend, contribute to or borrow from the Operating Partnership, and the Operating Partnership may lend to or borrow from the Partnership, funds on terms and conditions established in the sole discretion of the General Partner; provided, however, that the Partnership may not charge the Operating Partnership and the Operating Partnership may not charge the Partnership, as the case may be, interest at a rate greater than the rate and terms that would be charged the Operating Partnership or the Partnership, as the case may be, by unrelated lenders on comparable loans. The foregoing authority shall be exercised by the General Partner in its sole discretion and shall not create any right or benefit in favor of the Operating Partnership or any other Person. The Partnership may not lend funds to the General Partner or any of its Affiliates (other than the Operating Partnership), except for short- term funds management purposes. (c) The General Partner may itself, or may enter into an agreement with any of its Affiliates to, render services to the Partnership. Any service rendered to the Partnership by the General Partner or any of its Affiliates shall be on terms that are fair and reasonable to the Partnership; provided, however, that the requirements of this Section 6.6(c) shall be deemed satisfied as to any transaction the terms of which are no less favorable to the Partnership than those generally being provided to or available from unrelated third parties. The provisions of Section 6.4 shall apply to the rendering of services described in this Section 6.6(c). (d) The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as are consistent with this Agreement and applicable law. (e) Neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are fair and reasonable to the Partnership; provided, however, that the requirements of this Section 6.6(e) shall be deemed to be satisfied as to (i) the transactions effected pursuant to Sections 4.2 and 4.3, the Conveyance Agreement, and any other transactions described in or contemplated by the Registration Statement and (ii) as to any transaction the terms of which are no less favorable to the Partnership than those generally being provided to or available from unrelated third parties. (f) The General Partner and its Affiliates will have no obligation to permit the Partnership or the Operating Partnership to use any facilities of the General Partner and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use, nor shall there be any obligation on the General Partner or its Affiliates to enter into such contracts. (g) Without limitation of Sections 6.6(a) through 6.6(f), and notwithstanding anything to the contrary in this Agreement, the existence of the conflicts of interest described in the Registration Statement under the caption "Conflicts of Interest and Fiduciary Responsibility" are hereby approved by all Partners. 6.7 Indemnification. (a) To the fullest extent permitted by law, each Indemnitee (i) shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities (joint or several), expenses (including, without limitation, legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as (x) the General Partner, a Departing Partner or any of their Affiliates, (y) an officer or director of the General Partner, any Departing Partner or any of their Affiliates or (z) a Person serving at the request of the Partnership as an officer, director, employee, partner, member or agent of another corporation, A-37 partnership, joint venture, trust, committee or other enterprise and (ii) may be indemnified, to the extent deemed advisable by the General Partner to the fullest extent permitted by law, from and against any and all amounts described in clause (i) above, by reason of its status as an employee, partner or agent (other than a director or officer) of the General Partner, any Departing Partner or any of their Affiliates. Any indemnification pursuant to this Section 6.7 shall be made only out of the assets of the Partnership. (b) To the fullest extent permitted by law, expenses (including, without limitation, legal fees and expenses) incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding. (c) The indemnification provided by this Section 6.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, both as to actions in the Indemnitee's capacity as (i) the General Partner, a Departing Partner or an Affiliate thereof, (ii) an officer, director, employee, partner or agent of the General Partner, any Departing Partner or an Affiliate thereof or (iii) a Person serving at the request of the Partnership as an officer, director, employee, partner, member or agent of another corporation, partnership, joint venture, trust, committee or other enterprise, and shall continue as to an Indemnitee who has ceased to serve in such capacity and as to actions in any other capacity (including, without limitation, any capacity under the Underwriting Agreement). (d) The Partnership may purchase and maintain (or reimburse the General Partner or its Affiliates for the cost of) insurance, on behalf of any Indemnitee, against any liability that may be asserted against or expense that may be incurred by such Person in connection with the Partnership's activities, whether or not the Partnership would have the power to indemnify such Person against such liabilities under the provisions of this Agreement. (e) For purposes of this Section 6.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute "fines" within the meaning of Section 6.7(a); and action taken or omitted by it with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is in, or not opposed to, the best interests of the Partnership. (f) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement. (g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. (h) To the extent that, at law or in equity, any Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Limited Partners, AMC, as general partner of the Partnership, and any other Indemnitee acting in connection with the Partnership's business or offices shall not be liable to the Partnership or to any Limited Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of any Indemnitee otherwise existing at law or in equity, are agreed by the Limited Partners to replace such other duties and liabilities of such Indemnitee. (i) The provisions of this Section 6.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. (j) No amendment, modification, repeal or adoption of any provision inconsistent with this Section 6.7 or any provision hereof nor, to the fullest extent permitted by applicable law, any modification of law, shall in any manner terminate, reduce or impair the right of any past, present, or future Indemnitee to be indemnified by the Partnership, nor the obligation of the Partnership to indemnify any such A-38 Indemnitee under and in accordance with the provisions of this Section 6.7 as in effect immediately prior to such amendment, modification, repeal or adoption with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification, repeal or adoption, regardless of when such claims may arise or be asserted. 6.8 Liability of Indemnitees. (a) Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership, the Limited Partners, the Assignees or any other Persons who have acquired interests in the Units, for losses sustained or liabilities incurred as a result of any act or omission if such Indemnitee acted in good faith. (b) Subject to its obligations and duties as General Partner set forth in Section 6.1(a), the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and the General Partner shall mot be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith. (c) Any amendment, modification or repeal of this Section 6.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability to the Partnership and the Limited Partners of the General Partner, its directors, officers and employees under this Section 6.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. 6.9 Resolution of Conflicts of Interest. (a) Unless otherwise expressly provided in this Agreement or the Operating Partnership Agreement, whenever a potential conflict or interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership, the Operating Partnership, any Partner or any Assignee, on the other hand, any resolution or course of action in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, of the Operating Partnership Agreement, of any agreement contemplated herein or therein, or of any duty stated or implied by law or equity, if the resolution or course of action is or, by operation of this Agreement is deemed to be, fair and reasonable to the Partnership. The General Partner shall be authorized in connection with its resolution of any conflict of interest to consider (i) the relative interests of any party involved in such conflict or affected by such action, agreement, transaction or situation and the benefits and burdens relating to such interest; (ii) any customary or accepted AMC and industry practices; (iii) any applicable generally accepted accounting practices or principles; and (iv) such additional factors as the General Partner determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. Nothing contained in this Agreement, however, is intended to nor shall it be construed to require the General Partner to consider the interests of any Person other than the Partnership. In the absence of bad faith by the General Partner, the resolution, action or terms so made, taken or provided by the General Partner with respect to such matter shall not constitute a breach of this Agreement or any other agreement contemplated herein or a breach of any standard of care or duty imposed herein or therein or under the Delaware Act or any other law, rule or regulation. (b) Whenever this Agreement or any other agreement contemplated hereby provides that a General Partner or any of its Affiliates is permitted or required to make a decision (i) in its "sole discretion" or "discretion," that it deems "necessary or appropriate" or under a grant of similar authority or latitude, the General Partner or such Affiliate shall be entitled to consider only such interests and factors as it desires and shall have no duty or obligation to tive any consideration to any interest of, or factors affecting, the Partnership, the Operating Partnership, any Limited Partner or any Assignee, or (ii) in "good faith" or under another express standard, the General Partner or such Affiliate shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement, the Operating Partnership Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation. In addition, any actions taken by the General Partner consistent with the standards of "reasonable discretion" set forth in the definitions of Available Cash or Cash from Operations shall not constitute a breach of any duty of the General Partner to the Partnership or the Limited Partners. During or after the Preference Period, the General Partner shall have no duty, express or implied, to sell or otherwise dispose of any A-39 asset of the Operating Partnership or of the Partnership. No borrowing by the Partnership or the Operating Partnership or the approval thereof by the General Partner shall be deemed to constitute a breach of any duty of the General Partner to the Partnership or the Limited Partners by reason of the fact that the purpose or effect of such borrowing is directly or indirectly to (i) avoid having the Partnership draw on the Letter of Credit, (ii) avoid subordination of the Junior Preference Units or Common Units or (iii) result in or increase incentive distributions to the General Partner. (c) Whenever a particular transaction, arrangement or resolution of a conflict of interest is required under this Agreement to be "fair and reasonable" to any Person, the fair and reasonable nature of such transaction, arrangement or resolution shall be considered in the context of all similar or related transactions. (d) The Limited Partners hereby authorize the General Partner, on behalf of the Partnership as limited partner of the Operating Partnership, to approve of actions by the general partner of the Operating Partnership similar to those actions permitted to be taken by the General Partner pursuant to this Section 6.9. 6.10 Other Matters Concerning the General Partner. (a) The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. (b) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted in reliance upon the opinion (including, without limitation, an Opinion of Counsel) of such Persons as to matters that such General Partner reasonably believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. (c) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform each and every act and duty that is permitted or required to be done by the General Partner hereunder. (d) Any standard of care and duty imposed by this Agreement or under the Delaware Act or any applicable law, rule or regulation shall be modified, waived or limited as required to permit the General Partner to act under this Agreement or any other agreement contemplated by this Agreement and to make any decision pursuant to the authority prescribed in this Agreement so long as such action is not inconsistent with the best interests of the Partnership. 6.11 Title to Partnership Assets. Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner or Assignee, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Partnership assets for which record title is held in the name of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its reasonable efforts to cause record title to such assets (other than those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable and those assets listed on Schedule I to the Conveyance Agreement) to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Partnership assets are held. 6.12 Purchase or Sale of Units. The General Partner may cause the Partnership to purchase or otherwise acquire Units or other Partnership Securities, provided that the General Partner may not cause the Partnership to purchase Units or other Partnership Securities having rights to distribution on or in liquidation ranking junior to the Senior Preference Units if there is an arrearage in the payment of A-40 any distribution in respect of the Senior Preference Units, except as set forth in Section 17.2. As long as Units or other Partnership Securities are held by the Partnership or the Operating Partnership, such Units or other Partnership Securities shall not be considered Outstanding for any purpose, except as otherwise provided herein. The General Partner or any Affiliate of the General Partner may also purchase or otherwise acquire and sell or otherwise dispose of Units or other Partnership Securities for its own account, subject to the provisions of Articles XI and XII. 6.13. Reliance by Third Parties. Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership's sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. 6.14. Registration Rights of AMC and Its Affiliates. (a) The rights of AMC and its Affiliates pursuant to this Section 6.14 with respect to Units may be assigned by AMC or any of its Affiliates to purchasers of such Units. If AMC or any of its Affiliates (including, for purposes of this Section 6.14, Persons that are Affiliates at the date hereof notwithstanding that they may later cease to be Affiliates) holds Units that it desires to sell in a publicly registered offering, then upon the request of AMC or any such Affiliate, the Partnership shall file with the Securities and Exchange Commission as promptly as practicable after receiving such request, and use all reasonable efforts to cause to become effective and remain effective for the period set forth in any applicable underwriting agreement or, if there is no such underwriting agreement, a reasonable period following its effective date, a registration statement under the Securities Act including, if applicable, a shelf registration statement on Form S-3, to remain effective for a reasonable period of time, registering the offering and sale of the number of Units specified by AMC or any of its Affiliates; provided, however, that if the General Partner determines in its good faith judgment that a postponement of the requested registration for up to 180 days would be in the best interests of the Partnership or its Partners due to a pending transaction, investigation or other event, the filing of such registration statement or the effectiveness thereof may be deferred for up to 180 days, but not thereafter. In connection with any registration pursuant to the preceding sentence, the Partnership shall promptly prepare and file (x) such documents as may be necessary to register or qualify the securities subject to such registration under the securities laws of such states as AMC or any of its Affiliates shall reasonably request; provided, however, that no such qualification shall be required in any jurisdiction where, as a result thereof the Partnership would become subject to general service of process or to taxation or qualification to do business as a foreign corporation doing business in such jurisdiction, and (y) such documents as may be necessary to apply for listing or to list the securities subject to such registration on such National Securities Exchange as AMC or such Affiliates shall reasonably request, and do any and all other acts and things that may reasonably be necessary or advisable to enable AMC or any of its Affiliates to consummate a public sale of such Units in such states. Except as set forth in subsection (c) below, all costs and expenses of any such registration and offering shall be paid by the Partnership; provided, however, that AMC or its Affiliates shall bear the expense of all Commission filing fees, underwriting discounts and commissions attributable to the Units sold for its own account and shall reimburse the Partnership for any incremental costs to the Partnership for the third and any subsequent registration pursuant to this Section 6.14(a). A-41 (b) If the Partnership shall at any time propose to file a registration statement under the Securities Act for an offering of Units of the Partnership for cash (other than an offering relating solely to an employee benefit plan), the Partnership shall use its best efforts to include such number or amount of Units held by AMC and any of its Affiliates in such registration statement as AMC or any of such Affiliates shall request. If the proposed offering pursuant to this Section 6.14(b) shall be an underwritten offering, then, in the event that the managing underwriter of such offering advises the General Partner, AMC or any of such Affiliates in writing that in its opinion the inclusion of all or some of AMC's or any of its Affiliates' Units would materially adversely affect the proposed terms of such offering or the Partnership's ability to sell Units in such offering on such terms, the Partnership shall include in such offering only that number or amount, if any, of securities held by AMC or any of its Affiliates which, in the opinion of the managing underwriter, will not so adversely and materially affect the offering. In connection with any registration pursuant to this Section 6.14(b), AMC or any of its Affiliates shall bear the expense of all underwriting discounts and commissions attributable to the Units sold for its own account but shall not be required to reimburse the Partnership for any incremental costs incurred by the Partnership in connection with such registration resulting from the inclusion of Units held by AMC or any of its Affiliates. (c) If underwriters are engaged in connection with any registration referred to in this Section 6.14, the Partnership shall provide indemnification, representations, covenants, opinions and other assurance to the underwriters in form and substance reasonably satisfactory to such underwriters. Further, in addition to and not in limitation of the Partnership's obligation under Section 6.7 hereof, the Partnership shall, to the fullest extent permitted by law, indemnify and hold harmless AMC or such other holder, its officers, directors and each Person who controls AMC or such other holder (within the meaning of the Securities Act) and any agent thereof (collectively, "Indemnified Persons") against any losses, claims, demands, actions, causes of action, assessments, damages, liabilities (joint or several), costs and expenses (including without limitation, interest, penalties and reasonable attorneys' fees and disbursements), resulting to, imposed upon, or incurred by an Indemnified Person, directly or indirectly, under the Securities Act or otherwise (hereinafter referred to in this Section 6.14(c) as a "claim" and in the plural as "claims"), based upon, arising out of, or resulting from any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which any Units were registered under the Securities Act or any state securities or Blue Sky laws, in any preliminary prospectus (if used prior to the effective date of such registration statement), or in any summary or final prospectus or in any amendment or supplement thereto (if used during the period the Partnership is required to keep the registration statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein not misleading; provided, however, that the Partnership shall not be liable to the extent that any such claim arises out of, is based upon or results from an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, such preliminary, summary or final prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Partnership by or on behalf of such Indemnified Person specifically for use in the preparation thereof. (d) The provisions of Sections 6.14(a) and 6.14(b) hereof shall continue to be applicable with respect to AMC and its Affiliates after any affiliate of AMC ceases to be a general partner of the Partnership, during a period of two years subsequent to the effective date of such cessation and for so long thereafter as is required for AMC (or its Affiliates) to sell all of the Units of the Partnership with respect to which it has requested during such two-year period that a registration statement be filed; provided, however, that the Partnership shall not be required to file any additional registration statements covering the same securities for which registration was demanded during such two-year period. The provisions of Section 6.14(c) hereof shall continue in effect thereafter. A-42 ARTICLE VII Rights and Obligations of Limited Partners 7.1 Limitation of Liability. The Limited Partners and the Organizational Limited Partner and the Assignees shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Act. 7.2 Management of Business. No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner or any of its Affiliates, in its capacity as such, if such Person shall also be a Limited Partner or Assignee) shall take part in the operation, management or control (within the meaning of the Delaware Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner or any of its Affiliates, in its capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement. 7.3 Outside Activities. Subject to the provisions of Section 6.5, which shall continue to be applicable to the Persons referred to therein, regardless of whether such Persons shall also be Limited Partners or Assignees, any Limited Partner or Assignee shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including, without limitation, business interests and activities in direct competition with the Partnership or the Operating Partnership. Neither the Partnership nor any of the other Partners or Assignees shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. 7.4 Return of Capital. No Limited Partner shall be entitled to the withdrawal or return of his Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. Except to the extent provided by Article V or as otherwise expressly provided in this Agreement, no Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions. Any such return shall be a compromise to which all Partners and Assignees agree within the meaning of Section 17.502(b) of the Delaware Act. 7.5 Rights of Limited Partners Relating to the Partnership. (a) In addition to other rights provided by this Agreement or by applicable law, and except as limited by Section 7.5(b), each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon reasonable demand and at such Limited Partner's own expense: (i) to obtain true and full information regarding the status of the business and financial condition of the Partnership; (ii) promptly after becoming available, to obtain a copy of the Partnership's federal, state and local tax returns for each year; (iii) to have furnished to him, upon notification to the General Partner, a current list of the name and last known business, residence or mailing address of each Partner; (iv) to have furnished to him, upon notification to the General Partner, a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto and powers of attorney pursuant to which the same have been executed; (v) to obtain true and full information regarding the amount of cash, and a description and statement of the Agreed Value of any other Capital Contribution, contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner; and A-43 (vi) to obtain such other information regarding the affairs of the Partnership as is just and reasonable. (b) Notwithstanding any other provision of this Agreement, the General Partner may keep confidential from the Limited Partners and Assignees for such period of time as the General Partner deems reasonable, any information that the General Partner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or the Operating Partnership or which the Partnership or the Operating Partnership is required by law or by agreements with third parties to keep confidential. ARTICLE VIII Books, Records, Accounting and Reports 8.1 Records and Accounting. The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership's business including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 7.5(a). Any books and records maintained by or on behalf of the Partnership in the regular course of its business, including, without limitation, the record of the Record Holders and Assignees of Units, Depositary Units or other Partnership Securities, books of account and records of Partnership proceedings, may be kept on, or be in the form of computer disks, hard disks, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with generally accepted accounting principles. 8.2 Fiscal Year. The fiscal year of the Partnership shall be the calendar year. 8.3 Reports. (a) As soon as practicable, but in no event later than 120 days after the close of each Partnership Year, the General Partner shall cause to be mailed to each Record Holder of a Unit as of a record date selected by the General Partner in its sole discretion, an annual report containing financial statements of the Partnership for such Partnership Year, presented on an accrual basis in accordance with generally accepted accounting principles, including a balance sheet and statements of operations, Partners' equity and cash flows, such statements to be audited by a firm of independent public accountants selected by the General Partner. (b) As soon as practicable, but in no event later than ninety days after the close of each calendar quarter except the last calendar quarter of each year, the General Partner shall cause to be mailed to each Record Holder of a Unit, as of a record date selected by the General Partner in its sole discretion, a report containing unaudited financial statements of the Partnership and such other information as may be required by applicable law, regulation or rule of any National Securities Exchange on which the Units are listed for trading, or as the General Partner determines to be necessary or appropriate. ARTICLE IX Tax Matters 9.1 Preparation of Tax Returns. The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall use all reasonable efforts to furnish, within ninety days of the close of each taxable year of the Partnership, the tax information reasonably required by Unitholders for federal and state income tax reporting purposes. The classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for federal income tax purposes. The taxable year of the Partnership shall be the calendar year. A-44 9.2 Tax Elections. Except as otherwise provided herein, the General Partner shall, in its sole discretion, determine whether to make any available election pursuant to the Code; provided, however, that the General Partner shall make the election under Section 754 of the Code in accordance with applicable regulations thereunder. The General Partner shall have the right to seek to revoke any such election (including, without limitation, the election under Section 754 of the Code) upon the General Partner's determination in its sole discretion that such revocation is in the best interests of the Limited Partners and Assignees. For purposes of computing the adjustments under Section 743(b) of the Code, the General Partner shall be authorized (but not required) to adopt a convention whereby the price paid by a transferee of Units will be deemed to be the lowest quoted trading price of the Units on any National Securities Exchange on which such Units are traded during the calendar month in which such transfer is deemed to occur pursuant to Section 5.2(g) without regard to the actual price paid by such transferee. 9.3 Tax Controversies. Subject to the provisions hereof, the General Partner is designated the Tax Matters Partner (as defined in Section 6231 of the Code), and is authorized and required to represent the Partnership (at the Partnership's expense) in connection with all examinations of the Partnership's affairs by tax authorities, including, without limitation, resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner and Assignee agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings. 9.4 Organizational Expenses. The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership ratably over a sixty-month period as provided in Section 709 of the Code. 9.5 Withholding. Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines in its sole discretion to be necessary or appropriate to cause the Partnership and the Operating Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner or Assignee (including, without limitation, by reason of Section 1446 of the Code), the amount withheld shall be treated as a distribution of cash pursuant to Section 5.3 in the amount of such withholding from such Partner. 9.6 Entity-Level Arrearage Collections. If the Partnership is required by applicable law to pay any federal, state or local income tax on behalf of, or withhold such amount with respect to, any Partner or Assignee or any former Partner or Assignee (a) the General Partner shall cause the Partnership to pay such tax on behalf of such Partner or Assignee or former Partner or Assignee from the funds of the Partnership; (b) any amount so paid on behalf of or withheld with respect to, any Partner or Assignee shall constitute a distribution out of Available Cash to such Partner or Assignee pursuant to Section 5.3 (except as otherwise provided in Section 5.7(a)); and (c) to the extent any such Partner or Assignee (but not a former Partner or Assignee) is not then entitled to such distribution under this Agreement, the General Partner shall be authorized, without the approval of any Partner or Assignee, to amend this Agreement insofar as is necessary to maintain the uniformity of intrinsic tax characteristics as to all Units and to make subsequent adjustments to distributions in a manner which, in the reasonable judgment of the General Partner, will make as little alteration as practicable in the priority and amount of distributions otherwise applicable under this Agreement, and will not otherwise alter the distributions to which Partners and Assignees are entitled under this Agreement. If the Partnership is permitted (but not required) by applicable law to pay any such tax on behalf of any Partner or Assignee or former Partner or Assignee, the General Partner shall be authorized (but not required) to cause the Partnership to pay such tax from the funds of the Partnership and to take any action consistent with this Section 9.6. The General Partner shall be authorized (but not required) to take all necessary or appropriate actions to collect all or any portion of a deficiency in the payment of any such tax that relates to prior periods and that is attributable to Persons who were Limited Partners or Assignees when such deficiencies arose, from such Persons. A-45 9.7 Opinions of Counsel. Notwithstanding any other provision of this Agreement, if the Partnership is taxable for federal income tax purposes as a corporation or treated as an association taxable as a corporation at any time and, pursuant to the provisions of this Agreement, an Opinion of Counsel would otherwise be required to the effect that an action will not cause the Partnership to become so taxable as a corporation or to be treated as an association taxable as a corporation, such requirement for an Opinion of Counsel shall be deemed automatically waived. ARTICLE X Unit Certificates and Depositary Receipts 10.1 Unit Certificates and Depositary Receipts. (a) Upon the Partnership's issuance of Units to any Person, the Partnership shall issue one or more Unit Certificates in the name of such Person evidencing the number of such Units being so issued. Unit Certificates shall be executed on behalf of the Partnership by the General Partner. No Unit Certificate shall be valid for any purpose until it has been countersigned by the Transfer Agent. (b) The General Partner (i) may cause the deposit of some or all of the Unit Certificates in the Deposit Account pursuant to the Deposit Agreement; (ii) with respect to those Unit Certificates deposited in the Deposit Account, shall cause to be issued Depositary Receipts registered in the name of the Person(s) to whom such Units have been issued, evidencing the same number of Depositary Units, as the case may be, as the number of Units represented by the Unit Certificates so deposited; and (iii) shall cause the distribution of such Depositary Receipts to such Person(s). 10.2 Registration, Registration of Transfer and Exchange. (a) The General Partner shall cause to be kept on behalf of the Partnership a register (the "Unit Register") in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 10.2(b), the General Partner will provide for the registration and the transfer of Units. The Depositary is hereby appointed registrar and transfer agent for the purpose of registering and transferring the Senior Preference Units and the Common Units as herein provided. The Partnership shall not recognize transfers of Unit Certificates representing Units which have been deposited pursuant to Section 10.1(b) and not withdrawn or interests therein, except by transfers of Depositary Units in the manner described in this Section 10.2 and in the Deposit Agreement. Upon surrender for registration of transfer of any Depositary Units evidenced by a Depositary Receipt and subject to the provisions of Section 10.2(b), the Depositary will execute, and the Transfer Agent will countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder's instructions, one or more new Depositary Receipts evidencing the same aggregate number and class of Depositary Units as was evidenced by the Depositary Receipt so surrendered. (b) Except as otherwise provided in Section 11.5, the Partnership shall not recognize any transfer of Depositary Units until the Depositary Receipts evidencing such Depositary Units are surrendered for registration of transfer and such Depositary Receipts are accompanied by a Transfer Application duly executed by the transferee (or the transferee's attorney-in-fact duly authorized in writing). No charge shall be imposed by the Partnership for such transfer, provided that, as a condition to the issuance of any new Depositary Receipt under this Section 10.2, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto. 10.3 Mutilated, Destroyed, Lost or Stolen Unit Certificates and Depositary Receipts. (a) If any mutilated Unit Certificate or Depositary Receipt is surrendered to the Transfer Agent, the General Partner on behalf of the Partnership (with respect to Unit Certificates) or the Depositary (with respect to Depositary Receipts) shall execute, and, upon its request, the Transfer Agent shall countersign and deliver in exchange therefor, a new Unit Certificate or Depositary Receipt, as the case may be, evidencing the same number and class of Units as the Unit Certificate or Depositary Receipt so surrendered. (b) The General Partner on behalf of the Partnership or, with respect to Depositary Receipts, the Depositary shall execute, and, upon its request, the Transfer Agent shall countersign and deliver, a new A-46 Unit Certificate or Depositary Receipt, as the case may be, in place of any Unit Certificate or Depositary Receipt previously issued if the Record Holder of such Unit Certificate or Depositary Receipt: (i) makes proof by affidavit, in form and substance satisfactory to the General Partner, of the Record Holder's ownership of such Unit Certificate or Depositary Receipt, as the case may be, and that such previously issued Unit Certificate or Depositary Receipt has been lost, destroyed or stolen; (ii) requests the issuance of a new Unit Certificate or Depositary Receipt, as the case may be, before the Partnership has been notified that the Unit Certificate or Depositary Receipt, as the case may be, has been acquired by a purchaser for value in good faith and without notice of an adverse claim; (iii) if requested by the General Partner, delivers to the Partnership such security or indemnity as may be required by the General Partner, in form and substance satisfactory to the General Partner, with surety or sureties and with fixed or open penalty as the General Partner may direct, in its sole discretion, to indemnify and hold harmless the Partnership, the General Partner and the Transfer Agent (with respect to Unit Certificates) or the Depositary (with respect to Depositary Receipts) against any claim that may be made on account of the alleged loss, destruction or theft of the Unit Certificate or Depositary Receipt, as the case may be; and (iv) satisfies any other reasonable requirements imposed by the General Partner. If a Limited Partner or Assignee fails to notify the Partnership within a reasonable time after he has notice of the loss, destruction or theft of a Unit Certificate or Depositary Receipt, and a transfer of the Units represented by the Unit Certificate or Depositary Receipt, as the case may be, is registered before the Partnership, the General Partner or the Transfer Agent receives such notification, the Limited Partner or Assignee shall be precluded from making any claim against the Partnership, the General Partner or the Transfer Agent for such transfer or for a new Unit Certificate or Depositary Receipt, as the case may be. (c) As a condition to the issuance of any Unit Certificate or Depositary Receipt under this Section 10.3, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including, without limitation, the fees and expenses of the Transfer Agent) connected therewith. 10.4 Record Holder. In accordance with Section 10.2(b), the Partnership shall be entitled to recognize the Record Holder as the Limited Partner or Assignee with respect to any Units and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Units on the part of any other Person, whether or not the Partnership shall have actual or other notice thereof except as otherwise provided by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed for trading. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Units, as between the Partnership on the one hand and such other Persons on the other hand, such representative Person (a) shall be the Limited Partner or Assignee (as the case may be) of record and beneficially, (b) must execute and deliver a Transfer Application and (c) shall be bound by this Agreement and shall have the rights and obligations of a Limited Partner or Assignee (as the case may be) hereunder and as provided for herein. 10.5 Withdrawal of Units from and Redeposit of Units in Depositary Account. Any Units may be withdrawn from the Depositary Account upon the written request of the Record Holder thereof and by surrender of the Depositary Receipts evidencing the corresponding Depositary Units; provided that such Record Holder is then reflected on the books and records of the Partnership as the Limited Partner in respect of the Units for which such withdrawal is requested. Upon any such withdrawal, the General Partner shall cause the Partnership to issue a Unit Certificate evidencing such Units. Any such A-47 withdrawn Units, or Units that have not previously been so deposited, may be redeposited or deposited (as the case may be) in the Deposit Account by the surrender of the Unit Certificate evidencing such withdrawn Units or non- deposited Units to the Depositary and payment to the Depositary of such fee and upon such terms as may be required therefor pursuant to the Deposit Agreement. Upon any such redeposit or deposit, the Depositary shall issue a Depositary Receipt evidencing the same number of Units as was evidenced by the Unit Certificate so redeposited or deposited. 10.6 Amendment of Deposit Agreement. Subject to its fiduciary obligations, the General Partner may amend or modify any provision of the Deposit Agreement in any respect it reasonably determines to be necessary or appropriate; provided, however, that the General Partner shall not amend or modify the Deposit Agreement if the effect of any such amendment or modification would override or supersede the provisions of this Agreement or would impair the right of Limited Partners to withdraw their Units from deposit thereunder. ARTICLE XI Transfer of Interests 11.1 Transfer. (a) The term "transfer," when used in this Article XI with respect to a Partnership Interest, shall be deemed to refer to an appropriate transaction by which the General Partner assigns its Partnership Interest as General Partner to another Person or by which the holder of a Unit or other Partnership Security assigns such Unit or other Partnership Security to another Person who is or becomes an Assignee and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. (b) No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article XI. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article XI shall be null and void. 11.2 Transfer of General Partner's Partnership Interest. (a) The General Partner may transfer all, but not less than all, of its Partnership Interest as the General Partner to a single transferee if, but only if, (i) during the Preference Period, holders of at least a majority of the Outstanding Senior Preference Units (excluding for purposes of such determination Senior Preference Units held by the General Partner and its Affiliates), and after the Preference Period, the holders of at least a majority of Outstanding Units, approve of such transfer and of the admission of such transferee as General Partner, (ii) the transferee agrees to assume the rights and duties of the General Partner and be bound by the provisions of this Agreement and the Operating Partnership Agreement and (iii) the Partnership receives an Opinion of Counsel that such transfer would not result in the loss of limited liability of any Limited Partner or of any limited partner of any Operating Partnership or cause the Partnership or the Operating Partnership to be taxable as a corporation or otherwise treated as an association taxable as a corporation for federal income tax purposes. (b) Neither Section 11.2(a) or any other provision of this Agreement shall be construed to prevent (and all Partners do hereby consent to) (i) the transfer by the General Partner of all of its Partnership Interest as the General Partner to an Affiliate or (ii) the transfer by the General Partner of all of its Partnership Interest as the General Partner upon its merger, consolidation or other combination into any other Person or the transfer by it of all or substantially all of its assets to another Person if, in the case of a transfer described in either clause (i) or (ii) of this sentence, the rights and duties of the General Partner with respect to the Partnership Interest as the General Partner so transferred are assumed by the transferee and the transferee agrees to be bound by the provisions of this Agreement and the Operating Partnership Agreement; provided that, in either such case, such transferee furnishes to the Partnership an Opinion of Counsel that such merger, consolidation, combination, transfer or assumption will not result in a loss of limited liability of any Limited Partner or of any limited partner of the Operating Partnership or cause the Operating Partnership to be taxable as a corporation or otherwise treated as an association taxable as a corporation for federal income tax purposes. In the case of a transfer pursuant to this Section 11.2(b), the transferee or successor (as the A-48 case may be) shall be admitted to the Partnership as the General Partner immediately prior to the transfer of the Partnership Interest as the General Partner, and the business of the Partnership shall continue without dissolution. 11.3 Transfer of Units. (a) Units that have been deposited in the Deposit Account may be transferred only in the manner described in Section 10.2. Units that have been withdrawn from the Deposit Account and not redeposited are not transferable except upon death or by operation of law; provided, however, that any Limited Partner may transfer such Units to the Partnership or the General Partner, and such Units may be transferred otherwise in accordance with this Agreement. The transfer of any Units and the admission of any new Partner shall not constitute an amendment to this Agreement. (b) Until admitted as a Substituted Limited Partner pursuant to Article XII, the Record Holder of a Unit shall be an Assignee in respect of such Unit. Limited Partners may include custodians, nominees or any other individual or entity in its own or any representative capacity. (c) Each distribution in respect of Units shall be paid by the Partnership, directly or through the Transfer Agent or through any other Person or agent, only to the Record Holders thereof as of the Record Date set for the distribution. Such payment shall constitute full payment and satisfaction of the Partnership's liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise. (d) A transferee who has completed, executed and delivered a Transfer Application shall be deemed to have (i) requested admission as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and to have executed this Agreement and the Deposit Agreement, if applicable, (iii) represented and warranted that such transferee has the capacity or authority to enter into this Agreement and the Deposit Agreement, if applicable, (iv) granted the powers of attorney set forth in such Transfer Application and (v) given the consents and made the waivers contained in this Agreement and the Deposit Agreement, if applicable. 11.4 Restrictions on Transfers. Notwithstanding the other provisions of this Article XI, no transfer of any Unit or interest therein of any Limited Partner or Assignee shall be made if such transfer would (a) violate the then applicable federal or state securities laws or rules and regulations of the Securities and Exchange Commission, any state securities commission or any other governmental authorities with jurisdiction over such transfer, (b) cause the Partnership to be taxable as a corporation or otherwise treated as an association taxable as a corporation for federal income tax purposes or (c) affect the Partnership's existence or qualification as a limited partnership under the Delaware Act. 11.5 Citizenship Certificates; Non-citizen Assignees. (a) If the Partnership or the Operating Partnership is or becomes subject to any federal, state or local law or regulation which, in the reasonable determination of the General Partner, provides for the cancellation or forfeiture of any property in which the Partnership or the Operating Partnership has an interest based on the nationality, citizenship or other related status of a Limited Partner or Assignee, the General Partner may request any Limited Partner or Assignee to furnish to the General Partner or, with respect to Depositary Units, to the Depositary, within thirty days after receipt of such request, an executed Citizenship Certification or such other information concerning his nationality, citizenship, residency or other related status (or, if the Limited Partner or Assignee is a nominee holding for the account of another Person, the nationality, citizenship, residency or other related status of such Person) as the General Partner may request. If a Limited Partner or Assignee fails to furnish to the General Partner within the aforementioned thirty-day period such Citizenship Certification or other requested information or if upon receipt of such Citizenship Certification or other requested information the General Partner determines, with the advice of counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the Units owned by such Limited Partner or Assignee shall be subject to redemption in accordance with the provisions of Section 11.6. In addition, the General Partner may require that the status of any such Limited Partner or Assignee be changed to that of a Non-citizen Assignee, and, thereupon, the General Partner shall be substituted for such Non-citizen Assignee as the Limited Partner in respect of his LP Units. A-49 (b) The General Partner shall, in exercising voting rights in respect of each class of Units held by it on behalf of Non-citizen Assignees, distribute the votes in the same ratios as the votes of Limited Partners in respect of such class of Units other than those of Non-citizen Assignees are cast, either for, against or abstaining as to the matter. (c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have no right to receive a distribution in kind pursuant to Section 14.4 but shall be entitled to the cash equivalent thereof, and the General Partner shall provide cash in exchange for an assignment of the Non-citizen Assignee's share of the distribution in kind. Such payment and assignment shall be treated for Partnership purposes as a purchase by the General Partner from the Non-citizen Assignee of his Partnership Interest (representing his right to receive his share of such distribution in kind). (d) At any time after he can and does certify that he has become an Eligible Citizen, a Non-citizen Assignee may, upon application to the General Partner, request admission as a Substituted Limited Partner with respect to any Units of such Non-citizen Assignee not redeemed pursuant to Section 11.6, and upon his admission pursuant to Section 12.2 the General Partner shall cease to be deemed the Limited Partner in respect of the Non-citizen Assignee's Units. 11.6 Redemption of Interests. (a) If at any time a Limited Partner or Assignee fails to furnish a Citizenship Certification or other information requested within the thirty-day period specified in Section 11.5(a), or if upon receipt of such Citizenship Certification or other information the General Partner determines, with the advice of counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the Partnership may, unless the Limited Partner or Assignee establishes to the satisfaction of the General Partner that such Limited Partner or Assignee is an Eligible Citizen or has transferred his Units to a Person who furnishes a Citizenship Certification to the General Partner prior to the date fixed for redemption as provided below, redeem the Partnership Interest of such Limited Partner or Assignee as follows: (i) The General Partner shall, not later than the thirtieth day before the date fixed for redemption, give notice of redemption to the Limited Partner or Assignee, at his last address designated on the records of the Partnership or the Depositary, if applicable, by registered or certified mail, postage prepaid. The notice shall be deemed to have been given when so mailed. The notice shall specify the Redeemable Units, the date fixed for redemption, the place of payment, that payment of the redemption price will be made upon surrender of the Depositary Receipt or the Unit Certificate (as the case may be) evidencing the Redeemable Units and that on and after the date fixed for redemption no further allocations or distributions to which the Limited Partner or Assignee would otherwise be entitled in respect of the Redeemable Units will accrue or be made. (ii) The aggregate redemption price for Redeemable Units shall be an amount equal to the Current Market Price (the date of determination of which shall be the date fixed for redemption) of Units of the class to be so redeemed multiplied by the number of Units of each such class included among the Redeemable Units. The redemption price shall be paid, in the sole discretion of the General Partner, in cash or by delivery of a promissory note of the Partnership in the principal amount of the redemption price, bearing interest at the rate of 10% annually and payable in three equal annual installments of principal, together with accrued interest, commencing one year after the redemption date. (iii) Upon surrender by or on behalf of the Limited Partner or Assignee, at the price specified in the notice of redemption, of the Depositary Receipt of the Unit Certificate (as the case may be) evidencing the Redeemable Units, duly endorsed in blank or accompanied by an assignment duly executed in blank, the Limited Partner or Assignee or his duly authorized representative shall be entitled to receive the payment therefor. A-50 (iv) After the redemption date, Redeemable Units shall no longer constitute issued and Outstanding Units. (b) The provisions of this Section 11.6 shall also be applicable to Units held by a Limited Partner or Assignee as nominee of a Person determined to be other than an Eligible Citizen. (c) Nothing in this Section 11.6 shall prevent the recipient of a notice of redemption from transferring his Units before the redemption date if such transfer is otherwise permitted under this Agreement. Upon receipt of notice of such a transfer, the General Partner shall withdraw the notice of redemption; provided that the transferee of such Units or Depositary Units certifies in the Transfer Application that he is an Eligible Citizen. If the transferee fails to make such certification, such redemption shall be effected from the transferee on the original redemption date. (d) If the Partnership is or becomes subject to any federal, state or local law or regulation which, in the reasonable determination of the General Partner, provides for the cancellation or forfeiture of any property in which the Partnership or the Operating Partnership has an interest, based on the nationality (or other status) of the General Partner, whether or not in its capacity as such, the Partnership may, unless the General Partner has furnished a Citizenship Certification or transferred its Partnership Interest or Units to a Person who furnishes a Citizenship Certification prior to the date fixed for redemption, redeem the Partnership Interest or Interests of the General Partner in the Partnership as provided in Section 11.6(-), which redemption shall also constitute redemption of the general partner interest of the general partner of the Operating Partnership. If such redemption includes a redemption of the Combined Interest, the redemption price thereof shall be equal to the aggregate sum of the Current Market Price (the date of determination for which shall be the date fixed for redemption) of each class of Units then Outstanding, in each such case multiplied by the number of Units of such class into which the Combined Interest would then be convertible under the terms of Section 13.3(b) if the General Partner were to withdraw or be removed as the General Partner (the date of determination for which shall be the date fixed for redemption). The redemption price shall be paid in cash or by delivery of a promissory note of the Partnership in the principal amount of the redemption price, bearing interest at the rate of 10% annually and payable in three equal annual installments of principal, together with accrued interest, commencing one year after the redemption date. ARTICLE XII Admission of Partners 12.1 Admission of Initial Limited Partners. Upon the issuance by the Partnership of Units to the Initial Limited Partners as described in Section 4.3 and the execution by each such party of a Transfer Application, the General Partner shall admit to the Partnership the Initial Limited Partners as Limited Partners in respect of the Units. 12.2 Admission of Substituted Limited Partners. By transfer of a Depositary Unit or Unit in accordance with Article XI, the transferor shall be deemed to have given the transferee the right to seek admission as a Substituted Limited Partner subject to the conditions of, and in the manner permitted under, this Agreement. A transferor of a Depositary Unit or Unit shall, however, only have the authority to convey to a purchaser or other transferee who does not execute and deliver a Transfer Application (i) the right to transfer such Depositary Unit or Unit to a purchaser or other transferee and (ii) the right to transfer the right to request admission as a Substituted Limited Partner to such purchaser or other transferee in respect of the transferred Depositary Units or Units, as the case may be. Each transferee of a Depositary Unit or Unit (including, without limitation, any nominee holder or an agent acquiring such Depositary Unit or Unit for the account of another Person) who executes and delivers a Transfer Application shall, by virtue of such execution and delivery, be an Assignee and be deemed to have applied to become a Substituted Limited Partner with respect to the Depositary Units or Units, as the case may be, so transferred to such Person. Such Assignee shall become a Substituted Limited Partner (i) at such time as the General Partner consents thereto, which consent may be given or withheld in the General Partner's sole discretion, and (ii) when any such admission is shown on the books and records of the Partnership. If such consent is withheld, such transferee shall be an Assignee. An Assignee shall have an interest in the Partnership equivalent to that of a Limited Partner with respect to allocations and distributions, including, without limitation, liquidating distributions, of the A-51 Partnership. With respect to voting rights attributable to Units that are held by Assignees, the General Partner shall be deemed to be the Limited Partner with respect thereto and shall, in exercising the voting rights in respect of such Units on any matter, vote such Units at the written direction of the Assignee who is the Record Holder of such Units. If no such written direction is received, such Units will not be voted. An Assignee shall have no other rights of a Limited Partner. 12.3 Admission of Successor General Partner. A successor General Partner approved pursuant to Section 13.1 or 13.2 or the transferee of or successor to all of the General Partner's Partnership Interest pursuant to Section 11.2 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to the withdrawal or removal of the General Partner pursuant to Section 13.1 or the transfer of the General Partner's Partnership Interest pursuant to Section 11.2; provided, however, that no such successor shall be admitted to the Partnership until the terms of Section 11.2 have been complied with. Any such successor shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. 12.4 Admission of Additional Limited Partners. (a) A Person (other than an Initial Limited Partner or a Substituted Limited Partner) who makes a Capital Contribution to the Partnership in accordance with this Agreement (other than by virtue of the purchase of APIs) shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 1.4 and (ii) such other documents or instruments as may be required in the discretion of the General Partner to effect such Person's admission as an Additional Limited Partner. (b) Notwithstanding anything to the contrary in this Section 12.4, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner's sole discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission. 12.5 Amendment of Agreement and Certificate of Limited Partnership. To effect the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Delaware Act to amend the records of the Partnership and, if necessary, to prepare as soon as practicable an amendment of this Agreement and, if required by law, to prepare and file an amendment to the Certificate of Limited Partnership and may for this purpose, among others, exercise the power of attorney granted pursuant to Section 1.4. ARTICLE XIII Withdrawal or Removal of Partners 13.1 Withdrawal of the General Partner. (a) The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an "Event of Withdrawal"); (i) the General Partner voluntarily withdraws from the Partnership by giving written notice to the other Partners; (ii) the General Partner transfers all of its rights as General Partner pursuant to Article XI; (iii) the General Partner is removed pursuant to Section 13.2; (iv) the General Partner (A) makes a general assignment for the benefit of creditors; (B) files a voluntary bankruptcy petition; (C) files a petition or answer seeking for itself a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any law; (D) files an answer of other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in clauses (A)-(C) A-52 of this sentence; or (E) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the General Partner or of all or any substantial part of its properties; (v) a final and non-appealable judgment is entered by a court with appropriate jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect; or (vi) a certificate of dissolution or its equivalent is filed for the General Partner, or ninety days expire after the date of notice to the General Partner of revocation of its charter without a reinstatement of its charter, under the laws of its state of incorporation. If an Event of Withdrawal specified in Section 13.1(a)(iv), (v) or (vi) occurs, the withdrawing General Partner shall give written notice to the Limited Partners within thirty days after such occurrence. The Partners hereby agree that only the Events of Withdrawal described in this Section 13.1 shall result in the withdrawal of the General Partner from the Partnership. (b) Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal will not constitute a breach of this Agreement under the following circumstances: (i) at any time during the period ending on or prior to December 31, 2001, the General Partner voluntarily withdraws by giving at least ninety days' advance notice of its intention to withdraw to the Limited Partners; provided that, prior to the effective date of such withdrawal, the withdrawal is approved by the holders of at least a majority of the Outstanding Units (excluding for purposes of any such determination Units held by the General Partner and its Affiliates); (ii) at any time thereafter, the General Partner voluntarily withdraws by giving at least ninety days' advance notice to the Limited Partners, such withdrawal to take effect on the date specified in such notice; (iii) at any time that the General Partner ceases to be a General Partner pursuant to Section 13.1(a)(ii) or is removed pursuant to Section 13.2; or (iv) notwithstanding clause (i) of this sentence, at any time that the General Partner voluntarily withdraws by giving at least ninety days' advance notice of its intention to withdraw to the Limited Partners, such withdrawal to take effect on the date specified in the notice, if at the time such notice is given more than 50% of the Outstanding Units are owned beneficially or of record or controlled at any time by one Person or its Affiliates other than the General Partner and its affiliates. No provision of this Article XIII shall in any way limit the right of any holder of the capital stock of the General Partner to sell, exchange or otherwise dispose of such capital stock. The withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall also constitute the withdrawal of the general partner from the Operating Partnership. If the General Partner give a notice of withdrawal pursuant to Section 13.1(a)(i), holders of at least a majority of the Outstanding Units (excluding for purposes of such determination Units owned by the departing General Partner and its Affiliates) may, prior to the effective date of such withdrawal, elect a successor General Partner. The Person so elected shall automatically become the successor General Partner of the Operating Partnership, as provided in the Operating Partnership Agreement. If, prior to the effective date of the General Partner's withdrawal, a successor is not selected by the Limited Partners as provided herein or the Partnership does not receive an Opinion of Counsel that such withdrawal (following the selection of the successor General Partner) would not result in the loss of the limited liability of any Limited Partner or of the limited partner of the Operating Partnership or cause the Partnership or the Operating Partnership to be taxable as a corporation or to be treated as an association taxable as a corporation for federal income tax purposes, the Partnership shall be dissolved in accordance with Section 14.1. If a successor General Partner is elected and the Opinion of Counsel is rendered as provided in the immediately preceding sentence, such successor shall be admitted (subject to Section 12.3) immediately prior to the effective time of the withdrawal or removal of the Departing Partner and shall continue the business of the Partnership and the Operating Partnership without dissolution. 13.2 Removal of the General Partner. The General Partner may be removed if such removal is approved by at least 66 2/3% of the Outstanding Units; provided, however, that the General Partner may only vote its Units in favor of its own removal if its withdrawal under such circumstances would not constitute a breach of this Agreement pursuant to Section 13.1. Any such action by the Limited Partners for removal of the General Partner must also provide for the election and succession of a new A-53 General Partner. The removal of the General Partner is subject to the approval of a successor General Partner by holders of at least 66 2/3% of the Outstanding Units. Such removal shall be effective immediately following the admission of the successor General Partner pursuant to Article XII. The removal of the General Partner shall also automatically constitute the removal of the general partner of the Operating Partnership, as provided in the Operating Partnership Agreement. The Person elected as successor General Partner shall automatically become the successor general partner of the Operating Partnership. The right of the Limited Partners to remove the General Partner shall not exist or be exercised unless the Partnership has received an Opinion of Counsel that the removal of the General Partner and the selection of a successor General Partner will not result in the loss of limited liability of any Limited Partner or of the limited partner of the Operating Partnership or the taxation of the Partnership or the Operating Partnership as a corporation for federal income tax purposes. Any successor General Partner shall indemnify the Departing Partner as to all debts and liabilities of the Partnership arising on or after the effective date of the removal of the Departing Partner. 13.3 Interest of Departing Partner and Successor General Partner. (a) In the event of (i) withdrawal of the General Partner or (ii) removal of the General Partner by the Limited Partners, the Departing Partner shall, at its option exercisable prior to the effective date of the departure of such Departing Partner, promptly receive from its successor in exchange for its Partnership Interest as General Partner of the Partnership and its partnership interest as general partner of the Operating Partnership an amount in cash equal to the fair market value of the Departing Partner's Partnership Interest as general partner, such amount to be determined and payable as of the effective date of its departure. In either event, the Departing Partner shall be entitled to receive all reimbursements due such Departing Partner pursuant to Section 6.4, including, without limitation, any employee-related liabilities (including, without limitation, severance liabilities), incurred in connection with the termination of any employees employed by the General Partner for the benefit of the Partnership or the Operating Partnership. Subject to Section 13.3(b), the Departing Partner shall, as of the effective date of its departure, cease to share in any allocations or distributions with respect to its Partnership Interest as the General Partner and Partnership income, gain, loss, deduction and credit will be prorated and allocated as set forth in Section 5.2(g). For purposes of this Section 13.3(a), the fair market value of the Departing Partner's Partnership Interest as the general partner of the Partnership herein and the partnership interest of such Departing Partner as the general partner of the Operating Partnership (collectively, the "Combined Interest") shall be determined by agreement between the Departing Partner and its successor or, failing agreement within thirty days after the effective date of such Departing Partner's departure, by an independent investment banking firm or other independent expert selected by the Departing Partner and its successor, which, in turn, may rely on other experts and the determination of which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within forty-five days after the effective date or such departure, then the Departing Partner shall designate an independent investment banking firm or other independent expert, the Departing Partner's successor shall designate an independent investment banking firm or other independent expert, and such firms or experts shall mutually select a third independent investment banking firm or independent expert, which shall determine the fair market value of the Combined Interest. In making its determination, such independent investment banking firm or other independent expert shall consider the then current trading price of Units on any National Securities Exchange on which Units are then listed, the value of the Partnership's assets, the rights and obligations of the General Partner and other factors it may deem relevant. (b) If the Combined Interest is not acquired in the manner set forth in Section 13.3(a), the Departing Partner and its Affiliate shall become a Limited Partner and their Combined Interest shall be converted into Units pursuant to a valuation made by an investment banking firm or other independent expert selected pursuant to Section 13.3(a), without reduction in such Partnership Interest (but subject to proportionate dilution by reason of the admission of its successor). For purposes of this Agreement, conversion of the General Partner's Partnership Interest to Units will be characterized as if the General Partner contributed its Partnership Interest to the Partnership in exchange for the newly issued Units. A-54 (c) If the option described in Section 13.3(a) is not exercised, the successor General Partner shall, at the effective date of its admission to the Partnership, contribute to the capital of the Partnership cash in an amount such that its Capital Account, after giving effect to such contribution and any adjustments made to the Capital Accounts of all Partners pursuant to Section 4.6(d)(i), shall be equal to that percentage of the Capital Accounts of all Partners that is equal to its Percentage Interest as the General Partner. In such event, each successor General Partner shall, subject to the following sentence, be entitled to such Percentage Interest of all Partnership allocations and distributions and any other allocations and distributions to which the Departing Partner was entitled. In addition, such successor General Partner shall cause this Agreement to be amended to reflect that, from and after the date of such successor General Partner's admission, the successor General Partner's interest in all Partnership distributions and allocations shall be 1/99th, and that of the Unitholders shall be 98/99ths. 13.4 Redemption of APIs. (a) At such time as the Unrecovered API Capital in respect of an Outstanding API is reduced to zero, such API shall be deemed to be redeemed and shall thereupon cease to be Outstanding. (b) Notwithstanding any provision of this Agreement, if AMC (or any Affiliate of AMC that is a successor to AMC as General Partner of the Partnership) is removed as general partner of the Partnership by the Limited Partners, the Special Limited Partner shall have the right to require the Partnership to redeem, out of Available Cash constituting Cash from Operations prior to any distribution thereof to the Limited Partners, any APIs that are then outstanding at a price equal to the Unrecovered API Capital attributable thereto. 13.5 Withdrawal of Limited Partners. No Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a transferee of a Limited Partner's Units becomes a Record Holder, such transferring Limited Partner shall cease to be a Limited Partner shall cease to be a Limited Partner with respect to the Units so transferred. ARTICLE XIV Dissolution and Liquidation 14.1 Dissolution. The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs should be wound up, upon: (a) the expiration of its term as provided in Section 1.5; (b) an Event of Withdrawal of the General Partner as provided in Section 13.1(a), unless a successor is named as provided in Section 13.1(b) or 13.2, as the case may be; (c) an election to dissolve the Partnership by the General Partner that is approved by holders of a majority of the Outstanding Units (excluding for purposes of such determination Units held by the General Partner and its Affiliates); (d) a written determination by the General Partner that projected future revenues of the Partnership will be insufficient to enable payment of projected Partnership costs and expenses; (e) entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Delaware Act or any other event that would cause the dissolution of the Partnership under the Delaware Act; or (f) the sale of all or substantially all of the assets and properties of the Partnership or the Operating Partnership. 14.2 Continuation of the Business of the Partnership After Dissolution. Upon (i) dissolution of the Partnership caused by the withdrawal or removal of the General Partner and following a failure to appoint a successor General Partner prior to the effective date of such event, or (ii) dissolution of the Partnership upon an event constituting an Event of Withdrawal as defined in Section 13.1(a)(iv), then within 180 days thereafter, holders of at least 66 2/3% of the Outstanding Units may elect to reconstitute A-55 the Partnership and continue its business on the same terms and conditions set forth in this Agreement by forming a new limited partnership on terms identical to those set forth in this Agreement and having as a general partner a Person approved by at least 66 2/3% of the Outstanding Units. Upon any such election by holders of at least 66 2/3% of the Outstanding Units, all Partners shall be bound thereby and shall be deemed to have approved thereof. Unless such an election is made within the applicable time period as set forth above, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is so made, then: (a) the reconstituted Partnership shall continue until the end of the term set forth in Section 1.5 unless earlier dissolved in accordance with this Article XIV; (b) if the successor General Partner is not the former General Partner, then the interest of the former General Partner shall be treated thenceforth as the interest of a Limited Partner and converted into Units in the manner provided in Section 13.3(b); and (c) all necessary steps shall be taken to cancel this Agreement and the Certificate of Limited Partnership and to enter into and, as necessary, to file a new partnership agreement and certificate of limited partnership, and the successor general partner may for this purpose exercise the powers of attorney granted the General Partner pursuant to Section 1.4; provided that the right of holders of at least 66 2/3% of Outstanding Units to approve a successor general partner and to reconstitute and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel that (x) the exercise of the right would not result in the loss of limited liability of any Limited Partner and (y) neither the Partnership, the reconstituted limited partnership nor the Operating Partnership would become taxable as a corporation or be treated as an association taxable as a corporation for federal income tax purposes upon the exercise of such right to continue. 14.3 Liquidation. Upon dissolution of the Partnership, unless the Partnership is continued under an election to reconstitute and continue the Partnership pursuant to Section 14.2, the General Partner, or in the event the General Partner has been dissolved or removed, has become bankrupt as set forth in Section 13.1 or has withdrawn from the Partnership, a liquidator or liquidating committee approved by holders of at least 66 2/3% of the Outstanding Units, shall be the Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by holders of at least 66 2/3% of the Outstanding Units. The Liquidator shall agree not to resign at any time without fifteen days' prior written notice and (if other than the General Partner) may be removed at any time, with or without cause by notice of removal approved by holders of at least 66 2/3% of the Outstanding Units. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within thirty days thereafter be approved by holders of at least 66 2/3% of the Outstanding Units. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XIV, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 6.3(b)) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding-up and liquidation of the Partnership as provided for herein. The Liquidator shall liquidate the assets of the Partnership, and apply and distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of applicable law: (a) the payment to creditors of the Partnership, including, without limitation, Partners who are creditors, in the order of priority provided by law; and the creation of a reserve of cash or other assets of the Partnership for contingent liabilities in an amount, if any, determined by the Liquidator to be appropriate for such purposes; and A-56 (b) to all Partners and Special Limited Partners in accordance with the positive balances in their respective Capital Accounts after taking into account adjustments to such Capital Accounts pursuant to Section 5.1. 14.4 Distributions in Kind. Notwithstanding the provisions of Section 14.3, which require the liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership's assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including, without limitation, those to Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 14.3, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Limited Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreement governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt. 14.5 Cancellation of Certificate of Limited Partnership. Upon the completion of the distribution of Partnership cash and property as provided in Sections 14.3 and 14.4, the Partnership shall be terminated and the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be cancelled and such other actions as may be necessary to terminate the Partnership shall be taken. 14.6 Reasonable Time for Winding Up. A reasonable time shall be allowed for the orderly winding up of business and affairs of the Partnership and the liquidation of its assets pursuant to Section 14.3 in order to minimize any losses otherwise attendant upon such winding up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation. 14.7 Return of Capital. The General Partner shall not be personally liable for the return of the Capital Contributions of the Limited Partners, or any portion thereof it being expressly understood that any such return shall be made solely from Partnership assets. 14.8 No Capital Account Restoration. No Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership. 14.9 Waiver of Partition. Each Partner hereby waives any right to partition of the Partnership property. ARTICLE XV Amendment of Partnership Agreement; Meetings; Record Date 15.1 Amendment to Be Adopted Solely by General Partner. Each Limited Partner agrees that the General Partner (pursuant to its powers of attorney from the Limited Partners and Assignees), without the approval of any Limited Partner or Assignee, may amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect: (a) a change in the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent of the Partnership or the registered office of the Partnership; (b) admission, substitution, withdrawal or removal of Partners in accordance with this Agreement; (c) a change that, in the sole discretion of the General Partner, is necessary or advisable to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or that is necessary or advisable in the opinion of the General Partner to ensure that the Partnership will not be taxable as a corporation or treated as an association taxable as a corporation for federal income tax purposes; A-57 (d) a change (i) that, in the sole discretion of the General Partner, does not adversely affect the Limited Partners in any material respect, (ii) that is necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including, without limitation, the Delaware Act) or that is necessary or appropriate to facilitate the trading of the Units (including, without limitation, the division of Outstanding Units into different classes to facilitate uniformity of tax consequences within such classes of Units) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are or will be listed for trading, compliance with any of which the General Partner determines in its sole discretion to be in the best interests of the Partnership and the Limited Partners, or (iii) that is required to effect the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement or by the Registration Statement; (e) an amendment that is necessary, in the Opinion of Counsel to the Partnership, to prevent the Partnership or the General Partner or their respective directors or officers from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or "plan asset" regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, whether or not substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor; (f) a change in a provision of this Agreement that requires any action to be taken by or on behalf of the General Partner or the Partnership pursuant to the requirements of the Delaware Act, if the provisions of such Act are amended, modified or revoked so that the taking of such action is no longer required, provided that such changes are not materially adverse to the Limited Partners considered as a single class; (g) subject to the terms of Section 4.4, an amendment that the General Partner determines in its sole discretion to be necessary or appropriate in connection with the authorization for issuance of any class or series of Units pursuant to Section 4.4; (h) an amendment insofar as is necessary to maintain or establish the uniformity of intrinsic tax characteristics as to all Units or the uniformity of capital accounts underlying all Units and to make subsequent adjustments to distributions in a manner which, in the reasonable judgment of the General Partner, will make as little alteration as possible in the priority and amount of distributions otherwise applicable under this Agreement, and will not otherwise alter the distributions to which Partners and Assignees are entitled under this Agreement; (i) any amendment expressly permitted in this Agreement to be made by the General Partner acting alone; (j) an amendment effected, necessitated or contemplated by a Merger Agreement approved in accordance with Section 16.3; or (k) any other amendments similar to the foregoing. 15.2 Amendment Procedures. Except as provided in Section 15.1 and 15.3, all amendments to this Agreement shall be made in accordance with the following requirements. Amendments to this Agreement may be proposed solely by the General Partner. Each such proposal shall contain the text of the proposed amendment. If an amendment is proposed, the General Partner shall call a meeting of the Limited Partners entitled to consider and vote on such proposed amendment. A proposed amendment shall be effective upon its approval by the holders of a majority of the Outstanding Units (excluding for purposes of such determination Units held by the General Partner and its Affiliates) unless a greater or different percentage is required under this Agreement. The General Partner shall notify all Record Holders upon final adoption of any proposed amendment. A-58 15.3 Amendment Requirements. (a) Notwithstanding the provisions of Sections 15.1 and 15.2, no provision of this Agreement that establishes a percentage of Outstanding Units required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting requirement unless such amendment is approved by the affirmative vote of Unitholders whose aggregate percentage of Outstanding Units constitute not less than the voting requirement sought to be amended. (b) Notwithstanding the provisions of Sections 15.1 and 15.2, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner without the consent of the Limited Partner affected thereby or (ii) without the consent of the General Partner, which may be given or withheld in its sole discretion, (A) modify the compensation payable to the General Partner or any of its Affiliates by the Partnership or the Operating Partnership, (B) change Section 14.1(a) or (c), (C) restrict in any way any action by or rights of the General Partner as set forth in this Agreement, (D) change the term of the Partnership or, except as set forth in Section 14.1(c), given any Person the right to dissolve the Partnership or (E) modify the last sentence of Section 1.2. (c) Any amendment that would materially adversely affect the rights and preferences of a class of Outstanding Units must be approved by the holders of not less than a majority of the Outstanding Units of such class (excluding for purposes of such determination Units held by the General Partner and its Affiliates). (d) Notwithstanding any other provision of this Agreement, except for amendments pursuant to Section 6.3 or 15.1, no amendments shall become effective without the approval of the Record Holders of 95% of the Outstanding Units unless the Partnership obtains an Opinion of Counsel to the effect that (i) such amendment will not cause the Partnership or the Operating Partnership to be taxable as a corporation or to be treated as an association taxable as a corporation for federal income tax purposes and (ii) such amendment will not affect the limited liability of any Limited Partner or any limited partner of the Operating Partnership under applicable law. (e) This Section 15.3 shall only be amended with the approval of not less than 95% of the Outstanding Units. 15.4 Meetings. All acts of Limited Partners to be taken hereunder shall be taken in the manner provided in this Article XV. Meetings of the Limited Partners may be called by the General Partner or, with respect to meetings called to remove the General Partner, by Limited Partners owning 66 2/3% or more of the Outstanding Units. A meeting shall be held at a time and place determined by the General Partner on a date not more than sixty days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners' limited liability under the Delaware Act or the law of any other state in which the Partnership is qualified to do business. 15.5 Notice of a Meeting. Notice of a meeting called pursuant to Section 15.4 shall be given to the Record Holders in writing by mail or other means of written communication in accordance with Section 18.1. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication. 15.6 Record Date. For purposes of determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners, the General Partner may set a Record Date, which shall not be less than ten nor more than sixty days before the date of the meeting (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed for trading, in which case the rule, regulation, guideline or requirement of such exchange shall govern). 15.7 Adjournment. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than forty-five days. At the adjourned meeting, the Partnership may transact any business that might have been transacted at the original meeting. If the adjournment is for more than forty-five days A-59 or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with this Article XV. 15.8 Waiver of Notice; Approval of Meeting; Approval of Minutes. The transactions of any meeting of Limited Partners, however called and noticed, and whenever held, shall be as valid as if had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if either before or after the meeting, each of the Limited Partners entitled to vote, present in person or by proxy, signs a written waiver of notice or an approval of the holding of the meeting or an approval of the minutes thereof. All waivers and approvals shall be filed with the Partnership records or made a part of the minutes of the meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver of notice of the meeting, except when the Limited Partner disapproves, at the beginning of the meeting, the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to disapprove the consideration of matters required to be included in the notice of the meeting, but not so included, in either case if the disapproval is expressly made at the meeting. 15.9 Quorum. The holders of 66 2/3% of the Outstanding Units of the class for which a meeting has been called (excluding, if such are excluded from such vote, Units held by the General Partner and its Affiliates) represented in person or by proxy shall constitute a quorum at a meeting of Limited Partners of such class unless any such action by the Limited Partners requires approval by holders of a majority in interest of such Units, in which case the quorum shall be a majority (excluding if such are excluded from such vote, Units held by the General Partner and its Affiliates). At any meeting of the Limited Partners duly called and held in accordance with this Agreement at which a quorum is present, the act of Limited Partners holding Outstanding Units that in the aggregate represent at least a majority of the Outstanding Units entitled to vote and be present in person or by proxy at such meeting shall be deemed to constitute the act of all Limited Partners, unless a greater or different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Limited Partners holding Outstanding Units that in the aggregate represent at least such greater or different percentage shall be required. The Limited Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Limited Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of Outstanding Units specified in this Agreement. In the absence of a quorum, any meeting of Limited Partners may be adjourned from time to time by the affirmative vote of a majority of the Outstanding Units represented either in person or by proxy, but no other business may be transacted, except as provided in Section 15.7. 15.10 Conduct of Meeting. The General Partner shall have full power and authority concerning the manner of conducting any meeting of the Limited Partners or solicitation of approvals in writing, including, without limitation, the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 15.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting, in either case including, without limitation, a Partner or a director or officer of the General Partner. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such other regulations consistent with applicable law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Limited Partners or solicitation of approvals in writing, including, without limitation, regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of approvals in writing. 15.11 Voting and Other Rights. (a) Only those Record Holders of Units on the Record Date set pursuant to Section 15.6 shall be entitled to notice of, and to vote at, a meeting of Limited Partners. All references in this Agreement to votes of the Outstanding Units shall be deemed to be references to the votes of the Record Holders of such Outstanding Units. (b) With respect to Units that are held for a Person's account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose A-60 name such Units are registered, such broker, dealer or other agent shall, in exercising the voting rights in respect of such Units on any matter, and unless the arrangement between such Persons provides otherwise, vote such Units in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 15.11(b) (as well as all other provisions of this Agreement) are subject to the provisions of Section 10.4. ARTICLE XVI MERGER 16.1 Authority. The Partnership may merge or consolidate with one or more corporations, business trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses, including, without limitation, a general partnership or limited partnership, formed under the laws of the State of Delaware or any other state of the United States of America, pursuant to a written agreement of merger or consolidation ("Merger Agreement") in accordance with this Article. 16.2 Procedure for Merger or Consolidation. Merger or consolidation of the Partnership pursuant to this Article requires the prior approval of the General Partner. If the General Partner shall determine, in the exercise of its sole discretion, to consent to the merger or consolidation, the General Partner shall approve the Merger Agreement, which shall set forth: (a) The names and jurisdictions of formation or organization of each of the business entities proposing to merge or consolidate; (b) The name and jurisdictions of formation or organization of the business entity that is to survive the proposed merger or consolidation (hereafter designated as the "Surviving Business Entity"); (c) The terms and conditions of the proposed merger or consolidation; (d) The manner and basis of exchanging or converting the equity securities of each constituent business entity for, or into, cash, property or general or limited partnership interests, rights, securities or obligations of the Surviving Business Entity; and (i) if any general or limited partnership interests, securities or rights of any constituent business entity are not to be exchanged or converted solely for, or into, cash, property or general or limited partnership interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or general or limited partnership interests, rights, securities or obligations of any limited partnership, corporation, trust or other entity (other than the Surviving Business Entity) that the holders of such general or limited partnership interests are to receive in exchange for, or upon conversion of, their securities or rights, and (ii) in the case of securities represented by certificates, upon the surrender of such certificates, which cash, property or general or limited partnership interests, rights, securities or obligations of the Surviving Business Entity or any limited partnership, corporation, trust or other entity (other than the Surviving Business Entity), or evidences thereof, are to be delivered; (e) A statement of any changes in the constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation; (f) The effective time of the merger, which may be the date of the filing of the certificate of merger pursuant to Section 16.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided that, if the effective time of the merger is to be later than the date of the filing of the certificate of merger, it shall be fixed no later than the time of the filing of the certificate of merger and stated therein); and (g) Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or appropriate by the General Partner. 16.3 Approval by Limited Partners of Merger or Consolidation. (a) The General Partner of the Partnership, upon its approval of the Merger Agreement, shall direct that the Merger Agreement be submitted to a vote at a meeting of Limited Partners, in accordance with the requirements of Article A-61 XV. A copy or a summary of the Merger Agreement shall be included in or enclosed with the notice of the meeting. (b) The Merger Agreement shall be approved upon receiving the affirmative vote or consent of the holders of at least a majority of the Outstanding Units (excluding for purposes of such determination Units held by the General Partner and its Affiliates), unless the Merger Agreement contains any provision which, if contained in an amendment to this Agreement, the provisions of this Agreement or the Delaware Act would require the vote or consent of a greater percentage of the Outstanding Units of the Limited Partners or of any class of Limited Partners, in which case such greater percentage vote or consent shall be required for approval of the Merger Agreement. (c) After such approval by vote or consent of the Limited Partners, and at any time prior to the filing of the certificate of merger pursuant to Section 16.4, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement. 16.4 Certificate of Merger. Upon the required approval by the General Partner and Limited Partners of a Merger Agreement, a certificate of merger shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware Act. 16.5 Effect of Merger. (a) Upon the effective date of the certificate of merger: (i) all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity to the extent they were each constituent business entity; (ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and shall not be in any way impaired because of the merger or consolidation; (iii) all rights of creditors and all liens on or security interest in property of any of those constituent business entities shall be preserved unimpaired; and (iv) all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity, and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it . (b) A merger or consolidation effected pursuant to this Article shall not be deemed to result in a transfer or assignment of assets or liabilities from one entity to another having occurred. ARTICLE XVII RIGHT TO REDEEM OR ACCRUE UNITS 17.1 Right to Redeem Senior Preference Units. Notwithstanding anything to the contrary in this Agreement, the Partnership may at any time on or after the Senior Conversion Date, in the sole discretion of the General Partner, redeem any or all of the Senior Preference Units then issued and Outstanding for an amount equal to the Unrecovered Capital of such Senior Preference Units plus accrued arrearages, if any, as of the date the General Partner mails the notice described in Section 17.3 of the Partnership's election to redeem such Senior Preference Units. If after giving effect to an anticipated redemption, however, fewer than 1.0 million Senior Preference Units would be held by Persons other than the General Partner and its Affiliates, the Partnership shall redeem all of such Senior Preference Units if it redeems any Senior Preference Units. 17.2 Right to Call or Acquire Units of Any Class. Notwithstanding anything to the contrary in this Agreement, if at any time not more than 25% of the total Units of any class then issued and Outstanding are held by Persons other than the General Partner and its Affiliates, the Partnership, in the sole discretion of the General Partner, shall then have the right to call or to assign to the General Partner or its Affiliates the right to acquire all, but not less than all, of the Units of such class then Outstanding held by Persons other than the General Partner and its Affiliates, at the higher of (i) the A-62 Current Market Price of a Unit of such class as of the date five days before the applicable notice described in Section 17.3 is mailed or (ii) the highest cash price paid by the General Partner or any of its Affiliates for any Unit of such class purchased during the ninety-day period preceding the date that such notice is mailed. As used in this Agreement, (i) "Current Market Price" of a Unit as of any date means the average of the daily Closing Prices (as hereinafter defined) per Unit of such class for the twenty consecutive Trading Days (as hereinafter defined) immediately prior to, but not including, such date; (ii) "Closing Price" for any day means the last sale price on such day, regular way, or in case no such sale takes place on such day, the average of the closing bid and asked prices on such day, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Units of a class are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal National Securities Exchange on which the Units of such class are listed or admitted to trading or, if the Units of a class are not listed or admitted to trading on any National Securities Exchange, the last quoted price on such day or, if not so quoted, the average of the high bid and low asked prices on such day in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other system then in use, or, if on any such day the Units of a class are not quoted by any such organization, the average of the closing bid and asked prices on such day as furnished by a professional market maker making a market in the Units of such class selected by the Board of Directors of the General Partner, or, if on any such day no market maker is making a market in the Units of such class, the fair value of such Units on such day as determined reasonably and in good faith by the Board of Directors of the General Partner; and (iii) "Trading Day" means a day on which the principal National Securities Exchange on which the Units of any class are listed or admitted to trading is open for the transaction of business or, if Units of a class are not listed or admitted to trading on any National Securities Exchange, a day on which banking institutions in New York City generally are open. 17.3 Notice of Election to Redeem or Acquire Units. (a) If the Partnership elects to exercise the right to redeem Senior Preference Units granted pursuant to Section 17.1, the General Partner shall deliver to the Transfer Agent written notice of such election to redeem (the "Notice of Election to Redeem") and shall cause the Transfer Agent to mail a copy of such Notice of Election to Redeem to the Record Holders of such Senior Preference Units (as of a Record Date selected by the General Partner) at least thirty, but not more than sixty days prior to the Redemption Date. Such Notice of Election to Redeem shall also be published in daily newspapers of general circulation printed in the English language and published in the Borough of Manhattan, New York. The Notice of Election to Redeem shall specify the Redemption Date and the price (determined in accordance with Section 17.1) at which such Senior Preference Units will be redeemed and state that the Partnership elects to redeem such Senior Preference Units, upon surrender of Depositary Receipts or Unit Certificates representing such Senior Preference Units in exchange for payment, at such office or offices of the Transfer Agent as the Transfer Agent may specify, or as may be required by any National Securities Exchange on which such Senior Preference Units are listed or admitted to trading. Any such Notice of Election to Redeem mailed to a Record Holder of Senior Preference Units at his address as reflected in the records of the Transfer Agent shall be conclusively presumed to have been given whether or not the owner receives such notice. On or prior to the Redemption Date, the General Partner shall deposit with the Transfer Agent cash in an amount sufficient to pay the aggregate redemption price of all of the Senior Preference Units to be redeemed in accordance with this Article XVII. If the Notice of Election to Redeem shall have been duly given as aforesaid at least thirty, but not more than sixty days prior to the Redemption Date, and if on or prior to the Redemption Date the deposit described in the preceding sentence has been made for the benefit of the holders of Senior Preference Units subject to redemption as provided herein, then from and after the Redemption Date, notwithstanding that any Depositary Receipt or Unit Certificate shall not have been surrendered for redemption, all rights of the holders of such Senior Preference Units (including, without limitation, any rights pursuant to Articles IV, V and XIV) shall thereupon cease, except the right to receive the redemption price (determined in accordance with Section 17.1) for the Senior Preference Units therefor, without interest, upon surrender to the Transfer Agent of the Depositary Receipts or Unit Certificates representing such Senior Preference Units, and A-63 and Senior Preference Units shall thereupon be deemed to be no longer Outstanding and each holder of such Senior Preference Units will cease to be a Partner with respect to such Senior Preference Units. (b) If the General Partner, any of its Affiliates or the Partnership elects to exercise the right to call or to acquire, as the case may be, Units granted pursuant to Section 17.2, the General Partner (or such Affiliate) shall deliver to the Transfer Agent written notice of such election to call or to acquire (the "Notice of Election to Purchase") and shall cause the Transfer Agent to mail a copy of such Notice of Election to Purchase to the Record Holders of Units (as of a Record Date selected by the General Partner) at least thirty, but not more than sixty days prior to the Purchase Date. Such Notice of Election to Purchase shall also be published in daily newspapers of general circulation printed in the English language and published in the Borough of Manhattan, New York. The Notice of Election to Purchase shall specify the class of Units to be purchased, the Purchase Date and the price (determined in accordance with Section 17.2) at which such Units will be purchased and state that the General Partner, its Affiliate or the Partnership, as the case may be, elects to purchase such Units, upon surrender of Depositary Receipts or Unit Certificates representing such Units in exchange for payment, at such office or offices of the Transfer Agent as the Transfer Agent may specify, or as may be required by any National Securities Exchange on which such Units are listed or admitted to trading. Any such Notice of Election to Purchase mailed to a Record Holder of such Units at his address as reflected in the records of the Transfer Agent shall be conclusively presumed to have been given whether or not the owner receives such notice. On or prior to the Purchase Date, the General Partner, its Affiliate or the Partnership, as the case may be, shall deposit with the Transfer Agent cash in an amount sufficient to pay the aggregate purchase price of all of the Units to be purchased in accordance with this Article XVII. If the Notice of Election to Purchase shall have been duly given as aforesaid at least thirty, but not more than sixty days prior to the Purchase Date, and if on or prior to the Purchase Date the deposit described in the preceding sentence has been made for the benefit of the holders of Units subject to purchase as provided herein, then from and after the Purchase Date, notwithstanding that any Depositary Receipt or Unit Certificate shall not have been surrendered for purchase, all rights of the holders of such Units (including, without limitation, any rights pursuant to Articles IV, V and XIV) shall thereupon cease, except the right to receive the purchase price (determined in accordance with Section 17.2) for such Units therefor, without interest, upon surrender to the Transfer Agent of the Depositary Receipts or Unit Certificates representing such Units, and such Units shall thereupon be deemed to be transferred to the General Partner, its Affiliate or the Partnership, as the case may be, on the record books of the Transfer Agent and the Partnership and the General Partner, its Affiliate or the Partnership, as the case may be, shall be deemed to be the owner of all such Units from and after the Purchase Date and shall have all rights as the owner of such Units (including, without limitation, all rights as owner pursuant to Articles IV, V and XIV). 17.4 Surrender of Depositary Receipts or Unit Certificates. At any time from and after the Redemption Date or the Purchase Date, as the case may be, a holder of an Outstanding Unit subject to redemption or purchase as provided in this Article XVII may surrender his Unit Certificate or Depositary Receipt, as the case may be, evidencing such Unit to the Transfer Agent in exchange for payment of the amount described in Section 17.1 or 17.2, as the case may be, therefor without interest thereon. ARTICLE XVIII General Provisions 18.1 Addresses and Notices. Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first-class United States mail or by other means of written communication to the Partner or Assignee at the address described below. Any notice, payment or report to be given or made to a Partner or Assignee hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Unit at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Partnership, regardless of any claim of any A-64 Person who may have an interest in such Unit or the Partnership Interest of a General Partner by reason of any assignment or otherwise. An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this Section 18.1 executed by the General Partner, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report addressed to a Record Holder at the address of such Record Holder appearing on the books and records of the Transfer Agent or the Partnership is returned by the United States Post Office marked to indicate that the United States Postal Service is unable to deliver it, such notice, payment or report and any subsequent notices, payments and reports shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in his address) if they are available for the Partner or Assignee at the principal office of the Partnership for a period of one year from the date of the giving or making of such notice, payment or report to the other Partners and Assignees. Any notice to the Partnership shall be deemed given if received by the General Partner at the principal office of the Partnership designated pursuant to Section 1.3. The General Partner may rely and shall be protected in relying on any notice or other document from a Partner, Assignee or other Person if believed by it to be genuine. 18.2 Titles and Captions. All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to "Articles" and "Sections" are to Articles and Sections of this Agreement. 18.3 Pronouns and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice-versa. 18.4 Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. 18.5 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. 18.6 Integration. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto. 18.7 Creditors. None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership. 18.8 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. 18.9 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Unit, upon executing and delivering a Transfer Application as herein described, independently of the signature of any other part. 18.10 Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. 18.11 Invalidity of Provisions. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. A-65 In Witness Whereof, the parties hereto have executed this Agreement as of the date first written above. GENERAL PARTNER: Agricultural Minerals Corporation By: /s/ John A. Molenaar ------------------------------- Name: John A. Molenaar Title: Senior Vice President ORGANIZATIONAL LIMITED PARTNER: AMC Holdings Inc. By: /s/ John A. Molenaar ------------------------------- Name: John A. Molenaar Title: Vice President LIMITED PARTNERS: All Limited Partners now and hereafter admitted as limited partners of the Partnership, pursuant to Powers of Attorney now and hereafter executed in favor of, and granted and delivered to, the General Partner. By: Agricultural Minerals Corporation, General Partner, as attorney-in-fact for all Limited Partners pursuant to the Powers of Attorney granted pursuant to Section 1.4. By: /s/ John A. Molenaar ------------------------------- Name: John A. Molenaar Title: Senior Vice President A-66 EX-99.4 11 AGREEMENT LIMITED PRTSHI EXHIBIT 99.4 AGREEMENT OF LIMITED PARTNERSHIP OF AGRICULTURAL MINERALS, LIMITED PARTNERSHIP TABLE OF CONTENTS Page ---- ARTICLE I - ORGANIZATIONAL MATTERS.............................. 1 1.1 Formation............................................ 1 1.2 Name................................................. 1 1.3 Registered Office; Principal Office.................. 2 1.4 Power of Attorney.................................... 2 1.5 Term................................................. 4 ARTICLE II - DEFINITIONS........................................ 4 ARTICLE III - PURPOSE........................................... 14 3.1 Purpose and Business................................. 14 3.2 Powers............................................... 15 ARTICLE IV - CAPITAL CONTRIBUTIONS.............................. 15 4.1 Initial Contributions................................ 15 4.2 Return of Initial Contributions...................... 15 4.3 Contribution by the General Partner and the Limited Partner............................ 15 4.4 Additional Capital Contribution by the Investment Partnership............................. 16 4.5 Preemptive Rights.................................... 16 4.6 Capital Accounts..................................... 16 4.7 Interest............................................. 20 4.8 No Withdrawal........................................ 20 4.9 Loans from Partners.................................. 20 ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS....................... 20 5.1 Allocations for Capital Account Purposes............. 20 (a) Net Income...................................... 20 (b) Net Losses...................................... 21 (c) Net Termination Gains and Losses................ 21 (d) Special Allocations............................. 22 (i) Partnership Minimum Gain Chargeback............................... 22 (ii) Chargeback of Minimum Gain Attributable to Partner Nonrecourse Debt......................... 23 (iii) Qualified Income Offset.................... 24 (iv) Gross Income Allocations................... 24 (v) Nonrecourse Deductions..................... 25 (vi) Partner Nonrecourse Deductions............. 25 A-(i) Page ---- (vii) Nonrecourse Liabilities.................... 25 (viii) Code Section 754 Adjustments............... 25 (ix) Curative Allocation........................ 26 5.2 Allocations for Tax Purposes......................... 27 5.3 Requirements as to Distributions..................... 30 ARTICLE VI - MANAGEMENT AND OPERATION OF BUSINESS............... 30 6.1 Management........................................... 30 6.2 Certificate of Limited Partnership................... 32 6.3 Restrictions on General Partner's Authority.......... 32 6.4 Reimbursement of the General Partner................. 33 6.5 Outside Activities................................... 34 6.6 Loans to and from the Partnership; Contracts with Affiliates.......................... 35 6.7 Indemnification...................................... 37 6.8 Liability of Indemnitees............................. 39 6.9 Resolution of Conflicts of Interest.................. 40 6.10 Other Matters Concerning the General Partner............................................ 42 6.11 Title to Partnership Assets.......................... 42 6.12 Reliance by Third Parties............................ 43 ARTICLE VII - RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER......................................... 44 7.1 Limitation of Liability.............................. 44 7.2 Management of Business............................... 44 7.3 Outside Activities................................... 44 7.4 Return of Capital.................................... 44 7.5 Rights of the Limited Partner Relating to the Partnership................................. 44 ARTICLE VIII - BOOKS, RECORDS, ACCOUNTING AND REPORTS........... 45 8.1 Records and Accounting............................... 45 8.2 Fiscal Year.......................................... 46 ARTICLE IX - TAX MATTERS........................................ 46 9.1 Preparation of Tax Returns........................... 46 9.2 Tax Elections........................................ 46 9.3 Tax Controversies.................................... 46 9.4 Organizational Expenses.............................. 47 9.5 Withholding.......................................... 47 9.6 Opinions of Counsel.................................. 47 A-(ii) Page ---- ARTICLE X - TRANSFER OF INTERESTS............................... 47 10.1 Transfer............................................. 47 10.2 Transfer of the General Partner's Partnership Interest............................... 48 10.3 Transfer of the Limited Partner's Partnership Interest............................... 49 ARTICLE XI - ADMISSION OF PARTNERS.............................. 49 11.1 Admission of Substituted Limited Partner............. 49 11.2 Admission of Successor General Partner............... 49 11.3 Amendment of Agreement and Certificate of Limited Partnership............................. 50 ARTICLE XII - WITHDRAWAL OR REMOVAL OF PARTNERS................. 50 12.1 Withdrawal of the General Partner.................... 50 12.2 Removal of the General Partner....................... 52 12.3 Interest of Departing Partner and Successor General Partner.......................... 52 12.4 Reimbursement of Departing Partner................... 53 12.5 Withdrawal of the Limited Partner.................... 53 ARTICLE XIII - DISSOLUTION AND LIQUIDATION...................... 53 13.1 Dissolution.......................................... 53 13.2 Continuation of the Business of the Partnership After Dissolution...................... 54 13.3 Liquidation.......................................... 55 13.4 Distributions in Kind................................ 56 13.5 Cancellation of Certificate of Limited Partnership............................. 57 13.6 Reasonable Time for Winding Up....................... 57 13.7 Return of Capital.................................... 57 13.8 No Capital Account Restoration....................... 57 13.9 Waiver of Partition.................................. 57 ARTICLE XIV - AMENDMENT OF PARTNERSHIP AGREEMENT................ 57 14.1 Amendment to Be Adopted Solely by General Partner................................. 57 14.2 Amendment Procedures................................. 59 A-(iii) Page ---- ARTICLE XV - MERGER............................................. 59 15.1 Authority............................................ 59 15.2 Procedure for Merger or Consolidation................ 59 15.3 Approval by the Limited Partner of Merger or Consolidation............................ 61 15.4 Certificate of Merger................................ 61 15.5 Effect of Merger..................................... 61 ARTICLE XVI - GENERAL PROVISIONS................................ 62 16.1 Addresses and Notices................................ 62 16.2 Titles and Captions.................................. 62 16.3 Pronouns and Plurals................................. 62 16.4 Further Action....................................... 63 16.5 Binding Effect....................................... 63 16.6 Integration.......................................... 63 16.7 Creditors............................................ 63 16.8 Waivers.............................................. 63 16.9 Counterparts......................................... 63 16.10 Applicable Law....................................... 63 16.11 Invalidity of Provisions............................. 64 A-(iv) AGREEMENT OF LIMITED PARTNERSHIP OF AGRICULTURAL MINERALS, LIMITED PARTNERSHIP THIS AGREEMENT OF LIMITED PARTNERSHIP OF AGRICULTURAL MINERALS, LIMITED PARTNERSHIP, dated as of December 4, 1991, is entered into by and among Agricultural Minerals Corporation, a Delaware corporation ("AMC"), as the General Partner and AMC Holdings Inc., a Delaware corporation ("AMCH"), as the Organizational Limited Partner and Agricultural Minerals Company, L.P., a Delaware limited partnership, as the Limited Partner. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I ORGANIZATIONAL MATTERS 1.1 Formation. The General Partner and the Organizational Limited Partner have formed this Partnership as a limited partnership pursuant to the provisions of the Delaware Act, and hereby amend and restate the original Agreement of Limited Partnership, as amended by Amendment No. 1 thereto, in its entirety. Except as expressly provided to the contrary in this Agreement, the rights and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Act. The Partnership Interest of each Partner shall be personal property for all purposes. 1.2 Name. The name of the Partnership shall be "Agricultural Minerals, Limited Partnership." The Partnership's business may be conducted under any other name or names deemed necessary or appropriate by the General Partner, including, without limitation, the name of the General Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be included in the Partnership's name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partner of such change in the next regular communication to the Limited Partner. Notwithstanding the foregoing, unless otherwise permitted by AMC, the Partnership shall change its name to a name not including "AMC" or "Agricultural Minerals Corporation" and shall cease using the name "AMC," "Agricultural Minerals Corporation" or other names or symbols 2 associated therewith at such time as neither Agricultural Minerals Corporation nor any Affiliate thereof is or has been within three months the general partner of the Partnership. 1.3 Registered Office; Principal Office. Unless and until changed by the General Partner, the registered office of the Partnership in the State of Delaware shall be located at The Corporation Trust Center, 1209 Orange Street, New Castle County, Wilmington, Delaware 19801 and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership and the address of the General Partner shall be 5100 East Skelly Drive, Suite 800, Tulsa, Oklahoma 74135, or such other place as the General Partner may from time to time designate by notice to the Limited Partner. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable. 1.4 Power of Attorney. (a) The Limited Partner hereby constitutes and appoints each of the General Partner and, if a Liquidator shall have been selected pursuant to Section 13.3, the Liquidator severally (and any successor to either thereof by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to: (i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate of Limited Partnership and all amendments or restatements thereof) that the General Partner or the Liquidator deems necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator deems necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including, without limitation, conveyances and a certificate of cancellation) that the General 3 Partner or the Liquidator deems necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article X, XI, XII or XIII or the Capital Contribution of any Partner; and (E) all certificates, documents and other instruments (including, without limitation, agreements and a certificate of merger) relating to a merger or consolidation of the Partnership pursuant to Article XV; and (ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates and other instruments necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or is necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided that when the consent or approval of the Limited Partner is required by any provision of this Agreement, the General Partner or the Liquidator may exercise the power of attorney made in this Section 1.4(a)(ii) only after the necessary consent or approval of the Limited Partner. Nothing contained in this Section 1.4 shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XIV, or as may be otherwise expressly provided for in this Agreement. (b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of the Limited Partner and the transfer of all or any portion of such Limited Partner's Partnership Interest and shall extend to such Limited Partner's heirs, successors, assigns and personal representatives. The Limited Partner hereby agrees to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and the Limited Partner hereby waives any and all defenses that may be available to contest, negate or 4 disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. The Limited Partner shall execute and deliver to the General Partner or the Liquidator, within fifteen days after receipt of the General Partner's or the Liquidator's request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership. 1.5 Term. The Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until the close of Partnership business on December 31, 2041, or until the earlier termination of the Partnership in accordance with the provisions of Article XIII. ARTICLE II DEFINITIONS The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. "Adjusted Capital Account" means the Capital Account maintained for each Partner as of the end of each taxable year of the Partnership (a) increased by any amounts that such Partner is obligated to restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation Sections 1.704-1T(b)(4)(iv)(f) and 1.704- 1T(b)(4)(iv)(h)(5)), and (b) decreased by (i) the amount of all losses and deductions that, as of the end of such taxable year, are reasonably expected to be allocated to such Partner in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end of such taxable year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner's Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases as a result of a minimum gain chargeback pursuant to Section 5.1(d)(i) or 5.1(d)(ii) hereof). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury 5 Regulation Section 1.704-(b)(2)(ii)(d) and shall be interpreted consistently therewith. "Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Section 4.6(d)(i) or 4.6(d)(ii). "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, the Person in question. "Agreed Allocation" means any allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of Section 5.1 including, without limitation, a Curative Allocation (if appropriate to the context in which the term "Agreed Allocation" is used). "Agreed Value" of any Contributed Property means the fair market value of such property or other consideration at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, that the Agreed Value of any property deemed contributed to the Partnership for federal income tax purposes upon termination and reconstitution thereof pursuant to Section 708 of the Code shall be determined in accordance with Section 4.6(c). Subject to Section 4.6(c), the General Partner shall, in its sole discretion, use such method as it deems reasonable and appropriate to allocate the aggregate Agreed Value of Contributed Properties conveyed to the Partnership in a single or integrated transaction among each separate property on a basis proportional to the fair market value of each Contributed Property. "Agreement" means this Agreement of Limited Partnership of Agricultural Minerals, Limited Partnership, as it may be amended, supplemented or restated from time to time. "Available Cash" means, with respect to any calendar quarter, (i) the sum of (A) all cash receipts of the Partnership during such quarter from all sources and (B) any reduction in reserves established in prior quarters, less (ii) the sum of (aa) all cash disbursements of the Partnership during such quarter (excluding cash distributions to Partners, but including, for example, disbursements for taxes of the Partnership as an entity, debt service and capital expenditures) and (bb) any reserves established in such quarter in such amounts as the General Partner 6 determines to be necessary or appropriate in its reasonable discretion (x) to provide for the proper conduct of the business of the Partnership (including reserves for future capital expenditures) or (y) to provide funds for distributions with respect to any of the next four calendar quarters and (cc) any other reserves established in such quarter in such amounts as the General Partner determines in its reasonable discretion to be necessary because the distribution of such amounts would be prohibited by applicable law or by any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Partnership is a party or by which it is bound or its assets are subject. Taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners shall not be considered cash disbursements of the Partnership which reduce "Available Cash," but the payment or withholding thereof shall be deemed to be a distribution of Available Cash to such Partners. Alternatively, in the discretion of the General Partner, such taxes (if pertaining to all Partners) may be considered to be cash disbursements of the Partnership which reduce "Available Cash," but the payment or withholding thereof shall not be deemed to be a distribution of Available Cash to such Partners. Notwithstanding the foregoing, "Available Cash" shall not include any cash receipts or reductions in reserves or take into account any disbursements made or reserves established after commencement of the dissolution and liquidation of the Partnership. "Book-Tax Disparity" means with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner's Capital Account balance as maintained pursuant to Section 4.6 and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. "Capital Account" means the capital account maintained for a Partner pursuant to Section 4.6. "Capital Contribution" means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership pursuant to Section 4.1, 4.3, 4.4 or 4.6(c). 7 "Carrying Value" means (a) with respect to a Contributed Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, amortization and cost recovery deductions charged to the Partners' Capital Accounts, and (b) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Sections 4.6(d)(i) and 4.6(d)(ii) and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner. "Certificate of Limited Partnership" means the Certificate of Limited Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 6.2 hereof, as such Certificate may be amended and/or restated from time to time. "Closing Date" means the date on which the "First Closing Date" occurs as such term is defined in the Underwriting Agreement. "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. "Common Unit" has the meaning assigned to such term in the Investor Partnership Agreement. "Contributed Property" means each property or other asset, in such form as may be permitted by the Delaware Act, but excluding cash, contributed to the Partnership (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 4.6(d)(i), such property shall no longer constitute a Contributed Property, but shall be deemed an Adjusted Property. "Contributing Partner" means each Partner contributing (or deemed to have contributed on termination and reconstitution of the Partnership pursuant to Section 708 of the Code or otherwise) a Contributed Property. 8 "Conveyance Agreement" means the Conveyance Agreement dated as of December 4, 1991, among AMC, the Investor Partnership and the Partnership. "Curative Allocation" means any allocation of an item of income, gain, deduction, loss or credit pursuant to the provisions of Section 5.1(d)(ix). "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. (S) 17-101, et seq., as amended, supplemented or restated from time to time, and any successor to such statute. "Departing Partner" means a former General Partner, from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Section 12.1 or 12.2. "Economic Risk of Loss" has the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(1). "Event of Withdrawal" has the meaning assigned to such term in Section 12.1(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time, and any successor to such statute "General Partner" means Agricultural Minerals Corporation, a Delaware corporation, and its successors as general partner of the Partnership. "General Partner Equity Value" means, as of any date of determination, the fair market value of the General Partner's Partnership Interest, as determined by the General Partner using whatever reasonable method of valuation it may adopt. "Indemnitee" means the General Partner, any Departing Partner, any Person who is or was an Affiliate of the General Partner or any Departing Partner, any Person who is or was an officer, director, employee, partner or agent of the General Partner or any Departing Partner or any such Affiliate, or any Person who is or was serving at the request of the General Partner or any Departing Partner or any such Affiliate as a director, officer, employee, partner, member or agent of another corporation, partnership, joint venture, trust, committee or other enterprise. 9 "Initial Offering" means the initial offering of Senior Preference Units to the public, as described in the Registration Statement. "Investor Partnership" means Agricultural Minerals Company, L.P., a Delaware limited partnership. "Investor Partnership Agreement" means the Agreement of Limited Partnership of the Investor Partnership. "Junior Preference Unit" has the meaning assigned to such term in the Investor Partnership Agreement. "Letter of Credit" has the meaning assigned to such term in the Investor Partnership Agreement. "Limited Partner" means the Limited Partner, each Substituted Limited Partner, if any, and each other Person, if any, that is admitted to the Partnership as a limited partner pursuant to Section 11.1 and that is shown as a limited partner on the books and records of the Partnership. "Limited Partner Equity Value" means, as of any date of determination, the fair market value of the Limited Partner's Percentage Interest, as determined by the General Partner using whatever reasonable method of valuation it may adopt. "Liquidator" means the General Partner or other Person approved pursuant to Section 13.3 who performs the functions described therein. "Merger Agreement" has the meaning assigned to such term in Section 15.1. "Minimum Gain Attributable to Partner Nonrecourse Debt" means that amount determined in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(6). "National Securities Exchange" means an exchange registered with the Securities and Exchange Commission under Section 6(a) of the Exchange Act. "Net Agreed Value" means, (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed, and (b) in the case of any property distributed to a Partner by the Partnership, the 10 Partnership's Carrying Value of such property (as adjusted pursuant to Section 4.6(d)(ii)) at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution, in either case, as determined under Section 752 of the Code. "Net Income" means, for any taxable period, the excess, if any, of the Partnership's items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership's items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Section 4.6(b) and shall not include any items allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to a Required Allocation or a Curative Allocation, the applicable Net Income or Net Loss shall be recomputed without regard to such item. "Net Loss" means, for any taxable period, the excess, if any, of the Partnership's items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership's items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Section 4.6(b) and shall not include any items allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to a Required Allocation or a Curative Allocation, the applicable Net Income or Net Loss shall be recomputed without regard to such item. "Net Termination Gain" means, for any taxable period, the sum, if positive, of all items of income, gain or loss recognized by the Partnership from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Gain shall be determined in accordance with Section 4.6(b) and shall not include any items of income, gain or loss allocated under Section 5.1(d). Once an item of income, gain or loss that has been included in the initial computation of Net Termination Gain is subjected to a Required Allocation or 11 a Curative Allocation, the applicable Net Termination Gain or Net Termination Loss shall be recomputed without regard to such item. "Net Termination Loss" means, for any taxable period, the sum, if negative, of all items of income, gain or loss recognized by the Partnership from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Loss shall be determined in accordance with Section 4.6(b) and shall not include any items of income, gain or loss allocated under Section 5.1(d). Once an item of gain or loss that has been included in the initial computation of Net Termination Loss is subjected to a Required Allocation or a Curative Allocation, the applicable Net Termination Gain or Net Termination Loss shall be recomputed without regard to such item. "Nonrecourse Built-in Gain" means, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Section 5.2(b)(i)(A), 5.2(b)(ii)(A) or 5.2(b)(iii) if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration. "Nonrecourse Deductions" means any and all items of loss, deduction or expenditure (described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(b), are attributable to a Nonrecourse Liability. "Nonrecourse Liability" has the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(3). "Opinion of Counsel" means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner) acceptable to the General Partner. "Organizational Limited Partner" means AMCH in its capacity as the organizational limited partner of the Partnership pursuant to this Agreement. "Outstanding" means all Partnership Interests that are issued by the Partnership and reflected as outstanding on the Partnership's books and records as of the date of determination and includes Partnership Interests held by the General Partner and its Affiliates. 12 "Partner" means the General Partner and the Limited Partner. "Partner Nonrecourse Debt" has the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(4). "Partner Nonrecourse Deductions" means any and all items of loss, deduction or expenditure (including any expenditure described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(3), are attributable to a Partner Nonrecourse Debt. "Partnership" means Agricultural Minerals, Limited Partnership, a Delaware limited partnership established pursuant to this Partnership Agreement, and any successor thereto. "Partnership Assets" initially means the assets of AMC, as described in the Registration Statement, to be transferred to the Partnership and the Investor Partnership and, thereafter, means all assets of the Partnership whether tangible or intangible and whether real, personal or mixed. "Partnership Inception" means the Closing Date. "Partnership Interest" means the interest of a Partner in the Partnership. "Partnership Minimum Gain" means the amount determined in accordance with the principles of Treasury Regulation Sections 1.704-1T(b)(4)(iv)(a) and 1.704-1T(b)(4)(iv)(c). "Partnership Year" means the taxable year of the Partnership, which shall be the calendar year. "Percentage Interest" means as of the date of such determination (a) as to the General Partner, 1% and (b) as to the Limited Partner, 99%; provided, however, that following any additional Capital Contribution by the Limited Partner in accordance with Section 4.4 hereof, proper adjustment shall be made to the Percentage Interests of the General Partner and the Limited Partner, if necessary. "Person" means an individual or a corporation, partnership, trust, unincorporated organization, association or other entity. "Recapture Income" means any gain recognized by the Partnership (computed without regard to any adjustment 13 required by Section 734 or 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. "Record Holder" has the meaning assigned to such term in the Investor Partnership Agreement. "Registration Statement" means the Registration Statement on Form S-1 (Registration No. 33-43007), as it has been and as it may be amended or supplemented from time to time, filed by the Investor Partnership with the Securities and Exchange Commission under the Securities Act to register the offering and sale of the Senior Preference Units in the Initial Offering. "Required Allocations" means any allocation (or limitation imposed on any allocation) of an item of income, gain, deduction or loss pursuant to (a) the proviso-clause of Section 5.1(b)(i) or (b) Sections 5.1(d)(i), 5.1(d)(ii), 5.1(d)(iii), 5.1(d)(iv), 5.1(d)(v), 5.1(d)(vi), 5.1(d)(vii) and 5.1(d)(viii), such allocations (or limitations thereon) being directly or indirectly required by the Treasury Regulations promulgated under Section 704(b) of the Code. "Residual Gain" or "Residual Loss" means any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of a Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 5.2(b)(i)(A) or 5.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities. "Second Amended and Restated Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of November 25, 1991, among the Partnership, various lending institutions party thereto and Chemical Bank, as agent. "Securities Act" means the Securities Act of 1933, as amended, supplemented or restated from time to time, and any successor to such statute. "Senior Preference Unit" has the meaning assigned to such term in the Investor Partnership Agreement. "Substituted Limited Partner" means a Person who is admitted as a Limited Partner to the Partnership pursuant to 14 Section 11.1 in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership. "Surviving Business Entity" has the meaning assigned to such term in Section 15.2(b). "Termination Capital Transaction" means any sale, transfer or other disposition of assets of the Partnership following commencement of the dissolution and liquidation of the Partnership. "Underwriter" means each Person named as an underwriter in the Underwriting Agreement who purchases Senior Preference Units pursuant thereto. "Underwriting Agreement" means the Underwriting Agreement dated November 26, 1991 among the Underwriters, the Investor Partnership and the General Partner providing for the purchase of Senior Preference Units by such Underwriters. "Unit" has the meaning assigned to such term in the Investor Partnership Agreement. "Unitholder" means a Person who holds Units. "Unrealized Gain" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under Section 4.6(d)) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.6(d) as of such date). "Unrealized Loss" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.6(d) as of such date) over (b) the fair market value of such property as of such date (as determined under Section 4.6(d)). ARTICLE III PURPOSE 3.1 Purpose and Business. The purpose and nature of the business to be conducted by the Partnership shall be (i) to engage directly in, or to enter into any partnership, 15 joint venture or similar arrangement to engage in, the production and distribution of nitrogen fertilizers and any activities necessarily incidental or ancillary thereto and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity, (ii) to provide general and administrative services to its Affiliates and (iii) to do anything necessary or appropriate to the foregoing. 3.2 Powers. The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described in Section 3.1 and for the protection and benefit of the Partnership. ARTICLE IV CAPITAL CONTRIBUTIONS 4.1 Initial Contributions. To form the Partnership under the Delaware Act, the General Partner has made an initial Capital Contribution to the Partnership in the amount of $10 for an interest in the Partnership and has been admitted as the general partner of the Partnership, and the Organizational Limited Partner has made a Capital Contribution to the Partnership in the amount of $980 for an interest in the Partnership and has been admitted as a limited partner of the Partnership. 4.2 Return of Initial Contributions. As of the Closing Date, after giving effect to the transactions contemplated by Section 4.3, the interest in the Partnership of the Organizational Limited Partner shall be terminated, the $10 Capital Contribution by the General Partner and the $980 Capital Contribution by the Organizational Limited Partner as initial Capital Contributions shall be refunded and the Organizational Limited Partner shall withdraw as a limited partner of the Partnership. 98/99ths of any interest or other profit that may have resulted from the investment or other use of such initial Capital Contributions shall be allocated and distributed to the Organizational Limited Partner, and the balance thereof shall be allocated and distributed to the General Partner. 4.3 Contribution by the General Partner and the Limited Partner. (a) On the Closing Date, the General Partner shall, as more fully provided in the Conveyance 16 Agreement, convey, contribute and deliver to the Partnership, as a Capital Contribution, substantially all of its assets (exclusive of certain cash and certain assets necessary to provide general and administrative services to its Affiliates) in exchange for (i) a Partnership Interest as general partner in the Partnership representing an approximate 1.5875% general partner interest, (ii) a Partnership Interest as limited partner in the Partnership representing an approximate 98.4125% limited partner interest and (iii) the Partnership's assumption of, or taking of assets subject to, certain indebtedness and other liabilities. (b) On the Closing Date, as more fully provided in the Conveyance Agreement, the Investor Partnership shall convey, contribute and deliver to the Partnership as a Capital Contribution the net proceeds from the sale of the Senior Preference Units pursuant to the Underwriting Agreement, after which the Investor Partnership will hold a 99% limited partner interest in the Partnership, and the Investor Partnership shall be admitted to the Partnership as a limited partner of the Partnership. 4.4 Additional Capital Contribution by the Investor Partnership. The Investor Partnership, with the consent of the General Partner, may, but shall not be obligated to, make additional Capital Contributions to the Partnership. Upon any such Capital Contribution by the Investor Partnership, the General Partner shall be obligated to make an additional Capital Contribution to the Partnership such that the General Partner shall at all times have at least a 1% interest in each item of Partnership gain, loss, deduction and credit. 4.5 Preemptive Rights. The Limited Partner shall have preemptive rights with respect to (a) additional Capital Contributions; (b) issuance or sale of any class or series of Partnership Interests, whether unissued, held in the treasury or hereafter created; (c) issuance of any obligations, evidences of indebtedness or other securities of the Partnership convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase or subscribe to, any such Partnership Interests; (d) issuance of any right of subscription to or right to receive, or any warrant or option for the purchase of, any such Partnership Interests; or (e) issuance or sale of any other securities that may be issued or sold by the Partnership. 4.6 Capital Accounts. (a) The Partnership shall maintain for each Partner a separate Capital Account in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased 17 by (i) the amount of all Capital Contributions made to the Partnership pursuant to this Agreement and (ii) all items of Partnership income and gain (including, without limitation, income and gain exempt from tax) computed in accordance with Section 4.6(b) and allocated pursuant to Section 5.1 and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 4.6(b) and allocated pursuant to Section 5.1. (b) For purposes of computing the amount of any item of income, gain, loss or deduction to be reflected in the Partners' Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including, without limitation, any method of depreciation, cost recovery or amortization used for that purpose), provided that: (i) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under Section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such fees and other expenses are incurred and shall be allocated among the Partners pursuant to Section 5.1. (ii) Except as otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. (iii) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership's Carrying Value with respect to such property as of such date. (iv) In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any Contributed 18 Property shall be determined as if the adjusted basis of such property on the date it was acquired by the Partnership were equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 4.6(d) to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (A) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (B) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided, however, that, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method that the General Partner may adopt. (c) A transferee of a Partnership Interest shall succeed to a pro rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred; provided, however, that, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's properties shall be deemed to have been distributed in liquidation of the Partnership to the Partners (including any transferee of a Partnership Interest that is a party to the transfer causing such termination) pursuant to Sections 13.3 and 13.4 and recontributed by such Partners in reconstitution of the Partnership. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution pursuant to Section 4.6(d)(ii) and such Carrying Values shall then constitute the Agreed Values of such properties upon such deemed contribution to the reconstituted Partnership. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Section 4.6. (d) (i) Consistent with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or Contributed Property, the Capital Accounts of all Partners and the Carrying Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or 19 Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to the Partners at such time pursuant to Section 5.1. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to the issuance of Partnership Interests shall be determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, that the General Partner, in arriving at such valuation, must take into account the Limited Partner Equity Value and the General Partner Equity Value at such time. The General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its sole discretion to be reasonable) to arrive at a fair market value for individual properties. (ii) In accordance with Treasury Regulation Section 1.704- 1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Partner of any Partnership property (other than a distribution of cash that is not in redemption or retirement of a Partnership Interest), the Capital Accounts of all Partners and the Carrying Value of each Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value, and had been allocated to the Partners, at such time, pursuant to Section 5.1. Any Unrealized Gain or Unrealized Loss attributable to such property shall be allocated in the same manner as Net Termination Gain or Net Termination Loss pursuant to Section 5.1(c); provided, however, that, in making any such allocation, Net Termination Gain or Net Termination Loss actually realized shall be allocated first. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to a distribution shall (A) in the case of a deemed distribution occurring as a result of a termination of the Partnership pursuant to Section 708 of the Code, be determined and allocated in the same manner as that provided in Section 4.6(d)(i) or (B) in the case of a liquidating distribution pursuant to Section 13.3 or 13.4, be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt. 20 4.7 Interest. No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners' Capital Accounts. 4.8 No Withdrawal. No Partner shall be entitled to withdraw any part of its Capital Contributions or its Capital Account or to receive any distribution from the Partnership, except as provided herein. 4.9 Loans from Partners. Loans by a Partner to the Partnership shall not constitute Capital Contributions. If any Partner shall advance funds to the Partnership in excess of the amounts required hereunder to be contributed by it to the capital of the Partnership, the making of such excess advances shall not result in any increase in the amount of the Capital Account of such Partner. The amount of any such excess advances shall be a debt obligation of the Partnership to such Partner and shall be payable or collectible only out of the Partnership Assets in accordance with the terms and conditions upon which such advances are made. ARTICLE V ALLOCATIONS AND DISTRIBUTIONS 5.1 Allocations for Capital Account Purposes. For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership's items of income, gain, loss and deduction (computed in accordance with Section 4.6(b)) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below. (a) Net Income. After giving effect to the allocations set forth in Section 5.1(d), Net Income for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable period shall be allocated as follows: (i) First, 100% to the General Partner until the aggregate Net Income allocated to the General Partner pursuant to this Section 5.1(a)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the General Partner pursuant to Section 5.1(b)(ii) for all previous taxable years; and 21 (ii) Second, the balance, if any, 100% to the General Partner and the Limited Partner in accordance with their respective Percentage Interests. (b) Net Losses. After giving effect to the allocations set forth in Section 5.1(d), Net Losses for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated as follows: (i) First, 100% to the General Partner and the Limited Partner, in accordance with their respective Percentage Interests, provided that Net Losses shall not be allocated pursuant to this Section 5.1(b)(i) to the extent that such allocation would cause the Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); and (ii) Second, the balance, if any, 100% to the General Partner. (c) Net Termination Gains and Losses. After giving effect to the allocations set forth in Section 5.1(d), all items of gain and loss taken into account in computing Net Termination Gain or Net Termination Loss for such taxable period shall be allocated in the same manner as such Net Termination Gain or Net Termination Loss is allocated hereunder. All allocations under this Section 5.1(c) shall be made after Capital Account balances have been adjusted by all other allocations provided under this Section 5.1 and after all distributions of Available Cash provided under Section 5.3 have been made with respect to the taxable period ending on the date of the Partnership's liquidation pursuant to Section 13.3. (i) If a Net Termination Gain is recognized (or deemed recognized pursuant to Section 4.6(d)) from Termination Capital Transactions, such Net Termination Gain shall be allocated between the General Partner and the Limited Partner in the following manner: (A) First, to each Partner having a deficit balance in such Partner's Capital Account to the extent of and in the proportion 22 that such deficit balance bears to the total deficit balances in the Capital Accounts of all Partners, until each such Partner has been allocated Net Termination Gain equal to any such deficit balance in such Partner's Capital Account; and (B) Second, 100% to the General Partner and the Limited Partner, in proportion to their respective Percentage Interests. (ii) If a Net Termination Loss is recognized (or deemed recognized pursuant to Section 4.6(d)) from Termination Capital Transactions, such Net Termination Loss shall be allocated to the Partners in the following manner: (A) First, 100% to the General Partner and the Limited Partner, in accordance with their respective Percentage Interests, provided that Net Termination Losses shall not be allocated pursuant to this Section 5.1(c)(ii) to the extent that such allocation would cause the Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); and (B) Second, the balance, if any, 100% to the General Partner. (d) Special Allocations. Notwithstanding any other provision of this Section 5.1, the following allocations shall be made for such taxable period: (i) Partnership Minimum Gain Chargeback. Notwithstanding any other provision of this Section 5.1, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable period, each Partner shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the greater of (A) the portion of such Partner's share of the net decrease in Partnership Minimum Gain during such taxable period that is allocable (in accordance with the principles set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(e)(2)) to the disposition of 23 Partnership property subject to one or more Nonrecourse Liabilities of the Partnership, or (B) the deficit balance in such Partner's Adjusted Capital Account at the end of such taxable period (modified, as appropriate, by Treasury Regulation Section 1.704-1T(b)(4)(iv)(e)(2)). The items to be so allocated shall be determined in accordance with Treasury Regulation Section 1.704-1T(b)(4)(iv)(e) and, for purposes of this Section 5.1(d), each Partner's Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d) with respect to such taxable period. This Section 5.1(d)(i) is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-1T(b)(iv)(4)(e) and shall be interpreted consistently therewith. (ii) Chargeback of Minimum Gain Attributable to Partner Nonrecourse Debt. Notwithstanding the other provisions of this Section 5.1 (other than Section 5.1(d)(i)), if there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any Partnership taxable period, any Partner with a share of Minimum Gain Attributable to Partner Nonrecourse Debt at the beginning of such taxable period shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the greater of (A) the portion of such Partner's share of the net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt that is allocable (in accordance with the principles set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4)) to the disposition of Partnership property subject to such Partner Nonrecourse Debt or (B) the deficit balance in such Partner's Adjusted Capital Account at the end of such taxable period (modified, as appropriate, by Treasury Regulation Section 1.704- 1T(b)(4)(iv)(h)(4)). The items to be so allocated shall be determined in a manner consistent with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(e) and, for purposes of this Section 5.1(d), each Partner's Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder 24 shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d), other than Section 5.1(d)(i), with respect to such taxable period. This Section 5.1(d)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4) and shall be interpreted consistently therewith. (iii) Qualified Income Offset. Except as provided in Sections 5.1(d)(i) and 5.1(d)(ii), in the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) (modified, as appropriate, by Treasury Regulation Section 1.704-1T(b)(4)(iv)(e)(3) and 1.704- 1T(b)(4)(iv)(h)(4)), items of Partnership income and gain shall be allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible; Provided that an allocation pursuant to this Section 5.1(d)(iii) shall be made only if and to the extent that such Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 5.1 have been tentatively made as if this Section 5.1(d)(iii) were not in this Agreement. (iv) Gross Income Allocations. In the event any Partner has a deficit balance in its Capital Account at the end of any Partnership taxable period that is in excess of the sum of (A) the amount such Partner is obligated to restore pursuant to any provision of this Agreement and (B) the amount such Partner is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulation Sections 1.704-1T(b)(4)(iv)(f) and 1.704-1T(b)(4)(iv)(h)(5), such Partner shall be allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided that an allocation pursuant to this Section 5.1(d)(v) shall be made only if and to the extent that such Partner would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Section 5.1 have 25 been tentatively made as if Section 5.1(d)(iii) and this Section 5.1(d)(iv) were not in this Agreement. (v) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Partners in the same ratios that Net Income or Net Losses, as the case may be, is allocated for the taxable year. If the General Partner determines in its good faith discretion that the Partnership's Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio to the numerically closest ratio that does satisfy such requirements. (vi) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704- 1T(b)(4)(iv)(h). If more than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss. (vii) Nonrecourse Liabilities. For purposes of Treasury Regulation Section 1.752-1T(e)(ii)(C), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests. (viii) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts 26 shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations. (ix) Curative Allocation. (A) Notwithstanding any other provision of this Section 5.1, other than the Required Allocations provisions, the Required Allocations shall be taken into account in making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss and deduction allocated to each Partner pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Partner under the Agreed Allocations had the Required Allocations and this Curative Allocation not otherwise been provided in this Section 5.1. Notwithstanding the preceding sentence, Required Allocations relating to (1) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Minimum Gain Attributable to Partner Nonrecourse Debt. Allocations pursuant to this Section 5.1(d)(ix)(A) shall only be made with respect to Required Allocations to the extent the General Partner reasonably determines that such allocations will otherwise be inconsistent with the economic agreement among the Partners. Further, allocations pursuant to this Section 5.1(d)(ix)(A) shall be deferred with respect to allocations pursuant to clauses (1) and (2) hereof to the extent the General Partner reasonably determines that such allocations are likely to be offset by subsequent Required Allocations. (B) The General Partner shall have reasonable discretion, with respect to each taxable period, to (1) apply the provisions of Section 5.1(d)(ix)(A) in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations, and (2) divide all 27 allocations pursuant to Section 5.1(d)(ix)(A) among the Partners in a manner that is likely to minimize such economic distortions. 5.2 Allocations for Tax Purposes. (a) Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to Section 5.1. (b) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, depreciation, amortization and cost recovery deductions shall be allocated for federal income tax purposes among the Partners as follows: (i) (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted tax basis at the time of contribution; and (B) except as otherwise provided in Section 5.2(b)(iii), any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of "book" gain or loss is allocated pursuant to Section 5.1. (ii) (A) In the case of an Adjusted Property, such items shall (1) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 4.6(d)(i) or (ii), and (2) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 5.2(b)(i)(A); and (B) except as otherwise provided in Section 5.2(b)(iii), any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner as its correlative item of "book" gain or loss is allocated pursuant to Section 5.1. (iii) Any items of income, gain, loss or deduction otherwise allocable under Section 5.2(b)(i)(B) or 5.2(b)(ii)(B) shall be subject to allocation by the General Partner in a manner designed to eliminate, to the 28 maximum extent possible, Book-Tax Disparities in a Contributed Property or Adjusted Property otherwise resulting from the application of the "ceiling" limitation (under Section 704(c) of the Code or Section 704(c) principles) to the allocations provided under Section 5.2(b)(i)(A) or 5.2(b)(ii)(A). (c) For the proper administration of the Partnership and for the preservation of uniformity of the Units of the Investor Partnership (or any class or classes thereof), the General Partner shall have sole discretion to (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions; (ii) make special allocations for federal income tax purposes of income (including, without limitation, gross income) or deductions; (iii) amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of the Units of the Investor Partnership (or any class or classes thereof); and (iv) treat any payment of tax by the Partnership on behalf of fewer than all of the Partners as an item of Partnership expense. The General Partner may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this Section 5.2(c) only if such conventions, allocations or amendments would not have a material adverse effect on the Partners, the holders of any class or classes of Units of the Investor Partnership issued and Outstanding or the Partnership, and if such allocations are consistent with the principles of Section 704 of the Code. (d) The General Partner in its sole discretion may determine to depreciate the portion of an adjustment under Section 743(b) of the Code attributable to unrealized appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax Disparity) using a predetermined rate derived from the depreciation method and useful life applied to the Partnership's common basis of such property, despite the inconsistency of such approach with Proposed Treasury Regulation Section 1.168-2(n) and Treasury Regulation Section 1.167(c)-1(a)(6). If the General Partner determines that such reporting position cannot reasonably be taken, the General Partner may adopt a depreciation convention under which all purchasers acquiring Units of the Investor Partnership in the same month would receive depreciation, based upon the same applicable rate as if they had purchased a direct interest in the Partnership's property. If the General Partner chooses not to utilize such aggregate method, the General Partner may use any other reasonable depreciation convention to preserve the uniformity of the intrinsic tax 29 characteristics of any Units of the Investor Partnership that would not have a material adverse effect on the Limited Partners or the Record Holders of any class or classes of Units of the Investor Partnership. (e) Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 5.2 be characterized as Recapture Income in the same proportions and to the same extent as such Partners (or their predecessors in interest) have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. (f) All items of income, gain, loss, deduction and credit recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code which may be made by the Partnership; provided, however, that such allocations, once made, shall be adjusted as necessary or appropriate to take into account those adjustments permitted or required by Sections 734 and 743 of the Code. (g) The General Partner may adopt such methods of allocation of income, gain, loss or deduction between a transferor and a transferee of a Partnership Interest as it determines necessary, to the extent permitted or required by Section 706 of the Code and the regulations or rulings promulgated thereunder. (h) The General Partner shall amend or supplement this Article V to provide for the allocation of any item of income, gain, loss, deduction or credit for federal, state or local income tax purposes for which provision is not otherwise made herein in the manner that the General Partner determines to be reasonable, taking into account the requirements of the Code. (i) Notwithstanding any other provision of this Section 5.2, if the Internal Revenue Service is successful in asserting an adjustment to the taxable income of the General Partner and, as a result of any such adjustment, the Partnership is entitled to a deduction for federal income tax purposes with respect to any portion of such adjustment, such deduction shall be allocated to the General Partner. 30 5.3 Requirements as to Distributions. Within sixty days following the end of each calendar quarter (or following the period from the Closing Date through December 31, 1991), an amount equal to 100% of Available Cash with respect to such quarter (or period) shall be distributed in accordance with this Article V by the Partnership to the Partners in proportion to their respective Percentage Interests. The immediately preceding sentence shall not modify in any respect the provisions of Section 4.2 regarding the distribution of any interest or other profit on the initial contributions referred to therein or require any distribution of cash if and to the extent such distribution would be prohibited by applicable law or by any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Partnership is a party or by which it is bound or its assets are subject. ARTICLE VI MANAGEMENT AND OPERATION OF BUSINESS 6.1 Management. (a) The General Partner shall conduct, direct and exercise full control over all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and the Limited Partner shall have no right of control or management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 6.3, shall have full power and authority to do all things and on such terms as it, in its sole discretion, may deem necessary or desirable to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1, including, without limitation, (A) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness and the incurring of any other obligations and the securing of same by mortgage, deed of trust or other lien or encumbrance; (B) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership; (C) the acquisition, disposition, mortgage, 31 pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership or the merger or other combination of the Partnership with or into another Person (the matters described in this clause (C) being subject, however, to any prior approval that may be required by Section 6.3); (D) the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement, including, without limitation, the financing of the conduct of the operations of the Partnership, the lending of funds to other Persons and the repayment of obligations of the Partnership; (E) the negotiation, execution and performance of any contracts, conveyances or other instruments (including, without limitation, instruments that limit the liability of the Partnership under contractual arrangements to all or particular assets of the Partnership, with the other party to the contract to have no recourse against the General Partner or its assets other than its interest in the Partnership, even if same results in the terms of the transaction being less favorable to the Partnership than would otherwise be the case); (F) the distribution of Partnership cash; (G) the selection and dismissal of employees and agents (including, without limitation, employees having titles such as "president," "vice president," "secretary" and "treasurer") and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring; (H) the procurement and maintenance by the Partnership or the General Partner of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate; (I) the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, joint ventures or other relationships; (J) the control of any matters affecting the rights and obligations of the Partnership, including, without limitation, the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation and the incurring of legal expense and the settlement of claims and litigation; and (K) the indemnification of any person against liabilities and contingencies to the extent permitted by law. (b) Notwithstanding any other provision of this Agreement, the Investor Partnership Agreement, the Delaware Act or any applicable law, rule or regulation, each of the Partners hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of the Second Amended and Restated Credit Agreement, the Conveyance Agreement and the other applicable agreements described in or filed as part of the Registration Statement; 32 (ii) agrees that the General Partner is authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in the Registration Statement on behalf of the Partnership without any further act, approval or vote of the Partners; and (iii) agrees that none of the execution, delivery or performance by the General Partner and its officers and directors, the Partnership or any Affiliate thereof of any agreement authorized or permitted under this Agreement (including, without limitation, the exercise by the General Partner or any Affiliate of the General Partner of the rights accorded pursuant to Section 6.5) shall constitute a breach by the General Partner and its officers and directors of any duty that the General Partner and its officers and directors may owe the Partnership or the Limited Partner or any other Persons under this Agreement or of any duty stated or implied by law or equity. 6.2 Certificate of Limited Partnership. The General Partner has caused the Certificate of Limited Partnership to be filed with the Secretary of State of the State of Delaware as required by the Delaware Act and shall use all reasonable efforts to cause to be filed such other certificates or documents as may be determined by the General Partner in its sole discretion to be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business or own property. To the extent that such action is determined by the General Partner in its sole discretion to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware or of any other state in which the Partnership may elect to do business or own property. Subject to the terms of Section 7.5(a), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership, any qualification document or any amendment thereto to the Limited Partner. 6.3 Restrictions on General Partner's Authority. (a) The General Partner may not, without written approval of the specific act by the Limited Partner or by other written instrument executed and delivered by the Limited Partner 33 subsequent to the date of this Agreement, take any action in contravention of this Agreement, including, without limitation, (i) any act that would make it impossible to carry on the ordinary business of the Partnership, except as otherwise provided in this Agreement; (ii) possess Partnership property, or assign any rights in specific Partnership property, for other than a Partnership purpose; (iii) admit a Person as a Partner, except as otherwise provided in this Agreement; (iv) amend this Agreement in any manner, except as otherwise provided in this Agreement; or (v) transfer its interest as general partner of the Partnership, except as otherwise provided in this Agreement. (b) Except as provided in Article XIII, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the Partnership's assets in a single transaction or a series of related transactions (including by way of merger, consolidation or other combination with any other Person) without the approval of the Limited Partner; provided, however, that this provision shall not preclude or limit the General Partner's ability to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the Partnership's assets and shall not apply to any forced sale of any or all of the Partnership's assets pursuant to the foreclosure of, or other realization upon, any such encumbrance, or in any way limit the right of any holder of the capital stock of the General Partner to sell, exchange or otherwise dispose of such capital stock. (c) At all times while serving as the general partner of the Partnership, the General Partner shall not make any dividend or distribution on, or repurchase any shares of, its stock or take any other action within its control if the effect of such dividend, distribution, repurchase or other action would be to reduce its net worth below an amount necessary to receive an Opinion of Counsel that the Partnership will be treated as a partnership for federal income tax purposes. 6.4 Reimbursement of the General Partner. (a) Except as provided in this Section 6.4 and elsewhere in this Agreement, the General Partner shall not be compensated for its services as general partner of the Partnership. (b) The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole discretion, for (i) all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership (including, without limitation, amounts paid 34 to any Person to perform services for the Partnership) and (ii) that portion of the General Partner's or its Affiliates' legal, accounting, investor communications, utilities, telephone, secretarial, travel, entertainment, bookkeeping, reporting, data processing, office rent and other office expenses (including, without limitation, overhead charges), salaries, fees and other compensation and benefit expenses of employees, officers and directors, insurance, other administrative or overhead expenses and all other expenses, in each such case, necessary or appropriate to the conduct of the Partnership's business and reasonably allocable to the Partnership or otherwise incurred by the General Partner in connection with operating the Partnership's business (including, without limitation, expenses allocated to the General Partner by its Affiliates). The General Partner shall determine the fees and expenses that are allocable to the Partnership in any reasonable manner determined by the General Partner in its sole discretion. Such reimbursements shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 6.7. (c) The General Partner in its sole discretion and without the approval of the Limited Partner may propose and adopt on behalf of the Partnership employee benefit plans (including, without limitation, plans involving the issuance of Units of the Investor Partnership), for the benefit of employees of the General Partner, the Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership. 6.5 Outside Activities. (a) After the Closing Date, the General Partner shall limit its activities to those required or authorized by the Investor Partnership Agreement or this Agreement. AMC may provide general and administrative services to AMCH and its Affiliates. Certain officers, directors and employees of AMC are also officers, directors or employees of AMCH and/or its Affiliates. AMCH and its Affiliates are engaged in the business of making investments in various types of businesses, which may include businesses in the agricultural minerals industry, and managing such investments. Such officers, directors and employees of AMC may spend a substantial amount of time managing the business and affairs of AMCH and its Affiliates and may face conflicts regarding the allocation of their time between the Partnership and such other business interests. The General Partner shall cause its employees to devote as much time to the management of the Partnership as is necessary for the proper conduct of its business and affairs. The General Partner shall manage the Partnership 35 for the benefit of its Partners and the General Partner. In the event that AMC is no longer owned by AMCH, any new owner may engage in other businesses, or in the business of making investments in businesses, which may include businesses in the agricultural minerals industry, and managing such investments. The officers, directors and employees of AMC may also be officers, directors or employees of such new owners and may spend a substantial amount of time managing the business and affairs of such new owner and its Affiliates and may face conflicts regarding the allocation of their time between the Partnership and such other business interests. The new owners shall cause their employees to devote as much time to the management of the Partnership as is necessary for the proper conduct of its business and affairs. None of such other investment or management activities shall constitute a breach of fiduciary duty owed by AMC. (b) Except as provided in Section 6.5(a), each Indemnitee (other than AMC) is free to engage in any business, including any business that is in competition with the business of the Partnership. The General Partner and any other Persons affiliated with the General Partner may acquire Units or other partnership securities of the Investor Partnership, in addition to those acquired by any of such Persons on the Closing Date, and shall be entitled to exercise all rights of an Assignee or Limited Partner, as applicable, relating to such Units or partnership securities, as the case may be. (c) Without limiting Sections 6.5(a) and 6.5(b), but notwithstanding anything to the contrary in this Agreement, the ability of Indemnitees (other than AMC) to enter into competitive activities is hereby approved by all Partners, and it shall not be deemed to be a breach of the General Partner's fiduciary duty for the General Partner to permit an Indemnitee to engage in a business opportunity in preference to or to the exclusion of the Partnership. 6.6 Loans to and from the Partnership; Contracts with Affiliates. (a) The General Partner, the Limited Partner or any Affiliates thereof may lend to the Partnership, and the Partnership may borrow, funds needed or desired by the Partnership for such periods of time as the General Partner may determine; Provided, however, that the General Partner, the Limited Partner or any of their Affiliates may not charge the Partnership interest at a rate greater than the rate that would be charged the Partnership (without reference to the General Partner's financial abilities or guarantees), and the terms of such loan shall be 36 no less favorable to the Partnership than those required, by unrelated lenders on comparable loans. The Partnership shall reimburse the General Partner, the Limited Partner or any of their Affiliates, as the case may be, for any costs (other than any additional interest costs) incurred by it in connection with the borrowing of funds obtained by the General Partner, the Limited Partner or any of their Affiliates and loaned to the Partnership. (b) The Partnership may lend to or borrow from the Investor Partnership, and the Investor Partnership may lend, contribute to or borrow from the Partnership, funds on terms and conditions established in the sole discretion of the General Partner; provided, however, that the Partnership may not charge the Investor Partnership, and the Investor Partnership may not charge the Partnership, as the case may be, interest at a rate greater than the rate and terms that would be charged the Investor Partnership or the Partnership, as the case may be (without reference to the General Partner's financial abilities or guarantees), by unrelated lenders on comparable loans. The foregoing authority shall be exercised by the General Partner in its sole discretion and shall not create any right or benefit in favor of the Investor Partnership or any other Person. The Partnership may not lend funds to the General Partner or any of its Affiliates (other than the Investor Partnership), except for short- term funds management purposes. (c) The General Partner may itself, or may enter into an agreement with any of its Affiliates to, render services to the Partnership. Any service rendered to the Partnership by the General Partner or any of its Affiliates shall be on terms that are fair and reasonable to the Partnership; provided, however, that the requirements of this Section 6.6(c) shall be deemed satisfied as to any transaction the terms of which are no less favorable to the Partnership than those generally being provided to or available from unrelated third parties. The provisions of Section 6.4 shall apply to the rendering of services described in this Section 6.6(c). (d) The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as are consistent with this Agreement and applicable law. (e) Neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or 37 indirectly, except pursuant to transactions that are fair and reasonable to the Partnership; provided, however, that the requirements of this Section 6.6(e) shall be deemed to be satisfied as to (i) the transactions effected pursuant to Sections 4.2 and 4.3, the Conveyance Agreement and any other transactions described in or contemplated by the Registration Statement and (ii) as to any transaction the terms of which are no less favorable to the Partnership than those generally being provided to or available from unrelated third parties. (f) The General Partner and its Affiliates will have no obligation to permit the Partnership or the Investor Partnership to use any facilities of the General Partner and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use, nor shall there be any obligation on the General Partner or its Affiliates to enter into such contracts. (g) Without limitation of Sections 6.6(a) through 6.6(f), and notwithstanding anything to the contrary in this Agreement, the existence of the conflicts of interest described in the Registration Statement under the caption "Conflicts of Interest and Fiduciary Responsibility" are hereby approved by all Partners. 6.7 Indemnification. (a) To the fullest extent permitted by law, each Indemnitee (i) shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities (joint or several), expenses (including, without limitation, legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as (x) the General Partner, a Departing Partner or any of their Affiliates, (y) an officer or director of the General Partner, any Departing Partner or any of their Affiliates or (z) a Person serving at the request of the Partnership as a director, officer, employee, partner, member or agent of another corporation, partnership, joint venture, trust, committee or other enterprise and (ii) may be indemnified, to the extent deemed advisable by the General Partner to the fullest extent permitted by law, from and against any and all amounts described in clause (i) above, by reason of its status as an employee, partner or agent (other than a director or officer) of the General Partner, any Departing Partner or any of their Affiliates. Any indemnification pursuant to this Section 6.7 shall be made only out of the assets of the Partnership. 38 (b) To the fullest extent permitted by law, expenses (including, without limitation, legal fees and expenses) incurred by an Indemnitee that may be indemnified pursuant to Section 6.7(a) in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding. (c) The indemnification provided by this Section 6.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, both as to actions in the Indemnitee's capacity as (i) the General Partner, a Departing Partner or an Affiliate thereof, (ii) an officer, director, employee, partner or agent of the General Partner, any Departing Partner or an Affiliate thereof or (iii) a Person serving at the request of the Partnership as a director, officer, employee, partner, member or agent of another corporation, partnership, joint venture, trust, committee or other enterprise, and shall continue as to an Indemnitee who has ceased to serve in such capacity and as to actions in any other capacity (including, without limitation, any capacity under the Underwriting Agreement). (d) The Partnership may purchase and maintain (or reimburse the General Partner or its Affiliates for the cost of) insurance, on behalf of any Indemnitee, against any liability that may be asserted against or expense that may be incurred by such Person in connection with the Partnership's activities, whether or not the Partnership would have the power to indemnify such Person against such liabilities under the provisions of this Agreement. (e) For purposes of this Section 6.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute "fines" within the meaning of Section 6.7(a); and action taken or omitted by it with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is in, or not opposed to, the best interests of the Partnership. 39 (f) In no event may an Indemnitee subject the Limited Partner to personal liability by reason of the indemnification provisions set forth in this Agreement. (g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. (h) To the extent that, at law or in equity, any Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Limited Partner, AMC, as general partner of the Partnership, and any other Indemnitee acting in connection with the Partnership's business or offices shall not be liable to the Partnership or to any Limited Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of any Indemnitee otherwise existing at law or in equity, are agreed by the Limited Partner to replace such other duties and liabilities of such Indemnitee. (i) The provisions of this Section 6.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. (j) No amendment, modification, repeal or adoption of any provision inconsistent with this Section 6.7 or any provision hereof nor, to the fullest extent permitted by applicable law, any modification of law shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligation of the Partnership to indemnify any such Indemnitee under and in accordance with the provisions of this Section 6.7 as in effect immediately prior to such amendment, modification, repeal or adoption with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification, repeal or adoption, regardless of when such claims may arise or be asserted. 6.8 Liability of Indemnitees. (a) Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership, the Limited Partner or any other Persons who have acquired interests in the Partnership, for losses 40 sustained or liabilities incurred as a result of any act or omission if such Indemnitee acted in good faith. (b) Subject to its obligations and duties as General Partner set forth in Section 6.1(a), the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and the General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith. (c) Any amendment, modification or repeal of this Section 6.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability to the Partnership and the Limited Partner of the General Partner, its directors, officers and employees under this Section 6.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. 6.9 Resolution of Conflicts of Interest. (a) Unless otherwise expressly provided in this Agreement or the Investor Partnership Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership, the Investor Partnership or the Limited Partner, on the other hand, any resolution or course of action in respect of such conflict of interest shall be permitted and deemed approved by the Limited Partner, and shall not constitute a breach of this Agreement, of the Investor Partnership Agreement, of any agreement contemplated herein or therein, or of any duty stated or implied by law or equity, if the resolution or course of action is or, by operation of this Agreement is deemed to be, fair and reasonable to the Partnership. The General Partner shall be authorized in connection with its resolution of any conflict of interest to consider (i) the relative interests of any party involved in such conflict or affected by such action, agreement, transaction or situation and the benefits and burdens relating to such interest; (ii) any customary or accepted AMC and industry practices; (iii) any applicable generally accepted accounting practices or principles; and (iv) such additional factors as the General Partner determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. Nothing contained in this Agreement, however, is intended to nor shall it be construed to require the General Partner to 41 consider the interests of any Person other than the Partnership. In the absence of bad faith by the General Partner, the resolution, action or terms so made, taken or provided by the General Partner with respect to such matter shall not constitute a breach of this Agreement or any other agreement contemplated herein or a breach of any standard of care or duty imposed herein or therein or under the Delaware Act or any other law, rule or regulation. (b) Whenever this Agreement or any other agreement contemplated hereby provides that a General Partner or any of its Affiliates is permitted or required to make a decision (i) in its "sole discretion" or "discretion," that it deems "necessary or appropriate" or under a grant of similar authority or latitude, the General Partner or such Affiliate shall be entitled to consider only such interests and factors as it desires and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, the Partnership, the Investor Partnership, the Limited Partner or any holder of Units or (ii) in "good faith" or under another express standard, the General Partner or such Affiliate shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement, the Investor Partnership Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation. In addition, any actions taken by the General Partner consistent with the standards of "reasonable discretion" set forth in the definition of Available Cash shall not constitute a breach of any duty of the General Partner to the Partnership or the Limited Partner. The General Partner shall have no duty, express or implied, to sell or otherwise dispose of any asset of the Partnership. No borrowing by the Partnership or the approval thereof by the General Partner shall be deemed to constitute a breach of any duty of the General Partner to the Partnership or the Limited Partner by reason of the fact that the purpose or effect of such borrowing is directly or indirectly to (i) avoid having the Investor Partnership draw on the Letter of Credit, (ii) avoid subordination of the Junior Preference Units or Common Units pursuant to the Investor Partnership Agreement or (iii) result in or increase incentive distributions to the General Partner pursuant to the Investor Partnership Agreement. (c) Whenever a particular transaction, arrangement or resolution of a conflict of interest is required under this Agreement to be "fair and reasonable" to any Person, the fair and reasonable nature of such transaction, arrangement or resolution shall be considered in the context of all similar or related transactions. 42 6.10 Other Matters Concerning the General Partner. (a) The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or Presented by the proper party or parties. (b) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted in reliance upon the opinion (including, without limitation, an Opinion of Counsel) of such Persons as to matters that such General Partner reasonably believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. (c) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform each and every act and duty that is permitted or required to be done by the General Partner hereunder. (d) Any standard of care and duty imposed by this Agreement or under the Delaware Act or any applicable law, rule or regulation shall be modified, waived or limited as required to permit the General Partner to act under this Agreement or any other agreement contemplated by this Agreement and to make any decision pursuant to the authority prescribed in this Agreement so long as such action is not inconsistent with the best interests of the Partnership. 6.11 Title to Partnership Assets. Title to Partnership Assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership Assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Partnership assets for which record title is held in the name of the General Partner shall be held by the General Partner for the use and benefit 43 of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its reasonable efforts to cause record title to such assets (other than (a) those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable, provided that, prior to the withdrawal or removal of the General Partner or as soon thereafter as practicable, the General Partner will use reasonable efforts to effect the transfer of record title to the Partnership and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to the Partnership, and (b) those assets listed on Schedule I to the Conveyance Agreement) to be vested in the Partnership as on as reasonably practicable. All Partnership Assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Partnership Assets are held. 6.12 Reliance by Third Parties. Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership's sole party in interest, both legally and beneficially. The Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. 44 ARTICLE VII RIGHTS AND OBLIGATIONS OF THE L1MITED PARTNER 7.1 Limitation of Liability. The Limited Partner and the Organizational Limited Partner shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Act. 7.2 Management of Business. The Limited Partner shall not take part in the operation, management or control (within the meaning of the Delaware Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner or any of its Affiliates, in its capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partner under this Agreement. 7.3 Outside Activities. The Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including, without limitation, business interests and activities in direct competition with the Partnership. Neither the Partnership nor any of the other Partners shall have any rights by virtue of this Agreement in any business ventures of the Limited Partner. 7.4 Return of Capital. The Limited Partner shall not be entitled to the withdrawal or return of his Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. 7.5 Rights of the Limited Partner Relating to the Partnership. (a) In addition to other rights provided by this Agreement or by applicable law, and except as limited by Section 7.5(b), the Limited Partner shall have the right, for a purpose reasonably related to the Limited Partner's interest as a limited partner in the Partnership, upon reasonable demand and at the Limited Partner's own expense: (i) to obtain true and full information regarding the status of the business and financial condition of the Partnership; 45 (ii) promptly after becoming available, to obtain a copy of the Partnership's federal, state and local tax returns for each year; (iii) to have furnished to him, upon notification to the General Partner, a current list of the name and last known business, residence or mailing address of each Partner; (iv) to have furnished to him, upon notification to the General Partner, a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto and powers of attorney pursuant to which the same have been executed; (v) to obtain true and full information regarding the amount of cash, and a description and statement of the Agreed Value of any other Capital Contribution, contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner; and (vi) to obtain such other information regarding the affairs of the Partnership as is just and reasonable. (b) Notwithstanding any other provision of this Agreement, the General Partner may keep confidential from the Limited Partner for such period of time as the General Partner deems reasonable, any information that the General Partner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or which the Partnership is required by law or by agreements with third parties to keep confidential. ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS 8.1 Records and Accounting. The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership's business including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 7.5(a). Any books and records maintained by or on behalf of the 46 Partnership in the regular course of its business, including, without limitation, books of account and records of Partnership proceedings, may be kept on, or be in the form of computer disks, hard disks, punch cards, magnetic tape, photographs, micrographics or any other information storage device, Provided that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with generally accepted accounting principles. 8.2 Fiscal Year. The fiscal year of the Partnership shall be the calendar year. ARTICLE IX TAX MATTERS 9.1 Preparation of Tax Returns. The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall use all reasonable efforts to furnish, within ninety days of the close of each taxable year of the Partnership, the tax information reasonably required by the Limited Partner for federal and state income tax reporting purposes. The classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for federal income tax purposes. The taxable year of the Partnership shall be the calendar year. 9.2 Tax Elections. Except as otherwise provided herein, the General Partner shall, in its sole discretion, determine whether to make any available election pursuant to the Code; provided, however, that the General Partner shall make the election under Section 754 of the Code in accordance with applicable regulations thereunder. The General Partner shall have the right to seek to revoke any such election (including, without limitation, the election under Section 754 of the Code) upon the General Partner's determination in its sole discretion that such revocation is in the best interests of the Limited Partner. 9.3 Tax Controversies. Subject to the provisions hereof, the General Partner is designated the Tax Matters Partner (as defined in Section 6231 of the Code), and is authorized and required to represent the Partnership (at the 47 Partnership's expense) in connection with all examinations of the Partnership's affairs by tax authorities, including, without limitation, resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. The Limited Partner agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings. 9.4 Organizational Expenses. The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership ratably over a sixty-month period as provided in Section 709 of the Code. 9.5 Withholding. Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines in its sole discretion to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner (including, without limitation, by reason of Section 1446 of the Code), the amount withheld shall be treated as a distribution of cash pursuant to Section 5.3 in the amount of such withholding from such Partner. 9.6 Opinions of Counsel. Notwithstanding any other provision of this Agreement, if the Partnership is taxable for federal income tax purposes as a corporation or treated as an association taxable as a corporation at any time and, pursuant to the provisions of this Agreement, an Opinion of Counsel would otherwise be required to the effect that an action will not cause the Partnership to become so taxable as a corporation or to be treated as an association taxable as a corporation, such requirement for an Opinion of Counsel shall be deemed automatically waived. ARTICLE X TRANSFER OF INTERESTS 10.1 Transfer. (a) The term "transfer," when used in this Article X with respect to a Partnership Interest, shall be deemed to refer to an appropriate transaction by 48 which the General Partner assigns its Partnership Interest as General Partner to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. (b) No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article X. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article X shall be null and void. 10.2 Transfer of the General Partner's Partnership Interest. (a) If the general partner of the Investor Partnership transfers its partnership interest as a general partner therein to any Person in accordance with the provisions of the Investor Partnership Agreement, the General Partner shall contemporaneously therewith transfer its Partnership Interest as the general partner of the Partnership to such Person, and the Limited Partner hereby expressly consents to such transfer. Except as set forth in the immediately preceding sentence and in Section 10.2(b), the General Partner may not transfer all or any part of its Partnership Interest. (b) Neither Section 10.2(a) nor any other provision of this Agreement shall be construed to prevent (and all Partners do hereby consent to) (i) the transfer by the General Partner of all of its Partnership Interest to an Affiliate or (ii) the transfer by the General Partner of all of its Partnership Interest upon its merger, consolidation or other combination into any other Person or the transfer by it of all or substantially all of its assets to another Person if, in the case of a transfer described in either clause (i) or (ii) of this sentence, the rights and duties of the General Partner with respect to the Partnership Interest so transferred are assumed by the transferee and the transferee agrees to be bound by the provisions of this Agreement and the Investor Partnership Agreement; provided that, in either such case, such transferee furnishes to the Partnership an Opinion of Counsel that such merger, consolidation, combination, transfer or assumption will not result in a 1066 of limited liability of the Limited Partner or cause the Partnership to be taxable as a corporation or otherwise treated as an association taxable as a corporation for federal income tax purposes. In the case of a transfer pursuant to this Section 10.2(b), the transferee or successor (as the case may be) shall be admitted to the Partnership as the General Partner immediately prior to the transfer of the 49 Partnership Interest, and the business of the Partnership shall continue without dissolution. 10.3 Transfer of the Limited Partner's Partnership Interest. If the Limited Partner merges, consolidates or otherwise combines into any other Person or transfers all or substantially all of its assets to another Person, such Person may become a Substituted Limited Partner pursuant to Article XI. Except as set forth in the immediately preceding sentence, the Limited Partner may not transfer all or any part of its Partnership Interest or withdraw from the Partnership. ARTICLE XI ADMISSION OF PARTNERS 11.1 Admission of Substituted Limited Partner. Any Person that is the successor in interest to the Limited Partner as described in Section 10.3 shall be admitted to the Partnership as a limited partner upon (a) furnishing to the General Partner (i) acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement and (ii) such other documents or instruments as may be required to effect its admission as a limited partner in the Partnership and (b) obtaining the consent of the General Partner, which consent may be withheld or granted in the sole discretion of the General Partner. Such Person shall be admitted to the Partnership as a Limited Partner immediately prior to the transfer of the Partnership Interest, and the business of the Partnership shall continue without dissolution. 11.2 Admission of Successor General Partner. A successor General Partner approved pursuant to Section 12.1 or the transferee of or successor to all of the General Partner's Partnership Interest pursuant to Section 10.2 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to the withdrawal or removal of the General Partner pursuant to Section 12.1 or the transfer of the General Partner's Partnership Interest pursuant to Section 10.2; provided, however, that no such successor shall be admitted to the Partnership until the terms of Section 10.2 have been complied with. Any such successor shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership 50 an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. 11.3 Amendment of Agreement and Certificate of Limited Partnership. To effect the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Delaware Act to amend the records of the Partnership and, if necessary, to prepare as soon as practicable an amendment of this Agreement and, if required by law, to prepare and file an amendment to the Certificate of Limited Partnership and may for this purpose, among others, exercise the power of attorney granted pursuant to Section 1.4. ARTICLE XII WITHDRAWAL OR REMOVAL OF PARTNERS 12.1 Withdrawal of the General Partner. (a) The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an "Event of Withdrawal"): (i) the General Partner voluntarily withdraws from the Partnership by giving written notice to the Limited Partner; (ii) the General Partner transfers all of its rights as General Partner pursuant to Article X; (iii) the General Partner is removed pursuant to Section 12.2: (iv) the general partner of the Investor Partnership withdraws from or is removed as the general partner of the Investor Partnership; (v) the General Partner (A) makes a general assignment for the benefit of creditors; (B) files a voluntary bankruptcy petition; (C) files a petition or answer seeking for itself a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any law; (D) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in 51 clauses (A)-(C) of this sentence; or (E) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the General Partner or of all or any substantial part of its properties; (vi) a final and non-appealable judgment is entered by a court with appropriate jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect; or (vii) a certificate of dissolution or its equivalent is filed for the General Partner, or ninety days expire after the date of notice to the General Partner of revocation of its charter without a reinstatement of its charter, under the laws of its state of incorporation. If an Event of Withdrawal specified in Section 12.1(a)(v), (vi) or (vii) occurs, the withdrawing General Partner shall give written notice to the Limited Partner within thirty days after such occurrence. The Partners hereby agree that only the Events of Withdrawal described in this Section 12.1 shall result in the withdrawal of the General Partner from the Partnership. (b) Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal will not constitute a breach of this Agreement under the following circumstances: (i) at any time that the General Partner ceases to be a General Partner pursuant to Section 12.1(a)(i), (ii) or (iv) or (ii) at any time that the General Partner is removed pursuant to Section 12.2. If the General Partner gives a notice of withdrawal pursuant to Section 12.1(a)(i) or if the General Partner is removed pursuant to Section 12.2 or withdraws pursuant to Section 12.1(a)(iii), the Limited Partner may, prior to the effective date of such withdrawal, elect a successor General Partner; Provided that such successor shall be the same Person, if any, that is elected by the Unitholders pursuant to Section 13.1 or 13.2 of the Investor Partnership Agreement, as applicable, as the successor to the General Partner in its capacity as general partner of the Investor Partnership. No provision of this Article XII shall in any way limit the right of any holder of the capital stock of the General Partner to sell, exchange or otherwise dispose of 52 such capital stock. If, prior to the effective date of the General Partner's withdrawal or removal, a successor is not selected by the Limited Partner as provided herein or the Partnership does not receive an Opinion of Counsel that such withdrawal (following the selection of the successor General Partner) would not result in the loss of the limited liability of the Limited Partner or cause the Partnership to be taxable as a corporation or to be treated as an association taxable as a corporation for federal income tax purposes, the Partnership shall be dissolved in accordance with Section 13.1. If a successor General Partner is elected and the Opinion of Counsel is rendered as provided in the immediately preceding sentence, such successor shall be admitted (subject to Section 11.2) immediately prior to the effective time of the withdrawal or removal of the Departing Partner and shall continue the business of the Partnership without dissolution. 12.2 Removal of the General Partner. The General Partner may be removed if such removal is approved by the Limited Partner. Any such action by the Limited Partner for removal of the General Partner must also provide for the election and succession of a new General Partner. Such removal shall be effective immediately following the admission of the successor General Partner pursuant to Article XI. The right of the Limited Partner to remove the General Partner shall not exist or be exercised unless the Partnership has received an Opinion of Counsel that the removal of the General Partner and the selection of a successor General Partner will not result in the loss of limited liability of the Limited Partner or the taxation of the Partnership as a corporation for federal income tax purposes. Any successor General Partner shall indemnify the Departing Partner as to all debts and liabilities of the Partnership arising on or after the effective date of the removal of the Departing Partner. 12.3 Interest of Departing Partner and Successor General Partner. The Partnership Interest of a Departing Partner departing as a result of withdrawal or removal pursuant to Section 12.1 or 12.2 shall (unless it is otherwise required to be converted into Units pursuant to Section 13.3(b) of the Investor Partnership Agreement) be purchased by the successor to the Departing Partner for cash in an amount equal to the fair market value of the Departing 53 Partner's Partnership Interest, determined as of the effective date of its departure in the manner specified in the Investor Partnership Agreement. Such purchase (or conversion into Units, as applicable) shall be a condition to the admission to the Partnership of the Successor as the General Partner. 12.4 Reimbursement of Departing Partner. The Departing Partner shall be entitled to receive all reimbursements due such Departing Partner pursuant to Section 6.4, including, without limitation, any employee-related liabilities (including, without limitation, severance liabilities) incurred in connection with the termination of any employees employed by the General Partner for the benefit of the Partnership and properly allocable to the Partnership. 12.5 Withdrawal of the Limited Partner. The Limited Partner shall not have any right to withdraw from the Partnership without the prior consent of the General Partner. ARTICLE XIII DISSOLUTION AND LIQUIDATION 13.1 Dissolution. The Partnership shall not be dissolved by the admission of a Substituted Limited Partner or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs should be wound up, upon: (a) the expiration of its term as provided in Section 1.5; (b) an Event of Withdrawal of the General Partner as provided in Section 12.1(a), unless a successor is named as provided in Section 12.1(b); (c) an election to dissolve the Partnership by the General Partner that is approved by the Limited Partner; (d) a written determination by the General Partner that projected future revenues of the Partnership will be insufficient to enable payment of projected Partnership costs and expenses; 54 (e) entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Delaware Act or any other event that would cause the dissolution of the Partnership under the Delaware Act; (f) the sale of all or substantially all of the assets and properties of the Partnership; or (g) the dissolution of the Investor Partnership 13.2 Continuation of the Business of the Partnership After Dissolution. Upon (i) dissolution of the Partnership caused by the withdrawal or removal of the General Partner and following a failure of the Limited Partner to appoint a successor General Partner prior to the effective date of such event, or (ii) dissolution of the Partnership upon an event constituting an Event of Withdrawal as defined in Section 12.1(a)(v), then within 180 days thereafter, the Limited Partner may elect to reconstitute the Partnership and continue its business on the same terms and conditions set forth in this Agreement by forming a new limited partnership on terms identical to those set forth in this Agreement and having as a general partner a Person approved by the Limited Partner. In addition, upon dissolution of the Partnership pursuant to Section 13.1(g), if the Investor Partnership is reconstituted pursuant to Section 14.2 of the Investor Partnership Agreement, the reconstituted Investor Partnership may, within 180 days after such event of dissolution, as the Limited Partner, elect to reconstitute the Partnership in accordance with the immediately preceding sentence. Upon any such election by the Limited Partner, all Partners shall be bound thereby and shall be deemed to have approved thereof. Unless such an election is made within the applicable time period as set forth above, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is so made, then: (a) the reconstituted Partnership shall continue until the end of the term set forth in Section 1.5 unless earlier dissolved in accordance with this Article XIII; (b) if the successor General Partner is not the former General Partner, then the interest of the former General Partner shall be purchased by the successor General Partner in the manner provided in Section 12.3 or converted into Units in the manner provided in Section 13.3(b) of the Investor Partnership Agreement; and 55 (c) all necessary steps shall be taken to cancel this Agreement and the Certificate of Limited Partnership and to enter into and, as necessary, to file a new partnership agreement and certificate of limited partnership, and the successor general partner may for this purpose exercise the powers of attorney granted the General Partner pursuant to Section 1.4; provided that the right to approve a successor general partner and to reconstitute and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel that (x) the exercise of the right would not result in the loss of limited liability of the Limited Partner and (y) neither the Partnership nor the reconstituted limited partnership would become taxable as a corporation or be treated as an association taxable as a corporation for federal income tax purposes upon the exercise of such right to continue. 13.3 Liquidation. Upon dissolution of the Partnership, unless the Partnership is continued under an election to reconstitute and continue the Partnership pursuant to Section 13.2, the General Partner, or in the event the General Partner has been dissolved or removed, has become bankrupt as set forth in Section 12.1 or has withdrawn from the Partnership, a liquidator or liquidating committee approved by the Limited Partner, shall be the Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by the Limited Partner. The Liquidator shall agree not to resign at any time without fifteen days' prior written notice and (if other than the General Partner) may be removed at any time, with or without cause by notice of removal approved by the Limited Partner. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within thirty days thereafter be approved by the Limited Partner. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XIII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale 56 set forth in Section 6.3(b)) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding-up and liquidation of the Partnership as provided for herein. The Liquidator shall liquidate the assets of the Partnership, and apply and distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of applicable law: (a) the payment to creditors of the Partnership, including, without limitation, Partners who are creditors, in the order of priority provided by law; and the creation of a reserve of cash or other assets of the Partnership for contingent liabilities in an amount, if any, determined by the Liquidator to be appropriate for such purposes; and (b) to all Partners in accordance with the positive balances in their respective Capital Accounts after taking into account adjustments to such Capital Accounts pursuant to Section 5.1. 13.4 Distributions in Kind. Notwithstanding the provisions of Section 13.3, which require the liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership's assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including, without limitation, those to Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.3, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Limited Partner, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreement governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt. 57 13.5 Cancellation of Certificate of Limited Partnership. Upon the completion of the distribution of Partnership cash and property as provided in Sections 13.3 and 13.4, the Partnership shall be terminated and the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be cancelled and such other actions as may be necessary to terminate the Partnership shall be taken. 13.6 Reasonable Time for Winding Up. A reasonable time shall be allowed for the orderly winding up of business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.3 in order to minimize any losses otherwise attendant upon such winding up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation. 13.7 Return of Capital. The General Partner shall not be personally liable for the return of the Capital Contributions of the Limited Partner or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets. 13.8 No Capital Account Restoration. No Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership. 13.9 Waiver of Partition. Each Partner hereby waives any right to partition of the Partnership property. ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT 14.1 Amendment to Be Adopted Solely by General Partner. The Limited Partner agrees that the General Partner (pursuant to its powers of attorney from the Limited Partner), without the approval of the Limited Partner, may amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect: (a) a change in the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent of the Partnership or the registered office of the Partnership; 58 (b) admission, substitution, withdrawal or removal of Partners in accordance with this Agreement; (c) a change that, in the sole discretion of the General Partner, is necessary or advisable to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or that is necessary or advisable in the opinion of the General Partner to ensure that the Partnership will not be taxable as a corporation or treated as an association taxable as a corporation for federal income tax purposes; (d) a change (i) that, in the sole discretion of the General Partner, does not adversely affect the Limited Partner in any material respect, (ii) that is necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including, without limitation, the Delaware Act) or that is necessary or appropriate to facilitate the trading of the Units (including, without limitation, the division of Outstanding Units into different classes to facilitate uniformity of tax consequences within such classes of Units) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are or will be listed for trading, compliance with any of which the General Partner determines in its sole discretion to be in the best interests of the Partnership and the Limited Partner, or (iii) that is required to effect the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement or by the Registration Statement; (e) an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership or the General Partner or their respective directors or officers from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or "plan asset" regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, whether or not substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor; 59 (f) a change in a provision of this Agreement that requires any action to be taken by or on behalf of the General Partner or the Partnership pursuant to the requirements of the Delaware Act, if the provisions of such Act are amended, modified or revoked so that the taking of such action is no longer required; provided that such changes are not materially adverse to the Limited Partner; (g) any amendment expressly permitted in this Agreement to be made by the General Partner acting alone; (h) an amendment effected, necessitated or contemplated by a Merger Agreement approved in accordance with Section 15.3; or (i) any other amendments similar to the foregoing. 14.2 Amendment Procedures. Except as provided in Section 14.1, all amendments to this Agreement shall be made in accordance with the following requirements. Amendments to this Agreement may be proposed solely by the General Partner. Each such proposal shall contain the text of the proposed amendment. A proposed amendment shall be effective upon its approval by the Limited Partner. ARTICLE XV MERGER 15.1 Authority. The Partnership may merge or consolidate with one or more corporations, business trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses, including, without limitation, a general partnership or limited partnership, formed under the laws of the State of Delaware or any other state of the United States of America, pursuant to a written agreement of merger or consolidation ("Merger Agreement") in accordance with this Article. 15.2 Procedure for Merger or Consolidation. Merger or consolidation of the Partnership pursuant to this Article requires the prior approval of the General Partner. If the General Partner shall determine, in the exercise of its sole discretion, to consent to the merger or consolidation, the General Partner shall approve the Merger Agreement, which shall set forth: 60 (a) The names and jurisdictions of formation or organization of each of the business entities proposing to merge or consolidate; (b) The name and jurisdictions of formation or organization of the business entity that is to survive the proposed merger or consolidation (hereafter designated as the "Surviving Business Entity"); (c) The terms and conditions of the proposed merger or consolidation; (d) The manner and basis of exchanging or converting the equity securities of each constituent business entity for, or into, cash, property or general or limited partnership interests, rights, securities or obligations of the Surviving Business Entity; and (i) if any general or limited partnership interests, securities or rights of any constituent business entity are not to be exchanged or converted solely for, or into, cash, property or general or limited partnership interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or general or limited partnership interests, rights, securities or obligations of any limited partnership, corporation, trust or other entity (other than the Surviving Business Entity) that the holders of such general or limited partnership interests are to receive in exchange for, or upon conversion of, their securities or rights, and (ii) in the case of securities represented by certificates, upon the surrender of such certificates, which cash, property or general or limited partnership interests, rights, securities or obligations of the Surviving Business Entity or any limited partnership, corporation, trust or other entity (other than the Surviving Business Entity), or evidences thereof, are to be delivered; (e) A statement of any changes in the constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation; (f) The effective time of the merger, which may be the date of the filing of the certificate of merger pursuant to Section 15.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided that, if the effective time of the merger is to 61 be later than the date of the filing of the certificate of merger, it shall be fixed no later than the time of the filing of the certificate of merger and stated therein); and (g) Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or appropriate by the General Partner. 15.3 Approval by the Limited Partner of Merger or Consolidation. (a) The General Partner of the Partnership, upon its approval of the Merger Agreement, shall submit a copy or summary of the Merger Agreement to the Limited Partner for its approval. (b) The Merger Agreement shall be approved upon receiving the consent of the Limited Partner. (c) After such approval by the Limited Partner, and at any time prior to the filing of the certificate of merger pursuant to Section 15.4, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement. 15.4 Certificate of Merger. Upon the required approval by the General Partner and the Limited Partner of a Merger Agreement, a certificate of merger shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware Act. 15.5 Effect of Merger. (a) Upon the effective date of the certificate of merger: (i) all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity to the extent they were of each constituent business entity; (ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and shall not be in any way impaired because of the merger or consolidation; 62 (iii) all rights of creditors and all liens on or security interest in property of any of those constituent business entities shall be preserved unimpaired; and (iv) all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity, and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it. (b) A merger or consolidation effected pursuant to this Article shall not be deemed to result in a transfer or assignment of assets or liabilities from one entity to another having occurred. ARTICLE XVI GENERAL PROVISIONS 16.1 Addresses and Notices. Any notice, demand, request or report required or permitted to be given or made to a Partner under this Agreement shall be in writing and shall be deemed given or made when received by it at the principal office of the Partnership referred to in Section 1.3. Any notice, payment or report to be given or made to a Partner hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to such Partner at his address as shown on the records of the Partnership. 16.2 Titles and Captions. All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to "Articles" and "Sections" are to Articles and Sections of this Agreement. 16.3 Pronouns and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice-versa. 63 16.4 Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. 16.5 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. 16.6 Integration. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto. 16.7 Creditors. None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership. 16.8 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. 16.9 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. 16.10 Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. 64 16.11 Invalidity of Provisions. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. GENERAL PARTNER: AGRICULTURAL MINERALS CORPORATION By: /s/ John A. Molenaar ------------------------------ Name: John A. Molenaar Title: Senior Vice President ORGANIZATIONAL LIMITED PARTNER: AMC HOLDINGS INC. By: /s/ John A. Molenaar ----------------------------- Name: John A. Molenaar Title: Vice President LIMITED PARTNER: AGRICULTURAL MINERALS COMPANY, L.P. By: Agricultural Minerals Corporation, General Partner By: /s/ John A. Molenaar ----------------------------- Name: John A. Molenaar Title: Vice President EX-99.5 12 CREDIT AGREEMENT Exhibit 99.5 ================================================================= FORM OF CREDIT AGREEMENT dated as of October 20, 1994 among TERRA INDUSTRIES INC., TERRA CAPITAL, INC. and AGRICULTURAL MINERALS, LIMITED PARTNERSHIP, as Borrowers CERTAIN GUARANTORS CERTAIN LENDERS CERTAIN ISSUING BANKS and CITIBANK, N.A., as Agent ================================================================= 1 TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only. Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms..................... 3 Section 1.02. Computation of Time Periods............... 37 Section 1.03. Accounting Terms.......................... 37
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT
Section 2.01. The Advances.............................. 38 Section 2.02. Making the Advances....................... 43 Section 2.03. Repayment................................. 45 Section 2.04. Termination or Reduction of the Commitments............................. 48 Section 2.05. Prepayments............................... 49 Section 2.06. Interest.................................. 52 Section 2.07. Fees...................................... 53 Section 2.08. Conversion and Continuation of Advances... 54 Section 2.09. Increased Costs, Illegality, Etc.......... 56 Section 2.10. Payments and Computations................. 58 Section 2.11. Taxes..................................... 60 Section 2.12. Sharing of Payments, Etc.................. 63 Section 2.13. Letters of Credit......................... 63 Section 2.14. Assumption................................ 68 Section 2.15. Replacement of Lender..................... 69
ARTICLE III CONDITIONS OF LENDING
Section 3.01. Documentary Conditions Precedent to Initial Borrowing....................... 71 Section 3.02. Additional Conditions Precedent to Initial Borrowing....................... 75 Section 3.03. Conditions Precedent to Initial AMLP Borrowing............................... 76 Section 3.04. Conditions Precedent to Initial Terra Facility C Borrowing.................... 76 Section 3.05. Conditions Precedent to Each Borrowing and Issuance............................ 76 Section 3.06. Determinations Under Sections 3........... 77
2 ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01. Representations and Warranties of the Borrower. 77 ARTICLE V COVENANTS OF THE BORROWER
Section 5.01. Affirmative Covenants..................... 84 Section 5.02. Negative Covenants........................ 90 Section 5.03. Reporting Requirements.................... 98 Section 5.04. Financial Covenants....................... 103
ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default......................... 105 Section 6.02. Actions in Respect of the Letters of Credit Upon Default..................... 109 ARTICLE VII THE AGENT
Section 7.01. Authorization and Action.................. 109 Section 7.02. Agent's Reliance, Etc..................... 110 Section 7.03. Citibank and Affiliates................... 110 Section 7.04. Lender Credit Decision.................... 111 Section 7.05. Indemnification........................... 111 Section 7.06. Collateral Duties......................... 111 Section 7.07. Successor Agent........................... 112
ARTICLE VIII THE GUARANTEE
Section 8.01. The Guarantee............................. 113 Section 8.02. Obligations Unconditional................. 114 Section 8.03. Reinstatement............................. 115 Section 8.04. Subrogation............................... 116 Section 8.05. Remedies.................................. 116 Section 8.06. Instrument for the Payment of Money....... 116 Section 8.07. Continuing Guarantee...................... 116 Section 8.09. General Limitation on Guarantee Obligations............................. 118
ARTICLE IX 3 MISCELLANEOUS Section 9.01. Amendments, Consents, Etc................. 118 Section 9.02. Notices, Etc.............................. 119 Section 9.03. No Waiver; Remedies....................... 120 Section 9.04. Costs, Expenses and Indemnification....... 120 Section 9.05. Right of Setoff........................... 122 Section 9.06. Governing Law; Submission to Jurisdiction............................ 122 Section 9.07. Assignments and Participations............ 123 Section 9.08. Execution in Counterparts................. 127 Section 9.09. No Liability of the Issuing Banks......... 127 Section 9.10. Confidentiality........................... 128 Section 9.11. WAIVER OF JURY TRIAL...................... 128 Section 9.12. Survival.................................. 128 Section 9.13. Captions.................................. 129 Section 9.14. Successors and Assigns.................... 129
4 CREDIT AGREEMENT CREDIT AGREEMENT dated as of October 20, 1994 among: (1) TERRA INDUSTRIES INC., a Maryland corporation ("Terra"); ----- (2) TERRA CAPITAL, INC., a Delaware corporation and wholly owned subsidiary of Terra Capital Holdings ("Terra Capital"); (3) AGRICULTURAL MINERALS, LIMITED PARTNERSHIP, a Delaware limited partnership and indirect subsidiary of AMC ("AMLP"); (4) each of the corporations listed on the signature pages hereof under the caption "TERRA AND AMLP GUARANTORS"; (5) each of the lenders (the "Initial Lenders") listed on the signature --------------- pages hereof; and (6) CITIBANK, N.A., as agent (together with its successor in such capacity appointed pursuant to Article VII, the "Agent") for the Lenders and the Issuing Bank hereunder. PRELIMINARY STATEMENTS: (1) Terra, AMCI Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of Terra ("Acquisition Corp."), and Agricultural Minerals and Chemicals Inc., a Delaware corporation ("AMCI"), are parties to the Merger Agreement dated as of August 8, 1994 (as from time to time amended, the "Merger Agreement") providing, on the terms and conditions set forth therein, for the merger of Acquisition Corp. with and into AMCI (the "Initial Merger"), with AMCI being the corporation surviving the Initial Merger. (2) Immediately after the consummation of the Initial Merger, (a) Terra will contribute to AMCI all of the issued and outstanding capital stock of Terra International, Inc., a Delaware corporation ("TI"); (b) AMCI will merge (the "Second Merger" and, collectively with the Initial Merger, the "Merger") with and into Terra, with Terra being the corporation surviving the Second Merger; (c) Terra will have formed Terra Capital Holdings, Inc. as a Delaware corporation and a wholly owned Subsidiary of Terra ("Terra Capital Holdings"); (d) Terra Capital Holdings will have formed Terra Capital as a Delaware corporation and a wholly owned Subsidiary of Terra Capital Holdings; 5 (e) Terra will contribute to Terra Capital Holdings, and Terra Capital Holdings will thereupon contribute to Terra Capital, all of the issued and outstanding capital stock of Agricultural Minerals Corporation, a Delaware corporation ("AMC"), BMC Holdings Inc., a Delaware corporation ("BMCH"), and TI (the Merger and the other transactions referred to above being herein collectively called the "Transactions"). (3) Terra has asked the Lenders to make available credit to finance the consummation of the Initial Merger, to pay fees and expenses in connection with the Transactions, to repurchase or refinance certain outstanding indebtedness and to provide for the ongoing working capital needs of Terra Capital and certain of its subsidiaries, all on the terms and conditions provided herein, and AMLP has asked the Lenders to make available credit to refinance certain outstanding indebtedness and to provide for its ongoing working capital needs, all on the terms and conditions provided herein. (4) The Obligors, the Lenders, the Issuing Banks and the Agent have entered into this Agreement pursuant to which (a) the Lenders propose to make advances to, and the Issuing Banks propose to issue letters of credit for account of, Terra Capital and certain of its subsidiaries, (b) the Lenders propose to make advances to, and the Issuing Banks propose to issue letters of credit for account of, AMLP and certain of its subsidiaries, (c) each Terra Guarantor will guarantee the credit so extended to Terra Capital, (d) each AMLP Guarantor will guarantee the credit so extended to AMLP and (e) certain Obligors will agree to execute and deliver pledge agreements and security agreements providing for security interests and liens to be granted by such Obligors on certain of their respective properties as collateral security for the obligations of such Obligors to the Lenders, the Issuing Banks and the Agent hereunder, all on and subject to the terms and conditions of this Agreement. (5) Each of the Obligors expects to derive benefit, directly or indirectly, from the credit so extended, both in its separate capacity and as a member of the Consolidated Group, since the successful operation of each of such Obligors is dependent on the continued successful performance of the functions of the Consolidated Group as a whole. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: 6 ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Acquisition Amount" means, for any fiscal year of Terra, $15,000,000; provided, that the Acquisition Amount for any such fiscal year shall automatically be increased to $50,000,000 if (a) prior to the first day of such fiscal year, the principal of and interest on the Terra Facility C Advances and the Terra Facility D Advances have been paid in full, (b) on the first day of such fiscal year the aggregate outstanding principal amount of the Terra Facility A Advances and the Terra Facility B Advances does not exceed $100,000,000 and (c) the Debt to Cash Flow Ratio for the immediately preceding fiscal year does not exceed 2.50 to 1. "Acquisition Corp." has the meaning specified in the Preliminary ----------------- Statements. "Advance" means any Terra Advance or AMLP Advance. ------- "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 10% or more of the voting stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting stock, by contract or otherwise. "Agent" has the meaning specified in the recital of parties to this ----- Agreement. "Agent's Account" means the account of the Agent maintained by the Agent at its office at 399 Park Avenue, New York, New York 10043, Account No. [__________], Attention: [__________], or such other account maintained by the Agent as may be designated by the Agent in a written notice to the Lenders, each Issuing Bank and the Borrowers. "Allowance for Projected Common Dividends" means, for purposes of the definition of "Specified Payments", the 7 following respective amounts for the following respective fiscal years of Terra:
Fiscal Year Allowance - --------------------------------- ----------- 1995 $10,000,000 1996 $13,000,000 1997 $17,000,000 1998 $20,000,000 1999 and each fiscal year thereafter $23,000,000
"Allowance for Working Capital Increases/Decreases" means, for purposes of the definition of "Excess Cash Flow", the following respective amounts for the following respective fiscal years of Terra:
Fiscal Year Allowance - --------------------------------- ----------- 1995 $15,000,000 1996 $25,000,000 1997 $25,000,000 1998 and each fiscal year thereafter $30,000,000
"AMC" has the meaning specified in the Preliminary Statements. --- "AMCI" has the meaning specified in the Preliminary Statements. ---- "AMCI Change of Control Redemption" means the redemption by Terra of the AMCI Senior Notes pursuant to Section 4.11 of the AMCI Senior Note Indenture. "AMCI Senior Note Indenture" means the Indenture dated as of October 15, 1993 between AMCI and Society National Bank, as Trustee, providing for the issuance of the AMCI Senior Notes, as from time to time amended. "AMCI Senior Notes" mean the 10-3/4% senior notes of AMCI due 2003 ----------------- issued pursuant to the AMCI Senior Note Indenture. "AMLP" has the meaning specified in the recital of parties to this ---- Agreement. "AMLP Advance" means an AMLP Facility A Advance or an AMLP Facility B Advance, "AMLP Borrowing" means an AMLP 8 Facility A Borrowing or an AMLP Facility B Borrowing, "AMLP Commitment" means an AMLP Facility A Commitment or an AMLP Facility B Commitment, "AMLP Facility" means AMLP Facility A or AMLP Facility B, and "AMLP Note" means an AMLP Facilities Note. "AMLP Facilities Note" means a promissory note of AMLP payable to the order of a Lender, in substantially the form of Exhibit A-3, as from time to time amended. "AMLP Facility A" means the term credit facility provided hereunder in respect of the AMLP Facility A Commitments, "AMLP Facility A Advance" means an Advance pursuant to Section 2.01(f), "AMLP Facility A Borrowing" means a borrowing consisting of simultaneous AMLP Facility A Advances of the same Type, and "AMLP Facility A Commitment" has the meaning specified in Section 2.01(f). "AMLP Facility A Principal Payment Date" means the Quarterly Date -------------------------------------- occurring in October, 1999. "AMLP Facility B" means the revolving credit facility provided hereunder in respect of the AMLP Facility B Commitments, "AMLP Facility B Advance" means an Advance pursuant to Section 2.01(g), "AMLP Facility B Borrowing" means a borrowing consisting of simultaneous AMLP Facility B Advances of the same Type, and "AMLP Facility B Commitment" has the meaning specified in Section 2.01(g). "AMLP Facility B Commitment Termination Date" means the earlier of (a) the date five years after the Closing Date (provided, that if such day is not a Business Day, the AMLP Facility B Commitment Termination Date shall be the immediately preceding Business Day), and (b) the termination or cancellation of the AMLP Facility B Commitments pursuant to the terms of this Agreement. "AMLP Guaranteed Obligations" has the meaning specified in Section --------------------------- 8.01(b). "AMLP Guarantors" means Terra, Terra Capital Holdings, Terra Capital, --------------- AMC, BMCH and BMC. "AMLP L/C Cash Collateral Account" means the "AMLP L/C Cash Collateral Account" under the AMLP Pledge and Security Agreement. "AMLP Letter of Credit" means a letter of credit issued by an Issuing Bank for account of AMLP or any of its Subsidiaries pursuant to Section 2.13(a). 9 "AMLP Letter of Credit Commitment" means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank's name on Schedule 2.01 under the caption "AMLP Letter of Credit Commitment", as such amount may be reduced pursuant to Section 2.04. "AMLP Letter of Credit Liability" means, as of any date, all of the liabilities of AMLP to the Issuing Banks in respect of AMLP Letters of Credit, whether such liability is contingent or fixed, and shall consist of the sum of (a) the aggregate Available Amount of all AMLP Letters of Credit then outstanding, plus (b) the aggregate amount that has then been paid by, and has not been reimbursed to, any Issuing Bank under AMLP Letters of Credit. "AMLP Letter of Credit Sublimit" means $15,000,000. ------------------------------ "AMLP Obligors" mean AMLP and the AMLP Guarantors. ------------- "AMLP Pledge and Security Agreement" means a Pledge and Security Agreement in substantially the form of Exhibit B-4 between AMLP and the Agent, as from time to time amended. "Applicable Commitment Fee Rate" means 0.50% per annum; provided, that, if for any Rolling Period ending after the first anniversary of the Closing Date the Debt to Cash Flow Ratio for such Rolling Period shall be less than or equal to 2.50 to 1, then, subject to the delivery to the Agent of a certificate of the Senior Financial Officer demonstrating the same prior to the end of the next succeeding fiscal quarter, the "Applicable Commitment Fee Rate" shall be reduced to 0.375% per annum during the period commencing on the Quarterly Date on or immediately following the date of the Agent's receipt of such certificate until the next succeeding Quarterly Date thereafter. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Applicable Letter of Credit Fee Rate" means, at any time, a rate per annum equal to the Applicable Margin for Eurodollar Rate Advances (other than Terra Facility B Advances) in effect at such time. "Applicable Margin" means, (a) (i) with respect to all Base Rate Advances (other than Terra Facility B Advances), (x) with respect to the period prior to the payment in full of the principal of and interest on the Terra Facility D Advances, 1.00% per annum and (y) thereafter, 0.50% per 10 annum and (ii) with respect to all Eurodollar Rate Advances (other than Terra Facility B Advances), (x) with respect to the period prior to the payment in full of the principal of and interest on the Terra Facility D Advances, 2.00% per annum and (y) thereafter, 1.50% per annum; provided, that if for any Rolling Period ending after the first anniversary of the Closing Date the Debt to Cash Flow Ratio for such Rolling Period shall be within any of the ranges specified in the schedule below, then, subject to the delivery to the Agent of a certificate of the Senior Financial Officer demonstrating the same prior to the end of the next succeeding fiscal quarter, the "Applicable Margin" shall be reduced to the percentage per annum for the respective Type of Advance set forth opposite the reference to such range in such schedule during the period commencing on the Quarterly Date on or immediately following the date of the Agent's receipt of such certificate until the next succeeding Quarterly Date thereafter:
Applicable Margin (% p.a.) ---------------------------- Range of Debt Base Rate Eurodollar Rate to Cash Flow Ratio Advances Advances - ------------------------------------ --------- --------------- Greater than 3.00 to 1 (prior to the payment in full of the principal of and interest on the Terra Facility D Advances) 1.00% 2.00% Greater than 3.00 to 1 (from and after the payment in full of the principal of and interest on the Terra Facility D Advances) 0.50% 1.50% Less than or equal to 3.00 to 1 and greater than 2.50 to 1 0.50% 1.50% Less than or equal to 2.50 to 1 and greater than 2.00 to 1 0.25% 1.25% Less than or equal to 2.00 to 1 0.00% 1.00%
(b) with respect to Terra Facility B Advances (i) that are Base Rate Advances, 1.50% per annum and (ii) that are Eurodollar Advances, 2.50% per annum. 11 "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in accordance with Section 9.07 and in substantially the form of Exhibit G. "Assumption Time" has the meaning set forth in Section 2.14. --------------- "Available Amount" of any Letter of Credit means the maximum amount available to be drawn under such Letter of Credit (assuming compliance with all conditions to drawing specified therein). "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; (b) 0.50% per annum above the Federal Funds Rate; and (c) the sum (adjusted to the nearest 0.25% or, if there is no nearest 0.25%, to the next higher 0.25%) of (i) 0.50% per annum plus (ii) the rate obtained by dividing (x) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money center banks, such three-week moving average (adjusted to the bases of a year of 360 days) being determined weekly on each Monday (or, if such date is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank by (y) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank with respect to liabilities consisting of or including (among other liabilities) three-month Dollar non-personal time deposits in the 12 United States plus (iii) the average during such three-week period of the annual assessment rates estimated by Citibank for determining the then current annual assessment rate payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring Dollar deposits of Citibank in the United States. Each change in any interest rate provided for herein based upon the Base Rate resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate. "Base Rate Advance" means an Advance that bears interest as provided ----------------- in Section 2.06(a)(i). "BMC" means Beaumont Methanol Corporation, a Delaware corporation and --- a wholly owned Subsidiary of BMCH. "BMCH" has the meaning specified in the Preliminary Statements. ---- "Borrower" means each of the Company and AMLP; provided, that when reference is made in this Agreement or in any other Loan Document to the "relevant" Borrower in connection with any Facility, such reference shall be deemed to refer (a) in the case of any Terra Facility, to the Company, and (b) in the case of any AMLP Facility, to AMLP. "Borrower's Account" means (a) in the case of the Company, the account of the Company maintained with Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. [___________], and (b) in the case of AMLP, the account of AMLP maintained with Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. [___________]; or, in either case, such other account maintained by the relevant Borrower with Citibank and designated by such Borrower in a written notice to the Agent. "Borrowing" means a Terra Borrowing or an AMLP Borrowing. --------- "Business Day" means a day on which banks are not required or authorized to close in New York City and, if such Business Day relates to a Eurodollar Rate Advance, on which dealings are carried on in the London interbank market. "Capital Expenditures" means, for any period with respect to any Person, the sum of all expenditures during 13 such period (whether paid in cash or accrued as liabilities during such period) that, in conformity with GAAP, are required to be included in or reflected on the balance sheet of such Person in respect of equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, plus (without duplication) the amount of expenditures deemed to be made in connection with equipment that is purchased simultaneously with the trade-in of existing equipment owned by such Person to the extent the gross amount of the purchase price of such purchased equipment exceeds the fair market value (as determined in good faith by such Person) of the equipment then being traded in, but excluding expenditures made in connection with the replacement or restoration of assets to the extent such replacement or restoration is financed from insurance proceeds paid on account of loss or damage to the assets so replaced or restored. "Capital Lease Obligations" means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "Cash Interest Expense" means, with respect to Terra and its Subsidiaries on a Consolidated basis, for any period (without duplication), interest expense net of interest income, whether paid or accrued (including the interest component of Capital Lease Obligations), on all Debt of Terra and its Subsidiaries on a Consolidated basis for such period, including, without limitation, (a) interest expense in respect of the Advances, (b) commissions, discounts and other fees and charges payable in connection with letters of credit (including, without limitation, any Letter of Credit) and (c) the net payment, if any, payable in connection with any Hedge Agreement; excluding, in each case, interest not payable in cash (including, without limitation, amortization of original issue discount and the interest portion of any deferred payment obligation); all as determined in accordance with GAAP for such period. "Casualty Event" means, with respect to any property of any Person, any loss of or damage to, or any condemnation or other taking of, such property for which such Person or any of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation award or other compensation. 14 "CERCLA" means the Comprehensive Environmental Response, Compensation ------ and Liability Act of 1980, as amended. "Change in Non-Cash Working Capital" means, for any period, the difference (whether positive or negative) between non-cash working capital of Terra and its Subsidiaries on a Consolidated basis as at the first day of such period and non-cash working capital of Terra and its Subsidiaries on a Consolidated basis as at the last day of such period, but excluding in each case customer deposits and prepayments. "Citibank" means Citibank, N.A., a national banking association. -------- "Closing Date" means the date of the initial Advances hereunder. ------------ "Collateral" means all "Collateral" referred to in the Security Documents and all other property that is subject to any Lien created by any Security Document in favor of the Agent, the Lenders and the Issuing Banks. "Commitment" means a Terra Commitment or an AMLP Commitment. ---------- "Company" means (a) prior to the Assumption Time, Terra and (b) from ------- and after the Assumption Time, Terra Capital. "Confidential Information" means information identified as such that Terra or any of its Subsidiaries furnishes to the Agent, any Issuing Bank or any Lender, but does not include any such information once such information has become generally available to the public or once such information has become available to the Agent, any Issuing Bank or any Lender from a source other than Terra and its Subsidiaries (unless, in either case, such information becomes so available as a result of the breach by the Agent, an Issuing Bank or a Lender of its duty of confidentiality set forth in Section 9.10). "Consolidated" refers to the consolidation of accounts in accordance ------------ with GAAP. "Consolidated Group" means, collectively, Terra and its Consolidated Subsidiaries, and a "member" of the Consolidated Group means Terra or any such Subsidiary. "Continuation", "Continue" and "Continued" each refers to a continuation of Eurodollar Rate Advances from one 15 Interest Period to the next Interest Period pursuant to Section 2.08. "Conversion", "Convert" and "Converted" each refers to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.08 or 2.09. "Credit Parties" means Terra, Terra Capital Holdings, Terra Capital, AMCI, AMC, AMLP, BMCH, BMC and TI; provided, that after the Assumption Time, any reference herein to AMCI as a "Credit Party" shall be a reference to Terra as the successor thereto. "Current Assets" of any Person means, on any date, all assets of such Person on such date that would, in accordance with GAAP, be classified as current assets of a company conducting a business the same as or similar to that of such Person, after deducting adequate reserves in each case in which a reserve is proper in accordance with GAAP. "Current Liabilities" of any Person, on any date, means the following (determined in accordance with GAAP): (a) all Debt (other than Funded Debt) of such Person on such date, (b) all amounts of Funded Debt of such Person required to be paid or prepaid within one year after such date and (c) all other items (including taxes accrued as estimated) that in accordance with GAAP would be classified as current liabilities of such Person on such date; provided, that the term "Current Liabilities" shall not include Obligations under Hedge Agreements. "Debt" of any Person means (without duplication): (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than any trade payable incurred in the ordinary course of business, having a tenor of not more than 365 days and not overdue by more than 30 days and other than any Obligations in respect of letters of credit supporting any such trade payable), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities (other than Obligations in respect of letters of credit referred to in clause (a) of this definition), (g) all 16 Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Redeemable capital stock, which Obligations shall be valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Obligations of such Person in respect of Hedge Agreements, (i) all Debt of others referred to in clauses (a) through (h) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (j) all Debt referred to in clauses (a) through (i) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. "Debt to Capital Ratio" means, on any date, the ratio of (i) Funded Debt of Terra and its Subsidiaries on a Consolidated basis on such date to (ii) Total Capital of Terra and its Subsidiaries on a Consolidated basis on such date. "Debt to Cash Flow Ratio" means, for any period, the ratio of (i) Funded Debt of Terra and its Subsidiaries on a Consolidated basis as of the last day of such period to (ii) EBITDA of Terra and its Subsidiaries on a Consolidated basis for such period. "Default" means any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Disposition" means any sale, assignment, transfer or other disposition of any property (whether now owned or hereafter acquired) by Terra or any of its Subsidiaries, but excluding any sale, assignment, transfer or other disposition of any property (i) sold or disposed of in the ordinary course of business and on ordinary business terms, or (ii) by any Obligor to another Obligor or by any Obligor 17 to a wholly owned Subsidiary of an Obligor, or (iii) that consists of outmoded or obsolete items having a fair market value not in excess of $10,000,000. "Dividend Payments" means dividends (in cash, property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any shares of any class of stock of Terra Capital or Terra or of any warrants, options or other rights to acquire the same (or to make any payment to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market or equity value of Terra, Terra Capital or any of their Subsidiaries, other than any such payment made in the ordinary course of business of such Person in connection with an executive compensation plan approved by the Board of Directors of such Person), but excluding dividends payable solely in shares of common stock of Terra or Terra Capital. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule 2.01 or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Agent. "EBITDA" means the following, determined in accordance with GAAP for Terra and its Subsidiaries on a Consolidated basis, for any period: net income (or net loss) plus the sum of (a) interest expense, (b) income tax expense and (c) depreciation expense, amortization expense and other non- cash charges deducted in arriving at such net income (or loss). "Eligible Assignee" means (a) any other Lender or any affiliate of any Lender; (b) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $1,000,000,000; (c) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a net worth in excess of $100,000,000; (d) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, so long as such bank is acting through a branch or agency located in the country in which it is organized or another country that is described in this clause (d); (e) the central bank of any 18 country that is a member of the OECD; (f) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of $100,000,000; and (g) any other Person (other than an Affiliate of the Company) approved by the Agent and the Company, such approval of the Company not to be unreasonably withheld or delayed. "Environmental Action" means any administrative, regulatory or judicial suit, demand, demand letter, claim, notice of non-compliance or violation, consent order or consent agreement relating in any way to any violation of or liability under any Environmental Law or any Environmental Permit, including without limitation (a) any claim by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law, (b) any claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to the environment and (c) any notice by any governmental or regulatory authority alleging that Terra or any of its Subsidiaries is or may be responsible for, or is a potentially responsible party with respect to, any cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law. "Environmental Law" means any federal, state or local governmental law, rule, regulation, order, writ, judgment, injunction or decree relating to pollution or protection of the environment or the treatment, storage, disposal, release, threatened release or handling of Hazardous Materials, including, without limitation, CERCLA, the Resource Conservation and Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act, the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water Act, the Atomic Energy Act and the Federal Insecticide, Fungicide and Rodenticide Act, in each case, as amended from time to time. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "Equity Issuance" means (a) any issuance or sale by Terra or any of its Subsidiaries after the Closing Date of (i) any capital stock (including, without limitation, New Terra Equity), (ii) any warrants or options exercisable in 19 respect of capital stock (other than any warrants or options issued to directors, officers or employees of Terra or any of its Subsidiaries pursuant to employee benefit plans established in the ordinary course of business and any capital stock of Terra issued upon the exercise of such warrants or options) or (iii) any other security or instrument representing an equity interest (or the right to obtain any equity interest) in Terra or any of its Subsidiaries or (b) the receipt by Terra or any of its Subsidiaries after the Closing Date of any capital contribution (whether or not evidenced by any equity security issued by the recipient of such contribution); provided, that the term "Equity Issuance" shall not include (x) any such issuance or sale by any Subsidiary of Terra to Terra or to any wholly owned Subsidiary of Terra or (y) any capital contribution by Terra or any wholly owned Subsidiary of Terra to any Subsidiary of Terra. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" of any Person means any other Person that for purposes of Title IV of ERISA is a member of such Person's controlled group, or under common control with such Person, within the meaning of Sections 414(b), (c) (m) and (o) of the Internal Revenue Code. "ERISA Event" with respect to any Person means (a) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan of such Person or any of its ERISA Affiliates unless the 30-day notice requirement with respect to such event has been waived pursuant to regulations under Section 4043 of ERISA and excluding a reportable event under Section 4043(b)(7) of ERISA; (b) the provision by the administrator of any Plan of such Person or any of its ERISA Affiliates of a notice of intent to terminate such Plan, pursuant to Section 4041(c) of ERISA as a distress termination; (c) the cessation of operations at a facility of such Person or any of its ERISA Affiliates in the circumstances described in Section 4062(e) of ERISA; (d) the withdrawal by such Person or any of its ERISA Affiliates from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (e) the satisfaction of the conditions set forth in Sections 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of such Person or any ERISA Affiliate for failure to make a required payment to a Plan; (f) the adoption of an amendment to a Plan of such Person or any of its ERISA Affiliates requiring the provision of security to such Plan, 20 pursuant to Section 307 of ERISA; or (g) the institution by the PBGC of proceedings to terminate a Plan of such Person or any of its ERISA Affiliates, pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan. "Eurocurrency Liabilities" has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule 2.01 or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Agent. "Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurodollar Rate Advance comprising part of such Borrowing (determined without giving effect to any assignments or participations by such Reference Bank) and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. The Eurodollar Rate for each Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.09. "Eurodollar Rate Advance" means an Advance that bears interest as ----------------------- provided in Section 2.06(a)(ii). "Eurodollar Rate Reserve Percentage" for any Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing means the reserve percentage (if any) 21 applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding $1,000,000,000 with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. ----------------- "Excess Cash Flow" means, for any fiscal year of Terra, determined in accordance with GAAP for Terra and its Subsidiaries on a Consolidated basis: (a) EBITDA for such fiscal year, minus ----- (b) the sum of (i) Cash Interest Expense plus ---- (ii) minority interest payments for such fiscal year, plus ---- (iii) the aggregate amount of Capital Expenditures made by Terra or any of its Subsidiaries during such fiscal year (but not exceeding the amount permitted to be made in such fiscal year pursuant to Section 5.02(h)) plus (or, if negative, minus) (iv) the Change in Non-Cash Working Capital (but not exceeding the applicable Allowance for Working Capital Increase/Decreases) for such fiscal year, plus (v) the aggregate amount of Specified Payments in such fiscal year plus ---- (vi) scheduled payments of principal of Debt of Terra and its Subsidiaries in such fiscal year plus ---- (vii) cash taxes paid by Terra and its Subsidiaries in such fiscal year. 22 "Excluded Period" means, with respect to any additional amount payable under Section 2.09 or 2.13, the period ending 120 days prior to the applicable Lender's delivery of a certificate referenced in Section 2.09(a), 2.09(b) or 2.13(d), as applicable, with respect to such additional amount. "Facility" means a Terra Facility or an AMLP Facility. -------- "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" means the letter agreement dated August 25, 1994 between ---------- Terra and Citibank. "Funded Debt" of any Person means, on any date, the sum (determined without duplication) of: (a) all Debt of such Person that would be listed as long-term debt (including Capital Lease Obligations) of such Person on a balance sheet of such Person prepared in accordance with GAAP (including, without limitation, the current portion of such Debt), plus (b) the aggregate principal amount of all Advances outstanding under Terra Facility E and AMLP Facility B, plus (c) the aggregate amount of all Letters of Credit to the extent of unreimbursed drawings thereunder; provided, that the term "Funded Debt" shall include letters of credit issued in connection with the insurance program of Terra and its Subsidiaries only to the extent of unreimbursed drawings thereunder; and provided, further, that the term "Funded Debt" shall not include Obligations under Hedge Agreements. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the date of, and used in, the preparation of the audited financial statements referred to in Section 4.01(f). "Grower Notes Receivable" means accounts and notes receivable that arise from the sale of chemicals, fertilizers or similar products or services to industrial customers, dealers, distributors or growers, and, in the case of growers, receivables that arise from advances to pay 23 expenses of such growers incurred in the production of crops. "Guaranteed Obligations" means the Terra Guaranteed Obligations and ---------------------- the AMLP Guaranteed Obligations. "Guarantors" means the Terra Guarantors and the AMLP Guarantors. ---------- "Hazardous Materials" means (a) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is or could become friable, and radon gas, (b) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar meaning and regulatory effect, under any Environmental Law and (c) any other substance exposure to which is regulated under any Environmental Law. "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity future or option agreements and other similar agreements designed to hedge against fluctuations in interest rates, foreign exchange rates or commodity prices, including, without limitation, the Methanol Hedging Agreement. "Holdings Pledge Agreement" means a Pledge Agreement in substantially the form of Exhibit B-1 hereto between Terra Capital Holdings and the Agent, as from time to time amended. "Immaterial Subsidiary" means, as of any date of determination, any Subsidiary of Terra with not more than $500,000 of assets on such date nor more than $100,000 of gross income for the fiscal year of Terra ended on or most recently ended prior to such date. "Indemnified Party" has the meaning specified in Section 9.04(b). ----------------- "Initial Lenders" has the meaning specified in the recital of the --------------- parties to this Agreement. "Initial Merger" has the meaning specified in the Preliminary -------------- Statements. 24 "Initial Merger Date" means the date of consummation of the Initial ------------------- Merger. "Insufficiency" means, with respect to any Plan at any time, the amount, if any, by which the "accumulated benefit obligation" (as defined in Statement of Financial Accounting Standards 87) exceeds the fair market value of the assets of such Plan as of the date of the most recent actuarial valuation for such Plan, calculated using the actuarial methods, factors and assumptions used in such valuation. "Interest Coverage Ratio" means, for any Rolling Period for which such ratio is to be determined, the ratio of (i) EBITDA of Terra and its Subsidiaries for the immediately preceding Rolling Period to (ii) Cash Interest Expense for the Rolling Period for which such ratio is to be determined. "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the relevant Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the relevant Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, three or six months, as the relevant Borrower may, upon notice received by the Agent not later than 10:00 A.M. (New York City time) on the second Business Day prior to the first day of such Interest Period, select; provided, that: (a) a Borrower may not select any Interest Period that ends after any Principal Payment Date for a Facility relating to such Borrower unless, after giving effect to such selection, the aggregate principal amount of Base Rate Advances and Eurodollar Rate Advances under such Facility having Interest Periods that end on or prior to such Principal Payment Date shall be at least equal to the principal amount of Advances under such Facility due and payable on or prior to such Principal Payment Date; (b) no Interest Period for any Working Capital Advance may end after the Commitment Termination Date for the relevant Facility; (c) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration; 25 (d) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (e) whenever the first day of any Interest Period occurs on the last day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month), such Interest Period shall end on the last Business Day of the appropriate subsequent calendar month. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Investment" in any Person means any loan or advance to such Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities of such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any arrangement pursuant to which the investor incurs Debt of the types referred to in clauses (i) and (j) of the definition of "Debt" in respect of such Person. "Issuing Bank" means each Lender specified on the signature pages ------------ hereof as an "Issuing Bank". "L/C Cash Collateral Account" means the Terra L/C Cash Collateral --------------------------- Account and the AMLP L/C Cash Collateral Account. "L/C Related Documents" has the meaning specified in Section 2.13(e). --------------------- "Lenders" means the Initial Lenders listed on the signature pages hereof and each Eligible Assignee that shall become a party hereto pursuant to Section 9.07. When reference is made in this Agreement or any other Loan Document to any "relevant" Lender in connection with any Facility, such reference shall be deemed to refer to a Lender that has a Commitment or that has outstanding Advances under such Facility. "Letter of Credit Commitment" means the Terra Letter of Credit Commitment or the AMLP Letter of Credit Commitment, 26 "Letter of Credit Liability" means a Terra Letter of Credit Liability or an AMLP Letter of Credit Liability, and "Letter of Credit Sublimit" means the Terra Letter of Credit Sublimit or the AMLP Letter of Credit Sublimit. "Letters of Credit" has the meaning specified in Section 2.13(a). ----------------- "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means, collectively, this Agreement, the Notes, the Security Documents and the Loan Purchase Agreement. "Loan Purchase Agreement" means an agreement between the Agent and ----------------------- Terra in substantially the form of Exhibit F. "Margin Stock" has the meaning specified in Regulations U and X. ------------ "Material Adverse Change" means, with respect to any Person, any material adverse change in the business, assets, operations, properties or financial condition of such Person and its Subsidiaries taken as a whole, or in the contingent liabilities of such Person which could reasonably be expected to result in any of the foregoing, other than any of the foregoing resulting solely from a general economic change in the industry of such Person and its Subsidiaries. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, properties or financial condition of Terra and its Subsidiaries taken as a whole, or in the contingent liabilities of such Person which could reasonably be expected to result in any of the foregoing, (b) the rights and remedies of the Agent, any Issuing Bank or any Lender under any Loan Document or (c) the ability of any Obligor to perform its Obligations under any Loan Document to which it is or is to be a party. "Material Contract" means: ----------------- (A) each Hedge Agreement; (B) each contract to which Terra or any of its Subsidiaries is a party (a "Specified Party") that (a) provides for the provision of goods or services by 27 the Specified Party or the receipt of goods or services by the Specified Party, (b) has a term of more than one year (unless such contract may be cancelled at the sole option of another Person party to such contract), (c) involves the payment or receipt by the Specified Party of consideration having a fair market value in excess of $1,000,000 in any fiscal year of Terra and (d) provides for either: (i) the provision of goods or services to another Person that is obligated to purchase from the Specified Party a specified quantity of such goods or services (but only to the extent that, if such other Person did not purchase such quantity of such goods or services, the Specified Party would not be readily able to sell such goods or services at a price equal to or higher than the price set in such contract) or (ii) the receipt of goods or services from another Person that is obligated to supply to the Specified Party a specified quantity of such goods or services (but only to the extent that, if such other Person did not supply such quantity of such goods or services, the Specified Party would not be readily able to purchase such goods or services at a price less than or equal to the price set in such contract); and (C) each contract to which Terra or any of its Subsidiaries is a party that, if such contract were to be terminated or the obligations of any other Person party to such contract were to fail to be in full force and effect, could reasonably be expected, either individually or in the aggregate with any other such event, to have a Material Adverse Effect. "Material Subsidiary" means any Subsidiary of Terra other than an ------------------- Immaterial Subsidiary. "Merger" has the meaning specified in the Preliminary Statements. ------ "Merger Agreement" has the meaning specified in the Preliminary ---------------- Statements. "Methanol Hedging Agreement" means the Methanol Hedging Agreement dated as of the date of the Initial Borrowing between BMC and Morgan Stanley Leveraged Equity Fund II, as Agent, as from time to time amended. "Minorco" means Minorco, a Luxembourg corporation, and its successors. ------- "Minorco USA" means Minorco (U.S.A.) Inc., a Colorado corporation, and ----------- its successors. 28 "Minorco USA Put Option Agreement" means the Put Option Agreement dated as of August 8, 1994 between Terra and Minorco USA, as from time to time amended. "Multiemployer Plan" of any Person means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which such Person or any of its ERISA Affiliates is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" of any Person means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of such Person or any of its ERISA Affiliates and at least one Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates has or would have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Available Proceeds" means: ---------------------- (i) in the case of any Disposition, the amount of Net Cash Payments received in connection with such Disposition; (ii) in the case of any Casualty Event, the aggregate amount of proceeds of insurance, condemnation awards and other compensation received by Terra and its Subsidiaries (and, in the case of business interruption insurance, not contractually required to be paid over to Morgan Stanley Leveraged Equity Fund II, as agent, or its successors or assigns) in respect of such Casualty Event net of (A) reasonable expenses incurred by Terra and its Subsidiaries in connection therewith, (B) contractually required repayments of Indebtedness to the extent secured by a Lien on the property suffering such Casualty Event and any income and transfer taxes payable by Terra or any of its Subsidiaries in respect of such Casualty Event and (C) amounts promptly applied or set aside to the repair or replacement of the property suffering such Casualty Event; (iii) in the case of any Equity Issuance, the aggregate amount of all cash received by Terra and its Subsidiaries in respect of such Equity Issuance net of reasonable expenses (including reasonable registration fees, underwriting fees and discounts and similar 29 expenses) incurred by Terra and its Subsidiaries in connection therewith; and (iv) in the case of any issuance of any New Terra Debt, the aggregate amount of all cash received by Terra and its Subsidiaries in respect thereof net of reasonable expenses incurred by Terra and its Subsidiaries in connection therewith. "Net Cash Payments" means, with respect to any Disposition, the aggregate amount of all cash payments, and the fair market value of any non-cash consideration, received by Terra and its Subsidiaries directly or indirectly in connection with such Disposition; provided, that (a) Net Cash Payments shall be net of (i) the amount of any legal, title and recording tax expenses, commissions and other reasonable fees and expenses (including reasonable expenses of preparing the relevant property for sale) paid by Terra and its Subsidiaries in connection with such Disposition and (ii) any Federal, state and local income or other taxes estimated in good faith to be payable by Terra and its Subsidiaries as a result of such Disposition and (b) Net Cash Payments shall be net of any repayments by Terra or any of its Subsidiaries of Debt to the extent that (i) such Debt is secured by a Lien on the property that is the subject of such Disposition and (ii) the transferee of (or holder of a Lien on) such property requires that such Debt be repaid as a condition to the purchase of such property. "Net Worth" means, at any time, the sum of the following for Terra and --------- its Subsidiaries on a Consolidated basis: (a) the amount of capital stock; plus ---- (b) the amount of surplus and retained earnings (or, in the case of a surplus or retained earnings deficit, minus the amount of such deficit). "New Terra Equity" means any convertible Preferred Stock or other equity securities issued by Terra after the Closing Date, the proceeds of which are used to prepay Terra Facility D Advances pursuant to Section 2.05(b). "New Terra Debt" means any Debt incurred by Terra or any of its -------------- Subsidiaries under Section 5.02(b)(vi). "Note" means a Terra Note or an AMLP Note. ---- 30 "Notice of Borrowing" has the meaning specified in Section 2.02(a). ------------------- "Notice of Issuance" has the meaning specified in Section 2.13(b)(i). ------------------ "Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(g). Without limiting the generality of the foregoing, the Obligations of the Obligors under the Loan Documents include (a) their respective obligations to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable under any Loan Document and (b) their respective obligations to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Obligor. "Obligors" means the Terra Obligors and the AMLP Obligors. -------- "OECD" means the Organization for Economic Cooperation and ---- Development. "Other Taxes" has the meaning specified in Section 2.11(b). ----------- "PBGC" means the Pension Benefit Guaranty Corporation. ---- "Permitted Investments" means (a) direct obligations of the United States of America, or of any agency thereof, or obligations guaranteed as to principal and interest by the United States of America, or by any agency thereof, in either case maturing not more than 270 days from the date of acquisition thereof, (b) certificates of deposit issued by, and repurchase and reverse repurchase agreements with, any bank or trust company organized under the laws of the United States of America or any state thereof, having capital, surplus and undivided profits of at least $500,000,000 and whose unsecured, unguaranteed long-term senior debt obligations are rated at least A by Standard & Poor's Ratings Group and at least A2 by Moody's Investors Service, Inc., maturing not more than 270 days from the date of 31 acquisition thereof, (c) commercial paper and variable rate demand notes, in each case rated A-1 or better by Standard & Poor's Ratings Group and P-1 or better by Moody's Investors Service, Inc. and maturing not more than 270 days from the date of acquisition thereof, and (d) obligations of not more than $100,000 in the aggregate at any one time of any bank or bank holding company with a capital and surplus of less than $500,000,000 or whose unsecured, unguaranteed long-term senior debt obligations are rated less than A by Standard & Poor's Ratings Group or less than A2 by Moody's Investors Service, Inc. "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced (or, if such a proceeding has been commenced, such proceeding is being contested in good faith by appropriate proceedings and enforcement of any Lien has been and is stayed): (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b), (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens, statutory landlord's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings, (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations, (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases (other than capital leases), surety and appeal bonds, and performance bonds and other obligations of a like nature incurred, in each case arising in the ordinary course of business, (e) as to any particular property at any time, such easements, encroachments, covenants, rights of way, minor defects, irregularities or encumbrances on title which do not materially impair the use of such property for the purpose for which it is held by the owner thereof, (f) municipal and zoning ordinances that are not violated in any material respect by the existing 32 improvements and the present use made by the owner thereof, and (g) real estate taxes and assessments not yet delinquent. "Permitted TI Receivables Facilities" means, collectively, (a) the Receivables Purchase Agreement dated as of March 31, 1994 among TI, as Seller, the financial institutions party thereto, as Purchasers, and Bank of America Illinois, successor to Continental Bank N.A., as agent, as from time to time amended, or any replacement or refinancing thereof, provided, that the principal amount under such replacement or refinancing shall not exceed the principal amount under the facility so replaced or refinanced; and (b) an additional facility entered into by TI (which may be effected by an amendment to the facility referred to in clause (a) of this definition) providing for the sale by TI of Receivables, provided, that (i) no amounts may be outstanding thereunder unless the then aggregate principal amount of Grower Notes Receivable exceeds $50,000,000, (ii) the aggregate amount outstanding thereunder may not at any time exceed $50,000,000 plus reasonable reserves, and (iii) no amount shall be outstanding thereunder for more than 90 days during any calendar year, nor for more than two periods during any calendar year, nor for any single period in excess of 60 days during any calendar year. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. ---- "Post-Default Rate" means a rate per annum equal to 2% plus the Applicable Margin plus the Base Rate as in effect from time to time. "Preferred Stock" means, with respect to any corporation, capital stock issued by such corporation that is entitled to a preference or priority over any other capital stock issued by such corporation upon any distribution of such corporation's assets, whether by dividend or upon liquidation. "Principal Payment Date" means any of the Terra Facility A Principal Payment Dates, the Terra Facility B 33 Principal Payment Dates, the Terra Facility C Principal Payment Dates, the Terra Facility D Principal Payment Dates and the AMLP Facility A Principal Payment Date. "Pro Rata Share" of any amount means, with respect to any Lender under any Facility at any time, the product of (a) a fraction the numerator of which is the amount of such Lender's Advances under such Facility (or, prior to the Commitment Termination Date for such Facility, the amount of such Lender's Commitment thereunder), and the denominator of which is the aggregate Advances or Commitments, as the case may be, under such Facility at such time, multiplied by (b) such amount. "Purchase Event" means that for any fiscal year of Terra, the aggregate amount of Dividend Payments with respect to the capital stock of Terra Capital exceeds the sum of (a) the aggregate amount of Specified Payments plus (b) 50% of the portion of Excess Cash Flow for the prior fiscal year that is not required to be applied to the prepayment of Advances (provided, that Terra Capital may advance to Terra (indirectly through Terra Capital Holdings) the proceeds of (i) the Terra Facility C Advances to the extent required to finance the AMCI Change of Control Redemption and (ii) other Advances to the extent such proceeds are used by Terra to prepay an existing loan in the amount of $40,000,000). "Quarterly Dates" shall mean January 20, April 20, July 20 and October 20 in each year, the first of which shall be the first such day after the date of this Agreement, provided, that, if any such day is not a Business Day, the relevant Quarterly Date shall be the immediately preceding Business Day. "Receivables" means accounts receivable and Grower Notes Receivable, ----------- and, in each case, related reserves. "Redeemable" means any capital stock, Debt or other right or Obligation that (a) the issuer thereof has undertaken to redeem at a fixed or determinable date or dates prior to the final Principal Payment Date hereunder, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable on any date prior to said final Principal Payment Date at the option of the holder thereof. "Reference Banks" means Citibank, Bank of America and NationsBank of Texas, N.A. (or their respective Applicable Lending Offices, as the case may be). 34 "Register" has the meaning specified in Section 9.07(c). -------- "Regulation U" and "Regulation X" mean Regulations U and X of the Board of Governors of the Federal Reserve System, respectively, as in effect from time to time. "Related Document" means the Merger Agreement, the Minorco USA Put Option Agreement and the Methanol Hedging Agreement. "Required Lenders" means at any time Lenders owed or holding in the aggregate at least 51% of the sum of the then aggregate unpaid principal amount of the Advances, the then aggregate unused Commitments under all the Facilities, and the aggregate Available Amount of all Letters of Credit. For purposes of this definition, the Available Amount of each Letter of Credit shall be considered to be owed to the relevant Lenders according to their respective Pro Rata Shares of the Working Capital Facility under which such Letter of Credit has been issued. "Rolling Period" means any period of four consecutive fiscal quarters -------------- of Terra. "Second Merger" has the meaning specified in the Preliminary ------------- Statements. "Security Documents" means the Holdings Pledge Agreement, the Terra Capital Pledge Agreement, the Subsidiary Pledge and Security Agreement, the AMLP Pledge and Security Agreement, each security agreement or other grant of security now or hereafter made by any Obligor to secure any of the Obligations hereunder and under the other Loan Documents, and all Uniform Commercial Code financing statements required by this Agreement or any of the foregoing to be filed with respect to the security interests in personal property created pursuant thereto. "Senior Financial Officer" means the Chief Financial Officer of Terra. ------------------------ "Single Employer Plan" of any Person means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of ERISA and that (a) is maintained for employees or former employees of such Person or any of its ERISA Affiliates and no Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates has or would have liability under Section 4069 of 35 ERISA in the event such plan has been or were to be terminated. "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. "Specified Payments" means, for any fiscal year of Terra, (a) all interest due and payable on the AMCI Senior Notes during such fiscal year, (b) all dividends paid on shares of common stock of Terra during such fiscal year in an aggregate amount not exceeding the Allowance for Projected Common Dividends for such fiscal year, (c) all scheduled dividends on New Terra Equity payable during such fiscal year, (d) all scheduled dividends payable during such fiscal year on convertible Preferred Stock or other equity securities (other than New Terra Equity) issued and applied to prepay the Advances, (e) ordinary and necessary expenses incurred by Terra as a result of its operations as a publicly-held holding company and (f) other payments in an aggregate amount up to $5,000,000 per year to the extent required under pre-existing obligations. "Subordinated Indebtedness" means Debt of Terra or any of its Subsidiaries the payment of which is subordinated in right of payment to the prior payment in full of the Advances. "Subsidiary" of any Person means any corporation, partnership, joint venture, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or 36 indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Subsidiary Guarantor" means AMC, BMCH and BMC. -------------------- "Subsidiary Pledge and Security Agreement" means a Pledge and Security Agreement in substantially the form of Exhibit B-3 hereto between certain of the Terra Guarantors and the Agent, as from time to time amended. "Term Advances" means each of the Terra Facility A Advances, the Terra Facility B Advances, the Terra Facility C Advances, the Terra Facility D Advances and the AMLP Facility A Advances, "Term Commitment" means each of the Terra Facility A Commitments, the Terra Facility B Commitments, the Terra Facility C Commitments, the Terra Facility D Commitments and the AMLP Facility A Commitments, and "Term Facility" means each of Terra Facility A, Terra Facility B, Terra Facility C, Terra Facility D and AMLP Facility A. "Term Facility Commitment Termination Date" means the earlier of (a) November 15, 1994 and (b) the termination or cancellation of the Term Commitments pursuant to this Agreement. "Terminated Facilities" means, collectively, the credit facilities --------------------- identified in Schedule 3.01(d) hereto. "Terra" has the meaning specified in the recital of parties to this ----- Agreement. "Terra Advance" means an Advance under any Terra Facility, "Terra Borrowing" means a Borrowing under any Terra Facility, "Terra Commitment" means a Commitment under any Terra Facility, and "Terra Facility" means Terra Facility A, Terra Facility B, Terra Facility C, Terra Facility D or Terra Facility E. "Terra Capital" has the meaning specified in the recital of parties to ------------- this Agreement. "Terra Capital Holdings" has the meaning specified in the Preliminary ---------------------- Statements. "Terra Capital Pledge Agreement" means a Pledge Agreement in substantially the form of Exhibit B-2 hereto between Terra Capital and the Agent, as from time to time amended. 37 "Terra Facilities Note" means a promissory note of the Company payable to the order of a Lender, in substantially the form of Exhibit A-1, as from time to time amended. "Terra Facility A" means the term credit facility provided hereunder in respect of the Terra Facility A Commitments, "Terra Facility A Advance" means an Advance pursuant to Section 2.01(a), "Terra Facility A Borrowing" means a borrowing consisting of simultaneous Terra Facility A Advances of the same Type, and "Terra Facility A Commitment" has the meaning specified in Section 2.01(a). "Terra Facility A Principal Payment Dates" means the Quarterly Dates falling on or nearest to April 20 and October 20 of each year, commencing with April 20, 1995 through and including October 20, 1999. "Terra Facility B" means the term credit facility provided hereunder in respect of the Terra Facility B Commitments, "Terra Facility B Advance" means an Advance pursuant to Section 2.01(b), "Terra Facility B Borrowing" means a borrowing consisting of simultaneous Terra Facility B Advances of the same Type, and "Terra Facility B Commitment" has the meaning specified in Section 2.01(b). "Terra Facility B Note" means a promissory note of the Company payable to the order of a Lender, in substantially the form of Exhibit A-2 hereto, as from time to time amended. "Terra Facility B Principal Payment Dates" means the Quarterly Dates falling on or nearest to April 20 and October 20 of each year, commencing with April 20, 1995 through and including October 20, 2001. "Terra Facility C" means the term credit facility provided hereunder in respect of the Terra Facility C Commitments, "Terra Facility C Advance" means an Advance pursuant to Section 2.01(c), "Terra Facility C Borrowing" means a borrowing consisting of simultaneous Terra Facility C Advances of the same Type, and "Terra Facility C Commitment" has the meaning specified in Section 2.01(c). "Terra Facility C Commitment Termination Date" means the earlier of (a) 106 days after the Closing Date (provided, that if such day is not a Business Day, the Terra Facility C Commitment Termination Date shall be the next succeeding Business Day) and (b) the termination or cancellation of the Terra Facility C Commitments pursuant to this Agreement. 38 "Terra Facility C Principal Payment Dates" mean the first anniversary of the date of the AMCI Change of Control Redemption and each semi-annual anniversary thereof to and including the first such date in 2001, and the Quarterly Date falling nearest to October 20, 2001. "Terra Facility D" means the term credit facility provided hereunder in respect of the Terra Facility D Commitments, "Terra Facility D Advance" means an Advance pursuant to Section 2.01(d), "Terra Facility D Borrowing" means a borrowing consisting of simultaneous Terra Facility D Advances of the same Type, and "Terra Facility D Commitment" has the meaning specified in Section 2.01(d). "Terra Facility D Principal Payment Dates" mean the Quarterly Dates falling on or nearest to April 20 and October 20 of each year, commencing with April 20, 1995 through and including October 20, 2001. "Terra Facility E" means the revolving credit facility provided hereunder in respect of the Terra Facility E Commitments, "Terra Facility E Advance" means an Advance pursuant to Section 2.01(e), "Terra Facility E Borrowing" means a borrowing consisting of simultaneous Terra Facility E Advances of the same Type, and "Terra Facility E Commitment" has the meaning specified in Section 2.01(e). "Terra Facility E Commitment Termination Date" means the earlier of (a) the date five years after the Closing Date (provided, that if such day is not a Business Day, the Terra Facility E Commitment Termination Date shall be the immediately preceding Business Day), and (b) the termination or cancellation of the Terra Facility E Commitments pursuant to the terms of this Agreement. "Terra Guaranteed Obligations" has the meaning specified in Section ---------------------------- 8.01(a). "Terra Guarantors" means, from and after the Assumption Time, Terra ---------------- Capital Holdings, AMC, BMCH, BMC and Terra. "Terra L/C Cash Collateral Account" means the "Terra L/C Cash Collateral Account" under the Terra Capital Pledge Agreement and the "Terra L/C Cash Collateral Account" under the Subsidiary Pledge and Security Agreement. "Terra Letter of Credit" means a letter of credit issued by an Issuing Bank for account of Terra Capital or any of its Subsidiaries (other than AMLP or any of its Subsidiaries) pursuant to Section 2.13(a). 39 "Terra Letter of Credit Commitment" means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank's name on Schedule 2.01 under the caption "Terra Letter of Credit Commitment", as such amount may be reduced pursuant to Section 2.04. "Terra Letter of Credit Liability" means, as of any date of determination, all of the liabilities of Terra Capital to the Issuing Banks in respect of Terra Letters of Credit, whether such liability is contingent or fixed, and shall consist of the sum of (a) the aggregate Available Amount of all Terra Letters of Credit then outstanding, plus (b) the aggregate amount that has then been paid by, and has not been reimbursed to, any Issuing Bank under Terra Letters of Credit. "Terra Letter of Credit Sublimit" means $30,000,000. ------------------------------- "Terra Note" means a Terra Facilities Note or a Terra Facility B Note. ---------- "Terra Obligors" means the Terra Guarantors and the Company. -------------- "TI" has the meaning specified in the Preliminary Statements. -- "Total Capital" means, on any date, the sum of (i) Funded Debt of Terra and its Subsidiaries on a Consolidated basis on such date plus (ii) Net Worth of Terra and its Subsidiaries on a Consolidated basis on such date. "Total Commitment" means, with respect to each Lender, the aggregate of such Lender's Terra Commitments and AMLP Commitments. "Transactions" has the meaning specified in the Preliminary ------------ Statements. "Trigger Date" means the earliest date as of which each of the ------------ following is true: (a) the principal of and interest on the Terra Facility C Advances and the Terra Facility D Advances have been paid in full; (b) the aggregate outstanding principal amount of the Terra Facility A Advances and the Terra Facility B Advances does not exceed $100,000,000; and 40 (c) the Debt to Cash Flow Ratio for the fiscal year of Terra ending on or most recently ended prior to the date of determination does not exceed 2.50 to 1. "Type" refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate. "Unused AMLP Working Capital Commitment" means, with respect to any Lender at any time, (a) such Lender's AMLP Facility B Commitment at such time minus (without duplication) (b) the sum of (i) the aggregate outstanding principal amount of all AMLP Facility B Advances made by such Lender and (ii) such Lender's Pro Rata Share of the aggregate Available Amount of all AMLP Letters of Credit outstanding at such time and of all unreimbursed drawings thereunder. "Unused Terra Working Capital Commitment" means, with respect to any Terra Facility E Lender at any time, (a) such Lender's Terra Facility E Commitment at such time minus (without duplication) (b) the sum of (i) the aggregate outstanding principal amount of all Terra Facility E Advances made by such Lender and (ii) such Lender's Pro Rata Share of the aggregate Available Amount of all Terra Letters of Credit outstanding at such time and of all unreimbursed drawings thereunder. "U.S. Dollars" and "$" means lawful money of the United States of ------------ - America. "Working Capital Advance" means a Terra Facility E Advance or an AMLP Facility B Advance, "Working Capital Borrowing" means a Terra Facility E Borrowing or an AMLP Facility B Borrowing, "Working Capital Commitment" means a Terra Facility E Commitment or AMLP Facility B Commitment, "Working Capital Commitment Termination Date" means the Terra Facility E Commitment Termination Date or the AMLP Facility B Commitment Termination Date, and "Working Capital Facility" means Terra Facility E or AMLP Facility B. Section 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" mean "to but excluding". Section 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. 41 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT Section 2.01. The Advances. ------------ (a) Terra Facility A. ---------------- (i) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance (a "Terra Facility A Advance") to Terra on the Initial Merger Date in an amount not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 hereof under the caption "Terra Facility A Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register as such Lender's "Terra Facility A Commitment" (such amount being such Lender's "Terra Facility A Commitment"), and, as to all Lenders, in an aggregate amount not to exceed $150,000,000. (ii) The Terra Facility A Advances shall be made by the Lenders ratably according to their respective Terra Facility A Commitments. (iii) Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. (iv) The proceeds of the Terra Facility A Advances shall be used by Terra solely to make a capital contribution to Acquisition Corp. on the Initial Merger Date in order to assist in financing the consummation of the Merger and to pay fees and expenses in connection therewith. (b) Terra Facility B. ---------------- (i) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance (a "Terra Facility B Advance") to Terra on the Initial Merger Date in an amount not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 hereof under the caption "Terra Facility B Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register as such Lender's "Terra Facility B Commitment" (such amount being such Lender's "Terra Facility B Commitment"), and, as to all Lenders, in an aggregate amount not to exceed $80,000,000. (ii) The Terra Facility B Advances shall be made by the Lenders ratably according to their respective Terra Facility B Commitments. 42 (iii) Amounts borrowed under this Section 2.01(b) and repaid or prepaid may not be reborrowed. (iv) The proceeds of the Terra Facility B Advances shall be used by Terra solely to make a capital contribution to Acquisition Corp. on the Initial Merger Date in order to assist in financing the consummation of the Merger and to pay fees and expenses in connection therewith. (c) Terra Facility C. ---------------- (i) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance (a "Terra Facility C Advance") to the Company on the date of the AMCI Change of Control Redemption, if any, but in any event before the Terra Facility C Commitment Termination Date, in an amount not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 hereof under the caption "Terra Facility C Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register as such Lender's "Terra Facility C Commitment" (such amount being such Lender's "Terra Facility C Commitment"), and, as to all Lenders, in an aggregate amount not to exceed $177,000,000. (ii) The Terra Facility C Advances shall be made by the Lenders ratably according to their respective Terra Facility C Commitments. (iii) Amounts borrowed under this Section 2.01(c) and repaid or prepaid may not be reborrowed. (iv) The proceeds of the Terra Facility C Advances shall be used by the Company solely to finance payments, if any, required to be made as a result of any AMCI Change of Control Redemption. (d) Terra Facility D. ---------------- (i) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance (a "Terra Facility D Advance") to Terra on the Initial Merger Date in an amount not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 hereof under the caption "Terra Facility D Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register as such Lender's "Terra Facility D Commitment" (such amount being such Lender's "Terra Facility D Commitment"), and, as to all Lenders, in an aggregate amount not to exceed $80,000,000. 43 (ii) The Terra Facility D Advances shall be made by the Lenders ratably according to their respective Terra Facility D Commitments. (iii) Amounts borrowed under this Section 2.01(d) and repaid or prepaid may not be reborrowed. (iv) The proceeds of the Terra Facility D Advances shall be used by Terra solely to make a capital contribution to Acquisition Corp. on the Initial Merger Date in order to assist in financing the consummation of the Merger and to pay fees and expenses in connection therewith, and to refinance short-term indebtedness of Terra. (e) Terra Facility E. ---------------- (i) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances ("Terra Facility E Advances") to the Company from time to time on any Business Day during the period from the Assumption Time until the Terra Facility E Commitment Termination Date in an aggregate amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 under the caption "Terra Facility E Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register as such Lender's "Terra Facility E Commitment" (such amount being such Lender's "Terra Facility E Commitment"), and, as to all Lenders, in an aggregate amount at any one time outstanding not to exceed $175,000,000. (ii) The Terra Facility E Advances shall be made by the Lenders ratably according to their respective Terra Facility E Commitments. (iii) Within the limits of each Lender's Terra Facility E Commitment in effect from time to time, the Company may borrow under this Section 2.01(e) and/or obtain the issuance of Letters of Credit under Section 2.13, prepay pursuant to Section 2.05(a) and reborrow under this Section 2.01(e); provided, that the aggregate outstanding principal amount of Terra Facility E Advances when added to the aggregate Terra Letter of Credit Liability may not at any time exceed the aggregate amount of the Terra Facility E Commitments at such time. (iv) The proceeds of the Terra Facility E Advances shall be used solely to finance the ongoing working capital needs of the Company, TI and BMC. 44 (v) Notwithstanding the foregoing provisions of Section 2.01(e), the Company agrees that, for a period of 30 consecutive days during each period of 12 consecutive months commencing on the date of the initial Terra Facility E Borrowing or the last day of the previous such 12-month period and ending one year thereafter, no Terra Facility E Borrowings may be made or outstanding under this Section 2.01(e); provided, that this Section 2.01(e)(v) shall not prevent the Company from requesting the issuance of Terra Letters of Credit during any such period pursuant to Section 2.13, or the Lenders from making Terra Facility E Advances in respect thereof pursuant to Section 2.13(c), which Terra Facility E Advances (subject to the other terms and conditions of this Agreement) may remain outstanding during such period. (f) AMLP Facility A. --------------- (i) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance (an "AMLP Facility A Advance") to AMLP on the Initial Merger Date in an amount not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 under the caption "AMLP Facility A Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register as such Lender's "AMLP Facility A Commitment" (such amount being such Lender's "AMLP Facility A Commitment"), and, as to all Lenders, in an aggregate amount not to exceed $35,000,000. (ii) The AMLP Facility A Advances shall made by the Lenders ratably according to their respective AMLP Facility A Commitments. (iii) Amounts borrowed under this Section 2.01(f) and repaid or prepaid may not be reborrowed. (iv) The proceeds of the AMLP Facility A Advances shall be used solely to refinance outstanding indebtedness of AMLP. (g) AMLP Facility B. --------------- (i) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances ("AMLP Facility B Advances") to AMLP from time to time on any Business Day during the period from the Assumption Time until the AMLP Facility B Commitment Termination Date in an aggregate amount at any one time outstanding not to exceed "AMLP Facility B Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for 45 such Lender in the Register as such Lender's "AMLP Facility B Commitment" (such amount being such Lender's "AMLP Facility B Commitment"), and, as to all Lenders, in an aggregate amount at any one time outstanding not to exceed $50,000,000. (ii) The AMLP Facility B Advances shall be made by the Lenders ratably according to their respective AMLP Facility B Commitments. (iii) Within the limits of each Lender's AMLP Facility B Commitment in effect from time to time, AMLP may borrow under this Section 2.01(g) and/or obtain the issuance of Letters of Credit under Section 2.13, prepay pursuant to Section 2.05(a) and reborrow under this Section 2.01(g); provided, that the aggregate outstanding principal amount of AMLP Facility B Advances when added to the aggregate AMLP Letter of Credit Liability may not at any time exceed the aggregate amount of the AMLP Facility B Commitments at such time. (iv) The proceeds of the AMLP Facility B Advances shall be used solely for the ongoing working capital needs of AMLP. (v) Notwithstanding the foregoing provisions of Section 2.01(g), AMLP agrees that, for a period of 30 consecutive days during each period of 12 consecutive months commencing on the date of the initial AMLP Facility B Borrowing or the last day of the previous such 12-month period and ending one year thereafter, no AMLP Facility B Borrowings may be made or outstanding under this Section 2.01(g); provided, that this Section 2.01(g)(v) shall not prevent AMLP from requesting the issuance of AMLP Letters of Credit during such period pursuant to Section 2.13, or the Lenders from making AMLP Facility B Advances in respect thereof pursuant to Section 2.13(c), which AMLP Facility B Advances (subject to the other terms and conditions of this Agreement) may remain outstanding during such period. (h) Minimum Amounts. Each Working Capital Borrowing shall be in an aggregate amount at least equal to $3,000,000 or an integral multiple of $1,000,000 in excess thereof. (i) No Responsibility to Third Parties. Neither the Agent nor any Lender nor any Issuing Bank shall have any responsibility as to the application or use of any of the proceeds of any Advance. 46 Section 2.02. Making the Advances. ------------------- (a) (i) Except as otherwise provided in Section 2.13, each Borrowing shall be made on notice, given not later than 12:00 Noon (New York City time) on the Business Day of (or, with respect to a Borrowing of Eurodollar Rate Advances, 10:00 A.M. (New York City time) on the second Business Day prior to the date of) the proposed Borrowing, by the relevant Borrower to the Agent, which shall give to each Lender prompt notice thereof by telex, telecopier or cable. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by telex, telecopier or cable, confirmed immediately in writing, in substantially the form of Exhibit C, specifying therein (1) the requested date of such Borrowing, (2) the Facility under which such Borrowing is to be made, (3) the requested Type of Advances comprising such Borrowing (subject to clause (ii) below), (4) the requested aggregate amount of such Borrowing and (5) in the case of a Borrowing consisting of Eurodollar Rate Advances, the requested initial Interest Period for each such Advance. (ii) The Terra Facility A Advances, Terra Facility B Advances and Terra Facility D Advances and the AMLP Facility A Advances shall initially be made as Base Rate Advances. (iii) In the case of a proposed Borrowing comprised of Eurodollar Rate Advances, the Agent shall promptly notify each relevant Lender of the applicable interest rate under Section 2.06(a)(ii). (iv) Each Lender shall, before 1:00 P.M. (New York City time) on the date of each Borrowing, make available for the account of its Applicable Lending Office to the Agent at the Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will transfer same day funds to the relevant Borrower's Account; provided, that (i) in the case of any Terra Facility E Borrowing, the Agent shall first make a portion of such funds equal to any unreimbursed drawing under any Terra Letter of Credit available to each Issuing Bank having issued any such Letter of Credit for reimbursement of such drawing, and (ii) in the case of any AMLP Facility B Borrowing, the Agent shall first make a portion of such funds equal to any unreimbursed drawing under any AMLP Letter of Credit available to each Issuing Bank having issued any such Letter of Credit for reimbursement of such drawing. 47 (b) Anything in subsection (a) above to the contrary notwithstanding, (i) no Borrower may select Eurodollar Rate Advances (y) for any Borrowing if the aggregate amount of such Borrowing is less than $3,000,000 or (z) if the obligation of the relevant Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or 2.09, and (ii) Eurodollar Rate Advances may not be outstanding under more than (x) 15 separate Interest Periods under either Working Capital Facility at any one time and (y) three separate Interest Periods under any Term Facility at any one time. (c) Each Notice of Borrowing shall be irrevocable and binding on the relevant Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the relevant Borrower shall indemnify each relevant Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (d) Unless the Agent shall have received notice from a relevant Lender prior to 12:00 Noon (New York City time) on the date of any Borrowing under a Facility under which such Lender has a Commitment that such Lender will not make available to the Agent such Lender's ratable portion of such Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Borrowing in accordance with Section 2.02(a) and the Agent may, in reliance upon such assumption, make available to the relevant Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent and the Agent shall have made available such corresponding amount to the relevant Borrower, such Lender and the relevant Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the relevant Borrower until the date such amount is repaid to the Agent, at (i) in the case of the relevant Borrower, the interest rate applicable at such time under Section 2.06 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such 48 amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. Section 2.03. Repayment. --------- (a) Terra Term Advances. The Company hereby promises to pay to the Agent for the account of each Lender the full outstanding principal amount of such Lender's Advances under each Term Facility for Terra as follows: (i) in the case of the Terra Facility A Advances, in 10 consecutive semi-annual installments, one such installment to be payable on each Terra Facility A Principal Payment Date set forth below in a principal amount equal to the amount set forth below opposite such Terra Facility A Principal Payment Date:
Terra Facility A Principal Payment Date Falling on or Nearest To Amount ------------------------ ----------- April 20, 1995 $15,000,000 October 20, 1995 15,000,000 April 20, 1996 15,000,000 October 20, 1996 15,000,000 April 20, 1997 15,000,000 October 20, 1997 15,000,000 April 20, 1998 15,000,000 October 20, 1998 15,000,000 April 20, 1999 15,000,000 October 20, 1999 15,000,000
(ii) in the case of the Terra Facility B Advances, in 14 consecutive semi-annual installments, one such installment to be payable on each Terra Facility B Principal Payment Date set forth below in a principal amount equal to the amount set forth below opposite such Terra Facility B Principal Payment Date: 49
Terra Facility B Principal Payment Date Falling on or Nearest To Amount - ---------------------------------- ----------- April 20, 1995 $ 500,000 October 20, 1995 500,000 April 20, 1996 500,000 October 20, 1996 500,000 April 20, 1997 500,000 October 20, 1997 500,000 April 20, 1998 500,000 October 20, 1998 500,000 April 20, 1999 500,000 October 20, 1999 15,100,000 April 20, 2000 15,100,000 October 20, 2000 15,100,000 April 20, 2001 15,100,000 October 20, 2001 15,100,000
(iii) in the case of the Terra Facility C Advances, in 13 consecutive semi-annual installments, one such installment to be payable on each Terra Facility C Principal Payment Date set forth below in a principal amount equal to the amount set forth below opposite such Terra Facility C Principal Payment Date: Terra Facility C Principal Payment Date Amount ---------------------- ------
First such Date $13,615,384.62 Second such Date 13,615,384.62 Third such Date 13,615,384.62 Fourth such Date 13,615,384.62 Fifth such Date 13,615,384.62 Sixth such Date 13,615,384.62 Seventh such Date 13,615,384.62 Eighth such Date 13,615,384.62 Ninth such Date 13,615,384.62 Tenth such Date 13,615,384.62 Eleventh such Date 13,615,384.62 Twelfth such Date 13,615,384.62 Thirteenth such Date 13,615,384.56
(iv) in the case of the Terra Facility D Advances, in 14 consecutive semi-annual installments, one such installment to be payable on each Terra Facility D Principal Payment Date set forth below in a principal amount equal to the amount set forth below opposite such Terra Facility D Principal Payment Date: 50
Terra Facility D Principal Payment Date Falling on or Nearest To Amount - ---------------------------------- ------------- April 20, 1995 $5,714,285.72 October 20, 1995 5,714,285.72 April 20, 1996 5,714,285.72 October 20, 1996 5,714,285.72 April 20, 1997 5,714,285.72 October 20, 1997 5,714,285.72 April 20, 1998 5,714,285.72 October 20, 1998 5,714,285.72 April 20, 1999 5,714,285.72 October 20, 1999 5,714,285.72 April 20, 2000 5,714,285.72 October 20, 2000 5,714,285.72 April 20, 2001 5,714,285.72 October 20, 2001 5,714,285.64
(b) Terra Facility E Advances. The Company hereby promises to pay to the Agent for the account of each Lender the full outstanding principal amount of the Terra Facility E Advances of such Lender on the Terra Facility E Commitment Termination Date. (c) AMLP Facility A Advances. AMLP hereby promises to pay to the Agent for the account of each Lender the full outstanding principal amount of the AMLP Facility A Advances of such Lender on the AMLP Facility A Principal Payment Date. (d) AMLP Facility B Advances. AMLP hereby promises to pay to the Agent for the account of each Lender the full outstanding principal amount of the AMLP Facility B Advances of such Lender on the AMLP Facility B Commitment Termination Date. (e) All Advances. ------------ (i) All repayments of principal under this Section 2.03 shall be made together with interest accrued to the date of such repayment on the principal amount repaid. (ii) If any Principal Payment Date falls on a day that is not a Business Day, such Principal Payment Date shall be the immediately preceding Business Day. (iii) If the amount of the Borrowing under any Term Facility is less than the aggregate amount of the initial Commitments under such Facility, the shortfall shall be applied to reduce ratably the installments of such Facility payable under Section 2.03(a). 51 Section 2.04. Termination or Reduction of the Commitments. ------------------------------------------- (a) Optional. The Borrowers may, upon not less than two Business Days' notice to the Agent, terminate in whole or reduce in part the Commitments of the Lenders as follows: (i) The Company shall have the right at any time or from time to time (x) at any time prior to the Closing Date to terminate in full the Terra Commitments, (y) at any time to terminate in full or reduce the Terra Facility C Commitments, and (z) at any time to terminate in full or reduce the aggregate unused amount of the Terra Facility E Commitments; and (ii) AMLP shall have the right at any time or from time to time (x) prior to the first borrowing under this Agreement by AMLP, to terminate in full the AMLP Commitments, and (y) at any time to terminate in full or reduce the aggregate unused amount of the AMLP Facility B Commitments; provided, that (i) each partial reduction of the Commitments under any Facility shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof, and (ii) the aggregate amount of the Commitments under any Working Capital Facility shall not be reduced below the Letter of Credit Commitment for such Facility. (b) Mandatory. --------- (i) Each Term Commitment other than the Terra Facility C Commitments shall be automatically and permanently reduced to zero on the Term Facility Commitment Termination Date, and any portion of such Term Commitments not used on the Initial Merger Date shall be automatically and permanently terminated at the close of business (New York City time) on the Initial Merger Date. The Terra Facility C Commitments shall be automatically and permanently reduced to zero on the Terra Facility C Commitment Termination Date, and any portion thereof not used on the date of the AMCI Change of Control Redemption shall be automatically and permanently terminated at the close of business (New York City time) on said date. (ii) The Terra Facility E Commitments shall be automatically and permanently reduced to zero on the Terra Facility E Commitment Termination Date. 52 (iii) The AMLP Facility B Commitments shall be automatically and permanently reduced to zero on the AMLP Facility B Commitment Termination Date. (iv) In addition to the foregoing, the Commitments shall be automatically and permanently reduced as provided in Section 2.05(c). (v) Commitments once terminated or reduced may not be reinstated. (c) Reductions Pro Rata. Each reduction of the Commitments under any Facility shall be applied to the respective Commitments of the Lenders according to their respective Pro Rata Shares of such Facility. Section 2.05. Prepayments. ----------- (a) Optional Prepayments. (i) Either Borrower may, upon at least two Business Days' notice (in the case of prepayment of Eurodollar Rate Advances) or upon the notice given on the date of prepayment (in the case of prepayments of Base Rate Advances) to the Agent (which notice shall state the Facilities to be prepaid and the proposed date and aggregate principal amount of the prepayment), and if such notice is given such Borrower shall, prepay the outstanding principal amount of the Advances under the specified Facilities in the aggregate amount and on the date specified in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, that (x) each partial prepayment shall be in an aggregate principal amount of $3,000,000 or an integral multiple of $1,000,000 in excess thereof, (y) any such prepayment of a Eurodollar Rate Advance other than on the last day of the Interest Period therefor shall be accompanied by, and subject to, the payment of any amount payable under Section 9.04(c) in respect of such prepayment and (z) each such notice shall be made on the relevant day not later than, in the case of prepayments of Eurodollar Rate Advances, 10:00 A.M. (New York City time) and, in the case of prepayments of Base Rate Advances, 12:00 Noon (New York City time). (ii) Each prepayment of Advances under this Section 2.05(a) shall be made for account of the relevant Lenders according to their respective Pro Rata Shares of the principal amount of the Advances then outstanding under such Facility. 53 (b) Mandatory Prepayments. --------------------- (i) Excess Cash Flow. Not later than the date 90 days after the end of each fiscal year of the Company commencing with the fiscal year ending December 31, 1995, the Company (and, after the prepayment in full of the principal of and interest on the Term Advances under the Terra Facilities, AMLP) shall prepay the Advances in an aggregate amount equal to 75% of Excess Cash Flow for such fiscal year; provided, that once an aggregate amount of $20,000,000 or more has been prepaid pursuant to this clause (i), the figure 75% set forth above shall automatically be deemed to be reduced to 50%. (ii) Sale of Assets. Without limiting the obligation of the Company to obtain the consent of the Required Lenders pursuant to Section 5.02(e) to any Disposition not otherwise permitted hereunder, upon the occurrence of any Disposition, the Company (and, after the prepayment in full of the principal of and interest on the Term Advances under the Terra Facilities, AMLP) shall prepay the Advances in an aggregate amount equal to 100% of the Net Available Proceeds of such Disposition; provided, that (x) for purposes of this clause (ii) the aggregate Net Available Proceeds of all such Dispositions in such Fiscal Year shall be deemed to be reduced by $10,000,000 (but shall not be deemed to be less than zero); (y) the sale by TI of Receivables under a Permitted TI Receivables Facility shall not be deemed to be a Disposition for purposes of this clause (ii); and (z) upon the payment in full of the principal of and interest on the Terra Facility C Advances and the Terra Facility D Advances, the figure 100% set forth above shall automatically be deemed to be reduced to 75%. (iii) Equity Issuance. Upon the making of any Equity Issuance or any other public issuance of securities (including without limitation the New Terra Equity), the Company (and, after the prepayment in full of the principal of and interest on the Term Advances under the Terra Facilities, AMLP) shall prepay the Advances in an aggregate amount equal to 100% of the Net Available Proceeds thereof; provided, that this clause (iii) shall cease to apply upon the payment in full of the principal of and interest on the Terra Facility C Advances and the Terra Facility D Advances. (iv) Casualty Events. Upon the date 90 days following the receipt by Terra or any of its Subsidiaries of the proceeds of insurance, condemnation award or other compensation in respect of any Casualty Event affecting any property of Terra or any of its Subsidiaries (or upon such earlier date as Terra or such Subsidiary, as the case may 54 be, shall have determined not to repair or replace the property affected by such Casualty Event), the Borrowers shall prepay the Advances in an aggregate amount, if any, equal to 100% of the Net Available Proceeds of such Casualty Event not theretofore applied to the repair or replacement of such property; provided, that upon the payment in full of the principal of and interest on the Terra Facility C Advances and the Terra Facility D Advances, the figure 100% set forth above shall be deemed to be reduced to 75%. Nothing in this clause (iv) shall be deemed to limit any obligation of Terra or any of its Subsidiaries pursuant to any of the Security Documents to remit to a collateral or similar account (including, without limitation, a Collateral Account) maintained by the Agent pursuant to any of the Security Documents the proceeds of insurance, condemnation award or other compensation received in respect of any Casualty Event. (v) Non-Consummation of Merger. If on the Closing Date the Transactions are not consummated, Terra hereby promises to pay on demand to the Agent for account of the Lenders the full outstanding principal amount of the Advances. (c) Application. ----------- (i) Prepayments described in Section 2.05(b) shall (except as provided in clauses (ii), (iii) and (iv) below) be applied as follows: (w) first, to the prepayment of the Terra Facility A Advances and the Terra Facility B Advances ratably according to the respective aggregate outstanding principal amounts thereof and to the respective installments thereof ratably; (x) second, after the payment in full of the Terra Facility A Advances and the Terra Facility B Advances, to the prepayment of the Terra Facility C Advances and the Terra Facility D Advances ratably according to the respective aggregate outstanding principal amounts thereof and to the respective installments thereof ratably; and (y) third, after the payment in full of the Terra Facility C Advances and the Terra Facility D Advances, to the prepayment of the AMLP Facility A Advances and to the installments thereof ratably. (ii) Prepayments hereunder in respect of any issuance of New Terra Equity under Section 2.05(b) shall be applied as follows: 55 (x) first, to the prepayment of the Terra Facility D Advances and to the installments thereof in the inverse order of their maturities; and (y) second, to the prepayment of the Terra Facility C Advances and to the installments thereof in the inverse order of their maturities. (iii) Prepayments hereunder in respect of the public issuance of securities other than the New Terra Equity shall be applied to the prepayment of the Terra Facility C Advances and to the installments thereof in the inverse order of their maturities. (iv) Prepayments hereunder in respect of any Disposition of, or Casualty Event in respect of, any property of AMLP or any of its Subsidiaries shall be applied to the prepayment of the AMLP Facility A Advances. (d) Cover for Letter of Credit Liabilities. In the event that a Borrower shall be required pursuant to Section 6.02 to cash collateralize Letters of Credit or otherwise provide cover for Letter of Credit Liabilities, such Borrower shall effect the same by paying to the Agent immediately available funds in an amount equal to the required amount, which funds shall be retained by the Agent in the L/C Collateral Account for the relevant Facility (as provided therein as collateral security for the Letter of Credit Liabilities under such Facility) until such time as the Letters of Credit under such Facility shall have been terminated and all of such Letter of Credit Liabilities paid in full. (e) Payments with Interest. All prepayments under this Section 2.05 shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. Section 2.06. Interest. -------- (a) Ordinary Interest. The Company shall pay interest on the unpaid principal amount of each Terra Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, and AMLP shall pay interest on the unpaid principal amount of each AMLP Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, in each case at the following rates per annum: (i) Base Rate Advances. While such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (1) the Base Rate in effect from time to time plus (2) the Applicable Margin in effect from time to time, payable in arrears quarterly on each Quarterly Date and on 56 the date such Base Rate Advance shall be Converted (but only on the amount Converted) or paid in full. (ii) Eurodollar Rate Advances. While such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (1) the Eurodollar Rate for such Interest Period for such Advance plus (2) the Applicable Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each three-month anniversary of the first day of such Interest Period occurring during such Interest Period. (b) Post-Default Interest. If (i) an Event of Default shall have occurred and be continuing during any period and (ii) the Agent or the Required Lenders, through the Agent, shall have notified the Company thereof, each Borrower shall, notwithstanding anything else in this Agreement to the contrary, pay to the Agent for account of each Lender interest, during such period, at the applicable Post-Default Rate on any principal of any Advance made by such Lender to such Borrower, and on any other amount whatsoever then due and payable by such Borrower hereunder or under the Notes held by such Lender to or for account of such Lender, such interest to be payable from time to time on demand. Section 2.07. Fees. ---- (a) Commitment Fee. Each Borrower hereby promises to pay to the Agent for the account of each Lender a commitment fee (i) in the case of the Company, on the average daily unused portion of such Lender's Commitment under each Terra Facility and (ii) in the case of AMLP, on the average daily unused portion of such Lender's Commitment under each AMLP Facility, in each case for the period from the date specified in the Fee Letter (or from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender other than the Initial Lenders) until the Commitment Termination Date for such Facility at the Applicable Commitment Fee Rate, payable in arrears (x) on the Closing Date, (y) quarterly thereafter on each Quarterly Date (in the case of a Working Capital Facility) and (z) on the Commitment Termination Date for such Facility. (b) Letter of Credit Commission, Etc. --------------------------------- (i) The Company hereby promises to pay to the Agent (A) for the account of each Issuing Bank a non-refundable fronting fee of 1/4% per annum of the face amount of each Terra Letter of Credit issued by it for the period from the 57 date of issuance thereof until such Letter of Credit has been drawn in full, expires or is terminated and (B) for the account of each Lender a non-refundable commission on such Lender's Pro Rata Share of the average daily aggregate Available Amount of all Terra Letters of Credit then outstanding at the Applicable Letter of Credit Fee Rate, such fees to be payable in arrears on each Quarterly Date and on the Terra Facility E Commitment Termination Date and calculated, for any day, after giving effect to any payments made under such Letter of Credit on such day. (ii) AMLP hereby promises to pay to the Agent (A) for the account of each Issuing Bank a non-refundable fronting fee of 1/4% per annum of the face amount of each AMLP Letter of Credit issued by it for the period from the date of issuance thereof until such Letter of Credit has been drawn in full, expires or is terminated and (B) for the account of each Lender a non-refundable commission on such Lender's Pro Rata Share of the average daily aggregate Available Amount of all AMLP Letters of Credit then outstanding at the Applicable Letter of Credit Fee Rate, such fees to be payable quarterly in arrears on each Quarterly Date and on the AMLP Facility B Commitment Termination Date and calculated, for any day, after giving effect to any payments made under such Letter of Credit on such day. (c) Letter of Credit Expenses. Each Borrower shall pay to each Issuing Bank, for its own account, such commission, issuance fees, transfer fees and other fees and charges in connection with the issuance or administration of the Letters of Credit issued by it as such Borrower and such Issuing Bank shall agree; provided, that all fees and other charges payable pursuant to this Section 2.07(c) shall be the customary amounts charged by such Issuing Bank in connection with the issuance or administration of similar letters of credit and the amounts so determined shall be adjusted as necessary to avoid a duplicative payment hereunder. (d) Other Fees. Terra shall, on the Closing Date, pay to the Agent ---------- the fees payable pursuant to the Fee Letter. Section 2.08. Conversion and Continuation of Advances. --------------------------------------- (a) Optional Conversion. Each Borrower may on any Business Day, upon notice given to the Agent not later than 10:00 A.M. (New York City time) on the second Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.09 and 2.10, Convert all or any portion of the Advances of one Type outstanding under any Facility (and, in the case of Eurodollar Rate Advances, having the same Interest Period); provided, that any Conversion of Eurodollar Rate 58 Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b)(i) and no Conversion of any Advances shall result in a greater number of separate Interest Periods in respect of Eurodollar Rate Advances under any Facility than permitted under Section 2.02(b)(ii). Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the aggregate amount, Type and Facility of the Advances (and, in the case of Eurodollar Rate Advances, the Interest Period therefor) to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the relevant Borrower. (b) Certain Mandatory Conversions. ----------------------------- (i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $3,000,000 such Advances shall automatically Convert into Base Rate Advances. (ii) If a Borrower shall fail to select the duration of any Interest Period for any outstanding Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01 and in clause (a) or (c) of this Section 2.08, the Agent will forthwith so notify such Borrower and the relevant Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance. (iii) Upon the occurrence and during the continuance of any Event of Default and upon notice from the Agent to the Borrowers at the request of the Required Lenders, (x) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances shall be suspended. (c) Continuations. Each Borrower may, on any Business Day, upon notice given to the Agent not later than 10:00 A.M. (New York City time) on the second Business Day prior to the date of the proposed Continuation and subject to the provisions of Sections 2.09, Continue all or any portion of the Eurodollar Rate Advances outstanding under a relevant Facility having the same Interest Period as such Eurodollar Rate Advances; provided, that 59 any such Continuation shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Continuation of Eurodollar Rate Advances shall be in an amount not less than the minimum Borrowing amount specified in Section 2.02(b)(i) and no Continuation of any Eurodollar Rate Advances shall result in a greater number of separate Interest Periods in respect of Eurodollar Rate Advances under any Facility than permitted under Section 2.02(b)(ii). Each such notice of Continuation shall, within the restrictions specified above, specify (i) the date of such Continuation, (ii) the aggregate amount and Facility of, and the Interest Period for, the Advances being Continued and (iii) the duration of the initial Interest Period for the Eurodollar Rate Advances subject to such Continuation. Each notice of Continuation shall be irrevocable and binding on the relevant Borrower. Section 2.09. Increased Costs, Illegality, Etc. --------------------------------- (a) If, due to either (i) the introduction of or any change in or in the interpretation of (to the extent any such introduction or change occurs after the date hereof) any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority adopted or made after the date hereof (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances under any Facility, then the relevant Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided, that, before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to the relevant Borrower by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines in good faith that compliance with any law or regulation enacted or introduced after the date hereof or any guideline or request from any central bank or other governmental authority adopted or made after the date hereof (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type or the issuance of 60 the Letters of Credit (or similar contingent obligations), then, upon demand by such Lender (with a copy of such demand to the Agent), each Borrower shall pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder or to the issuance or maintenance of any Letters of Credit. A certificate as to such amounts submitted to the relevant Borrower by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (c) If, with respect to any Eurodollar Rate Advances, (i) the Required Lenders reasonably determine and notify the Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, or (ii) if fewer than two Reference Banks furnish timely information to the Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, the Agent shall forthwith so notify the Borrowers and the Lenders, whereupon (x) each Eurodollar Rate Advance will automatically, on the last day of any then existing Interest Period therefor, Convert to a Base Rate Advance, and (y) the obligation of the Lenders to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrowers and such Lenders that the circumstances causing such suspension no longer exist. (d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of (to the extent any such introduction or change occurs after the date hereof) any law or regulation shall make it unlawful, or any central bank or other governmental authority having appropriate jurisdiction shall assert in writing that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrowers through the Agent, (i) each Eurodollar Rate Advance under each Facility under which such Lender has a Commitment will automatically, upon such demand, Convert to a Base Rate Advance and (ii) the obligation of such Lender to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrowers that such Lender has determined that the circumstances causing such suspension no longer exist; provided, that, before making any such demand, such Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar 61 Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. (e) Neither Borrower shall be obligated to pay any additional amounts arising pursuant to clauses (a) and (b) of this Section 2.09 that are attributable to the Excluded Period with respect to such additional amount; provided, that if an applicable law, rule, regulation, guideline or request shall be adopted or made on any date and shall be applicable to the period (a "Retroactive Period") prior to the date on which such law, rule, regulation, guideline or request is adopted or made, the limitation on the Borrowers' obligations to pay such additional amounts hereunder shall not apply to the additional amounts payable in respect of such Retroactive Period. Section 2.10. Payments and Computations. ------------------------- (a) Each Borrower shall make each payment hereunder and under the Notes not later than 12:00 Noon (New York City time) on the day when due in U.S. Dollars to the Agent at the Agent's Account in same day funds and, except as expressly set forth herein, without deduction, set-off or counterclaim. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or commitment fees under or in respect of a particular Facility ratably (other than amounts payable pursuant to Section 2.09(a), 2.09(b), 2.11, 2.13(d) or 9.04(c), or amounts payable to an Issuing Bank in respect of Letters of Credit) to the relevant Lenders for the account of their Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) If the Agent receives funds for application to the Obligations under the Loan Documents under circumstances for which the Loan Documents do not specify the Advances or the Facility to which, or the manner in which, such funds are to be applied, and neither Borrower has otherwise directed how such 62 funds are to be applied (which direction is consistent with the terms of the Loan Documents), the Agent may, but shall not be obligated to, elect to distribute such funds to each Lender ratably in accordance with such Lender's proportionate share of the principal amount of all outstanding Advances and the Available Amount of all Letters of Credit then outstanding, in repayment or prepayment of such of the outstanding Advances or other Obligations owed to such Lender, and for application to such principal installments, as the Agent shall direct. (c) Each Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under any Note held by such Lender, to charge from time to time against any or all of such Borrower's accounts with such Lender any amount so due (with notice to the Agent and the relevant Borrower promptly following such charge). (d) Each Reference Bank agrees to furnish to the Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (e) All computations of interest, fees and Letter of Credit commissions shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Agent of an interest rate, fee or commission hereunder made in accordance with the provisions of this Agreement shall be conclusive and binding for all purposes, absent manifest error. (f) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the immediately preceding Business Day. (g) Unless the Agent shall have received notice from a Borrower prior to the date on which any payment is due to any Lender hereunder that such Borrower will not make such payment in full, the Agent may assume that such Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each 63 such Lender on such due date an amount equal to the amount then due such Lender. If and to the extent such Borrower shall not have so made such payment in full to the Agent, each such Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate. Section 2.11. Taxes. ----- (a) Any and all payments by each Obligor hereunder or under the relevant Notes shall be made, in accordance with Section 2.10, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Issuing Bank, each Lender and the Agent, net income taxes that are imposed by the United States and franchise taxes and net income taxes that are imposed on such Issuing Bank, such Lender or the Agent by the state or foreign jurisdiction under the laws of which such Issuing Bank, such Lender or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of such Issuing Bank and each Lender, franchise taxes and net income taxes that are imposed on it by the state or foreign jurisdiction of such Issuing Bank's or such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If an Obligor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Issuing Bank, any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.11) such Issuing Bank, such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Obligor shall make such deductions and (iii) such Obligor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each Obligor agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made by it hereunder or under the Notes or from the execution, delivery or registration of this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) Each Obligor will indemnify each Issuing Bank, each Lender and the Agent for the full amount of Taxes or Other 64 Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.11) paid by such Issuing Bank, such Lender or the Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from such date such Issuing Bank, such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, each Obligor will furnish to the Agent, at its address referred to in Section 9.02, appropriate evidence of payment thereof. If such Obligor shall make a payment hereunder or under the Notes through an account or branch outside the United States, or a payment is made on behalf of such Obligor by a payor that is not a United States Person, such Obligor will, if no taxes are payable in respect of such payment, furnish, or will cause such payor to furnish, to the Agent, at such address, a certificate from the appropriate taxing authority or authorities, or an opinion of counsel acceptable to the Agent, in either case stating that such payment is exempt from or not subject to Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States Person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement (in the case of each Initial Lender) and on the date of the Assignment and Acceptance pursuant to which it became a Lender (in the case of each other Lender), and from time to time thereafter if requested in writing by either Borrower or the Agent (but only so long as such Lender remains lawfully able to do so after the date such Assignment and Acceptance is accepted by the Agent pursuant to Section 9.07), provide the Agent and the Borrowers with either (i) Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party that reduces the rate of withholding tax on payments under this Agreement and the Notes or certifying that the income receivable pursuant to this Agreement and the Notes is effectively connected with the conduct of a trade or business in the United States or (ii) Internal Revenue Service form W-8, upon which each Borrower is entitled to rely, from a jurisdiction that has not at the time such Lender becomes a Lender hereunder been named in any notice issued by the Secretary of the Treasury (or such Secretary's authorized delegate) pursuant to Sections 881(c)(5) or 871(h)(5) of the Internal Revenue Code, or any successor form or statement prescribed by the Internal Revenue Service in order to establish that such Lender is entitled to treat the interest payments under 65 this Agreement and the Notes as portfolio interest that is exempt from withholding tax under the Internal Revenue Code, together with a certificate stating that such Lender is a foreign corporation or nonresident alien individual and is not described in Section 881(c)(3) of the Internal Revenue Code. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero (or if the Lender cannot provide at such time such form because it is not entitled to reduced withholding under a treaty, the payments are not effectively connected income and the payments do not qualify as portfolio interest), withholding tax at such rate (or at the then existing U.S. statutory rate if the Lender cannot provide the form) shall be excluded from Taxes unless and until such Lender provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be excluded from Taxes for periods governed by such form; provided, that, if at the date of the Assignment and Acceptance pursuant to which a Lender assignee becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to the extent such tax results in liability for such payments, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States interest withholding tax, if any, applicable with respect to the Lender assignee on such date. (f) For any period with respect to which a Lender has failed to provide the Borrowers and the Agent with the appropriate form described in Section 2.11(e) (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e)), such Lender shall not be entitled to indemnification under subsection (a) or (c) with respect to Taxes imposed by the United States. (g) Any Lender or any Issuing Bank claiming any additional amounts payable pursuant to this Section 2.11 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office(s) if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender or Issuing Bank, be otherwise disadvantageous to such Lender or Issuing Bank. (h) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 2.11 shall 66 survive the payment in full of principal and interest hereunder and under the Notes. Section 2.12. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances owing to it under any Facility (other than pursuant to Section 2.09(a), 2.09(b), 2.11, 2.13(d) or 9.04(c), or payments to an Issuing Bank in respect of Letters of Credit) in excess of its ratable share of payments on account of the Advances under such Facility obtained by all the relevant Lenders, such Lender shall forthwith purchase from the other relevant Lenders such participations in the Advances under such Facility owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each relevant Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.12 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. Section 2.13. Letters of Credit. ----------------- (a) Issuance of Letters of Credit. Each Borrower may request one or more Issuing Banks to issue, on the terms and conditions hereinafter set forth, letters of credit for the account of such Borrower under its respective Working Capital Facility (letters of credit so issued under Terra Facility E being herein called "Terra Letters of Credit" and letters of credit so issued under AMLP Facility B being herein called "AMLP Letters of Credit"; the Terra Letters of Credit and the AMLP Letters of Credit being collectively called the "Letters of Credit") from time to time on any Business Day during the period from the Closing Date until the date 90 days prior to the Commitment Termination Date for the relevant Facility; provided, that: (i) the Terra Facility E Commitments shall be utilized under this Section 2.13 solely for the issuance of Terra Letters of Credit for the account of Terra Capital and, to 67 the extent specified by Terra Capital, any of its Subsidiaries (other than AMLP or any of its Subsidiaries); (ii) the AMLP Facility B Commitments shall be utilized under this Section 2.13 solely for the issuance of AMLP Letters of Credit for the account of AMLP and, to the extent specified by AMLP, any of its Subsidiaries; (iii) the aggregate Available Amount of all Letters of Credit issued by all Issuing Banks under either Working Capital Facility shall not exceed at any time the Letter of Credit Sublimit for such Facility, and the aggregate outstanding principal amount of all Working Capital Advances under such Facility when added to the aggregate amount of Letter of Credit Liabilities under such Facility shall not exceed the aggregate Working Capital Commitments of the relevant Lenders under such Facility on such Business Day; (iv) the aggregate amount of all Letter of Credit Liabilities under Letters of Credit issued by any Issuing Bank under either Working Capital Facility shall not exceed at any time the Letter of Credit Commitment of such Issuing Bank for such Facility; and (v) no Letter of Credit shall have an expiration date later than, or shall permit the account party or the beneficiary to the require renewal thereof to a date beyond, the date 30 days prior to the Commitment Termination Date for the relevant Facility. On each day during the period commencing with the issuance by an Issuing Bank of any Terra Letter of Credit and until such Letter of Credit shall have been drawn in full or expired or been terminated, the Terra Facility E Commitment of each Lender shall be deemed to be utilized for all purposes of this Agreement in an amount equal to such Lender's Pro Rata Share of the then undrawn amount of such Letter of Credit. On each day during the period commencing with the issuance by an Issuing Bank of any AMLP Letter of Credit and until such Letter of Credit shall have been drawn in full or expired or been terminated, the AMLP Facility B Commitment of each Lender shall be deemed to be utilized for all purposes of this Agreement in an amount equal to such Lender's Pro Rata Share of the then undrawn amount of such Letter of Credit. (b) Request for Issuance. -------------------- (i) Each Letter of Credit shall be issued upon notice, given not later than 1:00 P.M. (New York City time) two Business Days prior to the date of the proposed issuance of such Letter of Credit, by the relevant Borrower to the 68 relevant Issuing Bank, which shall give to the Agent and each Lender prompt notice thereof by telex or telecopier. Each such notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by telex or telecopier, confirmed promptly in writing, specifying therein (A) the requested date of such issuance (which shall be a Business Day), (B) the Available Amount requested for such Letter of Credit, (C) the expiration date of such Letter of Credit, (D) the account party or parties for such Letter of Credit, (E) the name and address of the issuer and the beneficiary of such Letter of Credit, and (F) the form of such Letter of Credit, together with a description of the nature of the transactions or obligations proposed to be supported thereby. If the requested form of such Letter of Credit is acceptable to such Issuing Bank in its discretion, such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the relevant Borrower at its office referred to in Section 9.02 or as otherwise agreed with such Borrower in connection with such issuance. (ii) Each Issuing Bank shall furnish (A) to the Agent on the first Business Day of each week a written report summarizing the issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the previous week and drawings during such week under all Letters of Credit issued by such Issuing Bank, (B) to each Lender and to the relevant Borrower on the first Business Day of each month, a written report summarizing the issuance and expiration dates of the Letters of Credit issued by such Issuing Bank under the relevant Facility during the preceding month and drawings during such month under all Letters of Credit under such Facility issued by the Issuing Bank and (C) to the Agent and each Lender on the first Business Day of each calendar quarter, a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank under the relevant Facility. (c) Drawing and Reimbursement. ------------------------- (i) The payment by an Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by such Issuing Bank of an advance to the relevant Borrower in the amount of such payment, which the relevant Borrower agrees to repay on demand and, if not paid on demand, shall bear interest, from the date demanded to the date paid in full (and which interest shall be payable on demand), (x) from and including the date of demand to but not including the second Business Day thereafter at the Base Rate in effect for each such day 69 plus the Applicable Margin in effect for each such day, and (y) from and including said second Business Day thereafter at the Post-Default Rate. Without limiting the obligations of such Borrower hereunder, upon demand by such Issuing Bank through the Agent, each Lender having a Commitment under the relevant Facility shall make Working Capital Advances under such Facility in an aggregate amount equal to the amount of such Lender's Pro Rata Share of such advance by making available for the account of its Applicable Lending Office to the Agent for the account of such Issuing Bank, by deposit to the Agent's Account, in same day funds, an amount equal to the sum of (A) its Pro Rata Share of the outstanding principal amount of such advance plus (B) interest accrued and unpaid to and as of such date on the outstanding principal amount of such advance. (ii) Each Lender agrees to make such Working Capital Advances on the Business Day on which demand therefor is made by the relevant Issuing Bank through the Agent (provided, that notice of such demand is given not later than 12:00 Noon (New York City time) on such Business Day) or (if notice of such demand is given after such time) the first Business Day next succeeding such demand. (iii) If and to the extent that any relevant Lender shall not have so made the amount of such Working Capital Advance available to the Agent for account of such Issuing Bank, such Lender agrees to pay to the Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the relevant Issuing Bank until the date such amount is paid to the Agent, at the Federal Funds Rate. (iv) The Working Capital Advances provided for in this Section 2.13 shall be made by the Lenders irrespective of whether there has occurred and is continuing any Default or Event of Default or of whether any other condition precedent specified in Article III has not been satisfied, and the obligation of each Lender under each relevant Facility to make such Working Capital Advances is absolute and unconditional. (d) Increased Costs. --------------- (i) If any change in any law or regulation or in the interpretation thereof (to the extent any such change occurs after the date hereof) by any court or administrative or governmental authority charged with the administration thereof shall either (x) impose, modify or deem applicable any reserve, special deposit or similar requirement against letters of credit or guarantees issued by, or assets held 70 by, or deposits in or for the account of, any Issuing Bank or any Lender or (y) impose on any Issuing Bank or any Lender any other condition regarding this Agreement or such Issuing Bank or such Lender or any Letter of Credit, and the result of any event referred to in the preceding clause (x) or (y) shall be to increase the cost to such Issuing Bank or Lender of issuing or maintaining any Letter of Credit or any commitment hereunder in respect of Letters of Credit, then, upon demand by such Issuing Bank or such Lender, the Borrowers shall immediately pay to such Issuing Bank or such Lender, from time to time as specified by such Issuing Bank or such Lender, additional amounts that shall be sufficient to compensate such Issuing Bank or such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrowers by such Issuing Bank or such Lender shall be conclusive and binding for all purposes, absent manifest error. (ii) Neither Borrower shall be obligated to pay any additional amounts arising pursuant to this Section 2.13(d) that are attributable to the Excluded Period with respect to such additional amounts; provided, that if an applicable law, rule, regulation, guideline or request shall be adopted or made on any date and shall be applicable to the period (a "Retroactive Period") prior to the date on which such law, rule, regulation, guideline or request is adopted or made, the limitation on the Borrower's obligation to pay such additional amounts hereunder shall not apply to the additional amounts payable in respect of such Retroactive Period. (e) Obligations Absolute. The Obligations of each Borrower under this Agreement and any other agreement or instrument relating to any Letter of Credit (as hereafter amended, supplemented or otherwise modified from time to time, collectively, the "L/C Related Documents") shall, to the extent permitted by law, be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of such L/C Related Document under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any one or more of such other documents and agreements, including, but not limited to, the L/C Related Documents; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of such Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; 71 (iii) the existence of any claim, set-off, defense or other right that such Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (iv) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not comply with the terms of such Letter of Credit, except to the extent that such payment resulted from such Issuing Bank's willful misconduct or gross negligence in determining whether such draft or certificate complies on its face with the terms of such Letter of Credit; (vi) any exchange, release or nonperfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the Obligations of such Borrower in respect of the L/C Related Documents; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, such Borrower or a guarantor. Section 2.14. Assumption. ---------- (a) The Lenders, the Issuing Banks, the Agent and Terra hereby agree that, upon the execution and delivery of this Agreement by each of them, this Agreement shall be effective and binding on them, notwithstanding the fact that Terra Capital Holdings, Terra Capital, AMC, AMLP, BMCH and BMC shall not have then executed and delivered this Agreement. (b) Terra agrees that until the consummation of the Initial Merger it shall hold the proceeds of the initial Borrowing in trust for the Lenders, and shall cause them to be immediately paid to the Agent for application in accordance with Section 2.05(b)(iv) if the Initial Merger does not occur on the Closing Date. 72 (c) Terra unconditionally agrees that immediately upon the consummation of the Initial Merger it will cause each of the other Transactions to occur, and that immediately upon the consummation of the Transactions (the time of such consummation being herein called the "Assumption Time"), it will cause Terra Capital Holdings, Terra Capital, AMC, AMLP, BMCH and BMC to execute and deliver this Agreement. (d) Terra Capital hereby agrees that, effective at the Assumption Time, Terra Capital shall be the "Company" for all purposes hereof and shall be bound by, and shall assume, all of the obligations of Terra hereunder, without prejudice, however, to the obligations of Terra under Article VIII. (e) Each Credit Party agrees to take such actions and execute such other documents as may be reasonably requested by the Agent or any Lender to effectuate the purposes of this Section 2.14. Section 2.15. Replacement of Lender. --------------------- (a) Subject to clause (c) below, in the event that any Lender requests compensation pursuant to Section 2.09(a), 2.09(b) or 2.13(d), or the obligation of any Lender to make, or to Convert Base Rate Advances into, or to Continue, Eurodollar Rate Advances shall be suspended pursuant to Section 2.09(c) or 2.09(d) (such Lender being herein called an "Affected Lender"), then, so long as such condition exists, the Borrowers may either: (i) (x) designate an Eligible Assignee acceptable to the Agent and each Issuing Bank (which acceptance will not be unreasonably withheld) that is not an Affiliate of the Borrowers (such Eligible Assignee being herein called a "Replacement Lender") to assume the Affected Lender's Commitments and other obligations hereunder and to purchase the Affected Lender's Advances and other rights under the Loan Documents (all without recourse to or representation or warranty by, or expense to, the Affected Lender) for a purchase price equal to the aggregate principal amount of the outstanding Advances held by the Affected Lender plus all accrued but unpaid interest on such Advances and accrued but unpaid fees owing to the Affected Lender (and upon such assumption, purchase and substitution, and subject to the execution and delivery to the Agent by the Replacement Lender of documentation satisfactory to the Agent, the Replacement Lender shall succeed to the rights and obligations of the Affected Lender hereunder and the other Loan Documents), (y) pay to the Affected Lender all amounts payable to such Affected Lender under Section 9.04(c), calculated as if the purchase by the Replacement Lender constituted a mandatory prepayment of Advances by the 73 Borrowers, and (z) pay to the Agent the processing and recordation fee specified in Section 9.07(a)(vi) with respect to such assignment; or (ii) (x) terminate the Commitments of the Affected Lender and (y) pay to the Affected Lender the aggregate principal amount of the outstanding Advances held by the Affected Lender plus all accrued but unpaid interest on such Advances and accrued but unpaid fees owing to the Affected Lender plus all amounts payable to the Affected Lender under Section 9.04(c) as a result of such prepayment. In the event that the Borrowers exercise their rights under the preceding sentence, the Affected Lender shall no longer be a party hereto or have any rights or obligations hereunder or under the other Loan Documents; provided, that the obligations of the Borrowers to the Affected Lender under Sections 2.09, 2.11 and 9.04 with respect to events occurring or obligations arising before or as a result of such replacement shall survive such exercise. (b) If the Borrowers exercise their rights under clause (a)(ii) above, the Borrowers may, not later than the date 60 days after such exercise, designate an Eligible Assignee acceptable to the Agent and each Issuing Bank (which acceptance will not be unreasonably withheld) that is not an Affiliate of the Borrowers (such Eligible Assignee being herein called a "Substitute Lender") to assume Commitments hereunder and to make Advances hereunder in an amount equal to the respective Commitments and Advances of the Affected Lender under each of the Facilities and, subject to (x) the execution and delivery to the Agent by the Substitute Lender of documentation satisfactory to the Agent and (y) the payment by the Borrowers to the Agent of the processing and recordation fee specified in Section 9.07(a)(vi) with respect to such assignment, the Substitute Lender shall succeed to the rights and obligations of the Affected Lender hereunder and under the other Loan Documents. Upon the Substitute Lender so becoming a party hereto, the relevant Borrowers shall borrow Advances from the Substitute Lender and/or prepay the principal of the Advances of the other Lenders in such manner as will result in the outstanding principal amount of the Advances under each Facility being held by the Lenders according to their respective Pro Rata Shares of the relevant Facilities. (c) The Borrowers may not exercise their rights under this Section 2.15: (i) with respect to any Affected Lender unless the Borrowers simultaneously exercise such rights with respect to all Affected Lenders, 74 (ii) if a Default or an Event of Default has occurred and is then continuing, or (iii) with respect to any exercise of rights under clause (b) above, if, at the time of such exercise, the aggregate amount of the Commitments that shall have been terminated pursuant to said clause (b) (including the Commitments then proposed to be terminated) shall exceed 30% of the aggregate amount of the Commitments in effect on the Closing Date. ARTICLE III CONDITIONS OF LENDING Section 3.01. Documentary Conditions Precedent to Initial Borrowing. The obligation of each Lender to make an Advance on the occasion of the initial Borrowing is subject to the conditions precedent that the Agent shall have received the following, each in form and substance satisfactory to it (provided, that the documents hereinafter referred to as being executed and delivered by Terra Capital Holdings, Terra Capital, AMC, AMLP, BMCH and BMC shall be deemed to be delivered at the Assumption Time): (a) The Notes, duly executed by each Borrower. (b) Evidence that all conditions precedent to the consummation of the Merger set forth in the Merger Agreement have been satisfied or, with the prior written approval of the Agent, modified or waived. For the purposes of this Section 3.01(b), any such condition precedent required in the Merger Agreement to be satisfactory to, or subject to the discretion of, Terra or Acquisition Corp. shall be required to be reasonably satisfactory to, or subject to the reasonable discretion of, the Agent. (c) Evidence that Terra has received a cash equity contribution from Minorco USA pursuant to the Minorco USA Put Option Agreement, or from the proceeds of a public offering of stock, in an amount not less than $100,000,000 and that Terra has contributed the full amount thereof to Acquisition Corp. (d) Evidence of the cancellation of all commitments and letters of credit under, of the payment in full of all amounts owing under, and of the termination of all security interests securing indebtedness under, the Terminated Facilities. 75 (e) Evidence of receipt of all governmental and third party consents and approvals necessary in connection with the Transactions, this Agreement and the related grants of security interest (without the imposition of any conditions except those that are acceptable to the Lenders) and that the same remain in effect, and that all applicable waiting periods have expired without any action being taken by any competent authority and that no law or regulation exists, in the judgment of the Lenders, that restrains, prevents or imposes adverse conditions upon the Transactions, this Agreement or the other transactions contemplated by this Agreement. (f) Evidence of payment by Terra of all accrued fees and expenses of the Agent (including the reasonable and documented fees and expenses of counsel to the Agent in connection with this Agreement to the extent that statements for such fees and expenses have been delivered to the Borrower at least one Business Day prior to the date of the initial Borrowing). (g) The following documents, each dated such day (unless otherwise specified), in form and substance satisfactory to the Agent (unless otherwise specified) and in sufficient copies for the Agent, each Lender and each Issuing Bank: (i) certified copies of the resolutions of the Board of Directors of each Obligor approving the Transactions, this Agreement, the Notes, each other Loan Document and each Related Document to which such Obligor is or is to be a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Transactions, this Agreement, the Notes, each other Loan Document and each Related Document; (ii) a copy of the charter or articles of incorporation or articles of limited partnership, as the case may be, of each Obligor and each amendment thereto, certified (as of a date reasonably near the date of the initial Borrowing) by the Secretary of State of the state of its incorporation or organization as being a true and correct copy thereof; (iii) a copy of a certificate of the Secretary of State of the state of each Obligor's incorporation or organization, dated a date reasonably near the date of the initial Borrowing, specifying the date of incorporation or organization of each Obligor, stating that such Obligor has filed all annual reports and paid 76 all fees with respect to such reports and stating that such Obligor has legal existence and is in good standing with the office of said Secretary of State; (iv) for each Obligor, a copy of a certificate of the Secretary of State of each state set forth on Schedule 3.01(g)(iv) opposite the name of such Obligor, each dated a date reasonably near the date of the initial Borrowing, confirming that such Obligor is duly qualified to conduct business and in good standing as a foreign corporation in such state; (v) a certificate of each Obligor, signed on its behalf by its President or a Vice President and its Secretary or any Assistant Secretary, dated the date of the initial Borrowing (the statements made in which certificate shall be true on and as of the date of the initial Borrowing), certifying as to (A) the absence, except to the extent provided in said certificate, of any amendments to the charter or articles of incorporation or organization of such Obligor since the date of the Secretary of State's certificate referred to in Section 3.01(l)(iii), (B) a true and correct copy of the bylaws of such Obligor as in effect on the date of the initial Borrowing, and (C) the due incorporation or organization and good standing of such Obligor as a corporation or limited partnership, as the case may be, organized under the laws of its state of incorporation or organization, and the absence of any proceeding for the dissolution or liquidation of such Obligor; (vi) a certificate of Terra, signed on its behalf by its President or a Vice President and its Secretary or any Assistant Secretary, dated the date of the initial Borrowing (the statements made in which certificate shall be true on and as of the date of the initial Borrowing), certifying as to (A) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the date of the initial Borrowing (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date) and (B) the absence of any event occurring and continuing, or resulting from the initial Borrowing, that constitutes a Default or Event of Default; and (vii) a certificate of the Secretary or an Assistant Secretary of each Obligor certifying the names and true signatures of the officers of such Obligor authorized to sign this Agreement, the Notes (if applicable), each other Loan Document and each 77 Related Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. (h) The Holdings Pledge Agreement, the Terra Capital Pledge Agreement, the Subsidiary Pledge and Security Agreement and the AMLP Pledge and Security Agreement, in each case duly executed by each of the intended parties thereto, together with: (i) instruments evidencing the Pledged Stock referred to therein indorsed in blank, (ii) such appropriately completed and duly executed copies of Uniform Commercial Code financing statements as the Agent shall have requested in order to perfect and protect the Liens created by such Security Documents and covering the Collateral described therein, (iii) executed and delivered documents for recordation and filing of or with respect to such Security Documents that the Agent may deem necessary or desirable in order to perfect and protect the Liens created thereby, and (iv) evidence that all other action that the Agent may deem necessary or desirable in order to perfect and protect the Liens created by such Security Documents has been or will be taken, including, but not limited to, (x) evidence of the termination of any and all Liens against the property of the respective Obligors in respect of existing Debt terminated or satisfied and extinguished in accordance with Section 3.01(d) and (y) evidence of the termination of any and all existing Permitted Liens (except such Permitted Liens, if any, that the Lenders will permit to survive the Closing Date, as set forth on Part II of Schedule 5.02(a)(iii)). (i) The Loan Purchase Agreement, duly executed by Terra and the Agent. (j) Financial projections and a budget for Terra and its Subsidiaries after giving effect to the Transactions, for each fiscal year of Terra from and including the current fiscal year to and including the fiscal year in which the final Principal Payment Date is scheduled to occur. (k) Certified copies of each of the Related Documents, duly executed by the parties thereto and in form and 78 substance satisfactory to the Agent, the Lenders and each Issuing Bank, together with copies of all agreements, instruments and other documents delivered in connection therewith. (l) Letters and certificates, in substantially the form of Exhibit D attesting to the Solvency of (1) Terra, after giving effect to the Transactions and the other transactions contemplated hereby, (2) AMCI, after giving effect to the Initial Merger, and (3) Terra Capital, after giving effect to the Transactions and the other transactions contemplated hereby, from Valuation Research Corporation and from the Senior Financial Officer, respectively. (m) Evidence of insurance naming the Agent as loss payee in respect of tangible Collateral with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is satisfactory to the Agent. (n) A favorable opinion of Kirkland & Ellis, special counsel for the Obligors, in substantially the form of Exhibit E and as to such other matters as the Agent, any Issuing Bank or any Lender through the Agent may reasonably request. (o) A favorable opinion of Milbank, Tweed, Hadley & McCloy, special New York counsel for the Agent, in form and substance satisfactory to the Agent. (p) Such other approvals, opinions and documents relating to this Agreement and the transactions contemplated hereby as any Lender or any Issuing Bank may, through the Agent, reasonably request. Section 3.02. Additional Conditions Precedent to Initial Borrowing. The obligation of each Lender to make an Advance on the occasion of the initial Borrowing is also subject to the conditions precedent that (a) the initial Borrowing shall occur no later than two weeks after the date of this Agreement; (b) there shall not have occurred since March 31, 1994 any material adverse change in the business, assets, operations, properties or financial condition of Terra and its Subsidiaries taken as a whole, AMCI and its Subsidiaries taken as a whole or TI and its Subsidiaries taken as a whole (or in the contingent liabilities of the relevant Person and its Subsidiaries, taken as a whole, which could reasonably be expected to result in any of the foregoing), other than any of the foregoing resulting solely from a general economic change in the industry of Terra or AMCI and their respective Subsidiaries; (c) the Agent shall be satisfied with the sources and uses of the financing for the 79 Merger and the aggregate amount of unused Commitments immediately after giving effect thereto; (d) the Lenders shall be satisfied with the final terms and conditions of the Transactions (including, without limitation, the Merger Agreement and the legal structure and capitalization of each Obligors); and (e) there shall exist no action, suit, investigation, litigation or proceeding effecting any Obligor pending or threatened before any court, governmental agency or arbitration that could reasonably be expected to have a Material Adverse Effect or purports to affect the legality, validity, binding effect or enforceability of this Agreement, any Note, any other Loan Document, any Related Document, the Transactions or the consummation of the transactions contemplated hereby. Section 3.03. Conditions Precedent to Initial AMLP Borrowing. The obligation of each Lender to make an Advance on the occasion of the initial AMLP Borrowing, and the right of AMLP to request the issuance of any AMLP Letter of Credit, is subject to the conditions precedent that (a) the Terra Facility A Advances, the Terra Facility B Advances and the Terra Facility D Advances shall have been made, (b) each of Terra Capital Holdings, Terra Capital, AMLP, AMC, BMC and BMCH shall have executed and delivered this Agreement and each other Loan Document to which it is intended to be a party, and (iii) the Transactions shall have been consummated. Section 3.04. Conditions Precedent to Initial Terra Facility C Borrowing. The obligation of each Lender to make its Terra Facility C Advance is subject to the conditions precedent that the conditions precedent set forth in Sections 3.02(b), 3.02(e) and 3.03 shall be satisfied with respect to and as of the date of such Terra Facility C Advance and that Terra shall certify to the Agent that such Advances are required to finance payments by Terra in respect of the AMCI Change of Control Redemption. Section 3.05. Conditions Precedent to Each Borrowing and Issuance. The obligation of each Lender to make an Advance on the occasion of each Borrowing (including, without limitation, the initial Borrowing, but excluding the making of any Working Capital Advance pursuant to Section 2.13), and the right of each Borrower to request the issuance of Letters of Credit under any Working Capital Facility, shall be subject to the further conditions precedent that on the date of such Borrowing or issuance the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or Notice of Issuance and the acceptance by the relevant Borrower of the proceeds of such Borrowing or of such Letter of Credit shall 80 constitute a representation and warranty by such Borrower that on the date of such Borrowing or issuance such statements are true): (i) the representations and warranties contained in each Loan Document are correct on and as of the date of such Borrowing or issuance, before and after giving effect to such Borrowing or issuance and to the application of the proceeds therefrom, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and (ii) no event has occurred and is continuing, or would result from such Borrowing or issuance or from the application of the proceeds therefrom, that constitutes a Default or an Event of Default. Section 3.06. Determinations Under Sections 3.01 and 3.02. For purposes of determining compliance with the conditions specified in Sections 3.01 and 3.02, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender prior to the initial Borrowing specifying its objection thereto and such Lender shall not have made available to the Agent such Lender's ratable portion of such Borrowing. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01. Representations and Warranties of the Borrower. The Company represents and warrants as follows (provided, that until the consummation of the Merger, each representation and warranty herein with respect to AMC, AMCI, AMLP, BMCH or BMC or any of their respective Subsidiaries shall be to the best knowledge of the Company): (a) Each Obligor (i) is a corporation (or, in the case of AMLP, a limited partnership) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified and in good standing as a foreign corporation (or limited partnership, as the case may be) in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed and where, in each case, failure so to qualify and be in good 81 standing could reasonably be expected to have a Material Adverse Effect and (iii) has all requisite power (corporate or other) and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Material Subsidiaries of each Obligor as of the date of the initial Borrowing, both before and after giving effect to the Transactions, showing as of such date (as to each such Subsidiary) the jurisdiction of its organization, the number of shares of each class of capital stock or partnership interests authorized, and the number outstanding and the percentage of the outstanding shares or interests of each such class owned (directly or indirectly) by such Obligor and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights. All of the outstanding capital stock or partnership interests of all of such Subsidiaries has been validly issued, is fully paid and non-assessable and is owned by such Obligor or one or more of its Subsidiaries free and clear of all Liens, except those created by the Security Documents. Each Material Subsidiary (i) is a corporation (or, in the case of AMLP, a limited partnership) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified and in good standing as a foreign corporation or limited partnership, as the case may be, in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed and where, in each case, failure to so qualify and be in good standing could reasonably be expected to have a Material Adverse Effect and (iii) has all requisite power (corporate or other) and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (c) The execution, delivery and performance by each Obligor of this Agreement, the Notes, each other Loan Document and each Related Document to which it is or is intended to be a party, and the consummation of the Transactions and the other transactions contemplated hereby, are within such Obligor's powers (corporate or other), have been (or will, prior to the initial Borrowing, be) duly authorized by all necessary corporate action, and do not (i) contravene such Obligor's charter, by-laws or in the case of AMLP, its agreement of limited partnership, (ii) violate any applicable law (including, without limitation, the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Chapter of 82 the Organized Crime Control Act of 1970), rule, regulation (including, without limitation, Regulation X), order, writ, judgment, injunction, decree, determination or award (except for any such violation, by action or inaction of any Obligor, that could not reasonably be expected to have a Material Adverse Effect and that could not result in any liability of any Lender), (iii) except as set forth on Schedule 4.01(c), conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Obligor, any of its Subsidiaries or any of their properties (except for any such conflict, breach or default, caused by action or inaction of any Obligor, that could not reasonably be expected to have a Material Adverse Effect and that could not result in any liability of any Lender) or (iv) except for the Liens created by the Security Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Obligor or any of its Subsidiaries. No Obligor or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which could be reasonably expected to have a Material Adverse Effect. (d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Obligor of this Agreement, the Notes, any other Loan Document or any Related Document to which it is or is to be a party, or for the consummation of the Transactions or the other transactions contemplated hereby, (ii) the grant by any Obligor of the Liens granted by it pursuant to the Security Documents, (iii) the perfection or maintenance of the Liens created by the Security Documents (except for the filings required to be made pursuant to Section 3.01(h)) or (iv) the exercise by the Agent or any Lender or Issuing Bank of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Security Documents, except for the authorizations, approvals, actions, notices and filings listed on Schedule 4.01(d), all of which have been duly obtained, taken, given or made and are in full force and effect. On the date of initial Borrowing, all applicable waiting periods in connection with the Transactions and the other transactions contemplated hereby have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse 83 conditions upon the Transactions or the rights of the Obligors or their Subsidiaries. (e) This Agreement has been, and each of the Notes, each other Loan Document and each Related Document when delivered will have been, duly executed and delivered by each Obligor that is intended to be a party thereto. This Agreement is, and each of the Notes, each other Loan Document and each Related Document when delivered will be, the legal, valid and binding obligation of each Obligor that is intended to be a party thereto, enforceable against such Obligor in accordance with its terms. (f) The balance sheet of Terra as at June 30, 1994 and the related statements of income and cash flows of Terra for the six months then ended, accompanied by an opinion of Deloitte & Touche, independent public accountants, and the balance sheet of Terra as at June 30, 1994, and the related statements of income and cash flows of Terra for the six months then ended, duly certified by the chief financial officer of Terra, copies of which have been furnished to each Lender, present fairly, in all material respects, subject, in the case of said balance sheet as at June 30, 1994, and said statements of income and cash flows for the six months then ended, to year-end audit adjustments, the financial condition of Terra as at such dates and the results of the operations of Terra for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis. Since March 31, 1994, there has been no Material Adverse Change. (g) (A) No written information, exhibit or report (as at the date of the initial Borrowing) furnished by any officer of Terra to the Agent, any Issuing Bank or any Lender in connection with the negotiation of the Loan Documents (when taken together) contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading and (B) none of the information, exhibits or reports furnished by any Obligor to the Agent, any Issuing Bank or any Lender pursuant to Section 5.03 contained (on the date of delivery thereof) any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading. (h) There is no action, suit, litigation or proceeding against any Obligor or any of its Subsidiaries or any of their respective property, including any Environmental Action, pending before any court, governmental agency or arbitrator, or (to the knowledge of any Obligor) threatened, nor (to the knowledge of any Obligor) is there any 84 investigation pending in respect of any Obligor, that (i) could reasonably be expected to have a Material Adverse Effect, or (ii) on the date of the initial Borrowing could reasonably be expected to affect the legality, validity or enforceability of this Agreement, any Note, any other Loan Document, any Related Document, the Transactions or the consummation of the transactions contemplated hereby. (i) No Obligor is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. (j) Set forth on Schedule 4.01(j) hereto is a complete and accurate list, as of the date of the initial Borrowing, of each Plan that is subject to Title IV of ERISA and each Multiemployer Plan with respect to any employees or former employees of any Obligor or any of its ERISA Affiliates. (k) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan of any Obligor or any of its ERISA Affiliates that could reasonably be expected to have a Material Adverse Effect. (l) Since the date of the Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan of any Obligor or any of its ERISA Affiliates, there has been no change in the funding status of any such Plan except to the extent that such change is not reasonably expected to have a Material Adverse Effect. (m) Neither any Obligor nor any of its ERISA Affiliates has incurred or is reasonably expected to incur any withdrawal liability to any Multiemployer Plan except to the extent such withdrawal liability is not reasonably expected to have a Material Adverse Effect. (n) Neither any Obligor nor any of its ERISA Affiliates has been notified by the sponsor of a Multiemployer Plan of any Obligor or any of its ERISA Affiliates that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA. (o) As of the Closing Date, the aggregate annualized cost on a pay- as-you-go basis (including, without limitation, the cost of insurance premiums) with respect to post-retirement benefits under welfare plans (other than post-retirement benefits required to be provided by Section 85 4980B of the Code or applicable state law) for which Terra and its Subsidiaries is liable does not exceed $1,000,000. (p) Neither the business nor the properties of any Obligor or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect. (q) Except as set forth on Part I of Schedule 4.01(q) and except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect, the operations and properties of each Obligor and each of its Subsidiaries comply in all respects with all Environmental Laws, all necessary Environmental Permits have been obtained and are in effect for the operations and properties of each Obligor and its Subsidiaries, each Obligor and its Subsidiaries are in compliance in all respects with all such Environmental Permits, and no circumstances exist that could (i) form the basis of an Environmental Action against any Obligor or any of its Subsidiaries or any properties described in the Mortgages or (ii) cause any such property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law. (r) Except as set forth on Part II of Schedule 4.01(q) and except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect, as of the date of the initial Borrowing none of the properties of any Obligor or any of its Subsidiaries is listed or proposed for listing on the National Priorities List under CERCLA or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the Environmental Protection Agency or any analogous state list of sites requiring investigation or cleanup, and no underground storage tanks, as such term is defined in 42 U.S.C. 6901, are located on any property of any Obligor or any of its Subsidiaries. (s) Except as set forth on Part III of Schedule 4.01(q) and except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect, as of the date of the initial Borrowing neither any Obligor nor any of its Subsidiaries has been notified in writing by any federal, state or local governmental agency or any other Person that any Obligor or any of its Subsidiaries is potentially liable for the remedial or other costs with respect to treatment, storage, 86 disposal, release, arrangement for disposal or transportation of any Hazardous Substance generated by any Obligor or any of its Subsidiaries, and Hazardous Materials have not been generated, used, treated, handled, stored or disposed of on, or released or transported to or from, any property of such Obligor (or, to its knowledge, any adjoining property) except in compliance in all material respects with all Environmental Laws and Environmental Permits, and all other wastes generated at any such properties by any Obligor or any of its Subsidiaries (and their respective agents, employees and contractors) have been disposed of in compliance with all Environmental Laws and Environmental Permits. (t) Each Obligor and each of its Subsidiaries has filed, has caused to be filed or has been included in, all federal and state income tax returns and all other material tax returns (federal, state, local and foreign) required to be filed and has paid (or is contesting in good faith by appropriate proceedings) all taxes shown thereon to be owing, together with applicable interest and penalties. (u) (A) Set forth on Schedule 4.01(u) hereto is a complete and accurate list, as of the date hereof, of each taxable year of Terra for which federal income tax returns have been filed and for which the expiration of the applicable statute of limitations for assessment or collection has not occurred by reason of extension or otherwise (an "Open Year"). (v) As of the date of the initial Borrowing, there are no adjustments to the federal income tax liability of Terra proposed by the Internal Revenue Service with respect to Open Years. No issues have been raised by the Internal Revenue Service in respect of Open Years that, in the aggregate, could reasonably be expected to have a Material Adverse Effect. (w) Neither any Obligor nor any of its Subsidiaries is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. Neither any Obligor nor any of its Subsidiaries is 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. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrowers, nor the consummation of the other transactions contemplated hereby, will violate any provision 87 of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (x) Each of Terra and Terra Capital (both individually and collectively with their respective Subsidiaries) (i) is Solvent, and (ii) will be Solvent after giving effect to the Transactions. (y) Set forth on Part I of Schedule 4.01(y) hereto is a complete and accurate list, as of the date of the initial Borrowing, of all existing Debt of each Obligor, after giving effect to the cancellations and payments contemplated by Section 3.01(d), showing as of the date of the initial Borrowing (i) the principal amount outstanding thereunder, (ii) whether such Debt is secured by any Lien and (iii) the aggregate principal amount of such Debt scheduled to be paid during each fiscal year of Terra to and including the fiscal year of Terra in which the final Principal Payment Date is scheduled to occur. ARTICLE V COVENANTS OF THE BORROWER Section 5.01. Affirmative Covenants. So long as any principal of or interest on any Advance or any other amount payable under this Agreement shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, Terra will, and will cause each of the Obligors to: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970 (except to the extent that non- compliance with any thereof could not reasonably be expected to have a Material Adverse Effect). (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, that neither such Obligor nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are 88 being maintained to the extent required by GAAP, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) Compliance with Environmental Laws. Comply, and cause each of its Subsidiaries and all lessees and other Persons occupying its properties to comply, with all Environmental Laws and Environmental Permits applicable to its operations and properties; obtain and renew, and cause each of its Subsidiaries to obtain and renew, all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, that (i) neither such Obligor nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves to the extent required by GAAP are being maintained with respect to such circumstances and (ii) no such compliance with laws and permits, obligation to obtain or renew permits or obligation to undertake any such investigation, study, sampling, testing, removal, remedial or other action shall be required hereunder to the extent no Material Adverse Effect could reasonably be expected to result from any failure to so comply, obtain, renew or undertake, either individually or in the aggregate. (d) Maintenance of Insurance. Maintain, and cause each of its Material Subsidiaries to maintain, with responsible and reputable insurance companies or associations, insurance, including business interruption insurance with respect to each manufacturing plant, in such amounts and covering such risks as is usually carried by companies engaged in similar businesses. (e) Preservation of Corporate Existence, Etc. Subject to Section 5.02(d) and (e), preserve and maintain, and cause each of its Material Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises; provided, that the Obligors may consummate the Merger and the other Transactions, and that neither any Obligor nor any of its Subsidiaries shall be required to preserve any right or franchise if the Board of Directors of such Obligor or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of such Obligor or such Subsidiary, as the 89 case may be, and that the loss thereof will not have a Material Adverse Effect. (f) Visitation Rights. At any reasonable time and as may be reasonably requested from time to time, permit the Agent, any Issuing Bank or any of the Lenders or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, such Obligor and any of its Subsidiaries (in the presence of an appropriate officer or representative of the relevant Obligor), and to discuss the affairs (including, but not limited to, the compliance by such Obligor and its Subsidiaries with all Environmental Laws), finances and accounts of such Obligor and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants. (g) Preparation of Environmental Reports. Upon either (i) the acquisition of any real property by such Obligor or any of its Subsidiaries the purchase price of which exceeds $500,000, or (ii) the occurrence and during the continuance of a Default or Event of Default arising under Section 5.01(c) and at the written request of the Agent, such Obligor shall provide to the Agent, each Issuing Bank and each Lender within a reasonable time after such acquisition or request, as the case may be, at the expense of such Obligor, an environmental site assessment report for the acquired property (in the case of an acquisition as described in clause (i)) or for any properties of such Obligor which are the subject of any such Default or Event of Default (in the case of an event as described in clause (ii)) prepared by an environmental consulting firm reasonably acceptable to the Agent, indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties. Without limiting the generality of the foregoing, if the Agent determines at any time that a material risk exists that any such report will not be provided within a reasonable time following such request, the Agent may retain an environmental consulting firm to prepare such report at the expense of such Obligor, such Obligor and each of its Subsidiaries hereby granting to the Agent, each Issuing Bank, each Lender, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto its properties to undertake such an assessment. (h) Keeping of Books. Keep, and cause each of its Material Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of 90 all financial transactions and the assets and business of such Obligor and each such Subsidiary in accordance with GAAP. (i) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Material Subsidiaries to maintain and preserve, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (j) Compliance with Terms of Leaseholds. Make all payments and otherwise perform all obligations in respect of all leases of real property, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or canceled, except to the extent any such lease is no longer used or useful in the conduct of its business or which, in the exercise of the reasonable judgment of the relevant Obligor, is to be refinanced and except to the extent failure to comply with the foregoing would not have a Material Adverse Effect, and cause each of its Material Subsidiaries to do so. (k) Performance of Related Documents. Perform and observe all of the terms and provisions of each Related Document to be performed or observed by it, maintain each such Related Document in full force and effect and enforce such Related Document in accordance with its terms, except to the extent the failure to do any of the foregoing could not reasonably be expected to have a Material Adverse Effect. (l) Performance and Compliance with Material Contracts. Perform and observe, and cause each of its Subsidiaries to perform and observe, all the terms and provisions of each Material Contract to be performed or observed by it, maintain each such Material Contract in full force and effect and enforce each such Material Contract in accordance with its terms, except to the extent the failure to do any of the foregoing could not reasonably be expected to have a Material Adverse Effect. (m) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of its Affiliates on terms that are fair and reasonable and no less favorable to such Obligor or such Subsidiary than would obtain in a comparable arm's-length transaction with a 91 Person that is not an Affiliate; provided, that this Section 5.01(m) shall not be applicable to (i) the Transactions expressly contemplated by the Related Documents; (ii) transactions between such Obligor and its wholly owned Subsidiaries or between wholly owned Subsidiaries of such Obligor unless otherwise prohibited by this Agreement; and (iii) compensation paid for services rendered by any director or officer of such Obligor or any director or officer of a Subsidiary of such Obligor serving at the direction or request of such Obligor to the extent such compensation is determined in the good faith exercise of business judgment by the Board of Directors of such Obligor to be reasonable and appropriate to the functions of such office. (n) Further Assurances. (i) Promptly upon reasonable request by the Agent or any Lender or Issuing Bank through the Agent correct, and cause each Subsidiary promptly to correct, any material defect or error that may be discovered in any Loan Document, which material defect or error is the result of any untrue statement of material fact under any Loan Document or the omission to state a material fact necessary to make the statements made therein not misleading, or in the execution, acknowledgment or recordation of any Loan Document, and (ii) promptly upon reasonable request by the Agent or any Lender or Issuing Bank through the Agent do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re- register, and cause any such Subsidiary promptly to do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re- register, any and all such further acts, deeds, conveyances, pledge agreements, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as the Agent or any Lender or Issuing Bank through the Agent may reasonably require from time to time in order to (A) subject to the Liens created by any of the Security Documents any of such Obligor's and its Subsidiaries' properties, rights or interests covered or now or hereafter intended to be covered by any of the Security Documents, (B) perfect and maintain the validity, effectiveness and priority of any of the Security Documents and the Liens intended to be created thereby and (C) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Agent, the Lenders and any Issuing Bank the rights granted 92 or now or hereafter intended to be granted to the Agent, the Lenders and the Issuing Banks under any Security Document or under any other instrument executed in connection with any Security Document to which such Obligor, any other Obligor or any of their respective Subsidiaries is or may become a party. (o) Interest Rate Hedging. Within 90 days after the Closing Date, cause Terra Capital to enter into, and thereafter maintain in full force and effect until December 31, 1997, one or more interest rate Hedge Agreements with Persons acceptable to the Lenders in their reasonable determination with respect to a notional amount equal to the amount of the Relevant Debt providing effective protection against the Average Rate exceeding a rate per annum equal to 10% during the hedging period. For the purposes of this Section 5.01(o), the following terms have the following respective meanings: "Average Rate means, on any date, the weighted average rate of interest per annum payable on all Relevant Debt, excluding the Applicable Margin. "Relevant Debt" means Debt under Terra Facility A, Terra Facility ------------- B and AMLP Facility A. (p) Ownership of the Obligors. Take, and will cause each of its Subsidiaries to take, such action from time to time as shall be necessary to ensure that (i) Terra will at all times own, beneficially and of record, all of the issued and outstanding capital stock (other than directors' qualifying shares) of Terra Capital Holdings; (ii) Terra Capital Holdings will at all times own, beneficially and of record, all of the issued and outstanding capital stock (other than directors' qualifying shares) of Terra Capital, and will own no other property (other than cash and other property incidental to its business as a holding company); (iii) Terra Capital will at all times own, beneficially and of record, all of the issued and outstanding capital stock (other than directors' qualifying shares) of TI, AMC and BMCH, and will own no other property (other than cash and other property incidental to its business as a holding company); (iv) BMCH will at all times own, beneficially and of record, all of the issued and outstanding capital stock (other than directors' qualifying shares) of BMC, and will own no other property (other than cash and other property incidental to its business as a holding company); (v) AMC will own no property other than ownership interests of Agricultural and Minerals Company, L.P. ("AMCLP") and a general partnership interest in AMLP (other than cash and 93 other property incidental to its business as a holding company); and (vi) AMCLP will own no property other than ownership interests of AMLP (other than cash and other property incidental to its business as a holding company). In the event that any such additional shares of stock or other ownership interests shall be issued to an Obligor by any Subsidiary, the respective Obligor agrees forthwith to deliver to the Agent pursuant to the Security Documents the certificates (if any) evidencing such ownership interests accompanied by undated powers executed in blank and to take such other action as the Agent shall request to perfect the security interest created therein pursuant to the Security Documents. Section 5.02. Negative Covenants. So long as any principal of or interest on any Advance or any other amount payable under this Agreement shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, Terra will not, and will not permit any of its Material Subsidiaries to: (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Material Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file, or permit any of its Subsidiaries to sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement that names such Obligor or any of its Subsidiaries as debtor, or sign, or permit any of its Subsidiaries to sign, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, excluding from the operation of the foregoing restrictions the following: (i) Liens created by the Loan Documents; (ii) Permitted Liens; (iii) the existing Liens described on Schedule 5.02(a)(iii); (iv) Liens on cash (in an aggregate amount, for Terra and its Subsidiaries taken as a whole, not exceeding $10,000,000 at any time) to secure the Obligations in respect of letters of credit permitted under Section 5.02(b)(iv); 94 (v) Liens on Receivables of TI to secure TI's Obligations under the Permitted TI Receivables Facilities; (vi) purchase money Liens upon or in property acquired or held by Terra or such Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure Debt (including, without limitation, commercial letters of credit) incurred solely for the purpose of financing the acquisition, construction or improvement of any such property to be subject to such Liens, or Liens existing on any such property at the time of acquisition, or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, that (x) no such Lien shall extend to or cover any property other than the property being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and (y) the Debt secured by any such Lien shall at no time exceed 80% of the fair market value (as determined in good faith by the Senior Financial Officer) of such property at the time it was acquired (provided, that upon the payment in full of the principal of and interest on the Terra Facility C Advances and the Terra Facility D Advances, the figure 80% set forth above shall automatically be deemed to be increased to 90%); (vii) Any Lien arising after the date of this Agreement in favor of any state of the United States of America or any agency, political subdivision or instrumentality thereof, upon any pollution abatement or control facilities being financed in compliance with Section 103(c)(4)(F) of the Internal Revenue Code of 1986, as in effect on the date of this Agreement (or any successor statute which is similar in all substantive respects), the interest payable in respect of which financing is excluded from gross income under said Section 103, provided, however, that (x) the Debt secured by such Lien is not prohibited by clause (b) of this Section 5.02, and (y) such Lien does not cover any other property at any time owned by Terra or any Material Subsidiary; (viii) Liens on property that is the subject of a capital lease to secure the performance of the Capital Lease Obligations relating thereto; 95 (ix) Liens upon property acquired after the date hereof by Terra or such Subsidiary, each of which Liens existed on such property before the time of its acquisition and was not created in anticipation thereof; provided, that no such Lien shall extend to or cover any property of Terra or such Subsidiary other than the property so acquired and improvements thereon; (x) Leases or subleases, and licenses or sublicenses, granted to third Persons not interfering in any material respect with the business of Terra or such Subsidiary; (xi) Easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of Terra or such Subsidiary; (xii) Liens arising from Uniform Commercial Code financing statements regarding operating leases permitted by this Agreement; (xiii) any interest or title of a lessor or sublessor under any lease permitted by this Agreement; (xiv) additional Liens upon property created after the date hereof, provided, that the aggregate Debt secured thereby and incurred on and after the date hereof shall not exceed $7,000,000 in the aggregate at any one time outstanding; and (xv) the replacement, extension or renewal of any Lien permitted by clauses (iii), (iv), (v), (ix) and (xiv) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the principal amount or change in any direct or contingent obligor) of the Debt secured thereby. (b) Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt other than: (i) Debt under the Loan Documents; (ii) Debt in respect of Hedge Agreements permitted by Section 5.02(c); 96 (iii) Debt in respect of unsecured trade payables (and Obligations in respect of letters of credit supporting such trade payables); (iv) Debt (including, without limitation, Obligations in respect of letters of credit) not secured by any Lien (other than Liens permitted by Section 5.02(a)(iv)), so long as, on the date of the incurrence thereof, the aggregate principal amount (or the U.S. Dollar equivalent of the aggregate principal amount) of all Debt of Terra and its Subsidiaries on a Consolidated basis (as reasonably determined by the Senior Financial Officer on and as of the date of such incurrence) then outstanding under this clause (iv) (including, without limitation, the Debt proposed to be incurred on such date) does not exceed $35,000,000; (v) Obligations of TI under the Permitted TI Receivables Facilities; (vi) Debt securities of Terra issued in a public offering pursuant to an effective registration statement (including, without limitation, as to interest rates, amortization (provided, that in any event no payments of principal, redemptions, sinking fund payments or the like shall be scheduled to be made before the final Principal Payment Date), redemption, average life to maturity, covenants, events of default and other terms) reasonably satisfactory to the Required Lenders, the proceeds of which are used first to repay the Terra Facility C Advances and, after the repayment in full of the Terra Facility C Advances, to repay Advances in the manner specified in Section 2.05(c)(i); (vii) Debt outstanding (or committed to be made available) as at June 30, 1994 and set forth on Schedule 4.01(y); (viii) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (ix) in the case of any of its Subsidiaries, Debt owed to Terra or to a wholly owned Subsidiary of Terra; (x) Debt secured by Liens permitted under Section 5.02(a)(vi); purchase money Debt secured by Liens permitted under 5.02(a)(ix); and Debt in an aggregate principal amount not exceeding $7,000,000 at 97 any one time outstanding secured by Liens permitted under Section 5.02(a)(xiv); (xi) Debt of Subsidiaries of Terra acquired by Terra or any of its Subsidiaries after the date hereof in an aggregate principal amount not exceeding $15,000,000 at any one time outstanding (provided, that after the Trigger Date the figure $15,000,000 set forth above shall be deemed to be increased to $50,000,000); and (xii) renewals, refinancings and replacements of the Debt permitted under clauses (vi), (vii) and (ix) above (without increase in the principal amount or change in any direct or contingent obligor and not including any Debt to be paid or prepaid with the proceeds of Advances). (c) Hedge Agreements. Enter into or permit to be outstanding, or permit any of its Subsidiaries to enter into or permit to be outstanding, any Hedge Agreement other than (x) Hedge Agreements entered into pursuant to Section 5.01(o), (y) the Methanol Hedging Agreement, and (z) other Hedge Agreements entered into in the ordinary course of business and in a reasonably prudent manner and not for speculative purposes, in each case in order to protect against the fluctuation in interest rates, foreign exchange rates or commodity prices. (d) Mergers, Etc. Merge with or into or consolidate with or into any Person, or permit any of its Material Subsidiaries to do so, except that: (i) if no Default or Event of Default shall have occurred and be continuing or would result therefrom, (x) any Subsidiary of Terra Capital may be merged or consolidated with or into Terra Capital (provided, that Terra Capital shall be the continuing or surviving corporation) or any other wholly owned Subsidiary of Terra Capital and (y) Terra Capital or any of its Subsidiaries may merge or consolidate with any other Person; provided, that (1) in the case of a merger or consolidation of Terra Capital, Terra Capital is the continuing or surviving corporation, and (2) in any other case, the continuing or surviving corporation is a wholly owned Subsidiary of Terra Capital; and (ii) nothing herein shall be deemed to prohibit any of the Transactions. 98 (e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise dispose of (including, without limitation, in a sale-leaseback transaction), or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of (including, without limitation, in a sale-leaseback transaction), any of its assets, including (without limitation) any manufacturing plant or substantially all assets constituting the business of a division, branch or other unit operation, except: (i) sales of inventory in the ordinary course of its business; (ii) sales or other dispositions of obsolete or worn-out equipment no longer used or useful in its business; (iii) Dispositions of assets by one Obligor to another and by an Obligor to one of its or any other Obligor's wholly owned Subsidiaries, and other Dispositions in an aggregate amount not to exceed $10,000,000 in any period of 12 consecutive months, provided, that, in the case of all Dispositions under this clause (iii), (A) each such asset is sold for an amount not less than its fair market value, (B) no such asset may be sold to the extent that it is, individually or when considered with any other asset or assets sold or expected to be sold in such period, material to the business, assets, operations, properties or financial condition of Terra and its Subsidiaries taken as a whole, and (C) the Net Available Proceeds of such Disposition are applied in accordance with and to the extent required by Section 2.05(b), and to the extent the assets subject to the Disposition constituted part of the Collateral, all other cash and non-cash proceeds of such Disposition become subject to the Lien created by the Security Documents in accordance with the terms thereof; and (iv) nothing in this Section 5.02(e) shall prohibit TI from selling Receivables of TI under any Permitted TI Receivables Facility (subject to the restrictions specified in the definition of said term). (f) Investments. Make or hold, or permit any of its Subsidiaries to ----------- make or hold, any Investment, other than: (i) Investments by Terra and its Subsidiaries in cash and Permitted Investments; 99 (ii) Investments constituting (A) operating deposit accounts with banks and (B) Receivables arising in the ordinary course of business on ordinary business terms, in each case in accordance with, and subject to the terms of, the Security Documents; (iii) Investments described in Schedule 5.02(f); (iv) Investments arising solely by reason of any merger or consolidation expressly permitted by Section 5.02(d); (v) Subject to the terms set forth on Exhibit H, Investments in any fiscal year of Terra consisting of acquisitions of ownership interests in one or more entities engaged in the same or allied line or lines of business as Terra and its Subsidiaries, taken as a whole, in an aggregate amount not exceeding the sum of (x) the Acquisition Amount for such fiscal year (to the extent not utilized to make Capital Expenditures pursuant to Section 5.02(h)) plus (y) 50% of the unused Acquisition Amount for the prior fiscal year; (vi) Investments consisting of acquisitions of property (including, without limitation, ownership interests in any Person) by Terra or any of its Subsidiaries so long as (x) the aggregate fair market value of all such property acquired in any fiscal year of Terra shall not exceed $25,000,000 (provided, that after the Trigger Date the figure $25,000,000 set forth above shall be deemed to be increased to $50,000,000), and (y) the consideration paid by Terra and its Subsidiaries for each such acquisition consists solely of equity securities issued by Terra; (vii) Investments in respect of Hedge Agreements permitted by Section 5.02(c); (viii) Investments in Lynn Seeds, Inc. in an aggregate amount not exceeding $4,000,000; (ix) Investments in Agro-Terra Internacional, S.A. de C.V., a joint venture between TI and Grupo Acerero del Norte, S.A. de C.V., in an aggregate amount not exceeding $5,000,000; and (x) Investments made pursuant to Terra's Supplemental Deferred Compensation Plan as in effect on the date hereof. 100 (g) Payments to Minority Interests. Pay or cause to be paid, or permit any of its Subsidiaries to pay or cause to be paid, to any holder of a minority interest any amount with respect to such minority interest in excess of the amount to which such holder is legally entitled, unless Terra or such Subsidiary simultaneously receives payment in an amount equal to or greater than its ratable share of the amount of the related distribution (determined in accordance with the respective interests then held by Terra and such Subsidiary, on the one hand, and such holder, on the other). (h) Capital Expenditures. Make Capital Expenditures in any fiscal year in an aggregate amount, for Terra and its Subsidiaries on a Consolidated basis, exceeding the sum of (i) $40,000,000 plus (ii) an amount equal to the portion (if any) of the Acquisition Amount for such fiscal year not used to make Investments pursuant to Section 5.02(f)(v), provided, that if the aggregate amount of such Capital Expenditures made in any fiscal year shall be less than $40,000,000, then the shortfall shall be added to the amount of Capital Expenditures permitted hereunder for the immediately succeeding (but not any other) fiscal year. (i) Change in Nature of Business. Make, or permit any of its Material Subsidiaries to make, any material change in the nature of the business of Terra and its Subsidiaries taken as a whole (after giving effect to the Transactions) as carried on at the date hereof. (j) Charter Amendments. Amend, or permit any of its Material Subsidiaries to amend, its articles of incorporation or bylaws, or amend any partnership agreement to which it or any of its Subsidiaries is a party (except for amendments to authorize the issuance of preferred or common stock), in each case to the extent any such amendment could reasonably be expected to have a Material Adverse Effect. (k) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required or permitted by generally accepted accounting principles in effect in the United States; provided, that in the event of any change in generally accepted accounting principles from the date of the financial statements referred to in Section 4.01(f) and upon delivery of any financial statement and accompanying certificate of compliance required to be furnished under subsections (b) and (c) of Section 5.03, Terra shall deliver to the Lenders a statement of reconciliation conforming any information contained in such financial statement and a certificate of 101 compliance required to be furnished pursuant to subsections (b) through (c) of Section 5.03 with GAAP (it being understood that compliance with financial covenants herein shall be measured and determined on the basis of GAAP). (l) Amendment of Related Documents. Cancel or terminate any Related Document or consent to or accept any cancellation or termination thereof, amend, modify or change in any manner any term or condition of any Related Document or give any consent, waiver or approval thereunder, waive any default under or any breach of any term or condition of any Related Document or agree in any manner to any other amendment, modification or change of any term or condition of any Related Document to the extent any of the foregoing could reasonably be expected to have a Material Adverse Effect, or permit any of its Subsidiaries to do any of the foregoing. (m) Certain Obligations Respecting Subsidiaries. Enter into, or permit any of its Subsidiaries to enter into, after the date of this Agreement, any indenture, agreement, instrument or other arrangement that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the declaration or payment of dividends or the making of loans or advances to or Investments in or the sale, assignment, transfer or other disposition of property to Terra or any Subsidiary thereof. (n) Subordinated Indebtedness. Purchase, redeem, retire or otherwise acquire for value, or set apart any money for a sinking, defeasance or other analogous fund for the purchase, redemption, retirement or other acquisition of, or make any voluntary payment or prepayment of the principal of or interest on, or any other amount owing in respect of, any Subordinated Indebtedness (and such Obligor will not permit any of its Subsidiaries to do any of the foregoing), in each case except for regularly scheduled payments of principal and interest in respect thereof required pursuant to the instruments evidencing such Subordinated Indebtedness, or amend the documentation creating or evidencing Subordinated Indebtedness. (o) Transactions with Affiliates. Except to the extent otherwise expressly permitted hereunder, enter into any transaction with any Affiliate on terms less favorable than would pertain in a transaction entered into with a third party on an arm's-length basis. Section 5.03. Reporting Requirements. So long as any principal of or interest on any Advance or any other amount 102 payable under this Agreement shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder: (a) Default Notice. Each Obligor will furnish to the Agent, as soon as possible and in any event within five Business Days after such Obligor knows or has reason to believe that a Default or Event of Default has occurred (which Default or Event of Default is continuing on the date of the following statement), a statement of the Senior Financial Officer setting forth details of such Default or Event of Default and the action that such Obligor has taken and proposes to take with respect thereto. (b) Quarterly Financials. As soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of Terra, Terra will furnish to the Agent, with sufficient copies for each Lender and each Issuing Bank, Consolidated balance sheets of Terra and its Subsidiaries as of the end of such quarter and Consolidated statements of income and cash flows, and statements of earnings by product line, of Terra and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year in reasonable detail and duly certified (subject to year-end audit adjustments) by the Senior Financial Officer as having been prepared in accordance with GAAP, together with (i) a certificate of said officer (A) stating that no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and the action that Terra has taken and proposes to take with respect thereto, (B) stating that since March 31, 1994, there has been no Material Adverse Change with respect to Terra and (C) providing a comparison between the financial position and results of operations set forth in such financial statements with the comparable information set forth in the financial projections and budget most recently delivered pursuant to Section 3.01(j) or Section 5.03(m) and (ii) a schedule in form satisfactory to the Agent of the computations used by Terra in determining compliance with the covenants contained in Section 5.04. (c) Annual Financials. As soon as available and in any event within 90 days after the end of each fiscal year of Terra, Terra will furnish to the Agent, with sufficient copies for each Lender and each Issuing Bank, a copy of the annual audit report for such year for Terra and its 103 Subsidiaries, including therein a Consolidated balance sheet of Terra and its Subsidiaries as of the end of such fiscal year and Consolidated statements of income and cash flows, and statements of earnings by product line, of Terra and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year accompanied by an unqualified opinion of Deloitte & Touche or other independent public accountants of nationally recognized standing stating that, except as expressly disclosed therein, said Consolidated financial statements present fairly, in all material respects, the Consolidated financial position and results of operations of Terra and its Consolidated Subsidiaries as of the last day of, and for, such fiscal year, together with (i) a certificate of such accounting firm to the Lenders stating that in the course of the regular audit of the business of Terra and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default or Event of Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof (it being understood that said accountants shall have no liability to the Agent, the Lenders or the Issuing Banks) for failure to obtain knowledge of any Default or Event of Default), (ii) a schedule in form satisfactory to the Agent of the computations used by such accountants in determining, as of the end of such fiscal year, compliance with the covenants contained in Section 5.04 and (iii) a certificate of the Senior Financial Officer (A) stating that no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and the action that Terra has taken and proposes to take with respect thereto, (B) stating that since March 31, 1994, there has been no Material Adverse Change with respect to Terra and (C) providing a comparison between the financial position and results of operations set forth in such financial statements with the comparable information set forth in the financial projections and budget most recently delivered pursuant to Section 3.01(j) or Section 5.03(m). (d) ERISA Events. Promptly and in any event within 10 Business Days after any Obligor knows or has reason to know that any ERISA Event (including, for this purpose, a reportable event listed in Section 4043(b)(7) of ERISA) with respect to any Obligor or any of its ERISA Affiliates has occurred, Terra will furnish to the Agent a statement of the Senior Financial Officer describing such ERISA Event and the 104 action, if any, that such Obligor or such ERISA Affiliate has taken and proposes to take with respect thereto. (e) Plan Terminations. Promptly and in any event within 10 Business Days after receipt thereof by any Obligor or any of its ERISA Affiliates, such Obligor will furnish to the Agent copies of each notice from the PBGC stating its intention to terminate any Plan of any Obligor or any of its ERISA Affiliates or to have a trustee appointed to administer any such Plan. (f) Plan Annual Reports. Promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, each Obligor will furnish to the Agent copies of such Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan of each Obligor or any of its ERISA Affiliates that is then being maintained for employees or former employees of such Person. (g) Multiemployer Plan Notices. Promptly and in any event within five Business Days after receipt thereof by any Obligor or any of its ERISA Affiliates from the sponsor of a Multiemployer Plan of any Obligor or any of its ERISA Affiliates, such Obligor will furnish to the Agent copies of each notice concerning (i) the imposition of Withdrawal Liability by any such Multiemployer Plan, (ii) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the amount of liability incurred, or that is reasonably expected to be incurred, by such Obligor or any of its ERISA Affiliates in connection with any event described in clause (i) or (ii). (h) Litigation. Promptly after the commencement thereof, Terra will furnish to the Agent notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Obligor or any of its Subsidiaries of the type described in Section 4.01(h). (i) Environmental Conditions. Promptly after receiving notice thereof, Terra will furnish to the Agent notice of any condition or occurrence on any property of any Obligor that results in a material noncompliance by any Obligor or any of its Subsidiaries with any Environmental Law or Environmental Permit which noncompliance could reasonably be expected to have a Material Adverse Effect, or could (i) form the basis of an Environmental Action against any Obligor or any of its Subsidiaries or such property that 105 could reasonably be expected to have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that could reasonably be expected to have Material Adverse Effect. (j) Delivery of Acknowledgment Copies and Search Reports. Terra ---------------------------------------------------- shall: (i) on or before the 30th day after the Closing Date, deliver, or cause to be delivered, to the Agent acknowledgment copies or stamped receipt copies of the UCC financing statements and other filings required to be filed thereunder as set forth on Schedule 5.03(k), including, to the extent applicable, filings required to be made with the United States Patent and Trademark Office as promptly as practicable following the delivery thereof to Terra by the United States Patent and Trademark Office, and (ii) on or before the 30th day after the Closing Date, deliver to the Agent completed requests for information, dated on or before such day, listing the financing statements referred to in clause (i) above and all other effective financing statements that name an Obligor as debtor, together with copies of such other financing statements, together with all such other evidence that the Agent may reasonably request in respect of the foregoing. (k) Public Filings. Terra shall, promptly upon their becoming available, deliver to the Agent, each Issuing Bank and each Lender copies of all registration statements and regular periodic reports, if any, that Terra, Terra Capital or AMLP shall have filed with the Securities and Exchange Commission (or any governmental agency substituted therefor) or any national securities exchange. (l) Shareholder Reports, Etc. Terra shall deliver to the Agent, each Issuing Bank and each Lender promptly upon the mailing thereof to the shareholders of Terra or AMLP generally or to holders of Subordinated Indebtedness or New Terra Debt generally, copies of all financial statements and proxy statements so mailed. (m) Financial Projections and Budget. As soon as available and in any event within 90 days after the first day of each fiscal year of Terra, Terra will furnish to the Agent, with sufficient copies for each Lender and each Issuing Bank, financial projections and a budget for such 106 fiscal year and each subsequent fiscal year of Terra to and including the later of (i) the fiscal year in which the final Principal Payment Date is scheduled to occur and (ii) the fifth fiscal year ending after the date of determination, in each case, in form and detail similar to the financial projections and budget delivered under Section 3.01(j). (n) Other Information. Each Obligor shall furnish to the Lenders through the Agent such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Obligor or any of its Subsidiaries as the Agent, any Issuing Bank or any Lender may from time to time reasonably request. Section 5.04. Financial Covenants. So long as any principal of or interest on any Advance or any other amount payable under this Agreement shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, Terra will: (a) Debt to Cash Flow Ratio. Until the payment in full of the Facility C Advances and the Facility D Advances, maintain the Debt to Cash Flow Ratio at not more than the ratio set forth below for each day during each Rolling Period ending in the respective fiscal years of Terra set forth below: Each Rolling Period Ending In Ratio -------------- ----- 1994 or 1995 3.75 to 1.00 1996 and each fiscal 3.00 to 1.00 year thereafter (b) Debt to Capital Ratio. From and after the payment in full of the principal of and interest on the Facility C Advances and the Facility D Advances, maintain the Debt to Capital Ratio at not more than the ratio set forth below for each day during each Rolling Period ending in the respective periods set forth below: 107
Each Rolling Period Ending In Ratio - ------------------------------------- ------------ From the Closing Date 0.65 to 1.00 to September 30, 1995 From October 1, 1995 0.60 to 1.00 to September 30, 1996 From October 1, 1996 0.55 to 1.00 to September 30, 1997 From and after 0.50 to 1.00 October 1, 1997
(c) Current Ratio. Maintain the ratio of Consolidated Current Assets of Terra and its Subsidiaries (determined in accordance with GAAP) to Consolidated Current Liabilities of Terra and its Subsidiaries (determined in accordance with GAAP) at not less than the ratio set forth below for each day during each Rolling Period ending in the respective fiscal years of Terra set forth below:
Each Rolling Period Ending In Ratio - ------------------------------------- ------------ 1994 1.25 to 1.00 1995 1.25 to 1.00 1996 1.25 to 1.00 1997 1.25 to 1.00 1998 and each fiscal 1.50 to 1.00 year thereafter
(d) Interest Coverage Ratio. Maintain the Interest Coverage Ratio at not less than the ratio set forth below for each Rolling Period ending in the respective fiscal years of Terra set forth below:
Each Rolling Period Ending In Ratio - ------------------------------------- ------------ 1994 4.00 to 1.00 1995 4.00 to 1.00 1996 4.00 to 1.00 1997 4.00 to 1.00 1998 and each fiscal 4.50 to 1.00 year thereafter
108 (e) Net Worth. Maintain Net Worth on each day of not less than (i) $375,000,000 plus (ii) the aggregate increase in the amount of capital stock and additional paid-in capital of Terra subsequent to the Closing Date, plus (iii) 50% of net income (if positive) for each fiscal year of Terra ending on or after December 31, 1994. ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default. If any of the following events ----------------- ("Events of Default") shall occur and be continuing: - ------------------- (a) either Borrower (i) shall fail to pay when due any principal of any Advance made to it or (ii) shall fail for two Business Days to pay when due any interest on any Advance made to it or any other amount payable by it under any Loan Document; or (b) any representation or warranty made by any Obligor (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) any Obligor shall fail to perform or observe any term, covenant or agreement contained in Section 2.14 or clause (e) or (o) of Section 5.01, or clause (a), (b), (c), (d), (e), (g) or (i) of Section 5.02, or clause (a), (e) or (i) of Section 5.03, or Section 5.04; or (d) Terra shall fail to pay and perform its obligations under the Loan Purchase Agreement; or (e) any Obligor shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for a period of 30 days; or (f) any Obligor or any of its Material Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Debt that is outstanding in a principal or notional amount of at least $5,000,000 in the aggregate (but excluding Debt outstanding hereunder) of such Obligor or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the 109 agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder or holders (or an agent or trustee on its or their behalf) thereof to cause, such Debt to mature; or any such Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (g) any Obligor or any of its Material Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Obligor or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Obligor or any of its Material Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (g); or (h) any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against any Obligor or any of its Material Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect, unless 110 such judgment or order shall have been vacated, satisfied or dismissed or bonded pending appeal; or (i) any non-monetary judgment or order shall be rendered against any Obligor or any of its Subsidiaries that could be reasonably likely to have a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect unless such judgment or order shall have been vacated, satisfied, discharged or bonded pending appeal; or (j) any Security Document after delivery thereof pursuant to Section 3.01 shall for any reason (other than pursuant to the terms hereof and thereof) cease to create a valid and perfected first priority Lien (subject only to Permitted Liens) on the Collateral purported to be covered thereby; or (k) (i) prior to the payment in full of the principal of and interest on the Facility C Advances and the Facility D Advances, Minorco ceases to own, directly or indirectly, a majority of the issued and outstanding shares of voting capital stock of Terra; or (ii) after the payment in full of the principal of and interest on the Facility C Advances and the Facility D Advances, (y) Minorco ceases to own, directly or indirectly, at least 20% of the issued and outstanding shares of voting capital stock of Terra, or (z) Minorco ceases to hold, directly or indirectly, a plurality of the issued and outstanding shares of capital stock of Terra; or (l) any ERISA Event shall have occurred with respect to a Plan of any Obligor or any of its ERISA Affiliates and the amount (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans of the Obligors and their ERISA Affiliates with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Obligors and their ERISA Affiliates related to such ERISA Event) could reasonably be expected to have a Material Adverse Effect; provided, that with respect to any Multiple Employer Plan, such Insufficiency shall include only the portion thereof attributable to such Obligor or its ERISA Affiliates; or (m) any Obligor or any of its ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan of any Obligor or any of its ERISA Affiliates that it has incurred withdrawal liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts 111 required to be paid to Multiemployer Plans by the Obligors and their ERISA Affiliates as withdrawal liability (determined as of the date of such notification), could reasonably be expected to have a Material Adverse Effect; or (n) any Obligor or any of its ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan of any Obligor or any of its ERISA Affiliates that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Obligors and their ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount that could reasonably be expected to have a Material Adverse Effect; (o) there shall have been asserted against Terra or any of its Subsidiaries an Environmental Claim that, in the judgment of the Required Lenders is reasonably likely to be determined adversely to Terra or any of its Subsidiaries, and the amount thereof (either individually or in the aggregate) is reasonably likely to have a Material Adverse Effect (insofar as such amount is payable by Terra or any of its Subsidiaries but after deducting any portion thereof that is reasonably expected to be paid by other creditworthy Persons); then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrowers, declare the obligation of each Lender to make Advances and of each Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate (and this clause (i) shall also be applicable if there shall occur a Purchase Event), and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrowers, declare the Advances and the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Advances and the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrowers; provided, that in the event of an actual or deemed entry of an order for relief with respect to any Obligor or any of its Subsidiaries under the Federal Bankruptcy Code, (x) the obligation of each Lender to make Advances and of any Issuing Bank to issue Letters of Credit shall automatically be terminated and (y) the Advances and the 112 Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. Section 6.02. Actions in Respect of the Letters of Credit Upon Default. If any Event of Default shall have occurred and be continuing, the Agent may, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, make demand upon the Borrowers to, and forthwith upon such demand the Borrowers will, pay to the Agent on behalf of the Lenders in same day funds at the Agent's Office, for deposit in the relevant L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding. If at any time the Agent determines that any funds held in the relevant L/C Cash Collateral Account are subject to any right or claim of any Person other than the Agent and the Lenders or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrowers will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited and held in the relevant L/C Cash Collateral Account, an amount equal to excess of (a) such aggregate Available Amount over (b) total amount of funds, if any, then held in such L/C Cash Collateral Account that the Agent determines to be free and clear of any such right and claim. ARTICLE VII THE AGENT Section 7.01. Authorization and Action. Each Lender and each Issuing Bank hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents, including, without limitation, enforcement or collection of the Notes, the Agent shall not be required to exercise any discretion or take any action, and shall not be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) except upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of the Notes; provided, that the Agent shall not be required to take any action that exposes it to personal liability or that is contrary to this Agreement or applicable law. The Agent agrees to give to each Issuing Bank and each Lender prompt notice of each notice given to it by the Borrowers or Terra pursuant to the terms of this 113 Agreement. Each Lender and Issuing Bank hereby authorizes the Agent (i) to execute and deliver each of the Security Documents and (ii) to execute and deliver the Loan Purchase Agreement (and each Lender and Issuing Bank agrees that, upon such execution and delivery, it will be bound by the Loan Purchase Agreement as if such Lender or Issuing Bank, as the case may be, were a signatory thereto). Section 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent (i) may treat the payee of any Note as the holder thereof until the Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07; (ii) may consult with legal counsel (including counsel for any Obligor), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by them in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Issuing Bank or any Lender and shall not be responsible to any of them for any statements, warranties or representations made in or in connection with the Loan Documents; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Loan Document on the part of any Obligor or to inspect the property (including the books and records) of any Obligor; (v) shall not be responsible to any Issuing Bank or any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. Section 7.03. Citibank and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, Citibank shall have the same rights and powers under the Loan Documents as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, less otherwise expressly indicated, include Citibank in its individual capacity. Citibank and its Affiliates may accept deposits from, lend money to, act as trustee under indentures for, accept investment banking engagements from and generally engage in any kind of business with, any Obligor, any of its 114 Subsidiaries, any of its Affiliates and any Person who may do business with or own securities of any Obligor or any such Subsidiary or Affiliate, all as if Citibank were not the Agent and without any duty to account therefor to the Lenders or any Issuing Bank. Section 7.04. Lender Credit Decision. Each Lender and each Issuing Bank acknowledges that it has, independently and without reliance upon the Agent, any Issuing Bank or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and each Issuing Bank also acknowledges that it will, independently and without reliance upon the Agent, any Issuing Bank or any other Lender 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 this Agreement. Section 7.05. Indemnification. The Lenders agree to indemnify the Agent (to the extent not promptly reimbursed by the Borrowers), ratably according to the principal amounts of the Notes then held by each of them (or if no Advances are at the time outstanding, ratably according to the amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any of them in any way relating to or arising out of the Loan Documents or any action taken or omitted by any of them under the Loan Documents; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Agent. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs and expenses payable by the Borrowers under Section 9.04 of this Agreement, under the Holdings Pledge Agreement, under the Terra Capital Pledge Agreement, under the Subsidiary Pledge and Security Agreement, and under the AMLP Pledge and Security Agreement, to the extent that the Agent is not promptly reimbursed for such costs and expenses by the Borrowers. Section 7.06. Collateral Duties. ----------------- (a) Except for action expressly required of the Agent hereunder and under the Security Documents, the Agent shall in all cases be fully justified in refusing to act hereunder and thereunder unless it shall be further indemnified to its satisfaction by the Lenders and the Issuing Banks proportionately 115 in accordance with the Obligations then due and payable to each of them against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. (b) Except as expressly provided herein, the Agent shall have no duty to take any affirmative steps with respect to the collection of amounts payable in respect of the Collateral. The Agent shall incur no liability as a result of any private sale of the Collateral. (c) The Lenders and the Issuing Banks hereby consent, and agree upon written request by the Agent to execute and deliver such instruments and other documents as the Agent may deem desirable to confirm such consent, to the release of the Liens on any of the Collateral, including any release in connection with any sale, transfer or other disposition of the Collateral or any part thereof in accordance with the Loan Documents. (d) The Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Agent accords its own property, it being understood that none of the Agent, any Lender or any Issuing Bank shall have responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Agent, any Lender or any Issuing Bank has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any parties with respect to any Collateral. Section 7.07. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Issuing Banks, the Lenders and the Borrowers and may be removed at any time with or without cause the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint (subject, so long as no Default or Event of Default has occurred and is continuing, to the consent of the Company, which consent shall not be unreasonably withheld) a successor Agent. If no successor Agent shall been so appointed by the Required Lenders, and shall accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the Agent, as the case may be, then the retiring Agent may, on behalf of the Issuing Banks and the Lenders, appoint (subject, so long as no Default or Event of Default has occurred and is continuing, to the consent of the Company, which consent shall not be unreasonably withheld) a successor Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having 116 a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, as the case may be, and such retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to the benefit of the Agent as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and under the Security Documents. ARTICLE VIII THE GUARANTEE Section 8.01. The Guarantee. ------------- (a) The Terra Guarantors hereby jointly and severally guarantee to each Lender, each Issuing Bank and the Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Terra Advances made by the Lenders to, and the Notes held by each Lender of, the Company and all other amounts from time to time owing to the Lenders, each Issuing Bank or the Agent by the Company under this Agreement and under the Notes and by any Terra Obligor under any of the other Loan Documents, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "Terra Guaranteed Obligations"). The Terra Guarantors hereby further jointly and severally agree that if the Company shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Terra Guaranteed Obligations, the Terra Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Terra Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. (b) The AMLP Guarantors hereby jointly and severally guarantee to each Lender, each Issuing Bank and the Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the AMLP Advances made by the Lenders to, and the Notes held by each Lender of, AMLP and all other amounts from time to time owing to the Lenders, each Issuing Bank or the Agent by AMLP under this Agreement and under the Notes and by any AMLP Obligor under any 117 of the other Loan Documents, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "AMLP Guaranteed Obligations"). The AMLP Guarantors hereby further jointly and severally agree that if AMLP shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the AMLP Guaranteed Obligations, the AMLP Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the AMLP Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. Section 8.02. Obligations Unconditional. ------------------------- (a) The obligations of the Terra Guarantors under Section 8.01 are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Company under this Agreement, the Notes or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Terra Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 8.02 that the obligations of the Terra Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. (b) The obligations of the AMLP Guarantors under Section 8.01 are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of AMLP under this Agreement, the Notes or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the AMLP Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 8.02 that the obligations of the AMLP Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. (c) Without limiting the generality of the foregoing clauses (a) and (b), it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability 118 of the Guarantors hereunder which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or the Notes or any other agreement or instrument referred to herein or therein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (iv) any lien or security interest granted to, or in favor of, the Agent, any Issuing Bank or any Lender as security for any of the Guaranteed Obligations shall fail to be perfected. The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Agent, any Issuing Bank or any Lender exhaust any right, power or remedy or proceed against either Borrower under this Agreement or the Notes or any other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. Section 8.03. Reinstatement. The obligations of the Guarantors under this Section 8 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the relevant Borrower in respect of the relevant Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the relevant Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the relevant Guarantors jointly and severally agree that they will indemnify the Agent, each Issuing Bank and each Lender on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Agent, such Issuing Bank or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent 119 transfer or similar payment under any bankruptcy, insolvency or similar law. Section 8.04. Subrogation. To the extent that a Guarantor would, as a result of its making of a payment under this Article VIII, be deemed to be a creditor of a Borrower for purposes of Section 547 of the Bankruptcy Code, each Guarantor hereby waives all rights of subrogation or contribution, whether arising by contract or operation of law (including, without limitation, any such right arising under the Bankruptcy Code) or otherwise by reason of any payment by it pursuant to the provisions of this Section 8 and further agrees with the relevant Borrower for the benefit of each of its creditors (including, without limitation, each Lender, each Issuing Bank and the Agent) that any such payment by it shall constitute a contribution of capital by such Guarantor to the relevant Borrower (or an investment in the equity capital of the relevant Borrower by such Guarantor). Section 8.05. Remedies. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders and the Issuing Banks, the obligations of the Borrowers under this Agreement and the Notes may be declared to be forthwith due and payable as provided in Section 6 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 6) for purposes of Section 8.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the relevant Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the relevant Borrower) shall forthwith become due and payable by the Guarantors for purposes of said Section 8.01. Section 8.06. Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantee in this Section 8 constitutes an instrument for the payment of money, and consents and agrees that any Lender, any Issuing Bank or the Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. Section 8.07. Continuing Guarantee. The guarantee in this Section 8 is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. Section 8.08. Rights of Contribution. The Subsidiary Guarantors hereby agree, as between themselves, that if any Subsidiary Guarantor shall become an Excess Funding Guarantor (as 120 defined below) by reason of the payment by such Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata Portion (as defined below and determined, for this purpose, without reference to the properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any Excess Funding Guarantor under this Section 8.08 shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Subsidiary Guarantor under the other provisions of this Section 8 and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations. For purposes of this Section 8.08, (i) "Excess Funding Guarantor" shall mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has paid an amount in excess of its Pro Rata Portion of such Guaranteed Obligations, (ii) "Excess Payment" shall mean, in respect of any Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Portion of such Guaranteed Obligations and (iii) "Pro Rata Portion" shall mean, for any Subsidiary Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the aggregate present fair saleable value of all properties of such Subsidiary Guarantor (excluding any shares of stock of any other Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of such Subsidiary Guarantor (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of such Subsidiary Guarantor hereunder and any obligations of any other Subsidiary Guarantor that have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which the aggregate fair saleable value of all properties of the Company and all of the Subsidiary Guarantors exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Company and the Subsidiary Guarantors hereunder) of the Company and all of the Subsidiary Guarantors, all as of the Closing Date. If any Subsidiary becomes a Subsidiary Guarantor hereunder subsequent to the Closing Date, then for purposes of this Section 8.08 such subsequent Subsidiary Guarantor shall be deemed to have been a Subsidiary Guarantor as of the Closing Date and the aggregate present fair saleable value of the properties, and the amount of the debts and liabilities, of such Subsidiary Guarantor as of the Closing Date shall be deemed to be equal to such value and amount on the date such Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder. 121 Section 8.09. General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate law, or any state or Federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 8.01 would otherwise, taking into account the provisions of Section 8.08, be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under said Section 8.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Lender, each Issuing Bank, the Agent or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. ARTICLE IX MISCELLANEOUS Section 9.01. Amendments, Consents, Etc. -------------------------- (a) No amendment or waiver of any provision of this Agreement, the Notes or the other Loan Documents, nor any consent to any departure by any Obligor from any provision of this Agreement, the Notes or the other Loan Documents, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that (i) no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (1) waive any of the conditions specified in Section 3.01 or 3.02 or, in the case of the initial Borrowing or the Terra Facility C Borrowing, Section 3.03, (2) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, or the number or percentage of Lenders, that shall be required for the Lenders or any of them to take any action hereunder, (3) amend this Section 9.01, (4) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, or (5) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder or amend Section 2.03 or 2.05, and (ii) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender that has a Commitment under the Facility affected by such amendment, waiver or consent, (1) increase the Commitments of such Lender or subject such Lender to any additional obligations, (2) reduce the principal of, or interest on, the Notes held by such Lender or any fees or 122 other amounts payable hereunder to such Lender, (3) postpone any date fixed for any payment of principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender or (4) change the order of application of any prepayment set forth in Section 2.05 in any manner that materially affects such Lender; and provided, further, that no amendment, waiver or consent shall, unless in writing and (x) signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement, any Note or any other Loan Document, and (y) signed by each Issuing Bank in addition to the Lenders required to take such action, amend Section 2.07, 2.13 or 3.02, increase the Letter of Credit Sublimit or otherwise affect the rights or obligations of any Issuing Bank under this Agreement. (b) Except as otherwise provided in the Security Documents, the Agent shall not consent to release any Collateral or otherwise terminate any Lien under any Security Document unless such release or termination shall be consented to in writing by the Required Lenders; provided, that the consent of all Lenders shall be required to release all or substantially all of the Collateral, except upon the termination of the Liens created by each of the Security Documents in accordance with the terms thereof. Section 9.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopy communication) and mailed, telecopied or delivered: (a) if to the Company, care of Terra Industries Inc., 600 Fourth Street, Sioux City, Iowa 51102, Attention: Francis G. Meyer, Vice President and Chief Financial Officer, telephone number (712) 279-8790; telecopier number (712) 279-8703; (b) if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule 2.01; (c) if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; (d) if to any Issuing Bank, at its address beneath its signature hereto; (d) if to the Agent, at its address at 399 Park Avenue, New York, New York 10043, Attention: [___________], telephone number (___) ___-___, telecopier number (___) ___-___; 123 or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed or telecopied, be effective when deposited in the mails or transmitted by telecopier, respectively, except that notices and communications to the Agent pursuant to Article II, III or VII shall not be effective until received by the Agent. Section 9.03. No Waiver; Remedies. No failure on the part of any Lender, any Issuing Bank or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Each Obligor irrevocably waives, to the fullest extent permitted by applicable law, any claim that any action or proceeding commenced by the Agent, any Issuing Bank or any Lender relating in any way to this Agreement should be dismissed or stayed by reason, or pending the resolution, of any action or proceeding commenced by any Obligor relating in any way to this Agreement whether or not commenced earlier. To the fullest extent permitted by applicable law, the Obligors shall take all measures necessary for any such action or proceeding commenced by the Agent, any Issuing Bank or any Lender to proceed to judgment prior to the entry of judgment in any such action or proceeding commenced by any Obligor. Section 9.04. Costs, Expenses and Indemnification. ----------------------------------- (a) Each Borrower agrees to pay on demand (i) all costs and expenses of the Agent, the Issuing Banks and the Lenders in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents including, without limitation, (A) all due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, insurance, consultant, search, filing and recording fees and expenses, ongoing audit expenses and all other reasonable out-of-pocket expenses incurred by the Agent (including the reasonable and documented fees and expenses of Milbank, Tweed, Hadley & McCloy, special counsel to the Agent) whether or not any of the transactions contemplated by this Agreement are consummated and (B) the reasonable and documented fees and expenses of counsel for the Agent with respect thereto, with respect to advising the Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Obligor or with other creditors of any Obligor or any of its Subsidiaries arising 124 out of any Default or Event of Default or any events or circumstances that may reasonably be expected to give rise to a Default or Event of Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto) and (ii) all costs and expenses of the Agent, the Issuing Banks and the Lenders in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise (including, without limitation, the reasonable and documented fees and expenses of counsel for the Agent, each Issuing Bank and each Lender with respect thereto). (b) Each Borrower agrees to indemnify and hold harmless the Agent, each Issuing Bank and each Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) the Transactions or any part thereof (including, without limitation, the Initial Merger, the Second Merger and any of the other transactions contemplated hereby) or (ii) the actual or alleged presence of Hazardous Materials on any property owned by an Obligor or any Environmental Action relating in any way to any Obligor or any of its Subsidiaries, in each case whether or not such investigation, litigation or proceeding is brought by any Obligor, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the Transactions or the other transactions contemplated hereby are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non- appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. Each Borrower also agrees not to assert any claim against the Agent, any Issuing Bank, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to any of the Transactions or the other transactions contemplated herein or in any other Loan Document or the actual or proposed use of the proceeds of the Advances. For purposes of this Section 9.04(b), the term "non-appealable" includes any judgment as to which all appeals have been taken or as to which the time for taking an appeal shall have expired. 125 (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by a Borrower to or for the account of a relevant Lender other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.03, 2.05, 2.08(b)(i) or 2.09(d) or as the result of acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, such Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (d) If any Obligor fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, reasonable and documented fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Obligor by the Agent or any Lender, in its sole discretion. Section 9.05. Right of Setoff. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of each Borrower against any and all of the Obligations of such Borrower now or hereafter existing under this Agreement and the Note held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the relevant Borrower after any such setoff and application; provided, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) that such Lender may have. Section 9.06. Governing Law; Submission to Jurisdiction. This Agreement and the Notes shall be governed by, and construed in accordance with, the law of the State of New York. Each Obligor hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern 126 District of New York and of any New York state court sitting in New York City for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Obligor irrevocably waives, to the fullest extent permitted by applicable law, any objection that 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 9.07. Assignments and Participations. ------------------------------ (a) Each Lender may assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); provided, that: (i) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an affiliate of a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than the lesser of (x) such Lender's Commitments hereunder and (y) $5,000,000 or an integral multiple of $1,000,000 in excess thereof (except as otherwise agreed by the relevant Borrower and the Agent), (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an affiliate of a Lender, each such assignment shall be made only upon the prior written approval of the Company, such approval not to be unreasonably withheld, (iii) each such assignment shall be to an Eligible Assignee, (iv) each such assignment by a Lender of its Advances, Note or Commitment under any Facility shall be made in such manner so that the same portion of its Advances, Note and Commitment under such Facility is assigned to the respective assignee, (v) each such assignment by a Lender of its Advances, Note or Commitment under any of the Terra Facilities (other than Terra Facility B) shall be made in such manner so that the same portion of its Advances, Note and Commitment under all such Facilities is assigned to the respective assignee, 127 (vi) each such assignment by a Lender of its Advances, Note or Commitment under the AMLP Facilities shall be made in such manner so that the same portion of its Advances, Note and Commitment under the AMLP Facilities is assigned to the respective assignee, and (vii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $3,000. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Obligor or the performance or observance by the Obligors of any of their respective obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender 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 128 action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. (c) The Agent shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, together with any Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit G hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice, the relevant Borrower, at its own expense, shall execute and deliver to the Agent in exchange for the surrendered Note or Notes a new Note or Notes to the order of such assignee in an amount equal to the Commitments assumed by it under the relevant Facilities pursuant to such Assignment and Acceptance and, if the assigning Lender has retained Commitments under such Facilities, a new Note or Notes to the order of the assigning Lender in an amount equal to the Commitments retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1, A-2 or A-3, as the case may be. (e) Each Lender may sell participations in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its 129 Commitments, the Advances owing to it and the Note or Notes held by it); provided, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Obligors, the Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Obligor therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or release all or substantially all of the Collateral. (f) Any Issuing Bank may (subject to the prior written consent of Terra, such consent not to be unreasonably withheld) assign all, but not less than all, of its rights and obligations under this Agreement to a successor Issuing Bank that is a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $1,000,000,000 and, upon the acceptance of such assignment, the successor Issuing Bank shall succeed to such rights and obligations and such assigning Issuing Bank shall be discharged from its duties and obligations under this Agreement, including, without limitation, its Letter of Credit Commitment. (g) Any Issuing Bank and any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree in writing to preserve the confidentiality of any Confidential Information received by it from such Issuing Bank or Lender. (h) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in 130 accordance with Regulation A of the Board of Governors of the Federal Reserve System. (i) Anything in this Section 9.07 to the contrary notwithstanding, each Terra Facility B Lender shall be permitted to pledge all or any part of its right, title and interest in, to and under the Advances and Notes held by it to any trustee for the benefit of the holders of such Lender's securities. (j) Anything in this Section 9.07 to the contrary notwithstanding, neither Terra nor any of its Subsidiaries or Affiliates may acquire (whether by assignment, participation or otherwise), and no Lender or Issuing Bank shall assign or participate to Terra or any of its Subsidiaries or Affiliates, any interest in any Commitment, Advance or other amount owing hereunder without the prior consent of each Lender; provided, that the Lenders and the Issuing Banks may assign all of their interests in the Commitments, Advances and such other amounts pursuant to the Loan Purchase Agreement. Section 9.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. Section 9.09. No Liability of the Issuing Banks. Each relevant Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the relevant Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the relevant Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to such Borrower, to the extent of any direct, but not consequential, damages suffered by such Borrower that such Borrower proves were caused by (i) such Issuing Bank's willful misconduct or gross negligence in determining whether documents 131 presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. Section 9.10. Confidentiality. Neither the Agent, any Issuing Bank nor any Lender shall disclose any Confidential Information to any Person without the prior consent of the Company, other than (a) to the Agent's, such Issuing Bank's or such Lender's Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking and (d) in connection with credit inquiries from suppliers of the Borrowers and/or their Subsidiaries and other Persons who, from time to time, inquire as to the creditworthiness of the Borrowers. Section 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT, THE LENDERS AND THE ISSUING BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES, THE LETTERS OF CREDIT OR THE ACTIONS OF THE AGENT, ANY LENDER OR ANY ISSUING BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. Section 9.12. Survival. The obligations of the Borrowers under Sections 2.09, 2.11 and 9.04, the obligations of each Guarantor under Section 8.03, and the obligations of the Lenders under Section 7.05, shall survive the repayment of the Advances and the termination of the Commitments. In addition, each representation and warranty made, or deemed to be made by a notice of any extension of credit (whether by means of an Advance or a Letter of Credit), herein or pursuant hereto shall survive the making of such representation and warranty, and no Lender or Issuing Bank shall be deemed to have waived, by reason of making any extension of credit hereunder (whether by means of an Advance or a Letter of Credit), any Default or Event of Default that may arise by reason of such representation or warranty proving to have been false or misleading, notwithstanding that such Lender, such Issuing Bank or the Agent may have had notice or knowledge or reason to believe that such representation or warranty was 132 false or misleading at the time such extension of credit was made. Section 9.13. Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 9.14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, provided, that no Obligor may assign any of its rights or obligations hereunder or under the other Loan Documents without the prior consent of all of the Lenders, the Issuing Banks and the Agent. 133 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. TERRA INDUSTRIES INC. By____________________________ Title: TERRA CAPITAL, INC. By____________________________ Title: AGRICULTURAL MINERALS, LIMITED PARTNERSHIP By Agricultural Minerals Corporation, its General Partner By_______________________ Title: TERRA AND AMLP GUARANTORS ------------------------- AGRICULTURAL MINERALS CORPORATION By____________________________ Title: BEAUMONT METHANOL CORPORATION By____________________________ Title: BMC HOLDINGS, INC. By____________________________ Title: 134 TERRA CAPITAL HOLDINGS By____________________________ Title: THE AGENT --------- CITIBANK, N.A. By____________________________ Title: THE ISSUING BANKS ----------------- CITIBANK, N.A. By____________________________ Title: (Others) THE LENDERS ----------- [TO BE COMPLETED] By____________________________ Title: 135 -----END PRIVACY-ENHANCED MESSAGE-----