<PAGE>
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(/1/) DISCOUNT(/1/)(/2/) COMPANY(/3/)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
- -------------------------------------------------------------------------------
Total(/4/)......................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(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.
<PAGE>
[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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<TABLE>
<S> <C>
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
</TABLE>
- --------
(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
<PAGE>
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
<PAGE>
TERRA INDUSTRIES INC.
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1994
--------------------
ACTUAL PRO FORMA(A)
-------- -----------
(UNAUDITED)
<S> <C> <C>
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
</TABLE>
7
<PAGE>
- --------
(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
<PAGE>
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)
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- --------
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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.
<TABLE>
<S> <C> <C>
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
=============
</TABLE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
DIVIDENDS DECLARED
PER COMMON
HIGH LOW SHARE
------ ------ ------------------
<S> <C> <C> <C>
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 --
</TABLE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
AT JUNE 30, 1994
----------------------
(UNAUDITED)
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
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
========= ==========
</TABLE>
- --------
(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
<PAGE>
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
<PAGE>
TERRA INDUSTRIES INC.
PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION
JUNE 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE PRO FORMA
COMPANY AMCI ADJUSTMENTS PRO FORMA
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
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
======== ======== ======== ==========
</TABLE>
See accompanying Notes to the Pro Forma Combined Financial Statements.
21
<PAGE>
TERRA INDUSTRIES INC.
PRO FORMA COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THE PRO FORMA
COMPANY AMCI ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
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
========== ==========
</TABLE>
See accompanying Notes to the Pro Forma Combined Financial Statements.
22
<PAGE>
TERRA INDUSTRIES INC.
PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TERRA PRO FORMA
THE ASGROW PRO FORMA TERRA PRO FORMA
COMPANY FLORIDA ADJUSTMENTS CANADA AMCI ADJUSTMENTS PRO FORMA
---------- ------- ----------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
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
========== ==========
</TABLE>
See accompanying Notes to the Pro Forma Combined Financial Statements.
23
<PAGE>
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):
<TABLE>
<S> <C>
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)
=========
</TABLE>
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):
<TABLE>
<S> <C> <C>
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
========
</TABLE>
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
<PAGE>
(d) The pro forma adjustment reflects the following (in thousands):
<TABLE>
<S> <C>
Fair value adjustments to the Senior Notes of AMCI............... $(7,512)
<CAPTION>
Payment of finance fees for new financing........................ 11,200
Adjustment of other assets to conform accounting methods......... (3,994)
<S> <C>
Write-off of deferred finance fees related to refinanced credit
lines............................................................. (2,900)
-------
$(3,206)
=======
</TABLE>
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
<PAGE>
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
<PAGE>
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
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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):
<TABLE>
<CAPTION>
THE COMPANY
--------------
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Ammonia.......................................................... 28% 30% 31%
Urea............................................................. 11% 11% 11%
UAN.............................................................. 61% 59% 58%
</TABLE>
<TABLE>
<CAPTION>
AMCI
--------------
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Ammonia.......................................................... 18% 16% 16%
Urea............................................................. 16% 16% 16%
UAN.............................................................. 66% 68% 68%
</TABLE>
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)
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<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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
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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.
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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.
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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
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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
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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
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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.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
S. G. Warburg & Co. Inc.........................................
---------
Total....................................................... 9,700,000
=========
</TABLE>
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
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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,
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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
<PAGE>
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
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
F-1
<PAGE>
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
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------
1994 1993 1992
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
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
========= ========= =========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
F-3
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED
ENDED JUNE 30, DECEMBER 31,
-------------------- ----------------------------------
1994 1993 1993 1992 1991
---------- -------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
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)
========== ======== ========== ========== ==========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
F-4
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON CLASS A TRUST PAID-IN TRANSLATION ACCUMULATED
SHARES SHARES SHARES CAPITAL ADJUSTMENT DEFICIT TOTAL
-------- ------- ------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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
======== ======= ======= ======== ======= ========= ========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
F-5
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED
ENDED JUNE 30, DECEMBER 31,
-------------------- ------------------------------
1994 1993 1993 1992 1991
--------- --------- -------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
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
======== ======== ==========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
F-6
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
SIX MONTHS 31,
ENDED ---------------------
JUNE 30, 1994 1993 1992
------------- ---------- ----------
(IN THOUSANDS, EXCEPT PER-SHARE
DATA)
<S> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
1992 1991
----- ------
(IN
MILLIONS)
<S> <C> <C>
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
===== ======
</TABLE>
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:
<TABLE>
<CAPTION>
JUNE 30,
1994 DECEMBER 31,
----------- -----------------
1993 1992
(IN THOUSANDS) (UNAUDITED) -------- --------
<S> <C> <C> <C>
Raw materials..................................... $ 28,751 $ 22,983 $ 14,770
Finished goods.................................... 239,606 222,012 183,851
-------- -------- --------
Total......................................... $268,357 $244,995 $198,621
======== ======== ========
</TABLE>
F-10
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
<TABLE>
<CAPTION>
JUNE 30,
1994 DECEMBER 31,
----------- --------------------
1993 1992
(IN THOUSANDS) (UNAUDITED) --------- ---------
<S> <C> <C> <C>
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
========= ========= =========
</TABLE>
8. DEBT DUE WITHIN ONE YEAR
Debt due within one year consisted of the following:
<TABLE>
<CAPTION>
JUNE 30,
1994 DECEMBER 31,
----------- --------------
1993 1992
(IN THOUSANDS) (UNAUDITED) ------ -------
<S> <C> <C> <C>
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
======== ====== =======
</TABLE>
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:
<TABLE>
<CAPTION>
JUNE 30,
1994 DECEMBER 31,
----------- -----------------
1993 1992
(IN THOUSANDS) (UNAUDITED) -------- --------
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
F-11
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JUNE 30,
1994 DECEMBER 31,
----------- ------------------
1993 1992
(IN THOUSANDS) (UNAUDITED) -------- --------
<S> <C> <C> <C>
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
======= ======== ========
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1994.............................................................. $25,178
1995.............................................................. 21,329
1996.............................................................. 16,998
1997.............................................................. 11,244
1998 and thereafter............................................... 5,061
-------
Total......................................................... $79,810
=======
</TABLE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
COMMON CLASS A TRUST TOTAL
SHARES SHARES SHARES SHARES
(IN THOUSANDS) ------ ------- ------ ------
<S> <C> <C> <C> <C>
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
====== ======= ====== ======
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
UNDER OPTION PER SHARE
(IN THOUSANDS) ------------ ----------------
<S> <C> <C>
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
===== ================
</TABLE>
The number of options exercisable at December 31 for each of the past three
years follows:
<TABLE>
<CAPTION>
PRICE RANGE
OPTIONS PER SHARE
(IN THOUSANDS) ------- ---------------
<S> <C> <C>
1991............................................ 2,101 $4.13 to $13.11
1992............................................ 2,255 3.38 to 13.11
1993............................................ 1,777 3.38 to 11.38
===== ===============
</TABLE>
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:
<TABLE>
<CAPTION>
1993 1992 1991
(IN THOUSANDS) ------ ------ ------
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
F-16
<PAGE>
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:
<TABLE>
<CAPTION>
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) ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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)
======== ======= ======== =======
</TABLE>
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:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
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%
==== ==== ====
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
1993 1992
(IN THOUSANDS) -------- --------
<S> <C> <C>
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)
======== ========
</TABLE>
Net periodic post-retirement medical benefit cost consisted of the following
components:
<TABLE>
<CAPTION>
1993 1992
(IN THOUSANDS) ------ ------
<S> <C> <C>
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
====== ======
</TABLE>
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:
<TABLE>
<CAPTION>
1993 1992 1991
(IN THOUSANDS) ------- ------- -------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
18. INCOME TAXES
Components of the income tax provision (benefit) applicable to continuing
operations are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
(IN THOUSANDS) ------- ------ ------
<S> <C> <C> <C>
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
======= ====== ======
</TABLE>
F-18
<PAGE>
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:
<TABLE>
<CAPTION>
1993 1992 1991
(IN THOUSANDS) ------- ------- -------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
1993 1992
(IN THOUSANDS) -------- -------
<S> <C> <C>
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
======== =======
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
1993 1992 1991
(IN THOUSANDS) ------- -------- ------
<S> <C> <C> <C>
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
======= ======== ======
</TABLE>
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
<PAGE>
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
<PAGE>
AGRICULTURAL MINERALS AND CHEMICALS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -----------------
1994 1993 1992
---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
See accompanying notes.
F-22
<PAGE>
AGRICULTURAL MINERALS AND CHEMICALS INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED
ENDED JUNE 30, DECEMBER 31,
------------------ ----------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
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
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-23
<PAGE>
AGRICULTURAL MINERALS AND CHEMICALS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES AND PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
AGRICULTURAL
MINERALS
AND CHEMICALS
INC. BMC HOLDINGS INC. CAPITAL
COMMON STOCK COMMON STOCK IN
------------------ ------------------ EXCESS OF RETAINED
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS
---------- ------ ---------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
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
========== ==== ========== ==== ======== =======
</TABLE>
See accompanying notes.
F-24
<PAGE>
AGRICULTURAL MINERALS AND CHEMICALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
---------------- --------------------------
1994 1993 1993 1992 1991
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
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
======= ======= ======= ======= ========
</TABLE>
See accompanying notes.
F-25
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
Property, plant and equipment...................................... $ 158
<S> <C>
Receivables........................................................ 2
Other assets and obligations (net)................................. 5
-----
$ 165
=====
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1993 1992 1991
(IN THOUSANDS) ------ ------- -------
<S> <C> <C> <C>
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
====== ======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1993 1992
(IN THOUSANDS) ------- -------
<S> <C> <C>
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
======= =======
</TABLE>
F-30
<PAGE>
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:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1993 1992 1991
(IN THOUSANDS) ------- ------- -------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
JUNE 30,
1994 1993 1992
----------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1993 1992 1991
(IN THOUSANDS) ------ ------ ------
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
The following table reconciles the funded status of the plans to the amount
included in the balance sheets:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1993 1992
(IN THOUSANDS) ------ ------
<S> <C> <C>
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
====== ======
</TABLE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1992
---------- ---------------------
AMCI AMCI BMCH
---------- ---------- ----------
<S> <C> <C> <C>
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 $ --
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -----------------
1994 1993 1992
----------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
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
======== ======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1998........................................................... 105.375%
1999........................................................... 102.688%
2000 and thereafter............................................ 100.000%
</TABLE>
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
<PAGE>
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):
<TABLE>
<S> <C>
Year ending December 31:
1994........................................................... $ 726
1995........................................................... 763
1996........................................................... 41,386
1997........................................................... 386
1998........................................................... 386
Later years.................................................... 175,771
--------
$219,418
========
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
(IN THOUSANDS) ------- ---------
<S> <C> <C>
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
====== ======
</TABLE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
1993 1992
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
(IN THOUSANDS) -------- ------- -------- -------
<S> <C> <C> <C> <C>
Natural gas swaps..................... $ -- $(4,849) $ -- $(3,827)
Interest rate swaps................... (1,096) (1,096) (2,096) (4,634)
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1992 1991
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) -------- -------- --------
<S> <C> <C> <C>
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
======== ======== ========
<CAPTION>
DECEMBER 31,
------------------
1993 1992
-------- --------
<S> <C> <C> <C>
Identifiable assets:
Nitrogen fertilizer....................... $330,169 $317,035
Methanol.................................. 176,226 188,878
-------- --------
Total assets............................ $506,395 $505,913
======== ========
</TABLE>
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
<PAGE>
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
<PAGE>
[This page left intentionally blank]
<PAGE>
[Inside back Cover Page.]
<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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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.
<TABLE>
<S> <C>
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
==========
</TABLE>
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
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<C> <S> <C>
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
</TABLE>
- --------
*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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE(S)
--------- ----- -------
<S> <C> <C>
* 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
</TABLE>
/s/ GEORGE H. VALENTINE
By: ______________________________________
George H. Valentine
Attorney-in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
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.................................................
</TABLE>
- --------
*Filed previously in connection with Amendment No. 2.
II-5
<PAGE>
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."
<PAGE>
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
<PAGE>
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
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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
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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
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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
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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
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<PAGE>
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
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<PAGE>
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
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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
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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.
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(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.
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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
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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
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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.
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<PAGE>
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
<PAGE>
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
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<PAGE>
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
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<PAGE>
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
<PAGE>
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.
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<PAGE>
(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
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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.
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<PAGE>
(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
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<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
SCHEDULE I
----------
Number of Firm
Name Shares To be Purchased
---- ----------------------
S.G. Warburg & Co. Inc. ...............
Total ..............................
26
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
<CAPTION>
Rights Period Gallons of Methanol
------------- -------------------
<S> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
- --------------------------------------------------------------------------------
<PAGE>
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
<PAGE>
(ii)
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
<PAGE>
(iii)
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
<PAGE>
(iv)
<TABLE>
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<S> <C>
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
</TABLE>
<PAGE>
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
<PAGE>
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
<PAGE>
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,
<PAGE>
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
<PAGE>
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
<PAGE>
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).
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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)
<PAGE>
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
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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
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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.
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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
<PAGE>
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
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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.
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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
<PAGE>
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
<PAGE>
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.
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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.
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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.
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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;
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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.
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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.
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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
<PAGE>
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.
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
1998 105.375%
1999 102.688%
</TABLE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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:
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
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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
<PAGE>
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
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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
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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;
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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
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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
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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).
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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
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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;
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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.
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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
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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;
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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;
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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
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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
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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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
(A) (B) (C)
--- --- ---
<S> <C> <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
</TABLE>
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
<PAGE>
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
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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
<PAGE>
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
<PAGE>
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.
<PAGE>
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;
<PAGE>
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
<PAGE>
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.
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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
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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.
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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).
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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
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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.
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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
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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:
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(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
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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.
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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,
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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
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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
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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
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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;
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(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
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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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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)
<PAGE>
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:__________________________________
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
1998 105.375%
1999 102.688%
</TABLE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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)
<PAGE>
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:__________________________________
<PAGE>
EXHIBIT 99.3
AGREEMENT OF LIMITED PARTNERSHIP
OF
AGRICULTURAL MINERALS COMPANY, L.P.
<PAGE>
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>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
A-2
<PAGE>
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
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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
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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
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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
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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.
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"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.
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<PAGE>
"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
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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.
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"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.
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"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.
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"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.
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"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.
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"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.
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"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.
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"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
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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);
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(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
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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,
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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
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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;
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(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
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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
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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
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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)
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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
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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,
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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
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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
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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
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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-
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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
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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.
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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
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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
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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,
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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
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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
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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
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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).
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(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.
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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
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(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.
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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.
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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
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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
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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
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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.
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(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.
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(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
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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)
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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
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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.
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(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
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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
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(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;
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(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.
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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
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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
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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
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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
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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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
EXHIBIT 99.4
AGREEMENT OF LIMITED PARTNERSHIP
OF
AGRICULTURAL MINERALS, LIMITED PARTNERSHIP
<PAGE>
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>
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>
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>
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)
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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).
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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.
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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.
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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
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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
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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.
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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
<PAGE>
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
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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,
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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
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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
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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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
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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
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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
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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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
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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,
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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;
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
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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
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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.
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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.
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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
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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
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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.
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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
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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.
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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;
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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
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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
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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
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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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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;
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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;
<PAGE>
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;
<PAGE>
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:
<PAGE>
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
<PAGE>
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;
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<TABLE>
<CAPTION>
<S> <C>
Section 1.01. Certain Defined Terms..................... 3
Section 1.02. Computation of Time Periods............... 37
Section 1.03. Accounting Terms.......................... 37
</TABLE>
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
ARTICLE III
CONDITIONS OF LENDING
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
2
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the
Borrower. 77
ARTICLE V
COVENANTS OF THE BORROWER
<TABLE>
<CAPTION>
<S> <C>
Section 5.01. Affirmative Covenants..................... 84
Section 5.02. Negative Covenants........................ 90
Section 5.03. Reporting Requirements.................... 98
Section 5.04. Financial Covenants....................... 103
</TABLE>
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
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
ARTICLE VIII
THE GUARANTEE
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
ARTICLE IX
3
<PAGE>
<TABLE>
MISCELLANEOUS
<S> <C>
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
</TABLE>
4
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
following respective amounts for the following respective fiscal years of
Terra:
<TABLE>
<CAPTION>
Fiscal Year Allowance
- --------------------------------- -----------
<S> <C>
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
</TABLE>
"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:
<TABLE>
<CAPTION>
Fiscal Year Allowance
- --------------------------------- -----------
<S> <C>
1995 $15,000,000
1996 $25,000,000
1997 $25,000,000
1998 and each
fiscal year
thereafter $30,000,000
</TABLE>
"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
<PAGE>
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
<PAGE>
"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
<PAGE>
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:
<TABLE>
<CAPTION>
Applicable Margin (% p.a.)
----------------------------
<S> <C> <C>
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%
</TABLE>
(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
<PAGE>
"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
<PAGE>
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
<PAGE>
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
<PAGE>
"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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
"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
<PAGE>
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
<PAGE>
"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
<PAGE>
(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
<PAGE>
"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
<PAGE>
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
<PAGE>
"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
<PAGE>
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
<PAGE>
"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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
"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
<PAGE>
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
<PAGE>
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
<PAGE>
"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
<PAGE>
"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
<PAGE>
"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
$100,000,000; and
40
<PAGE>
(c) the Debt to Cash Flow Ratio for the fiscal year of Terra
ending on or most recently ended prior to the date of determination
does not exceed 2.50 to 1.
"Type" refers to the distinction between Advances bearing interest at
the Base Rate and Advances bearing interest at the Eurodollar Rate.
"Unused AMLP Working Capital Commitment" means, with respect to any
Lender at any time, (a) such Lender's AMLP Facility B Commitment at such
time minus (without duplication) (b) the sum of (i) the aggregate
outstanding principal amount of all AMLP Facility B Advances made by such
Lender and (ii) such Lender's Pro Rata Share of the aggregate Available
Amount of all AMLP Letters of Credit outstanding at such time and of all
unreimbursed drawings thereunder.
"Unused Terra Working Capital Commitment" means, with respect to any
Terra Facility E Lender at any time, (a) such Lender's Terra Facility E
Commitment at such time minus (without duplication) (b) the sum of (i) the
aggregate outstanding principal amount of all Terra Facility E Advances
made by such Lender and (ii) such Lender's Pro Rata Share of the aggregate
Available Amount of all Terra Letters of Credit outstanding at such time
and of all unreimbursed drawings thereunder.
"U.S. Dollars" and "$" 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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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:
<TABLE>
<CAPTION>
Terra Facility A
Principal Payment Date
Falling on or
Nearest To Amount
------------------------ -----------
<S> <C>
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
</TABLE>
(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
<PAGE>
<TABLE>
<CAPTION>
Terra Facility B
Principal Payment Date
Falling on or
Nearest To Amount
- ---------------------------------- -----------
<S> <C>
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
</TABLE>
(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
---------------------- ------
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
(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
<PAGE>
<TABLE>
<CAPTION>
Terra Facility D
Principal Payment Date
Falling on or
Nearest To Amount
- ---------------------------------- -------------
<S> <C>
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
</TABLE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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(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
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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;
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(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.
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(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.
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(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.
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(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
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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,
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(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.
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(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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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,
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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
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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
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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
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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
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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
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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
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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
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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);
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(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;
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(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);
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(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
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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.
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(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;
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(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.
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(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
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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
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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
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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
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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
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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
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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:
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<TABLE>
<CAPTION>
Each
Rolling Period
Ending In Ratio
- ------------------------------------- ------------
<S> <C>
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
</TABLE>
(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:
<TABLE>
<CAPTION>
Each
Rolling Period
Ending In Ratio
- ------------------------------------- ------------
<S> <C>
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
</TABLE>
(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:
<TABLE>
<CAPTION>
Each
Rolling Period
Ending In Ratio
- ------------------------------------- ------------
<S> <C>
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
</TABLE>
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(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
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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
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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
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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
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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
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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
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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.
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(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
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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
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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.
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(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
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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.
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(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
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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
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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
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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.
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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
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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 (___) ___-___;
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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
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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.
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(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
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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,
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(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
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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
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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
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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
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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
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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.
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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:
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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
