<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 1-8520
TERRA INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
MARYLAND 52-1145429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
TERRA CENTRE
P.O. BOX 6000
600 FOURTH STREET 51102-6000
SIOUX CITY, IOWA (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (712) 277-1340
------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of October 31, 1996, the following shares of the registrant's stock were
outstanding:
Common Shares, without par value 74,716,994 shares
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS
Cash and short-term investments $ 35,410 $ 138,707 $ 93,447
Accounts receivable, less allowance for
doubtful accounts of $12,130, $10,626 and $11,481 379,107 178,738 407,113
Inventories 366,390 367,272 344,587
Deferred tax asset -- current 23,768 23,768 43,992
Other current assets 72,885 55,511 59,421
- ------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 877,560 763,996 948,560
- ------------------------------------------------------------------------------------------------------------------
Equity and other investments 22,308 15,408 17,575
Property, plant and equipment, net 792,990 694,358 667,180
Excess of cost over net assets of acquired businesses 296,294 308,414 313,050
Partnership distribution reserve fund 18,480 18,480 18,480
Other assets 68,285 67,202 55,491
- ------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,075,917 $1,867,858 $2,020,336
==================================================================================================================
LIABILITIES
Debt due within one year $ 178,998 $ 30,425 $ 107,172
Accounts payable 223,658 203,400 248,789
Accrued and other liabilities 208,248 222,298 164,354
- ------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 610,904 456,123 520,315
- ------------------------------------------------------------------------------------------------------------------
Long-term debt 405,338 407,162 503,925
Deferred tax liability -- non-current 124,121 111,871 117,583
Other liabilities 169,928 138,218 135,786
Minority interest 176,711 182,901 184,329
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,487,002 1,296,275 1,461,938
- ------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock
Common Shares, authorized 133,500 shares;
outstanding 74,764, 81,173 and 81,178 shares 127,534 133,970 133,969
Paid-in capital 549,755 631,195 631,192
Cumulative translation adjustment (234) (271) 191
Accumulated deficit (88,140) (193,311) (206,954)
- ------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 588,915 571,583 558,398
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,075,917 $1,867,858 $2,020,336
==================================================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements. 2
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ------------------------------
1996 1995 1996 1995
--------------------------- ------------------------------
<S> <C> <C> <C> <C>
REVENUES
Net sales $456,678 $483,318 $1,911,851 $1,889,148
Other income, net 14,860 8,947 40,106 50,126
- -------------------------------------------------------------------------------------------------------------
471,538 492,265 1,951,957 1,939,274
- -------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales 343,105 357,143 1,470,402 1,419,252
Selling, general and
administrative expense 69,903 64,956 224,109 196,737
Equity in earnings of
unconsolidated affiliates (3,718) (2,602) (4,902) (3,860)
Interest income (2,054) (4,824) (5,781) (10,887)
Interest expense 16,123 17,797 42,891 48,240
Minority interest 9,220 10,660 35,017 38,869
- -------------------------------------------------------------------------------------------------------------
432,579 443,130 1,761,736 1,688,351
- -------------------------------------------------------------------------------------------------------------
Income before income taxes and
extraordinary items 38,959 49,135 190,221 250,923
Income tax provision 15,057 19,900 76,469 103,670
- -------------------------------------------------------------------------------------------------------------
Income before
extraordinary items 23,902 29,235 113,752 147,253
Extraordinary loss on early
retirement of debt --- (4,338) --- (4,338)
- -------------------------------------------------------------------------------------------------------------
NET INCOME $ 23,902 $ 24,897 $ 113,752 $ 142,915
=============================================================================================================
EARNINGS PER SHARE:
Income before
extraordinary items $ 0.32 $ 0.36 $ 1.45 $ 1.81
Extraordinary loss on early
retirement of debt --- (0.05) --- (0.05)
- -------------------------------------------------------------------------------------------------------------
NET INCOME $ 0.32 $ 0.31 $ 1.45 $ 1.76
=============================================================================================================
WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 75,370 81,443 78,651 81,297
=============================================================================================================
CASH DIVIDENDS DECLARED
PER SHARE $ 0.04 $ 0.03 $ 0.11 $ 0.07
=============================================================================================================
See accompanying Notes to the Consolidated Financial Statements. 3
</TABLE>
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
Common Paid-In Translation Accumulated
Shares Capital Adjustment Deficit Total
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $133,770 $630,111 $(1,259) $(344,193) $418,429
Exercise of stock options 194 1,071 --- --- 1,265
Stock incentive plan 5 10 --- --- 15
Translation adjustment --- --- 1,450 --- 1,450
Dividends --- --- --- (5,676) (5,676)
Net income --- --- --- 142,915 142,915
- -----------------------------------------------------------------------------------------------
Balance at September 30, 1995 $133,969 $631,192 $ 191 $(206,954) $558,398
===============================================================================================
<CAPTION>
Cumulative
Common Paid-In Translation Accumulated
Shares Capital Adjustment Deficit Total
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $133,970 $631,195 $ (271) $(193,311) $571,583
Exercise of stock options 141 517 --- --- 658
Stock repurchase (6,798) (84,585) --- --- (91,383)
Issuance of Common Shares 219 2,623 --- --- 2,842
Stock incentive plan 2 5 --- --- 7
Translation adjustment --- --- 37 --- 37
Dividends --- --- --- (8,581) (8,581)
Net income --- --- --- 113,752 113,752
- -----------------------------------------------------------------------------------------------
Balance at September 30, 1996 $127,534 $549,755 $ (234) $ (88,140) $588,915
===============================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
4
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 113,752 $ 142,915
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 57,196 49,263
Deferred income taxes 10,955 33,337
Equity in earnings of unconsolidated affiliates (4,902) (3,860)
Minority interest in earnings 35,017 38,869
Other non-cash items 696 4,486
Changes in current assets and liabilities, excluding
working capital purchased:
Accounts receivable (197,332) (252,685)
Inventories 10,643 (7,853)
Other current assets 7,304 (18,029)
Accounts payable 17,496 67,739
Accrued and other liabilities (27,631) (29,406)
Unreimbursed Port Neal casualty (17,660) (55,458)
Other (6,419) 18,794
- ------------------------------------------------------------------------------------
Net cash used in operating activities (885) (11,888)
- ------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (11,551) (12,185)
Port Neal plant construction (84,996) (93,433)
Insurance proceeds from plant casualty 26,675 92,637
Purchase of property, plant and equipment (39,390) (32,330)
Discontinued operations (154) 5,242
Purchase of minority interest - TNCLP --- (28,837)
Proceeds from investments 724 577
- ------------------------------------------------------------------------------------
Net cash used in investing activities (108,692) (68,329)
- ------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term borrowings 150,259 53,175
Proceeds from issuance of long-term debt --- 200,000
Principal payments on long-term debt (3,510) (225,111)
Stock repurchase/issuance, net (90,719) 1,187
Distribution to minority interests (41,206) (26,957)
Sale of subsidiary preferred stock to minority interests --- 24,950
Debt issuance costs --- (7,738)
Dividends (8,581) (5,676)
- ------------------------------------------------------------------------------------
Net cash provided by financing activities 6,243 13,830
- ------------------------------------------------------------------------------------
Foreign exchange effect on cash and short-term investments 37 1,450
- ------------------------------------------------------------------------------------
Decrease in cash and short-term investments (103,297) (64,937)
Cash and short-term investments at beginning of period 138,707 158,384
- ------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 35,410 $ 93,447
====================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
5
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The accompanying unaudited consolidated financial statements and notes
thereto contain all adjustments necessary to summarize fairly the financial
position of Terra Industries Inc. and all majority-owned subsidiaries (the
"Corporation") and the results of the Corporation's operations for the
periods presented. Because of the seasonal nature of the Corporation's
operations and effects of weather-related conditions in several of its
marketing areas, results of operations of any single reporting period
should not be considered as indicative of results for a full year. Certain
reclassifications have been made to prior years' financial statements to
conform with current year presentation. These statements should be read in
conjunction with the Corporation's 1995 Annual Report to Stockholders.
2. Per-share data are based on the weighted average number of Common Shares
that would become outstanding after allowing for the exercise of
outstanding stock options.
3. Inventories consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
(in thousands) 1996 1995 1995
<S> <C> <C> <C>
---------------------------------------------------------------------
Raw materials $ 48,891 $ 36,499 $ 36,013
Finished goods 317,499 330,773 308,574
---------------------------------------------------------------------
Total $366,390 $367,272 $344,587
=====================================================================
</TABLE>
4. The Corporation and certain of its subsidiaries are involved in various
legal actions and claims, including environmental matters, arising during
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 the results
of operations, financial position or cash flows of the Corporation.
5. The Corporation entered into a methanol hedging agreement (the "Methanol
Hedging Agreement") effective October 1994. Pursuant to the agreement, the
Corporation received $4 million in cash and agreed to make payments to the
extent that average methanol prices exceed the sum of $0.65 per gallon plus
0.113 times the average spot price index, in cents per MMBtu for natural
gas during the periods October 20, 1994 to December 31, 1995, calendar year
1996, and calendar year 1997. The amount due, if any, is dependent upon
average methanol and natural gas prices during each of the periods.
Payments are due five days after the end of each period. The quantities
subject to the agreement for each of these periods are 155.5 million, 140
million and 130 million gallons, respectively. The Corporation's methanol
production facilities have a capacity of 320 million gallons of methanol
per year.
The $4 million received pursuant to the Methanol Hedging Agreement is being
recognized as income over the term of the agreement. No amounts have been
paid or are presently accrued under the terms of the agreement. The
estimated fair value of the agreement, representing the amount that the
Corporation would expect to pay at September 30, 1996 to liquidate the
agreement for its remaining term, is less than $1 million.
6. On December 13, 1994, the Corporation's Port Neal facility in Iowa was
extensively damaged as a result of an explosion. There were four employee
fatalities plus injuries to other people and property damage. Insurance was
in force to cover the Corporation's property damage, business interruption
and third party liability claims. A $7 million pretax charge was recorded
in 1994 for expected uninsured costs associated with the incident,
including deductibles. As of September 30, 1996, the Corporation had
received interim payments of $203.3 million on its insurance claims. The
Corporation is in discussions with its insurers concerning additional
insurance proceeds to which the Corporation believes it should be entitled.
Estimated lost profits recoverable under the business interruption policy
are being included in income. Insurance
6
<PAGE>
proceeds received under the Corporation's property damage claim are being
deferred pending final settlement of the claim. The Corporation has
invested additional funds for enhancements and improvements at the Port
Neal facility.
The Corporation expects to record a substantial non-recurring gain,
representing the difference between the property insurance settlement on
the Port Neal facility with the Corporation's insurers and the carrying
value of the facility at the time of the explosion. The amount of the gain
will be dependent on final construction, clean-up expenditures and the
settlement reached with the Corporation's insurance carriers. As of
September 30, 1996, $109 million has been recorded as a deferred gain and
is included in other liabilities.
In September 1995, the Corporation transferred the Port Neal facility to
Port Neal Holdings Corp. ("PNH"). PNH was structured to finance and
complete the reconstruction of the Port Neal facility through its wholly
owned subsidiary, Port Neal Corporation ("PNC"). PNH issued to unrelated
third parties $25 million of non-convertible preferred stock. The preferred
stock represents 25% of the voting rights of PNH and accrues dividends
commensurate with market interest rates.
7. The Corporation's natural gas procurement policy is to effectively fix or
cap the price of between 40% and 80% of its natural gas requirements for a
one-year period and up to 50% of its natural gas requirements for the
subsequent two-year period through various supply contracts, financial
derivatives and other forward pricing techniques to gain some protection
against natural gas price changes on the spot market. These contracts are
based on a designated price, which price is referenced to market natural
gas prices or appropriate NYMEX futures contract prices. The Corporation
frequently uses prices at Henry Hub Louisiana as the index price. Natural
gas supplies for the Corporation's six production facilities are purchased
from various suppliers for each plant location. This creates a location
basis differential between the contract price and the physical price of
natural gas. Accordingly, the use of financial derivatives may more than
offset the change in the price of physical gas.
The Corporation has entered into firm contracts to minimize the risk of
interruption or curtailment of natural gas supplies. Additionally, the
Corporation has entered into forward pricing positions for a substantial
portion of its natural gas requirements for the remainder of 1996, 1997 and
1998, consistent with its policy mentioned above. As a result of its
policies, the Corporation has reduced the potential adverse financial
impact of natural gas price increases during the forward pricing period,
but conversely, if natural gas prices were to fall, the Corporation will
incur higher costs. Unrealized gains from forward pricing positions totaled
$22.7 million as of September 30, 1996. The amount recognized by the
Corporation will be dependent on prices in effect at the time of
settlement. As of September 30, 1995 unrealized losses from forward pricing
positions totaled $13.8 million.
For the 1996 first nine months, natural gas hedging activities produced
cost savings of approximately $55.5 million. Conversely, for the comparable
1995 period, natural gas hedging increased cost by approximately $28.9
million.
8. During December 1995, the Corporation amended its credit agreement to
provide revolving credit facilities of up to $375 million for domestic
working capital needs and other corporate purposes. Bank term loans
outstanding were converted into advances under the amended credit
agreement. There was $158.0 million outstanding at September 30, 1996.
Interest on borrowings under this line is charged at current market rates.
9. In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") 123, "Accounting for Stock Based
Compensation." Beginning in 1996, SFAS 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages, but
does not require, the recognition of employee compensation expense related
to stock compensation based on the fair value of the equity instrument
granted. Companies that do not adopt the fair value recognition provisions
of SFAS 123 and continue to follow the existing APB Opinion 25 rules to
recognize and measure compensation, will be required to disclose the pro
forma amounts of net income and earnings per share that
7
<PAGE>
would have been reported had the Corporation elected to follow the fair
value recognition of SFAS 123. The Corporation will continue to apply APB
Opinion 25 to its stock-based compensation awards to employees and will
disclose annually the required pro forma effect on net income and earnings
per share. The impact on the Corporation's financial position and results
of operations is not material.
10. On April 30, 1996, the Board of Directors of the Corporation authorized the
repurchase of up to 8.5 million Common Shares on the open market and
through privately negotiated transactions over the ensuing fifteen months.
As of September 30, 1996 the Corporation had repurchased 6,798,000 shares
for $91.4 million.
11. On August 20, 1996, the Corporation, through Terra Funding Corporation
("TFC"), a beneficially owned subsidiary of the Corporation and a limited
purpose corporation, entered into an agreement with a large financial
institution to sell an undivided interest in its accounts receivable. Under
the agreement, which expires August 20, 1999, the Corporation may sell
without recourse an undivided interest in a designated pool of its accounts
receivable and receive up to $150 million in proceeds. Undivided interests
in new receivables may be sold as amounts are collected on previously sold
interests. As of September 30, 1996, the proceeds of the uncollected
balance of accounts receivable sold totaled $150 million. The Corporation
pays a monthly discount fee on the outstanding amount of the accounts
receivable sold which is included in interest expense in the Consolidated
Statements of Income. TFC's assets are owned directly by TFC which is a
separate legal entity with creditors who have received security interests
in those assets.
12. In June 1996, the Financial Accounting Standards Board issued SFAS 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which establishes accounting and reporting
standards for such transfers. The Corporation will adopt SFAS 125 effective
January 1, 1997 as required. The impact on the Corporation's financial
position and results of operations is not expected to be material.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
---------------------
QUARTER ENDED SEPTEMBER 30, 1996 COMPARED WITH
QUARTER ENDED SEPTEMBER 30, 1995
CONSOLIDATED RESULTS
The Corporation reported net income of $23.9 million, or $0.32 per share, on
revenues of $471.5 million for the third quarter of 1996 compared with net
income of $24.9 million, or $0.31 per share, on revenues of $492.3 million in
1995. The 1995 third quarter results include an extraordinary loss of $4.3
million, or $0.05 per share, on early retirement of debt.
The Corporation classifies its operations into three business segments:
Distribution, Nitrogen Products and Methanol. The Distribution segment includes
sales of products purchased from manufacturers, including the Corporation, and
resold by the Corporation. Distribution revenues are derived primarily from
grower and dealer customers through sales of crop protection products,
fertilizers, seed and services. The Nitrogen Products segment represents only
those operations directly related to the wholesale sales of nitrogen products
produced at the Corporation's ammonia manufacturing and upgrading facilities.
The Methanol segment represents wholesale sales of methanol produced at the
Corporation's two methanol manufacturing facilities.
Total revenues and operating income (loss) for the three month periods ended
September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Distribution $306,705 $323,189
Nitrogen Products 146,721 137,272
Methanol 35,634 40,200
Other - net of intercompany eliminations (17,522) (8,396)
- -----------------------------------------------------------------------------------------
$471,538 $492,265
=========================================================================================
OPERATING INCOME:
Distribution $ 6,398 $ 3,757
Nitrogen Products 49,980 53,007
Methanol 6,765 16,461
Other expense - net (895) (457)
- -----------------------------------------------------------------------------------------
62,248 72,768
Interest expense -net (14,069) (12,973)
Minority interest (9,220) (10,660)
- -----------------------------------------------------------------------------------------
Total from operations $ 38,959 $ 49,135
=========================================================================================
</TABLE>
9
<PAGE>
Volumes and prices for the three month periods ended September 30, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
VOLUMES AND PRICES
(excludes the Distribution segment) 1996 1995
- ------------------------------------------------------------------------------------------------------------
Sales Average Sales Average
(quantities in thousands) Volumes Unit Price Volumes Unit Price
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ammonia (tons) 294 $ 168 290 $ 178
Nitrogen solutions (tons) 817 $ 87 574 $ 93
Urea (tons) 127 $ 162 167 $ 171
Methanol (gallons) 79,161 $0.45 65,263 $0.62
- ------------------------------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTION
Revenues for the Distribution segment were $306.7 million during the 1996 third
quarter compared with $323.2 million for the third quarter of 1995. Increased
sales in Northern markets resulting from a late start to the planting season
were more than offset by lower sales in Southern markets attributed to a shift
from cotton to corn acres and reduced insect pressure from 1995 levels.
Fertilizer revenues increased $3.8 million or 10.6% and seed revenues increased
$1.5 million or 22.1% while crop protection products revenues decreased $28.0
million or 10.9% for the third quarter 1996 compared with the same period a year
ago. Application revenue and customer service charges for the 1996 third
quarter increased $2.2 million and $0.8 million, respectively, over 1995.
Distribution operating income amounted to $6.4 million for the third quarter of
1996 compared with $3.8 million for the third quarter of 1995. Higher sales
volumes contributed to a $2.2 million increase in fertilizer gross profit for
1996 compared with the 1995 third quarter. A decline in crop protection
products gross profit of $2.0 million was due to lower sales volumes partially
offset by higher margins. Higher margins for seed more than offset lower sales
volumes to contribute $0.8 million to operating income. Equity earnings of
affiliates, application income and customer service charges added $4.2 million
to operating income for the quarter. Selling, general and administrative
expenses increased by $2.9 million for the 1996 third quarter from an expanded
sales force and additional equipment to meet the demands of the 1996 selling
season.
NITROGEN PRODUCTS
Revenues of the Nitrogen Products segment increased $9.4 million to $146.7
million for the third quarter of 1996 compared with the 1995 quarter primarily
due to higher nitrogen solutions sales volumes partially offset by lower prices.
The increase in nitrogen solutions sales volumes was due to the startup of the
Port Neal nitrogen solutions plant in May 1996, a late spring planting season
and fall dealer requirements. Urea sales volumes declined as a result of a
maintenance turnaround performed at the Blytheville plant and reduced shipments
for wheat pre-plant application during the third quarter of 1996.
Operating income for the Nitrogen Products segment was $50.0 million for the
third quarter of 1996 compared with $53.0 million for the third quarter of 1995.
The decline in market prices reduced operating income by $8.1 million, offset by
an increase in sales volumes and favorable natural gas costs of $1.5 million.
METHANOL
Methanol revenues were $35.6 million for the 1996 third quarter compared with
$40.2 million for the 1995 third quarter. Revenues for the 1995 third quarter
include the benefit of reversing $12.6 million of the methanol hedge accrual
recorded earlier. Excluding the effect of the 1995 methanol hedge, revenues
increased by $8.0 million due to a combination of higher volumes and prices. An
increase in sales volumes of 13.9 million gallons or 21.3% contributed $5.9
million to revenues.
10
<PAGE>
Operating income for the methanol segment was $6.8 million and $16.5 million,
respectively, for the quarters ended September 30, 1996 and 1995. The methanol
hedge agreement and an increase in sales volume effected operating income as
discussed above.
OTHER OPERATING EXPENSE - NET
Other operating expense was $0.9 million in the 1996 third quarter compared with
$0.5 million in the comparable 1995 period. Other expense includes expenses not
directly related to individual business segments, including certain insurance
coverages, corporate finance fees and other costs.
INTEREST EXPENSE - NET
Interest expense, net of interest income, totaled $14.1 million in 1996 third
quarter compared with $13.0 million in 1995. Net interest expense increased due
to increased short-term borrowings to fund current operations.
INCOME TAXES
Income taxes for the third quarter 1996 were recorded at an effective tax rate
of 38.6%, compared with 40.5% for the third quarter 1995. The reduction in the
effective tax rates is due to lower state income taxes for the 1996 quarter in
comparison with 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1995
CONSOLIDATED RESULTS
The Corporation reported net income of $113.8 million, or $1.45 per share, on
revenues of $1.95 billion for the first nine months of 1996 compared with net
income of $142.9 million, or $1.76 per share, on revenues of $1.94 billion in
the first nine months of 1995. The 1995 results included an extraordinary loss
on early retirement of debt of $4.3 million, or $0.05 per share.
Total revenues and operating income (loss) for the nine month periods ended
September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Distribution $1,411,351 $1,336,736
Nitrogen Products 490,558 476,938
Methanol 94,194 153,817
Other - net of intercompany eliminations (44,146) (28,217)
- -----------------------------------------------------------------------
$1,951,957 $1,939,274
=======================================================================
OPERATING INCOME:
Distribution $ 51,953 $ 60,146
Nitrogen Products 200,043 200,769
Methanol 12,409 69,993
Other expense - net (2,057) (3,763)
- -----------------------------------------------------------------------
262,348 327,145
Interest expense - net (37,110) (37,353)
Minority interest (35,017) (38,869)
- -----------------------------------------------------------------------
Total from operations $ 190,221 $ 250,923
=======================================================================
</TABLE>
11
<PAGE>
Volumes and prices for the nine month periods ended September 30, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
VOLUMES AND PRICES
(excludes the Distribution segment) 1996 1995
- ----------------------------------------------------------------------------------------
Sales Average Sales Average
(quantities in thousands) Volumes Unit Price Volumes Unit Price
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ammonia (tons) 940 $ 183 817 $ 203
Nitrogen solutions (tons) 2,281 $ 97 1,923 $ 97
Urea (tons) 409 $ 179 487 $ 186
Methanol (gallons) 231,508 $ 0.41 216,696 $ 0.71
- ----------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTION
Distribution revenues for the nine months ended September 30, 1996 increased by
5.6% to $1.4 billion from the comparable 1995 period. The expansion of the
distribution network contributed $58.9 million to the increase in revenues for
all product lines. Revenues at existing locations for fertilizers and seed
increased $4.8 million and $10.2 million, respectively. Crop protection
products revenues at existing locations declined by $8.0 million for the first
nine months of 1996 in comparison with the 1995 due to adverse weather
conditions, change in mix of crops and the economic condition of some growers.
Application revenues and customer service charges contributed $4.8 million and
$2.4 million, respectively, to the revenue growth.
Operating income for the Distribution segment amounted to $52.0 million for the
1996 nine months in comparison with $60.1 million for the first nine months of
1995. Gross profit increased by $6.5 million due to the expansion of the
distribution network and by $1.9 million at existing locations for the first
nine months of 1996 compared with 1995. Offsetting the gross profit increase
was a $25.8 million increase in selling, general and administrative expenses for
the first nine months of 1996 versus the prior year comparable period. Bad debt
provisions increased $4.9 million in 1996 as a result of two consecutive years
of drought conditions across the Southern market. The growth of the
Distribution network to 394 locations from 375 in 1995 increased selling
expenses by $7.8 million. An expanded sales force and extra equipment at
existing locations to meet expected demands for services and products in the
1996 season contributed to increases in compensation, depreciation and operating
and maintenance expenses.
NITROGEN PRODUCTS
Nitrogen Products revenues increased $13.6 million to $490.6 million for the
nine months ended September 30, 1996 in comparison with the similar period in
1995 due to greater sales volumes for ammonia and nitrogen solutions partly
offset by lower sales volumes for urea and lower prices for ammonia. Ammonia
and nitrogen solutions sales volumes increased as a result of the startup of the
Port Neal manufacturing plant which began producing ammonia in December 1995 and
nitrogen solutions in May 1996. Included in 1995 revenues were estimated lost
profits which would have been generated by the Port Neal plant and were covered
by business interruption insurance.
Nitrogen Products operating income for the nine months ended September 30, 1996
of $200.0 million approximated the similar 1995 period. Gross profits in 1996
from the startup of the Port Neal plant approximated business interruption
insurance for Port Neal in 1995. Price declines of $16.6 million were more than
offset by natural gas cost savings of $23.3 million for the nine months ended
September 30, 1996 compared with 1995. The use of financial derivatives to
forward price natural gas costs more than offset an approximate 45% increase in
the spot market price of natural gas for the first nine months of 1996 in
comparison with the first nine months of 1995. In addition, the 1996 period
included severance costs of $4.2 million at the Courtright manufacturing plant.
12
<PAGE>
METHANOL
Methanol revenues for the nine months ended September 30, 1996 and 1995 totaled
$94.2 million and $153.8 million, respectively. The lower revenues reflect
significantly lower prices. Average prices were $0.41 in 1996 and $0.71 in 1995
resulting in a decrease to revenues of $70.6 million. Sales volumes increased
14.8 million gallons or 6.8% for the first nine months of 1996 as compared with
1995.
Methanol operating income for the 1996 first nine months was $12.4 million,
while 1995 operating income was $70.0 million. Lower prices reduced methanol
operating income by $70.6 million compared with the nine months ended September
30, 1995. Higher sales volumes and lower natural gas costs offset a portion of
the pricing shortfall. Natural gas costs were lower as the use of financial
derivatives to forward price a majority of the natural gas requirements offset
an approximate 45% increase in the spot market price of natural gas for the
first nine months of 1996 in comparison with the first nine months of 1995.
OTHER OPERATING EXPENSE - NET
Other operating expense was $2.1 million in the first nine months of 1996
compared with $3.8 million in 1995. Other expense includes expenses not directly
related to individual business segments, including certain insurance coverages,
corporate finance fees and other costs. Other operating expenses in the first
nine months of 1995 included consulting fees related to the partial acquisition
of the TNCLP minority interest and revised financing arrangements.
INTEREST EXPENSE - NET
Net interest expense of $37.1 million approximated 1995 amounts for the nine
months ended September 30, 1996.
INCOME TAXES
Income tax expense was recorded at an effective rate of 40.2% for the first nine
months of 1996 compared with 41.3% in the 1995 first nine months. The reduction
in the effective tax rates is due to lower state income taxes in 1996 as
compared with 1995.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Corporation's primary uses of funds will be to fund its working capital
requirements, make payments on its indebtedness and other obligations, make
quarterly distributions to minority interests, disburse quarterly dividends on
common stock, make capital expenditures and acquisitions, and fund repurchases
of its common stock. The principal sources of funds will be cash flow from
operations and borrowings under available bank facilities. The Corporation
believes that cash from operations and available financing sources will be
sufficient to meet anticipated cash requirements.
Cash used for operations in the first nine months of 1996 was $885,000. Net
proceeds received from the sale of receivables (see Note 11 to the Consolidated
Financial Statements) are included in cash flows from operating activities and
amounted to $100 million. Working capital balances, exclusive of the accounts
receivable sold increased $289.5 million for the first nine months of 1996 due
to the seasonal nature of the Corporation's operations. The Corporation has
available a $375 million revolving credit facility for domestic working capital
needs. As of September 30, 1996, $158.0 million was outstanding under this
facility.
Cash used for investing activities was $108.7 million in the first nine months
of 1996, $85.0 million was used to rebuild the Port Neal manufacturing plant
while $39.4 million funded other investments in plant and equipment. Cash used
for acquisitions represents amounts paid to acquire new locations for the
Corporation's distribution network. The Corporation has received $203 million
in advances from its insurers ($26.7 million in the nine
13
<PAGE>
months ended September 30, 1996) related to the Port Neal casualty. The
Corporation is in discussions with its insurers and expects that additional
proceeds will be received in connection with the insurance claim.
The rebuild of the Port Neal manufacturing plant is substantially complete. The
Corporation began construction in the third quarter of 1996 on a $23 million
nitric acid plant at Port Neal with the facility expected to be fully
operational by the end of 1997. The Corporation expects 1996 capital
expenditures, exclusive of expenditures related to the Port Neal casualty and
the acquisition of retail distribution locations, to approximate $50 million
consisting of the expansion of existing service centers, routine replacement of
equipment, and efficiency improvements at manufacturing facilities.
Additionally, the Corporation has a lease financing agreement in connection with
its Courtright, Ontario nitrogen manufacturing plant which includes an option to
purchase the plant during the lease term. The Corporation intends to exercise
the lease purchase option during the fourth quarter of 1996 for $55 million.
In May 1995, the Board of Directors of the Corporation approved an open market
purchase program pursuant to which the Corporation may purchase up to five
million Senior Preference Units in Terra Nitrogen Company, L.P. from time to
time at prices and in quantities determined by the Corporation's management.
There were no repurchases in the first nine months of 1996.
On April 30, 1996, the Board of Directors of the Corporation authorized the
repurchase of up to 8.5 million Common Shares on the open market and through
privately negotiated transactions over the ensuing fifteen months. As of
September 30, 1996, the Corporation had repurchased 6.8 million shares for $91.4
million.
During the first nine months of 1996, the Corporation distributed $5.96 per
unit, or $39.7 million, to minority Senior Preference Unitholders, paid a
dividend rate of 7.86%, or $1.5 million, to minority preferred stock
shareholders, and paid a dividend of $0.11 per Common Share which totaled $8.6
million.
Cash balances at September 30, 1996 were $35.4 million of which $8.7 million is
used to collateralize letters of credit supporting recorded liabilities.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
4.5 Consent and Amendment No. 2 dated as of July 31, 1996 to
Amended and Restated Credit Agreement dated as of December 14, 1995
among Terra Industries Inc., Terra Capital, Inc. Terra Nitrogen,
Limited Partnership, Certain Guarantors, Certain Lenders, Certain
Issuing Banks and Citibank, N.A.
10.12 Receivables Purchase Agreement dated as of August 20, 1996
among Terra Funding Corporation, Terra Capital, Inc., Certain
Financial Institutions and Bank of America National Trust and
Savings Association, without exhibits or schedules.
10.13 Purchase and Sale Agreement dated as of August 20, 1996
among Terra International, Inc., Terra Nitrogen, Limited
Partnership, Beaumont Methanol, Limited Partnership, Terra Funding
Corporation and Terra Capital, Inc., without exhibits or schedules.
27 Financial Data Schedule [EDGAR filing only]
(B) REPORTS ON FORM 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TERRA INDUSTRIES INC.
Date: November 14, 1996 /s/ Francis G. Meyer
-----------------------------------------
Francis G. Meyer
Senior Vice President and Chief Financial
Officer and a duly authorized signatory
15
<PAGE>
EXHIBIT 4.5
CONSENT AND AMENDMENT NO. 2
CONSENT AND AMENDMENT NO. 2 dated as of July 31, 1996 among: TERRA
CAPITAL, INC., a Delaware corporation (the "Company"); TERRA NITROGEN, LIMITED
PARTNERSHIP, a Delaware limited partnership ("TNLP") and, together with the
Company, the "Borrowers"); each of the entities listed on the signature pages
hereof under the caption "GUARANTORS" (each such entity, and each of the
Borrowers, an "Obligor" and, collectively, the "Obligors"); each of the lenders
(the "Lenders") and issuing banks (the "Issuing Banks") listed on the signature
pages hereof; and CITIBANK, N.A., as agent for the Lenders and Issuing Banks
under the Credit Agreement referred to below (in such capacity, the "Agent").
The Obligors, the Lenders, the Issuing Banks and the Agent are parties
to an Amended and Restated Credit Agreement dated as of December 14, 1995 (as
amended by Consent and Amendment No. 1 dated as of June 4, 1996, and as from
time to time further amended, the "Credit Agreement"). In order to implement a
new "Permitted Receivables Facility" (as defined in the Credit Agreement), the
Company has requested that the Lenders grant certain consents and amend the
Credit Agreement in certain respects. The Lenders are willing to so consent and
to so amend the Credit Agreement, all on the terms and conditions set forth
herein. Accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement and
not otherwise defined herein are used herein as therein defined.
Section 2. Amendments to Credit Agreement. Subject to the
satisfaction of the conditions precedent specified in Section 5 hereof, but
effective as of the date hereof, the Credit Agreement shall be amended as
follows:
A. General. References in the Credit Agreement and the other
Loan Documents (including references to the Credit Agreement as amended
hereby) to the Credit Agreement (including indirect references such as
"hereunder", "hereby", "herein" and "hereof") shall be deemed to be
references to the Credit Agreement as amended hereby.
B. Definitions. Section 1.01 of the Credit Agreement shall be
amended by restating the following definitions:
"Permitted 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, and (b) one or more
additional facilities entered
<PAGE>
into by the Company and/or any of its Subsidiaries (which may be
effected by an amendment to the facility referred to in clause
(a) of this definition or otherwise) providing for the sale of
Receivables (including without limitation the August 1996
Receivables Purchase Agreement among Terra Funding Corporation,
as Seller, the Company, as initial servicer, the financial
institutions party thereto, as Purchasers, and Bank of America
National Trust and Savings Association, as Administrative Agent)
(the "1996 Receivables Agreement"), provided, that the aggregate
amount outstanding under all of the Permitted Receivables
Facilities (other than Intercompany Receivables Facilities),
taken together, may not at any time exceed $150,000,000 plus
reasonable reserves.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, limited
liability company, trust, unincorporated association, joint
venture or other entity, or a government or any political
subdivision or agency thereof.
"Receivables Subsidiary" means a Subsidiary of the Company
that meets both of the following criteria:
(1) such Subsidiary is formed solely for the purpose of,
and is engaged solely in the business of, (x)
purchasing Receivables of the Company and one or more
of its Subsidiaries under an Intercompany Receivables
Facility and, at its option, selling all or a portion
of such Receivables under a Permitted Receivables
Facility and/or (y) owning the capital stock of, or
other ownership interests in, one or more Receivables
Subsidiaries; and
(2) all of the capital stock of and/or other ownership
interests in, such Subsidiary (other than, in the case
of a Subsidiary of the Company that is an obligor or a
seller under a Permitted Receivables Facility, shares
of preferred stock of such Subsidiary having a de
minimis liquidation value, which preferred shares may
be held by one or more financial institutions party to
such Permitted Receivables Facility or their designees,
including one or more individuals, and their
successors) is owned beneficially and of record,
directly or indirectly, by Terra Capital Holdings, the
Company and/or one or more other Receivables
Subsidiaries.
"Second Amendment" means the Consent and Amendment No. 2 to
this Credit Agreement, dated as of July 31, 1996.
-2-
<PAGE>
"Subsidiary" of any Person means any corporation,
partnership, joint venture, limited liability company, 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, joint venture or
limited liability company or (c) the beneficial interest in such
trust or estate is at the time directly or 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.
C. Certain Obligations Respecting Subsidiaries. Section 5.02(m)
shall be amended to read as follows:
"(m) Certain Obligations Respecting Subsidiaries. Enter
into, or permit any of its Subsidiaries (other than a Receivables
Subsidiary) to enter into, after the Restatement Date, 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 (other than a Receivables Subsidiary);
provided, that notwithstanding this Section 5.02(m), Terra and
its Subsidiaries (whether or not Receivables Subsidiaries) may
include in Permitted Receivables Facilities provisions
substantially to the effect of those attached as Exhibit A to the
Second Amendment."
Section 3. Consents Relating to the Permitted Receivables Facility.
Subject to the satisfaction of the conditions precedent set forth in Section 5
hereof, but effective as of the date hereof, each Lender and Issuing Bank
hereby:
A. Consents to the inclusion in the 1996 Receivables Agreement
of the provisions attached as Exhibit A hereto; and
B. Without limiting Section 7.06(c) of the Credit Agreement,
authorizes and directs the Agent to release from any Liens all Receivables
(including guarantees and security therefor) in which an interest is sold
or transferred pursuant to a Permitted Receivables Facility (including any
related Intercompany Receivables Facility).
Section 4. Representations and Warranties. The Company hereby
represents and warrants to the Agent, the Lenders and the Issuing Banks that,
both before and after giving effect to the amendments to the Credit Agreement
and the consents set forth herein:
-3-
<PAGE>
(i) the representations and warranties contained in each
Loan Document are correct on and as of the date hereof, 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 that
constitutes a Default or an Event of Default.
Section 5. Conditions Precedent. As provided in Sections 2 and 3
hereof, the amendments to the Credit Agreement set forth in said Section 2 and
the consents set forth in said Section 3 shall each become effective, as of the
date hereof, upon the satisfaction of the condition precedent that the Agent
shall have received the following (each in form and substance satisfactory to
it):
A. Execution and Delivery, Etc. This Consent and Amendment
No. 2, duly executed by each of the Obligors, Lenders constituting Required
Lenders and the Agent.
B. Other Documents. Such other documents as the Agent or any
Lender or special New York counsel to the Agent may reasonably request.
Section 6. Miscellaneous. Except as herein provided, the Credit
Agreement and each of the other Loan Documents shall remain unchanged and in
full force and effect. This Consent and Amendment No. 2 may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Consent and
Amendment No. 2 by signing any such counterpart. This Consent and Amendment No.
2 shall be governed by, and construed in accordance with, the law of the State
of New York.
* * * * *
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Amendment No. 2 to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE BORROWERS
-------------
TERRA CAPITAL, INC.
By___________________________________
Title: Vice President
TERRA NITROGEN, LIMITED PARTNERSHIP
By Terra Nitrogen Corporation,
its General Partner
By________________________________
Title: Vice President
GUARANTORS
----------
TERRA INDUSTRIES INC.
By___________________________________
Title: Vice President
TERRA NITROGEN CORPORATION
By___________________________________
Title: Vice President
-5-
<PAGE>
BEAUMONT METHANOL,
LIMITED PARTNERSHIP
By Terra Methanol Corporation,
its General Partner
By_______________________________
Title: Vice President
TERRA METHANOL CORPORATION
By__________________________________
Title: Vice President
BMC HOLDINGS, INC.
By__________________________________
Title: Vice President
TERRA CAPITAL HOLDINGS, INC.
By__________________________________
Title: Vice President
THE AGENT
---------
CITIBANK, N.A.
By___________________________________
Title: Attorney-in-Fact
-6-
<PAGE>
THE ISSUING BANKS
-----------------
CITIBANK, N.A.
By___________________________________
Title: Attorney-in-Fact
COMMITMENTS THE LENDERS
- ----------- -----------
Terra Commitment CITIBANK, N.A.
- ----------------
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title: Attorney-in-Fact
$1,900,000.00
Terra Commitment THE CHASE MANHATTAN BANK
- ---------------- (formerly known as CHEMICAL BANK)
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,900,000.00
Terra Commitment ARAB BANKING CORPORATION
- ----------------
$16,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,100,000.00
Terra Commitment BANK OF AMERICA ILLINOIS
- ----------------
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,900,000.00
Terra Commitment THE BANK OF NOVA SCOTIA
- ----------------
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,900,000.00
-7-
<PAGE>
Terra Commitment CAISSE NATIONALE DE CREDIT AGRICOLE
- ----------------
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,900,000.00
Terra Commitment COOPERATIEVE CENTRALE RAIFFEISEN-
- ---------------- BOERENLEEBANK, B.A. "RABOBANK
$28,500,000.00 NEDERLAND", New York Branch
TNLP Commitment
- ---------------
$1,900,000.00
By_____________________________________
Title:
Terra Commitment CREDIT LYONNAIS CHICAGO BRANCH
- ----------------
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,900,000.00
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By_____________________________________
Title: Attorney-in-Fact
Terra Commitment DRESDNER BANK AG, CHICAGO AND
- ---------------- GRAND CAYMAN BRANCHES
$28,500,000.00
TNLP Commitment
- ---------------
$1,900,000.00 By____________________________________
Title:
By_____________________________________
Title:
Terra Commitment FIRST BANK NATIONAL ASSOCIATION
- ----------------
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,900,000.00
-8-
<PAGE>
Terra Commitment THE FUJI BANK, LIMITED
- ----------------
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,900,000.00
Terra Commitment MELLON BANK, N.A.
- ----------------
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,900,000.00
Terra Commitment NATIONSBANK OF TEXAS, N.A.
- ----------------
$28,500,000.00
TNLP Commitment By_____________________________________
- --------------- Title:
$1,900,000.00
Terra Commitment UNION BANK OF SWITZERLAND, CHICAGO
- ---------------- BRANCH
$16,500,000.00
TNLP Commitment
- ---------------
$1,100,000.00 By____________________________________
Title:
By_____________________________________
Title:
-9-
<PAGE>
EXHIBIT 10.12
RECEIVABLES PURCHASE AGREEMENT
DATED AS OF AUGUST 20, 1996
AMONG
TERRA FUNDING CORPORATION
AS SELLER
---------
TERRA CAPITAL, INC.
AS INITIAL SERVICER
-------------------
AND
THE FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME
AS PURCHASERS
-------------
AND
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
AS ADMINISTRATIVE AGENT
-----------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
ARTICLE I
THE COMMITMENT......................................... 2
SECTION 1.01. Commitment............................................. 2
SECTION 1.02. Commitment Termination Date............................ 2
SECTION 1.03. Purchase and Reinvestment Limits....................... 3
SECTION 1.04. Making Purchases from Seller........................... 3
SECTION 1.05. Voluntary Termination of Commitment or Reduction
of Purchase Limit...................................... 4
SECTION 1.06. Continuation/Conversion; Investment Multiples.......... 4
SECTION 1.07. Limitation of Ownership Interest....................... 5
SECTION 1.08. Assignment............................................. 5
ARTICLE II
UNDIVIDED INTEREST AND PURCHASERS' SHARE............... 6
SECTION 2.01. Undivided Interest..................................... 6
SECTION 2.02. Frequency of Computation of Undivided Interest......... 7
SECTION 2.03. Purchasers' Investment................................. 8
SECTION 2.04. Discount Factor........................................ 8
SECTION 2.05. Earned Discount........................................ 8
SECTION 2.06. Run Off Discount....................................... 9
SECTION 2.07. Servicer's Fee Reserve................................. 9
SECTION 2.08. Certain Definitions.................................... 10
SECTION 2.09. Purchasers' Share...................................... 12
SECTION 2.10. Loss Reserve........................................... 12
SECTION 2.11. Dilution Reserve....................................... 13
ARTICLE III
SETTLEMENTS............................................ 13
SECTION 3.01. Non-Run Off Settlement Procedures for
Collections........................................... 13
SECTION 3.02. Run Off Settlement Procedures for Collections.......... 15
SECTION 3.03. General Settlement Procedures; Reduction of
Purchasers' Investment................................. 16
SECTION 3.04. Reporting.............................................. 18
SECTION 3.05. Payments and Computations, Etc......................... 19
SECTION 3.06. Treatment of Collections and Deemed Collections........ 20
SECTION 3.07. Repurchases for Administrative Convenience............. 20
ARTICLE IV
FEES AND YIELD PROTECTION.............................. 21
SECTION 4.01. Fees................................................... 21
SECTION 4.02. Yield Protection....................................... 21
SECTION 4.03. Funding Losses......................................... 25
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE V
CONDITIONS OF PURCHASES .............................. 25
SECTION 5.01. Conditions Precedent to Initial Purchase.............. 25
SECTION 5.02. Conditions Precedent to All Purchases and
Reinvestments......................................... 27
ARTICLE VI
REPRESENTATIONS AND WARRANTIES........................ 28
SECTION 6.01. Representations and Warranties of Seller.............. 28
SECTION 6.02. Representations and Warranties of Terra Capital....... 32
ARTICLE VII
GENERAL COVENANTS..................................... 34
SECTION 7.01. Affirmative Covenants of Seller....................... 34
SECTION 7.02. Reporting Requirements of Seller...................... 36
SECTION 7.03. Negative Covenants of Seller.......................... 37
SECTION 7.04. Affirmative Covenants of Terra Capital................ 39
SECTION 7.05. Reporting Requirements of Terra Capital............... 40
SECTION 7.06. Negative Covenants of Terra Capital................... 42
SECTION 7.07. Separate Existence.................................... 43
ARTICLE VIII
ADMINISTRATION AND COLLECTION......................... 46
SECTION 8.01. Designation of Servicer............................... 46
SECTION 8.02. Duties of Servicer.................................... 47
SECTION 8.03. Rights of the Administrative Agent.................... 48
SECTION 8.04. Responsibilities under Contracts...................... 50
SECTION 8.05. Further Action Evidencing Purchases................... 50
ARTICLE IX
TERMINATION EVENTS.................................... 51
SECTION 9.01. Termination Events.................................... 51
SECTION 9.02. Remedies.............................................. 53
ARTICLE X
THE ADMINISTRATIVE AGENT............................. 53
SECTION 10.01. Authorization and Action............................. 53
SECTION 10.02. Administrative Agent's Reliance, Etc................. 53
SECTION 10.03. Administrative Agent and Affiliates.................. 54
SECTION 10.04. Indemnity............................................ 54
SECTION 10.05. Successor............................................ 55
SECTION 10.06. Credit Decisions..................................... 55
SECTION 10.07. Notices, etc. to Administrative Agent................ 56
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE XI
<S> <C> <C>
ASSIGNMENT OF UNDIVIDED INTERESTS...................... 56
SECTION 11.01. Restrictions on Assignments............................ 56
SECTION 11.02. Rights of Assignee..................................... 56
ARTICLE XII
INDEMNIFICATION........................................ 57
SECTION 12.01. Indemnities by Seller.................................. 57
SECTION 12.02. Indemnities by Servicer................................ 59
SECTION 12.03. General Provisions..................................... 59
ARTICLE XIII
MISCELLANEOUS.......................................... 60
SECTION 13.01. Amendments, Etc........................................ 60
SECTION 13.02. Notices, Etc........................................... 60
SECTION 13.03. No Waiver; Remedies.................................... 61
SECTION 13.04. Binding Effect; Survival............................... 61
SECTION 13.05. Integration............................................ 61
SECTION 13.06. GOVERNING LAW.......................................... 62
SECTION 13.07. Costs, Expenses and Taxes.............................. 62
SECTION 13.08. Captions and Cross References.......................... 62
SECTION 13.09. Execution in Counterparts.............................. 62
SECTION 13.10. Confidentiality........................................ 63
SECTION 13.11. No Duplication of Information.......................... 65
SECTION 13.12. Sale of BLMP........................................... 65
</TABLE>
-iii-
<PAGE>
DEFINITIONAL APPENDIX
---------------------
SCHEDULE I - DEFINITIONS
LIST OF EXHIBITS
----------------
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT IA Assignment
EXHIBIT IC Forms of Contracts
EXHIBIT ID Description of Credit and Collection Policy
EXHIBIT IE1 Form of Lock-Box Notice
EXHIBIT IE2 Form of Collection Bank Notice
EXHIBIT IF Form of Periodic Report
EXHIBIT 1.04 Form of Purchase Notice
EXHIBIT 1.06 Form of Continuation/Conversion Notice
EXHIBIT 5.01(i)-1 Form of Enforceability Opinion of Counsel for Terra Parties
EXHIBIT 5.01(i)-2 Form of Substantive Consolidation/True Sale Opinion
EXHIBIT 5.01(i)-3 Form of Opinion of In-House Counsel for Terra Parties
EXHIBIT 6.01(n) List of Offices of Seller where Records Are Kept
EXHIBIT 6.01(o)-1 List of Lock-Box Banks
EXHIBIT 6.01(o)-2 List of Collection Banks
</TABLE>
-iv-
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
------------------------------
Dated as of August 20, 1996
THIS IS A RECEIVABLES PURCHASE AGREEMENT, among TERRA FUNDING CORPORATION,
a Delaware corporation, having its principal office at 600 Fourth Street, Terra
Centre, Sioux City, Iowa 51101 ("Seller"), a subsidiary of Terra Capital Funding
LLC, TERRA CAPITAL, INC., a Delaware corporation ("Terra Capital"), having its
principal office at 1 River Plaza, 600 Stevens Port Drive, Suite 200, Dakota
Dunes, South Dakota 57049, as initial Servicer, BANK OF AMERICA ILLINOIS, an
Illinois banking corporation having an office at 231 South LaSalle Street,
Chicago, Illinois 60697 ("BAI"), together with the other financial institutions
that are, or that may become, parties hereto (individually, a "Purchaser" and
collectively, the "Purchasers") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association having an office at 231 South
LaSalle Street, Chicago, Illinois 60697 ("BofA"), as agent for the Purchasers
(in such capacity, the "Administrative Agent"). Unless otherwise indicated,
capitalized terms used in this Agreement are defined in Schedule I.
Background
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1. Seller has, and expects to have, Pool Receivables in which Seller
intends to sell interests referred to herein as Undivided Interests. Such Pool
Receivables shall have been generated in the ordinary course of an Originator's
business, and sold or contributed to Seller pursuant to the Purchase and Sale
Agreement. Seller has requested each Purchaser, and each Purchaser has agreed,
subject to the terms and conditions contained in this Agreement, to Purchase its
Percentage of such Undivided Interests from Seller from time to time during the
term of this Agreement.
2. Seller and Purchasers also desire that, subject to the terms and
conditions of this Agreement, certain of the daily Collections in respect of
such Undivided Interests be reinvested in Pool Receivables through the sale by
Seller to Purchasers of additional undivided interests in the Pool Receivables,
such daily reinvestment of Collections to be effected by an automatic daily
adjustment to each Purchaser's Undivided Interests, and to be intended to permit
each Purchaser to maintain its Percentage of the Aggregate Purchasers'
Investments fully invested in uncollected Pool Receivables.
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3. BofA has been requested, and is willing, to act as the Administrative
Agent.
4. Terra Capital has been required, and is willing, to act as the initial
Servicer.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
THE COMMITMENT
SECTION 1.01. Commitment. On the terms and subject to the conditions set
forth in this Agreement (including Article V):
(a) Purchases. Each Purchaser shall severally, and not jointly,
Purchase from Seller undivided percentage interests in Pool Assets by
making Purchases of such Purchaser's Percentage of Undivided Interests from
time to time during the period from the date hereof to the Commitment
Termination Date.
(b) Reinvestments. Pursuant to Section 3.01, each Purchaser shall make
Reinvestments by permitting Servicer to cause certain of the Collections in
respect of the Undivided Interests to be applied to the purchase of
additional undivided percentage interests in the Pool Receivables, thereby
resulting in an appropriate readjustment of such Undivided Interests.
Each Purchaser's obligation to make such Purchases and Reinvestments is herein
called its "Commitment".
SECTION 1.02. Commitment Termination Date. (a) The "Commitment Termination
Date" shall be the earlier to occur of (i) August 20, 1999 (herein, as the same
may be extended, called the "Scheduled Commitment Termination Date"), and (ii)
the date of termination of the Commitment pursuant to Section 1.05 or Section
9.02.
(b) If Seller desires to extend the then Scheduled Commitment Termination
Date for an additional period, Seller shall give written notice of such request
to the Administrative Agent (who shall forward such request on to each
Purchaser) at least 90, but not more than 180, days before such Scheduled
Commitment Termination Date. Each Purchaser shall notify Seller and the
Administrative Agent in writing, on or prior to 45 days
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before such Scheduled Commitment Termination Date, whether it consents to such
extension; failure to respond in such period shall be deemed to be a rejection
of such requested extension. For those Purchasers that consent to such
extension, the Scheduled Commitment Termination Date shall be extended for the
requested period, and Seller shall pay each such Purchaser such renewal fee as
may be agreed to by such Purchaser and Seller. If less than the Required
Purchasers consent to such extension, then the Commitments of all of the
Purchasers shall terminate on the Scheduled Commitment Termination Date (without
giving effect to such extension). If less than all of the Purchasers (but at
least the Required Purchasers) agree to extend the then Scheduled Commitment
Termination Date, Seller, the Administrative Agent and the extending Purchasers
agree to negotiate in good faith such amendments to this Agreement as shall be
necessary to segregate the Pool Receivables purchased by the extending
Purchasers and those purchased prior to the Scheduled Commitment Termination
Date and to liquidate such Pool Receivables purchased prior to the Scheduled
Commitment Termination Date for the pro rata benefit of the non-extending
Purchasers, and as shall be otherwise necessary to reflect such extension.
SECTION 1.03. Purchase and Reinvestment Limits. Under no circumstances
shall any Purchaser make any Purchase or Reinvestment to the extent that, after
giving effect to such Purchase or Reinvestment, as the case may be:
(a) Purchase Limit. The Aggregate Purchasers' Investment under this
Agreement would exceed an amount (the "Purchase Limit") equal to
$150,000,000, as such amount may be reduced pursuant to Section 1.05; or
(b) Required Allocations Limit. The Aggregate Required Allocations
under this Agreement would exceed an amount (the "Required Allocations
Limit") equal to 100% of the Net Pool Balance; or
(c) Purchaser's Percentage Limit. The total Purchasers' Investment
of such Purchaser under this Agreement would exceed an amount equal to such
Purchaser's Percentage of the Purchase Limit or the Aggregate Purchasers'
Investment.
SECTION 1.04. Making Purchases from Seller. (a) Notice of Purchase.
Each Purchase from Seller by Purchasers shall be made on notice substantially in
the form of Exhibit 1.04 (each, a "Purchase Notice") from Seller to the
Administrative Agent received by the Administrative Agent not later than 9:00
a.m. (Chicago time) on (i) the second Business Day next preceding the date of
such proposed Purchase if the related Undivided Interest
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is to be a Eurodollar Undivided Interest and (ii) on the date of such proposed
Purchase if the related Undivided Interest is to be an Alternate Rate Undivided
Interest. Each such notice of a proposed Purchase shall specify the desired
amount and date of such proposed Purchase.
(b) Amount of Purchase. The amount of each Purchase shall be equal to the
lesser of (x) the amount proposed by Seller pursuant to Section 1.04(a) and (y)
the maximum amount permitted under Section 1.03.
(c) Funding of Purchase. Not later than 11:00 a.m. (Chicago time) on the
date of each Purchase, each Purchaser shall, upon satisfaction of the applicable
conditions set forth in Article V, make available to the Administrative Agent at
its office at 231 South LaSalle Street in Chicago, Illinois its Percentage of
the amount of the Purchase (determined pursuant to Section 1.04(b)) in same day
funds, and after receipt by the Administrative Agent of such funds, the
Administrative Agent will make such funds immediately available to Seller at
such office, or at such other place as Seller may direct in writing.
(d) Notice of Purchaser Rate. The Administrative Agent shall, on the date
of each Purchase of a Eurodollar Undivided Interest and on the first day of each
successive Yield Period for a Eurodollar Undivided Interest, notify Seller of
the Purchaser Rate for such Yield Period. The Administrative Agent shall, on
the first day of each Alternate Rate Undivided Interest, notify Seller of the
Alternate Reference Rate in effect on such day.
SECTION 1.05. Voluntary Termination of Commitment or Reduction of Purchase
Limit. Seller may, upon at least 15 days' written notice to the Administrative
Agent, terminate the Commitments in whole or reduce in part the unused portion
of the Purchase Limit; provided, however, that (i) each partial reduction shall
be in an amount equal to $5,000,000 or an integral multiple thereof and (ii)
after giving effect to such partial reduction, the remaining Purchase Limit will
not be less than $50,000,000.
SECTION 1.06. Continuation/Conversion; Investment Multiples. Two Business
Days prior to the last day of each Yield Period for each Eurodollar Undivided
Interest, Seller shall deliver to the Administrative Agent a notice
substantially in the form of Exhibit 1.06 (each, a "Continuation/Conversion
Notice"), appropriately completed. Pursuant to such Continuation/Conversion
Notice, Seller may, as of the last day of the related Yield Period for a
Eurodollar Undivided Interest, (i) continue such Eurodollar Undivided Interest,
in whole or in part, as a Eurodollar Undivided Interest for a subsequent Yield
Period with a duration as set forth in the applicable
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Continuation/Conversion Notice or (ii) convert such Undivided Interest, in whole
or in part, to an Alternate Rate Undivided Interest, in each case as set forth
in the related Continuation/Conversion Notice. On any Business Day, Seller may
convert any Alternate Rate Undivided Interest to a Eurodollar Undivided Interest
by delivery of a Continuation/Conversion Notice at least two Business Days prior
to the date of such requested conversion. Any allocation, continuation, or
conversion of Undivided Interests pursuant to this Section 1.06 shall be subject
to the following provisions: (i) each Eurodollar Undivided Interest shall have a
related Purchasers' Investment equal to at least $2,000,000 or an integral
multiple of $500,000 in excess thereof; (ii) there shall not be more than 15
Yield Periods outstanding at any one time; (iii) no Yield Period shall extend
beyond the Scheduled Commitment Termination Date; (iv) on each conversion of an
Undivided Interest, accrued Yield thereon (or the portion thereof being
converted) shall be paid at the time of such conversion; and (v) no Undivided
Interest may be converted to, or continued as, a Eurodollar Undivided Interest
if a Termination Event or Unmatured Termination Event shall have occurred and be
continuing. Each Continuation/ Conversion Notice shall be irrevocable. If no
notice is given with respect to the allocation of the related Undivided Interest
at least two Business Days prior to the date of such Purchase, or to the
continuation/conversion of a Eurodollar Undivided Interest on or prior to the
second Business Day before the last day of the Yield Period with respect
thereto, such Undivided Interest shall be made as, or converted to, as the case
may be, an Alternate Rate Undivided Interest.
SECTION 1.07. Limitation of Ownership Interest. Nothing in this Agreement
shall be interpreted as providing any Purchaser with an interest in any
Receivables that are not Pool Receivables. Each Purchaser's interest in the
Receivables shall terminate on the date following the Commitment Termination
Date on which the Aggregate Purchasers' Investments shall be reduced to zero and
all other amounts due to each Purchaser or the Administrative Agent under the
Agreement Documents shall have finally been paid in full (the "End Date").
SECTION 1.08. Assignment. Seller hereby sells, transfers, assigns and
sets over each Undivided Interest from time to time purchased hereunder to the
Administrative Agent, for the benefit of the Purchasers. The parties hereto
intend that this Agreement constitutes the absolute sale and assignment of the
Undivided Interests to the Administrative Agent, for the benefit of the
Purchasers.
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ARTICLE II
UNDIVIDED INTEREST AND PURCHASERS' SHARE
SECTION 2.01. Undivided Interest. For purposes of this Agreement,
"Undivided Interest" means, at any time, an undivided percentage ownership
interest at such time in (i) all then outstanding Pool Receivables, (ii) all
Related Security with respect to such Pool Receivables, (iii) all Collections
with respect to, and other proceeds of, such Pool Receivables, (iv) all lock-
boxes and accounts to which such Collections are sent or deposited, and all cash
and investments from time to time therein, in each case, to the extent of
Collections of Pool Receivables therein, (v) all of Seller's rights, interests
and claims under the Purchase and Sale Agreement, (vi) all books and records
(including computer tapes and disks) to the extent relating to the foregoing and
(vii) all proceeds of the foregoing (collectively, the "Pool Assets"). Such
undivided percentage interest for any time for such Undivided Interest shall be
computed as:
RA = PI+DF+SFR+LR+DR = PI+[ED+ROD]+[SF+ROSF]+LR+DR
- --- --------------- ---------------------------
NPB NPB NPB
where:
-----
RA = Required Allocation of such
Undivided Interest = PI + DF + SFR + LR + DR;
PI = the Purchasers' Investment as to such Undivided
Interest at the time of such computation, as
determined per Section 2.03;
DF = the Discount Factor of such Undivided Interest at
the time of such computation, as determined per Section 2.04;
SFR = the Servicer's Fee Reserve of such Undivided
Interest at the time of such computation, as determined per
Section 2.07;
ED = Earned Discount of such Undivided Interest at the
time of computation, as determined per Section 2.04;
ROD = Run Off Discount of such Undivided Interest at the
time of computation, as determined per Section 2.06;
SF = Servicer's Fee of such Undivided Interest at the
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time of computation, as determined per Section 2.07;
ROSF = Run Off Servicer's Fee of such Undivided Interest at the time of
such computation, as determined per Section 2.07;
NPB = the Net Pool Balance at the time of such
computation, as determined per Section 2.08;
LR = the Loss Reserve of such Undivided Interest at the
time of computation, as determined per Section 2.10; and
DR = the Dilution Reserve of such Undivided Interest at the time of
computation, as determined per Section 2.11.
For purposes of this Agreement, "Undivided Interest" also includes Purchasers'
rights with respect to Seller's undivided interest in Pool Receivables as set
forth in Section 3.02(d). The "related" Undivided Interest with respect to any
of the foregoing items shall mean the Undivided Interest as to which such item
is calculated. The then sum of all Required Allocations of all Undivided
Interests shall constitute "Aggregate Required Allocations".
SECTION 2.02. Frequency of Computation of Undivided Interest. Each
Undivided Interest shall be initially computed as of the opening of business of
Servicer on the date of Purchase of such Undivided Interest from Seller (it
being understood that such computation will be made from information as of the
most recent Month End Date or, for the initial Settlement Period, such other
date as is acceptable to the Administrative Agent). Thereafter until such
Undivided Interest shall be reduced to zero, such Undivided Interest shall be
deemed to be automatically recomputed as of the close of business of Servicer on
each day, and such Undivided Interest shall constitute the percentage ownership
interest in Pool Receivables on such date held by the Purchasers. Such
Undivided Interest shall become zero at such time as the Purchasers shall have
received the Earned Discount for such Undivided Interest, shall have recovered
the related Purchasers' Investment and shall have received all other amounts
payable to the Purchasers pursuant to this Agreement with respect to such
Undivided Interest, and Servicer shall have received the accrued Servicer's Fee
for such Undivided Interest. Such Undivided Interest shall remain constant from
the time as of which any such computation or recomputation is made until the
time as of which the next such recomputation, if any, shall be made.
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SECTION 2.03. Purchasers' Investment. "Purchasers' Investment" as to any
Undivided Interest means an amount equal to the original amount paid to Seller
for such Undivided Interest at the time of its acquisition by the Purchasers
pursuant to Sections 1.01 and 1.04 and by Reinvestments pursuant to Section
3.01, reduced from time to time by Collections received and distributed to the
Purchasers on account of the related Purchasers' Investment pursuant to Sections
3.01 and 3.02. The "related" Purchasers' Investment with regard to a Yield
Period or Undivided Interest means the Purchasers' Investment calculated with
regard to such Yield Period or Undivided Interest, as the case may be. The then
sum of the Dollar amount of all Purchasers' Investments shall constitute
"Aggregate Purchasers' Investments". Each Purchaser's "Total Investment" shall
mean such Purchaser's Percentage of the Aggregate Purchasers' Investments, and
such Total Investment shall be allocated ratably to each Undivided Interest.
SECTION 2.04. Discount Factor. The "Discount Factor" for a related
Undivided Interest at any time in a Yield Period means an amount determined as
follows:
DF = ED + ROD
where:
------
DF = the Discount Factor of such Undivided Interest at the time of
computation;
ED = Earned Discount of such Undivided Interest accrued and unpaid at the
time of computation, as determined per Section 2.05; and
ROD = Run Off Discount of such Undivided Interest at such time, as
determined per Section 2.06.
SECTION 2.05. Earned Discount. The "Earned Discount" for any Undivided
Interest for each day in a related Yield Period means an amount determined as
follows:
ED = PI x PR x 1/360;
where:
------
ED = Earned Discount of such Undivided Interest at the time of
computation;
PI = the Purchasers' Investment of such Undivided Interest on such day,
as determined pursuant to Section 2.03; and
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PR = the Purchaser Rate for such Undivided Interest on such day during
such Yield Period, as determined pursuant to Section 2.08.
No provision of this Agreement shall require the payment or permit the
collection of Earned Discount in excess of the maximum permitted by applicable
law. Earned Discount for any Undivided Interest shall not be considered paid by
any distribution if at any time such distribution is rescinded or must otherwise
be returned for any reason.
SECTION 2.06. Run Off Discount. The "Run Off Discount" for the related
Undivided Interest at any time for each day in a related Yield Period means an
amount determined as follows:
ROD = PI x (PR + RVF) x AAM
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360
where:
------
PI = the Purchasers' Investment of such Undivided Interest at the time
of such computation;
PR = the Purchaser Rate for such Undivided Interest for a Yield Period
deemed to commence at such time for a period of one month as
determined per Section 2.08;
AAM = the Adjusted Average Maturity of the Receivables Pool, as
determined per Section 2.08; and
RVF = the Rate Variance Factor deemed to be in effect at the time of such
computation, as determined per Section 2.08;
SECTION 2.07. Servicer's Fee Reserve. The "Servicer's Fee Reserve" for
the related Undivided Interest at any time means an amount determined as
follows:
SFR = SF + ROSF
where:
------
SF = the unpaid "Servicer's Fee" relating to such Undivided Interest
accrued to such time, determined as (i) an amount accrued for each
day equal to 0.25% per annum times the amount of the related
Purchasers' Investment at the close of business on such day, times
1/360; or (ii) on Servicer's request from and after any time that
Terra Capital shall no longer be Servicer, an alternative
reasonable amount
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charged by Servicer to perform its obligations under this
Agreement.
ROSF = the "Run Off Servicer's Fee" for such Undivided Interest at such
time, determined as an amount equal to (x) the related Purchasers'
Investment, times (y) the percentage per annum set forth in clause
(i) of the definition of "Servicer's Fee", or, if Servicer's Fee is
calculated pursuant to clause (ii) of such definition, the
percentage determined for each day by dividing the Purchasers'
Investment at the close of business on such day by the amount of
Servicer's Fee accrued for such day, multiplying the quotient by
1/360 and expressing the product as a percentage, times (z) a
fraction the numerator of which is the number of days equal to the
then Adjusted Average Maturity, and the denominator of which is 360
days.
SECTION 2.08. Certain Definitions. For purposes hereof, the following
terms shall have the meanings as indicated:
"Adjusted Average Maturity" means two times Days Sales Outstanding.
"Days Sales Outstanding" means the twelve (12) month rolling average of
receivable balances less rebates divided by the quotient of twelve (12) month
rolling revenues divided by 360.
"Net Pool Balance" means at any time an amount equal to the Unpaid Balance
of the Eligible Receivables in the Receivables Pool at such time, as reduced by,
without double counting, (i) the sum of the aggregate amount by which the Unpaid
Balance of all Eligible Receivables of each Obligor exceeds the Concentration
Limit for such Obligor at such time, (ii) the sum of the aggregate amount by
which the Unpaid Balance of all Eligible Receivables of Obligors resident in
each state exceeds the applicable State Percentage (or such larger percentage as
may be designated for any particular state by the Administrative Agent in
writing delivered to Seller) of the aggregate Unpaid Balance of the Eligible
Receivables in the Receivables Pool at such time, (iii) the aggregate amount by
which the Unpaid Balance of all Eligible Receivables that are Future Due
Receivables exceeds 25% of the aggregate Unpaid Balance of the Eligible
Receivables in the Receivables Pool at such time and (iv) the aggregate amount
of Consigned Inventory that has been sold. For purposes hereof, "Concentration
Limit" for any Obligor means on any date the greater of (x) the Special
Concentration Limit for such Obligor and (y) 3% of the aggregate Unpaid Balance
of the Eligible Receivables in the Receivables Pool at such time. "Special
Concentration Limit" for any Obligor whose long term
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unsecured debt is rated at least A2 by Moody's or A by S&P means 7.5% of the
aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at
such time; provided, however, that there shall be no more than four (4) Obligors
with a Special Concentration Limit at any one time. In the case of any Obligor
which is an Affiliate of any other Obligor (an "Affiliated Obligor"), the
Concentration Limit, the Special Concentration Limit and the Receivables related
thereto shall be calculated as if such Obligor and such Affiliated Obligor were
one Obligor; it being understood that with respect to the state concentration
set forth in clause (ii) of the first sentence of this definition, each Obligor
with a different billing address shall be treated separately. "State
Percentage" means (i) 25% for each of Florida, Louisiana, Mississippi, Texas and
not more than two (2) other states designated from time to time by Seller or
Servicer on the Periodic Report and (ii) 17.5% for each other state.
"Purchaser Rate" for any Yield Period for any related Undivided Interest
(or portion thereof) means a rate equal to:
(a) in the case of a Eurodollar Undivided Interest other than one
referred to in clause (c) of this definition, the sum of (i) the Eurodollar
Rate for such Yield Period, plus (ii) 0.45%; provided that if any Purchaser
notifies the Administrative Agent that the introduction of, or any change
in the interpretation of, any law or regulation makes it unlawful, or any
governmental authority asserts that it is unlawful for such Purchaser to
fund any portion of the Undivided Interest at Eurodollar Rate, the
Purchaser Rate shall be the rate described in clause (b);
(b) in the case of an Alternate Rate Undivided Interest other than one
referred to in clause (c) of this definition, a rate per annum equal for
each day during such Yield Period to the Alternate Reference Rate in effect
on such day; and
(c) in the case of each Undivided Interest at a time when a
Termination Event has occurred and is continuing, a rate per annum equal
for each day during such Yield Period to the Alternate Reference Rate in
effect on such day plus 2% per annum.
The Administrative Agent shall promptly, but in any event within two Business
Days, notify Seller of the implementation of the terms of paragraph (c) above.
"Rate Variance Factor" means, (i) during any Yield Period when no Run Off
Day shall occur, 0% per annum, and (ii) during any Yield Period in which one or
more Run Off Days occur, such
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percentage per annum not exceeding 1% as the Administrative Agent shall choose
in the exercise of its discretion.
SECTION 2.09. Purchasers' Share. "Purchasers' Share" of any Undivided
Interest with regard to any Collections of Pool Receivables received (or deemed
received) by Seller, any Originator or Servicer on any day shall be determined
as an amount equal to the product of
(a) the amount of such Collections, times:
(b) (i) if such day is not a Run Off Day, such Undivided Interest on
such day expressed as a decimal, and
(ii) if such day is a Run Off Day, either (A) such Undivided
Interest on the day immediately preceding the first Run Off Day to have
occurred during the then current Run Off Period or (B) if higher, upon the
request of the Administrative Agent, such Undivided Interest on such Run
Off Day, in each case expressed as a decimal, it being understood, that for
purposes of calculating the Undivided Interest on each Run Off Day pursuant
to this clause (ii)(B), the related Adjusted Average Maturity shall be
reduced by the number of Run Off Days in the Run Off Period preceding the
Run Off Day as to which such measurement is being made;
provided that after such time as an Undivided Interest shall equal zero the
Purchasers' Share of Collections therefor shall also equal zero.
SECTION 2.10 Loss Reserve. The "Loss Reserve" for the related Undivided
Interest at any time means an amount determined as follows:
PI
---
LR = the greater of (i) $5,000,000 x API and (ii) LP X PI, where:
LR = the Loss Reserve of such Undivided Interest at the time of
computation;
LP = the Loss Percentage as to such Undivided Interest at the time of such
computation, which shall be the greater of (i) 12.5%, and (ii) 2 times
the greatest Sales Based Default Ratio to have occurred during the
most recent (12) months, times the Net Sales Ratio;
PI = the Purchasers' Investment as to such Undivided
Interest at the time of such computation, as determined per Section
2.03; and
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API = the Aggregate Purchasers' Investments at the time of such
computation, as determined per Section 2.03.
SECTION 2.11 Dilution Reserve. The "Dilution Reserve" for the related
Undivided Interest at any time means an amount determined as follows:
PI
---
DR = the greater of (i) $3,000,000 x API and (ii) DP X PI, where:
DR = the Dilution Reserve of such Undivided Interest at the time of
computation;
DP = the Dilution Percentage as to such Undivided Interest at the time of
such computation, which shall be the greater of (i) 4% and (ii) an
amount equal to the product of (A) the Dilution Horizon Ratio for the
most recently ended month times (B) the sum of (1) two times the
Expected Dilution Ratio, plus (2) the product of the Spike Factor
times the Spike Ratio;
PI = the Purchasers' Investment as to such Undivided Interest at the time
of such computation, as determined per Section 2.03; and
API = the Aggregate Purchasers' Investments at the time of such computation,
as determined per Section 2.03.
ARTICLE III
SETTLEMENTS
SECTION 3.01. Non-Run Off Settlement Procedures for Collections. (a)
Daily Procedure. On each day (other than a Run Off Day) with regard to each
Yield Period for each Undivided Interest, Servicer shall deem an amount equal to
Purchasers' Share of Collections of Pool Receivables received or deemed received
on such day to be received in respect of such Undivided Interest; and
(i) out of Purchasers' Share of such Collections of Pool Receivables
in respect of such Undivided Interest, hold in trust (but need not deposit
in a separate account or otherwise segregate, except as required by Section
8.02(b)) for the benefit of the Purchasers and Servicer, respectively, an
amount equal to the Earned Discount, the Commitment Fee and Servicer's Fee
accrued through such day
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for such Undivided Interest and not previously so held for the benefit of
the Purchasers,
(ii) apply an amount equal to the remainder of Purchasers' Share of
such Collections (the "Remaining Collections") to reduce the related
Purchasers' Investment of such Undivided Interest (it being understood that
such amount need not be physically paid to the Purchasers under this clause
(ii)),
(iii) after such reduction, apply such Remaining Collections to the
Reinvestment, for the benefit of the Purchasers, of additional undivided
interests in Pool Receivables by recomputation of such Undivided Interest
pursuant to Section 2.02 as of the end of such day, thereby increasing the
related Purchasers' Investment, and
(iv) pay to Seller such Remaining Collections.
The recomputed Undivided Interest shall constitute the percentage ownership
interest in Pool Receivables on such day held by the Purchasers.
(b) Settlement Date Procedure. On each Settlement Date, for each day in
the related Yield Period that is not a Run Off Day for such Undivided Interest,
Servicer shall deposit to the Administrative Agent's Account, the amounts set
aside as described in Section 3.01(a)(i) (other than the Commitment Fee);
provided that, if there are sufficient funds to pay all of the amounts due on
such Settlement Date and Terra Capital has been the Servicer for such Yield
Period, Terra Capital may retain the Servicer's Fee. On each Quarterly Date,
Servicer shall deposit to the Administrative Agent's Account the amounts set
aside pursuant to Section 3.01(a)(i) in respect of the Commitment Fee.
(c) Order of Application. Upon receipt by the Administrative Agent of
funds distributed pursuant to the first sentence of subsection (b), the
Administrative Agent shall distribute them to the Purchasers, pro rata based
upon such Purchasers' Percentages, in payment of the Earned Discount for such
Undivided Interest and to Servicer in payment of the accrued Servicer's Fee
payable with respect to such Undivided Interest (unless the Servicer's Fee has
been retained by Terra Capital). If there shall be insufficient funds on
deposit for the Administrative Agent to distribute funds in payment in full of
the aforementioned amounts, the Administrative Agent shall distribute funds,
first, in payment of the Earned Discount for such Undivided Interest, and
second, in payment of the accrued Servicer's Fee payable with respect to such
Undivided Interest. Upon receipt by the Administrative Agent of funds
distributed pursuant to the second sentence of subsection (b), the
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Administrative Agent shall distribute them to the Purchasers, pro rata based
upon such Purchasers' Percentages, in payment of the Commitment Fee accrued for
the calendar quarter ending on such date.
SECTION 3.02. Run Off Settlement Procedures for Collections. (a) Daily
Procedure. On each Run Off Day with regard to each Yield Period for each
Undivided Interest, Servicer shall set aside and hold in trust for the
Purchasers all of the Collections of Pool Receivables for such Run Off Day by
depositing, or causing to be deposited, such Collections within two Business
Days of Servicer's receipt of good funds therefor into a bank account located at
a bank acceptable to the Administrative Agent in which no other funds shall be
deposited, unless otherwise agreed in writing by the Administrative Agent. The
funds in such account shall be invested in Permitted Investments, as directed by
Seller (so long as no Termination Event has occurred and is continuing) until
the last day of the next Settlement Period to occur, on which date such funds
will be applied pursuant to Section 3.02(b), and the earnings thereon shall be
for the account of Seller. Each Permitted Investment shall mature no later than
the next occurring Settlement Date.
(b) Settlement Date Procedure. On the last day of each Settlement Period
for each Undivided Interest, if one or more Run Off Days for such Undivided
Interest occurs during the related Yield Period for such Settlement Period,
Servicer shall deposit to the Administrative Agent's Account the Purchasers'
Share of the amounts set aside pursuant to Section 3.02(a), but not to exceed
the sum of (i) the accrued and unpaid Earned Discount for such Undivided
Interest, (ii) the related Purchasers' Investment of such Undivided Interest,
(iii) the aggregate of other amounts owed hereunder by Seller to the Purchasers,
and (iv) the accrued Servicer's Fee payable with respect to such Undivided
Interest; provided that, so long as Terra Capital is Servicer, and the
Administrative Agent has not revoked such right in a writing delivered to
Servicer, the amount described in the foregoing clause (iv) may be retained by
Servicer. Any amounts set aside pursuant to Section 3.02(a) and not required to
be deposited to the Administrative Agent's Account pursuant to the preceding
sentence shall be held in the account described in Section 3.02(a) for
distribution on the last day of the next Settlement Period or, if there are not
remaining Pool Receivables, shall be held for distribution pursuant to Section
3.02(d).
(c) Order of Application. Upon receipt of funds deposited to the
Administrative Agent's Account pursuant to Section 3.02(b) or 3.02(d), the
Administrative Agent shall distribute them (i) to the Purchasers, pro rata based
on such Purchasers' Percentages, (A) in payment of the Earned Discount for such
Undivided Interest and (B) in reduction of the related Purchasers' Investment
until
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reduced to zero, (ii) in payment of any other amounts owed by Seller hereunder
to the Purchasers, to the Purchasers owed such amounts, and (iii) unless such
amount has been retained by Terra Capital pursuant to Section 3.02(b), to
Servicer in payment of the accrued Servicer's Fee payable with respect to such
Undivided Interest, also until reduced to zero. If there shall be insufficient
funds on deposit for the Administrative Agent to distribute funds in payment in
full of the aforementioned amounts, the Administrative Agent shall distribute
funds, first, in payment of the Earned Discount for such Undivided Interest,
second, in reduction of related Purchasers' Investment, third, in payment of
other amounts payable to the Purchasers hereunder, and, fourth, in payment of
the Servicer's Fee payable with respect to such Undivided Interest, unless such
amount has been retained by Terra Capital pursuant to Section 3.02(b).
(d) Distribution Upon Liquidation. If the Purchasers have not received
the Aggregate Purchasers' Investments, all accrued Earned Discount and all other
amounts due to each Purchaser hereunder on or prior to the day upon which there
are no remaining Pool Receivables, Servicer shall deposit to the Administrative
Agent's Account all amounts set aside pursuant to Section 3.02(a) and not
previously deposited to the Administrative Agent's Account, but not to exceed
the (i) accrued and unpaid Earned Discount for all Undivided Interests, (ii)
remaining Aggregate Purchasers' Investments and (iii) aggregate of all other
amounts owed hereunder by Seller to Purchasers or the Administrative Agent. Any
amounts held pursuant to Section 3.02(a) at such time and not required to be
deposited in the Administrative Agent's Account pursuant to the preceding
sentence shall be paid to Seller by Servicer.
SECTION 3.03. General Settlement Procedures; Reduction of Purchasers'
Investment.
(a) Deemed Collections. If on any day in any month the Unpaid Balance of
any Pool Receivable is
(A) reduced as a result of any defective or rejected services or
products, returns of unclaimed products, any cash discount, allowances,
credits, billing errors, write-offs, discounts, sales return adjustments,
credit memos or any adjustment by Seller or any Affiliate of Seller (other
than any adjustment permitted by Section 8.02(c)(i) unless the
Administrative Agent shall reasonably object thereto within 30 days of
being informed thereof), or
(B) reduced or cancelled as a result of a setoff in respect of any
claim by the Obligor thereof (whether such claim arises out of the same or
a related or an unrelated transaction), or
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(C) reduced on account of the obligation of Seller or any Affiliate
of Seller to pay to the related Obligor any rebate or refund,
then Seller shall be deemed to have received on such day a Collection of such
Receivable in the amount of such reduction, cancellation or payment. If on any
day Seller receives a payment pursuant to the Purchase and Sale Agreement,
Seller shall be deemed to have received on such day a Collection in the amount
of such payment. If on any day the representation or warranty of Seller set
forth in Section 6.01(l) is no longer true with respect to a Pool Receivable or
the representation or warranty of Seller set forth in Section 6.01(p) was or is
not true as of each date such representation or warranty is made or deemed made,
Seller shall be deemed to have received on such day a Collection of the full
Unpaid Balance of such Pool Receivable.
(b) Unreinvested Collections. Collections that may not be reinvested by
means of Reinvestments in an Undivided Interest on account of the application of
the Required Allocations Limit or the Purchase Limit pursuant to Section 2.01
shall be so reinvested as soon as it is possible to do so without violating such
Required Allocations Limit or Purchase Limit, as the case may be.
Notwithstanding anything to the contrary set forth herein, and regardless of the
information on the most recent Periodic Report, if, subsequent to the
preparation of such Periodic Report, the Aggregate Required Allocations exceed
the Required Allocations Limit, Seller shall not reinvest Collections, but shall
hold such Collections pursuant to the next sentence. To the extent and so long
as such Collections may not be so reinvested, Servicer shall hold such
Collections for the benefit of Purchasers, for payment to the Administrative
Agent on the earlier of (i) two Business Days after the related Reporting Date
and (ii) the next following Settlement Date, and the related Purchasers'
Investment as to the related Undivided Interest shall be deemed reduced in the
amount to be paid to the Administrative Agent only when in fact so paid. During
any Run Off Period, upon one Business Day's written notice given by the
Administrative Agent to Seller, Servicer shall pay in immediately available
funds such Collections to the Administrative Agent within two Business Days of
receipt (in good funds) thereof by Servicer.
(c) Seller's Reduction of Purchasers' Investment. If at any time Seller
shall wish to cause the reduction of the Purchasers' Investments of an Undivided
Interest (but not to commence the liquidation of all Undivided Interests),
Seller may do so as follows:
(i) Seller shall give the Administrative Agent at least 2 Business
Days' prior written notice (or same day written notice, given prior to
12:00 noon, Chicago time, in the case
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of an Alternate Rate Undivided Interest) thereof (including the amount of
such proposed reduction and the proposed date on which such reduction will
commence),
(ii) on the proposed date of commencement of such reduction and on
each day thereafter, Servicer shall refrain from reinvesting Remaining
Collections until the amount thereof not so reinvested shall equal the
desired amount of reduction, and
(iii) Servicer shall hold such Collections for the benefit of the
Purchasers, for payment to the Administrative Agent on the next following
Settlement Date, and the Purchasers' Investment as to the related Undivided
Interest shall be deemed reduced in the amount to be paid to the
Administrative Agent only when in fact so paid; provided that, (A) the
amount of any such reduction shall be not less than $2,000,000 and shall be
an integral multiple of $500,000 in excess thereof, (B) if Seller shall
commence any voluntary reduction in a Yield Period containing all or a
portion of any Run Off Period, Collections from Pool Receivables not so
reinvested shall be treated as if collected during the next following Run
Off Day, (C) Seller shall use reasonable efforts to attempt to choose a
reduction amount, and the date of the commencement thereof, so that such
reduction shall commence and conclude in the same Yield Period, (D) if two
or more Yield Periods shall be outstanding at the time of any proposed
reduction, such proposed reduction shall be applied, unless the
Administrative Agent shall otherwise consent, to the Alternate Rate
Undivided Interest, if any, until reduced to zero, and then to the
Eurodollar Undivided Interest with the shortest remaining Yield Period, and
(E) the reduction of the Purchasers' Investments shall be made among the
Purchasers on a pro rata basis, according to the Purchasers' Percentages.
(d) Allocations of Obligor's Payments. Except as provided in Section
3.03(a) or as otherwise required by law or the underlying Contract, all
Collections received from an Obligor of any Receivable shall be applied to Pool
Receivables then outstanding of such Obligor in the order of the age of such
Pool Receivables, starting with the oldest such Pool Receivable; provided,
however, that if payment is designated by such Obligor for application to
specific Receivables or can be readily identified to specific Receivables, it
shall be applied to such specified Receivables.
SECTION 3.04. Reporting. On or prior to the 20th day of each month (each,
a "Reporting Date"), Servicer shall prepare and forward to the Administrative
Agent a Periodic Report, relating
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to each Undivided Interest, as of the close of business of Servicer on the last
day of the next preceding month (a "Month End Date"). On or prior to the day
Servicer is required to make a deposit with respect to a Settlement Period
pursuant to Section 3.01 or 3.02, Seller will advise the Administrative Agent of
each Run Off Day occurring during such Settlement Period and of the allocation
of the amount of such deposit to each outstanding Undivided Interest; provided,
however, that if Terra Capital is not Servicer, Seller shall advise Servicer of
the occurrence of each such Run Off Day occurring during such Settlement Period
on or prior to such Run Off Day.
SECTION 3.05. Payments and Computations, Etc. (a) All amounts to be paid
or deposited by Seller or Servicer, hereunder shall be paid or deposited in
accordance with the terms hereof no later than 11:00 a.m. (Chicago time) on the
day when due in lawful money of the United States of America in same day funds
to a special account in the name of the Administrative Agent, attention: Loan
Division RC #1159, ABA# 071000039, regarding Account No. 7062407, Reference:
Terra Receivables Purchase Facility, maintained in the name of the
Administrative Agent at BofA's office at 231 South LaSalle Street, Chicago,
Illinois (the "Administrative Agent's Account"). Seller or Servicer, as
applicable, shall, to the extent permitted by law, pay to the Administrative
Agent interest on all amounts not paid or deposited when due hereunder at 2% per
annum above the Alternate Reference Rate, payable on demand, provided, however,
that such interest rate shall not at any time exceed the maximum rate permitted
by applicable law. Such interest shall be retained by the Administrative Agent
except to the extent that such failure to make a timely payment or deposit has
continued beyond the date for distribution by the Administrative Agent of such
overdue amount to Purchasers or any other Person having an interest in such
overdue amount, in which case such interest accruing after such date shall be
for the account of, and distributed by the Administrative Agent to, such Persons
ratably in accordance with their respective interests in such overdue amount.
All computations of interest and all computations of Earned Discount and other
fees hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) elapsed.
(b) All proceeds obtained by any Purchaser on account of the exercise of,
or forbearance to exercise, any right of setoff, counterclaim or similar right
if applied with regard to Seller's obligations arising under an agreement for
the purchase of Receivables or an agreement for borrowed money, in whole or in
part, shall be applied first to those arising under this Agreement until
exhausted prior to their application to obligations arising under any such other
agreement. Each Purchaser agrees that if it shall, by exercising or forebearing
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to exercise any right of setoff or counterclaim or otherwise, receive
proportionate collections on its Purchasers' Investment which are greater than
proportionate collections received by any other Purchaser in respect of the
Purchasers' Investment held by such other Purchaser, the Purchaser receiving
such proportionately greater collections shall purchase participations in the
Purchasers' Investments held by the other Purchasers, and such other adjustments
shall be made as may be required, so that all such collections with respect to
such Purchasers' Investments held by the Purchasers shall be shared by the
Purchasers pro rata according to their respective Percentages; provided however,
that if all or any portion of such collections is thereafter recovered from such
purchasing Purchaser (including, without limitation, by reason of insolvency or
bankruptcy) the purchase shall be rescinded and the purchase price restored to
the extent of such recovery, but without interest.
SECTION 3.06. Treatment of Collections and Deemed Collections. Subject to
the following sentence, Seller shall deliver, or cause to be delivered, to
Servicer on the first Settlement Date following each Reporting Date (and if the
amount of deemed Collections exceeds the Purchasers' Investment related to the
Undivided Interest maturing on such date, on each succeeding Settlement Date
until the amount of such deemed Collections is reduced to zero) all Collections
deemed received by Seller pursuant to Section 3.03(a) during the preceding
month, and Servicer shall hold or distribute such Collections pursuant to
Section 3.01 or 3.02, as applicable. If Collections are then being paid to the
Administrative Agent, or lock boxes or accounts directly or indirectly owned or
controlled by the Administrative Agent, Servicer shall forthwith cause such
deemed Collections to be paid to the Administrative Agent or such lock boxes or
accounts. So long as Seller shall hold any Collections or deemed Collections
required to be paid to Servicer or the Administrative Agent, it shall hold such
Collections in trust and separate and apart from its own funds and shall clearly
mark its records to reflect such trust; provided, that, subject to the other
provisions of this Agreement, Seller shall not be required to segregate such
funds into a separate account.
SECTION 3.07. Repurchases for Administrative Convenience. If on the last
day of a Yield Period with respect to any Undivided Interest the Aggregate
Purchasers' Investment shall equal or be less than 5% of the greatest amount of
the Aggregate Purchasers' Investment at any time prior to such last day, Seller
shall be entitled to repurchase all, but not less than all, of the Undivided
Interests from Purchasers. Seller shall give the Administrative Agent at least
three Business Days' prior written notice of such repurchase and upon payment of
the repurchase price for all of the Undivided Interests, as hereinafter
provided, each Purchaser shall be obligated to reconvey its
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entire interest in the Undivided Interests to Seller pursuant to an assignment
acceptable to the parties, but without representation or warranty except that
the interest assigned is free of offset, liens and other encumbrances created by
the assignor. Seller shall pay such repurchase price in cash to the
Administrative Agent on each Settlement Date in an amount equal to, for each
Undivided Interest, the sum of (i) accrued and unpaid Earned Discount for such
Undivided Interest, (ii) the aggregate related Purchasers' Investment therefor,
and (iii) the aggregate of other amounts then owed hereunder by Seller to
Purchasers, and Seller shall pay to Servicer the accrued Servicer's Fee payable
with respect to such Undivided Interest. Upon receipt of the aforesaid
repurchase price with regard to an Undivided Interest, the Administrative Agent
shall distribute it (i) to Purchasers (a) in payment of the Earned Discount for
such Undivided Interest, (b) in reduction of the related Purchasers' Investment
and (c) in payment of any other amounts owed by Seller hereunder to Purchasers,
including any amounts owing under Section 4.03, in each case until reduced to
zero.
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees. (a) Seller shall pay to the Administrative Agent the
fees in the amounts and at the times set forth in the letter dated as of August
20, 1996 between Seller and the Administrative Agent (as amended and
supplemented from time to time, the "Fee Letter").
(b) From the date hereof to the Commitment Termination Date, Seller
shall pay to the Administrative Agent, for the account of the Purchasers, pro
rata based on the Purchasers' Percentages, a commitment fee (the "Commitment
Fee") for each day equal to (x) 0.175% per annum times (y) the excess, if any,
of the Purchase Limit over the Aggregate Purchasers' Investment on such day
divided by (z) 360. Such Commitment Fee shall be paid in arrears on each
Quarterly Date and on the Commitment Termination Date, in the amount of such
Commitment Fee that shall have accrued during the calendar quarter ending on
such Quarterly Date or other period then ending for which no such fee shall have
been paid.
SECTION 4.02. Yield Protection. (a) If (i) Regulation D of the Board of
Governors of the Federal Reserve System or (ii) any Regulatory Change occurring
after the date hereof:
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(A) shall subject an Affected Party to any tax, duty or other charge
with respect to any Undivided Interest or Interests owned by or funded by
it, or any obligations or right to make Purchases or Reinvestments or to
provide funding therefor, or shall change the basis of taxation of payments
to the Affected Party of any amounts in respect of Purchasers' Investments
or Earned Discount made by or owed to or funded by it or any other amounts
due under this Agreement in respect of any Undivided Interests owned by or
funded by it or its obligations or rights, if any, to make Purchases or
Reinvestments or to provide funding therefor (except for franchise taxes
imposed with respect to net income or taxes upon or measured by the net
income of such Affected Party imposed by the United States of America or
any other jurisdiction); or
(B) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve included in the
determination of Earned Discount), special deposit or similar requirement
against assets of, deposits or obligations with or for the account of (or
with or for the account of any affiliate of), or credit extended by, any
Affected Party; or
(C) shall change the amount of capital maintained or required or
requested or directed to be maintained by such Affected Party; or
(D) shall impose any other condition affecting any Undivided
Interests owned or funded by any Affected Party, or its obligations or
rights, if any, to make Purchases or Reinvestments or to provide funding
therefor;
and the result of any of the foregoing is or would be
(x) to increase the cost to or, to impose a cost on, (I) an Affected
Party funding or making or maintaining any Purchases or Reinvestments, or
any commitment of such Affected Party with respect to any of the foregoing,
or (II) the Administrative Agent for continuing its, or Seller's,
relationship with Purchasers pursuant to the Agreement Documents,
(y) to reduce the amount of any sum received or receivable by an
Affected Party under this Agreement, or
(z) in the reasonable sole determination of such Affected Party
(using reasonable assumptions and averaging and attribution methods), to
reduce the rate of return on the capital of an Affected Party as a
consequence of its obligations hereunder or arising in connection herewith
to a
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level below that which any such Affected Party could otherwise have
achieved,
then within thirty days after demand by such Affected Party (which demand
shall be accompanied by a statement setting forth the basis of such demand),
Seller shall pay directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party, on an after-tax basis, for such
additional or increased cost or such reduction.
(b) Without limiting the generality of the foregoing, if Regulation D
shall require reserves actually to be maintained in connection with any
Eurodollar Undivided Interest or any Eurocurrency liabilities with respect
thereto of any Purchaser, regardless of whether such Eurodollar Undivided
Interest is then outstanding, without duplication of amounts paid pursuant to
Section 4.02(a), such Purchaser may require Seller to pay (and Seller agrees to
pay) additional Earned Discount on such Eurodollar Undivided Interest at a rate
per annum equal to the difference between the Eurodollar Rate (Reserve Adjusted)
and the Eurodollar Rate for such Eurodollar Undivided Interest's Yield Period.
Any Purchaser wishing to require such payment with respect to any such
Eurodollar Undivided Interest or any Eurocurrency liabilities with respect
thereto shall give notice thereof at least three Business Days prior to the last
day of such Eurodollar Undivided Interest's Yield Period if such Eurodollar
Undivided Interest is then outstanding or at least one Business Day prior to the
commencement of such Yield Period if such Eurodollar Undivided Interest is not
then outstanding. On the last day of each Yield Period relating to each such
Eurodollar Undivided Interest of such Purchaser, Seller shall pay directly to
such Purchaser such additional Earned Discount. Once given, each such notice by
a Purchaser shall be deemed automatically to continue in effect and apply to all
of such Purchaser's Eurodollar Undivided Interests until such Purchaser revokes
such notice. At such time, if any, as such Purchaser shall not be required so
to maintain reserves, such Purchaser agrees so to notify Seller.
(c) Each Affected Party will notify Seller and the Administrative Agent
within 90 days of the date on which a responsible officer of such Affected Party
has actual knowledge of any event occurring after the date hereof which will
entitle such Affected Party to compensation pursuant to this Section 4.02.
Seller shall have no liability pursuant to this Section 4.02 to any Affected
Party for additional costs or reductions of amounts received that were incurred
more than 90 days prior to the date on which a responsible officer of such
Affected Party had actual knowledge of such additional cost or reduced amount.
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(d) In determining any amount provided for or referred to in this Section
4.02, an Affected Party may use any reasonable assumptions and averaging and
attribution methods that it (in its reasonable sole discretion) shall deem
applicable. Any Affected Party when making a claim under this Section 4.02 shall
submit to Seller a statement as to such increased cost or reduced return
(including calculation thereof in reasonable detail), which statement shall,
subject to the previous sentence, in the absence of manifest error, be
conclusive and binding upon the Seller.
(e) Each Affected Party that makes a claim pursuant to this Section 4.02
shall, upon Seller's request, take all reasonable actions to mitigate the
amounts that may be due under this Section 4.02, provided that, in such Affected
Party's sole discretion, such actions shall not result in any cost or other
adverse consequence to such Affected Party.
(f) In the event that any Purchaser requests compensation pursuant to this
Section 4.02 or the obligation of any Purchaser to make or maintain Eurodollar
Undivided Interests is suspended pursuant to this Agreement (such Purchaser, an
"Affected Purchaser") then, so long as such condition exists, Seller may, after
the date that is 30 days after the date of such request or suspension, either:
(i) (x) designate a bank or other financial institution (the
"Replacement Purchaser") acceptable to the Administrative Agent to assume
the Affected Purchaser's Commitment and to purchase the Affected
Purchaser's interest in the Undivided Interests and other rights hereunder,
all without recourse to or representation or warranty by, or expense to,
the Affected Purchaser, for a purchase price equal to the such Affected
Purchaser's Total Purchasers' Investment, plus all accrued, plus all unpaid
Earned Discount thereon and accrued and unpaid Commitment Fee owing to the
Affected Purchaser, and upon such assumption and payment, and subject to
the execution and delivery to the Administrative Agent of an Assignment
Agreement, the Replacement Purchaser shall succeed to the rights and
obligations of the Affected Purchaser hereunder and the other Agreement
Documents and (y) pay to the Affected Purchaser all other amounts payable
to such Affected Purchaser hereunder, including amounts due pursuant to
Section 4.03; or
(ii) (x) terminate the Commitment of the Affected Purchaser and (y)
pay to the Affected Purchaser such Affected Purchaser's Total Purchasers'
Investment, plus all accrued and unpaid Earned Discount thereon and accrued
and unpaid Commitment Fee owing to the Affected Purchaser, plus all other
amounts owed to such Affected Purchaser hereunder,
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including any amounts due pursuant to Section 4.03, in which case the
Purchase Limit shall be reduced by the amount of such Affected Purchaser's
Commitment and the remaining Purchasers' Percentages shall be adjusted to
reflect such reduction.
In the event that Seller exercises its rights under clause (ii) above, Seller
may, not later than the date that is 60 days after such exercise, designate a
Replacement Purchaser acceptable to the Administrative Agent to assume the
Commitment of the Affected Purchaser, and subject to the execution and delivery
by such Replacement Purchaser of an Assignment Agreement, such Replacement
Purchaser shall be added as a Purchaser hereunder, the Purchase Limit shall be
increased by the amount of the Commitment assumed by such Replacement Purchaser,
the Purchasers' Percentages shall be adjusted to reflect such increase and such
Replacement Purchaser shall fund the amount necessary to fully fund the amount
of Aggregate Purchasers' Investment then permitted to be outstanding pursuant to
Section 1.01. Seller may not exercise its rights under this Section 4.02(f) (i)
with respect to any Affected Purchaser unless the Seller simultaneously
exercises such rights with respect to all Affected Purchasers, or (ii) if a
Termination Event or Unmatured Termination Event exists.
SECTION 4.03. Funding Losses. In the event that any Purchaser shall incur
any loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Purchaser to make any Purchase or maintain any Undivided Interest) as a result
of (i) any settlement with respect to any portion of the Aggregate Purchasers'
Investment being made on any day other than the scheduled last day of an
applicable Settlement Period with respect thereto, including, without
limitation, any payment pursuant to Section 3.03(b), or (ii) any Purchase not
being made in accordance with a request therefor under Section 1.02, then,
within thirty days of written notice from such Purchaser to Seller and the
Administrative Agent, Seller shall pay to such Purchaser the amount of such loss
or expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding upon
the Seller.
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ARTICLE V
CONDITIONS OF PURCHASES
SECTION 5.01. Conditions Precedent to Initial Purchase. The initial
Purchase hereunder is subject to the condition precedent that the Administrative
Agent shall have received on or before the date of such Purchase the following,
each (unless otherwise indicated) dated such date, in form and substance
satisfactory to the Administrative Agent and each Purchaser:
(a) This Agreement, duly executed by the parties hereto;
(b) A copy of the resolutions of the Board of Directors of each Terra Party
(or, in the case of a partnership, of the general partner of such Terra Party)
approving the execution, delivery and performance of each Agreement Document to
be delivered by it hereunder or in connection herewith and the transactions
contemplated thereby;
(c) Good standing certificates for each Terra Party issued by the
Secretaries of State of the state of such Person's incorporation and such
Person's principal place of business as of a recent date;
(d) A certificate of the Secretary or Assistant Secretary of each Terra
Party (or, in the case of a partnership, of the general partner of such Terra
Party) certifying the names and true signatures of the officers authorized on
its behalf to sign the Agreement Documents to be delivered by it hereunder or in
connection herewith (on which certificate the Administrative Agent and
Purchasers may conclusively rely until such time as the Administrative Agent
shall receive from such Person a revised certificate meeting the requirements of
this subsection (d));
(e) The Articles of Incorporation of each Terra Party that is a corporation
duly certified by the Secretary of State of the state of such Person's
incorporation as of a recent date acceptable to Administrative Agent, together
with a copy of the By-laws of such Person, duly certified by the Secretary or an
Assistant Secretary of such Person; in the case of each Terra Party that is a
partnership, a copy of such Person's partnership agreement, duly certified by
the Secretary or an Assistant Secretary of the general partners; in the case of
each Terra Party that is a limited liability company, a copy of such Person's
certificate of formation and operating agreement duly certified by the Secretary
or an Assistant Secretary of a member;
(f) Acknowledgment copies of proper Financing Statements (Form UCC-1),
filed on or prior to the date of the initial
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Purchase, naming (i) each Originator as the debtor and seller of Receivables,
Seller as the secured party and purchaser and the Administrative Agent as the
assignee and (ii) Seller as the debtor and seller of Receivables or an undivided
interest therein and the Administrative Agent, for the benefit of the
Purchasers, as the secured party and purchaser, or other, similar instruments or
documents, as may be necessary or, in the opinion of the Administrative Agent,
desirable under the UCC or any comparable law of all appropriate jurisdictions
to perfect Seller's and Purchasers' interests in the Pool Assets; and
termination statements or releases with respect to each Financing Statement
filed by any other Person that covers any Pool Asset;
(g) A search report provided in writing to the Administrative Agent by
LEXIS Document Services (or other report acceptable to the Administrative
Agent), listing all effective financing statements that name Seller or any
Originator as debtor or seller and that are filed in the jurisdictions in which
filings were made pursuant to subsection (f) above and in such other
jurisdictions as the Administrative Agent shall reasonably request, together
with copies of such financing statements (none of which shall cover any Pool
Asset, except for those for which releases have been delivered to the
Administrative Agent);
(h) Duly executed copies of Lock-Box Agreements with each of the Lock-Box
Banks and duly executed copies of the Collection Bank Notice to each of the
Collection Banks;
(i) Opinions of McDermott, Will & Emery, counsel to the Terra Parties in
substantially the form of Exhibit 5.01(i)-1 and 5.01(i)-2, respectively, and of
George Valentine, general counsel to the Terra Parties substantially in the form
of Exhibit 5.01(i)-3;
(j) The Purchase and Sale Agreement, duly executed by the parties thereto,
and the Initial Purchaser Notes, duly executed by Seller;
(k) Such powers of attorney as the Administrative Agent shall reasonably
request to enable the Administrative Agent to collect all amounts due under any
and all Pool Receivables;
(l) A duly executed copy of a Periodic Report calculated as of July 31,
1996 (or such later date as information is available);
(m) A field review report by Price Waterhouse, dated October 30, 1995, with
respect to a field review of the Originators' books and records relating to the
Receivables (which is hereby acknowledged to have been received);
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(n) The Fee Letter duly executed by Seller;
(o) A listing by Obligor of all Eligible Receivables in the Receivables
Pool as of the most recent Month End Date;
(p) The Parent Agreement duly executed by the Parent; and
(q) Such other documents, opinions and instruments as any Purchaser or the
Administrative Agent may reasonably request.
SECTION 5.02. Conditions Precedent to All Purchases and Reinvestments. Each
Purchase (including the initial Purchase) and each Reinvestment hereunder shall
be subject to the further conditions precedent ("Conditions Precedent") that on
the date of such Purchase or Reinvestment the following statements shall be true
(and Seller by accepting the amount of such Purchase or by receiving the
proceeds of such Reinvestment shall be deemed to have certified that):
(i) The representations and warranties contained in Article VI are
correct on and as of such day as though made on and as of such day and
shall be deemed to have been made on such day,
(ii) No event has occurred and is continuing, or would result from
such Purchase or Reinvestment, which constitutes a Termination Event or
Unmatured Termination Event,
(iii) After giving effect to each proposed Purchase or Reinvestment,
the Aggregate Purchasers' Investments will not exceed the Purchase Limit
and Aggregate Required Allocations will not exceed the Required Allocations
Limit, and
(iv) The Commitment Termination Date shall not have occurred.
Notwithstanding the occurrence of an Unmatured Termination Event (i) any
Reinvestment being made with the proceeds of Collections that were, on the same
day, applied in reduction of the Purchasers' Investment, and (ii) any other
Reinvestment or any Purchase on any day which does not cause the Aggregate
Purchasers' Investments, after giving effect to such Reinvestment or Purchase
(and any Reinvestment referred to in clause (i) next above) to exceed the
Aggregate Purchasers' Investments as of the opening of business on such day
shall be permitted.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
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SECTION 6.01. Representations and Warranties of Seller. Seller represents
and warrants as follows:
(a) Organization and Good Standing. Seller has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority to own its properties and to conduct its
business as such properties are presently owned and such business is presently
conducted, and had at all relevant times, and now has, all necessary power,
authority, and legal right to acquire and own the Pool Receivables.
(b) Due Qualification. Seller is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals, in Iowa and in all jurisdictions where the failure to preserve and
maintain such qualification, licenses or approvals would reasonably be expected
to have a Material Adverse Effect.
(c) Power and Authority; Due Authorization. Seller (i) has all necessary
power, authority and legal right to (A) execute and deliver this Agreement and
the other Agreement Documents to be executed and delivered in connection
herewith (B) carry out the terms of the Agreement Documents to which it is a
party and (C) sell and assign Undivided Interests on the terms and conditions
herein provided and (ii) has duly authorized by all necessary corporate action
the execution, delivery, and performance of this Agreement and the other
Agreement Documents and the sale and assignment of the Undivided Interests on
the terms and conditions herein provided.
(d) Valid Sale; Binding Obligations. This Agreement constitutes a valid
sale, transfer, and assignment of the Undivided Interests from time to time
purchased hereunder to the Administrative Agent, for the benefit of the
Purchasers, enforceable against creditors of, and purchasers from, Seller; and
this Agreement constitutes, and each other Agreement Document to be signed by
Seller when duly executed and delivered will constitute, a legal, valid and
binding obligation of Seller enforceable in accordance with its terms, except,
in the case of all the foregoing clauses, as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the other Agreement Documents and the fulfillment of the terms
hereof will not (i) conflict
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with, result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, the articles
of incorporation or by-laws of Seller, or (ii) conflict with or result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under any indenture, loan agreement,
mortgage, deed of trust, agreement or instrument to which Seller is a party or
by which it or any of its properties is bound, which conflict, breach or default
could reasonably be expected to have a Material Adverse Effect, (iii) result in
the creation or imposition of any Adverse Claim upon any of Seller's properties
pursuant to the terms of any such indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument, other than this Agreement, or (iv)
violate any law or any order, rule, or regulation applicable to Seller of any
court or of any federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over Seller or any of its
properties which violation could reasonably be expected to have a Material
Adverse Effect.
(f) No Proceedings. There are no proceedings or investigations pending,
or, to Seller's knowledge, threatened, before any court, regulatory body,
administrative agency, or other tribunal or governmental instrumentality (i)
asserting the invalidity of this Agreement or any other Agreement Document, (ii)
seeking to prevent the sale and assignment of any of the Undivided Interests, or
the consummation of any of the other transactions contemplated by this or any
other Agreement Document, or (iii) seeking any determination or ruling that
could reasonably be expected to have a Material Adverse Effect.
(g) Bulk Sales Act. No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(h) Government Approvals. No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by Seller of
this Agreement or any other Agreement Document, except for the filing of the UCC
Financing Statements referred to in Article V, all of which, at the time
required in Article V, shall have been duly made and shall be in full force and
effect.
(i) Financial Condition. (w) The balance sheet of Seller as at the date
hereof, and after giving effect hereto, certified by a Responsible Officer,
copies of which have been furnished to the Administrative Agent, fairly present
the financial position and business of Seller as at such date, all in accordance
with GAAP, and (x) since the date of Seller's formation, there has
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been no material adverse change in any such condition, business or operations.
(j) Litigation. No injunction, decree or other decision has been issued
or made by any court, governmental agency or instrumentality thereof that
prevents, and, to Seller's knowledge, no threat by any person has been made to
attempt to obtain any such decision that would prevent, Seller from conducting a
significant part of its business operations.
(k) Margin Regulations. The use of all funds obtained by Seller under
this Agreement will not conflict with or contravene any of Regulations G, T, U
and X promulgated by the Board of Governors of the Federal Reserve System from
time to time.
(l) Quality of Title. Each Pool Asset is owned by Seller free and clear
of any Adverse Claim (other than any Adverse Claim arising solely as the result
of any action taken by a Purchaser, any assignee thereof or by the
Administrative Agent) except as created hereby; when each Purchaser makes a
Purchase it (or the Administrative Agent on its behalf) shall have acquired and
shall continue to have maintained a valid and perfected first priority undivided
percentage ownership interest to the extent of its Undivided Interest in each
Pool Asset, free and clear of any Adverse Claim (other than any Adverse Claim
arising solely as the result of any action taken by a Purchaser, any assignee
thereof or by the Administrative Agent) except as created hereby; and no
effective financing statement or other instrument similar in effect covering any
Pool Asset is on file in any recording office except such as may be filed in
favor of an Originator in accordance with the Contracts, in favor of the
Administrative Agent in accordance with this Agreement, in favor of the
consignor or assignor with respect to (and only with respect) to Consigned
Inventory or in connection with any Adverse Claim arising solely as the result
of any action taken by a Purchaser, any assignee thereof or by the
Administrative Agent. Notwithstanding anything set forth in this Section
6.01(l) or otherwise in this Agreement, Pool Receivables that relate to the sale
of Consigned Inventory may be subject to the prior claims of the consignor or
assignor thereof.
(m) Accurate Reports. No Periodic Report (if prepared by Seller or to the
extent that information contained therein was supplied by Seller), information,
exhibit, financial statement, document, book, record or report furnished by
Seller to the Administrative Agent or any Purchaser in connection with this
Agreement was, in light of the circumstances made, inaccurate or incomplete in
any material respect as of the date it was dated or (except as otherwise
disclosed to the Administrative Agent or such Purchaser, as the case may be, at
such time) as of the date so furnished.
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(n) Offices; Trade Names. The chief place of business and chief executive
office of Seller are located at the address of Seller referred to in Section
13.02 and the offices where Seller keeps all its books, records and documents
evidencing Pool Assets are located at the addresses specified in Exhibit 6.01(n)
(or at such other locations, notified to the Administrative Agent in accordance
with Section 7.01(f), in jurisdictions where all action required by Section 8.05
has been taken and completed). Seller is not, nor at any time during the prior
five years has been, known by any other name (including any trade name) except
as set forth in Exhibit 6.01(n).
(o) Lock-Box Accounts. The names and addresses of all the Lock-Box Banks,
together with the account numbers of the lock-box accounts and concentration
accounts of Seller at such Lock-Box Banks, are specified in Exhibit 6.01(o)-1
(or have been notified to the Administrative Agent in accordance with Section
7.03(d)). The names and addresses of all Collection Banks, together with the
account numbers of Seller's accounts, are specified in Exhibit 6.01(o)-2, as
updated pursuant to Section 7.01(h).
(p) Eligible Receivables. Each Receivable included in the Net Pool
Balance as an Eligible Receivable shall in fact be an Eligible Receivable on the
date of the Purchase of, or Reinvestment in, such Receivable or other date of
the calculation of Net Pool Balance.
(q) Transfers. No Purchase of an interest in Receivables by any Purchaser
from Seller constitutes a fraudulent transfer or fraudulent conveyance or is
otherwise void, voidable or subordinated under similar laws or principles, the
doctrine of equitable subordination or for any other reason.
(r) Solvency. Immediately after giving effect to each of Seller's
obligations now or hereafter arising pursuant to any Agreement Document, Seller
will be Solvent.
SECTION 6.02. Representations and Warranties of Terra Capital. Terra
Capital represents and warrants as follows:
(a) Organization and Good Standing. Terra Capital has been duly organized
and is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to conduct
its business as such properties are presently owned and such business is
presently conducted.
(b) Due Qualification. Terra Capital is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in Iowa and in all
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jurisdictions where the failure to preserve and maintain such qualification,
licenses or approvals would reasonably be expected to have a Material Adverse
Effect.
(c) Power and Authority; Due Authorization. Terra Capital (i) has all
necessary power, authority and legal right to (A) execute and deliver this
Agreement and the other Agreement Documents to be executed and delivered in
connection herewith and (B) carry out the terms of the Agreement Documents to
which it is a party and (ii) has duly authorized by all necessary corporate
action the execution, delivery, and performance of this Agreement and the other
Agreement Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each other
Agreement Document to be signed by Terra Capital when duly executed and
delivered will constitute, a legal, valid and binding obligation of Terra
Capital enforceable in accordance with its terms, except, in the case of all the
foregoing clauses, as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the other Agreement Documents and the fulfillment of the
terms hereof will not (i) conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a default under, the articles of incorporation or by-laws of Terra
Capital, or (ii) conflict with or result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
default under any indenture, loan agreement, mortgage, deed of trust, agreement
or instrument to which Terra Capital is a party or by which it or any of its
properties is bound, which conflict, breach or default could have a Material
Adverse Effect, (iii) result in the creation or imposition of any Adverse Claim
upon any of Terra Capital's properties pursuant to the terms of any such
indenture, loan agreement, mortgage, deed of trust, or other agreement or
instrument, other than this Agreement, or (iv) violate any law or any order,
rule, or regulation applicable to Terra Capital of any court or of any federal
or state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over Terra Capital or any of its properties
which violation could have a Material Adverse Effect.
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(f) No Proceedings. There are no proceedings or investigations pending,
or, to Terra Capital's knowledge, threatened, before any court, regulatory body,
administrative agency, or other tribunal or governmental instrumentality (i)
asserting the invalidity of this Agreement or any other Agreement Document, (ii)
seeking to prevent the sale and assignment of any of the Undivided Interests, or
the consummation of any of the other transactions contemplated by this or any
other Agreement Document, or (iii) seeking any determination or ruling that
could reasonably be expected to have a Material Adverse Effect.
(g) Government Approvals. No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by Terra
Capital of this Agreement or any other Agreement Document.
(h) Financial Condition. (w) The consolidated balance sheets of Parent and
its consolidated subsidiaries as at December 31, 1995, and the related
consolidated statements of income and shareholders' equity of Parent and its
consolidated subsidiaries for the fiscal year then ended certified by Deloitte &
Touche, independent accountants, copies of which have been furnished to the
Administrative Agent, fairly present the consolidated financial position and
business of Parent and its consolidated subsidiaries as at such dates and the
consolidated results of the operations of Parent and its consolidated
subsidiaries for the periods ended on such dates, all in accordance with GAAP,
and (x) since December 31, 1995 there has been no material adverse change in any
such condition, business or operations.
(i) Litigation. No injunction, decree or other decision has been issued
or made by any court, governmental agency or instrumentality thereof that
prevents, and, to Terra Capital's knowledge, no threat by any person has been
made to attempt to obtain any such decision that would prevent, Terra Capital
from conducting a significant part of its business operations.
(j) Accurate Reports. No Periodic Report (if prepared by Terra Capital or
to the extent that information contained therein was supplied by Terra Capital),
information, exhibit, financial statement, document, book, record or report
furnished by Terra Capital to the Administrative Agent or any Purchaser in
connection with this Agreement was, in light of the circumstances made,
inaccurate or incomplete in any material respect as of the date it was dated or
(except as otherwise disclosed to the Administrative Agent or such Purchaser, as
the case may be, at such time) as of the date so furnished.
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(k) Solvency. Immediately after giving effect to each of Terra Capital's
obligations now or hereafter arising pursuant to any Agreement Document, Terra
Capital will be Solvent.
ARTICLE VII
GENERAL COVENANTS
SECTION 7.01. Affirmative Covenants of Seller. From the date hereof until
the End Date, unless the Required Purchasers shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Seller will comply in all material
respects with all laws, rules, regulations and orders with respect to the Pool
Receivables and related Contracts, or otherwise applicable to it or its
property.
(b) Preservation of Corporate Existence. Seller will preserve and maintain
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualification would
reasonably be expected to have a Material Adverse Effect.
(c) Audits. Seller will at any time and from time to time during regular
business hours, permit the Administrative Agent or any Purchaser, or its agents
or representatives, upon 5 Business Days' notice (provided that no such notice
shall be required if a Termination Event has occurred and is continuing) (i) to
examine and make copies of and abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in the possession or
under the control of Seller relating to Pool Receivables; and (ii) to visit the
offices and properties of Seller for the purpose of examining such materials
described in clause (i) next above, and to discuss matters relating to Pool
Receivables or Seller's performance hereunder with any of the officers or
employees of Seller having knowledge of such matters.
(d) Keeping of Records and Books of Account. Seller will maintain and
implement, or cause to be maintained or implemented, administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing Pool Receivables in the event of the destruction of the
originals thereof), and keep and maintain, or cause to be kept and maintained,
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Pool
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Receivables (including, without limitation, records adequate to permit the daily
identification of each new Pool Receivable and all Collections of and
adjustments to each existing Pool Receivable).
(e) Performance and Compliance with Receivables and Contracts. Seller
will at its expense timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it under the
Contracts related to the Pool Receivables and all purchase orders and other
agreements related to such Pool Receivables.
(f) Location of Records. Seller will keep its chief place of business and
chief executive office, and the offices where it keeps its records concerning
the Pool Assets at the address(es) of Seller referred to in Section 6.01(n) or,
upon 15 days' prior written notice to the Administrative Agent, at such other
locations in jurisdictions where all action required by Section 8.05 shall have
been taken and completed.
(g) Credit and Collection Policies. Seller will comply in all material
respects with the Credit and Collection Policy in regard to each Pool Receivable
and the related Contract.
(h) Collections. Seller will, on the date hereof and on each anniversary
thereof and, after the occurrence and during the continuance of a Termination
Event, upon the Administrative Agent's request provide to the Administrative
Agent a complete and accurate list of all bank accounts in which Collections of
Pool Receivables are deposited. Seller will cause each such account to be swept
regularly (but in no event less often than weekly) to a concentration account at
a Lock-Box Bank. Seller will cause each of its local offices to deposit any
Collections received by such office to an account at a Collection Bank that is
swept as set forth in the previous sentence.
(i) Taxes. Seller will pay all federal, state and local taxes owing by it
on or before the date due, provided that Seller shall not be required to pay any
such tax that is being contested in good faith and by appropriate proceedings
and as to which appropriate reserves are being maintained to the extent required
by GAAP. Seller will maintain at all times reserves (in the form of cash or
Receivables in excess of those required to maintain the Required Allocations
Limit) at least equal to its then Estimated Taxes.
SECTION 7.02. Reporting Requirements of Seller. From the date hereof
until the End Date, Seller will unless the Required Purchasers shall otherwise
consent in writing, furnish to the Administrative Agent:
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(a) Quarterly Financial Statements. As soon as available and in any event
within 60 days after the end of each of the first three Fiscal Quarters of each
Fiscal Year of Seller, copies of its balance sheets as at the end of such
quarter and the related statements of earnings and shareholders' equity for the
Fiscal Quarter then ended, prepared in reasonable detail and in accordance with
GAAP and certified by the chief financial or accounting officer of Seller;
(b) Annual Financial Statements. As soon as available and in any event
within 110 days after the end of each Fiscal Year of Seller, copies of its
balance sheets as at the end of such fiscal year, and the related statements of
earnings, shareholders' equity and cash flows for the Fiscal Year then ended,
prepared in reasonable detail and in accordance with GAAP, and certified by
Deloitte & Touche or other nationally recognized independent certified
accountants, together with a certificate from Seller's chief financial or
accounting officer stating that no Termination Event or Unmatured Termination
Event has occurred and is continuing, or, if such event has occurred and is
continuing, the nature and status thereof;
(c) Termination Events. As soon as possible and in any event within five
Business Days after a Responsible Officer has become aware of the occurrence of
each Termination Event and each Unmatured Termination Event, a written statement
of a Responsible Officer setting forth details of such Termination Event or
Unmatured Termination Event and the action that Seller proposes to take with
respect thereto;
(d) Litigation. As soon as possible and in any event within 10 days of
knowledge thereof by a Responsible Officer, notice of (i) any litigation,
investigation or proceeding which may exist at any time which could reasonably
be expected to have a Material Adverse Effect, unless Seller is insured with
respect thereto and the insurer, except to the extent covered by permitted self
insurance, has assumed responsibility therefor in writing and (ii) any material
adverse development in previously disclosed litigation; and
(e) Other. Promptly, from time to time, such other information,
documents, records or reports respecting the Receivables or the conditions or
operations, financial or otherwise, of Seller as the Administrative Agent or any
Purchaser may from time to time reasonably request in order to protect the
interests of the Administrative Agent or of Purchasers under or as contemplated
by this Agreement.
SECTION 7.03. Negative Covenants of Seller. From the date hereof until
the End Date, without the prior written consent of the Required Purchasers:
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(a) Sales, Liens, Etc. Seller will not sell, assign (by operation of law
or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, any Pool Asset, or assign any right to receive
income from or in respect of any of the foregoing, except pursuant to this
Agreement and except the Adverse Claims of consignors and assignors of Consigned
Inventory.
(b) Extension or Amendment of Receivables. Except as set forth in Section
8.02(c), Seller will not extend, amend or otherwise modify the terms of any Pool
Receivable, or amend, modify or waive any term or condition of any Contract
related thereto, if such extension, amendment, modification or waiver would
impair the ultimate collectibility of such Pool Receivable or otherwise
materially adversely affect the rights of any Purchaser or the Administrative
Agent hereunder or in the Pool Receivables or the Related Security.
(c) Change in Business or Credit and Collection Policy. Seller will not
make any change in the character of its business or in the Credit and Collection
Policy, which change would, in either case, impair the collectibility of any
Pool Receivable (other than changes that relate solely to Receivables that are
not Eligible Receivables).
(d) Change in Payment Instructions to Obligors. Seller will not add or
terminate any bank as a Lock-Box Bank from those listed in Exhibit 6.01(o),
unless the Administrative Agent shall have received notice of such addition,
termination or change and duly executed copies of a Lock-Box Agreement with each
new Lock-Box Bank. Seller will not make any change in its instructions to each
Collection Bank with respect to the regular (but in no event less often than
weekly) sweeps of the accounts at such Collection Bank to a Lock-Box Bank.
(e) Mergers. Seller will not be a party to any merger or consolidation.
(f) Accurate Reports. Seller will not permit any Periodic Report (if
prepared by Seller or to the extent that information contained therein was
supplied by Seller), information, exhibit, financial statement, document, book,
record or report furnished by Seller to the Administrative Agent or any
Purchaser in connection with this Agreement to be, in light of the circumstances
made, inaccurate or incomplete in any material respect as of the date it is
dated or (except as otherwise disclosed to the Administrative Agent or such
Purchaser, as the case may be, at such time) as of the date so furnished.
(g) Transfers. Seller will not allow any Purchase of an interest in
Receivables by Purchasers from Seller to constitute a
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fraudulent transfer or fraudulent conveyance or to otherwise be void, voidable
or subordinated under similar laws or principles, the doctrine of equitable
subordination or for any other reason.
(h) Other Business. Seller will not engage in any business other than the
transactions contemplated by the Agreement Documents; incur any indebtedness,
obligation, liability or contingent obligation of any kind other than (i)
pursuant to this Agreement, the Management Agreement, the Initial Purchaser
Notes or the Purchase and Sale Agreement, (ii) taxes owed in the ordinary course
of business and (iii) other operating expenses incurred in the ordinary course
of business that do not exceed $4,995 in the aggregate at any time; form any
Subsidiary or make any investments in any other Person (other than investments
in cash equivalents and purchases of Receivables pursuant to the Purchase and
Sale Agreement).
(i) Certificate of Incorporation; Purchase Agreement. Seller will not
amend, modify, terminate, revoke or waive Article Third, Fourth or Eleventh of
its certificate of incorporation, any Initial Purchaser Note or the Purchase and
Sale Agreement.
(j) Net Worth. Seller will not permit its tangible net worth to be less
than $2,500,000.
(k) Change in Name. Seller will not change its name unless Seller has
provided the Administrative Agent with at least 30 days' prior written notice
thereof and shall have taken all action required by Section 8.05.
SECTION 7.04. Affirmative Covenants of Terra Capital. From the date
hereof until the End Date, unless the Required Purchasers shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Terra Capital will comply in all material
respects with all laws, rules, regulations and orders with respect to the Pool
Receivables and related Contracts, or otherwise applicable to it or its
property.
(b) Preservation of Corporate Existence. Terra Capital will preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, except as allowed pursuant to Section
7.06(d), and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification would have a
Material Adverse Effect.
(c) Audits. Terra Capital will at any time and from time to time during
regular business hours, permit the Administrative
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Agent or any Purchaser, or its agents or representatives, upon 5 Business Days'
notice (provided that no such notice shall be required if a Termination Event
has occurred and is continuing) (i) to examine and make copies of and abstracts
from all books, records and documents (including, without limitation, computer
tapes and disks) in the possession or under the control of Terra Capital
relating to Pool Receivables; and (ii) to visit the offices and properties of
Terra Capital for the purpose of examining such materials described in clause
(i) next above, and to discuss matters relating to Pool Receivables or Terra
Capital's performance hereunder with any of the officers or employees of Terra
Capital having knowledge of such matters.
(d) Keeping of Records and Books of Account. Terra Capital will maintain
and implement, or cause to be maintained or implemented, administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing Pool Receivables in the event of the destruction of the
originals thereof), and keep and maintain, or cause to be kept and maintained,
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Pool Receivables (including, without
limitation, records adequate to permit the daily identification of each new Pool
Receivable and all Collections of and adjustments to each existing Pool
Receivable).
(e) Location of Records. Terra Capital will keep its chief place of
business and chief executive office, and the offices where it keeps its records
concerning the Pool Assets at the address(es) of Terra Capital referred to in
Section 13.02 or, upon 15 days' prior written notice to the Administrative
Agent, at such other locations set forth in such notice.
(f) Credit and Collection Policies. Terra Capital will comply in all
material respects with the Credit and Collection Policy in regard to each Pool
Receivable and the related Contract.
(g) Collections. Terra Capital will, on the date hereof and on each
anniversary thereof and, after the occurrence and during the continuance of a
Termination Event, upon the Administrative Agent's request provide to the
Administrative Agent a complete and accurate list of all bank accounts in which
Collections of Pool Receivables are deposited. Terra Capital will cause each
such account to be swept regularly (but in no event less often than weekly) to a
concentration account at a Lock-Box Bank. Terra Capital will cause each of its
local offices to deposit any Collections received by such office to an account
at a Collection Bank that is swept as set forth in the previous sentence.
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SECTION 7.05. Reporting Requirements of Terra Capital. From the date
hereof until the End Date, Terra Capital will unless the Required Purchasers
shall otherwise consent in writing, furnish to the Administrative Agent:
(a) Parent's Quarterly Financial Statements. As soon as available and in
any event within 60 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year of Parent, copies of the consolidated balance
sheets as at the end of such quarter and the consolidated related statements of
earnings and shareholders' equity for the Fiscal Quarter then ended, prepared in
reasonable detail and in accordance with GAAP and certified by the chief
financial or accounting officer of Parent.
(b) Parent's Annual Financial Statements. As soon as available and in any
event within 110 days after the end of each Fiscal Year of Parent, copies of the
consolidated balance sheets as at the end of such fiscal year, and the related
consolidated statements of earnings, shareholders' equity and cash flows for the
Fiscal Year then ended, prepared in reasonable detail and in accordance with
GAAP, and, with respect to the consolidated statements, certified by Deloitte &
Touche or other nationally recognized independent certified accountants,
together with a certificate from Parent's chief financial or accounting officer
stating that no Termination Event or Unmatured Termination Event has occurred
and is continuing, or if such event has occurred and is continuing, the nature
and status thereof;
(c) Reports to Holders and Exchanges. In addition to the reports required
by subsections (a) and (b) next above, promptly upon the Administrative Agent's
reasonable request, copies of any reports specified therein which Parent sends
to any of the holders of its publicly held securities and which is relevant to
the protection of the interests of the Administrative Agent or of the Purchasers
under or as contemplated by this Agreement, and any reports or registration
statements that Parent files with the Securities and Exchange Commission or any
national securities exchange (including the reports filed by Parent on Forms
10-Q and 10-K), other than registration statements relating to employee benefit
plans, to stock plans for dealers and/or distributors and to registrations of
securities for selling Security holders;
(d) ERISA. Promptly after the filing or receiving thereof, copies of all
reports and notices with respect to any Reportable Event as defined in Article
IV of ERISA as to which the 30-day notice requirement has not been waived by the
Pension Benefit Guaranty Corporation which Terra Capital files under ERISA with
the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the
U.S. Department of Labor or which Terra Capital receives from the Pension
Benefit Guaranty Corporation;
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(e) Termination Events. As soon as possible and in any event within five
Business Days after a Responsible Officer has become aware of the occurrence of
each Termination Event and each Unmatured Termination Event, a written statement
of a Responsible Officer setting forth details of such Termination Event or
Unmatured Termination Event and the action that Terra Capital proposes to take
with respect thereto;
(f) Litigation. As soon as possible and in any event within 10 days of
knowledge thereof by a Responsible Officer, notice of (i) any litigation,
investigation or proceeding which may exist at any time which could reasonably
be expected to have a Material Adverse Effect, unless Terra Capital is insured
with respect thereto and the insurer, except to the extent covered by permitted
self insurance, has assumed responsibility therefor in writing and (ii) any
material adverse development in previously disclosed litigation; and
(g) Other. Promptly, from time to time, such other information,
documents, records or reports respecting the Receivables or the conditions or
operations, financial or otherwise, of Terra Capital as the Administrative Agent
or any Purchaser may from time to time reasonably request in order to protect
the interests of the Administrative Agent or of Purchasers under or as
contemplated by this Agreement.
SECTION 7.06. Negative Covenants of Terra Capital. From the date hereof
until the End Date, without the prior written consent of the Required
Purchasers:
(a) Extension or Amendment of Receivables. Except as set forth in Section
8.02(c), Terra Capital will not extend, amend or otherwise modify the terms of
any Pool Receivable, or amend, modify or waive any term or condition of any
Contract related thereto, if such extension, amendment, modification or waiver
would impair the ultimate collectibility of such Pool Receivable or otherwise
materially adversely affect the rights of any Purchaser or the Administrative
Agent hereunder or in the Pool Receivables or the Related Security.
(b) Change in Business or Credit and Collection Policy. Terra Capital
will not make any change in the character of its business or in the Credit and
Collection Policy, which change would, in either case, impair the collectibility
of any Pool Receivable (other than changes that relate solely to Receivables
that are not Eligible Receivables).
(c) Change in Payment Instructions to Obligors. Terra Capital will not
add or terminate any bank as a Lock-Box Bank from those listed in Exhibit
6.01(o), unless the Administrative Agent shall have received notice of such
addition, termination or
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change and duly executed copies of a Lock-Box Agreement with each new Lock-Box
Bank. Terra Capital will not make any change in its instructions to each
Collection Bank with respect to the regular (but in no event less often than
weekly) sweeps of the accounts at such Collection Bank to a Lock-Box Bank.
(d) Mergers, etc. Terra Capital will not merge with or into, or consolidate
with or into, any Person, or permit any Subsidiary to merge with or into, or
consolidate with or into, any Person, except as permitted under the Amended and
Restated Credit Agreement, dated as of December 14, 1995 (as amended, waived,
supplemented or replaced from time to time, the "Credit Agreement"); provided,
however that no amendment, waiver, supplement or replacement to or of the Credit
Agreement shall be effective for purposes of this Section 7.06(d) if, at the
time such amendment, waiver, supplement or replacement is adopted or approved,
neither BAI nor any Affiliate of BAI is a "Lender", an "Issuing Bank" or a
participant under the Credit Agreement (in which case, the provision with
respect to merger and consolidation as in effect prior to such amendment,
waiver, supplement or replacement shall remain in effect for purposes of this
Section 7.06(d), unless otherwise specified by the Administrative Agent in
writing). If the Credit Agreement is terminated prior to the End Date, the
provision with respect to merger and consolidation as in effect prior to such
termination shall remain in effect for purposes of this Section 7.06(d).
(e) Accurate Reports. Terra Capital will not permit any Periodic Report
(if prepared by Terra Capital or to the extent that information contained
therein was supplied by Terra Capital), information, exhibit, financial
statement, document, book, record or report furnished by Terra Capital to the
Administrative Agent or any Purchaser in connection with this Agreement to be,
in light of the circumstances made, inaccurate or incomplete in any material
respect as of the date it is dated or (except as otherwise disclosed to the
Administrative Agent or such Purchaser, as the case may be, at such time) as of
the date so furnished.
SECTION 7.07 Separate Existence. Each of Seller and Terra Capital hereby
acknowledges that each Purchaser and the Administrative Agent, are entering into
the transactions contemplated by this Agreement and the other Agreement
Documents in reliance upon Seller's identity as a legal entity separate from
each other Terra Party. Therefore, from and after the date hereof, each of
Seller and Terra Capital shall take all steps specifically required by this
Agreement or by any Purchaser or Administrative Agent to continue Seller's
identity as a separate legal entity and to make it apparent to third Persons
that Seller is an entity with assets and liabilities distinct from those of any
other Terra Party and any other Person, and is not a division
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of any other Terra Party or any other Person. Without limiting the generality of
the foregoing and in addition to and consistent with the other covenants set
forth herein, each of Seller and Terra Capital shall take such actions as shall
be required in order that:
(a) Seller will be a limited purpose corporation whose primary
activities are restricted in its certificate of incorporation to purchasing
or otherwise acquiring, owning, holding, granting security interests, or
selling interests, in Pool Assets or other receivables, entering into
agreements for the selling and servicing of receivables, and conducting
such other activities as it deems necessary or appropriate to carry out its
primary activities;
(b) Seller shall not engage in any business or activity, or incur any
indebtedness or liability other than as expressly permitted or contemplated
by the Agreement Documents;
(c) The Preferred Stock shall be owned by an individual or entity who
is not a direct, indirect or beneficial stockholder, partner, officer,
director, employee, affiliate, associate, or supplier of Parent or any
Related Party (other than the beneficial ownership of the Preferred Stock
and stock of Parent or its Affiliates owned through mutual funds or
retirement plans over which such Person has no direct control), or the
spouse, parent or sibling of any of the foregoing. For purposes of this
Section 7.07, (i) "associate" and "supplier" means a Person who provides
goods or services to Parent or any Related Party that generate revenues for
such Person in an amount equal to 5% or more of such Person's annual net
revenues, and (ii) "Related Party" means a Subsidiary of Parent, or a
partnership in which Parent or its Subsidiary is the general partner or a
limited partner with more than 5% of the limited partnership interests in
such partnership, or a limited liability company in which Parent or its
Subsidiary is a member. The certificate of incorporation of Seller shall
provide that (i) Seller's Board of Directors shall not approve, or take any
other action to cause the filing of, a voluntary bankruptcy petition with
respect to Seller unless the holder of the Preferred Stock shall approve
the taking of such action in writing prior to the taking of such action and
(ii) such provision cannot be amended without the prior written consent of
the holder of the Preferred Stock;
(d) Any employee, consultant or agent of Seller will be compensated
from Seller's funds for services provided to Seller. Seller will not
engage any agents other than its attorneys, auditors and other
professionals, and a servicer
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and any other agent contemplated by the Agreement Documents for the
Receivables Pool, which servicer will be fully compensated for its services
by payment of the Servicer's Fee and a manager, which manager will be fully
compensated from Seller's funds;
(e) Seller will contract with Servicer to perform for Seller all
operations required on a daily basis to service the Receivables Pool.
Seller will pay Servicer the Servicer's Fee pursuant hereto. Seller will
not incur any material indirect or overhead expenses for items shared with
Terra Capital (or any other Affiliate thereof) which are not reflected in
the Servicer's Fee or the fee to Terra Capital in its role as manager for
Seller. To the extent, if any, that Seller (or any other Affiliate thereof)
share items of expenses not reflected in the Servicer's Fee or the
manager's fee, such as legal, auditing and other professional services,
such expenses will be allocated to the extent practical on the basis of
actual use or the value of services rendered, and otherwise on a basis
reasonably related to the actual use or the value of services rendered, it
being understood that Terra Capital shall pay all expenses relating to the
preparation, negotiation, execution and delivery of the Agreement
Documents, including, without limitation, legal, agency and other fees;
(f) Seller's operating expenses will not be paid by Terra Capital or
any other Affiliate thereof (except for expenses paid by Terra Capital that
are reimbursed pursuant to the manager's fee);
(g) Seller will have its own stationery;
(h) Seller's books and records will be maintained separately from
those of Terra Capital and any other Affiliate thereof;
(i) All financial statements represented by the audited annual report
and SEC Form 10-K of Parent will contain detailed notes clearly stating
that (A) all of Seller's assets are owned by Seller, and (B) Seller is a
separate entity with creditors who have received security interests in
Seller's assets;
(j) Seller's assets will be maintained in a manner that facilitates
their identification and segregation from those of Terra Capital or any
Affiliate thereof;
(k) Seller will strictly observe corporate formalities in its dealings
with Terra Capital or any Affiliate thereof, and funds or other assets of
Seller will not be commingled
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with those of Terra Capital or any Affiliate thereof except as permitted or
contemplated by the Agreement Documents. Seller shall not maintain joint
bank accounts or other depository accounts to which Terra Capital or any
Affiliate thereof (other than Terra Capital or an Originator in its
capacity as Servicer or Subservicer, respectively) has independent access.
Seller is not named, and has not entered into any agreement to be named,
directly or indirectly, as a direct or contingent beneficiary or loss payee
on any insurance policy with respect to any loss relating to the property
of Terra Capital or any Affiliate of Terra Capital (other than Seller).
Seller will pay to the appropriate Affiliate its allocable portion of the
premium payable with respect to any insurance policy that covers Seller and
such Affiliate; and
(l) Seller will maintain arm's-length relationships with Terra Capital
(and any Affiliate thereof). Any Person that renders or otherwise
furnishes services to Seller will be compensated by Seller at market rates
for such services it renders or otherwise furnishes to Seller. Neither
Seller nor Terra Capital will be or will hold itself out to be responsible
for the debts of the other or the decisions or actions respecting the daily
business and affairs of the other. Seller and Terra Capital will
immediately correct any known misrepresentation with respect to the
foregoing, and they will not operate or purport to operate as an integrated
single economic unit with respect to each other or in their dealing with
any other entity.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer. (a) Terra Capital as Initial
Servicer. The servicing, administering and collection of the Pool Receivables
shall be conducted by the Person designated as Servicer hereunder ("Servicer")
from time to time in accordance with this Section 8.01. Until the
Administrative Agent gives to Terra Capital a Successor Notice, Terra Capital is
hereby designated as, and hereby agrees to perform the duties and obligations
of, Servicer pursuant to the terms hereof. The Administrative Agent agrees not
to provide Terra Capital with the Successor Notice until after the occurrence of
any Servicer Transfer Event, in which case such Successor Notice may be given at
any time in the Administrative Agent's discretion (and shall be given by the
Administrative Agent at the request of the Required Purchasers).
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(b) Successor Notice. Upon Terra Capital's receipt of a notice from the
Administrative Agent of the Administrative Agent's designation of a new Servicer
(a "Successor Notice") Terra Capital agrees that it will terminate its
activities as Servicer hereunder in a manner which the Administrative Agent
believes will facilitate the transition of the performance of such activities to
the new Servicer, and the Administrative Agent (or its designee) shall assume
each and all of Terra Capital's said obligations to service and administer such
Receivables, on the terms and subject to the conditions herein set forth and
Terra Capital shall use its best efforts to assist the Administrative Agent (or
its designee) in assuming such obligations. If Terra Capital disputes the
occurrence of a Servicer Transfer Event, Terra Capital may take appropriate
action to resolve such dispute; provided that Terra Capital must terminate its
activities hereunder as Servicer and allow the newly designated Servicer to
perform such activities on the date provided by the Administrative Agent as
described above, notwithstanding the commencement or continuation of any
proceeding to resolve the aforementioned dispute.
(c) Subcontracts. Servicer may, with the prior consent of the
Administrative Agent, subcontract with any other person for servicing,
administering or collecting the Pool Receivables, provided that Servicer shall
remain liable for the performance of the duties and obligations of Servicer
pursuant to the terms hereof and that any such subcontract may be terminated
upon the occurrence of a Servicer Transfer Event; it being understood, that
Administrative Agent hereby consents to the appointment of each Originator
pursuant to the Purchase and Sale Agreement as a Subservicer with respect to the
Pool Receivables originated by it.
SECTION 8.02. Duties of Servicer. (a) Appointment; Duties in General.
Each of Seller, each Purchaser and the Administrative Agent hereby appoints as
its agent Servicer from time to time designated pursuant to Section 8.01, to
enforce its rights and interests in and under the Pool Receivables, the Related
Security and the related Contracts. Servicer shall take or cause to be taken
all such actions as may be necessary or advisable to collect each Pool
Receivable from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy.
(b) Allocation of Collections; Segregation. Servicer shall set aside for
the account of Seller and Purchasers their respective allocable shares of the
Collections of Pool Receivables in accordance with Sections 3.01 and 3.02 but
shall not be required (unless otherwise requested by the Administrative Agent
after the occurrence and during the continuance of a
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Termination Event) to segregate the funds constituting such portions of such
Collections, prior to the remittance thereof in accordance with said Sections.
If instructed by the Administrative Agent after the occurrence of a Termination
Event or a Run Off Day, Servicer shall segregate and deposit with a bank (which
may be BofA) designated by the Administrative Agent such allocable shares of
Collections of Pool Receivables set aside for Purchasers within two Business
Days following receipt by Servicer of such Collections in immediately available
funds.
(c) Modification of Receivables. So long as no Termination Event or
Purchase Termination Event shall have occurred and be continuing, Terra Capital,
while it is Servicer, may, in accordance with reasonable business judgment and
the Credit and Collection Policy, (i) extend the maturity or adjust the Unpaid
Balance of any Delinquent or Defaulted Receivable as Terra Capital may determine
to be appropriate to maximize Collections thereof, (ii) prior to the Termination
Date, in the ordinary course of such Servicer's (or Subservicer's) business
extend the maturity of Pool Receivables not constituting a material portion of
the Receivables Pool in order to maximize the volume of Receivables sold to
Seller, and (iii) adjust the Unpaid Balance of any Receivable to reflect the
reductions or cancellations described in the first sentence of Section 3.03(a).
(d) Documents and Records. Subject to Section 8.03(c)(iii), Seller shall
deliver, or cause to be delivered, to Servicer, and Servicer shall hold in trust
for Seller and Purchasers, in accordance with their respective interests, all
documents, instruments and records (including, without limitation, computer
tapes or disks) that evidence or relate to Pool Receivables.
(e) Certain Duties to Seller. Servicer shall, as soon as practicable
following receipt of good funds, turn over to Seller subject to Section 3.02,
that portion of Collections of Pool Receivables representing its undivided
interest therein, less all reasonable and appropriate out-of-pocket costs and
expenses of such Servicer of servicing, collecting and administering the Pool
Receivables to the extent not covered by the Servicer's Fee received by it, plus
all collections received by it of Receivables that are not Pool Receivables.
Servicer, shall, as soon as practicable upon demand, deliver to Seller copies of
documents, instruments and records in its possession that evidence or relate to
Pool Receivables.
(f) Termination. Servicer's authorization under this Agreement shall
terminate on the End Date.
SECTION 8.03. Rights of the Administrative Agent. (a) Notice to Obligors.
At any time after the occurrence of a
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Servicer Transfer Event the Administrative Agent may notify the Obligors of Pool
Receivables, or any of them, of the ownership of Undivided Interests by
Purchasers.
(b) Notice to Lock-Box and Collection Banks. At any time following the
occurrence of a Termination Event, the Administrative Agent is hereby authorized
to give notice to the Lock-Box Banks of the actual assumption by the
Administrative Agent of dominion and control over the accounts held by such
banks, as set forth in the Lock-Box Agreements. At any time following the
occurrence of a Servicer Transfer Event, the Administrative Agent is hereby
authorized to give notice to the Collection Banks of the actual assumption by
the Administrative Agent of dominion and control over the accounts held by such
banks, as set forth in the Collection Bank Notices. Seller hereby transfers to
the Administrative Agent, effective on the date hereof, but subject to the
foregoing sentences, the exclusive dominion and control over all such accounts,
and shall take any further action that the Administrative Agent may reasonably
request to effect such transfer. Upon any such assumption by the Administrative
Agent of dominion and control over any such accounts, Servicer, on a daily
basis, shall identify those proceeds in such accounts that do not constitute
Pool Assets, which proceeds shall be transferred to, or transferred or held as
directed by, Servicer (if Servicer is Terra Capital or Affiliate thereof) or
Seller (if Servicer is not Terra Capital or an Affiliate thereof). In the event
that the Administrative Agent disputes any such identification, the disputed
amount shall be held in the related account until such dispute is resolved. If
the Administrative Agent and the Servicer or Seller (if Servicer is not Terra
Capital or an Affiliate thereof) are unable to resolve such dispute within five
Business Days, the Administrative Agent may appoint an independent accounting
firm, at the expense of the Servicer, to resolve such dispute.
(c) Servicer other than Seller. At any time following the designation of
a Servicer other than Terra Capital pursuant to Section 8.01:
(i) The Administrative Agent may direct the Obligors of Pool
Receivables, or any of them, to pay all amounts payable under any Pool
Receivable directly to the Administrative Agent or its designee.
(ii) Seller shall at the Administrative Agent's request and at
Seller's expense, give notice of such ownership to each such Obligor and
direct that payments be made directly to the Administrative Agent or its
designee.
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(iii) Seller shall, at the Administrative Agent's request, (A)
assemble all of the documents, instruments and other records (including,
without limitation, computer programs, tapes and disks) which evidence the
Pool Receivables, and the related Contracts and Related Security, or which
are otherwise necessary or desirable to collect such Pool Receivables, and
shall make the same available to the Administrative Agent at a place
selected by the Administrative Agent or its designee, and (B) segregate all
cash, checks and other instruments received by it from time to time
constituting Collections of Pool Receivables in a manner acceptable to the
Administrative Agent and shall, promptly upon receipt, remit all such cash,
checks and instruments, duly endorsed or with duly executed instruments of
transfer, to the Administrative Agent or its designee.
(iv) Each of Seller and each Purchaser hereby authorizes the
Administrative Agent to take any and all steps in Seller's name and on
behalf of Seller and Purchasers which are necessary or desirable, in the
determination of the Administrative Agent, to collect all amounts due under
any and all Pool Receivables, including, without limitation, endorsing
Seller's name on checks and other instruments representing Collections and
enforcing such Pool Receivables and the related Contracts.
SECTION 8.04. Responsibilities under Contracts. (a) Anything herein to
the contrary notwithstanding neither the Administrative Agent nor any Purchaser
shall have any obligation or liability with respect to any Pool Receivables,
Contracts related thereto or any other related purchase orders or other
agreements, nor shall any of them be obligated to perform any of the obligations
of Seller.
(b) Seller hereby grants to Servicer an irrevocable power of attorney,
with full power of substitution, coupled with an interest, to take in the name
of Seller all steps which are necessary or advisable (but subject to Sections
8.01, 8.02 and 8.03) to endorse, negotiate or otherwise realize on any writing
or other right of any kind held or transmitted by Seller or transmitted or
received by a Purchaser (whether or not from Seller) in connection with any Pool
Receivable. The Administrative Agent agrees that it shall only have the right
to use the powers of attorney delivered to it in connection with this Agreement
from and after the time it has given a notice pursuant to Section 8.03(b) or has
replaced Terra Capital as Servicer.
SECTION 8.05. Further Action Evidencing Purchases. Seller will from time
to time, at its expense, promptly execute and deliver all further instruments
and documents, and take all
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further action that the Administrative Agent may reasonably request in order to
perfect, protect or more fully evidence the Purchases hereunder and Purchasers'
interests hereunder, including the Undivided Interests purchased by Purchasers
hereunder, or to enable any of any Purchaser or the Administrative Agent to
exercise or enforce any of their respective rights hereunder. Without limiting
the generality of the foregoing, Seller will upon the request of the
Administrative Agent: (i) execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate; (ii) made after the
occurrence of a Termination Event, mark conspicuously each Contract evidencing
each Pool Receivable with a legend, acceptable to the Administrative Agent,
evidencing that such Undivided Interests have been sold in accordance with this
Agreement; and (iii) mark its master data processing records evidencing such
Pool Receivables and related Contracts with such legend. Seller hereby
authorizes the Administrative Agent to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Pool Receivables and the Related Security now
existing or hereafter arising in the name of Seller. If Seller fails to perform
any of its agreements or obligations under this Agreement, the Administrative
Agent may (but shall not be required to) itself perform, or cause performance
of, such Agreement or obligation, and the expenses of the Administrative Agent
incurred in connection therewith shall be payable by Seller as provided in
Section 12.01.
ARTICLE IX
TERMINATION EVENTS
SECTION 9.01. Termination Events. Each of the following events shall be a
"Termination Event" hereunder:
(a) (i) Servicer (if Terra Capital) shall fail to perform or observe any
term, covenant or agreement hereunder in its capacity as Servicer (other than as
referred to in clause (ii) next following) and such failure shall remain
unremedied for five Business Days after notice of such failure by the
Administrative Agent or a Purchaser to Terra Capital or (ii) Servicer (if Terra
Capital) or Seller shall fail to make any payment or deposit to be made by it
hereunder and such failure shall continue for one Business Day; or
(b) Any representation or warranty made or deemed to be made by any Terra
Party (or any of its officers) under or in
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connection with this Agreement, any other Agreement Document or any Periodic
Report or other information or report delivered pursuant hereto shall prove to
have been false or incorrect in any material respect when made and shall remain
material at the time in question; or
(c) Any Terra Party shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or any other Agreement
Document on its part to be performed or observed and any such failure shall
remain unremedied for ten Business Days after written notice thereof shall have
been given by the Administrative Agent to such Terra Party; or
(d) (i) Any Terra Party shall fail to pay the principal of any Debt of
such Person that is outstanding in an aggregate principal amount equal to at
least $10,000,000, when due at final maturity and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or
(ii) as a result of a default, breach or violation, any such Debt
shall be declared to be due and payable, or becomes automatically due and
payable, or is required to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, 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
(e) After any Settlement, Aggregate Required Allocations shall exceed the
Required Allocations Limit; or
(f) An Event of Bankruptcy shall have occurred and remained continuing
with respect to any Terra Party; or
(g) Any judgment or order for the payment of money in excess of $1,000,000
shall be rendered against Seller, or any judgment or order for the payment of
money in excess of $10,000,000 shall be rendered against any other Terra Party
and, in either case, shall not have been satisfied 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; or
(h) There shall have occurred any event which materially and adversely
affects the collectibility of the Pool Receivables or the ability of Servicer to
collect the Pool Receivables; or
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(i) The Internal Revenue Service shall file notice of a lien pursuant to
Section 6323 of the Code with regard to any of the Pool Assets and such lien
shall not have been released within 10 Business Days of such filing, or the
Pension Benefit Guaranty Corporation shall, or shall indicate its intention to,
file notice of a lien pursuant to Section 4068 of ERISA with regard to any of
the Pool Receivables, Related Security or Collections and such lien shall not
have been released within 10 Business Days of such filing and in each case, the
claim secured by such lien exceeds $5,000,000; or
(j) The occurrence of a Change in Control; or
(k) The Sales Based Default Ratio exceeds 5.50%; or
(l) The average Dilution Ratio for any three consecutive months exceeds
12.0%; or
(m) The remaining term to maturity of any Initial Purchaser Note is less
than 150 days.
SECTION 9.02 Remedies.
(a) Optional Termination. Upon the occurrence of a Termination Event
(other than a Termination Event described in subsection (f) of Section 9.01),
the Administrative Agent shall, at the request, or may with the consent, of the
Required Purchasers, by notice to Seller declare the Commitment Termination Date
to have occurred.
(b) Automatic Termination. Upon the occurrence of a Termination Event
described in subsection (f) of Section 9.01, the Commitment Termination Date
shall be deemed to have occurred automatically upon the occurrence of such
event.
(c) Additional Remedies. Upon any termination of the facility pursuant to
this Section 9.02, the Administrative Agent and Purchasers shall have, in
addition to all other rights and remedies under this Agreement or otherwise, all
other rights and remedies provided under the UCC of each applicable jurisdiction
and other applicable laws, which rights shall be cumulative. Without limiting
the foregoing or the general applicability of Article XI hereof, (i) the
occurrence of a Termination Event shall not deny to any Purchaser any remedy in
addition to termination of the Commitment to which such Purchaser may be
otherwise appropriately entitled, whether at law or in equity, and (ii)
following the occurrence of any Termination Event, notwithstanding the
provisions of Section 11.01, each Purchaser may elect to assign any Undivided
Interest, or any portion thereof owned by such Purchaser to any Person.
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ARTICLE X
THE ADMINISTRATIVE AGENT
SECTION 10.01. Authorization and Action. Each Purchaser hereby appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto.
SECTION 10.02. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or the
Administrative Agent under or in connection with this Agreement (including,
without limitation, the Administrative Agent's servicing, administering or
collecting Pool Receivables as Servicer pursuant to Section 8.01), except for
its or their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Administrative Agent: (i) may consult with
legal counsel (including counsel for any Terra Party), independent certified
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 it in accordance with
the advice of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Purchaser and shall not be responsible to any Purchaser
for any statements, warranties or representations made in or in connection with
this Agreement; (iii) 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
this Agreement on the part of any Terra Party or to inspect the property
(including the books and records) of any Terra Party; (iv) shall not be
responsible to any Purchaser for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; and (v) shall incur no
liability under or in respect of this Agreement by acting upon any notice
(including notice by telephone), consent, certificate or other instrument or
writing (which may be by telex) believed by it to be genuine and signed or sent
by the proper party or parties.
SECTION 10.03. Administrative Agent and Affiliates. With respect to any
interest in Pool Receivables held by BofA, BofA shall have the same rights and
powers under this Agreement as would a Purchaser if such Purchaser were the
holder of such interest and may exercise the same as though it were not the
Administrative Agent. BofA and its Affiliates may generally engage in any kind
of business with any Terra Party or any Obligor, any of their respective
Affiliates and any Person who
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may do business with or own securities of any Terra Party or any Obligor or any
of their respective Affiliates, all as if BofA were not the Administrative Agent
and without any duty to account therefor to any Purchaser, except that BofA
shall not exercise against deposits of Collections in any Lock-Box Account any
right of setoff it might have under other agreements with Seller.
SECTION 10.04. Indemnity. Each Purchaser agrees (which agreement shall
survive any termination of this Agreement) to indemnify the Administrative
Agent, pro rata according to such Purchaser's Percentage, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or asserted against
the Administrative Agent in any way relating to or arising out of this Agreement
and the other Agreement Documents, including the reimbursement of the
Administrative Agent for all reasonable out-of-pocket expenses (including
reasonable and documented attorneys' fees) incurred by the Administrative Agent
hereunder or in connection herewith or in enforcing the obligations of any Terra
Party under this Agreement and the other Agreement Documents, in all cases as to
which the Administrative Agent is not reimbursed by a Terra Party; provided that
no Purchaser shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements determined by a court of competent jurisdiction in a
final proceeding to have resulted from the Administrative Agent's gross
negligence or willful misconduct. The Administrative Agent shall not be required
to take any action hereunder or under any other Agreement Document, or to
prosecute or defend any suit in respect of this Agreement or any other Agreement
Document, unless indemnified to its satisfaction by the Purchasers against loss,
costs, liability, and expense, which indemnity need not indemnify the
Administrative Agent for its gross negligence or willful misconduct. If any
indemnity in favor of the Administrative Agent shall become impaired, it may
call for additional indemnity and cease to do the acts indemnified against until
such additional indemnity is given. The Administrative Agent may delegate its
duties hereunder to Affiliates, agents or attorneys-in-fact selected in good
faith by the Administrative Agent.
SECTION 10.05. Successor. The Administrative Agent may resign as such at
any time upon at least thirty days' prior notice to the Seller and all
Purchasers. If the Administrative Agent at any time shall resign, the Required
Purchasers may appoint a successor Administrative Agent; provided that, if such
successor Administrative Agent is not a Purchaser, such successor Administrative
Agent shall be reasonably acceptable to the Seller. If the Required Purchasers
do not make such appointment within thirty days, the retiring Administrative
Agent shall
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appoint a new Administrative Agent from among the Purchasers or, if no Purchaser
accepts such appointment, from among commercial banking institutions or trust
institutions generally. Upon the acceptance of any appointment as Administrative
Agent by a successor Administrative Agent, such successor Administrative Agent
shall thereupon become the Administrative Agent hereunder and shall be entitled
to receive from the prior Administrative Agent such documents of transfer and
assignment as such successor Administrative Agent may reasonably request, and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement and the other Agreement Documents. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Agreement and the other Agreement
Documents shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
SECTION 10.06. Credit Decisions. Each Purchaser acknowledges that it has,
independently of the Administrative Agent and each other Purchaser, and based on
the financial information referred to in Section 6.01(i) and such other
documents, information, and investigations as it has deemed appropriate, made
its own credit decision to make its Purchases from time to time. Each Purchaser
also acknowledges that it will, independently of the Administrative Agent and
each other Purchaser, and based on such other documents, information, and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or the other
Agreement Documents.
SECTION 10.07. Notices, etc. to Administrative Agent. The Administrative
Agent shall give prompt notice to each Purchaser of each notice or request given
to the Administrative Agent by the Seller pursuant to the terms of this
Agreement and of each Termination Event or Unmatured Termination Event of which
the Administrative Agent has actual knowledge. The Administrative Agent will
promptly distribute to each Purchaser copies of all other communications and
financial statements received by the Administrative Agent from a Terra Party for
distribution to the Purchasers by the Administrative Agent in accordance with
the terms of this Agreement. The Administrative Agent shall not be deemed to
have actual knowledge of any event unless an authorized corporate officer of the
Administrative Agent involved in the administration of this Agreement has
discovered or has received actual notice of such event.
ARTICLE XI
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ASSIGNMENT OF UNDIVIDED INTERESTS
SECTION 11.01. Restrictions on Assignments. Neither Seller nor any
Purchaser may assign its rights hereunder or any interest herein without the
prior written consent of the Administrative Agent and, in the case of Seller,
all of the Purchasers, and no Purchaser may assign its Purchaser's Interest or
any portion thereof to any Person without the prior written consent of the
Administrative Agent and Seller, which consent shall not be unreasonably
withheld. Any such assignment by a Purchaser shall be in an amount equal to at
least the lesser of (i) such Purchaser's Commitment and (ii) $20,000,000 and
shall be evidenced by an Assignment Agreement. Any Purchaser may grant
participations in its purchased interest, provided that no such participant
shall be given voting rights except as to reductions in the amount of, or change
in the date of payment of, any Earned Discount, any fee or Purchasers'
Investment, or the increase, or extension of, the Commitment or the release of
any interest in Pool Receivables except as expressly set forth herein.
SECTION 11.02. Rights of Assignee. Upon the assignment by Purchaser of all
or any portion of Purchaser's Interest pursuant to this Article XI, the
respective assignee receiving such assignment shall have all of the rights of
Purchaser hereunder with respect to Purchaser's Interest or the portion thereof
so assigned, as the case may be.
ARTICLE XII
INDEMNIFICATION
SECTION 12.01. Indemnities by Seller. Without limiting any other rights
which any such Person may have hereunder or under applicable law, Seller hereby
agrees to indemnify each of the Administrative Agent, each Purchaser, BofA, each
of BofA's Affiliates, their respective successors, transferees and assigns and
all officers, directors, shareholders, controlling persons, employees and agents
of any of the foregoing (each an "Indemnified Party"), forthwith on demand, from
and against any and all damages, losses, claims, liabilities and related costs
and expenses, including reasonable and documented attorneys' fees and
disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them arising out of
or related to this Agreement or the ownership or funding of an Undivided
Interest (or portion thereof) or in respect of any Receivable or any Contract,
excluding, however, (a) Indemnified Amounts to the extent that a court of
competent jurisdiction determined that they resulted from gross negligence or
willful misconduct on the part of such
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Indemnified Party or (b) recourse (except as otherwise specifically provided in
this Agreement) for Defaulted Receivables. Without limiting the foregoing,
Seller shall indemnify each Indemnified Party for Indemnified Amounts relating
to or arising out of:
(i) the transfer by Seller of any interest in any Pool Receivable
other than an Undivided Interest;
(ii) the fact that any representation or warranty made by Seller (or
any of its officers) under or in connection with this Agreement, any
Periodic Report or any other information or report delivered by Seller
pursuant hereto shall have been false or incorrect in any material respect
when made or deemed made;
(iii) the failure by Seller to comply with any applicable law, rule
or regulation with respect to any Pool Receivable or the related Contract,
or the nonconformity of any Pool Receivable or the related Contract with
any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in each Purchaser (or in
the Administrative Agent, for the benefit of each Purchaser) an undivided
percentage ownership interest, to the extent of each Undivided Interest
owned by it hereunder, in the Receivables in, or purporting to be in, the
Receivables Pool, free and clear of any Adverse Claim, other than an
Adverse Claim arising solely as a result of an act of such Purchaser, any
assignee from such Purchaser or the Administrative Agent (when used in this
clause (iv), an Adverse Claim shall include any lien for taxes whether
accrued and payable or not), whether existing at the time of any Purchase
of such Undivided Interest or at any time thereafter;
(v) the failure to file, or any delay in filing, financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any receivables in,
or purporting to be in, the Receivables Pool, whether at the time of any
Purchase or Reinvestment or at any time thereafter, unless such failure or
delay is caused by the Administrative Agent's or a Purchaser's wrongful
refusal to sign any such financing statement or similar instrument or
document;
(vi) any dispute, claim, offset, discount, allowance or defense
(other than discharge in bankruptcy) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool (including,
without
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limitation, a defense based on such Receivable's or the related
Contract's not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other claim
resulting from the sale of the merchandise or services related to such
Receivable or the furnishing or failure to furnish such merchandise or
services;
(vii) any products, environmental liability, hazardous material,
nuisance or other tort claim arising out of or in connection with
merchandise or services that are the subject of any Pool Receivable;
(viii) the commingling of any Collections with other funds of Seller;
(ix) any claim or Adverse Claim related to Consigned Inventory; and
(x) any tax or governmental fee or charge (but not including
franchise taxes imposed with respect to net income or taxes upon or measured by
net income), all interest and penalties thereon or with respect thereto, and all
out-of-pocket costs and expenses, including the reasonable and documented fees
and expenses of counsel in defending against the same, which may arise by reason
of the Purchase or ownership of any Undivided Interest (or any portion thereof),
or other interest in the Pool Receivables or in any goods which secure any such
Pool Receivables. If any Indemnified Party shall have notice of any attempt to
impose or collect any tax or governmental fee or charge for which
indemnification will be sought from Seller hereunder, such Indemnified Party
shall give prompt and timely notice of such attempt to Seller and Seller shall
have the right, at its expense, to conduct or participate in any proceedings
resisting or objecting to the imposition or collection of any such tax,
governmental fee or charge. Any Indemnified Party that has received an indemnity
pursuant to this clause (x) shall cooperate, at Seller's request, with Seller to
recover the amount of any such tax, governmental fee or charge, provided that
such cooperation shall be at Seller's expense and shall not, in such Indemnified
Party's reasonable judgment, adversely affect such Indemnified Party's tax
position.
SECTION 12.02. Indemnities by Servicer. Without limiting any other rights
which any Indemnified Party may have hereunder or under applicable law, Servicer
hereby agrees to indemnify each Indemnified Party, forthwith on demand, from and
against any and all Indemnified Amounts awarded against or incurred by any of
them arising out of or related to (i) the fact that any representation or
warranty made by Servicer (or any of its officers) under or in connection with
this Agreement, any
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Periodic Report or any other information or report delivered by Servicer
pursuant hereto shall have been false or incorrect in any material respect when
made or deemed made; (ii) the failure by Servicer to comply with any applicable
law, rule or regulation with respect to any Pool Receivable or the related
Contract, of the collection or servicing thereof; (iii) any failure of the
Servicer to perform its duties or obligations in accordance with Article VIII;
or (iv) the commingling of any Collections with other funds of Servicer.
SECTION 12.03. General Provisions. Indemnification hereunder shall be in
an amount necessary to make the Indemnified Party whole after taking into
account any tax consequences to the Indemnified Party of the payment of any of
the aforesaid taxes and the receipt of the indemnity provided hereunder or of
any refund of any such tax previously indemnified hereunder, including the
effect of such tax or refund on the amount of tax measured by net income or
profits which is or was payable by the Indemnified Party. If for any reason the
indemnification provided above in Section 12.01 or 12.02 is unavailable to an
Indemnified Party or is insufficient to hold an Indemnified Party harmless, then
Seller or Servicer, as the case may be, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Party on the one hand and Seller or
Servicer, as the case may be, on the other hand but also the relative fault of
such Indemnified Party as well as any other relevant equitable considerations.
Upon payment in full of all amounts due under this Agreement, Seller or
Servicer, as the case may be, shall be subrogated, to the extent of Seller's or
Servicer's payments pursuant to Section 12.01 or 12.02, to the Indemnified
Party's claims relating to the subject of such indemnity payment.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by Seller or Terra Capital
therefrom shall in any event be effective unless the same shall be in writing
and signed by (i) Seller, the Administrative Agent, Servicer and the Required
Purchasers (with respect to an amendment) or (ii) the Administrative Agent and
the Required Purchasers (with respect to a waiver or consent by them) or Seller
or Terra Capital (with respect to a waiver or consent by it), as the case may
be; provided, that, without the consent of (A) Purchasers with an aggregate
Percentage in excess of 60%,
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no such amendment or waiver shall affect the calculation of Net Pool Balance,
Loss Reserve or Dilution Reserve, or (B) each Purchaser, no such amendment or
waiver shall (i) reduce the amount of, or change the date of payment of, any
Earned Discount, the Commitment Fee any other fee or Purchasers' Investment,
(ii) extend the Scheduled Commitment Termination Date, (iii) change the
definition of Required Purchasers or this proviso or (iv) release any interest
in Pool Assets, except as expressly set forth herein. Each such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 13.02. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
certified mail, postage prepaid, or overnight courier or by facsimile, to the
intended party at the address or facsimile number of such party set forth under
its name on the signature pages hereof or at such other address or facsimile
number as shall be designated by such party in a written notice to the other
parties hereto. All such notices and communications shall be effective, (i) if
personally delivered, when received, (ii) if sent by certified mail, three
Business Days after having been deposited in the mail, postage prepaid, (iii) if
sent by overnight courier, one Business Day after having been sent, and (iv) if
transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means, except that notices and communications pursuant to Article I
shall not be effective until received.
SECTION 13.03. No Waiver; Remedies. No failure on the part of the
Administrative Agent, any Affected Party, any Indemnified Party or any Purchaser
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
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. Without limiting the foregoing, each of BofA and each
Purchaser is hereby authorized by Seller at any time and from time to time, to
the fullest extent permitted by law, to set off and 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 BofA and each Purchaser to or for the
credit or the account of Seller, to the Seller's recourse obligations now or
hereafter existing under this Agreement, to the Administrative Agent, any
Affected Party, any Indemnified Party, any Purchaser, or their respective
successors and assigns.
SECTION 13.04. Binding Effect; Survival. This Agreement shall be binding
upon and inure to the benefit of Seller, Terra
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Capital, the Administrative Agent, each Purchaser and their respective
successors and assigns, and the provisions of Sections 4.02 and 4.03 and Article
XII shall inure to the benefit of the Affected Parties and the Indemnified
Parties, respectively, and their respective successors and assigns; provided,
however, nothing in the foregoing shall be deemed to authorize any assignment
not permitted by Section 11.01. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until the End Date. The rights and
remedies with respect to any breach of any representation and warranty made by
Seller or Terra Capital pursuant to Article VI and the indemnification and
payment provisions of Article XII and Sections 4.02, 4.03 and 13.07 shall be
continuing and shall survive any termination of this Agreement.
SECTION 13.05. Integration. This Agreement, together with the other
Agreement Documents, contains a final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire Agreement among the parties hereto with respect to
the subject matter hereof, superseding all prior oral or written understandings.
SECTION 13.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICT OF LAWS, EXCEPT TO THE EXTENT THAT
THE PERFECTION OF THE INTERESTS OF PURCHASER IN THE RECEIVABLES ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF ILLINOIS.
SECTION 13.07. Costs, Expenses and Taxes. In addition to its obligations
under Article XII, Seller agrees to pay on demand:
(a) subject to the terms of the Fee Letter, all costs and expenses in
connection with the preparation, execution and delivery of this Agreement, and
the other Agreement Documents, including, without limitation, the reasonable and
documented fees and expenses of counsel for the Administrative Agent and BofA
with respect thereto (but not including any fees and expenses of counsel other
than Mayer, Brown & Platt for any Purchaser with respect thereto) and all costs
and expenses in connection with the administration (including periodic auditing)
and enforcement of this Agreement or the Agreement Documents or any breach of
contract, breach of warranty or other breach of this Agreement or any other
Agreement Document, including, without limitation, the reasonable and documented
fees and expenses of counsel, incurred by any Affected Party in connection with
such enforcement or breach, including, those costs and expenses incurred in
connection with such enforcement or breach with respect to
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advising the Administrative Agent, any Purchaser, BofA, BofA's Affiliates and
any other Affected Party as to their respective rights and remedies under this
Agreement; and
(b) all stamp and other taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing and recording of this
Agreement or the other Agreement Documents, and agrees to indemnify each
Indemnified Party against any liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.
SECTION 13.08. Captions and Cross References. The various captions
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. References in this Agreement
to any underscored Section or Exhibit are to such Section or Exhibit of this
Agreement, as the case may be.
SECTION 13.09. 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 when taken together shall constitute one and the same
agreement.
SECTION 13.10. Confidentiality. (a) Each party hereto (other than BofA)
acknowledges that BofA regards the structure of the transactions contemplated by
this Agreement to be proprietary, and each such party severally agrees that:
(i) it will not disclose without the prior consent of BofA (other than
to the directors, employees, auditors, counsel or affiliates (collectively,
"representatives") of such party and the holder of the Preferred Stock,
each of whom shall be informed by such party of the confidential nature of
the Information (as defined below) and of the terms of this Section 13.10),
(A) any information regarding, or copies of, this Agreement or any
transaction contemplated hereby, or (B) any information regarding BofA,
which information is furnished by BofA to such party and which is
designated by BofA to such party in writing or otherwise as confidential or
not otherwise available to the general public (the information referred to
in clauses (A) and (B) are collectively referred to as the "Information");
provided, however, that such party may disclose any such Information to any
other party to this Agreement (in each case for the purposes contemplated
by this Agreement to which such other party is a party) or as may be
required by any municipal, state, federal or other regulatory body having
or claiming to have jurisdiction over such party or
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in order to comply with any law, order, regulation, regulatory request or
ruling applicable to such party;
(ii) it will use the Information solely for the purposes of
evaluating, administering and enforcing the transactions contemplated by
this Agreement and making any necessary business judgments with respect
thereto; and
(iii) it will, upon demand, destroy or return (and cause each of its
representatives to return) to BofA all documents or other written material
received from BofA in connection with (a)(i)(B) above and all copies
thereof made by such party which contain the Information.
(b) The Administrative Agent and each Purchaser acknowledge that Seller
regards certain information with respect to Seller and the Pool Receivables to
be confidential, and each of each Purchaser and the Administrative Agent
severally agrees that:
(i) it will not disclose without the prior consent of Seller (other
than to assignees, participants, proposed assignees, proposed participants,
directors, employees, auditors, counsel or affiliates (collectively,
"representatives") of such person, each of whom shall be informed by such
party of the confidential nature of the Seller Information (as defined
below) and of the terms of this Section 13.10), (A) the Contracts, (B) the
identity of the Obligors of the Pool Receivables and the Unpaid Balances
thereof, or (C) any other information regarding Seller or Pool Receivables,
which information is furnished by Seller to such party and which is
designated by Seller to such party in writing as confidential or not
otherwise available to the general public (the information referred to in
clauses (A), (B) and (C) are collectively referred to as the "Seller
Information"); provided, however, that such party may disclose any such
Seller Information to any other party to this Agreement (in each case for
the purposes contemplated by this Agreement) or as may be required or to
any municipal, state, federal or other regulatory body having or claiming
to have jurisdiction over such party or in order to comply with any law,
order, regulation or ruling applicable to such party; provided, further,
that the Administrative Agent or a Purchaser shall notify Seller of any
assignee, participant, proposed assignee or proposed participant to whom it
proposes to disclose Seller Information, and shall require such Person to
execute a confidentiality agreement containing terms substantially similar
to this Section 13.10(b);
(ii) it will use the Seller Information solely for the purpose of
evaluating, administering and enforcing the
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transactions contemplated by this Agreement and making any necessary
business judgments with respect thereto; and
(iii) it will, upon demand, destroy or return (and cause each of its
representatives to return) to Seller all documents or other written
material received from Seller in connection with (b)(i)(C) above and all
copies thereof made by such party which contain the Seller Information.
(c) This Section 13.10 shall be inoperative as to such portions of the
Information or Seller Information which are or become generally available to the
public or such party on a nonconfidential basis from a source other than BofA or
Seller, as the case may be, or were known to such party on a nonconfidential
basis prior to its disclosure by BofA or Seller, as the case may be.
(d) In the event that any party or anyone to whom such party or its
representatives transmits the Information or Seller Information, as the case may
be, is requested or becomes legally compelled (by interrogatories, requests for
information or documents, subpoena, civil investigation demand or similar
process) to disclose any of the Information or Seller Information, as the case
may be, such party will provide BofA or Seller, as appropriate, with prompt
written notice so that BofA or Seller, as the case may be, may seek a protective
order or other appropriate remedy and/or waive compliance with the provisions of
this Section 13.10. In the event that such protective order or other remedy is
not obtained, or BofA or Seller, as the case may be, waives compliance with the
provisions of this Section 13.10, such party will furnish only that portion of
the Information or Seller Information, as the case may be, which is legally
required to be furnished and will exercise such party's best efforts to obtain
reliable assurance that confidential treatment will be accorded the Information
or Seller Information, as the case may be.
(e) This Section 13.10 shall survive termination of this Agreement.
SECTION 13.11 No Duplication of Information. If any Terra Party provides
to the Administrative Agent and/or Purchaser any statement, report, information
or notice pursuant to the Agreement Documents, such action shall be deemed to
satisfy each other Terra Party's obligation, if any, to provide the same
statement, report, information or notice.
SECTION 13.12 Sale of BMLP. The parties hereto acknowledge that it is the
Parent's intent to sell BMLP, or the partnership interests therein, or the
assets thereof, or the equity interests in one or more of the partners thereof,
or the equity interest of
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BMC Holdings, Inc. (which is the 99% limited partner of BMLP) and that nothing
set forth in this Agreement shall prohibit such sale. The Administrative Agent
agrees to execute such documents as may be reasonably requested by Terra
Capital, at Terra Capital's expense, to evidence the release of any Adverse
Claim of the Administrative Agent on any Receivables originated by BMLP and the
Pool Assets related thereto so long as, after giving effect to the exclusion of
such Receivables from the calculation of Net Pool Balance and any payment made
to the Administrative Agent, for the benefit of Purchasers, in connection with
such release, the Aggregate Required Allocations do not exceed the Required
Allocations Limit.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as the Administrative Agent
By_________________________________
Name Printed:____________________
Title: Attorney-in Fact
231 South LaSalle Street
Chicago, Illinois 60697
Telex No.: 25233
(Answerback: CONILLBK CGOB)
Facsimile No.: (312) 828-7855
Attention: Asset Securitization
Group
RECEIVABLES
PURCHASE
AGREEMENT
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TERRA FUNDING CORPORATION, as Seller
By_______________________________________
Name Printed:____________________________
Title:___________________________________
600 Fourth Street, Terra Centre
Sioux City, Iowa 51101
Facsimile No.: 712/279-8703
Attention: Chief Financial Officer
With a copy to: William D. Conner
TERRA CAPITAL, INC.,
as initial Servicer
By_______________________________________
Name Printed:____________________________
Title:___________________________________
1 River Plaza
600 Stevens Part Drive
Suite 200
Dakota Dunes, South Dakota 57049
Facsimile No.: 712/279-8703
Attention: Chief Financial Officer
With a copy to: William D. Conner
RECEIVABLES
PURCHASE
AGREEMENT
S-2
<PAGE>
Percentage BANK OF AMERICA ILLINOIS, as
- ---------- a Purchaser
30%
By_______________________________________
Name Printed_____________________________
Title____________________________________
231 South LaSalle Street
Chicago, Illinois 60697
Facsimile No.: (312) 828-7855
Attention: Asset Securitization
Group
RECEIVABLES
PURCHASE
AGREEMENT
S-3
<PAGE>
Percentage THE FUJI BANK, LIMITED, CHICAGO BRANCH, a
- ---------- Purchaser
6.6667%
By
---------------------------------------
Name Printed: Hidekazu Seo
Title: Joint General Manager
225 West Wacker Drive
Suite 2000
Chicago, Illinois 60606
Facsimile No.: (312) 621-0539
Attention: Koichi Yashima
RECEIVABLES
PURCHASE
AGREEMENT
S-4
<PAGE>
Percentage CAISSE NATIONALE de CREDIT AGRICOLE,
- ---------- a Purchaser
20%
By_______________________________________
Name Printed:____________________________
Title:___________________________________
55 East Monroe Street
47th Floor
Chicago, Illinois 60603
Facsimile No.: (312) 372-3455
Attention: Kathy Abbott
RECEIVABLES
PURCHASE
AGREEMENT
S-5
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Percentage MELLON BANK, N.A., a Purchaser
- ----------
20%
By_______________________________________
Name Printed:____________________________
Title:___________________________________
One Mellon Bank Center
Room 400
Pittsburgh, Pennsylvania 15258
Facsimile No.: (412) 234-8888
Attention: George Davis
RECEIVABLES
PURCHASE
AGREEMENT
S-6
<PAGE>
Percentage COOPERATIVE CENTRALE RAIFFEISEN-
- ----------
BOERENLEENBANK B.A., "RABOBANK
23.3333% NEDERLAND", NEW YORK BRANCH
By_______________________________________
Name Printed:____________________________
Title:___________________________________
By_______________________________________
Name Printed:____________________________
Title:___________________________________
245 Park Avenue
New York, New York 10167
Facsimile No.: (212) 818-0233
Attention: Corporate Services
Department
with a copy to: Elizabeth L. Hund
Rabobank
300 South Wacker Drive
Suite 3500
Chicago, Illinois 60606-6610
Facsimile No.: (312) 408-8240
Wire Transfer Instructions: Bank of New York
ABA No. 021000018
A/C Rabobank New York
A/C No. 802 6002533
Re: Terra Funding
RECEIVABLES
PURCHASE
AGREEMENT
S-7
<PAGE>
DEFINITIONAL APPENDIX
TO RECEIVABLES PURCHASE AGREEMENT
SCHEDULE I
DEFINITIONS
1.1. Definitions. As used in this Agreement, unless the context requires a
different meaning, the following terms have the meanings as indicated:
"Adjusted Average Maturity" has the meaning set forth in Section 2.08.
"Administrative Agent" has the meaning set forth in the preamble.
"Administrative Agent's Account" has the meaning set forth in Section
3.05(a).
"Adverse Claim" means a lien, security interest, charge, or encumbrance, or
other right or claim of any Person that could reasonably be expected to impair
any Purchaser's ownership interest in any Pool Receivable or any of Purchasers'
or the Administrative Agent's rights under the Agreement Documents other than
(i) a potential claim or right (that has not yet been asserted) of a trustee
appointed for an Obligor in connection with any Event of Bankruptcy or (ii) an
unfiled lien for taxes accrued but not yet payable.
"Affected Party" means each of each Purchaser, any permitted assignee of
any Purchaser, the Administrative Agent and any holding company of BofA.
"Affiliate" when used with respect to a Person means any other Person
controlling, controlled by, or under common control with, such Person.
"Aggregate Purchasers' Investments" has the meaning set forth in Section
2.03.
"Aggregate Required Allocations" has the meaning set forth in Section 2.01.
"Agreement" means this Receivables Purchase Agreement, as it may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"Agreement Documents" means this Agreement, the Purchase and Sale
Agreement, the Initial Purchaser Notes, the Parent Agreement, the Lock-Box
Agreements, the Fee Letter, the Collection Bank
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Notices and each other document and agreement entered into in connection with
the transactions contemplated by this Agreement.
"Alternate Rate Undivided Interest" means an Undivided Interest for which
the Purchaser Rate is determined by reference to the Alternate Reference Rate.
"Alternate Reference Rate" means, on any date, a fluctuating rate of
interest per annum equal to the higher of
(a) the rate of interest most recently announced by BofA at its office
in Chicago, Illinois as its reference rate; and
(b) the Federal Funds Rate (as defined below) most recently determined
by BofA plus 0.50%.
For purposes of this definition, "Federal Funds Rate" means, for any period, a
fluctuating interest rate per annum equal (for each day during such period) to
(i) 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
(ii) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by BofA from three federal funds brokers of
recognized standing selected by it.
The Alternate Reference Rate is not necessarily intended to be the lowest rate
of interest determined by BofA in connection with extensions of credit.
"Assignment Agreement" means an Assignment and Assumption Agreement
substantially in the form of Exhibit IA, evidencing an assignment by a Purchaser
of all or a part of its obligations and rights hereunder.
"BAI" has the meaning set forth in the preamble.
"BMLP" means Beaumont Methanol, Limited Partnership, a Delaware limited
partnership.
"BofA" has the meaning set forth in the preamble.
"Business Day" means a day on which both (a) the Administrative Agent at
its office in Chicago, Illinois is open for
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business and (b) commercial banks in New York City are not authorized or
required to be closed for business.
"Change in Control" means that (i) Parent does not directly or indirectly
own 100% of the common stock of Seller or (ii) the Parent does not, directly or
indirectly, own at least 80% (or more than 50%, in the case of TNLP) of the
common stock or other equity interest of each Originator and Terra Capital,
unless such Originator or Terra Capital is merged with Parent or any other
entity, the common stock or other equity interests of which are owned, directly
or indirectly, 80% by the Parent, in each case, in a transaction not prohibited
by Section 7.06; provided that the sale of BMLP, or the partnership interests in
BMLP or the assets thereof, or the equity interest in one or more partners of
BMLP, or the equity interests of BMC Holdings, Inc. shall not constitute a
Change in Control.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collection Bank" means any of the banks where one or more accounts are
located into which Collections from Pool Receivables are deposited.
"Collection Bank Notice" means a notice to a Collection Bank, in
substantially the form of Exhibit IE 2.
"Collections" means, with respect to any Pool Receivable, all funds which
either (a) are received by Seller, any Originator or Servicer from or on behalf
of the related Obligors in payment of any amounts owed (including, without
limitation, purchase prices, finance charges, interest and all other charges) in
respect of such Pool Receivable, or applied to such amounts owed by such
Obligors (including, without limitation, deposits, insurance payments that
Seller, any Originator or Servicer applies in the ordinary course of its
business to amounts owed in respect of such Receivable, proceeds of government
subsidies and net proceeds of sale or other disposition of repossessed goods or
other collateral or property of the Obligor or any other party directly or
indirectly liable for payment of such Pool Receivable and available to be then
applied thereon), or (b) are deemed to have been received by Seller or any other
Person as a Collection pursuant to Section 3.03 or 3.04; provided that, prior to
such time as Terra Capital shall cease to be Servicer, late payment charges,
collection fees and extension fees shall not be deemed to be Collections.
"Commitment" has the meaning set forth in Section 1.01.
"Commitment Fee" has the meaning set forth in Section 4.01(b).
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"Commitment Termination Date" has the meaning set forth in Section 1.02.
"Conditions Precedent" has the meaning set forth in Section 5.02.
"Concentration Limit" has the meaning set forth in the definition of Net
Pool Balance in Section 2.08.
"Consigned Inventory" means inventory of Seller that is not owned by
Seller, but is held for sale on consignment or is held for sale pursuant to an
agency arrangement with a manufacturer; it being understood that if Seller
purchases such inventory prior to the time that any Receivables relating thereto
are collected, such inventory shall no longer be considered Consigned Inventory
hereunder.
"Continuation/Conversion Notice" has the meaning set forth in Section 1.06.
"Contract" means a contract between an Originator (or the Person from whom
such Originator acquired such contract) and any Person, or an invoice from an
Originator to any Person, in one of the forms of contracts or invoices, as
appropriate, that an Originator (or the Person from whom such Originator
acquired such contract) executes in the ordinary course of business pursuant to
or under which such Person shall be obligated to make payments to such
Originator from time to time.
"Credit and Collection Policy" means those credit policies and practices
relating to Contracts and Receivables described in Exhibit ID, as modified
without violating Section 7.03(c).
"Debt" of any Person or entity means, without duplication,
(i) indebtedness for borrowed money or for the deferred purchase
price of property or services;
(ii) obligations under leases which shall have been or should be
recorded as capital leases in accordance with GAAP; and
(iii) all guaranties, and all other direct or indirect liabilities,
contingent or otherwise, with respect to clauses (i), and (ii) above.
"Days Sales Outstanding" has the meaning set forth in Section 2.08.
"Defaulted Receivable" means a Receivable: (i) as to which any payment, or
part thereof remains unpaid for more than ninety
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(90) days from the original due date, as such due date may be extended in the
ordinary course of the related Originator's business for reasons other than
credit concerns with respect to the Obligor thereof, (ii) with regard to which
an Event of Bankruptcy has occurred and remains continuing with respect to the
Obligor thereof, (iii) as to which payments have been extended, or the terms of
payment thereof rewritten, without the Administrative Agent's consent, except as
permitted by this Agreement, (iv) which, consistent with the Credit and
Collection Policy, have been, or should have been, written off the related
Originator's books as uncollectible or (v) which, consistent with the Credit and
Collection Policy, would be classified as defaulted for reasons other than the
number of days past due.
"Delinquent Receivable" means a Receivable that is not a Defaulted
Receivable: (i) as to which any payment, or part thereof, remains unpaid for
more than thirty (30) days from the original due date, as such due date may be
extended in the ordinary course of an Originator's business for reasons other
than credit concerns with respect to the Obligor thereof; or (ii) which,
consistent with the Credit and Collection Policy, would be classified as
delinquent for reasons other than the number of days past due.
"Dilution Horizon Ratio" means, for any calendar month, the ratio,
expressed as a percentage, of (a) the aggregate net sales of the Originators
during such month to (b) the aggregate Unpaid Balance of all Gross Receivables
as of the last day of such month.
"Dilution Ratio" means, for any calendar month, the ratio, expressed as a
percentage, of (a) the aggregate amount of Dilutions made or granted during such
month to (b) the aggregate net sales of the Originators during the immediately
preceding month.
"Dilution Reserve" has the meaning set forth in Section 2.11.
"Dilutions" means, for any period, the aggregate amount by which the Unpaid
Balance of Gross Receivables has been reduced as a result of any defective or
rejected services or products, returns of unclaimed products, cash discounts,
allowances, credits, billing errors, write-offs, discounts, sales return
adjustments, credit memos (net of rebilled amounts) or other adjustment by a
Terra Party or any Affiliate thereof, or reduced or cancelled as a result of any
setoff in respect of any claim by an Obligor (whether such claim arises out of
the same or a related or unrelated transaction), or reduced on account of the
obligation of any Terra Party or any Affiliate to pay any Obligor a rebate or
refund.
"Discount Factor" has the meaning set forth in Section 2.04.
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"Disposition" means, with respect to any Person, a merger or consolidation
involving such Person, or a sale, transfer, conveyance or lease of all or
substantially all of such Person's assets.
"Dollars" means dollars in lawful money of the United States of America.
"Earned Discount" has the meaning set forth in Section 2.05.
"Eligible Receivable" means, at any time, a Receivable evidenced by or
arising under a Contract:
(i) which, (i) if the perfection of each Purchaser's undivided
ownership interest therein is governed by the laws of a jurisdiction where
the Uniform Commercial Code -- Secured Transactions is in force,
constitutes an account, chattel paper or general intangible as defined in
the Uniform Commercial Code as in effect in such jurisdiction, and (ii) if
the perfection of each Purchaser's undivided ownership interest therein is
governed by the law of any jurisdiction where the Uniform Commercial Code -
- Secured Transactions is not in force, Seller has furnished to the
Administrative Agent such opinions of counsel and other evidence as has
reasonably been requested, establishing to the reasonable satisfaction of
the Administrative Agent that each Purchaser's undivided ownership interest
and other rights with respect thereto are not significantly less protected
and favorable than such rights under the Uniform Commercial Code;
(ii) the primary Obligor of which is a United States resident and is
not an Affiliate of Seller;
(iii) which is not a Delinquent Receivable at the time of inclusion
in the Pool or a Defaulted Receivable;
(iv) with regard to which the warranty of Seller in Section 6.01(l)
is true and correct;
(v) which is a Trade Receivable that was originated or acquired in
the ordinary course of business of an Originator and was sold or
contributed to Seller pursuant to the Purchase and Sale Agreement;
(vi) the sale of an undivided interest in which does not require the
consent of the related Obligor under the related Contract and does not
contravene or conflict with any law;
(vii) which is denominated and payable only in Dollars in the United
States;
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(viii) which arises under a Contract that has been duly authorized
and that, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor in accordance with its terms
and is not, by the terms of the Contract, subject to any dispute, offset,
counterclaim or defense whatsoever (except the discharge in bankruptcy of
such Obligor) and does not include any amount that is being disputed by the
Obligor thereof;
(ix) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices
and privacy) and with respect to which no party to the Contract related
thereto is in violation of any such law, rule or regulation in any material
respect if such violation would impair the collectibility of such
Receivable;
(x) which satisfies all applicable requirements of the Credit and
Collection Policy;
(xi) if such Receivable was acquired by an Originator, or was
originated by a Person that was acquired by an Originator, such Originator
has filed all financing statements necessary to perfect its interest
therein and such Receivable is substantially similar, in characteristics
and expected performance, to the Trade Receivables and, unless such
Receivable was acquired from an Affiliate of Seller, the Unpaid Balance of
which, when combined with the Unpaid Balance of all other such Receivables
does not exceed 10% of the aggregate Unpaid Balance of the Eligible
Receivables in the Receivables Pool unless the Administrative Agent has
consented in writing to the inclusion of such Receivables; and
(xii) as to which the Administrative Agent has not notified Seller,
at least thirty days prior to the date of determination, that the
Administrative Agent has determined, in its reasonable sole discretion,
based on non-arbitrary credit considerations as a result of events or
circumstances arising after the date hereof, that such Receivable or class
of Receivables is not acceptable for Purchase hereunder, which notice shall
set forth the reasons for such determination.
"End Date" has the meaning set forth in Section 1.07.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time.
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"ERISA Affiliate" means, with respect to any Person, any trade or business
(whether or not incorporated) that is a member of a group of which such Person
is a member and that is under common control within the meaning of the
regulations under Section 414 of the Code.
"Estimated Taxes" at any time means an amount determined in good faith by
Seller equal to the aggregate federal, state and local taxes payable by Seller
during the next quarter; it being understood that such amount will be estimated
within 31 days after each Quarterly Date and that such amount as so estimated
will be shown on and used for the purposes of the next succeeding Periodic
Report.
"Eurodollar Rate" means, with respect to any Undivided Interest (or portion
thereof) for any Yield Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) at which Dollar deposits in immediately available
funds are offered to the Eurodollar Office of the Administrative Agent two
Eurodollar Business Days prior to the beginning of such Yield Period by prime
banks in the interbank eurodollar market as at or about the relevant local time
of such Eurodollar Office, for delivery on the first day of such Yield Period,
for the number of days comprised therein and in an amount equal or comparable to
the amount of the related Purchasers' Investment of such Undivided Interest (or
such portion) for such Yield Period. "Relevant local time" as to any Eurodollar
Office shall mean (i) if the Administrative Agent shall have received adequate
notice, 11:00 a.m., London time when such Eurodollar Office is located in Europe
or the Middle East, or 10:00 a.m., Chicago time, when such Eurodollar Office is
located in North America or the Caribbean, or (ii) if the Administrative Agent
shall not have received adequate notice, then the actual time the Administrative
Agent determines the Eurodollar Rate. "Eurodollar Business Day" means a day of
the year on which dealings are carried on in the eurodollar interbank market and
banks are open for business in Chicago and in New York City. "Eurodollar
Office" shall mean the office of the Administrative Agent designated as such
with its signature hereto and, thereafter, such other office or offices of the
Administrative Agent (as designated from time to time by notice from the
Administrative Agent to Seller) which shall be funding the Undivided Interests
of the Administrative Agent hereunder or such other office or offices through
which the Administrative Agent determines the Eurodollar Rate. A Eurodollar
Office of the Administrative Agent may be, at the option of the Administrative
Agent, either a domestic or foreign office.
"Eurodollar Rate (Reserve Adjusted)" means, with respect to any Undivided
Interest (or portion thereof) for any Yield Period, a rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the
following formula:
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Eurodollar Rate = Eurodollar Rate
---------------
(Reserve Adjusted) 1-Eurodollar
Reserve Percentage
"Eurodollar Reserve Percentage" means, with respect to each Yield Period,
the then applicable percentage (expressed as a decimal) prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for determining
reserve requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other then applicable regulation of the Board of Governors
(or any successor) that prescribes reserve requirements applicable to
"Eurocurrency Liabilities" as presently defined in Regulation D.
"Eurodollar Undivided Interest" means an Undivided Interest for which the
Purchaser Rate is determined by reference to the Eurodollar Rate.
"Event of Bankruptcy" shall be deemed to have occurred with respect to a
Person if either:
(a) a case or other proceeding shall be commenced, without the application
or consent of such Person, in any court, seeking the liquidation,
reorganization, debt arrangement, dissolution, winding up, or composition or
readjustment of debts of such person, the appointment of a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for such Person or all
or substantially all of its assets, or any similar action with respect to such
Person under any law relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60 consecutive
days; or an order for relief in respect of such Person shall be entered in an
involuntary case under the federal bankruptcy laws or other similar laws now or
hereafter in effect; or
(b) such Person shall commence a voluntary case or other proceeding under
any applicable bankruptcy, insolvency, reorganization, debt arrangement,
dissolution or other similar law now or hereafter in effect, or shall consent to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) for, such Person or
for any substantial part of its property, or shall make any general assignment
for the benefit of creditors, or shall fail to, or admit in writing its
inability to, pay its debts generally as they become due, or, if a corporation
or similar entity, its board of directors shall vote to implement any of the
foregoing.
"Expected Dilution Ratio" means at any time the average of the Dilution
Ratios for the most recent 12 months.
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"Fee Letter" has the meaning set forth in Section 4.01.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months ending
on December 31; references to a Fiscal Year with a number corresponding to any
calendar year (e.g. the "1991 Fiscal Year") refer to the Fiscal Year ending on
December 31 occurring during such calendar year.
"Future Due Receivable" means Receivables due more than 90, but less than
181, days after the date of determination.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States.
"Gross Receivables" means all Trade Receivables that meet the requirements
set forth in paragraphs (ii), (iii), (vii), (viii), (ix), (x), (xi) and (xii) of
the definition of "Eligible Receivable".
"Grower/Dealer Receivable" means a Receivable originated or acquired in the
ordinary course of business by an Originator from the sale of chemicals,
fertilizer or similar products or services to dealers, distributors, industrial
users or growers and that is due within 180 days of sale.
"Indemnified Amounts" has the meaning set forth in Section 12.01.
"Indemnified Party" has the meaning set forth in Section 12.01.
"Information" has the meaning set forth in Section 13.10.
"Initial Purchaser Note" has the meaning set forth in the Purchase and Sale
Agreement.
"Lock-Box Agreement" means a letter agreement, in substantially the form of
Exhibit IE1, with each Lock-Box Bank.
"Lock-Box Bank" means any of the banks holding one or more lock-box or
concentration accounts for receiving Collections from Pool Receivables as
described on Exhibit 6.01(o)-1 or notified to the Administrative Agent pursuant
to Section 7.03(d).
"Loss Reserve" has the meaning set forth in Section 2.10.
"Management Agreement" means the Management Agreement, dated as of
August 20, 1996, between Seller and Terra Capital, as it may be amended,
supplemented or otherwise modified from time to time.
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"Material Adverse Effect" means, with respect to any event or circumstance,
a material adverse effect on:
(i) the financial condition, operations or business of (A) Seller or
(B) the Parent and its consolidated Subsidiaries, taken as a whole;
(ii) the ability of any Terra Party to perform its obligations under
any Agreement Document to which it is a party;
(iii) the enforceability, validity or collectibility of any Agreement
Document;
(iv) the status, priority, perfection or enforceability of the
Administrative Agent's or any Purchaser's interests in the Pool Assets; or
(v) the validity, enforceability or collectibility of any Eligible
Receivable, if the effect of the deletion of such Receivable from the Net
Pool Balance would result in a violation of the Required Allocations Limit.
"Month End Date" has the meaning set forth in Section 3.04.
"Moody's" means Moody's Investors Service, Inc.
"Net Pool Balance" has the meaning set forth in Section 2.08.
"Net Sales Ratio" means, as of any date, the ratio, expressed as a
percentage, of (a) the aggregate net sales of the Originators for the most
recently ended four consecutive months to (b) the aggregate Unpaid Balance of
all Gross Receivables as of the most recent Month End Date.
"Obligor" means a Person obligated to make payments pursuant to a
Receivable.
"Originator" means each of TI, TNLP, BMLP (until BMLP is sold to a third
party) and each other Subsidiary of Parent that may be added as an Originator
pursuant to the Purchase and Sale Agreement.
"Parent" means Terra Industries Inc., a Maryland corporation.
"Parent Agreement" means the Parent Agreement, dated as of August 20, 1996,
executed by the Parent, as it may be amended, supplemented or otherwise modified
from time to time.
"Percentage" means, with respect to any Purchaser, the percentage set forth
opposite such Purchaser's name on the signature page hereto, or on the
applicable Assignment Agreement.
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"Periodic Report" means a report, in substantially the form of Exhibit IF,
furnished by Servicer to the Administrative Agent for Purchasers pursuant to
Section 3.04 and Section 5.01(l).
"Permitted Investments" means any one or more of the following obligations
or securities:
(i) direct non-callable obligations of, and non-callable obligations fully
guaranteed by, the United States of America, or any agency or instrumentality of
the United States of America, the obligations of which are backed by the full
faith and credit of the United States of America;
(ii) demand and time deposits in, certificates of deposits of, and
bankers' acceptances issued by, any depository institution or trust company
incorporated under the laws of the United States of America or any state
thereof, having a combined capital and surplus of at least $500,000,000, and
subject to supervision and examination by federal and/or state banking
authorities, so long as at the time of such investment or contractual commitment
providing for such investment the commercial paper or other short-term debt
obligations of such depository institution or trust company (or, in the case of
a depository institution that is the principal subsidiary of a holding company,
the commercial paper or other short-term debt obligations of such holding
company) have the highest short-term credit rating available from Moody's and
S&P;
(iii) repurchase obligations with respect to and collateralized by (A) any
security described in clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the United States of America, in
each case entered into with a depository institution or trust company (acting as
principal) of the type described in clause (ii) above;
(iv) commercial paper (including both non-interest-bearing discount or
obligations and interest-bearing obligations) payable on demand or on a
specified date not more than one year after the date of issuance thereof having
the highest short-term credit rating from Moody's and S&P at the time of such
investment; and
(v) money market mutual funds rated at least AAAm-G by S&P or the
equivalent rating by Moody's.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, government or any agency or political subdivision thereof or any other
entity.
"Plan" means, with respect to any Person, an employee pension benefit plan
(other than a multiemployer plan) as defined in Section 3(2) of ERISA currently
maintained by, or to which
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<PAGE>
contributions have been made at any time after December 31, 1984 by, such Person
or any ERISA Affiliate of such Person for employees of such Person or any such
ERISA Affiliate and covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code.
"Pool Assets" has the meaning set forth in Section 2.01.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Preferred Stock" means the preferred stock of Seller issued pursuant to
Article Fourth of Seller's certificate of incorporation.
"Purchase" means a purchase by a Purchaser (or by the Administrative Agent,
on behalf of the Purchasers) of an Undivided Interest from Seller pursuant to
Article II; it being understood, that a Reinvestment is not a "Purchase".
"Purchase and Sale Agreement" means the Purchase and Sale Agreement, dated
as of August 20, 1996, among Seller, Terra Capital and the Originators, as it
may be amended, supplemented or otherwise modified from time to time.
"Purchase Limit" has the meaning set forth in Section 1.03(a).
"Purchase Notice" has the meaning set forth in Section 1.04.
"Purchase Termination Event" means any failure to satisfy the condition set
forth in Section 5.02.
"Purchaser" has the meaning set forth in the preamble.
"Purchaser Rate" has the meaning set forth in Section 2.08.
"Purchaser's Interest" means, with respect to any Purchaser, such
Purchaser's rights, claims and interests in, to and under the Pool Assets and
the Agreement Documents.
"Purchasers' Investment" has the meaning set forth in Section 2.03.
"Purchasers' Share" has the meaning set forth in Section 2.09.
"Quarterly Date" means the last Business Day of each March, June, September
and December.
"Rate Variance Factor" has the meaning set forth in Section 2.08.
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<PAGE>
"Receivable" means any right to payment from an obligor, whether
constituting an account, chattel paper, instrument or general intangible,
arising from the sale of chemicals, fertilizer, methanol and related goods and
services, and includes the right to payment of any interest or finance charges
and other obligations of such obligor with respect thereto. The term
"Receivable" includes Trade Receivables.
"Receivables Pool" means at any time all then outstanding Receivables which
have been, or which purport to have been, sold, assigned, transferred or
contributed to Seller. If, with respect to any Undivided Interest, a Receivable
is a Pool Receivable on the day immediately preceding the Termination Date for
such Undivided Interest, such Receivable shall continue to be considered a Pool
Receivable with respect to such Undivided Interest at all times thereafter.
"Regulatory Change" means, relative to any Affected Party
(a) any change in (or the adoption, implementation, phase-in or
commencement of effectiveness of) any
(i) United States federal or state law or foreign law applicable to
such Affected Party;
(ii) regulation, interpretation, directive, requirement or request
(whether or not having the force of law) applicable to such Affected Party
of (A) any court, government authority charged with the interpretation or
administration of any law referred to in clause (a)(i) or of (B) any
fiscal, monetary or other authority having jurisdiction over such Affected
Party; or
(iii) generally accepted accounting principles or regulatory
accounting principles applicable to such Affected Party and affecting the
application to such Affected Party of any law, regulation, interpretation,
directive, requirement or request referred to in clause (a)(i) or (a)(ii)
above; or
(b) any change in the application to such Affected Party of any existing
law, regulation, interpretation, directive, requirement, request or accounting
principles referred to in clause (a)(i), (a)(ii) or (a)(iii) above.
"Reinvestment" means the Purchase of additional undivided interests that
are added to a related Undivided Interest with proceeds of Collections that
initially were applied to reduce such Undivided Interest pursuant to Section
3.01.
"Related Security" means, with respect to any Pool Receivable all of the
following, to the extent of the Seller's interest
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<PAGE>
therein: (i) all of Seller's right, title and interest in and to any and all
Contracts, security agreements or other agreements that relate to such Pool
Receivable; (ii) all of Seller's interest in the merchandise (including returned
merchandise), if any, relating to the sale which gave rise to such Pool
Receivable; (iii) all other security interests, assignments or liens and
property subject thereto from time to time purporting to secure payment of such
Pool Receivable, whether pursuant to the Contract related to such Pool
Receivable or otherwise; (iv) all UCC financing statements and other notice
filings covering any collateral securing payment of such Pool Receivable; (v)
all guarantees and other agreements or arrangements of whatever character from
time to time supporting or securing payment of such Pool Receivable whether
pursuant to the Contract related to such Pool Receivable or otherwise; and (vi)
all of Seller's rights and claims with respect thereto under the Purchase and
Sale Agreement. The interest of any Purchaser in any Related Security is only
to the extent of such holder's Undivided Interest, as more fully described in
the definition of an Undivided Interest.
"Remaining Collections" has the meaning set forth in Section 3.01(a)(ii).
"Reporting Date" has the meaning set forth in Section 3.04.
"Required Allocations" with respect to any Undivided Interest at any time
means the sum of Purchasers' Investment, Discount Factor, Servicer's Fee
Reserve, Loss Reserve and Dilution Reserve with respect to such Undivided
Interest at such time.
"Required Allocations Limit" has the meaning set forth in Section 1.03(b).
"Required Purchasers" means Purchasers with an aggregate Percentage in
excess of 50%.
"Responsible Officer" means the President, the General Counsel, the Chief
Financial Officer, chief accounting officer or any Senior Vice President of the
applicable Terra Party, or, in the case of the Periodic Reports, any Vice
President of the Servicer.
"Run Off Day" for any Undivided Interest means any of (i) each day which
occurs on or after the date designated by the Administrative Agent to Seller to
be the "Run Off Commencement Date", provided such date is designated on at least
one Business Day's notice during a time when any of the conditions set forth in
Section 5.02 are not satisfied, (ii) each day which occurs on or after the
Commitment Termination Date for such Undivided Interest, or (iii) each day which
occurs on or after Seller shall have given written notice to the Administrative
Agent that it no longer wishes to sell undivided interests in the Receivables
Pool to Purchasers.
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<PAGE>
There shall be no Run Off Day for any Undivided Interest after it shall equal
zero.
"Run Off Discount" has the meaning section forth in Section 2.06.
"Run Off Period" means one or more contiguous Run Off Days.
"Run Off Servicer's Fee" has the meaning set forth in Section 2.07.
"Sales Based Default Ratio" means, as of any date, the ratio, expressed as
a percentage, of (a) the aggregate Unpaid Balance of all Gross Receivables that
have become Defaulted Receivables during the most recently ended three
consecutive months to (b) the net sales of the Originators for the months
occurring seven, six and five months, respectively, before the month of
determination. For example, the Sales Based Default Ratio as of the last day of
April (as reflected in the May 20th Periodic Report furnished pursuant to
Section 3.04) would be the ratio, expressed as a percentage, of (a) the
aggregate Unpaid Balance of all Gross Receivables that have become Defaulted
Receivables during the preceding February, March and April to (b) the aggregate
net sales of the Originators for the preceding October, November and December.
"Scheduled Commitment Termination Date" has the meaning set forth in
Section 1.02.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"Seller" has the meaning set forth in the preamble.
"Seller Information" has the meaning set forth in Section 13.10(b).
"Servicer" means at any time the Person then authorized pursuant to Article
VIII to service, administer and collect Pool Receivables.
"Servicer Transfer Event" means each of the following events: (i) the
occurrence of any Termination Event described in Section 9.01(a), (f), (g) or
(j); (ii) a Termination Event described in Section 9.01(d) with respect to Terra
Capital or Parent; (iii) a Termination Event described in Section 9.01(i) if
such event materially and adversely effects the Receivables Pool; (iv) there
shall have occurred any event which materially adversely affects the ability of
Servicer to collect Pool Receivables or the ability of Servicer to perform under
this Agreement; (v) the Sales Based Default Ratio exceeds 6.5%; or (vi) the
average Dilution Ratio for any three consecutive months exceeds 13%.
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<PAGE>
"Servicer's Fee" has the meaning set forth in Section 2.07.
"Servicer's Fee Reserve" has the meaning set forth in Section 2.07.
"Settlement" means the payments and other actions provided for on the last
day of each Settlement Period.
"Settlement Date" means the last day of each Settlement Period.
"Settlement Period" for any Undivided Interest means each period commencing
on the first day of each Yield Period for such Undivided Interest and ending on
the last day of such Yield Period, and, on and after the Termination Date for
such Undivided Interest, such period (including, without limitation, a daily
period) as shall be selected from time to time by the Administrative Agent or,
in absence of any such selection, each period of thirty days from the last day
of the immediately preceding Settlement Period; provided, however, that with
respect to any Yield Period of one day as described in clause (ii) of the
proviso clause of the definition of "Yield Period", the related Settlement
Period shall be the first day following such Yield Period.
"Solvent" means, with respect to any Person at any time, a condition under
which:
(i) the fair value and present fair saleable value of such Person's
total assets is, on the date of determination, greater than such Person's
total liabilities (including contingent and unliquidated liabilities) at
such time;
(ii) the fair value and present fair saleable value of such Person's
assets is greater than the amount that will be required to pay such
Person's probable liability on its existing debts as they become absolute
and matured ("debts", for this purpose, includes all legal liabilities,
whether matured or unmatured, liquidated or unliquidated, absolute, fixed,
or contingent);
(iii) such Person is and shall continue to be able to pay all of its
liabilities as such liabilities mature; and
(iv) such Person does not have unreasonably small capital with which
to engage in its current and in its anticipated business.
For purposes of this definition:
(A) the amount of a Person's contingent or unliquidated liabilities
at any time shall be that amount which, in light
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<PAGE>
of all the facts and circumstances then existing, represents the amount
which can reasonably be expected to become an actual or matured liability;
(B) the "fair value" of an asset shall be the amount which may be
realized within a reasonable time either through collection or sale of such
asset at its regular market value;
(C) the "regular market value" of an asset shall be the amount which
a capable and diligent business person could obtain for such asset from an
interested buyer who is willing to Purchase such asset under ordinary
selling conditions; and
(D) the "present fair saleable value" of an asset means the amount
which can be obtained if such asset is sold with reasonable promptness in
an arms-length transaction in an existing and not theoretical market.
"S&P" means Standard & Poor's.
"Spike Factor" means the positive difference, if any, between the greatest
Dilution Ratio to have occurred during the previous 12 months and the most
recently calculated Expected Dilution Ratio.
"Spike Ratio" means, for any calendar month, the ratio, expressed as a
percentage, of (a) the greatest Dilution Ratio to have occurred during the
previous 12 months to (b) the most recently calculated Expected Dilution Ratio.
"Subservicer" means each Originator in its capacity as subservicer pursuant
to the Purchase and Sale Agreement.
"Subsidiary" means a corporation of which Parent and/or its other
Subsidiaries own, directly or indirectly, such number of outstanding shares as
have more than 50% of the ordinary voting power for the election of directors.
"Successor Notice" has the meaning set forth in Section 8.01(b).
"Termination Date" for any Undivided Interest means the earlier of (i) the
Business Day which Seller designates, or, if any of the Conditions Precedent in
Section 5.02 are not satisfied (other than the absence of an Unmatured
Termination Event), such Business Day which the Administrative Agent designates,
as the Termination Date for such Undivided Interest by notice to the
Administrative Agent (if Seller so designates) or to Seller (if the
Administrative Agent so designates) at least one Business Day prior to such
Business Day and (ii) the Commitment Termination Date.
"Termination Event" has the meaning set forth in Section 9.01.
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<PAGE>
"Terra Capital" is defined in the preamble.
"Terra Party" means any of Seller, Terra Capital, Parent and any
Originator, and "Terra Parties" means all of the foregoing.
"TI" means Terra International, Inc., a Delaware corporation.
"TNLP" means Terra Nitrogen, Limited Partnership, a Delaware limited
partnership.
"Total Investment" has the meaning set forth in Section 2.03.
"Trade Receivable" means (i) a Grower/Dealer Receivable, (ii) a Receivable
originated or acquired in the ordinary course of business by an Originator from
the sale of nitrogen products and related services to growers, dealers and
industrial consumers or (iii) a Receivable originated or acquired in the
ordinary course of business by an Originator from the sale of methanol and
related services to industrial consumers.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the applicable jurisdiction or jurisdictions.
"Undivided Interest" has the meaning set forth in Section 2.01.
"Unmatured Termination Event" means any event which, with the giving of
notice or lapse of time, or both, would become a Termination Event.
"Unpaid Balance" of any Receivable means at any time the amount equal to
the unpaid principal amount thereof.
"Yield Period" means with respect to any Undivided Interest the period
commencing on the date of the initial Purchase of such Undivided Interest or the
last day of the immediately preceding Yield Period, as the case may be, and
ending (i) in the case of a Eurodollar Undivided Interest, one, two or three
months later, as specified by Seller pursuant to Section 1.06 and (ii) in the
case of an Alternate Rate Undivided Interest, the period from the date of
Purchase of, or conversion to, such Alternate Rate Undivided Interest to the
earlier of (i) the date of conversion of such Alternate Rate Undivided Interest
to a Eurodollar Undivided Interest and (ii) the next occurring Quarterly Date;
provided, however, that (I) any such Yield Period (other than of one day) which
would otherwise end on a day which is not a Business Day shall be extended to
the next succeeding Business Day, unless such succeeding Business Day is in a
different calendar month, in which case such Yield Period shall be shortened to
the next preceding Business Day; (II) in the case of Yield Periods of one
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day for any Undivided Interest, (A) the initial Yield Period shall be the day of
the related Purchase; (B) any subsequently occurring Yield Period which is one
day shall, if the immediately preceding Yield Period is more than one day, be
the last day of such immediately preceding Yield Period, and if the immediately
preceding Yield Period is one day, be the day next following such immediately
preceding Yield Period; and (C) any Yield Period of one day which occurs on a
day immediately preceding a day which is not a Business Day shall be extended to
the next succeeding Business Day; and (III) in the case of any Yield Period for
any Undivided Interest which commences before the Termination Date for such
Undivided Interest and would otherwise end on a date occurring after such
Termination Date, such Yield Period shall end on such Termination Date and the
duration of each such Yield Period which commences on or after the Termination
Date for such Undivided Interest shall be of such duration as shall be selected
by the Administrative Agent. The "related" Yield Period for any Undivided
Interest at any time means the Yield Period pursuant to which Earned Discount is
then accruing for such Undivided Interest.
1.2. Other Terms. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles.
All terms used in Article 9 of the UCC in the State of Illinois, and not
specifically defined herein, are used herein as defined in such Article 9.
1.3. Computation of Time Periods. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding".
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<PAGE>
EXHIBIT 10.13
PURCHASE AND SALE AGREEMENT
Dated as of August 20, 1996
among
TERRA INTERNATIONAL, INC.,
TERRA NITROGEN, LIMITED PARTNERSHIP,
BEAUMONT METHANOL, LIMITED PARTNERSHIP,
TERRA FUNDING CORPORATION
and
TERRA CAPITAL, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I
AGREEMENT TO SELL............................. 4
1.1. Sales.................................................................. 4
1.2. Timing of Purchases.................................................... 5
1.3. Consideration for Purchases............................................ 6
1.4. Sale Termination Date.................................................. 6
1.5. No Recourse............................................................ 6
1.6. True Sales............................................................. 6
ARTICLE II
CALCULATION OF PURCHASE PRICE....................... 7
2.1. Calculation of Purchase Price.......................................... 7
ARTICLE III
PAYMENT OF PURCHASE PRICE......................... 9
3.1. Initial Purchase Price Payment......................................... 9
3.2. Subsequent Purchase Price Payments..................................... 9
3.3. Settlement as to Specific Receivables.................................. 10
3.4. Settlement as to Dilution.............................................. 11
3.5. Reconveyance of Receivables............................................ 12
ARTICLE IV
CONDITIONS OF PURCHASES.......................... 12
4.1. Conditions Precedent to Initial Purchase............................... 12
4.2. Certification as to Representations and Warranties..................... 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES....................... 14
5.1. Representations of Originators......................................... 14
ARTICLE VI
COVENANTS................................. 19
6.1. Affirmative Covenants.................................................. 19
6.2. Reporting Requirements................................................. 20
6.3. Negative Covenants..................................................... 21
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PAGE
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ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE RECEIVABLES .................... 22
7.1. Rights of the Company ............................................ 22
7.2. Responsibilities of Originators .................................. 22
7.3. Further Action Evidencing Purchases .............................. 23
7.4. Application of Collections ....................................... 24
7.5. Sub-Servicers .................................................... 24
ARTICLE VIII
INDEMNIFICATION ......................... 24
8.1. Indemnities by Originators ....................................... 24
ARTICLE IX
MISCELLANEOUS ........................... 26
9.1. Amendments, Etc .................................................. 26
9.2. Notices, Etc ..................................................... 27
9.3. No Waiver; Cumulative Remedies ................................... 27
9.4. Binding Effect; Assignability .................................... 27
9.5. Governing Law .................................................... 27
9.6. Costs, Expenses and Taxes ........................................ 28
9.7. Submission to Jurisdiction ....................................... 28
9.8. Waiver of Jury Trial ............................................. 28
9.9. Captions and Cross References; Incorporation by Reference ........ 29
9.10. Execution in Counterparts ........................................ 29
9.11. Acknowledgment and Agreement ..................................... 29
9.12. No Proceedings ................................................... 29
9.13. Addition of Originators .......................................... 29
9.14. Deletion of BMLP ................................................. 30
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PAGE
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EXHIBIT A -- Form of Purchase Report
EXHIBIT B -- Form of the Initial Purchaser Note
EXHIBIT C -- Office Locations
Schedule 5.1(n) Trade Names
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<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND CONTRIBUTION AGREEMENT (as amended, supplemented or
modified from time to time, this "Agreement"), dated as of August 20, 1996, is
among TERRA INTERNATIONAL, INC., a Delaware corporation ("TI"), TERRA NITROGEN,
LIMITED PARTNERSHIP, a Delaware limited partnership ("TNLP"), BEAUMONT METHANOL,
LIMITED PARTNERSHIP, a Delaware limited partnership ("BMLP"; TI, TNLP, BMLP and
the other Persons that may become parties hereto as originators pursuant to
Section 9.13 are sometimes individually referred to as an "Originator" and
collectively as the "Originators"), TERRA FUNDING CORPORATION, a Delaware
corporation (the "Company"), and TERRA CAPITAL, INC., a Delaware corporation
("Terra Capital"), as initial Servicer.
Definitions
-----------
Unless otherwise indicated, certain terms that are capitalized and used
throughout this Agreement are defined in Schedule I to the Receivables Purchase
Agreement of even-date herewith (as amended, supplemented or otherwise modified
from time to time, the "Receivables Purchase Agreement"), among the Company,
Terra Capital, as initial Servicer, the financial institutions party thereto
from time to time as purchasers ("Purchasers") and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as administrative agent for Purchasers (in such
capacity, the "Administrative Agent").
The following terms have the respective meanings indicated hereinbelow:
Available Funds shall have the meaning assigned to such term in Section 3.2
hereof.
Contributed Receivables shall have the meaning assigned to such term in
Section 1.2(b) hereof.
Deemed Collection means amounts payable by an Originator pursuant to
Section 3.3 or 3.4.
"Designated Receivables" means all Receivables originated or acquired by an
Originator, other than those Receivables designated by such Originator on a
Purchase Report as not being sold, assigned or transferred to the Company,
provided that such excluded Receivables shall have been selected on a random
basis and that, after giving effect to such exclusion, the Aggregate Required
Allocations do not exceed the Required Allocations Limit.
<PAGE>
Ineligible Receivable shall have the meaning assigned to such term in
Section 3.3 hereof.
Initial Closing Date shall have the meaning assigned to such term in
Section 1.2 hereof.
Initial Cut-Off Date means July 31, 1996.
Initial Purchaser Note shall have the meaning assigned to such term in
Section 3.1 hereof.
Lock-Box Accounts means one or more accounts held in Lock-Box Banks for
receiving Collections from Designated Receivables.
Originator Material Adverse Effect means, with respect to any event or
circumstance, a material adverse effect on:
(i) the business, financial condition or operations of an
Originator;
(ii) the ability of an Originator to perform its obligations under
this Agreement or any other Transaction Document to which it is a party;
(iii) the validity or enforceability as against an Originator of this
Agreement or any other Transaction Document to which it is a party;
(iv) the status, existence, perfection, priority or enforceability
of the Company's interest in the Transferred Receivables and the Related
Rights sold, contributed or transferred by an Originator; or
(v) the validity, enforceability or collectibility of any Eligible
Receivable, if the effect of the deletion of such Receivable from the Net
Pool Balance would result in a violation of the Required Allocations Limit.
Payment Day means (i) the Initial Closing Date and (ii) each Business Day
thereafter that the Originators are open for business.
Pro Rata Share with respect to any Originator means the ratio, expressed as
a percentage, of (i) the aggregate Unpaid Balance of the Transferred Receivables
generated by such Originator sold or contributed to the Company on the Initial
Closing Date to the aggregate Unpaid Balance of all Transferred Receivables sold
or contributed to the Company on the Initial Closing Date, with respect to all
periods prior to the first Reporting Date and (ii) the aggregate Unpaid Balance
of the Transferred Receivables generated by such Originator sold or
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contributed to the Company during the most recently ended calendar month to the
aggregate Unpaid Balance of all Transferred Receivables sold or contributed
during such month, with respect to all periods thereafter.
Purchase Price shall have the meaning assigned to such term in Section 2.1
hereof.
Purchase Report shall have the meaning assigned to such term in Section
2.1 hereof.
Related Rights shall have the meaning assigned to such term in Section
1.1(a) hereof.
Reporting Date shall have the meaning assigned to such term in Section 2.1.
Sale Indemnified Amounts shall have the meaning assigned to such term in
Section 8.1 hereof.
Sale Indemnified Party shall have the meaning assigned to such term in
Section 8.1 hereof.
Sale Termination Date shall have the meaning assigned to such term in
Section 1.4 hereof.
Transferred Receivable means a Designated Receivable sold, or purported to
have been sold, to the Company pursuant to the Agreement or a Contributed
Receivable.
Background
----------
1. The Company is a limited purpose corporation, all of the issued and
outstanding shares of capital stock of which are wholly-owned, directly or
indirectly, by Parent.
2. The Originators concurrently with the initial sale hereunder may
transfer certain Receivables and Related Rights to the Company as part of the
capitalization of the Company.
3. In order to finance its business, each Originator wishes to sell
Designated Receivables and Related Rights to the Company, and the Company is
willing, on the terms and subject to the conditions set forth herein, to
purchase Designated Receivables and Related Rights from each Originator.
4. The Company intends to sell to the Administrative Agent, for the
benefit of the Purchasers, from time to time undivided interests in the
Designated Receivables and Related Rights pursuant to the Receivables Purchase
Agreement in order to
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finance, in part, its purchases of Designated Receivables and Related Rights
hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
AGREEMENT TO SELL
1.1. Sales. On the terms and subject to the conditions set forth in this
Agreement (including Article V), and in consideration of the Purchase Price,
until the Sale Termination Date, each Originator agrees to sell, assign, and
transfer, and does hereby sell, assign and transfer to the Company, and the
Company agrees to purchase, and does hereby purchase, from each Originator, all
of such Originator's right, title and interest in and to:
(i) each Designated Receivable (other than Initial Contributed
Receivables, if any) of such Originator that existed and was owing to such
Originator as of the close of such Originator's business on the Initial
Cut-Off Date;
(ii) each Designated Receivable (other than Contributed Receivables,
if any) created, acquired or originated by such Originator from the close
of such Originator's business on the Initial Cut-Off Date, to and including
the Sale Termination Date;
(iii) all rights to, but not the obligations under, the Contracts and
all Related Security with respect to such Designated Receivables;
(iv) all monies due or to become due with respect to the foregoing;
(v) all books and records related to any of the foregoing;
(vi) each lock-box to which Collections of Designated Receivables are
sent, the Lock-Box Accounts, all amounts on deposit and all investments
therein and all related agreements between such Originator and the Lock-Box
Banks, in each case to the extent related to such Collections; and
(vii) all proceeds of the foregoing (as defined in the UCC) received
on or after the Initial Cut-Off Date including, without limitation, all
funds which either are received by
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such Originator, the Company or the Servicer from or on behalf of the
Obligors in payment of any amounts owed (including, without limitation,
finance charges, interest and all other charges) in respect of Designated
Receivables, or are applied to such amounts owed by the Obligors
(including, without limitation, insurance payments, if any, that such
Originator or the Servicer applies in the ordinary course of its business
to amounts owed in respect of any Designated Receivable and net proceeds of
sale or other disposition of repossessed goods or other collateral or
property of the Obligors or any other party directly or indirectly liable
for payment of such Designated Receivable and available to be applied
thereon).
All purchases and capital contributions hereunder shall be made without
recourse, but shall be made pursuant to, and in reliance upon, the
representations, warranties and covenants of the Originator, set forth in each
Transaction Document. The proceeds and rights described in subsections (iii)
through (vii) of this Section 1.1(a) are herein collectively called the "Related
Rights" (it being understood that when the term "Related Rights" is applied to
the Contributed Receivables, the references in subsections (iii) through (vii)
of this Section 1.1(a) to "Designated Receivables" shall be deemed to refer to
"Contributed Receivables").
1.2. Timing of Purchases.
(a) Initial Closing Date Purchases. On the date of the first Purchase
under the Receivables Purchase Agreement (the "Initial Closing Date") each
Originator shall sell to the Company, and the Company shall purchase, pursuant
to Section 1.1, such Originator's entire right, title and interest in (i) each
Designated Receivable (other than Contributed Receivables, if any) that existed
and was owing to such Originator as of the close of such Originator's business
on the Initial Cut-Off Date, and (ii) all Related Rights with respect thereto.
(b) Regular Purchases and Contributions. After the Initial Closing Date,
and continuing until the Sale Termination Date, each Designated Receivable
described in Section 1.1(a)(ii) hereof, and all the Related Rights with respect
thereto, shall be automatically deemed to be sold or contributed by the related
Originator to the Company (without any further action) upon the creation or
origination of such Designated Receivable. All Receivables indicated on a
Purchase Report, if any, as having been contributed to the Company (such
Receivables, together with the Initial Contributed Receivables, the "Contributed
Receivables"), shall be contributed to the Company on such date.
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1.3. Consideration for Purchases. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to make all Purchase
Price payments to the Originators in accordance with Article III.
1.4. Sale Termination Date. The "Sale Termination Date" shall be the
Commitment Termination Date under the Receivables Purchase Agreement.
1.5. No Recourse. Except as specifically provided in this Agreement, the
purchase and sale of Receivables and Related Rights under this Agreement shall
be without recourse to the related Originator; provided that each Originator
shall be liable to the Company for all representations, warranties, covenants
and indemnities made by such Originator pursuant to the terms of this Agreement,
it being understood that such obligation of the Originators will not arise on
account of the failure of the Obligor for credit reasons to make any payment in
respect of a Receivable.
1.6. True Sales.
(a) Each of the Originators and the Company intend the transactions
hereunder to constitute true sales (or, in the case of Contributed Receivables,
conveyances in the form of capital contributions) of Receivables and Related
Rights by each of the Originators to the Company, providing the Company with the
full benefits of ownership thereof, and no party hereto intends the transactions
contemplated hereunder to be, or for any purpose to be characterized as, a loan
from the Company to any Originator.
(b) In the event (but only to the extent) that the conveyance of
Receivables and Related Rights hereunder is characterized by a court or other
governmental authority as a loan rather than a sale, each Originator shall be
deemed hereunder to have granted to the Company, and each Originator hereby
severally grants to the Company, a security interest in all of such Originator's
right, title and interest in, to and under all of the following, whether now or
hereafter owned, existing or arising: (A) all Transferred Receivables of such
Originator, and (B) all Related Rights of such Originator with respect thereto.
Such security interest shall secure all of such Originator's obligations
(monetary or otherwise) under this Agreement and the other Transaction Documents
to which it is a party, whether now or hereafter existing or arising, due or to
become due, direct or indirect, absolute or contingent. The Company shall have,
with respect to the property described in this Section 1.6, and in addition to
all the other rights and remedies available to the Company under this Agreement
and applicable law, all the rights and remedies of a secured party under any
applicable UCC, and this
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Agreement shall constitute a security agreement under applicable law.
ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price. On each Reporting Date (commencing
with the first Reporting Date following the Initial Closing Date), the Servicer
shall deliver to the Company, the Administrative Agent and each Originator (if
the Servicer is other than Terra Capital) a report in substantially the form of
Exhibit A (each such report being herein called a "Purchase Report") with
respect to the Company's purchases of Designated Receivables from the
Originators
(a) that arose on or prior to the Initial Cut-Off Date (in the case of
the first Purchase Report to be delivered hereunder) and
(b) that arose during the calendar month immediately preceding such
Reporting Date (in the case of each successive Purchase Report).
The "Purchase Price" (to be paid to each Originator in accordance with the terms
of Article III) for the Designated Receivables and the Related Rights sold by
such Originator shall be determined in accordance with the following formula:
PP = AUB - (AUB X FMVD)
where:
PP = Purchase Price (to be paid to the related Originator in
accordance with the terms of Article III) as calculated on the
relevant Reporting Date.
AUB = (i) for purposes of calculating the Purchase Price on the Initial
Closing Date, the aggregate Unpaid Balance of, or the amount
shown on the related Originator's books for (if less), all
Designated Receivables generated by such Originator as at the
Initial Cut-Off Date, and
(ii) for purposes of calculating the Purchase Price for
Receivables on each Reporting Date thereafter, the aggregate
Unpaid Balance of the Designated Receivables described in Section
1.1(a)(ii) hereof that were generated by such Originator during
the immediately preceding calendar month.
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FMVD = Fair Market Value Discount Factor on the determination date, which
is the sum of the Loss Discount and the Cost Discount, in each
case as calculated on the most recent Reporting Date as set forth
in the definitions below.
"Loss Discount" as measured on any date, a percentage, determined in good
faith by Servicer, that reflects the historical average losses experienced by
the related Originator with respect to similar receivable generated by such
Originator during the previous twelve (12) months, as such average may be
adjusted by the Servicer, based on current information then available to the
Servicer, to reflect any additional losses that might reasonably be expected to
be incurred, but which at the time of determination may not be reflected in such
average.
"Cost Discount" as measured on [(1) the Initial Closing Date, means the one
month Eurodollar Rate as of two Business Days prior to the Initial Closing Date,
plus .72%] and (2) any Reporting Date means a percentage determined in
accordance with the following formula:
<TABLE>
<CAPTION>
<S> <C> <C>
CD = (DSO/360) x CR
where:
CD = the Cost Discount as measured on such Reporting Date;
DSO = the Days of Sales Outstanding, as set forth in the most recent
Purchase Report; and
CR = the Cost Rate as measured on such Reporting Date.
</TABLE>
"Cost Rate" as measured on any Reporting Date means a per annum percentage
rate equal to the sum of (i) the blended Purchaser Rate applicable during the
previous calendar month, plus (ii) the percentage used in calculating the
Servicer's Fee for the previous calendar month, plus (iii) .02% (or such higher
percentage which such Originator and the Company shall specify in good faith so
that the purchase price reflects the related fair market value of the related
Receivables), plus (iv) the amount, expressed as a per annum percentage rate, of
any fees, costs and expenses incurred by the Company during the previous
calendar month (and not accounted for in the foregoing clauses (i) and (ii) or
paid by the Company from funds other than Collections), including tax payments,
management fees and indemnity obligations for which the Company is not
indemnified pursuant to this Agreement; provided that, for purposes of
minimizing fluctuations in the Cost Rate, the Servicer may allocate and spread
any costs and expenses of the Company over several months at the Servicer's
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reasonable discretion, subject to the requirement that such allocation be
reasonably calculated to allow the Company to recover such costs and expenses
over a reasonable period of time. It is understood that at the discretion of the
Company, expenses in clause (iv) shall not include expenses paid from
contributions to capital, earnings, fees or sources other than Collections.
ARTICLE III
PAYMENT OF PURCHASE PRICE
3.1. Initial Purchase Price Payment. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to pay to each
Originator on the Initial Closing Date the Purchase Price for the purchase to be
made from such Originator with respect to Designated Receivables generated by
such Originator existing on or prior to the Initial Cut-Off Date (a) in cash in
an amount equal to such Originator's Pro Rata Share of the amount received by
the Company in connection with the first Purchase made pursuant to the
Receivables Purchase Agreement and (b) by the issuance of a promissory note in
the form of Exhibit B to each Originator (other than TNLP) and to Terra Capital
(each such promissory note, as it may be amended, supplemented, indorsed or
otherwise modified from time to time in substitution therefor or renewal thereof
in accordance with the Transaction Documents, being herein called an "Initial
Purchaser Note") in the initial principal amount equal to the remainder of the
Purchase Price owing to such Originator (or to TNLP in the case of Terra
Capital's Initial Purchaser Note) on the Initial Closing Date after subtracting
the amount paid in cash. The principal of the Initial Purchaser Note issued to
Terra Capital evidences amounts paid by Terra Capital to TNLP.
3.2. Subsequent Purchase Price Payments. On each Business Day after the
Initial Closing Date until the termination of this Agreement pursuant to Section
9.4 hereof, the Company shall pay to each Originator a portion of the Purchase
Price due to such Originator pursuant to Section 2.1 by depositing into such
account as such Originator shall specify immediately available funds from such
Originator's Pro Rata share of monies then held by or on behalf of the Company
(or by permitting such Originator to retain Collections received by such
Originator in its capacity as a sub-servicer) solely to the extent that such
monies do not constitute Collections that are required to be segregated and held
by the Servicer pursuant to the Receivables Purchase Agreement or to be
distributed to the Administrative Agent or the Purchasers pursuant to the
Receivables Purchase Agreement on the next Settlement Date or required to be
paid to the Servicer as the Servicer's Fee on the next Settlement Date, or
otherwise necessary to pay current expenses of the Company or to provide
required reserves for
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Estimated Taxes (in its reasonable discretion) (such available monies, the
"Available Funds") and provided that such Originator has paid all amounts then
owing by it hereunder. To the extent that the Available Funds are insufficient
to pay the Purchase Price then due to any Originator in full, the remaining
portion of such Purchase Price shall be paid by increasing the principal amount
of the Initial Purchaser Note of such Originator (or, in the case of TNLP, of
Terra Capital), effective as of the related Month End Date. To the extent that
(x) the amount due pursuant to Section 2.1 with respect to all Designated
Receivables generated by an Originator that arose during the corresponding month
is exceeded by (y) the amount paid to such Originator during such month pursuant
to the foregoing sentences for such Designated Receivables, such excess shall be
treated as a reduction in the principal amount of the Initial Purchaser Note of
such Originator (or, in the case of TNLP, of Terra Capital), effective as of the
related Month End Date; provided, however, that if at any time the unpaid
principal amount of the Initial Purchaser Note of such Originator (or, in the
case of TNLP, of Terra Capital) has been reduced to zero, such Originator shall
pay the Company the remainder owed with respect thereto in immediately available
funds.
Each Originator (or Terra Capital, in the case of the Initial Purchaser
Note held by it) shall make all appropriate record keeping entries with respect
to the Initial Purchaser Note held by it to reflect payments by the Company
thereon and such Person's books and records shall constitute rebuttable
presumptive evidence of the principal amount of and accrued interest on such
Initial Purchaser Note. Each Originator (or Terra Capital, in the case of the
Initial Purchaser Note held by it) shall return the Initial Purchaser Note held
by it to the Company upon the final payment thereof after the termination of
this Agreement pursuant to Section 9.4 hereof.
3.3. Settlement as to Specific Receivables. Subject to Section 7.2(a)
hereof, if an officer of any Originator obtains knowledge or receives notice
from the Company or the Administrative Agent that (a) on the day that any
Receivable purchased or contributed hereunder was created, acquired or
originated by such Originator (or, in the case of Receivables transferred or
contributed on the Initial Closing Date, on the Initial Closing Date) any of the
representations or warranties set forth in Section 5.1(k) was not true with
respect to such Receivable, or such Receivable was designated as an Eligible
Receivable on the related Purchase Report and was not an Eligible Receivable or,
(b) on any day any of the representations or warranties set forth in Section
5.1(k) with respect to any Transferred Receivable generated by such Originator
is no longer true with respect to a Transferred Receivable (each such
Receivable, an "Ineligible Receivable"), then such Originator as
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soon as practicable, but in any event on or before the next Reporting Date,
shall offset against the Purchase Price with respect to Designated Receivables
generated by such Originator that arose during the same month in which such
knowledge is obtained or notification is received an amount equal to the Unpaid
Balance of such Ineligible Receivable as of the related Month End Date;
provided, however, that if there have been no purchases of Designated
Receivables from such Originator (or insufficiently large purchases of
Designated Receivables from such Originator to create a Purchase Price large
enough to so reduce by the amount of such net reduction) during such month, any
amount owed by which the Purchase Price payable to such Originator would have
been reduced pursuant to the immediately preceding clause of this sentence shall
be paid by either (at the option of such Originator, unless the Company will,
absent such payment in cash, be unable to meet its obligations under the
Receivables Purchase Agreement (including its obligations to maintain reserves
for Estimated Taxes) on the next occurring Settlement Date or other date on
which a payment is due pursuant to the Receivables Purchase Agreement, in which
case such Originator shall make a cash payment on or before such Settlement Date
or other date) a reduction in the principal amount of the Initial Purchaser Note
of such Originator (or, in the case of TNLP, of Terra Capital) (but not below
zero) or by payment within five Business Days after the related Reporting Date
in cash by such Originator to the Company by payment of same day funds;
provided, further, that if the Company receives payment on account of
Collections due with respect to such Ineligible Receivable after such Settlement
Date or other date, as the case may be, the Company promptly shall deliver such
funds to such Originator. The enforcement of the obligations set forth in this
Section 3.3 shall be the sole remedy of the Company with respect to Ineligible
Receivables.
3.4. Settlement as to Dilution. Each Purchase Report shall include, in
respect of the Receivables previously contributed or sold to the Company
(including the Initial Contributed Receivables), a calculation of the aggregate
net reduction in the aggregate Unpaid Balance of such Receivables owed by
particular Obligors on account of any defective or rejected products or
services, returns of unclaimed products, any cash discount, allowances, credits,
billing errors, write-offs, discounts, sales return adjustments, credit memos
and adjustments by, or setoffs in respect of any claims by the Obligor(s)
thereof against, any Originator or any of its Affiliates, other than the Company
(whether such claims arise out of the same or a related or unrelated
transaction), or any rebate or refund during the most recent month. Subject to
Section 7.2(a) hereof, the Purchase Price to be paid to each Originator for the
Designated Receivables generated by it during the month for which such Purchase
Report is delivered shall be decreased by the amount of such net reduction;
provided, however, that if there have been no purchases of
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Receivables from such Originator (or insufficiently large purchases of
Receivables from such Originator to create a Purchase Price large enough to so
reduce by the amount of such net reduction) during such month, any amount owed
by which the Purchase Price payable to such Originator would have been reduced
pursuant to the immediately preceding clause of this sentence shall be paid by
either (at the option of such Originator, unless the Company will, absent such
payment in cash, be unable to meet its obligations under the Receivables
Purchase Agreement on the next occurring Settlement Date, in which case such
Originator shall make a cash payment on or before such Settlement Date) a
reduction in the principal amount of the Initial Purchaser Note (but not below
zero) of such Originator (or, in the case of TNLP, of Terra Capital) or by
payment within two Business Days after the related Reporting Date in cash by
such Originator to the Company by payment of same day funds.
3.5. Reconveyance of Receivables. In the event that an Originator has
paid (by effecting a Purchase Price reduction or otherwise) to the Company the
full Unpaid Balance of any Receivable pursuant to Section 3.3, the Company shall
reconvey such Receivable and all Related Rights with respect thereto, to such
Originator, without recourse, representation or warranty, but free and clear of
all liens created by the Company.
ARTICLE IV
CONDITIONS OF PURCHASES
4.1. Conditions Precedent to Initial Purchase. The initial purchase and
contribution hereunder is subject to the condition precedent that the Company
shall have received, on or before the Initial Closing Date, the following, each
(unless otherwise indicated) dated the Initial Closing Date, and each in form,
substance and date reasonably satisfactory to the Company and the Administrative
Agent:
(a) A copy of the resolutions of the Board of Directors of each
Originator (or, in the case of a partnership, of the general partner of
such Originator) approving the Transaction Documents to be delivered by it
and the transactions contemplated hereby and thereby, certified by the
Secretary or Assistant Secretary of such Person;
(b) Good standing certificate for each Originator issued as of a
recent date by the Secretaries of State of the states of such Person's
incorporation and such Person's principal place of business;
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(c) A certificate of the Secretary or Assistant Secretary of each
Originator (or, in the case of a partnership, of the general partner of
such Originator) certifying the names and true signatures of the officers
authorized on its behalf to sign the Transaction Documents to be delivered
by it (on which certificate the Company and Servicer (if other than Terra
Capital) may conclusively rely until such time as the Company and the
Servicer shall receive from such Originator a revised certificate meeting
the requirements of this subsection (c));
(d) The articles of incorporation of each Originator that is a
corporation, duly certified by the Secretary of State of the state of such
Person's incorporation as of a recent date, together with a copy of the by-
laws of such Person, duly certified by the Secretary or an Assistant
Secretary of such Person; in the case of each Originator that is a
partnership, a copy of such Person's partnership agreement, duly certified
by the Secretary or an Assistant Secretary of the general partners;
(e) Copies of proper financing statements (Form UCC-1) that have
been duly executed and name each Originator as the assignor and the Company
as the assignee (and the Administrative Agent as assignee of the Company)
of the Transferred Receivables and the Related Rights or other, similar
instruments or documents, as may be necessary or, in Servicer's or the
Administrative Agent's opinion, desirable under the UCC of all appropriate
jurisdictions or any comparable law of all appropriate jurisdictions to
perfect the Company's ownership interest in all Receivables and Related
Rights in which an ownership interest may be assigned to it hereunder;
(f) A written search report from a Person satisfactory to Servicer
and the Administrative Agent listing all effective financing statements
that name any Originator as debtor or assignor and that are filed in the
jurisdictions in which filings were made pursuant to the foregoing
subsection (e) together with copies of such financing statements (none of
which, except for those described in the foregoing subsection (e) and those
for which a proper release or amendment shall have been executed by the
related debtor and secured party and delivered to the Administrative Agent,
shall cover any Transferred Receivable or any Related Right), and tax and
judgment lien search reports from a Person satisfactory to Servicer and the
Administrative Agent showing no evidence of such liens filed against any
Originator;
(g) Evidence (i) of the execution and delivery by each of the
parties thereto of each of the other Transaction
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Documents to be executed and delivered in connection herewith and (ii) that
each of the conditions precedent to the execution, delivery and
effectiveness of such other Transaction Documents has been satisfied to the
Company's satisfaction;
(h) The Initial Purchaser Notes in favor of each Originator (other
than TNLP) and Terra Capital, duly executed by the Company; and
(i) A certificate from an officer of each Originator to the effect
that Servicer and such Originator have placed on the most recent, and have
taken all steps reasonably necessary to ensure that there shall be placed
on subsequent, summary master control data processing reports the following
legend (or the substantive equivalent thereof): "DESIGNATED RECEIVABLES
DESCRIBED HEREIN HAVE BEEN SOLD TO TERRA FUNDING CORPORATION PURSUANT TO A
PURCHASE AND SALE AGREEMENT, DATED AS OF AUGUST 20, 1996, AS AMENDED; AND
AN INTEREST IN THE RECEIVABLES DESCRIBED HEREIN HAS BEEN GRANTED AND
ASSIGNED TO BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
ADMINISTRATIVE AGENT, PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT, DATED
AS OF AUGUST 20, 1996, AMONG TERRA FUNDING CORPORATION, TERRA CAPITAL,
INC., CERTAIN FINANCIAL INSTITUTIONS AND BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS ADMINISTRATIVE AGENT.
4.2. Certification as to Representations and Warranties. Each Originator,
by accepting the Purchase Price related to each purchase of Designated
Receivables (and Related Rights), shall be deemed to have certified that the
representations and warranties contained in Article V are true and correct on
and as of the day of such purchase, with the same effect as though made on and
as of such day.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations of Originators. In order to induce the Company to
enter into this Agreement and to make purchases hereunder, each Originator
hereby makes the representations and warranties set forth in this Section 5.1.
(a) Organization and Good Standing. Such Originator has been duly
organized and is validly existing as a corporation or partnership in good
standing under the laws of the state of its formation, with power and
authority to own its properties and to conduct its business as such
properties are presently owned and such business is presently conducted.
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(b) Due Qualification. Such Originator is duly licensed or qualified
to do business as a foreign entity in good standing in all jurisdictions in
which the ownership or lease of its property or the conduct of its business
requires such licensing or qualification except where the failure to be so
licensed or qualified has not had and would not reasonably be expected to
have an Originator Material Adverse Effect.
(c) Power and Authority; Due Authorization. Such Originator has (a)
all necessary power, authority and legal right (i) to execute and deliver,
and perform its obligations under, each Transaction Document to which it is
a party, and (ii) to generate, own, sell, contribute and assign Receivables
on the terms and subject to the conditions herein and therein provided; and
(b) duly authorized such execution and delivery and such sale, contribution
and assignment and the performance of such obligations by all necessary
corporate or partnership, as the case may be, action.
(d) Valid Sale; Binding Obligations. Each sale or contribution of
Receivables and Related Rights made by such Originator pursuant to this
Agreement shall constitute a valid sale (or contribution, as the case may
be), transfer, and assignment thereof to the Company, enforceable against
creditors of, and purchasers from, such Originator; and this Agreement
constitutes, and each other Transaction Document to be signed by such
Originator, when duly executed and delivered, will constitute, a legal,
valid, and binding obligation of such Originator, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or other similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Transaction Documents to which such
Originator is a party, and the fulfillment of the terms hereof or thereof
will not (a) conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of time
or both) a default under (i) such Originator's organizational documents, or
(ii) any indenture, loan agreement, mortgage, deed of trust, or other
agreement or instrument to which it is a party or by which it is bound,
except where such violation has not had and would not reasonably be
expected to have an Originator Material Adverse Effect, (b) result in the
creation or imposition of any Adverse Claim upon any of its properties
pursuant to the
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terms of any such indenture, loan agreement, mortgage, deed of trust, or
other agreement or instrument, other than the Transaction Documents, or (c)
violate any law or any order, rule, or regulation applicable to it of any
court or of any federal, state or foreign regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over it
or any of its properties, except where such violation has not had and would
not reasonably be expected to have an Originator Material Adverse Effect.
(f) Proceedings. There is no litigation, proceeding or
investigation pending, or to the best of such Originator's knowledge,
threatened, before any court, regulatory body, arbitrator, administrative
agency, or other tribunal or governmental instrumentality (a) asserting the
invalidity of any Transaction Document to which such Originator is a party,
(b) seeking to prevent the sale or contribution of Receivables to the
Company or the consummation of any of the other transactions contemplated
by any Transaction Document to which such Originator is a party, or (c)
seeking any determination or ruling that would reasonably be expected to
have an Originator Material Adverse Effect.
(g) Bulk Sales Act. No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(h) Government Approvals. Except for the filing of the UCC
financing statements referred to in Article IV, all of which, at the time
required in Article IV, shall have been duly made and shall be in full
force and effect, no authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for such Originator's due execution, delivery and performance of
any Transaction Document to which it is a party.
(i) Financial Condition. On the date hereof such Originator is, and
on the date of each transfer of a new Receivable hereunder (both before and
after giving effect to such transfer), such Originator shall be Solvent.
(j) Margin Regulations. No use of any funds acquired by such
Originator under this Agreement will conflict with or contravene any of
Regulations G, T, U and X promulgated by the Board of Governors of the
Federal Reserve System from time to time.
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(k) Quality of Title.
(i) Each Receivable (together with the Related Rights with
respect to such Receivable) which is to be sold or contributed by such
Originator to the Company hereunder is or shall be, at the time of
such sale or contribution, owned by such Originator, free and clear of
any Adverse Claim. Whenever the Company makes a purchase or accepts a
contribution of a Receivable from such Originator hereunder, it shall
have acquired a valid and perfected ownership interest (free and clear
of any Adverse Claim, other than an Adverse Claim created by or
arising through the Company or the Administrative Agent) in such
Receivable and all Collections related thereto, and in such
Originator's entire right, title and interest in and to the Related
Rights with respect thereto.
(ii) No effective financing statement or other instrument similar
in effect covering any Transferred Receivable or any Related Right is
on file in any recording office except such as may be filed in favor
of the Company in accordance with this Agreement or in favor of the
Administrative Agent in accordance with the Receivables Purchase
Agreement or those that, on or prior to the Initial Closing Date, have
been released.
(l) Accuracy of Information. No information heretofore or
contemporaneously furnished by such Originator to the Company, any
Purchaser or the Administrative Agent for purposes of or in connection with
any Transaction Document or any transaction contemplated hereby or thereby
is, and no other such information hereafter furnished by such Originator to
the Company, any Purchaser, or the Administrative Agent pursuant to or in
connection with any Transaction Document will be, inaccurate in any
material respect as of the date it was furnished or (except as otherwise
disclosed to the Company at or prior to such time) as of the date as of
which such information is dated or certified, or, in light of the
circumstances made, contained or will contain any material misstatement of
fact or omitted or will omit to state any material fact necessary to make
such information not materially misleading.
(m) Offices. Such Originator's principal place of business and chief
executive office is located at the address set forth under such
Originator's signature hereto, and the offices where such Originator keeps
all its books, records and documents evidencing the Receivables, the
related
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Contracts and all other agreements related to such Receivables are located
at the addresses specified in Exhibit C (or at such other locations,
notified to Servicer (if other than Terra Capital), the Company and the
Administrative Agent in accordance with Section 6.1(f), in jurisdictions
where all action required by Section 7.3 has been taken and completed).
(n) Trade Names. Except as disclosed on Schedule 5.1(n), such
Originator does not use any trade name other than its actual corporate or
partnership name. From and after the date that fell five (5) years before
the date hereof, such Originator has not been known by any legal name other
than its corporate or partnership name as of the date hereof, nor has such
Originator been the subject of any merger or other corporate
reorganization, except as disclosed on Schedule 5.1(n).
(o) Taxes. Such Originator has filed all material tax returns and
reports required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes which
are not yet delinquent or are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
generally accepted accounting principles shall have been set aside on its
books.
(p) Compliance with Applicable Laws. Such Originator is in
compliance, in all material respects, with the requirements of all
applicable laws, rules, regulations, and orders of all governmental
authorities (including, without limitation, Regulation Z, laws, rules and
regulations relating to usury, truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices
and privacy and all other consumer laws applicable to the Receivables and
related Contracts), a breach of any of which, individually or in the
aggregate, would be reasonably likely to have an Originator Material
Adverse Effect.
(q) Reliance on Separate Legal Identity. Such Originator is aware
that the Purchasers and the Administrative Agent are entering into the
Transaction Documents to which they are parties in reliance upon the
Company's identity as a legal entity separate from such Originator and any
of its other Affiliates.
(r) Transfers. No purchase of Designated Receivables by the Company
from such Originator constitutes a fraudulent transfer or fraudulent
conveyance or is otherwise void, voidable or subordinated under similar
laws or principles,
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<PAGE>
the doctrine of equitable subordination or for any other reason.
ARTICLE VI
COVENANTS
6.1. Affirmative Covenants. From the date hereof until the End Date, each
Originator will, unless the Company and the Administrative Agent shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations and orders, including those with
respect to the Receivables generated by it and the Contracts and other
agreements related thereto.
(b) Preservation of Existence. Preserve and maintain its corporate
or partnership, as the case may be, existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign entity in each jurisdiction where
the failure to preserve and maintain such existence, rights, franchises,
privileges and qualification would have an Originator Material Adverse
Effect.
(c) Receivables Review. (i) At any time and from time to time
during regular business hours, upon five Business Days' notice (provided
that no such notice shall be required if a Termination Event has accrued
and is continuing), permit the Company, the Administrative Agent or their
respective agents or representatives, (A) to examine, to audit and make
copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under
the control of such Originator relating to the Receivables, including,
without limitation, the Contracts, and purchase orders and other agreements
related thereto, and (B) to visit such Originator's offices and properties
for the purpose of examining such materials described in the foregoing
clause (A) and discussing matters relating to the Receivables generated by
such Originator or such Originator's performance hereunder with any of the
officers or employees of such Originator having knowledge of such matters,
provided that such Originator shall have the right to have a Responsible
Officer present during such discussions; and (ii) to meet with the
independent auditors of such Originator, to review such auditors' work
papers and otherwise to review with such auditors the books and records of
such Originator with respect to the Receivables and the Related Rights,
provided that such Originator shall have the
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<PAGE>
right to have a Responsible Officer present during such discussions.
(d) Keeping of Records and Books of Account. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Receivables generated by it in
the event of the destruction of the originals thereof), and keep and
maintain all documents, books, records and other information reasonably
necessary or advisable for the collection of all Transferred Receivables
generated by it (including, without limitation, records adequate to permit
the daily identification of each new Transferred Receivable and all
Collections of, and adjustments to, each existing Transferred Receivable).
(e) Performance and Compliance with Receivables and Contracts. At
its expense timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it
under the Contracts and all purchase orders and other agreements related to
the Receivables generated by it.
(f) Location of Records. Keep its principal place of business and
chief executive office, and the offices where it keeps its records
concerning or related to Receivables, at the address(es) referred to in
Exhibit C or, upon 15 days' prior written notice to the Company and the
Administrative Agent, at such other locations in jurisdictions where all
action required by Section 7.3 shall have been taken and completed.
(g) Credit and Collection Policies. Comply in all material respects
with the Credit and Collection Policy in connection with the Receivables
generated by it and all Contracts related thereto.
(h) Separate Corporate Existence of the Company. Take such actions
as shall be required in order to maintain the separate identity of the
Company separate and apart from such Originator and its other affiliates,
including those set forth in Section 7.07 of the Receivables Purchase
Agreement.
6.2. Reporting Requirements. From the date hereof until the End Date, such
Originator will, unless the Company and the Administrative Agent shall otherwise
consent in writing, furnish to the Company, the Administrative Agent, and each
Purchaser:
(a) Proceedings. As soon as possible and in any event within 10
days after a Responsible Officer of such Originator has knowledge thereof,
written notice to the Company and the
-20-
<PAGE>
Administrative Agent of (i) all pending proceedings and investigations of
the type described in Section 5.1(f) not previously disclosed to the
Company and/or the Administrative Agent and (ii) all material adverse
developments that have occurred with respect to any previously disclosed
proceedings and investigations;
(b) Credit and Collection Policy. Prior to its effective date,
notice of any change in the Credit and Collection Policy, other than
immaterial changes; and
(c) Other. Promptly, from time to time, such other information,
documents, records or reports respecting the Receivables generated by such
Originator or such Originator's performance as seller hereunder that the
Company or the Administrative Agent may from time to time reasonably
request in order to protect the interests of the Company, the Purchasers,
the Administrative Agent or any other Affected Party under or as
contemplated by the Transaction Documents.
6.3. Negative Covenants. From the date hereof until the End Date, such
Originator agrees that, unless the Administrative Agent shall otherwise consent
in writing, it shall not:
(a) Sales, Liens, Etc. Except as otherwise provided herein or in
any other Transaction Document, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to, any Transferred Receivable or
related Contract or other Related Right, or any interest therein, or any
Collections thereon, or assign any right to receive income in respect
thereof.
(b) Change in Credit and Collection Policy. Make any change in the
character of its business or in the Credit and Collection Policy that would
impair the collectibility of any Transferred Receivable (unless such
Transferred Receivable is not an Eligible Receivable and the Company
consents to such change) or otherwise adversely affect the interests or
remedies of the Company hereunder or the Administrative Agent or the
Purchasers under any Transaction Document.
(c) Receivables Not to be Evidenced by Promissory Notes. Take any
action to cause or permit any Receivable generated by it to become
evidenced by any "instrument" (as defined in the applicable UCC), except in
connection with the collection of overdue Receivables, provided that, in
the case of Eligible Receivables, the original of such instrument is
delivered to the Administrative Agent, duly endorsed.
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<PAGE>
(d) Extension or Amendment of Receivables. Except as permitted
pursuant to the Receivables Purchase Agreement, extend, amend or otherwise
modify the terms of any Transferred Receivable, or amend, modify or waive
any term or condition of any Contract related thereto, if such extension,
amendment, modification or waiver would impair the ultimate collectibility
of such Transferred Receivable or otherwise materially adversely affect the
rights of the Company, any Purchaser or the Administrative Agent hereunder
or in the Transferred Receivables or Related Rights.
(e) Instructions to Obligors. Instruct Obligors to make payments
with respect to any Transferred Receivable to any place other than a lock-
box located at a Lock-Box Bank for which an executed Collection Bank Notice
or Lock-Box Agreement has been delivered to the Administrative Agent.
(f) Change in Name. Change its name unless it shall have provided at
least 30 days' prior written notice thereof to the Company and the
Administrative Agent and shall have taken all action required by Section
7.3.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE RECEIVABLES
7.1. Rights of the Company. Each Originator hereby authorizes the Company
and the Servicer (if other than such Originator) or their respective designees
to take any and all steps in such Originator's name necessary or desirable, in
their respective determination, to collect all amounts due under any and all
Transferred Receivables, including, without limitation, endorsing such
Originator's name on checks and other instruments representing Collections and
enforcing such Transferred Receivables and the provisions of the related
Contracts.
7.2. Responsibilities of Originators. Anything herein to the contrary
notwithstanding:
(a) Each Originator agrees to direct the Obligors to make payments of
Transferred Receivables directly to a Lock-Box Account that is the subject
of an executed Collection Bank Notice or Lock-Box Agreement at a Lock-Box
Bank. Each Originator further agrees to transfer any Collections that it
receives directly to Servicer within two Business Days of receipt thereof,
and agrees that all such Collections shall be deemed to be received in
trust for the Company; provided that, to the extent permitted pursuant to
Section 3.2, such Originator may retain such Collections as a portion of
the Purchase Price then payable to or apply such Collections to
-22-
<PAGE>
the reduction of the outstanding balance of the Initial Purchaser Note held
by it.
(b) Each Originator shall perform its obligations hereunder and
under the Contracts, and the exercise by the Company or its designee of its
rights hereunder shall not relieve such Originator from such obligations.
(c) Each Originator hereby grants to Servicer (if other than each
Originator) an irrevocable power of attorney, with full power of
substitution, coupled with an interest, to take in the name of such
Originator all steps necessary or advisable to indorse, negotiate or
otherwise realize on any writing or other right of any kind held or
transmitted by such Originator or transmitted or received by the Company
(whether or not from such Originator) in connection with any Receivable.
7.3. Further Action Evidencing Purchases. Each Originator agrees that
from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the Company
or the Administrative Agent may reasonably request in order to perfect, protect
or more fully evidence the Company's ownership of the Transferred Receivables
(and the Related Rights) purchased or accepted by the Company hereunder, or to
enable the Company to exercise or enforce any of its rights hereunder or under
any other Transaction Document. Without limiting the generality of the
foregoing, upon the request of the Company or the Administrative Agent, each
Originator will:
(a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate; and
(b) mark the summary master control data processing records with the
legend set forth in Section 4.1(i).
Each Originator hereby authorizes the Company or its designee to file one or
more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Transferred Receivables (and
the Related Rights) now existing or hereafter contributed or sold by such
Originator. If such Originator fails to perform any of its agreements or
obligations under this Agreement, the Company or its designee may (but shall not
be required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Company or its designee incurred in
connection therewith shall be payable by such Originator as provided in Section
9.6.
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<PAGE>
7.4. Application of Collections. Any payment by an Obligor in respect of
any indebtedness owed by it to such Originator in respect of any Contract shall,
except as otherwise specified by such Obligor or otherwise required by contract
or law, be applied first, as a Collection of the Transferred Receivables of such
Obligor, in the order of the age of such Transferred Receivables, starting with
the oldest of such Transferred Receivables, and second, to any other
indebtedness of such Obligor.
7.5. Sub-Servicers. The Company hereby appoints each Originator, and each
Originator hereby agrees to act, as sub-servicer with respect to the Transferred
Receivables generated by it. In connection therewith, each Originator agrees to
service such Transferred Receivables in accordance with, and agrees to be bound
by, the provisions of Article VIII of the Receivables Purchase Agreement,
provided that nothing set forth herein shall relieve Terra Capital from primary
responsibility as Servicer pursuant to the Transaction Documents. Each
Originator agrees that it may be terminated as sub-servicer (i) upon notice from
the Administrative Agent after the occurrence of any Servicer Transfer Event and
(ii) upon notice from the Company to such Originator and the Administrative
Agent at any time.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnities by Originators. Without limiting any other rights which
the Company may have hereunder or under applicable law, each Originator hereby
agrees to indemnify the Company and each of its assigns, officers, directors,
employees and agents (each of the foregoing Persons being individually called a
"Sale Indemnified Party"), on demand, from and against any and all damages,
losses, claims, judgments, liabilities and related costs and expenses, including
reasonable and documented attorneys' fees and disbursements (all of the
foregoing being collectively called "Sale Indemnified Amounts") awarded against
or incurred by any of them arising out of or as a result of the following:
(a) the transfer by such Originator of an interest in any
Transferred Receivable or Related Right to any Person other than the
Company;
(b) without duplication of amounts paid as Deemed Collections, the
breach of any representation or warranty made by such Originator under or
in connection with this Agreement or any other Transaction Document, or any
information or report delivered by such Originator pursuant hereto or
thereto which shall have been false or incorrect in any material respect
when made or deemed made;
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<PAGE>
(c) the failure by such Originator to comply with any applicable
law, rule or regulation with respect to any Receivable or the related
Contract, or the nonconformity of any Receivable or the related Contract
with any such applicable law, rule or regulation;
(d) the failure to vest and maintain vested in the Company an
ownership interest in the Transferred Receivables and the Related Rights
free and clear of any Adverse Claim, other than an Adverse Claim arising
solely as a result of an act of the Company, the Purchasers or the
Administrative Agent, whether existing at the time of the purchase of such
Transferred Receivables or at any time thereafter;
(e) the failure of such Originator to file with respect to itself,
or any delay in filing, financing statements or other similar instruments
or documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Transferred Receivables or purported
Transferred Receivables generated by such Originator, whether at the time
of any purchase or at any subsequent time;
(f) without duplication of amounts paid as Deemed Collections, any
dispute, claim, offset or defense (other than discharge in bankruptcy) of
the Obligor to the payment of any Transferred Receivable or purported
Transferred Receivable generated by such Originator (including, without
limitation, a defense based on such Receivables or the related Contracts
not being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from
the services or merchandise related to any such Transferred Receivable or
the furnishing of or failure to furnish such services or merchandise;
(g) any product liability claim arising out of or in connection with
services or merchandise that are the subject of any Transferred Receivable
generated by such Originator; and
(h) any tax or governmental fee or charge (but not including
franchise taxes imposed with respect to net income or taxes upon or
measured by net income), all interest and penalties thereon or with respect
thereto, and all out-of-pocket costs and expenses, including the reasonable
and documented fees and expenses of counsel in defending against the same,
which may arise by reason of the purchase or ownership of the Transferred
Receivables generated by such Originator or any Related Right connected
with any such Transferred Receivables;
-25-
<PAGE>
excluding, however, (i) Sale Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of such Sale Indemnified
Party, and (ii) any indemnification which has the effect of recourse to such
Originator for non-payment of the Transferred Receivables due to credit problems
of the Obligors.
If for any reason the indemnification provided above in this Section 8.1 is
unavailable to a Sale Indemnified Party or is insufficient to hold such Sale
Indemnified Party harmless, then such Originator shall contribute to the amount
paid or payable by such Sale Indemnified Party to the maximum extent permitted
under applicable law.
ARTICLE IX
MISCELLANEOUS
9.1. Amendments, Etc.
(a) The provisions of this Agreement may from time to time be
amended, modified or waived, if such amendment, modification or waiver is
in writing and consented to by the parties hereto, the Required Purchasers
and the Administrative Agent.
(b) No failure or delay on the part of the Company, Servicer, any
Originator or any third party beneficiary in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to
or demand on the Company, Servicer, or any Originator in any case shall
entitle it to any notice or demand in similar or other circumstances. No
waiver or approval by the Company or Servicer under this Agreement shall,
except as may otherwise be stated in such waiver or approval, be applicable
to subsequent transactions. No waiver or approval under this Agreement
shall require any similar or dissimilar waiver or approval thereafter to be
granted hereunder.
9.2. Notices, Etc. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by express
mail or courier or by certified mail, postage-prepaid, or by facsimile, to the
intended party at the address or facsimile number of such party set forth under
its name on the signature pages hereof or at such other address or facsimile
number as shall be designated by such party
-26-
<PAGE>
in a written notice to the other parties hereto. All such notices and
communications shall be effective, (i) if personally delivered or sent by
express mail or courier or if sent by certified mail, when received, and (ii) if
transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means.
9.3. No Waiver; Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
9.4. Binding Effect; Assignability. This Agreement shall be binding upon
and inure to the benefit of the Company, each Originator, Servicer and its
respective successors and permitted assigns. No Originator may assign its
rights hereunder or any interest herein without the prior written consent of the
Company and the Administrative Agent; subject to Section 9.11, the Company may
not assign its rights hereunder or any interest herein without the prior written
consent of each Originator and the Administrative Agent. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until the
date after the Sale Termination Date on which such Originator has received
payment in full for all Transferred Receivables and Related Rights conveyed
pursuant to Section 1.1 hereof and has paid and performed all of its obligations
hereunder in full. The rights and remedies with respect to any breach of any
representation and warranty made by any Originator pursuant to Article V and the
indemnification and payment provisions of Article VIII and Section 9.6 shall be
continuing and shall survive any termination of this Agreement.
9.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS.
9.6. Costs, Expenses and Taxes. In addition to the obligations of the
Originators under Article VIII, each Originator agrees to pay on demand:
(a) all costs and expenses, including reasonable and documented
attorneys' fees, in connection with the enforcement against any Originator
of this Agreement and the other Transaction Documents executed by such
Originator; and
(b) all stamp and other similar taxes and fees payable or determined
to be payable in connection with the execution, delivery, filing and
recording of this Agreement or the other Transaction Documents, and agrees
to indemnify each Sale Indemnified Party against any liabilities with
respect to or resulting from any delay in paying or omission to pay such
taxes and fees.
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<PAGE>
9.7. Submission to Jurisdiction. EACH PARTY HERETO HEREBY IRREVOCABLY (a)
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY ILLINOIS STATE OR UNITED STATES
FEDERAL COURT SITTING IN CHICAGO, STATE OF ILLINOIS, OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT; (b) AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE OR UNITED STATES FEDERAL COURT; (c) WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING; (d) CONSENTS
TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SPECIFIED IN
SECTION 9.2; AND (e) TO THE EXTENT ALLOWED BY LAW, AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. NOTHING IN THIS SECTION 9.7 SHALL AFFECT THE COMPANY'S RIGHT TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY ORIGINATOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTIONS.
9.8. Waiver of Jury Trial. EACH PARTY HERETO EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR UNDER ANY AMENDMENT,
INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
9.9. Captions and Cross References; Incorporation by Reference. The
various captions (including, without limitation, the table of contents) in this
Agreement are included for convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement. References in this Agreement
to any underscored Section or Exhibit are to such Section or Exhibit of this
Agreement, as the case may be. The Exhibits hereto are hereby incorporated by
reference into and made a part of this Agreement.
9.10. 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 when taken together shall constitute one and the same agreement.
9.11. Acknowledgment and Agreement. By execution below, each Originator
expressly acknowledges and agrees that all of the Company's rights, title, and
interests in, to, and under this Agreement shall be assigned by the Company to
the Administrative
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<PAGE>
Agent, for the benefit of the Purchasers, pursuant to the Receivables Purchase
Agreement, and each Originator consents to such assignment. Each of the parties
hereto acknowledges and agrees that the Administrative Agent and the Purchasers
are third party beneficiaries of the rights of the Company arising hereunder and
under the other Transaction Documents to which any Originator is a party.
9.12. No Proceedings. Each Originator agrees that it shall not institute
against the Company, or join any other Person in instituting against the
Company, any insolvency proceeding (namely, any proceeding of the type referred
to in the definition of Event of Bankruptcy) so long as there shall not have
elapsed one year plus one day since the End Date. The foregoing shall not limit
such Originator's right to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted by any Person other
than such Originator.
9.13. Addition of Originators. Additional Subsidiaries of the Parent may
be added as Originators hereunder upon satisfaction of all of the following
conditions:
(i) the addition of such Originator is approved in writing by the
Administrative Agent and the Required Purchasers (unless such Originator
generates, on a pro forma basis, less than 10% of the aggregate Unpaid
Balance of Designated Receivables in a calendar year, in which case no
prior consent shall be necessary);
(ii) such Originator delivers the documents referred to in Section
4.1;
(iii) such Originator delivers an opinion of counsel satisfactory in
form and substance to the Administrative Agent;
(iv) such Originator uses the same reporting system, is in similar
lines of business and reports to the same management personnel as the
existing Originators; and
(v) such Originator delivers an agreement in form and substance
satisfactory to the Administrative Agent agreeing to be bound by all of the
terms and conditions of this Agreement and the other Transaction Documents.
9.14. Deletion of BMLP. Upon the sale by Terra Capital of BMLP, or the
partnership interests therein, or the assets thereof, or the equity interests in
one or more of the partners thereof, or the equity interest of BMC Holdings,
Inc. (which is the 99% limited partner of BMLP), BMLP shall no longer be an
Originator hereunder, and shall have no right to continue to sell Receivables
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<PAGE>
to the Company. Subject to Section 9.4, BMLP shall be released from all
obligations under this Agreement upon such sale. Terra Capital agrees to
promptly notify the Administrative Agent of the sale of its interests in BMLP.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
TERRA FUNDING CORPORATION
By:___________________________________
Name Printed:______________________
Title:_____________________________
Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Attention:
Facsimile: __________________________
TERRA CAPITAL, INC.
By:___________________________________
Name Printed:______________________
Title:_____________________________
Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Attention:
Facsimile: _________________________
TERRA INTERNATIONAL, INC.
By:___________________________________
Name Printed:______________________
Title:_____________________________
Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Attention:
Facsimile: __________________________
S-1
<PAGE>
TERRA NITROGEN, LIMITED PARTNERSHIP
By:___________________________________
Name Printed:______________________
Title:_____________________________
Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Attention:
Facsimile: _________________________
BEAUMONT METHANOL, LIMITED PARTNERSHIP
By:___________________________________
Name Printed:______________________
Title:_____________________________
Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Attention:
Facsimile: _________________________
S-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This Schedule contains summary financial information extracted from the
consolidated statement of financial position of Terra Industries Inc. as of
September 30, 1996 and the related consolidated statement of income for the nine
months then ended.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 25,451
<SECURITIES> 9,959
<RECEIVABLES> 391,237
<ALLOWANCES> (12,130)
<INVENTORY> 366,390
<CURRENT-ASSETS> 877,560
<PP&E> 986,316
<DEPRECIATION> (193,326)
<TOTAL-ASSETS> 2,075,917
<CURRENT-LIABILITIES> 610,904
<BONDS> 405,338
0
0
<COMMON> 127,534
<OTHER-SE> 461,381
<TOTAL-LIABILITY-AND-EQUITY> 2,075,917
<SALES> 1,911,851
<TOTAL-REVENUES> 1,951,957
<CGS> 1,470,402
<TOTAL-COSTS> 1,653,896
<OTHER-EXPENSES> 70,730
<LOSS-PROVISION> 9,943
<INTEREST-EXPENSE> 42,891
<INCOME-PRETAX> 190,221
<INCOME-TAX> 76,469
<INCOME-CONTINUING> 113,752
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,752
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 0
</TABLE>
