EXECUTION COPY
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SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BEAUMONT METHANOL, LIMITED PARTNERSHIP
Dated as of March 31, 1998
Among
TERRA METHANOL CORPORATION,
as General Partner,
-- ------- -------
and
BMC HOLDINGS, INC.,
as Class B Limited Partner,
-- ----- - ------- -------
and
NOVA PRODUCTS LLC,
as Class A Limited Partner
-- ----- - ------- -------
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Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission under Rule 24b-2(b)
and has been filed separately with the Commission.
T A B L E O F C O N T E N T S
Section Page
ARTICLE I
THE PARTNERSHIP
SECTION 1.01. Formation.............................................. 1
SECTION 1.02. Name and Principal Office.............................. 1
SECTION 1.03. Registered Agent....................................... 1
SECTION 1.04. Filings; Certificate of Limited Partnership............ 2
SECTION 1.05. Term................................................... 2
SECTION 1.06. Independent Activities................................. 2
SECTION 1.07. Computation of Time Periods............................ 3
ARTICLE II
PURPOSE
SECTION 2.01. Purpose................................................ 3
SECTION 2.02. Powers................................................. 3
SECTION 2.03. Separate Business...................................... 4
ARTICLE III
PARTNERS' CAPITAL CONTRIBUTIONS
SECTION 3.01. General Partner........................................ 4
SECTION 3.02. Limited Partners....................................... 4
SECTION 3.03. Additional Capital Contributions....................... 4
SECTION 3.04. Other Matters.......................................... 5
ARTICLE IV
ALLOCATIONS
SECTION 4.01. Profits................................................ 5
SECTION 4.02. Losses................................................. 5
SECTION 4.03. Special Allocations.................................... 6
SECTION 4.04. Curative Allocations................................... 7
SECTION 4.05. Limitation on Losses................................... 8
SECTION 4.06. Priority of Allocations................................ 8
SECTION 4.07. Other Allocation Rules................................. 8
SECTION 4.08. Tax Allocations: Section 704(c) of the Code........... 9
SECTION 4.09. Asset Values........................................... 10
ARTICLE V
DISTRIBUTIONS
SECTION 5.01. Class A Limited Partner's First Priority Distribution.. 12
SECTION 5.02. Terra Partners' Second Priority Distribution........... 12
SECTION 5.03. Class A Limited Partner Guaranteed Payment............. 12
SECTION 5.04. Amounts Withheld....................................... 12
SECTION 5.05. Tax Distributions...................................... 13
ARTICLE VI
MANAGEMENT
SECTION 6.01. Authority of the General Partner....................... 13
SECTION 6.02. Right to Rely on the General Partner................... 13
SECTION 6.03. Restrictions on Authority of the General Partner....... 14
SECTION 6.04. Duties and Obligations of the General Partner.......... 15
SECTION 6.05. Indemnification of Class A Limited Partner............. 17
SECTION 6.06. Compensation and Expenses.............................. 18
ARTICLE VII
ROLE OF LIMITED PARTNERS
SECTION 7.01. Rights or Powers....................................... 19
SECTION 7.02. Voting Rights.......................................... 19
SECTION 7.03. Procedure for Consent.................................. 19
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
SECTION 8.01. General................................................ 19
SECTION 8.02. Representations and Warranties of Each
Terra Partner.......................................... 19
SECTION 8.03. Representations and Warranties of the
Class A Limited Partner................................ 22
ARTICLE IX
BOOKS AND RECORDS; REPORTS
SECTION 9.01. Accounting; Books and Records.......................... 23
SECTION 9.02. Reports................................................ 24
SECTION 9.03. Tax Matters............................................ 27
SECTION 9.04. Confidential Information............................... 28
ARTICLE X
AMENDMENTS; MEETINGS
SECTION 10.01. Amendments............................................ 28
SECTION 10.02. Meetings of the Partners.............................. 28
SECTION 10.03. Unanimous Consent..................................... 29
ARTICLE XI
TRANSFERS OF INTERESTS
SECTION 11.01. Restriction on Transfers.............................. 29
SECTION 11.02. Permitted Transfers................................... 29
SECTION 11.03. Conditions to Permitted Transfers..................... 30
SECTION 11.04. Prohibited Transfers.................................. 31
SECTION 11.05. Admission as Substitute Partners...................... 31
SECTION 11.06. Rights of Unadmitted Assignees........................ 32
SECTION 11.07. Distributions with Respect to Transferred Interests... 32
SECTION 11.08. Retirement of Partners' Interest in the Partnership... 33
ARTICLE XII
GENERAL PARTNER
SECTION 12.01. Covenant Not to Withdraw, Transfer or Dissolve........ 33
SECTION 12.02. Termination of Status as General Partner.............. 33
ARTICLE XIII
DISSOLUTION AND WINDING UP
SECTION 13.01. Liquidation........................................... 34
SECTION 13.02. Winding Up............................................ 34
SECTION 13.03. Restoration of Deficit Capital Accounts;
Compliance with Timing Requirements of Regulations.... 35
SECTION 13.04. Deemed Contribution and Liquidation................... 36
SECTION 13.05. Rights of Partners.................................... 37
SECTION 13.06. Notice of Dissolution................................. 37
SECTION 13.07. The Liquidator........................................ 37
SECTION 13.08. Form of Liquidating Distributions..................... 37
ARTICLE XIV
POWER OF ATTORNEY
SECTION 14.01. General Partner as Attorney-In-Fact................... 38
SECTION 14.02. Nature of Special Power............................... 38
ARTICLE XV
MISCELLANEOUS
SECTION 15.01. Notices............................................... 39
SECTION 15.02. Binding Effect........................................ 40
SECTION 15.03. Construction.......................................... 40
SECTION 15.04. Headings.............................................. 40
SECTION 15.05. Severability.......................................... 40
SECTION 15.06. Governing Law......................................... 41
SECTION 15.07. Waiver of Action for Partition........................ 41
SECTION 15.08. Consent to Jurisdiction............................... 41
SECTION 15.09. Execution in Counterparts............................. 41
SECTION 15.10. Treatment as Security................................. 41
SECTION 15.11. Waiver of Jury Trial.................................. 41
SCHEDULES
Schedule I - Original Capital Contributions
Schedule II - Appraisal Guidelines
Schedule III - Collateral for Demand Loans
Schedule IV - Existing Investments of Terra U.K.
Schedule V - Collateral for Terra Capital Note
Schedule 8.02(g) - Environmental Matters
Schedule 11.02(b) - Restricted Transferees of the Class A Limited Partner
EXHIBITS
Exhibit A - Form of Partnership Balance Sheet
Exhibit B - Form of Confidentiality Agreement
Exhibit C - Form of Transferor Certificate
Exhibit D - Form of Transferee Certificate
Exhibit E-1 - Form of Demand Loan
Exhibit E-2 - Form of Terra Capital Guarantee
Exhibit F - Form of Terra Capital Note
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BEAUMONT METHANOL, LIMITED PARTNERSHIP
This SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is
entered into and shall be effective as of the 31st day of March, 1998, by and
among TERRA METHANOL CORPORATION, a Delaware corporation ("TMC"), as the General
Partner, BMC HOLDINGS, INC., a Delaware corporation ("Holdings"), as the Class B
Limited Partner, and NOVA PRODUCTS LLC, a Delaware limited liability company
("Nova"), as the Class A Limited Partner. Capitalized terms used in this
Agreement shall have the meanings specified therefor in the Appendix attached
hereto (such meanings to be equally applicable to both the singular and plural
forms of the terms defined).
ARTICLE I
THE PARTNERSHIP
SECTION 1.01. Formation. The Partnership was formed on December 23,
1994. The Partners hereby agree to continue the Partnership as a limited
partnership pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement. This Agreement completely amends,
restates and supersedes that certain Agreement of Limited Partnership of
Beaumont Methanol, Limited Partnership entered into on December 31, 1997 (the
"First Amended Partnership Agreement"), by and between TMC, as the General
Partner, and Holdings, as the Limited Partner. On the Closing Date, (a)
Holdings became the Class B Limited Partner and (b) Nova acquired an Interest in
the Partnership in exchange for the contribution described in Section 3.02 and
Nova was admitted to the Partnership as the Class A Limited Partner.
SECTION 1.02. Name and Principal Office. The name of the Partnership
shall continue to be "BEAUMONT METHANOL, LIMITED PARTNERSHIP", or such other
name as the General Partner shall hereafter determine. All Partnership Property
shall be held in such name (and not in the name of any Partner), and all
business and affairs of the Partnership shall be conducted under such name, or
under any name licensed for use by the Partnership. The principal office of the
Partnership shall continue to be at the address of the General Partner set forth
in Section 15.01, or such other place as the General Partner may from time to
time designate. In addition, the General Partner may establish and maintain
such other offices and places of business within and without the State of
Delaware as it may from time to time determine.
SECTION 1.03. Registered Agent. The name of the Partnership's
registered agent for service of process in the State of Delaware is The
Xxxxxxxx-Xxxx Corporation, or any successor as appointed by the General Partner.
The address of the registered agent and the address of the registered office in
the State of Delaware is 00 Xxxxxxxxxx Xxxxxx, Xxxxx X000, Xxxxx, Xxxxxxxx
00000.
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SECTION 1.04. Filings; Certificate of Limited Partnership. (a) The
General Partner has executed and caused the Certificate of Limited Partnership
described in the Act (the "Certificate") to be filed with the Secretary of State
of Delaware as required under Section 1.05 and the provisions of the Act and has
executed and caused to be filed, recorded and/or published, and shall execute
and cause to be filed, recorded and/or published, such other certificates or
documents with the appropriate authorities of the State of Texas as may be
determined by the General Partner to be reasonable and necessary or appropriate
for the formation, continuation, qualification, registration and/or operation of
a limited partnership in the State of Texas or any other state in which the
Partnership has elected or may elect to do business. The General Partner has
executed and filed such fictitious name registrations as are required under
applicable law with regard to the use of the name of the Partnership. The
General Partner shall take any and all other actions necessary or reasonable and
appropriate to perfect and maintain the status of the Partnership as a "limited
partnership", each of the Limited Partners as a "limited partner" in the
Partnership, and the General Partner as a "general partner" in the Partnership,
under the Act and the other laws of the State of Delaware or any other state in
which the Partnership has elected or may elect to do business. The General
Partner may omit from the Certificate filed with the Secretary of State of
Delaware and from any other certificates or documents filed in any other state
in order to register and/or qualify the Partnership to do business therein, and
from all amendments thereto, any information not required under applicable law
(including, without limitation, the name and address of each Limited Partner and
information relating to the Capital Contributions and shares of Profits and
Losses and compensation of the General Partner).
(b) To the extent the General Partner determines such action to be
necessary or reasonable and appropriate, the General Partner shall cause a
certified copy of the Certificate and any amendments thereto to be recorded in
the office of the county recorder in each county in which the Partnership owns
real property.
(c) Upon the dissolution of the Partnership, the General Partner (or,
if there is no remaining General Partner, the Liquidator selected pursuant to
clause (b) of the definition thereof set forth in the Appendix attached hereto)
shall promptly execute and cause to be filed certificates of dissolution and/or
certificates of cancellation in accordance with the Act and the law of any other
jurisdictions in which the Partnership has filed a Certificate or has registered
and/or qualified to do business therein.
SECTION 1.05. Term. The existence of the Partnership as a limited
partnership commenced on the date on which the Certificate was filed in the
office of the Secretary of State of Delaware in accordance with the Act, and
shall continue until the winding up and liquidation of the partnership and its
business and affairs following a Terminating Event, as provided in Article XIII.
SECTION 1.06. Independent Activities. (a) The General Partner and
each Limited Partner may, except as otherwise expressly provided in this Section
1.06, engage in whatever activities they choose, without having or incurring any
obligation to offer any interest in such activities to the Partnership or any
Partner. Neither this Agreement nor any action undertaken pursuant hereto shall
prevent any Partner or any of its Affiliates from engaging in such activities
(including, without limitation, making and managing Investments and otherwise
engaging in the methanol and/or agricultural minerals industry), or require any
Partner to permit the Partnership or any Partner to participate in any such
activities, and as a material part of the consideration for the execution of
this Agreement by each Partner, each Partner hereby waives, relinquishes and
renounces any such right or claim of participation.
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(b) To the extent permitted under applicable law and except as
otherwise provided in this Agreement, the General Partner, when acting on behalf
of the Partnership, is hereby authorized to purchase property and assets from,
sell property and assets to or otherwise deal with any Partner, acting on its
own behalf, or any Affiliate of any Partner; provided that any such purchase,
sale or other transaction shall be made on terms and conditions which are no
less favorable to the Partnership than if such sale, purchase or other
transaction had been made with an independent third party. The Partners agree
that the Transaction Documents shall satisfy this independent third-party
standard and, under the First Amended Partnership Agreement, the Partners
authorized, and the Partners hereby authorize, the General Partner to cause the
Partnership to enter into the Transaction Documents to which it is or is to be a
party.
(c) Each Limited Partner and any Affiliate thereof may also lend
money to, borrow money from, act as a surety, guarantor or endorser for,
guarantee or assume one or more specific obligations of, provide collateral for,
and transact other business with the Partnership and, subject to other
applicable law, has the same rights and obligations with respect thereto as a
Person who is not a Partner. The existence of these relationships and acting in
such capacities will not result in the Limited Partners being deemed to be
participating in the control of the business of the Partnership or otherwise
affect the limited liability of the Limited Partners.
SECTION 1.07. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding."
ARTICLE II
PURPOSE
SECTION 2.01. Purpose. The purpose of the Partnership is to provide
a business structure wherein the Partners can join together their knowledge,
expertise and resources and engage in the business of owning and managing the
Methanol Business and the Permitted Assets and manage, protect and conserve the
Partnership Property and make such additional investments and engage in such
additional business and activities as are permitted under this Agreement, and
engage in activities related or incidental thereto. The Partnership shall have
the power to do any and all acts necessary, appropriate, proper, advisable,
incidental or convenient to or in furtherance of the purpose of the Partnership
and shall have, without limitation, any and all powers that may be exercised on
behalf of the Partnership by the General Partner pursuant to Section 1.06(b) and
Article VI.
SECTION 2.02. Powers. The Partnership shall have such powers as are
necessary or appropriate to carry out the purposes of the Partnership,
including, without limitation:
(a) to have and maintain one or more offices and places of business
described in Section 1.02 and, in connection therewith, to do such acts and
things and incur such expenses as may be necessary or advisable in
connection with the maintenance of each such office or place of business
and the conduct of the business and affairs of the Partnership;
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(b) to open, maintain and close accounts with one or more banks or
other financial institutions, and to draw checks and other orders for the
payment of money;
(c) to guarantee on a nonrecourse basis borrowings of the Partners
used to acquire Partnership Property, and, in connection therewith, to
pledge and grant liens on and security interests in all or any portion of
the Partnership Property;
(d) to borrow money in furtherance of the purposes set forth in
Section 2.01, and to secure the payment of such borrowing or other
obligations of the Partnership by the pledge of, or the grant of liens on
and security interests in, all or any portion of the Partnership Property;
(e) to enter into, make and perform all such contracts, agreements
and other undertakings as may be necessary, advisable or incident to the
carrying out of the purposes set forth in Section 2.01; and
(f) to engage in any other lawful act or activity which may be
necessary or appropriate in the pursuance of the foregoing, including,
without limitation, the retention of employees, agents, independent
contractors, attorneys, accountants and investment counselors and the
preparation and filing of all Partnership tax returns.
SECTION 2.03. Separate Business. The Partnership shall keep its
business and affairs and all of the Partnership Property and operations separate
and distinct from the business, affairs, property and assets and operations of
the Partners and of any other Person in which any of them may be or become
interested.
ARTICLE III
PARTNERS' CAPITAL CONTRIBUTIONS
SECTION 3.01. General Partner. The General Partner contributed or was
deemed to have contributed on the Closing Date, as an Original Capital
Contribution, the property and assets described on of Schedule I attached
hereto.
SECTION 3.02. Limited Partners. Each Limited Partner contributed or
was deemed to have contributed on the Closing Date, as an Original Capital
Contribution, the property and assets described opposite the name of such
Limited Partner on of Schedule I attached hereto.
SECTION 3.03. Additional Capital Contributions. (a) General. Each
Partner may (with the consent of the General Partner) contribute from time to
time as Additional Capital Contributions such additional cash or other property
or assets as it may determine; provided that any such Additional Capital
Contributions shall consist solely of Permitted Assets. None of the Partners
shall be required to contribute additional cash or other Permitted Assets to the
Partnership, except as required under Section 3.03(b).
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(b) Required Capital Contributions. [Confidential material has been
omitted pursuant to a request for confidential treatment filed with the
Commission under Rule 24b-2(b) and has been filed separately with the
Commission.]
SECTION 3.04. Other Matters. (a) Except as otherwise expressly
provided in this Agreement, no Partner shall demand or receive a return of its
Capital Contributions or withdraw from the Partnership without the consent of
all of the other Partners. Under any circumstances requiring a return of any
Capital Contribution, no Partner shall have the right to receive property or
assets other than cash, except as may be otherwise expressly provided in this
Agreement.
(b) No Partner shall receive any interest, salary, or drawing with
respect to its Capital Contributions or its Capital Account or for services
rendered by it or any of its Affiliates on behalf of the Partnership or
otherwise in its capacity as a Partner, except as may be otherwise expressly
provided in this Agreement.
(c) The Limited Partners shall not be liable for the debts,
liabilities, contracts or any other obligations of the Partnership. Except as
otherwise provided under any other agreements among the Partners or any
mandatory provisions of applicable law, a Limited Partner shall be liable only
to make its Capital Contributions as expressly set forth in this Agreement, and
shall not be required to lend any funds to the Partnership or, after such
Capital Contributions have been made, to make any Additional Capital
Contributions to the Partnership.
ARTICLE IV
ALLOCATIONS
SECTION 4.01. Profits. Profits for any Allocation Year shall be
allocated in the following manner and order of priority:
[Confidential material has been] pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
SECTION 4.02. Losses. Losses for any Allocation Year shall be
allocated in the following manner and order of priority:
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
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SECTION 4.03. Special Allocations. (a) Minimum Gain Chargeback.
Except as otherwise provided in Section 1.704-2(f) of the Regulations,
notwithstanding any other provision of this Article IV, if there is a net
decrease in Partnership Minimum Gain during any Allocation Year, each Partner
shall be specially allocated items of Partnership income and gain for such
Allocation Year (and, if necessary, subsequent Allocation Years) in an amount
equal to such Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Section 1.704-2(g) of the Regulations. Allocations
pursuant to the immediately preceding sentence shall be made in proportion to
the respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance with
Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section
4.03(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Article IV, if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to any Partner Nonrecourse Debt during any Allocation Year,
each Partner who has a share of the Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of
Partnership income and gain for such Allocation Year (and, if necessary,
subsequent Allocation Years) in an amount equal to such Partner's share of the
net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(4) of
the Regulations. Allocations pursuant to the immediately preceding sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 4.03(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. If any Limited Partner unexpectedly
receives any adjustment, allocation or distribution described in Section 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of the
Regulations, items of Partnership income and gain shall be specially allocated,
as promptly as practicable, to each such Limited Partner in an amount and a
manner sufficient to eliminate, to the extent required under the Regulations,
the Adjusted Capital Account Deficit of such Limited Partner; provided that an
allocation pursuant to this Section 4.03(c) shall be made only if and to the
extent that such Limited Partner would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Article IV have been
tentatively made as if this Section 4.03(c) were not included in this Agreement.
(d) Gross Income Allocation. If any Limited Partner has a deficit in
its Capital Account at the end of any Allocation Year which is in excess of the
sum of (i) the amount such Limited Partner is obligated to restore pursuant to
any provision of this Agreement and (ii) the amount such Limited Partner is
deemed to be obligated to restore pursuant to the penultimate sentences of
Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Limited
Partner shall be specially allocated, as promptly as practicable, items of
Partnership income and gain in the amount of such excess; provided that an
allocation pursuant to this Section 4.03(d) shall be made only if and to the
extent that such Limited Partner would have a deficit in its Capital Account in
excess of such sum after all other allocations
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provided for in this Article IV have been made as if Section 4.03(c) and this
Section 4.03(d) were not included in this Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation
Year shall be specially allocated Ratably among the Partners.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Allocation Year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse Debt
to which such Partner Nonrecourse Deductions are attributable in accordance with
Section 1.704-2(i)(1) of the Regulations.
(g) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership Property pursuant to Section 734(b) or
743(b) of the Code is required pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4) of the Regulations to be taken into account in
determining Capital Accounts as the result of a distribution to a Partner in
complete liquidation of its Interest, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the such Partnership Property) or loss (if the adjustment decreases the
basis of the such Partnership Property), and such gain or loss shall be
specially allocated (i) if Section 1.704-1(b)(2)(iv)(m)(2) of the Regulations
applies, to the Partners in accordance with their Interests, or (ii) if Section
1.704-1(b)(2)(iv)(m)(4) of the Regulations applies, to the Partner to whom such
distribution was made.
(h) Allocations Relating to Taxable Issuance of Interests. Any item
of income, gain, loss, or deduction realized as a direct or indirect result of
the issuance of an Interest by the Partnership to a Partner (the "Issuance
Items") shall be allocated among the Partners so that, to the extent possible,
the net amount of such Issuance Items, together with all other allocations made
to each Partner pursuant to this Agreement, shall be equal to the net amount
that would have been allocated to each such Partner if the Issuance Items had
not been realized.
(i) Class A Limited Partner Guaranteed Payment. [Confidential material
has been omitted pursuant to a request for confidential treatment filed with the
Commission under Rule 24b-2(b) and has been filed separately with the
Commission.]
(j) Depreciation. [Confidential material has been omitted pursuant to
a request for confidential treatment filed with the Commission under Rule 24b-
2(b) and has been filed separately with the Commission.]
SECTION 4.04. Curative Allocations. (a) The allocations set forth in
Sections 4.03(a) through 4.03(g) and Section 4.05 (the "Regulatory Allocations")
are intended to comply with certain requirements of the Regulations. It is the
intent of the Partners that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of Partnership income, gain, loss, or deduction
pursuant to this Section 4.04. Therefore, notwithstanding any other provision of
this Article IV (other than the Regulatory Allocations), the General Partner
shall make such offsetting special allocations of Partnership income, gain, loss
or deduction as are necessary so that, after such offsetting allocations are
made, the balance in each Partner's Capital Account is, to the
8
extent possible, equal to the balance such Partner's Capital Account would have
had if the Regulatory Allocations were not included in this Agreement. In making
offsetting allocations under this Section 4.04 at any time, the General Partner
shall take into account future Regulatory Allocations under Sections 4.03(a) and
4.03(b) that, although not made at such time, are likely to offset other
Regulatory Allocations made under Sections 4.03(e) and 4.03(f) prior to such
time.
(b) The General Partner shall have reasonable discretion, with respect
to each Allocation Year, (i) to apply the provisions of Section 4.04(a) in
whatever order is likely to minimize the economic distortions that might
otherwise result from the Regulatory Allocations and (ii) to divide all
allocations pursuant to Section 4.04(a) among the Partners in a manner that is
likely to minimize such economic distortions.
SECTION 4.05. Limitation on Losses. The Losses allocated pursuant to
Section 4.02 and the items of Partnership loss or deduction allocated pursuant
to Sections 4.03 and 4.04 shall not exceed the maximum amount of Losses that can
be so allocated without causing any Limited Partner to have an Adjusted Capital
Account Deficit at the last day of any Allocation Year. All Losses in excess of
the limitations set forth in the immediately preceding sentence shall be
allocated to the General Partner.
SECTION 4.06. Priority of Allocations. (a) The allocations set
forth in this Article IV shall be made in the following manner and order of
priority:
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
(b) The Partners and the Partnership agree to treat the Partnership as
a partnership for federal, state and local income tax purposes and to report all
Partnership items and all transactions involving the Partnership or any of the
Interests or other ownership or profit interests therein, whether direct or
indirect (collectively, the "Partnership Matters"), in a manner consistent with
such treatment. Furthermore, the Partners and the Partnership agree to report
all Partnership Matters for federal, state and local income tax purposes
consistently with the treatment provided in this Agreement or, if no such
treatment is so provided, consistently with the manner in which the Class A
Limited Partner reasonably determines to treat such Partnership Matters. If the
Class A Limited Partner does not notify the Partnership of its treatment of any
Partnership Matter, the Partners and the Partnership shall report such
Partnership Matter consistently with the manner in which the General Partner
reasonably determines to treat such Partnership Matter.
SECTION 4.07. Other Allocation Rules. (a) Profits, Losses and any
other items of Partnership income, gain, loss or deduction shall be allocated to
the Partners pursuant to this Article IV as of the last day of each Allocation
Year; provided that Profits, Losses and such other items shall also be allocated
at such times as are required under Section 11.08(b) and at such other times as
the Asset Values of the Partnership Property are adjusted in accordance with
Section 4.09 and the definition of "Asset Value" set forth in the Appendix
attached hereto.
(b) In the case of a Partner whose entire Interest is retired or sold,
the Partnership taxable year shall close with respect to such Partner, and such
Partner's distributive share of all items of
9
Profits, Losses and other items of Partnership income, gain, loss or deduction
shall be determined by using the interim closing of the books method under
Section 706 of the Code and Section 1.706-1(c)(2)(i) of the Regulations. In all
other cases in which it is necessary to determine the Profits, Losses or any
other such items allocable to any period, Profits, Losses or any such other item
shall be determined on a daily, monthly or other basis, as determined by the
General Partner using any permissible method under Section 706 of the Code and
the Regulations promulgated thereunder.
(c) The Partners are aware of the income tax consequences of the
allocations made under this Article IV, and each Partner hereby agrees to be
bound by the provisions of this Article IV in reporting their shares of
Partnership income and loss for income tax purposes.
SECTION 4.08. Tax Allocations: Section 704(c) of the Code. (a) In
accordance with Section 704(c) of the Code and the Regulations promulgated
thereunder, income, gain, loss and deduction with respect to any Permitted Asset
contributed to the capital of the Partnership shall, solely for income tax
purposes, be allocated among the Partners so as to take account of any variation
between the adjusted basis of such Permitted Asset to the Partnership for United
States federal income tax purposes and its Initial Asset Value.
(b) If the Asset Value of any Partnership Property is adjusted
pursuant to clause (ii) of the definition of "Asset Value" set forth in the
Appendix attached hereto, subsequent allocations of income, gain, loss and
deduction with respect to such Partnership Property shall take account of any
variation between the adjusted basis of such Partnership Property for United
States federal income tax purposes and its Asset Value in the same manner as is
provided under Section 704(c) of the Code and the Regulations promulgated
thereunder.
(c) Depreciation recapture arising under Sections 1245 and 1250 of the
Code shall be allocated in accordance with such Sections and the Regulations
promulgated thereunder.
(d) Any elections or other decisions relating to such allocations
shall be made by the General Partner in any manner that reasonably reflects the
purpose and intention of this Agreement. Allocations pursuant to this Section
4.08 are solely for purposes of federal, state and local taxes and shall not
affect, or in any way be taken into account in computing, any Partner's Capital
Account or share of Profits, Losses, other items of Partnership income, gain,
loss or deduction, or distributions pursuant to any other provision of this
Agreement.
(e) Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss and deduction, and any other allocations not
otherwise provided for herein, shall be divided among the Partners in the same
proportions as they share Profits or Losses and items thereof, as the case may
be, for the Allocation Year.
(f) Subject to any limitations set forth in the Code and the
Regulations promulgated thereunder (including Section 263 of the Code with
respect to the capitalization of certain expenses), the Partners and the
Partnership hereby agree to treat, for federal, state and local income tax
purposes, all Extraordinary Expenses, all payments made to the Class A Limited
Partner for Qualified Investor Costs and all indemnification payments made to
the Class A Limited Partner pursuant to Section 6.05(b), as Code
10
Section 162 ordinary and necessary expenses incurred in connection with the
carrying on of a trade or business.
SECTION 4.09. Asset Values. For the purpose of determining the
balance in the Capital Account of each Partner on the Closing Date and for
purposes of determining the amount of gain or loss deemed to be realized on a
Xxxx-to-Market Valuation of any Permitted Asset, the Asset Values of the
Permitted Assets of the Partnership shall be as follows:
(a) Initial Asset Values. (i) The initial Asset Value of the Terra
U.K. Holdings Stock shall be equal to the sum of (A) the aggregate
outstanding principal amount of the Terra U.K. Loan plus all accrued and
unpaid interest thereon, if any, (B) the book value of all Investments made
by the Partnership, directly or indirectly, in the Ammonia Loop and (C) the
face value of all Liquid Investments of Terra U.K. Holdings, plus accrued
and unpaid interest thereon, if any, adjusted for any unamortized premium
or discount thereon; provided that each of the amounts or values referred
to in subclause (i)(A), (i)(B) or (i)(C) of this Section 4.09(a) shall be
adjusted, if necessary, on a pro forma basis for all reasonably anticipated
income taxes that will be required to be paid by Terra U.K. Holdings or any
Subsidiary of Terra U.K. Holdings on such amount or value at a rate of 35%.
(ii) The initial Asset Value of the Terra Capital Note, any of the
Demand Loans or any of the Permitted Securitization Assets shall be equal
to the aggregate outstanding principal amount thereof plus all accrued and
unpaid interest thereon, if any.
(iii) The initial Asset Value of the Methanol Plant and all Methanol
Related Assets shall be determined pursuant to an appraisal conducted by an
independent valuation firm acceptable to each of the Partners (the "Initial
Appraiser") pursuant to the Appraisal Guidelines.
(iv) The initial Asset Value of any of the Liquid Investments shall be
equal to the face value thereof, plus accrued and unpaid interest thereon,
if any, adjusted for any unamortized premium or discount.
(b) Xxxx-to-Market Valuation. A Xxxx-to-Market Valuation shall be
made upon the occurrence of each Xxxx-to-Market Event, and the Xxxx-to-
Market Value of each Permitted Asset comprising part of the Partnership
Property shall be determined in accordance with the following provisions,
except that, unless otherwise expressly provided in this Section 4.09(b),
the Xxxx-to-Market Value of any such Permitted Asset shall be made as of
the applicable Measurement Date:
(i) The Terra U.K. Holdings Stock shall be valued at the sum of:
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
provided that each of the amounts or values referred to in subclause
(i)(A), (i)(B) or (i)(C) of this Section 4.09(b) shall be adjusted, if
necessary, on a pro forma basis for all reasonably anticipated income
taxes that will be required to be paid by Terra U.K.
11
Holdings or any Subsidiary of Terra U.K. Holdings on such amount or
value at a rate of 35%; and provided further, however, that, if any
payment or other material default has occurred and is continuing with
respect to the certificate of incorporation or bylaws of Terra U.K.
Holdings or the Terra U.K. Loan Documents, and such default shall
continue after the applicable grace period, if any, specified therein,
the value of the Partnership Property described above in this Section
4.09(b)(i) with respect to which such payment or other material
default shall have occurred and be continuing shall be determined by
an appraisal firm, investment bank or commercial bank of national
reputation selected by the General Partner with the consent of the
Class A Limited Partner (which consent shall not be unreasonably
withheld).
(ii) The Terra Capital Note, each of the Permitted Securitization
Assets and each of the Demand Loans shall be valued at the aggregate
outstanding principal amount thereof plus all accrued and unpaid
interest thereon to the date of any such Xxxx-to-Market Valuation;
provided that if any payment or other material default has occurred
and is continuing with respect to the Terra Capital Note, any of the
Permitted Securitization Assets or any of the Demand Loans, and such
default shall continue after the applicable grace period, if any,
specified in the Terra Capital Note or the agreements or instruments
evidencing or setting forth the terms of any such Permitted
Securitization Asset or Demand Loan, as the case may be, the value of
the Partnership Property described above in this Section 4.09(b)(ii)
with respect to which such payment or other material default shall
have occurred and be continuing shall be determined by an investment
bank or commercial bank of national reputation selected by the General
Partner with the consent of the Class A Limited Partner (which consent
shall not be unreasonably withheld).
(iii) The Methanol Plant and all of the Methanol Related Assets
will be valued pursuant to an appraisal conducted by the Initial
Appraiser on or about the date of such Xxxx-to-Market Valuation, or,
if the Initial Appraiser is unavailable or unwilling to do such
appraisal on or about such date, by an Appraiser pursuant to the
Appraisal Guidelines; provided, however, that any of the Partners may,
at such Partner's sole expense, independently elect to determine the
fair market value of the Methanol Plant and all of the Methanol
Related Assets, in which case such fair market value shall be
determined by an Alternate Appraiser pursuant to the Appraisal
Guidelines (and if the fair market value of the Methanol Plant and all
of the Methanol Related Assets determined by the Alternate Appraiser
differs by at least 10% (whether higher or lower) from the fair market
value thereof determined by the Initial Appraiser or the Appraiser, as
applicable, then the Methanol Plant and all of the Methanol Related
Assets will be valued at the average of the respective fair market
values of the Methanol Plant and all of the Methanol Related Assets
determined by Initial Appraiser or the Appraiser, as applicable, and
the Alternate Appraiser).
(iv) Each of the Liquid Investments of the Partnership shall be
valued at their face value plus all accrued and unpaid interest
thereon, if any, to the date of any such Xxxx-to-Market Valuation,
adjusted for any unamortized premium or discount thereon at such date;
provided that if any payment or other material default has occurred
and is
12
continuing with respect to any of the Liquid Investments, the value of
the Liquid Investment with respect to which such payment or other
material default shall have occurred and be continuing shall be
determined by an investment bank or commercial bank of national
reputation selected by the General Partner with the consent of the
Class A Limited Partner (which consent shall not be unreasonably
withheld).
Each of the Partners hereby agrees that any election by such Partner to have the
Ammonia Loop appraised by an Alternate Appraiser pursuant to Section
4.09(b)(i)(B)(2) or the Methanol Plant and the Methanol Related Assets appraised
by an Alternate Appraiser pursuant to Section 4.09(b)(iii) shall be made as
promptly as practicable and that it shall use its reasonable efforts to cause
each such Alternate Appraiser to diligently conduct its appraisal of the Ammonia
Loop or the Methanol Plant and the Methanol Related Assets, as the case may be,
and to complete such appraisal within a reasonable period of time.
ARTICLE V
DISTRIBUTIONS
SECTION 5.01. Class A Limited Partner's First Priority Distribution.
The General Partner shall cause the Partnership to make cash distributions to
the Class A Limited Partner on each Distribution Date until the Class A Limited
Partner has been distributed an amount equal to the remainder, if any, of (a)
the Cumulative First Priority Return from the Closing Date to such Distribution
Date, minus (b) all cash distributions in respect of the First Priority Return
previously made to the Class A Limited Partner pursuant to this Section 5.01.
SECTION 5.02. Terra Partners' Second Priority Distribution. The
General Partner shall cause the Partnership to make cash distributions to the
Terra Partners, on each Distribution Date, Ratably until the Terra Partners have
been distributed an amount equal to the remainder, if any, of (a) the Cumulative
Second Priority Return from the Closing Date to such Distribution Date, minus
(b) all cash distributions in respect of the Second Priority Return previously
made to the Terra Partners pursuant to this Section 5.02; provided, however,
that no distribution shall be made under this Section 5.02 on any Distribution
Date unless, after giving pro forma effect to such distribution, the aggregate
principal amount of all Liquid Investments of the Partnership and all Demand
Loans shall be at least equal to the sum of (i) $145,000,000 and (ii) the
aggregate book value of all fixed and capital assets comprising part of the
Partnership Property which have been sold, transferred or otherwise disposed of
at or prior to such Distribution Date (in each case which book value shall be
determined as of the later of (A) the Closing Date and (B) the date of
acquisition of the applicable fixed or capital asset).
SECTION 5.03. Class A Limited Partner Guaranteed Payment.
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
SECTION 5.04. Amounts Withheld. All amounts withheld pursuant to the
Code or any provision of any other federal, state or local law with respect to
any payment, distribution or allocation to the Partnership or the Partners shall
be treated as amounts distributed to the Partners pursuant to this
13
Article V for all purposes under this Agreement. The General Partner is hereby
authorized to withhold from distributions, or with respect to allocations, to
the Partners and to pay over to any federal, state or local taxation authority
or other governmental authority any amounts required to be so withheld pursuant
to the Code or any provision of any other federal, state or local law, and shall
allocate any such amounts to the Partners with respect to which such amount was
withheld.
SECTION 5.05. Tax Distributions. Within ten Business Days after the
end of each Fiscal Quarter, the General Partner shall make a good faith estimate
of the First Priority Return and the taxable income for United States federal
income tax purposes of the Partnership for such Fiscal Quarter. If and to the
extent that the General Partner estimates that the amount of taxable income
allocable to the Class A Limited Partner for such Fiscal Quarter exceeds the
First Priority Return allocated to the Class A Limited Partner for such Fiscal
Quarter, the General Partner shall, within two Business Days after making such
estimate, cause the Partnership to make cash distributions to the Class A
Limited Partner in an amount equal to 45% of such excess.
ARTICLE VI
MANAGEMENT
SECTION 6.01. Authority of the General Partner. Subject to the
limitations and restrictions set forth in this Agreement (including, without
limitation, those limitations and restrictions set forth in this Article VI),
the General Partner shall direct the business and affairs of the Partnership
and, in so doing, shall manage, control and have all of the rights and powers
which may be possessed by a general partner under the Act.
SECTION 6.02. Right to Rely on the General Partner. (a) Any Person
dealing with the Partnership may rely (without duty of further inquiry) upon a
certificate signed by any General Partner as to:
(i) The identity of the General Partner or any Limited Partner;
(ii) The existence or nonexistence of any fact or facts which
constitute a condition precedent to acts by the General Partner or which
are in any other manner germane to the affairs of the Partnership;
(iii) The Persons who are authorized to execute and deliver any
agreement, instrument or other document of or on behalf of the Partnership;
or
(iv) Any act or failure to act by the Partnership or any other
matter whatsoever involving the Partnership or any Partner.
(b) The signature of the General Partner shall be sufficient to
convey title to any of the Partnership Property, and all of the Partners agree
that (i) a copy of this Agreement may be shown to the appropriate Persons in
order to confirm the authority or such signature and (ii) the signature of the
14
General Partner shall be sufficient to execute any "statement of partnership" or
other documents necessary or appropriate to effectuate any provision of this
Agreement.
SECTION 6.03. Restrictions on Authority of the General Partner.
Except as otherwise provided in this Agreement, the General Partner shall not
have the authority to, and the General Partner covenants and agrees that it
shall not, without the consent of all the other Partners (which consent shall
not be unreasonably withheld (it being understood and agreed that the failure of
the Class A Limited Partner to obtain the consent of the requisite lenders and,
if applicable, the agent under the Credit Facility to any of the actions set
forth below in this Section 6.03 shall be deemed to be a reasonable basis for
the Class A Limited Partner to withhold any such consent)):
(a) Take any action that (i) is in contravention of this Agreement or
(ii) would subject any Limited Partner to liability as a general partner in
any jurisdiction;
(b) Engage in any business or activity on behalf of the Partnership
that is inconsistent with the purposes of the Partnership described in
Section 2.01;
(c) Cause or permit the Partnership to voluntarily take any action
with respect to the Partnership described in clause (a)(iii), (b) or (c) of
the definition of "Voluntary Bankruptcy" set forth in the Appendix attached
hereto;
(d) Cause or permit the Partnership to acquire, by purchase or
contribution, any property or assets that, at the time of the acquisition
thereof, (i) does not constitute a Permitted Asset or (ii) is a Permitted
Asset comprised of a financial asset that is in default;
(e) Cause or consent to any amendment, modification or waiver of any
rights or obligations of the Partnership, or cause or give any consent to
or approval or make any election on behalf of the Partnership, under any of
the Transaction Documents if any such amendment, waiver, consent approval
or election, either individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the Partnership's rights or
materially increase its obligations thereunder, including, without
limitation, unless such action is immaterial and insubstantial in nature
and does not adversely affect the Class A Limited Partner:
(i) Cause or consent to any amendment, modification or waiver
of any provision of the Terra Capital Note or any of the agreements,
instruments or other documents evidencing or otherwise setting forth
the terms of any Demand Loan;
(ii) Cause or permit Terra U.K. Holdings to consent to any
amendment, modification or waiver of any provision of any of the Terra
U.K. Loan Documents; or
(iii) Cause or consent to any amendment, modification or waiver
of any provision of the certificate of incorporation or bylaws of Terra
U.K. Holdings or BAI;
(f) Cause or permit the Partnership to change its Fiscal Year, except
as required under Section 706 of the Code;
15
(g) Cause or permit the admission of any Limited Partner to the
Partnership other than pursuant to Article XI;
(h) Cause or permit the Partnership to merge or consolidate with or
into, or sell all or substantially all of the Partnership Property (whether
in one transaction or a series of transactions) to, any Person;
(i) Cause or permit the Partnership to issue any additional Interests
or any other ownership or profit interests therein to any Person other than
the Interests issued or held by the Partners referred to in the first
paragraph of this Agreement on the date hereof (it being understood and
agreed that the making of any Additional Capital Contribution pursuant to
Section 3.03 shall not, in and of itself, constitute the issuance of any
additional Interests or other ownership or profit interests in the
Partnership); or
(j) Cause or permit the Partnership to enter into, or to purchase or
otherwise acquire, any supply or sales contracts in which the Partnership
has basis for federal income tax purposes.
Notwithstanding the foregoing provisions of this Section 6.03, the General
Partner shall not have the authority to, and the General Partner covenants and
agrees that it shall not, with or without the consent of any or all of the other
Partners, possess Partnership Property, or assign rights in specific Partnership
Property, other than for a purpose of the Partnership described in Section 2.01.
SECTION 6.04. Duties and Obligations of the General Partner. (a) The
General Partner shall cause the Partnership to conduct its business, operations
and activities in all material respects separate and apart from the business,
operations and activities of any Terra Partner or any of its Affiliates,
including, without limitation, in all material respects (i) segregating all
Partnership Property and not allowing funds or other Partnership Property to be
commingled with the funds or other property or assets of, held by, or registered
in the name of, any Terra Partner or any of its Affiliates, except as and to the
extent contemplated in the Services Agreement, (ii) maintaining books and
financial records of the Partnership separate from the books and financial
records of any Terra Partner and its Affiliates, (iii) observing all procedures
and formalities of the Partnership (including, without limitation, maintaining
minutes of Partnership meetings and acting on behalf of the Partnership only
pursuant to the due authorization of the Partners or as otherwise required under
applicable law), (iv) causing the Partnership to pay its liabilities solely from
the Partnership Property and (v) causing the Partnership to conduct its dealings
with third parties in its own name and as a separate and independent entity,
including dealings conducted pursuant to the Services Agreement.
(b) The General Partner shall take in its sole discretion all actions
which are necessary or reasonable and appropriate (i) for the continuation of
the Partnership's valid existence as a limited partnership and its qualification
to do business under the laws of the State of Delaware, the State of Texas and
each other jurisdiction in which such existence or qualification is necessary or
appropriate in order to protect the limited liability of the Limited Partners or
to enable the Partnership to conduct the business in which it is engaged or to
perform its obligations under any agreement, instrument or other document to
which it is a party, except where the failure to so exist or qualify, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, and (ii) for the
16
accomplishment of the purposes of the Partnership described in Section 2.01,
including the acquisition, management, maintenance, preservation and operation
of Permitted Assets in accordance with the provisions of this Agreement and
applicable laws. Without limiting any of the foregoing provisions of this
Section 6.04(b), the General Partner shall cause the Partnership and its
Subsidiaries:
(A) to maintain all licenses and permits necessary to own or lease
and operate their respective property and assets and to conduct their
respective businesses and activities in accordance in all material respects
with all applicable laws, rules, regulations and orders;
(B) to pay and discharge (1) all taxes, assessments, reassessments,
levies and other governmental charges imposed upon it or upon its property
and assets and (2) all lawful claims, that, if unpaid, might by applicable
law become a Lien upon its property and assets or any part thereof;
provided, however, that neither the Partnership nor any of its Subsidiaries
shall be required to pay or discharge any such tax, assessment,
reassessment, levy, charge or claim the amount, applicability or validity
of which is being contested in good faith and by proper proceedings and as
to which appropriate and adequate reserves are being maintained in
accordance with GAAP, unless and until any Lien resulting therefrom
attaches to its property or assets and becomes enforceable against its
other creditors; and
(C) to maintain insurance (including, without limitation,
environmental insurance) for the benefit of the Partnership or its
Subsidiaries for their respective properties, assets and businesses with
sound and responsible insurance companies and of such types, in such
amounts and covering such casualties and contingencies as are at least as
favorable as those usually carried by companies of established reputations
engaged in similar businesses and owning similar property and assets in the
same general areas in which the Partnership or the applicable Subsidiary
thereof operates and, in any case, as may otherwise be required by
applicable law.
(c) The General Partner shall devote to the Partnership such time as
in its sole discretion it determines is necessary for the proper performance of
all duties under this Agreement. Certain officers, directors and employees of
the General Partner may from time to time also be officers, directors or
employees of one or more of its Affiliates. The General Partner shall cause its
employees to devote as much time to the management of the Partnership as is
necessary in its sole discretion for the proper conduct of its business and
affairs. The General Partner and its Affiliates shall not be liable to any
Limited Partner or any of its Affiliates for any action taken or omitted to be
taken by it in the good faith exercise of its reasonable business judgment in
the management and operation of the Partnership.
(d) The General Partner shall cause all distributions or payments to
the Partners (in their capacities as such) pursuant to any provision of this
Agreement to be made no later than 12:00 Noon (New York City time) on the date
of distribution or payment, and, at the time of any such distribution or
payment, the General Partner shall provide to the other Partners a notice
setting forth the nature of the distribution or payment, each of the Sections of
this Agreement pursuant to which such distribution or payment is being made and
the amount being distributed or paid pursuant to each such Section.
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
17
(h) The General Partner shall cause the Partnership to comply with all
of the terms of, and perform all of its obligations under, this Agreement.
SECTION 6.05. Indemnification of Class A Limited Partner. (a) The
Partnership or, solely to the extent of the Partnership Property, its receiver
or its trustee shall indemnify and hold harmless the Class A Limited Partner for
any and all claims, damages, losses, liabilities and expenses of the Partnership
arising out of or relating to events, developments or circumstances occurring
prior to the Closing Date, other than the liabilities and expenses of the
Partnership comprising part of the Original Capital Contributions of the Terra
Partners and set forth on Schedule I hereto. In the case of any investigation,
litigation or proceeding for which the indemnity under this Section 6.05(a)
applies, such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by the Class A Limited Partner, any of its
respective directors, stockholders, partners, members or creditors, the
Partnership or any other Partner and whether or not the Partnership or any other
Partner is otherwise a party thereto. The indemnification provided pursuant to
this Section 6.05(a) shall not guarantee the payment of the First Priority
Return, any Class A Limited Partner Guaranteed Payment in lieu thereof, the
return of any of the Capital Contributions of the Class A Limited Partner or the
retirement or purchase of the Interest of the Class A Limited Partner (whether
through the exercise of the Purchase Option or otherwise).
(b) The Partnership or, solely to the extent of the Partnership
Property, its receiver or its trustee shall, to the extent any state or local
taxes based on or measured by the income of the Partnership or the Partnership
Property are imposed on the Class A Limited Partner or any Class A Beneficial
Owner by any External Taxing Jurisdiction, indemnify and hold harmless the Class
A Limited Partner or such Class A Beneficial Owner for an amount equal to, on an
After-Tax Basis, the excess of such state and local taxes (determined after
taking into account associated deductions) over the amount of any state or local
tax refund, deduction or credit which the Class A Limited Partner or such Class
A Beneficial Owner (or any of its Affiliates) realizes as a result of the
imposition of such state or local taxes by such External Taxing Jurisdiction,
conclusively presuming for purposes of this Section 6.05(b) that any such
beneficial owner is subject to the tax laws of the State of New York. The Class
A Limited Partner or the Class A Beneficial Owner seeking indemnification under
this Section 6.05(b) shall provide the Partnership with notice of such claim,
which notice shall set forth in reasonable detail the Class A Limited Partner's
or such Class A Beneficial Owner's calculation of the amount of such claim. In
connection with the foregoing provisions of this Section 6.05(b), the Class A
Limited Partner agrees to use its reasonable efforts, and to cause its
affiliates to use their reasonable efforts, to claim and pursue any state or
local tax refund, deduction or credit that would reduce the indemnification
obligations of the Partnership (or its receiver or trustee) hereunder.
(c) All indemnities provided for in this Section 6.05 shall survive
any transfer of the Interest of the Class A Limited Partner, in whole or in
part, and the indemnities provided for in Section 6.05(b) shall also survive the
liquidation or winding up of the Partnership.
(d) (i) If any claim is made by a third party against the Class A
Limited Partner, any Class A Beneficial Owner, the Liquidator or any Affiliate
of any of the foregoing, or any officer, director, agent, employee,
representative, advisor, successor or assign thereof (each, an "Indemnitee"),
with respect to an actual or potential claim, damage, loss, liability or expense
for which any such Person is otherwise
18
entitled to be indemnified under any provisions of Section 6.05(a), 6.05(b) or
13.07(b), and any such Person wishes to be indemnified with respect thereto,
such Indemnitee shall promptly notify the appropriate indemnitor as provided in
the applicable Section (the "Indemnitor"), which notice shall set forth in
reasonable detail the nature of the related claim, damage, loss, liability or
expense; provided that the failure of any such Indemnitee to notify the
applicable Indemnitor shall not relieve such Indemnitor from any liability or
other obligation which it otherwise may have to such Person under Section
6.05(a), 6.05(b) or 13.07(c), as applicable, or otherwise, unless, and then only
to the extent that, such failure results in the forfeiture of rights or defenses
and the Indemnitor incurs an increased indemnification obligation to such
Indemnitee under the terms of such applicable Section on account of such
failure.
(ii) Any Indemnitor may, by notice to the Indemnitee, take control of
all aspects of the investigation and assume the defense of all claims asserted
against such Indemnitee, and may employ counsel of its choice and at its
expense; provided that (A) no Indemnitor may, without the consent of any
Indemnitee, agree to any settlement that requires such Indemnitee to make any
payment that is not indemnified hereunder, or does not grant a full and
unconditional release to such Indemnitee, and, in any event, such Indemnitor may
not in connection with any such investigation, defense or settlement, without
the consent of any Indemnitee, take or refrain from taking any action which
would reasonably be expected to materially impair the indemnification of such
Indemnitee hereunder or would require such Indemnitee to take or refrain from
taking any action or to make any public statement which such Indemnitee
reasonably considers to materially and adversely affect its rights or interests,
and (B) no Indemnitor may take control of any investigation, defense or
settlement which could reasonably be expected to entail a risk of criminal
liability to any Indemnitee. Upon the request of any Indemnitee, the Indemnitor
shall use its best efforts to keep such Indemnitee reasonably apprised of the
status of those aspects of such investigation and defense controlled by such
Indemnitor and shall provide such information with respect thereto as such
Indemnitee may reasonably request. The Indemnitee shall cooperate with the
Indemnitor in all reasonable respects with respect thereto.
(e) No Indemnitor shall be liable to any Indemnitee for the settlement
by such Indemnitee of any pending or threatened investigation, litigation or
proceeding for which such Indemnitee may seek indemnity under Section 6.05(a)
without the prior written consent of such Indemnitor (which consent shall not be
unreasonably withheld or delayed). In turn, none of the Indemnitors or any of
their respective Affiliates or their respective officers, directors,
stockholders, partners, members, employees, agents, representatives or advisors
shall effect the settlement of any such pending or threatened investigation,
litigation or proceeding unless either (i) such settlement includes a full and
unconditional release and discharge of each Indemnitee subject to such
investigation, litigation or proceeding from all liability and potential
liability on claims that are the subject matter thereof or (ii) each Indemnitee
subject to such investigation, litigation or proceeding shall give its prior
written consent to the settlement thereof (which consent shall not be
unreasonably withheld or delayed).
SECTION 6.06. Compensation and Expenses. (a) Compensation and
Reimbursement. Except as otherwise provided in this Section 6.06, neither any
Partner nor any Affiliate of any Partner shall receive any salary, fee or draw
from the Partnership for services rendered to or on behalf of the Partnership or
otherwise in its capacity as a Partner, and neither any Partner nor any
Affiliate of any Partner shall be reimbursed by the Partnership for any expenses
incurred by such Partner or Affiliate on behalf of the Partnership or otherwise
in its capacity as a Partner.
19
(b) Management Fee; Expenses. [Confidential material has been omitted
pursuant to a request for confidential treatment filed with the Commission under
Rule 24b-2(b) and has been filed separately with the Commission.]
ARTICLE VII
ROLE OF LIMITED PARTNERS
SECTION 7.01. Rights or Powers. The Limited Partners shall not have
any right or power to take part in the management or control of the Partnership
or its business and affairs or to act for or bind the Partnership in any way.
Notwithstanding the foregoing, the Limited Partners shall have all the rights
and powers specifically set forth in this Agreement. A Limited Partner, any
Affiliate thereof, or an employee, stockholder, agent, director or officer of a
Limited Partner or any Affiliate thereof, may also be an employee or agent of
the Partnership or a stockholder, director or officer of a General Partner or
any of its Affiliates. The existence of these relationships and acting in such
capacities will not result in a Limited Partner being deemed to be participating
in the control of the business of the Partnership or otherwise affect the
limited liability of any Limited Partner.
SECTION 7.02. Voting Rights. The Limited Partners shall have the
right to vote only on those matters expressly reserved for their vote under this
Agreement and otherwise as required under the Act.
SECTION 7.03. Procedure for Consent. In any circumstances requiring
the approval or consent of the Limited Partners specified in this Agreement or
otherwise required under the Act, such approval or consent may, except as
expressly provided to the contrary in this Agreement, be given or withheld in
the sole and absolute discretion of the Limited Partners. If the General Partner
receives the necessary approval or consent of the Limited Partners to such
circumstances, the General Partner shall be authorized and empowered to
implement such action without further authorization by the Limited Partners.
Each class of Limited Partners shall exercise the rights to vote or consent
granted such class of Limited Partners under this Agreement by a vote or consent
of the majority in Percentage Interest of such class of Limited Partners, such
result of the majority vote or consent to be the decision of the class of
Limited Partners.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
SECTION 8.01. General. Each of the Partners hereby makes each of the
representations and warranties applicable to such Partner as set forth in this
Article VIII, and such representations and warranties shall survive the
execution of this Agreement.
SECTION 8.02. Representations and Warranties of Each Terra Partner.
Each Terra Partner hereby represents and warrants as follows:
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(a) Such Terra Partner (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property
or in which the conduct of its business requires it to so qualify or be
licensed, except where the failure to so qualify or be licensed, either
individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect, and (iii) has all requisite corporate power and
authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its property and
assets (including, without limitation, its Interest) and to carry on its
business as now conducted and as proposed to be conducted. All of the
outstanding shares of capital stock of such Terra Partner have been validly
issued, are fully paid and nonassessable and are owned by Terra Capital,
free and clear of all Liens, except for the liens and security interests
created therein under the Terra Capital Loan Documents.
(b) The execution, delivery and performance by such Terra Partner of
this Agreement and each other Transaction Document to which it is or is to
be a party, and the consummation of the transactions contemplated hereby
and thereby, are within such Terra Partner's corporate powers, have been
duly authorized by all necessary corporate action and do not (i) contravene
such Terra Partner's certificate of incorporation or bylaws (or similar
organizational documents), (ii) violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award, except to the
extent that any such violation, either individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect, (iii)
result in the breach of, or constitute a default under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease, instrument or other
agreement binding on or affecting such Terra Partner, any of its
Subsidiaries or any of their respective properties or assets, except to the
extent that any such breach or default, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect, or (iv) result in or require the creation or imposition of any Lien
upon or with respect to any of the properties or assets of the Partnership
or any of its Subsidiaries.
(c) No authorization, approval or other action by, and no notice to or
filing with, any governmental or regulatory authority, or any other third
party that is a party to any contract, loan agreement, indenture, mortgage,
deed of trust, lease, instrument or other agreement referred to in Section
8.02(b)(iii), is required for the due execution, delivery, recordation,
filing or performance by such Terra Partner of this Agreement or any other
Transaction Document to which it is or is to be a party, or for the
consummation of any material transaction contemplated hereby or thereby.
(d) This Agreement has been, and each other Transaction Document to
which such Terra Partner is or is to be a party when delivered hereunder
will have been, duly executed and delivered by such Terra Partner. This
Agreement is, and each other Transaction Document to which such Terra
Partner is or is to be a party when delivered hereunder will be, the legal,
valid and binding obligation of such Terra Partner, enforceable against
such Terra Partner in accordance with its terms, except to the extent such
enforceability may be limited by the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity.
21
(e) There is no action, suit, investigation, litigation, arbitration
or proceeding pending or, to the best knowledge of such Terra Partner,
threatened against or affecting such Terra Partner, any of its Subsidiaries
or any of their respective properties or assets in any court, before any
arbitrator or by or before any governmental or regulatory authority that
(i) either individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect or (ii) purports to affect the legality,
validity or enforceability of this Agreement or any other Transaction
Document or the consummation of the transactions contemplated hereby or
thereby.
(f) The Partnership's Methanol Business complies in all material
respects with all applicable Environmental Laws and Environmental Permits;
all past noncompliance with such Environmental Laws and Environmental
Permits has been resolved without ongoing material obligations or costs;
and no circumstances exist that would be reasonably likely to (i) form the
basis of an Environmental Action against the Partnership or such Terra
Partner, any of their Subsidiaries or any of their respective properties or
assets or (ii) cause the Partnership Property to be subject to any
restrictions on ownership, occupancy, use or transferability under any
Environmental Law, except in the case of clauses (i) and (ii) of this
Section 8.02, as, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(g) Except as described on Schedule 8.02(g) attached hereto: (i) none
of the Partnership Property related to the Methanol Business is listed or
proposed for listing on the NPL or on the CERCLIS or any analogous state or
local list or, to the best knowledge of such Terra Partner, is adjacent to
any properties so listed or proposed for listing; (ii) there are no and, to
the best knowledge of such Terra Partner, there never have been any
underground or aboveground storage tanks or any surface impoundments,
septic tanks, pits, sumps or lagoons in which Hazardous Materials are being
or have been treated, stored or disposed on any such Partnership Property;
(iii) there is no asbestos or asbestos-containing material on any such
Partnership Property; and (iv) Hazardous Materials have not been released,
discharged or disposed of on any such Partnership Property in a manner
that, either individually or in the aggregate, could reasonably be expected
to result in material liability to the Partnership.
(h) Except as, either individually or in the aggregate, could not
reasonably be expected to result in material liability to the Partnership:
(i) such Terra Partner is not undertaking, and has not completed, either
individually or together with other potentially responsible parties, any
investigation or assessment or remedial or response action relating to any
location or operation related to the Methanol Business, either voluntarily
or pursuant to the order of any governmental or regulatory authority or the
requirements of any Environmental Law; and (ii) no Hazardous Materials
generated, used, treated, handled or stored at, or transported to or from,
any Partnership Property related to the Methanol Business have been
disposed of in any manner.
(i) Each of such Terra Partner and the Partnership has filed, has
caused to be filed or has been included in all material tax returns
(federal, state, local and foreign) required to be filed and has paid all
taxes shown thereon to be due, together with applicable interest and
penalties, except for any such taxes, assessments, levies, fees and other
charges the amount, applicability or validity of which is being contested
in good faith and by appropriate proceedings
22
and with respect to which such Terra Partner or the Partnership, as the
case may be, has established appropriate and adequate reserves in
accordance with GAAP.
(j) Such Terra Partner is not (i) an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company", nor, as a result of such Terra Partner's ownership of
its Interests, is the Partnership an "investment company", or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company", in each case as such term is defined in the
Investment Company Act of 1940, as amended, or (ii) a "holding company", an
"affiliate of a holding company" or a "subsidiary of a holding company", in
each case as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, as amended.
SECTION 8.03. Representations and Warranties of the Class A Limited
Partner. The Class A Limited Partner represents and warrants as follows:
(a) The Class A Limited Partner (i) has been duly formed as a limited
liability company and is validly existing and in good standing under the
laws of the State of Delaware, and (ii) has all requisite limited liability
company power and authority (including, without limitation, all
governmental licenses, permits and other approvals) to enter into this
Agreement and the other Transaction Documents to which it is a party and to
own or lease and operate its property and assets (including, without
limitation, its Interest) and to carry on its business as described in its
limited liability company agreement.
(b) The execution, delivery and performance by the Class A Limited
Partner of this Agreement and each other Transaction Document to which it
is or is to be a party are within the Class A Limited Partner's limited
liability company powers, have been duly authorized by all necessary
limited liability company action and do not (i) contravene the Class A
Limited Partner's limited liability company agreement, (ii) violate any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award binding upon or applicable to it, (iii) result in
the breach of, or constitute a default under, any contract, loan agreement,
indenture, mortgage, deed of trust, lease, instrument or other agreement
binding on or affecting the Class A Limited Partner or any of its
properties or assets or (iv) result in or require the creation or
imposition of any Lien upon or with respect to any of the properties or
assets of the Partnership or any of its Subsidiaries.
(c) No authorization, approval or other action by, and no notice to or
filing with, any governmental or regulatory authority or any other third
party is required for the due execution, delivery, recordation, filing or
performance by the Class A Limited Partner of this Agreement or any other
Transaction Document to which it is or is to be a party.
(d) This Agreement has been, and each other Transaction Document to
which the Class A Limited Partner is or is to be a party when delivered
hereunder will have been, duly executed and delivered by the Class A
Limited Partner. This Agreement is and each other Transaction Document to
which the Class A Limited Partner is or is to be a party when delivered
hereunder will be the legal, valid and binding obligation of the Class A
Limited Partner, enforceable against the Class A Limited Partner in
accordance with its terms, except to the extent
23
such enforceability may be limited by the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity.
(e) There is no action, suit, investigation, litigation, arbitration
or proceeding pending or, to the best knowledge of the Class A Limited
Partner, threatened against or affecting the Class A Limited Partner or any
of its properties or assets in any court, before any arbitrator or by or
before governmental or regulatory authority that (i) either individually or
in the aggregate, could reasonable be expected to have a Material Adverse
Effect or (ii) purports to affect the legality, validity or enforceability
of this Agreement or any other Transaction Document.
(f) The Class A Limited Partner is not an "investment company", or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company", in each case as such term is defined in the
Investment Company Act of 1940, as amended.
ARTICLE IX
BOOKS AND RECORDS; REPORTS
SECTION 9.01. Accounting; Books and Records. (a) Maintenance of
Books and Records. The Partnership shall maintain at its address set forth in
Section 15.01 or, upon notice to the Limited Partners, at such other place as
the General Partner shall determine, books of record and account for the
Partnership in which full and correct entries shall be made of all financial
transactions and the Partnership Property in sufficient detail to reflect the
business and operations of the Partnership and to make all of the calculations
required under this Agreement.
(b) Accounting Methods. (i) The Partnership shall use the accrual
method of accounting in the preparation of its annual reports and for tax
purposes, and shall keep its books and records accordingly.
(ii) Except with respect to distributions and other payments provided
for in Article V and Sections 3.03(b), 11.08 and 13.02, all amounts payable
under any agreement between the Partnership, on the one hand, and any Partner or
any of its Affiliates, on the other hand, shall be treated as occurring between
the Partnership and a Person who is not a Partner within the meaning of Section
707(a)(1) of the Code, and such amounts payable by the Partnership to any
Partner or any of its Affiliates shall be considered an expense of the
Partnership for both income tax and financial reporting purposes and shall not
be considered a distribution to such Partner (including, without limitation, any
such amounts payable in maintaining such Partner's Capital Account), and any
such amounts payable by any Partner or any of its Affiliates to the Partnership
shall not be considered a contribution to the Partnership, including, without
limitation, any such amounts payable in maintaining such Partner's Capital
Account.
(c) Access to Books, Records, Etc. Any Partner or any agent or
representative thereof on its behalf may, subject to Section 9.04 and at the
Partnership's sole and reasonable expense, upon reasonable notice, for proper
purposes and during normal business hours, visit and inspect any of the
24
properties of the Partnership and its Subsidiaries (subject to reasonable safety
requirements) and examine any information it may reasonably request and make
copies of and abstracts from the financial and operating records and books of
account of the Partnership and its Subsidiaries, and discuss the affairs,
finances and accounts of the Partnership and/or any of its Subsidiaries with the
General Partner and its officers and directors, and with the independent
accountants of the Partnership and its Subsidiaries, as often as such Partner or
any such agent or representative may reasonably request.
SECTION 9.02. Reports. The General Partner shall cause to be
prepared and furnished to the Class A Limited Partner the following:
(a) Terminating Events, Notice Events and Incipient Events. Within
five Business Days of knowledge thereof by any Responsible Officer of the
General Partner or Terra Capital, notice of each Terminating Event, Notice
Event (other than the Notice Event referred to in clause (a) of the
definition thereof set forth in the Appendix attached hereto) or Incipient
Event, and each incurrence of an Extraordinary Expense and each occurrence
of any events, developments or circumstances which, either individually or
in the aggregate, could reasonably be expected to give rise to an
Extraordinary Expense or to have a Material Adverse Effect, and the actions
that the Partnership or any other appropriate Person has taken or proposes
to take with respect thereto.
(b) Quarterly. Within 60 days after the end of each Fiscal Quarter,
commencing with the Fiscal Quarter ending March 31, 1998:
(i) Compliance Statements. A certificate of a Senior Financial
Officer of Terra Capital, certifying (A) as to whether the Partnership
holds any Permitted Asset which is a financial asset that is in
default, (B) the aggregate principal amount of all Demand Loans
outstanding on the last day of such Fiscal Quarter, after giving pro
forma effect to the Demand Loans and the repayments of Demand Loans
made within the 30-day period following the end of such Fiscal
Quarter, and (C) that no Terminating Event, Notice Event (other than
the Notice Event referred to in clause (a) of the definition thereof
set forth in the Appendix attached hereto) or Incipient Event has
occurred and is continuing or, if any such Terminating Event, Notice
Event or Incipient Event has occurred and is continuing, the actions
that the Partnership or any other appropriate Person has taken or
proposes to take with respect thereto;
(ii) Financial Reports. An unaudited balance sheet of the
Partnership and its Subsidiaries as of the end of such Fiscal Quarter
and statements of income and cash flow of the Partnership for the
period commencing at the end of the previous Fiscal Year and ending
with the end of such Fiscal Quarter, in each case certified by a
Senior Financial Officer of Terra Capital as (A) having been prepared
in accordance with GAAP (without the requirement for complete
footnotes and subject to normal year-end audit adjustments) and (B)
fairly presenting (subject to the absence of complete footnotes and
normal year-end audit adjustments) the financial condition of the
Partnership and its Subsidiaries as at the last day of such Fiscal
Quarter and the results of operations and cash flows of the
Partnership and its Subsidiaries for the period ended on the last day
of such Fiscal Quarter; and
25
(iii) Insurance Compliance. A certificate, signed by a
Responsible Officer of the General Partner or Terra Capital,
confirming compliance with the provisions of Section 6.04(b).
(c) Annually. Within 110 days after the end of each Fiscal Year, a
report for such Fiscal Year which sets forth (i) a copy of the annual audit
report of the Partnership for such Fiscal Year, including therein the
audited balance sheet of the Partnership and its Subsidiaries as of the end
of such Fiscal Year and statements of income and cash flow of the
Partnership for such Fiscal Year, in each case prepared in accordance with
GAAP, and accompanied by an unqualified opinion or an opinion otherwise
acceptable to the Partners of Deloitte & Touche LLP or other independent
public accountants of nationally recognized standing and (ii) a schedule,
certified by a Senior Financial Officer of Terra Capital, setting forth, in
reasonable detail, each of the following: (A) the Asset Values of the
Permitted Assets and the balance in the Capital Account of each Partner,
all as reflected in, and in substantially the form of, Exhibit A attached
hereto (a "Partnership Balance Sheet"), as of the last day of such Fiscal
Year and (B) the Partnership's income, including items of profit, expense
or deduction and any realized and recognized (or deemed to be realized and
recognized on a Xxxx-to-Market Valuation) gains or losses, and the
allocations to the Capital Accounts (a "Partnership Income Statement"), for
such Fiscal Year.
(d) Financial Asset Default. Within five Business Days following
knowledge by any Responsible Officer of the General Partner or Terra
Capital of a default on any Permitted Asset which is a financial asset, a
certificate setting forth, in reasonable detail, a description of the
Permitted Asset so affected and the nature of such default.
(e) Contribution Date, Retirement Date and Termination Date Reports.
(i) (A) As promptly as practicable and in any event within 30 days after
the date on which any Capital Contribution (other than an Original Capital
Contribution) is made by any of the Partners, whether pursuant to Section
3.03 or otherwise, (B) on any date on which any distribution is made to any
of the Partners in retirement of all or any part of its Interest pursuant
to Section 11.08 and (C) on the date on which final distributions are made
to the Partners upon the liquidation or winding up of the Partnership
pursuant to Article XIII, each of the following reports:
(1) A report which sets forth an unaudited pro forma Partnership
Balance Sheet and Partnership Income Statement for the applicable
Measurement Date (based upon a Xxxx-to-Market Valuation as of such
Xxxx-to-Market Event, if applicable) and includes a certificate of a
Senior Financial Officer of Terra Capital that such pro forma
Partnership Balance Sheet and Partnership Income Statement fairly
present in all material respects the information contained therein;
and
(2) In the case of reports required under subclause (i)(B) of
this Section 9.02(e), a certificate of a Responsible Officer of the
General Partner or Terra Capital that, immediately before and after
giving pro forma effect to the retirement of all or any portion of the
Interest of any of the Partners, no Terminating Event, Notice Event or
Incipient Event has occurred and is continuing.
26
(ii) Not later than 60 days after the date on which any Capital
Contribution, retirement or liquidating distribution referred to in
subclause (i)(A), (i)(B) or (i)(C) of this Section 9.02(e) is made, the
General Partner shall cause the statements referred to in this Section
9.02(e) to be reviewed and reported on by the Partnership's independent
public accountants.
(f) Purchase Option Reports. (i) On the Purchase Date, a report which
sets forth an unaudited pro forma Partnership Balance Sheet and Partnership
Income Statement for the applicable Measurement Date and includes a
certificate of a Senior Financial Officer of Terra Capital that such pro
forma Partnership Balance Sheet and Partnership Income Statement fairly
present in all material respects the information contained therein and (ii)
not later than 60 days after the Purchase Date, the General Partner shall
cause the statements referred to in this Section 9.02(f) to be reviewed and
reported on by the Partnership's independent public accountants.
(g) Environmental Conditions. Promptly and in any event within five
Business Days after a Responsible Officer of the General Partner or Terra
Capital becomes aware of the assertion or occurrence thereof, notice of:
(i) any condition or occurrence on or arising from any property
owned or operated by the Partnership or any of the Terra Partners or
any of their respective Subsidiaries that resulted or is alleged to
have resulted in noncompliance by the Partnership or any such Terra
Partner or Subsidiary with any applicable Environmental Law or
Environmental Permit in such a manner as, either individually or in
the aggregate, could reasonably be expected to have a Material Adverse
Effect;
(ii) any condition or occurrence on any Partnership Property
related to the Methanol Business that could reasonably be expected to
cause such Partnership Property to be subject to any material
restrictions on the ownership, occupancy, use or transferability
thereof by the Partnership under any Environmental Law; and
(iii) the taking of any removal or remedial action outside of
the ordinary course of business of the Partnership in response to the
actual or alleged presence of any Hazardous Materials on any
Partnership Property related to the Methanol Business required by any
Environmental Law or any Environmental Permit or any governmental or
regulatory authority.
All such notices shall set forth in reasonable detail the nature of the
condition, occurrence, removal or remedial action described therein and, in
the case of each such condition or occurrence, the action that the
applicable Partner or Subsidiary of the Partnership or any of the Partners
has taken or proposes to take with respect thereto.
(h) Terra Capital Information. As promptly as practicable and in any
event within two Business Days after receipt thereof, all financial and
other information received by, and all notices delivered to, the
Partnership from Terra Capital pursuant to the Terra Capital Note or the
Loan Purchase Agreement.
27
(i) Terra U.K.. As promptly as practicable and in any event within
two Business Days after receipt thereof, all financial and other
information received by the Partnership regarding Terra U.K. and its
property, assets and businesses pursuant to Section 6.04(g)(ii).
(j) Additional Information. Promptly following any such request, such
other information relating to the Partnership or any of its Subsidiaries,
or the properties, assets, business, operations or activities thereof, as
any of the Partners may from time to time reasonably request.
SECTION 9.03. Tax Matters. (a) The General Partner is authorized to
make any and all elections for federal, state and local tax purposes (including,
without limitation, any election, if permitted by applicable law):
(i) to adjust the basis of Partnership Property pursuant to Sections
754, 734(b) and 743(b) of the Code, or comparable provisions of state or
local law, in connection with Transfers of Interests and Partnership
distributions;
(ii) with the consent of the Class A Limited Partner, to extend the
statute of limitations for assessment of tax deficiencies against the
Partners with respect to adjustments to the Partnership's federal, state or
local tax returns; and
(iii) to the extent provided in Sections 6221 through 6231 of the
Code, to represent the Partnership and the Partners before taxation
authorities and other governmental authorities or courts of competent
jurisdiction in tax matters affecting the Partnership or the Partners in
their capacities as Partners, and to file any tax returns and execute any
agreements or other documents relating to or affecting such tax matters,
including, without limitation, agreements or other documents that bind the
Partners with respect to such tax matters or otherwise affect the rights of
the Partnership and the Partners.
The General Partner is specifically authorized to act as the "Tax Matters
Partner" under the Code and in any similar capacity under state or local law (in
such capacity, the "Tax Matters Partner"). Notwithstanding the generality of the
foregoing, the Tax Matters Partner shall make regular and current reports to the
Class A Limited Partner on the status of all representations of the Partnership
and the Partners before taxation authorities and other governmental authorities
and courts of competent jurisdiction. Furthermore, without the prior consent of
the Class A Limited Partner (which consent shall not be unreasonably withheld),
the Tax Matters Partner may not enter into any agreement or document which would
affect the amount, timing or character of any item of Profits or Losses
allocated to, or otherwise realized by, the Class A Limited Partner.
(b) The General Partner shall cause all necessary tax information to
be delivered to each Partner as soon as practicable and in any event not later
than 90 days after the end of each Fiscal Year. The General Partner shall file
tax returns for the Partnership prepared in accordance with the Code and the
Regulations. Promptly and in any event no later than 30 days after the filing
or receipt thereof, the General Partner shall furnish to each other Partner all
federal, state and local tax returns filed on behalf
28
of the Partnership and all written notices received by the Partnership from any
taxation authority or other governmental authority.
SECTION 9.04. Confidential Information. The Class A Limited Partner
shall keep all information furnished to it pursuant to this Article IX
confidential pursuant to a Confidentiality Agreement, and shall take reasonable
steps to ensure that any other Person to whom the Class A Limited Partner
provides any such information shall keep such information confidential on a
similar basis as is provided in the Confidentiality Agreement executed and
delivered by the Class A Limited Partner.
ARTICLE X
AMENDMENTS; MEETINGS
SECTION 10.01. Amendments. Amendments to this Agreement may be
proposed by the General Partner or any Limited Partner. The General Partner
shall seek the written vote of the Partners on the proposed amendment or shall
call a meeting to vote thereon and to transact any other business that it may
deem appropriate. A proposed amendment shall be adopted and be effective as an
amendment to this Agreement only if it receives the affirmative vote of all of
the Partners.
SECTION 10.02. Meetings of the Partners. (a) Meetings of the
Partners may be called by the General Partner and shall be called upon the
written request of any other Partner. Each call for a meeting of the Partners
shall state the nature of the business to be transacted at such meeting and the
proposed date of such meeting. Unless waived in writing, notice of any such
meeting shall be given to all Partners not less than seven Business Days nor
more than 30 days prior to the date of such meeting. Partners may vote in
person, by proxy or by telephone at such meeting. Whenever the vote or consent
of Partners is permitted or required under this Agreement, such vote or consent
may be given at a meeting of Partners or may be given in accordance with the
procedure prescribed in Section 10.03. Except as otherwise expressly provided
in this Agreement, the unanimous vote of all of the Partners shall be required
to constitute the act of the Partners.
(b) For the purpose of determining the Partners entitled to vote on,
or to vote at, any meeting of the Partners or any adjournment thereof, the
General Partner or the Limited Partner requesting such meeting may fix, in
advance, a date as the record date for any such determination. Such date shall
not be less than ten days nor more than 30 days before any such meeting.
(c) Each Limited Partner may authorize any Person or Persons to act
for it by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner granting such
proxy or its attorney-in-fact. No proxy shall be valid for more than 11 months
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the Limited Partner executing it.
29
(d) Each meeting of the Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate.
SECTION 10.03. Unanimous Consent. If the consent of the Partners is
required for any action to be taken by the Partnership, such consent may be
given at a meeting, which may be conducted by conference telephone call, or
provided in a writing executed by all of the Partners.
ARTICLE XI
TRANSFERS OF INTERESTS
SECTION 11.01. Restriction on Transfers. Except as otherwise
permitted under this Agreement, no Partner shall pledge or otherwise Transfer
all or any portion of its Interest.
SECTION 11.02. Permitted Transfers. (a) Terra Partners. Subject to
the conditions set forth in Section 11.03, a Terra Partner may at any time (i)
pledge all or any portion of its Interest to the agent, the lenders and the
other secured parties under the Terra Capital Loan Documents in accordance with
the terms thereof and (ii) otherwise Transfer all or any portion of its Interest
to (A) Terra or a Wholly Owned Subsidiary of Terra or (B) any other Person
approved by all of the other Partners (such consent not to be unreasonably
withheld).
(b) Class A Limited Partner. Subject to the conditions set forth in
Section 11.03, the Class A Limited Partner may pledge or otherwise Transfer all
or any portion of its Interest to any Person other than any of the Persons
specified on Schedule 11.02(b) attached hereto with the consent of the General
Partner, which consent shall not be unreasonably withheld or delayed; provided
that the General Partner shall be deemed to be reasonably withholding such
consent to any pledge or other Transfer (other than pursuant to the Credit
Facility) which imposes additional costs on the Partnership or on any of the
Terra Partners or any of their Affiliates. The General Partner shall have the
right from time to time to supplement Schedule 11.02(b) attached hereto to
include any other Person that it determines in good faith is a competitor of
Terra.
(c) Consent to Pledge of Interest of Class A Limited Partner. Each of
the Partners (other than the Class A Limited Partner) hereby acknowledges
notice, and consents to the terms and conditions, of the pledge and security
agreement related to the Credit Facility and the pledge of the Interest of the
Class A Limited Partner and the rights of the Class A Limited Partner under this
Agreement to the security agent and the lenders under the Credit Facility
pursuant to such pledge and security agreement, and hereby further consents and
agrees to any Transfer of such Interest or such rights made as a result of the
exercise by security agent for the Credit Facility of the rights and remedies
afforded to the security agent, the agent and the lenders under, and in
accordance with the terms of, such pledge and security agreement and the other
loan documentation for the Credit Facility (whether as a result of foreclosure
thereon or any other disposition thereof).
30
(d) General. Any Transfer permitted under this Section 11.02 shall be
a "Permitted Transfer" for all purposes of this Agreement.
SECTION 11.03. Conditions to Permitted Transfers. A Transfer shall
only be treated as a Permitted Transfer under Section 11.02 upon the
satisfaction of the following conditions:
(a) (i) The transferor and transferee shall execute and deliver to the
Partnership such documents and instruments of conveyance as may be
necessary or appropriate in the opinion of counsel to the Partnership to
effect such Transfer and to confirm the agreement of the transferee to be
bound by the provisions of this Agreement and (ii) unless the requirement
of this clause (ii) has been waived by the General Partner, the transferee
shall execute and deliver to the Partnership a confidentiality agreement,
in substantially the form of Exhibit B attached hereto (a "Confidentiality
Agreement"). In addition, unless the requirements of this sentence have
been waived by the General Partner, the Partnership shall be reimbursed by
the transferor and/or transferee for all costs and expenses (including,
without limitation, reasonable fees and expenses of counsel) that it
reasonably incurs in connection with such Transfer.
(b) The Transfer shall not cause the Partnership to terminate, within
the meaning of Section 708(b)(1)(B) of the Code, for United States federal
income tax purposes, and, unless the General Partner has waived the
requirements of this Section 11.03(b) with respect to a Transfer by any
Limited Partner, the transferor shall provide the Partnership a favorable
opinion of counsel or a qualified tax advisor to such effect. Such counsel
or qualified tax advisor, as the case may be, and opinion shall be
reasonably satisfactory to the General Partner, and the General Partner and
the other Partners shall provide to such counsel or qualified tax advisor
any information available to the General Partner or such other Partners, as
the case may be, as is relevant to such opinion.
(c) The transferor and transferee shall furnish the Partnership with
the transferee's federal taxpayer identification number, sufficient
information to determine the transferee's initial tax basis in the
Interests Transferred and any other information reasonably necessary to
permit the Partnership to file all required federal and state tax returns
and other required information statements or returns. Without limiting the
generality of the foregoing, the Partnership shall not be required to make
any distribution otherwise provided for in this Agreement with respect to
any Transferred Interests until it has received such information.
(d) Such Transfer shall be exempt from all applicable registration
requirements and shall not violate any applicable laws regulating the
Transfer of securities, and, except in the case of a Transfer of Interests
to another Partner or to a Wholly Owned Subsidiary of the transferor or of
any other Partner, unless waived by the General Partner, the transferor
shall provide an opinion of counsel to such effect. Such counsel and
opinion shall be reasonably satisfactory to the General Partner.
(e) Such Transfer shall not cause the Partnership to be deemed to be
an "investment company" under the Investment Company Act of 1940, as
amended, and, unless waived by the General Partner, the transferor shall
provide an opinion of counsel to such effect. Such counsel
31
and opinion shall be reasonably satisfactory to the General Partner, and
the General Partner and the other Partners shall provide to such counsel
any information available to the General Partner or to such other Partners,
as the case may be, as is relevant to such opinion.
(f) If the transferor is the General Partner, the transferor and
transferee shall provide the Partnership with an opinion of counsel to the
effect that such Transfer will not cause the Partnership to become taxable
as a corporation for federal income tax purposes. Such counsel and opinion
shall be reasonably satisfactory to the other Partners.
(g) If the transferor is the Class A Limited Partner, unless waived by
the General Partner, the Class A Limited Partner and the transferee of the
Class A Limited Partner shall execute certificates, in substantially the
forms of Exhibits C and D attached hereto, respectively (the "Transferor
Certificate" and the "Transferee Certificate", respectively).
SECTION 11.04. Prohibited Transfers. (a) Any purported Transfer of
Interests that is not a Permitted Transfer shall be null and void and of no
effect whatever; provided that, if the Partnership is required to recognize a
Transfer that is not a Permitted Transfer (or if the General Partner, in its
sole discretion, elects to recognize a Transfer that is not a Permitted
Transfer), the Interest Transferred shall be strictly limited to the
transferor's rights to allocations and distributions as provided under this
Agreement with respect to such Transferred Interests, which allocations and
distributions may be applied (without limiting any other legal or equitable
rights of the Partnership) to satisfy any debts, obligations or liabilities for
damages that the transferor or transferee of such Interests may have to the
Partnership.
(b) In the case of a Transfer or attempted Transfer that is not a
Permitted Transfer, the parties engaging or attempting to engage in such
Transfer shall indemnify and hold harmless the Partnership and each of the other
Partners from any and all claims, damages, losses, liabilities and expenses that
the Partnership or any such other Partner may incur (including, without
limitation, incremental tax liability and fees and expenses of counsel) as a
result of such Transfer or attempted Transfer and any efforts to enforce the
indemnity granted under this Section 11.04(b).
SECTION 11.05. Admission as Substitute Partners. Subject to the
other provisions of this Article XI, a transferee of Interests may be admitted
to the Partnership as a substitute Partner only upon satisfaction of the
following conditions:
(a) If such transferee acquired its interest from a Class A Limited
Partner, the General Partner shall consent to such admission, which consent
shall not be unreasonably withheld or delayed;
(b) The Interests with respect to which the transferee is being
admitted shall be acquired by means of a Permitted Transfer;
(c) The transferee shall become a party to this Agreement as a Partner
and shall execute such documents and instruments as the General Partner may
reasonably request (including, without limitation, amendments to the
Certificate) as may be necessary or appropriate to confirm
32
such transferee as a Partner in the Partnership and the agreement of such
transferee to be bound by the terms and conditions of this Agreement;
(d) Unless waived by the General Partner, the transferee shall pay or
reimburse the Partnership for all reasonable legal, filing and publication
costs that the Partnership incurs in connection with the admission of the
transferee as a Partner with respect to the Transferred Interests;
(e) Unless waived by the General Partner, if the transferee is a
Person other than an individual, the transferee shall provide the
Partnership with evidence satisfactory to counsel for the Partnership that
such transferee has made each of the representations and warranties
contained in Section 8.02 or 8.03, as applicable, as of the date of the
Transfer; and
(f) If the transferee of an Interest is admitted under this Agreement,
such transferee shall be deemed admitted to the Partnership as a substitute
Partner immediately prior to the Transfer, and with respect to the
transferee of a General Partner, such transferee shall continue the
business of the Partnership without dissolution.
SECTION 11.06. Rights of Unadmitted Assignees. (a) General. A
Person who acquires one or more Interests but who is not admitted as a
substitute Partner pursuant to Section 11.05 shall be entitled only to
allocations and distributions with respect to such Interests in accordance with
this Agreement, but shall have no right to any information or accounting of the
affairs of the Partnership, shall not be entitled to inspect the books or
records of the Partnership and shall not have any of the rights of a Partner
under the Act or this Agreement.
(b) General Partners. A transferee who acquires an Interest from a
General Partner under this Agreement by means of a Transfer that is permitted
under this Article XI, but who is not admitted as a General Partner, shall have
no authority to act for or bind the Partnership or otherwise to be treated as a
General Partner. Following such a Transfer, the transferor shall not cease to
be a General Partner of the Partnership and shall continue to be a General
Partner until such time as the transferee is admitted as a General Partner.
(c) Limited Partners. Following a transfer to a transferee who
acquires an Interest from a Limited Partner under this Agreement by means of a
Transfer that is permitted under this Article XI, but who is not admitted as a
Limited Partner, the transferor shall not cease to be a Limited Partner of the
Partnership and shall continue to be a Limited Partner until such time as the
transferee is admitted as a Limited Partner under this Agreement.
SECTION 11.07. Distributions with Respect to Transferred Interests.
If any Interest is sold, assigned or otherwise Transferred in compliance with
the provisions of this Article XI, all distributions made on or before the date
of such Transfer shall be made to the transferor, and all distributions made
after such date shall be made to the transferee. Solely for purposes of making
such distributions, the Partnership shall recognize such Transfer not later than
the end of the calendar month during which it is given notice of such Transfer;
provided, however, that if the Partnership is given notice of a Transfer at
least 14 days prior to the Transfer, the Partnership shall recognize such
Transfer as of the
33
date of such Transfer; and provided further, however, that if the Partnership
does not receive a notice stating the date such Interest was Transferred and
such other information as the General Partner may reasonably require within 30
days after the end of the accounting period during which the Transfer occurs,
all distributions shall be made to the Person who, according to the books and
records of the Partnership, was the owner of the Interest on the last day of the
accounting period during which the Transfer occurs. Neither the Partnership nor
the General Partner shall incur any liability for making distributions in
accordance with the provisions of this Section 11.07, whether or not the General
Partner or the Partnership has knowledge of any Transfer of any Interest.
SECTION 11.08. Retirement of Partners' Interest in the Partnership.
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
ARTICLE XII
GENERAL PARTNER
SECTION 12.01. Covenant Not to Withdraw, Transfer or Dissolve.
Except as otherwise permitted by this Agreement, the General Partner hereby
covenants and agrees not to (a) take any action to file a certificate of
dissolution or its equivalent with respect to itself, (b) withdraw or attempt to
withdraw from the Partnership other than as a result of distributions made under
Section 11.08 in retirement of its entire Interest, (c) exercise any power under
the Act to dissolve the Partnership, (d) Transfer all or any portion of its
Interest in the Partnership as a General Partner, except pursuant to the
applicable provisions of Article XI (and only so long as a substitute General
Partner is admitted pursuant to Section 11.05 at or prior to such time) or (e)
petition for judicial dissolution of the Partnership. Furthermore, the General
Partner hereby covenants and agrees to continue to carry out its duties as
General Partner under this Agreement until a substitute General Partner is
admitted pursuant to Section 11.05 or the Partnership is dissolved and
liquidated pursuant to Article XIII.
SECTION 12.02. Termination of Status as General Partner. (a) A
General Partner shall cease to be a General Partner upon the earliest to occur
of: (i) the retirement of its entire Interest in accordance with Section 11.08;
(ii) the Bankruptcy of the General Partner; (iii) the Transfer of the General
Partner's entire Interest as a General Partner pursuant to Section 11.02 (so
long as a substitute General Partner is admitted pursuant to Section 11.06 at or
prior to such time); (iv) the involuntary Transfer by operation of law of such
General Partner's Interest; (v) the vote of all of the other Partners to approve
a request by such General Partner to withdraw; or (vi) the vote of the Class A
Limited Partner to remove such General Partner after such General Partner has
attempted to make a Transfer of its Interest that is not permitted under Section
11.02. If, at any time, a Person ceases to be a General Partner without having
Transferred its entire Interest as a General Partner, such Person shall be
treated as an unadmitted transferee of an Interest as a result of a Transfer
(other than a Permitted Transfer) pursuant to Section 11.04. If a Person who is
General Partner ceases to be a General Partner for any reason under this
Agreement, such Person shall continue to be liable as a Partner for all debts,
obligations and liabilities of the Partnership existing at the time such Person
ceases to be a General Partner, regardless of whether, at such time, such debts,
obligations or liabilities were known or unknown, actual or contingent, unless
the substitute General Partner therefor has unconditionally agreed to be liable
for all such debts, obligations and liabilities to the
34
same extent as if such substitute General Partner had itself incurred such
debts, obligations and liabilities. A Person shall not be liable as a General
Partner for debts, obligations or liabilities of the Partnership arising after
such Person ceases to be a General Partner. Any debts, obligations or
liabilities to the Partnership of any Person who ceases to be a General Partner
shall be collectible by any legal means, and the Partnership is authorized, in
addition to any other remedies it may have at law or in equity, to apply any
amounts otherwise distributable or payable by the Partnership to such Person to
satisfy such debts, obligations or liabilities.
(b) It is the intention of the Partners that the Partnership not
dissolve as a result of the cessation of any General Partner's status as a
General Partner; provided, however, that if it is determined by a court of
competent jurisdiction that the Partnership has dissolved, the provisions of
Section 13.01 shall govern.
(c) If at the time a Person ceases to be a General Partner, such
Person is also a Limited Partner with respect to Interests other than its
Interest as a General Partner, such cessation shall not affect such Person's
rights and obligations with respect to its Interests as a Limited Partner.
ARTICLE XIII
DISSOLUTION AND WINDING UP
SECTION 13.01. Liquidation. (a) Terminating Events. The
Partnership shall dissolve and commence winding up and liquidating upon, and
only upon, the occurrence of a Terminating Event.
(b) Notice Events. [Confidential material has been omitted pursuant to
a request for confidential treatment filed with the Commission under Rule 24b-
2(b) and has been filed separately with the Commission.]
SECTION 13.02. Winding Up. (a) Upon the occurrence of a Terminating
Event, the Partnership shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets and satisfying the claims
of its creditors and Partners, and no Partner shall take any action with respect
to the Partnership that is inconsistent with the winding up of the Partnership's
business and affairs; provided that all covenants of the Partners contained in
this Agreement and all obligations of the Partners provided for in this
Agreement shall continue to be fully binding upon the Partners until such time
as the Partnership Property has been distributed pursuant to this Section 13.02
and the Certificate has been canceled pursuant to the Act. The Liquidator shall
be responsible for overseeing the winding up and dissolution of the Partnership.
The Liquidator shall take full account of the Partnership's liabilities and all
of the Partnership Property and, except as otherwise provided in Section 13.03,
shall, within 90 days of the occurrence of a Terminating Event, cause the
Partnership Property or the proceeds from the sale, lease, transfer or other
disposition thereof (as determined pursuant to Section 13.08), to the extent
sufficient therefor, to be applied and distributed, to the maximum extent
permitted by applicable law and notwithstanding anything in this Agreement to
the contrary, in the following order of priority:
35
(i) First, to creditors other than the Terra Partners (including, to
the extent otherwise permitted by applicable law, the Class A Limited
Partner to the extent such Partner is a creditor), in satisfaction of all
of the Partnership's debts and liabilities other than debts and liabilities
for which reasonable provision for payment has been made and liabilities
for distributions to Partners under Section 17-601 or 17-604 of the Act;
(ii) Second,[Confidential material has been omitted pursuant to a
request for confidential treatment filed with the Commission under Rule
24b-2(b) and has been filed separately with the Commission.]
(iii) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the Terra Partners, Ratably, to the extent
adequate provision therefor has not been made; and
(iv) Fourth, to the Partners in accordance with their positive Capital
Accounts on the applicable Measurement Date, after giving effect to all
contributions, distributions and allocations for all periods.
If any payment or distribution made under this Section 13.02 is made in-kind,
the amount of the payment or distribution shall be equal to the Xxxx-to-Market
Value of the Partnership Property paid or distributed at the time of such
payment or distribution.
(b) No General Partner shall receive any additional compensation for
any services performed pursuant to this Article XIII.
(c) Each of the Terra Partners understands and hereby agrees that, by
accepting the provisions of this Section 13.02 setting forth the priority of the
distribution of the Partnership Property to be made upon its liquidation, it
expressly waives any right or claim which it might otherwise have as a creditor
of the Partnership under the Act to receive distributions of the Partnership
Property pari passu with the other creditors of the Partnership in connection
with a distribution of the Partnership Property in satisfaction of any liability
of the Partnership, and each of the Terra Partners hereby subordinates any such
right or claim to all such creditors of the Partnership.
(d) If (i) the Termination Event giving rise to the dissolution and
liquidation of the Partnership is the occurrence of the Notice Event described
in clause (s) of the definition of "Notice Event" and (ii) the amount received
in such liquidation on account of the Ammonia Loop is less than the Xxxx-to-
Market Value of the Ammonia Loop, the Terra Partners shall promptly pay to the
Class A Limited Partner the amount, if any, by which (A) the amount received by
the Class A Limited Partner pursuant to Section 13.02(a)(iv) above, is less than
(B) the amount the Class A Limited Partner would have received pursuant to
Section 13.02(a)(iv) above if such amount was calculated using the Xxxx-to-
Market Value of the Ammonia Loop rather than the amount actually received in
such liquidation on account of the Ammonia Loop.
SECTION 13.03. Restoration of Deficit Capital Accounts; Compliance
with Timing Requirements of Regulations. (a) If the Partnership is
"liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations, (i) distributions shall be made pursuant to this Article XIII
36
to the Partners who have positive balances in their Capital Accounts in
compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations and (ii) if
the General Partner Capital Account has a deficit balance in its Capital Account
(after giving effect to all contributions, distributions and allocations for all
taxable years, including the taxable year during which such liquidation occurs),
such General Partner shall contribute to the capital of the Partnership the
amount necessary to restore such deficit balance to zero in compliance with
Section 1.704-1(b)(2)(ii)(b)(3) of the Regulations. If any Limited Partner has a
deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the taxable year during which such liquidation occurs), such Limited Partner
shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever.
(b) In the discretion of the Liquidator, with the consent of the Class
A Limited Partner, a portion (determined in the manner provided below) of the
distributions that would otherwise be made to the Partners pursuant to this
Article XIII may be:
(i) Distributed to a trust established for the benefit of the Partners
solely for the purposes of liquidating Partnership Property, collecting
amounts owed to the Partnership and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner
arising out of or in connection with the Partnership. The property and
assets of any such trust shall be distributed to the Partners from time to
time, in the reasonable discretion of the Liquidator, in the same
proportions (as determined in the manner provided below) as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the Partners pursuant to Section 13.02; or
(ii) Withheld to provide a reasonable reserve for Partnership debts
and liabilities (contingent or otherwise) and to allow for the collection
of the unrealized portion of any installment obligations owed to the
Partnership; provided that such withheld amounts shall be distributed to
the Partners as soon as practicable.
The portion of the distributions that would otherwise have been made to each of
the Partners that is instead distributed to a trust pursuant to Section 13.03(i)
or withheld to provide a reserve pursuant to Section 13.03(ii) shall be
determined in the same manner as the expense or deduction would have been
allocated if the Partnership had realized an expense equal to the amount of such
distributions immediately prior to any distributions being made pursuant to
Section 13.02.
SECTION 13.04. Deemed Contribution and Liquidation. If the
Partnership is liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of
the Regulations and no Terminating Event has occurred and is continuing, the
Partnership Property shall not be liquidated, the Partnership's debts and
liabilities shall not be paid or discharged (except to the extent due and
payable in the ordinary course) and the Partnership's affairs shall not be wound
up. Instead, solely for federal income tax purposes, the Partnership shall be
deemed to have contributed the Partnership Property in-kind to a "new
partnership", which shall be deemed to have taken the Partnership Property
subject to all debts and liabilities of the Partnership. Immediately
thereafter, the Partnership shall be deemed to have been liquidated,
distributing
37
new partnership interests to the Partners, all in accordance with
their respective Capital Accounts. The new partnership shall operate in
accordance with this Agreement.
SECTION 13.05. Rights of Partners. Each Partner shall look solely to
the Partnership Property for the return of its Capital Contribution and, except
as otherwise provided in this Article XIII, shall have no right or power to
demand or receive Partnership Property other than cash from the Partnership.
SECTION 13.06. Notice of Dissolution. If a Terminating Event has
occurred and is continuing, the General Partner shall, within 30 days
thereafter, provide notice thereof to each of the other Partners and to all
other parties with whom the Partnership regularly conducts business (as
determined in the discretion of the General Partner) and shall publish notice
thereof in a newspaper of general circulation in each place in which the
Partnership regularly conducts business (as determined in the discretion of the
General Partner).
SECTION 13.07. The Liquidator. (a) Fees. If the Liquidator is a
Person other than a General Partner, the Partnership is authorized to pay a
reasonable fee to the Liquidator for services performed thereby pursuant to this
Article XIII and to reimburse the Liquidator for its reasonable out-of-pocket
costs and expenses incurred in performing those services.
(b) Indemnification. Subject to Section 6.05(d), if the Liquidator is
a Person other than a General Partner, the Partnership, or in the event that the
Partnership has terminated, the General Partner, shall indemnify and hold
harmless the Liquidator and each of its officers, directors, agents, employees
representatives and advisors from any and all claims, damages, losses,
liabilities and expenses arising out of or relating to any action taken or
omitted to be taken by the Liquidator or any such officer, director, agent,
employee, representative or advisor in connection with the liquidation of the
Partnership (including reasonable fees and expenses of counsel incurred by the
Liquidator or any such officer, director, agent, employee, representative or
advisor in connection with the defense of any action or proceeding based on any
such action or omission, which fees and expenses of counsel may be paid as
incurred), except to the extent that any such claim, damage, loss, liability or
expense has resulted from the fraud, willful misconduct or gross negligence of
the Liquidator or any such officer, director, agent, employee, representative or
advisor.
SECTION 13.08. Form of Liquidating Distributions. (a) General.
Except as provided in this Section 13.08, for purposes of making distributions
required by Section 13.02, the Liquidator may determine whether to distribute
all or any portion of the Partnership Property in-kind or to sell, assign,
transfer or otherwise dispose of all or any portion of the Partnership Property
and distribute the proceeds therefrom; provided, however, that the Liquidator
(i) shall not distribute Partnership Property other than cash to the Class A
Limited Partner without the consent of the Class A Limited Partner and (ii)
shall be required to reduce the Partnership Property to cash to the extent
necessary to make distributions in cash to the Class A Limited Partner pursuant
to Section 13.02 unless the Class A Limited Partner otherwise agrees.
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
38
ARTICLE XIV
POWER OF ATTORNEY
SECTION 14.01. General Partner as Attorney-In-Fact. Each Partner
hereby makes, constitutes and appoints the General Partner and the Liquidator,
severally, with full power of substitution and resubstitution, its true and
lawful attorney-in-fact for it and in its name, place and stead and for its use
and benefit, to sign, execute, certify, acknowledge, swear to, file, publish and
record:
(a) All certificates of limited partnership, amended name or similar
certificates and other certificates and instruments (including counterparts
of this Agreement) which the General Partner or Liquidator may deem
necessary to be filed by the Partnership under the laws of the State of
Delaware or any other jurisdiction in which the Partnership is doing or
intends to do business;
(b) Any and all amendments, restatements, supplements or other
modifications to this Agreement and the instruments described in clause (a)
of this Section 14.01, as now or hereafter amended, which the General
Partner may deem necessary to effect a change in or modification to the
Partnership approved by the Partners in accordance with the terms of this
Agreement, including, without limitation, amendments, restatements or
changes to reflect (i) the exercise by the General Partner of any power
granted to it under this Agreement, (ii) any amendments adopted by the
Partners in accordance with the terms of this Agreement, (iii) the
admission of any substitute Partner and (iv) the disposition by any Partner
of its Interest;
(c) All certificates of cancellation and other instruments which the
General Partner or the Liquidator deem necessary or appropriate to effect
the liquidation, winding up, dissolution or termination of the Partnership
pursuant to the terms of this Agreement; and
(d) Any other instrument which is now or may hereafter be required
under applicable law to be filed on behalf of the Partnership or is deemed
necessary by the General Partner or the Liquidator to carry out fully the
provisions of this Agreement in accordance with its terms (including,
without limitation, in the case of the General Partner, executing the
documents described in Section 6.02(b)).
Each Partner (A) hereby authorizes each such attorney-in-fact to take any
further action which such attorney-in-fact shall consider necessary or
appropriate in connection with any of the foregoing provisions of this Section
14.01, (B) hereby gives each such attorney-in-fact full power and authority to
do and perform each and every act required to be done in connection with any of
the foregoing provisions of this Section 14.01 as fully as such Partner might or
could do personally, and (C) hereby ratifies and confirms all that any such
attorney-in-fact shall lawfully do or cause to be done by virtue thereof or
hereof.
SECTION 14.02. Nature of Special Power. The power of attorney
granted pursuant to Section 14.01:
39
(a) Is a special power of attorney coupled with an interest and is
irrevocable;
(b) May be exercised by any such attorney-in-fact by listing the
Partners executing any agreement, certificate, instrument or other document
with the single signature of any such attorney-in-fact acting as attorney-
in-fact for such Partners; and
(c) Shall survive and not be affected by the subsequent Bankruptcy,
insolvency, liquidation, winding up, dissolution or cessation of the
existence of a Partner, and shall survive the delivery of an assignment by
a Partner of all or a portion of its Interest (except that where the
assignment is of such Partner's entire Interest and the assignee, with the
consent of the General Partner, is admitted as a substitute Partner, the
power of attorney shall survive the delivery of such assignment for the
sole purpose of enabling any such attorney-in-fact to effect such
substitution) and shall extend to such Partner's or assignee's successors
and assigns.
ARTICLE XV
MISCELLANEOUS
SECTION 15.01. Notices. Any notice, payment, demand or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be deemed to have been delivered, given and received for all
purposes (a) upon delivery, if delivered personally to the Person or to an
officer of the Person to whom the same is directed, or (b) when the same is
actually received, if sent either by registered or certified mail, postage and
charges prepaid, or by facsimile, if such facsimile is followed by a hard copy
of the facsimilied communication sent by registered or certified mail, postage
and charges prepaid, addressed as follows:
(i) If to the Partnership, to
Beaumont Methanol, Limited Partnership
Xxxxxxx 000
Xxxxxxxx, Xxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Plant Manager,
with a copy sent to:
Terra Capital, Inc.
000 Xxxxxx Xxxxxx
Xxxxx Xxxx, Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Chief Financial Officer,
and to the General Partner at its address set forth in subclause (ii)
of this Section 15.01;
(ii) If to the General Partner, to
Terra Methanol Corporation
000 Xxxxxx Xxxxxx
00
Xxxxx Xxxx, Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: General Counsel;
(iii) If to the Class B Limited Partner, to
BMC Holdings, Inc.
000 Xxxxxx Xxxxxx
Xxxxx Xxxx, Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: General Counsel; and
(iv) If to the Class A Limited Partner, to
Nova Products LLC
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxx,
with a copy sent to:
Nixon, Hargrave, Devans & Xxxxx LLP
Clinton Square, X.X. Xxx 0000
Xxxxxxxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Any Person may from time to time specify a different address by notice to the
Partnership and the other Partners.
SECTION 15.02. Binding Effect. Except as otherwise provided in this
Agreement, every covenant, term and provision of this Agreement shall be binding
upon and inure to the benefit of the Partners and their respective successors,
transferees and assigns.
SECTION 15.03. Construction. Every covenant, term and provision of
this Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Partner.
SECTION 15.04. Headings. Section and other headings contained in
this Agreement are for reference purposes only and are not intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision of this Agreement.
SECTION 15.05. Severability. Every term and provision of this
Agreement is intended to be severable, and, if any term or provision of this
Agreement is illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the legality or validity of the remainder of this
Agreement. The immediately preceding sentence of this Section 15.05 shall be of
no force or effect if the consequence of enforcing the remainder of this
Agreement without such illegal or invalid term or provision would be to cause
any Partner to lose the benefit of its economic bargain.
41
SECTION 15.06. Governing Law. The laws of the State of Delaware
shall govern the validity of this Agreement, the construction of its terms and
the interpretation of the rights and duties of the Partners.
SECTION 15.07. Waiver of Action for Partition. Each Partner
irrevocably waives any right that it may have to maintain any action for
partition with respect to any of the Partnership Property.
SECTION 15.08. Consent to Jurisdiction. Each Partner hereby (a)
irrevocably submits to the jurisdiction of any New York state or Delaware state
court or federal court sitting in New York County, New York, or Wilmington,
Delaware in any action or proceeding arising out of this Agreement, (b) agrees
that all claims in such action may be decided in such court, (c) waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum
and (d) consents to the service of process by mail. A final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions. Nothing herein shall affect the right of any Partner to serve
legal process in any manner permitted by applicable law or affect its right to
bring any action or proceeding in the courts of any jurisdiction.
SECTION 15.09. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different Partners in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 15.10. Treatment as Security. The Partnership and the
Partners intend that the Class A Limited Partnership Interest and each of the
other Interests is a "security" governed by Article 8 of the Delaware Uniform
Commercial Code, 6 Del. C. (S)1-101 et seq., within the meaning of (S)8-
102(a)(15) thereof, the transfer of which may be registered upon the books
maintained for such purpose by the Partnership.
SECTION 15.11. Waiver of Jury Trial. Each of the Partners hereby
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement, any other Transaction Document, any documents
delivered pursuant to the terms of this Agreement or any of the other
Transaction Documents, or any of the transactions contemplated hereby or
thereby.
42
IN WITNESS WHEREOF, the parties have entered into this Second Amended
and Restated Agreement of Limited Partnership as of the day first above written.
THE GENERAL PARTNER
TERRA METHANOL CORPORATION
By________________________
Name:
Title:
THE CLASS B LIMITED PARTNER
BMC HOLDINGS, INC.
By________________________
Name:
Title:
THE CLASS A LIMITED PARTNER
NOVA PRODUCTS LLC
By: STONEHURST CAPITAL L.L.C.,
as Managing Member
By: STONEHURST CAPITAL, INC.,
as Manager
By________________________________
Name:
Title:
THIS IS A SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF BEAUMONT METHANOL, LIMITED PARTNERSHIP, AND IS EXECUTED BY THE
PARTIES NAMED ABOVE.
APPENDIX TO SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF BEAUMONT METHANOL, LIMITED PARTNERSHIP
DEFINITIONS
-----------
"Act" means the Delaware Revised Uniform Limited Partnership Act, as
set forth in Del. Code Xxx. Tit. 6, (S)(S) 17-101 to 17-1109, as amended from
time to time.
"Additional Capital Contributions" means, with respect to each
Partner, the Capital Contributions made by such Partner pursuant to Section
3.03.
"Adjusted Capital Account" means, with respect to each Partner for any
Allocation Year, the Capital Account of such Partner as of the last day of such
Allocation Year, after giving effect to the following adjustments:
(a) Such Capital Account shall be credited for any amounts which such
Partner is obligated to restore pursuant to any provision of this Agreement
or is deemed to be obligated to restore pursuant to the penultimate
sentences of Sections 1.704-1(g)(1) and 1.704-2(i)(5) of the Regulations;
and
(b) Such Capital Account shall be debited for all of the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
"Adjusted Capital Account Deficit" means, with respect to each Limited
Partner, the deficit balance, if any, in such Limited Partner's Capital Account
as of the end of the relevant Allocation Year, after giving effect to the
following adjustments:
(a) Such Capital Account shall be credited for any amounts which such
Limited Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Sections 1.704-1(g)(1) and 1.704-2(i)(5) of the
Regulations; and
(b) Such Capital Account shall be debited for all of the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
This definition is intended to comply with the provisions of Section 1.704-
1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
"Adjusted Eurodollar Rate" means, for any Current Period, a rate per
annum equal to the rate obtained by dividing (a) the Eurodollar Rate for such
Current Period by (b) a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage for such Current Period.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person or is a director, officer, partner or member of such Person.
For purposes of this definition, the term "control" (including the terms
"controlling", "controlled by" and "under common control with") of a Person
means the possession, direct
2
or indirect, of the power to vote 20% or more of the Voting Interests of such
Person or to direct or cause the direction of the management and policies of
such Person, whether through the ownership of Voting Interests, by contract or
otherwise.
"After-Tax Basis" means, with respect to any payment to any Person,
the amount of such payment (the "base payment") supplemented by a further
payment (the "gross-up amount") to such Person so that the sum of the base
payment and the gross-up amount, after deduction of the amount of all taxes
actually required to be paid by such Person in respect of the receipt or accrual
of the base payment and gross-up amount (and after taking into account all
credits or deductions (collectively, the "tax benefits") realized from (i) the
payment by the indemnified Person of any amount giving rise to the obligation to
make the base payment and (ii) the payment by the indemnified Person of taxes
that the gross-up amount is intended to pay), shall be equal to the amount
required to be received on an "After-Tax Basis". Such calculations shall be made
on the basis of the assumptions that for such Person or any Affiliate thereof,
(A) federal taxes are payable at the highest marginal rate applicable to such
Person or any such Affiliate for the relevant period or periods and (B) state
and local taxes are payable at a rate equal to 5% (after taking into account the
federal tax benefits attributable to such state and local taxes).
"Agreement" means this Second Amended and Restated Agreement of
Limited Partnership, as further amended, supplemented or otherwise modified
hereafter from time to time. All references in this Agreement to any "Article",
"Section", "Schedule" or "Exhibit" are, unless otherwise specified, to an
Article, a Section, a Schedule or an Exhibit of or to this Agreement.
"Allocation Year" means (a) the period commencing on the Closing Date
and ending on December 31, 1997, (b) except as otherwise required under Section
706 of the Code, any subsequent 12-month period commencing on January 1 and
ending on the next succeeding December 31 and (c) any portion of the period
described in clause (a) or (b) of this definition for which the Partnership is
required to allocate Profits, Losses and other items of Partnership income,
gain, loss or deduction pursuant to Article IV.
"Alternate Appraiser" has the meaning specified in Section
4.09(b)(i)(B).
"Alternate Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be equal to
the highest of:
(a) the rate of interest announced publicly by the Rate Determination
Bank in New York, New York from time to time, as the Rate Determination
Bank's base rate or prime rate;
(b) the sum (adjusted to the nearest 1/4 of 1% or, if there is no
nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1% per annum
plus (ii) the rate obtained by dividing (A) the latest three-week moving
average of secondary market morning offering rates in the United States of
America for three-month certificates of deposit of major United States
money center banks, such three-week moving average (adjusted to the basis
of a year of 360 days) being determined weekly on each Monday (or, if such
day is not a Business Day, on the next succeeding Business Day) for the
three-week period ending on the previous Friday by the Rate Determination
Bank on the basis of such rates reported by certificate of deposit dealers
to and published by the
3
Federal Reserve Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates received by the
Rate Determination Bank from three New York certificate of deposit dealers
of recognized standing selected by the Rate Determination Bank, by (B) a
percentage equal to 100% minus the average of the daily percentages
specified during such three-week period by the Board of Governors of the
Federal Reserve System (or any successor thereto) for determining the
maximum reserve requirement (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) for the Rate
Determination Bank with respect to liabilities consisting of or including
(among other liabilities) three-month U.S. dollar nonpersonal time deposits
in the United States of America plus (iii) the average during such three-
week period of the annual assessment rates estimated by the Rate
Determination Bank for determining the then current annual assessment rate
payable by the Rate Determination Bank to the Federal Deposit Insurance
Corporation (or any successor thereto) for insuring U.S. dollar deposits of
the Rate Determination Bank in the United States of America; and
(c) 1/2 of 1% per annum above the Federal Funds Rate.
"Ammonia Loop" means the ammonia loop facility that will be
constructed as an extension of the Methanol Plant pursuant to the Engineering,
Procurement and Construction Agreement dated as of October 20, 1997 between
Terra Nitrogen Corporation, a Delaware corporation and a Wholly Owned Subsidiary
of Terra Capital, and Xxxxxx Xxxxxxx USA Corporation, a Delaware corporation, as
amended, supplemented or otherwise modified from time to time hereafter in
accordance with the terms thereof.
"Applicable Amounts" has the meaning specified in the definition of
"Early Termination Premium" set forth below in this Appendix.
"Appraisal Guidelines" means the guidelines set forth on Schedule II
attached hereto which have been established for appraising the fair market value
of the Methanol Plant and the Methanol Related Assets and/or the Ammonia Loop.
"Appraiser" has the meaning specified in Section 4.09(b)(i)(B).
"Asset Value" means, with respect to any Partnership Property, the
adjusted basis of such Partnership Property for United States federal income tax
purposes, except as follows:
(a) The initial Asset Value of any Partnership Property contributed to
the Partnership pursuant to Sections 3.01 and 3.02 shall be as set forth in
Section 4.09(a);
(b) The Asset Values of all Partnership Property shall be adjusted to
equal their respective values, as determined in accordance with Section
4.09(b) (or, in the case of cash, shall be its face amount) on the date
specified in Section 4.09(b), upon the following events: (i) the
distribution by the Partnership to a Partner of more than a de minimis
amount of Partnership Property as consideration for an Interest and (b) the
liquidation of the Partnership within the meaning of Section 1.704-
1(b)(2)(ii)(g) of the Regulations;
4
(c) The Asset Value of any Partnership Property distributed to any
Partner shall be adjusted to equal the value of such Partnership Property,
as determined in accordance with Section 4.09(b) (or, in the case of cash,
shall be its face amount) on the date specified in Section 4.09(b), or, if
the distribution is made pursuant to Section 13.02, on the date of such
distribution; and
(d) The Asset Values of all Partnership Property shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
Partnership Property pursuant to Section 734(b) or 743(b) of the Code, but
only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of
the Regulations and clause (d) of the definition of "Profits" and "Losses"
set forth below in this Appendix or Section 4.03(g); provided, however,
that Asset Values shall not be adjusted pursuant to this clause (d) to the
extent that an adjustment pursuant to clause (b) is required in connection
with a transaction that would otherwise result in an adjustment pursuant to
this clause (d).
If the Asset Value of any Partnership Property has been determined or adjusted
pursuant to clause (a), (b) or (d) of this definition, such Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such Partnership Property for purposes of the allocations made pursuant to
Article IV.
"BAI" means Beaumont Ammonia, Inc., a Delaware corporation and Wholly
Owned Subsidiary of Terra U.K. Holdings, the principal business of which shall
be the construction and operation of the Ammonia Loop.
"Bankruptcy" means, collectively, a Voluntary Bankruptcy or an
Involuntary Bankruptcy.
"Business Day" means a day on which banks are not required or
authorized to close in New York, New York, and, if the applicable Business Day
relates to the computation of the Eurodollar Rate, a day on which dealings are
carried on in the London interbank market.
"Capital Account" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(a) To each Partner's Capital Account there shall be credited (i) such
Partner's Capital Contributions, (ii) such Partner's distributive share of
Profits and any items of Partnership income or gain which are specially
allocated pursuant to Section 4.03 or 4.04 and (iii) the amount of any
Partnership debts or liabilities assumed by such Partner or secured by any
Partnership Property distributed to such Partner.
(b) From each Partner's Capital Account there shall be debited (i) the
amount of cash and the Asset Value of any Partnership Property distributed
to such Partner pursuant to any provision of this Agreement, (ii) such
Partner's distributive share of Losses and any items of Partnership losses
or deductions which are specially allocated pursuant to Section 4.03 or
4.04 and (iii) the amount of any debts or liabilities of such Partner
assumed by the Partnership or secured by any property or assets contributed
by such Partner to the Partnership.
5
(c) If all or a portion of an Interest is Transferred in accordance
with the terms of Article XI, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the Interest
Transferred.
(d) In determining the amount of any debt or liability for purposes
of clause (a) or (b) of this definition, Section 752(c) of the Code and any
other applicable provisions of the Code and the Regulations shall be taken
into account.
The foregoing provisions of this definition and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Section 1.704-1(b) of the Regulations and shall be interpreted and applied
in a manner consistent with such Regulations. If the General Partner shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to debts or liabilities which are secured by contributed or
distributed property or assets or which are assumed by the Partnership or any
Partner), are computed in order to comply with such Regulations, the General
Partner may make such modification; provided that any such modification, either
individually or in the aggregate, could not reasonably be expected to have a
material effect on the amounts distributable to any Partner pursuant to Article
XIII upon the dissolution of the Partnership. The General Partner also shall
make any such adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Partners and the amount of Partnership
capital reflected on the Partnership's balance sheet, as computed for book
purposes in accordance with Section 1.704-1(b)(2)(iv)(q) of the Regulations;
provided that, to the extent any such adjustment is inconsistent with the other
provisions of this Agreement and would have a material effect on the amounts
distributable to any Limited Partner, such adjustment shall require the consent
of such Limited Partner.
"Capital Contribution" means, with respect to any Partner, the amount
of cash and the Initial Asset Value of all Permitted Assets (other than cash)
contributed to the Partnership with respect to the Interest held by such
Partner. The principal amount of a promissory note which is not readily traded
on an established securities market and which is contributed to the Partnership
by the maker of the note (or a Partner related to the maker of the note (within
the meaning of Section 1.704-1(b)(2)(ii)(c) of the Regulations)) shall not be
included in the Capital Account of any Partner until the Partnership makes a
taxable disposition of such promissory note or until (and to the extent)
principal payments are made on such promissory note, all in accordance with
Section 1.704-1(b)(2)(iv)(d)(2) of the Regulations.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System maintained by the United States Environmental
Protection Agency.
"Certificate" has the meaning specified in Section 1.04.
"Class A Beneficial Owners" means the beneficial owners of the Class A
Limited Partner.
6
"Class A Limited Partner" means any Person who (a) is referred to as
such in the first paragraph of this Agreement or who has become a substitute
Class A Limited Partner pursuant to the applicable provisions of Article XI and
(b) has not ceased to be a Class A Limited Partner.
"Class A Limited Partner Guaranteed Payment" has the meaning specified
in Section 5.03.
"Class B Limited Partner" means any Person who (a) is referred to as
such in the first paragraph of this Agreement or who has become a substitute
Class B Limited Partner pursuant to the applicable provisions of Article XI and
(b) has not ceased to be a Class B Limited Partner.
"Closing Date" means December 31, 1997.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Confidentiality Agreement" has the meaning specified in Section
11.03(a).
"Credit Facility" means the Amended and Restated Credit Agreement
dated as of March 31, 1998 among the Class A Limited Partner, the banks,
financial institutions and other institutional lenders from time to time party
thereto, Citibank, N.A., as agent for such banks, financial institutions and
other institutional lenders, and The Bank of Nova Scotia and Bank of America
National Trust and Savings Association, as syndication agents therefor, as
further amended, supplemented or otherwise modified from time to time hereafter
in accordance with the terms thereof.
"Cumulative First Priority Return" means, at any date of
determination, the sum of the amounts determined pursuant to the definition of
the "First Priority Return" set forth below in this Appendix for each
Distribution Period since the Closing Date, and, without duplication, any
Current Period ending on such date.
"Cumulative Second Priority Return" means, at any date of
determination, the sum of the amounts determined pursuant to the definition of
the "Second Priority Return" set forth below in this Appendix for each
Distribution Period since the Closing Date, and, without duplication, any
Current Period ending on such date.
"Current Period" means any Distribution Period or any portion thereof.
"Demand Loan" means any senior demand loan (a) made by the Partnership
to Terra Capital or any of its Affiliates (including, without limitation, Terra
U.K.), (b) the repayment obligations of which bear an arm's-length floating
interest rate, and are evidenced by a promissory note, in substantially the form
of Exhibit E-1 attached hereto, (c) which is secured by a valid and perfected
lien on and security interest in all of the property and assets of Terra and its
Subsidiaries described on Schedule III attached hereto and (d) solely in the
case of any such demand loan to an Affiliate of Terra Capital, the repayment
obligations of which are unconditionally and irrevocably guaranteed by Terra
Capital on the terms set forth in Exhibit E-2 attached hereto.
7
"Depreciation" means, for each Allocation Year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable for United
States federal income tax purposes with respect to any Partnership Property for
such Allocation Year, except that if the Asset Value of any such Partnership
Property asset differs from its adjusted basis for United States federal income
tax purposes at the beginning of such Allocation Year, Depreciation shall be an
amount which bears the same ratio to such beginning Asset Value as the United
States federal income tax depreciation, amortization or other cost recovery
deduction for such Allocation Year bears to such beginning adjusted
basis;[Confidential material has been omitted pursuant to a request for
confidential treatment filed with the Commission under Rule 24b-2(b) and has
been filed separately with the Commission.]
"Distribution Date" means the last Business Day of each Distribution
Period.
"Distribution Period" means (a) the period commencing on the Closing
Date and ending on March 31, 1998 and (b) thereafter, each subsequent period
commencing on the last day of the immediately preceding Distribution Period and
ending on the earliest to occur of the next succeeding March 31, June 30,
September 30 or December 31; provided, however, that whenever the last day of
any Distribution Period would otherwise occur on a day other than a Business
Day, the last day of such Distribution Period shall occur on the immediately
preceding Business Day and the next Distribution Period shall commence on such
day.
"Early Termination Premium" means an amount equal to (a) the aggregate
Capital Contribution of the Class A Limited Partner multiplied by (b) the
difference, if any, between (i) the present value of the sum of (A) 0.00189
received quarterly on the last Business Day of each Distribution Period
occurring during the period commencing on the applicable Retirement Date,
Purchase Date or Termination Date, as the case may be, and ending on the then
current Reset Date and (B) 0.04444 received on such Reset Date (the "Applicable
Amounts"), discounted at a rate equal to the sum of (1) the bid-side yield on
U.S. Treasury notes whose maturity matches or approximates the then current
Reset Date and (2) 2.50% minus (ii) the present value of the Applicable Amounts,
discounted at the rate of 17%.
"Environmental Action" means any legal action, suit, demand, demand
letter, claim, notice of noncompliance or violation, notice of liability or
potential liability, governmental or regulatory investigation, proceeding,
consent order or consent agreement, abatement order or other order or directive
(conditional or otherwise) relating in any way to any Environmental Law, any
Environmental Permit or any Hazardous Materials or arising from alleged injury
or threat to health, safety, natural resources or the environment, including,
without limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
and (b) by any governmental or regulatory authority or other third party for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, order, writ, judgment,
injunction or decree, or any judicial or agency interpretation, policy,
guideline or other requirement of any governmental or regulatory authority,
relating to (a) the generation, use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Materials, (b) pollution or
the protection of the environment, health, safety or natural resources or (c)
occupational safety and health, industrial hygiene, land use or the protection
of human, plant or
8
animal health or welfare, including CERCLA, the Hazardous Materials
Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 136 et seq.),
the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.), the Oil
Pollution Act (33 U.S.C. (S) 2701 et seq.) and the Emergency Planning and
Community Right-to-Know Act (42 U.S.C. (S) 11001 et seq.), in each case as
amended from time to time, and including the regulations promulgated and the
rulings issued from time to time thereunder.
"Environmental Permit" means any permit, approval, license,
identification number or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of the Partnership, or under common
control with the Partnership, within the meaning of Section 414 of the Internal
Revenue Code.
"ERISA Event" means:
(a) (i) the occurrence of a reportable event, within the meaning of
Section 4043(c) of ERISA, with respect to any Plan unless the 30-day notice
requirement with respect to such event has been waived by the Pension
Benefit Guaranty Corporation or (ii) the requirements of paragraph (1) of
Section 4043(b) of ERISA are met with respect to a contributing sponsor, as
defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described
in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA
could reasonably be expected to occur with respect to such Plan within the
following 30 days;
(b) the application for a minimum funding waiver with respect to a
Plan;
(c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred to in
Section 4041(e) of ERISA);
(d) the cessation of operations at a facility of the Partnership or
any of the ERISA Affiliates under the circumstances described in Section
4062(e) of ERISA;
(e) the withdrawal or partial withdrawal by the Partnership or any of
the ERISA Affiliates from a Plan or a Multiemployer Plan;
(f) the conditions for the imposition of a Lien under Section 302(f)
of ERISA shall have been met with respect to any Plan;
9
(g) the adoption of an amendment to a Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the Pension Benefit Guaranty Corporation of
proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA,
that constitutes grounds for the termination of, or the appointment of a
trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning specified in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from time
to time.
"Eurodollar Rate" means, for any Distribution Period or portion
thereof, an interest rate per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is not such a
multiple) of the rates per annum at which deposits in U.S. dollars are offered
by the principal office of each of the Reference Banks in London, England to
prime banks in the London interbank market at approximately 5:00 P.M. (London
time) two Business Days before the immediately preceding Distribution Date in an
amount substantially equal to $10,000,000 and for a period equal to three
months.
"Eurodollar Rate Reserve Percentage" means, for any Distribution
Period, the reserve percentage applicable two Business Days before the
immediately preceding Distribution Date under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any successor
thereto) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for a member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities (or
with respect to any other category of liabilities that includes deposits by
reference to which the Eurodollar Rate is determined) having a term equal to
three months.
"External Taxing Jurisdiction" means any state or local taxing
jurisdiction in the United States of America or any foreign taxing jurisdiction
with respect to which the Class A Limited Partner or any Class A Beneficial
Owner (or any of their respective Affiliates) has no connection other than as a
result of being a Partner or enforcing its rights under this Agreement.
"Extraordinary Expenses" means, collectively, all expenses in excess
of $500,000 for any single occurrence arising from any events, developments or
circumstances occurring after the Closing Date relating to or in connection with
or arising out of (a) any Environmental Law or Environmental Action, (b) (i) the
occurrence of any ERISA Event with respect to a Plan or any Withdrawal Liability
to any Multiemployer Plan, (ii) the insolvency, reorganization or termination of
any Multiemployer Plan, within the meaning of Title IV of ERISA, (iii) any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Internal Revenue Code), whether or not waived, with respect to one or
more of the Plans, or any Lien on the property and assets of the Partnership or
any of the ERISA Affiliates in favor of the Pension Benefit Guaranty Corporation
or any Plan, (c) local, state or federal income taxes in excess of 6% of taxable
income as computed for United States federal income tax purposes, (d) liability
in tort and (e) casualty and condemnation losses.
10
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the immediately preceding Business Day)
by the Federal Reserve Bank of New York or, if such rate is not so published for
any day that is a Business Day, the average of the quotations for such day for
such transactions received by the Rate Determination Bank from three federal
funds brokers of recognized standing selected by it.
"First Amended Partnership Agreement" has the meaning specified in
Section 1.01.
"First Priority Return"[Confidential material has been omitted
pursuant to a request for confidential treatment filed with the Commission under
Rule 24b-2(b) and has been filed separately with the Commission.]
"First Priority Return Rate" means (a) for each Current Period
occurring during the period commencing on the Closing Date and ending on the
first Reset Date, a rate per annum equal to (i) the sum of (A) 2.1043% per annum
and (B) (1) 0.95556 multiplied by (2) the Adjusted Eurodollar Rate in effect on
the first day of such Current Period or (ii) if at any time the Eurodollar Rate
is unavailable, the sum of (A) 1.1487% per annum and (B) (1) 0.95556 multiplied
by (2) the Alternate Base Rate in effect from time to time during such Current
Period and (b) for each Current Period commencing on or after the first Reset
Date, a rate per annum equal to either (i) (A) the sum of (1) 2.2969% per annum
and (2) the Adjusted Eurodollar Rate in effect on the first day of such Current
Period or (B) if at any time the Eurodollar Rate is unavailable, the sum of (1)
1.2969% per annum and (2) the Alternate Base Rate in effect from time to time
during such Current Period or (ii) such rate per annum as shall be agreed among
all of the Partners.
"Fiscal Quarter" means (a) the period commencing on the Closing Date
and ending on Xxxxx 00, 0000, (x) with respect to any fiscal quarter in any
Fiscal Year not described in clause (a) or (c) of this definition, any
subsequent consecutive three-month period commencing on April 1 and ending on
the next succeeding June 30, the period commencing on July 1 and ending on the
next succeeding September 30, the period commencing on October 1 and ending on
the next succeeding December 31 or the period commencing on January 1 and ending
on the next succeeding March 31, as the case may be, and (c) the period
commencing on the first day of the fiscal quarter in which the Termination Date
occurs and ending on the Termination Date.
"Fiscal Year" means (a) the period commencing on the Closing Date and
ending on December 31, 1998, (b) with respect to any fiscal year not described
in clause (a) or (c) of this definition, any subsequent consecutive 12-month
period commencing on January 1 and ending on the next succeeding December 31 and
(c) the period commencing on the immediately preceding January 1 and ending on
the Termination Date.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time and applied on a consistent basis.
11
"General Partner" means any Person who (a) is referred to as such in
the first paragraph of this Agreement or has become a substitute General Partner
pursuant to the applicable provisions of Article XI and (b) has not ceased to be
a General Partner.
"Hazardous Materials" means: (a) any chemical, material or substance
at any time defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous waste", "acutely
hazardous waste", "radioactive waste", "biohazardous waste", "pollutant", "toxic
pollutant", "contaminant", "restricted hazardous waste", "infectious waste",
"toxic substances", or any other term or expression intended to define, list or
classify substances by reason of properties harmful to health, safety or the
indoor or outdoor environment (including, without limitation, harmful properties
such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar
import) under any applicable Environmental Laws; (b) any oil, petroleum,
petroleum fraction or petroleum-derived substance; (c) any drilling fluids,
produced waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (d) any flammable
substances or explosives; (e) any radioactive materials; (f) any asbestos-
containing materials; (g) any urea formaldehyde foam insulation; (h) any
electrical equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls; (i) any pesticides; (j) any radon gas; and (k) any
other chemical, material or substance designated, classified or regulated as
hazardous or toxic or as a pollutant or contaminant under any Environmental Law
or which could pose a hazard to health, safety or the environment.
"Holdings" has the meaning specified in the first paragraph of this
Agreement.
"Incipient Event" means an event which with notice or lapse of time or
both would constitute a Terminating Event or Notice Event.
"Indebtedness" means, with respect to any Person (without
duplication):
(a) all indebtedness of such Person for borrowed money;
(b) all obligations of such Person for the deferred purchase price of
property and assets or services (other than (i) trade payables or other
accounts payable incurred in the ordinary course of such Person's business
and not past due for more than 30 days and (ii) deferred employee
compensation and other employee benefits);
(c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments;
(d) all obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as capital leases; and
(e) all Indebtedness referred to in clauses (a) through (d) above
guaranteed directly or indirectly by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee
or lessor)
12
property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the
holder of such Indebtedness against loss, (iii) to supply funds to or in
any other manner invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is received or
such services are rendered) or (iv) otherwise to assure a creditor against
loss.
"Indemnitee" has the meaning specified in Section 6.05(d)(i).
"Indemnitor" has the meaning specified in Section 6.05(d)(i).
"Initial Appraiser" has the meaning specified in Section 4.09(a)(iii).
"Initial Asset Value" means the initial value of a Permitted Asset
determined pursuant to Section 4.09(a).
"Interest" means any interest in the Partnership representing all or
any portion of the Capital Contributions made or deemed made by a Partner
pursuant to Article III, including any and all benefits to which the holder of
such an Interest may be entitled as provided in this Agreement, together with
all obligations of such Person to comply with the terms and provisions of this
Agreement.
"Investment" means, with respect to any Person, any loan or advance to
such Person, any purchase or other acquisition of shares of capital stock of (or
other ownership or profit interests in), or other obligations or other
securities (including, without limitation, warrants, rights and options) of,
such Person, any capital contribution to such Person or any other investment in
such Person, including, without limitation, any arrangement pursuant to which
the investor incurs Indebtedness of the types referred to in clause (e) of the
definition of "Indebtedness" set forth above in this Appendix in respect of such
Person.
"Involuntary Bankruptcy" means, with respect to any Person, without
the consent or acquiescence of such Person, the entering of an order for relief
or approving of a petition for relief or reorganization of such Person, or any
other petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or other similar relief of such Person
under any present or future bankruptcy, insolvency or similar statute, law or
regulation, or the filing of any such petition against such Person, in any such
case which petition shall not be dismissed within 60 days, or, without the
consent or acquiescence of such Person, the entering of an order appointing a
trustee, custodian, receiver or liquidator of such Person or of all or any
substantial portion of its property and assets, in any such case which order
shall not be dismissed within 60 days.
"Issuance Items" has the meaning specified in Section 4.03(h).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement having
the effect of a lien, security interest or other charge or encumbrance,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on title
to real property.
13
"Limited Partners" means, collectively, the Class A Limited Partner
and the Class B Limited Partner.
"Liquid Investments" means any of the following types of Investments,
to the extent owned by any Person free and clear of all Liens (other than Liens
created under the Transaction Documents):
(a) readily marketable obligations issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than 90 days from the
date of acquisition thereof; provided that the full faith and credit of the
United States of America is pledged in support thereof;
(b) time deposits or demand deposits with, or insured certificates of
deposit of, any commercial bank that (i) is organized under the laws of the
United States of America, any state thereof or the District of Columbia or
is the principal banking subsidiary of a bank holding company organized
under the laws of the United States of America, any state thereof or the
District of Columbia and is a member of the Federal Reserve System and (ii)
issues (or the parent of which issues) commercial paper rated as described
in clause (c) of this definition, in each case with maturities of not more
than 90 days from the date of acquisition thereof;
(c) commercial paper issued by any Person organized under the laws of
any state of the United States of America and rated at least "Prime-1" (or
the then equivalent grade) by Moody's or at least "A-1" (or the then
equivalent grade) by S&P, in each case with maturities of not more than 90
days from the date of acquisition thereof;
(d) Investments, classified in accordance with GAAP as current assets
of such Person, in money market investment programs registered under the
Investment Company Act of 1940, as amended, which are structured to trade
at a price equal to the face value thereof, and the portfolios of which are
substantially comprised of Investments of the character and quality
described in clauses (a), (b) and (c) of this definition; and
(e) cash.
"Liquidator" means (a) any Person appointed as such by the Class A
Limited Partner (which Person may be the General Partner) or (b) if a
Terminating Event which results from the Bankruptcy of the Class A Limited
Partner or the Notice Event referred to in clause (a) of the definition thereof
set forth below in this Appendix has occurred and is continuing, the General
Partner; provided that if the final liquidation distributions have not been made
by the General Partner within 30 days of the date of any such Terminating Event,
the Class A Limited Partner shall thereafter have the right to appoint a
replacement Liquidator.
"Loan Purchase Agreement" has the meaning specified in Section 6.01 of
the Terra Capital Note.
"Losses" has the meaning specified in the definition of "Profits and
Losses" set forth below in this Appendix.
14
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
"Xxxx-to-Market Event" means either (a) the retirement of any Interest
pursuant to Section 11.08 or (b) the liquidation of the Partnership pursuant to
Article XIII; provided, however, that, unless the Class A Limited Partner
otherwise consents, no Xxxx-to-Market Event shall occur if the Notice Event
giving rise to any event referred to in clause (a) or (b) above results from a
Terra Event.
"Xxxx-to-Market Valuation" means an adjustment of the Asset Value of
the Permitted Assets of the Partnership to reflect their respective Xxxx-to-
Market Values.
"Xxxx-to-Market Value" means, with respect to any Permitted Asset of
the Partnership, (a) upon a Xxxx-to-Market Event, the value of such Permitted
Asset as determined pursuant to Section 4.09(b) and (b) upon the exercise of the
Purchase Option, the value of such Permitted Asset as determined pursuant to
Section 4.09(b) and Section 2 of the Support and Option Agreement.
"Material Adverse Effect" means a material adverse effect on (a) (i)
the business, assets, operations, properties or financial condition of the
Partnership or any of its Subsidiaries or (ii) the contingent liabilities of the
Partnership or any of its Subsidiaries which could reasonably be expected to
result in any of the effects described in subclause (a)(i) of this definition
other than, in the case of subclause (a)(i) or (a)(ii) of this definition, any
such effect resulting solely from a general economic change in the industry of
the Partnership or any of its Subsidiaries, (b) the rights and remedies of the
Class A Limited Partner under this Agreement or any other Transaction Document
or (c) the ability of the Partnership or any of its Subsidiaries or the any of
the Terra Partners to perform or observe its obligations under this Agreement or
any other Transaction Document to which it is a party.
"Measurement Date" means (a) with respect to the retirement of the
Class A Partner's Interest pursuant to Section 11.08(a), the Distribution Date
immediately preceding the date on which the related Retirement Notice was
delivered, (b) with respect to the liquidation of the Partnership pursuant to
Article XIII, the Distribution Date immediately preceding the Distribution
Period in which the earlier of (i) the date on which the Terminating Event
giving rise to such liquidation occurred and (ii) if applicable, the date on
which the Notice Event (without giving effect to any grace period therefor)
giving rise to such Terminating Event occurred and (c) with respect to the
exercise of the Purchase Option, the Distribution Date immediately preceding the
Distribution Period in which the earlier of (i) if applicable, the Purchase
Election Date and (ii) the date on which the Notice Event (without giving effect
to any grace period therefor) giving rise to the Purchase Option occurred.
"Methanol Business" means the manufacture, storage, distribution and
marketing of methanol, including the maintenance and operation of the Methanol
Plant and the Methanol Related Assets.
"Methanol Plant" means the methanol production facility of the
Partnership located in Beaumont, Texas and having, on the date of this
Agreement, a rated capacity of approximately 280,000,000 gallons per year.
15
"Methanol Related Assets" means the feedstock and other raw materials,
the product pipeline and the other property and assets related to the
maintenance and operation of the Methanol Plant and the operation of the
Methanol Business.
"Moody's" means Xxxxx'x Investors Service, Inc., or any successor
thereto.
"Multiemployer Plan" means a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) to which the Partnership or any of the ERISA Affiliates (a)
is making or accruing an obligation to make contributions or (b) has within any
of the preceding five plan years made or accrued an obligation to make
contributions and with respect to which the Partnership or any of the ERISA
Affiliates could reasonably be expected to have liability.
"Multiple Employer Plan" means a single employer plan (as defined in
Section 4001(a)(15) of ERISA) that (a) is maintained for employees of the
Partnership or any of the ERISA Affiliates and at least one Person other than
the Partnership and the ERISA Affiliates or (b) was so maintained and in respect
of which the Partnership or any of the ERISA Affiliates could reasonably be
expected to have liability under Section 4064 or 4069 of ERISA in the event such
plan has been or were to be terminated.
"Nonrecourse Deductions" has the meaning specified in Section 1.704-
2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning specified in Section 1.704-
2(b)(3) of the Regulations.
"Notice Event" means any of the following events:
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
"Nova" has the meaning specified in the first paragraph of this
Agreement.
"NPL" means the National Priorities List under CERCLA.
"Original Capital Contribution" means, with respect to each Partner,
the Capital Contribution made, or deemed made, by such Partner pursuant to
Section 3.01 or 3.02, as applicable.
"Partner Nonrecourse Debt" has the meaning specified in Section 1.704-
2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means, with respect to any
Partner Nonrecourse Debt, an amount equal to the Partnership Minimum Gain that
would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
16
"Partner Nonrecourse Deductions" has the meaning specified in Sections
1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
"Partners" means, collectively, the General Partner and the Limited
Partners.
"Partnership" means the partnership continued pursuant to this
Agreement.
"Partnership Balance Sheet" has the meaning specified in Section
9.02(c)(ii)(A).
"Partnership Income Statement" has the meaning specified in Section
9.02(c)(ii)(B).
"Partnership Matters" has the meaning specified in Section 4.06(b).
"Partnership Minimum Gain" has the meaning specified in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Partnership Property" means all real and personal property and assets
owned by the Partnership and any improvements thereto, and shall include both
tangible and intangible property.
"Percentage Interest" means, with respect to each Partner at any date
of determination, the ratio (expressed as a percentage) of (a) such Partner's
Capital Account on such date to (b) the aggregate Capital Accounts of all of the
Partners on such date, such Capital Accounts to be determined after giving
effect to all contributions, distributions and allocations for all periods
ending on or prior to such date.
"Permitted Assets" means,[Confidential material has been omitted
pursuant to a request for confidential treatment filed with the Commission under
Rule 24b-2(b) and has been filed separately with the Commission.]
"Permitted Securitization Assets" means the rights of the Partnership
under or in connection with (a) the Receivables Purchase Agreement dated as of
August 20, 1996 among Terra Funding, Inc., Terra Capital, the financial
institutions from time to time party thereto and Bank of America National Trust
and Savings Association, as administrative agent thereunder, and the "Agreement
Documents" referred to therein, in each case as amended, supplemented or
otherwise modified hereafter from time to time in accordance with their terms,
and (b) any successor transaction thereto effected on substantially the same
terms (other than with respect to the size of the receivables securitization
program) as the transaction contemplated by the documentation referred to in
clause (a) of this definition.
"Permitted Transfer" has the meaning specified in Section 11.02.
"Person" means any individual, partnership (whether general or
limited), corporation (including a business trust), limited or unlimited
liability company, joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
17
"Plan" means a Single Employer Plan and/or a Multiple Employer Plan,
as the context may require.
"Profits" and "Losses" means, for each Allocation Year, an amount
equal to the Partnership's taxable income or loss for such Allocation Year,
determined in accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in taxable income or
loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
(b) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be subtracted from such taxable income or
loss;
(c) If the Asset Value of any Partnership Property is adjusted
pursuant to clause (a) or (b) of the definition of "Asset Value" set forth
above in this Appendix, the amount of such adjustment shall be treated as
an item of gain (if the adjustment increases the Asset Value of such
Partnership Property) or an item of loss (if the adjustment decreases the
Asset Value of such Partnership Property) from the disposition of such
Partnership Property and shall be taken into account for purposes of
computing Profits or Losses;
(d) Gain or loss resulting from any disposition of Partnership
Property with respect to which gain or loss is recognized for United States
federal income tax purposes shall be computed by reference to the Asset
Value of the Partnership Property disposed of, notwithstanding that the
adjusted basis for United States federal income tax purposes of such
Partnership Property differs from its Asset Value;
(e) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year,
computed in accordance with the definition of "Depreciation" set forth
above in this Appendix;
(f) To the extent that an adjustment to the adjusted basis of any
Partnership Property pursuant to Section 734(b) or 743(b) of the Code is
required pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations to
be taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Partner's Interest, the amount
of such adjustment shall be treated as an item of gain (if the adjustment
increases the basis of such Partnership Property) or loss (if the
adjustment decreases the basis of such Partnership Property) from the
disposition of such Partnership Property and shall be taken into account
for purposes of computing Profits or Losses; and
18
(g) Notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Section 4.03 or 4.04 shall not be
taken into account in computing Profits or Losses.
"Purchase Date" means the date on which Terra Capital or its designee
purchases or otherwise acquires all (but not a portion) of the Interest of the
Class A Limited Partner or the equity interests in Nova, as the case may be,
pursuant to, and in accordance with the terms of, Section 2.1 or 2.2 of the
Support and Option Agreement.
"Purchase Election Date" means the date on which Terra Capital or its
designee elects to exercise the Purchase Option pursuant to, and in accordance
with the terms of, Section 2.1 or 2.2 of the Support and Option Agreement.
[Confidential material has been omitted pursuant to a request for confidential
treatment filed with the Commission under Rule 24b-2(b) and has been filed
separately with the Commission.]
"Ratably" means (a) with respect to the Terra Partners, in proportion
to each Terra Partner's Percentage Interest in the Partnership and (b) with
respect to all of the Partners, in proportion to each Partner's Percentage
Interest in the Partnership.
"Rate Determination Bank" means any of the Reference Banks selected by
the General Partner from time to time to act as such for all purposes of this
Agreement, which Reference Bank shall initially be Citibank, N.A.; provided that
the General Partner shall provide notice of any change in its selection of the
Rate Determination Bank to each of the other Partners at least five Business
days prior to the date on which any such change is proposed to become effective.
"Reference Banks" means Citibank, N.A., The Bank of Nova Scotia, Bank
of America National Trust and Savings Association and NationsBank of Texas, N.A.
"Regulations" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as amended from time to time (including
the corresponding provisions of successor regulations).
"Regulatory Allocations" has the meaning specified in Section 4.04(a).
"Reset Date" means (a) December 29, 2000 or (b) the Business Day
occurring on or immediately prior to the next succeeding third anniversary of
December 29, 2000, as the context may require.
"Responsible Officer" means (a) in the case of TMC, Holdings, Terra
Capital or Terra U.K. Holdings, any person that is an officer thereof holding
the position of vice president or higher (or the equivalent thereto) and (b) in
the case of any Person admitted as a substitute Partner in accordance with the
applicable provisions of Article XI, such executive officers of such Person as
are approved by the other Partners (such approval not to be unreasonably
withheld or delayed).
19
"Retirement Date" has the meaning specified in Section 11.08(d)(ii).
"Retirement Notice" has the meaning specified in Section 11.08(c).
"Retirement Payment" has the meaning specified in Section 11.08(d)(i).
"S&P" means Standard & Poor's Ratings Service, a division of The
XxXxxx-Xxxx Companies, Inc., or any successor thereto.
"Second Priority Return" means, for each Current Period, an amount
equal to (a) the Second Priority Return Rate for such Current Period multiplied
by (b) the sum of (i) (A) the Original Capital Contributions of the Terra
Partner described in Sections 3.01 and 3.02 plus (B) all Additional Capital
Contributions made by the Terra Partners pursuant to Section 3.03, adjusted for
the timing of any Additional Capital Contributions made during such Current
Period and (ii) (A) the Cumulative Second Priority Return as of the immediately
preceding Distribution Date minus (B) the cumulative distributions made to the
Terra Partners pursuant to Section 5.02 during the period commencing on the
Closing Date and ending on the immediately preceding Distribution Date. All
computations referred to in this definition shall be determined on the basis of
the actual number of days elapsed in a 360-day year (including the first day but
excluding the last day) occurring in the period for which the Second Priority
Return is being calculated.
"Second Priority Return Rate"[Confidential material has been omitted
pursuant to a request for confidential treatment filed with the Commission under
Rule 24b-2(b) and has been filed separately with the Commission.].
"Senior Financial Officer" means, with respect to any Person, the
Treasurer, the Assistant Treasurer, the Controller or the Chief Financial
Officer of such Person.
"Services Agreement" means the General and Administrative Services
Agreement dated as of December 31, 1997 among Terra, the General Partner and the
Partnership, as amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof and thereof.
"Single Employer Plan" means a single employer plan (as defined in
Section 4001(a)(15) of ERISA) that (a) is maintained for employees of the
Partnership or any of the ERISA Affiliates and no Person other than the
Partnership and the ERISA Affiliates or (b) was so maintained and in respect of
which the Partnership or any of the ERISA Affiliates could reasonably be
expected to have liability under Section 4069 of ERISA in the event such plan
has been or were to be terminated.
"Subsidiary" means, with respect to any Person, 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 Voting Interests
in such corporation, (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.
20
"Support and Option Agreement" means the Amended and Restated Support
and Option Agreement dated as of March 31, 1998 among Terra Capital, the Class A
Limited Partner and the Class A Beneficial Owners, as further amended
supplemented or otherwise modified from time to time hereafter in accordance
with the terms hereof and thereof.
"Tax Matters Partner" has the meaning specified in Section 9.03(a).
"Terminating Event" means any of the following events: [Confidential
material has been omitted pursuant to a request for confidential treatment filed
with the Commission under Rule 24b-2(b) and has been filed separately with the
Commission.]
"Termination Date" has the meaning specified in Section 5.03(a).
"Terra" means Terra Industries, Inc., a Maryland corporation and, on
the date of this Agreement, the indirect parent of Terra Capital.
"Terra Canada" means Terra International (Canada) Inc., a corporation
governed by the laws of Ontario and, on the date of this Agreement, an indirect
Subsidiary of Terra Capital.
"Terra Capital" means Terra Capital, Inc., a Delaware corporation and,
on the date of this Agreement, the direct parent of the Terra Partners.
"Terra Capital Loan Documents" means the Amended and Restated Credit
Agreement dated as of March 31, 1998 among Terra Capital, Terra Nitrogen,
Limited Partnership, the guarantors named therein, the banks, financial
institutions and other institutional lenders party thereto and Citibank, N.A.,
as administrative agent for such banks, financial institutions and other
institutional lenders, the notes issued from time to time thereunder and all of
the other "Loan Documents" as defined and referred to therein, in each case as
such agreement, instrument or other document may be amended, supplemented or
otherwise modified from time to time hereafter in accordance with the terms
thereof.
"Terra Capital Note" means the senior promissory note, of Terra
Capital payable to the order of the Partnership, which was issued in the form of
Exhibit F attached hereto, the repayment obligations under which bear an arm's-
length floating interest rate and all of the principal of which is due and
payable on December 29, 2000, and the obligations under which are secured by a
valid and perfected lien on and security interest in all of the property and
assets of Terra and its Subsidiaries described on Schedule V attached hereto, as
such promissory note has been or may be amended, supplemented or otherwise
modified from time to time hereafter in accordance with the terms hereof and
thereof.
"Terra Event" means an act or omission by Terra Capital or any of its
Affiliates [Confidential material has been omitted pursuant to a request for
confidential treatment filed with the Commission under Rule 24b-2(b) and has
been filed separately with the Commission.]
"Terra U.K. Holdings Stock" means the issued and outstanding shares of
capital stock of Terra U.K. Holdings.
21
"Terra Partners" means, collectively, TMC and Holdings, in each case
so long as such Person remains a Partner, and any other Affiliate of Terra that
may from time to time own an Interest hereunder.
"Terra U.K." means Terra Nitrogen (U.K.) Limited, a company formed
under the laws of England.
"Terra U.K. Holdings" means Terra (U.K.) Holdings Inc., a Delaware
corporation and a direct subsidiary of the Partnership.
"Terra U.K. Loan" means, at any date of determination, the aggregate
principal amount of all loans and advances outstanding under the Terra U.K. Loan
Documents on such date.
"Terra U.K. Loan Documents" means the Credit Agreement dated as of
December 31, 1997 among Terra U.K. and Terra U.K. Holdings, the note issued to
Terra U.K. Holdings thereunder and all of the other "Loan Documents" as defined
and referred to therein, in each case as amended by Amendment No. 1 dated as of
February 6, 1998 and Amendment No. 2 dated as of March 31, 1998 and as such
agreement, instrument or other document may be amended, supplemented or
otherwise modified from time to time hereafter in accordance with the terms
hereof and thereof.
"TMC" has the meaning specified in the first paragraph of this
Agreement.
"Transaction Documents" means this Agreement, the Support and Option
Agreement, the Terra Capital Note, the notes evidencing the Demand Loans and the
Services Agreement.
"Transfer" means, with respect to all or any portion of an Interest,
as a noun, any voluntary or involuntary sale, pledge, assignment, transfer or
other disposition of such Interest or any such portion thereof and, as a verb,
to voluntarily or involuntarily sell, pledge, assign, transfer or otherwise
dispose of such Interest or any such portion thereof.
"Transferee Certificate" has the meaning specified in Section
11.03(g).
"Transferor Certificate" has the meaning specified in Section
11.03(g).
"United States" and "U.S." each means the United States of America.
"Voluntary Bankruptcy" means, with respect to any Person, (a) (i) the
inability of such Person generally to pay its debts as such debts become due,
(ii) the failure of such Person generally to pay its debts as such debts become
due or (iii) an admission in writing by such Person of its inability to pay its
debts generally or a general assignment by such Person for the benefit of
creditors, (b) the filing of any petition or answer by such Person seeking to
adjudicate it a bankrupt or insolvent, or seeking for itself or its property and
assets any liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of such Person or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking, consenting to, or acquiescing in the entry of an order for relief or
the appointment of a receiver, trustee, custodian or other similar official for
such Person or for
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any substantial portion of its property or assets, or (c) the taking of any
corporate action by such Person to authorize any of the actions set forth in
clause (a) or (b) of this definition.
"Voting Interests" means shares of capital stock issued by a
corporation, or equivalent equity (or other ownership or profit) interests in
any other Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or Persons
performing similar functions) of such Person, even if the right so to vote has
been suspended by the happening of such a contingency.
"Wholly Owned Subsidiary" means, with respect to any Person, a
Subsidiary of such Person 100% of the Voting Interests in which are owned
beneficially by such Person, directly or indirectly through one or more Wholly
Owned Subsidiaries (without taking into account in determining such percentage
de minimis amounts of Voting Interests held by directors, nominees and similar
persons pursuant to statutory or regulatory requirements).
"Withdrawal Liability" has the meaning specified in Part I of Subtitle
E of Title IV of ERISA.
BLANK COPY
Omitted Version Second Amended and
Restated Partnership Agreement
