-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KiUNpTWvR0UZj1BdMV4W1SCMwcZ+UjFy9BicY3r1B5Yj8wfE7xDGM50hFBUJGd6d 1Xdge3xSECoXUVEJ15AuOA== 0000950131-98-000176.txt : 19980115 0000950131-98-000176.hdr.sgml : 19980115 ACCESSION NUMBER: 0000950131-98-000176 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TERRA INDUSTRIES INC CENTRAL INDEX KEY: 0000722079 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 521145429 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-08520 FILM NUMBER: 98506370 BUSINESS ADDRESS: STREET 1: TERRA CENTRE 600 4TH ST STREET 2: P.O. BOX 6000 CITY: SIOUX CITY STATE: IA ZIP: 51102-6000 BUSINESS PHONE: 7122771340 MAIL ADDRESS: STREET 1: TERRA CENTER STREET 2: 600 4TH ST P O BOX 6000 CITY: SIOUX CITY STATE: IA ZIP: 51102-6000 FORMER COMPANY: FORMER CONFORMED NAME: INSPIRATION RESOURCES CORP DATE OF NAME CHANGE: 19920517 8-K/A 1 AMENDMENT #1 TO FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A Amendment No. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 31, 1997 TERRA INDUSTRIES INC. (Exact name of registrant as specified in its charter) Maryland 1-8520 52-1145429 (State or other jurisdiction of (Commission File (I.R.S. Employer incorporation or organization) Number) Identification No.) Terra Centre 600 Fourth Street P.O. Box 6000 Sioux City, Iowa 51102-6000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (712) 277-1340 ================================================================================ Reference is made to the Current Report on Form 8-K dated November 20, 1997 filed by Terra Industries Inc. There is hereby added to such Form 8-K an Item 2 and an Item 7 as follows: ITEM 2. Acquisition or Disposition of Assets. Terra Industries Inc. ("Terra"), through its indirect, wholly owned subsidiary Terra Nitrogen (U.K.) Limited ("Terra Nitrogen UK"), acquired on December 31, 1997 the United Kingdom nitrogen fertilizer business (the "Business") of Imperial Chemical Industries plc ("ICI"). The Business, which had 1996 revenues of about $350 million, employs nearly 600 people at two manufacturing facilities located in Billingham (northeastern England) and Severnside (southwestern England) and at an office in Wilton. Combined annual production capacity for the facilities is approximately 740,000 metric tons of ammonia. Most of the ammonia is upgraded into nitric acid and ammonium nitrate, which upgrade facilities have annual production capacity of 1.2 million metric tons and 1.1 million metric tons, respectively. Additionally, 600,000 metric tons of annual carbon dioxide capacity is included in the Business. The output from these facilities is expected to continue to be marketed by Terra Nitrogen UK to agricultural and industrial users in the UK and to be exported to western Europe. The purchase price for the Business was (Pounds)200 million (or approximately $340 million). ICI retains liabilities relating to the Business. In a separate transaction, ICI is paying Terra (Pounds)8 million for an ammonium nitrate hedge agreement covering, under certain conditions, 500,000 metric tons per year for five years. Terra's payments, if any, under the hedge agreement cannot exceed (Pounds)58 million over the five-year period. As a result of making any such payments, Terra will not benefit fully from the U.K. price of ammonium nitrate over certain threshholds during the term of this hedge agreement. In addition, various implementation agreements have been entered into by the parties to provide services and materials to one another in connection with the Business and ICI's other businesses located nearby. Terra funded the acquisition with $125 million from a five year term loan provided by a bank group led by Citibank and secured by the assets of the Terra International (Canada) Inc. subsidiary, $175 million as part of the sale by Terra of a $225 million minority preferred limited partnership interest in its Beaumont Methanol, Limited Partnership subsidiary, and the balance with available cash. ITEM 7. Financial Statements and Exhibits. (a), (b) Financial Statements of Businesses Acquired and Pro Forma Financial Information. It is impracticable to provide the historical and pro forma financial statements for the Business, required by Item 7 of Form 8-K, by the date on which the report on Form 8-K relating to the above-described acquisition would be required to be filed under the Securities Exchange Act of 1934. Such financial statements will be filed with the Securities and Exchange Commission as soon as practicable, but not later than 60 days after January 15, 1998, the date on which such report on Form 8-K would be required to be filed. (c) Exhibits. 2 Sale of Business Agreement dated November 20, 1997 between ICI Chemicals & Polymers Limited, Imperial Chemical Industries, Terra Nitrogen (U.K.) Limited (f/k/a Terra Industries Limited) and Terra Industries Inc. 4 Amended and Restated Credit Agreement dated December 31, 1997 among Terra Capital, Inc., Terra Nitrogren, Limited Partnership, Certain Guarantors, Certain Lenders, Certain Issuing Banks and Citibank, N.A. (without exhibits or schedules). 99 Ammonium Nitrate Hedge Agreement dated December 31, 1997 between Terra International (Canada) Inc. and ICI Chemicals & Polymers Limited. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TERRA INDUSTRIES INC. By: /s/ George H. Valentine ------------------------------------ George H. Valentine Senior Vice President, General Counsel and Corporate Secretary Date: January 14, 1998 3 EX-2 2 SALE OF BUSINESS AGREEMENT CONFORMED COPY - -------------- EXHIBIT 10.14 DATED 20TH NOVEMBER, 1997 ICI CHEMICALS & POLYMERS LIMITED IMPERIAL CHEMICAL INDUSTRIES PLC TERRA INDUSTRIES LIMITED and TERRA INDUSTRIES INC. ------------------------------------ SALE OF BUSINESS AGREEMENT RELATING TO THE ICI FERTILIZER BUSINESS ------------------------------------ ALLEN & OVERY London CONTENTS
Clause Page 1. Interpretation............................................................1 2. Sale Of Business..........................................................7 3. Excluded Assets...........................................................9 4. Consideration And Stocks.................................................10 5. Conditions Precedent.....................................................11 6. Contracts................................................................15 7. Debts And Creditors......................................................17 8. Apportionments, Prepayments And Discounts................................17 9. Liabilities..............................................................19 10. Purchaser's Warranties...................................................21 11. Seller's Warranties......................................................22 12. Environmental............................................................26 13. Completion...............................................................26 14. Records, Assistance And Accounts.........................................27 15. Defunct Plant............................................................28 16. Employees................................................................29 17. Pensions.................................................................29 18. Guarantees...............................................................29 19. Protective Covenants.....................................................30 20. ICI Roundel..............................................................32 21. Confidentiality..........................................................32 22. Independent Accountant...................................................34 23. Announcements............................................................34 24. Value Added Tax And Capital Allowances...................................34 25. Computer Systems.........................................................36 26. Default Interest.........................................................37 27. Notices..................................................................37 28. General..................................................................37 29. Whole Agreement..........................................................39 30. Governing Law............................................................40 31. Jurisdiction.............................................................40 Schedules 1. Properties...............................................................41 2. Plant and Equipment......................................................42 3. Intellectual Property....................................................43 4. ICI and Terra Individuals................................................45 5. Excluded Assets..........................................................46 6. Implementation Agreements................................................47 7. Warranties...............................................................51 8. Employees................................................................62 9. Pensions.................................................................66 10. Stock Valuation..........................................................79 11. Environmental............................................................84 12. Conduct of Business up to Completion.....................................93 Signatories..................................................................122
Annexes 1. Implementation Agreements (not in agreed form) 2. Property Schedule 3. Property Warranties Agreed Form Documents A. Completion Certificate B. Disclosure Letter C. Property Documents D. Ammonium Nitrate Hedging Agreement E. Put Agreement F. Guarantee relating to D and E above G. Implementation Agreements (Schedule 6) H. Employee Notice (Schedule 8, paragraph (1)) THIS AGREEMENT is made on 20th November, 1997 BETWEEN: (1) ICI CHEMICALS & POLYMERS LIMITED (registered number 358535), a company incorporated under the laws of England, whose registered office is at The Heath, Runcorn, Cheshire WA7 4QF (the "Seller"); (2) TERRA INDUSTRIES LIMITED (registered number 3455690), a company incorporated under the laws of England, whose registered office is at 5 Appold Street, London EC2A 2HA (the "Purchaser"); (3) IMPERIAL CHEMICAL INDUSTRIES PLC (registered number 218019), a company incorporated under the laws of England, whose registered office is at Imperial Chemical House, Millbank, London SW1P 3JF ("ICI"); and (4) TERRA INDUSTRIES INC., a corporation incorporated under the laws of the state of Maryland, USA whose principal executive office is at 600 Fourth Street, P.O. Box 6000, Sioux City, Iowa ("Terra"). WHEREAS: (A) The Seller carries on the Business (as defined below). (B) The Seller wishes to sell and the Purchaser wishes to purchase the Business with a view to carrying on the Business as a going concern in succession to the Seller on the terms set out in this agreement. (C) The Seller is a wholly owned subsidiary of ICI. (D) The Purchaser is a wholly owned subsidiary of Terra. IT IS AGREED as follows: 1. INTERPRETATION (1) In this agreement: "Accounts" means the audited accounts relating to the Business for the twelve month periods ended 31st December, 1995 and 31st December, 1996 and the unaudited accounts relating to the Business for the nine months ended 30th September, 1997 (comprising in each case a balance sheet, profit and loss account and cash flow statement and related notes), copies of which are annexed to the Disclosure Letter and, for the purpose of clause 14(5) only, the audited accounts relating to the Business for the twelve months ending on 31st December, 1997; "Acquired Intellectual Property" means the Business Intellectual Property, Licensed Intellectual Property, Non-Exclusive Information and Exclusive Information; "Affiliate" means in relation to any party, any subsidiary undertaking or parent undertaking of that party and any other subsidiary undertaking of that parent undertaking for the time being; "Agreed Form" means, in relation to any document, the form of that document which has been initialled for the purpose of identification by or on behalf of the parties to this agreement; "Assets" means the several assets relating exclusively or primarily to the Business to be sold to the Purchaser under this agreement and described in clause 2(1) but excluding the Excluded Assets; "Billingham Site Services" means those services which the Seller or any relevant member of the Seller's Group supply from the Properties before Completion and which the Purchaser or its Affiliates will provide from the Properties following Completion pursuant to the Implementation Agreements; "Business" means the business carried on by the Seller and any relevant member of the Seller's Group at or from the Properties comprising: (1) the production, distribution and sale of: (a) ammonia; (b) nitric acid; (c) ammonium nitrate fertilizers; (d) sodium nitrite; (e) liquid carbon dioxide; and (2) the supply of the Billingham Site Services; "Business Day" means a day (other than a Saturday or Sunday) on which banks are generally open for normal business in both London and New York; "Business Intellectual Property" means all Intellectual Property (other than Licensed Intellectual Property) owned by the Seller or any relevant member of the Seller's Group and used exclusively in connection with the Business together with goodwill relating thereto including, without limitation, those shortly described in Part 1 of Schedule 3; "Completion" means completion of the sale and purchase of the Assets in accordance with clause 13 which shall be deemed to occur at 12 midnight London time on the Completion Date; "Completion Certificate" means a certificate in the Agreed Form confirming the matters described in clause 5(9); "Completion Date" has the meaning given in clause 13; "Computer Systems" means all computer systems and shall include, but not be limited to, computer processors, computer programmes, technical or other documentation, telecommunication systems and equipment data entered into, created or stored by such computer systems and all other computer related hardware, software, or peripherals; "Contracts" means all contracts and engagements (other than (i) any leases or licences in relation to the Properties and (ii) the contracts relating to the Employees) relating exclusively or primarily to the Business entered into before Completion, including orders made before Completion, by or on behalf of the Seller or any relevant member of the Seller's Group with third parties in connection with the Business which remain (in whole or in part) to be performed at Completion including, without limitation, all orders and contracts for the manufacture, sale or purchase of goods or provision or supply of services or for the hire purchase, credit sale, leasing or licence of goods or services, or the licensing of Intellectual Property and Information and including, without limitation, the Material Contracts; "Creditors" means all book, trade and other debts (including without limitation financial debt) or sums (including credit notes granted) due, owing, accrued or payable by the Seller or any of its Affiliates in respect of the Business (whether or not then invoiced and whether or not then due and payable) which are in respect of the period up to Completion; "Customs" means HM Customs & Excise; "Debts" means all book, trade and other debts or sums (including suppliers' credit notes) due, owing, accrued or payable to the Seller or its Affiliates in respect of the Business (whether or not then invoiced and whether or not then due and payable) which are in respect of the period up to Completion; "Default Interest" means LIBOR plus 2 per cent.; "Defunct Plant" has the meaning given in clause 15; "Disclosure Letter" means the letter to be dated the date of this agreement from the Seller to the Purchaser in the Agreed Form and, as the context may require, the letter together with additional specific disclosures made pursuant to clause 5 which shall be incorporated into the Disclosure Letter with effect from the Completion Date; "Employees" means those individuals employed by the Seller in the Business as set out in the Disclosure Letter; "Employment Regulations" means the Transfer of Undertakings (Protection of Employment) Regulations 1981; "Encumbrance" means any debenture, mortgage, charge, lien, deposit by way of security, bill of sale, option or right of pre-emption or other third party right (legal or equitable) but excluding licences of Intellectual Property or Information; "Environmental Claims" means any claims under the environmental warranties in paragraph A.6 of Schedule 7 or under the provisions of Schedule 11; "Excluded Assets" means the assets or rights referred to in clause 3; "Excluded Technologies" means those technologies set out in Part 3 of Schedule 3; "Exclusive Information" means all Information relating exclusively to the Business at Completion including, without limitation, the Information listed in Part 4 of Schedule 3; "Field of Activity" means the business of sale and manufacture of the Products; "Goodwill" means the goodwill of the Business with the right to carry on the Business in succession to the Seller and any relevant member of the Seller's Group but excludes any goodwill or other right in the ICI Roundel; "Hedging Agreements" has the meaning given in clause 13(2)(j); "ICI Controller's Manuals" means the control manuals which are recorded on disk which accompanies the Disclosure Letter or any printed copy made from that disk (as more fully described in Schedule 10); "Implementation Agreements" means the documents in Agreed Form listed in Schedule 6 and those other documents listed in Annex 1 to be entered into on the Completion Date; "Independent Accountant" has the meaning given in clause 22; "Information" means all information owned by the Seller or any other member of the Seller's Group relating to the Business including (but without limitation) know-how, trade secret, industrial and commercial information and techniques including (but not limited to) drawings, formulae, test reports, operating and testing procedures, shop practices, instruction manuals and tables of operating conditions and including all information owned by the Seller or any other member of the Seller's Group relating to the supply of any materials to the Business and to the marketing of any products or services supplied by the Business, including customer names and lists, sales targets, sales statistics, market share statistics, marketing surveys and reports, marketing research and any advertising or other promotional materials; "Intellectual Property Assignment" means the proforma assignment of Business Intellectual Property in Agreed Form; "Intellectual Property Consent" means the written consents executed by NWS Bank plc to the assignment to the Purchaser of the Seller's jointly held ownership in the marks "TALISMAN", "TALISMAN GOLD CARD", "CLASSIC" and "CLASSIC GOLD"; "Intellectual Property" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and re-examinations thereof, (b) all trademarks, service marks, trade dress, logos and trade names, together with all translations, adaptations, derivations and combinations thereof and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights and all applications, registrations, and renewals in connection therewith, (d) all intellectual property rights in all computer software (including data and related documentation), (e) all other proprietary rights of a similar nature, and (f) all intellectual property rights in all copies and tangible embodiments thereof (in whatever form or medium); "LIBOR" means the rate for deposits in Pounds Sterling for a period of one month which appears on the Reuters Screen ISDA Page at approximately 11.00 a.m., London time, on the first day of the period to which any interest period relates (the "Relevant Date"). If such rate does not appear on the Reuters Screen ISDA Page on the Relevant Date, the rate for that Relevant Date will be determined as if the parties had specified that the rate for the Relevant Date will be determined on the basis of the rates at which deposits in Pounds Sterling are offered by Midland Bank plc at approximately 11.00 a.m., London time, on the Relevant Date to prime banks in the London interbank market for a period of one month commencing on that Relevant Date; "Licensed Intellectual Property" means Intellectual Property owned by the Seller or any member of the Seller's Group and used non-exclusively in connection with the Business which is to be licensed by the Seller or the relevant member of the Seller's Group to the Purchaser but excluding the Excluded Technologies; "Material Contracts" has the meaning given in paragraph D(1) of Schedule 7; "Non-Exclusive Information" means Information owned by the Seller or any member of the Seller's Group and used non-exclusively in connection with the Business but excluding the Excluded Technologies; "Plant and Equipment" means the plant, machinery, desk top computers, spare parts, tools, equipment, tangible chattels, motor vehicles, trailers, furniture, fixtures and fittings (to the extent they are not included in the Properties) owned by the Seller or any member of the Seller's Group and used exclusively or primarily in connection with the Business as at Completion including, without limitation, those shortly described in Schedule 2; "Pounds Sterling", "Pounds" and "(Pounds)" means the lawful currency of the United Kingdom; "Premises" and "Premises Agreements" has the meaning given in Schedule 1; "Products" means ammonia, nitric acid, ammonium nitrate fertilizers, sodium nitrite and liquid carbon dioxide; "Properties" means the properties short particulars of which are set out in Schedule 1 and "Property" means any of them and includes every part of each of them; "Property Purchase Price" means, in respect of each Property, the consideration attributed to that Property as set out in Schedule 1; "Property Rights" has the meaning given in Schedule 1; "Property Documents" has the meaning given in Schedule 1; "Purchaser's Auditors" means Deloitte & Touche, Stonecutter Court, 1 Stonecutter Street, London EC4A 4TR; "Purchaser's Group" means the Purchaser's ultimate parent undertaking and that parent undertaking's Affiliates; "Purchaser's Solicitors" means Ashurst Morris Crisp of Broadwalk House, 5 Appold Street, London EC2A 2HA; "Records" means: (a) supplier records (but not the records referred to in clause 24(7)) excluding specific price, rebate and discount information relating in large part to supplies procured as part of an arrangement relating to any business other than the Business; (b) employee records; (c) management accounting records; and (d) all documents of title to the Assets (but excluding those relating to the Properties), in each case to the extent that the items are owned by the Seller or any relevant member of the Seller's Group at the Completion Date and relate exclusively or primarily to the Business; "Seller's Auditors" means KPMG Audit plc of 8 Salisbury Square, London EC4V 7BB; "Seller's Group" means the Seller's ultimate parent undertaking and that parent undertaking's Affiliates; "Seller's Solicitors" means Allen & Overy of One New Change, London EC4M 9QQ; "Shared IT Services Agreement" means the IT Services Agreement of even date herewith made between ICI and Terra; "Stock Location" has the meaning given in Schedule 10; "Stocktake" has the meaning given in Schedule 10; "Stocks" means the stocks of fuels, raw materials, ingredients, packaging, office and laboratory supplies, revenue engineering spares, consumable stores, work in progress and finished goods at Completion belonging to the Seller's Group held exclusively or primarily for the purposes of the Business; "subsidiary" shall have the meaning given in section 736 of the Companies Act 1985; "subsidiary undertaking" and "parent undertaking" shall have the meanings given in section 258 of the Companies Act 1985; "Taxation" means all taxes, levies, charges, imposts and withholdings wheresoever imposed and having the character of taxation and all penalties, charges and interest relating thereto; "Terra Individuals" has the meaning given in clause 11(2)(d); "Territory" means those countries which at the date of this agreement are part of the European Economic Area; "VAT" means value added tax; and "VAT Element" means the amount of the consideration for any supply of goods or services which is attributable to VAT chargeable on that supply. (2) Any express reference to an enactment includes references to: (a) that enactment as amended, extended or applied by or under any other enactment before or after this agreement; (b) any enactment which that enactment re-enacts (with or without modification); and (c) any subordinate legislation made (before or after this agreement) under any enactment, including one within (a) or (b) above, except to the extent that any of the matters referred to in (a) to (c) occurring after the date of this agreement increase or alter the liability of any party under this agreement. (3) The singular shall include the plural and vice versa and words denoting persons shall include bodies corporate and unincorporated associations of persons and, unless otherwise stated, shall include the permitted successors or assigns of such persons. (4) Subclauses (1) to (3) apply unless the contrary intention appears. (5) The headings in this agreement do not affect its interpretation. (6) Any Schedule, Appendix or Annex to this agreement shall take effect as if set out in this agreement and references to this agreement shall include its Schedules, Appendices and Annexes. (7) Where any statement is qualified by the expression "so far as the Seller is aware" or "to the Seller's knowledge, information and belief" or any similar statement, that statement shall, unless otherwise provided in this agreement, be deemed to mean such knowledge which those officers and operational and functional managers of the Seller listed in Part 1 of Schedule 4 (and no other persons) had in relation to the matter for which they have responsibility or ought to have had in relation to such matter. (8) For the purposes of clauses 7(1), 11(6)(b), 11(14), 14(1) and 14(4), where the statement "at the Seller's expense" or any similar statement is used and for the purpose of clauses 14(3) and 24(8) where the statement "at the Purchaser's expense" or any similar statement is used, that statement shall be deemed to mean the reimbursement by the Seller or Purchaser (as appropriate) of any reasonable out-of-pocket cost by the other party (or another member of such party's group) but shall not include any internal management time or attributable internal cost of the party to be reimbursed (or any other member of the such party's group). 2. SALE OF BUSINESS (1) The Seller shall sell or shall procure the sale by any relevant member of the Seller's Group in each case and the Purchaser shall purchase from Completion: (a) the Properties (together with the Property Rights); (b) the Plant and Equipment; (c) the Stocks; (d) the benefit (subject to the burden) of the Contracts; (e) the Goodwill; (f) the Business Intellectual Property; (g) to the extent they are capable of transfer to the Purchaser, franchises, approvals, permits, governmental licences, orders, registrations, certificates, variances, and similar rights obtained from governments and governmental agencies which relate exclusively or primarily to the Business; (h) the Exclusive Information; (i) all records, books, letters, files, correspondence, lists, plans, architectural plans, drawings, specifications, creative materials, studies, reports and other documents (or copies or extracts thereof if such records or documents do not relate exclusively or primarily to the Business) relating to the Business (excluding the VAT records referred to in clause 24(7)); and (j) all other assets of the Seller or any relevant member of the Seller's Group used, in the case of Business Intellectual Property and Exclusive Information, exclusively or, in the case of any other asset, exclusively or primarily, in connection with the Business, but excluding the assets referred to in clause 3. (2) Subject to subclauses (3) and (4), the Seller (or the relevant member of the Seller's Group) shall sell the Assets (except the Properties, the unregistered Business Intellectual Property and the Exclusive Information) with full title guarantee with effect from Completion free from all Encumbrances and together with all rights attaching thereto; provided that this shall be qualified to the extent that there has been specifically disclosed in the Disclosure Letter any Encumbrance or any other matter the existence of which reveals that the sale of the relevant Asset cannot be so made, in which event the Seller shall sell that Asset (except the Properties) with such rights, title and interest as the Seller has in that Asset and, for the avoidance of doubt, Part 1 of the Law of Property (Miscellaneous Provisions) Act 1994 shall not apply to the extent of such disclosure. (3) The Properties shall be sold on and subject to the conditions contained in Schedule 1. (4) The unregistered Business Intellectual Property and the Exclusive Information shall be sold with such rights, title and interest as the Seller or the relevant member of the Seller's Group has in such Business Intellectual Property. (5) The Seller and ICI grant to the Purchaser, effective from Completion, an irrevocable, perpetual, non-exclusive, royalty free licence to use the Licensed Intellectual Property and the Non-Exclusive Information in and for the purposes of the Business as carried on by the Seller at Completion. The Purchaser may appoint a sub-contractor to carry out, perform and discharge some or all of the rights and obligations granted under the licence without relieving the Purchaser of primary liability thereunder. Further, such licence shall be assignable in whole or in part if the assignment forms part of a sale of the whole or part of the Business by the Purchaser and the Intellectual Property and Information which is the subject of such assignment will be used by the assignee only in and for the purpose of the Business, or that part of it, provided that the Purchaser will remain primarily liable to the Seller under such licence unless the Seller, the Purchaser and any such assignee consent to a novation (or partial novation as the case may be) of such licence (or part thereof) such consent not to be unreasonably withheld or delayed by the Seller whose reasonable legal costs of entering into such novation or partial novation as the case may be, will be payable by the Purchaser. (6) The Seller undertakes that, if at any time after the date of this agreement, the Seller or the relevant member of the Seller's Group executes any assignment of all or any part of the Licensed Intellectual Property or Non-Exclusive Information, the Seller will or will procure that the relevant member of the Seller's Group will notify such assignee (as the case may be) of the Purchaser's rights in the same. (7) The Seller shall supply to the Purchaser a copy of such of the Non- Exclusive Information as the Purchaser may reasonably request. (8) Pending Completion the Seller shall, and shall procure that any relevant member of the Seller's Group shall, observe the provisions of Schedule 12. 3. EXCLUDED ASSETS Nothing in this agreement shall operate to transfer any assets or rights of the Seller, or any of its Affiliates other than those referred to in clause 2(1) and without limiting the generality of the foregoing there shall be expressly excluded and excepted from the sale and purchase and nothing in this agreement shall operate to transfer: (a) the statutory books and records of the Seller and the benefit to the Seller of this agreement; (b) any cash in hand or at bank (including uncleared cheques received at or before Completion to the extent the same relate to the period up to Completion) or bills receivable; (c) the Licensed Intellectual Property (provided that the Purchaser shall have the right to use and deal with the Licensed Intellectual Property in accordance with clause 2(5)); (d) subject to the provisions of clause 5, the benefit of any insurance effected by or on behalf of the Seller; (e) those assets listed in Schedule 5; (f) Non-Exclusive Information excluding the goodwill relating thereto; (g) any Debts and all charges, bills, notes and securities, receivable therefor; (h) any balances in respect of Taxation relating to the period up to Completion; (i) the Defunct Plant; and (j) the Excluded Technologies. 4. CONSIDERATION AND STOCKS (1) Subject to subclause (3), the consideration payable by the Purchaser for the sale of the Assets (under or procured under this agreement) shall be (Pounds)200,000,000, allocated as follows: (a) for the Properties and the Property Rights the sum of (Pounds)8,000,000 to be apportioned as provided in Schedule 1; (b) for the Plant and Equipment, the sum of (Pounds)170,000,000; (c) for the benefit (subject to the burden) of the Contracts, the Purchaser's covenant in clause 6; (d) for the Stocks, the sum of (Pounds)12,000,000 adjusted in accordance with the provisions of subclause (3); (e) for the Goodwill, the sum of (Pounds)7,000,000; (f) for the Business Intellectual Property, the sum of (Pounds)3,000,000; and (g) for the remaining items in clause 2(1), the sum of (Pounds)0. (2) The amount of (Pounds)200,000,000 shall be paid in full on Completion. (3) (a) The final purchase price to be paid hereunder for the Stocks shall be an amount equal to the value of the Stocks at the Completion Date calculated in accordance with the Stocktaking and valuation method set out in Schedule 10 (the "Stock Valuation"). (b) If the value of the Stocks exceeds (Pounds)12,000,000, the amount of such excess shall be due and payable by the Purchaser to the Seller within 15 days of the Stock Valuation. (c) If the value of the Stocks is less than (Pounds)12,000,000, the amount of such deficit shall be due and payable by the Seller to the Purchaser within 15 days of the Stock Valuation. (d) Any amounts due under this subclause (3) shall bear interest at the rate of LIBOR plus one per cent. from Completion to the date of receipt by the relevant party. (e) Each party shall bear its own costs in connection with the said Stocktaking and Stock Valuation. The fees of the Independent Accountant instructed in accordance with Schedule 10 shall be borne equally between the Seller and the Purchaser. (4) Subject to any express provisions in this agreement to the contrary, the consideration for the Business and the Assets and any other sum payable hereunder is exclusive of any stamp duty or transfer fees, which, if payable, shall be borne by the Purchaser. 5. CONDITIONS PRECEDENT (1) The sale and purchase of the Business is conditional on: (a) the Purchaser not having exercised its right to withdraw from the acquisition pursuant to subclause (6) below; (b) the Seller having delivered to the Purchaser confirmation of the matters referred to in subclause (5) below; and (c) satisfaction of subclause (2) below. (2) Insofar as the proposed acquisition constitutes a concentration with a community dimension within the scope of Council Regulation (EEC) 4064/89 (the "Regulation") the Seller and the Purchaser agree to comply with the requirements of the Regulation and not to enter into the proposed acquisition until the requirements of the Regulation have been satisfied which will be achieved by the occurrence of any of the following events: (a) if the European Commission issues a decision under Article 6(1)(b) of the Regulation (or is deemed to have done so under Article 10(6) of the Regulation) declaring that the proposed transaction is compatible with the common market without imposing any conditions on either the Seller's Group or the Purchaser's Group which are deemed by the Seller or the Purchaser, as the case may be, in their reasonable opinion to be unacceptable; or (b) if the European Commission initiates proceedings pursuant to Article 6(1)(c) of the Regulation and issues a decision declaring that the proposed transaction is compatible with the common market (or is deemed to have done so under Article 10(6) of the Regulation) without imposing any conditions on either the Seller's Group or the Purchaser's Group which are deemed by the Seller or the Purchaser, as the case may be, in their reasonable opinion to be unacceptable; or (c) if the proposed transaction has been referred to a competent authority of one or more EEA States, such competent authority or authorities having issued all authorisations, consents, clearances and approvals in respect of the proposed transaction as may reasonably be deemed necessary or appropriate by the Seller's Group and the Purchaser's Group; or (d) if the European Commission grants a derogation to Article 7(1) of the Regulation in respect of the proposed transaction pursuant to Article 7(4) of the Regulation; or (e) if the European Commission decides not to continue the suspension of the proposed transaction pursuant to Article 7(2) of the Regulation. (3) Each of the parties shall use reasonable endeavours to procure that the conditions in subclause (l) are fulfilled on or before 31st March, 1998 provided that if subclause (2)(b) is applicable each of the parties shall use reasonable endeavours to procure that subclause (2)(b) is fulfilled on or before 30th June, 1998. (4) If the conditions in subclause (l) are not fulfilled or waived on or before the relevant date specified in subclause (3) none of the parties (provided it shall have used reasonable endeavours as aforesaid) will have any rights or liabilities under this agreement except under clauses 1, 18, 21, 23, 27, 28(2), 28(5), 29, 30 and 31 which shall survive termination of this agreement. (5) Not later than 15 Business Days and five Business Days before the anticipated Completion Date and also immediately prior to Completion, the Seller shall provide the Purchaser with additional specific disclosures relating to the matters (if any) between the date of this agreement and the Completion Date, the absence of which would make the Warranties untrue (or incomplete) as at the Completion Date. (6) If there has been a Material Adverse Change (as defined below), the Purchaser shall be entitled either to agree to proceed to Completion or to withdraw from the acquisition in which latter case the provisions of subclause (4) shall apply (as if the conditions in subclause (1) had not been fulfilled before the relevant date referred to in subclause (3)). (7) If there arises or occurs between the time of execution of this agreement on the date hereof and Completion any fact, matter, event or circumstance in relation or pertaining to or giving rise to physical loss or damage to the Properties or Plant and Equipment which is or might reasonably be anticipated to be insured by or otherwise within the ambit of material damage Policy P450141/97/0/00 (the "Policy") under which the Seller or any member of the Seller's Group is an insured or otherwise has an insurable interest or any actual or contingent right of benefit, indemnity or payment from the insurer of that policy (the "Insurer"), then the Seller will use (and will procure that the relevant members of the Seller's Group use) its (and their) best endeavours to make all insurance recoveries (including any reinsurance recoveries) and to secure for the Purchaser all available benefits and indemnities in respect of the said physical loss or damage under the Policy and, subject to Completion, shall transfer all such insurance recoveries to the Purchaser and to the extent reasonably practicable give the Purchaser the benefit of or a benefit equal to all said available benefits and indemnities (in any case net of the reasonable costs of recovery from the Insurer and/or reinsurers). (8) (a) The Seller undertakes to the Purchaser that with reference to clause 5(7), the Seller will (and will procure that the relevant members of the Seller's Group will) furthermore: (i) as soon as reasonably practicable (and in any event within any time limit set down in the Policy) notify the Insurer in writing of the occurrence of an event, fact, matter or circumstance giving rise to a claim for physical loss or damage to the Properties, Plant and Equipment under the Policy, (at the same time delivering to the Purchaser a copy of such written notification to the Insurer) and keep the Purchaser regularly and fully advised as to the progress of such claim and allow the Purchaser at its election (but without obligation) to be consulted in any loss adjustment, claims handling and settlement; (ii) in the event that and to the extent that any payment is made or indemnity or benefit is given by the Insurer to the Seller or any member of the Seller's Group in relation to such claim under the Policy, forthwith pay to the Purchaser a sum equal to the payment received (net of the reasonable costs of recovery from the Insurer and/or reinsurers) or utilise, apply or secure for the benefit of the Purchaser any such benefit or indemnity. (b) The Seller further irrevocably undertakes to the Purchaser that the Seller will forthwith upon execution of this agreement notify the Insurer of the provisions of clause 5(7) and of this clause 5(8) and will procure that the interest of the Purchaser is noted by the Insurer on the Policy. (c) The Seller warrants and represents to the Purchaser that there is no impediment or prohibition (legal or otherwise) according to the terms of the Policy or according to the terms of any statute or regulation applicable to the Insurer or according to any licence or consent possessed or required by the Insurer that would prevent or restrict the operation of clause 5(7) and this clause 5(8) for the benefit of the Purchaser in accordance with the terms hereof including without limitation: (i) any restriction or prohibition on the ability of the Seller or any relevant of member the Seller's Group to procure the noting of the Purchaser's interest; or (ii) any restriction or prohibition on the Insurer making any payment or giving any benefit or indemnity to the Seller or any member of the Seller's Group pursuant to clauses 5(7) and 5(8)(b). (d) The provisions of this clause 5(8) shall only be of effect in respect of an event, fact, matter or circumstance occurring during the period commencing from the time of execution of this agreement on the date hereof until the provisions of clause 13 are satisfied on the Completion Date save in respect of any claims or events notified, (or of which the Seller was aware but did not notify) to the Insurer on or prior to the satisfaction of the provisions of clause 13 on the Completion Date. (e) The Seller undertakes to maintain in full force and effect the Policy until the satisfaction of the provisions of clause 13 on the Completion Date and in the event of any prior renewal or replacement of the Policy shall effect such renewal or replacement on at least the same terms and conditions of coverage as the Policy with the same Insurer and with equivalent reinsurance protections and further undertakes that the provisions of 5(8)(b) and 5(8)(c) shall apply to any such policy as if it were the Policy. (9) If there has been a breach of Warranty, by reference to the facts subsisting at the date of this agreement or at Completion or a breach of Schedule 12 but there has not been a Material Adverse Change (as defined below), then: (a) in the case of a breach of Warranty arising only upon its repetition at Completion and by reason of matters outside the Seller's control, the Seller, if it elects to remedy the breach of Warranty by reference to insurance recoveries, will use (and will procure that the relevant members of the Seller's Group use) its (and their) best endeavours to make all insurance recoveries (including any reinsurance recoveries) and to secure for the Purchaser all available benefits and indemnities in respect of the physical loss or damage to the Properties, Plant and Equipment under the Policy and, subject to Completion, shall transfer such insurance recoveries to the Purchaser and to the extent reasonably practicable give the Purchaser the benefit of or a benefit equal to all said available benefits and indemnities (in any case net of the reasonable costs of recovery from the Insurer and/or reinsurers). The Seller further undertakes that the Seller will (and will procure that the relevant members of the Seller's Group will) comply with the provisions of clause 5(8)(a) above. This provision shall only apply to insurance proceeds recoverable in respect of physical loss or damage to the Properties, Plant and Equipment occurring in the period between the time of execution of this agreement on the date hereof and Completion; and (b) in any other case the Seller shall, in respect of a breach of Warranty at the date of this of agreement or such a breach which arises between the date of this agreement and the Completion Date, remedy the matter or, if the matter is not remediable prior to Completion or is in respect of a breach of Warranty at Completion or breach of Schedule 12 prior to Completion, be liable in damages for breach of Warranty or for failing to comply with Schedule 12 (if applicable). (10) The Purchaser's right to withdraw under subclause (6) is its sole remedy under this agreement in the event of a Material Adverse Change. (11) The Seller shall provide a Completion Certificate in the Agreed Form to the Purchaser at Completion confirming, as appropriate, that: (a) the Warranties are true as at the Completion Date subject to the matters disclosed pursuant to subclause (5) above (which shall be incorporated into the Disclosure Letter); (b) the covenants given under Schedule 12 have been complied with or, if they have not been complied with, details of such non-compliance; and (c) there has been no Material Adverse Change. (12) For the purposes of this clause a "Material Adverse Change" means a change, whether inside or outside the Seller's control, whether relating to the Business or generally, which shows a deterioration in the aggregate value of the Business in the period from the date of signature of this agreement (on the assumption that the Warranties were, subject to the Disclosure Letter at the date hereof, correct at the date of this agreement) to the (scheduled) Completion Date of 10 per cent or more. In the event of dispute as to whether there has been a Material Adverse Change, either party may refer the matter for resolution by the courts of England pursuant to the provisions of clause 31. (13) If the matter is referred to the courts pursuant to subclause (10), the Seller will continue to perform the covenants in Schedule 12 pending final determination. If the final determination is that a Material Adverse Change did occur, the Purchaser's sole remedy shall be to withdraw in accordance with subclause (6) subject to any award for costs which the court may make. If the final determination is that a Material Adverse Change did not occur then Completion shall take place 30 Business Days following the final determination and the Warranties and Disclosure Letter will be treated as having been given as at the original scheduled Completion Date and shall not be repeated or speak from the actual later Completion Date. This shall be the Seller's sole remedy subject to any award for costs which the court may make. 6. CONTRACTS (1) As part of the consideration for the sale and purchase of the Assets the Purchaser shall from Completion: (a) accept assignments from the Seller (or other members of the Seller's Group, or both, as the case may be) of the Contracts or join with the Seller in procuring a novation of the Contracts; (b) carry out, perform and discharge all the obligations and liabilities created by or arising under the Contracts and which, under the terms of the relevant Contract, are (in whole or in part) to be performed after Completion; and (c) indemnify the Seller against all actions, proceedings, costs, damages, claims and demands in respect of any failure on the part of the Purchaser to carry out, perform and discharge those obligations and liabilities. (2) The Seller shall from Completion indemnify the Purchaser against all actions, proceedings, costs, damages, claims and demands in respect of any failure on the part of the Seller to carry out, perform and discharge all the obligations and liabilities created by or arising under the Contracts and which, under the terms of the relevant Contract, should have been carried out, performed or discharged prior to Completion. (3) Insofar as the benefit or burden of any of the Contracts cannot effectively be assigned to the Purchaser as set out in subclause (1) except by an agreement or novation with or consent to the assignment from the person, firm or company concerned: (a) the Seller shall at the Purchaser's request use all reasonable endeavours with the co-operation of the Purchaser to procure such novation or assignment; (b) until the Contract is novated or assigned the Seller shall hold it in trust for the Purchaser absolutely and the Purchaser shall (if such sub-contracting is permissible and lawful under the Contract), as the Seller's sub-contractor, carry out, perform and discharge all the obligations and liabilities of the Seller under the Contract to be carried out, performed or discharged after Completion (subject to receiving the benefit of such Contract) and shall indemnify the Seller against all actions, proceedings, costs, damages, claims and demands in respect of any failure on the part of the Purchaser to perform those obligations; and (c) until the Contract is novated or assigned the Seller shall (so far as it lawfully may) give all reasonable assistance to the Purchaser (at the Purchaser's request) to enable the Purchaser to enforce its rights under the Contract. If the Contract prohibits the Purchaser from acting as the Seller's sub- contractor (as referred to in paragraph (b) above) or the Purchaser cannot be permitted to act as sub-contractor because of confidentiality obligations, the Seller shall, at the cost of the Purchaser and to the extent that the Seller is reasonably able, do all such acts and things as the Purchaser may reasonably require to enable due performance of the Contract and to provide for the Purchaser the benefit, subject to the burden, of the Contract. For the purpose of this paragraph and paragraph (b) above, it shall not be reasonable to require the Seller to make any payment unless the Purchaser has first paid the Seller sufficient cleared funds to make such payment. For the purpose of complying with this paragraph (c) the parties shall bear their own costs except that the Seller shall pay any reasonable out of pocket expenses of the Purchaser. (4) Insofar as the benefit or burden of any licence of Intellectual Property (other than copyright in computer programmes which shall be dealt with under the provisions of clause 25) or Information (including without limitation a part of such licence as the case may be) that is not, nor forms part of, a Contract and that is necessary for the Business as performed by the Seller at Completion (a "Necessary Licence") cannot effectively be assigned to the Purchaser except by an agreement or novation with or consent to the assignment from the person, firm or company concerned: (a) the Seller shall at the Purchaser's request use all reasonable endeavours with the co-operation of the Purchaser to procure such novation or assignment; (b) until the Necessary Licence is novated or assigned the Seller shall hold it in trust for the Purchaser absolutely and the Purchaser shall (if such sub-contracting is permissible and lawful under the terms and conditions of the Necessary Licence), as the Seller's sub-contractor, carry out, perform and discharge all the obligations and liabilities of the Seller under the Necessary Licence to be carried out, performed or discharged after Completion (subject to receiving the benefit of such Necessary Licence) and shall indemnify the Seller against all actions, proceedings, costs, damages, claims and demands in respect of any failure on the part of the Purchaser to perform those obligations; and (c) until the Necessary Licence is novated or assigned the Seller shall (so far as it lawfully may) give all reasonable assistance to the Purchaser (at the Purchaser's request) to enable the Purchaser to enforce its rights under the Necessary Licence. If the Necessary Licence prohibits the Purchaser from acting as the Seller's sub- contractor (as referred to in paragraph (b) above) or the Purchaser cannot be permitted to act as sub-contractor because of confidentiality obligations, the Seller shall, at the cost of the Purchaser and to the extent that the Seller is reasonably able, do all such acts and things as the Purchaser may reasonably require to enable due performance of the Necessary Licence and to provide for the Purchaser the benefit, subject to the burden, of the Necessary Licence. For the purpose of this paragraph and paragraph (b) above, it shall not be reasonable to require the Seller to make any payment unless the Purchaser has first paid the Seller sufficient cleared funds to make such payment. For the purpose of complying with this paragraph (c) the parties shall bear their own costs except that the Seller shall pay any reasonable out of pocket expenses of the Purchaser. 7. DEBTS AND CREDITORS (1) The Seller shall collect the Debts for its own account and the Purchaser shall give reasonable assistance at the Seller's expense to the Seller to enable the Seller to collect the Debts. The Parties shall co-operate to ensure that in all aspects, including the application of payments and dealing with defaulting debtors, debtors are treated in a manner which is consistent with the Seller's previous practice. (2) The Purchaser shall account to the Seller for any Debts paid to it within 14 days of receipt. If a payment is received by the Purchaser from a person who owes any of the Debts and who is also a debtor of the Purchaser, it shall be applied (notwithstanding any direction of the debtor) in discharge of the earliest undischarged debt due from that person to the Seller or the Purchaser. (3) Any sums received by the Purchaser in respect of any of the Debts shall be held on trust by the Purchaser for the Seller on the terms of this clause. (4) If a payment is received by the Seller from a person who is a debtor of the Purchaser in respect of the Business carried on after the Completion Date, the Seller shall account to the Purchaser in respect of such amount within 14 days of receipt. Any such sums received by the Seller shall be held on trust by the Seller for the Purchaser. (5) The Seller shall discharge the Creditors and shall indemnify the Purchaser against all costs, claims, demands, proceedings, expenses and liabilities in respect of them. (6) The Purchaser shall discharge all creditors (as defined in the next sentence) and shall indemnify the Seller against all costs, claims, demands, proceedings, expenses and liabilities in respect of them. In this subclause (6) "creditors" means all book, trade and other debts (including without limitation financial debt) or sums (including credit notes granted) in respect of the Business which arise in respect of the period from Completion. 8. APPORTIONMENTS, PREPAYMENTS AND DISCOUNTS (1) For the avoidance of doubt all periodical charges and periodical outgoings of the Business including but not limited to rents, rates, non-customer rebates, gas, electricity, telephone and water charges and all liabilities in relation to salaries, wages, employee bonus entitlements, national insurance and pension contributions and accrued holiday pay and holiday entitlements (but for the avoidance of doubt this shall not include any entitlement to redundancy payments or any other obligation in respect of an Employee's period of continuous service) shall be apportioned on a time basis so that such part of the relevant charges attributable to the period ending on Completion shall be borne by the Seller and such part of the relevant charges attributable to the period commencing on the day immediately following Completion shall be borne by the Purchaser. All rents, licence fees, royalties and other periodical receipts of the Business shall be apportioned between the Seller and the Purchaser on a like basis. (2) As soon as practicable after Completion (and in any event not later than 45 Business Days after Completion) the Purchaser (with the assistance of the Seller as the Purchaser may reasonably request) shall prepare a schedule of the apportionment of costs and outgoings described in subclause (1) above (excluding employee bonus entitlements) and either the Seller or the Purchaser (as the case may require) shall (within 15 Business Days of such schedule being prepared) pay to the other an amount equal to the net liability shown in such schedule; in the case of employee bonus entitlements the Purchaser shall prepare schedules of the apportionment of the employee bonus payments as soon as reasonably practicable after the period in which the employee bonus entitlements accrue and the bonus entitlements have been calculated and the Seller shall (within 15 Business Days of such schedules being prepared) pay to the Purchaser the amounts payable by the Seller shown in such schedules. (3) All prepayments and payments in advance (excluding the amount of any VAT Element thereof to the extent that the Seller or the representative member of any VAT group of which the Seller is a member is required to account to Customs for such VAT) made to the Seller in the ordinary course of business prior to the Completion Date in respect of goods which are to be supplied or services which are to be provided by the Purchaser after the Completion Date, liability for which is to be assumed by the Purchaser under this agreement, shall be paid by the Seller to the Purchaser and a schedule of all such prepayments and payments in advance shall, as soon as practicable on or after the Completion Date and in any event not later than 45 Business Days after the Completion Date, be prepared by the Seller (with such assistance of the Purchaser as the Seller shall reasonably request) as at the Completion Date and the Seller shall, subject to the provisions of subclause (5) below, on the Completion Date or as soon as practicable thereafter pay to the Purchaser an amount equal to the amount of the liability shown in such schedule. (4) All prepayments and payments in advance (excluding any VAT Element thereof which is recovered by the Seller or the representative member of any VAT group of which the Seller is a member) made by the Seller in the ordinary course of business prior to the Completion Date in respect of goods to be supplied or services to be provided to the Purchaser after the Completion Date, the benefit of which the Purchaser shall receive under this agreement, shall be reimbursed to the Seller by the Purchaser and a schedule of such prepayments and payments in advance shall, as soon as practicable on or after the Completion Date (and in any event not later than 45 Business Days after the Completion Date), be prepared by the Seller (with such assistance of the Purchaser as the Seller shall reasonably request) as at the Completion Date, and the Purchaser shall, subject to the provisions of subclause (5) below, on the Completion Date or as soon as practicable thereafter pay to the Seller an amount equal to the amount of the liability shown in such schedule. (5) In the event that the Purchaser disputes the accuracy of the schedule(s) prepared by the Seller in accordance with subclauses (2), (3) or (4) above it shall pay or require the Seller to pay, as the case may be, the amount which is not in dispute forthwith and in the event that the Seller and Purchaser are unable to agree to such schedule(s) within fifteen (15) Business Days of the receipt of the relevant schedule(s) the Purchaser may refer the matter to an Independent Accountant in accordance with clause 22 and the Independent Accountant shall be instructed to make such determination as soon as practicable and in any event within 45 Business Days of being instructed) and the Seller or the Purchaser (as appropriate) shall pay the balance so determined within 15 Business Days of such determination. In the event that any such dispute is so referred to such Independent Accountant each of the Seller and the Purchaser shall bear 50 per cent. of the costs of such referral unless the Independent Accountant determines otherwise. (6) Notwithstanding anything suggesting the contrary contained in this agreement, the Seller shall remain responsible for paying customer discounts (on the basis set out below) which accrue in respect of sales made in the period up to Completion and the Purchaser shall be responsible for paying customer discounts which accrue in respect of sales made in the period after Completion. (7) In respect of any discounts (including, for this purpose, any volume related payments) which apply in respect of sales made both before Completion by the Seller and after Completion by the Purchaser, the Purchaser shall promptly following the expiry of the period to which they relate inform the Seller of the same and shall provide the Seller with a calculation of how much of such discount is payable by the Seller and how much by the Purchaser. Such calculation shall be made according to the discount structure by applying the ratio of volume of the Seller's sales pre-Completion to the volume of the Purchaser's sales post-Completion to the total discount due therefor. The total discount due in respect of the total discount period shall be calculated in line with the contract conditions existing at Completion and shall be pro-rated between the Purchaser and Seller according to the said ratio notwithstanding that the discount is expressed on a differential basis (e.g. even though a higher discount may be payable once sales pass a certain figure the parties shall assume that the total discount due is evenly spread across the total volume to which the discount pertains). Unless the Seller questions the accuracy of such calculation (in which case they shall be entitled to receive sufficient information to enable them to verify the same) such calculation shall be used by the Seller and the Purchaser for the purposes of settling the discount due in each case. The Seller shall pay to the Purchaser the discount payable by the Seller in accordance with the above calculation prior to the date on which it is payable by the Purchaser. (8) In the event that the Purchaser wishes to change an existing discount scheme it shall first bring to an end the existing scheme and make the calculations under subclause (7) in respect of the period up to the date on which the scheme is ended. (9) Disputes under subclauses (6), (7) or (8) may be referred by either party to the Independent Accountant pursuant to the provisions of clause 22. 9. LIABILITIES (1) The Seller undertakes to indemnify and keep indemnified the Purchaser against all claims by third parties giving rise to losses, costs, liabilities, proceedings, claims, demands and expenses (including reasonable legal fees) (together "Liabilities") which may be incurred by the Purchaser, or to which the Purchaser may become subject, and which arise as a result of the operation of the Business by the Seller (or any of its Affiliates) prior to Completion (whether the Liabilities are accrued, absolute, contingent, known or unknown at the Completion Date) other than as provided in clause 9(2) or the Implementation Agreements, but including without limitation Liabilities arising as a result of: (a) the Seller's failure (or that of any of its Affiliates) to comply with any relevant and legally enforceable corporate or other laws, rules, ordinances, regulations with respect to the operation of the Business by the Seller (or any of its Affiliates) prior to Completion; (b) any liability to Taxation in respect of the period prior to Completion; (c) the Seller's failure (or that of any of its Affiliates) to obtain any required relevant governmental or regulatory permit, licence, consent or other authorisation or renewal or variation thereof with respect to the operation of the Business by the Seller (or any of its Affiliates) prior to Completion; (d) any breach of contract, tort, product liability or other claim arising from or with respect to, the operation of the Business by the Seller (or any of its Affiliates) prior to Completion; (e) any suit, action, arbitration, charge, governmental investigation, claim, litigation or proceedings arising as a result of the operation of the Business prior to Completion; (f) any liabilities of the Business arising in connection with any Excluded Assets; (g) any fines and/or penalties and/or damages which are imposed by the Commission of the European Communities (the "Commission") and/or the EFTA Surveillance Authority (the "ESA") or which result from any judgement, order or direction (including without limitation any interlocutory, injunctive or other relief) made by any court, tribunal or other regulatory body (including the Commission and the ESA) in respect of any infringements by the Business of Articles 85 and/or 86 of the Treaty establishing the European Community and/or their equivalent provisions under the European Economic Area Agreement, which arise from the entry into of agreements by the Business prior to Completion and/or any conduct or omissions on the part of the Business prior to Completion in connection with such agreements, and all reasonable costs and expenses which the Purchaser or any member of the Purchaser's Group may incur in responding to or defending any Commission and/or ESA inquiry or proceeding or any other proceedings before a court, tribunal or other regulatory body in relation to such infringements or alleged infringements; and (h) any amount owing to any member of the Seller's Group. (2) The indemnity in subclause (1) shall not apply: (a) in relation to Contracts, to which the provisions of clause 6 shall apply; (b) in relation to Debts and Creditors, to which the provisions of clause 7 shall apply; (c) in relation to VAT, to which the provisions of clause 24 shall apply; (d) in relation to Employees, to which the provisions of Schedule 8 shall apply; (e) in relation to pensions, to which the provisions of Schedule 9 shall apply; or (f) in relation to Environmental Liabilities (as defined in Schedule 11), to which the provisions of Schedule 11 shall apply. (3) Save as expressly stated otherwise in this agreement the Purchaser undertakes to indemnify and hold harmless the Seller from and against all Liabilities which may be incurred by the Seller (or any of its Affiliates), or to which the Seller (or any of its Affiliates) may become subject, and which arise as a result of the operation of the Business after Completion (other than Liabilities expressly retained by the Seller under this agreement) and any and all actions suits, proceedings, claims, demands, assessments and judgements with respect to the foregoing. 10. PURCHASER'S WARRANTIES The Purchaser and Terra each warrants to the Seller that: (a) it (and each of its Affiliates, in respect of the Implementation Agreements and the other agreements entered into pursuant to this agreement to which it is a party) has the requisite power and authority to enter into and to perform this agreement, such Implementation Agreements and the other agreements entered into pursuant to this agreement; (b) it (and each of its Affiliates, in respect of the Implementation Agreements and the other agreements entered into pursuant to this agreement to which it is a party) has obtained or satisfied all corporate, regulatory and other approvals, or any other significant conditions, necessary to execute and perform this agreement, such Implementation Agreements and the other agreements entered into pursuant to this agreement; (c) this agreement, the Implementation Agreements and the other agreements entered into pursuant to this agreement constitute (or, when executed, will constitute) valid and binding obligations of the Purchaser (and each of its Affiliates, in respect of the Implementation Agreements and the other agreements entered into pursuant to this agreement to which it is a party) enforceable in accordance with their terms; (d) compliance with the terms of this agreement, the Implementation Agreements and the other agreements entered into pursuant to this agreement by the Purchaser or its Affiliates (as appropriate) will: (i) not constitute a breach of any agreement or contract to which the Purchaser or such Affiliate is a party or by which it is bound; (ii) be in compliance with the Purchaser's or such Affiliate's memorandum and articles of association or other constitutional documents; and (iii) not contravene any order, judgement, decree or regulation or any other restriction of any kind by which the Purchaser or such Affiliate is bound; and (e) each of the Purchaser and Terra: (i) is a company, duly incorporated and subsisting under the laws of England and Wales and the State of Maryland, USA, respectively; and (ii) is not in liquidation, administration or administrative receivership, nor has any resolution been passed by the shareholders or creditors to put either of the companies into liquidation, administration or administrative receivership (and has not done or suffered in any jurisdiction other than England and Wales, anything equivalent to the things referred to in this subparagraph (ii)). 11. SELLER'S WARRANTIES (1) The Seller warrants to the Purchaser that, save as otherwise stated in this agreement and subject to all matters and circumstances disclosed in the Disclosure Letter, each of the statements set out in Schedule 7 to this agreement (the "Warranties") are true and accurate as at the date of this agreement and at Completion (by reference to the facts and circumstances then subsisting). (2) The Purchaser acknowledges and agrees that: (a) no representations, warranties, collateral contracts or other assurances of any kind (express or implied) have been given by or on behalf of the Seller or any member of the Seller's Group and on which the Purchaser may rely in entering into this agreement except for the Warranties and, in particular, but without prejudice to the generality of the foregoing, no member of the Seller's Group makes any express or implied representation or warranty (other than the Warranties) as to the physical condition or suitability for any particular purpose of any of the Assets, individually or collectively, which are otherwise being purchased "as is, where is" at the time of Completion; (b) no other statement, promise or forecast made by or on behalf of the Seller or any member of the Seller's Group (except in instances of fraud) may form the basis of, or be pleaded in connection with, any claim by the Purchaser under or in connection with this agreement or the Implementation Agreements (save as set out in such agreements); (c) any claim by the Purchaser or any person deriving title from it in connection with the Warranties (a "Warranty Claim") shall be subject to the following provisions of this clause; and (d) at the time of entering into this agreement none of the individuals set out in Part 2 of Schedule 4 (the "Terra Individuals") are aware that the Purchaser will at the date of this agreement or at Completion be entitled to bring a Warranty Claim. (3) The liability of the Seller under or in respect of the Warranties or under Schedule 11 shall be limited as follows: (a) there shall be disregarded for all purposes any breach of the Warranties or liability under Schedule 11 in respect of which the amount of the damages (or other payment) to which the Purchaser would otherwise be entitled is less than (Pounds)50,000 (excluding interest, costs and expenses) provided that any series of claims arising from the same or similar circumstances shall be treated as a single claim for these purposes and to the extent that the claim(s) is satisfied by the Seller from insurance proceeds a series of claims or events or a single claim or event shall be interpreted in accordance with the terms and conditions of the Policy referred to in 5(7); (b) the Purchaser shall not be entitled to recover any damages (or other payment) in respect of any breach or breaches of the Warranties until the amount of damages in respect of such breach or breaches (together with any liability on the part of the Seller and all members of the Seller's Group under Schedule 11) exceeds in aggregate the sum of (Pounds)1,000,000 in which event the Purchaser shall be entitled to recover the whole of such amount and not just the excess; (c) the maximum aggregate liability of the Seller and all members of the Seller's Group in respect of all and any Warranty Claims (other than Environmental Claims) shall not exceed (Pounds)100,000,000; (d) the maximum aggregate liability of the Seller and all members of the Seller's Group in respect of all and any Environmental Claims shall not exceed (Pounds)100,000,000; (e) in respect of any liability which is contingent, unless and until such liability becomes an actual liability and is due and payable provided that recovery for claims associated with a contingent liability in existence prior to the Expiration Date shall still be permitted when actual liability does not become due and payable until after the Expiration Date if notice of the contingent liability has been given in accordance with subclauses (6) and (7) below. (4) The Purchaser acknowledges and agrees that: (a) no liability shall attach to the Seller by reason of any breach of any of the Warranties to the extent that the loss has been recovered by the Purchaser under Schedule 11 or any other term of this agreement or any other document referred to herein and accordingly the Purchaser may only recover once in respect of the same loss; (b) the Seller shall not be liable for breach of any Warranties or under Schedule 11 or any other term of this agreement to the extent that the subject of the claim has been or is made good or is otherwise compensated for without cost, expense or loss to the Purchaser in a manner reasonably acceptable to the Purchaser; and (c) in calculating the liability of the Seller for any breach of the Warranties or under Schedule 11 there shall be taken into account the amount by which any taxation for which the Purchaser is now or will in the future be accountable or liable to be assessed is or will be reduced or extinguished as a result of the matter giving rise to such liability. (5) The Purchaser shall not be entitled to make any Warranty Claim: (a) to the extent that provision or allowance for the matter or liability which would otherwise give rise to the claim in question is taken account of or reflected in the determination of the Stock Valuation; (b) in respect of anything fairly disclosed in the Disclosure Letter (which, with respect to the Warranties given as at the date of this agreement, shall, for the avoidance of doubt, exclude any additional specific disclosures after the date of this agreement and, with respect to the Warranties given at the date of Completion, will include the benefit of additional specific disclosures made pursuant to clause 5); (c) if the claim would not have arisen but for a change in (or in the judicial interpretation of) or an enactment or repeal of legislation or regulation, or the introduction, change in or cessation of the published practice of any taxation authority taking effect after the date of this agreement; (d) to the extent that the claim arises as a result only of any change after Completion in the accounting bases upon which the Business values its assets or computes its profits or arises as a result of the taxation or accounting policies, bases or practices of the Purchaser being different to those adopted or used in preparing the Accounts (except to the extent that such change is made as a result of the Accounts not being as warranted in paragraph B(1) of Schedule 7); or (e) to the extent that the claim arises as a result of a circumstance which arose: (i) prior to Completion with the written consent of the Purchaser; or (ii) due to any voluntary act or omission of the Purchaser after Completion which was outside the ordinary course of business, which the Purchaser knew would result in a breach of Warranty and the primary intention of which was to create a claim for breach of Warranty. Notwithstanding any other provision of this agreement, the Purchaser shall be deemed not to have any notice of any matters which might be disclosed in any fire certificates or planning provisions which may have been available to the Purchaser or its advisers. (6) If any of the directors of the Purchaser or senior management of Terra become aware that the Purchaser is entitled to make a Warranty Claim or a claim in respect of any indemnity by the Seller under this agreement (except in relation to claims under the indemnities set out in Schedule 11) the Purchaser shall give notice to the Seller within 30 days of such person or persons becoming aware of any such matter specifying (in reasonable detail) the matter which gives rise to the claim, the nature of the claim and the amount claimed in respect thereof (including the Purchaser's calculation of the loss thereby alleged to have been suffered by it) provided that the Purchaser shall not lose any rights to bring a Warranty Claim or a claim in respect of any indemnity by reason of failing to give such a notice unless and except to the extent that the Seller's liability is increased as a result of such failure. If the Warranty Claim or claim in respect of an indemnity in question is as a result of or in connection with a liability or alleged liability to a third party: (a) the Purchaser shall make no admission of liability, agreement, settlement or compromise with any third party in relation to any such liability or alleged liability without the prior written consent of the Seller (such consent not to be unreasonably withheld or delayed), and the Purchaser shall (subject to being indemnified by the Seller against all reasonable costs, claims and liabilities arising in connection therewith) take such action to avoid, mitigate, dispute, resist, appeal, settle, compromise or contest the liability as may be reasonably requested by the Seller (provided any such actions would not be prejudicial to its ongoing business interests in a material respect); (b) the Purchaser shall make available to the Seller, at the Seller's expense, such persons and all such access and information as the Seller may reasonably require for avoiding, disputing, resisting, appealing, compromising or contesting any such liability. (7) The Seller shall cease to have any liability under or in respect of the Warranties (other than the Warranties in respect of environmental matters to which the time limitations in Schedule 11 shall apply) on the date two years from Completion (the "Expiration Date") in respect of any Warranties except in respect of a Warranty Claim of which the Purchaser gives notice to the Seller before the relevant date and in accordance with subclause (6) above but the liability of the Seller in respect of any Warranty Claim shall absolutely terminate if proceedings in respect of it have not been commenced within 12 months of service of notice of that Warranty Claim (and for this purpose proceedings shall not be deemed to have been commenced unless they have been properly issued and validly served upon the Seller); provided, however, that such limitation on liability shall not apply with respect to Warranties relating to the ownership of assets and due authorisation of this agreement, the Implementation Agreements and transactions contemplated thereby. (8) Without prejudice to the Purchaser's duty to mitigate any loss in respect of any breach of the Warranties or in respect of any claim under Schedule 11 if in respect of any matter which would otherwise give rise to a breach of the Warranties or a claim under Schedule 11 the Purchaser is entitled to claim under any policy of insurance then the Purchaser shall use all reasonable endeavours to pursue such insurance claim and the amount of any insurance monies recovered by the Purchaser (net of taxes and costs of recovery and excluding returns of premium (if any)) shall reduce to that extent or extinguish the claim for breach of the Warranties or the amount indemnified under Schedule 11. (9) If the Seller or any member of the Seller's Group makes any payment by way of damages for breach of the Warranties (the "Damages Payment") and the Purchaser receives any benefit otherwise than from the Seller or that member which would not have been received but for the circumstance giving rise to the claim in respect of which the Damages Payment was made the Purchaser shall, once it has received such benefit, forthwith repay to that Seller or member an amount equal to the lower of the amount of such benefit and the Damages Payment net of taxes and the cost of recovery. (10) The Purchaser shall not be entitled to rescind or terminate this agreement after Completion in any circumstances provided that nothing in this subclause shall exclude or limit any liability for fraud. (11) Any payment made by the Seller in respect of a breach of the Warranties or under any indemnity shall be deemed to be a reduction in the consideration for the sale of the Business. (12) References to the Seller shall include any member of the Seller's Group which might have any liability with respect to the Warranties or under any indemnity. (13) The Purchaser shall not be entitled to claim for punitive damages in respect of any Warranty Claim or in respect of a claim in respect of any indemnity by the Seller under this agreement. (14) The Purchaser shall take reasonable steps at the Seller's expense (provided such expenses are taken into account when calculating damages) to avoid or mitigate any loss or damage which may give rise to a claim under or in connection with this agreement, whether arising in contract, tort (including, without limitation, negligence) or otherwise howsoever arising. (15) The Seller shall have no liability under or in connection with this agreement whether arising in contract, tort (including, without limitation, negligence or otherwise howsoever arising) save in relation to the Warranties and as otherwise expressed in this agreement. (16) The Seller and ICI, on behalf of themselves and each member of the Seller's Group, waive any and all claims which they or any member of the Seller's Group might otherwise have against any of the Employees, to the intent that this subclause (16) shall be for the benefit of, and enforceable against the Seller, ICI and each member of the Seller's Group by, the Employees and each member of the Purchaser's Group in connection with the sale of the Assets and the Business, this agreement and any document ancillary to it and any information supplied or omitted to be supplied by them and any act or omission by them or any of them in connection with the preparation of and the contents of this agreement and any document ancillary to it (including, without limitation, the Disclosure Letter) except that this clause shall not result in the Seller, ICI or any member of the Seller's Group waiving claims for wilful default or fraud by the Employees. (17) The Purchaser shall not be deemed to have any specific knowledge except as specifically disclosed in the Disclosure Letter. (18) The provisions of this clause shall have effect notwithstanding any other provisions of this agreement. (19) Subject to the Terra Individuals not being aware of the Purchaser being entitled to bring a Warranty Claim at the date of this agreement or at Completion (as provided for in (2)(d) above), the Purchaser shall be entitled to claim after Completion that any of the Warranties is or was untrue or has or had been breached even if the Purchaser knew or could have discovered on or before Completion that the Warranty in question was untrue or had been breached and Completion shall not in any way constitute a waiver of any of the Purchaser's rights in respect of any such claim (provided that subclause (2)(d) shall take precedence over the provisions of this subclause (19)). 12. ENVIRONMENTAL The Seller and the Purchaser shall observe and perform the provisions of Schedule 11 expressed to be observed and performed by each of them respectively. 13. COMPLETION (1) Completion shall take place on the later of 31st December, 1997 and the tenth Business Day following the satisfaction or, with the agreement of all the parties, waiver of the conditions precedent set out in clause 5 (other than conditions with respect to actions the respective parties will take at Completion itself) or such other date as the parties hereto may mutually determine (the "Completion Date"). (2) Completion shall take place at the offices of the Seller's Solicitors on the Completion Date, at which time: (a) each party shall provide to the other evidence in a form reasonably satisfactory to the other that it (and each Affiliate entering into an Implementation Agreement) has all necessary corporate approvals and its signatories have the necessary authority to enter into this agreement and the other agreements referred to herein; (b) the Seller shall execute and deliver to the Purchaser the Property Documents in the Agreed Form; (c) the Seller shall execute and deliver the Completion Certificate as described in clause 5(11); (d) each party shall (or shall procure that its relevant Affiliates) duly execute, deliver and, to the extent applicable, complete the Implementation Agreements; (e) the Purchaser shall pay to the Seller the sum of (Pounds)200,000,000 in respect of the Consideration by telegraphic transfer to such account as the Seller may specify; (f) the Seller shall let the Purchaser into possession of the Assets and occupation of the Properties; (g) the Seller shall make available at the Properties the Records and other documents relating exclusively to the operation of the Business (the "Business Records") to the Purchaser (but delivery at the place where the Records are currently kept shall be a sufficient discharge of this obligation provided that such place is included with the Properties); (h) the Seller shall execute and deliver the Disclosure Letter (as amended pursuant to clause 5) which the Purchaser shall acknowledge and return the duly executed copy; (i) the Seller shall deliver the Intellectual Property Consent; (j) the Seller or the relevant member of the Seller's Group shall, in respect of the Business Intellectual Property, execute and deliver to the Purchaser the Intellectual Property Assignment in the Agreed Form; and (k) the parties shall procure the execution and delivery by their respective Affiliates of the Ammonium Nitrate Hedging Agreement, the Put Agreement and the related Guarantee (the "Hedging Agreements") each in the Agreed Form and, if the Seller so requires, corporate resolutions, approvals and legal opinions in a form satisfactory to the Seller in respect of the Hedging Agreements. 14. RECORDS, ASSISTANCE AND ACCOUNTS (1) The Purchaser shall retain all the Business Records (including, without limitation, those documents pertaining to research, development and testing of products, sales, marketing and regulatory compliance of products) for a period of at least six years following the Completion Date and during that period shall allow the Seller and its advisers to inspect and (at the Seller's expense) to copy the same at reasonable times on reasonable notice for reasonable purposes. For a period of six years following the expiry of that period the Purchaser shall not dispose of or destroy any of the Business Records without first giving the Seller at least six months' notice of its intention to do so and giving the Seller the opportunity to remove and retain any of them (at the Seller's expense). (2) Prior to any disposal of the Business by the Purchaser or any member of the Purchaser's Group (whether or not the disposal is part of some larger transaction and whether or not it forms part of a sale of shares or assets) during the twelve year period following Completion, the Purchaser shall give written notice of such sale to the Seller in sufficient time for the Seller to pursue its rights to inspect, copy, remove or retain documentation pursuant to this clause 14. (3) For a period of at least six years following the Completion Date, the Seller shall retain all the records relating to the Business owned by and in the possession of the Seller other than the Business Records or (at the Seller's option) shall retain extracts from the same. During that period, the Purchaser shall be entitled to inspect the same and, in so far as they relate to the Business, the Purchaser shall be entitled (at the Purchaser's cost) to copy such extracts at reasonable times on reasonable notice. For a period of six years following the expiry of that period the Seller shall not dispose of or destroy any of such records without first giving the Purchaser at least six months' notice of its intention to do so and giving the Purchaser the opportunity to remove and retain any of them (at the Purchaser's expense). Following the expiry of that further period the Seller shall be at liberty to destroy any of such records or extracts. (4) The Purchaser shall, at the Seller's expense and on reasonable notice from the Seller for reasonable purposes, give such assistance to the Seller as the Seller may reasonably require in relation to completing accounts of the Seller for the year ending 31st December, 1997 or any proceedings by or against the Seller or any of its Affiliates (other than proceedings involving the Purchaser or its Affiliates), including, without limitation, proceedings relating to employees' claims, product liability or taxation. Such assistance shall include, without limitation, access to personnel and records of the Purchaser after Completion and access to the Properties (insofar as the Purchaser or its Affiliates can grant such access) except to the extent that access relates to litigation between the Seller and the Purchaser. (5) The Seller shall as soon as reasonably practicable and in any event within 60 days after the Completion Date provide to the Purchaser copies of the Accounts for the year ended 31st December, 1997. 15. DEFUNCT PLANT (1) The Seller shall at its expense remove the following plant (the "Defunct Plant") within the periods stated: (a) the 1A ammonia plant at Severnside within 42 months of Completion; (b) the LP1 plant at Billingham within 42 months of Completion; (c) the LP2 plant at Billingham within 42 months of Completion; and (d) the LP3 ammonia plant at Billingham within 42 months of Completion. (2) The removal of the Defunct Plant shall be conducted in accordance with the terms of the letter dated 13th November, 1997 (LP Ammonia Arrangements) and an internal ICI e-mail dated 15th November, 1997 which are attached as annex 9 to the Disclosure Letter. (3) In removing the Defunct Plant the Seller shall ensure that there is no breach of Environmental Law, that no contamination is created and that the area from which the Defunct Plant has been removed is in a safe condition. (4) The Seller further undertakes to ensure that the removal is carried out in such a way so as not to interfere to any material degree with the normal running of the Business or damage to the Business. (5) The Seller shall be liable for all loss or liability caused to the Purchaser as a result of the breach by the Seller of its obligations under this clause. 16. EMPLOYEES The Seller and the Purchaser shall observe and perform the provisions of Schedule 8 expressed to be observed and performed by each of them respectively. 17. PENSIONS The Seller and the Purchaser shall observe and perform the provisions of Schedule 9 expressed to be observed and performed by each of them respectively. 18. GUARANTEES (1) Each of ICI and Terra (the "Guarantor") as primary obligor unconditionally and irrevocably: (a) guarantees by way of continuing guarantee to the other and its Affiliates (the "Beneficiary") the payment when due of all amounts payable by it and its Affiliate which is party to this agreement (the "Obligor") to the Beneficiary under this agreement; (b) undertakes to ensure that the Obligor will perform when due all its obligations under this agreement; (c) agrees to indemnify and keep indemnified the Beneficiary against all losses and damages sustained by it flowing from any non-payment or default of any kind by the Obligor under this agreement; and (d) agrees that if and each time that the Obligor fails to make any payment to the Beneficiary when it is due under this agreement, the Guarantor shall on demand (without requiring the Beneficiary first to take steps against the Obligor or any other person) pay that amount to the Beneficiary (and the certificate of the Beneficiary shall in the absence of manifest error be conclusive evidence of the Seller's failure to make the payment). (2) The Guarantor's obligations under this clause shall not be affected by any matter or thing which but for this provision might operate to affect or prejudice those obligations, including without limitation: (a) any time or indulgence granted to, or composition with, the Obligor or any other person; (b) the taking, variation, renewal or release of, or neglect to perfect or enforce this agreement or any right, guarantee, remedy or security from or against the Obligor or any other person; or (c) any unenforceability or invalidity of any obligation of the Obligor, so that this clause shall be construed as if there were no such unenforceability or invalidity. (3) The Beneficiary may appropriate any sum paid by the Obligor, the Guarantor or any other person or recovered or received on account of the obligations the subject of this clause as the Beneficiary sees fit, whether or not towards those obligations. (4) Until all amounts which may be or become payable under this agreement have been irrevocably paid in full, the Guarantor shall not as a result of this clause or any payment or performance under this clause be subrogated to any right or security of the Beneficiary or claim or prove in competition with the Beneficiary against the Obligor or any other person or claim any right of contribution, set-off or indemnity. (5) The Guarantor will not hold any security from the Obligor in respect of this guarantee and any such security which is held in breach of this provision will be held by the Guarantor in trust for the Beneficiary. (6) Subject to subclause (7) below, the Guarantor will reimburse the Beneficiary for all legal and other costs (including VAT) incurred by the Purchaser in connection with the enforcement of this guarantee. (7) The liability of the Guarantor under the Guarantee in this clause shall under no circumstances exceed the liability of the Obligor and shall be subject to any limitations on liability contained in this agreement (including, without limitation, the provisions of clause 11). 19. PROTECTIVE COVENANTS (1) The Seller covenants with the Purchaser that no member of the Seller's Group will: (a) for a period of four years from Completion within the Territory carry on or be engaged or involved in the Field of Activity (save as the owner for investment purposes only of securities traded on a recognised stock exchange and not exceeding ten per cent. of the securities of that class); (b) without prior approval from the Purchaser, for a period of two years from Completion, solicit or endeavour to entice away from the Purchaser or its Affiliates any of the Employees whether or not such person would commit any breach of his/her contract of employment by reason of leaving the service of that member of the Purchaser's Group; (c) disclose to any third party (except as otherwise required by law or any competent regulatory body or Stock Exchange) any information of a secret or confidential nature in the possession of the Seller's Group relating to the Business; or (d) attempt or knowingly assist or procure any person to do any of the foregoing things. (2) The Purchaser covenants with the Seller that no member of the Purchaser's Group will disclose to any third party (except as otherwise required by law or any competent regulatory body or Stock Exchange), any Non-Exclusive Information of a secret or confidential nature in the possession of the Purchaser's Group. (3) Each of the restrictions in subclause (1) above shall be enforceable independently and its validity shall not be affected if the other is invalid. (4) The parties acknowledge that the provisions of this clause are no more extensive than are reasonable to protect the Purchaser and the Seller (as the case may be). (5) Nothing in this clause 19 or in this agreement shall prevent the Seller or its Affiliates from: (a) purchasing shares in any company or any business which has an interest in the Field of Activity (the ownership of which would otherwise contravene subclause (1)) unless more than 20 per cent. of the turnover of such company or business in its last accounting year was generated by its interest in the Field of Activity; provided, however, that if the Seller or its Affiliates acquire any such shares or business which it wishes to sell at any time during the period of four years from Completion, the Seller or its Affiliates (as applicable) will first offer such shares or business to the Purchaser. If the Purchaser does not buy such shares or business within a reasonable period of time following such offer and in any event (provided the Seller or the Purchaser has not unreasonably delayed) within six months of such offer being made, the Seller and its Affiliates may sell such shares or business to any third party at not less than the price so offered and declined; (b) carrying on or being engaged, involved or having any interest in: (i) any business it currently carries on (other than the Business) substantially as conducted in the previous 12 months; (ii) any business after such time as the Purchaser or its Affiliates have ceased to carry on or be engaged or involved in such business; (iii) shares of Irish Fertilizer Industries Limited (or its successor) and the business carried on by that company; (iv) sales of ammonium nitrate by the ICI explosives business provided that such sales are not knowingly made by the Seller's Group for use in fertilizers in the Territory; or (v) nitric acid as an intermediate for industrial use by the Seller's Group or a joint venture to which a member of the Seller's Group is a party; (c) being involved in the Field of Activity only insofar as it relates to process licensing, technical assistance or the manufacture, sale or lease of catalysts, absorbents and adsorbents to any person which is itself involved in the Field of Activity. (6) Each of the parties to this agreement confirms that if by virtue of any provision of this agreement or of any other agreement or arrangement of which this agreement forms part any such agreement or arrangement is subject to registration under the Restrictive Trade Practices Act 1976 (the "RTPA") none of the parties to any such agreement or arrangement who carries on business within the United Kingdom shall give effect to, or enforce or purport to enforce the agreement or arrangement in respect of any such provision until the day after particulars of the agreement or arrangement have been furnished to the Director General of Fair Trading under section 24 of the RTPA. 20. ICI ROUNDEL (1) Nothing contained in this agreement shall entitle the Purchaser to any rights to carry on business in the names of ICI or of the Seller, or otherwise to use any trademark, service mark, trade name or logo (including but not limited to the ICI trade mark known as the ICI Roundel) or to use any name, mark or logo confusingly similar thereto, other than those comprised in the Business Intellectual Property and the Licensed Intellectual Property subject to the terms and conditions of this agreement. (2) To the extent that any such name or trademark is displayed on any Asset or is displayed on any sign or otherwise at the Properties the Purchaser shall delete or cover the same as soon as practicable after Completion. (3) To the extent that any such name or trademark appears on any Stock, the Purchaser shall delete or cover the same before such Stock is sold, passed to or otherwise disclosed to any third party, except where it is displayed on packaging or labelling materials which are included in the Stock and used for the packaging or labelling of products passed to customers of the Business within the period of six months from the Completion Date or if such supplies existing at Completion are unused at the expiry of six months from the Completion Date, at the earlier of the date on which such supplies are used or 12 months from the Completion Date. (4) The Purchaser shall indemnify the Seller (for itself and on behalf of its Affiliates) against all costs, claims, demands and liabilities which result from a breach by the Purchaser or any of its Affiliates of the provisions of this clause. 21. CONFIDENTIALITY (1) For the purposes of this clause: (a) "Confidential Information" means all information received by the Purchaser's Group from the Seller's Group relating to the Seller, its Affiliates and the businesses conducted by the Seller's Group (whether pursuant to, or in relation to, this agreement or any of the Implementation Agreements) and all information received by the Seller's Group from the Purchaser's Group relating to the Purchaser, its Affiliates and the businesses conducted by the Purchaser's Group (whether pursuant to, or in relation to, this agreement or any of the Implementation Agreements), including not only written information but information transferred orally, visually, electronically, or by any other means. For the avoidance of doubt, the term Confidential Information shall not include: (i) information that is in the public domain at the date of this agreement; (ii) information that subsequently comes into the public domain, otherwise than as a result of a breach of this agreement, but only after it has come into the public domain; (iii) information which the receiving party or its Representatives obtain from a third party not under any confidentiality obligation to the disclosing party respecting such information; (iv) information which the receiving party or its Representatives at the time of disclosure already has in its possession and which is not subject to any obligation of secrecy on its part to the other party; or (v) information which is independently developed by employees of the receiving party or its Representatives who had no access to the information disclosed by the disclosing party. (b) "Representatives" means Affiliates, directors, officers, employees, agents or representatives of either party or its Affiliates and also the funders of any member of the Purchaser's Group in connection with the funding of the acquisition under this agreement at Completion or any refinancing thereof, and their respective solicitors, accountants, consultants and financial or other advisers (provided that any entities or persons are subject to an obligation or duty of confidentiality). (2) Each party undertakes, for a period of 10 years from the date of this agreement (subject to such other period specified in an Implementation Agreement in relation to particular information), to maintain Confidential Information received by it or its Representatives relating to the other party or the other party's Affiliates (or their respective businesses) in confidence and not disclose that Confidential Information to any person other than its Representatives except with the prior written approval of the other party. (3) Each party undertakes only to disclose to Representatives such Confidential Information relating to the other party or the other party's Affiliates as is reasonably required for the purposes of performing the obligations under this agreement and the Implementation Agreements and only to Representatives whom it has informed of the confidential nature of the Confidential Information and who undertake to keep it confidential. Each party shall be responsible for breach of such confidentiality undertaking by it or its Representatives and undertakes to indemnify and hold harmless the other party, its Affiliates or any successor to such business against all actions, proceedings, costs, claims, demands, liabilities, losses or expenses (including legal expenses) arising from such breach. (4) In the event that, after receipt of Confidential Information, either party, or any person or Representative to whom it has transmitted Confidential Information, becomes legally required (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigation, demand or similar process, or otherwise) to disclose any of the Confidential Information received, the legally compelled party shall provide the other party with prompt written notice of that requirement so that the other party may seek a protective order or other appropriate remedy but shall not be obliged to delay disclosure if to do so would be in breach of any conditions for such disclosure imposed by the authority compelling disclosure and in any event should the other party not be successful in seeking or obtaining a protective order or other appropriate remedy, the other party shall waive compliance with the provisions of this agreement for such particular case to enable the legally compelled party or its Representative to comply with any such legal requirement. (5) Each party will only use (or permit the use by its Representatives of) the Confidential Information received by it or its Representatives for the purposes of the transactions contemplated by this agreement. (6) Notwithstanding any provision to the contrary, the provisions of this clause shall survive termination of this agreement. 22. INDEPENDENT ACCOUNTANT (1) Where this agreement expressly so provides or if either party wishes to refer any matter in dispute in accordance with the provisions of Schedule 10 for determination under this clause 22 it shall give notice to the other requiring the appointment of an independent accounting firm of international reputation (the "Independent Accountant"). If the parties are unable to agree upon the Independent Accountant within 14 days of such notice, then the Independent Accountant shall be appointed by the President for the time being of the Institute of Chartered Accountants in England and Wales on the application of either party. (2) If the Independent Accountant delays or becomes unwilling or incapable of acting or if for any other reason the President for the time being of the Institute of Chartered Accountants in England and Wales thinks fit he may discharge the Independent Accountant and, in the absence of agreement between the parties, appoint another in his place. (3) The Independent Accountant shall act as an expert and not as an arbitrator and his decision shall (in the absence of manifest error or material departure from instructions) be final and binding on the parties. The Independent Accountant shall afford the parties the opportunity of making written representations to him. (4) The fees and expenses of the Independent Accountant shall be borne by the parties in equal shares unless the Independent Accountant otherwise determines or as otherwise stated in this agreement. 23. ANNOUNCEMENTS Neither party shall make or permit any member of the Seller's Group or the Purchaser's Group, as the case may be, to make any announcement concerning this agreement, the fact or status of the transaction to which this agreement relates or any ancillary matter except as required by law or any competent regulatory body or with the prior written approval of the other party, the Seller or ICI such approval not to be unreasonably withheld or delayed. 24. VALUE ADDED TAX AND CAPITAL ALLOWANCES (1) All amounts expressed in this agreement as being payable by the Purchaser are expressed exclusive of any Value Added Tax which may be chargeable on any supply for which such amounts form the consideration and the amount of any such Value Added Tax shall be payable in addition thereto subject as hereinafter provided. (2) The Seller, ICI and the Purchaser intend that article 5 of the Value Added Tax (Special Provisions) Order 1995 ("article 5") shall apply to the sale of the Assets under, or procured under, this agreement, so that the sale is treated as neither a supply of goods nor a supply of services. (3) If nevertheless any VAT is payable on any supply by the Seller or ICI under this agreement or any supply procured pursuant to this agreement, the Purchaser shall pay the Seller or ICI the amount of that VAT in addition to the price and the Seller, or, as the case may be, ICI shall issue (or procure the issue) to the Purchaser a proper VAT invoice in respect of that VAT, but any such payments shall be without prejudice to the rights of the Purchaser under clause 24(4). (4) If any VAT is payable as mentioned in subclause (3) above and such VAT would not have been payable: (a) had the Purchaser complied with its obligations under subclause (6)(a) or continued to use the Assets as mentioned in subclause (6)(b); or (b) had any matter or circumstance notified in writing by the Purchaser to the Seller or ICI (as the case may be) in relation to the application by the Seller or ICI (as the case may be) to Customs for a ruling as to the application of article 5 to the sale of the Assets under this Agreement been correct, then (aa) such VAT shall be payable by the Purchaser to the Seller or ICI (as the case may be) on the later of (i) five working days before the Seller or ICI (as the case may be) is obliged to account to Customs for such VAT and (ii) five working days after the Seller or ICI (as the case may be) gives the Purchaser written notice that such VAT is payable and of the amount of such VAT; and (bb) the Purchaser shall indemnify the Seller or ICI (as the case may be) against any interest or penalties imposed by Customs arising out of the treatment by the Seller, ICI and the Purchaser of the sale as described in subclause (2) above except to the extent that any such interest or penalties are referable to any period after the Seller or ICI (as the case may be) has received cleared funds equal to such VAT from the Purchaser. In all other circumstances the Purchaser shall pay such VAT to the Seller or ICI (as the case may be) within five working days of recovery of such VAT by the Purchaser (or by the representative member of any VAT group of which the Purchaser is a member) pursuant to sections 25 or 26 of the Value Added Tax Act 1994 (and the Purchaser shall use reasonable endeavours to procure such recovery as soon as lawfully possible) provided that if such VAT has not been so recovered in full on the expiration of three months after Completion the Purchaser shall be deemed for the purposes of this sub-clause to have recovered such VAT in full on that date. (5) If the Purchaser fails to pay the amount of the tax on the due date under subclause (3), it shall pay Default Interest on that amount from the due date until actual payment (excluding any period for which interest indemnified under subclause (2) runs) compounded monthly. (6) With a view to procuring that article 5 applies, the Purchaser: (a) shall ensure that the Purchaser is registered for VAT not later than the date of Completion; and (b) warrants that the Assets are to be used by the Purchaser in carrying on the same kind of business as that carried on by the Seller and ICI. (7) The Seller and the Purchaser envisage that section 49 of the Value Added Tax Act 1994 will apply to the sale and purchase of the Assets under this agreement but intend that the Seller should retain the records referred to in that section, and accordingly: (a) notwithstanding anything in this agreement the Seller shall not be required to deliver to the Purchaser the records referred to in section 49; (b) the Seller shall make a request to Customs under section 49 for the records to be preserved by the Seller; (c) if or for so long as that request is not granted, the Seller shall preserve the records on behalf of the Purchaser for such period as may be required by law, and shall during that period permit the Purchaser reasonable access to them to inspect or make copies of them; and (d) the Seller may fulfil its obligations under paragraph (c) by procuring that a future transferee of its business or any other person preserves the records and permits reasonable access as mentioned in that paragraph, in which case the Seller shall notify the Purchaser of the name of that person to the contrary in this agreement. (8) The Seller shall if so requested by the Purchaser and at the Purchaser's expense supply the Purchaser with all information which is in the Seller's possession and which is reasonably necessary to enable the Purchaser to claim any capital allowances which may be available to the Purchaser in respect of any Asset, fixture, property or any other item or asset of any description being acquired by the Purchaser. 25. COMPUTER SYSTEMS (1) To the extent that defined terms are used in this clause 25 they shall bear the meaning given to them in this agreement but in the absence of any definition they shall bear the meaning given to them in the Shared IT Services Agreement. (2) On condition that the Purchaser and ICI enter into the Shared IT Services Agreement on or before the Completion Date, each of the Seller and ICI shall use its reasonable endeavours to ensure that the Purchaser will for a period of 18 months from and including Completion be able to use and/or obtain the benefit of the Computer Systems necessary for the conduct of the Business as the Business was carried on by the Seller during the Comparison Period. 26. DEFAULT INTEREST Subject as otherwise provided to the contrary in this agreement, if any sum due for payment under or in accordance with this agreement is not paid on the due date the party in default shall pay Default Interest on that sum from the due date until the date of actual payment calculated on a day to day basis. 27. NOTICES (1) Any notice or other document to be served under this agreement shall be in writing and may be delivered by hand or sent by post or overnight courier service to the party to be served at its address appearing in this agreement (and marked for the attention of the person whose name is referred to in subclause (3) below) or at such other address (or marked for the attention of such other person) as it may have notified to the other party in accordance with this clause. Any notice or other document sent by post shall be sent by registered post (if both posted and for delivery within the same jurisdiction) or by registered airmail (if posted for delivery outside the jurisdiction in which it is posted). (2) Any notice or document shall be deemed to have been served: (a) if delivered by hand, at the time of delivery; or (b) if posted or if sent by overnight courier service, at 10.00 a.m. on the second Business Day after it was sent for delivery within the same jurisdiction, or at 10.00 a.m. (local time at the place of destination) on the fifth Business Day after it was put in the post if sent by registered airmail. (3) The person to whom notices or documents should be addressed for the purposes of subclause (1) is: (a) if to be served on the Seller or ICI: the Company Secretary; (b) if to be served on the Purchaser or Terra: Mr G.M. Valentine. (4) In proving service of a notice or document it shall be sufficient to prove that delivery was made by hand or that the envelope containing the notice or document was properly addressed and provided to the overnight courier or posted (either by registered post or by registered airmail, as the case may be, in accordance with the requirements of this clause). 28. GENERAL (1) Each of the obligations, warranties and undertakings set out in this agreement which is not fully performed at Completion will continue in force after Completion. (2) Unless otherwise expressly stated all payments to be made under this agreement shall be made in Pounds Sterling to the Seller in immediately available funds to the account of the Seller at such account as the Seller may notify to the Purchaser and to the Purchaser in immediately available funds to such account as the Purchaser may notify to the Seller. (3) Save as otherwise provided to the contrary in this agreement, each payment to be made under this agreement shall be made free and clear of all deductions or withholdings of any kind, except for those required by law, and if any deduction or withholding must be made by law, an additional amount will be paid sufficient to ensure that the recipient receives a net amount equal to the full amount which it would have received if the payment had been made without the deduction or withholding. If and when the recipient of the payment (the "recipient") obtains a relief or refund attributable to the deduction or withholding, it will pay to the maker of the payment (the "payer") an amount equal to the relief or refund, less: (a) any external costs of the recipient in obtaining the relief or refund and in paying the said amount to the payer; (b) any additional Taxation liability of the recipient arising on such relief or refund; and (c) any deduction or withholding required by law on such payment of such amount by the recipient to the payer. (4) None of the rights or obligations under this agreement may be assigned or transferred without the written consent of the other party provided, however, that either party may: (a) assign any or all of its rights and interests hereunder to one or more of its Affiliates provided that: (i) such assignment shall only be permitted if the assignment has no adverse effect on the non-assigning party; (ii) if the Affiliate to which the rights have been assigned ceases to be an Affiliate of the assigning party, the rights which have been transferred shall, prior to it ceasing to be an Affiliate, be re-transferred to the party which originally assigned those rights or to another Affiliate of that original assigning party; and (iii) it shall be a condition of any such assignment that reasonable notice is given in writing to the other party of the proposal to assign (identifying the rights proposed to be assigned, the identity of the proposed assignee and such other details relating thereto as the other party may reasonably require); (b) designate one or more of its Affiliates to perform its obligations under this agreement (in any or all of which cases the Seller or the Purchaser, as the case may be, nonetheless shall remain responsible for the performance of all of its obligations hereunder); or (c) (in respect of the Purchaser only) assign its rights and interests under this agreement for the benefit of the funders of any member of the Purchaser's Group in connection with the funding of the acquisition under this agreement at Completion or any refinancing thereof. (5) Save as otherwise provided in this agreement, each party shall pay the costs and expenses incurred by it in connection with the entering into and completion of this agreement. (6) This agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement and any party may enter into this agreement by executing a counterpart. (7) No amendment, variation or waiver of this agreement or any provision of this agreement shall be effective unless it is in writing and duly executed by or on behalf of each of the parties. (8) Both parties shall and shall procure that their Affiliates shall at their own expense at all times from the date of this agreement do all things as may be reasonably required to give effect to this agreement including, without limitation, the execution of all deeds and documents, procuring the convening of all meetings, the giving and obtaining of all necessary waivers and consents and the passing of all resolutions and otherwise exercising all powers and rights available to them. For the avoidance of doubt, the Seller shall be responsible for all costs that have been or may be incurred as a result of any assignment of Business Intellectual Property executed between members of the Seller's Group prior to Completion including the costs of recording of such assignment. (9) The Purchaser hereby waives and relinquishes any right of set-off or counterclaim, deduction or retention which the Purchaser might otherwise have in respect of sums due to the Seller under the Hedging Agreements. (10) Each of the parties hereto acknowledges and agrees that the other parties would be damaged irreparably in the event any of the provisions of this agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the parties hereto agrees that the other parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this agreement and to enforce specifically this agreement and the terms and provisions of this agreement in addition to any other remedy to which it may be entitled, at law or in equity. (11) The Seller's Group will, prior to the Completion Date, permit representatives of the Purchaser to have reasonable access at all reasonable times and on reasonable notice, and in a manner which, in the reasonable opinion of the Seller, will not unduly interfere with the normal business operations of the Seller or any member of the Seller's Group, to all premises, properties, personnel, books, records (including tax records), contracts, and documents of or pertaining to the Business, subject to appropriate undertakings of confidentiality and subject to obligations of confidentiality to third parties. 29. WHOLE AGREEMENT (1) Subject to subclause (2) below, this agreement, the Implementation Agreements and the other agreements to be entered into pursuant to this agreement (if and when executed) contain the whole agreement between the parties and their respective Affiliates relating to the transactions contemplated by this agreement and the Implementation Agreements and supersede all previous agreements (including the Data Room Rules dated 19th August, 1997) between the parties and their respective Affiliates relating to such transactions. (2) A provision in another agreement between the parties to this agreement or between the respective parent undertakings of the parties (and whether made before or after the date of this agreement) which refers to this agreement and which extends or supplements any provision in this agreement will be deemed for the purposes of subclause (1) above to form part of the whole agreement between the parties as referred to in that subclause. (3) Each of the parties to this agreement acknowledges on its own behalf and on behalf of each of its Affiliates that, in agreeing to enter into this agreement and the Implementation Agreements, it has not relied on any representation, warranty, collateral contract or other assurance (except those set out in this agreement and the Implementation Agreements) and waives all rights and remedies which, but for this subclause, might otherwise be available to it in respect of any such representation, warranty, collateral contract or other assurance, provided that nothing in this subclause shall limit or exclude any liability for fraud. 30. GOVERNING LAW This agreement is governed by and shall be construed in accordance with English law. 31. JURISDICTION The parties submit to the non-exclusive jurisdiction of the English courts for all purposes relating to this agreement. Terra irrevocably appoints the Purchaser as its agent for service of process. AS WITNESS the hands of the duly authorised representatives of the parties on the date which first appears on page 1. SCHEDULE 1 See Annex 2 SCHEDULE 2 PLANT AND EQUIPMENT BILLINGHAM Ammonia 4 Production Plant (NH3) Ammonia Storage Facilities (NH3 Sto) Sphere and loading facilities for Road Tankers Dilution plant and storage and Road Tanker Loading Nitric Acid Plants, Nos 1,8,3 and 4 Ammonium Nitrate Prilling Tower Sodium Nitrate Plant Storage facilities for finished product fertilizer, nitric acid and sodium nitrate CO\\2\\ liquefaction plants (Nos 2 and 3) and storage bullets Pipe bridges with pipes and cables; buried pipelines; auxiliary boilers and; de- mineralised water plant SEVERNSIDE Two leading concept ammonia plants Two nitric acid plants One ammonium nitrate prilling tower Storage for finished product fertilizer CO\\2\\ liquefaction plant Utilities infrastructure STANLOW CO\\2\\ liquefaction plant and storage SCHEDULE 3 INTELLECTUAL PROPERTY AND EXCLUDED TECHNOLOGIES Part 1: Business Intellectual Property Registered Trade Marks See annex 6 of the Disclosure Letter Unregistered Trade Marks Classic Classic Gold Number 8 Super 8 Sulphur Gold Blue Bag Part : Licensed Intellectual Property Designs 1054749 1054750 Patents EP 0080839 (UK) EP 0320153 (UK) Copyright relating to the following Software: QSA Modifications to SAP/R2 order processing system dedicated to the Business Developments as at Completion of Modifications to SAP/R3 order processing system dedicated to the Business Part 3: Excluded Technologies Patents EP 0080270 (UK) EP 0124228 (UK) EP 0157480 (UK) EP 0180412 (UK) EP 0194067 (UK) EP 0254395 (UK) EP 0287238 (UK) Part 4: Exclusive Information Information relating to the manufacture of Sodium Nitrite Information relating to the abatement of NOx from Nitric Acid Manufacture using caustic soda SCHEDULE 4 Part 1 ICI Individuals R.W. Carter G.M. Fish M. Gardner S.A. Roberts T.A. Shovlin A.J. Lewis C. Lock P. Gill M.J. Welch D.S. Flett J. Hullah R.C. Goodwin M. Bell J. Lees C.A. Hobson S.J. Beer J. Robertson M. White Part 2 Terra Individuals M.L. Bennett G.H. Valentine L.S. Hlobek E.L. Slockers S. Savage SCHEDULE 5 EXCLUDED ASSETS 1. All assets required by the Seller or its Affiliates for the supply or receipt of utilities, services or products to be supplied by the Seller or its Affiliates to the Purchaser or its Affiliates pursuant to the Implementation Agreements which are located either outside the Properties and are not subject to the Property Rights or identified in the Implementation Agreements as being retained by the Seller or its Affiliates. 2. Any interest in the Wilton site except as set out in the Implementation Agreements or the Property Documents and/or Premises Agreements. SCHEDULE 6 IMPLEMENTATION AGREEMENTS
- ------------------------------------------------------------------------------------- AGREEMENT SUPPLIER PURCHASER - ------------------------------------------------------------------------------------- 1. UTILITIES The Business Methanol Nitrogen Potable Water Fire Water (Raw Water) Gately Water Demin Water Effluent IP Steam LP Steam - ------------------------------------------------------------------------------------- 2. ELECTRICITY The Business Methanol 50Hz Elec - ------------------------------------------------------------------------------------- 3. MATERIALS The Business Methanol Carbon Dioxide - ------------------------------------------------------------------------------------- 4. SERVICES The Business Methanol Site Road System Interface Ops Process Pipes - ------------------------------------------------------------------------------------- 5. UTILITIES The Business Amines Gately Water Fire Water Potable Water Effluent HP Steam IP Steam LP Steam Condensate Nitrogen (by pipeline) - ------------------------------------------------------------------------------------- 6. ELECTRICITY The Business Amines Elec 40Hz Elec 50Hz - -------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------- AGREEMENT SUPPLIER PURCHASER - ---------------------------------------------------------------------------------------- 7. MATERIALS The Business Amines Ammonia - ---------------------------------------------------------------------------------------- 8. UTILITIES The Business Acrylics LP Steam Demin Water Raw Water (Fire Water) Raw Water (Gately Water) Potable Water Nitrogen (by pipeline) Effluent IP Steam (includes supply and purchase) - ---------------------------------------------------------------------------------------- 9. ELECTRICITY The Business Acrylics 50 Hz Elec - ---------------------------------------------------------------------------------------- 10. MATERIAL The Business Acrylics Ammonia - ---------------------------------------------------------------------------------------- 11. UTILITIES The Business Katalco Potable Water Fire Water (Raw Water) Effluent LP Steam Gately Water (Raw Water) Nitrogen - ---------------------------------------------------------------------------------------- 12. ELECTRICITY The Business Katalco 50 Hz Electricity - ---------------------------------------------------------------------------------------- 13. MATERIAL The Business Katalco Weak Nitric Acid - ---------------------------------------------------------------------------------------- 14. MATERIALS The Business Polyurethanes Weak Nitric Acid - ---------------------------------------------------------------------------------------- 15. MATERIALS The Business Explosives Weak Nitric Acid - ---------------------------------------------------------------------------------------- 16. UTILITIES ICI Tubs The Business Raw Water Nitrogen Nitrogen - ----------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------- AGREEMENT SUPPLIER PURCHASER - ----------------------------------------------------------------------------------------- 17. SERVICES Plymouth Tubs The Business Pay Roll Services Jetty Services - ----------------------------------------------------------------------------------------- 18. MATERIALS Hydrogen - ----------------------------------------------------------------------------------------- 19. MATERIALS Katalco The Business Catalysts - ----------------------------------------------------------------------------------------- 20. MATERIALS Methanol The Business Instrument Air LP Steam - ----------------------------------------------------------------------------------------- 21. UTILITIES Acrylics The Business IP Steam (includes supply and purchase) - ----------------------------------------------------------------------------------------- 22. GAS-SUPPLY Seller Purchaser BGT (No. 1) - ----------------------------------------------------------------------------------------- 23. GAS-SUPPLY Seller Purchaser BGT (No. 2) - ----------------------------------------------------------------------------------------- 24. GAS-SUPPLY Seller Purchaser Mobil - ----------------------------------------------------------------------------------------- 25. GAS-SUPPLY Purchaser Acrylics - ----------------------------------------------------------------------------------------- 26. GAS-SUPPLY Purchaser Amines - ----------------------------------------------------------------------------------------- 27. GAS-TRANSPORTATION Purchaser --- Master - ----------------------------------------------------------------------------------------- 28. GAS-TRANSPORTATION Purchaser Methanol Methanol - ----------------------------------------------------------------------------------------- 29. Terra and ICI parent guarantees relating to the agreements - -----------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------ AGREEMENT SUPPLIER PURCHASER - ------------------------------------------------------------------------------------------- 30. The Shared IT Services Agreement between ICI and the Purchaser - ------------------------------------------------------------------------------------------- 31. Assignment of Business Intellectual Property - ------------------------------------------------------------------------------------------- 32. Ammonia facilities access agreement (Amines) - ------------------------------------------------------------------------------------------- 33. Ammonia facilities access agreement (Acrylics) - -------------------------------------------------------------------------------------------
SCHEDULE 7 WARRANTIES In this Schedule 7 "material adverse effect" means an adverse effect upon the Business which might reasonably be expected to result in a diminution in the value of the Business in the hands of the Purchaser following Completion in excess of (Pounds)100,000. A. GENERAL A.1 Capacity and conduct of business (1) Each of the Seller and ICI (and each of its Affiliates, in respect of the Implementation Agreements and the other agreements entered into pursuant to this agreement to which it is a party) has the requisite power and authority to enter into and to perform this agreement, such Implementation Agreements and the other agreements entered into pursuant to this agreement. (2) Each of the Seller and ICI (and each of its Affiliates, in respect of the Implementation Agreements and the other agreements entered into pursuant to this agreement to which it is a party) has obtained or satisfied all corporate, regulatory and other approvals, or any other significant conditions, necessary to execute and perform this agreement, such Implementation Agreements and the other agreements entered into pursuant to this agreement. (3) This agreement, the Implementation Agreements and the other agreements entered into pursuant to this agreement constitute (or when executed, will constitute) valid and binding obligations of the Seller and ICI (and each of its Affiliates, in respect of Implementation Agreements and the other agreements entered into pursuant to this agreement to which it is a party) enforceable in accordance with their terms. (4) Compliance with the terms of this agreement by the Seller and ICI and the other agreements entered into pursuant to this agreement and the Implementation Agreements by the Seller or its Affiliates (as appropriate) will: (a) not constitute a breach of any agreement or contract to which the Seller, ICI or such Affiliate is a party or by which it is bound; or (b) be in compliance with the Seller's, ICI's or such Affiliate's memorandum and articles of association or other constitutional documents; or (c) not contravene any order, judgment, decree or regulation or any other restriction of any kind by which the Seller, ICI or such Affiliate is bound. (5) Each of the Seller and ICI is a company, duly incorporated and subsisting under the laws of England and Wales and is not in liquidation, administration or administrative receivership, nor has any resolution been passed by the shareholders or creditors to put either of the companies into liquidation, administration or administrative receivership. (6) The Seller does not act or carry on business in partnership with any other person in relation to the Business. (7) The Seller does not have any branch, agency, place of business or permanent establishment outside England and Wales in relation to the Business. A.2 The assets (1) Save in respect of Business Intellectual Property, Exclusive Information and those Assets that are leased and are identified as such in the Disclosure Letter, the Seller has full legal and beneficial title to each of the Assets. (2) None of the Assets is subject to any Encumbrance except those which arise in the ordinary course of business and do not have a material adverse effect on the Business. (3) The Assets together with the rights conferred under or pursuant to this agreement will enable the Purchaser to continue to run the Business after Completion in all material respects in the same way as it was run by the Seller as at 30th September, 1997 and as at the date of this agreement. (4) All significant items of plant and equipment used in the Business have been adequately maintained and are in reasonable working order having regard to their age and use. A.3 Compliance with statutes (1) The Seller, its officers, agents and employees are not in contravention of any statute, order or regulation which is likely to result in a fine or penalty which would have a material adverse effect on the Business. (2) There is no order, decree or judgment or any court or governmental agency outstanding in relation to the Business other than in relation to routine debt collection. A.4 Licences, consents and permits (1) The Seller has all governmental and regulatory authorisations, licences, permits and consents necessary to own and operate the Assets and to carry on the Business, except where the failure to obtain such authorisations, licences, permits or consents individually or in aggregate would not have a material adverse effect on the Business. For the avoidance of doubt the Seller provides no warranty or undertaking that any such authorisations, licences, permits or consents will be available to the Purchaser. (2) All authorisations, licences, permits and consents of the type referred to in (1) have been identified in the Disclosure Letter. A.5 Litigation The Seller's Group is not engaged in any litigation or arbitration proceedings which would have a material adverse effect on the Business except as plaintiff for collection of debts in the ordinary course of business and there are no such proceedings, in existence or, so far as the Seller is aware, threatened against the Seller and, so far as the Seller is aware, there are no claims, facts or events which are likely to give rise to any such proceedings. A.6 Environmental matters (1) Notwithstanding the provisions of any other Warranty the provisions of this paragraph A.6 are the only Warranties given in relation to the Environment, Environmental Laws, Environmental Permits and Dangerous Substances. (2) In this paragraph: (a) "Environmental Law" has the meaning given in Schedule 11; (b) "Environmental Permits" means any governmental authorisations, permits, licences and consents required under or in relation to any Environmental Law; (c) "Environmental Contamination" has the meaning given in Schedule 11 provided that, for the purposes of this warranty A.6 such contamination must be present prior to Completion and cause or be likely to cause material harm to human health or pollution of the environment; (d) "Dangerous Substance" means any natural or artificial substance (whether in the form of solid, liquid, gas or vapour) capable of causing significant harm to man or the environment. (e) "Material Upgrades" means in relation to any plant or process all material changes under current written conditions contained in existing Environmental Permits which are required either now or in the future including for the avoidance of doubt any upgrades required under improvement programmes. (3) The Seller, its agents, officers and employees are not in contravention of any Environmental Law which is likely to result in a fine or penalty which would have a material adverse effect on the Business. (4) There is no written notice, order, decree or judgment of any court or regulatory or governmental agency of the United Kingdom outstanding, nor agreements to which the Seller is a party or by which the Seller is bound, in relation to the Business which arises as a result of or, in the case of agreements, concern Environmental Law or liabilities thereunder which would have a material adverse effect on the Business. (5) The Seller has all Environmental Permits necessary to own and operate the Assets and to carry on the Business, except where the failure to obtain such Environmental Permits individually or in aggregate would not have a material adverse affect on the Business. For the avoidance of doubt, the Seller provides no warranty or undertaking that any such Environmental Permits will be available to the Purchaser.(6) A list of all material Environmental Permits has been identified in the Disclosure Letter. (7) The Seller is not engaged in any litigation or arbitration proceedings concerning Environmental Law or Dangerous Substances solely in relation to and affecting the Business and, so far as the Seller is aware, there are no such proceedings pending nor any circumstances likely to give rise to such proceedings against the Seller in its capacity as owner of the Business, in each case which would have a material adverse effect. (8) So far as Seller is aware, there is no Environmental Contamination present at any adjoining sites which has led or is likely to lead to on site Environmental Contamination at the Billingham and/or Severnside sites. For the purposes of this warranty A.6(8) only, the Seller's awareness shall be judged by reference solely to the actual knowledge, without any documentary, oral or other investigation enquiry or consultation of any kind, of Tony Lewis, John Reynolds, Ron Goodwin in the case of the Billingham site and Richard Baker, Graham Foster, Mike Welch in the case of the Severnside site. (9) A list of all Material Upgrades of which the Seller is aware is provided in the Disclosure Letter. A.7 Title retention Other than in the ordinary course of trading, the Seller has not acquired or agreed to acquire any of the Assets on terms that the property therein does not pass until full payment is made. A.8 Customers and suppliers The Disclosure Letter sets out details of the ten principal customers and ten principal suppliers of materials (by value) of the Business. A.9 Condition of Stock All products manufactured by the Seller prior to Completion and included within the Stocks conform with the specifications against which those products would have been sold by the Seller to customers of the Business if the Seller had continued to carry on the Business after Completion as it was carried on by the Seller prior to Completion, provided always that the Seller's liability for breach of this warranty shall not exceed the costs which the Seller would have suffered had the Seller's policy in relation to out of specification product which applied prior to Completion, been continued following Completion. B. ACCOUNTS (1) The Accounts have been prepared in accordance with UK generally accepted accounting principles and present fairly the financial position of the Business as at the end of the periods for which they were prepared and the results of operations and changes in financial position and cash flows for the period in respect of which they were prepared have been prepared in conformity with the ICI Controller's Manual applied on a basis consistent with the previous twelve months save for changes made in the ICI Controller's Manual to reflect changes in UK accounting practice from time to time (save as noted therein). (2) Save as noted therein, the Accounts have not been affected by any extraordinary, exceptional or non-recurring item or by any other fact or circumstance rendering the profit or loss for the relevant period unusually high or low. (3) Particulars of all grants, subsidies, payments or allowances received or receivable by the Seller or any of its Affiliates in relation to the Business from any governmental authority, body or agency (whether supranational regional or local) (but always excluding any relating to Taxation) the loss of which would have a material adverse effect are identified in the Disclosure Letter. (4) The amounts of raw materials, work in progress, finished goods and packaging and promotional material comprised in the Stock are at a level which is consistent with the trading requirements of the Business. C. ANTI COMPETITIVE ARRANGEMENTS (1) In relation to the Business, the Seller is not a party to any agreement, arrangement, concerted practice or course of conduct (whether by omission or otherwise) which: (a) is subject to registration under the Restrictive Trade Practices Acts 1976 but is not so registered; (b) infringes Article 85 or 86 of the Treaty establishing the European Community and/or Articles 53 and/or 54 of the European Economic Area Agreement or any other anti-trust or similar legislation in any jurisdiction in which the Seller carries on the Business; (c) is an "anti-competitive practice" within the meaning of the Competition Act 1980; (d) contravenes the provisions of the Resale Prices Act 1976 or an undertaking which has been given by, or an order which has been made against, the Seller pursuant to that Act; (e) so far as the Seller is aware, could give rise to the imposition of any anti-dumping duty on the Seller or the Purchaser or other sanction against the Seller or the Purchaser under any EU trade legislation, and the effect of which would have a material adverse effect on the Business. (2) The Seller has not received in the last three years any process, notice or communication, formal or informal, from the Office of Fair Trading or Directorate General IV of the European Commission or the EFTA Surveillance Authority or any relevant local or national anti-trust regulatory authority, relating to any aspect of the Business which alleges any illegal practices, course of conduct, agreements or arrangements in relation to the Business and so far as the Seller is aware no such process, notice or communication is likely to be received. D. MATERIAL CONTRACTS (1) All Material Contracts relating to the Business are referred to in the Disclosure Letter. For the purpose of this warranty "Material Contracts" means contracts or commitments to enter into contracts (with third parties not within the Seller's Group): (a) of a duration from the date of this agreement of more than 12 months; (b) which are for a duration from the date of this agreement of less than 12 months but which can reasonably be expected to involve aggregate income or expenditure in respect of the Business in excess of (Pounds)300,000; or (c) which are agency, distributorship or management agreements. (2) So far as the Seller is aware, it is not in breach of, or in default under, any of the Material Contracts, the consequence of which would have a material adverse effect on the Business. (3) The Seller is not a party to any contract or arrangement, other than to the extent that they relate to Intellectual Property, which restricts its freedom to carry on the Business in any part of the world in such manner as it thinks fit. (4) Save as set out in the Disclosure Letter there is not, and there has not at any time during the last two years been, any contract or arrangement between the Seller and a party which was not part of the Seller's Group in relation to the Business which was not of an arm's length nature and was material to the Business. (5) So far as senior management of the Seller is aware (without having made any enquiry of third parties), after Completion (whether by reason of an existing agreement or arrangement or as a result of the proposed acquisition of the Business and Assets by the Purchaser): (a) no supplier of the Business will cease supplying the Business or will substantially reduce its supplies to the Business; (b) no customer of the Business will cease to deal with the Business or will substantially reduce its existing level of business with the Business; (c) the Business will not lose the benefit of any right or privilege which it enjoys; and (d) no officer or Employee will leave, in each case, which he is aware would have a material adverse effect. (6) There will be no material agreements between the Businesses and any member of the Seller's Group immediately following Completion (save for the Implementation Agreements, any other agreements to be entered into pursuant to this agreement and any other arrangements to be entered into pursuant or ancillary thereto) which is not in the ordinary course of business or other than on an arm's length basis. E. EMPLOYEES (1) The Employees are all the persons employed in the Business. The Disclosure Letter contains details of each Employee's name, age, salary, period of continuous employment, grade and any allowances the Employee is entitled to and the particulars of the Employees in the Disclosure Letter are accurate in all respects. (2) No Employee has given, or has been given, notice of termination of his employment. (3) Specimen terms of employment of all Employees are included in the Disclosure Letter. (4) The collective agreements included in the Disclosure Letter are all the agreements between the Seller and the trade unions representing the Employees. (5) So far as the Seller is aware, there is no industrial action pending in relation to the Business which would have a material adverse effect on the Business. (6) Since 30th September, 1997 there has been no change in the rates of remuneration or other benefits or other terms of employment of the Employees and no person will be entitled to receive any benefit as a direct consequence of the Sale of Business. The Seller is not a party to any contractual arrangement to make changes to remuneration or other benefits or other terms of employment or to establish any new bonus arrangements for the Employees. (7) There are no sums owing to any present or former Employees or officers in the Business apart from salary for the month in which Completion takes place and any business expenses. (8) The Seller has not in relation to the Business in the last three years been the subject of any adverse report, complaint or investigation of the Health and Safety Executive in relation to the Assets or been prosecuted, formally cautioned or warned for any violation of any applicable laws or regulations including the Health and Safety at Work etc. Act 1974 and the Control of Substances Hazardous to Health Regulations 1987. So far as the Seller is aware, the Seller has fully complied with all health and safety statutes and regulations in relation to the Business. (9) The terms of the Employees are such that their employment may be terminated by not less than three months' notice without liability for any contractual payments in excess of three months' salary including by way of compensation or damages (except for unfair dismissal or a statutory redundancy payment). F. PENSION SCHEMES (1) This sub-paragraph applies to the ICI Pension Fund governed by a deed dated 5th March, 1996 (the "Scheme"). (2) Except pursuant to the Scheme, the Seller has not paid, provided or contributed towards, and is not under any obligation or commitment (whether or not legally enforceable) to pay, provide or contribute towards, any retirement/death/disability benefit for or in respect of any Employee or any person previously employed in the Business (or any spouse, child or dependant of any of them). For this purpose "retirement/death/disability benefit" means any pension, lump sum, gratuity or other like benefit given or to be given on retirement or on death, or in anticipation of retirement, or, in connection with past service, after retirement or death, or to be given on or in anticipation of or in connection with any change in the nature of the service of the employee in question or given or to be given on or in connection with the sickness or disability of an employee. (3) The Seller has included the following in the Disclosure Letter: (a) copies of the documents constituting and governing the Scheme (including notices, announcements and explanatory literature of current effect); (b) a copy of the Trustees' report to members and the audited accounts of the Scheme (including the auditor's report) for the last scheme year and any short form report issued to members; (c) all material particulars relating to the Employees relevant to establish their entitlement to benefits; (d) all material particulars of any discretionary practice of the Scheme in the two years before the date of this agreement and of any proposal to operate any discretionary practice in the future (including, without limitation, pension increases and early retirement benefits). (4) The documents disclosed contain particulars of all the benefits provided by and the terms of the Scheme, including (but without limitation) any enhancement of or addition to the benefits or terms in respect of any person. (5) The Scheme is approved by the Board of the Inland Revenue as an exempt approved scheme within the meaning of section 592 of the Income and Corporation Taxes Act 1988 and so far as the Seller is aware there is no reason why such approval might be withdrawn or cease to apply. (6) The active members of the Scheme are contracted-out of the State Earnings- Related Pension Scheme by reference to the Scheme and so far as the Seller is aware there are no circumstances which might cause such certificate to be withdrawn or cease to apply. (7) Each Employee who is entitled to membership of the Scheme (whether under the Scheme Documents or any applicable law) has been invited to join the Scheme as of the date on which he became entitled. (8) There are no legal proceedings with regard to the benefits payable in respect of any Employee under the Scheme which are pending or threatened in writing. (9) No power has been exercised under the Scheme to grant or augment any benefit under the Scheme for or in respect of an Employee which would not otherwise have been provided under the Scheme Documents and no assurance has been given that such a power will be exercised. (10) All contributions due from Employees who are members of the Scheme have been duly made. (11) No claim has been made, or threatened in writing, by any of the Employees against the trustees or administrator of the Scheme, the Seller or any person the Seller is or may be liable to indemnify or compensate (including any complaint under the internal dispute resolution procedure or to the Pensions Ombudsman or the Occupational Pensions Regulatory Authority) in respect of any act, event, omission or other matter arising out of or in connection with the Scheme (other than routine claims for benefits) and so far as the Seller is aware there are no circumstances which may give rise to any such claim. G. PROPERTIES See Annex 3 H. INTELLECTUAL PROPERTY To the extent that any warranty in this Section H is qualified by the words "so far as the Seller is aware" or any similar statement, this statement shall be deemed to mean such knowledge which any of those persons listed in Part 1 of Schedule 4, John Leng, Chris Gratwick or Ann Bashir (and no other persons) had or ought reasonably to have had at Completion in relation to the matter for which they have responsibility. (1) The Seller or a member of the Seller's Group is the legal and beneficial owner of the Acquired Intellectual Property. (2) Short particulars of all registrations (or applications for registration) of Business Intellectual Property and material Licensed Intellectual Property are provided in the Disclosure Letter. (3) Following Completion the Purchaser will own or have licensed to it all Material Intellectual Property and have the right to use all Material Information necessary for the conduct of the Business as such Business was carried on by the Seller at Completion. (4) The Seller has not received notice that any Intellectual Property or Information used in the Business infringes any third party rights. (5) The Seller is not currently aware of attacks by others on the validity of any Business Intellectual Property. (6) All material agreements relating to the Business Intellectual Property and Exclusive Information to which the Seller or a member of the Seller's Group is a party are listed in the Disclosure Letter. (7) Neither the Seller nor any member of the Seller's Group is in breach or is aware of a breach by any third parties of any of the agreements referred to in paragraph (6) above which would have a material adverse effect. (8) So far as the Seller is aware, no third party is infringing or misusing or threatening to infringe or misuse any Business Intellectual Property or Exclusive Information. I. TAX I.1 Duties etc. None of the Assets is liable to distraint, sale, mortgage, confiscation or forfeiture by virtue of non-payment or underpayment of any Taxation or duty or by virtue of non-compliance by the Seller with any legislation or regulation relating to any Taxation or duty. I.2 Capital Goods Scheme All Assets which are or have been subject to the provisions of Part XV of The Value Added Tax Regulations 1995 are listed in the Disclosure Letter and all adjustments required to be made pursuant to the said part on or before the date hereof have been properly made and properly declared to H.M. Customs and Excise. I.3 Elections to waive exemption from VAT The Seller has not made any elections to waive exemption from VAT under paragraph 2 of Schedule 10 to the Value Added Tax Act 1994 in relation to any Property or any part of any Property which are in force. I.4 Capital allowances (1) None of the Assets is leased within the meaning of section 50 of the Capital Allowances Act 1990. (2) In respect of any Assets which are plant and machinery for the purposes of Part II of the Capital Allowances Act 1990 and which are fixtures (as defined in section 51(2) of that Act) at Completion either (i) no person has been or will have become entitled to allowances in respect of any expenditure incurred on the provision of the fixture or, (ii) if any person has become so entitled that person has been, is or will be required to bring the disposal value of the fixture into account under section 24 of that Act otherwise than by virtue of sub-section (7) of that section. (3) No person other than the Seller has an interest in any Asset which is a fixture (by virtue of such person holding an interest in the land to which that fixture is attached) where such person is entitled to claim allowance pursuant to Part II Capital Allowances Act 1990 in respect of the fixture. (4) The Seller has claimed allowances pursuant to Part II Capital Allowances Act 1990 in respect of any machinery and plant which has become a fixture and which is an Asset, or where the Seller has not claimed such allowances the Disclosure Letter contains particulars of the disposal value (as defined in section 26 Capital Allowances Act 1990) brought into account by the last person (if any) disposing of such fixtures on or after 24 July 1997 to claim such allowances. I.5 Stamp Duty All documents in the possession or under the control of the Seller or to the production of which the Seller is entitled and which are necessary to establish the title of the Seller to any of the Assets and which attract stamp duty in the United Kingdom or elsewhere which would need to be paid in order rely on any such document before a competent court have been properly stamped, and, if United Kingdom stamp duty has not been paid because the documents have been executed and retained outside the United Kingdom, would not attract United Kingdom stamp duty if brought into the United Kingdom. J. CONDUCT OF BUSINESS SINCE 30TH SEPTEMBER, 1997 (1) Except for the purposes of giving effect to the transactions contemplated by this agreement the Business has since 30th September, 1997 been conducted and carried out only in the ordinary course consistent with its past practices. (2) Except for Plant and Equipment purchased, sold or leased in the ordinary course of business the Seller has not since 30th September, 1997 purchased, sold, leased, mortgaged, pledged or otherwise hired or disposed of any material Asset and without limiting the generality of the foregoing has not terminated, entered into or modified any contract, lease, sub-lease, licence or sub-licence which at Completion can reasonably be expected to involve income or expenditure in respect of the Business in excess of (Pounds)1,000,000 per annum. (3) Since 30th September, 1997: (a) there has been no material adverse change in the Business taken as a whole; and (b) no customer or supplier of the Business has ceased purchasing from, or supplying to, the Seller in connection with the Business which would have a material adverse effect on the Business. K. GENERAL The slides given at the presentations made by representatives of the Seller to representatives of the Purchaser and the written responses to written questions copies of both of which are included in the Disclosure Letter, the information contained in Part 2 of annex 3 of the Disclosure Letter and the historical pensions information contained in annex [ ] to the Disclosure Letter were given in good faith and at the time they were given fairly presented the historical data and facts contained therein and the Seller is not aware of any fact which renders any such information untrue or inaccurate in any material respect. All such information has been given in good faith by the Seller to the Purchaser but nothing in this agreement shall constitute a warranty in respect of matters in the future, including any forecast of future performance of the Business or any aspect thereof, or of any expression of opinion or judgement or of the accuracy of any estimate. L. INSURANCE (1) The Seller has produced to the Purchaser summaries of insurance policies in effect in relation to the Plant and Equipment and Properties which are relevant for the purposes of clause 5(7) and all such policies are in full force and effect. (2) The policies of insurance referred to in (1) afford the Seller adequate cover against such risks as companies carrying on the same type of business as the Business commonly cover by such insurance and in particular insure the Plant and Equipment and Properties against fire in their full replacement value. (3) So far as the Seller is aware, there are no circumstances which might lead to any liability under such insurance as referred to in (1) being avoided by the insurers. SCHEDULE 8 EMPLOYEES (1) The Seller and the Purchaser acknowledge and agree that under the Employment Regulations the contracts of employment between the Seller and the Employees and the collective agreements annexed to the Disclosure Letter will have effect after Completion as if originally made between the Purchaser and the Employees or between the Purchaser and the relevant trade union (as the case may be). On or as soon as practicable after Completion the Seller and the Purchaser shall jointly issue to each Employee a notice in the Agreed Form. (2) Without prejudice to paragraph (1) above, if the contract of employment of any of the Employees is found or alleged not to have effect after Completion as if originally made with the Purchaser as a consequence of the application of the Employment Regulations to the transaction the Purchaser agrees that it will: (a) in consultation with the Seller and within seven days of being so requested by the Seller, make to that Employee an offer in writing to employ him under a new contract of employment to take effect on the termination referred to below; and (b) the offer to be made will be such that none of the terms and conditions of the new contract will differ materially from the corresponding provision of that Employee's contract of employment immediately before Completion. Upon that offer being made the Seller shall terminate the contract of employment of the Employee concerned acting lawfully in accordance with the terms of the contract of employment. If such offer were not made the Seller may, at any time after the expiry of seven days from the request by the Seller, terminate the contract of employment of the Employee. In either event the Purchaser shall indemnify the Seller against all liabilities arising out of or in connection with the termination of the employment of that Employee and against any such sum payable to it or in respect of that Employee under his contract of employment after Completion until such termination, including the costs of such termination. (3) If any contract or employment of any employee of the Seller who is not an Employee is found or alleged to have effect after as if originally made with the Purchaser as a consequence of the application of the Employment Regulations to the transaction the Seller agrees that it will: (a) in consultation with the Purchaser and within seven days of being so requested by the Purchaser, make to that employee an offer in writing to employ him under a new contract of employment to take effect on the termination referred to below; and (b) the offer to be made will be such that none of the terms and conditions of the new contract will differ materially from the corresponding provision of that employee's contract of employment immediately before Completion. Upon that offer being made the Purchaser shall terminate the contract of employment of the employee concerned acting lawfully in accordance with the terms of the contract of employment. If such offer were not made the Purchaser may, at any time after the expiry of seven days from the request by the Purchaser, terminate the contract of employment of the employee. In either event the Seller shall indemnify the Purchaser against all liabilities arising out of or in connection with the termination of the employment of that employee and against any sum payable to it or in respect of that employee under his contract of employment. (4) The Seller shall discharge all its obligations in respect of the Employees up to Completion and shall indemnify the Purchaser against all liabilities arising from the Seller's failure to do so. (5) The Purchaser shall on and from Completion discharge all the obligations of the employer in relation to the Employees and shall indemnify the Seller against all liabilities arising from the Purchaser's failure to do so. (6) The Purchaser shall provide the Seller with such information and assistance at such times as the Seller may reasonably request or as may be necessary for the Seller to comply with the requirements of Regulation 10 of the Employment Regulations or any other requirement to consult with the Employees a relevant trade union or any other employee representative. (7) The Seller shall indemnify the Purchaser against any liability relating to an Employee which arises out of any act or omission by the Seller or any other event, matter or circumstance occurring before Completion excluding: (a) any obligation in respect of the Employee's period of continuous employment; (b) any liabilities which arise out of a failure by the Purchaser to comply with (4) above; (c) any liability referred to in (6) below. (8) The Purchaser shall indemnify the Seller against any liability relating to an Employee which arises out of or in connection with: (a) any provision of this agreement including (without limitation) the change of employer occurring by virtue of the Employment Regulations and/or this agreement; (b) the termination of his employment, a change to a term of his employment or working conditions (including, without limitation, any term under an occupational pension scheme), any act or omission by the Purchaser or any other event, matter or circumstance occurring at or after Completion. (9) The Purchaser agrees that for a period of two years from the Completion Date: (a) the Employees will receive contractual remuneration and benefits (including retirement benefits) which in aggregate, judged objectively, are no less favourable than their contractual remuneration and benefits at the Completion Date; and (b) it will not make any unilateral material change to the contractual terms and conditions of employment of the Employees (which would include as an example those contained in the 1991 Staff Agreement Manual) without prior consultation, where required, by any local laws or agreements, with recognised trade unions, appropriate employee representatives, or the Employees. (10) In this Schedule: "Beneficiary" means, in relation to an indemnity, the person receiving the benefit of the indemnity; "claim" includes a claim by any person (including a trade union, a governmental or statutory or local authority or commission); "Covenantor" means, in relation to an indemnity, the person undertaking to indemnify the Beneficiary; and "liability" and "liabilities" includes any award, compensation, damages, fine, loss, order, payment made by way of settlement, costs and expenses (including legal expenses on an indemnity basis) properly incurred in connection with a claim and also includes the costs and expenses of any investigation by the Equal Opportunities Commission, the Commission for Racial Equality or any health and safety enforcement body and of implementing any requirements which may arise from any such investigation. (11) If the Beneficiary becomes aware of any matter which might give rise to a claim for an indemnity from the Covenantor, the following provisions shall apply: (a) the Beneficiary shall, within seven days of becoming aware of the matter, give written notice to the Covenantor of the matter in respect of which the indemnity is being claimed (stating in reasonable detail the nature of the matter and, so far as practicable, the amount claimed) and shall consult with the Covenantor with respect to the matter. If the matter has become the subject of any proceedings the Beneficiary shall give the notice within sufficient time to enable the Covenantor time to contest the proceedings before any first instance judgement in respect of such proceedings is given; (b) the Beneficiary shall: (i) take such action and institute such proceedings, and give such information and assistance, as the Covenantor or its insurers may reasonably request to dispute, resist, appeal, compromise, defend, remedy or mitigate the matter or enforce against any person (other than the Covenantor) the rights of the Beneficiary or its insurers in relation to the matter; (ii) in connection with any proceedings related to the matter (other than against the Covenantor) use professional advisers nominated by the Covenantor or its insurers and, if the Covenantor or its insurers so requests, allow the Covenantor or its insurers the exclusive conduct of the proceedings in each case on the basis that the Covenantor shall fully indemnify the Beneficiary for all costs incurred as a result of any request or nomination by the Covenantor or its insurers; and (iii) not admit liability in respect of or settle the matter without the prior written consent of the Covenantor, such consent not to be unreasonably withheld or delayed; and (c) if the Covenantor has conduct of any litigation and negotiations in connection with a claim, the Covenantor shall promptly take all proper action to deal with the claim so as not, by any act or omission in connection with the claim, to cause the Beneficiary to be in breach of its obligations to its current or past employees or to cause the Beneficiary's business interests to be materially prejudiced. (12) If the Covenantor does not elect to have conduct of any litigation and negotiations in connection with a claim by notice in writing to the Beneficiary within seven days of the Beneficiary giving notice of the matter which might give rise to a claim for an indemnity under this clause the Beneficiary shall be at liberty to take such action in relation to that matter as it considers expedient. (13) If the Inland Revenue brings into any charge to taxation any sum payable under any of the indemnities contained in this clause, the amount so payable shall be grossed up by such amount (such amount being referred to as the "gross-up amount") as will ensure that after deduction of the tax so chargeable there shall remain a sum equal to the amount that would otherwise have been payable under such indemnity. To the extent that the Beneficiary subsequently obtains any tax credit, allowance, repayment or relief as a result of the Covenantor paying to it the gross-up amount, it shall pay to the Covenantor so much of the economic benefit from that tax credit, allowance, repayment or relief which it has received as does not exceed the gross-up amount (any question as to the accrual or amount of any such economic benefit, the order and manner of making any claim for any tax credit, allowance, repayment or relief, and the timing of any payment, being determined by the Beneficiary's auditors). (14) Any failure by any party to exercise any rights under this clause will not operate as a waiver by that party of any such rights nor should it prevent that party from exercising the same right. The liability of any party under this clause shall not be released, impaired or affected by anything done by or arrangements or alterations of terms made with any of the parties to this agreement. (15) The indemnities given by the Covenantor in this clause are in addition to any rights which the Beneficiary may have at law or otherwise including, but not limited to, any right of contribution. (16) The indemnities contained in this clause shall, for the avoidance of doubt, extend to include all costs and expenses suffered or reasonably incurred by the Beneficiary in connection with enforcing its rights under this clause. (17) No statement in the Disclosure Letter shall affect any of the indemnities in this clause. SCHEDULE 9 PENSIONS 1. Interpretation (A) In addition to the provisions of clause 1 of this agreement, this schedule is construed as set out in this paragraph. (B) The following expressions and related expressions have the same meanings as in the Pension Schemes Act 1993: "cash equivalent", "contracted-out", "guaranteed minimum pension" and "money purchase benefits". (C) The following expressions have the same meanings as in the Rules: "Pensionable Service" and "Normal Retirement Age". (D) The following expressions have the following meanings: "Actual Payment Date" means the date on which the Transfer Amount is actually transferred to the Purchaser's Scheme. "Actuary" means a Fellow of the Institute or Faculty of Actuaries or a firm of those Fellows or a body making available the advice of one of those Fellows. "Actuary's Letter" means the letter from the Seller's Actuary to the Purchaser's Actuary relating to this schedule dated 17th November, 1997, a copy of which appears as annex 10 to the Disclosure Letter. "AVCs" means additional voluntary contributions paid by Members to the Seller's Scheme. "Consenting Member" means a person: (a) who is an Employee and a Member at Completion; (b) who begins to accrue retirement benefits as stated in paragraph 2(B) under the Purchaser's Scheme as of Completion and who continues to accrue those benefits at the Due Payment Date; and (c) in respect of whom the Seller's Scheme receives within one month of the distribution of election forms to Members, a signed election that a transfer payment be made from the Seller's Scheme to the Purchaser's Scheme and who does not withdraw his election. "Due Payment Date" means a date notified by the Seller to the Purchaser which is not later than one month after all the Transfer Conditions have been satisfied provided they then remain satisfied. "Exempt Approved Scheme" has the same meaning as in section 592 of the Income and Corporation Taxes Act 1988 and "Exempt Approved" is construed accordingly. "Investment Adjustment" has the meaning as defined in the Actuary's Letter. "Member" means, at any time or during any period specified in this schedule, an active member of the Seller's Scheme (including a member who is temporarily absent under the Rules on maternity leave). "Purchaser's Actuary" means an Actuary appointed by the Purchaser and notified to the Seller for the purpose of this schedule. Until further notice, the Purchaser's Actuary is Simon Lawrence of Hewitt Associates, Prospect House, Abbey View, St. Albans, Herts AL1 2QU. "Purchaser's Scheme" means the occupational pension scheme or schemes described in paragraph 2 and, where the context requires, includes its or their trustees. "Rules" means, in relation to the Seller's Scheme, the trust deeds, rules and other documents governing the Seller's Scheme as identified in the Disclosure Letter. "Seller's Actuary" means an Actuary appointed by the Seller and notified to the Purchaser for the purpose of this schedule. Until further notice, the Seller's Actuary is Mr R T G Hails of Watson Wyatt Partners. "Seller's Scheme" means the retirement benefit scheme established by deed dated 22nd July, 1927 and governed by a deed dated 5th March, 1996 known as the ICI Pension Fund. Where the context requires, the "Seller's Scheme" includes its trustees. "Transfer Conditions" means all of the following: (a) The Board of the Inland Revenue has given written approval to the transfer of assets from the Seller's Scheme and to the Purchaser's Scheme in respect of the Consenting Members and any condition to which that approval is subject is satisfied. (b) The Purchaser's Scheme is as described in paragraph 2, the invitation to join and the notices have been issued and the Purchaser's Scheme provides the benefits referred to in that paragraph and neither the Purchaser nor any member of the Purchaser's Group has made any statement to the effect that any such benefit will be reduced or discontinued in respect of any Employees. (c) The Seller's Scheme has received the written elections that a transfer payment be made from the Seller's Scheme to the Purchaser's Scheme completed and signed by the Consenting Members. (d) The calculation referred to in paragraph 3(C) has become final and binding as mentioned in that paragraph. (e) The Seller's Scheme has received the confirmation, undertakings and appendices (which includes a copy of the contracting-out certificate in relation to the Purchaser's Scheme) set out in appendix B executed by the Purchaser's Scheme and those confirmations and undertakings remain true and effective in all material respects. "Transfer Amount" and "unadjusted Transfer Amount" have the meanings given in paragraph 3. 2. Purchaser's Scheme (A) The Purchaser will procure that the Purchaser's Scheme: (i) is an Exempt Approved Scheme at Completion or is designed to be capable of approval by the Board of the Inland Revenue as an Exempt Approved Scheme with effect from Completion and at the Due Payment Date will be a scheme to which the Seller's Scheme can by law, and in accordance with Inland Revenue practice relating to Exempt Approved Schemes, make a transfer payment in respect of the Consenting Members' entire rights under the Seller's Scheme (including rights to guaranteed minimum pensions); (ii) is contracted-out by virtue of section 9(2B) of the Pension Schemes Act 1993 with effect from Completion; (iii) provides the benefits which are offered and accepted as mentioned below, subject, in the case of benefits under (C), to receipt of the Transfer Amount and, before the full Transfer Amount has been transferred, those benefits must be paid by the Purchaser's Scheme to the extent of the assets which have been received. (B) The Purchaser will offer to each person who is an Employee and a Member at Completion, in relation to employment from and after Completion, benefits which are of final salary type, are in accordance with the benefit structure set out in Appendix A, and in the opinion of the Seller's Actuary are as at Completion, no less valuable than those which would prospectively have been provided by the Seller's Scheme for and in respect of him if he had continued in membership of the Seller's Scheme after Completion. The Purchaser's Scheme will include in the benefits offered, an equivalent benefit to that provided by Rule 13(A)(iii) and (iv) of the 1949 section of the Rules and Rules 17 and 19 of the 1967 section of the Rules. (C) The Purchaser will offer to each person who is both an Employee and a Member at Completion for his Pensionable Service under the Seller's Scheme up to Completion, benefits which are of final salary type, are in accordance with the benefit structure set out in Appendix A, and in the opinion of the Seller's Actuary are, as at Completion, no less valuable than those which would prospectively have been provided by the Seller's Scheme for an in respect of him if he had continued in membership of the Seller's Scheme after Completion. The Purchaser's Scheme will include in the benefits offered, an equivalent benefit to that provided by Rule 13(A)(iii) and (iv) of the 1949 section of the Rules and Rules 17 and 19 of the 1967 section of the Rules. (D) The Purchaser will offer arrangements for additional voluntary contributions of similar type to those available under the Seller's Scheme at Completion. The Purchaser will procure that the Purchaser's Scheme will provide under those arrangements, in respect of any Consenting Members' AVCs transferred to the Purchaser's Scheme, benefits which are at least equal in value at the date of transfer to the value of the AVCs so transferred. (E) Not later than one week after Completion the Purchaser will invite in writing Employees who are members of the Seller's Scheme who are still employed in the Business and who have not reached their Normal Retirement Age to become members of the Purchaser's Scheme with effect from Completion with benefits in accordance with paragraph 2(B), such offer not being conditional on such Employees agreeing to transfer their benefits in respect of past service to the Purchaser's Scheme. The forms of invitation referred to in this paragraph will be submitted to the Seller in advance of their issue, and will not be issued until the Seller has approved them, such approval not to be unreasonably withheld or delayed. (F) Before Completion the Purchaser will supply the Seller with a draft of a notice (the "notice") to be issued to Employees who were members of the Seller's Scheme and have joined the Purchaser's Scheme pursuant to the invitation referred to in paragraph 2(E) above explaining the options available to them in relation to their accrued rights under the Seller's Scheme. Within 10 working days after receipt of the notice, the Seller will inform the Purchaser in writing whether the Seller agrees that the notice adequately explains the options and accrued rights under the Seller's Scheme, or of any objection thereto. As soon as practicable after the notice, or any revised notice following an objection by the Seller, has been agreed (or, in the event of a dispute, the determination of the issue concerned pursuant to paragraph 8), the Purchaser will issue the notice in the agreed form to each person referred to in this paragraph and confirm such issue, with a copy of the notice, to the Seller. (G) In this paragraph "benefits" includes all options under the Rules and the rate of contributions required to be paid by Members. 3. Calculation of Transfer Amount (A) The Purchaser will provide the Seller promptly with the documents and information necessary for the calculation of the unadjusted Transfer Amount and both the Seller and the Purchaser will answer any questions which the Seller's Actuary may reasonably have on the documents and information provided. The Seller will procure that the Seller's Actuary will calculate the Transfer Amount within 6 weeks of receiving those documents, information and answers. The unadjusted Transfer Amount shall be calculated in accordance with the Actuary's Letter. Any liability which there may be in respect of any difference as between a man and a woman relating to the guaranteed minimum pension shall not be included in the calculation. If any Consenting Member has more than one period of Pensionable Service any period before the last (the "previous periods") is ignored in that calculation but the unadjusted Transfer Amount includes the cash equivalents at Completion of the benefits (as set out in the Rules) which have accrued in respect of those Consenting Members for the previous periods. The Transfer Amount shall be the unadjusted Transfer Amount adjusted in line with the Investment Adjustment in accordance with the Actuary's letter. In calculating the Transfer Amount any benefits under the Seller's Scheme which are attributable to AVCs paid by the Consenting Members and in respect of which the Consenting Members are not entitled to benefits based on their final pensionable earnings, and the AVCs themselves, are disregarded. (B) Within 14 days after the Seller's Actuary has calculated the unadjusted Transfer Amount the Seller (or the Seller's Actuary) will notify the Purchaser (or the Purchaser's Actuary) in writing of the result of that calculation and supply to him the particulars of the calculation (excluding the amount of the Investment Adjustment but including particulars of the precise manner in which they are calculated) and the data on which the calculation is based which the Purchaser's Actuary reasonably requires to enable him to check that the calculation is mathematically correct and in accordance with the terms of this schedule. The Purchaser's Actuary has 6 weeks from the date on which those particulars and data have been supplied to him in which he may raise any objection in writing that the calculation is incorrect or not in accordance with the terms of this schedule. (C) The calculation referred to above is final and binding on the Seller and the Purchaser on the later of (i) if the Purchaser's Actuary raises no objection within the terms of (B) above, the expiry of the period mentioned above in which he may raise an objection, and (ii) if the Purchaser's Actuary raises an objection within the terms of (B) above, the date of a subsequent written agreement between the Seller's Actuary and the Purchaser's Actuary that the calculation (or revised calculation) is mathematically correct. 4. Transfer of Transfer Amount and AVCs (A) The Seller will use all reasonable endeavours to procure that on the Due Payment Date the Seller's Scheme transfers to the Purchaser's Scheme equities representing the Transfer Amount and, as at the date of transfer, the AVCs paid by the Consenting Members. (B) The Seller and the Purchaser will use all reasonable endeavours to secure agreement between the Seller's Scheme and the Purchaser's Scheme respectively as to the particular equities to be transferred representing the Transfer Amount. If agreement is not reached by the Due Payment Date, the transfer will be in the form of equities of the Seller's Scheme selected by the Seller's Scheme as a representative selection held by the Seller's Scheme. Any equities to be transferred will be valued at the mid- market price at the close of business on The London Stock Exchange on the day before the date of transfer. (C) The Purchaser will seek promptly from the Board of Inland Revenue approval to the transfer of assets from the Seller's Scheme to the Purchaser's Scheme in respect of the Consenting Members and, at the Seller's request, will supply promptly to the Seller the documents and information which the Seller reasonably requires to enable the Seller's Scheme to obtain a corresponding approval. 5. Payments by Seller and Purchaser (A) If the Transfer Amount is not transferred in full to the Purchaser's Scheme within one month after the Due Payment Date as provided for in paragraph 4, the Seller shall, subject to (B) and (C) below, not later than one month after receipt of a written demand from the Purchaser, pay to the Purchaser, by way of an adjustment of the consideration for the Shares, the following amount: (i) if some assets have been transferred from the Seller's Scheme to the Purchaser's Scheme (whether before or after that written demand is received) - the amount by which the Transfer Amount (calculated as at the date on which those assets were transferred) exceeds the value so transferred but the excess for this purpose shall: (a) be the excess adjusted by the Investment Adjustment as provided for by the Actuary's Letter; and (b) be reduced (after the adjustment in (a)) if, despite some assets having been transferred to the Purchaser's Scheme, any benefit remains payable to or in respect of a Consenting Member under the Seller's Scheme; the reduction will be by the aggregate of the cash equivalents of these benefits; (ii) if no assets have been transferred - the amount by which the Transfer Amount (calculated as at the date on which payment is made to the Purchaser in accordance with this sub-paragraph) exceeds the aggregate of the cash equivalents of the benefits remaining payable to or in respect of the Consenting Members under the Seller's Scheme when payment is made in accordance with this sub-paragraph. For the purpose of this sub-paragraph each of the Consenting Members in respect of whom benefits are so payable shall be deemed to have a right to a cash equivalent. The amount derived under (i) and (ii) above is referred to below as the "Shortfall". (B) If any of the Transfer Conditions ceases to be fulfilled or effective, the Purchaser shall not demand payment pursuant to (A) above and the time limit referred to in (A) above will not commence, or (if any of the Transfer Conditions cease to be fulfilled or effective after the time limit has started to run) will be suspended, until all those conditions are again fulfilled and effective. (C) No payment shall be due from the Seller pursuant to (A) above: (i) if the reason for the Transfer Amount (or part of it) not having been transferred to the Purchaser's Scheme by the expiry of the time limit referred to above is the failure of the Purchaser's Scheme for whatever reason to accept the whole or any part of the Transfer Amount or if the reason is any other reason within the control of the Purchaser or the Purchaser's Scheme; (ii) unless the Purchaser undertakes in writing to the Seller to pay any amount received pursuant to (A) above forthwith to the Purchaser's Scheme. (D) If payment is made by the Seller in accordance with (A) above the amount of that payment, will be deducted from the amount otherwise payable under paragraph 4(A). (E) If the Seller pays to the Purchaser an amount under paragraph 5(A), the Purchaser shall forthwith make a contribution of an equal amount to the Purchaser's Scheme. (F) If the Purchaser or any member of the Purchaser's Group obtains for the accounting period in which the Shortfall is paid by the Seller under this paragraph or in any of the four succeeding accounting periods a Tax Benefit, the Purchaser shall pay to the Seller an amount equal to the amount of the Tax Benefit. Payment shall be made by the Purchaser forthwith upon the later of (i) the date on which corporation tax would otherwise have been paid if it had not been for the Tax Benefit or the date of receipt of any repayment of corporation tax and (ii) the amount of the Tax Benefit being certified by the auditor to the Purchaser or the applicable member of the Purchaser's Group, which certification the Purchaser shall procure is made at the earliest reasonably practicable opportunity, each accounting period being dealt with separately. For this purpose Tax Benefit means the aggregate of the amount by which a company's liability to pay corporation tax is reduced and the amount of any repayment of corporation tax to which the company is entitled which, in either case, arises as a result of the contribution referred to in paragraph 5(E), including any such reduction or entitlement attributable to a surrender by way of group relief or consortium relief in accordance with the provisions of sections 402 to 413 of the Taxes Act 1988 to a member of the Purchaser's Group. The Purchaser shall use all reasonable endeavours to procure that a Tax Benefit is obtained in the earliest possible accounting period. 6. Discontinuance of Purchaser's Scheme The Purchaser shall not exercise any power to terminate its liability to contribute to the Purchaser's Scheme before the expiry of two years from Completion. 7. No assistance The Purchaser agrees that it will not, and will procure that the Purchaser's Scheme and the Purchaser's Group will not, take any action or provide any assistance to any person (direct or indirect) which might result in the Seller's Scheme transferring a smaller or a larger amount than the Transfer Amount and the assets representing Consenting Members' AVCs to the Purchaser's Scheme. 8. Disputes Any dispute between the Seller and the Purchaser or between the Seller's Actuary and the Purchaser's Actuary concerning the calculation of the Transfer Amount or compliance with paragraph 3 shall, in the absence of agreement between them within one month of the party concerned having notified the other of the dispute, be referred to an independent actuary chosen by agreement between the parties or, failing agreement, appointed by the President for the time being of the Institute of Actuaries at the instance of either party. The independent actuary shall determine the disputed matter in accordance with this schedule (including the Actuary's Letter) acting as an expert and not as an arbitrator and his decision shall be final and binding. The fees and expenses of the independent Actuary and of the President shall be borne equally between the parties, except that the independent Actuary shall have power to determine, at the request of either party, that the fees and expenses shall be borne exclusively by the other party or in such proportions as the Actuary may determine and any such determination shall be final and binding. APPENDIX A SUMMARY OF BENEFITS The intention of this appendix is to summarise the main provisions of the Seller's Scheme as at the date of this agreement. If there is an error in that description the provisions of the Seller's Scheme (as set out in the Rules) will replace the appropriate provision of this appendix. Relationship with SERPS Contracted-out Normal Retirement Age Last day of the month in which the member attains age 62. Eligibility All Employees who elect to join the Purchaser's Scheme. Pensionable Service Years and months as a member of the Seller's Scheme and the Purchaser's Scheme prior to retirement. Pensionable Pay Basic annual salary plus overtime, and bonuses treated as pensionable but excludes profit related pay bonus and holiday bonus. Final Pensionable Pay The greater of either final 12 months' pensionable pay or highest pensionable pay during any tax year in the last 10 years. State Pension Element The pension will be reduced to take account of the State pensions earned while the member has contributed to the Seller's Scheme under the 1967 Rules and the Purchaser's Scheme. This will include any graduated National Insurance pension earned after joining under the 1967 Rules in respect of contributions to the State Graduated Pension Scheme before April 1975 and the State Pension Element including Graduated Pension will be calculated at leaving or retirement as: State Single Person's Pension (averaged over 12 months) x 1967 Rules/Service with the Buyer x 1/50 plus Graduated Pension The State Pension Element including Graduated Pension will be paid as a temporary supplement from the later of age 50 and retirement date until State Pension Age. For service after 5th April, 1997, the State Pension Element will be subject to the same increase guarantee as applies to pensions in payment (in excess of GMP). Member's contributions Members will pay contributions as a percentage of Pensionable Pay at the difference between employee's Contracted-in and employee's Contracted-out rates on earning between the Lower Earnings Limit and the Upper Earnings Limit and at the rate of 6.5% above the Upper Earnings Limit. Members may also pay Additional Voluntary Contributions. Member's Pension Retirement at Normal Retirement Date 1.47% x Final Pensionable Pay x Service under the 1948 Rules of the Seller's Scheme plus 2.2% x (Final Pensionable Pay up to and including (Pounds)11,250 non adjustable) x Service under the 1967 Rules of the ICI Scheme/Service with the Purchaser plus 1.83% x (Final Pensionable Pay - (Pounds)11,250 non adjustable) x Service under the 1967 Rules of the ICI Scheme/Service with the Buyer minus the State Pension Element including the Graduated Pension Scheme element. A temporary supplement is also paid until State Pension Age equal to State Pension Element, including the Graduated Pension Scheme element, subject to Inland Revenue maxima. Women employed by the Seller before 1st January, 1986 as monthly staff may choose, on leaving, to be Special Category Members. In this case their pension percentages for the purposes of the above formulae will be increased as follows: 1.47% becomes 1.69% 2.2% becomes 2.31% 1.83% becomes 1.93% This pension is available from age 60. Men in the same circumstances may choose to have their service after 17th May, 1990 calculated on the Special Category Member basis. If a Member chooses to receive Special Category Member's benefits, no spouse's or children's pensions will be payable in respect of those benefits. Early Retirement Employee initiated: Available from age 57 without actuarial abatement with Company consent subject to 10 years' Pensionable Service. Pension calculated as for retirement at Normal Retirement Date but based on Final Pensionable Pay and Pensionable Service completed at date of retirement. The pensionable service requirement reduces on early retirement after the age of 57. Employer initiated: Available from age 50 subject to 10 years' Pensionable Service. Pension calculated as above. Ill-health Retirement A failure of health pension is payable either: a) on retirement due to permanent incapacity (as certified by the Company Medical Officer) subject to the completion of 10 or more years' Pensionable Service or b) on retirement at any time if the Company Medical Officer certifies that employment is ceasing by reason of serious and permanent incapacity arising from injury or ill-health. The pension is calculated in the normal manner except that credit is given for part of the additional service the member could have completed if he had continued in the Company's employment until Normal Retirement Date. In the case of a) above, the special credit is half the member's potential service up to a maximum of 10 years. In the case of b) above the special credit shall be equal to half the additional service the member could have completed. Cash Option Up to 25% of the basic pension (excluding the temporary supplement to the pension) may be exchanged for a sum, subject to such Inland Revenue rates as are applicable, including any maximum. Benefits on Death while a Contributing Member Cash 4 times the member's Pensionable Pay (excluding overtime) or Final Pensionable Pay if higher is paid as a lump sum. Spouse's and Children's pension A prospective pension (calculated on the same basis as for serious ill-health retirement) is payable to the Member's spouse during the first five years after death. Thereafter the pension reduces to 52.5% of the full pension but children's pensions are payable. Benefits on Death after Retirement Cash on death within 5 years of retirement and if no spouse's or children's pension is payable the balance of 5 years' pension payments is payable. Spouse's pension during the balance (if any) of the 5 year period after the member's retirement: a pension calculated by reference to the amount of the pension before commutation (and including any increases granted since the pension commenced) is payable to the member's spouse. Thereafter: the pension payable to the spouse will reduce to 52.5% of the full pension but children's pensions will become payable. Leaving membership A deferred pension is payable from age 62 calculated on Final Pensionable Pay and Pensionable Service to date of leaving. A deferred pension may be taken at the member's request on or after age 50 at a reduced rate (as advised by the independent actuary). 1. A female member may opt to receive a deferred pension at age 60 without reduction. 2. A male member who opts to take his deferred pension at age 60 will have no reduction applied to that part of his pension attributable to his Pensionable Service after 17th May, 1990. For 1. and 2. above, if Special Category Membership is adopted, they will not be entitled to any spouse's pension earned by female members for all service and male members for service post 17th May, 1990, apart from that required by legislation. A member with less than 2 years' Pensionable Service may opt for a refund of contributions as an alternative to a deferred pension. Pension Increases In deferment increases at the statutory rate of 5% per annum or the increase in the Retail Prices Index, if less, on pension in excess of the Guaranteed Minimum Pension (GMP). Fixed rate increases on the GMP. In payment guaranteed increases at the rate of 5 per cent. per annum or the increase in the Retail Prices Index, if less, on pension in excess of the GMP. Statutory increases on the GMP. Maximum Benefits Rule The benefits payable will continue to be subject to the limits set out in the Seller's Maximum Benefits Rule and the maximum laid down from time to time by the Inland Revenue. Seller's Supplementary Fund Benefits Those Employees who are entitled to additional benefits under the Rules of the Seller's Supplementary Pension Fund (which Rules form part of the Seller's Scheme) will be entitled to additional benefits in the Purchaser's Scheme as advised by Seller's Actuary to the Purchaser's Actuary. APPENDIX B TRANSFER AGREEMENT Date: To: The trustees of the [ ] Scheme From: The trustees of the [ ] Scheme (the "Receiving Scheme") Re: Employees of [ ] Limited We request the transfer to us of the sum and/or assets referred to in Appendix 2 hereto equal in value to the Transfer Amount calculated in accordance with the letter from [ ] to [ ] dated [ ] 1997 in respect of the members listed in Appendix 1 hereto (the "Consenting Members") and, in consideration of that transfer, we hereby confirm and undertake as follows: 1. The Consenting Members have been offered membership of the Receiving Scheme as of [ ], 1997 with the benefits and members' contribution rate described in the notice issued to them on [ ] 1997, a copy of which is Appendix 3 hereto (the "Notice"). 2. Each Consenting Member who has accepted that offer has been admitted to membership of the Receiving Scheme and has entered employment with an employer which participates in the Receiving Scheme and that employment is contracted-out by reference to the Receiving Scheme by virtue of section 9(2B) of the Pension Schemes Act 1993 (a copy of the appropriate contracting-out certificate(s) is Appendix 4 hereto). Each Consenting Member will be entitled in respect of the Transfer Amount to benefits from the Receiving Scheme which are as described in the Notice and, on receipt of the Transfer Amount, we relieve you of all liabilities to or in respect of the Consenting Members. 3. We undertake to treat the amounts previously advised as Consenting Members' contributions for the purposes of the Receiving Scheme and not to allow a refund of contributions on subsequent cessation of service or membership except where a refund is not prohibited by Inland Revenue restrictions or the preservation requirements in force under the Pension Schemes Act 1993. 4. We confirm that the Receiving Scheme is established and administered wholly in the United Kingdom and is an exempt approved scheme (within the meaning of section 592 of the Income and Corporation Taxes Act 1988) or is designed to be capable of approval as an exempt approved Scheme with effect from [ ] and that we are permitted under the documents governing the scheme and by the Inland Revenue to receive the Transfer Value (a copy of the appropriate letter of consent from the Inland Revenue is Appendix 5). 5. We enter into this agreement as the trustees of the Receiving Scheme so as to bind us and our successors as trustee(s) of the Receiving Scheme. Add names and signatures of trustees of Receiving Scheme. SCHEDULE 10 STOCK VALUATION STOCK VALUATION PROCEDURES In this Schedule references in brackets (for example (Ref. AP 144)) are references to ICI's Controller's Manual. 1. Stock Taking Procedure (1) This stocktaking procedure shall be followed to carry out a physical stocktake pursuant to Clause 4 of this agreement in order to quantify the Stock (the "Stocktake"). The Stock quantified will be valued in accordance with the provisions of paragraph 2 of this Schedule 10. (2) The Seller shall provide to the Purchaser at least 21 days before the Completion Date for the purposes of this Schedule 10 the following information relating to the Stock: (a) details of each location where the Stock is stored ("Stock Location"); (b) details of the type, by unit and/or item, of Stock held; (c) details of the estimated quantities and value (by unit and/or item) of Stock; and (d) details of the Seller's existing stocktaking procedures. (3) For all Stock, the Stocktake shall commence at each Location at the Completion Date (unless otherwise agreed between the parties) commencing at a time to be agreed (unless otherwise agreed between the parties). (4) At each Stock Location: (a) separate serially pre-numbered stock sheets (the "Stock Sheets") shall be used to record all quantities of Stock (an original and a duplicate copy of each); (b) the Stock Sheets shall record: (i) the physical location of the Stock; (ii) a detailed description of the Stock; (iii)the total quantity, by unit and/or item, of the Stock; (iv) the date of the Stocktake; (v) the time at which the Stocktake commenced and terminated; (vi) the identity of the persons undertaking the Stocktake; (c) the persons undertaking the Stocktake at each Stock Location shall sign each Stock Sheet; (d) any potentially damaged or out of specification quantities of the Stock with a brief description of the nature of the potential damage or deviation from specification shall be recorded on separate Stock Sheets from those referred to in sub-paragraph (b) above; (e) for the Stock, where book records are available, they shall be reconciled to the Stock counted at the Stocktake and any discrepancies between the two sets of figures up to 90% of the total value of discrepancies shall be checked and the actual quantities shall be confirmed; (f) procedures shall be agreed between the parties (if appropriate) to avoid omission or double counting of Stock; (g) where necessary, meters at each Stock Location shall be read at the Completion Date or as close as is practicable to that time and, if appropriate, adjusted back to the Completion Date by applying the relevant production/consumption rates; and (h) the Purchaser and the Purchaser's Auditors shall have the right to attend the Stocktake and to perform tests. (5) The Stocktake at each Stock Location shall be deemed to have been completed when the Seller shall have received all of the Stock Sheets (including those in sub-paragraph (4)(a) above) for each Stock Location and shall have signed the Actual Values Certificate (as defined in this Schedule 10) confirming the quantities of the Stock recorded on the Stock Sheets and shall have provided the Purchaser with true copies of such Stock Sheets and the Actual Values Certificate as defined in paragraph 3(1) below. (6) The Seller shall retain the original Stock Sheets and the duplicate of the same shall be retained by the Purchaser. (7) The Seller and the Purchaser shall use all reasonable endeavours to ensure that no deliveries to or despatches from any of the Stock Locations shall take place during the Stocktake provided that this shall not restrict the right of the Seller or the Purchaser to continue production, deliveries or despatches at any Stock Location. (8) Although it is the Seller's responsibility to undertake the Stocktake, the Seller shall require the assistance of the Purchaser's employees to fulfil this responsibility and the Purchaser shall ensure such assistance is provided at no charge. 2. Valuation of Stock The valuation shall be made in accordance with principles laid down in ICI's Controller's Manuals as consistently applied by the Business. "ICI Controller's Manuals" means the control manuals in existence as at the date of this agreement which are compiled in accordance with UK GAAP and used for accounting purposes within the ICI Group and which are recorded on disk form as attached and identified as Annex 8 of the Disclosure Letter (and which consists of an introduction to the Group Controller's Manual, Bulletin Board Accounting Language, Bulletin Board Reporting, Accounting Definitions and Conventions, Accounting Policies and Procedures, Controls, Reporting). The following are key extracts relevant to this agreement. (1) Valuation of the Stock (to be quantified in accordance with the provisions of Clause 1 of this Schedule 10) shall be conducted by the Seller. In this paragraph 2 of Schedule 10 the valuation of the Stock shall be calculated by reference to the Cost (as hereinafter defined) of the Stock unless otherwise indicated herein. (2) Subject to the provisions of paragraph 2(3), "Cost" for the purposes of the valuation of the Stock shall be calculated in accordance with the Seller's usual accounting conventions as applied in the past and shall have the following meanings: (a) in respect of raw materials and ingredients and packaging which are purchased by the Seller (and any other member of the Seller's Group) from sources external to the Seller's Group, Cost shall be the lower of the unit rate recorded in the Seller records at the Completion Date which will include the purchase price, including non-recoverable duties, transport and handling costs and any other directly attributable costs, less trade discounts, rebates and subsidies incurred to acquire the same (Ref. AP 143 2.2.1) and net realisable value (as defined below); (b) in respect of raw materials and ingredients and packaging which are purchased by the Seller (or another member of the Seller's Group) from another business owned by a member of the Seller's Group, Cost shall be the lower of the unit rate recorded in the Seller stock records at the Completion Date which will include the internal transfer price charged by that other business together with any duties, transport and handling costs and any other directly attributable costs incurred to acquire the same and net realisable value (as defined below); (c) in respect of each Manufactured Products (Ref AD 12123), Cost shall be the lower of either: (i) the variable production cost as recorded in the Seller stock records at the Completion Date plus the unit rate of fixed cost of production (including depreciation and plant and work's overheads) for 1997, the unit rate of fixed cost of production being the budgeted fixed costs of production divided by the budgeted production (Ref. AP 142); or (ii) net realisable value, being Sales Value less Variable Selling Expenses as defined in (Ref. AP 144); (d) in respect of each of the scrap quality Manufactured Products, Cost shall be zero; (e) in respect of Purchased Products (Ref. AD 1213), Cost shall be the lower of: (i) the unit rate recorded in the Seller records at the Completion Date which will include the purchase price together with any non- recoverable duties, transport and handling costs and any other directly attributable costs to acquire the same; or (ii) the net realisable value, as defined in sub-paragraph 2(2)(c)(ii) of this Schedule; (f) in respect of work-in-progress, Cost shall be the lower of the cost of issues of materials (including intermediaries and finished product) input to the process (Ref. AD 12121/AP 143) and net realisable value (as defined above). (3) At the completion of the valuation of Stock within the period as defined in paragraph 3(1) below, the Seller shall issue the Actual Values Certificate. The Seller shall provide to the Purchaser copies of the supporting working papers, if requested to do so. 3. Certification and Resolution Disputes (1) At the Completion Date or as soon as reasonably practicable thereafter and in any event no later than twenty one days after the Completion Date, the Seller shall prepare and issue to the Purchaser a detailed schedule showing the calculation of the values of Stock. Such schedule shall be the Actual Values Certificate and shall be expressed in Pounds Sterling (or in local currency of the Business if it is not located in the UK). (2) The Purchaser shall within a period of twenty one days from receipt of the Actual Values Certificate from the Seller either issue its confirmation thereof or shall state in writing if it disagrees (providing reasons and reasonable details of the areas of dispute and quantifying the amount thereof) in default of which it shall be deemed to have confirmed the Actual Values Certificate. During the said period the Seller shall supply to the Purchaser such information as it may reasonably require to show how the Seller has arrived at the values contained in the Actual Values Certificate and will allow them full access to their working papers supporting the calculation of such values. (3) If the Purchaser shall disagree with any element or elements of the calculation of the values in the Actual Values Certificates then the parties shall attempt to resolve the issues between them. Any such resolution shall be expressed in a joint report (the "Joint Resolution") signed by both the Seller and the Purchaser stating the values agreed upon. (4) If no Joint Resolution has been signed by both parties within a period of thirty-nine days from the issue of the Actual Values Certificate the element or elements within the calculation of the values in the Actual Values Certificate with which the Purchaser disagrees (the "area of dispute") may be referred by either party to an Independent Accountant in accordance with clause 22 of this agreement. (5) The Seller and the Purchaser shall procure that all records, working papers and other information as may be reasonably required by the Independent Accountant for the purposes of this Schedule shall be made available upon request therefore and they shall generally render all assistance reasonably necessary for the preparation of the Confirmed Actual Values Certificate. (6) For the purposes of this Agreement the Confirmed Actual Values Certificate shall mean: (i) the Actual Values Certificate (if such certificate is confirmed by the Purchaser pursuant to paragraph 3(2) above); (ii) the Joint Resolution (if a disagreement shall have been resolved pursuant to paragraph 3(3) above); or (iii) the Actual Values Certificate as amended by the Independent Accountant (if any matters shall be referred to them pursuant to paragraph 3(4) above). SCHEDULE 11 ENVIRONMENTAL 1. INTERPRETATION For the purposes of this Schedule, words and expressions defined in the Sale of Business Agreement to which this Schedule is attached shall have the same meaning in this Schedule and, in addition, the following terms shall have the following meanings: "Commercially Reasonable Expenses" are those costs and expenses which a reasonable person acting in a commercially prudent manner taking into account the need to minimise his expenditure would expend to meet any Environmental Liabilities. For the avoidance of doubt Commercially Reasonable Expenses shall not include any cost or expenses incurred as a result of the adoption or imposition of standards of clean-up more stringent than those which are provided for under Environmental Law which, in the event of a dispute, shall be determined solely by the Expert under subparagraph 11(iii); "Controlled Waters" means any ground or surface waters to which Environmental Law applies; "Environment" means air, Controlled Waters, land (whether on, in or below such land, excluding any buildings or other permanent structures on, in or below the land), and flora and fauna including man; "Environmental Contamination" means any discharge, release, leakage, spillage, escape or disposal or presence of Hazardous Material at, in, on or under the Properties; "Environmental Laws" means any and all legislation, regulations, orders or common law relating to protection of the Environment which as at the Completion Date are in effect and capable of enforcement by legal process in the U.K., including, for the avoidance of doubt, Part IIA of the Environmental Protection Act 1990 and the first set of statutory guidance which is brought into force thereunder, and any subsequent set to the extent that they do not impose materially more onerous obligations, as if such provisions and guidance were in full force and effect at the date hereof; "Environmental Liabilities" means: (i) all claims, costs, expenses (including reasonable professional fees incurred), losses, liabilities, fines or penalties necessarily suffered or incurred by the Purchaser (or the Seller or any member of the Seller's Group in the case of the Counter Indemnity) pursuant to any Environmental Proceedings; (ii) for the purposes only of an Environmental Remediation Agreement, all claims, costs, expenses (including reasonable professional fees incurred), losses or liabilities (including the cost of carrying out remediation of Environmental Contamination) to the extent necessarily suffered or incurred by the Purchaser (or the Seller or any member of the Seller's Group in the case of the Counter Indemnity) in order to avoid an environmental authority bringing an Environmental Proceeding which, in the event of a dispute, shall be determined solely by the Expert under subparagraph 11(ii); BUT EXCLUDING any claims, costs, damages, expenses, losses, liabilities or penalties to the extent that they are not Commercially Reasonable Expenses; "Environmental Proceeding" means any writ and/or interim or final judicial or administrative decree, judgment, injunction, order or notice brought or served on or against the Purchaser (or the Seller or any member of the Seller's Group in the case of the Counter Indemnity) under which it is obliged due to action taken by any regulatory authority pursuant to Environmental Laws to undertake or pay the cost of clean-up of Environmental Contamination and/or fines or penalties arising as a result of Environmental Contamination; "Environmental Remediation Agreement" means any agreement between the Seller and the Purchaser that it is reasonably necessary to undertake remediation of Environmental Contamination or, in the event of disagreement, any determination by the Expert that: (i) Environmental Contamination is present in circumstances where an environmental authority has the power to issue an Environmental Proceeding against the Purchaser or the Seller which would, if so issued, result in a requirement to carry out remediation; and (ii) the environmental authority would, but for the fact that it is unaware of the Environmental Contamination concerned, be more likely than not to bring such an Environmental Proceeding in relation to such Environmental Contamination; PROVIDED THAT for the purposes of the determinations in both (i) and (ii) above; (i) it is to be assumed that the party or parties against whom such an Environmental Proceeding would be brought have not reached and would not reach agreement regarding voluntary clean-up with the relevant environmental authority; and (ii) the Expert is to take no account of Environmental Contamination and/or circumstances existing to the extent that either would not be present had the Purchaser complied with its duty to mitigate under paragraph 5; "Hazardous Material" means hazardous or harmful or toxic substances, pollutants or wastes; "Indemnity" means the indemnity contained in paragraph 2 below; "Site(s)" means the Properties as defined in the agreement of which this Schedule forms part; 2. INDEMNITY (1) The Seller undertakes to the Purchaser that, subject to the provisions of this agreement, it will indemnify and hold harmless the Purchaser against all Environmental Liabilities arising at or from the Site(s), to the extent that such Environmental Liabilities are a direct result of Environmental Contamination occurring on or before the Completion Date. (2) Notwithstanding paragraph 2(1) above neither the Seller nor any member of the Seller's Group shall be liable under the Indemnity or otherwise to the extent that such liability arises from or is attributable to the failure of the Purchaser to comply with the provisions of paragraphs 4(1), 4(4) and 5 to 14. 3. THE COUNTER INDEMNITY (1) The Purchaser undertakes to the Seller (for the benefit of the Seller and any member of the Seller's Group) that, subject to the provisions of this agreement, it will indemnify and hold harmless (the "Counter Indemnity") the Seller and any member of the Seller's Group from and against all Environmental Liabilities arising at or from the Site(s) after the Completion Date save to the extent that such Environmental Liabilities fall within the Indemnity. (2) Notwithstanding subparagraph 3(1) above, the Purchaser shall not be liable to the Seller under the Counter Indemnity or otherwise to the extent that such liability arises from or is attributable to the failure of the Seller to comply with the provisions of paragraphs 6-8, 10, 11, 13 and 14 of this Schedule. 4. LIMITATIONS (1) Neither the Seller nor any member of the Seller's Group shall be liable under the Indemnity to the extent that Environmental Liabilities have arisen: (a) due to any act or omission of the Purchaser or any employee, agent, contractor or Affiliate thereof which is outside the normal course of business and which the Purchaser knew or ought reasonably to have known could give rise to a claim under the Indemnity, provided, for the avoidance of doubt and subject to the duty to mitigate in paragraph 5, that the Purchaser shall not be considered to have made such an omission solely by a non-negligent failure to undertake precautionary investigatory or remediatory work in relation to Environmental Contamination; or (b) as a result of a change in use of the Site(s) to a use which is more sensitive to Environmental Contamination; or (c) due to any negligent act or omission of the Purchaser or any employee, agent, contractor or Affiliate thereof. (2) No claim against the Seller or any member of the Seller's Group under the terms of the Indemnity for any Environmental Liabilities shall be valid unless notice has been served on the Seller in accordance with the provisions of paragraph 7 within 10 years of the Completion Date. (3) The maximum aggregate liability of the Seller and all members of the Seller's Group in respect of all and any claims under the Indemnity and warranties in paragraph A.6 of Schedule 7 shall not exceed (Pounds)100 million. (4) The Seller shall not be liable in respect of any Environmental Liability to the extent that such Environmental Liability arises: (a) as a result directly or indirectly of information voluntarily given by or on behalf of the Purchaser to a regulatory authority in circumstances other than where there is a mandatory reporting requirement under Environmental Law or where the Seller has previously proposed or approved this course of action in writing, such approval not to be unreasonably withheld or delayed; and/or (b) from any admission of liability by the Purchaser in respect of any clean-up which needs to be done, except where the Seller has approved such admission in writing, such approval not to be unreasonably withheld or delayed. (5) If the Indemnitor (as defined in paragraph 6(1)) makes any payment in respect of any Environmental Liabilities under the Indemnity or Counter Indemnity, as the case may be, (the "Indemnity Payment") and the Claimant (as defined in paragraph 6(1)) receives any benefit otherwise than from the Indemnitor which would not have been received but for the circumstances giving rise to the claim in respect of which the Indemnity Payment was made, the Claimant shall, once it has received such benefit, forthwith repay to the Indemnitor an amount equal to the lower of the amount of such benefit and the Indemnity Payment. (6) In the event that the Indemnitor (as defined in paragraph 6(1)) either incurs external charges, costs and expenses for environmental services or internal charges for its own environmental services, in either case including but not limited to testing and/or analytical services and/or contaminated soil disposal facilities, in connection with or in relation to any actual or potential Environmental Liabilities under the Indemnity or Counter Indemnity (as appropriate) then such external charges, costs and expenses shall be deemed to be payments made under the Indemnity or Counter Indemnity (as appropriate). Any internal charges shall be made on the same basis as the Indemnitor charges to its own business or its Affiliates. (7) It is hereby expressly agreed that, save where the Seller has accepted liability or is otherwise liable under the terms of the Indemnity, all costs incurred by the Purchaser in carrying out environmental analyses and tests of the Site(s) (and its (or their) surrounds) shall be borne by the Purchaser. 5. MITIGATION The Purchaser shall take all reasonable steps to avoid or mitigate any Environmental Liabilities and/or potential Environmental Liabilities which may give rise to a claim under or in connection with this Indemnity howsoever arising. Where and to the extent such steps require expenditure, the costs will be borne by the Seller provided that, except in the case of emergency or imminent danger to public health or safety, the Seller has agreed in advance to the performance of the steps by the Purchaser, such agreement not to be unreasonably withheld or delayed. In the event such steps would involve any substantive clean-up, any dispute as to whether such agreement is unreasonably withheld or delayed shall be referred to the Expert for determination, who shall have regard to the matters set out in subparagraphs 11(i) to (iv). Such steps may include but shall not be limited to: (a) carrying out soil tests before taking any action which is likely to cause a material disturbance to soil; (b) carrying on its activities on the Site(s) so as to minimise disturbance to known areas of existing or probable contamination and take all necessary steps to protect human health; (c) the Purchaser (with the approval of the Seller) settling a claim which will or may fall within the terms of the Indemnity, the costs and expenses associated with such settlement (so approved by the Sellers) being deemed to be Environmental Liabilities for the purposes of this agreement; (d) making reasonable and timely efforts to pursue claims against any third parties (including insurers) who may have some liability to the Purchaser in respect of the matter in question; and (e) avoiding acts or omissions of the nature described in paragraph 4(1). 6. NOTIFICATION (1) As soon as reasonably practicable after either party (the "Claimant") becomes aware of any actual or potential Environmental Liabilities which may give rise to a claim by it under the Indemnity or Counter Indemnity (whether or not the Claimant is of the opinion that it has a valid claim against the other party (the "Indemnitor") under the Indemnity or Counter Indemnity or, in the case of any potential Environmental Liabilities, that no liability will in fact arise), the Claimant shall give written notice thereof to the Indemnitor (and thereafter will keep the Indemnitor fully informed of all material developments relating thereto). Such written notice shall include all material details of any actual or potential Environmental Liabilities (including the Claimant's reasonable estimate of the extent of and cost of clean-up of the Environmental Liabilities as a result thereof). (2) Neither party shall admit, settle compromise or discharge any claim or liability or make any proposal which might constitute or lead to a claim against the other under the Indemnity or Counter Indemnity (as appropriate) without having first served a notice under this paragraph 6 and given the other a reasonable opportunity to consider the circumstances referred to in the said notice. 7. CLAIMS (1) In the event that the Claimant wishes to make a claim against the Indemnitor under the Indemnity or Counter Indemnity (as appropriate) in relation to any Environmental Liabilities (whether or not suffered or incurred) then, subject to paragraph 7(2), it shall do so by giving notice in writing of the same to the Indemnitor. (2) The Claimant shall not be entitled to claim under this Schedule for any actual or potential Environmental Liabilities in relation to either an Environmental Proceeding or Environmental Remediation Agreement unless, in each case, the Claimant has properly served a written notice on the Indemnitor which specifies reasonable details of the nature, extent and location of the Environmental Contamination concerned and specifies the claim with sufficient particularity, including, without limitation, the circumstances giving rise to the Claimants' view that such Environmental Contamination gives rise to an Environmental Liability. 8. CONDUCT If any notice is received by either party under paragraphs 6 or 7 the Claimant shall if so requested by the Indemnitor take all steps which are necessary and reasonable to avoid, mitigate, dispute, resist, appeal, settle, compromise, contest or defend any claim and any adjudication in respect thereof and reasonable costs incurred by the Claimant due to its taking such steps will be borne by the Indemnitor. Subject to consultation with the Claimant, the Indemnitor shall, at its request and its cost, be allowed to conduct any negotiations, proceedings or appeals relating to any claim or potential claim. 9. SITE ACCESS If any notice is received by the Seller under paragraphs 6 or 7, subject, except in the case of emergencies, to the Seller giving written notice three days prior to any site access and the Seller agreeing to comply with all reasonable instructions of the Purchaser's site engineers: (a) the Seller and/or its agents and contractors shall be free to have access to the Site(s) during normal business hours to assess (including but not limited to assessment by soil sampling and testing) the extent of the Environmental Liabilities and/or potential Environmental Liabilities and to determine the action required in order to clean-up such liabilities; and (b) the Purchaser shall (during normal business hours) allow the Seller or its agents access to inspect and take copies of such books and records of the Business of the Purchaser relating to the Site(s) as may be necessary in connection with any Environmental Liabilities and/or potential Environmental Liabilities. 10. DISCUSSIONS Upon either party having given a notice under paragraphs 6 or 7, either the Seller or the Purchaser may request a meeting as soon as practicable to discuss the matter (and if either does so the other party shall comply promptly with such request) and, irrespective of whether there has been any agreement on liability, each party shall be fully involved in any discussions and/or negotiations with any party imposing or seeking to impose any Environmental Liabilities including reaching agreement with any regulatory authority on measures required to avoid such Environmental Liabilities. 11. DISPUTE RESOLUTION Upon either party giving a notice in accordance with paragraph 7, for the purposes of a determination under the definition of Environmental Remediation Agreement and/or in the event that the Seller and Purchaser are unable to agree promptly the issues set out in subparagraphs (i), (ii), (iii) and (iv) below: (i) the remediation measures required to comply with an Environmental Proceeding; or (ii) the remediation measures required and/or the costs which it is necessary to suffer or incur to avoid in either case an environmental authority bringing an Environmental Proceeding; or (iii) whether any costs or expenses incurred in cleaning up Environmental Contamination pursuant to Environmental Law are incurred or suffered as a result of the adoption of standards of clean up more stringent than those which are provided for under Environmental Law; or (iv) any factual matter relevant to a claim under this Indemnity or Counter Indemnity (as appropriate); the following provisions of this paragraph 11 shall apply: (a) a reputable independent firm of experts (the "Experts") (who shall act as experts and not arbitrators) in respect of the Environment relevant to the claim or potential claim (having at least 10 years relevant experience) shall be appointed by mutual agreement of the parties hereto (and the parties shall each be obliged to use their respective best endeavours to reach agreement as soon as practicable) to resolve any factual matter in dispute between the parties but not including any interpretation of laws or regulations as they apply to such factual matters, except where such is necessary for the purpose of making the determinations or agreements referred to in paragraphs 11, 11(i), (ii) and (iii) above, or any conclusions regarding responsibility or liability for or in relation to any factual matters. The Experts shall be offered the appointment within fifteen (15) Business Days of the parties reaching such mutual agreement and shall be notified in writing of the provision of subparagraph (g) below. Failing such mutual agreement on the appointment of Experts, the parties shall promptly refer the issue, at their joint cost, to the President for the time being of the Royal Institute of Chartered Surveyors in the United Kingdom with instructions to appoint suitable Experts within seven (7) days of receipt of such instructions; (b) the said Experts shall only be dismissed by the mutual agreement of the parties hereto; (c) both parties shall promptly and simultaneously, exchange with each other and submit to the Experts, and in any event in accordance with the Experts' written directions, their arguments and submissions in connection with any matter of fact referred to the Experts in accordance with this paragraph 11; (d) following receipt by the Experts of the written arguments and other submissions of the parties pursuant to paragraph 11(c), the parties shall instruct the Experts to issue, as soon as reasonably practicable, a formal written opinion pertaining to the matter of fact referred to them. In any event the Experts shall be instructed to present the said opinion within two months of receiving the written arguments and other submissions of the parties pursuant to paragraph 11(c); (e) the formal written opinion of the Experts issued pursuant to paragraph 11(d) shall be conclusive in any proceedings between the parties hereto as to the question of fact so determined; (f) the fees and expenses of the Experts, shall be borne equally by the Seller and the Purchaser (unless otherwise directed by the Expert or recoverable pursuant to a claim under the Indemnity or Counter Indemnity as the case may be); and (g) the Experts, and any company, firm, partnership or other organisation with which the Experts are connected shall not be eligible to be considered to undertake any clean-up work in respect of the claim for which they have so acted on or around the Site(s) save where the parties hereto mutually agree to waive this provisions. For the avoidance of doubt, either party may withhold such consent in any event. 12. ACCEPTANCE OF LIABILITY In the event that the Seller admits that it has any liability to the Purchaser under the Indemnity relating to clean up (or where the Seller agrees to accept the Purchaser's claim as falling within the Indemnity notwithstanding the fact that no Environmental Liability may at that point in time have arisen): (a) the Seller shall have the right independently to carry out the clean- up of the Environmental Contamination which is the subject matter of the claim itself (or through suitable third party agents or contractors) provided that in so doing (i) the Seller shall procure that any such clean-up is to carried out to such standard as is reasonably necessary in the circumstances to comply with the requirements of Environmental Law having regard to the nature and extent of the Environmental Contamination, and (ii) there shall be full consultation with the Purchaser and (iii) the Seller and its agents or contractors shall accede to any reasonable requests from the Purchaser as to the conduct of remediation; (b) the Seller and/or its agents and contractors shall, in addition to the rights of access provided for in paragraph 9 above, be free to have access to the Site(s) during normal business hours to carry out the clean-up referred to in paragraph 12(a) above; PROVIDED THAT in relation to both subparagraphs (a) and (b) above, if the carrying out of such clean-up operations would be likely to cause material disruption to the carrying on of the Business at any Site(s), the parties shall agree the appropriate and reasonable means of avoiding such disruption in the circumstances. 13. STATEMENTS In the event of any circumstances arising which do or may give rise to Environmental Liabilities which may fall within the terms of the Indemnity or the Counter Indemnity (as appropriate) neither the Purchaser nor the Seller (nor any of their respective Affiliates) shall make any public statements (including, for the avoidance of doubt, any statement to any regulatory authority, unless required by law or in an emergency) regarding such circumstances without first discussing with the other party and reaching written agreement on the text of any such public statement before it is made. 14. GENERAL (1) Any information, records, or other material of one party shall be treated as strictly confidential by the other party except when it is required to be used in order to comply with an order of the court or regulatory authority or it is used by the other party to enforce its rights under this Schedule 11 or so as to make an insurance claim. (2) The Purchaser's and its Affiliates' exclusive remedies in respect of Environmental Claims shall be in accordance with the provisions of this Schedule 11 and the environmental warranties in paragraph A.6 of Schedule 7 (the "Environmental Warranties"), and the Purchaser on behalf of itself and its Affiliates hereby waives all other remedies whether in contract, tort (including, for the avoidance of doubt, negligence) but without prejudice to its rights under clauses 5(6) and 15, or howsoever otherwise arising which it may have against the Seller or any member of the Seller's Group at law or in equity in respect of the matters which fall within the scope of the Indemnity or the Environmental Warranties and, for the avoidance of doubt, if such an Environmental Claim could also give rise to a claim under any other provision of this agreement, the Purchaser may only bring a claim under this Schedule or the Environmental Warranties or clauses 5(6) or 15. (3) Nothing in the preceding paragraph shall permit the Purchaser any double recovery in respect of the same loss. SCHEDULE 12 CONDUCT OF BUSINESS UP TO COMPLETION (1) In the period from the date of this agreement until the Completion Date, the Seller shall (in so far as it is within its power to do so) procure that except with the prior consent of the Purchaser: (a) the Business is not carried on other than other than in the ordinary course consistent with past practice over the 12 months prior to the date of this agreement; (b) projects which the Seller has commenced to implement within the Business are not discontinued or progressed other than pursuant to their respective project plans; and (c) except as required by law or by any governmental, administrative or judicial authority of competent jurisdiction or pursuant to any existing agreement it will not; (i) dispose of, or grant any security over or any interest in, any material property or plant and equipment used in the Business otherwise than in the normal course of business; or (ii) terminate, enter into or amend to any material extent any material contract or arrangement or commitment (whether conditional or unconditional) the term of which will extend more than six months beyond the Completion Date or which would oblige the Purchaser to expend capital of (Pounds)300,000 or more (provided that this subparagraph (ii) shall not apply to any such contract, arrangement or commitment which is in the normal course of business which shall include, but not be limited to, the extension or replacement of existing contracts, arrangements or commitments); or (iii) appoint any new Senior Employee or terminate the employment of any Senior Employee (other than for breach of his or her employment contract) (for the purposes of this subclause a Senior Employee shall mean an employee in ICI's Grade 40 or above) or make a change in the terms of employment or pensions benefits of any employees except in the ordinary course of business; or (iv) increase or reduce the number of employees engaged in Business other than in accordance with plans which have been disclosed to the Purchaser prior to this agreement. (2) Prior consent requested from the Purchaser by the Seller under (1) shall not be unreasonably withheld or delayed by the Purchaser. (3) The requirement for consent under this Schedule 12 shall be overridden and this Schedule 12 shall not be breached in the event that the Seller can demonstrate that it was necessary for it to take the relevant action without the prior written consent of the Purchaser due to emergency operational requirements which would have caused significant operational difficulties if not remedied before it was practicable to consult with and obtain the consent of the Purchaser and provided further that the Purchaser is notified by the Seller of such step as soon as the Seller is reasonably able to do so. (4) In the period from the date of this agreement until the Completion Date each of the Seller and the Purchaser shall use all reasonable endeavours in obtaining any third party consents necessary for the transfer of the Contracts pursuant to clause 6 of this agreement and to transfer or obtain any permits, consents, licences and authorisations of the Business and, without prejudice to the generality of the foregoing, the Purchaser and the Seller shall make all relevant notifications and applications in respect of such permits, consents, licences and authorisations. ANNEX 1 IMPLEMENTATION AGREEMENTS (not in Agreed Form)
- ------------------------------------------------------------------------------------------------------ SUPPLIER PURCHASER AGREEMENT (Schedule) - ------------------------------------------------------------------------------------------------------ GOOSE ALPHA SERVICES Process Pipes Interface Ops Site Road System - ------------------------------------------------------------------------------------------------------ GOOSE ACRYLICS SERVICES Process Pipes - ------------------------------------------------------------------------------------------------------ GOOSE KATALCO SERVICES Site Road System Process Pipes - ------------------------------------------------------------------------------------------------------ PLYMOUTH GOOSE UTILITIES Compressed Air Supply - ------------------------------------------------------------------------------------------------------ PLYMOUTH GOOSE SERVICES Pay Roll Services Jetty Services - ------------------------------------------------------------------------------------------------------ GANDER GOOSE MATERIALS Instrument Air - ------------------------------------------------------------------------------------------------------ GOOSE HALOCHEMICALS UTILITIES Potable Water Gately Water/Fire Water - ------------------------------------------------------------------------------------------------------ GOOSE HALOCHEMICALS SERVICES Transport of process pipes and cabling via pipebridges - ------------------------------------------------------------------------------------------------------ GOOSE HALOCHEMICALS ELECTRICITY 50 Hz Electricity - ------------------------------------------------------------------------------------------------------ GOOSE TIOXIDE UTILITIES IP Steam - ------------------------------------------------------------------------------------------------------ GOOSE TRACERCO UTILITIES Potable Water LP Steam - ------------------------------------------------------------------------------------------------------ GOOSE TRACERCO ELECTRICITY 50 Hz Electricity - ------------------------------------------------------------------------------------------------------ GOOSE EUTECH UTILITIES LP Steam Potable Water Effluent - ------------------------------------------------------------------------------------------------------ GOOSE EUTECH ELECTRICITY 50 Hz - ------------------------------------------------------------------------------------------------------ GOOSE* EUTECH SERVICES Site Road System Transport of Communications via pipebridges - ------------------------------------------------------------------------------------------------------
Goose = The Business Alpha = Amines Plymouth = ICI *Plymouth Tabs (Supplier)/The Business (Purchaser): Electricity (Electricity 50Hz) ANNEX 2 PROPERTY SCHEDULE SCHEDULE 1 PROPERTIES Plymouth = ICI Tango = The Purchaser PART 1: DEFINITIONS In this Schedule the following expressions are used with the following meanings, namely:- "Ancillary Property Documents" means the documents listed in Table A (relating to the Billingham Property) Table B (relating to the Severnside Property) and Table C (relating to the Stanlow Property) "Assignment Properties" means the leasehold properties in respect of which the Reversioner's consent to assign is required namely:- (a) the Stanlow Property (b) the HOC Corridor (c) the Frequency Changer House "Billingham Documents" means the Billingham Transfer and such of the Ancillary Property Documents as are listed in Table A "Billingham Property" means the Seller's Billingham Property and Plymouth's Billingham Property "Billingham Transfer" means a transfer of the Billingham Property in the form of a draft thereof which is in Agreed Form "Frequency Changer House" means the premises demised by a Lease dated 6th August 1984 made between (1) North Eastern Electricity Board and (2) Plymouth "HOC Corridor" means that part of the Billingham Property comprising the pipe corridor known as the HOC Corridor (which comprises the pipe corridor shown edged red on Plan V4) "Lease Completion Date" means the later of:- (a) the tenth working day after the date of the last of the two Reversioner's licence permitting the assignment or underletting (as the case may be) of the relevant Lease has been granted and a copy thereof is supplied to the Purchaser or its Solicitors (b) the Completion Date "Link Corridor" means that part of the Billingham Property comprising part of the Seller's/Plymouth's Billingham/Wilton Link being the part edged red on Plan 1.6 attached to the Billingham Transfer "Plymouth's Billingham Property" means that part of the property comprised in the Billingham Transfer which is to be transferred by Plymouth "Premises" means the premises forming the subject matter of the Premises Agreements "Premises Agreements" means the aggregate of the following (all of even date herewith): (a) an Agreement for Lease made between the Seller (1) and Tango (2) relating to the grant by the Seller to Tango of a Lease of the Ammonia Storage Facilities at North Tees; (b) an Agreement made between the Seller and Plymouth (1) and Tango (2) relating to the grant by the Seller and Plymouth to Tango of a Licence to occupy premises at Wilton Centre; (c) an Agreement made between Plymouth (1) and Tango (2) relating to the grant by Plymouth to Tango of two Leases at Severnside "Properties" means the aggregate of the Billingham Property the Severnside Property and the Stanlow Property "Property Documents" means the aggregate of:- (a) the Property Transfers; and (b) the Ancillary Property Documents "Property Rights" means the rights appurtenant (or to be granted as appurtenant) to the Properties and Premises to be granted by the Property Documents "Property Transfers" means the aggregate of:- (a) the Billingham Transfer; (b) the Severnside Transfer; and (c) the Stanlow Assignment "Reversioner" means all persons entitled to the reversion expectant on the termination of the relevant Leases under which the Seller holds the property/premises and where reference is made in this Agreement to any licence required from or by the Reversioner it shall be deemed to mean all and any such licences where more than one is required "Seller's Billingham Property" means that part of the property comprised in the Billingham Transfer which is to be transferred by the Seller "Severnside Property" means the land at Severn Road Severnside as more particularly described in the Severnside Transfer "Severnside Transfer" means a Transfer of the Severnside Property in the form of a draft thereof which is in Agreed Form "Stanlow Assignment" means the two assignments of the Stanlow Property in the form of drafts thereof which are in Agreed Form (including a Supplemental Deed of Covenant also in Agreed Form) "Stanlow Leases" means (a) a Lease dated 4th January 1995 made between (1) Manchester Ship Canal Company and (2) the Seller and (b) a Lease dated 10th November 1993 made between (1) Moorish Holdings Limited and (2) the Seller "Stanlow Property" means the premises at Oil Sites Road Stanlow Cheshire as more particularly described in the Stanlow Leases together with the appurtenant rights "Table A" to "Table E" (inclusive) means the Tables at the foot of this Schedule and respectively so lettered "Underlet Properties" means the No. 1 Tees Tunnel demised by a Lease dated 21st September 1955 made between (1) The Commissioner for Crown Lands and (2) Plymouth and any other part of the Seller's No. 1 Billingham/Wilton Link over which rights are to be granted to the Purchaser and a reversioner's consent thereto is needed "Volume of Plans" means a volume containing various plans in Agreed Form and reference to a plan by the letter V followed by a number means the plan in such Volume so numbered PART II: PROVISIONS RELATING TO PROPERTIES 1. Completion (1) On Completion the Seller and Plymouth (to the extent of their respective interests therein) will subject to as stated in this Schedule transfer the Properties to the Purchaser by means of assurances which (subject as hereinafter provided) will be in the form of the Property Transfers (2) The price to be paid for the Properties shall be as stated in Clause 4 of this Agreement and apportioned between the several parts of the Properties as follows:- (a) to the Seller's Billingham Property FIVE MILLION NINE HUNDRED AND NINETY FIVE THOUSAND POUNDS ((Pounds)5,995,000) (b) to the Plymouth Billingham Property FOUR THOUSAND POUNDS ((Pounds)4,000) (c) to the Severnside Property TWO MILLION POUNDS ((Pounds)2,000,000) (d) to the Stanlow Property ONE THOUSAND POUNDS ((Pounds)1,000) (3) The Seller and Plymouth shall not be required or compelled to execute any of the Property Transfers:- (a) for a consideration greater than that shown in the foregoing paragraph 1(2); or (b) otherwise than in favour of the Purchaser as herein named; or (c) in such manner as to transfer any of the Properties otherwise than as a single lot (4) On Completion the Seller Plymouth and the Purchaser will also enter into the Ancillary Property Documents other than the Ancillary Property Documents which relate to the Assignment Properties and/or the Underlet Properties which will be completed on the Lease Completion Date (5) The Property Documents will be entered into in duplicate (6) Save in the case of Deeds of Grant in favour of the Seller or Plymouth all stamp duty payable in respect of all Property Documents (including the duplicates thereof) will be payable by the Purchaser and the Purchaser will deliver the duly stamped and denoted duplicates thereof to the Seller within 30 days of Completion (7) All stamp duty (if any) payable in respect of Deeds of Grant in favour of the Seller or Plymouth (including the duplicates thereof) will be payable by the Seller or Plymouth and the Seller or Plymouth will deliver the duly stamped and denoted duplicates thereof to the Purchaser within 30 days of Completion (8) If it is not possible to complete any one or more of the Property Documents at Completion (other than the Billingham Transfer and the Severnside Transfer which shall be completed at Completion in any event) Completion shall none the less occur and any of the Ancillary Property Documents outstanding at Completion will be completed as soon as reasonably practicable thereafter 2. Form of Billingham Documents (1) The agreed forms of the Billingham Documents are based on the assumption that:- (a) the Billingham Documents will be completed at Completion; and (b) that at Completion the Seller and Plymouth will collectively own the whole of the Retained Land (as so defined in the Billingham Transfer) (2) The Purchaser agrees that the Seller and Plymouth shall be entitled to deal with any part of the Retained Land (as so defined) prior to Completion PROVIDED THAT any such dealings will take effect subject to the rights of the Purchaser as comprised in this Schedule and in the Billingham Documents (3) The Seller and Plymouth shall only be entitled to require that the Billingham Documents be amended such as to secure to the Purchaser the Seller and Plymouth the same rights benefits and obligations as would have applied had the Billingham Documents been completed in accordance with the assumption in paragraph 2(1) above to the intent that matters excepted and reserved in the Agreed Form Billingham Transfer may become matters to which the Property is subject but that the Billingham Transfer shall otherwise remain unamended and such amendments shall be agreed between the respective parties or their Solicitors acting reasonably and in default of agreement settled by Conveyancing Counsel agreed upon between the parties or (in default of such agreement) nominated by the President of the Law Society (or his deputy or other person nominated by him to make appointments on his behalf) such Counsel to act as an expert and not as an arbitrator PROVIDED THAT if any amendment shall not have been agreed or settled by the Completion Date the Billingham Transfer shall be completed without such amendments in the Agreed Form and in that event the Seller and Plymouth will procure that any third parties with whom dealings have taken place join in the Billingham Transfer to confirm the grant of any rights or otherwise as may be requisite 3. Adverse Rights The Properties are to be transferred and the Ancillary Property Documents entered into subject so far as thereby affected to but with the benefit (so far as applicable) of all those matters specified contained or referred to in the Property Transfers and the Ancillary Property Documents but otherwise free from encumbrances and the Purchaser shall be deemed to take the Property Transfers and enter into the Ancillary Property Documents with full knowledge and notice of such matters and shall not raise any objection or requisition whatsoever in relation thereto save for any matters revealed by searches of H.M. Land Registry H.M. Land Charges Registry and Companies House 4. Title The Seller and Plymouth shall sell the Properties with full title guarantee and the Ancillary Property Documents shall be entered into with full title guarantee save where otherwise stated in the relevant Agreed Form 5. Local Land Charges etc. The Properties are to be transferred and the Ancillary Property Documents entered into subject to such of the following matters as relate thereto:- (a) all Local Land Charges whether registered or not before the date of this Agreement and all matters capable of registration as Local Land Charges whether or not actually so registered; (b) all notices served and orders, demands, proposals or requirements made by any local, public or other competent authority whether before or after the date of this Agreement; and (c) all actual or proposed orders, directions, notices or charges, restrictions, conditions, agreements, consents, permissions or other matters of any kind arising under any legislation including delegated legislation; PROVIDED THAT this Clause shall not in anyway prejudice the Warranties given by the Seller or Plymouth 6. Vacant Possession The Properties will be transferred with vacant possession save (a) as specified in the Property Transfers (b) as regards the Stanlow Property which will be transferred subject to the rights of occupation of Air Products Limited (c) as regards the occupation by Eutech Engineering Solutions Limited at Severnside and Billingham (d) as to huts and compounds at Billingham and Severnside used by contractors in relation to current and ongoing contracts on the Completion Date and (e) as otherwise disclosed in the Disclosure Letter 7. Insurance (1) The Properties shall be at the Seller's and/or Plymouth's risk for insurance purposes until Completion (2) From the date of this Agreement until Completion ("the said period") the Seller and/or Plymouth shall maintain in force (at levels applicable at the date hereof) the Seller's and/or Plymouth's existing insurance policies in relation to the Properties 8. Non-merger The provisions of this Schedule shall remain in full force and effect notwithstanding Completion insofar as they remain to be implemented after the date of Completion 9. National Conditions of Sale The National Conditions of Sale (20th Edition) ("National Conditions") as published by The Solicitors' Law Stationery Society plc in December 1981 shall apply (except for Conditions 2,3,4,5,7,9,10, 11(5), 15, 17, 20, 21, and 22) insofar as the same are not inconsistent with the terms of this Agreement PROVIDED THAT:- (a) references to "vendor" and "purchaser" shall be deemed to be references to the Seller and the Purchaser respectively and where any rights to be granted affect or benefit the Plymouth Billingham Property or other Property of Plymouth and the Purchaser respectively (b) the "prescribed rate" shall be the rate of default interest prevailing under this Agreement (c) in National Condition 13(1) the words after the words "such muniments" shall be deemed to be deleted (d) in National Condition 16 the reference to the "date of the contract" shall be deemed to be a reference to the date when this Agreement becomes unconditional 10. Billingham Transfer (1) Paragraph 2 in each of Parts 1 and 2 of Schedules 2 and 3 to the Billingham Transfer remain to be completed with details of the:- Transferee's C & P Apparatus Transferee's ICI Apparatus C & P Apparatus ICI Apparatus (all as defined in the Billingham Transfer) which as at the date of this Agreement have yet to be fully identified) (2) Prior to Completion and following Completion the Seller and Plymouth and the Purchaser (acting reasonably and with the utmost good faith) will meet and agree:- (a) as to the matters referred to in paragraph 10(1) above ("Reserved Matters"); (b) as to the adjustments to the form of the Billingham Transfer (and the plans to be annexed to it) required in the light of the agreement on Reserved Matters (3) The agreement to be reached on Reserved Matters shall be reached on the basis of the apparatus and equipment which belongs to and serves (i) the Business (which will comprise Transferee's C & P Apparatus and Transferee's ICI Apparatus) and (ii) the businesses of the Seller and Plymouth on the Retained Land as defined in the Billingham Transfer (which will comprise the C & P Apparatus and the ICI Apparatus) and will be such as to permit:- (a) the Purchaser to make and receive the services necessary to comply with the Implementation Agreements (for this purpose construed as excluding the clause headed and/or relating to Easements and Wayleaves) and the services listed in Table D and Table E; and (b) the Seller and/or Plymouth to maintain supplies required for the conduct of its retained business as carried on on the date hereof (4) The Billingham Transfer shall be completed on Completion and shall grant rights and reserve rights in respect of the Reserved Matters which have been agreed as set out in paragraph 10 (2) not less than three working days prior to Completion Insofar as the Reserved Matters have not been identified prior to the date being three working days before Completion the Seller and Plymouth and the Purchaser shall continue to act with the utmost good faith in identifying the Reserved Matters and in the event that any Reserved Matters are agreed or determined under paragraph 12 within the period of one year from the date of Completion (time to be of the essence) the parties shall as soon as reasonably practicable but not later than two months after the date such manner is agreed or determined enter into a Deed whereby the Billingham Transfer shall be varied to take account of the Reserved Matters so agreed and determined as if they had been so agreed or determined three working day before completion (5) Where apparatus which would otherwise be C&P Apparatus and/or ICI Apparatus is located in the Link Corridor such apparatus shall not be listed in Schedule 3 to the Billingham Transfer but will form the "Existing Apparatus" for the purposes of the Deeds of Grant which comprise the items numbered 1 and 2 in Table A 11. Determination of Disputes (1) Any dispute or difference between the Seller and Plymouth on the one hand and the Purchaser on the other hand as to the Reserved Matters and any amendments required to the Billingham Transfer and the plans to be attached to it in connection with the Reserved Matters shall be resolved by means of a reference to an independent person ("Independent Person") appointed in accordance with paragraph 11(2) below and either party at any time by giving written notice to the other ("Determination Notice") may refer the dispute or difference for determination to an Independent Person (2) The Independent Person shall be appointed by agreement between the Seller and Plymouth on the one hand and the Purchaser on the other hand or if within five working days after the service of the Determination Notice they are unable to agree then on the application of any of the parties by the President for the time being of the Royal Institution of Chartered Surveyors or the duly appointed deputy of such President or any other person authorised by him to make appointments on his behalf (3) The Independent Person to be appointed under this paragraph 11 shall act as an expert and the following provisions shall have effect:- (a) the Independent Person shall act as an expert and not as an arbitrator and his decision shall be final and binding upon the parties; (b) the Independent Person shall consider (inter alia) any written representations and cross-representations and supporting evidence made on behalf of the parties (if made reasonably promptly) but shall not be bound thereby; (c) the parties shall use all reasonable endeavours to procure that the Independent Person shall give his decision as speedily as possible; (d) the costs of appointing the Independent Person and his costs and disbursements in connection with his duties hereunder shall be shared between the parties in such proportions as the Independent Person shall determine or, in the absence of such determination, equally between the parties; and (e) if the Independent Person shall be or become unable or unwilling to act then the procedure contained in this paragraph 12 for the appointment of an Independent Person may be repeated as often as necessary until a decision is obtained 12. Leases and other Documents where Licence to Assign or Sub-let is needed (1) Wherever a Licence to Assign or sub-let is required under the terms of a Lease or other documents vested in the Seller or Plymouth in order to complete the Property Documents the Seller or Plymouth (as the case may be) will use all reasonable endeavours to obtain the same as soon as reasonably practicable (2) The Purchaser will provide such assistance as the Seller or Plymouth may reasonably require in regard to such Licences including:- (a) providing such references information and accounts as may be reasonably required by the Reversioner; and (b) entering into a direct covenant with and giving or procuring such guarantees in favour of the relevant Reversioner to pay the rents reserved by the relevant lease and to perform the covenants and other obligation of the Tenant therein as the Reversioner shall reasonably require but not otherwise (3) The Purchaser shall on and from the Completion Date be permitted to enter into occupation of the Assignment Properties and to enjoy the rights to be demised in respect of the Underlet Properties as licensee of the Seller and/or Plymouth and shall be entitled to receive all profit and other profit and income from it pending completion of the relevant Property Documents and the Seller shall from the Completion Date until the relevant Lease Completion Date hold the Assignment Properties on trust for the Purchaser (4) From the Completion Date until the relevant Lease Completion Date the Purchaser shall be responsible for the payment of all outgoings (save for any rent or sums payable to the landlord which the Seller and/or Plymouth shall continue to pay) for the Assignment Properties and the Seller and/or Plymouth shall observe and perform the covenants agreements conditions and stipulations on its part to be observed and performed in relation to the Assignment Properties (5) The following further provisions shall apply in relation to any period of occupation of the Assignment Properties prior to completion of the relevant assignment/demise to the Purchaser:- (a) the Purchaser shall pay to the Seller a licence fee at the same annual rate and on the same date as specified in the document relating to the Assignment Properties save in respect of the Stanlow Property where the licence fee shall be the sum of (Pounds)23,570 (plus VAT) per annum (b) the Purchaser shall not carry out any activity which would constitute a breach or non-observance of the covenants and conditions contained in the document relating to the Assignment Properties and shall not carry out any alterations or other work thereto (c) the Seller and/or Plymouth so far as it is lawfully able to as so shall permit the Purchaser to remain in occupation of the Assignment Properties (6) If any landlord lawfully requested the Seller and/or Plymouth to terminate the Purchaser's occupation or serves a writ or summons for possession of an Assignment Property upon the Seller and/or Plymouth (as the case may be) or the Purchaser on the ground that the Purchaser's occupation constitutes a breach of covenant the Purchaser shall vacate the Assignment Property and the Seller and/or Plymouth shall operate the Business as agent for the Purchaser and shall comply entirely with the Purchaser's requirements and instructions (7) If the Reversioner's consent to an assignment of the Assignment Properties has not been obtained within three months of the Completion Date the Seller shall where requested by the Purchaser:- (a) make application to the relevant landlord for a licence to underlet the Assignment Property and/or (b) apply to a court of competent jurisdiction for a declaration that the landlord is acting unreasonably (8) Completion of the assignment/underlease of the Assignment Property shall take place on the Lease Completion Date and if the parties shall enter into an underlease such underlease shall be for a term equal to the unexpired residue of the term of the lease relating to the Assignment Property (less 3 days) and shall be on the same terms mutatis mutandis as the said lease 13. Special Conditions of Sale [(1)] Where any of the Ancillary Property Documents relating to the Billingham Property contain a Schedule which remains to be completed as to the matters to which the grant is subject there shall be listed therein such of the documents referred to in the Disclosure Letter as relate to the land identified on the relevant plan [(2)] In Table A to the Schedule a note is to be inserted to preserve for 5 years the right to build a 16" gas line referred to the proviso to paragraph 1 of Schedule 2 to the draft Deed of Grant (Corridor Deed - Existing and New pipelines) on the same terms as in such draft deed (3) In Schedule 1 to Business Sale Agreement Tables D & E to be verified by Purchaser as comprising requirements of Implementation Agreements and receipt of supplies A: AS TO BILLINGHAM PROPERTY 1. Licences from THPA and Crown - -- ---------------------------- (1) In this paragraph 1 "Licences" means:- (i) a Licence dated 16th June 1997 made between The Tees and Hartlepool Port Authority ("THPA") (1) and the Seller (2) (ii) a Licence dated 17th June 1977 made between The Queen's Most Excellent Majesty (1) the Crown Estate Commissioners ("CEC") (2) THPA (3) and Imperial Chemical Industries Limited (4) (as varied by Deed dated 17th November 1986 not affecting the Business) (iii) a Licence dated 15th October 1990 made between CEC (1) THPA (2) and Plymouth (3) (2) The Licences relate to (inter alia):- (a) a 78" and a 66" Outfall at Billingham Reach; and (b) Bamletts Wharf ("the Facilities") and are non-assignable. (3) Plymouth the Seller and the Purchaser will use all reasonable endeavours to obtain prior to completion new Licences (from CEC and THPA) in relation to the Facilities ("New Licences") whereupon the Seller and Plymouth will surrender the Licences in so far as (and only in so far as) they relate to the Facilities. The Seller will provide such information as it is able to assist the Purchaser in negotiating the Licence fees payable to CEC and THPA in respect of the Facilities but settlement of the amount thereof (and its subsequent payment) shall be agreed between the Purchaser CEC and THPA (as to which the Purchaser will act reasonably) (4) If the New Licences have not been obtained prior to completion Plymouth and the Seller will hold the Licences on trust for the Purchaser (as regards the Facilities) and Plymouth and the Seller (as regards all other works affected thereby) shall jointly permit the Purchaser to use the Facilities as sub-licensee of the Seller or Plymouth (as the case may be) (5) The Purchaser will comply with the terms of the Licence so far as they relate to the Facilities and not do anything (other than using the Facilities) which may expose Plymouth or the Seller to liability for breach thereof (6) If CEC or THPA require the Purchaser to cease using the Facilities the Seller and/or Plymouth will operate the same (at the Purchaser's cost and as the Purchaser's agent) pending grant of the New Licences (7) If the New Licences have not been granted within one year of the Date of Completion the Seller will (if so required by the Purchaser) repurchase from the Purchaser the property secondly described in Part 1 of Schedule 1 to the Billingham Transfer and operate Bamletts Wharf and the above mentioned Outfalls in like manner as heretofore and the Purchaser and the Seller will enter into a Services Agreement whereby the Seller undertakes to operate the Facilities on the same terms as the relevant Implementation Agreement relating to the Facilities with the Seller and/or Plymouth named as the service provider and the Purchaser as the customer The price to be paid by the Seller for the said land shall be:- A (Pounds)--x (Pounds)6,000,000 B where A is the acreage of the land repurchased and B is the total acreage comprised in the Billingham Transfer 3. Street Works Consents (1) The Seller confirms that all licences required from any relevant Highway Authority with regard to any pipelines or cables crossing public highways have been obtained. So far as permissible the Seller will:- (a) where the licence or permit concerned relates solely to apparatus to be vested in the Purchaser assign such Licences to the Purchaser; and (b) where such licences relate to apparatus to be vested in the Purchaser and to be retained by the Seller/Plymouth either grant a sub-licence of the relevant rights to the Purchaser or (if that is not possible) hold the relevant licence or permit upon trust for the Seller and/or Plymouth and the Purchaser jointly (2) The arrangement set out in sub-paragraph (1) will apply until such times as the Purchaser obtains new licences or permits from the relevant Highway Authority. 4. Statutory Declarations (1) The Seller will provide (in a form reasonably acceptable to the Purchaser and prior to Completion) two Statutory Declarations as follows:- (a) a Statutory Declaration to the effect that the Billingham Property has been owned by the Seller or Plymouth (as the case may be) and occupied by them for a period in excess of 12 years without payment to any third party of any rent or other acknowledgement and otherwise than pursuant to any consent issued by a third party; (b) a Statutory Declaration to the effect that the various parcels of land so identified in the Deeds referred to in the Disclosure Letter and relate to the pipe corridor running between the Billingham Property and the Nylon Plant at Wilton owned by DuPont plc form a continuous corridor broken only by road and rail crossings 5. Land Registry Requirements (1) The Seller and/or Plymouth will use all reasonable endeavours to locate and supply to the Purchaser copies of:- (a) any conveyances or other documents referred to in the title documentation relating to the Billingham Property where copies of such documents have not already been provided to the Purchaser; and (b) the conveyances and other documents Memoranda whereof are endorsed upon the Seller's/Plymouth's title deeds. (2) The Seller and/or Plymouth will provide to the Purchaser at their own cost and expense all reasonable assistance required by the Purchaser in securing registration with Title Absolute at H M Land Registry of the Purchaser's freehold interest in the Billingham Property. (3) On Completion the Seller and Plymouth will provide to the Purchaser at their own cost a certified copy of a letter dated 22nd February 1988 from H.M. Land Registry together with the written confirmation referred to therein 6. Railtrack Plc In respect of such of the apparatus of the Purchaser as crosses railways vested in Railtrack Plc the Seller will grant by sub-demise to the Purchaser such rights as the Seller is able to demise pursuant to the combined effect of a Lease dated 13th March 1951 made between British Transport Commission (1) and Imperial Chemical Industries (2) and a further Lease dated 7th July 1966 made between British Railways Board (1) and Imperial Chemical Industries Limited (2) 7. Lorry Park adjoining Portrack Site At Completion (if so requested) the Seller will grant to the Purchaser for a period not exceeding one year a non-exclusive licence free of charge for the parking of lorries in the lorry park adjoining the entrance to Portrack Site (edged red on Plan 3 attached to the Billingham Transfer) B: AS TO SEVERNSIDE PROPERTY 1. New Leases from Zeneca As soon as practicable following the date of this Agreement Plymouth will call upon ZENECA Limited ("ZENECA") to grant to the Purchaser Leases in favour of the Purchaser in accordance with the Clauses numbered 8 contained in two Leases each dated 18th December 1992 and made between ZENECA (1) and Plymouth (2) and Plymouth and the Purchaser will:- (a) procure that such Leases are granted to the Purchaser; and (b) use all reasonable endeavours to procure that such Leases are granted on Completion and if such Leases have not been granted at Completion then Purchaser shall be entitled to occupy the premises concerned on like terms (mutatis mutandis) to those set out at paragraph 13 above 2. 1962 Bridge Lease The parties will following the date of this Agreement use their reasonable endeavours to obtain the consent of the Landlord of a Lease ("the Lease") dated 5th April 1962 made between the British Transport Commission (1) Imperial Chemical Industries Limited (2) (relating to an easement to construct a bridge under a railway) to a subletting in favour of the Purchaser in the following terms. If consent is received the format of the sublease will be:- (1) The sublessee will be granted a right to use the roadway (as referred to in the Lease) in common with Plymouth and all persons thereafter authorised so to do by Plymouth with or without vehicles for the purposes only (insofar as the sublessee is concerned) of gaining access to the foreshore to undertake repairs, maintenance and renewal of the effluent pipelines (such pipelines being the subject of a Deed of Grant to be entered into between Plymouth (1) the Purchaser (2) on Completion) (2) The sublessee will be granted a right to maintain in position the bridge (as referred to in the Lease) (3) The term of the sublease will be for the residue of the unexpired term of the Lease less the last three days thereof (4) The sublessee will take all necessary steps to prevent the acquisition of any public or private rights of way or easements (5) The sublessee will contribute to all costs incurred by Plymouth pursuant to Plymouth's obligations under the Lease (for the avoidance of doubt to include sums incurred pursuant to clauses 2(6) and 3(5) but not any costs relating to or consequent upon the construction of the bridge and roadway) such proportion to be established by Plymouth (as lessor) acting reasonably on a user basis (6) The sublessee will permit inspection of the bridge over the roadway by Plymouth (as lessor) (7) The sublessee will not make any alterations or additions whatsoever (8) The sublessee will covenant to repair and maintain the bridge and roadway (both as referred to in the Lease) in a good and substantial condition and Plymouth (as lessor) will contribute to the balance of the proper costs thereby incurred on a user basis as determined by the sublessee (acting reasonably), after any contribution by the landlord of the Lease has been taken into account (which shall be due to the sublessee) (9) The sublessee will contribute a proportion of all costs which are to be met by the lessee of the Lease (including for the avoidance of doubt rent due and sums due pursuant to clauses 2(5), 2(8), 2(9), 3(1) and 3(2) but not any costs relating to or consequent upon the construction of the bridge and roadway) such proportion to be established by Plymouth (acting reasonably) on a user basis (10) The sublessee will indemnify Plymouth (as lessor) against any claim or demand by the Head Lessor pursuant to the Lease arising out of any act omission or negligence of the sublessee or any breach of the sublessee's obligations in this sublease and will observe and perform all the covenants and conditions of the Lease (save as to payment of sums due thereunder) (11) Not to assign charge sublet or deal with the sublease in any way save for an assignment of the whole to a party taking a simultaneous transfer of the Property under the Transfer and then only with the prior written consent of the landlord under the Lease and of Plymouth (12) The sublease shall contain provisos in the form of clauses 3(3) and 3(5) of the Lease (mutatis mutandis) (13) The sublease shall contain on the part of the sublessee a covenant with Plymouth in the form (mutatis mutandis) of clause 2(10) of the Lease. (14) The sublease shall contain provisions for reference to an arbitrator if the parties cannot agree the proportion payable under any of the forgoing provisions, the decision of such arbitrator to be final and binding on the parties and his costs shall be within his award 3. Schedule of Condition re Main Stores The parties will act reasonably in agreeing a photographic schedule of condition detailing the present condition of the building known as Main Stores, Central Avenue which is to be the subject of a lease between Plymouth and the Purchaser on Completion. Such schedule shall be agreed within a reasonable time of the date of this Agreement (and in any event before Completion) Provided that in the event of disagreement all photographs taken shall be included in the Schedule 4. Statutory Declaration Plymouth will provide to the Purchaser a Statutory Declaration (in a form reasonably acceptable to the Purchaser) in respect of Plymouth's use of the southern access road under the A403 (used in connection with access to the foreshore) and in relation to the effluent mains which lie under the Severn Road. Both Statutory Declarations to relate to a period in excess of twelve years 5. Rosier Tankers Limited Occupation (1) Plymouth will use its reasonable endeavours opposite Rosier Tankers Limited, company number 2295236, (previously known as Chemic-Haul Limited) before Completion either to:- (i) obtain vacant possession of the premises currently occupied by Rosier Tankers Limited; or (ii) enter into a new lease with Rosier Tankers Limited for a term of three years (being contracted out of the provisions of sections 24 to 28 inclusive of the Landlord and Tenant Act 1954, (as amended) and such contractual provision being authorised by Court order) such lease to be on terms approved by the Purchaser (such approval not to be unreasonably withheld) and to include a break clause in favour of the Landlord on six months' notice given at any time PROVIDED THAT Plymouth's reasonable endeavours will not involve payment of a sum exceeding FORTY-TWO THOUSAND POUNDS ((Pounds)42,000) (2) If on Completion Plymouth have not achieved either vacant possession or a new lease as detailed in 5(1) above Plymouth will pay to the Purchaser on Completion the sum of FORTY-TWO THOUSAND POUNDS ((Pounds)42,000) by way of compensation C: AS TO STANLOW PROPERTY 1. Occupation Pending Completion The Purchaser shall be entitled to enter into occupation of the Stanlow Property from the Completion Date until the Lease Completion Date (if later) 2. Dispute re Lease (1) The Seller shall diligently pursue to determination the proceedings issued by Aubrey Weis in the High Court of Justice Chancery Division Case Number CH1996 W5659 and shall use all reasonable endeavours to procure the dispute referred to therein is determined as soon as reasonably practicable (2) If the Purchaser shall be joined as a third party into the proceedings referred to in Clause 2(1) above or any proceedings shall be issued or threatened against it arising out of such proceedings or the non-payment of rent under the Stanlow Lease dated 10th November 1993 the Seller will indemnify the Purchaser in respect of all costs claims and expenses incurred by the Purchaser in connection therewith (including interest on rent paid after the due date) 3. 6" Water Main The Seller will use all reasonable endeavours prior to Completion (but not thereafter) to procure:- (a) the grant from the Manchester Ship Canal Company ("MSC") and Ellesmere Port and Neston Borough Council of a demise of the 6" water main and associated rights for a term of 21 years from 25th December 1989 in a form reasonably acceptable to the Purchaser; and (b) a statutory declaration from MSC as to the title to grant such demise in a form reasonably acceptable to the Purchaser and will also deliver at Completion a statutory declaration by the Seller (as to the maintenance in position and use of the said 6" water main for a period in excess of twenty years) in a form reasonably acceptable to the Purchaser 4. Agreement dated 23rd December 1993 The Purchaser will co-operate with the Seller at the Seller's cost in connection with the Seller's discussions with Shell UK Limited concerning the payment of rates to Shell UK Limited under an Agreement dated 23rd December 1993 made between (1) Shell UK Limited and (2) the Seller and in the event that any sum is payable to the Purchaser in respect of rates for the period prior to the Completion Date the Purchaser shall pay such sum to the Seller 5. Air Products plc The Seller shall not without the consent of the Purchaser grant a lease/licence or other property right to Air Products plc 113 TABLE A Ancillary Property Documents re Billingham
- ------------------------------------------------------------------------------------------------------------------------------------ No. Document Parties Description Comment - ------------------------------------------------------------------------------------------------------------------------------------ 1. Deed of Grant Purchaser (1) Deed of Grant to Seller of easements over (1) Agreed Form Seller (2) the Link Corridor (2) Plan per Plan 1 in Volume of Plans - ------------------------------------------------------------------------------------------------------------------------------------ 2. Deed of Grant Purchaser (1) Deed of Grant to Plymouth of easements (1) In like form to 1 above (mutatis Plymouth (2) over the Link Corridor mutandis but for new pipes etc only (not existing pipes) (2) Plan per Plan 2 in Volume of Plans - ------------------------------------------------------------------------------------------------------------------------------------ 3. Deed of Grant Purchaser (1) Deed of Grant to Seller of easements over (1) In like form to 1 above (mutatis Seller (2) the HOC Corridor mutandis) (2) Plan per Plan 3 in Volume of Plans - ------------------------------------------------------------------------------------------------------------------------------------ 4. Deed of Grant Purchaser (1) Deed of Grant to Plymouth of easements (1) In like form to 1 above (mutatis Plymouth (2) over the HOC Corridor mutandis) (2) Plan per Plan 4 in Volume of Plans - ------------------------------------------------------------------------------------------------------------------------------------ 5. Deed of Grant Seller (1) Deed of Grant to Purchaser of easements (1) In like form to 1 above (but Purchaser (2) for ammonia pipelines to North Tees excluding the right to lay new pipes etc.) (2) Plan per Plan 5 in Volume of Plans - ------------------------------------------------------------------------------------------------------------------------------------ 6. Deed of Grant Seller (1) Deed of Grant to Purchaser of easements (1) In like form to 1 above (but Purchaser (2) for ammonia pipeline to Wilton excluding the right to lay new pipes etc.) (2) Easements to be demised where the Seller/Plymouth has a term of years - ------------------------------------------------------------------------------------------------------------------------------------
114
==================================================================================================================================== 7. Deed of Grant Seller (1) Deed of Grant to Purchaser of easements Purchaser (2) for that part of the Nitrogen Pipeline (to BOC at Teesport) lying in the Seller's retained land at Billingham - ------------------------------------------------------------------------------------------------------------------------------------ 8. Assignment Seller (1) Assignment of Pipe Corridor Easements in Purchaser (2) Deed dated 10th March 1970 above referred to - ------------------------------------------------------------------------------------------------------------------------------------ 9. Assignment Seller(1) Assignment of Lease of Frequency Purchaser (2) Changer House dated 6th August 1984 above referred to - ------------------------------------------------------------------------------------------------------------------------------------ 10. Deed of Grant Seller (1) Deed of Grant to Purchaser of `De- Purchaser (2) Landlock' Corridor Easements - ------------------------------------------------------------------------------------------------------------------------------------ 11. Deed of Grant Purchaser (1) Deed of Grant to Seller of `De-Landlock' Seller (2) Corridor Easements - ------------------------------------------------------------------------------------------------------------------------------------ 12. Deed of Grant Purchaser (1) Deed of Grant to Plymouth of `De- Plymouth (2) Landlock' Corridor Easements - ------------------------------------------------------------------------------------------------------------------------------------ 13. Deed of Grant Seller (1) Deed of Grant to Purchaser of rights for:- Purchaser (2) (a) a natural gas pipeline (max 12" external diameter); and (b) a liquids pipeline (max 6" external diameter) from the Link Corridor to (but not to ====================================================================================================================================
============================================= only) (3) Plan per Plan 6 in Volume of Plans - --------------------------------------------- (1) Per 1 above (2) Plan per Plan 7 in Volume of Plans - --------------------------------------------- Agreed Form - --------------------------------------------- Agreed Form - --------------------------------------------- (1) Agreed Form (2) Plan per Plan 8 in Volume of Plans - --------------------------------------------- (1) In like form to 10 above (mutatis mutandis) (2) Plan per Plan 10 in Volume of Plans - --------------------------------------------- (1) In like form to 10 above (mutatis mutandis) (2) Plan per Plan 11 in Volume of Plans - --------------------------------------------- (1) Like form to 5 above - but for new (as opposed to existing pipelines) (2) Grant to the extent of Seller's rights only in BASF and THPA pipe corridor where easements only are held by Seller) In BASF Land the Seller's rights expire 27/10/70 ============================================= 115
==================================================================================================================================== include) Seller's No. 2 Tees Tunnel Head House on North Bank of Tees via Billingham/Wilton Link ==================================================================================================================================== TABLE B Ancillary Property Documents re Severnside ==================================================================================================================================== No. Document Parties Description - ------------------------------------------------------------------------------------------------------------------------------------ 1. Licence Plymouth (1) Licence for Lighting Tower Purchaser (2) - ------------------------------------------------------------------------------------------------------------------------------------ 2. Agreement Plymouth (1) Agreement re Railway Sidings Purchaser (2) - ------------------------------------------------------------------------------------------------------------------------------------ 3. Six Deeds of Grant Plymouth (1) Deeds of Grant to Purchaser for rights re pipelines for IP Steam, Purchaser (2) Firefighting Water, Sharpness Water, Potable Water, Gas and Effluent - ------------------------------------------------------------------------------------------------------------------------------------ 4. Deed of Grant Plymouth (1) Deed of Grant for Cables Purchaser (2) ====================================================================================================================================
TABLE C ANCILLARY PROPERTY DOCUMENTS re STANLOW
- ------------------------------------------------------------------------------------------------------------------------------------ 1. Assignment Seller (1) Assignment of rights re CO2 Pipeline Purchaser (2) - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- 2. Assignment Seller (1) Assignment of Agreement with Briti`sh Railways Board Purchaser (2) dated 20th December 1976 - -------------------------------------------------------------------------------------------- NOTE: All of the documents in Tables B and C above are in Agreed Form - -------------------------------------------------------------------------------------
TABLE D TERRA TO SUPPLY
================================================================================================= Product Amines & Acrylics Methanol Derivatives Business - ------------------------------------------------------------------------------------------------- LP Steam X X X - ------------------------------------------------------------------------------------------------- IP Steam X X - ------------------------------------------------------------------------------------------------- HP Steam X - ------------------------------------------------------------------------------------------------- Tees Valley Water X X X - ------------------------------------------------------------------------------------------------- Gately Water X X X - ------------------------------------------------------------------------------------------------- Fire Water X X X - ------------------------------------------------------------------------------------------------- Demineralised Water X X - ------------------------------------------------------------------------------------------------- Nitrogen X X X - ------------------------------------------------------------------------------------------------- Effluent X X X - ------------------------------------------------------------------------------------------------- Natural Gas X X X - ------------------------------------------------------------------------------------------------- Propane X - ------------------------------------------------------------------------------------------------- 50Hz Electricity X X - ------------------------------------------------------------------------------------------------- 40Hz Electricity X - ------------------------------------------------------------------------------------------------- Condensate X =================================================================================================
TABLE E TERRA OBTAIN FROM Teeside Utilities Business Raw Water Nitrogen Methanol Business LP Steam IP Steam Instrument Air Acrylics (Cassel Works) IP Steam Grade 1 and 2 SUPPLIED TO AMONIA STORAGE AT NORTH TEES Nitrogen Electricity Compressed Air ANNEX 3 PROPERTY WARRANTIES G. PROPERTIES (1) The Properties the Premises and the Property Rights together constitute all the freehold or leasehold or other immovable property and rights in immovable property owned or occupied or used by the Seller for the purposes of the Business. (2) The Seller has good and marketable title to the Properties the Premises and the Property Rights. (3) The Property Rights comprise all the easements rights and licences owned occupied or used by the Seller or the Seller's Group on the date hereof in connection with the Business and/or necessary in order to enable the Purchaser to comply with its obligations in the Implementation Agreements (construed for the purposes of this paragraph (3) only as if the Clause headed Easements and Wayleaves were excluded therefrom). No further easements rights and licences are required in order to conduct the Business in the manner in which it has heretofore been conducted and in accordance with statutory requirements and all subsisting governmental and regulatory authorisations licences permits and consents. (4) Where any pipelines run under over or through any public highways waterways or rivers or any property owned by Railtrack plc the pipelines are lawfully in such positions and the Seller has the benefit of a lease or licence/consent not involving excessive payment or onerous obligations from Railtrack plc, any local highway authority, British Waterways Board or any River Authority or their predecessors in title. (5) The Seller and/or Plymouth have duly performed, observed and complied with all material covenants, restrictions, reservations, conditions, agreements, statutory and common law requirements, by-laws, orders, building regulations and other stipulations and regulations affecting the Properties and the Premises and the uses of the Properties and the Premises and no lease is liable to be forfeited and all rent and other sums due are paid up to date. (6) The existing use of each of the Properties the Premises and the Property Rights is the lawful permitted use whether under the current Town and County Planning legislation and is not a temporary use and all necessary consents to such existing use have been obtained. (7) All development carried out on the Properties the Premises and the Property Rights has been and is lawful and all necessary consents and permissions have been or are being obtained for such development. (8) The consents and permissions referred to in paragraphs (6) and (7) are valid, subsisting and unimpeachable and are not temporary or suspended and are also either unconditional or subject only to conditions which have been satisfied and no planning permission remains unimplemented (whether in whole or in part) nor has any planning application been submitted which awaits determination. (9) Neither the Properties the Premises or the Property Rights are subject to or affected by any Agreements made pursuant to S.106 of the Town and Country Planning Act 1990 Section 33 of the Local Government (Miscellaneous Provisions) Act 1982 Section 278 of the Highways Act 1980 Section 104 of the Water Industry Act 1991 or any similar legislation whether or not currently in force. (10) All relevant matters affecting the Properties the Premises and the Property Rights or the use or value thereof or any proposals relating thereto and full details of all leases have been disclosed in writing to the Purchaser or its Solicitors prior to the date hereof. (11) The replies given to the enquiries and requisitions concerning the Properties the Premises and the Property Rights made by the Purchaser's Solicitors and all disclosures are true and accurate in all material respects. (12) All the information produced to or given in writing to the Purchaser or the Purchaser's Solicitors in respect of or relating to the Properties the Premises and the Property Rights is true and accurate. (13) The Seller has complied with its obligations under the Fire Precautions Act 1971 and has applied for and obtained fire certificates thereunder in respect of all the Properties the Premises and the Property Rights to the extent required by such Act. (14) The Office Copy Entries of Title No. AV220591 dated 22nd September 1994 reveal all matters affecting and benefitting the Severnside Property and no rights or easements have been granted or covenants created which affect the Severnside Property since 22nd September 1994. (15) The conveyances and other documents referred to in any memoranda endorsed on the Billingham Documents (here meaning any conveyance or documents of title relating to the Billingham Property referred to in the Disclosure Letter) does not relate to a sale of any part of the Billingham Property. The Seller and Plymouth are not aware of any rights created or covenants imposed by such conveyances or documents referred to in the said memoranda which affect the Billingham Property nor have they received notice of any claim to any such rights. (16) Any conveyances deeds or documents referred to in the Billingham Documents but not comprised in the Billingham Documents do not create any rights or impose any covenants which affect the Billingham Property and neither the Seller nor Plymouth are aware of any claims made to any such rights. (17) The Seller and/or Plymouth has a good and marketable title sufficient to enable it to grant to the Purchaser a right as to part in perpetuity and as to the remainder for a period expiring in the year 2070 over the land between the Billingham Property and the Seller's No. 2 Head House on the North Bank of the River Tees (but not including that Head House and other than which such route crosses public highways or railways) to lay a pipe of up to 16" diameter and thereafter inspect maintain and repair the same free from any encumbrances which shall prevent the laying operation maintenance and repair of the same. (18) Notwithstanding the disclosure of the title documents relating to the route of the Ammonia Pipeline the Seller has good and marketable title to the unregistered part of site ACP No. 616 held by virtue of the conveyance of easements and facilities dated 1st January 1988 made between Plymouth (1) the Seller (2) and that Plymouth had good and marketable title demonstrated by a good root of title at the date of the said conveyance free from encumbrances other than those disclosed in the Disclosure Letter. SIGNED by J.K. REYNOLDS ) for and on behalf of ) J. K. REYNOLDS ICI CHEMICALS & POLYMERS LIMITED ) .................................... SIGNED by G.H. VALENTINE ) for and on behalf of ) G.H. VALENTINE TERRA INDUSTRIES LIMITED ) .................................... SIGNED by R.W.R. CARTER ) for and on behalf of ) R.W.R. CARTER IMPERIAL CHEMICAL INDUSTRIES PLC ) .................................... SIGNED by B.M. JOYCE ) for and on behalf of ) B.M. JOYCE TERRA INDUSTRIES INC. ) .................................... EX-4 3 AMENDED CREDIT AGREEMENT EXHIBIT 4 [Conformed Copy] ================================================================================ AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 31, 1997 among TERRA CAPITAL, INC. and TERRA NITROGEN, LIMITED PARTNERSHIP, as Borrowers CERTAIN GUARANTORS CERTAIN LENDERS CERTAIN ISSUING BANKS and CITIBANK, N.A., as Administrative Agent ================================================================================ TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.
Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.01. Certain Defined Terms.................................... 2 Section 1.02. Computation of Time Periods.............................. 45 Section 1.03. Accounting Terms......................................... 45 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT Section 2.01. The Advances............................................. 46 Section 2.02. Making the Advances...................................... 50 Section 2.03. Repayment................................................ 52 Section 2.04. Termination or Reduction of the Commitments............................................. 52 Section 2.05. Prepayments, Etc......................................... 53 Section 2.06. Interest................................................. 56 Section 2.07. Fees..................................................... 57 Section 2.08. Conversion and Continuation of Advances.................. 58 Section 2.09. Increased Costs, Illegality, Etc......................... 59 Section 2.10. Payments and Computations................................ 62 Section 2.11. Taxes.................................................... 64 Section 2.12. Sharing of Payments, Etc................................. 66 Section 2.13. Letters of Credit........................................ 67 Section 2.14. Replacement of Lender.................................... 73 ARTICLE III CONDITIONS OF LENDING Section 3.01. Conditions Precedent to Amendment and Restatement............................................. 75 Section 3.02. Conditions Precedent to Each Borrowing and Issuance............................................ 78 Section 3.03. Determinations Under Section 3.01........................ 79 ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01. Representations and Warranties of the Company................................................. 79 Section 4.02. Representations and Warranties of each Lender.................................................. 86
(i)
Page ---- ARTICLE V COVENANTS OF TERRA Section 5.01. Affirmative Covenants.................................... 86 Section 5.02. Negative Covenants....................................... 95 Section 5.03. Reporting Requirements................................... 112 Section 5.04. Financial Covenants...................................... 116 ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default........................................ 117 Section 6.02. Actions in Respect of the Letters of Credit Upon Default..................................... 121 ARTICLE VII THE ADMINISTRATIVE AGENT Section 7.01. Authorization and Action................................. 122 Section 7.02. Administrative Agent's Reliance, Etc..................... 122 Section 7.03. Citibank and Affiliates.................................. 123 Section 7.04. Lender Credit Decision................................... 123 Section 7.05. Indemnification.......................................... 124 Section 7.06. Collateral Duties........................................ 124 Section 7.07. Successor Administrative Agent........................... 125 ARTICLE VIII THE GUARANTEE Section 8.01. The Guarantee............................................ 126 Section 8.02. Obligations Unconditional................................ 127 Section 8.03. Reinstatement............................................ 128 Section 8.04. Subrogation.............................................. 129 Section 8.05. Remedies................................................. 129 Section 8.06. Instrument for the Payment of Money...................... 129 Section 8.07. Continuing Guarantee..................................... 129 Section 8.08. Rights of Contribution................................... 130 Section 8.09. General Limitation on Guarantee Obligations............................................. 131 ARTICLE IX MISCELLANEOUS Section 9.01. Amendments, Consents, Etc................................ 131 Section 9.02. Notices, Etc............................................. 133 Section 9.03. No Waiver; Remedies...................................... 134 Section 9.04. Costs, Expenses and Indemnification...................... 135 Section 9.05. Right of Setoff.......................................... 136 Section 9.06. Governing Law; Submission to Jurisdiction............................................ 137 Section 9.07. Assignments and Participations........................... 137
(ii) Section 9.08. Execution in Counterparts................................ 142 Section 9.09. No Liability of the Issuing Banks........................ 142 Section 9.10. Confidentiality.......................................... 142 Section 9.11. WAIVER OF JURY TRIAL..................................... 143 Section 9.12. Survival................................................. 143 Section 9.13. Captions................................................. 143 Section 9.14. Successors and Assigns................................... 143 Section 9.15. NationsBank Assignments.................................. 144
SCHEDULES --------- SCHEDULE 2.01 List of Commitments and Lending Offices SCHEDULE 4.01(b) Subsidiaries SCHEDULE 4.01(c) List of Conflicts with Credit Instruments SCHEDULE 4.01(d) List of Required Authorizations, Consents SCHEDULE 4.01(j) Plans and Multiemployer Plans SCHEDULE 4.01(q) Environmental Compliance Schedule SCHEDULE 4.01(u) Open Tax Years SCHEDULE 4.01(y) Existing Debt SCHEDULE 5.02(a)(iii) Existing Liens SCHEDULE 5.02(c) Existing Hedge Agreements SCHEDULE 5.02(f) Investments EXHIBITS -------- EXHIBIT A-1 Form of Terra Note EXHIBIT A-2 Form of TNLP Note EXHIBIT B-1 Form of Amended and Restated Holdings Pledge Agreement EXHIBIT B-2 Form of Amended and Restated Terra Capital Pledge Agreement EXHIBIT B-3 Form of Amended and Restated Subsidiary Pledge and Security Agreement EXHIBIT B-4 Form of Amended and Restated TNLP Pledge and Security Agreement EXHIBIT C Form of Notice of Borrowing EXHIBIT D [Intentionally Omitted] EXHIBIT E Loan Purchase Agreement EXHIBIT F Form of Assignment and Acceptance EXHIBIT G Provisions Relating to Certain Investments EXHIBIT H Form of Intercreditor Agreement (iii) CREDIT AGREEMENT AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 31, 1997 among: (1) TERRA CAPITAL, INC., a Delaware corporation (the "Company"); (2) TERRA NITROGEN, LIMITED PARTNERSHIP, a Delaware limited partnership and a Subsidiary of the Company ("TNLP"); (3) each of the corporations and limited partnerships listed on the signature pages hereof under the caption "GUARANTORS"; (4) each of the lenders (the "Initial Lenders") listed on the signature pages hereof; and (5) CITIBANK, N.A., as agent (together with its successor in such capacity appointed pursuant to Article VII, the "Administrative Agent") for the Lenders and the Issuing Banks hereunder. PRELIMINARY STATEMENTS: Capitalized terms used in these Preliminary Statements and not otherwise defined have the meanings assigned to them in Section 1.01. (a) The Company, TNLP, certain Guarantors, the Initial Lenders (or certain of their Affiliates), the Retiring Lenders, the Issuing Banks and the Administrative Agent are parties to an Amended and Restated Credit Agreement dated as of December 14, 1995 (as heretofore amended to and in effect on the Restatement Date, the "Existing Credit Agreement") providing, subject to the terms and conditions thereof, for the making of working capital advances to, and the issuance of letters of credit for the account of, the Company and for the making of working capital advances to, and the issuance of letters of credit for the account of, TNLP. (b) The Company, TNLP, the Guarantors, the Initial Lenders, the Issuing Banks and the Administrative Agent wish to amend the Existing Credit Agreement, among other things: (1) to permit the Company to acquire, indirectly through Terra U.K., the U.K. Nitrogen Assets from ICI pursuant to the Sale of Business Agreement (the "U.K. Nitrogen Acquisition"); - 2 - (2) to permit the BMLP Restructuring to occur; (3) to permit the Company, indirectly through Terra U.K. Holdings, to construct the Ammonia Loop (and, in that connection, to create Beaumont Ammonia, Inc., a Delaware corporation and Subsidiary of Terra U.K. Holdings, the principal business of which shall be the construction and operation of the Ammonia Loop); (4) to make certain other changes to the Existing Credit Agreement and the other Loan Documents (including, without limitation, to provide that (x) the "Applicable Commitment Fee Rate" during the period from the Restatement Date until the Quarterly Date in December, 1998 shall be not less than 0.375% per annum and (y) the "Applicable Margin" during the period from the Restatement Date until the Quarterly Date in December, 1998 shall be not less than 0.375% per annum (in the case of Base Rate Advances) and not less than 1.250% (in the case of Eurodollar Rate Advances); (5) to reduce the aggregate Commitments to $350,000,000; and (6) to reflect that the Retiring Lenders shall cease to be parties hereto, all on the terms and conditions set forth herein, it being the intention of the parties hereto that the advances and letters of credit outstanding under the Existing Credit Agreement on the Restatement Date shall continue and remain outstanding and not be repaid on the Restatement Date. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree that the Existing Credit Agreement shall (subject to the satisfaction of the conditions precedent specified in Section 3) be amended and restated to read as set forth herein. ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): - 3 - "Acquired Debt" means, without duplication: (a) Debt of Subsidiaries of Terra acquired by Terra or any of its Subsidiaries after the Restatement Date; (b) Debt assumed by Terra (whether by operation of law or contract or otherwise) in connection with mergers by Terra after the Restatement Date consummated in accordance with Section 5.02(d)(ii)(y); and (c) assumptions or Guarantees of other Acquired Debt by Terra or one of its Subsidiaries. "Adjusted Debt to Cash Flow Ratio" means, for any period, the ratio of (i) Funded Debt of the Adjusted Terra Group on a Consolidated basis as at the last day of such period to (ii) EBITDA of the Adjusted Terra Group on a Consolidated basis for such period. "Adjusted Interest Coverage Ratio" means, for any period, the ratio of (i) EBITDA of the Adjusted Terra Group on a Consolidated basis for such period to (ii) Cash Interest Expense of the Adjusted Terra Group on a Consolidated basis for such period. "Adjusted Net Worth" means, at any time, the sum of the following for Terra and its Subsidiaries on a Consolidated basis: (a) the Net Worth of Terra and its Subsidiaries on a Consolidated basis; minus (b) the Net Worth of Terra Canada and its Subsidiaries (including, without limitation, Terra U.K. and its Subsidiaries) on a Consolidated basis; minus (c) from and after the BMLP Restructuring Time, the Net Worth of BMLP and its Subsidiaries (including, without limitation, Terra U.K. Holdings, BAI and their respective Subsidiaries) on a Consolidated basis minus the BMLP Class A Capital Contribution Amount as at such time (to the extent such amount was included in determining Net Worth of BMLP and its Subsidiaries). "Adjusted Terra Group" means, collectively, Terra and its Subsidiaries (other than members of the Terra Canada Group and, from and after the BMLP Restructuring Time, members of the BMLP Group). - 4 - "Administrative Agent" has the meaning specified in the recital of parties to this Agreement. "Administrative Agent's Account" means the account of the Administrative Agent maintained by the Administrative Agent at its office at 2 Penns Way, Suite 200, New Castle, Delaware, 19720, Account No. 368- 52248, Attention: Carlos Lopez (or his successor), or such other account maintained by the Administrative Agent as may be designated by the Administrative Agent in a written notice to the Lenders, each Issuing Bank and the Borrowers. "Advance" means a Terra Advance or a TNLP Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 10% or more of the voting stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting stock, by contract or otherwise. "AMCI Senior Note Indenture" means the Indenture dated as of October 15, 1993 between Terra and Society National Bank, as Trustee, providing for the issuance of the AMCI Senior Notes, as from time to time amended. "AMCI Senior Notes" means the 10-3/4% senior notes of Terra due 2003 issued pursuant to the AMCI Senior Note Indenture. "Ammonia Loop" means the ammonia loop facility to be constructed as an extension of BMLP's methanol plant pursuant to the Engineering, Procurement and Construction Agreement dated as of October 20, 1997 between TNC and Foster Wheeler USA Corporation, as from time to time amended. "Ammonium Nitrate Hedging Agreement" means an agreement between Terra Canada and ICI pursuant to which Terra Canada agrees to pay certain amounts to ICI in the event that the annual average price of ammonium nitrate exceeds (Pounds)100 per tonne, as from time to time amended (without prejudice to Section 5.02(l)). - 5 - "Applicable Commitment Fee Rate" means 0.50% per annum; provided that: (1) The Applicable Commitment Fee Rate shall, from the Restatement Date until the Quarterly Date falling in March, 1998, be 0.375% per annum. (2) Subject to clause (1) above and clause (3) below, if for any Rolling Period ending on or after the Restatement Date the Debt to Cash Flow Ratio for such Rolling Period shall be within any of the ranges specified in the schedule below, then, subject to the delivery to the Administrative Agent of a certificate of the Senior Financial Officer demonstrating the same prior to the first Quarterly Date (the "relevant Quarterly Date") occurring after the end of such Rolling Period, the "Applicable Commitment Fee Rate" shall be changed to the percentage per annum set forth opposite the reference to such range in such schedule during the period commencing on the relevant Quarterly Date until the next succeeding Quarterly Date thereafter: Range of Debt Applicable Commitment to Cash Flow Ratio Fee Rate ------------------ --------------------- Greater than 3.00 to 1 0.500% Less than or equal to 3.00 to 1 and greater than 2.00 to 1 0.375% Less than or equal to 2.00 to 1 and greater than 1.25 to 1 0.250% Less than or equal to 1.25 to 1 and greater than 0.75 to 1 0.225% Less than or equal to 0.75 to 1 0.200% (3) Notwithstanding any reduction in the Applicable Commitment Fee Rate below 0.375% per annum that would otherwise be made pursuant to clause (2) above, the "Applicable Commitment Fee Rate" during the period from the Restatement Date until the Quarterly Date in December, 1998 shall be not less than 0.375% per annum. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of - 6 - a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Applicable Letter of Credit Fee Rate" means, at any time, a rate per annum equal to the Applicable Margin for Eurodollar Rate Advances in effect at such time. "Applicable Margin" means, (a) with respect to all Base Rate Advances, 0.50% per annum and (b) with respect to all Eurodollar Rate Advances, 2.00% per annum; provided that: (1) The Applicable Margin with respect to all Base Rate Advances and Eurodollar Rate Advances shall, from the Restatement Date until the Quarterly Date falling in March, 1998, be 0.375% per annum (in the case of such Base Rate Advances) and 1.250% per annum (in the case of such Eurodollar Rate Advances). (2) Subject to clause (1) above and clause (3) below, if for any Rolling Period ending on or after the Restatement Date the Debt to Cash Flow Ratio for such Rolling Period shall be within any of the ranges specified in the schedule below, then, subject to the delivery to the Administrative Agent of a certificate of the Senior Financial Officer demonstrating the same prior to the first Quarterly Date (the "relevant Quarterly Date") occurring after the end of such Rolling Period, the "Applicable Margin" shall be changed to the percentage per annum for the respective Type of Advance set forth opposite the reference to such range in such schedule during the period commencing on the relevant Quarterly Date until the next succeeding Quarterly Date thereafter:
Applicable Margin (% p.a.) ---------------------------- Range of Debt Base Rate Eurodollar Rate to Cash Flow Ratio Advances Advances - ------------------ --------- --------------- Greater than 3.00 to 1 0.500% 2.000% Less than or equal to 3.00 to 1 and greater than 2.00 to 1 0.375% 1.250% Less than or equal to 2.00 to 1 and greater than 1.25 to 1 0.250% 0.750%
- 7 - Less than or equal to 1.25 to 1 and greater than 0.75 to 1 0.000% 0.625% Less than or equal to 0.75 to 1 0.000% 0.500%
(3) Notwithstanding any reduction in the Applicable Margin below 0.375% per annum (in the case of Base Rate Advances) or 1.250% per annum (in the case of Eurodollar Rate Advances) that would otherwise be made pursuant to clause (2) above, the "Applicable Margin" during the period from the Restatement Date until the Quarterly Date in December, 1998 shall be not less than 0.375% per annum (in the case of Base Rate Advances) and not less than 1.250% (in the case of Eurodollar Rate Advances). "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit F. "Available Amount" of any Letter of Credit means the maximum amount available to be drawn under such Letter of Credit (assuming compliance with all conditions to drawing specified therein). "BAI" means Beaumont Ammonia, Inc., a Delaware corporation and Subsidiary of Terra U.K. Holdings, the principal business of which shall be the construction and operation of the Ammonia Loop. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; (b) 0.50% per annum above the Federal Funds Rate; and (c) the sum (adjusted to the nearest 0.25% or, if there is no nearest 0.25%, to the next higher 0.25%) of (i) 0.50% per annum plus (ii) the rate obtained by dividing (x) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major - 8 - United States money center banks, such three-week moving average (adjusted to the bases of a year of 360 days) being determined weekly on each Monday (or, if such date is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank by (y) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank with respect to liabilities consisting of or including (among other liabilities) three-month U.S. Dollar non-personal time deposits in the United States plus (iii) the average during such three-week period of the annual assessment rates estimated by Citibank for determining the then current annual assessment rate payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. Dollar deposits of Citibank in the United States. Each change in any interest rate provided for herein based upon the Base Rate resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate. "Base Rate Advance" means an Advance that bears interest as provided in Section 2.06(a)(i). "Basic Documents" means the Loan Documents and the Intercreditor Agreement. "BFI" means Britz Fertilizer, Inc., a California corporation. "Blytheville Assets" means TI's Blytheville, Arkansas facility and related assets having (in the reasonable judgment of TI's Board of Directors) an aggregate fair market value not exceeding $5,000,000. "BMCH" means BMC Holdings, Inc., a Delaware corporation. - 9 - "BMLP" means Beaumont Methanol, Limited Partnership, a Delaware limited partnership. "BMLP Class A Capital Contribution Amount" means, at any time, the aggregate amount of the BMLP Class A Limited Partner's capital contributions to BMLP (net of redemptions thereof). "BMLP Class A Limited Partner" means the holder from time to time of the BMLP Class A Limited Partnership Interest. "BMLP Class A Limited Partnership Interest" means a Class A limited partnership interest in BMLP. "BMLP Demand Loans" has the meaning assigned to such term in Section 5.02(b)(2)(ii). "BMLP First Priority Distributions" means, for any period, the aggregate amount of distributions (exclusive of redemptions) made by BMLP in cash during such period in respect of the BMLP Class A Limited Partnership Interest pursuant to the terms of the BMLP Partnership Agreement. "BMLP Group" means, collectively, BMLP and its Subsidiaries, and a "member" of the BMLP Group means, individually, BMLP and each such Subsidiary. "BMLP Partners" means, collectively, TMC, BMCH and, from and after the BMLP Restructuring Time, the BMLP Class A Limited Partner. "BMLP Partnership Agreement" means the agreement of limited partnership of BMLP, as amended and restated at the BMLP Restructuring Time and as further amended from time to time (without prejudice to Section 5.02(j)). "BMLP Restructuring" means the sale of the BMLP Class A Limited Partnership Interest to a Person that is not an Affiliate of Terra, provided that such sale, and the transactions related thereto, shall be effected in accordance with the following terms (or on such other terms as shall be reasonably satisfactory to the Required Lenders): (A) both immediately prior to and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; - 10 - (B) the aggregate cash proceeds received by BMLP from the BMLP Class A Limited Partner in connection with the issuance of the BMLP Class A Limited Partnership Interest shall be not less than $225,000,000; and (C) the Company shall deliver to the Administrative Agent a true, correct and complete copy of each of the principal documents executed in connection with the BMLP Restructuring and shall certify to the Administrative Agent and the Lenders that the same has been (or is being) consummated in accordance with the terms and conditions set forth herein. "BMLP Restructuring Time" means the time as of which the BMLP Restructuring shall have occurred in accordance with the terms set forth herein and in the other Loan Documents. "BMLP Support and Option Agreement" means a Support and Option Agreement dated as of the date of the BMLP Restructuring among the Company, the BMLP Class A Limited Partner and the holders of the BMLP Class A Limited Partnership Interest, as from time to time amended. "Borrower" means each of the Company and TNLP; provided that when reference is made in this Agreement or in any other Loan Document to the "relevant" Borrower in connection with either Facility, such reference shall be deemed to refer (a) in the case of the Terra Facility, to the Company, and (b) in the case of the TNLP Facility, to TNLP. "Borrower's Account" means (a) in the case of the Company, the account of the Company maintained with Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. 4065-6098, and (b) in the case of TNLP, the account of TNLP maintained with Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. 4065-6071; or, in either case, such other account maintained by the relevant Borrower with Citibank and designated by such Borrower in a written notice to the Administrative Agent. "Borrowing" means a Terra Borrowing or a TNLP Borrowing. "Britz Documents" means the Britz LLC Agreement and the Britz JV Agreement. - 11 - "Britz JV Agreement" means the Joint Venture Agreement among TI, BFI, Britz LLC and certain other Persons pursuant to which TI will acquire ownership interests in Britz LLC, as amended from time to time. "Britz LLC" means Britz Fertilizer, L.L.C., a Delaware limited liability company, as the same may be renamed from time to time. "Britz LLC Agreement" means the limited liability company management agreement for Britz LLC, as the same may be in effect from time to time. "Business Day" means a day on which banks are not required or authorized to close in New York City and, if such Business Day relates to a Eurodollar Rate Advance, on which dealings are carried on in the London interbank market. "Capital Expenditures" means, for any period with respect to any Person, the sum of all expenditures during such period (whether paid in cash or accrued as liabilities during such period) that, in conformity with GAAP, are required to be included in or reflected on the balance sheet of such Person in respect of equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, plus (without duplication) the amount of expenditures deemed to be made in connection with equipment that is purchased simultaneously with the trade-in of existing equipment owned by such Person to the extent the gross amount of the purchase price of such purchased equipment exceeds the fair market value (as determined in good faith by such Person) of the equipment then being traded in, but excluding expenditures made in connection with the replacement or restoration of assets to the extent such replacement or restoration is financed from insurance proceeds paid on account of loss or damage to the assets so replaced or restored. "Capital Lease Obligations" means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. - 12 - "Cash Interest Expense" means, for any Person for any period (without duplication), interest expense net of interest income, whether paid or accrued (including the interest component of Capital Lease Obligations), on all Debt of such Person for such period, including, without limitation, (a) interest expense in respect of the Advances, (b) commissions, discounts and other fees and charges payable in connection with letters of credit (including, without limitation, any Letter of Credit) and (c) the net payment, if any, payable in connection with any Hedge Agreement; excluding, in each case, interest not payable in cash (including, without limitation, amortization of original issue discount and the interest portion of any deferred payment obligation); all as determined in accordance with GAAP for such period. "Casualty Event" means, with respect to any property of any Person, any loss of or damage to, or any condemnation or other taking of, such property for which such Person or any of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation award or other compensation. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "Citibank" means Citibank, N.A., a national banking association. "Collateral" means all "Collateral" referred to in the Security Documents and all other property that is subject to any Lien created by any Security Document in favor of the Collateral Agent. "Collateral Agent" means Citibank, in its capacity as Collateral Agent for the Secured Parties under and as defined in the Security Documents and the Intercreditor Agreement, together with its successors in such capacity. "Commitment" means a Terra Commitment or a TNLP Commitment. "Commitment Termination Date" means the Terra Commitment Termination Date or the TNLP Commitment Termination Date. "Confidential Information" means information identified as such that Terra or any of its Subsidiaries furnishes to the Administrative Agent, any Issuing Bank or any Lender, but does not include any such information once such - 13 - information has become generally available to the public or once such information has become available to the Administrative Agent, any Issuing Bank or any Lender from a source other than Terra and its Subsidiaries (unless, in either case, such information becomes so available as a result of the breach by the Administrative Agent, an Issuing Bank or a Lender of its duty of confidentiality set forth in Section 9.10). "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Consolidated Group" means, collectively, Terra and its Consolidated Subsidiaries, and a "member" of the Consolidated Group means Terra or any such Subsidiary. "Continuation", "Continue" and "Continued" each refers to a continuation of Eurodollar Rate Advances from one Interest Period to the next Interest Period pursuant to Section 2.08. "Conversion", "Convert" and "Converted" each refers to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.08 or 2.09. "Covered Transaction" means, collectively: (1) the Transactions (as defined in the Original Credit Agreement) or any part thereof, including, without limitation, the Initial Merger and the Second Merger referred to therein and any of the other transactions contemplated thereby; (2) the SPU Redemption; (3) the U.K. Nitrogen Acquisition; (4) the BMLP Restructuring; and (5) the construction of the Ammonia Loop. "Cumulative Adjusted Net Income" means, for any period, the sum, for each complete fiscal year of Terra (beginning with the fiscal year ending December 31, 1995) during such period, of the Adjusted Net Income Amounts for all such fiscal years. For purposes of this definition, "Adjusted Net Income Amount" means, for any fiscal year of Terra, the greater of (x) 33-1/3% of the net income of Terra and its Subsidiaries on a Consolidated basis during such fiscal year and (y) $20,000,000. - 14 - "Debt" of any Person means (without duplication): (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than any trade payable having a tenor of not more than 365 days, or any like item arising from the purchase of equipment or services having a tenor of not more than 90 days, in each case incurred in the ordinary course of business and on normal business terms and in each case not overdue by more than 30 days, and other than any Obligations in respect of letters of credit supporting any such trade payable or like item), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations and Major Operating Lease Obligations of such Person, (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities (other than Obligations in respect of letters of credit referred to in clause (b) of this definition), (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Redeemable capital stock, which Obligations shall be valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Obligations of such Person in respect of Hedge Agreements, (i) all Debt of others referred to in clauses (a) through (h) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (j) all Debt referred to in clauses (a) through (i) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even - 15 - though such Person has not assumed or become liable for the payment of such Debt. "Debt to Cash Flow Ratio" means, for any period, the ratio of: (1) the sum of (x) Funded Debt of Terra and its Subsidiaries on a Consolidated basis as of the last day of such period plus (y) from and after the BMLP Restructuring Time, the BMLP Class A Capital Contribution Amount as at the last day of such period to (2) the sum of (x) EBITDA of Terra and its Subsidiaries on a Consolidated basis for such period plus (y) from and after the BMLP Restructuring Time, the aggregate amount of BMLP First Priority Distributions made during such period (to the extent such distributions were deducted in determining such EBITDA for such period). "Default" means any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Disposition" means any sale, assignment, transfer or other disposition of any property (whether now owned or hereafter acquired) by Terra or any of its Subsidiaries, but excluding any sale, assignment, transfer or other disposition of any property (i) sold or disposed of in the ordinary course of business and on ordinary business terms, or (ii) by any Obligor or a wholly owned Subsidiary of an Obligor to another Obligor or to a wholly owned Subsidiary of an Obligor, or (iii) that consists of outmoded or obsolete items, provided that the aggregate value of all such excluded outmoded or obsolete items with a value of $1,000,000 or more each shall not exceed $10,000,000. "Dividend Payments" means dividends (in cash, property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any shares of any class of stock of the Company or of any warrants, options or other rights to acquire the same (or to make any payment to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market or equity value of Terra, the Company or any of their Subsidiaries, other than any such payment made in the ordinary course of business of such Person in connection - 16 - with an executive compensation plan approved by the Board of Directors of such Person), but excluding dividends payable solely in shares of common stock of the Company. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule 2.01 or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Administrative Agent. "EBITDA" of any Person for any period means the following, determined in accordance with GAAP: net income (or net loss) plus the sum of (a) interest expense, (b) income tax expense and (c) depreciation expense, amortization expense and other non-cash charges deducted in arriving at such net income (or loss). "Eligible Assignee" means (a) any other Lender or any affiliate of any Lender; (b) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $1,000,000,000; (c) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having a net worth in excess of $100,000,000; (d) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, so long as such bank is acting through a branch or agency located in the country in which it is organized or another country that is described in this clause (d); (e) the central bank of any country that is a member of the OECD; (f) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of $100,000,000; and (g) any other Person (other than an Affiliate of the Company) approved by the Administrative Agent and the Company, such approval of the Company not to be unreasonably withheld or delayed. "Environmental Action" means any administrative, regulatory or judicial suit, demand, demand letter, claim, notice of non-compliance or violation, consent order or consent agreement relating in any way to any violation of or liability under any Environmental Law or any Environmental - 17 - Permit, including without limitation (a) any claim by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law, (b) any claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to the environment and (c) any notice by any governmental or regulatory authority alleging that Terra or any of its Subsidiaries is or may be responsible for, or is a potentially responsible party with respect to, any cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law. "Environmental Law" means any federal, state or local governmental law, rule, regulation, order, writ, judgment, injunction or decree relating to pollution or protection of the environment or the treatment, storage, disposal, release, threatened release or handling of Hazardous Materials, including, without limitation, CERCLA, the Resource Conservation and Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act, the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water Act, the Atomic Energy Act and the Federal Insecticide, Fungicide and Rodenticide Act, in each case, as amended from time to time. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" of any Person means any other Person that for purposes of Title IV of ERISA is a member of such Person's controlled group, or under common control with such Person, within the meaning of Sections 414(b), (c), (m) and (o) of the Internal Revenue Code. "ERISA Event" with respect to any Person means (a) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan of such Person or any of its ERISA Affiliates unless the 30-day notice requirement with respect to such event has been waived pursuant to regulations under Section 4043 of ERISA and excluding a reportable event under Section 4043(c)(7) of ERISA; (b) the provision by the administrator of any Plan of such Person or any of its ERISA Affiliates of a notice of - 18 - intent to terminate such Plan, pursuant to Section 4041(c) of ERISA as a distress termination; (c) the cessation of operations at a facility of such Person or any of its ERISA Affiliates in the circumstances described in Section 4062(e) of ERISA; (d) the withdrawal by such Person or any of its ERISA Affiliates from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (e) the satisfaction of the conditions set forth in Sections 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of such Person or any ERISA Affiliate for failure to make a required payment to a Plan; (f) the adoption of an amendment to a Plan of such Person or any of its ERISA Affiliates requiring the provision of security to such Plan, pursuant to Section 307 of ERISA; or (g) the institution by the PBGC of proceedings to terminate a Plan of such Person or any of its ERISA Affiliates, pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan. "Eurocurrency Liabilities" has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule 2.01 or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Administrative Agent. "Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at approximately 5:00 P.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurodollar Rate Advance comprising part of such Borrowing (determined without giving effect to any assignments or participations by such Reference Bank) and for a period equal to such - 19 - Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. The Eurodollar Rate for each Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.09. "Eurodollar Rate Advance" means an Advance that bears interest as provided in Section 2.06(a)(ii). "Eurodollar Rate Reserve Percentage" for any Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing means the reserve percentage (if any) applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding $1,000,000,000 with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Excluded Period" means, with respect to any additional amount payable under Section 2.09 or 2.13, the period ending 120 days prior to the applicable Lender's delivery of a certificate referenced in Section 2.09(a), 2.09(b) or 2.13(d), as applicable, with respect to such additional amount. "Excluded Transactions" means, collectively: (1) Investments contemplated by the Port Neal Transaction; (2) Terra Stock Repurchases; (3) the purchase, redemption or other acquisition of Senior Preference Units pursuant to the SPU Redemption; - 20 - (4) capital contributions by TMC and BMCH to BMLP required to be made pursuant to the terms of the BMLP Partnership Agreement or which, if not made, would result in the occurrence of a "Notice Event" (as defined in the BMLP Partnership Agreement); (5) capital contributions by BMLP to its Subsidiaries and by Subsidiaries of BMLP to their respective Subsidiaries; (6) capital contributions to Subsidiaries of Terra (other than, from and after the BMLP Restructuring Time, capital contributions to members of the BMLP Group not referred to in clauses (4) and (5) above); (7) the U.K. Nitrogen Acquisition; and (8) the redemption of the BMLP Class A Limited Partnership Interest pursuant to the BMLP Partnership Agreement and the BMLP Support and Option Agreement, and the making of other payments under Article 2 of the BMLP Support and Option Agreement. "Existing Credit Agreement" has the meaning specified in the Preliminary Statements to this Agreement. "Extraordinary Expenses" means, collectively, all expenses of BMLP in excess of $500,000 for any single occurrence arising from any events, developments or circumstances occurring after the BMLP Restructuring Time 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 any "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, 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 BMLP or any of the "ERISA Affiliates" of BMLP in favor of PBGC or any "Plan", (c) local, state or federal income tax 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. Quoted terms used in this definition have the meanings given to them in the BMLP Partnership Agreement. "Facility" means the Terra Facility or the TNLP Facility. - 21 - "Farmland JV" means a joint venture (which may be structured as a partnership, limited liability company, corporation or other business form) between TI and Farmland Industries, Inc. (or one of its Affiliates), in which joint venture TI has at least a 50% ownership interest. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Funded Debt" of any Person means, on any date, the sum (determined without duplication) of: (a) all Debt of such Person that would be listed as long-term debt (including Capital Lease Obligations and Major Operating Lease Obligations) of such Person on a balance sheet of such Person prepared in accordance with GAAP (including, without limitation, the current portion of such Debt), plus (b) the aggregate principal amount of all outstanding Advances, plus (c) the aggregate amount of all Letters of Credit to the extent of unreimbursed drawings thereunder; provided that: (1) the term "Funded Debt" shall include letters of credit issued in connection with the insurance program of Terra and its Subsidiaries only to the extent of unreimbursed drawings thereunder; and (2) the term "Funded Debt" shall not include Obligations under Hedge Agreements. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the date of, and used in, the preparation of the audited financial statements referred to in Section 4.01(f). "Guarantee" by any Person means any arrangement by which such Person incurs Debt of the types referred to in clauses (i) and (j) of the definition of "Debt" in respect of such Person. "Guaranteed Obligations" means the Terra Guaranteed Obligations and the TNLP Guaranteed Obligations. - 22 - "Guarantors" means the Terra Guarantors and the TNLP Guarantors. "Hazardous Materials" means (a) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is or could become friable, and radon gas, (b) any substances defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants" or "pollutants", or words of similar meaning and regulatory effect, under any Environmental Law and (c) any other substance exposure to which is regulated under any Environmental Law. "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity future or option agreements and other similar agreements designed to hedge against fluctuations in interest rates, foreign exchange rates or commodity prices, including, without limitation, (a) the Methanol Hedging Agreement, (b) the Terra U.K. Offtake Agreement, and (c) the Ammonium Nitrate Hedging Agreement. "Holdings Pledge Agreement" means an Amended and Restated Pledge Agreement in the form of Exhibit B-1 between Terra Capital Holdings and the Collateral Agent, as from time to time amended. "ICI" means, collectively, ICI Chemicals & Polymers Limited and Imperial Chemical Industries Plc. "Immaterial Subsidiary" means, as of any date of determination, any Subsidiary of Terra with not more than $500,000 of assets on such date nor more than $100,000 of gross income for the fiscal year of Terra ended on or most recently ended prior to such date. "Indemnified Party" has the meaning specified in Section 9.04(b). "Initial Lenders" has the meaning specified in the recital of the parties to this Agreement. "Insufficiency" means, with respect to any Plan at any time, the amount, if any, by which the "accumulated benefit obligation" (as defined in Statement of Financial Accounting Standards 87) exceeds the fair market value of the assets of such Plan as of the date of the most recent actuarial - 23 - valuation for such Plan, calculated using the actuarial methods, factors and assumptions used in such valuation. "Intercompany Debt" means Debt owed by Terra or one of its Subsidiaries to Terra or one of its Subsidiaries. "Intercompany Receivables Facility" means a facility entered into by the Company and/or any of its Subsidiaries, as sellers, and one or more Receivables Subsidiaries, as purchasers, providing for the sale of Receivables by said sellers to said purchasers. "Intercreditor Agreement" means a Collateral Agency and Intercreditor Agreement substantially in the form of Exhibit H among the Company, certain of the other Obligors, the Collateral Agent, the Administrative Agent and the other Secured Parties referred to therein (or representatives on their behalf), as from time to time amended. "Interest Coverage Ratio" means, for any period, the ratio of: (1) the sum of (x) EBITDA of Terra and its Subsidiaries on a Consolidated basis for such period plus (y) from and after the BMLP Restructuring Time, the aggregate amount of BMLP First Priority Distributions made during such period (to the extent such distributions were deducted in determining such EBITDA for such period) to (2) the sum of (x) Cash Interest Expense of Terra and its Subsidiaries on a Consolidated basis for such period plus (y) from and after the BMLP Restructuring Time, the aggregate amount of BMLP First Priority Distributions made during such period. "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the relevant Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the relevant Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, three or six months, as the relevant Borrower may, upon notice received by the Administrative Agent not later than 10:00 A.M. (New York City time) on the second Business Day - 24 - prior to the first day of such Interest Period, select; provided that: (a) the Company may not select any Interest Period that ends after any Terra Commitment Reduction Date unless, after giving effect thereto, the aggregate principal amount of Terra Advances having Interest Periods that end after such Terra Commitment Reduction Date shall be equal to or less than the aggregate principal amount of Terra Advances scheduled to be outstanding after giving effect to the payments of principal required to be made on such Terra Commitment Reduction Date; (b) no Interest Period for any Advance may end after the relevant Commitment Termination Date; (c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (d) whenever the first day of any Interest Period occurs on the last day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month), such Interest Period shall end on the last Business Day of the appropriate subsequent calendar month. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Investment" in any Person means any loan or advance to such Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities of such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, (a) any arrangement pursuant to which the investor Guarantees Debt of another Person, (b) the acquisition of all or substantially all of the assets of such Person or of any division of such Person, and (c) any merger of or consolidation with such Person; provided that the purchase of equipment, fixed assets, real property or improvements from such Person do not constitute - 25 - Investments in such Person to the extent the same constitute Capital Expenditures. "Issuing Bank" means each Lender specified on the signature pages hereof as an "Issuing Bank", together with its successors in such capacity. "L/C Cash Collateral Account" means the Terra L/C Cash Collateral Account and the TNLP L/C Cash Collateral Account. "L/C Related Documents" has the meaning specified in Section 2.13(e). "Lenders" means the Initial Lenders listed on the signature pages hereof and each Eligible Assignee that shall become a party hereto pursuant to Section 9.07. When reference is made in this Agreement or any other Loan Document to any "relevant" Lender in connection with any Facility, such reference shall be deemed to refer to a Lender that has a Commitment or outstanding Advances under such Facility. "Letter of Credit Commitment" means the Terra Letter of Credit Commitment or the TNLP Letter of Credit Commitment. "Letter of Credit Liability" means a Terra Letter of Credit Liability or a TNLP Letter of Credit Liability. "Letter of Credit Sublimit" means the Terra Letter of Credit Sublimit or the TNLP Letter of Credit Sublimit. "Letters of Credit" has the meaning specified in Section 2.13(a). "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means, collectively, this Agreement, the Notes, the Security Documents and the Loan Purchase Agreement. "Loan Purchase Agreement" means an Amended and Restated Loan Purchase Agreement in the form of Exhibit E between the Administrative Agent and Terra, as from time to time amended. - 26 - "Major Operating Lease Obligations" means, for any Person, all obligations of such Person under an operating lease to pay required termination payments or like payments in an amount exceeding $7,000,000 and in an amount at least equal to 75% of the original acquisition cost of the leased property under such operating lease. "Management Agreements" means one or more management agreements between Terra and/or certain of its Subsidiaries and other Persons providing for the performance by Terra or any of such Subsidiaries of certain treasury, purchasing, legal and/or other services for such Subsidiaries and such other Persons, as such agreements are in effect from time to time. "Margin Stock" has the meaning specified in Regulations G, U and X. "Material Adverse Change" means, with respect to any Person, any material adverse change in the business, assets, operations, properties or financial condition of such Person and its Subsidiaries taken as a whole, or any material adverse change in the contingent liabilities of such Person which could reasonably be expected to result in any of the foregoing, other than any of the foregoing resulting solely from a general economic change in the industry of such Person and its Subsidiaries. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, properties or financial condition of Terra and its Subsidiaries taken as a whole, or a material adverse effect on the contingent liabilities of such Person which could reasonably be expected to result in any of the foregoing, (b) the rights and remedies of the Administrative Agent, any Issuing Bank or any Lender under any Loan Document or (c) the ability of any Obligor to perform its Obligations under any Loan Document to which it is or is to be a party. "Material Contract" means: (A) each Hedge Agreement; (B) each contract to which Terra or any of its Subsidiaries is a party (a "Specified Party") that (a) provides for the provision of goods or services by the Specified Party or the receipt of goods or services by the Specified Party, (b) has a term of more than one year (unless such contract may be cancelled at the sole option of another Person party to such contract), - 27 - (c) involves the payment or receipt by the Specified Party of consideration having a fair market value in excess of $1,000,000 in any fiscal year of Terra and (d) provides for either: (i) the provision of goods or services to another Person that is obligated to purchase from the Specified Party a specified quantity of such goods or services (but only to the extent that, if such other Person did not purchase such quantity of such goods or services, the Specified Party would not be readily able to sell such goods or services at a price equal to or higher than the price set in such contract) or (ii) the receipt of goods or services from another Person that is obligated to supply to the Specified Party a specified quantity of such goods or services (but only to the extent that, if such other Person did not supply such quantity of such goods or services, the Specified Party would not be readily able to purchase such goods or services at a price less than or equal to the price set in such contract); and (C) each contract to which Terra or any of its Subsidiaries is a party that, if such contract were to be terminated or the obligations of any other Person party to such contract were to fail to be in full force and effect, could reasonably be expected, either individually or in the aggregate with any other such event, to have a Material Adverse Effect. "Material Subsidiary" means any Subsidiary of Terra other than an Immaterial Subsidiary. "Methanol Hedging Agreement" means the Methanol Hedging Agreement dated as of October 24, 1994 between BMLP (as successor to Beaumont Methanol Corporation) and Morgan Stanley Leveraged Equity Fund II, as Agent, as from time to time amended. "Minorco" means Minorco, S.A., a Luxembourg societe anonyme, and its successors. "Minorco USA" means Minorco (U.S.A.) Inc., a Colorado corporation, and its successors. "Moody's" means Moody's Investors Service, Inc. and its successors. "Multiemployer Plan" of any Person means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which such Person or any of its ERISA Affiliates is making or accruing an obligation to make contributions, - 28 - or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" of any Person means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of such Person or any of its ERISA Affiliates and at least one Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates has or would have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Available Proceeds" means: (a) in the case of any Disposition, the aggregate amount of all cash payments, and the fair market value of any non-cash consideration, received by Terra and its Subsidiaries directly or indirectly in connection with such Disposition; provided that (i) such Net Available Proceeds shall be net of (x) the amount of any legal, title and recording tax expenses, commissions and other reasonable fees and expenses (including reasonable expenses of preparing the relevant property for sale) paid by Terra and its Subsidiaries in connection with such Disposition and (y) any Federal, state and local income or other taxes estimated in good faith to be payable by Terra and its Subsidiaries as a result of such Disposition and (ii) such Net Available Proceeds shall be net of any repayments by Terra or any of its Subsidiaries of Debt to the extent that (x) such Debt is secured by a Lien on the property that is the subject of such Disposition and (y) the transferee of (or holder of a Lien on) such property requires that such Debt be repaid as a condition to the purchase of such property; and (b) in the case of any Casualty Event, the aggregate amount of proceeds of insurance, condemnation awards and other compensation received by Terra and its Subsidiaries (and, in the case of business interruption insurance, not contractually required to be paid over to Morgan Stanley Leveraged Equity Fund II, as agent, or its successors or assigns) in respect of such Casualty Event net of (A) reasonable expenses incurred by Terra and its Subsidiaries in connection therewith, (B) contractually required repayments of Debt to the extent secured by a Lien on the property suffering such Casualty Event and any income and transfer taxes payable by Terra or any of its Subsidiaries in respect - 29 - of such Casualty Event and (C) amounts promptly applied to or set aside for the repair or replacement of the property suffering such Casualty Event; provided that the proceeds of insurance received by Terra and its Subsidiaries in connection with the December 13, 1994 Casualty Event at the Port Neal Facility shall be deemed to be applied to the repair or replacement of the Port Neal Facility. "Net Worth" means, for any Person at any time, the sum of the following for such Person and its Subsidiaries on a Consolidated basis: (a) the amount of capital stock; plus (b) the amount of surplus and retained earnings (or, in the case of a surplus or retained earnings deficit, minus the amount of such deficit). "1995 Terra Debt" means Debt incurred by Terra under the 1995 Terra Debt Indenture. "1995 Terra Debt Indenture" means the Indenture dated as of June 22, 1995 between Terra and First Trust National Association, as Trustee, providing for the issuance of Terra's 10.50% Senior Notes, as from time to time amended. "1996 Receivables Agreement" means the August 1996 Receivables Purchase Agreement among Terra Funding Corporation, as Seller, the Company, as initial servicer, the financial institutions party thereto, as Purchasers, and Bank of America National Trust and Savings Association, as Agent. "Note" means a Terra Note or a TNLP Note. "Notice of Borrowing" has the meaning specified in Section 2.02(a). "Notice of Issuance" has the meaning specified in Section 2.13(b)(i). "Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise - 30 - affected by any proceeding referred to in Section 6.01(g). Without limiting the generality of the foregoing, the Obligations of the Obligors under the Loan Documents include (a) their respective obligations to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable under any Loan Document and (b) their respective obligations to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Obligor. "Obligors" means the Terra Obligors and the TNLP Obligors. "OECD" means the Organization for Economic Cooperation and Development. "Original Credit Agreement" means the Credit Agreement dated as of October 24, 1994 among the Company, Terra and TNLP, as Borrowers, certain Guarantors, the "Lenders" and "Issuing Banks" referred to therein and Citibank, as Agent. "Other Distribution" means a Dividend Payment made with respect to the capital stock of the Company except to the extent that the Company determines, reasonably and in good faith, that such Dividend Payment (1) is made to fund one or more of the items described in the definition of "Specified Payments" in this Section 1.01 or (2) is made out of the then- available amount of Cumulative Adjusted Net Income. "Other Taxes" has the meaning specified in Section 2.11(b). "Outside Subsidiary" means any Subsidiary of Terra (other than Terra Capital Holdings or any of its Subsidiaries). "PBGC" means the Pension Benefit Guaranty Corporation. "Permitted Investments" means: (a) direct obligations of the United States of America, or of any agency thereof, or obligations guaranteed as to principal and interest by the United States of America, or by any agency thereof, in either case maturing not more than one year from the date of acquisition thereof; (b) readily marketable direct obligations of the United States of America, or of any agency thereof, or - 31 - readily marketable obligations guaranteed as to principal and interest by the United States of America, or by any agency thereof, in either case maturing not more than three years from the date of acquisition thereof (provided that the aggregate amount of Permitted Investments outstanding at any time under this paragraph (b) having maturities in excess of one year from the date of determination shall not exceed $25,000,000 at any time); (c) readily marketable direct obligations issued by any State of the United States of America or any political subdivision thereof or of the government of Canada or any agency thereof, in each case maturing not more than one year from the date of acquisition thereof and having the highest credit rating obtainable from either of Moody's or Standard & Poor's; (d) money market mutual funds (including, without limitation, tax- free money market mutual funds) with assets consisting solely of U.S. Dollars and securities principally of the types described in paragraphs (a), (b) and (c) in this definition; (e) certificates of deposit issued by, repurchase and reverse repurchase agreements with, banker's acceptances of, and eurodollar time deposits with, any Initial Lender or any bank or trust company organized under the laws of the United States of America or any state thereof, having capital, surplus and undivided profits of at least $500,000,000 (or any national or regional brokerage firm) and whose unsecured, unguaranteed long-term senior debt obligations are rated at least A by Standard & Poor's and at least A2 by Moody's, maturing not more than 270 days from the date of acquisition thereof; (f) obligations of not more than $100,000 in the aggregate at any one time of any bank or bank holding company with a capital and surplus of less than $500,000,000 or whose unsecured, unguaranteed long-term senior debt obligations are rated less than A by Standard & Poor's or less than A2 by Moody's; (g) commercial paper and variable rate demand notes, in each case rated at least A-1 by Standard & Poor's or at least P-1 by Moody's and maturing not more than 270 days from the date of acquisition thereof; (h) tax-exempt auction rate preferred stock and taxable and tax- exempt auction rate securities, in each case rated at least AAA by Standard & Poor's and Aaa by Moody's - 32 - and maturing not more than 60 days from the date of acquisition thereof; (i) "Liquidity Optimized Guaranteed Investment Contracts" with insurance companies having short-term debt ratings of at least A-1 by Standard & Poor's and P-1 by Moody's and maturing not more than 30 days from the date of acquisition thereof; (j) Canadian dollar-denominated banker's acceptances of Canadian banks rated at least R1-mid by Dominion Bond Rating Service ("Dominion") and maturing not more than one year from the date of acquisition thereof; and (k) Canadian dollar-denominated commercial paper rated at least R1- mid by Dominion and maturing not more than one year from the date of acquisition thereof; and (l) solely with respect to Terra U.K., (i) British government bonds maturing not more than one year from the date of acquisition thereof; (ii) money-market funds or composite funds with assets consisting solely of Pounds Sterling, high-quality short-term corporate securities and securities principally of the type described in clause (i) in this paragraph (l); and (iii) funds held in corporate accounts at banks organized under the laws of the United Kingdom having capital, surplus and undivided profits not less than $350,000,000 or at branches of U.S. banks located in the United Kingdom of the quality described in paragraph (e) above. "Permitted JV" means Britz LLC and Farmland JV. "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced (or, if such a proceeding has been commenced, such proceeding is being contested in good faith by appropriate proceedings and enforcement of any Lien has been and is stayed): (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b), (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens, statutory landlord's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more - 33 - than 30 days or which are being contested in good faith and by appropriate proceedings, (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations, (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases (other than capital leases), surety and appeal bonds, and performance bonds and other obligations of a like nature incurred, in each case arising in the ordinary course of business, (e) as to any particular property at any time, such easements, encroachments, covenants, rights of way, minor defects, irregularities or encumbrances on title which do not materially impair the use of such property for the purpose for which it is held by the owner thereof, (f) municipal and zoning ordinances that are not violated in any material respect by the existing improvements and the present use made by the owner thereof, and (g) real estate taxes and assessments not yet delinquent. "Permitted Receivables Facilities" means, collectively: (a) the Receivables Purchase Agreement dated as of March 31, 1994 among TI, as Seller, the financial institutions party thereto, as Purchasers, and Bank of America National Trust and Savings Association, successor to Continental Bank N.A., as agent, as from time to time amended, or any replacement or refinancing thereof; and (b) the 1996 Receivables Agreement and one or more additional facilities entered into by the Company and/or any of its Subsidiaries (which may be effected by an amendment to the facility referred to in clause (a) of this definition or otherwise) providing for the sale of Receivables, provided that the aggregate amount outstanding under all of the Permitted Receivables Facilities (other than Intercompany Receivables Facilities), taken together, may - 34 - not at any time exceed $150,000,000 plus reasonable reserves. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, limited liability company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Port Neal Facility" means TI's facility in Port Neal, Iowa. "Port Neal Transaction" means the "Proposed Transaction" under and as defined in the Consent, Waiver and Amendment dated as of July 31, 1995 relating to the Existing Credit Agreement. "Post-Default Rate" means a rate per annum equal to 2% plus the Applicable Margin plus the Base Rate as in effect from time to time. "Pounds Sterling" and "(Pounds)" means lawful money of the United Kingdom. "Preferred Stock" means, with respect to any corporation, capital stock issued by such corporation that is entitled to a preference or priority over any other capital stock issued by such corporation upon any distribution of such corporation's assets, whether by dividend or upon liquidation. "Pro Rata Share" of any amount means, with respect to any Lender under any Facility at any time, the product of (a) a fraction the numerator of which is the amount of such Lender's Advances under such Facility (or, in the case of a Facility prior to the Commitment Termination Date for such Facility, the amount of such Lender's Commitment under such Facility), and the denominator of which is the aggregate Advances or Commitments, as the case may be, under such Facility at such time, multiplied by (b) such amount. "Purchase Event" means: (1) that during any period commencing January 1, 1995, the aggregate amount of Dividend Payments with respect to the capital stock of the Company during such period exceeds the sum of: - 35 - (a) the aggregate amount of Specified Payments for such period plus (b) Cumulative Adjusted Net Income for such period plus (c) the amounts available during such period for Restricted Transactions under Section 5.02(h)(A) (provided that this clause (c) shall be determined, with respect to all periods prior to the Restatement Date, as provided in the Existing Credit Agreement) to the extent not utilized for Restricted Transactions during such period; or (2) that: (A) Liens on or with respect to any property of the Company or any of its Subsidiaries have been created in favor of Terra or any of its Subsidiaries, other than Liens permitted under any of clauses (i) through (xix) of Section 5.02(a); or (B) the Company or any of its Subsidiaries has any outstanding Debt owing to Terra or any of its Subsidiaries, other than Debt permitted to be outstanding under any of clauses (i) through (ix) of Section 5.02(b)(2); or (C) the Company or any of its Subsidiaries has sold, transferred or otherwise disposed of any of its property to Terra or any of its Subsidiaries, other than sales, transfers or other dispositions permitted under any of clauses (i) through (xi) of Section 5.02(e); or (D) the Company or any of its Subsidiaries has made any Investments in Terra or any of its Subsidiaries, other than Investments permitted under any of clauses (i) through (xxiii) of Section 5.02(f). "Quarterly Dates" means March 31, June 30, September 30 and December 31 in each year, the first of which shall be the first such day after the Restatement Date, provided that, if any such day is not a Business Day, the relevant Quarterly Date shall be the immediately preceding Business Day. "Receivables" means accounts and notes receivable and, in each case, related reserves. - 36 - "Receivables Subsidiary" means a Subsidiary of the Company that meets both of the following criteria: (1) such Subsidiary is formed solely for the purpose of, and is engaged solely in the business of, (x) purchasing Receivables of the Company and one or more of its Subsidiaries under an Intercompany Receivables Facility and, at its option, selling all or a portion of such Receivables under a Permitted Receivables Facility and/or (y) owning the capital stock of, or other ownership interests in, one or more Receivables Subsidiaries; and (2) all of the capital stock of and/or other ownership interests in, such Subsidiary (other than, in the case of a Subsidiary of the Company that is an obligor or a seller under a Permitted Receivables Facility, shares of preferred stock of such Subsidiary having a de minimis liquidation value, which preferred shares may be held by one or more financial institutions party to such Permitted Receivables Facility or their designees, including one or more individuals, and their successors) is owned beneficially and of record, directly or indirectly, by Terra Capital Holdings, the Company and/or one or more other Receivables Subsidiaries. "Redeemable" means any capital stock, Debt or other right or Obligation that (a) the issuer thereof has undertaken to redeem at a fixed or determinable date or dates prior to the Terra Commitment Termination Date hereunder, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable on any date prior to the Terra Commitment Termination Date at the option of the holder thereof. For purposes of this Agreement, the BMLP Class A Limited Partnership Interest shall not be deemed to be "Redeemable". "Reference Banks" means Citibank, Bank of America National Trust and Savings Association, NationsBank, N.A. and The Bank of Nova Scotia (or their respective Applicable Lending Offices, as the case may be). "Register" has the meaning specified in Section 9.07(c). "Regulation G", "Regulation U" and "Regulation X" mean Regulations G, U and X of the Board of Governors of the - 37 - Federal Reserve System, respectively, as in effect from time to time. "Required Lenders" means at any time Lenders owed or holding in the aggregate at least 51% of the sum of the then aggregate unpaid principal amount of the Advances, the then aggregate Unused Commitments and the aggregate Available Amount of all Letters of Credit. For purposes of this definition, the Available Amount of each Letter of Credit shall be considered to be owed to the relevant Lenders according to their respective Pro Rata Shares of the Facility under which such Letter of Credit has been issued. "Restatement Date" has the meaning assigned to such term in Section 3.01. "Restricted Transactions" means, collectively, Capital Expenditures and Specified Acquisitions. "Retiring Lender" means each "Lender" under the Existing Credit Agreement identified under the caption "RETIRING LENDERS" on the signature pages hereof. "Rolling Period" means any period of four consecutive fiscal quarters of Terra. "Sale of Business Agreement" means the Sale of Business Agreement relating to the ICI Fertilizer Business dated November 20, 1997 between ICI, Terra U.K. and Terra providing for the U.K. Nitrogen Acquisition, as from time to time amended (without prejudice to Section 5.02(l)). "Second Restatement Date" means December 14, 1995. "Security Documents" means the Holdings Pledge Agreement, the Terra Capital Pledge Agreement, the Subsidiary Pledge and Security Agreement, the TNLP Pledge and Security Agreement, each security agreement or other grant of security now or hereafter made by any Obligor to secure any of the Obligations hereunder and under the other Loan Documents, and all Uniform Commercial Code financing statements required by this Agreement or any of the foregoing to be filed with respect to the security interests in personal property created pursuant thereto. "Senior Financial Officer" means the Chief Financial Officer of Terra. "Senior Preference Units" means, collectively, (a) the "Senior Preference Units" issued and outstanding under, and - 38 - as defined in, the Agreement of Limited Partnership dated as of December 4, 1991 of TNCLP, as such Agreement of Limited Partnership is in effect on the Restatement Date, and (b) the "Common Units" into which such Senior Preference Units have been converted in accordance with Section 5.5 of such Agreement of Limited Partnership. "Single Employer Plan" of any Person means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of ERISA and that (a) is maintained for employees or former employees of such Person or any of its ERISA Affiliates and no Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates has or would have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. "Specified Acquisitions" means Investments (including, without limitation, Investments arising by reason of any merger or consolidation permitted under Sections 5.02(d)(i)(y) and 5.02(d)(ii)(y), but excluding the Excluded Transactions) consisting of acquisitions of ownership interests in one or more entities engaged in the same or allied line or lines of business as Terra and its Subsidiaries, taken as a whole. For purposes hereof, the amount of Specified Acquisitions made during any period shall include, without duplication, the aggregate amount of Investments in Permitted JVs (other than Investments referred to in clauses (xvi) and (xviii)(y) of Section 5.02(f)) made during such period and the aggregate amount of payments made during such period by Terra and its Subsidiaries in respect of the Obligations referred to in clauses (xiv), (xv), (xvi) and (xvii) of Section 5.02(b)(1). - 39 - "Specified Call Option" means a cash-settled call option with respect to a U.S. Stock Index, which call option (a) has an expiration date not later than March 31, 1998, (b) is entered into with a counterparty (or designated guarantor) having (at the time of acquisition thereof) senior, unsecured long-term debt rated at least BBB by Standard & Poor's and Baa2 by Moody's and (c) is documented under an agreement that permits close-out and netting of all call options thereunder. "Specified Payments" means, for any period, (a) all interest due and payable on the AMCI Senior Notes and on the 1995 Terra Debt during such period, (b) all scheduled dividends payable during such period on convertible Preferred Stock or other equity securities issued and applied to prepay the Advances (to the extent the Commitments hereunder are reduced simultaneously with such issuance), (c) ordinary and necessary expenses incurred by Terra as a result of its operations as a publicly-held holding company and (d) other payments in an aggregate amount up to $5,000,000 per year to the extent required under pre-existing obligations. "SPU Redemption" means the purchase, redemption or other acquisition from time to time of all or a portion of the outstanding Senior Preference Units by Terra and its Subsidiaries (or any of them): (a) on such terms and conditions as could not reasonably be expected to have a Material Adverse Effect; and (b) in accordance in all material respects with the terms and conditions hereof. "SPU Redemption Time" means the time as of which all of the Senior Preference Units shall have been purchased or otherwise redeemed pursuant to the SPU Redemption. "Standard & Poor's" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors. "Subordinated Indebtedness" means Debt of Terra or any of its Subsidiaries the payment of which is subordinated in right of payment to the prior payment in full of the Advances. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust - 40 - or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. For all purposes of this Agreement and the other Loan Documents, BMLP and each of BMLP's Subsidiaries shall be deemed to be Subsidiaries of the Company so long as TMC or one of TMC's Subsidiaries is the sole general partner of BMLP. "Subsidiary Guarantor" means, collectively, (x) TNC, BMCH, TMC and TI, (y) prior to the BMLP Restructuring Time, BMLP and (z) from and after the SPU Redemption Time, TNLP and its successors. "Subsidiary Pledge and Security Agreement" means an Amended and Restated Pledge and Security Agreement in the form of Exhibit B-3 between certain of the Guarantors and the Collateral Agent, as from time to time amended. "Terra" means Terra Industries Inc., a Maryland corporation and an indirect parent of the Company. "Terra Advance" means an Advance made or outstanding pursuant to Section 2.01(a). "Terra Borrowing" means a borrowing consisting of simultaneous Terra Advances of the same Type. "Terra Canada" means Terra International (Canada) Inc., a corporation governed by the laws of Ontario and an indirect wholly owned Subsidiary of the Company. "Terra Canada Credit Facility" means the Credit Agreement dated as of December 31, 1997 among Terra Canada, the lenders party thereto and Citibank, as administrative agent for said lenders, providing for term loans to be made to Terra Canada in an aggregate principal amount equal to $125,000,000 having a tenor of five years and one day, as from time to time amended. - 41 - "Terra Canada Group" means, collectively, Terra Canada and its Subsidiaries, and a "member" of the Terra Canada Group means, individually, Terra Canada and each such Subsidiary. "Terra Capital Holdings" means Terra Capital Holdings, Inc., a Delaware corporation and the direct parent of the Company. "Terra Capital Note" has the meaning assigned to such term in Section 5.02(b)(2)(iii). "Terra Capital Pledge Agreement" means an Amended and Restated Pledge Agreement in the form of Exhibit B-2 between the Company and the Collateral Agent, as from time to time amended. "Terra Commitment" has the meaning specified in Section 2.01(a). "Terra Commitment Reduction Dates" shall mean the Quarterly Dates falling on or nearest to December 31 of each year, commencing with December 31, 1998, through and including December 31, 2000. "Terra Commitment Termination Date" means the earlier of (a) December 31, 2000 (provided that if such day is not a Business Day, the Terra Commitment Termination Date shall be the immediately preceding Business Day), and (b) the termination or cancellation of the Terra Commitments pursuant to the terms of this Agreement. "Terra Facility" means the revolving credit facility provided hereunder in respect of the Terra Commitments. "Terra Guaranteed Obligations" has the meaning specified in Section 8.01. "Terra Guarantors" means, collectively, (x) Terra, Terra Capital Holdings, TNC, TI, BMCH and TMC, (y) prior to the BMLP Restructuring Time, BMLP and (z) from and after the SPU Redemption Time, TNLP and its successors. "Terra L/C Cash Collateral Account" means one or more cash collateral accounts maintained by the Administrative Agent with Citibank for the benefit of the Lenders and Issuing Banks. "Terra Letter of Credit" means a letter of credit issued by an Issuing Bank for account of the Company or any - 42 - of its Subsidiaries (other than, prior to the SPU Redemption Time, TNLP or any of its Subsidiaries) pursuant to Section 2.13(a). "Terra Letter of Credit Commitment" means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank's name on Schedule 2.01 under the caption "Terra Letter of Credit Commitment", as such amount may be reduced pursuant to Section 2.04. "Terra Letter of Credit Liability" means, as of any date of determination, all of the liabilities of the Company to the Issuing Banks in respect of Terra Letters of Credit, whether such liability is contingent or fixed, and shall consist of the sum of (a) the aggregate Available Amount of all Terra Letters of Credit then outstanding, plus (b) the aggregate amount that has then been paid by, and has not been reimbursed to, any Issuing Bank under Terra Letters of Credit. "Terra Letter of Credit Sublimit" means (a) prior to the SPU Redemption Time, $30,000,000 and (b) from and after the SPU Redemption Time, $45,000,000. "Terra Note" means a promissory note of the Company payable to the order of a Lender, in substantially the form of Exhibit A-1, as from time to time amended. "Terra Obligors" means the Terra Guarantors and the Company. "Terra Stock Repurchase" means the purchase, redemption, retirement or other acquisition of shares of common stock of Terra. "Terra U.K." means Terra Nitrogen (U.K.) Limited, a corporation formed under the laws of England and a wholly owned Subsidiary of Terra Canada. "Terra U.K. Holdings" means Terra (U.K.) Holdings, Inc., a Delaware corporation and a direct Subsidiary of BMLP. "Terra U.K. Loan" has the meaning specified in Section 5.02(b)(2)(iv). "Terra U.K. Loan Agreement" means the credit agreement, loan agreement, promissory note or other agreement providing for the Terra U.K. Loan, as from time to time amended. - 43 - "Terra U.K. Offtake Agreement" means, collectively, one or more nitrogen products offtake agreements between the Company and Terra U.K. entered into in connection with the BMLP Restructuring, as from time to time amended. "TI" means Terra International, Inc., a Delaware corporation and a wholly owned Subsidiary of the Company. "TMC" means Terra Methanol Corporation, a Delaware corporation. "TNC" means Terra Nitrogen Corporation, a Delaware corporation and a wholly owned Subsidiary of the Company. "TNCLP" means Terra Nitrogen Company, L.P., a Delaware limited partnership and a Subsidiary of the Company. "TNLP Advance" means an Advance made or outstanding pursuant to Section 2.01(b). "TNLP Borrowing" means a borrowing consisting of simultaneous TNLP Advances of the same Type. "TNLP L/C Cash Collateral Account" means one or more cash collateral accounts maintained by the Administrative Agent with Citibank for the benefit of the Lenders and Issuing Banks. "TNLP Commitment" has the meaning specified in Section 2.01(b). "TNLP Commitment Termination Date" means the earliest of (a) December 31, 2000 (provided that if such day is not a Business Day, the TNLP Commitment Termination Date shall be the immediately preceding Business Day), (b) the termination or cancellation of the TNLP Commitments pursuant to the terms of this Agreement, and (c) the date on which the SPU Redemption Time occurs. "TNLP Facility" means the revolving credit facility provided hereunder in respect of the TNLP Commitments. "TNLP Guaranteed Obligations" has the meaning specified in Section 8.01. "TNLP Guarantors" means, collectively, (x) Terra, Terra Capital Holdings, the Company, TNC, TI, TMC and BMCH and (y) prior to the BMLP Restructuring Time, BMLP. - 44 - "TNLP Letter of Credit" means a letter of credit issued by an Issuing Bank for account of TNLP or any of its Subsidiaries pursuant to Section 2.13(a). "TNLP Letter of Credit Commitment" means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank's name on Schedule 2.01 under the caption "TNLP Letter of Credit Commitment", as such amount may be reduced pursuant to Section 2.04. "TNLP Letter of Credit Liability" means, as of any date of determination, all of the liabilities of TNLP to the Issuing Banks in respect of TNLP Letters of Credit, whether such liability is contingent or fixed, and shall consist of the sum of (a) the aggregate Available Amount of all TNLP Letters of Credit then outstanding, plus (b) the aggregate amount that has then been paid by, and has not been reimbursed to, any Issuing Bank under TNLP Letters of Credit. "TNLP Letter of Credit Sublimit" means $15,000,000. "TNLP Note" means a promissory note of TNLP payable to the order of a Lender, in substantially the form of Exhibit A-2, as from time to time amended. "TNLP Obligors" means the TNLP Guarantors and TNLP. "TNLP Pledge and Security Agreement" means an Amended and Restated Pledge and Security Agreement in the form of Exhibit B-4 between TNLP and the Collateral Agent, as from time to time amended. "Type" refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate. "U.K. Nitrogen Acquisition" has the meaning specified in the Preliminary Statements to this Agreement. "U.K. Nitrogen Assets" means the "Assets", as defined in the Sale of Business Agreement. "U.K. Nitrogen MAC" means a deterioration in the aggregate value of the U.K. Nitrogen Assets of 10% or more in the period from November 20, 1997 to the Restatement Date. - 45 - "Unused Commitment" means, at any time, the aggregate amount of all Lenders' Unused Terra Commitments at such time and all Lenders' Unused TNLP Commitments at such time. "Unused Terra Commitment" means, with respect to any Lender at any time, (a) such Lender's Terra Commitment at such time minus (without duplication) (b) the sum of (i) the aggregate outstanding principal amount of all Terra Advances made by such Lender and (ii) such Lender's Pro Rata Share of the aggregate Available Amount of all Terra Letters of Credit outstanding at such time and of all unreimbursed drawings thereunder. "Unused TNLP Commitment" means, with respect to any Lender at any time, (a) such Lender's TNLP Commitment at such time minus (without duplication) (b) the sum of (i) the aggregate outstanding principal amount of all TNLP Advances made by such Lender and (ii) such Lender's Pro Rata Share of the aggregate Available Amount of all TNLP Letters of Credit outstanding at such time and of all unreimbursed drawings thereunder. "U.S. Dollars" and "$" means lawful money of the United States of America. "U.S. Stock Index" means a nationally-recognized diversified index of equity securities (which may relate to a single industry) of companies that are predominantly domiciled or doing business in the United States. Section 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" mean "to but excluding". Section 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. - 46 - ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT Section 2.01. The Advances. (a) Terra Facility. (i) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances ("Terra Advances") to the Company from time to time on any Business Day during the period from the Restatement Date until the Terra Commitment Termination Date in an aggregate amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 under the caption "Terra Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register as such Lender's "Terra Commitment" (such amount being such Lender's "Terra Commitment"), and, as to all Lenders, in an aggregate amount at any one time outstanding not to exceed $350,000,000 (provided that at all times prior to the SPU Redemption Time the aggregate amount of the Terra Commitments shall be deemed to be reduced for all purposes hereof by the aggregate amount of the TNLP Commitments as in effect from time to time). On the Restatement Date, all outstanding "Terra Advances" of each Lender under the Existing Credit Agreement shall automatically, without any action on the part of any Person, be deemed to be Terra Advances hereunder; and each Initial Lender (if any) whose relative proportion of the Terra Commitments hereunder is increasing over the proportion of "Terra Commitment" held by it under the Existing Credit Agreement shall, by assignments from the other Initial Lenders (which shall be deemed to occur automatically on the Restatement Date), acquire a portion of the Terra Advances of the Initial Lenders so designated in such amounts (and the Initial Lenders shall, through the Administrative Agent, make such additional adjustments among themselves as shall be necessary) so that on the Restatement Date, after giving effect to such assignments and adjustments, the Initial Lenders shall hold the Terra Advances hereunder ratably in accordance with their respective Terra Commitments. On the Restatement Date, the Company will repay the "Terra Advances" held by each Retiring Lender under (and as defined in) the Existing Credit Agreement and all accrued fees and other amounts payable with respect thereto and, upon such repayment, each - 47 - Retiring Lender shall cease to be a Lender for all purposes of this Agreement and the other Basic Documents. On the Restatement Date all Interest Periods under the Existing Credit Agreement in respect of the "Terra Advances" under and as defined in the Existing Credit Agreement shall automatically be terminated, and, subject to the provisions of Section 2.01(c), the Company shall be permitted to Continue such "Terra Advances" as Eurodollar Rate Advances hereunder, or to Convert such "Terra Advances" into Base Rate Advances hereunder. The aggregate principal amount of the Terra Advances of each Lender as of the Restatement Date shall be the amount set forth opposite such Lender's name on Schedule 2.01 under the caption "Terra Advances". (ii) The Terra Advances shall be made by the Lenders ratably according to their respective Terra Commitments. (iii) Within the limits of each Lender's Terra Commitment in effect from time to time, the Company may borrow under this Section 2.01(a) and/or obtain the issuance of Letters of Credit under Section 2.13, prepay pursuant to Section 2.05(a) and reborrow under this Section 2.01(a); provided that the aggregate outstanding principal amount of Terra Advances when added to the aggregate Terra Letter of Credit Liability may not at any time exceed the aggregate amount of the Terra Commitments at such time. (iv) The proceeds of the Terra Advances shall be used solely (A) for general corporate purposes of the Company and its Subsidiaries (other than, prior to the SPU Redemption Time, TNLP and its successors), including, without limitation, to finance the ongoing working capital needs of, and to refinance outstanding Debt of, such Persons, (B) to finance all or a portion of the SPU Redemption (provided that proceeds of Terra Advances used for such purpose shall not exceed $125,000,000 in the aggregate) and (C) to finance the purchase, redemption, retirement or other acquisition of shares of common stock of Terra. (v) Notwithstanding the foregoing provisions of Section 2.01(a), the Company agrees that, for a period of 30 consecutive days during each fiscal year it will prepay the Terra Advances in such amounts as shall be necessary so the aggregate outstanding principal amount of the Terra Advances shall not exceed the Terra Cleanup Amount as in effect at such time; provided that this Section 2.01(a)(v) shall not prevent the Company from requesting the issuance of Terra - 48 - Letters of Credit during any such period pursuant to Section 2.13, or the Lenders from making Terra Advances in respect thereof pursuant to Section 2.13(c), which Terra Advances (subject to the other terms and conditions of this Agreement) may remain outstanding during such period. For purposes hereof, "Terra Cleanup Amount" means, at any time during the periods set forth in column (A) below, the respective amount set forth for such period in column (B) below: (A) (B) Period Terra Cleanup Amount --------------------- --------------------- From January 1, 1998 to $90,000,000 December 31, 1998 From January 1, 1999 to $60,000,000 December 31, 1999 From and after January 1, 2000 $30,000,000 (b) TNLP Facility. (i) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances ("TNLP Advances") to TNLP from time to time on any Business Day during the period from the Restatement Date until the TNLP Commitment Termination Date in an aggregate amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 under the caption "TNLP Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register as such Lender's "TNLP Commitment" (such amount being such Lender's "TNLP Commitment"), and, as to all Lenders, in an aggregate amount at any one time outstanding not to exceed $25,000,000. On the Restatement Date, all outstanding "TNLP Advances" of each Lender under the Existing Credit Agreement shall automatically, without any action on the part of any Person, be deemed to be TNLP Advances hereunder; and each Initial Lender (if any) whose relative proportion of the TNLP Commitments hereunder is increasing over the proportion of "TNLP Commitment" held by it under the Existing Credit Agreement shall, by assignments from the other Initial Lenders (which shall be deemed to occur automatically on the Restatement Date), acquire a portion of the TNLP Advances of the Initial Lenders so designated in such amounts (and the Initial Lenders shall, through the Administrative Agent, make such additional adjustments among themselves as shall - 49 - be necessary) so that on the Restatement Date, after giving effect to such assignments and adjustments, the Initial Lenders shall hold the TNLP Advances hereunder ratably in accordance with their respective TNLP Commitments. On the Restatement Date, TNLP will repay the "TNLP Advances" held by each Retiring Lender under (and as defined in) the Existing Credit Agreement and all accrued fees and other amounts payable with respect thereto and, upon such repayment, each Retiring Lender shall cease to be a Lender for all purposes of this Agreement and the other Basic Documents. On the Restatement Date all Interest Periods under the Existing Credit Agreement in respect of the "TNLP Advances" under and as defined in the Existing Credit Agreement shall automatically be terminated, and, subject to the provisions of Section 2.01(c), TNLP shall be permitted to Continue such "TNLP Advances" as Eurodollar Rate Advances hereunder, or to Convert such "TNLP Advances" into Base Rate Advances hereunder. The aggregate principal amount of the TNLP Advances of each Lender as of the Restatement Date shall be the amount set forth opposite such Lender's name on Schedule 2.01 under the caption "TNLP Advances". (ii) The TNLP Advances shall be made by the Lenders ratably according to their respective TNLP Commitments. (iii) Within the limits of each Lender's TNLP Commitment in effect from time to time, TNLP may borrow under this Section 2.01(b) and/or obtain the issuance of Letters of Credit under Section 2.13, prepay pursuant to Section 2.05(a) and reborrow under this Section 2.01(b); provided that the aggregate outstanding principal amount of TNLP Advances when added to the aggregate TNLP Letter of Credit Liability may not at any time exceed the aggregate amount of the TNLP Commitments at such time. (iv) The proceeds of the TNLP Advances shall be used solely (A) for general corporate purposes of TNLP, including, without limitation, to finance its ongoing working capital needs and to refinance outstanding Debt and (B) to finance all or a portion of the SPU Redemption. (c) Minimum Amounts. Each Borrowing shall be in an aggregate amount at least equal to $3,000,000 or an integral multiple of $1,000,000 in excess thereof. - 50 - (d) No Responsibility to Third Parties. Neither the Administrative Agent nor any Lender nor any Issuing Bank shall have any responsibility as to the application or use of any of the proceeds of any Advance. Section 2.02. Making the Advances. (a) (i) Except as otherwise provided in Section 2.13, each Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) on the Business Day of (or, with respect to a Borrowing of Eurodollar Rate Advances, 10:00 A.M. (New York City time) on the second Business Day prior to the date of) the proposed Borrowing, by the relevant Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telex, telecopier or cable. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by telex, telecopier or cable, confirmed immediately in writing, in substantially the form of Exhibit C, specifying therein (1) the requested date of such Borrowing, (2) the Facility under which such Borrowing is to be made, (3) the requested Type of Advances comprising such Borrowing, (4) the requested aggregate amount of such Borrowing and (5) in the case of a Borrowing consisting of Eurodollar Rate Advances, the requested initial Interest Period for each such Advance. (ii) In the case of a proposed Borrowing comprised of Eurodollar Rate Advances, the Administrative Agent shall promptly notify each relevant Lender of the applicable interest rate under Section 2.06(a)(ii). (iii) Each Lender shall, before 1:00 P.M. (New York City time) on the date of each Borrowing after the Restatement Date, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will transfer same day funds to the relevant Borrower's Account; provided that (i) in the case of any Terra Borrowing, the Administrative Agent shall first make a portion of such funds equal to any unreimbursed drawing under any Terra Letter of Credit available to each Issuing Bank having issued any such Letter of Credit for reimbursement of such drawing, and (ii) in the case of any TNLP Borrowing, the Administrative Agent shall first make a portion of such funds equal to any unreimbursed drawing under any TNLP Letter of Credit available to each - 51 - Issuing Bank having issued any such Letter of Credit for reimbursement of such drawing. (b) Anything in subsection (a) above to the contrary notwithstanding, (i) neither Borrower may select Eurodollar Rate Advances (y) for any Borrowing if the aggregate amount of such Borrowing is less than $3,000,000 or (z) if the obligation of the relevant Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or 2.09, and (ii) Eurodollar Rate Advances may not be outstanding under more than 15 separate Interest Periods under either Facility at any one time. (c) Each Notice of Borrowing shall be irrevocable and binding on the relevant Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the relevant Borrower shall indemnify each relevant Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (d) Unless the Administrative Agent shall have received notice from a relevant Lender prior to 12:00 Noon (New York City time) on the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with Section 2.02(a) and the Administrative Agent may, in reliance upon such assumption, make available to the relevant Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent and the Administrative Agent shall have made available such corresponding amount to the relevant Borrower, such Lender and the relevant Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the relevant Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the relevant Borrower, the interest rate applicable - 52 - at such time under Section 2.06 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. Section 2.03. Repayment. (a) Terra Advances. The Company hereby promises to pay to the Administrative Agent for the account of each Lender the full outstanding principal amount of the Terra Advances of such Lender on the Terra Commitment Termination Date. In addition, if following any Terra Commitment Reduction Date the aggregate principal amount of the Terra Advances, together with the aggregate amount of all Terra Letter of Credit Liabilities, shall exceed the Terra Commitments, the Company shall, first, pay Advances and, second, provide cover for Terra Letter of Credit Liabilities in the manner specified in Section 2.05(d)) in an aggregate amount equal to such excess. (b) TNLP Advances. TNLP hereby promises to pay to the Administrative Agent for the account of each Lender the full outstanding principal amount of the TNLP Advances of such Lender on the TNLP Commitment Termination Date. (c) All Advances. All repayments of principal under this Section 2.03 shall be made together with interest accrued to the date of such repayment on the principal amount repaid. Section 2.04. Termination or Reduction of the Commitments. (a) Optional. The Borrowers may at any time or from time to time, upon not less than two Business Days' notice to the Administrative Agent, terminate in whole or reduce in part the Commitments under the relevant Facility, provided that (i) each partial reduction of the Commitments under such Facility shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof, and (ii) the aggregate amount of the Commitments under either Facility shall not be reduced below the Letter of Credit Commitment for such Facility. - 53 - (b) Mandatory -- Terra Commitments. The Terra Commitments shall be automatically and permanently reduced to zero on the Terra Commitment Termination Date. In addition, the aggregate amount of the Terra Commitments shall be automatically reduced on each Terra Commitment Reduction Date set forth in column (A) below to the amount set forth in column (B) below opposite such Terra Commitment Reduction Date: (A) (B) Terra Terra Commitment Reduction Commitments Reduced Date Falling on or to the Following Nearest to: Amounts ($) -------------------- ------------------- December 31, 1998 $330,000,000 December 31, 1999 $310,000,000 (c) Mandatory -- TNLP Commitments. The TNLP Commitments shall be automatically and permanently reduced to zero on the TNLP Commitment Termination Date. (d) Reductions Pro Rata. Each reduction of the Commitments under a Facility shall be applied to the respective Commitments of the Lenders according to their respective Pro Rata Shares of such Facility. (e) General. Commitments once terminated or reduced may not be reinstated. Section 2.05. Prepayments, Etc. (a) Optional Prepayments. (i) Either Borrower may, upon at least two Business Days' notice (in the case of prepayment of Eurodollar Rate Advances) or upon notice given on the date of prepayment (in the case of prepayments of Base Rate Advances) to the Administrative Agent (which notice shall state the Facilities to be prepaid and the proposed date and aggregate principal amount of the prepayment), and if such notice is given such Borrower shall, prepay the outstanding principal amount of the Advances under the specified Facilities in the aggregate amount and on the date specified in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided that (x) each partial prepayment shall be in an aggregate principal amount of $3,000,000 or an integral multiple of $1,000,000 in excess thereof, (y) any such prepayment of a Eurodollar Rate Advance other than on the last day of the Interest Period therefor shall be accompanied by, and subject to, the payment of any amount payable under Section 9.04(c) in - 54 - respect of such prepayment and (z) each such notice shall be made on the relevant day not later than, in the case of prepayments of Eurodollar Rate Advances, 10:00 A.M. (New York City time) and, in the case of prepayments of Base Rate Advances, 12:00 Noon (New York City time). (ii) Each prepayment of Advances under this Section 2.05(a) shall be made for account of the relevant Lenders according to their respective Pro Rata Shares of the principal amount of the Advances then outstanding under the relevant Facility. (b) Mandatory Prepayments; Commitment Reductions. (i) Sale of Assets. Without limiting the obligation of the Company to obtain the consent of the Required Lenders pursuant to Section 5.02(e) to any Disposition not otherwise permitted hereunder, on the first anniversary of each Disposition the Company shall prepay the Terra Advances (and/or provide cover for Terra Letter of Credit Liabilities as specified in Section 2.05(d)), and the Terra Commitments shall be subject to automatic reduction, in an aggregate amount equal to (A) 75% of the Net Available Proceeds of such Disposition minus (B) the amount of such Net Available Proceeds theretofore invested or committed to be invested in the business of the Company and its Subsidiaries; provided that (x) for purposes of this clause (i) the aggregate Net Available Proceeds of all such Dispositions in a fiscal year shall be deemed to be reduced by $25,000,000 (but shall not be deemed to be less than zero) and (y) the following shall not be deemed to be Dispositions for purposes of this clause (i): (1) the sale by the Company or any of its Subsidiaries of Receivables under an Intercompany Receivables Facility or under a Permitted Receivables Facility; (2) the transfer of the Blytheville Assets in accordance with Section 5.02(e)(viii); (3) the BMLP Restructuring; (4) the sale of any property by any member of the Terra Canada Group; (5) from and after the BMLP Restructuring Time, the sale of any property by any member of the BMLP Group; - 55 - (6) the transactions under the Terra U.K. Offtake Agreement; (7) the transactions relating to the construction of the Ammonia Loop; and (8) the transactions under the Ammonium Nitrate Hedging Agreement. (ii) Casualty Events. Upon the date 360 days following the receipt by Terra or any of its Subsidiaries (other than members of the Terra Canada Group and, from and after the BMLP Restructuring Time, members of the BMLP Group) of the proceeds of insurance, condemnation award or other compensation in respect of any Casualty Event affecting any property of Terra or any of its Subsidiaries, the Company shall prepay the Terra Advances (and/or provide cover for Terra Letter of Credit Liabilities as specified in Section 2.05(d)), and the Terra Commitments shall be subject to automatic reduction, in an aggregate amount, if any, equal to (A) 75% of the Net Available Proceeds of such Casualty Event not theretofore applied to the repair or replacement of such property or set aside for such purpose minus (B) the amount of such Net Available Proceeds theretofore invested or committed to be invested in the business of the Company and its Subsidiaries. Nothing in this clause (ii) shall be deemed to limit any obligation of Terra or any of its Subsidiaries pursuant to any of the Security Documents to remit to a collateral or similar account (including, without limitation, a Collateral Account under and as defined in the Security Documents) maintained by the Collateral Agent pursuant to any of the Security Documents the proceeds of insurance, condemnation award or other compensation received in respect of any Casualty Event. (c) Application. On the dates specified in clauses (i) and (ii) of Section 2.05(b), the Terra Commitments shall be reduced automatically in an aggregate amount equal to the amount specified in such paragraphs (and to the extent that, after giving effect to such reduction, the aggregate principal amount of Terra Advances and Terra Letter of Credit Liabilities would exceed the Terra Commitments, the Company shall, first, prepay Terra Advances and, second, provide cover for Terra Letter of Credit Liabilities as specified in paragraph (d) below, in an aggregate amount equal to such excess). (d) Cover for Terra Letter of Credit Liabilities. In the event that the Company shall be required pursuant to Section 2.03(a) or Section 2.05(b) to provide cover for Terra - 56 - Letter of Credit Liabilities, the Company shall effect the same by paying to the Administrative Agent same day funds in an amount equal to the required amount, which funds shall be deposited in the Terra L/C Cash Collateral Account until such time as the Terra Letters of Credit shall have been terminated and all of the Terra Letter of Credit Liabilities paid in full. (e) Payments with Interest. All prepayments under this Section 2.05 shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. Section 2.06. Interest. (a) Ordinary Interest. The Company shall pay interest on the unpaid principal amount of each Terra Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, and TNLP shall pay interest on the unpaid principal amount of each TNLP Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, in each case at the following rates per annum: (i) Base Rate Advances. While such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (1) the Base Rate in effect from time to time plus (2) the Applicable Margin in effect from time to time, payable in arrears quarterly on each Quarterly Date and on the date such Base Rate Advance shall be Converted (but only on the amount Converted) or paid in full. (ii) Eurodollar Rate Advances. While such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (1) the Eurodollar Rate for such Interest Period for such Advance plus (2) the Applicable Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each three-month anniversary of the first day of such Interest Period occurring during such Interest Period. (b) Post-Default Interest. If (a) any Obligor shall fail to pay when due (by acceleration or otherwise) any amount payable under any Loan Document after any applicable grace period provided in Section 6.01(a), or (b) (i) an Event of Default shall have occurred and be continuing during any period and (ii) the Administrative Agent or the Required Lenders, through the Administrative Agent, shall have notified the Company thereof, each Borrower shall, notwithstanding anything else in this Agreement to the contrary, pay to the Administrative Agent for account of each Lender interest, during such period, at the - 57 - applicable Post-Default Rate on any principal of any Advance made by such Lender to such Borrower, and on any other amount whatsoever then due and payable by such Borrower hereunder or under the Notes held by such Lender to or for account of such Lender, such interest to be payable from time to time on demand. Section 2.07. Fees. (a) Commitment Fee. Each Borrower hereby promises to pay to the Administrative Agent for the account of each Lender a commitment fee (i) in the case of the Company, on the average daily Unused Terra Commitment of such Lender and (ii) in the case of TNLP, on the average daily Unused TNLP Commitment of such Lender, in each case for the period from the Restatement Date (or from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender other than the Initial Lenders) until the Commitment Termination Date for the relevant Facility at the Applicable Commitment Fee Rate, payable in arrears (x) quarterly after the Restatement Date on each Quarterly Date and (y) on the Commitment Termination Date for the relevant Facility. (b) Letter of Credit Commission, Etc. (i) The Company hereby promises to pay to the Administrative Agent (A) for the account of each Issuing Bank a non-refundable fronting fee of 1/4% per annum of the face amount of each Terra Letter of Credit issued by it for the period from the date of issuance thereof until such Letter of Credit has been drawn in full, expires or is terminated and (B) for the account of each Lender a non-refundable commission on such Lender's Pro Rata Share of the average daily aggregate Available Amount of all Terra Letters of Credit then outstanding at the Applicable Letter of Credit Fee Rate, such fees to be payable in arrears on each Quarterly Date and on the Terra Commitment Termination Date and calculated, for any day, after giving effect to any payments made under such Letter of Credit on such day. (ii) TNLP hereby promises to pay to the Administrative Agent (A) for the account of each Issuing Bank a non-refundable fronting fee of 1/4% per annum of the face amount of each TNLP Letter of Credit issued by it for the period from the date of issuance thereof until such Letter of Credit has been drawn in full, expires or is terminated and (B) for the account of each Lender a non-refundable commission on such Lender's Pro Rata Share of the average daily aggregate Available Amount of all TNLP Letters of Credit then outstanding at the Applicable Letter of Credit Fee Rate, such fees to be payable quarterly in arrears on - 58 - each Quarterly Date and on the TNLP Commitment Termination Date and calculated, for any day, after giving effect to any payments made under such Letter of Credit on such day. (c) Letter of Credit Expenses. Each Borrower shall pay to each Issuing Bank, for its own account, such commission, issuance fees, transfer fees and other fees and charges in connection with the issuance or administration of the Letters of Credit issued by it as such Borrower and such Issuing Bank shall agree; provided that all fees and other charges payable pursuant to this Section 2.07(c) shall be the customary amounts charged by such Issuing Bank in connection with the issuance or administration of similar letters of credit and the amounts so determined shall be adjusted as necessary to avoid a duplicative payment hereunder. Section 2.08. Conversion and Continuation of Advances. (a) Optional Conversion. Each Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 10:00 A.M. (New York City time) on the second Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.09 and 2.10, Convert all or any portion of the Advances of one Type outstanding under any Facility (and, in the case of Eurodollar Rate Advances, having the same Interest Period); provided that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b)(i) and no Conversion of any Advances shall result in a greater number of separate Interest Periods in respect of Eurodollar Rate Advances under any Facility than permitted under Section 2.02(b)(ii). Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the aggregate amount, Type and Facility of the Advances (and, in the case of Eurodollar Rate Advances, the Interest Period therefor) to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the relevant Borrower. (b) Certain Mandatory Conversions. (i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $3,000,000 such Advances shall automatically Convert into Base Rate Advances. - 59 - (ii) If a Borrower shall fail to select the duration of any Interest Period for any outstanding Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01 and in clause (a) or (c) of this Section 2.08, the Administrative Agent will forthwith so notify such Borrower and the relevant Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance. (iii) Upon the occurrence and during the continuance of any Event of Default and upon notice from the Administrative Agent to the Borrowers at the request of the Required Lenders, (x) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances shall be suspended. (c) Continuations. Each Borrower may, on any Business Day, upon notice given to the Administrative Agent not later than 10:00 A.M. (New York City time) on the second Business Day prior to the date of the proposed Continuation and subject to the provisions of Sections 2.09, Continue all or any portion of the Eurodollar Rate Advances outstanding under a relevant Facility having the same Interest Period as such Eurodollar Rate Advances; provided that any such Continuation shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Continuation of Eurodollar Rate Advances shall be in an amount not less than the minimum Borrowing amount specified in Section 2.02(b)(i) and no Continuation of any Eurodollar Rate Advances shall result in a greater number of separate Interest Periods in respect of Eurodollar Rate Advances under any Facility than permitted under Section 2.02(b)(ii). Each such notice of Continuation shall, within the restrictions specified above, specify (i) the date of such Continuation, (ii) the aggregate amount and Facility of, and the Interest Period for, the Advances being Continued and (iii) the duration of the initial Interest Period for the Eurodollar Rate Advances subject to such Continuation. Each notice of Continuation shall be irrevocable and binding on the relevant Borrower. Section 2.09. Increased Costs, Illegality, Etc. (a) If, due to either (i) the introduction of or any change in or in the interpretation of (to the extent any such introduction or change occurs after the date hereof) any law or regulation or (ii) the compliance with any guideline or request - 60 - from any central bank or other governmental authority adopted or made after the date hereof (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances under any Facility, then the relevant Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided that, before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to the relevant Borrower by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines in good faith that compliance with any law or regulation enacted or introduced after the date hereof or any guideline or request from any central bank or other governmental authority adopted or made after the date hereof (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type or the issuance of the Letters of Credit (or similar contingent obligations), then, upon demand by such Lender (with a copy of such demand to the Administrative Agent), each Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder or to the issuance or maintenance of any Letters of Credit. A certificate as to such amounts submitted to the relevant Borrower by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (c) If, with respect to any Eurodollar Rate Advances, (i) the Required Lenders reasonably determine and notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, or (ii) if fewer than two Reference Banks furnish timely information - 61 - to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, the Administrative Agent shall forthwith so notify the Borrowers and the Lenders, whereupon (x) each Eurodollar Rate Advance will automatically, on the last day of any then existing Interest Period therefor, Convert to a Base Rate Advance, and (y) the obligation of the Lenders to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrowers and such Lenders that the circumstances causing such suspension no longer exist. (d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of (to the extent any such introduction or change occurs after the date hereof) any law or regulation shall make it unlawful, or any central bank or other governmental authority having appropriate jurisdiction shall assert in writing that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrowers through the Administrative Agent, (i) each Eurodollar Rate Advance of such Lender will automatically, upon such demand, Convert to a Base Rate Advance and (ii) the obligation of such Lender to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrowers that such Lender has determined that the circumstances causing such suspension no longer exist; provided that, before making any such demand, such Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. (e) Neither Borrower shall be obligated to pay any additional amounts arising pursuant to clauses (a) and (b) of this Section 2.09 that are attributable to the Excluded Period with respect to such additional amount; provided that if an applicable law, rule, regulation, guideline or request shall be adopted or made on any date and shall be applicable to the period (a "Retroactive Period") prior to the date on which such law, rule, regulation, guideline or request is adopted or made, the limitation on the Borrowers' obligations to pay such additional amounts hereunder shall not apply to the additional amounts payable in respect of such Retroactive Period. - 62 - Section 2.10. Payments and Computations. ------------------------- (a) Each Borrower shall make each payment hereunder and under the Notes not later than 12:00 Noon (New York City time) on the day when due in U.S. Dollars to the Administrative Agent at the Administrative Agent's Account in same day funds and, except as expressly set forth herein, without deduction, set-off or counterclaim. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or commitment fees under or in respect of a particular Facility ratably (other than amounts payable pursuant to Section 2.09(a), 2.09(b), 2.11, 2.13(d) or 9.04(c), or amounts payable to an Issuing Bank in respect of Letters of Credit) to the relevant Lenders for the account of their Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) If the Administrative Agent receives funds for application to the Obligations under the Basic Documents under circumstances for which the Basic Documents do not specify the Advances or the Facility to which, or the manner in which, such funds are to be applied, and neither Borrower has otherwise directed how such funds are to be applied (which direction is consistent with the terms of the Basic Documents), the Administrative Agent may, but shall not be obligated to, elect to distribute such funds to each Lender ratably in accordance with such Lender's proportionate share of the principal amount of all outstanding Advances and the Available Amount of all Letters of Credit then outstanding, in repayment or prepayment of such of the outstanding Advances or other Obligations owed to such Lender, and for application to such principal installments, as the Administrative Agent shall direct. (c) Each Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under any Note held by such Lender, to charge from time to time against any or all of such Borrower's accounts with such Lender any amount so due (with notice to the - 63 - Administrative Agent and the relevant Borrower promptly following such charge). (d) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (e) All computations of interest, fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder made in accordance with the provisions of this Agreement shall be conclusive and binding for all purposes, absent manifest error. (f) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the immediately preceding Business Day. (g) Unless the Administrative Agent shall have received notice from a Borrower prior to the date on which any payment is due to any Lender hereunder that such Borrower will not make such payment in full, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender on such due date an amount equal to the amount then due such Lender. If and to the extent such Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. - 64 - Section 2.11. Taxes. ----- (a) Any and all payments by each Obligor hereunder or under the relevant Notes shall be made, in accordance with Section 2.10, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Issuing Bank, each Lender and the Administrative Agent, net income taxes that are imposed by the United States and franchise taxes and net income taxes that are imposed on such Issuing Bank, such Lender or the Administrative Agent by the state or foreign jurisdiction under the laws of which such Issuing Bank, such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of such Issuing Bank and each Lender, franchise taxes and net income taxes that are imposed on it by the state or foreign jurisdiction of such Issuing Bank's or such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If an Obligor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Issuing Bank, any Lender or the Administrative Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.11) such Issuing Bank, such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Obligor shall make such deductions and (iii) such Obligor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each Obligor agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made by it hereunder or under the Notes or from the execution, delivery or registration of this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) Each Obligor will indemnify each Issuing Bank, each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.11) paid by such Issuing Bank, such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from such date such Issuing Bank, - 65 - such Lender or the Administrative Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, each Obligor will furnish to the Administrative Agent, at its address referred to in Section 9.02, appropriate evidence of payment thereof. If such Obligor shall make a payment hereunder or under the Notes through an account or branch outside the United States, or a payment is made on behalf of such Obligor by a payor that is not a United States Person, such Obligor will, if no taxes are payable in respect of such payment, furnish, or will cause such payor to furnish, to the Administrative Agent, at such address, a certificate from the appropriate taxing authority or authorities, or an opinion of counsel acceptable to the Administrative Agent, in either case stating that such payment is exempt from or not subject to Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States Person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement (in the case of each Initial Lender) and on the date of the Assignment and Acceptance pursuant to which it became a Lender (in the case of each other Lender), and from time to time thereafter if requested in writing by either Borrower or the Administrative Agent (but only so long as such Lender remains lawfully able to do so after the date such Lender becomes a Lender hereunder), provide the Administrative Agent and the Borrowers with either (i) Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party that reduces the rate of withholding tax on payments under this Agreement and the Notes or certifying that the income receivable pursuant to this Agreement and the Notes is effectively connected with the conduct of a trade or business in the United States or (ii) Internal Revenue Service form W-8, upon which each Borrower is entitled to rely, from a Lender that has not at the time such Lender becomes a Lender hereunder been named in any notice issued by the Secretary of the Treasury (or such Secretary's authorized delegate) pursuant to Sections 881(c)(2)(B) or 871(h)(5) of the Internal Revenue Code, or any successor form or statement prescribed by the Internal Revenue Service in order to establish that such Lender is entitled to treat the interest payments under this Agreement and the Notes as portfolio interest that is exempt from withholding tax under the Internal Revenue Code, together with a certificate stating that such Lender is not described in Section 881(c)(3) of the Internal Revenue Code. If the form - 66 - provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero (or if the Lender cannot provide at such time such form because it is not entitled to reduced withholding under a treaty, the payments are not effectively connected income and the payments do not qualify as portfolio interest), withholding tax at such rate (or at the then existing U.S. statutory rate if the Lender cannot provide the form) shall be excluded from Taxes unless and until such Lender provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be excluded from Taxes for periods governed by such form; provided that, if at the date of the Assignment and Acceptance pursuant to which a Lender assignee becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to the extent such tax results in liability for such payments, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States interest withholding tax, if any, applicable with respect to the Lender assignee on such date. (f) For any period with respect to which a Lender has failed to provide the Borrowers and the Administrative Agent with the appropriate form described in Section 2.11(e) (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e)), such Lender shall not be entitled to indemnification under subsection (a) or (c) with respect to Taxes imposed by the United States. (g) Any Lender or any Issuing Bank claiming any additional amounts payable pursuant to this Section 2.11 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office(s) if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender or Issuing Bank, be otherwise disadvantageous to such Lender or Issuing Bank. (h) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 2.11 shall survive the payment in full of principal and interest hereunder and under the Notes. Section 2.12. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through - 67 - the exercise of any right of set-off, or otherwise) on account of the Advances owing to it under any Facility (other than pursuant to Section 2.09(a), 2.09(b), 2.11, 2.13(d) or 9.04(c), or payments to an Issuing Bank in respect of Letters of Credit) in excess of its ratable share of payments on account of the Advances under such Facility obtained by all the relevant Lenders, such Lender shall forthwith purchase from the other relevant Lenders such participations in the Advances under such Facility owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each relevant Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.12 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. Section 2.13. Letters of Credit. ----------------- (a) Issuance of Letters of Credit, Etc. Each Borrower may request one or more Issuing Banks to issue, on the terms and conditions hereinafter set forth, letters of credit for the account of such Borrower under its respective Facility (letters of credit so issued under the Terra Facility being herein called "Terra Letters of Credit" and letters of credit so issued under the TNLP Facility being herein called "TNLP Letters of Credit"; the Terra Letters of Credit and the TNLP Letters of Credit being collectively called the "Letters of Credit") from time to time on any Business Day during the period from the Restatement Date until the date 90 days prior to the Commitment Termination Date under the relevant Facility; provided that: (i) the Terra Commitments shall be utilized under this Section 2.13 solely for the issuance of Terra Letters of Credit for the account of the Company and, to the extent specified by the Company, any of its Subsidiaries (other than, prior to the SPU Redemption Time, TNLP or any of its Subsidiaries); - 68 - (ii) the TNLP Commitments shall be utilized under this Section 2.13 solely for the issuance of TNLP Letters of Credit for the account of TNLP and, to the extent specified by TNLP, any of its Subsidiaries; (iii) the aggregate Available Amount of all Letters of Credit issued by all Issuing Banks under either Facility shall not exceed at any time the Letter of Credit Sublimit for such Facility, and the aggregate outstanding principal amount of all Advances under such Facility when added to the aggregate amount of Letter of Credit Liabilities under such Facility shall not exceed the aggregate Commitments of the relevant Lenders under such Facility on such Business Day; (iv) the aggregate amount of all Letter of Credit Liabilities under Letters of Credit issued by any Issuing Bank under either Facility shall not exceed at any time the Letter of Credit Commitment of such Issuing Bank for such Facility; and (v) no Letter of Credit shall have an expiration date later than, or shall permit the account party or the beneficiary to require the renewal thereof to a date beyond, the date 30 days prior to the Commitment Termination Date for the relevant Facility. On the Restatement Date, all outstanding "Terra Letters of Credit" outstanding under the Existing Credit Agreement (the "Existing Terra Letters of Credit") shall automatically, without any action on the part of any Person, be deemed to be Terra Letters of Credit hereunder for all purposes of this Agreement. On the Restatement Date, all outstanding "TNLP Letters of Credit" outstanding under the Existing Credit Agreement (the "Existing TNLP Letters of Credit") shall automatically, without any action on the part of any Person, be deemed to be TNLP Letters of Credit hereunder for all purposes of this Agreement. At the SPU Redemption Time, all outstanding TNLP Letters of Credit shall automatically, without any action on the part of any Person, be deemed to be Terra Letters of Credit hereunder for all purposes of this Agreement. On each day during the period commencing with the issuance by an Issuing Bank of any Terra Letter of Credit (or, in the case of any Existing Terra Letter of Credit, during the period commencing with the Restatement Date) and until such Letter of Credit shall have been drawn in full or expired or been terminated, the Terra Commitment of each Lender shall be deemed to be utilized for all purposes of this Agreement in an amount equal to such Lender's Pro Rata Share of the then undrawn amount of such Letter of Credit. On each day during the period commencing with the issuance by an Issuing Bank of any TNLP - 69 - Letter of Credit (or, in the case of any Existing TNLP Letter of Credit, during the period commencing with the Restatement Date) and until such Letter of Credit shall have been drawn in full or expired or been terminated, the TNLP Commitment of each Lender shall be deemed to be utilized for all purposes of this Agreement in an amount equal to such Lender's Pro Rata Share of the then undrawn amount of such Letter of Credit. (b) Request for Issuance. -------------------- (i) Each Letter of Credit shall be issued upon notice, given not later than 1:00 P.M. (New York City time) two Business Days prior to the date of the proposed issuance of such Letter of Credit, by the relevant Borrower to the relevant Issuing Bank, which shall give to the Administrative Agent and each Lender prompt notice thereof by telex or telecopier. Each such notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by telex or telecopier, confirmed promptly in writing, specifying therein (A) the requested date of such issuance (which shall be a Business Day), (B) the Available Amount requested for such Letter of Credit, (C) the expiration date of such Letter of Credit, (D) the account party or parties for such Letter of Credit, (E) the name and address of the issuer and the beneficiary of such Letter of Credit, and (F) the form of such Letter of Credit, together with a description of the nature of the transactions or obligations proposed to be supported thereby. If the requested form of such Letter of Credit is acceptable to such Issuing Bank in its discretion, such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the relevant Borrower at its office referred to in Section 9.02 or as otherwise agreed with such Borrower in connection with such issuance. (ii) Each Issuing Bank shall furnish (A) to the Administrative Agent on the first Business Day of each week a written report summarizing the issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the previous week and drawings during such week under all Letters of Credit issued by such Issuing Bank, (B) to each Lender and to the relevant Borrower on the first Business Day of each month, a written report summarizing the issuance and expiration dates of the Letters of Credit issued by such Issuing Bank under the relevant Facility during the preceding month and drawings during such month under all Letters of Credit under such Facility issued by the Issuing Bank and (C) to the Administrative Agent and each Lender on the first Business Day of each calendar quarter, a written report setting forth the average daily - 70 - aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank under the relevant Facility. (c) Drawing and Reimbursement. ------------------------- (i) The payment by an Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by such Issuing Bank of an advance to the relevant Borrower in the amount of such payment, which the relevant Borrower agrees to repay on demand and, if not paid on demand, shall bear interest, from the date demanded to the date paid in full (and which interest shall be payable on demand), (x) from and including the date of demand to but not including the second Business Day thereafter at the Base Rate in effect for each such day plus the Applicable Margin in effect for each such day, and (y) from and including said second Business Day thereafter at the Post-Default Rate. Without limiting the obligations of such Borrower hereunder, upon demand by such Issuing Bank through the Administrative Agent, each Lender having a Commitment under the relevant Facility shall make Advances under such Facility in an aggregate amount equal to the amount of such Lender's Pro Rata Share of such advance by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of such Issuing Bank, by deposit to the Administrative Agent's Account, in same day funds, an amount equal to the sum of (A) its Pro Rata Share of the outstanding principal amount of such advance plus (B) interest accrued and unpaid to and as of such date on the outstanding principal amount of such advance. (ii) Each Lender agrees to make such Advances on the Business Day on which demand therefor is made by the relevant Issuing Bank through the Administrative Agent (provided that notice of such demand is given not later than 12:00 Noon (New York City time) on such Business Day) or (if notice of such demand is given after such time) the first Business Day next succeeding such demand. (iii) If and to the extent that any relevant Lender shall not have so made the amount of such Advance available to the Administrative Agent for account of such Issuing Bank, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the relevant Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate. - 71 - (iv) The Advances provided for in this Section 2.13 shall be made by the Lenders irrespective of whether there has occurred and is continuing any Default or Event of Default or of whether any other condition precedent specified in Article III has not been satisfied, and the obligation of each Lender under each relevant Facility to make such Advances is absolute and unconditional. (d) Increased Costs. --------------- (i) If any change in any law or regulation or in the interpretation thereof (to the extent any such change occurs after the date hereof) by any court or administrative or governmental authority charged with the administration thereof shall either (x) impose, modify or deem applicable any reserve, special deposit or similar requirement against letters of credit or guarantees issued by, or assets held by, or deposits in or for the account of, any Issuing Bank or any Lender or (y) impose on any Issuing Bank or any Lender any other condition regarding this Agreement or such Issuing Bank or such Lender or any Letter of Credit, and the result of any event referred to in the preceding clause (x) or (y) shall be to increase the cost to such Issuing Bank or Lender of issuing or maintaining any Letter of Credit or any commitment hereunder in respect of Letters of Credit, then, upon demand by such Issuing Bank or such Lender, the Borrowers shall immediately pay to such Issuing Bank or such Lender, from time to time as specified by such Issuing Bank or such Lender, additional amounts that shall be sufficient to compensate such Issuing Bank or such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrowers by such Issuing Bank or such Lender shall be conclusive and binding for all purposes, absent manifest error. (ii) Neither Borrower shall be obligated to pay any additional amounts arising pursuant to this Section 2.13(d) that are attributable to the Excluded Period with respect to such additional amounts; provided that if an applicable law, rule, regulation, guideline or request shall be adopted or made on any date and shall be applicable to the period (a "Retroactive Period") prior to the date on which such law, rule, regulation, guideline or request is adopted or made, the limitation on either Borrower's obligation to pay such additional amounts hereunder shall not apply to the additional amounts payable in respect of such Retroactive Period. (e) Obligations Absolute. The Obligations of each Borrower under this Agreement and any other agreement or - 72 - instrument relating to any Letter of Credit (as hereafter amended, supplemented or otherwise modified from time to time, collectively, the "L/C Related Documents") shall, to the extent permitted by law, be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of such L/C Related Document under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any one or more of such other documents and agreements, including, but not limited to, the L/C Related Documents; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of such Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (iii) the existence of any claim, set-off, defense or other right that such Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (iv) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not comply with the terms of such Letter of Credit, except to the extent that such payment resulted from such Issuing Bank's willful misconduct or gross negligence in determining whether such draft or certificate complies on its face with the terms of such Letter of Credit; (vi) any exchange, release or nonperfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the Obligations of such Borrower in respect of the L/C Related Documents; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might - 73 - otherwise constitute a defense available to, or a discharge of, such Borrower or a guarantor. Section 2.14. Replacement of Lender. (a) Subject to clause (c) below, in the event that any Lender requests compensation pursuant to Section 2.09(a), 2.09(b) or 2.13(d), or the obligation of any Lender to make, or to Convert Base Rate Advances into, or to Continue, Eurodollar Rate Advances shall be suspended pursuant to Section 2.09(c) or 2.09(d) (such Lender being herein called an "Affected Lender"), then, so long as such condition exists, the Borrowers may, after the date 30 days after the date of such request or suspension, either: (i) (x) designate an Eligible Assignee acceptable to the Administrative Agent and each Issuing Bank (which acceptance will not be unreasonably withheld) that is not an Affiliate of the Borrowers (such Eligible Assignee being herein called a "Replacement Lender") to assume the Affected Lender's Commitments and other obligations hereunder and to purchase the Affected Lender's Advances and other rights under the Loan Documents (all without recourse to or representation or warranty by, or expense to, the Affected Lender) for a purchase price equal to the aggregate principal amount of the outstanding Advances held by the Affected Lender plus all accrued but unpaid interest on such Advances and accrued but unpaid fees owing to the Affected Lender (and upon such assumption, purchase and substitution, and subject to the execution and delivery to the Administrative Agent by the Replacement Lender of documentation satisfactory to the Administrative Agent and compliance with the requirements of Section 9.07(c), the Replacement Lender shall succeed to the rights and obligations of the Affected Lender hereunder and the other Loan Documents), and (y) pay to the Affected Lender all amounts payable to such Affected Lender under Section 9.04(c), calculated as if the purchase by the Replacement Lender constituted a mandatory prepayment of Advances by the Borrowers, and (z) pay to the Administrative Agent the processing and recordation fee specified in Section 9.07(a)(vi) with respect to such assignment; or (ii) (x) terminate the Commitments of the Affected Lender and (y) pay to the Affected Lender the aggregate principal amount of the outstanding Advances held by the Affected Lender plus all accrued but unpaid interest on such Advances and accrued but unpaid fees owing to the Affected Lender plus all amounts payable to the Affected Lender under Section 9.04(c) as a result of such prepayment. - 74 - In the event that the Borrowers exercise their rights under the preceding sentence, the Affected Lender shall no longer be a party hereto or have any rights or obligations hereunder or under the other Loan Documents; provided that the obligations of the Borrowers to the Affected Lender under Sections 2.09, 2.11 and 9.04 with respect to events occurring or obligations arising before or as a result of such replacement shall survive such exercise. (b) If the Borrowers exercise their rights under clause (a)(ii) above, the Borrowers may, not later than the date 60 days after such exercise, designate an Eligible Assignee acceptable to the Administrative Agent and each Issuing Bank (which acceptance will not be unreasonably withheld) that is not an Affiliate of the Borrowers (such Eligible Assignee being herein called a "Substitute Lender") to assume Commitments hereunder and to make Advances hereunder in an amount equal to the respective Commitments and Advances of the Affected Lender under each of the Facilities and, subject to (x) the execution and delivery to the Administrative Agent by the Substitute Lender of documentation satisfactory to the Administrative Agent, (y) the payment by the Borrowers to the Administrative Agent of the processing and recordation fee specified in Section 9.07(a)(vi) with respect to such assignment, and (z) compliance with Section 9.07(c), the Substitute Lender shall succeed to the rights and obligations of the Affected Lender hereunder and under the other Loan Documents. Upon the Substitute Lender so becoming a party hereto, the Borrowers shall borrow Advances from the Substitute Lender and/or prepay the principal of the Advances of the other Lenders in such manner as will result in the outstanding principal amount of the Advances under each Facility being held by the Lenders according to their respective Pro Rata Shares of the relevant Facilities. (c) The Borrowers may not exercise their rights under this Section 2.14: (i) with respect to any Affected Lender unless the Borrowers simultaneously exercise such rights with respect to all Affected Lenders, (ii) if a Default or an Event of Default has occurred and is then continuing, or (iii) with respect to any exercise of rights under clause (b) above, if, at the time of such exercise, the aggregate amount of the Commitments that shall have been terminated pursuant to said clause (b) (including the Commitments then proposed to be terminated) shall exceed 30% - 75 - of the aggregate amount of the Commitments in effect on the Restatement Date. ARTICLE III CONDITIONS OF LENDING Section 3.01. Conditions Precedent to Amendment and Restatement. The Existing Credit Agreement shall be amended and restated to read in full as set forth herein on the date (the "Restatement Date") on which the Administrative Agent shall notify the Company that the Administrative Agent shall have received the following in form and substance satisfactory to it: (a) The Notes, duly executed by each Borrower. (b) The following documents, each dated the Restatement Date (unless otherwise specified), in form and substance satisfactory to the Administrative Agent (unless otherwise specified) and in sufficient copies for the Administrative Agent, each Lender and each Issuing Bank: (i) for TI, a copy of the charter, as amended and in effect, of TI certified (as of a date reasonably close to the Restatement Date) by the Secretary of State of the State of Delaware and a certificate from such Secretary of State dated as of a date reasonably close to the Restatement Date as to the good standing of and charter documents filed by TI; (ii) for TI, a certificate of the Secretary or an Assistant Secretary of TI, dated the Restatement Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of TI as amended and in effect at all times from the date on which the resolutions referred to in clause (B) were adopted to and including the date of such certificate, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the board of directors of TI authorizing the execution, delivery and performance of such of the Loan Documents to which TI is or is intended to be a party and the extensions of credit hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the charter of TI has not been amended since the date of the certification thereto furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer of TI executing such of the Loan Documents to which TI - 76 - is intended to be a party and each other document to be delivered by TI from time to time in connection therewith (and the Administrative Agent and each Lender may conclusively rely on such certificate until it receives notice in writing from TI); (iii) for TI, a certificate of another officer of TI, dated the Restatement Date, as to the incumbency and specimen signature of the Secretary or Assistant Secretary, as the case may be, of TI; (iv) a copy of each amendment to the charter or articles of incorporation or articles of limited partnership, as the case may be, of each Obligor (other than TI) that has become effective since the Second Restatement Date, certified (as of a date reasonably near the Restatement Date) by the Secretary of State of the state of its incorporation or organization, and a certificate from such Secretary of State dated as of a date reasonably close to the Restatement Date as to the good standing of and charter documents filed by such Obligor; and (v) a certificate of each Obligor (other than TI), signed on its behalf by its President or a Vice President and its Secretary or any Assistant Secretary, dated the Restatement Date (the statements made in which certificate shall be true on and as of the Restatement Date), certifying as to (A) the absence, except to the extent provided in said certificate, of any amendments to the charter or articles of incorporation or organization of such Obligor since the Second Restatement Date, (B) the absence, except to the extent provided in said certificate, of any amendments to the bylaws of such Obligor subsequent to the Second Restatement Date, and (C) the due incorporation or organization and good standing of such Obligor as a corporation or limited partnership, as the case may be, organized under the laws of its state of incorporation or organization, and the absence of any proceeding for the dissolution or liquidation of such Obligor. (c) The Holdings Pledge Agreement, the Terra Capital Pledge Agreement, the Subsidiary Pledge and Security Agreement and the TNLP Pledge and Security Agreement, in substantially the forms of Exhibits B-1, B-2, B- 3 and B-4, respectively, duly executed by each of the intended parties thereto, together with: - 77 - (i) such appropriately completed and duly executed copies of Uniform Commercial Code financing statements and financing statement amendments as the Collateral Agent or any Secured Party thereunder shall have requested in order to continue the perfection and protection of the Liens created by the Security Documents and covering the Collateral described therein, and (ii) executed and delivered documents for recordation and filing of or with respect to such Security Documents that the Collateral Agent or any Secured Party thereunder may deem necessary or desirable in order to continue the perfection and protection of the Liens created thereby. (d) The Intercreditor Agreement, duly executed by each of the intended parties thereto. (e) The Loan Purchase Agreement, duly executed and delivered by Terra and the Administrative Agent. (f) A favorable opinion of Kirkland & Ellis, special counsel for the Obligors, in form and substance satisfactory to the Administrative Agent and the Lenders. (g) A favorable opinion of Milbank, Tweed, Hadley & McCloy, special New York counsel for Citibank, in form and substance satisfactory to Citibank. (h) A certificate of the Senior Financial Officer to the effect that: (x) the representations and warranties contained in each Loan Document are correct on and as of the Restatement Date, before and after giving effect to the amendment and restatement provided for hereby, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and (y) no event has occurred and is continuing that constitutes a Default or an Event of Default. (i) Evidence of payment of (1) all accrued fees and expenses of the Administrative Agent (including the reasonable and documented fees and expenses of counsel to Citibank in connection with this Agreement to the extent that statements for such fees and expenses have been - 78 - delivered to the Borrowers at least one Business Day prior to the Restatement Date); (2) all interest accrued through the Restatement Date on the "Advances" outstanding under and as defined in the Existing Credit Agreement, all accrued commitment fees, all accrued letter of credit fees and all other expenses payable thereunder; and (3) all "Advances" under and as defined in the Existing Credit Agreement owing to the Retiring Lenders and all other amounts owing to the Retiring Lenders under the Existing Credit Agreement. (j) Evidence of the existence of all insurance required to be maintained by Terra hereunder. (k) Evidence of receipt of all governmental and third party consents and approvals necessary in connection with this Agreement and the U.K. Nitrogen Acquisition (without the imposition of any conditions except those that are acceptable to the Lenders) and that the same remain in effect. (l) Evidence that, since December 31, 1996, there has been no Material Adverse Change; and that no U.K. Nitrogen MAC has occurred. (m) Evidence that (1) all conditions to the U.K. Nitrogen Acquisition by Terra U.K. set forth in the Sale of Business Agreement have been (or shall simultaneously be) satisfied in all material respects without modification or waiver not consented to by the Lenders; and (2) the U.K. Nitrogen Acquisition has occurred or is contemporaneously occurring. (n) Evidence that the Terra Canada Credit Facility shall be in full force and effect. (o) Such other approvals, opinions and documents relating to this Agreement and the transactions contemplated hereby as any Lender or any Issuing Bank may, through the Administrative Agent, reasonably request. Section 3.02. Conditions Precedent to Each Borrowing and Issuance. The obligation of each Lender to make an Advance on the occasion of each Borrowing (excluding, however, the making of any Advance pursuant to Section 2.13), and the right of each Borrower to request the issuance of Letters of Credit under either Facility, shall be subject to the further conditions precedent that on the date of such Borrowing or issuance the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or Notice of Issuance and the acceptance by the relevant Borrower of the proceeds of such - 79 - Borrowing or of such Letter of Credit shall constitute a representation and warranty by such Borrower that on the date of such Borrowing or issuance such statements are true): (i) the representations and warranties contained in each Loan Document are correct on and as of the date of such Borrowing or issuance, before and after giving effect to such Borrowing or issuance and to the application of the proceeds therefrom, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and (ii) no event has occurred and is continuing, or would result from such Borrowing or issuance or from the application of the proceeds therefrom, that constitutes a Default or an Event of Default. Section 3.03. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender prior to the Restatement Date specifying its objection thereto. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01. Representations and Warranties of the Company. The Company represents and warrants as follows: (a) Each Obligor (i) is a corporation (or, in the case of TNLP or BMLP, a limited partnership) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified and in good standing as a foreign corporation (or limited partnership, as the case may be) in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed and where, in each case, failure so to qualify and be in good standing could reasonably be expected to have a Material Adverse Effect and (iii) has all requisite power (corporate or other) and authority to own or lease and operate its - 80 - properties and to carry on its business as now conducted and as proposed to be conducted. (b) Set forth on Schedule 4.01(b) is a complete and accurate list of all Material Subsidiaries of each Obligor as of the Restatement Date (and after giving effect to the U.K. Nitrogen Acquisition), showing as of such date (as to each such Subsidiary) the jurisdiction of its organization, the number of shares of each class of capital stock or partnership interests authorized, and the number outstanding and the percentage of the outstanding shares or interests of each such class owned (directly or indirectly) by such Obligor and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights. All of the outstanding capital stock or partnership interests of all of such Subsidiaries has been validly issued, is fully paid and non- assessable and is owned by such Obligor or one or more of its Subsidiaries free and clear of all Liens, except those created by the Security Documents. Each Material Subsidiary (i) is a corporation (or, in the case of TNLP or BMLP, a limited partnership) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified and in good standing as a foreign corporation or limited partnership, as the case may be, in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed and where, in each case, failure to so qualify and be in good standing could reasonably be expected to have a Material Adverse Effect and (iii) has all requisite power (corporate or other) and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (c) The execution, delivery and performance by each Obligor of this Agreement, the Notes and each other Loan Document to which it is or is intended to be a party, and the consummation of the credit transactions between Borrowers and Lenders contemplated hereby, are within such Obligor's powers (corporate or other), have been (or will, prior to the Restatement Date, be) duly authorized by all necessary corporate or other action, and do not (i) contravene such Obligor's charter, by-laws or, in the case of TNLP or BMLP, its agreement of limited partnership, (ii) violate any applicable law (including, without limitation, the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970), rule, regulation (including, without limitation, Regulation U and - 81 - Regulation X), order, writ, judgment, injunction, decree, determination or award (except for any such violation, by action or inaction of any Obligor, that could not reasonably be expected to have a Material Adverse Effect and that could not result in any liability of any Lender), (iii) except as set forth on Schedule 4.01(c), conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Obligor, any of its Subsidiaries or any of their properties (except for any such conflict, breach or default, caused by action or inaction of any Obligor, that could not reasonably be expected to have a Material Adverse Effect and that could not result in any liability of any Lender) or (iv) except for the Liens created by the Security Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Obligor or any of its Subsidiaries. No Obligor or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which could be reasonably expected to have a Material Adverse Effect. (d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Obligor of this Agreement, the Notes or any other Loan Document to which it is or is to be a party, or for the consummation of the credit transactions between Borrowers and Lenders contemplated hereby, (ii) the grant by any Obligor of the Liens granted by it pursuant to the Security Documents, (iii) the perfection or maintenance of the Liens created by the Security Documents (except for the filings required to be made pursuant to Section 3.01(c)) or (iv) the exercise by the Collateral Agent, the Administrative Agent, any Lender or Issuing Bank or any other Secured Party (as defined in the Security Documents) of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Security Documents, except for the authorizations, approvals, actions, notices and filings listed on Schedule 4.01(d), all of which have been duly obtained, taken, given or made and are in full force and effect. (e) This Agreement has been, and each of the Notes and each other Loan Document when delivered will have been, duly executed and delivered by each Obligor that is intended to - 82 - be a party thereto. This Agreement is, and each of the Notes and each other Loan Document when delivered will be, the legal, valid and binding obligation of each Obligor that is intended to be a party thereto, enforceable against such Obligor in accordance with its terms. (f) The balance sheet of Terra as at December 31, 1996 and the related statements of income and cash flows of Terra for the twelve months then ended, accompanied by an opinion of Deloitte & Touche, independent public accountants, and the balance sheet of Terra as at September 30, 1997 and the related statements of income and cash flows of Terra for the nine months then ended, duly certified by the chief financial officer of Terra, copies of which have been furnished to each Lender, present fairly, in all material respects, subject, in the case of said balance sheet as at September 30, 1997, and said statements of income and cash flows for the nine months then ended, to year-end audit adjustments, the financial condition of Terra as at such dates and the results of the operations of Terra for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis. Since December 31, 1996, there has been no Material Adverse Change with respect to Terra. Prior to the consummation of the U.K. Nitrogen Acquisition, there has been no U.K. Nitrogen MAC. (g) (A) No written information, exhibit or report (as at the Restatement Date) furnished by any officer of Terra to the Administrative Agent, any Issuing Bank or any Lender in connection with the negotiation of the Loan Documents (when taken together) contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading and (B) none of the information, exhibits or reports furnished by any Obligor to the Administrative Agent, any Issuing Bank or any Lender pursuant to Section 5.03 contained (on the date of delivery thereof) any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading; provided that the representations made in this Section 4.01(g) with respect to the U.K. Nitrogen Assets with respect to any time prior to the Restatement Date are made to the best of Terra's knowledge after due inquiry. (h) There is no action, suit, litigation or proceeding against any Obligor or any of its Subsidiaries or any of their respective property, including any Environmental Action, pending before any court, governmental agency or arbitrator, or (to the knowledge of any Obligor) threatened, - 83 - nor (to the knowledge of any Obligor) is there any investigation pending in respect of any Obligor, that: (1) could reasonably be expected to have a Material Adverse Effect; (2) on the Restatement Date could reasonably be expected to affect the legality, validity or enforceability of this Agreement, any Note, any other Loan Document or the consummation of the transactions contemplated hereby; or (3) on the Restatement Date has resulted in a U.K. Nitrogen MAC. (i) No Obligor is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance will be used for any purpose which violates the provisions of the regulations of the Board of Governors of the Federal Reserve System. After applying the proceeds of each Advance, not more than 25% of the value of the assets of either Borrower and such Borrower's Subsidiaries (as determined in good faith by such Borrower) that are subject to Section 5.02(a) or Section 5.02(e) will consist of or be represented by Margin Stock. If requested by any Lender or the Administrative Agent, each Borrower will furnish to the Administrative Agent and each Lender a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U, the statements made in which shall be such, in the opinion of each Lender, as to permit the transactions contemplated hereby in accordance with Regulation U. (j) Set forth on Schedule 4.01(j) is a complete and accurate list, as of the Restatement Date, of each Plan that is subject to Title IV of ERISA and each Multiemployer Plan with respect to any employees or former employees of any Obligor or any of its ERISA Affiliates. (k) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan of any Obligor or any of its ERISA Affiliates that could reasonably be expected to have a Material Adverse Effect. (l) Since the date of the Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan of any Obligor or any of its ERISA Affiliates, there has been no change in the funding status of any such Plan except to the extent that such change is not reasonably expected to have a Material Adverse Effect. - 84 - (m) Neither any Obligor nor any of its ERISA Affiliates has incurred or is reasonably expected to incur any withdrawal liability to any Multiemployer Plan except to the extent such withdrawal liability is not reasonably expected to have a Material Adverse Effect. (n) Neither any Obligor nor any of its ERISA Affiliates has been notified by the sponsor of a Multiemployer Plan of any Obligor or any of its ERISA Affiliates that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA. (o) As of the Restatement Date, the aggregate annualized cost on a pay-as-you-go basis (including, without limitation, the cost of insurance premiums) with respect to post-retirement benefits under welfare plans (other than post-retirement benefits required to be provided by Section 4980B of the Code or applicable state law) for which Terra and its Subsidiaries is liable does not exceed $1,000,000. (p) Neither the business nor the properties of any Obligor or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect. (q) Except as set forth on Part I of Schedule 4.01(q) and except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect, the operations and properties of each Obligor and each of its Subsidiaries comply in all material respects with all Environmental Laws, all necessary Environmental Permits have been obtained and are in effect for the operations and properties of each Obligor and its Subsidiaries, each Obligor and its Subsidiaries are in compliance in all material respects with all such Environmental Permits, and no circumstances exist that could (i) form the basis of an Environmental Action against any Obligor or any of its Subsidiaries or (ii) cause any such property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law. (r) Except as set forth on Part II of Schedule 4.01(q) and except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect, as of the Restatement Date none of the properties of any - 85 - Obligor or any of its Subsidiaries is listed or proposed for listing on the National Priorities List under CERCLA or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the Environmental Protection Agency or any analogous state list of sites requiring investigation or cleanup, and no underground storage tanks, as such term is defined in 42 U.S.C. 6901, are located on any property of any Obligor or any of its Subsidiaries. (s) Except as set forth on Part III of Schedule 4.01(q) and except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect, as of the Restatement Date neither any Obligor nor any of its Subsidiaries has been notified in writing by any federal, state or local governmental agency or any other Person that any Obligor or any of its Subsidiaries is potentially liable for the remedial or other costs with respect to treatment, storage, disposal, release, arrangement for disposal or transportation of any Hazardous Substance generated by any Obligor or any of its Subsidiaries, and Hazardous Materials have not been generated, used, treated, handled, stored or disposed of on, or released or transported to or from, any property of such Obligor (or, to its knowledge, any adjoining property) except in compliance in all material respects with all Environmental Laws and Environmental Permits, and all other wastes generated at any such properties by any Obligor or any of its Subsidiaries (and their respective agents, employees and contractors) have been disposed of in compliance with all Environmental Laws and Environmental Permits. (t) Each Obligor and each of its Subsidiaries has filed, has caused to be filed or has been included in, all federal and state income tax returns and all other material tax returns (federal, state, local and foreign) required to be filed and has paid (or is contesting in good faith by appropriate proceedings) all taxes shown thereon to be owing, together with applicable interest and penalties. (u) Set forth on Schedule 4.01(u) is a complete and accurate list, as of the date hereof, of each taxable year of Terra for which federal income tax returns have been filed and for which the expiration of the applicable statute of limitations for assessment or collection has not occurred by reason of extension or otherwise (an "Open Year"). (v) As of the Restatement Date, there are no adjustments to the federal income tax liability of Terra - 86 - proposed by the Internal Revenue Service with respect to Open Years. No issues have been raised by the Internal Revenue Service in respect of Open Years that, in the aggregate, could reasonably be expected to have a Material Adverse Effect. (w) Neither any Obligor nor any of its Subsidiaries is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. Neither any Obligor nor any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrowers, nor the consummation of the other transactions contemplated hereby, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (x) Each of Terra and the Company (both individually and collectively with their respective Subsidiaries) is Solvent. (y) Set forth on Part I of Schedule 4.01(y) is a complete and accurate list, as of the Restatement Date, of all existing Debt of each Obligor, showing as of the Restatement Date (i) the principal amount outstanding thereunder, (ii) whether such Debt is secured by any Lien and (iii) the aggregate principal amount of such Debt scheduled to be paid during each fiscal year of Terra to and including the fiscal year of Terra in which the Terra Commitment Termination Date is scheduled to occur. Section 4.02. Representations and Warranties of each Lender. Each Lender hereby represents and warrants that such Lender, in good faith, has not relied upon Margin Stock as collateral for the Obligations of the Obligors hereunder and under the other Loan Documents. ARTICLE V COVENANTS OF TERRA Section 5.01. Affirmative Covenants. So long as any principal of or interest on any Advance or any other amount payable under this Agreement shall remain unpaid, any Letter of - 87 - Credit shall be outstanding or any Lender shall have any Commitment hereunder, Terra will, and will cause each of the Obligors to: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970 (except to the extent that non- compliance with any thereof could not reasonably be expected to have a Material Adverse Effect). (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided that neither such Obligor nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained to the extent required by GAAP, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) Compliance with Environmental Laws. Comply, and cause each of its Subsidiaries and all lessees and other Persons occupying its properties to comply, with all Environmental Laws and Environmental Permits applicable to its operations and properties; obtain and renew, and cause each of its Subsidiaries to obtain and renew, all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided that (i) neither such Obligor nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves to the extent required by GAAP are being maintained with respect to such circumstances and (ii) no such compliance with laws and permits, obligation to obtain or renew permits or obligation to undertake any such investigation, study, sampling, testing, removal, remedial or other action shall be required hereunder to the extent no - 88 - Material Adverse Effect could reasonably be expected to result from any failure to so comply, obtain, renew or undertake, either individually or in the aggregate. (d) Maintenance of Insurance. Maintain, and cause each of its Material Subsidiaries to maintain, with responsible and reputable insurance companies or associations, insurance, including business interruption insurance with respect to each manufacturing plant, in such amounts and covering such risks as is usually carried by companies engaged in similar businesses. (e) Preservation of Corporate Existence, Etc. Subject to Section 5.02(d) and (e), preserve and maintain, and cause each of its Material Subsidiaries to preserve and maintain, its corporate or partnership existence, rights (charter and statutory) and franchises; provided that: (1) from and after the BMLP Restructuring Time, BMLP may be dissolved on the terms and conditions set forth in the BMLP Partnership Agreement as in effect at the BMLP Restructuring Time; and (2) neither any Obligor nor any of its Subsidiaries shall be required to preserve any right or franchise if the Board of Directors of such Obligor or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of such Obligor or such Subsidiary, as the case may be, and that the loss thereof will not have a Material Adverse Effect. (f) Visitation Rights. At any reasonable time and as may be reasonably requested from time to time, permit the Administrative Agent, any Issuing Bank or any of the Lenders or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, such Obligor and any of its Subsidiaries (in the presence of an appropriate officer or representative of the relevant Obligor), and to discuss the affairs (including, but not limited to, the compliance by such Obligor and its Subsidiaries with all Environmental Laws), finances and accounts of such Obligor and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants. (g) Preparation of Environmental Reports. Upon either (i) the acquisition of any real property by such Obligor or any of its Subsidiaries the purchase price of which exceeds - 89 - $1,000,000 or (ii) the occurrence and during the continuance of a Default or Event of Default arising under Section 5.01(c), and in each case at the written request of the Administrative Agent, such Obligor shall provide to the Administrative Agent within a reasonable time after such acquisition or request, as the case may be, at the expense of such Obligor, an environmental site assessment report for the acquired property (in the case of an acquisition as described in clause (i)) or for any properties of such Obligor which are the subject of any such Default or Event of Default (in the case of an event as described in clause (ii)) prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent, indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties (provided that if such Obligor, in the exercise of its reasonable judgment, determines not to have such an environmental site assessment report prepared, such Obligor shall instead deliver to the Administrative Agent a copy of such Obligor's internal site assessment report relating to relevant property). Without limiting the generality of the foregoing, if the Administrative Agent determines at any time that a material risk exists that any such report will not be provided within a reasonable time following such request, the Administrative Agent may retain an environmental consulting firm to prepare such report at the expense of such Obligor, such Obligor and each of its Subsidiaries hereby granting to the Administrative Agent, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto its properties to undertake such an assessment. (h) Keeping of Books. Keep, and cause each of its Material Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of such Obligor and each such Subsidiary in accordance with GAAP. (i) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Material Subsidiaries to maintain and preserve, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. - 90 - (j) Compliance with Terms of Leaseholds. Make all payments and otherwise perform all obligations in respect of all leases of real property, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or canceled, except to the extent any such lease is no longer used or useful in the conduct of its business or which, in the exercise of the reasonable judgment of the relevant Obligor, is to be refinanced and except to the extent failure to comply with the foregoing would not have a Material Adverse Effect, and cause each of its Material Subsidiaries to do so. (k) Performance of Sale of Business Agreement, Etc. Perform and observe in all material respects all of the terms and provisions of the Sale of Business Agreement (and each document relating thereto) to be performed or observed by it, maintain the Sale of Business Agreement (and each such other document) in full force and effect and enforce in all material respects the Sale of Business Agreement (and each such other document) in accordance with its terms. (l) Performance and Compliance with Material Contracts. Perform and observe, and cause each of its Subsidiaries to perform and observe, all the terms and provisions of each Material Contract to be performed or observed by it, maintain each such Material Contract in full force and effect and enforce each such Material Contract in accordance with its terms, except to the extent the failure to do any of the foregoing could not reasonably be expected to have a Material Adverse Effect. (m) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of its Affiliates on terms that are fair and reasonable and no less favorable to such Obligor or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person that is not an Affiliate; provided that this Section 5.01(m) shall not be applicable to: (i) transactions between such Obligor and wholly owned Subsidiaries of Terra or between wholly owned Subsidiaries of Terra unless otherwise prohibited by this Agreement; (ii) compensation paid for services rendered by any director or officer of such Obligor or any director or officer of a Subsidiary of such Obligor serving at the direction or request of such Obligor to the extent - 91 - such compensation is determined in the good faith exercise of business judgment by the Board of Directors of such Obligor to be reasonable and appropriate to the functions of such office; (iii) transactions under Intercompany Receivables Facilities; (iv) Investments in Permitted JVs to the extent permitted hereunder and general and administrative and purchasing services for Permitted JVs (including inventory purchasing arrangements, whether for inventory manufactured and/or produced by Terra or any of its Subsidiaries or purchased from third parties, vendors or suppliers and including leasing and subleasing of furnishings, fixtures and equipment); (v) transactions among members of the BMLP Group; (vi) transactions under the Management Agreements; and (vii) transactions under the Terra U.K. Offtake Agreement. (n) Further Assurances. (i) Promptly upon reasonable request by the Administrative Agent or any Lender or Issuing Bank through the Administrative Agent, correct, and cause each Subsidiary promptly to correct, any material defect or error that may be discovered in any Loan Document, which material defect or error is the result of any untrue statement of material fact under any Loan Document or the omission to state a material fact necessary to make the statements made therein not misleading, or in the execution, acknowledgment or recordation of any Loan Document, and (ii) promptly upon reasonable request by the Collateral Agent, the Administrative Agent or any Lender or Issuing Bank through the Administrative Agent do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, and cause any such Subsidiary promptly to do, execute, acknowledge, deliver, record, re-record, file, re- file, register and re-register, any and all such further acts, deeds, conveyances, pledge agreements, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as the Collateral Agent, the Administrative Agent or any Lender or Issuing Bank through the Administrative Agent may reasonably require from time to time in order to (A) subject to the Liens created by any of - 92 - the Security Documents any of such Obligor's and its Subsidiaries' properties, rights or interests covered or now or hereafter intended to be covered by any of the Security Documents, (B) perfect and maintain the validity, effectiveness and priority of any of the Security Documents and the Liens intended to be created thereby and (C) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Collateral Agent the rights granted or now or hereafter intended to be granted to it under any Security Document or under any other instrument executed in connection with any Security Document to which such Obligor, any other Obligor or any of their respective Subsidiaries is or may become a party. (o) Ownership of the Obligors. Take, and will cause each of its Subsidiaries to take, such action from time to time as shall be necessary to ensure that: (i) Terra will at all times own, beneficially and of record, all of the issued and outstanding capital stock (other than directors' qualifying shares) of Terra Capital Holdings; (ii) Terra Capital Holdings will at all times own, beneficially and of record, all of the issued and outstanding capital stock (other than directors' qualifying shares) of the Company, and will own no other property (other than (x) cash, (y) other property incidental to its business as a holding company and (z) capital stock of, or other ownership interests in, Receivables Subsidiaries); (iii) the Company will at all times own: (1) beneficially and of record, all of the issued and outstanding capital stock (other than directors' qualifying shares) of TI, BMCH, TMC and TNC and (2) no other property, other than: (A) cash and Permitted Investments, (B) Receivables of one or more of its Subsidiaries transferred to it, and capital stock of, or other ownership interests in, Receivables Subsidiaries, (C) Senior Preference Units purchased pursuant to the SPU Redemption, and capital - 93 - stock of a wholly owned Subsidiary of the Company organized for the purpose of holding such Senior Preference Units, (D) other property incidental to its business as a holding company, (E) other property used solely in connection with its performance of services pursuant to the terms of the Management Agreements and (F) other Investments permitted to be held by the Company pursuant to Section 5.02(f) (to the extent such Investments, in the case of those made under clauses (iv), (v) and (vi) of said Section 5.02(f), are subject to the Lien of the Security Documents); (iv) except to the extent necessary to give effect to the BMLP Restructuring, BMCH will at all times own, beneficially and of record, a 99% limited partnership interest in BMLP; and at all times BMCH will own no other property (other than cash and other property incidental to its business as a holding company); (v) except to the extent necessary to give effect to the BMLP Restructuring, TMC will at all times own, beneficially and of record, a 1% general partnership interest in BMLP; and at all times TMC will own no other property (other than cash and other property incidental to its business as a holding company); (vi) without limiting clauses (iv) and (v) above, TMC and BMCH will at all times own, beneficially and of record, all of the partnership interests in BMLP other than the BMLP Class A Limited Partnership Interest; (vii) Terra Canada will at all times own, beneficially and of record, all of the capital stock of Terra U.K.; (viii) TNC will own no property other than cash and: - 94 - (v) ownership interests of TNCLP and its successors and a general partnership interest in TNLP and its successors; (w) capital stock of a wholly owned Subsidiary of TNC organized for the purpose of holding Senior Preference Units; (x) equipment and other property principally used in connection with TNC's performance of general and administrative services (including, without limitation, property related to incentive compensation plans, deferred compensation plans and other funded benefit plans) for Terra and its Subsidiaries; (y) raw materials and other property used in the manufacture, storage, sale and distribution of nitrogen and methanol products by Terra and its Subsidiaries in the ordinary course of business, provided that the aggregate book value of all tangible property of TNC referred to in this paragraph (y) shall not at any time exceed $10,000,000; and (z) other property incidental to its business as a holding company and a general partner; and (ix) TNCLP will at all times own no property other than ownership interests of TNLP and its successors (other than cash, Senior Preference Units purchased pursuant to the SPU Redemption and other property incidental to its business as a holding company). In the event that any such additional shares of stock or other ownership interests shall be issued to an Obligor by any Subsidiary thereof, the respective Obligor agrees forthwith to deliver to the Collateral Agent pursuant to the Security Documents the certificates (if any) evidencing such ownership interests accompanied by undated powers executed in blank and to take such other action as the Collateral Agent or the Administrative Agent shall request to perfect the security interest created therein pursuant to the Security Documents. Without limiting the foregoing, neither TNCLP nor TNLP shall convert to a corporate form except pursuant to the SPU Redemption. - 95 - (p) Delivery of Management Agreements. On or prior to the date of execution of each Management Agreement, notify the Administrative Agent thereof (and the Administrative Agent shall notify the Lenders thereof promptly) and shall deliver to the Administrative Agent a certified copy thereof (each such Management Agreement to be in form and substance reasonably satisfactory to the Administrative Agent). Promptly following each amendment, waiver and consent relating to a Management Agreement (but subject to Section 5.02(p)), Terra shall give the Administrative Agent notice thereof (and the Administrative Agent shall notify the Lenders thereof promptly), and shall deliver to the Administrative Agent a certified or conformed copy of each such amendment, waiver and consent. Section 5.02. Negative Covenants. So long as any principal of or interest on any Advance or any other amount payable under this Agreement shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, Terra will not, and will not permit any of its Material Subsidiaries to: (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Material Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file, or permit any of its Subsidiaries to sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement that names such Obligor or any of its Subsidiaries as debtor, or sign, or permit any of its Subsidiaries to sign, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, excluding from the operation of the foregoing restrictions the following: (i) Liens created by the Loan Documents; (ii) Permitted Liens; Liens in favor of banks which arise under Article 4 of the Uniform Commercial Code on items in collection and documents relating thereto and proceeds thereof; and Liens in favor of customs and revenue authorities arising as a matter of law to secure customs duties in connection with the importation of goods; (iii) Liens existing on the Restatement Date and described on Schedule 5.02(a)(iii); - 96 - (iv) Liens on cash (in an aggregate amount, for Terra and its Subsidiaries taken as a whole, not exceeding $15,000,000 at any time) to secure the Obligations in respect of letters of credit permitted under Section 5.02(b)(1)(iv); (v) Liens on Receivables and incidental property of the Company or any of its Subsidiaries to secure such Person's Obligations under the Intercompany Receivables Facilities and/or under the Permitted Receivables Facilities; (vi) Purchase money Liens upon or in property acquired or held by Terra or such Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure Debt (including, without limitation, commercial letters of credit) incurred solely for the purpose of financing the acquisition, construction or improvement of any such property to be subject to such Liens, or Liens existing on any such property at the time of acquisition (and not created in anticipation thereof), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided that (x) no such Lien shall extend to or cover any property other than the property being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and (y) the Debt secured by any such Lien shall at no time exceed 100% of the fair market value (as determined in good faith by the Senior Financial Officer) of such property at the time it was acquired; (vii) Any Lien arising after the Restatement Date in favor of any state of the United States of America or any agency, political subdivision or instrumentality thereof, upon any pollution abatement or control facilities being financed in compliance with Section 103(c)(4)(F) of the Internal Revenue Code of 1986, as in effect on the date of this Agreement (or any successor statute which is similar in all substantive respects), the interest payable in respect of which financing is excluded from gross income under said Section 103, provided that (x) the Debt secured by such Lien is not prohibited by clause (b)(1) of this Section 5.02, and (y) such Lien does not cover any other property at any time owned by Terra or any Material Subsidiary; - 97 - (viii) Liens on property that is the subject of a capital lease to secure the performance of the Capital Lease Obligations relating thereto; (ix) Liens upon property of a Person that becomes a Subsidiary of Terra after the Restatement Date, each of which Liens existed on such property before the time such Person became a Subsidiary of Terra and was not created in anticipation thereof; provided that no such Lien shall extend to or cover any property of Terra or any of its Subsidiaries other than the property subject to such Liens at the time such Person became a Subsidiary of Terra and improvements thereon; (x) Leases or subleases, and licenses or sublicenses, granted to third Persons not interfering in any material respect with the business of Terra or such Subsidiary; (xi) Easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of Terra or such Subsidiary; (xii) Liens arising from Uniform Commercial Code financing statements regarding operating leases permitted by this Agreement; (xiii) Any interest or title of a lessor or sublessor or licensor under any lease or license permitted or not prohibited by this Agreement; (xiv) Additional Liens upon property created after the Restatement Date, provided that the aggregate Debt secured thereby and incurred on and after the Restatement Date shall not exceed $10,000,000 in the aggregate at any one time outstanding; (xv) Liens on property constituting all or part of the Ammonia Loop incurred in connection with the construction thereof; (xvi) The replacement, extension or renewal of any Lien permitted by clauses (iii), (iv), (v), (ix), (xiv) and (xv) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the principal amount or change in any direct or contingent obligor) of the Debt secured thereby; - 98 - (xvii) Liens on property of Terra Canada to secure the Terra Canada Credit Facility; (xviii) Liens on property of Terra U.K. to secure the Terra U.K. Loan; (xix) Liens securing obligations of the Company and its Subsidiaries under Hedge Agreements permitted by Section 5.02(c); and (xx) Liens on property of Terra and its Subsidiaries (other than (1) property subject to the Liens under the Security Documents and (2) property subject to any Liens securing Debt of Terra or such Subsidiaries) in favor of Terra or any of its Subsidiaries to secure Debt owing to Terra or any of its Subsidiaries. (b) Debt. (1) Generally. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt other than: (i) Debt under the Loan Documents; (ii) Debt in respect of Hedge Agreements permitted by Section 5.02(c); (iii) Debt in respect of unsecured trade payables (and Obligations in respect of letters of credit supporting such trade payables); (iv) Debt (including, without limitation, Obligations in respect of letters of credit) not secured by any Lien (other than Liens permitted by Section 5.02(a)(iv)), so long as, on the date of the incurrence thereof, the aggregate principal amount (or the U.S. Dollar equivalent of the aggregate principal amount) of all Debt of Terra and its Subsidiaries on a Consolidated basis (as reasonably determined by the Senior Financial Officer on and as of the date of such incurrence) then outstanding under this clause (iv) (including, without limitation, the Debt proposed to be incurred on such date) does not exceed $50,000,000; (v) Obligations of the Company and its Subsidiaries under the Intercompany Receivables Facilities and under the Permitted Receivables Facilities; - 99 - (vi) Debt securities of Terra issued in a public offering pursuant to an effective registration statement the terms of which (including, without limitation, as to interest rates, amortization (provided that in any event no payments of principal, redemptions, sinking fund payments or the like shall be scheduled to be made before the Terra Commitment Termination Date), redemption, average life to maturity, covenants, events of default and other terms) are reasonably satisfactory to the Required Lenders; (vii) Debt outstanding (or committed to be made available) as at September 30, 1997 and set forth on Schedule 4.01(y); (viii) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (ix) Intercompany Debt permitted under Section 5.02(b)(2); (x) Debt secured by Liens permitted under Section 5.02(a)(vi); purchase money Debt secured by Liens permitted under 5.02(a)(ix); and Debt in an aggregate principal amount not exceeding $10,000,000 at any one time outstanding secured by Liens permitted under Section 5.02(a)(xiv); (xi) Acquired Debt in an aggregate principal amount not exceeding $50,000,000 at any one time outstanding; (xii) 1995 Terra Debt (and Debt of Terra evidenced by instruments issued in exchange for such Debt), and renewals, refinancings and replacements thereof (without increase in the principal amount or change in any direct or contingent obligor, and on such other terms and conditions as shall be no less favorable to Terra and its Subsidiaries than the Debt being so renewed, refinanced or replaced); (xiii) renewals, refinancings and replacements of the Debt permitted under clauses (vi), (vii), (x) and (xi) above and clause (xviii) below (without increase in the principal amount or change in any direct or contingent obligor and not including any Debt to be paid or prepaid with the proceeds of Advances); - 100 - (xiv) if at any time Britz LLC is a Subsidiary of Terra, Capital Lease Obligations owing by Britz LLC to BFI with respect to fixtures, furniture, equipment and other Property in an aggregate principal amount presently contemplated to be approximately $25,400,000 but in no event exceeding $30,000,000, and (regardless of whether Britz LLC is a Subsidiary of Terra) the Guarantee of such Obligations by Terra or one or more of its Subsidiaries; (xv) Debt of Terra (or one or more of its Subsidiaries) in a principal amount (contemplated to be approximately $20,000,000, subject to adjustment in increases or decreases in BFI's capital account in Britz LLC) as required under the put/call provisions of the Britz JV Agreement, but in any event not exceeding $30,000,000, owing under one or more promissory notes payable by Terra or one or more of its Subsidiaries to BFI and/or one or more of BFI's Affiliates as consideration for the transfer by BFI to TI or one or more of its Subsidiaries of the membership interests in Britz LLC not theretofore held by TI and its Subsidiaries, and the Guarantee of such Debt by Terra or one or more of its Subsidiaries; (xvi) Obligations of TI in a maximum amount not exceeding $5,000,000 owing to BFI and/or one or more of BFI's Affiliates under one or more consulting or service agreements, and the Guarantee of such Obligations by Terra or one or more of its Subsidiaries; (xvii) Debt of Terra to former shareholders of Huntting Elevator Company in an aggregate principal amount not exceeding $7,000,000; (xviii) Debt of Terra Canada under the Terra Canada Credit Facility in an aggregate principal amount not at any time exceeding $125,000,000, and Guarantees thereof by Terra and one or more of its Subsidiaries; (xix) [intentionally omitted]; (xx) unsecured Debt of Terra U.K. in an aggregate principal amount not at any time exceeding (Pounds)7,000,000; and (xxi) unsecured Debt of Terra Canada in an aggregate principal amount not at any time exceeding - 101 - $10,000,000 (or its equivalent in Canadian Dollars at the time of borrowing thereof). (2) Intercompany Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Intercompany Debt other than: (i) Intercompany Debt outstanding on December 31, 1997; (ii) Debt of the Company to BMLP, and Debt of one or more of the Company's Subsidiaries to BMLP that is Guaranteed by the Company (collectively, "BMLP Demand Loans"), provided that, if the aggregate principal amount of BMLP Demand Loans outstanding as at the end of any month ending on or after the BMLP Restructuring Time exceeds $145,000,000, the Company shall repay (or cause to be repaid) BMLP Demand Loans in an aggregate amount equal to such excess as soon as reasonably possible and in any event within 30 days after the end of such month; (iii) from and after the BMLP Restructuring Time, Debt of the Company to BMLP in an aggregate principal amount not at any time exceeding $5,000,000 evidenced by a single promissory note payable to BMLP (such note, as from time to time amended, the "Terra Capital Note"), provided that such Debt reevidences an equivalent principal amount of accounts receivables owing by the Company to BMLP at the BMLP Restructuring Time; (iv) Debt of Terra U.K. to Terra U.K. Holdings in an aggregate principal amount not at any time exceeding $175,000,000 (the "Terra U.K. Loan"), provided that the proceeds of such Debt are used solely to finance part of the purchase price of the U.K. Nitrogen Acquisition; (v) Obligations under the U.K. Offtake Agreement; (vi) additional Intercompany Debt (other than Debt of members of the Terra Canada Group and, from and after the BMLP Restructuring Time, Debt of members of the BMLP Group); (vii) Intercompany Debt owing by members of the BMLP Group to other members of the BMLP Group; - 102 - (viii) Intercompany Debt owing by members of the Terra Canada Group to other members of the Terra Canada Group; (ix) additional Intercompany Debt of Terra Canada and Terra U.K. in an aggregate principal amount not at any time exceeding (1) during the period ending on December 31, 1998, $60,000,000, and (2) thereafter, $50,000,000; and (x) additional Intercompany Debt. (c) Hedge Agreements. Enter into or permit to be outstanding, or permit any of its Subsidiaries to enter into or permit to be outstanding, any Hedge Agreement other than: (1) Hedge Agreements entered into prior to the Restatement Date and identified on Schedule 5.02(c); (2) the Methanol Hedging Agreement; (3) the Terra U.K. Offtake Agreement; (4) the Ammonium Nitrate Hedging Agreement; and (5) other Hedge Agreements entered into in the ordinary course of business and in a reasonably prudent manner and not for speculative purposes, in each case in order to protect against the fluctuation in interest rates, foreign exchange rates or commodity prices. (d) Mergers, Etc. Merge with or into or consolidate with or into any Person, or permit any of its Material Subsidiaries to do so, except that: (i) if no Default or Event of Default shall have occurred and be continuing or would result therefrom, (x) any Subsidiary of the Company may be merged or consolidated with or into the Company (provided that the Company shall be the continuing or surviving corporation) or any other wholly owned Subsidiary of the Company and (y) the Company or any of its Subsidiaries may merge or consolidate with any other Person; provided that (1) in the case of a merger or consolidation of the Company, the Company is the continuing or surviving corporation, and (2) in any other case, the continuing or surviving corporation is a wholly owned Subsidiary of the Company; - 103 - (ii) if no Default or Event of Default shall have occurred and be continuing or would result therefrom, (x) any Outside Subsidiary may be merged or consolidated with or into Terra (provided that Terra shall be the continuing or surviving corporation) or any other wholly owned Outside Subsidiary of Terra and (y) Terra or any of its Outside Subsidiaries may merge or consolidate with any other Person (other than Terra Capital Holdings or any of its Subsidiaries); provided that (1) in the case of a merger or consolidation of Terra, Terra is the continuing or surviving corporation, and (2) in any other case, the continuing or surviving corporation is a wholly owned Outside Subsidiary of Terra; and (iii) nothing in this Section 5.02(d) shall be deemed to prohibit the U.K. Nitrogen Acquisition. (e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise dispose of (including, without limitation, in a sale-leaseback transaction), or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of (including, without limitation, in a sale-leaseback transaction), any of its assets, including (without limitation) any manufacturing plant or substantially all assets constituting the business of a division, branch or other unit operation, except: (i) sales of inventory in the ordinary course of its business; (ii) sales or other dispositions of obsolete or worn-out equipment no longer used or useful in its business; (iii) dispositions of assets by one member of the Specified Group to another member of the Specified Group (where "Specified Group" means, collectively, the Company and each of its wholly owned Subsidiaries); (iv) (X) to the extent not permitted pursuant to clause (iii) above, dispositions of assets by one Obligor to another and by an Obligor to one of its or any other Obligor's wholly owned Subsidiaries, (Y) other Dispositions to the extent the Net Available Proceeds thereof are invested or committed to be invested in the business of the Company and its Subsidiaries within one year from the date of the relevant Disposition, and (Z) other Dispositions in an aggregate amount not to exceed $50,000,000 in any - 104 - period of 12 consecutive months; provided that, in the case of all Dispositions under this clause (iv) (A) each such asset is sold for an amount not less than its fair market value, (B) no such asset may be sold to the extent that it is, individually or when considered with any other asset or assets sold or expected to be sold in such period (but taking into account property acquired in exchange for, or to be acquired substantially contemporaneously with the disposition of, the assets so sold or expected to be sold), material to the business, assets, operations, properties or financial condition of Terra and its Subsidiaries taken as a whole, and (C) the Net Available Proceeds of such Disposition are applied in accordance with and to the extent required by Section 2.05(b), and to the extent the assets subject to the Disposition constituted part of the Collateral, all other cash and non-cash proceeds of such Disposition become subject to the Lien created by the Security Documents in accordance with the terms thereof; (v) nothing in this Section 5.02(e) shall prohibit the Company or any of its Subsidiaries from selling Receivables (x) under any Permitted Receivables Facility (subject to the restrictions specified in the definition of said term) or (y) under any Intercompany Receivables Facility; (vi) sales, transfers and other dispositions of assets to Britz LLC so long as such transactions are (if at the time Britz LLC is not a wholly owned Subsidiary of the Company) in the ordinary course of business and on ordinary business terms; (vii) transfers of assets by Terra or one of the Outside Subsidiaries, directly or indirectly, to a wholly owned Subsidiary of Terra (a "Recipient") so long as the consideration paid by such Recipient (if any) for all such assets does not exceed the fair market value of such property; (viii) transfers by TI of the Blytheville Assets to Farmland JV in accordance with Section 5.02(f)(xviii)(x); (ix) from and after the BMLP Restructuring Time, transfers of assets by BMLP or any of its wholly owned Subsidiaries to BMLP or any of its wholly owned Subsidiaries; - 105 - (x) from and after the BMLP Restructuring Time, (A) transfers of assets by Terra or one of its wholly owned Subsidiaries to BMLP or a Subsidiary thereof so long as the consideration paid to Terra and its wholly owned Subsidiaries for all such assets is not less than the fair market value of such property; and (B) transfers of assets by BMLP or a Subsidiary thereof to Terra or one of its wholly owned Subsidiaries so long as the consideration paid by Terra and its wholly owned Subsidiaries for all such assets does not exceed the fair market value of such property; (xi) nothing in this Section 5.02(e) shall prohibit the BMLP Restructuring; and (xii) additional sales, leases, transfers and other dispositions of property by Terra and its Subsidiaries (other than (1) property subject to the Liens under the Security Documents and (2) property subject to any Liens securing Debt of Terra or such Subsidiary) to Terra or any of its Subsidiaries. (f) Investments. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment, other than: (i) Investments by Terra and its Subsidiaries in cash and Permitted Investments; (ii) Investments constituting (A) operating deposit accounts with banks and (B) Receivables arising in the ordinary course of business on ordinary business terms, in each case in accordance with, and subject to the terms of, the Security Documents; (iii) Investments described in Schedule 5.02(f); (iv) Investments arising solely by reason of any merger or consolidation expressly permitted by Section 5.02(d)(i)(x) or 5.02(d)(ii)(x); (v) Subject to the terms set forth on Exhibit G, Specified Acquisitions to the extent permitted to be made under Section 5.02(h); (vi) Investments consisting of acquisitions of property (including, without limitation, ownership interests in any Person) by Terra or any of its Subsidiaries so long as (x) the aggregate fair market value of all such property acquired in any fiscal year of Terra shall not exceed $50,000,000, and (y) the - 106 - consideration paid by Terra and its Subsidiaries for each such acquisition consists solely of equity securities issued by Terra; (vii) Investments in respect of Hedge Agreements permitted by Section 5.02(c); (viii) Investments in Lynn Seeds, Inc. in an aggregate amount not exceeding $4,000,000; (ix) Investments in Agro-Terra Internacional, S.A. de C.V., a joint venture between TI and Grupo Acerero del Norte, S.A. de C.V., in an aggregate amount not exceeding $5,000,000; (x) Investments made pursuant to Terra's Supplemental Deferred Compensation Plan and its Excess Benefit Plan, each as in effect from time to time; (xi) Investments by Terra consisting of Terra Stock Repurchases; (xii) Investments by Terra and its Subsidiaries consisting of the purchase, redemption or other acquisition of Senior Preference Units pursuant to the SPU Redemption; (xiii) Debt (including Guarantees of Debt) constituting Investments, to the extent such Debt is permitted under Section 5.02(b); (xiv) Investments by the Company and its Subsidiaries in members of the Terra Canada Group, and Investments by the Company and its Subsidiaries in members of the BMLP Group, in each case outstanding on the Restatement Date; (xv) capital contributions to Receivables Subsidiaries; (xvi) (x) working capital advances or loans made by Terra or one or more of its Subsidiaries to Britz LLC from time to time to the extent required or permitted pursuant to the terms of the Britz Documents; and (y) loans, advances and capital contributions made by Terra or one or more of its Subsidiaries to Britz LLC from time to time to finance the purchase by Britz LLC of furnishings, fixtures and equipment, real estate and/or equity interests in entities engaged in the same or allied lines of business in an aggregate principal - 107 - amount not to exceed $10,000,000 at any one time outstanding; (xvii) the purchase and sale by Terra of one or more Specified Call Options (each relating to the same U.S. Stock Index and entered into with the same counterparty) having an aggregate net cost to Terra and its Subsidiaries of not more than $20,000,000, which purchases and sales when taken together are (in the reasonable determination of Terra) reasonably prudent investments to be made for an appropriate business purpose; and (xviii) Investments by TI in Farmland JV constituting (x) the acquisition of not less than 50% of the ownership interests of Farmland JV in exchange for the contribution of the Blytheville Assets to Farmland JV; and (y) loans and net capital contributions made by Terra or one or more of its Subsidiaries to Farmland JV from time to time, in an aggregate principal amount not to exceed $10,000,000 at any one time outstanding, to finance working capital needs of Farmland JV and the purchase by Farmland JV of furnishings, fixtures and equipment, real estate and/or equity interests in entities engaged in the same or allied lines of business; (xix) Investments by Terra Canada and its Subsidiaries in Subsidiaries of Terra Canada; (xx) Investments by BMLP and its Subsidiaries in Subsidiaries of BMLP; (xxi) Investments by Terra and its Subsidiaries in members of the BMLP Group (including, without limitation, capital contributions by the Company, TMC and BMCH to BMLP in respect of Extraordinary Expenses pursuant to the terms of the BMLP Partnership Agreement) in an aggregate amount not exceeding $30,000,000; provided that: (1) not more than $25,000,000 of such amount may be capital contributions made by the Company, TMC and BMCH to BMLP in respect of such Extraordinary Expenses; and (2) the aggregate amount of insurance, indemnification, guarantee and other similar third-party arrangements resulting from or relating to Extraordinary Expenses received by - 108 - BMLP and returned to the Company or any of its Subsidiaries (other than members of the BMLP Group) shall be deemed to reduce, pro tanto, the amount of capital contributions made by the Company and such Subsidiaries in respect of Extraordinary Expenses; (xxii) additional Investments by Terra and its Subsidiaries in members of the Terra Canada Group in an aggregate amount not exceeding $10,000,000; (xxiii) additional Investments by Terra and its Subsidiaries in Subsidiaries of Terra (other than in members of the Terra Canada Group and members of the BMLP Group); (xxiv) additional Investments by Terra and its Subsidiaries in Terra or any of its Subsidiaries. (g) Payments to Minority Interests. Pay or cause to be paid, or permit any of its Subsidiaries to pay or cause to be paid, to any holder of a minority interest any amount with respect to such minority interest in excess of the amount to which such holder is legally entitled, unless Terra or such Subsidiary simultaneously receives payment in an amount equal to or greater than its ratable share of the amount of the related distribution (determined in accordance with the respective interests then held by Terra and such Subsidiary, on the one hand, and such holder, on the other), provided that the following will not constitute a breach of this Section 5.02(g): (1) the SPU Redemption; (2) the redemption in whole, but not in part, of the BMLP Class A Limited Partnership Interest in accordance with the terms of the BMLP Partnership Agreement and the BMLP Support and Option Agreement; and (3) payments permitted to be made pursuant to the terms of the BMLP Partnership Agreement and the BMLP Support and Option Agreement. (h) Restricted Transactions. Make any Capital Expenditures or Specified Acquisitions, except for: (A) Restricted Transactions for Terra and its Subsidiaries on a Consolidated basis, in any fiscal year (the "Subject Fiscal Year") in an aggregate amount - 109 - not exceeding the sum of (i) $150,000,000 plus (ii) for fiscal years beginning January 1, 1996 and thereafter, the lesser of: (x) an amount equal to the unused portion (if any) of the amount available for Restricted Transactions pursuant to paragraph (i) of this Section 5.02(h)(A) for the prior fiscal year (provided that this clause (x) shall be determined, with respect to all periods prior to the Restatement Date, as provided in the Existing Credit Agreement); and (y) $100,000,000; provided that, at the time of each Other Distribution, the amount of such Other Distribution shall reduce (but not below zero) the amount remaining available for Restricted Transactions pursuant to this clause (A) for the then-current fiscal year by the amount of such Other Distribution; and (B) Capital Expenditures in connection with the construction of the Ammonia Loop in an aggregate amount not exceeding $60,000,000. (i) Change in Nature of Business. Make, or permit any of its Material Subsidiaries to make, any material change in the nature of the business of Terra and its Subsidiaries taken as a whole as carried on at the Restatement Date. (j) Charter Amendments. Amend, or permit any of its Material Subsidiaries to amend, its articles of incorporation or bylaws, or amend any partnership agreement to which it or any of its Subsidiaries is a party (except for (1) amendments to authorize the issuance of preferred or common stock and (2) in the case of BMLP, the amendment and restatement of its agreement of limited partnership at the BMLP Restructuring Time), in each case to the extent any such amendment could reasonably be expected to have a Material Adverse Effect. (k) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required or permitted by generally accepted accounting principles in effect in the United States; provided that in the event of any change in generally accepted accounting principles from the date of the financial statements referred to in Section 4.01(f) and upon delivery of any - 110 - financial statement and accompanying certificate of compliance required to be furnished under subsections (b) and (c) of Section 5.03, Terra shall deliver to the Lenders a statement of reconciliation conforming any information contained in such financial statement and a certificate of compliance required to be furnished pursuant to subsections (b) and (c) of Section 5.03 with GAAP (it being understood that compliance with financial covenants herein shall be measured and determined on the basis of GAAP). (l) Amendment of Sale of Business Agreement, Etc. Consent to or accept any cancellation or termination of the Sale of Business Agreement or the Ammonium Nitrate Hedging Agreement, amend, modify or change in any manner any material term or condition thereof, waive any default under or any breach of any material term or condition thereof, agree in any manner to any other amendment, modification or change of any material term or condition thereof, or cancel or terminate the Sale of Business Agreement, in each case without the prior consent of the Lenders. (m) Certain Obligations Respecting Subsidiaries. Enter into, or permit any of its Subsidiaries (other than a Receivables Subsidiary) to enter into, after the Restatement Date, any indenture, agreement, instrument or other arrangement that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the declaration or payment of dividends or the making of loans or advances to or Investments in or the sale, assignment, transfer or other disposition of property to Terra or any Subsidiary thereof (other than a Receivable Subsidiary); provided that: (1) Terra and its Subsidiaries (whether or not Receivables Subsidiaries) may include in Permitted Receivables Facilities provisions substantially to the effect of those attached as Exhibit A to Consent and Amendment No. 2 to the Existing Credit Agreement, dated as of July 31, 1996; (2) the BMLP Partnership Agreement (and the certificates of incorporation of Subsidiaries of BMLP) may restrict such actions by BMLP and its Subsidiaries; (3) the Terra Canada Credit Facility may restrict such actions by Terra Canada and its Subsidiaries; and (4) the Terra U.K. Loan Agreement may restrict such actions by Terra U.K. and its Subsidiaries. - 111 - (n) Subordinated Indebtedness. Purchase, redeem, retire or otherwise acquire for value, or set apart any money for a sinking, defeasance or other analogous fund for the purchase, redemption, retirement or other acquisition of, or make any voluntary payment or prepayment of the principal of or interest on, or any other amount owing in respect of, any Subordinated Indebtedness (other than Intercompany Debt) (and such Obligor will not permit any of its Subsidiaries to do any of the foregoing), in each case except for regularly scheduled payments of principal and interest in respect thereof required pursuant to the instruments evidencing such Subordinated Indebtedness, or amend the documentation creating or evidencing such Subordinated Indebtedness. (o) Transactions with Affiliates. Except to the extent otherwise expressly permitted hereunder, enter into any transaction with any Affiliate on terms less favorable than would pertain in a transaction entered into with a third party on an arm's-length basis. (p) Amendments to Management Agreements. Without the consent of the Administrative Agent, amend, modify or change in any material respect the terms or conditions of any Management Agreement. (q) Margin Stock. Permit more than 25%, after applying the proceeds of each Advance, of the value of the assets of either Borrower and such Borrower's Subsidiaries (as determined in good faith by such Borrower) that are subject to Section 5.02(a) or Section 5.02(e) to consist of or be represented by Margin Stock. (r) BMLP Purchase Option. Permit the Company to transfer or otherwise assign (other than to Minorco or one of its Affiliates): (x) any of its rights under Section 2.1 of the BMLP Support and Option Agreement to purchase the Class A Limited Partnership Interest; or (y) any of its rights under Section 2.2 of the BMLP Support and Option Agreement to purchase the "Nova Interests" referred to therein; or permit any Person other than the Company, Minorco or any of Minorco's Affiliates to be the "Class A Purchaser" or "Nova Purchaser" pursuant to Section 2.1 or 2.2, respectively, of the BMLP Support and Option Agreement. - 112 - Section 5.03. Reporting Requirements. So long as any principal of or interest on any Advance or any other amount payable under this Agreement shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder: (a) Default Notice. Each Obligor will furnish to the Administrative Agent, as soon as possible and in any event within five Business Days after such Obligor knows or has reason to believe that a Default or Event of Default has occurred (which Default or Event of Default is continuing on the date of the following statement), a statement of the Senior Financial Officer setting forth details of such Default or Event of Default and the action that such Obligor has taken and proposes to take with respect thereto. (b) Quarterly Financials. As soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of Terra, Terra will furnish to the Administrative Agent, with sufficient copies for each Lender and each Issuing Bank, a Consolidated balance sheet of Terra and its Subsidiaries as of the end of such quarter and Consolidated statements of income and cash flows of Terra and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year in reasonable detail and duly certified (subject to year-end audit adjustments) by the Senior Financial Officer as having been prepared in accordance with GAAP, together with (i) a certificate of said officer (A) stating that no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and the action that Terra has taken and proposes to take with respect thereto, (B) stating that since December 31, 1996, there has been no Material Adverse Change with respect to Terra and (C) providing a comparison between the financial position and results of operations set forth in such financial statements with the comparable information set forth in the financial projections and budget most recently delivered pursuant Section 5.03(l) of the Existing Credit Agreement or Section 5.03(l) and (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by Terra in determining compliance with the covenants contained in Section 5.04. (c) Annual Financials. As soon as available and in any event within 110 days after the end of each fiscal year - 113 - of Terra, Terra will furnish to the Administrative Agent, with sufficient copies for each Lender and each Issuing Bank, a copy of the annual audit report for such year for Terra and its Subsidiaries, including therein a Consolidated balance sheet of Terra and its Subsidiaries as of the end of such fiscal year and Consolidated statements of income and cash flows of Terra and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year accompanied by an unqualified opinion of Deloitte & Touche or other independent public accountants of nationally recognized standing stating that, except as expressly disclosed therein, said Consolidated financial statements present fairly, in all material respects, the Consolidated financial position and results of operations of Terra and its Consolidated Subsidiaries as of the last day of, and for, such fiscal year, together with (i) a certificate of such accounting firm to the Lenders stating that in the course of the regular audit of the business of Terra and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default or Event of Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof (it being understood that said accountants shall have no liability to the Administrative Agent, the Lenders or the Issuing Banks for failure to obtain knowledge of any Default or Event of Default), (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by such accountants in determining, as of the end of such fiscal year, compliance with the covenants contained in Section 5.04 and (iii) a certificate of the Senior Financial Officer (A) stating that no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and the action that Terra has taken and proposes to take with respect thereto, (B) stating that since December 31, 1996, there has been no Material Adverse Change with respect to Terra and (C) providing a comparison between the financial position and results of operations set forth in such financial statements with the comparable information set forth in the financial projections and budget most recently delivered pursuant to Section 5.03(l) of the Existing Credit Agreement or Section 5.03(l). (d) ERISA Events. Promptly and in any event within 10 Business Days after any Obligor knows or has reason to know that any ERISA Event (including, for this purpose, a - 114 - reportable event listed in Section 4043(c)(7) of ERISA) with respect to any Obligor or any of its ERISA Affiliates has occurred, Terra will furnish to the Administrative Agent a statement of the Senior Financial Officer describing such ERISA Event and the action, if any, that such Obligor or such ERISA Affiliate has taken and proposes to take with respect thereto. (e) Plan Terminations. Promptly and in any event within 10 Business Days after receipt thereof by any Obligor or any of its ERISA Affiliates, such Obligor will furnish to the Administrative Agent copies of each notice from the PBGC stating its intention to terminate any Plan of any Obligor or any of its ERISA Affiliates or to have a trustee appointed to administer any such Plan. (f) Plan Annual Reports. Promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, each Obligor will furnish to the Administrative Agent copies of such Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan of each Obligor or any of its ERISA Affiliates that is then being maintained for employees or former employees of such Person. (g) Multiemployer Plan Notices. Promptly and in any event within five Business Days after receipt thereof by any Obligor or any of its ERISA Affiliates from the sponsor of a Multiemployer Plan of any Obligor or any of its ERISA Affiliates, such Obligor will furnish to the Administrative Agent copies of each notice concerning (i) the imposition of withdrawal liability by any such Multiemployer Plan, (ii) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the amount of liability incurred, or that is reasonably expected to be incurred, by such Obligor or any of its ERISA Affiliates in connection with any event described in clause (i) or (ii). (h) Litigation. Promptly after the commencement thereof, Terra will furnish to the Administrative Agent notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Obligor or any of its Subsidiaries of the type described in Section 4.01(h). (i) Environmental Conditions. Promptly after receiving notice thereof, Terra will furnish to the Administrative Agent notice of any condition or occurrence - 115 - on any property of any Obligor that results in a material noncompliance by any Obligor or any of its Subsidiaries with any Environmental Law or Environmental Permit which noncompliance could reasonably be expected to have a Material Adverse Effect, or could (i) form the basis of an Environmental Action against any Obligor or any of its Subsidiaries or such property that could reasonably be expected to have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that could reasonably be expected to have Material Adverse Effect. (j) Public Filings. Terra shall, promptly upon their becoming available, deliver to the Administrative Agent, each Issuing Bank and each Lender copies of all registration statements and regular periodic reports, if any, that Terra, the Company or TNCLP shall have filed with the Securities and Exchange Commission (or any governmental agency substituted therefor) or any national securities exchange. (k) Shareholder Reports, Etc. Terra shall deliver to the Administrative Agent, each Issuing Bank and each Lender promptly upon the mailing thereof to the shareholders of Terra or TNCLP generally or to holders of Subordinated Indebtedness or 1995 Terra Debt generally, copies of all financial statements and proxy statements so mailed. (l) Financial Projections and Budget. As soon as available and in any event within 110 days after the first day of each fiscal year of Terra, Terra will furnish to the Administrative Agent, with sufficient copies for each Lender and each Issuing Bank, financial projections and a budget for such fiscal year and each subsequent fiscal year of Terra to and including the fiscal year in which the Terra Commitment Termination Date is scheduled to occur, in each case in form and detail similar to the financial projections and budget delivered under Section 5.03(l) of the Existing Credit Agreement. (m) Other Information. Each Obligor shall furnish to the Lenders through the Administrative Agent such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Obligor or any of its Subsidiaries as the Administrative Agent, any Issuing Bank or any Lender may from time to time reasonably request. - 116 - Section 5.04. Financial Covenants. So long as any principal of or interest on any Advance or any other amount payable under this Agreement shall remain unpaid, any Letter of Credit shall be outstanding or any Lender shall have any Commitment hereunder, Terra will: (a) Debt to Cash Flow Ratio. Maintain the Debt to Cash Flow Ratio at not more than the ratio set forth below for each Rolling Period ending in the respective periods set forth below: Each Rolling Period Ending In Ratio -------------- ----- March and December 3.00 to 1.00 of each fiscal year June and September 3.50 to 1.00 of each fiscal year (b) Adjusted Debt to Cash Flow Ratio. Maintain the Adjusted Debt to Cash Flow Ratio at not more than the ratio set forth below for each Rolling Period ending in the respective periods set forth below: Each Rolling Period Ending In Ratio -------------- ----- March and December 3.00 to 1.00 of each fiscal year June and September 3.50 to 1.00 of each fiscal year (c) Interest Coverage Ratio. Maintain the Interest Coverage Ratio for each Rolling Period at not less than 3.50 to 1.00. (d) Adjusted Interest Coverage Ratio. Maintain the Adjusted Interest Coverage Ratio for each Rolling Period at not less than 3.50 to 1.00. (e) Net Worth. Maintain the Net Worth of Terra on each day of not less than (i) $550,000,000 plus (ii) the aggregate increase in the amount of capital stock and additional paid-in capital of Terra subsequent to the Restatement Date plus (iii) 50% of net income of Terra and its Subsidiaries on a Consolidated basis (if positive) for - 117 - each fiscal year of Terra ending on or after December 31, 1997. (f) Adjusted Net Worth. Maintain Adjusted Net Worth on each day of not less than (i) $250,000,000 plus (ii) the aggregate increase in the amount of capital stock and additional paid-in capital of Terra subsequent to the Restatement Date plus (iii) 50% of net income (if positive) of the Adjusted Terra Group on a Consolidated basis for each fiscal year of Terra ending on or after December 31, 1997. ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) either Borrower (i) shall fail to pay when due any principal of any Advance made to it or (ii) shall fail for three Business Days to pay when due any interest on any Advance made to it or any other amount payable by it under any Loan Document; or (b) any representation or warranty made by any Obligor (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) any Obligor shall fail to perform or observe any term, covenant or agreement contained in clause (o) of Section 5.01, or clause (a), (b), (c), (d), (e), (g), (i), (q) or (r) of Section 5.02, or clause (a), (e) or (i) of Section 5.03, or Section 5.04; or (d) Terra shall fail to pay and perform its obligations under the Loan Purchase Agreement; or (e) any Obligor shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for a period of 30 days; or (f) any Obligor or any of its Material Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Debt that is outstanding in a principal or notional amount of at least $10,000,000 in the aggregate (but excluding Debt outstanding - 118 - hereunder) of such Obligor or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder or holders (or an agent or trustee on its or their behalf) thereof to cause, such Debt to mature; or any such Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (g) any Obligor or any of its Material Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Obligor or any of its Material Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Obligor or any of its Material Subsidiaries shall take any corporate or partnership action to authorize any of the actions set forth above in this subsection (g); or (h) any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against any Obligor - 119 - or any of its Material Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect, unless such judgment or order shall have been vacated, satisfied or dismissed or bonded pending appeal; or (i) any non-monetary judgment or order shall be rendered against any Obligor or any of its Subsidiaries that could be reasonably likely to have a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect unless such judgment or order shall have been vacated, satisfied, discharged or bonded pending appeal; or (j) any Security Document shall for any reason (other than pursuant to the terms hereof and thereof) cease to create a valid and perfected first priority Lien (subject only to Permitted Liens) on the Collateral purported to be covered thereby; or (k) Minorco ceases to own, directly or indirectly, at least 20% of the issued and outstanding shares of voting capital stock of Terra; or Minorco ceases to hold, directly or indirectly, a plurality of the issued and outstanding shares of capital stock of Terra; or (l) any ERISA Event shall have occurred with respect to a Plan of any Obligor or any of its ERISA Affiliates and the amount (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans of the Obligors and their ERISA Affiliates with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Obligors and their ERISA Affiliates related to such ERISA Event) could reasonably be expected to have a Material Adverse Effect; provided that with respect to any Multiple Employer Plan, such Insufficiency shall include only the portion thereof attributable to such Obligor or its ERISA Affiliates; or (m) any Obligor or any of its ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan of any Obligor or any of its ERISA Affiliates that it has incurred withdrawal liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Obligors - 120 - and their ERISA Affiliates as withdrawal liability (determined as of the date of such notification), could reasonably be expected to have a Material Adverse Effect; or (n) any Obligor or any of its ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan of any Obligor or any of its ERISA Affiliates that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Obligors and their ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount that could reasonably be expected to have a Material Adverse Effect; or (o) there shall have been asserted against Terra or any of its Subsidiaries an Environmental Claim that, in the judgment of the Required Lenders, is reasonably likely to be determined adversely to Terra or any of its Subsidiaries, and the amount thereof (either individually or in the aggregate) is reasonably likely to have a Material Adverse Effect (insofar as such amount is payable by Terra or any of its Subsidiaries but after deducting any portion thereof that is reasonably expected to be paid by other creditworthy Persons); or (p) any Notice Event (other than the Notice Event set forth in clause (a) of the definition thereof) shall occur under the BMLP Partnership Agreement and such Notice Event shall not be cured (or deemed cured) or waived within 30 days (with the term "Notice Event" having the meaning assigned to such term in the BMLP Partnership Agreement); then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrowers, declare the obligation of each Lender to make Advances and of each Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate (and this clause (i) shall also be applicable if there shall occur a Purchase Event), and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrowers, declare the Advances and the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Advances and the Notes, all such interest and all such amounts shall become and be forthwith due and payable, - 121 - without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrowers; provided that in the event of an actual or deemed entry of an order for relief with respect to any Obligor or any of its Subsidiaries under the Federal Bankruptcy Code, (x) the obligation of each Lender to make Advances and of any Issuing Bank to issue Letters of Credit shall automatically be terminated and (y) the Advances and the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrowers. Section 6.02. Actions in Respect of the Letters of Credit Upon Default. If any Event of Default shall have occurred and be continuing, the Administrative Agent may, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, make demand upon the Borrowers to, and forthwith upon such demand the Borrowers will, pay to the Administrative Agent on behalf of the Lenders in same day funds at the Administrative Agent's Office, for deposit in the relevant L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding, which funds shall be retained by the Administrative Agent in the relevant L/C Collateral Account as collateral security for the Letter of Credit Liabilities until such time as the Letters of Credit shall have been terminated and all of such Letter of Credit Liabilities paid in full. If at any time the Administrative Agent determines that any funds held in the relevant L/C Cash Collateral Account are subject to any right or claim of any Person other than the Administrative Agent and the Lenders or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrowers will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the relevant L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in such L/C Cash Collateral Account that the Administrative Agent determines to be free and clear of any such right and claim. - 122 - ARTICLE VII THE ADMINISTRATIVE AGENT Section 7.01. Authorization and Action. Each Lender and each Issuing Bank hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Basic Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Basic Documents, including, without limitation, enforcement or collection of the Notes, the Administrative Agent shall not be required to exercise any discretion or take any action, and shall not be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) except upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of the Notes; provided that the Administrative Agent shall not be required to take any action that exposes it to personal liability or that is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Issuing Bank and each Lender prompt notice of each notice given to it by the Borrowers or Terra pursuant to the terms of this Agreement. Each Lender and Issuing Bank: (1) hereby authorizes the Administrative Agent to execute and deliver the Intercreditor Agreement, and each Lender and Issuing Bank agrees that, upon such execution and delivery, it will be bound thereby as if such Lender or Issuing Bank, as the case may be, were a signatory thereto; (2) hereby authorizes the Administrative Agent to execute and deliver the Loan Purchase Agreement, and each Lender and Issuing Bank agrees that, upon such execution and delivery, it will be bound thereby as if such Lender or Issuing Bank, as the case may be, were a signatory thereto; and (3) hereby authorizes the Collateral Agent to execute and deliver each of the Security Documents and the Intercreditor Agreement. Section 7.02. Administrative Agent's Reliance, Etc. Neither the Administrative Agent nor any of its respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Basic Documents, except for its or their own - 123 - gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07; (ii) may consult with legal counsel (including counsel for any Obligor), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by them in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Issuing Bank or any Lender and shall not be responsible to any of them for any statements, warranties or representations made in or in connection with the Loan Documents; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Loan Document on the part of any Obligor or to inspect the property (including the books and records) of any Obligor; (v) shall not be responsible to any Issuing Bank or any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Basic Document or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of any Basic Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. Section 7.03. Citibank and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, Citibank shall have the same rights and powers under the Basic Documents as any other Lender and may exercise the same as though it were not the Administrative Agent or the Collateral Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Citibank in its individual capacity. Citibank and its Affiliates may accept deposits from, lend money to, act as trustee under indentures for, accept investment banking engagements from and generally engage in any kind of business with, any Obligor, any of its Subsidiaries, any of its Affiliates and any Person who may do business with or own securities of any Obligor or any such Subsidiary or Affiliate, all as if Citibank were not the Administrative Agent and without any duty to account therefor to the Lenders or any Issuing Bank. Section 7.04. Lender Credit Decision. Each Lender and each Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent, any Issuing Bank or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and - 124 - information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and each Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent, any Issuing Bank or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Section 7.05. Indemnification. The Lenders agree to indemnify the Administrative Agent (to the extent not promptly reimbursed by the Borrowers), ratably according to the principal amounts of the Notes then held by each of them (or if no Advances are at the time outstanding, ratably according to the amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any of them in any way relating to or arising out of the Basic Documents or any action taken or omitted by any of them under the Basic Documents; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. Without limitation of the foregoing, each Lender agrees to reimburse (x) the Administrative Agent promptly upon demand for its ratable share of any costs and expenses payable by the Borrowers under Section 9.04 of this Agreement and (y) the Collateral Agent under the Security Documents, in each case to the extent that the Administrative Agent or the Collateral Agent, as the case may be, is not promptly reimbursed for such costs and expenses by the Borrowers. Section 7.06. Collateral Duties. ----------------- (a) Except for action expressly required of the Administrative Agent hereunder and under the other Basic Documents, the Administrative Agent shall in all cases be fully justified in refusing to act hereunder and thereunder unless it shall be further indemnified to its satisfaction by the Lenders and the Issuing Banks proportionately in accordance with the Obligations then due and payable to each of them against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. (b) Except as expressly provided herein, the Administrative Agent shall have no duty to take any affirmative steps with respect to the collection of amounts payable in - 125 - respect of the Collateral. The Administrative Agent shall incur no liability as a result of any private sale of the Collateral. (c) The Lenders and the Issuing Banks hereby consent, and agree upon written request by the Collateral Agent or the Administrative Agent to execute and deliver such instruments and other documents as the Collateral Agent or Administrative Agent may deem desirable to confirm such consent, to the release of the Liens on any of the Collateral, including any release in connection with any sale, transfer or other disposition of the Collateral or any part thereof in accordance with the Basic Documents. (d) The parties hereto acknowledge that each of the Collateral Agent and the Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Collateral Agent or the Administrative Agent, as the case may be, accords its own property, it being understood that none of the Collateral Agent, the Administrative Agent, any Lender or any Issuing Bank shall have responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Collateral Agent, Administrative Agent, any Lender or any Issuing Bank has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any parties with respect to any Collateral. Section 7.07. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Issuing Banks, the Lenders and the Borrowers and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint (subject, so long as no Default or Event of Default has occurred and is continuing, to the consent of the Borrowers, which consent shall not be unreasonably withheld) a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Required Lenders' removal of the Administrative Agent, as the case may be, then the retiring Administrative Agent may, on behalf of the Issuing Banks and the Lenders, appoint (subject, so long as no Default or Event of Default has occurred and is continuing, to the consent of the Borrowers, which consent shall not be unreasonably withheld) a successor Administrative Agent, which shall be an Initial Lender or a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and - 126 - surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent such successor Administrative Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Administrative Agent, as the case may be, and such retiring Administrative Agent shall be discharged from its duties and obligations under the Basic Documents. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to the benefit of the Administrative Agent as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and under the Security Documents. ARTICLE VIII THE GUARANTEE Section 8.01. The Guarantee. ------------- (a) The Terra Guarantors hereby jointly and severally guarantee to each Lender, each Issuing Bank and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Terra Advances made by the Lenders to, and the Notes held by each Lender of, the Company and all other amounts from time to time owing to the Lenders, each Issuing Bank or the Administrative Agent by the Company under this Agreement and under the Notes and by any Terra Obligor under any of the other Loan Documents, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "Terra Guaranteed Obligations"). The Terra Guarantors hereby further jointly and severally agree that if the Company shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Terra Guaranteed Obligations, the Terra Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Terra Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. (b) The TNLP Guarantors hereby jointly and severally guarantee to each Lender, each Issuing Bank and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on - 127 - the TNLP Advances made by the Lenders to, and the Notes held by each Lender of, TNLP and all other amounts from time to time owing to the Lenders, each Issuing Bank or the Administrative Agent by TNLP under this Agreement and under the Notes and by any TNLP Obligor under any of the other Loan Documents, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "TNLP Guaranteed Obligations"). The TNLP Guarantors hereby further jointly and severally agree that if TNLP shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the TNLP Guaranteed Obligations, the TNLP Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the TNLP Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. Section 8.02. Obligations Unconditional. ------------------------- (a) The obligations of the Terra Guarantors under Section 8.01 are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Company under this Agreement, the Notes or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Terra Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 8.02 that the obligations of the Terra Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. (b) The obligations of the TNLP Guarantors under Section 8.01 are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of TNLP under this Agreement, the Notes or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the TNLP Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 8.02 that the obligations of the TNLP Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. - 128 - (c) Without limiting the generality of the foregoing clauses (a) and (b), it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or the Notes or any other agreement or instrument referred to herein or therein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (iv) any lien or security interest granted to, or in favor of, the Administrative Agent, any Issuing Bank or any Lender as security for any of the Guaranteed Obligations shall fail to be perfected. The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent, any Issuing Bank or any Lender exhaust any right, power or remedy or proceed against either Borrower under this Agreement or the Notes or any other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. Section 8.03. Reinstatement. The obligations of the Guarantors under this Article VIII shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the relevant Borrower in respect of the relevant Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the relevant Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the relevant Guarantors jointly and severally agree that they will indemnify the Administrative Agent, each Issuing Bank and each Lender on demand for all reasonable costs and expenses (including, without - 129 - limitation, fees of counsel) incurred by the Administrative Agent, such Issuing Bank or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. Section 8.04. Subrogation. To the extent that, as a result of this Article VIII, any Lender or Issuing Bank would be subject to an extended preference period under Section 547 of the Bankruptcy Code, each Guarantor hereby waives all rights of subrogation, whether arising by contract or operation of law (including, without limitation, any such right arising under the Bankruptcy Code) or otherwise, by reason of any payment by it pursuant to the provisions of this Article VIII and agrees with the relevant Borrower for the benefit of each of its creditors (including, without limitation, each Lender, each Issuing Bank and the Administrative Agent) that any such payment by it shall constitute a contribution of capital by such Guarantor to the relevant Borrower (or an investment in the equity capital of the relevant Borrower by such Guarantor). Section 8.05. Remedies. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders and the Issuing Banks, the obligations of the Borrowers under this Agreement and the Notes may be declared to be forthwith due and payable as provided in Article VI (and shall be deemed to have become automatically due and payable in the circumstances provided in said Article VI) for purposes of Section 8.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the relevant Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the relevant Borrower) shall forthwith become due and payable by the Guarantors for purposes of said Section 8.01. Section 8.06. Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantee in this Article VIII constitutes an instrument for the payment of money, and consents and agrees that any Lender, any Issuing Bank or the Administrative Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. Section 8.07. Continuing Guarantee. The guarantee in this Article VIII is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. - 130 - Section 8.08. Rights of Contribution. The Subsidiary Guarantors hereby agree, as between themselves, that if any Subsidiary Guarantor shall become an Excess Funding Guarantor (as defined below) by reason of the payment by such Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata Portion (as defined below and determined, for this purpose, without reference to the properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any Excess Funding Guarantor under this Section 8.08 shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Subsidiary Guarantor under the other provisions of this Article VIII and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations. For purposes of this Section 8.08, (i) "Excess Funding Guarantor" shall mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has paid an amount in excess of its Pro Rata Portion of such Guaranteed Obligations, (ii) "Excess Payment" shall mean, in respect of any Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Portion of such Guaranteed Obligations and (iii) "Pro Rata Portion" shall mean, for any Subsidiary Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the aggregate present fair saleable value of all properties of such Subsidiary Guarantor (excluding any shares of stock of any other Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of such Subsidiary Guarantor (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of such Subsidiary Guarantor hereunder and any obligations of any other Subsidiary Guarantor that have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which the aggregate fair saleable value of all properties of the Company and all of the Subsidiary Guarantors exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Company and the Subsidiary Guarantors hereunder) of the Company and all of the Subsidiary Guarantors, all as of the Restatement Date. If any Subsidiary becomes a Subsidiary Guarantor hereunder subsequent to the Restatement Date, then for purposes of this Section 8.08 such subsequent Subsidiary Guarantor shall be deemed to have been a Subsidiary Guarantor as of the Restatement Date and the aggregate present fair saleable value of the properties, and the amount of - 131 - the debts and liabilities, of such Subsidiary Guarantor as of the Restatement Date shall be deemed to be equal to such value and amount on the date such Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder. Section 8.09. General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate law, or any state or Federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 8.01 would otherwise, taking into account the provisions of Section 8.08, be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under said Section 8.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Lender, any Issuing Bank, the Administrative Agent or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. ARTICLE IX MISCELLANEOUS Section 9.01. Amendments, Consents, Etc. (a) No amendment or waiver of any provision of this Agreement, the Notes or the other Basic Documents, nor any consent to any departure by any Obligor from any provision of this Agreement, the Notes or the other Basic Documents, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that: (i) no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (1) waive any of the conditions specified in Section 3.01; (2) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, or the number or percentage of Lenders, that shall be required for the Lenders or any of them to take any action hereunder; - 132 - (3) amend this Section 9.01; (4) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder; (5) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder or amend Section 2.03 or 2.05; (6) release any Guarantor from its obligations under Article VIII; or (7) amend, modify or supplement the Intercreditor Agreement; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender that would be adversely affected by such amendment, waiver or consent: (1) increase the Commitment of such Lender or subject such Lender to any additional obligations; (2) reduce the principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender; (3) postpone any date fixed for any payment of principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender or (4) change the order of application of any prepayment set forth in Section 2.05 in any manner that materially affects such Lender; and (iii) no amendment, waiver or consent shall, unless in writing and (x) signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement, any Note or any other Basic Document, and (y) signed by each Issuing Bank in addition to the Lenders required to take such action, amend Section 2.07, 2.13 or 3.02, increase the Letter of Credit Sublimit or otherwise affect the rights or obligations of any Issuing Bank under this Agreement. (b) Except as otherwise provided in the Security Documents or the Intercreditor Agreement, the Administrative - 133 - Agent shall not consent to release any Collateral or terminate any Lien under any Security Document unless such release or termination shall be consented to in writing by Lenders owed or holding in the aggregate at least 75% of the sum of the then aggregate unpaid principal amount of the Advances, the then aggregate Unused Commitments and the aggregate Available Amount of all Letters of Credit (for which purposes the Available Amount of each Letter of Credit shall be considered to be owed to the relevant Lenders according to their respective Pro Rata Shares of the Facility under which such Letter of Credit has been issued); provided that: (1) the consent of all Lenders shall be required to release all or substantially all of the Collateral, except upon the termination of the Liens created by each of the Security Documents in accordance with the terms thereof; (2) no such consent shall be required to release any Lien covering property that is the subject of a disposition of property permitted hereunder (including, without limitation, dispositions of Receivables pursuant to the Permitted Receivables Facilities) and, upon such a permitted disposition, such property shall be deemed to be transferred free and clear of the Lien of the Security Documents without any action on the part of any party (and the Administrative Agent is hereby authorized to execute such releases and other documents, and to take such other action, as the Company may reasonably request to give effect thereto); and (3) no such consent shall be required to release the Liens under the Security Documents covering property of BMLP and its Subsidiaries upon the occurrence of the BMLP Restructuring and, upon the BMLP Restructuring, all property of BMLP shall be deemed to be released from the Lien of the Security Documents without any action on the part of any party (and each of the Collateral Agent and the Administrative Agent are hereby authorized to execute such releases and other documents, and to take such other action, as the Company may reasonably request to give effect thereto). Section 9.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopy communication) and mailed, telecopied or delivered: (a) if to the Borrowers, care of Terra Industries Inc., 600 Fourth Street, Sioux City, Iowa 51102, Attention: Francis G. Meyer, Senior Vice President and Chief Financial - 134 - Officer, telephone number (712) 279-8790; telecopier number (712) 279-8703; (b) if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule 2.01; (c) if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; (d) if to any Issuing Bank, at its address beneath its signature hereto; (e) if to the Administrative Agent, at its address at 2 Penns Way, Suite 200, New Castle, Delaware, 19720, Attention: Carlos Lopez (or his successor), telephone number (302) 894-6007, telecopier number (302) 894- 6120; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed or telecopied, be effective when deposited in the mails or transmitted by telecopier, respectively, except that notices and communications to the Administrative Agent pursuant to Article II, III or VII shall not be effective until received by the Administrative Agent. Section 9.03. No Waiver; Remedies. No failure on the part of any Lender, any Issuing Bank or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Each Obligor irrevocably waives, to the fullest extent permitted by applicable law, any claim that any action or proceeding commenced by the Administrative Agent, any Issuing Bank or any Lender relating in any way to this Agreement should be dismissed or stayed by reason, or pending the resolution, of any action or proceeding commenced by any Obligor relating in any way to this Agreement whether or not commenced earlier. To the fullest extent permitted by applicable law, the Obligors shall take all measures necessary for any such action or proceeding commenced by the Administrative Agent, any Issuing Bank or any Lender to proceed to judgment prior to the entry of judgment in any such action or proceeding commenced by any Obligor. - 135 - Section 9.04. Costs, Expenses and Indemnification. ----------------------------------- (a) Each Borrower agrees to pay on demand (i) all costs and expenses of the Administrative Agent, the Issuing Banks and the Lenders in connection with the preparation, execution, delivery, administration, modification and amendment of the Basic Documents including, without limitation, (A) all due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, insurance, consultant, search, filing and recording fees and expenses, ongoing audit expenses and all other reasonable out-of-pocket expenses incurred by the Administrative Agent (including the reasonable and documented fees and expenses of Milbank, Tweed, Hadley & McCloy, special counsel to Citibank, but not, under this clause (A) or clause (B) below, of any other counsel) whether or not any of the transactions contemplated by this Agreement are consummated, (B) the reasonable and documented fees and expenses of counsel for the Administrative Agent with respect thereto, with respect to advising the Administrative Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Basic Documents, and (C) with respect to negotiations with any Obligor or with other creditors of any Obligor or any of its Subsidiaries arising out of any Default or Event of Default or any events or circumstances that may reasonably be expected to give rise to a Default or Event of Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto) and (ii) all costs and expenses of the Administrative Agent, the Issuing Banks and the Lenders in connection with the enforcement of the Basic Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise (including, without limitation, the reasonable and documented fees and expenses of counsel for the Administrative Agent, each Issuing Bank and each Lender with respect thereto). (b) Each Borrower agrees to indemnify and hold harmless the Administrative Agent, each Issuing Bank and each Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with the Covered Transactions or the actual - 136 - or alleged presence of Hazardous Materials on any property owned by an Obligor or any Environmental Action relating in any way to any Obligor or any of its Subsidiaries, in each case whether or not such investigation, litigation or proceeding is brought by any Obligor, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the Covered Transactions or the other transactions contemplated hereby are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. Each Borrower also agrees not to assert any claim against the Administrative Agent, any Issuing Bank, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Covered Transactions or any part thereof or the other transactions contemplated herein or in any other Basic Document or the actual or proposed use of the proceeds of the Advances. For purposes of this Section 9.04(b), the term "non- appealable" includes any judgment as to which all appeals have been taken or as to which the time for taking an appeal shall have expired. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by a Borrower to or for the account of a relevant Lender other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.03, 2.05, 2.08(b)(i) or 2.09(d) or as the result of acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, such Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (d) If any Obligor fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, reasonable and documented fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Obligor by the Administrative Agent or any Lender, in its sole discretion. Section 9.05. Right of Setoff. Upon (a) the occurrence and during the continuance of any Event of Default and - 137 - (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of each Borrower against any and all of the Obligations of such Borrower now or hereafter existing under this Agreement and the Note held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the relevant Borrower after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) that such Lender may have. Section 9.06. Governing Law; Submission to Jurisdiction. This Agreement and the Notes shall be governed by, and construed in accordance with, the law of the State of New York. Each Obligor hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in New York City for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Obligor irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Section 9.07. Assignments and Participations. ------------------------------ (a) Each Lender may assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes held by it); provided that: (i) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an affiliate of a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitments of the assigning Lender being assigned pursuant to each such assignment (determined as of - 138 - the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than the lesser of (x) such Lender's Commitments hereunder and (y) $5,000,000 or an integral multiple of $1,000,000 in excess thereof (except as otherwise agreed by the relevant Borrower and the Administrative Agent), (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an affiliate of a Lender, each such assignment shall be made only upon the prior written approval of the relevant Borrower, the Administrative Agent and each Issuing Bank, such approval not to be unreasonably withheld, (iii) each such assignment shall be to an Eligible Assignee, (iv) each such assignment by a Lender of its Advances, Commitment or Note under any Facility shall be made in such manner so that the same portion of its Advances, Commitment and Note under such Facility is assigned to the respective assignee, (v) each such assignment by a Lender of its Advances, Commitments and Notes shall be made in such a manner so that the same portion of its Terra Advances, TNLP Advances, Terra Commitment, TNLP Commitment, Terra Note and TNLP Note is assigned to the respective assignee, and (vi) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $3,000. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). - 139 - (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Obligor or the performance or observance by the Obligors of any of their respective obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Advances owing under each Facility to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. No assignment shall be effective until it is recorded in the Register pursuant to this Section 9.07(c). The Register shall be available for inspection - 140 - by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit F hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrowers. Within five Business Days after its receipt of such notice, the relevant Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes a new Note or Notes to the order of such assignee in an amount equal to the portion of the Facilities assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a portion of such Facilities, a new Note or Notes to the order of the assigning Lender in an amount equal to the portion so retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1 and A-2, as the case may be. (e) Each Lender may sell participations in or to all or a portion of its rights and/or obligations under this Agreement (including, without limitation, all or a portion of its Commitments or the Advances owing to it and the Note or Notes held by it); provided that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Obligors, the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Basic Document, or any consent to any departure by any Obligor therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to - 141 - such participation, or release all or substantially all of the Collateral. (f) Any Issuing Bank may (subject to the prior written consent of Terra, such consent not to be unreasonably withheld) assign all or any portion of its rights and obligations under this Agreement to one or more successor Issuing Banks that is a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $1,000,000,000 and, upon the acceptance of such assignment, the respective successor Issuing Banks shall succeed to such portion of such rights and obligations and such assigning Issuing Bank shall be discharged from its duties and obligations under this Agreement to such extent, including, without limitation, such portion of its Letter of Credit Commitment. (g) Any Issuing Bank and any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree in writing to preserve the confidentiality of any Confidential Information received by it from such Issuing Bank or Lender. (h) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. (i) Anything in this Section 9.07 to the contrary notwithstanding, each Lender shall be permitted to pledge all or any part of its right, title and interest in, to and under the Advances and Notes held by it to any trustee for the benefit of the holders of such Lender's securities. (j) Anything in this Section 9.07 to the contrary notwithstanding, neither Terra nor any of its Subsidiaries or Affiliates may acquire (whether by assignment, participation or otherwise), and no Lender or Issuing Bank shall assign or participate to Terra or any of its Subsidiaries or Affiliates, any interest in any Commitment, Advance or other amount owing hereunder without the prior consent of each Lender; provided that the Lenders and the Issuing Banks may assign all of their - 142 - interests in the Commitments, Advances and such other amounts pursuant to the Loan Purchase Agreement. Section 9.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. Section 9.09. No Liability of the Issuing Banks. Each Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the relevant Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the relevant Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to such Borrower, to the extent of any direct, but not consequential, damages suffered by such Borrower that such Borrower proves were caused by (i) such Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. Section 9.10. Confidentiality. Neither the Administrative Agent, any Issuing Bank nor any Lender shall disclose any Confidential Information to any Person without the prior consent of the Company, other than (a) to the Administrative Agent's, such Issuing Bank's or such Lender's Affiliates and their officers, directors, employees, agents and - 143 - advisors (including independent auditors and counsel) and to actual or prospective assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, federal or foreign authority or examiner regulating or having authority over Lenders or the Lenders' respective activities and (d) in connection with credit inquiries from suppliers of the Borrowers and/or their Subsidiaries and other Persons who, from time to time, inquire as to the creditworthiness of the Borrowers. Section 9.11. WAIVER OF JURY TRIAL. EACH OF THE OBLIGORS, THE ADMINISTRATIVE AGENT, THE LENDERS AND THE ISSUING BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE BASIC DOCUMENTS, THE ADVANCES, THE LETTERS OF CREDIT OR THE ACTIONS OF THE ADMINISTRATIVE AGENT, ANY LENDER OR ANY ISSUING BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. Section 9.12. Survival. The obligations of the Borrowers under Sections 2.09, 2.11 and 9.04, the obligations of each Guarantor under Section 8.03, and the obligations of the Lenders under Section 7.05, shall survive the repayment of the Advances and the termination of the Commitments. In addition, each representation and warranty made, or deemed to be made by a notice of any extension of credit (whether by means of an Advance or a Letter of Credit), herein or pursuant hereto shall survive the making of such representation and warranty, and no Lender or Issuing Bank shall be deemed to have waived, by reason of making any extension of credit hereunder (whether by means of an Advance or a Letter of Credit), any Default or Event of Default that may arise by reason of such representation or warranty proving to have been false or misleading, notwithstanding that such Lender, such Issuing Bank or the Administrative Agent may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such extension of credit was made. Section 9.13. Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 9.14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, provided that no Obligor may assign any of its rights or obligations hereunder or under the other Basic Documents without - 144 - the prior consent of all of the Lenders, the Issuing Banks and the Administrative Agent. Section 9.15. NationsBank Assignments. By its signature below, NationsBank, N.A. hereby acknowledges and agrees that it has, as of the date hereof (but prior to the amendment and restatement provided for hereby), acquired all of the "Advances" and "Commitments" of Boatman's National Bank and NationsBank of Texas, N.A. outstanding under the Existing Credit Agreement. By their signatures below, the Company and the Administrative Agent hereby acknowledge their consent to such assignment. - 145 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BORROWERS ------------- TERRA CAPITAL, INC. By /s/Francis G. Meyer --------------------------------- Title: Vice President TERRA NITROGEN, LIMITED PARTNERSHIP By Terra Nitrogen Corporation, its General Partner By /s/Francis G. Meyer ----------------------------- Title: Vice President GUARANTORS ---------- TERRA INDUSTRIES INC. By /s/Francis G. Meyer ---------------------------------- Title: Senior Vice President TERRA CAPITAL HOLDINGS, INC. By /s/Francis G. Meyer ---------------------------------- Title: Vice President TERRA NITROGEN CORPORATION By /s/Francis G. Meyer ---------------------------------- Title: Vice President - 146 - TERRA METHANOL CORPORATION By /s/Francis G. Meyer ---------------------------------- Title: Vice President BMC HOLDINGS, INC. By /s/Francis G. Meyer ---------------------------------- Title: Vice President TERRA INTERNATIONAL INC. By /s/Francis G. Meyer ---------------------------------- Title: Senior Vice President THE ADMINISTRATIVE AGENT ------------------------ CITIBANK, N.A. By /s/James Simpson --------------------------------- Title: Managing Director THE ISSUING BANKS ----------------- CITIBANK, N.A. By /s/James Simpson ---------------------------------- Title: Managing Director - 147 - THE LENDERS ----------- CITIBANK, N.A. By /s/James Simpson ---------------------------------- Title: Attorney-in-Fact BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/Margaret H. Claggett ----------------------------------- Title: Vice President THE BANK OF NOVA SCOTIA By /s/F.C.H. Ashby ----------------------------------- Title: Senior Manager Loan Operations THE CHASE MANHATTAN BANK By /s/Michael D. Peist ----------------------------------- Title: Vice President ARAB BANKING CORPORATION By /s/Sheldon Tilney ----------------------------------- Title: Deputy General Manager - 148 - CREDIT AGRICOLE INDOSUEZ By /s/W. Leroy Startz ----------------------------------- Title: First Vice President By /s/David Bouhl ---------------------------------- Title: First Vice President, Head of Corporate Banking Chicago COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK, B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By /s/Dana W. Hemenway ---------------------------------- Title: Vice President By /s/W. Pieter C. Kodde ---------------------------------- Title: Vice President CREDIT LYONNAIS CHICAGO BRANCH By /s/Julie T. Kanak ---------------------------------- Title: Vice President DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/Michiel V.M. van der Voort ---------------------------------- Title: Vice President By /s/ Richard G. Reilly ---------------------------------- Title: Vice President - 149 - FIRST BANK NATIONAL ASSOCIATION By /s/ Michael S. Harter ----------------------------------- Title: Assistant Vice President THE FUJI BANK, LIMITED By /s/ Peter L. Chinnici ---------------------------------- Title: Joint General Manager NATIONSBANK, N.A. By /s/ Barry P. Sullivan ---------------------------------- Title: Vice President UNION BANK OF SWITZERLAND, NEW YORK BRANCH By /s/ Mary V. Turnbach ---------------------------------- Title: Assistant Treasurer By /s/ Paula Mueller ---------------------------------- Title: Vice President Structured Finance BANQUE NATIONALE DE PARIS By /s/ William J. Krummen ---------------------------------- Title: Vice President and Manager - 150 - RETIRING LENDERS ---------------- MELLON BANK, N.A. By /s/ Charles A. Gilbert ---------------------------------- Title: Banking Officer EX-99 4 AMMONIUM NITRATE HEDGE AGREEMENT EXHIBIT 99 CONFORMED COPY -------------- DATED 31ST DECEMBER, 1997 TERRA INTERNATIONAL (CANADA) INC. and ICI CHEMICALS & POLYMERS LIMITED ----------------------------------------------- AMMONIUM NITRATE HEDGING AGREEMENT ----------------------------------------------- ALLEN & OVERY London THIS AGREEMENT is made on 31st December, 1997 BETWEEN: (1) TERRA INTERNATIONAL (CANADA) INC., 252 Pall Mall Street, Suite 200 London, Ontario, Canada N6A 5P6 an Ontario corporation ("Terra"); and (2) ICI CHEMICALS & POLYMERS LIMITED, (registered number 358535) a company incorporated under the laws of England (the "Counterparty"). WHEREAS: (A) An affiliate of Terra has acquired from the Counterparty a business (the "Business") engaged in the manufacture of ammonium nitrate in the United Kingdom pursuant to a Sale of Business Agreement dated 20th November 1997. (B) The revenues of the Business from sales of ammonium nitrate during the calendar years ending 31st December, 1998, 1999, 2000, 2001, 2002 and, if clause 3 applies, 2003 (each year is referred to as a "Rights Period") are expected to vary depending on the market price of ammonium nitrate at the time of sale, with such revenues increasing if prices increase and declining if prices decline. (C) Terra and its affiliates are desirous of reducing their risk with respect to future changes in the market prices of ammonium nitrate with respect to the Business by receiving a fixed cash payment from the Counterparty in exchange for undertaking an obligation to make future payments to the Counterparty in the event that a portion of the ammonium nitrate produced by the Business is sold for more than a specified amount during the Rights Periods. (D) Terra Industries Inc., the ultimate parent company of Terra, has agreed to guarantee the obligations of Terra, and certain other subsidiaries, in connection with the acquisition of the Business. NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows: 1. PURCHASE OF RIGHTS The Counterparty will pay to Terra on each of the first three Payment Days (as such term is defined in clause 2(a) below) the sum of (Pounds) 2.7 million; provided, however, that if any amount is payable on such Payment Day from Terra to the Counterparty under clause 2(a) below, the Counterparty may instead instruct Terra to deduct the amount which would otherwise be due under this clause from the amount Terra is required to pay under clause 2(a) below. 2. GRANTS OF RIGHTS (a) Terra will pay to the Counterparty, within 30 days after the end of each Rights Period (such day being referred to as a "Payment Day"), the amount, if any, computed to be due for such Rights Period in accordance with this paragraph. For each Rights Period, the amount, if any, payable hereunder by Terra to the Counterparty shall be an amount in pounds sterling equal to the product of 500,000 times: 2 (i) the average delivered selling price (taking account of all rebates and discounts) per metric tonne of all bagged ammonium nitrate fertiliser (the "Product") sold in the UK by the then owner of the Business during such Rights Period, minus (ii) (pounds)100. Notwithstanding the foregoing, the total amount payable hereunder shall, subject to clause 3 below, not exceed (pounds)58.1 million in the aggregate for all Rights Periods. (b) If Terra so elects by written notice of not less than 14 days to the Counterparty and provided Terra Industries Inc. is not insolvent, Terra may, in lieu of making any portion or all of the foregoing payment for any Rights Period, deliver to the Counterparty at such address as the Counterparty nominates for the purpose in the UK, up to 500,000 tonnes of Product for such Rights Period against payment by the Counterparty to Terra in cash of (pounds)100 per tonne so delivered. For each tonne so delivered, the number 500,000 used in clause 2(a) will be reduced by one. 3. UNRECOMPENSED FORCE MAJEURE (a) If the Counterparty would be entitled to be paid an amount in excess of the Capped Amount (as defined below) in any Rights Period but an Unrecompensed Force Majeure Event (as defined below) has occurred then Terra shall be entitled to serve a Hardship Notice upon the Counterparty in accordance with sub-clause (b) below. (b) A Hardship Notice shall comprise a certificate by an officer of Terra, countersigned by an officer of Terra Industries Inc., confirming that the circumstances in sub-clause (a) have occurred supported by a certificate from Terra's insurers to the effect that the insurance cover is not available in respect of the Unrecompensed Force Majeure Event (in the terms described in the definition "Unrecompensed Force Majeure Event" below). (c) If a Hardship Notice is validly served it shall have the following effect: (i) the maximum payment for the Rights Period in question shall be the Capped Amount; (ii) the maximum amount payable under this agreement shall be increased from (pounds)58.1 million to (pounds)61.1 million; and (iii) the period in respect of which payments may be due hereunder shall be extended by one additional calendar year. (d) In this Agreement "Unrecompensed Force Majeure Event" means any event beyond the reasonable control of the (then) owner of the Business which materially affects the operation of the Business and subsists for a continuous period of 60 days or more and for which by reason of the nature of the incident(s) the then owner is not able to be recompensed under the business interruption insurance in force in respect of the Business for the Rights Period in question. (e) In this Agreement the "Capped Amount" means (pounds)12.7 million in any of the years ending 31 December, 1998, 1999 or 2000 and (pounds)10 million in any of the subsequent years. 3 4. SALE (a) This Agreement shall apply irrespective of which member or members of the group of companies of which Terra Industries Inc. is the ultimate parent company is the owner of the Business. (b) This Agreement shall not prevent Terra selling or otherwise disposing of the Business or its interest therein but such sale or disposal shall not relieve Terra (or Terra Industries Inc. under its guarantee) of the obligations to make payments under this Agreement and references to sales of Product shall be deemed to include sales by any successor. Terra shall be obliged to ensure that all rights of the Counterparty under this Agreement, including rights of verification, are not prejudiced by any such sale or disposal. 5. VERIFICATION RIGHTS (a) On each Payment Day, Terra shall provide to the Counterparty a certificate signed by an officer, certifying the calculations made and date used for such calculations to be used in determining the amount, if any, due on such Payment Day. (b) Terra shall keep complete, true and accurate books of account and records for the purpose of showing the correctness of the above calculations and such certificate. Those books and records shall be made available during normal working hours for inspection by an independent chartered public accountant selected by the Counterparty (the "Accountant"), to whom Terra has no reasonable objection, for the purpose of verifying the correctness of the applicable certificate. (c) The Accountant shall be obliged to treat such books and records as confidential: provided, however, that the Accountant may disclose to the Counterparty whether the applicable certificate is correct and, if it is not, how it is not. (d) The Counterparty shall pay the costs of such inspection unless the Accountant determines that the calculation is incorrect in which case the costs shall be borne as the Accountant shall determine having regard to the degree by which the calculation is incorrect. (e) The determination of the Accountant shall be final and binding on the parties. 6. GOVERNING LAWS This Agreement shall be governed by, and construed and interpreted in accordance with the laws of England (excluding principles of conflicts of laws). 7. INDEPENDENT ACCOUNTANT (a) If the parties disagree on the application of clause 3 (Unrecompensed Force Majeure) either party may give notice to the other requiring the appointment of an independent accounting firm of international reputation (the "Independent Accountant"). If the parties are unable to agree upon the Independent Accountant within 14 days of such notice, then the Independent Accountant shall be appointed by the President for the time being of the Institute of Chartered Accountants in England and Wales on the application of either party. 4 (b) If the Independent Accountant delays or becomes unwilling or incapable of acting or if for any other reason the President for the time being of the Institute of Chartered Accountants in England and Wales thinks fit he may discharge the Independent Accountant and, in the absence of agreement between the parties, appoint another in his place. (c) The Independent Accountant shall act as an expert and not as an arbitrator and his decision shall (in the absence of manifest error or material departure from instructions) be final and binding on the parties. The Independent Accountant shall afford the parties the opportunity of making written representations to him. (d) The fees and expenses of the Independent Accountant shall be borne by the parties in equal shares unless the Independent Accountant otherwise determines. 8. Notices Any notice, request, instruction, correspondence or other document to be given hereunder by either party to the other shall be in writing and shall be delivered in person or by confirmed facsimile transmission as follows: Terra: c/o Terra Industries, Inc. 600 Fourth Street Terra Centre Sioux City, Iowa 51101 Facsimile: 001 712 279 8703 Attention: George H. Valentine, Esq. Counterparty: ICI Chemicals & Polymers Limited The Heath Runcorn Cheshire WA7 4QF Facsimile: 00 44 1928 515 555 Attention: The Company Secretary Notice given by personal delivery shall be effective upon actual receipt. Notices given by facsimile transmission shall be effective at 5.00 p.m., local time, at the place of receipt on the next business day after transmission of confirmation of receipt by the sending party. Either party may change any address to which notices are required to be given by giving notice thereof as provided above. 9. Miscellaneous (a) The section headings contained in this Agreement are for the convenience of the parties only and shall not be interpreted as part of this Agreement. 5 (b) Waiver by one party of the other party's breach of any provision of this Agreement shall not be deemed a waiver of any subsequent or continuing breach of such provision or of the breach of any other provision or provisions hereof. (c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (d) All amounts of money referred to in this Agreement shall be construed to mean money which at the time is lawful of money to the United Kingdom. (e) Each party hereto represents and warrants that this Agreement has been duly authorized, executed and delivered and constitutes a legal, valid and binding agreement enforceable against it in accordance with its terms. (f) Terra hereby waives and relinquishes any right of set-off or counterclaim deduction or retention which Terra might otherwise have in relation to any payment under this Agreement. (g) This Agreement shall not be modified except by written instrument executed by duly authorized representatives of the parties. (h) This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same Agreement and any party may enter into this Agreement by executing a counterpart. IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above. TERRA INTERNATIONAL (CANADA) INC. By: G.H. VALENTINE Name: G.H. VALENTINE Title: VICE PRESIDENT ICI CHEMICALS & POLYMERS LIMITED By: J.K. REYNOLDS Name: J.K. REYNOLDS Title: BUSINESS MANAGER -----END PRIVACY-ENHANCED MESSAGE-----