0001021408-01-508265.txt : 20011019 0001021408-01-508265.hdr.sgml : 20011019 ACCESSION NUMBER: 0001021408-01-508265 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20011010 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TERRA INDUSTRIES INC CENTRAL INDEX KEY: 0000722079 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 521145429 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08520 FILM NUMBER: 1760460 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 1 d8k.txt FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): October 10, 2001 TERRA INDUSTRIES INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Maryland 1-8520 52-1145429 (State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.) incorporation)
Terra Centre 600 Fourth Street, P.O. Box 6000 Sioux City, Iowa 51102-6000 (712) 277-1340 (Address of Principal Executive Offices, including Zip Code) (Registrant's Telephone Number, Including Area Code) ================================================================================ Item 5. Other Events and Regulation FD Disclosure. On October 10, 2001, we entered into a new $175.0 million revolving credit facility (the "New Credit Facility") and issued $200.0 million of 12 7/8% Senior Secured Notes due 2008 (the "New Notes"). The net proceeds from the issuance of the New Notes and the initial borrowings under our New Credit Facility were used to repay in full the outstanding indebtedness under our senior secured term loan facilities and will be used to repay in full our 10 3/4% Senior Notes due 2003 (the "2003 Notes"). The notice of redemption for our 2003 Notes was sent to the holders of the 2003 Notes on or around October 10, 2001 and we expect to redeem the 2003 Notes in November 2001. We entered into the New Credit Facility pursuant to an Amended and Restated Credit Agreement, dated as of October 10, 2001, by and among Terra Capital, Inc., Terra Nitrogen (U.K.), Limited, Terra Nitrogen, Limited Partnership, Terra Industries Inc., the lenders named therein, the issuers named therein and Citicorp USA, Inc. Concurrent with the closing of the New Credit Facility, Terra Capital, Inc. issued $200.0 million aggregate principal amount of the New Notes. The New Notes were sold in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended (the "Securities Act"). The New Notes are expected to be exchanged for notes with identical terms in an exchange offer under the Securities Act. This filing contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements are based on current expectations. These statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and our plans and objectives to differ materially from those expressed in the forward-looking statements. These risks and uncertainties include conditions prevailing in the financial and capital markets from time to time, as well as factors described in the reports and documents that we file from time to time with the Securities and Exchange Commission. We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise. Item 7. Exhibits. Exhibit No. Description ----------- -------------------------------------------------------------- 4.1 Indenture dated as of October 10, 2001 among Terra Capital, Inc., certain guarantors and U.S. Bank National Association, as trustee, including the form of Note. We agree to furnish a copy of any exhibit or schedule to such Indenture to the Commission upon request. 4.2 Amended and Restated Credit Agreement dated as of October 10, 2001 among Terra Capital, Inc., Terra Nitrogen (U.K.), Limited, and Terra Nitrogen, Limited Partnership, certain guarantors, certain lenders, certain issuing banks and Citicorp USA, Inc. without exhibits or schedules. We agree to furnish a copy of any exhibit or schedule to such Credit Agreement to the Commission upon request. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TERRA INDUSTRIES INC. /s/ FRANCIS G. MEYER -------------------- Francis G. Meyer Senior Vice President and Chief Financial Officer Date: October 16, 2001 Exhibit Index
Exhibit Description Incorporated Herein Filed with Electronic ------- ----------- ------------------- --------------------- No. by Reference to Submission --- --------------- ---------- 4.1 Indenture dated as of October 10, 2001 among Terra X Capital, Inc., certain guarantors and U.S. Bank National Association, as trustee, including the form of Note. We agree to furnish a copy of any exhibit or schedule to such Indenture to the Commission upon request. 4.2 Amended and Restated Credit Agreement dated as of X October 10, 2001 among Terra Capital, Inc., Terra Nitrogen (U.K.), Limited, and Terra Nitrogen, Limited Partnership, certain guarantors, certain lenders, certain issuing banks and Citicorp USA, Inc. without exhibits or schedules. We agree to furnish a copy of any exhibit or schedule to such Credit Agreement to the Commission upon request.
EX-4.1 3 dex41.txt INDENTURE DATED AS OF OCTOBER 10, 2001 ================================================================================ TERRA CAPITAL, INC., as Company, THE GUARANTORS party hereto and U.S. BANK NATIONAL ASSOCIATION, as Trustee 12 7/8% Senior Secured Notes due 2008 -------------------- INDENTURE Dated as of October 10, 2001 -------------------- ================================================================================ TABLE OF CONTENTS -----------------
Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. Definitions....................................................................... 1 SECTION 1.2. Other Definitions................................................................. 31 SECTION 1.3. Incorporation by Reference of Trust Indenture Act................................. 32 SECTION 1.4. Rules of Construction............................................................. 32 ARTICLE 2 THE NOTES SECTION 2.1. Form and Dating................................................................... 33 SECTION 2.2. Execution and Authentication...................................................... 34 SECTION 2.3. Registrar and Paying Agent........................................................ 34 SECTION 2.4. Paying Agent To Hold Money in Trust............................................... 34 SECTION 2.5. Holder Lists...................................................................... 35 SECTION 2.6. Transfer and Exchange............................................................. 35 SECTION 2.7. Replacement Notes................................................................. 37 SECTION 2.8. Outstanding Notes................................................................. 37 SECTION 2.9. Temporary Notes................................................................... 38 SECTION 2.10. Cancellation...................................................................... 38 SECTION 2.11. Defaulted Interest................................................................ 38 SECTION 2.12. CUSIP Numbers..................................................................... 38 SECTION 2.13. Restrictive Legends............................................................... 38 SECTION 2.14. Special Transfer Provisions....................................................... 40 ARTICLE 3 REDEMPTION SECTION 3.1. Notices to Trustee................................................................ 42 SECTION 3.2. Selection of Notes To Be Redeemed................................................. 42 SECTION 3.3. Notice of Redemption.............................................................. 42 SECTION 3.4. Effect of Notice of Redemption.................................................... 43 SECTION 3.5. Deposit of Redemption Price....................................................... 43 SECTION 3.6. Notes Redeemed in Part............................................................ 43
-i- ARTICLE 4 COVENANTS SECTION 4.1. Payment of Notes.................................................................... 44 SECTION 4.2. Corporate Existence................................................................. 44 SECTION 4.3. Maintenance of Office or Agency..................................................... 44 SECTION 4.4. Payment of Taxes and Other Claims................................................... 45 SECTION 4.5. Additional Guarantees............................................................... 45 SECTION 4.6. SEC Reports......................................................................... 45 SECTION 4.7. Compliance Certificate.............................................................. 46 SECTION 4.8. Change of Control................................................................... 46 SECTION 4.9. Limitation on Incurrence of Indebtedness............................................ 47 SECTION 4.10. Limitation on Restricted Payments................................................... 50 SECTION 4.11. Limitation on Liens................................................................. 52 SECTION 4.12. Limitation on Transactions with Affiliates.......................................... 53 SECTION 4.13. Limitation on Asset Sales........................................................... 54 SECTION 4.14. Limitation on Dividend and Other Restrictions Affecting Restricted Subsidiaries..... 58 SECTION 4.15. Limitation on Sale of Principal Properties.......................................... 59 SECTION 4.16. Limitation on Sale and Leaseback Transactions....................................... 63 SECTION 4.17. Impairment of Security Interest..................................................... 63 SECTION 4.18. Conduct of Business................................................................. 63 SECTION 4.19. Maintenance of Insurance, Properties, Books and Records............................. 63 ARTICLE 5 SUCCESSOR COMPANY SECTION 5.1. Merger, Consolidation and Sale of Assets............................................ 66 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.1. Events of Default................................................................... 70 SECTION 6.2. Acceleration........................................................................ 72 SECTION 6.3. Other Remedies...................................................................... 72 SECTION 6.4. Waiver of Past Defaults............................................................. 73 SECTION 6.5. Control by Majority................................................................. 73 SECTION 6.6. Limitation on Suits................................................................. 73 SECTION 6.7. Rights of Holders To Receive Payment................................................ 73 SECTION 6.8. Collection Suit by Trustee.......................................................... 74 SECTION 6.9. Trustee May File Proofs of Claim.................................................... 74 SECTION 6.10. Priorities.......................................................................... 74
-ii- SECTION 6.11. Undertaking for Costs............................................................... 74 ARTICLE 7 TRUSTEE SECTION 7.1. Duties of Trustee................................................................... 75 SECTION 7.2. Rights of Trustee................................................................... 75 SECTION 7.3. Individual Rights of Trustee........................................................ 77 SECTION 7.4. Trustee's Disclaimer................................................................ 77 SECTION 7.5. Notice of Defaults.................................................................. 78 SECTION 7.6. Reports by Trustee to Holders....................................................... 78 SECTION 7.7. Compensation and Indemnity.......................................................... 78 SECTION 7.8. Replacement of Trustee.............................................................. 79 SECTION 7.9. Successor Trustee by Merger......................................................... 79 SECTION 7.10. Eligibility; Disqualification....................................................... 80 SECTION 7.11. Preferential Collection of Claims Against Terra Capital............................. 80 ARTICLE 8 DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.1. Discharge of Liability on Notes; Defeasance......................................... 80 SECTION 8.2. Conditions to Defeasance............................................................ 81 SECTION 8.3. Application of Trust Money.......................................................... 82 SECTION 8.4. Repayment to Terra Capital.......................................................... 82 SECTION 8.5. Indemnity for Government Obligations................................................ 82 SECTION 8.6. Reinstatement....................................................................... 83 ARTICLE 9 AMENDMENTS AND WAIVERS SECTION 9.1. Without Consent of Holders.......................................................... 83 SECTION 9.2. With Consent of Holders............................................................. 84 SECTION 9.3. Compliance with Trust Indenture Act................................................. 85 SECTION 9.4. Revocation and Effect of Consents and Waivers....................................... 85 SECTION 9.5. Notation on or Exchange of Notes.................................................... 85 SECTION 9.6. Trustee To Sign Amendments.......................................................... 86 ARTICLE 10 GUARANTEES SECTION 10.1. Guarantees.......................................................................... 86
-iii- SECTION 10.2. Limitation on Liability............................................................ 88 SECTION 10.3. Successors and Assigns............................................................. 88 SECTION 10.4. No Waiver.......................................................................... 88 SECTION 10.5. Modification....................................................................... 88 SECTION 10.6. Release of Guarantor............................................................... 88 SECTION 10.7. Execution of Supplemental Indenture for Future Guarantors.......................... 89 ARTICLE 11 MISCELLANEOUS SECTION 11.1. Trust Indenture Act Controls....................................................... 89 SECTION 11.2. Notices............................................................................ 89 SECTION 11.3. Communication by Holders with Other Holders........................................ 90 SECTION 11.4. Certificate and Opinion as to Conditions Precedent................................. 90 SECTION 11.5. Statements Required in Certificate or Opinion...................................... 90 SECTION 11.6. When Notes Disregarded............................................................. 91 SECTION 11.7. Rules by Trustee, Paying Agent and Registrar....................................... 91 SECTION 11.8. Legal Holidays..................................................................... 91 SECTION 11.9. Governing Law...................................................................... 91 SECTION 11.10. No Recourse Against Others......................................................... 91 SECTION 11.11. Successors......................................................................... 92 SECTION 11.12. Multiple Originals................................................................. 92 SECTION 11.13. Table of Contents; Headings........................................................ 92 SECTION 11.14. Severability Clause................................................................ 92 ARTICLE 12 SECURITY DOCUMENTS SECTION 12.1. Security Documents; Additional Collateral.......................................... 92 SECTION 12.2. Recording, Etc..................................................................... 95 SECTION 12.3. Certain Dispositions of Collateral Without Release................................. 96 SECTION 12.4. Possession, Use and Release of Collateral.......................................... 99 SECTION 12.5. Eminent Domain and Other Governmental Takings...................................... 101 SECTION 12.6. Trust Indenture Act Requirements................................................... 102 SECTION 12.7. Suits To Protect the Collateral.................................................... 103 SECTION 12.8. Purchaser Protected................................................................ 103 SECTION 12.9. Powers Exercisable by Receiver or Trustee.......................................... 103 SECTION 12.10. Disposition of Obligations Received................................................ 103 SECTION 12.11. Determinations Relating to Collateral.............................................. 104 SECTION 12.12. Renewal and Refunding.............................................................. 104 SECTION 12.13. Release upon Termination of Issuer's Obligations................................... 104 SECTION 12.14. Certain Actions by Trustee......................................................... 105
-iv- ARTICLE 13 APPLICATION OF TRUST MONIES SECTION 13.1. Trust Monies....................................................................... 105 SECTION 13.2. Retirement of Notes................................................................ 105 SECTION 13.3. Withdrawals of Net Insurance Proceeds.............................................. 106 SECTION 13.4. Withdrawal of Trust Monies for Reinvestment........................................ 109 SECTION 13.5. Powers Exercisable Notwithstanding Event of Default................................ 111 SECTION 13.6. Powers Exercisable by Trustee or Receiver.......................................... 111 SECTION 13.7. Disposition of Notes Retired....................................................... 111 SECTION 13.8. Investment of Trust Monies......................................................... 111 Signatures......................................................................................... S-1 Exhibit A - Form of Note........................................................................... A-1 Exhibit B - Form of Exchange Note.................................................................. B-1 Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers to Non- QIB Accredited Investors................................................................. C-1 Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S...................................................................... D-1 Exhibit E - Form of Guarantee...................................................................... E-1 Exhibit F - Form of Supplemental Indenture......................................................... F-1 Exhibit G-1 - Form of Fixed Asset Intercompany Note................................................ G-1-1 Exhibit G-2 - Form of Unsecured Intercompany Note.................................................. G-2-1 Exhibit H-1 - Form of Mortgage..................................................................... H-1 Exhibit H-2 - Form of Deed of Trust................................................................ H-2-1 Exhibit H-3 - Form of Leasehold Mortgage........................................................... H-3-1 Exhibit H-4 - Form of Leasehold Deed of Trust...................................................... H-4-1 Exhibit H-5 - Form of UK Debenture................................................................. H-5-1 Exhibit H-6 - Form of Canadian Charge.............................................................. H-6-1 Exhibit I - Forms of Security Agreement............................................................ I-1
Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture. -v- CROSS-REFERENCE TABLE
TIA Section Indenture Section ----------- ----------------- 310(a)(1)................................................... 7.9; 7.10 (a)(2)................................................... 7.10 (a)(3)................................................... N.A. (a)(4)................................................... N.A. (b)...................................................... 7.8; 7.10 (b)(1)................................................... 7.10 (c)...................................................... N.A. 311(a)...................................................... 7.11 (b)...................................................... 7.11 312(a)...................................................... 2.5 (b)...................................................... 2.5; 11.3 (c)...................................................... 11.3 313(a)...................................................... 7.6 (b)...................................................... 7.6 (c)...................................................... 13.2 (d)...................................................... 7.6 314(a)...................................................... 4.6; 4.7; 11.2 (b)...................................................... N.A. (c)(1)................................................... 11.4 (c)(2)................................................... 11.4 (c)(3)................................................... N.A. (d)...................................................... 12.6 (e)...................................................... 11.5 (f)...................................................... N.A. 315(a)...................................................... 7.1 (b)...................................................... 7.5; 11.2 (c)...................................................... 7.1 (d)...................................................... 7.1 (e)...................................................... 6.11 316(a)(last sentence)....................................... 11.6 (a)(1)(A)................................................ 6.5 (a)(1)(B)................................................ 6.4 (a)(2)................................................... N.A. (b)...................................................... 6.7 317(a)(1)................................................... 6.9 (a)(2)................................................... 6.9 (b)...................................................... 2.4 318(a)...................................................... 11.1
N.A. means Not Applicable. Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. INDENTURE dated as of October 10, 2001, among TERRA CAPITAL, INC., a Delaware corporation ("Terra Capital," "Issuer" or the "Company"), TERRA ------------- ------ ------- INDUSTRIES INC., a Maryland corporation, as parent guarantor ("Parent"), certain ------ of Parent's subsidiaries party hereto (each a "Guarantor" and, collectively with --------- Parent, the "Guarantors") and U.S. BANK NATIONAL ASSOCIATION, a national banking ---------- association, as trustee (the "Trustee"). ------- Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of Terra Capital's 12 7/8% Senior Secured Notes due 2008: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. Definitions. ----------- "Acquired Indebtedness" means (1) with respect to any Person that --------------------- becomes a Restricted Subsidiary after the Issue Date, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary that was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary and (2) with respect to Parent or any Restricted Subsidiary, any Indebtedness of a Person (other than Parent or a Restricted Subsidiary) existing at the time such Person is merged with or into Parent or a Restricted Subsidiary, or Indebtedness expressly assumed by Parent or any Restricted Subsidiary in connection with the acquisition of an asset or assets from another Person, which Indebtedness was not, in any case, incurred by such other Person in connection with, or in contemplation of, such merger or acquisition. "Affiliate" of any specified Person means any other Person, directly --------- or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the ------- management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. ----------- ---------- "After-Acquired Property" means (i) in the case of Issuer or any ----------------------- Guarantor, any and all assets or property of the type constituting Collateral (including, without limitation, Principal Properties) acquired after the Issue Date including any assets or property of the type constituting Collateral (including, without limitation, Principal Properties) acquired by Issuer or any Guarantor from a transfer from Issuer or a Guarantor and (ii) in the case of any Restricted Subsidiary that is not a Guarantor, any and all assets or property of the type constituting Collateral (including, without limitation, Principal Properties) acquired after the Issue Date including any assets or property of the type constituting Collateral (including, without limitation, Principal Properties) acquired by such Restricted Subsidiary from a transfer from any other Subsidiary. Notwithstanding the foregoing, the terms "After-Acquired Property" shall not include any interest in Real Property having a Fair Market Value of less than $500,000 and any interest in Real Property having a Fair Market Value in excess of $1,000,000 shall constitute a "Principal Property." -2- "amend" means amend, modify, supplement, restate or amend and restate, ----- including successively; and "amending" and "amended" have correlative meanings. -------- ------- "asset" means any asset or property, whether real, personal or mixed, ----- tangible or intangible. "Asset Sale" means any Transfer by Parent or any Restricted Subsidiary ---------- of (i) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares and, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders), (ii) all or substantially all the assets of any division, business segment or comparable line of business of Parent or any Restricted Subsidiary or (iii) any other assets of Parent or any Restricted Subsidiary outside of the ordinary course of business of Parent or such Restricted Subsidiary. Notwithstanding the foregoing, the term "Asset Sale" shall not include (1) for purposes of Section 4.13, a Transfer (a) that constitutes a Permitted Investment or a Restricted Payment permitted by Section 4.10 or (b) consummated in compliance with Section 4.15 or Section 5.1; (2) sales of accounts receivable of the type specified in the definition of "Qualified Securitization Transaction" to a Securitization Entity for the Fair Market Value thereof; (3) sales or grants of non-exclusive licenses to use the patents, trade secrets, know-how and other intellectual property of Parent or any Restricted Subsidiary to the extent that such licenses are granted in the ordinary course of business, and do not prohibit Parent or any Restricted Subsidiary from using the technologies licensed and do not require Parent or any Restricted Subsidiary to pay any fees for any such use; (4) a Transfer pursuant to any foreclosure of assets or other remedy provided by applicable law by a creditor of Parent or any Restricted Subsidiary with a Lien on such assets, if such Lien is permitted under this Indenture; (5) a Transfer involving only Temporary Cash Investments or inventory in the ordinary course of business; (6) any Transfer of damaged, worn-out or obsolete equipment in the ordinary course of business; (7) the lease or sublease of any real or personal property in the ordinary course of business; provided that, to the extent such property -------- constitutes Collateral, such lease or sublease shall comply with the provisions of the applicable Security Documents; (8) the sale at cost of equipment pursuant to a program in which participants agree to purchase or construct and maintain specific spare parts necessary to operate production facilities in the Permitted Business; or (9) a Transfer of assets having a Fair Market Value and a sale price of less than $1.0 million. "Attributable Debt" in respect of a Sale and Leaseback Transaction ----------------- means, as at the time of determination, the present value (discounted at the implied interest rate in such transaction) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended). "Bank Collateral Agent" means the Person designated as administrative --------------------- and collateral agent under the Credit Facility or a Person otherwise performing the duties typical of a collateral agent under a credit facility like the Credit Facility. "Basket" has the meaning set forth in Section 4.10. ------ -3- "Board of Directors" means the Board of Directors of Parent or any ------------------ committee thereof duly authorized to act on behalf of such Board under this Indenture. "Business Day" means each day which is not a Legal Holiday. ------------ "Capital Lease Obligations" means an obligation that is required to ------------------------- be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP. The amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, ------------- rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Change of Control" means the occurrence of any of the following ----------------- events: (i) Issuer ceases to be a Wholly Owned Subsidiary of Parent; (ii) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have "beneficial ownership" of all securities that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock representing 50% or more of the voting power of the total outstanding Voting Stock of Parent; (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election to the Board of Directors or whose nomination for election by the shareholders of Parent was approved by a vote of 66 2/3% of the directors of Parent then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; (iv) Parent consolidates with or merges with or into another Person or another Person merges with or into Parent, or all or substantially all the assets of Parent and the Restricted Subsidiaries, taken as a whole, are Transferred to another Person (other than to a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of Parent that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of Parent are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, se- -4- curities of the surviving Person that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person; or (v) Parent or Issuer liquidates or dissolves or the stockholders of Parent adopt a plan of liquidation or dissolution. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Collateral" means, collectively, all of the property and assets ---------- that are from time to time subject to or are required to be subject to the Lien of this Indenture and the Security Documents other than Second Lien Collateral. "Collateral Account" means the collateral account established ------------------ pursuant to Section 13.1. "Collateral Permitted Liens" means: -------------------------- (1) Liens securing obligations under this Indenture, the Notes, the Guarantees and the Security Documents in favor of the Trustee; (2) Liens in favor of Issuer or any Guarantor; provided that such Liens -------- do not secure obligations that are assigned to any Person other than the Trustee pursuant to the Security Documents; (3) Liens on assets of a Person at the time such Person becomes a Subsidiary; provided that (a) such Lien was not incurred in -------- anticipation of or in connection with the transaction or series of related transactions pursuant to which such Person became a Subsidiary and (b) such Lien does not extend to or cover any assets of Parent or any other Restricted Subsidiary; (4) Liens existing on the Issue Date to the extent permitted by the applicable Security Document; (5) Liens imposed by law that are incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, mechanics', landlords', materialmen's, employees', laborers', employers', suppliers', banks', repairmen's and other like Liens, in each case, for sums not yet due or that (a) are being contested in good faith by appropriate proceedings and that are appropriately reserved for in accordance with GAAP if required by GAAP and (b) satisfy the Contested Collateral Lien Conditions; (6) Liens for taxes, assessments and governmental charges not yet due or payable or subject to penalties for non-payment or that (a) are being contested in good faith by appropriate proceedings and that are appropriately reserved for in accordance with GAAP if required by GAAP and (b) satisfy the Contested Collateral Lien Conditions; -5- (7) Liens on assets acquired or constructed after the Issue Date securing Purchase Money Indebtedness and Capital Lease Obligations; provided that such Liens shall in no event extend to or cover any -------- assets other the assets acquired or constructed after the Issue Date with the proceeds of such Purchase Money Indebtedness or Capital Lease Obligations; (8) zoning restrictions, easements, rights-of-way, restrictions on the use of real property, other similar encumbrances on real property incurred in the ordinary course of business and minor irregularities of title to real property that do not (a) secure Indebtedness or (b) individually or in the aggregate materially impair the value or marketability of the real property affected thereby or the occupation, use and enjoyment in the ordinary course of business of Parent and the Restricted Subsidiaries at such real property; (9) terminable or short-term leases or permits for occupancy, which leases or permits (a) expressly grant to Parent or any Restricted Subsidiary the right to terminate them at any time on not more than six months' notice, (b) do not individually or in the aggregate interfere with the operation of the business of Parent or any Restricted Subsidiary or individually or in the aggregate impair the use (for its intended purpose) or the value of the property subject thereto and (c) are subordinated to the Liens granted and evidenced by the Security Documents in accordance with the provisions thereof; (10) Liens resulting from operation of law with respect to any judgments, awards or orders to the extent that such judgments, awards or orders do not cause or constitute an Event of Default; provided that any -------- such Liens shall be paid, discharged, bonded or stayed prior to the sale or forfeiture of any portion of the Collateral on account of such Liens; (11) bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash and cash equivalents on deposit in one or more accounts maintained by Parent or any Restricted Subsidiary in accordance with the provisions of this Indenture or the applicable Security Documents, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements; provided that in no case shall any such Liens secure (either -------- directly or indirectly) the repayment of any Indebtedness; (12) Liens securing Refinancing Indebtedness relating to Collateral Permitted Liens of the type described in clauses (3) and (7) of this definition; provided that such Liens extend only to the assets -------- securing the Indebtedness being Refinanced; and (13) other Liens securing obligations (not constituting indebtedness for money borrowed) in an aggregate amount, together with the aggregate amount of any obligations secured pursuant to clause (10) of the definition of "Permitted Liens," not to exceed -6- $2.0 million at any time outstanding; provided that such Liens shall in no -------- event extend to or cover any assets constituting Principal Properties encumbered by a mortgage, deed of trust or foreign equivalent thereof in favor of the Trustee except to the extent permitted thereby. "Commission" or "SEC" means the Securities and Exchange Commission. ---------- --- "Comparable Treasury Issue" means the United States Treasury security ------------------------- selected by a Reference Treasury Dealer as having a maturity comparable to the Stated Maturity of the principal of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining life of the Notes. "Comparable Treasury Price" means, with respect to any date of redemption ------------------------- or purchase: (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such date of redemption or purchase, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities"; or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the average of the Reference Treasury Dealer Quotations. "Consolidated Coverage Ratio" of any date of determination means the ratio --------------------------- of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for which financial statements are available to (ii) Consolidated Fixed Charges for such four fiscal quarters; provided that (1) if -------- Parent or any Restricted Subsidiary has incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an incurrence of Indebtedness, or both, EBITDA and Consolidated Fixed Charges for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had --- ----- been incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period (except that, in the case of Indebtedness used to finance working capital needs incurred under a revolving credit or similar arrangement, the amount thereof shall be deemed to be the average daily balance of such Indebtedness during such four-fiscal-quarter period), (2) if since the beginning of such period Parent or any Restricted Subsidiary shall have Transferred any assets outside the ordinary course of business, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Transfer for such period, or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period, and Consolidated Fixed Charges for such period shall be reduced by an amount equal to the Consolidated Fixed Charges directly attributable to any Indebtedness of Parent or any Restricted Subsidiary repaid, repurchased, defeased, assumed by a third person (to the extent Parent and its Restricted Subsidiaries are no longer liable for such Indebtedness) or otherwise discharged with respect to Parent and its continuing Restricted Subsidiaries in connection with such Transfer for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Fixed Charges for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the -7- extent Parent and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such period Parent or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, which acquisition constitutes all or substantially all of an operating unit of a business, including any such Investment or acquisition occurring in connection with a transaction requiring a calculation to be made hereunder, EBITDA and Consolidated Fixed Charges for such period shall be calculated after giving pro --- forma effect thereto (including the incurrence of any Indebtedness) as if such ----- Investment or acquisition occurred on the first day of such period and (4) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into Parent or any Restricted Subsidiary since the beginning of such period) shall have made any Transfer of assets outside the ordinary course of business, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or clause (3) above if made by Parent or a Restricted Subsidiary during such period, EBITDA and Consolidated Fixed Charges for such period shall be calculated after giving pro forma effect thereto as if such Transfer, Investment or acquisition --- ----- occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given --- ----- to an acquisition of assets, the amount of income, earnings or expense relating thereto and the amount of Consolidated Fixed Charges associated with any Indebtedness incurred in connection therewith, the pro forma calculations shall be prepared in accordance with Regulation S-X and after giving effect to any Pro --- Forma Cost Savings. If any Indebtedness bears a floating rate of interest and is ----- being given pro forma effect, the interest of such Indebtedness shall be --- ----- calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Fixed Charges" means, with respect to any period, the sum -------------------------- (without duplication) of (i) the interest expense of Parent and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP consistently applied, including, without limitation, (a) amortization of debt issuance costs and debt discount, (b) the net payments, if any, under Interest Rate Agreements (including amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) accrued interest and (e) commissions, discounts and other fees and charges incurred in respect of letters of credit or bankers' acceptance financings, (ii) the interest component of the Capital Lease Obligations paid or accrued during such period, (iii) all interest capitalized during such period, (iv) interest accrued during such period on Indebtedness of the type described in clause (6) or (7) of the definition of "Indebtedness" and (v) the product of (x) the amount of all dividends on any series of Preferred Stock of Parent and the Restricted Subsidiaries (other than dividends paid in Qualified Stock and other than dividends paid to Parent or to a Restricted Subsidiary) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the ----- denominator of which is one minus the then current effective consolidated Federal, state and local tax rate of Parent, expressed as a decimal; excluding, --------- however, any amount of such interest of any Restricted Subsidiary if the net ------- income (or loss) of such Restricted Subsidiary is excluded in the calculation of Consolidated Net Income pursuant to clause (iii) of the proviso in the definition thereof (but only in the same proportion as the net income (or loss) of such Restricted Subsidiary is so excluded from the calculation of Consolidated Net Income). -8- "Consolidated Net Income" means, for any period, the net income (or ----------------------- loss) of Parent and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP consistently applied; provided that -------- there shall not be included in such Consolidated Net Income: (i) any extraordinary gains or extraordinary losses; (ii) any net income or loss of any Person if such Person is not a Restricted Subsidiary, except that the equity of Parent or any Restricted Subsidiary in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actualy distributed by such Person during such period to Parent or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (iii) below); (iii) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is not at the time permitted, directly or indirectly, without prior approval (that has not been obtained), pursuant to the terms of its charter or any agreement, instrument and governmental regulation applicable to such Restricted Subsidiary or its stockholders; (iv) any gain or loss realized upon the sale or other disposition of (x) any assets (including pursuant to Sale and Leaseback Transactions) which are not sold or otherwise disposed of in the ordinary course of business or (y) any Capital Stock of any Person; and (v) the cumulative effect of a change in accounting principles; provided, further, that -------- ------- Consolidated Net Income shall be reduced by the product of (x) the amount of all dividends on Designated Preferred Stock (other than dividends paid in Qualified Stock and other than dividends paid to Parent or to a Restricted Subsidiary) paid, accrued or scheduled to be paid or accrued during such period times (y) a ----- fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated Federal, state and local tax rate of Parent, expressed as a decimal. "Consolidated Net Worth" means with respect to any Person on any date, ---------------------- the equity of the common and preferred stockholders of such Person and its Restricted Subsidiaries as of such date, determined on a consolidated basis in accordance with GAAP consistently applied, less any amount attributable to Unrestricted Subsidiaries. "Contested Collateral Lien Conditions" shall mean, with respect to any ------------------------------------ Collateral Permitted Lien of the type described in clauses (5) and (6) of the definition of "Collateral Permitted Lien," the following conditions: (1) any proceeding instituted contesting such Lien shall conclusively operate to stay the sale or forfeiture of any portion of the Collateral on account of such Lien; (2) in the event the amount of any such Lien shall exceed $250,000, at the option and upon request of the Trustee, Parent or the applicable Restricted Subsidiary shall maintain cash reserves in an amount sufficient to pay and discharge such Lien and the Trustee's reasonable estimate of all interest and penalties related thereto; and (3) such Lien shall in all respects be subject and subordinated in priority to the Lien and security interest created and evidenced by the Security Documents, except if and to the extent that the law or regulation creating, permitting or authorizing such Lien provides that such Lien is or must be superior to the Lien and security interest created and evidenced by the Security Documents. -9- "Corporate Trust Office" means the office of the Trustee located at ---------------------- 180 East Fifth Street, St. Paul, Minnesota 55101; provided that corporate trust -------- office or Trustee's Office located in New York, shall mean the office of the Trustee located at 100 Wall Street, Suite 1600, New York, New York 10005. "Coverage Ratio Exception" has the meaning set forth in the proviso ------------------------ in Section 4.9(a). "Credit Facility" means one or more unsubordinated credit --------------- agreements, including the Amended and Restated Revolving Credit Agreement dated on or about the Issue Date among Issuer, Terra UK, TNLP, the guarantors party thereto, the lenders party thereto and Citicorp USA, Inc., as administrative and collateral agent, including any notes, guarantees, collateral and security documents (including mortgages, pledge agreements and other security arrangements), instruments and agreements executed in connection therewith, and in each case as amended or Refinanced from time to time, including any agreement or agreements extending the maturity of, or Refinancing (including increasing the amount of borrowings or other Indebtedness outstanding or available to be borrowed thereunder), all or any portion of the Indebtedness under such agreement, and any successor or replacement agreement or agreements with the same or any other agents, creditor, lender or group of creditors or lenders. "Currency Agreement" means, with respect to any Person, any foreign ------------------ exchange contract, currency swap agreement or other similar agreement to which such Person is a party or a beneficiary. "Default" means any event which is, or after notice or passage of ------- time or both would be, an Event of Default. "Depository" means The Depository Trust Company, its nominees and ---------- their respective successors. "Designated Preferred Stock" means preferred stock of Parent that is -------------------------- designated as Designated Preferred Stock pursuant to an officers' certificate executed by the principal executive officer and the principal financial officer of Parent on the issuance date thereof, the Net Cash Proceeds of which do not increase the Basket and are not used for purposes of Section 4.10(b)(2). "Destruction" means any damage to, loss or destruction of all or any ----------- portion of the Collateral. "Destroyed" shall have a correlative meaning. --------- "Disqualified Stock" means, with respect to any Person, any Capital ------------------ Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, or (ii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the date that is 91 days after the Stated Maturity of the Notes; provided that any class of Capital Stock of such -------- Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pur- -10- suant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Qualified Stock, and that is not convertible, puttable or exchangeable for Disqualified Stock or Indebtedness, will not be deemed to be Disqualified Stock so long as such Person satisfies its obligations with respect thereto solely by the delivery of Qualified Stock; provided, further, that any -------- ------- Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof (or the holders of any security into or for which such Capital Stock is convertible, exchangeable or exercisable) the right to require Parent or any Restricted Subsidiary to redeem or purchase such Capital Stock upon the occurrence of a change in control occurring prior to the final maturity date of the Notes shall not constitute Disqualified Stock if the change in control provisions applicable to such Capital Stock are no more favorable to such holders than Section 4.8 and such Capital Stock specifically provides that Parent or such Restricted Subsidiary will not redeem or purchase any such Capital Stock pursuant to such provisions prior to Issuer's purchase of the Notes as required pursuant to Section 4.8. "Domestic Subsidiary" means a Restricted Subsidiary of Parent that ------------------- is not a Foreign Subsidiary. "EBITDA" for any period means the sum of Consolidated Net Income for ------ such period plus, without duplication, the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Fixed Charges, (ii) income tax expense determined on a consolidated basis in accordance with GAAP, (iii) depreciation expense determined on a consolidated basis in accordance with GAAP, (iv) amortization expense determined on a consolidated basis in accordance with GAAP, (v) minority interest and (vi) all other non-cash items reducing such Consolidated Net Income (excluding (x) any non-cash item to the extent it represents an accrual of, or reserve for, cash disbursements to be made in any subsequent period and (y) the amount attributable to minority interests) for such period; provided that EBITDA shall be reduced by (a) all non-cash items -------- increasing such Consolidated Net Income (excluding (x) any non-cash item to the extent that it represents an accrual of cash receipts to be received in a subsequent period and (y) the amount attributable to minority interest); and (b) amounts paid as dividends or distributions to any Person other than Parent or any Restricted Subsidiary. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of Parent shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended or otherwise distributed to Parent by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments and governmental regulations applicable to such Subsidiary or its stockholders. "Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended. "Exchange Notes" means the 12 7/8% Senior Secured Notes due 2008, -------------- Series B, to be issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. "Fair Market Value" means, with respect to any asset, the price ----------------- (after taking into account any liabilities relating to such asset) that would be negotiated in an arm's-length transaction for cash between a willing seller and a willing and able buyer, neither of which is under any compulsion -11- to complete the transaction. Fair Market Value (other than of any asset with a public trading market) in excess of $5.0 million shall be determined by the Board of Directors acting reasonably and in good faith and shall be evidenced by a Board Resolution delivered to the Trustee. Fair Market Value (other than of any asset with a public trading market) in excess of $15.0 million shall be determined by an Independent Financial Advisor, which determination shall be evidenced by an opinion delivered to the Trustee. "Fixed Asset Intercompany Note" means an unsubordinated promissory ----------------------------- note substantially in the form attached as Exhibit G-1 hereto; provided that ----------- -------- (1) each such note shall be secured by the Fixed Assets of the obligor thereof and assigned to the Trustee as Collateral under this Indenture; (2) the Stated Maturity of, and interest payment dates on, each such note shall be the same as those for the Notes; (3) the interest rate on each such note shall be equal to the weighted average interest rate of borrowings under the Credit Facility; and (4) any such note outstanding on the Issue Date will not be permitted to be prepaid below the amount outstanding on the Issue Date, except that (x) any such note will be permitted to be prepaid at any time to the extent that, after giving effect to the prepayment, the aggregate principal amount of all Fixed Asset Intercompany Notes then outstanding exceeds the aggregate principal amount of Notes then outstanding and (y) the TNLP Intercompany Note may be repaid under the conditions described in paragraph 12 thereof. "Fixed Assets" means assets of the type constituting Collateral ------------ other than the limited partnership interests issued by TNCLP and any Fixed Asset Intercompany Note. "Foreign Subsidiary" means a Restricted Subsidiary that is ------------------ incorporated in a jurisdiction other than the United States or a State thereof or the District of Columbia and with respect to which a majority of its sales (determined on a consolidated basis in accordance with GAAP) is generated from or derived from operations outside the United States of America and a majority of its assets is located outside the United States of America. "GAAP" means generally accepted accounting principles in the United ---- States of America as in effect on the date hereof, except that Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," shall be given effect when adopted by Parent and its Subsidiaries. "guarantee" means any obligation, contingent or otherwise, of any --------- Person directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising -12- by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "guarantee" -------- --------- shall not include endorsements for collection or deposit in the ordinary course of business. The term "guarantee" used as a verb has a corresponding meaning. --------- The term "guarantor" shall mean any Person guaranteeing any obligation. --------- "Guarantee" means a full and unconditional senior guarantee of the --------- Notes pursuant to Article 10, secured pursuant to the Security Documents. "Guarantor" means (i) each of Beaumont Ammonia Inc., a Delaware --------- corporation; Beaumont Holdings Corporation, a Delaware corporation; BMC Holdings Inc., a Delaware corporation; Port Neal Corporation, a Delaware corporation; Terra (UK) Holdings Inc., a Delaware corporation; Terra Capital Holdings, Inc., a Delaware corporation; Terra Industries Inc., a Maryland corporation; Terra International (Oklahoma) Inc., a Delaware corporation; Terra International, Inc., a Delaware corporation; Terra Methanol Corporation, a Delaware corporation; Terra Nitrogen Corporation, a Delaware corporation; and Terra Real Estate Corp., an Iowa corporation; and (ii) any other Restricted Subsidiary of Parent that issues a Guarantee of the Notes, in each case, until such Person is released from its Guarantee in accordance with Section 10.6. "Hedging Obligations" of any Person means the obligations of such ------------------- Person pursuant to any Interest Rate Agreement or Currency Agreement entered into in the ordinary course of business and not for speculative purposes. "Holder" or "Noteholder" means the Person in whose name a Note is ------ ---------- registered on the Registrar's books. "incur" means issue, create, assume, guarantee, incur or otherwise ----- become liable for; provided that any Indebtedness or Capital Stock of a Person -------- existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be incurred by such Subsidiary at the time it becomes a Restricted Subsidiary. Neither the accrual of interest nor the accretion of original issue discount shall be considered an incurrence of Indebtedness. The term "incurrence" when used as a ---------- noun shall have a correlative meaning. "Indebtedness" means, with respect to any Person, without ------------ duplication, and whether or not contingent, (1) all indebtedness of such Person for borrowed money or for the deferred purchase price of assets or services or which is evidenced by a note, bond, debenture or similar instrument, to the extent it would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (2) all Capital Lease Obligations of such Person, (3) all obligations of such Person in respect of letters of credit or bankers' acceptances issued or created for the account of such Person, (4) net obligations of such Person under Interest Rate Agreements or Currency Agreements, (5) all Disqualified Stock issued by such Person and all preferred stock issued by any Subsidiary of such Person, in each case, valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends thereon, (6) to the extent not otherwise included, any -13- guarantee by such Person of any other Person's indebtedness or other obligations described in clauses (1) through (5) above and (7) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall -------- be the lesser of (x) the Fair Market Value of such asset at such date of determination and (y) the amount of such Indebtedness. For the avoidance of doubt, "Indebtedness" shall not include: (a) current trade payables incurred in the ordinary course of business and payable in accordance with customary practices; (b) deferred tax obligations; (c) minority interest; (d) uncapitalized interest; (e) non-interest bearing installment obligations and accrued liabilities incurred in the ordinary course of business; and (f) obligations of Parent or any Restricted Subsidiary pursuant to contracts for, or options, puts or similar arrangements relating to, the purchase of raw materials or the sale of inventory at a time in the future entered into in the ordinary course of business. For purposes hereof, the "maximum fixed repurchase price" of any ------------------------------ Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by the fair market value of, such Disqualified Stock, such Fair Market Value is to be determined in good faith by the board of directors of the issuer of such Disqualified Stock. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations as described above at such date; provided that the amount outstanding at any time -------- of any Indebtedness issued with original issue discount shall be deemed to be the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP. "Indenture" means this Indenture as amended or supplemented from --------- time to time by one or more supplemental indentures entered into pursuant to the applicable provisions hereof or otherwise in accordance with the terms hereof. "Independent Financial Advisor" means a firm (i) which does not, and ----------------------------- whose directors, officers or Affiliates do not, have a material financial interest in Parent or any of its Subsidiaries; and (ii) which, in the judgment of the Board of Directors, is otherwise independent and qualified to perform the task for which it is to be engaged. -14- "Initial Notes" means the 12 7/8% Senior Secured Notes due 2008 of ------------- Terra Capital originally issued on the Issue Date. "Initial Purchasers" means, collectively, Salomon Smith Barney Inc. ------------------ and Credit Suisse First Boston Corporation. "Insurance Certificate" shall mean a certificate evidencing the --------------------- Insurance Requirements (i) in substantially the form commonly known as "ACORD 27" that (A) provides that the insurance has been issued, is in full force and effect, and conveys all the rights and privileges afforded under the Insurance Policies, (B) provides an unequivocal obligation to give notice in advance to additional interest parties of termination and notification in advance of changes and (C) purports to convey all the privileges of the Insurance Policies to the certificate holders and (ii) that otherwise complies with the requirements with respect thereto set forth in Article 7. "Intercreditor Agreement" shall mean the access, use and ----------------------- intercreditor agreement dated as of the date hereof among the Trustee, the Bank Collateral Agent, the Issuer, Terra UK, TNLP and the Guarantors. "interest" means, with respect to the Notes, the sum of any interest -------- and any Liquidated Damages on the Notes. "Interest Rate Agreement" means any interest rate swap agreement, ----------------------- interest rate cap agreement or other financial agreement or arrangement. "Investment" in any Person means any direct or indirect advance, ---------- loan or other extension of credit (including by way of guarantee or similar arrangement) or capital contribution to, or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by, such Person. "Investment" excludes (a) any Restricted Payment of the type described in clause (ii) of the definition thereof and (b) any purchase or acquisition of Indebtedness of Parent or any of its Subsidiaries. For purposes of the definition of "Unrestricted Subsidiary," the definition of "Restricted Payment" and Section 4.10, (i) "Investment" shall include the portion (proportionate to Parent's direct and indirect equity interest in such Subsidiary) of the Fair Market Value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary; (ii) any asset Transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such Transfer; and (iii) if Parent or any Restricted Subsidiary Transfers any Capital Stock of any direct or indirect Restricted Subsidiary, or any Restricted Subsidiary issues Capital Stock, such that, after giving effect to any such Transfer or issuance, such Person is no longer a Restricted Subsidiary, Parent shall be deemed to have made an Investment on the date of any such Transfer or issuance equal to the Fair Market Value of the Capital Stock of such Person held by Parent or such Restricted Subsidiary immediately following any such Transfer or issuance. "Issue Date" means October 10, 2001. ---------- "Issuer Surviving Entity" has the meaning set forth in Section 5.1. ----------------------- -15- "Legal Holiday" means a Saturday, a Sunday or a day on which banking ------------- institutions are not required to be open in the State of New York. "Lien" means, with respect to any asset, any mortgage, deed of ---- trust, lien, pledge, charge, debenture, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset and any filing of, or agreement to give, any financing statement under the UCC or equivalent statutes) of any jurisdiction other than to evidence a lease. "Liquidated Damages" has the meaning set forth in paragraph 8 of the ------------------ Initial Notes. "Make Whole Amount" means the excess, if any, of (i) an amount equal ----------------- to the sum of the present values of the remaining scheduled payments of principal of the Notes to be redeemed or purchased and the scheduled payment of interest thereon to originally scheduled maturity, discounted to the redemption or purchase date (assuming a 360-day year consisting of twelve 30-day months) at the Special Adjusted Treasury Rate from the respective dates on which such principal and interest would have been payable over (ii) the principal amount of the Notes being redeemed or purchased. "Mortgage" means (i) in the case of Real Property located in the -------- United States, each mortgage instrument (or deed of trust) and assignment of leases and rents, in the case of owned Real Property, substantially in the form of Exhibit H-1 or Exhibit H-2 hereto (as appropriate) and, in the case of leased ----------- ----------- Real Property, substantially in the form of Exhibit H-3 or Exhibit H-4 hereto ----------- ----------- (as appropriate) (in each case, including such changes to such form as may be necessary or desirable to conform to applicable local laws or customs regarding property in the jurisdiction where such instrument is to be recorded), in each case described in clauses (i), (ii) and (iii) of this definition, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof, or (ii) in the case of Real Property located in the United Kingdom or Canada, each charge, mortgage instrument or debenture (and each debenture delivery agreement, if any, relating thereto), substantially in the form of Exhibit H-3 or Exhibit H-4 hereto (to the ----------- ----------- extent Exhibit H-4 encumbers Real Property), respectively, or (iii) in the case ----------- of Real Property located in any jurisdiction other than the United States or a state thereof or the District of Columbia or the United Kingdom or Canada intended to be encumbered by a Mortgage hereby, in such form as shall be necessary or desirable to create a valid, enforceable, perfected Lien on such Real Property in favor of the Trustee under the laws of such jurisdiction, continuing the provisions set forth in Exhibit H-1 or H-3 (as appropriate) to the greatest extent permitted under the applicable laws of such jurisdiction, in each case described in clauses (i), (ii) and (iii) of this definition, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "Mortgaged Property" means any Real Property that is subject to a ------------------ Mortgage. "Net Available Proceeds" from an Asset Sale or a Sale of a Principal ---------------------- Property means the aggregate cash proceeds received by such Person and/or its Affiliates in respect of such transaction, which amount is equal to the excess, if any, of: (i) the cash received by such Person and/or its Affiliates (including any cash payments received by way of deferred payment pursuant to, or moneti- -16- zation of, a note or installment receivable or otherwise, but only as and when received) in connection with such transaction, over (ii) the sum of (a) the amount of any Indebtedness that is secured by such asset and which is required to be repaid by such person in connection with such transaction, plus (b) all fees, commissions, and other expenses incurred by such Person in connection with such transaction, plus (c) provision for taxes, including income taxes, attributable to the transaction or attributable to required prepayments or repayments of Indebtedness with the proceeds of such transaction, plus (d) a reasonable reserve for the after-tax cost of any indemnification payments (fixed or contingent) attributable to seller's indemnities to purchaser in respect of such transaction undertaken by Parent or any of its Restricted Subsidiaries in connection with such transaction, plus (e) if such Person is a Restricted Subsidiary, any dividends or distributions payable to holders of minority interests in such Restricted Subsidiary from the proceeds of such transaction. "Net Cash Proceeds," with respect to any issuance or sale of Capital ----------------- Stock, means the cash proceeds of such issuance or sale, net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a direct result thereof. "Net Insurance Proceeds" means the insurance proceeds (excluding ---------------------- liability insurance proceeds payable to the Trustee for any loss, liability or expense incurred by it) or condemnation awards actually paid as a result of any Destruction or Taking of all or any portion of the Collateral less costs incurred in litigating, arbitrating, compromising or settling any claim arising out of such Destruction or Taking, including fees and expenses of attorneys and insurance adjusters paid by Parent or any Restricted Subsidiary. For the avoidance of doubt, Net Insurance Proceeds do not include proceeds from business interruption insurance. "Non-U.S. Person" means a Person who is not a U.S. Person, as --------------- defined in Regulation S. "Notes" shall mean the Initial Notes and the Exchange Notes. ----- "Obligations" means, with respect to any Indebtedness, any ----------- principal, interest, penalties, fees, indemnification, reimbursements, cost, expenses, damages and other liabilities payable under the documentation at such time governing such Indebtedness. "Offering Memorandum" means the offering memorandum, dated October ------------------- 3, 2001, relating to the Initial Notes. "Officer" means, with respect to Parent, the Chairman of the Board, ------- any Vice Chairman, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President or Vice President, the Secretary or any Assistant Secretary. "Officers' Certificate" means, with respect to any Person, a --------------------- certificate signed by two Officers, one of which is the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President or any Executive Vice President. -17- "Opinion of Counsel" means a written opinion from legal counsel who ------------------ is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to Parent or the Trustee. "Parent Surviving Entity" has the meaning set forth in Section 5.1. ----------------------- "Permitted Business" means (i) the same or a similar line of ------------------ business as Parent and the Restricted Subsidiaries are engaged in on the date hereof as described in the Offering Memorandum and (ii) such business activities as are complementary, incidental, ancillary or related to, or are reasonable extensions of, the foregoing. "Permitted Holders" means Anglo American plc, an English public ----------------- limited company, and its Affiliates. "Permitted Indebtedness" has the meaning set forth in Section ---------------------- 4.9(b). "Permitted Investment" means: -------------------- (1) any Investment in Temporary Cash Investments or the Notes or the Exchange Notes; (2) any Investment in Issuer or any Guarantor; (3) any Investment by Parent or any Restricted Subsidiary in a Person, if as a result of such Investment: (x) such Person becomes a Guarantor; or (y) such Person is merged or consolidated with or into, or Transfers or conveys all or substantially all of its assets to, or is liquidated into, Issuer or a Guarantor; (4) any Investment by any Foreign Subsidiary in (x) any other Foreign Subsidiary; or (y) any Person if as a result of such Investment, (i) such Person becomes a Foreign Subsidiary, or (ii) such Person is merged or consolidated with or into, or Transfers or conveys all or substantially all of its assets to, or is liquidated into, any Foreign Subsidiary; (5) receivables owing to Parent or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided -------- that such trade terms may include such concessionary trade terms as Parent or any such Restricted Subsidiary deems reasonable under the circumstances; (6) loans or advances to employees of Parent or any Restricted Subsidiary that are made in the ordinary course of business consistent with past practices of Parent or such Restricted Subsidiary; (7) Investments in any Person to the extent such Investment represents the non-cash portion of the consideration received in an Asset Sale or Sale of a Principal Property as permitted pursuant to Section 4.13 or Section 4.15; -18- (8) Investments of cash or Temporary Cash Investments in any Restricted Subsidiary that is not a Guarantor in the form of Indebtedness that is not subordinated by its terms to any other obligations; provided -------- that (a) any such Investment made with proceeds from the Transfer of Fixed Assets shall be evidenced by a Fixed Asset Intercompany Note issued by such Restricted Subsidiary to the Person that makes such Investment; and (b) to the extent that the aggregate amount of Indebtedness owed to Issuer or any Guarantor by such Restricted Subsidiary (other than those evidenced by a Fixed Asset Intercompany Note) after giving effect to such Investment is greater than the aggregate amount of such Indebtedness outstanding on the Issue Date, such Investment shall be evidenced by an unsecured promissory note issued by such Restricted Subsidiary to the Person that makes such Investment, on which note the Bank Collateral Agent under the Credit Facility shall have a first priority Lien and the Trustee shall have a second priority Lien (which priorities shall be governed by the Intercreditor Agreement); (9) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (10) Hedging Obligations incurred pursuant to clause (7) of the definition of "Permitted Indebtedness"; (11) Investments in joint ventures not to exceed $10.0 million at any time outstanding; provided that each such joint venture is engaged -------- only in a Permitted Business; (12) any Investment by Parent or a Wholly Owned Subsidiary of Parent in a Securitization Entity; provided that such Investment is in the form -------- of a Purchase Money Note or an equity interest or interests in accounts receivable generated by Parent or any of its Subsidiaries; (13) any Indebtedness of Parent to any of its Subsidiaries incurred in connection with the purchase of accounts receivable and related assets by Parent from any such Subsidiary which assets are subsequently conveyed by Parent to a Securitization Entity in a Qualified Securitization Transaction; (14) any guarantees of Indebtedness permitted by clause (6) or (17) of the definition of "Permitted Indebtedness"; (15) an Investment by TNCLP or TNLP in the other; and (16) additional Investments in an aggregate amount not to exceed $10.0 million at any time outstanding. -19- The amount of any Investments outstanding for purposes of clause (11) or (16) above and the amount of Investments deemed made since the Issue Date for purposes of Section 4.10(b)(8) shall be equal to the aggregate amount of Investments made pursuant to such clause reduced (but not below zero) by the following (to the extent not included in the calculation of Consolidated Net Income for purposes of determining the Basket and without duplication): (a) the aggregate net proceeds (including the Fair Market Value of assets other than cash) received by Parent or any Restricted Subsidiary upon the sale or other disposition of any Investment made pursuant to such clause; (b) the net reduction in Investments made pursuant to such clause resulting from dividends, repayments of loans or advances or other Transfers of assets to Parent or any Restricted Subsidiary; (c) to the extent that the amount available for Investments under such clause was reduced as the result of the designation of an Unrestricted Subsidiary, the portion (proportionate to Parent's equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is redesignated, or liquidated or merged into, a Restricted Subsidiary; and (d) the net reduction in Investments made pursuant to such clause resulting from repayment of letters of credit or the expiration of letters of credit undrawn. "Permitted Liens" means: --------------- (1) Liens of the type described in the definition of "Collateral Permitted Liens" (other than clause (2) thereof), without giving effect to any requirement of compliance with the Contested Collateral Lien Conditions; (2) Liens encumbering the Revolving Credit Collateral and the Second Lien Collateral securing the Credit Facility; (3) Liens securing Hedging Obligations of the type described in clause (7) of the definition of "Permitted Indebtedness"; (4) Liens securing Indebtedness of Foreign Subsidiaries (other than Principal Property Subsidiaries); (5) Liens in favor of Issuer or any Guarantor; provided that such Liens do -------- not secure obligations that are assigned to any Person other than the Trustee pursuant to the Security Documents or the Bank Collateral Agent pursuant to the Credit Facility; (6) Liens on assets or shares of stock of a Person at the time such Person becomes a Subsidiary; provided that such Lien was not incurred in -------- anticipation of or in connection with the transaction or series of related transactions pursuant to which such Person became a Subsidiary; -20- (7) pledges of or Liens on raw materials or on manufactured products as security for any drafts or bills of exchange drawn in connection with the importation of such raw materials or manufactured products; (8) Liens in favor of banks that arise under Article 4 of the UCC on items in collection and documents relating thereto and proceeds thereof and Liens arising under Section 2-711 of the UCC; (9) Liens arising or that may be deemed to arise in favor of a Securitization Entity arising in connection with a Qualified Securitization Transaction; (10) other Liens securing obligations in an aggregate amount, together with the aggregate amount of any obligations secured pursuant to clause (13) of the definition of "Collateral Permitted Liens," not to exceed $2.0 million at any time outstanding; (11) pledges or deposits by such Person under workers' compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent or deposits as security for the payment of insurance-related obligations (including, but not limited to, in respect of deductibles, self-insured retention amounts and premiums and adjustments thereto), in each case incurred in the ordinary course of business; (12) Liens in favor of issuers of surety, performance, judgment, appeal and like bonds or letters of credit issued in the ordinary course of business; (13) Liens occurring solely by the filing of a UCC statement, which filing has not been consented to by Parent or any Restricted Subsidiary; (14) any obligations or duties affecting any property of Parent or any Restricted Subsidiary to any municipality or public authority with respect to any franchise, grant, license or permit that do not materially impair the use of such property for the purposes for which it is held; (15) Liens on any property in favor of domestic or foreign governmental bodies to secure partial, progress, advance or other payments pursuant to any contract or statute, not yet due and payable; (16) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements; and (17) deposits, pledges or other Liens to secure obligations under purchase or sale agreements. -21- "Person" means any individual, corporation, partnership, joint ------ venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Pledgor" means each of Issuer, Parent and the Restricted ------- Subsidiaries party to any of the Security Documents executed on the date hereof and each other party that becomes a pledgor, mortgagor, transferor or assignor under any Security Document. "Preferred Stock," as applied to the Capital Stock of any --------------- corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "principal" of a Note means the principal of the Note plus the --------- premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. "Principal Properties" means (1) each of the facilities at or -------------------- near the following locations described in the Offering Memorandum: (a) Beaumont, Texas, (b) Billingham, U.K., (c) Blytheville, Arkansas, (d) Courtright, Ontario, (e) Port Neal, Iowa, (f) Severnside, U.K., (g) Verdigris, Oklahoma and (h) Woodward, Oklahoma and (2) each other real property of Parent or any Subsidiary required, pursuant to this Indenture and the Security Documents, to be pledged to the Trustee as a "Principal Property." "Principal Property Subsidiaries" means (1) each of the following ------------------------------- Subsidiaries of Parent: (a) Beaumont Ammonia Inc., a Delaware corporation, (b) BMC Holdings Inc., a Delaware corporation, (c) Port Neal Corporation, a Delaware corporation, (d) Terra International (Canada) Inc., an Ontario corporation, (e) Terra International (Oklahoma) Inc., a Delaware corporation, (f) Terra Nitrogen (U.K.) Ltd., an English company, (g) Terra Nitrogen Company, L.P., a Delaware limited partnership, (h) Terra Nitrogen, Limited Partnership, a Delaware limited partnership, and (i) Terra Real Estate Corp., a Delaware corporation and (2) any other Subsidiary that owns any Principal Property. "Prior Liens" has the meaning ascribed to that term in the ----------- applicable Security Document. "Private Placement Legend" means the legend initially set forth ------------------------ on the securities in the form set forth in Section 2.13. "Pro Forma Cost Savings" means, with respect to any period, the ---------------------- reduction in costs that occurred during the period that were (1) directly attributable to an acquisition and calculated on a basis that is consistent with Article 11 of Regulation S-X as in effect on the date hereof or (2) implemented by the business that was the subject of any such acquisition within one year of the date of the acquisition and that are supportable and quantifiable by the underlying accounting records of such business, as if, in the case of each of clauses (1) and (2), all such reductions in costs had been effected as of the beginning of such period, decreased by any incremental expenses (except to the extent capi- -22- talized on Parent's consolidated balance sheet) incurred or to be incurred for the period in order to achieve such reduction in costs. "Prudent Operator" has the meaning set forth in the applicable ---------------- Security Document. "Purchase Money Indebtedness" means Indebtedness (i) consisting --------------------------- of the deferred purchase price of assets, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds or similar Indebtedness, in each case where the maturity of such Indebtedness does not exceed the anticipated useful life of the asset being financed, and (ii) incurred to finance the acquisition by Parent or a Restricted Subsidiary of such asset, including additions and improvements; provided that any Lien arising in -------- connection with any such Indebtedness shall be limited to the specified asset being financed or, in the case of real property or fixtures, including additions and improvements, the real property on which such asset is attached; provided, -------- further that such Indebtedness is incurred within 120 days after such ------- acquisition of, or the completion of construction of, such asset by Parent or Restricted Subsidiary. "Purchase Money Note" means a promissory note evidencing a line ------------------- of credit, which may be irrevocable, from, or evidencing other Indebtedness owed to, Parent or any of its Subsidiaries in connection with a Qualified Securitization Transaction, which note shall be repaid from cash available to the maker of such note, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts paid in connection with the purchase of newly generated receivables. "Qualified Institutional Buyer" or "QIB" shall have the meaning ----------------------------- --- specified in Rule 144A under the Securities Act. "Qualified Securitization Transaction" means any transaction or ------------------------------------ series of transactions that may be entered into by Parent, any Restricted Subsidiary or a Securitization Entity pursuant to which Parent or such Restricted Subsidiary or that Securitization Entity may, pursuant to customary terms, sell, convey or otherwise transfer to, or grant a security interest in for the benefit of, (i) a Securitization Entity or Parent or any Restricted Subsidiary which subsequently transfers to a Securitization Entity (in the case of a transfer by Parent or such Restricted Subsidiary) and (ii) any other Person (in the case of transfer by a Securitization Entity), any accounts receivable (whether now existing or arising or acquired in the future) of Parent or any Restricted Subsidiary which arose in the ordinary course of business of Parent or such Restricted Subsidiary, and any assets related thereto, including, without limitation, all collateral securing such accounts receivable, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable. "Qualified Stock" means any Capital Stock of Parent other than --------------- Disqualified Stock. -23- "Real Property" means any interest in any real property or any ------------- portion thereof whether owned in fee or leased or otherwise owned. "Reference Treasury Dealer" means each of (i) Salomon Smith ------------------------- Barney Inc. or any successor; provided that if the foregoing shall not be a -------- primary U.S. Government securities dealer in New York City (a "Primary Treasury ---------------- Dealer"), Issuer shall substitute therefor another Primary Treasury Dealer and ------ (ii) any Primary Treasury Dealer selected by Issuer. "Reference Treasury Dealer Quotations" means, with respect to ------------------------------------ each Reference Treasury Dealer on any date of redemption, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such date of redemption. "Refinance" means, in respect of any Indebtedness, to refinance, --------- extend, increase, replace, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. ---------- ----------- "Refinancing Indebtedness" means with respect to any ------------------------ Indebtedness, Indebtedness incurred to Refinance such Indebtedness that does not: (1) result in an increase in the aggregate principal amount of Indebtedness being Refinanced as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable expenses incurred in connection with such Refinancing) or (2) create Indebtedness with (a) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (b) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if the Indebtedness being Refinanced is subordinated by its -------- terms to the Notes or a Guarantee, then such Refinancing Indebtedness shall be subordinated by its terms to the Notes or such Guarantee at least to the same extent and in the same manner as the Indebtedness being Refinanced and (y) the obligor(s) on the Refinancing Indebtedness shall not include any Person that is not the Issuer or a Guarantor or a Person that is an obligor on the Indebtedness being Refinanced. "Registration Rights Agreement" means the Registration Rights ----------------------------- Agreement dated the Issue Date among Terra Capital, the Guarantors party thereto and the Initial Purchasers. "Regulation S" means Regulation S under the Securities Act. ------------ "Regulation S-X" means Regulation S-X under the Securities Act. -------------- -24- "Related Business" means the manufacture, distribution and sale ---------------- of excavation equipment, or components for such equipment, used in large-scale surface mining operations and activities reasonably related thereto, including, without limitation, aftermarket parts sales and services, and such other businesses as the Board of Directors determines in good faith are reasonably related to the foregoing. "Released Interests" has the meaning set forth in Section 12.4. ------------------ "Responsible Officer" means, when used with respect to the ------------------- Trustee, any officer assigned to the Corporate Trust Office, including any vice president, assistant vice president, assistant secretary or any other officer of the Trustee to whom any corporate trust matter is referred because of his or her knowledge or familiarity with the particular subject. "Restricted Payment" means, with respect to any Person, (i) any ------------------ dividend or other distribution declared or paid on any Capital Stock of Parent (other than dividends or distributions payable solely in Qualified Stock); (ii) any payment to purchase, redeem or otherwise acquire or retire for value any Capital Stock of Parent or any Affiliate of Parent (other than any Restricted Subsidiary); (iii) any payment to purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Obligations prior to the Stated Maturity thereof (other than any Purchase Money Indebtedness incurred after the Issue Date upon the sale of the related asset); or (iv) the making of an Investment (other than a Permitted Investment), including any Investment in an Unrestricted Subsidiary (including by the designation of any Subsidiary of Parent as an Unrestricted Subsidiary). "Restricted Security" has the meaning assigned to "Restricted ------------------- Security" in Rule 144(a)(3) under the Securities Act; provided, however, that -------- ------- the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security. "Restricted Subsidiary" means Issuer, each Principal Property --------------------- Subsidiary and each other Subsidiary of Parent that is not an Unrestricted Subsidiary. "Revolving Credit Collateral" has the meaning set forth in the --------------------------- Intercreditor Agreement. "Rule 144A" means Rule 144A under the Securities Act. --------- "Sale and Leaseback Transaction" means an arrangement relating to ------------------------------ property now owned or hereafter acquired whereby Parent or a Restricted Subsidiary Transfers such property to a Person and Parent or a Restricted Subsidiary leases it from such Person. "Second Lien Collateral" has the meaning set forth in the ---------------------- Security Documents. "Securities Act" shall mean the Securities Act of 1933, as -------------- amended. -25- "Securitization Entity" means a Wholly Owned Subsidiary of Parent --------------------- (or another Person in which Parent or any Subsidiary of Parent makes an Investment and to which Parent or any Subsidiary of Parent Transfers accounts receivable) (1) which is designated by the Board of Directors (as provided below) as a Securitization Entity and engages in no activities other than in connection with the financing of accounts receivable; (2) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (a) is guaranteed by Parent or any of its Subsidiaries (other than the Securitization Entity) (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness)) pursuant to Standard Securitization Undertakings), (b) is recourse to or obligates Parent or any of its Subsidiaries (other than the Securitization Entity) in any way other than pursuant to Standard Securitization Undertakings or (c) subjects any asset of Parent or any of its Subsidiaries (other than the Securitization Entity), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings and other than any interest in the accounts receivable (whether in the form of an equity interest in such assets or subordinated indebtedness payable primarily from such financed assets) retained or acquired by Parent or any of its Subsidiaries; (3) with which neither Parent nor any of its Subsidiaries has any material contract, agreement, arrangement or understanding other than on terms no less favorable to Parent or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of Parent, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity; and (4) to which neither Parent nor any of its Subsidiaries has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing conditions. "Security Agreement" means each security agreement, charge or ------------------ debenture (and each debenture delivery agreement, if any, relating thereto) substantially in the form of (i) Exhibit I-1 hereto in the case of assets ----------- located in or used in connection with the Real Property located in the United States or in the case of other assets to the extent the laws of the United States would be applicable to the creation, attachment, perfection, priority and enforceability of a security interest therein or Lien thereon or the rights and remedies of the Trustee with respect thereto, (ii) Exhibit I-2 hereto in the ----------- case of assets located at or used in connection with the Real Property located in the United Kingdom or in the case of other assets to the extent United Kingdom law would be applicable to the creation, attachment perfection, priority and enforceability of a security interest therein or Lien thereon or the rights and remedies of the Trustee with respect thereto or (iii) Exhibit I-3 hereto in ----------- the case of as- -26- sets located at or used in connection with the Real Property located in Canada or in the case of other assets to the extent the laws of Canada would be applicable to the creation, attachment, perfection, priority and enforceability of a security interest therein or Lien thereon or the rights and remedies of the Trustee with respect thereto or (iv) each other security agreement, pledge, collateral assignment, charge, debenture or other agreement or instrument from time to time evidencing or creating any security interest in or Lien on assets of the type constituting Collateral (other than Real Property) in favor of the Trustee (whether directly or by assignment) on behalf of itself and the Holders, in each case, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "Security Documents" means, collectively, (1) the Security ------------------ Agreement among Issuer, the Guarantors and the Trustee, as trustee and collateral agent, (2) the Security Agreement encumbering the personal property owned by Terra Canada made by Terra Canada in favor of Issuer as assigned to the Trustee, as trustee and collateral agent, (3) the Security Agreement encumbering the personal property owned by Terra UK made by Terra UK in favor of Issuer as assigned to the Trustee, as trustee and collateral agent, (4) the Security Agreement encumbering the personal property owned by TNLP and TNCLP made by TNLP and TNCLP in favor of Issuer as assigned to the Trustee, as trustee and collateral agent, (5) the Mortgage encumbering the Real Property located in the United States of the applicable Domestic Subsidiaries made by the applicable Domestic Subsidiary in favor of Trustee, as trustee and collateral agent, (6) the Mortgage encumbering the Real Property owned or leased by Terra UK made by Terra UK in favor of the Issuer as assigned to Trustee, as trustee and collateral agent, (7) the Mortgage encumbering the Real Property owned or leased by Terra Canada in favor of Issuer as assigned to Trustee, as trustee and collateral agent, (8) the Mortgages encumbering the Real Property owned or leased by TNLP made by TNLP in favor of Issuer as assigned to Trustee, as trustee and collateral agent, (9) the Intercreditor Agreement and (10) all security agreements, mortgages, deeds of trust, pledges, collateral assignments, charges, debentures and other agreements or instruments evidencing or creating any security interest or Lien in favor of the Trustee (whether directly or by assignment) on behalf of itself and the Holders in any or all of the Collateral, in each case as amended from time to time in accordance with their terms. "Security Interests" means the Liens on the Collateral and Second ------------------ Lien Collateral created by the Security Documents in favor of the Trustee, for its benefit and for the benefit of the Holders. "Significant Subsidiary" means (i) any Restricted Subsidiary that ---------------------- is a "significant subsidiary" of Parent on a consolidated basis within the meaning of Regulation S-X or (ii) any Restricted Subsidiary that, when aggregated with all other Restricted Subsidiaries that are not otherwise Signif icant Subsidiaries and as to which any event described in Section 6.1(vii), (viii) or (ix) has occurred or is continuing, would constitute a Significant Subsidiary under clause (i) of this definition. "Special Adjusted Treasury Rate" means, with respect to any date ------------------------------ of redemption or purchase, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price equal to the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such date of redemption or purchase, plus 0.50%. -27- "Standard Securitization Undertakings" means representations, ------------------------------------ warranties, covenants and indemnities entered into by Parent or any of its Subsidiaries which are reasonably customary in an accounts receivable securitization transaction. "Stated Maturity" means, with respect to any security, the date --------------- specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of Issuer or a ----------------------- Guarantor (whether outstanding on the Issue Date or thereafter incurred) which is subordinated by its terms in right of payment to the Notes or the Guarantee of such Guarantor. "Subsidiary" means, in respect of any Person, any corporation, ---------- association, partnership or other business entity of which Voting Stock representing more than 50% of the total voting power of all outstanding Voting Stock of such Person is at the time owned, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. "Survey" means a survey of any parcel of Real Property (and all ------ improvements thereon): (i) prepared by a surveyor or engineer licensed to perform surveys in the state or province in which such Real Property is located, (ii) dated (or redated) not earlier than six months prior to the date of delivery thereof (unless there shall have occurred within six months prior to such date of delivery any exterior construction on the site of such Real Property, in which event such survey shall be dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery), (iii) certified by the surveyor in a manner reasonably acceptable to the title company providing title insurance in respect of the Liens granted under the Mortgages (provided that such certification shall not be -------- required with respect to any survey of any parcel of real property located in Canada or the United Kingdom) and (iv) complying in all respects with the minimum detail requirements of the American Land Title Association, or local or foreign equivalent, as such requirements are in effect on the date of preparation of such survey, or that is otherwise reasonably acceptable to the Trustee (giving consideration to the applicable transaction). "Taking" means any taking of all or any portion of the Collateral ------ by condemnation or other eminent domain proceedings, pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of all or any portion of the Collateral by any governmental authority, civil or military, or any sale pursuant to the exercise by any such governmental authority of any right which it may then have to purchase or designate a purchaser or to order a sale of all or any portion of the Collateral. "Taken" ----- shall have a correlative meaning. "Taxes" means any tax, duty, levy, impost, assessment or other ----- governmental charge (including penalties, interest, expenses and any other liabilities related thereto) levied, imposed or assessed by or on behalf of any taxing authority. -28- "Temporary Cash Investments" means any of the following: (i) any -------------------------- investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof, (ii) investments in time or demand deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any State thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50,000,000 (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A-2" or higher by Moody's Investors Service, Inc. ("Moody's"), A or higher by ------- Standard & Poor's Rating Group ("S&P") or the equivalent rating by any other --- nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of Terra Capital) organized and in existence under the laws of the United States of America, any State thereof or the District of Columbia or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-2" or higher from Moody's, "A-2" or higher from S&P or the equivalent rating by any other nationally recognized statistical rating organization (as defined above), (v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by Moody's or "A" by S&P, and (vi) shares of any money market mutual fund rated at least AAA or the equivalent thereof by S&P, at least Aaa or the equivalent thereof by Moody's or any other mutual fund at least 95% of whose assets consist of the type specified in clauses (i) through (v) above. "Terra Canada" means Terra International (Canada) Inc., an Ontario ------------ corporation. "Terra UK" means Terra Nitrogen (U.K.) Ltd., an English company. -------- "Terra UK Customer Debt" means Indebtedness for borrowed money of a ---------------------- customer of Terra UK owing to a financial institution in the United Kingdom; provided that: -------- (i) such customer uses the entire principal proceeds of such Indebtedness to pay for goods and services purchased from Terra UK; (ii) such customer is required to repay such Indebtedness in full within 12 months of the date on which such Indebtedness is incurred; (iii) in the reasonable opinion of Terra UK, such customer is creditworthy; and (iv) it is a condition of the extension of credit by such financial institution to such customer that Terra UK guarantee a portion of such Indebtedness. -29- "Terra UK Intercompany Note" means the Fixed Asset Intercompany Note -------------------------- issued by Terra UK to Terra (UK) Holdings Inc. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) --- 77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in Section 9.3. "TNCLP" means Terra Nitrogen Company, L.P., a Delaware limited ----- partnership. "TNLP" means Terra Nitrogen, Limited Partnership, a Delaware limited ---- partnership. "TNLP Intercompany Note" means the Fixed Asset Intercompany Note ---------------------- issued by TNLP to Issuer. "Transfer" means to sell, assign, transfer, lease (other than pursuant -------- to an operating lease entered into in the ordinary course of business), convey or otherwise dispose of, including by Sale and Leaseback Transaction, consolidation, merger or otherwise, in one transaction or a series of transactions. "Transferred," "Transferor" and "Transferee" have correlative ----------- ---------- ---------- meanings. "Trustee" means the party named as such in this Indenture until a ------- successor replaces it and, thereafter, means the successor. "Trust Monies" means all cash and Temporary Cash Investments received ------------ by the Trustee: (1) upon the release of Collateral from the Lien of this Indenture or the Security Documents, including all Net Available Proceeds and all moneys received in respect of the principal of all purchase money, governmental and other obligations; (2) as compensation for or proceeds of the sale of all or any part of the Collateral taken by eminent domain or purchased by or sold pursuant to any order of a governmental authority or otherwise disposed of; (3) as Net Insurance Proceeds; (4) pursuant to the Security Documents; (5) as proceeds of any Transfer of all or any part of the Collateral by or on behalf of the Trustee or any collection, recovery, receipt, appropriation or other realization of or from all or any part of the Collateral pursuant to this Indenture or any of the Security Documents or otherwise; or (6) for application as provided in the relevant provisions of this Indenture or any Security Document or which disposition is not otherwise specifically provided for in this Indenture or in any Security Document; -30- provided that Trust Monies shall in no event include any property deposited with -------- the Trustee for any redemption, legal defeasance or covenant defeasance of Notes, for the satisfaction and discharge of this Indenture or to pay the purchase price of Notes pursuant to Section 4.8 or a Net Proceeds Offer or offer to purchase Notes required under Section 4.15. "Trust Officer" means the Chairman of the Board, the President or any ------------- other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "UCC" means the Uniform Commercial Code in effect in the applicable --- jurisdiction. "Unrestricted Subsidiary" means (i) any Subsidiary of Parent that at ----------------------- the time of determination shall have been designated an Unrestricted Subsidiary by the Board of Directors and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of Parent (including any newly acquired or newly formed Subsidiary but excluding any Principal Property Subsidiary and any parent company of any Principal Property Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any assets of, Issuer or any other Subsidiary of Parent that is not a Subsidiary of the Subsidiary to be so designated; provided that (i) no Default shall have occurred and be -------- continuing or would occur as a consequence thereof, (ii) Issuer could incur at least $1.00 of additional Indebtedness under Section 4.9(a) and (iii) either (x) the Subsidiary to be so designated has total assets of $1,000 or less or (y) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.10 (treating the Fair Market Value of Issuer's proportionate interest in the net worth of such Subsidiary on such date calculated in accordance with GAAP as the amount of the Investment). The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (i) no Default shall have occurred and is -------- continuing and (ii) Indebtedness of such Unrestricted Subsidiary and all Liens on any asset of such Unrestricted Subsidiary outstanding immediately following such redesignation would, if incurred at such time, be permitted to be incurred under this Indenture. "U.S. Government Obligations" means direct obligations (or --------------------------- certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "U.S. Legal Tender" means such coin or currency of the United States ----------------- of America as at the time of payment shall be legal tender for the payment of public or private debts. "Valuation Date" has the meaning set forth in Section 12.4(a). -------------- "Voting Stock" of a Person means all classes of Capital Stock or other ------------ interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. -31- "Weighted Average Life to Maturity" means, when applied to any --------------------------------- Indebtedness at any date, the number of years obtained by dividing: (1) the then outstanding aggregate principal amount of such Indebtedness into (2) the sum of the total of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the ----------------------- Capital Stock of which (other than directors' qualifying shares) is owned by Parent and/or one or more Wholly Owned Subsidiaries. SECTION 1.2. Other Definitions. ----------------- Term Defined in Section ---- ------------------ "Affiliate Transaction" 4.12 --------------------- "Alternate Investment" 4.13(e) -------------------- "Bankruptcy Law" 6.1 -------------- "covenant defeasance option" 8.1(b) -------------------------- "Custodian" 6.1 --------- "defeasance trust" 8.2 ---------------- "Event of Default" 6.1 ---------------- "Excess Proceeds" 4.13(f) --------------- "Global Notes" 2.1(b) ------------ "Guaranteed Obligations" 10.1 ---------------------- "legal defeasance option" 8.1(b) ----------------------- "maximum fixed repurchase price" 1.1 ------------------------------ "Moody's" 1.1 ------- "Net Proceeds Deficiency" 4.13(g) ----------------------- "Net Proceeds Offer" 4.13(g) ------------------ "Net Proceeds Offer Amount" 4.13(i) ------------------------- "Net Proceeds Offer Period" 4.13(i) ------------------------- "Notes Register" 2.3 -------------- "Participants" 2.6 ------------ "Paying Agent" 2.3 ------------ "Payment Default 6.1 --------------- "Physical Notes" 2.1(b) -------------- "Principal Property Acquisition" 13.4 ------------------------------ "Private Placement Legend" 2.13 ------------------------ "Purchase Date" 4.13(h) ------------- "Registrar" 2.3 --------- -32- Term Defined in Section ---- ------------------ "Related Investment" 4.13(e) ------------------ "Release Notice" 12.4 -------------- "Replacement Principal Property" 4.15(d) ------------------------------ "Required Filing Dates" 4.6 --------------------- "S&P" 1.1 --- "Sale of a Principal Property" 4.15(a) ---------------------------- "Unused Proceeds" 4.14(c) --------------- "Unused Proceeds Offer" 4.15(d) --------------------- "Unused Proceeds Offer Amount" 4.15(d) ---------------------------- "Unused Proceeds Offer Period" 4.15(d) ---------------------------- SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This ------------------------------------------------- Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. ---------- "indenture securities" means the Notes. -------------------- "indenture security holder" means a Noteholder. ------------------------- "indenture to be qualified" means this Indenture. ------------------------- "indenture trustee" or "institutional trustee" means the Trustee. ----------------- --------------------- "obligor" on the indenture securities means Terra Capital, the ------- Guarantors or any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.4. Rules of Construction. Unless the context otherwise --------------------- requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; -33- (5) words in the singular include the plural and words in the plural include the singular; (6) the principal amount of any non-interest-bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of Parent dated such date prepared in accordance with GAAP; (7) all references to $, US$, dollars or United States dollars shall refer to the lawful currency of the United States; and (8) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE 2 THE NOTES SECTION 2.1. Form and Dating. --------------- (a) The Initial Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto. The --------- Exchange Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit B hereto. The Notes may have --------- notations, legends or endorsements required by law, stock exchange rules, agreements to which Parent or Terra Capital is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable -------- to Parent or Terra Capital, as the case may be). Each Note shall be dated the date of its authentication. If required, the Notes may bear the appropriate legend regarding any original issue discount for federal income tax purposes. Each Note shall have an executed Guarantee from each of the Guarantors. The terms and provisions contained in the Notes, annexed hereto as Exhibits A and B, shall constitute, and are hereby expressly made, a part of ---------- - this Indenture and, to the extent applicable, Terra Capital, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. (b) Global Notes. The Notes offered and sold in reliance on Rule 144A ------------ and Notes offered and sold in reliance on Regulation S shall be issued initially in the form of one or more permanent Global Notes ("Global Notes") in ------------ definitive, fully registered form without interest coupons, in substantially the form of Exhibit A, which shall be deposited on behalf of the purchasers of the --------- Notes represented thereby with the Trustee, at the Trustee's office in New York City, as custodian for the Depository, and registered in the name of the Depository or a nominee of the Depository, duly executed by Terra Capital (and having an executed Guarantee endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in Section 2.13. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee in the limited circumstances hereinafter provided. -34- Securities issued in exchange for interests in Global Notes pursuant to Section 2.6 may be issued in the form of permanent certificated Securities in registered form in substantially the form set forth in Exhibit A (the "Physical --------- -------- Notes"). ----- SECTION 2.2. Execution and Authentication. An Officer of Terra Capital ---------------------------- and each Guarantor shall sign the Notes and the Guarantees, respectively, by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless. A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate and make available for delivery (i) Initial Notes for original issue in an aggregate principal amount of $200,000,000 and (ii) Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes, in each case, upon a written order of Terra Capital signed by an Officer of Terra Capital. Such order shall specify the amount of the Notes to be authenticated and the date on which the Notes are to be authenticated. The aggregate principal amount of Notes outstanding at any time may not exceed $200,000,000 except as provided in Section 2.7. The Trustee may appoint an authenticating agent acceptable to Terra Capital to authenticate the Notes, upon the consent of Terra Capital to such appointment. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.3. Registrar and Paying Agent. Terra Capital shall maintain -------------------------- an office or agency where Notes may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be --------- presented for payment (the "Paying Agent"). The Registrar, acting on behalf of ------------ and as agent for Terra Capital, shall keep a register (the "Notes Register") of -------------- the Notes and of their transfer and exchange. Terra Capital may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. Terra Capital shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. Terra Capital shall notify the Trustee of the name and address of any such agent. If Terra Capital fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. Terra Capital or a Subsidiary thereof may act as Paying Agent, Registrar, co-Registrar or transfer agent. Terra Capital initially appoints the Trustee as Registrar and Paying Agent in connection with the Notes, until such time as the Trustee has resigned or a successor has been appointed. Any of the Registrar, the Paying Agent or any other agent may resign upon 30 days' notice to Terra Capital. SECTION 2.4. Paying Agent To Hold Money in Trust. On or prior to each ----------------------------------- due date of the principal and interest on any Note, Terra Capital shall deposit with the Paying Agent a sum suf- -35- ficient to pay such principal and interest when so becoming due. Terra Capital shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Notes and shall notify the Trustee of any default by Terra Capital in making any such payment. If Terra Capital or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. Terra Capital at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.5. Holder Lists. The Trustee shall preserve in as current a ------------ form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, Terra Capital shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders; provided, however, -------- ------- that as long as the Trustee is the Registrar, no such list need be furnished. SECTION 2.6. Transfer and Exchange. The Notes shall be issued in --------------------- registered form and shall be transferable only upon the surrender of a Note for registration of transfer. When a Note is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Registrar shall record in the Notes Register the transfer as requested if the requirements of Section 8-401(1) of the UCC are met, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the designated assignee or transferee and the old Note will be returned to Terra Capital. When Notes are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall make the exchange as requested, in the same manner, if the same requirements are met. To permit registration of transfers and exchanges, Terra Capital shall execute and the Trustee shall authenticate Notes and each of the Guarantors shall execute a Guarantee thereon at the Registrar's or co-registrar's request. Terra Capital may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. Terra Capital shall not be required to make and the Registrar need not register transfers or exchanges of Notes selected for redemption (except, in the case of Notes to be redeemed in part, the portion thereof not to be redeemed) or any Notes for a period of 15 days before a selection of Notes to be redeemed or 15 days before an interest payment date. Prior to the due presentation for registration of transfer of any Note, Terra Capital, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of Terra Capital, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. -36- All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange. With respect to Global Notes: (1) Each Global Note authenticated under this Indenture shall (i) be registered in the name of the Depository designated for such Global Note or a nominee thereof, (ii) be deposited with such Depository or a nominee thereof or custodian therefor, (iii) bear legends as set forth in Section 2.13 and (iv) constitute a single Note for all purposes of this Indenture. (2) Transfers of a Global Note shall be limited to transfers in whole but not in part to the Depository, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.14. In addition, a Global Note is exchangeable for certificated Notes if (i) the Depository notifies Terra Capital that it is unwilling or unable to continue as a Depository for such Global Note or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, (ii) Terra Capital executes and delivers to the Trustee a notice that such Global Note shall be so transferable, registrable, and exchangeable, and such transfers shall be registrable or (iii) there shall have occurred and be continuing a Default. Any Global Note that is exchangeable for certificated Notes pursuant to the preceding sentence will be transferred to, and registered and exchanged for, certificated Notes in authorized denominations, without legends applicable to a Global Note, and registered in such names as the Depository holding such Global Note may direct. Subject to the foregoing, a Global Note is not exchangeable, except for a Global Note of like denomination to be registered in the name of the Depository or its nominee. In the event that a Global Note becomes exchangeable for certificated Notes, (i) certificated Notes will be issued only in fully registered form in denominations of $1,000 or integral multiples thereof, (ii) payment of principal, any repurchase price, and interest on the certificated Notes will be payable, and the transfer of the certificated Notes will be registrable, at the office or agency of Terra Capital maintained for such purposes, and (iii) no service charge will be made for any registration or transfer or exchange of the certificated Notes, although Terra Capital may require payment of a sum sufficient to cover any tax or governmental charge imposed in connection therewith. (3) Notes issued in exchange for a Global Note or any portion thereof shall have an aggregate principal amount equal to that of such Global Note or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depository shall designate and shall bear the applicable legends provided for herein. Any Global Note to be exchanged in whole shall be surrendered by the Depository to the Trustee. With respect to any Global Note to be exchanged in part, either such Global Note shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depository or its nominee with respect to such Global Note, the principal amount thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the -37- Trustee shall authenticate and deliver the Note issuable on such exchange to or upon the order of the Depository or an authorized representative thereof. (4) Every Note authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Note or any portion thereof, whether pursuant to this Section 2.6, Section 2.7, 2.9, 2.14 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Note, unless such Note is registered in the name of a Person other than the Depository for such Global Note or a nominee thereof. Members of, or participants in, the Depository ("Participants") shall have ------------ no rights under this Indenture with respect to any Global Note held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Note, and the Depository may be treated by Terra Capital, the Trustee and any agent of Terra Capital or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent Terra Capital, the Trustee or any agent of Terra Capital or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Participants, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Note. SECTION 2.7. Replacement Notes. If a mutilated Note is surrendered to ----------------- the Trustee or Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, Terra Capital shall issue and the Trustee shall authenticate a replacement Note and the Guarantors shall execute a Guarantee thereon if the requirements of Section 8-405 of the UCC are met and the Holder satisfies any other reasonable requirements of the Trustee and Terra Capital. Such Holder shall furnish an indemnity bond sufficient in the judgment of Terra Capital, the Guarantors and the Trustee to protect Terra Capital, the Guarantors, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Note is replaced. Terra Capital and the Trustee may charge the Holder for their expenses in replacing a Note. Every replacement Note issued pursuant to the terms of this Section shall constitute an additional obligation of Terra Capital and the Guarantors under this Indenture. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 2.8. Outstanding Notes. Notes outstanding at any time are all ----------------- Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to the provisions of Section 11.6, a Note does not cease to be outstanding because Terra Capital or an Affiliate of Terra Capital holds the Note. If a Note is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Trustee and Terra Capital receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser. -38- If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date or, pursuant to Section 8.1(a), within 91 days prior thereto, money sufficient to pay all principal and interest payable on that redemption or maturity date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, then on and after such date such Notes (or portions thereof) cease to be outstanding and on and after such redemption or maturity date interest on them ceases to accrue. SECTION 2.9. Temporary Notes. Until definitive Notes are ready for --------------- delivery, Terra Capital may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that Terra Capital considers appropriate for temporary Notes. Without unreasonable delay, Terra Capital shall prepare and the Trustee shall authenticate definitive Notes and deliver them in exchange for temporary Notes. SECTION 2.10. Cancellation. Terra Capital at any time may deliver ------------ Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment or cancellation and deliver such canceled Securities to Terra Capital. The Trustee shall from time to time provide Terra Capital a list of all Securities that have been canceled as requested by Terra Capital. Terra Capital may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.11. Defaulted Interest. If Terra Capital defaults in a ------------------ payment of interest on the Notes, Terra Capital shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner in accordance with Section 4.1. Terra Capital may pay the defaulted interest to the Persons who are Holders on a subsequent special record date. Terra Capital shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Holder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP Numbers. Terra Capital in issuing the Notes may ------------- use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in no tices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the -------- correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. Terra Capital will promptly notify the Trustee of any change in the CUSIP numbers. SECTION 2.13. Restrictive Legends. Each Global Note and Physical Note ------------------- that constitutes a Restricted Security or is sold in compliance with Regulation S shall bear the following legend (the "Private Placement Legend") on the face ------------------------ thereof until after the second anniversary of the later of the Issue Date and the last date on which Terra Capital or any Affiliate of Terra Capital was the owner of such Note (or any predecessor note) (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder), or such longer period of time -39- as may be required under the Securities Act or applicable state securities laws in the opinion of counsel for Terra Capital, unless otherwise agreed by Terra Capital and the Holder thereof: This security has not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and neither this security nor any -------------- interest or participation herein (or therein) may be offered, sold, assigned, transferred, pledged, encumbered or otherwise disposed of in the absence of such registration or unless such transaction is exempt from, or not subject to, the registration requirements of the Securities Act or any applicable state securities laws. The holder hereof, by its acceptance of this security, agrees for the benefit of the issuer that this security may not be offered, sold, pledged or otherwise transferred prior to the expiration of the holding period applicable thereto under Rule 144(k) under the Securities Act which is applicable to this security (the "Resale ------ Restriction Termination Date") other than (1) to either issuer or its ---------------------------- subsidiaries, (2) so long as this security is eligible for resale pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person who the --------- seller reasonably believes is a "qualified institutional buyer" within the meaning of Rule 144A purchasing for its own account or for the account of a qualified institutional buyer, in each case to whom notice is given that the resale, pledge or other transfer is being made in reliance on Rule 144A (as indicated by the box checked by the transferor on the certificate of transfer on the reverse of this security if this security is not in book-entry form), (3) to a non-"U.S. person" in an "offshore transaction" (as such terms are defined in Regulation S under the Securities Act) in accordance with Regulation S under the Securities Act (as indicated by the box checked by the transferor on the certificate of transfer on the reverse of this security if this security is not in book-entry form), (4) pursuant to any other available exemption from the registration requirements of the Securities Act, including the exemption provided by Rule 144 under the Securities Act, if available, or (5) pursuant to an effective registration statement under the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control, and subject to the right of the issuer or the Trustee for the securities prior to any such sale, pledge or other transfer pursuant to clause (4) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to each of them. This legend will be removed upon request of the holder on or after the Resale Restriction Termination Date. Each Global Note shall also bear the following legend on the face thereof: Unless and until it is exchanged in whole or in part for securities in definitive form, this security may not be transferred except as a whole by the depository to a nominee of the depository, or by any such nominee of the depository, or by the depository or nominee of such successor depository or any such nominee to a successor depository or a nominee of such successor depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to an issuer or its agent for registration of --- transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as is -40- requested by an authorized representative of DTC (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein. Transfers of this global note shall be limited to transfers in whole, but not in part, to nominees of Cede & Co. or to a successor thereof or such successor's nominee and transfers of portions of this global note shall be limited to transfers made in accordance with the restrictions set forth in Section 2.14 of the Indenture referred to herein. SECTION 2.14. Special Transfer Provisions. --------------------------- (a) Transfers to Non-QIB Institutional Accredited Investors and ----------------------------------------------------------- Non-U.S. Persons. The following provisions shall apply with respect to the ---------------- registration of any proposed transfer of a Security constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person: (i) the Registrar shall register the transfer of any Note constituting a Restricted Security whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date (provided, however, that neither Terra -------- ------- Capital nor any Affiliate of Terra Capital has held any beneficial interest in such Note, or portion thereof, at any time on or prior to the second anniversary of the Issue Date) or (y) (1) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto and any legal --------- opinions and certifications required thereby or (2) in the case of a transfer to a Non-U.S. Person, the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto; and --------- (ii) if the proposed transferor is a Participant holding a beneficial interest in the Global Note, upon receipt by the Registrar of (x) the certificate, if any, required by paragraph (i) above and (y) written instructions given in accordance with the Depository's and the Registrar's procedures, whereupon (a) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Notes) a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and (b) Terra Capital shall execute, the Guarantors shall execute the Guarantees on, and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with ----------------- respect to the registration of any proposed transfer of a Security constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons): -41- (i) the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised Terra Capital and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised Terra Capital and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding Terra Capital as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (ii) if the proposed transferee is a Participant, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in a Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of such Global Note in an amount equal to the principal amount of the Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred. (c) Private Placement Legend. Upon the transfer, exchange or ------------------------ replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) the requested transfer is after the second anniversary of the Issue Date (provided, however, that neither Terra Capital nor -------- ------- any Affiliate of Terra Capital has held any beneficial interest in such Note, or portion thereof, at any time prior to or on the second anniversary of the Issue Date), or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to Terra Capital and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (d) General. By its acceptance of any Note bearing the Private ------- Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this In denture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.6 or this Section 2.14. Terra Capital shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time during the Registrar's normal business hours upon the giving of reasonable written notice to the Registrar. (e) Transfers of Notes Held by Affiliates. Any certificate (i) ------------------------------------- evidencing a Note that has been transferred to an Affiliate of Terra Capital within two years after the Issue Date, as evi- -42- denced by a notation on the Assignment Form for such transfer or in the representation letter delivered in respect thereof or (ii) evidencing a Note that has been acquired from an Affiliate (other than by an Affiliate) in a transaction or a chain of transactions not involving any public offering, shall, until two years after the last date on which either Terra Capital or any Affiliate of Terra Capital was an owner of such Note, in each case, bear a legend in substantially the form set forth in Section 2.13, unless otherwise agreed by Terra Capital (with written notice thereof to the Trustee). ARTICLE 3 REDEMPTION SECTION 3.1. Notices to Trustee. If Terra Capital elects to redeem ------------------ Notes pursuant to paragraph 5 thereof, it shall notify the Trustee in writing of the redemption date, the principal amount of Notes to be redeemed and the paragraph of the Notes pursuant to which the redemption will occur. Terra Capital shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate from Terra Capital to the effect that such redemption will comply with the provisions herein. SECTION 3.2. Selection of Notes To Be Redeemed. If fewer than all the --------------------------------- Notes are to be redeemed, the Trustee shall select the Notes to be redeemed on a pro rata basis or by lot or by such other method that complies with applicable --- ---- legal and securities exchange requirements, if any, and that the Trustee in its sole discretion shall deem to be fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Notes not previously called for redemption. Notes and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify Terra Capital promptly of the Notes or portions of Notes to be redeemed. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. In the event Terra Capital is required to make an offer to purchase Notes pursuant to Section 4.8, 4.13 or 4.15 and the amount available for such offer is not evenly divisible by $1,000, the Trustee shall promptly refund to Terra Capital any remaining funds, which in no event will exceed $1,000. SECTION 3.3. Notice of Redemption. At least 30 days but not more than -------------------- 60 days before a date for redemption of Notes, Terra Capital shall mail a notice of redemption by first-class mail to the registered address appearing in the Notes Register of each Holder of Notes to be redeemed. The notice shall identify the Notes to be redeemed and shall state: (1) the redemption date; (2) the redemption price; -43- (3) the name and address of the Paying Agent; (4) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Notes are to be redeemed, the identification and principal amounts of the particular Notes to be redeemed; (6) that, unless Terra Capital defaults in making such redemption payment, interest on Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Notes pursuant to which the Notes called for redemption are being redeemed; (8) the CUSIP number, if any, printed on the Notes being redeemed; and (9) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At Terra Capital's request, the Trustee shall give the notice of redemption in Terra Capital's name and at Terra Capital's sole expense. In such event, Terra Capital shall provide the Trustee with the information required by this Section. SECTION 3.4. Effect of Notice of Redemption. Once notice of redemption ------------------------------ is mailed, Notes called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. A notice of redemption may not be conditional. Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date. Such notice if mailed in the manner herein provided shall be conclusively presumed to have been given, whether or not the Holder receives such notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.5. Deposit of Redemption Price. Prior to 11:00 a.m. (New --------------------------- York City time) on the redemption date, Terra Capital shall deposit with the Trustee or Paying Agent (or, if Parent or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest (if any) on all Notes or portions thereof to be redeemed on that date other than Notes or portions of Notes called for redemption which have been delivered by Terra Capital to the Trustee for cancellation. SECTION 3.6. Notes Redeemed in Part. Upon surrender of a Note that is ---------------------- redeemed in part (with, if Terra Capital or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to Terra Capital and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), Terra Capital shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in -44- exchange for the unredeemed portion of the principal of the Note so surrendered, except that if a Global Note is so surrendered, Terra Capital shall execute, and the Trustee shall authenticate and deliver to the Depository for such Global Note, without service charge, a new Global Note in denomination equal to and in exchange for the unredeemed portion of the principal of the Global Note so surrendered. ARTICLE 4 COVENANTS SECTION 4.1. Payment of Notes. Terra Capital shall promptly pay the ---------------- principal of and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due. Terra Capital shall pay interest on overdue principal at 1% per annum in excess of the rate per annum set forth in the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. Interest will be computed on a basis of a 360-day year of twelve 30-day months. SECTION 4.2. Corporate Existence. Subject to Article 5 and Section ------------------- 4.13, Parent shall do or caused to be done, at its own cost and expense, all things necessary to, and will cause each Restricted Subsidiary to, preserve and keep in full force and effect the corporate or partnership existence and rights (charter and statutory), licenses and/or franchises of Parent and each Restricted Subsidiary; provided, however, that neither Parent nor any Restricted -------- ------- Subsidiary shall be required to preserve any such rights, licenses or franchises if the Board of Directors shall reasonably determine that the preservation thereof is no longer desirable in the conduct of the business of Terra Capital and its Subsidiaries, taken as a whole. SECTION 4.3. Maintenance of Office or Agency. Terra Capital shall ------------------------------- maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office or agency of the Trustee, Registrar or co-Registrar), where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon Terra Capital in respect of the Notes and this Indenture may be served. Terra Capital will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time Terra Capital shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee's office located in New York City. Terra Capital may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, -------- however, that no such designation or rescission shall in any manner relieve ------- Terra Capital of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York, for such purposes. Terra Capital will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. -45- Terra Capital hereby initially designates the Trustee's office or agency in New York City as an agency of Terra Capital in accordance with Section 2.3. SECTION 4.4. Payment of Taxes and Other Claims. Parent shall, and --------------------------------- shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, all taxes, assessments and governmental charges levied or imposed upon its or its Subsidiaries' income, profits or property; provided, however, that none of Parent or its Subsidiaries -------- ------- shall be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate negotiations or proceedings and for which disputed amounts adequate reserves have been made in accordance with GAAP. SECTION 4.5. Additional Guarantees. --------------------- (a) If Parent or any Restricted Subsidiary transfers, acquires or creates another Restricted Subsidiary (other than any Foreign Subsidiary) after the date of this Indenture, then that newly acquired or created Restricted Subsidiary shall, within ten Business Days of the date on which it was acquired or created, execute and deliver to the Trustee (1) a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall fully and unconditionally guarantee all of Issuer's obligations under the Notes and this Indenture on the terms set forth in this Indenture and (2) Security Documents in the appropriate forms annexed hereto with such changes as shall be reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall grant to the Trustee a first priority security interest in and Lien on its Fixed Assets. Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture until released in accordance with Section 10.6. (b) If TNCLP becomes a Wholly Owned Subsidiary, TNCLP and TNLP shall, concurrently with the release of the limited partnership interests in TNCLP from the Lien of this Indenture and the Security Documents, execute and deliver to the Trustee (1) a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which TNCLP and TNLP shall fully and unconditionally guarantee all of Issuer's obligations under the Notes and this Indenture on the terms set forth in Article 10 and (2) Security Documents in form and substance reasonably satisfactory to the Trustee pursuant to which each of TNCLP and TNLP shall grant to the Trustee a first priority security interest in and Lien on its Fixed Assets. Thereafter, each of TNCLP and TNLP shall be a Guarantor for all purposes of the Indenture until released in accordance with Section 10.6. SECTION 4.6. SEC Reports. Whether or not Terra Capital and the ----------- Guarantors are then subject to Section 13(a) or 15(d) of the Exchange Act, Terra Capital and the Guarantors shall electronically file with the Commission, so long as the Notes are outstanding, the annual reports, quarterly reports and other periodic reports that Terra Capital and the Guarantors would be required to file with the Commission pursuant to Section 13(a) or 15(d) if Terra Capital and the Guarantors were so subject, and such documents shall be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by --------------------- which Terra Capital and the Guarantors would be required so to file such documents if Terra Capital and the Guarantors were so subject, unless, in any case, such filing is not then permitted by the Commission. If such filings with Commission are not then permitted by the -46- Commission, or such filings are not generally available on the Internet free of charge, Issuer and the Guarantors will, within 15 days of each Required Filing Date, transmit by mail to Holders, as their names and addresses appear in the Note Register, without cost to such Holders, and file with the Trustee copies of the annual reports, quarterly reports and other periodic reports that Issuer and the Guarantors would be required to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if Issuer and the Guarantors were subject to such Section 13(a) or 15(d), and promptly upon written request, supply copies of such documents to any prospective holder or beneficial owner at Issuer's cost. SECTION 4.7. Compliance Certificate. Issuer shall deliver to the ---------------------- Trustee within 120 days after the end of each fiscal year of Issuer an Officers' Certificate, one of the signers of which shall be the principal executive, financial or accounting officer of Issuer, stating that in the course of the performance by the signers of their duties as Officers of Issuer they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action Issuer is taking or proposes to take with respect thereto. Issuer and the Guarantors also shall comply with TIA Section 314(a)(4). SECTION 4.8. Change of Control. ----------------- (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require Terra Capital to purchase all or a portion (equal to $1,000 or an integral multiple thereof) of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the date fixed for redemption), in accordance with the terms contemplated in Section 4.8(b). (b) Within 30 days following any Change of Control, Terra Capital shall mail a notice to each Holder, with a copy to the Trustee, stating: (1) that a Change of Control has occurred and that such Holder has the right to require Terra Capital to purchase such Holder's Notes at the purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on an interest payment date that is on or prior to the date fixed for purchase); (2) the circumstances and relevant facts and relevant financial information regarding such Change of Control; (3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions as determined by Terra Capital, consistent with this Section 4.8, that a Holder must follow in order to have its Notes purchased. -47- (c) Holders electing to have a Note purchased will be required to surrender the Note, together with all necessary endorsements and other appropriate materials duly completed, to Terra Capital at the address specified in the notice at least three Business Days prior to the purchase date. Holders will be entitled to withdraw their election if the Trustee or Terra Capital receives not later than one Business Day prior to the purchase date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note which was delivered for purchase by the Holder as to which such notice of withdrawal is being submitted and a statement that such Holder is withdrawing its election to have such Note purchased. (d) On the purchase date, all Notes purchased by Terra Capital under this Section 4.8 shall be delivered to the Trustee for cancellation, and Terra Capital shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto. (e) Terra Capital shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this Section 4.8. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.8, Terra Capital shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the covenant described hereunder by virtue thereof. (f) Notwithstanding the occurrence of a Change of Control, Terra Capital shall not be obligated to purchase the Notes or otherwise comply with this Section 4.8 if Terra Capital has irrevocably elected to redeem all the Notes in accordance with paragraph 5 thereof; provided that Terra Capital does -------- not default in its redemption obligations pursuant to such election. SECTION 4.9. Limitation on Incurrence of Indebtedness. ---------------------------------------- (a) Parent shall not, and shall not permit any Restricted Subsidiary to, incur, directly or indirectly, any Indebtedness; provided that Issuer or any -------- Guarantor may incur Indebtedness if, immediately after giving effect to such incurrence, the Consolidated Coverage Ratio is at least 2.0 to 1.0 (this proviso, the "Coverage Ratio Exception"). ------------------------ (b) The foregoing Section 4.9(a) will not prohibit incurrence of the following Indebtedness (collectively, "Permitted Indebtedness"): ----------------------- (1) the Notes issued on the Issue Date and any Guarantees; (2) Indebtedness of Parent or any Restricted Subsidiary to the extent outstanding on the Issue Date (other than Indebtedness under the Credit Facility); (3) Indebtedness of Parent or any Restricted Subsidiary under the Credit Facility in an aggregate amount at any time outstanding pursuant to this clause (3) (including amounts outstanding on the date of this Indenture) not to exceed the greater of (x) $225.0 million; and -48- (y) the sum of (x) 70% of the net book value of the inventory of Parent and the Restricted Subsidiaries and (y) 85% of the net book value of the accounts receivable of Parent and the Restricted Subsidiaries, in each case determined on a consolidated basis in accordance with GAAP; (4) Refinancing Indebtedness in respect of Indebtedness incurred pursuant to the Coverage Ratio Exception, clause (1) of this paragraph (including the Exchange Notes and any Guarantees thereof), clause (2) of this paragraph (other than any Indebtedness owed to Parent or any of its Subsidiaries) or this clause (4); (5) Indebtedness owed by Parent or any Restricted Subsidiary to Parent or any Restricted Subsidiary; provided that -------- (x) any such Indebtedness owed by Issuer shall be subordinated by its terms to the prior payment in full in cash of all Obligations with respect to the Notes, and any such Indebtedness owed by any Guarantor (other than to Issuer or any other Guarantor) shall be subordinated by its terms to the prior payment in full in cash of all Obligations with respect to the Guarantee of such Guarantor; and (y) if such Indebtedness is held by a Person other than Parent or any Restricted Subsidiary, Parent or such Restricted Subsidiary shall be deemed to have incurred Indebtedness not permitted by this clause (5); (6) (x) the guarantee by Issuer or any Guarantor of Indebtedness of Issuer or a Guarantor and (y) the guarantee by any Restricted Subsidiary that is not a Guarantor of Indebtedness of any other Restricted Subsidiary that is not a Guarantor; provided that, in each case, the Indebtedness -------- being guaranteed is incurred pursuant to the Coverage Ratio Exception or is Permitted Indebtedness; (7) Hedging Obligations; (8) industrial revenue bonds or similar tax-exempt Indebtedness, Purchase Money Indebtedness and Capital Lease Obligations of Parent or any Restricted Subsidiary incurred to finance the acquisition, construction or improvement of any assets (including capital expenditures of Parent or any Restricted Subsidiary), and Refinancings thereof, in an aggregate amount not to exceed $15.0 million at any time outstanding; (9) Indebtedness of any Foreign Subsidiary in an aggregate amount not to exceed $15.0 million at any time outstanding; (10) Indebtedness represented by letters of credit in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements of Parent or any Restricted Subsidiary in the ordinary course of business; -49- (11) customary indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the acquisition or disposition of any assets of Parent or any Restricted Subsidiary (other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such assets for the purpose of financing such acquisition); (12) obligations in respect of performance bonds and completion, guarantee, surety and similar bonds in the ordinary course of business; (13) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds; provided that such Indebtedness is extinguished within five Business -------- Days of incurrence; (14) Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business; (15) Indebtedness consisting of take-or-pay obligations contained in supply agreements entered into in the ordinary course of business; (16) Indebtedness the net proceeds of which are used solely to pay Federal, state or local taxes arising as a result of any recharacterization of TNCLP or TNLP as an association taxable as a corporation as a result of changes after the Issue Date in law, regulation or the interpretation thereof by governmental authorities; (17) guarantees by Terra UK of Terra UK Customer Debt; provided that -------- (x) the aggregate principal amount of the Indebtedness so guaranteed by Terra UK with respect to any customer at any time shall not exceed 50% of the aggregate principal amount of the Terra UK Customer Debt of such customer outstanding at such time; and (y) the aggregate principal amount of Terra UK Customer Debt guaranteed by Terra UK at any time during any fiscal year shall not exceed (x) (pounds)15,000,000 minus (y) the ----- aggregate amount of payments made by Terra UK under all such guarantees during such fiscal year; and (18) additional Indebtedness in an aggregate amount not to exceed $30.0 million at any time outstanding. (c) For purposes of determining compliance with this Section 4.9, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (18) above or is entitled to be incurred pursuant to the Coverage Ratio Exception, Issuer shall, in its sole discretion, classify such item of Indebtedness and may divide and classify such Indebtedness in more than one of the types of Indebtedness described (except that Indebtedness outstanding under the Credit Facility on the Issue Date shall be deemed to have -50- been incurred under clause (3) above) and may later reclassify such item into any one or more of the categories of Permitted Indebtedness described in clauses (3) through (18) above (provided that at the time of reclassification it meets -------- the criteria in such category or categories). The maximum amount of Indebtedness that Parent or any Restricted Subsidiary may incur pursuant to this Section 4.9 will not be deemed to be exceeded solely as the result of fluctuations in the exchange rates of currencies. In determining the amount of Indebtedness outstanding under one of the clauses above, the outstanding principal amount of any particular Indebtedness of any Person shall be counted only once and any obligation of such Person or any other Person arising under any guarantee, Lien, letter of credit or similar instrument supporting such Indebtedness shall be disregarded so long as it is permitted to be incurred by the Person or Persons incurring such obligation. (d) Notwithstanding the foregoing, Parent shall not, and shall not permit Issuer or any other Guarantor to, incur any Indebtedness that purports to be by its terms (or by the terms of any agreement or instrument governing such Indebtedness) subordinated to any other Indebtedness of Parent, Issuer or such other Guarantor, as the case may be, unless such Indebtedness is also by its terms made subordinated to the Notes or the Guarantee of such Guarantor, as applicable, to at least the same extent as such Indebtedness is subordinated to such other Indebtedness of Issuer or such Guarantor, as the case may be. SECTION 4.10. Limitation on Restricted Payments. --------------------------------- (a) Parent shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to, declare or make a Restricted Payment if: (1) a Default shall have occurred and be continuing or would result therefrom; (2) Issuer could not incur at least $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception; or (3) the aggregate amount of such Restricted Payment together with all other Restricted Payments (the amount of any Restricted Payments made in assets other than cash to be valued at its Fair Market Value) declared or made since the Issue Date (other than any Restricted Payment described in clause (2), (3), (4), (5), (6) or (8) of Section 4.10(b)) would exceed the sum (the "Basket") of: ------ (i) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from October 1, 2001 to the end of the most recent fiscal quarter prior to the date of such Restricted Payment for which internal financial statements are available (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); plus ---- (ii) the aggregate Net Cash Proceeds received by Parent from the issuance and sale (other than to a Subsidiary of Parent) of Qualified Stock subsequent to the Issue Date; plus ---- -51- (iii) the amount by which Indebtedness or Disqualified Stock incurred or issued subsequent to the Issue Date is reduced on Parent's consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary of Parent) into Qualified Stock (less the amount of any cash, or the Fair Market Value of any other asset, distributed by Parent or any Restricted Subsidiary upon such conversion or exchange); provided that such amount shall not exceed the aggregate Net Cash -------- Proceeds received by Parent or any Restricted Subsidiary from the issuance and sale (other than to a Subsidiary of Parent) of such Indebtedness or Disqualified Stock; plus ---- (iv) to the extent not included in the calculation of the Consolidated Net Income referred to in (i), an amount equal to, without duplication: (x) 100% of the aggregate net proceeds (including the Fair Market Value of assets other than cash) received by Parent or any Restricted Subsidiary upon the sale or other disposition of any Investment (other than a Permitted Investment) made by Parent or any Restricted Subsidiary since the Issue Date; plus ---- (y) the net reduction in Investments (other than Permitted Investments) in any Person resulting from dividends, repayments of loans or advances or other Transfers of assets subsequent to the Issue Date, in each case to Parent or any Restricted Subsidiary from such Person; plus ---- (z) to the extent that the Basket was reduced as the result of the designation of an Unrestricted Subsidiary, the portion (proportionate to Parent's equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is redesignated, or liquidated or merged into, a Restricted Subsidiary; provided that the foregoing shall not exceed, in the -------- aggregate, the amount of all Investments which previously reduced the Basket. (b) The provisions of Section 4.10(a) shall not prohibit the following: (1) dividends paid within 90 days after the date of declaration thereof if at such date of declaration such dividend would have been permitted under this Indenture; (2) any repurchase, redemption, retirement or other acquisition of Capital Stock or Subordinated Obligations made in exchange for, or out of the proceeds of the substantially concurrent issuance and sale (other than to a Subsidiary of Parent) of, Qualified Stock or, with respect to any such Subordinated Obligations, in exchange for or out of the proceeds of the substantially concurrent incurrence and sale (other than to a Subsidiary of Parent) of Refinancing Indebtedness thereof; provided that (x) no such -------- exchange or issuance and sale shall -52- increase the Basket and (y) no Default has occurred and is continuing or would occur as a consequence thereof; (3) the purchase, redemption, acquisition, cancellation or other retirement for a nominal value per right of any rights granted to all the holders of Common Stock of Parent pursuant to any shareholders' rights plan adopted for the purpose of protecting shareholders from unfair takeover tactics; provided that any such purchase, redemption, acquisition, -------- cancellation or other retirement of such rights shall not be for the purpose of evading the limitations of this Section (all as determined in good faith by the Board of Directors); (4) payments by Parent or any Restricted Subsidiary in respect of Indebtedness of Parent or any Restricted Subsidiary owed to Parent or another Restricted Subsidiary; (5) repurchases of Capital Stock deemed to occur upon the exercise of stock options or warrants if such Capital Stock represents a portion of the exercise price thereof and repurchases of Capital Stock deemed to occur upon the withholding of a portion of the Capital Stock granted or awarded to an employee to pay for the taxes payable by such employee upon such grant or award; (6) if no Default has occurred and is continuing or would occur as a consequence thereof, the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued after the Issue Date; provided that, at the time of the -------- issuance of such Designated Preferred Stock and after giving pro forma --- ----- effect thereto, Issuer could incur at least $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception; (7) purchases of the Capital Stock, or contributions to the equity, of any Foreign Subsidiary to the extent that Investments in the form of Indebtedness advanced to such Foreign Subsidiary would, or are likely to, result in (x) any then existing Indebtedness owing by such Foreign Subsidiary to Parent or any Restricted Subsidiary being characterized as equity under the "thin capitalization" rules of the Code or under any other applicable law or (y) any similar consequences; or (8) Restricted Payments of up to $15.0 million in the aggregate since the Issue Date. SECTION 4.11. Limitation on Liens. Parent shall not, and shall not ------------------- permit any Restricted Subsidiary to, directly or indirectly, incur any Lien of any kind on any asset of Parent or any Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except: (1) in the case of any asset that does not constitute Collateral or a Fixed Asset or Second Lien Collateral, Permitted Liens, unless the Notes and the Guarantees are secured on -53- an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien; (2) in the case of any asset that constitutes Collateral or a Fixed Asset, Collateral Permitted Liens; and (3) in the case of any asset that constitutes Second Lien Collateral, Liens permitted thereon to the extent and for so long as such Liens secure or are permitted to be incurred under the Credit Facility. In the case of clause (1), if the obligations so secured are subordinated by their terms to the Notes or a Guarantee, the Lien securing such obligations will also be so subordinated by its terms at least to the same extent. SECTION 4.12. Limitation on Transactions with Affiliates. ------------------------------------------ (a) Parent shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, in one transaction or a series of related transactions, Transfer any of its assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of Parent (an "Affiliate --------- Transaction"), unless the terms thereof are no less favorable to Parent or such ----------- Restricted Subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a Person that is not such an Affiliate; provided that the Board of Directors must approve each Affiliate -------- Transaction that involves aggregate payments or other assets or services with a Fair Market Value in excess of $5.0 million, which approval shall be evidenced by a board resolution that states that the Board of Directors has determined that the transaction complies with the foregoing provisions; provided, further -------- ------- that if Parent or any Restricted Subsidiary enters into an Affiliate Transaction that involves aggregate payments or other assets or services with a Fair Market Value in excess of $15.0 million, then prior to the consummation of such Affiliate Transaction, Parent must obtain a favorable opinion from an Independent Financial Advisor that it has determined such Affiliate Transaction to be fair, from a financial point of view, to the Holders, and deliver such opinion to the Trustee. (b) The provisions of clause (a) above shall not prohibit: (1) transactions exclusively between or among (a) Parent and one or more Restricted Subsidiaries or (b) Restricted Subsidiaries; provided, in -------- each case, that no Affiliate of Parent (other than another Restricted Subsidiary) owns Capital Stock in any such Restricted Subsidiary; (2) customary director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements, in each case approved by the Board of Directors; (3) the entering into of a tax sharing agreement, or payments pursuant thereto, between Parent and/or one or more Subsidiaries, on the one hand, and any other Person with -54- which Parent or such Subsidiaries are required or permitted to file a consolidated tax return or with which Parent or such Subsidiaries are part of a consolidated group for tax purposes, on the other hand, which payments by Parent and the Restricted Subsidiaries are not in excess of the tax liabilities that would have been payable by them on a stand-alone basis; (4) loans and advances permitted by clause (6) of the definition of "Permitted Investments"; (5) Restricted Payments of the type described in clause (i), (ii) or (iii) of the definition of "Restricted Payment" and which are made in accordance with Section 4.10; (6) any transaction with an Affiliate where the only consideration paid by Parent or any Restricted Subsidiary is Qualified Stock; (7) the provision of management, financial and operational services by Parent and its Subsidiaries to Affiliates of Parent in which Parent or any Restricted Subsidiary has an Investment and the payment of compensation for such services; provided that the Board of Directors has determined that the provision of such services is in the best interests of Parent and the Restricted Subsidiaries; (8) transactions between Parent or any Subsidiary and any Securitization Entity in connection with a Qualified Securitization Transaction, in each case provided that such transactions are not otherwise prohibited by this Indenture; (9) transactions with a Person that is an Affiliate solely because Parent or any Restricted Subsidiary owns Capital Stock in such Person; provided that no Affiliate of Parent (other than a Restricted Subsidiary) owns Capital Stock in such Person; or (10) purchases and sales of raw materials or inventory in the ordinary course of business on market terms. SECTION 4.13. Limitation on Asset Sales. ------------------------- (a) This Section shall not apply to the Sale of Principal Properties, which is covered by Section 4.15. (b) Parent shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale unless: (i) Parent or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale; (ii) at least 85% of the total consideration received in such Asset Sale consists of cash, Temporary Cash Investments, assets referred to in clause (e)(1) below (in the case of a Transfer of Collateral) or clause (2)(z) below (in the case of a Transfer of assets other than -55- Collateral), in each case, valued at the Fair Market Value thereof, or a combination of the foregoing; and (iii) if such Asset Sale involves the Transfer of Collateral, (x) it complies with Section 12.4, (y) all consideration received in the form of cash or Temporary Cash Investments is paid directly by the purchaser of such Collateral to the Trustee for deposit into the Collateral Account, and (z) all consideration received in any other form is made subject to the Lien of this Indenture and the applicable Security Documents. (c) For purposes of Section 4.13(b)(ii) above, the following shall be deemed to be cash: (x) the amount (without duplication) of any Indebtedness (other than Subordinated Obligations) of Parent or such Restricted Subsidiary that is expressly assumed by the Transferee in such Asset Sale and with respect to which Parent or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness; and (y) the amount of any obligations received from such Transferee that are within 60 days repaid, converted into or sold or otherwise disposed of for cash or Temporary Cash Investments (to the extent of the cash or Temporary Cash Investments actually so received). (d) If at any time any non-cash consideration received by Parent or any Restricted Subsidiary in connection with any Asset Sale is repaid, converted into or sold or otherwise disposed of for cash or Temporary Cash Investments (other than interest received with respect to any such non-cash consideration), then the date of such repayment, conversion, sale or other disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this Section 4.13. (e) If Parent or any Restricted Subsidiary engages in an Asset Sale, Parent or a Restricted Subsidiary shall, no later than 365 days following the consummation thereof, apply an amount equal to all or any of the Net Available Proceeds therefrom as follows: (1) in the case of any Transfer of Collateral: (x) to make an investment in or expenditure for Fixed Assets that replace the assets that were the subject of the Asset Sale or in Fixed Assets that will be used in the Permitted Business, in each case, which shall be made subject to the Lien of this Indenture and the applicable Security Documents (and shall otherwise comply with the provisions of this Indenture applicable to After-Acquired Property); and/or (y) to make an investment in Capital Stock of any Person that owns Fixed Assets that replace the assets that were the subject of the Asset Sale or -56- in Fixed Assets that will be used in the Permitted Business, in each case, which Fixed Assets shall be made subject to the Lien of this Indenture and the applicable Security Documents (and shall otherwise comply with the provisions of this Indenture applicable to After-Acquired Property); provided that such Person is or becomes a Guarantor and the -------- Fair Market Value of the Fixed Assets owned by such Person is at least equal to the Fair Market Value of the Collateral Transferred (each such investment or expenditure of the type described in clauses (1)(x) and (y), a "Related ------- Investment"); and ---------- (2) in all other cases: (x) to repay borrowings owing under the Credit Facility in accordance with the Credit Facility; (y) to redeem, purchase or repay Parent's 10-1/2% senior notes due 2005 that are outstanding on the Issue Date; and/or (z) to make an investment in or expenditure for assets (including Capital Stock of any Person) that replace the assets that were the subject of the Asset Sale or in assets (including Capital Stock of any Person) that will be used in the Permitted Business (each such repayment, redemption, purchase, investment or expenditure of the type described in clauses (2) (x), (y) and (z), an "Alternate Investment"). -------------------- (f) The amount of Net Available Proceeds not applied or invested as provided in Section 4.13(e) will constitute "Excess Proceeds." --------------- (g) If at any time the aggregate amount of Excess Proceeds not theretofore subject to a Net Proceeds Offer (as defined below) totals at least $15.0 million, Issuer shall, not later than 10 Business Days after the end of the period during which Issuer is required to apply such Excess Proceeds pursuant to Section 4.13(e) (or, if Issuer so elects, at any time within such period), make an offer (a "Net Proceeds Offer") to purchase from the Holders of ------------------ Notes (determined on a pro rata basis according to the accreted value or --- ---- principal amount, as the case may be, of the Notes) that may be purchased out of the Excess Proceeds (rounded down to the nearest multiple of $1,000) on such date, at a purchase price equal to 100% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to the date of purchase. Upon completion of a Net Proceeds Offer the amount of Excess Proceeds remaining after application pursuant to such Net Proceeds Offer (a "Net Proceeds Deficiency") ----------------------- (including payment of the purchase price for Notes duly tendered) may be used by Issuer for any corporate purpose (to the extent not otherwise prohibited by this Indenture); provided that to the extent that all or a portion of the Net -------- Proceeds Deficiency is comprised of proceeds from the Transfer of Collateral, such proceeds shall remain subject to the Lien of this Indenture and the applicable Security Documents. -57- (h) Within 30 days after Issuer becomes obligated to make a Net Proceeds Offer, Issuer shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, at the address appearing in the Notes Register, a written notice stating that the Holder may elect to have his Securities purchased by Issuer either in whole or in part (subject to prorationing as hereinafter described in the event the Net Proceeds Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice, which shall govern the terms of the Net Proceeds Offer, shall include such disclosures as are required by law and shall specify (i) that the Net Proceeds Offer is being made pursuant to this Section 4.13; (ii) the purchase price (including the amount of accrued interest, if any) for each Note and the purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date"); (iii) that any Note not tendered or ------------- accepted for payment will continue to accrue interest in accordance with the terms thereof; (iv) that, unless Issuer defaults on making the payment, any Note accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest on and after the Purchase Date; (v) that Holders electing to have Securities purchased pursuant to a Net Proceeds Offer will be required to surrender their Notes to the Paying Agent at the address specified in the notice at least three Business Days prior to the Purchase Date and must complete any form letter of transmittal proposed by Issuer and acceptable to the Trustee and the Paying Agent; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than one Business Day prior to the Purchase Date, a telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Securities the Holder delivered for purchase, the Note certificate number (if any) and a statement that such Holder is withdrawing its election to have such Notes purchased; (vii) that if Notes in a principal amount in excess of the aggregate principal amount which Issuer has offered to purchase are tendered pursuant to the Net Proceeds Offer, Issuer shall purchase Notes on a pro rata basis among the Notes tendered (with such --- ---- adjustments as may be deemed appropriate by Issuer so that only Notes in denominations of $1,000 or integral multiples of $1,000 shall be acquired); (viii) that Holders whose Notes are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Notes surrendered; and (ix) the instructions that Holders must follow in order to tender their Notes. (i) Not later than the date upon which written notice of a Net Proceeds Offer is delivered to the Trustee as provided below, Issuer shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Net Proceeds Offer (the "Net Proceeds Offer Amount"), (ii) the allocation of the Net ------------------------- Available Proceeds from the Asset Sales pursuant to which such Net Proceeds Offer is being made, and (iii) the compliance of such allocation with the provisions of Section 4.13(b). Upon the expiration of the period for which the Net Proceeds Offer remains open (the "Net Proceeds Offer Period"), Issuer shall ------------------------- deliver to the Trustee for cancellation the Notes or portions thereof which have been properly tendered to and are to be accepted by Issuer. Not later than 11:00 a.m. (New York City time) on the Purchase Date, Issuer shall irrevocably deposit with the Trustee or with a paying agent (or, if Issuer is acting as Paying Agent, segregate and hold in trust) an amount in cash sufficient to pay the Net Proceeds Offer Amount for all Notes properly tendered to and accepted by Issuer. The Trustee shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. (j) Holders electing to have a Note purchased will be required to surrender the Note, together with all necessary endorsements and other appropriate materials duly completed, to -58- Issuer at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders will be entitled to withdraw their election in whole or in part if the Trustee or Issuer receives not later than one Business Day prior to the Purchase Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note (which shall be $1,000 or an integral multiple thereof) which was delivered for purchase by the Holder, the aggregate principal amount of such Note (if any) that remains subject to the original notice of the Net Proceeds Offer and that has been or will be delivered for purchase by Issuer and a statement that such Holder is withdrawing his election to have such Note purchased. If at the expiration of the Net Proceeds Offer Period the aggregate principal amount of Notes surrendered by Holders exceeds the Net Proceeds Offer Amount, Issuer shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed --- ---- appropriate by Issuer so that only securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Notes are purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. (k) A Note shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (l) In the event of the Transfer of substantially all (but not all) of the assets of Parent and the Restricted Subsidiaries as an entirety to a Person in a transaction covered by and effected in accordance with Section 5.1, the Transferee shall be deemed to have sold for cash at Fair Market Value the assets of Parent and the Restricted Subsidiaries not so Transferred for purposes of this Section 4.13, and shall comply with the provisions of this Section 4.13 with respect to such deemed sale as if it were an Asset Sale (with such Fair Market Value being deemed to be Net Available Proceeds for such purpose). (m) Issuer shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with any purchase of Notes pursuant to this Indenture. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Indenture by virtue thereof. SECTION 4.14. Limitation on Dividend and Other Restrictions Affecting ------------------------------------------------------- Restricted Subsidiaries. Parent shall not, and shall not permit any Restricted ----------------------- Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to: (a) pay dividends or make any other distributions on its Capital Stock to Parent or any other Restricted Subsidiary or pay any Indebtedness owed to Parent or any other Restricted Subsidiary, (b) make any loans or advances to, or guarantee any Indebtedness of, Parent or any other Restricted Subsidiary, or (c) Transfer any of its assets to Parent or any other Restricted Subsidiary, -59- except: (1) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date (including this Indenture and the Credit Facility), as such encumbrance or restriction is in effect on the Issue Date; (2) restrictions on the Transfer of assets subject to any Lien permitted under this Indenture imposed by the holder of such Lien; (3) restrictions on the Transfer of assets imposed under any agreement to sell such assets permitted under this Indenture pending the closing of such sale; (4) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the assets of any Person, other than the Person or the assets of the Person so acquired; (5) customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture agreements and other similar agreements entered into in the ordinary course of business that restrict the Transfer of ownership interests in such partnership, limited liability company, joint venture or similar Person; (6) Purchase Money Indebtedness and Capital Lease Obligations incurred pursuant to clause (8) of the definition of "Permitted Indebtedness" that impose restrictions of the nature described in clause (c) above on the assets acquired; (7) any encumbrances or restrictions imposed by any amendments or Refinancings of the contracts, instruments or obligations referred to in clause (1), (4) or (6) above; provided that such amendments or Refinancings -------- are, in the good faith judgment of the Board of Directors, no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or Refinancing; (8) covenants to maintain net worth, total assets or liquidity and similar financial responsibility covenants under contracts with customers or suppliers in the ordinary course of business; (9) any such encumbrance or restriction consisting of customary provisions in leases governing leasehold interests to the extent such provisions restrict the Transfer of the lease or the property leased thereunder; and (10) any restriction imposed by applicable law. SECTION 4.15. Limitation on Sale of Principal Properties. ------------------------------------------ (a) Parent shall not, and shall not permit any Restricted Subsidiary (including each Principal Property Subsidiary) to, directly or indirectly, Transfer any Principal Property or any mate- -60- rial part thereof or Transfer or issue any Capital Stock of any Principal Property Subsidiary (each, a "Sale of a Principal Property") unless: ---------------------------- (1) Parent or such Restricted Subsidiary receives consideration at the time of such Sale of a Principal Property at least equal to the Fair Market Value of the assets included in such Sale of a Principal Property; (2) all consideration received in the form of cash or Temporary Cash Investments is paid directly by the purchaser of such Collateral to the Trustee for deposit into the Collateral Account, and all consideration in the form of Replacement Principal Property (as defined below) is made subject to the Lien of this Indenture and the applicable Security Documents; and (3) prior to consummating such transaction, either: (i) Parent delivers to the Trustee an Officers' Certificate and an opinion from a nationally recognized firm of independent accountants that the Net Available Proceeds from such proposed transaction will be sufficient at the proposed purchase date to purchase all of the outstanding Notes at the Make Whole Amount plus accrued and unpaid interest thereon to the proposed purchase date, using the Special Adjusted Treasury Rate in effect on the Business Day prior to the date of delivery of such certificate and opinion; or (ii) 100% of the total consideration received in such Sale of a Principal Property consists of cash, Temporary Cash Investments, Replacement Principal Property (valued at the Fair Market Value thereof) or a combination of the foregoing, and Issuer delivers an opinion to the Trustee from an Independent Financial Advisor that it has determined the transaction to be fair, from a financial point of view, to the Holders. For purposes of clause (3) above, the following shall be deemed to be cash: (x) the amount (without duplication) of any Indebtedness (other than Subordinated Obligations) of Parent or such Restricted Subsidiary that is expressly assumed by the Transferee in such Sale of a Principal Property and with respect to which Parent or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness; and (y) the amount of any obligations received from such Transferee that are within 60 days repaid, converted into or sold or otherwise disposed of for cash or Temporary Cash Investments (to the extent of the cash or Temporary Cash Investments actually so received). (b) Section 4.15(a) shall not apply to any of the following: (1) any such Transfer or issuance to Issuer or any Guarantor; provided that -------- -61- (i) all Principal Property so Transferred shall remain subject to the Lien of this Indenture and the applicable Security Documents; (ii) the Issuer or the applicable Guarantor shall expressly assume, pursuant to documentation in form and substance satisfactory to the Trustee, the performance of every obligation under the applicable Security Documents to be performed or observed by the applicable Transferor; and (iii) the Issuer and applicable Guarantor shall cause such amendments, supplements or other instruments to be executed, filed and/or recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien of the Security Documents on the Collateral owned by or Transferred to such Person, together with such financing statements as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a financing statement under the UCC; (2) any such Transfer or issuance by a Foreign Subsidiary to a Foreign Subsidiary; provided that -------- (i) all Principal Property so Transferred shall remain subject to the Lien of the Security Documents securing the applicable Fixed Asset Intercompany Notes; (ii) the applicable Foreign Subsidiary shall expressly assume, pursuant to documentation satisfactory to the Trustee, the performance of every obligation under the applicable Fixed Asset Intercompany Note or the guarantee thereof, as the case may be, and the Security Documents and other supporting documents to be performed or observed by the applicable Transferor; and (iii) such Foreign Subsidiaries shall cause such amendments, supplements or other instruments to be filed, executed and/or recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien of the Security Documents on the Collateral owned by or Transferred to such Person, together with such financing statements as may be required to perfect any security interests in such Collateral; or (3) any such Transfer of Capital Stock of any Foreign Subsidiary to a Foreign Subsidiary. (c) If at any time any non-cash consideration received by Parent or any Restricted Subsidiary in connection with any Sale of a Principal Property is repaid, converted into or -62- sold or otherwise disposed of for cash or Temporary Cash Investments (other than interest received with respect to any such non-cash consideration), then the date of such repayment, conversion, sale or other disposition shall be deemed to constitute the date of a Sale of a Principal Property hereunder and the Net Available Proceeds thereof shall be applied in accordance with this Section. (d) If Parent or any Restricted Subsidiary engages in a Sale of a Principal Property, Parent or a Restricted Subsidiary shall, no later than 365 days following the consummation thereof, apply an amount equal to all of the Net Available Proceeds therefrom as follows: (1) to purchase or otherwise acquire a facility of the general nature and type as the Principal Properties in existence on the Issue Date, which shall be made subject to the Lien of this Indenture and the applicable Security Documents as a "Principal Property" (a "Replacement Principal --------------------- Property"); and/or -------- (2) to make an offer to purchase Notes from all Holders with the amount of the Net Available Proceeds not used to purchase or otherwise acquire Replacement Principal Property (an "Unused Proceeds Offer"). --------------------- The offer price for the Notes (the "Unused Proceeds Offer Amount") ---------------------------- will be payable in cash and will be equal to 100% of the principal amount of the Notes tendered pursuant to the offer, plus accrued and unpaid interest thereon, if any, to the date such offer is consummated, plus the Make Whole Amount, if any. Such offer will otherwise be conducted in accordance with the procedures with respect to a Net Proceeds Offer set forth in Section 4.13(h)-(k), substituting the term "Unused Proceeds Offer" for "Net Proceeds Offer", "Unused Proceeds Offer Amount" for "Net Proceeds Offer Amount", "Sale of Principal Property" for "Asset Sales" and appropriate references to Section 4.15 for references to Section 4.13. If the aggregate amount of the Notes validly tendered and not withdrawn by Holders thereof exceeds the amount of Net Available Proceeds not used to purchase or otherwise acquire Replacement Principal Property, Notes to be purchased will be selected on a pro rata basis. --- ---- (e) Parent or any Restricted Subsidiary may Transfer any part of a Principal Property (1) which is damaged, worn-out or obsolete or (2) no longer used or useful in the business of Parent and its Subsidiaries, which shall not constitute a Sale of Principal Property; provided that (x) in each case, such -------- Transfer is consistent with past practice and does not significantly reduce the value or usefulness of any Principal Property and (y) in the case of clause (2) only, such Transfer shall be subject to compliance with Section 4.13. (f) With respect to any Sale of a Principal Property, an amount equal to any Net Available Proceeds from such Sale of a Principal Property shall, concurrently with the closing of such sale, be delivered to the Trustee for deposit into the Collateral Account pending its application to acquire a Replacement Principal Property or purchase the Notes. To the extent that funds remain after repayment of all obligations in connection with the purchase of the Notes, such excess amounts and any interest thereon shall remain subject to the Lien of this Indenture and the applicable Security Documents. Pending such application of such amounts, the Trustee shall invest such amount at Is- -63- suer's direction in Temporary Cash Investments; provided that the maturity of -------- those investments is prior to the proposed purchase date of the Notes. SECTION 4.16. Limitation on Sale and Leaseback Transactions. --------------------------------------------- Parent shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction; provided that Parent or any Restricted -------- Subsidiary may enter into a Sale and Leaseback Transaction not involving any Collateral if: (1) Parent or such Restricted Subsidiary could have (x) incurred Indebtedness in an amount equal to the Attributable Debt relating to such Sale and Leaseback Transaction pursuant to Section 4.9, and (y) incurred a Lien to secure such Indebtedness pursuant to Section 4.11; (2) the gross cash proceeds of such Sale and Leaseback Transaction are at least equal to the Fair Market Value of the asset that is the subject of such Sale and Leaseback Transaction; and (3) the Transfer of the asset in such Sale and Leaseback Transaction is permitted by, and Issuer applies the proceeds of such transaction in compliance with, Section 4.13. SECTION 4.17. Impairment of Security Interest. Parent shall not, and ------------------------------- shall not permit any Restricted Subsidiary to, take, or knowingly omit to take, any action, which action or omission might or would have the result of materially impairing the security interest in favor of the Trustee on behalf of the Holders with respect to the Collateral or Second Lien Collateral, and neither Parent nor any Restricted Subsidiary shall grant to any Person (other than the Trustee on behalf of the Holders) any interest whatsoever in the Collateral or the Second Lien Collateral (other than as permitted by the Security Documents). No Pledgor shall file or record any instrument or document with any entity, officer or office having responsibility for recording of Security Interests which purports to terminate, vitiate or extinguish a Security Interest in or Lien on Collateral. SECTION 4.18. Conduct of Business. Parent shall not, and shall not ------------------- permit any Restricted Subsidiary to, engage in any business other than the Permitted Business. SECTION 4.19. Maintenance of Insurance, Properties, Books and Records. ------------------------------------------------------- (a) Parent shall, and shall cause its Subsidiaries to, maintain property and casualty, business interruption, workers' compensation and such other insurance against such risks and in such amounts as are customarily carried by similar businesses with deductibles, retentions, self-insured amounts and coinsurance customarily carried by similar businesses of similar size; provided that, with respect to the Collateral, Parent will, and will cause the -------- Restricted Subsidiaries to, maintain the fol- -64- lowing insurance policies and coverages with policy limits and deductibles in such amounts as would be maintained by a Prudent Operator or as the Trustee may otherwise reasonably request: (i) Physical hazard insurance on an "all risk" basis covering, without limitation, hazards commonly covered by such policies, in an amount equal to the full replacement cost of the Mortgaged Property and Equipment, (ii) Commercial general liability insurance against claims for bodily injury, death or property damage occurring on, in or about the Mortgaged Property (and any other adjoining streets, sidewalks and passageways) and other Collateral covering such matters as are customarily covered by such policies, arising out of or connected with the possession, use, leasing, operation or condition of the Collateral; (iii) Explosion insurance in respect of any boilers, machinery and similar apparatus located on or comprising the Mortgaged Property and Equipment; (iv) If the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards pursuant to the National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of 1973, each as amended, or any successor laws, flood insurance; (v) Worker's compensation insurance as required by the laws of the state where the Collateral is located to protect the Pledgors and the Trustee against claims for injuries sustained in the course of employment at the premises of the Pledgors; and (vi) Such other types of insurance, against such risks as the Trustee may from time to time reasonably require to the extent such Insurance is commercially available at commercially reasonable prices to the extent secured lenders are requiring borrowers to obtain such insurance in connection with financings of the type contemplated by this Indenture; (b) Each insurance policy described in Section 4.19(a) shall provide that: (i) it may not be materially modified, reduced, cancelled or otherwise terminated without at least thirty (30) days' prior written notice to the Trustee; (ii) the Trustee is permitted to pay any premium therefor within thirty (30) days after receipt of any notice stating that such premium has not been paid when due; (iii) all losses thereunder shall be payable notwithstanding any act or negligence of the applicable Pledgor or its agents or employees which otherwise might have resulted in a forfeiture of all or a part of such insurance payments; (iv) with respect to the insurance policies described in clauses (i), (iii), (iv), (v) and, to the extent applicable (viii) of Section 4.19(a), all losses payable thereunder shall be payable to the Trustee, as loss payee, pursuant to a standard non-contributory New York -65- mortgagee endorsement and shall be in an amount, at least sufficient to prevent coinsurance liability; and (v) with respect to the insurance policies described in clauses (ii) and to the extent applicable (vi) and (vii) of Section 4.19(a), the Trustee shall be named as an additional insured. (c) Settlement or adjustment of any claim under any of the insurance policies described in Section 4.19(a), if such claim involves any loss in excess of $5,000,000 (as determined by the Board of Directors acting reasonably and in good faith) shall require the consent of the Trustee, and the Pledgors shall cause each such policy to contain a provision to such effect. (d) On an annual basis and prior to the expiration of any insurance policy described in Section 4.19(a), the Pledgors shall deliver to the Trustee an insurance policy or policies renewing or extending such expiring insurance policy or policies or renewal or extension Insurance Certificates or other reasonable evidence of renewal or extension providing that the insurance policies are in full force and effect. (e) The Pledgors shall not purchase separate insurance policies concurrent in form or contributing in the event of loss with the insurance policies required to be maintained under this Section 4.19 unless the Trustee is included thereon as an additional insured and, if applicable, with loss payable to the Trustee under an endorsement containing the provisions described in Section 4.19(b). The Pledgors shall immediately notify the Trustee whenever any such separate insurance policy is obtained and shall promptly deliver to the Mortgagee the insurance policy or Insurance Certificate evidencing such insurance. (f) The Pledgors may maintain the coverages required by Section 4.19 under blanket policies covering the Collateral and other locations owned or operated by the Pledgors or an Affiliate of the Pledgors if the terms of such blanket policies otherwise comply with the provisions of Section 4.19(b) and contain specific coverage allocations in respect of the Premises complying with the provisions of Section 4.19(b). (g) If there shall occur any Destruction, (i) individually or in the aggregate, in excess of $5,000,000 the applicable Pledgor shall promptly send to the Trustee a written notice setting forth the nature and extent of such Destruction and (ii) all Net Insurance Proceeds shall be applied in accordance with the provisions of Section 13.3. (h) If there shall occur any Taking or the commencement of any proceeding thereof, the Mortgagor shall immediately notify the Trustee upon receiving notice of such Taking or commencement of proceedings therefor. The Trustee may, at its option, participate in any proceedings or negotiations which might result in any Taking, and the Trustee shall deliver or cause to be delivered to the Trustee all instruments requested by it to permit such participation. The Trustee may be represented by counsel satisfactory to it at the expense of the applicable Pledgor in connection with any such participation. The Pledgor shall pay all fees, costs and expenses incurred by the Trustee in connection with any Taking and in seeking and obtaining any award or payment on account thereof. -66- (i) All insurance under this Section will be issued by carriers having an A.M. Best & Company, Inc. rating of A or higher, or if such carrier is not rated by A.M. Best & Company, Inc., having the financial stability and size deemed appropriate by Parent after consultation with a reputable insurance broker. (j) Subject to, and in compliance with, the provisions of Sections 12.3 and 12.4 and to the provisions of the applicable Security Documents, Parent and each of the Restricted Subsidiaries shall cause all properties used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in good working condition, repair and order (ordinary wear and tear and damage from casualty and condemnation excepted) and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereto. (k) Parent and Issuer shall, and shall cause each of the Restricted 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 the Parent and Issuer and each of the Restricted Subsidiaries, in accordance with GAAP. ARTICLE 5 SUCCESSOR COMPANY SECTION 5.1. Merger, Consolidation and Sale of Assets. ---------------------------------------- (a) Parent shall not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or Transfer (or cause or permit any Restricted Subsidiary of Parent to Transfer) all or substantially all of Parent's assets (determined on a consolidated basis for Parent and its Subsidiaries) whether as an entirety or substantially as an entirety to any Person, unless (1) either (i) Parent is the surviving or continuing corporation; or (ii) the Person (if other than Parent) formed by such consolidation or into which Parent is merged or the Transferee of such assets (the "Parent Surviving Entity"): ----------------------- (x) is a corporation or limited liability company organized and validly existing under the laws of the United States or any State thereof or the District of Columbia; and (y) expressly assumes, by supplemental indenture and Security Documents (in each case, in form and substance satisfactory to the Trustee) executed and delivered to the Trustee, all of the Obligations of Parent under its Guarantee and the performance of every covenant under Parent's Guarantee, this Indenture, the Registration Rights Agreement and the -67- Security Documents on the part of Parent to be performed or observed; and (2) each of the conditions specified in Section 5.1(d) is satisfied. For purposes of the foregoing, the Transfer in a single transaction or series of related transactions of all or substantially all of the assets of one or more Restricted Subsidiaries of Parent, the Capital Stock of which constitutes all or substantially all of the assets of Parent (determined on a consolidated basis for Parent and its Subsidiaries), shall be deemed to be the Transfer of all or substantially all of the assets of Parent. Upon any consolidation or merger in which Parent is not the continuing corporation, or any Transfer of all or substantially all of the assets of Parent in accordance with the foregoing, the Parent Surviving Entity shall succeed to, and be substituted for, and may exercise every right and power of, Parent under its Guarantee, this Indenture, the Registration Rights Agreement and the Security Documents with the same effect as if such Parent Surviving Entity had been named as such. (b) Issuer shall not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or Transfer (or cause or permit any Restricted Subsidiary of Issuer to Transfer) all or substantially all of Issuer's assets (determined on a consolidated basis for Issuer and its Subsidiaries) whether as an entirety or substantially as an entirety to any Person, unless (1) either (i) Issuer is the surviving or continuing corporation; or (ii) the Person (if other than Issuer) formed by such consolidation or into which Issuer is merged or the Transferee of such assets (the "Issuer Surviving Entity"): ----------------------- (x) is a corporation or limited liability company organized and validly existing under the laws of the United States or any State thereof or the District of Columbia; and (y) expressly assumes, by supplemental indenture and Security Documents (in each case, in form and substance satisfactory to the Trustee) executed and delivered to the Trustee, the due and punctual payment of the principal of and premium, if any, and interest on all of the Notes and the performance of every covenant under the Notes, this Indenture, the Registration Rights Agreement and the Security Documents on the part of Issuer to be performed or observed; and (2) each of the conditions specified in Section 5.1(d) is satisfied. -68- For purposes of the foregoing, the Transfer in a single transaction or series of related transactions of all or substantially all of the assets of one or more Restricted Subsidiaries of Issuer, the Capital Stock of which constitutes all or substantially all of the assets of Issuer (determined on a consolidated basis for Issuer and its Subsidiaries), shall be deemed to be the Transfer of all or substantially all of the assets of Issuer. Upon any consolidation or merger in which Issuer is not the continuing corporation or any Transfer of all or substantially all of the assets of Issuer in accordance with the foregoing, the Issuer Surviving Entity shall succeed to, and be substituted for, and may exercise every right and power of, Issuer under the Notes, this Indenture, the Registration Rights Agreement and the Security Documents with the same effect as if such Issuer Surviving Entity had been named as such. (c) No Guarantor (other than Parent) will, and Parent will not cause or permit any such Guarantor to, consolidate with or merge with or into any Person unless (1) either (i) such Guarantor shall be the surviving or continuing corporation; or (ii) the Person (if other than such Guarantor) formed by such consolidation or into which such Guarantor is merged shall expressly assume, by supplemental indenture and Security Documents (in each case, in form and substance satisfactory to the Trustee) executed and delivered to the Trustee, all of the obligations of such Guarantor under its Guarantee and the performance of every covenant under such Guarantor's Guarantee, this Indenture, the Registration Rights Agreement and the Security Documents on the part of such Guarantor to be performed or observed; and (2) each of the conditions specified in Section 5.1(d) (other than clause (1) thereof) is satisfied. The requirements of this paragraph (c) shall not apply to (x) a consolidation or merger of any Guarantor with and into Issuer or any other Guarantor, so long as Issuer or a Guarantor survives such consolidation or merger, or (y) a Transfer of any Guarantor that complies with Section 4.13 or Section 4.15. (d) The following additional conditions shall apply to each transaction described in paragraph (a), (b) or (c), except that clause (1) below shall not apply to a transaction described in paragraph (c): (1) immediately after giving effect to such transaction and the assumption contemplated above (including giving effect to any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), Parent (or the Parent Surviving Entity, if applicable) (x) could incur at least $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception; and -69- (y) has a Consolidated Net Worth not less than the Consolidated Net Worth of Parent immediately before the transaction; (2) immediately before and immediately after giving effect to such transaction and the assumption contemplated above (including giving effect to any Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default has occurred and is continuing; (3) Parent, Issuer, such Guarantor or the relevant surviving entity, as applicable, shall cause such amendments, supplements or other instruments to be filed, executed and/or recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien of the Security Documents on the Collateral and Second Lien Collateral owned by or Transferred to such Person, together with such financing statements as may be required to perfect any security interests in such Collateral and Second Lien Collateral which may be perfected by the filing of a financing statement under the UCC of the relevant States; (4) the Collateral and Second Lien Collateral owned by or Transferred to Parent, Issuer, such Guarantor or the relevant surviving entity, as applicable, shall (i) continue to constitute Collateral and Second Lien Collateral under the Indenture and the Security Documents, (ii) be subject to the Lien in favor of the Trustee for the benefit of the Holders, and (iii) not be subject to any Lien other than Liens permitted by the Security Documents; (5) the assets of the Person which is merged or consolidated with or into the relevant surviving entity, to the extent that they are assets of the types which would constitute Collateral under the Security Documents, shall be treated as After-Acquired Property and such surviving entity shall take such action as may be reasonably necessary to cause such assets to be made subject to the Lien of the Security Documents in the manner and to the extent required in this Indenture; and (6) Parent shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such transaction and, if a supplemental indenture or supple mental Security Documents are required in connection with such transaction, such supplemental indenture and Security Documents comply with the applicable provisions of this Indenture, that all conditions precedent in this Indenture relating to such transaction have been satisfied and that such supplemental indenture and Security Documents are enforceable. Opinions of Counsel required to be delivered under this Section or elsewhere in this Indenture may have qualifications customary for opinions of the type required, and counsel delivering -70- such Opinions of Counsel may rely on certificates of Terra Capital or government or other officials customary for opinions of the type required, including certificates certifying as to matters of fact. The successor entity pursuant to Section 5.1(a), (b) or (c) shall be the successor to Parent, Issuer or the applicable Guarantor, as the case may be, and shall succeed thereto and be substituted thereor, and may exercise every right and power thereof under this Indenture, but the predecessor entity in the case of a Transfer shall not be released from the obligation to pay the principal of and interest on the Notes. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.1. Events of Default. Any of the following shall ----------------- constitute an Event of Default: (i) default for 30 days in the payment when due of interest on any Note; (ii) default in the payment when due of principal on any Note, whether upon maturity, acceleration, optional redemption, required repurchase or otherwise; (iii) failure to perform or comply with Section 4.8 or Section 4.15; (iv) failure to perform or comply with any covenant, agreement, warranty or obligation in this Indenture or the Notes (other than any specified in clause (i), (ii) or (iii) above) which failure continues for 60 days after written notice thereof has been given to Terra Capital by the Trustee or to Terra Capital and the Trustee by the Holders of at least 25% in aggregate principal amount of the then outstanding Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Parent or any Restricted Subsidiary whether such Indebtedness now exists, or is created after the Issue Date, which default (a) is caused by a failure to pay such Indebtedness at Stated Maturity (after giving effect to any grace period related thereto) (a "Payment Default") or (b) results --------------- in the acceleration of such Indebtedness prior to its Stated Maturity and, in each case, the principal amount of any such Indebtedness as to which a Payment Default or acceleration shall have occurred, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (vi) one or more final and non-appealable judgments, orders or decrees for the payment of money of $15.0 million or more, individually or in the aggregate, shall be entered against Parent or any Restricted Subsidiary or any of their respective properties and which final and non-appealable judgments, orders or decrees are not covered by third party indemnities -71- or insurance as to which coverage has not been disclaimed and are not paid, discharged, bonded or stayed within 60 days after their entry; (vii) a court having jurisdiction in the premises enters (x) a decree or order for relief in respect of Issuer, Parent or any of its Significant Subsidiaries in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (y) a decree or order adjudging Issuer, Parent or any of its Significant Subsidiaries a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Issuer, Parent or any of its Significant Subsidiaries under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Issuer, Parent or any of its Significant Subsidiaries or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; (viii) Terra Capital, Parent or any Significant Subsidiary: (A) commences a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent; (B) consents to the entry of an order for relief in respect of Issuer, Parent or any of its Significant Subsidiaries in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against Issuer, Parent or any of its Significant Subsidiaries; (C) files a petition or answer or consent seeking reorganization or relief under any applicable federal or state law; (D) consents to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Issuer, Parent or any of its Significant Subsidiaries or of any substantial part of its property; (E) makes an assignment for the benefit of creditors; (F) admits in writing its inability to pay its debts generally as they become due; or (G) takes corporate action in furtherance of any such action; (ix) the Guarantee of Parent or any Guarantor that is a Significant Subsidiary ceases to be in full force and effect (other than in accordance with its terms of such Guarantee and this Indenture) or is declared null and void and unenforceable or is found invalid or any -72- Guarantor denies or disaffirms its obligations under its Guarantee (other than by reason of release of a Guarantor from its Guarantee in accordance with the terms of this Indenture); or (x) default by Issuer or any Pledgor in the performance of the Security Documents which adversely affects the enforceability or the validity of the Trustee's Lien on the Collateral or Second Lien Collateral or which adversely affects the condition or value of the Collateral or Second Lien Collateral, taken as a whole, in any material respect, repudiation or disaffirmation by Issuer or any Pledgor of its obligations under any of the Security Documents or the determination in a judicial proceeding that any of the Security Documents is unenforceable or invalid against Issuer or any Guarantor for any reason. The term "Bankruptcy Law" means Title 11, United States Code, as -------------- amended, or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or --------- similar official under any Bankruptcy Law. Terra Capital shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clause (v) of this Section 6.1 and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (iv) or (vi) of this Section 6.1, its status and what action Terra Capital is taking or proposes to take with respect thereto. SECTION 6.2. Acceleration. If an Event of Default occurs and is ------------ continuing (other than an Event of Default described in clause (vii) or (viii) of Section 6.1 with respect to Terra Capital, Issuer, Parent or any Guarantor that is a Significant Subsidiary), the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default described in clause (vii) or (viii) of Section 6.1 occurs with respect to Issuer, Parent or any Guarantor that is a Significant Subsidiary, the principal of and interest on all the Notes will ipso facto ---- ----- become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders of the Notes. The Holders of a majority in aggregate principal amount of the outstanding Notes by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.3. Other Remedies. If an Event of Default occurs and is -------------- continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are, to the extent permitted by law, cumulative. -73- SECTION 6.4. Waiver of Past Defaults. The Holders of a majority ----------------------- in aggregate principal amount of the Notes then outstanding by notice to the Trustee may waive any past or existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Note or (ii) a Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each Holder affected. When a Default is waived, it is deemed cured, and any Event of Default arising therefrom shall be deemed to have been cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.5. Control by Majority. The Holders of a majority in ------------------- principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.1, that the Trustee determines is unduly prejudicial to the rights of any other Holder (it being understood that the Trustee shall have no duty to make such determination) or that would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed -------- ------- proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification from the Holders satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.6. Limitation on Suits. A Holder may not pursue any ------------------- remedy with respect to this Indenture or the Notes unless: (1) such Holder has previously given the Trustee notice that an Event of Default is continuing; (2) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy; (3) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request during such 60-day period. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 6.7. Rights of Holders To Receive Payment. ------------------------------------ Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal, premium (if any) or interest on the Notes held by such Holder, on or after the respective due dates therefor, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. -74- SECTION 6.8. Collection Suit by Trustee. If an Event of Default -------------------------- specified in Section 6.1(i) or (ii) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against Terra Capital for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.7. SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may -------------------------------- file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to Issuer, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.7. SECTION 6.10. Priorities. If the Trustee collects any money or ---------- property pursuant to this Article 6, it shall pay out the money or property in the following order, subject to applicable law: FIRST: to the Trustee for amounts due under Section 7.7; SECOND: to Holders for amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and THIRD: to Terra Capital. The Trustee may, upon prior written notice to Terra Capital, fix a record date and payment date for any payment to Holders pursuant to this Section. At least 15 days before such record date, Terra Capital shall mail to each Holder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the --------------------- enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in aggregate principal amount of the outstanding Notes. -75- ARTICLE 7 TRUSTEE SECTION 7.1. Duties of Trustee. ----------------- (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and the Security Documents and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and the Security Documents and no implied covenants or obligations shall be read into this Indenture or the Security Documents against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Sections 6.2 and 6.5. (d) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.2. Rights of Trustee. Subject to Section 7.1, ----------------- -76- (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. (b) Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate. (c) Before the Trustee acts or refrains from acting, the Trustee may consult with counsel, and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (d) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (e) Prior to the occurrence of an Event of Default hereunder and after the cure or waiver of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, Officers' Certificate, or other request, consent, order, approval, appraisal, bond, debenture, note, coupon, security or other paper or document unless requested in writing to do so by the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding; provided that, if the payment -------- within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigations, in the opinion of the Trustee, is not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by Terra Capital or, if advanced by the Trustee, shall be repaid by Terra Capital on demand. (f) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (g) Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, or where information is required or necessary to be furnished by Terra Capital in order for the Trustee to act, the Trustee (unless otherwise evidence by herein specifically prescribed), shall not be liable for any action it takes or omits to take in good faith in reliance -77- upon an Officers' Certificate, or for any action taken or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture. (h) The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of Terra Capital, except as otherwise specifically set forth in this Indenture, but the Trustee may require of Terra Capital full information and advice as to the performance of the covenants, conditions and agreements contained herein. (i) Except for (i) a default under Section 6.1(i) or 6.1(ii), (ii) the failure of Parent or Terra Capital to file any financial statements, documents or certificates specifically required to be filed with the Trustee pursuant to the provisions of this Indenture or (iii) any other event of which the Trustee has "actual knowledge" and which event constitutes a Default under this Indenture, the Trustee shall not be deemed to have notice of any default or event unless specifically notified in writing by Terra Capital or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding; as used herein, the term "actual knowledge" means the actual fact of knowing, without a duty to make any investigation with regard thereto. (j) The Trustee shall not be required to give any note, bond or surety in respect of the execution of the trusts and powers under this Indenture. (k) The permissive rights of the Trustee to perform acts enumerated in this Indenture shall not be construed as a duty. (l) The Trustee shall not be liable for any interest on any money received by it except as the Trustee may agree in writing with Terra Capital. (m) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.3. Individual Rights of Trustee. The Trustee in its ---------------------------- individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with Parent or its respective Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be -------------------- responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for Terra Capital's use of the proceeds from the Notes, and it shall not be responsible for any statement of Terra Capital in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee's certificate of authentication. -78- SECTION 7.5. Notice of Defaults. If a Default occurs and is continuing ------------------ and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to each Holder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Note (including payments pursuant to the mandatory redemption provisions of such Note, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Holders. SECTION 7.6. Reports by Trustee to Holders. As promptly as practicable ----------------------------- after each January 1 beginning with the January 1 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Holder a brief report dated as of May 15 that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b). Prior to delivery to the Holders, the Trustee shall deliver to Terra Capital a copy of any report it delivers to Holders pursuant to this Section 7.6. SECTION 7.7. Compensation and Indemnity. Terra Capital shall pay to -------------------------- the Trustee from time to time such reasonable compensation for its services as Terra Capital and the Trustee shall from time to time agree in writing. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. Terra Capital shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to such compensation for its services, except any such expense, disbursement or advance as may arise from its negligence, willful misconduct or bad faith. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Trustee shall provide Terra Capital reasonable notice of any expenditure not in the ordinary course of business. Terra Capital shall indemnify each of the Trustee and any predecessor Trustees against any and all loss, damage, claim, liability or expense (including attorneys' fees and expenses) (other than taxes applicable to the Trustee's compensation hereunder) incurred by it in connection with the acceptance or administration of this trust and the performance of its duties hereunder. The Trustee shall notify Terra Capital promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify Terra Capital shall not relieve Terra Capital of its obligations hereunder. Terra Capital shall defend the claim and the Trustee shall cooperate in the defense of such claim. The Trustee may have separate counsel at its own expense. If, however, representation in any defense by Terra Capital and its counsel would in the opinion of counsel to the Trustee create a conflict of interest, Terra Capital shall pay the expense of separate counsel to the Trustee. Terra Capital need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own willful misconduct, negligence or bad faith. Terra Capital need not pay for any settlement made without its written consent. To secure Terra Capital's payment obligations in this Section, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Notes. Terra Capital's payment obligations pursuant to this Section shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of an Event of Default specified in Section 6.1(vii) or (viii) with respect to -79- Terra Capital, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.8. Replacement of Trustee. The Trustee may resign at any ---------------------- time upon 30 days notice to Terra Capital. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. Terra Capital shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by Terra Capital or by the Holders of a majority in principal amount of the outstanding Notes and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), Terra Capital shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to Terra Capital. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.7. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, Terra Capital's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee. SECTION 7.9. Successor Trustee by Merger. If the Trustee consolidates --------------------------- with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee, so long as such corporation is eligible under this Article 7 and TIA (S) 310(a). -80- In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all ----------------------------- times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA (S) 310(b); provided, however, that there shall be excluded from the operation -------- ------- of TIA (S) 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of Terra Capital are outstanding if the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Terra Capital. ------------------------------------------------------- The Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated. ARTICLE 8 DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.1. Discharge of Liability on Notes; Defeasance. ------------------------------------------- (a) When (i) Terra Capital delivers to the Trustee all outstanding Notes (other than Notes replaced pursuant to Section 2.7) for cancellation or (ii) all outstanding Notes have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 3, and Terra Capital irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Notes, including interest thereon, and if in either case Terra Capital pays all other sums payable hereunder by Terra Capital, then the Indenture shall, subject to Section 8.1(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of Terra Capital accompanied by an Officers' Certificate and an Opinion of Counsel that all conditions precedent provided for herein relating to satisfaction and discharge of this Indenture have been complied with and at the cost and expense of Terra Capital. (b) Subject to Sections 8.1(c) and 8.2, Terra Capital at any time may terminate (i) all its obligations under the Notes and this Indenture ("legal ----- defeasance option") or (ii) its obligations under Sections 4.4 through 4.19, ----------------- inclusive, and the operation of Sections 6.1(iv), 6.1(v), 6.1(vi), 6.1(vii) (but only with respect to Significant Subsidiaries) and 6.1(viii) (but only with respect to Significant Subsidiaries), 6.1(ix) and 5.1(d)(1) and 5.1(d)(2) ("covenant defeasance option"). Terra Capital may exercise its legal defeasance -------------------------- option notwithstanding its prior exercise of its covenant defeasance option. -81- If Terra Capital exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default. If Terra Capital exercises its covenant defeasance option, payment of the Notes may not be accelerated due to a failure to comply with any of Sections 4.4 through 4.19, inclusive, or the operation of Sections 6.1(iv), 6.1(v), 6.1(vi), 6.1(vii) (but only with respect to Significant Subsidiaries), 6.1(viii) (but only with respect to Significant Subsidiaries), or 6.1(ix). If Terra Capital exercises its legal defeasance option or its covenant defeasance option, each Guarantor will be released from all of its obligations under Article 10. Upon satisfaction of the conditions set forth herein and upon request of Terra Capital, the Trustee shall acknowledge in writing the discharge of those obligations that Terra Capital terminates. (c) Notwithstanding clauses (a) and (b) above, Terra Capital's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.3, 8.4, 8.5 and 8.6 shall survive until the Notes have been paid in full. Thereafter, Terra Capital's obligations in Sections 7.7, 8.4 and 8.5 shall survive. SECTION 8.2. Conditions to Defeasance. Terra Capital may exercise its ------------------------ legal defeasance option or its covenant defeasance option only if: (1) Terra Capital irrevocably deposits in trust (the "defeasance ---------- trust") with the Trustee money or U.S. Government Obligations which through ----- the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide cash (without reinvestment) at such times and in such amounts as will be sufficient to pay principal and interest on the Notes (except Notes replaced pursuant to Section 2.7) to redemption or maturity, as the case may be; (2) Terra Capital delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all outstanding Notes (except Notes replaced pursuant to Section 2.7) to maturity or redemption, as the case may be; (3) 91 days pass after the deposit is made and during the 91-day period no Default specified in Section 6.1(vi) or (vii) with respect to Terra Capital occurs which is continuing at the end of the period; (4) no default exists under any Indebtedness of Parent or any Restricted Subsidiary; (5) Terra Capital delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; -82- (6) Terra Capital shall have delivered to the Trustee an Opinion of Counsel stating that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or change in applicable Federal income tax law); (7) Terra Capital delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Notes as contemplated by this Article 8 have been complied with; and (8) Terra Capital shall have paid or duly provided for payment under terms mutually satisfactory to Terra Capital and the Trustee all amounts then due to the Trustee pursuant to Section 7.7. Opinions of Counsel required to be delivered under this Section may have qualifications customary for opinions of the type required and counsel delivering such Opinions of Counsel may rely on certificates of Terra Capital or government or other officials customary for opinions of the type required, including certificates certifying as to matters of fact. Before or after a deposit, Terra Capital may make arrangements satisfactory to the Trustee for the redemption of Notes at a future date in accordance with Article 3. SECTION 8.3. Application of Trust Money. The Trustee shall hold in -------------------------- trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations either directly or through the Paying Agent (including Terra Capital acting as its own Paying Agent as the Trustee may determine) and in accordance with this Indenture to the payment of principal of and interest on the Notes. SECTION 8.4. Repayment to Terra Capital. The Trustee and the Paying -------------------------- Agent shall notify Terra Capital of any excess money or Notes held by them at any time and shall promptly turn over to Terra Capital upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to Terra Capital upon written request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Holders entitled to the money must look to Terra Capital for payment as general creditors. SECTION 8.5. Indemnity for Government Obligations. Terra Capital shall ------------------------------------ pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations other than any such tax, fee or other charge which by law is for the account of the Holders of the defeased Notes; provided that the Trustee shall be entitled to charge any such -------- tax, fee or other charge to such Holder's account. -83- SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable ------------- to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, Terra Capital's obligations under this Indenture and the Notes and the Guarantors' obligations under this Indenture and the Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that (a) if Terra Capital has made any -------- ------- payment of interest on or principal of any Notes following the reinstatement of their obligations, Terra Capital shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent and (b) unless otherwise required by any legal proceeding or any order or judgment of any court or governmental authority, the Trustee or Paying Agent shall return all such money and U.S. Government Obligations to Terra Capital promptly after receiving a written request therefor at any time, if such reinstatement of Terra Capital's obligations has occurred and continues to be in effect. ARTICLE 9 AMENDMENTS AND WAIVERS SECTION 9.1. Without Consent of Holders. Terra Capital and the Trustee -------------------------- may amend this Indenture or the Notes without notice to or consent of any Holder: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for the assumption by a successor Person of the obligations of Issuer or any Guarantor under this Indenture in accordance with Article 5; (3) to provide for uncertificated Notes in addition to or in place of certificated Notes; provided that the uncertificated Notes are issued in -------- registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Notes are as described in Section 163(f)(2)(B) of the Code; (4) to add a Guarantor with respect to the Notes; (5) to release a Guarantor from its Guarantee and the Security Documents when permitted by this Indenture; (6) to add any additional asset as Collateral; (7) to release Collateral from the Lien of the Indenture and the Security Documents when permitted or required by the Indenture; (8) to add to the covenants of Parent or Terra Capital for the benefit of the Holders or to surrender any right or power herein conferred upon Parent or Terra Capital; -84- (9) to make any change that does not adversely affect the rights of any Holder; or (10) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA. After an amendment under this Section becomes effective, Terra Capital shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this section. SECTION 9.2. With Consent of Holders. Terra Capital and the Trustee ----------------------- may amend this Indenture, the Notes and the Security Documents and any Fixed Asset Intercompany Note with the consent of the Holders of a majority of the aggregate principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange for the Notes) and any past default or compliance with any provisions may also be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each Holder of outstanding Note affected thereby, no amendment may: (1) reduce the principal amount or change the fixed maturity of any Note; (2) alter the provisions with respect to the redemption or repurchase provisions of any Note or this Indenture in a manner adverse to the Holders of the Notes (other than the provisions of this Indenture relating to any offer to purchase required under Section 4.8 or 4.15); (3) reduce the rate of or change the time for payment of interest on any Note; (4) waive a Default in the payment of principal or interest on the Notes (except that Holders of at least a majority in aggregate principal amount of the then outstanding Notes may (x) rescind an acceleration of the Notes that resulted from a non-payment default and (y) waive the payment default that resulted from such acceleration); (5) make the principal of or interest on any Note payable in money other than United States Dollars; (6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or interest on the Notes; (7) waive a redemption or purchase payment due with respect to any Note; (8) release from the Lien of the Indenture and the Security Documents all or substantially all of the Collateral and the Second Lien Collateral; (9) make the Notes or any Guarantee subordinated by their or its terms in right of payment to any other Indebtedness; -85- (10) release any Guarantor that is a Significant Subsidiary from its Guarantee except in compliance with this Indenture; or (11) make any change in the amendment and waiver provisions of this Indenture; provided, further, that no such modification or amendment may, without the -------- ------- consent of the Holders of two-thirds of the aggregate principal amount of Notes then outstanding, (a) amend or waive any of the provisions (including the definitions thereto) in Section 4.8 or Section 4.15 in a manner materially adverse to the Holders or (b) release from the Lien of this Indenture and the Security Documents any Principal Property other than in accordance with Section 4.15. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment or waiver. It is sufficient if such consent approves the substance of the proposed amendment or waiver. After an amendment or waiver under this Section becomes effective, Terra Capital shall mail to Holders a notice briefly describing such amendment or waiver. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment or waiver. SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to ----------------------------------- this Indenture or the Notes shall comply with the TIA as then in effect. SECTION 9.4. Revocation and Effect of Consents and Waivers. A consent --------------------------------------------- to an amendment or a waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent or waiver is not made on the Note. An amendment or waiver becomes effective once the requisite number of consents are received by Terra Capital or the Trustee. After an amendment or waiver becomes effective, it shall bind every Holder. Terra Capital may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.5. Notation on or Exchange of Notes. If an amendment changes -------------------------------- the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the Holder. -86- Alternatively, if Terra Capital or the Trustee so determines, Terra Capital in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment. SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any -------------------------- amendment authorized pursuant to this Article 9 (other than Section 9.1(4)) if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment complies with the provisions of Article 9. ARTICLE 10 GUARANTEES SECTION 10.1. Guarantees. Each Guarantor hereby unconditionally and ---------- irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns as primary obligor and not merely as a surety, on a senior secured basis the performance and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of Terra Capital under this Indenture and the Notes whether for payment of principal of or interest on the Notes, expenses, indemnification or otherwise (all such obligations guaranteed by the Guarantors being herein called the "Guaranteed ---------- Obligations"). The Guarantors will agree to pay, in addition to the amount ----------- stated above, any and all expenses (including reasonable counsel fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under the Guarantees. Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Guarantor and that such Guarantor will remain bound under this Article 10 notwithstanding any extension or renewal of any Guaranteed Obligation. Each Guarantor waives presentation to, demand of, payment from and protest to Terra Capital of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Notes or the Guaranteed Obligations. The obligations of each Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against Terra Capital or any other Person under this Indenture, the Notes or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Notes or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (f) any change in the ownership of such Guarantor. Each Guarantor further agrees that its Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any -87- right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations. Except as expressly set forth in Sections 8.2, 10.2 and 10.6, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Notes or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Guarantor or would otherwise operate as a discharge of such Guarantor as a matter of law or equity. Each Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of Terra Capital or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of Terra Capital to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any Guaranteed Obligation, each Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Guaranteed Obligations of Terra Capital to the Holders and the Trustee. Each Guarantor agrees that it shall not be entitled to any right of subrogation in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. Each Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations hereby may be accelerated as provided in Article 6 for the purposes of such Guarantor's Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations, and (y) in the event of any declaration of acceleration of Guaranteed Obligations as provided in Article 6, the Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section. Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section. -88- SECTION 10.2. Limitation on Liability. Any term or provision of this ----------------------- Indenture to the contrary notwithstanding, the maximum aggregate amount of the obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. To effectuate the foregoing intention, the obligations of each Guarantor (other than the Guarantee by Parent and each other parent company of Issuer) shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations hereunder, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal, state or foreign law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Guarantor in an amount pro rata based --- ---- on the net assets of each Guarantor. SECTION 10.3. Successors and Assigns. This Article 10 shall be binding ---------------------- upon each Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 10.4. No Waiver. Neither a failure nor a delay on the part of --------- either the Trustee or the Holders in exercising any right, power or privilege under this Article 10 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 10 at law, in equity, by statute or otherwise. SECTION 10.5. Modification. No modification, amendment or waiver of ------------ any provision of this Article 10, nor the consent to any departure by any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 10.6. Release of Guarantor. A Guarantor may, by execution and -------------------- delivery to the Trustee of a supplemental indenture satisfactory to the Trustee, be automatically and unconditionally released from its Guarantee upon either of the following: (x) any sale, exchange or transfer by Parent or any Restricted Subsidiary to any Person that is not an Affiliate of Parent of all of the Capital Stock of, or all or substantially all the assets of, such Restricted Subsidiary, which sale, exchange or transfer is made in accordance with the provisions of this Indenture; or -89- (y) the designation of such Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the provisions of this Indenture; provided, in each such case, Parent has delivered to the Trustee an Officers' -------- Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in this Indenture relating to such transactions have been complied with and that such release is authorized and permitted under this Indenture. SECTION 10.7. Execution of Supplemental Indenture for Future ---------------------------------------------- Guarantors. Each Subsidiary which is required to become a Guarantor pursuant to ---------- Section 4.5 shall, and Terra Capital shall cause each such Subsidiary to, promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit F hereto pursuant to which such Subsidiary shall become a Guarantor --------- under this Article 10 and shall guarantee the Guaranteed Obligations. Concurrently with the execution and delivery of such supplemental indenture, Terra Capital shall deliver to the Trustee an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors' rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Guarantee of such Guarantor is a valid and legally binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms. ARTICLE 11 MISCELLANEOUS SECTION 11.1. Trust Indenture Act Controls. If any provision of this ---------------------------- Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. If this Indenture excludes any provision of the TIA that is required to be included, such provision shall be deemed included herein. SECTION 11.2. Notices. Any notice or communication shall be in writing ------- and delivered in person, by overnight courier or facsimile (if to Terra Capital, with receipt confirmed by an Officer) or mailed by first-class mail addressed as follows: If to Terra Capital or any Guarantor: ------------------------------------ TERRA INDUSTRIES INC. Terra Centre 600 Fourth Street P.O. Box 6000 Sioux City, Iowa 51102 Attention: Chief Financial Officer -90- If to the Trustee: ----------------- c/o U.S. BANK NATIONAL ASSOCIATION 180 East Fifth Street St. Paul, Minnesota 55101 Attention: Corporate Trust Administration Terra Capital or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed or sent by overnight courier or facsimile to a Holder shall be sent to the Holder at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so sent within the time prescribed. Failure to send a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is sent in the manner provided above, it is duly given, whether or not the addressee receives it. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. SECTION 11.3. Communication by Holders with Other Holders. Holders may ------------------------------------------- communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Notes. Terra Capital, the Trustee, the Registrar and anyone else shall have the protection of TIA (S) 312(c). SECTION 11.4. Certificate and Opinion as to Conditions Precedent. Upon -------------------------------------------------- any request or application by Terra Capital to the Trustee to take or refrain from taking any action under this Indenture, Terra Capital shall furnish to the Trustee to the extent required by the TIA or this Indenture: (1) an Officers' Certificate (which in connection with the original issuance of the Notes need only be executed by one Officer for Terra Capital) in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.5. Statements Required in Certificate or Opinion. Each --------------------------------------------- certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: -91- (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with; provided -------- that an Opinion of Counsel can rely as to matters of fact on an Officers' Certificate or a certificate of a public official. SECTION 11.6. When Notes Disregarded. In determining whether the ---------------------- Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by Terra Capital or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with Parent shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination. SECTION 11.7. Rules by Trustee, Paying Agent and Registrar. The -------------------------------------------- Trustee may make reasonable rules for action by or a meeting of Holders. The Trustee shall provide Terra Capital reasonable notice of such rules. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 11.8. Legal Holidays. If a payment date is a Legal Holiday, -------------- payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 11.9. Governing Law. This Indenture and the Notes shall be ------------- governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflict of laws to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 11.10. No Recourse Against Others. No recourse for the payment -------------------------- of the principal of or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of Terra Capital or any Guarantor in this Indenture, or in any of the Notes or the Guarantees or because of the creation of any Indebtedness represented hereby and thereby, shall be had against any incorporator, stockholder, officer, director, employee or controlling person of Parent or any of its Subsidiaries. Each Holder, by accepting a Note, waives and releases all such liability. The waiver and release shall be part of the consideration for the issuance of the Notes. -92- SECTION 11.11. Successors. All agreements of Terra Capital in this ---------- Indenture and the Notes shall bind Terra Capital's successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Multiple Originals. The parties may sign any number of ------------------ copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 11.13. Table of Contents; Headings. The table of contents, --------------------------- cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. SECTION 11.14. Severability Clause. In case any provision in this ------------------- Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. ARTICLE 12 SECURITY DOCUMENTS SECTION 12.1. Security Documents; Additional Collateral. ----------------------------------------- (a) Security Documents. In order to secure the due and punctual ------------------ payment of the Notes, the Pledgors and the Trustee shall on the Issue Date enter into the Security Documents to create the Security Interests and for related matters. The Trustee and the Pledgors hereby agree that the Trustee holds the Collateral in trust for its benefit and the benefit of the Holders pursuant to the terms of the Security Documents. Unless an Event of Default has occurred and is continuing, the Pledgors will have the right to remain in possession and retain exclusive control of the Collateral (other than any cash, securities, obligations and Temporary Cash Investments constituting part of the Collateral and deposited with the Trustee and other than as set forth in the Security Documents), to freely operate the Collateral and to collect, invest and dispose any income thereon. (b) Additional Collateral. Promptly upon the acquisition or receipt by --------------------- Issuer or any Pledgor of After-Acquired Property: (i) Issuer or the applicable Pledgor, as the case may be, and the Trustee will, if necessary, enter into such amendments or supplements to the Security Documents or such additional Mortgages (in each case in registerable or recordable form) and other Security Documents, and Issuer shall cause such amendments, supplements, mortgages and other Security Documents to be filed and recorded in all such governmental offices as shall be necessary in order to grant and create a valid first priority Lien on and security interest in such After-Acquired Property in favor of the Trustee (subject to no Liens except Collateral Permitted Liens), Issuer shall cause appropriate financing statements to be filed in such governmental offices as shall be reasonably necessary in order to perfect any security interest in such After- -93- Acquired Property as to which a security interest may, under the UCC of the applicable jurisdiction, be perfected by the filing of a financing statement and, if any such After-Acquired Property consists of stock certificates, promissory notes or other property as to which, under the relevant UCC, a security interest may be perfected only by possession, subject to the terms and conditions of the Security Documents, deliver such certificates, promissory notes and other property, together with stock powers or assignments duly endorsed in blank, to the Trustee; (ii) in the case of After-Acquired Property which constitutes personal property having a value in excess of $10,000,000, and to the extent additional recordings, registrations or filings are necessary to create and/or perfect a Security Interest in such personal property under the Security Documents, Issuer or the applicable Pledgor, as the case may be, shall also deliver to the Trustee the following: (A) an Opinion of Counsel substantially to the effect that, in the opinion of such counsel, the applicable Security Documents and all other instruments of further assurance or assignment have been properly recorded, registered and filed to the extent necessary to create and/or perfect the Security Interests in such personal property under the Security Documents and reciting the details of such action and stating that as to such Security Interests under such Security Documents, such recordings, registrations and filings are the only recordings, registrations and filings necessary to give notice thereof and no re-recordings, re-registrations or refilings are necessary to maintain such notice (other than as stated in such opinion); (B) an Officers' Certificate of Issuer stating that any specific Liens on such personal property are Collateral Permitted Liens; and (C) evidence of payment or a closing statement indicating payments to be made of all filing fees, recording charges, transfer taxes and other costs and expenses including reasonable legal fees and disbursements of counsel for the Trustee (and any local counsel) that may be incurred to validly and effectively subject such personal property to the Lien of any applicable Security Document to perfect such Liens; (iii) in the case of After-Acquired Property which constitutes Real Property, Issuer or the applicable Pledgor, as the case may be, shall also deliver to the Trustee the following: (A) a title insurance policy or an endorsement to an existing title insurance policy, in the Chicago Title Insurance Loan Policy Extended Coverage form, or its equivalent, and in an amount at least equal to the purchase price thereof (or, if such property was not purchased or such purchase price cannot be determined by Issuer, the fair market value thereof as determined by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee), in favor of the Trustee insuring that the Lien of the Security Documents or any additional Security Documents constitutes a valid and perfected Lien, subject to no Liens except Collateral Permitted -94- Liens, on such Real Property in an aggregate amount equal to the purchase price or the fair market value, as applicable, of the Real Property and containing such endorsements and other assurances of the type included in the title insurance policies delivered to the Trustee on the Issue Date with respect to the Mortgaged Property, together with an Officers' Certificate stating that any Liens on such Real Property are Liens expressly permitted by this Indenture and the applicable Security Documents; (B) any Opinion of Counsel either (a) substantially to the effect that, in the opinion of such counsel, the applicable Security Documents and all other instruments of further assurance or assignment have been properly recorded, registered and filed to the extent necessary to create and/or perfect the Security Interests in such Real Property under the Security Documents and reciting the details of such action and stating that as to such Security Interests under such Security Documents, such recordings, registrations and filings are the only recordings, registrations and filings necessary to give notice thereof and no re-recordings, re-registrations or refilings are necessary to maintain such notice (other than as stated in such opinion) or (b) to the effect that, in the opinion of such counsel, no such action is necessary to perfect the Security Interests in such Real Property; (C) a Survey with respect to such Real Property; (D) a policy or certificate of insurance as required by Section 4.19 of this Indenture relating to such Real Property, which policy or certificate shall bear mortgagee endorsements of the character required by such Section; (E) evidence of payment or a closing statement indicating payments to be made by Issuer or the applicable Subsidiary of all title premiums, filing fees, recording and registration charges, transfer taxes and other costs and expenses including reasonable legal fees and disbursements of counsel for the Trustee (and any local counsel) that may be incurred to validly and effectively subject such After-Acquired Property to the Lien of any applicable Security Document to perfect such Lien; (F) copies of all leases with respect to such Real Property, all of which leases shall be in conformance with any applicable provisions of the Security Documents; (G) an Officers' Certificate of Issuer stating that there has been issued and is in effect a valid and proper certificate of occupancy or local or foreign equivalent, if required by the local or foreign codes or ordinances for the use then being made of such Real Property and that there is not outstanding any citation, violation or similar notice indicating that such Real Property contains conditions which are not in compliance with local or foreign codes or ordinances relating to building or fire safety or structural soundness; and -95- (H) such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as shall be necessary in order for the owner or holder of the fee interest to grant the Lien contemplated by the Mortgage with respect to such Real Property; and (iv) Issuer or the applicable Pledgor shall deliver to the Trustee an Opinion of Counsel and an Officers' Certificate to the effect that the documents that have been or are therewith delivered to the Trustee pursuant to this Section 12.1(b) (including any amendments, supplements, mortgages or other Security Documents referred to in paragraph (i) above) conform to the requirements of this Indenture. (c) Each Holder, by accepting a Note, agrees to all of the terms and provisions of the Security Documents, as the same may be amended from time to time pursuant to the provisions of the Security Documents and this Indenture. SECTION 12.2. Recording, Etc. -------------- (a) Parent shall, and shall cause each other Pledgor to, take or cause to be taken all action required or desirable to maintain, perfect, preserve and protect the Security Interests in the Collateral and Second Lien Collateral granted by the Security Documents, including, but not limited to, causing all financing statements, Mortgages, other instruments of further assurance, including, without limitation, continuation statements covering security interests in personal property, and all mortgages securing purchase money obligations delivered to the Trustee or to the trustee, mortgagee or other holder of a Permitted Lien under Section 12.4 to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, and will execute and file such financing statements and cause to be issued and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve and protect the rights of the Holders and the Trustee under this Indenture and the Security Documents to all property comprising the Collateral and Second Lien Collateral. Issuer shall from time to time promptly pay and discharge all mortgage and financing and continuation statement recording and/or filing fees, charges and Taxes relating to this Indenture and the Security Documents, any amendments thereto and any other instruments of further assurance. Without limiting the generality of the foregoing covenant, in the event at any time the Trustee shall determine that additional mortgage recording, transfer or similar Taxes are required to be paid to perfect or continue any Lien on any Real Property in an amount at least equal to the fair market value from time to time of such Real Property, Issuer shall pay such Taxes promptly upon demand by the Trustee. Notwithstanding the foregoing, the Trustee shall not have any duty or obligation to ascertain whether any such Taxes are required to be paid at any time, and the determination referred to in the preceding sentence shall only be made by the Trustee upon receipt of written notice that such Taxes are due and owing. -96- (b) Issuer shall furnish or cause to be furnished to the Trustee: (i) at the time of execution and delivery of this Indenture, Opinion(s) of Counsel substantially in the form of the opinions to counsel delivered on the Issue Date to the Initial Purchasers; (ii) at the time of execution and delivery of this Indenture, with respect to each Mortgage, a policy of title insurance (or a commitment to issue such policy) insuring (or commiting to insure) the Lien of such Mortgage as a valid mortgage Lien, subject only to Liens specified in such Mortgage as "Prior Liens" or, in the case of each Mortgage encumbering Mortgaged Property located in Canada or the United Kingdom, a title Opinion of Counsel, substantially to the effect that the Lien of such Mortgage is a valid first mortgage Lien on such Mortgaged Property and fixtures thereon, subordinate only to those Liens specified in such Mortgage as "Prior Liens"; (iii) to the extent as would be required by the TIA, within 30 days after the Issue Date, Opinion(s) of Counsel either (a) substantially to the effect that, in the opinion of such counsel, this Indenture, each Security Document and all other instruments of further assurance or assignment have been properly recorded, registered and filed to the extent necessary to perfect or create the Security Interests created by each such Security Document and reciting the details of such action, and stating that as to the Security Interests created pursuant to each such Security Document, such recordings, registerings and filings are the only recordings, registerings and filings necessary to give notice thereof and that no re-recordings, re-registerings or refilings are necessary to maintain such notice (other than as stated in such opinion), or (b) to the effect that, in the opinion of such counsel, no such action is necessary to perfect such Security Interests; and (iv) within 30 days after October 8 in each year beginning with October 8, 2002, an Opinion of Counsel, dated as of such date, either (a) to the effect that, in the opinion of such counsel, such action has been taken with respect to the recordings, registerings, filings, re-recordings, re-registerings and refilings of all instruments of further assurance as is necessary to maintain the Security Interests of each of the Security Documents and reciting with respect to such Security Interests the details of such action or referencing prior Opinions of Counsel in which such details are given, and stating that all instruments have been executed and/or filed that are necessary fully to preserve and protect the rights of the Holders and the Trustee hereunder and under each of the Security Documents with respect to the Security Interests, or (b) to the effect that, in the opinion of such counsel, no such action is necessary to maintain such Security Interests. SECTION 12.3. Certain Dispositions of Collateral Without Release. -------------------------------------------------- (a) Notwithstanding the provisions of Section 12.4, so long as no Event of Default shall have occurred and be continuing, the Pledgors may, without any requirement of release or consent by the Trustee: -97- (i) sell or otherwise dispose of, in any transaction or series of related transactions, any personal property subject to the Lien of the Security Documents which has become worn out or obsolete and which either has an aggregate fair market value of $100,000 or less, or which is replaced by property of substantially equivalent or greater value which becomes subject to the Lien of the Security Documents as After-Acquired Property; (ii) grant rights-of-way and easements over or in respect of any Real Property; provided that such grant will not in any material respect, in the -------- reasonable opinion of the Board of Directors, impair the usefulness of such property in the conduct of the relevant Pledgor's business and will not be prejudicial to the interests of the Holders; (iii) alter, repair, replace, change the location or position of and add to its plants, structures, machinery, systems, equipment, fixtures and appurtenances; provided that no change in the location of any such -------- Collateral subject to the Lien of any of the Security Documents shall be made which (1) removes such property into a jurisdiction in which any instrument required by law to preserve the Lien of any of the Security Documents on such property, including all necessary instruments of further assurance, has not been recorded, registered or filed in the manner required by law to preserve the Lien of any of the Security Documents on such property, (2) does not comply with the terms of this Indenture and the Security Documents or (3) otherwise impairs the Lien of the Security Documents; (iv) demolish, dismantle, tear down, scrap or abandon any Collateral if, in the good faith opinion of the Board of Directors, such demolition, dismantling, tearing down, scrapping or abandonment is in the best interest of Issuer; (v) subject to the provisions of the Security Documents, abandon, terminate, cancel, release or make alterations in or substitutions of any leases, contracts or of rights-of-way subject to the Lien of the Security Documents; provided that (i) any altered or substituted leases, contracts -------- or rights-of-way shall forthwith, without further action, be subject to the Lien of the Security Documents to the same extent as those previously existing and (ii) if the relevant Pledgor shall receive any money or property in excess of such Pledgor's expenses in connection with such termination, cancellation, release, alteration or substitution as consideration or compensation for such termination, cancellation, release, alteration or substitution, such money or property, shall be treated as having been received in connection with an Asset Sale and subject to the provisions of Section 4.13; (vi) grant a non-exclusive license of any Patent, Trademark or Copyright (each as defined in the relevant Security Document); (vii) abandon any patent, trademark or copyright where subsequent applications relating to such patent, trademark or copyright have been filed with respect to similar subject matter or where the relevant Pledgor, in its reasonable business judgment, concludes that such patent, trademark or copyright is no longer useful in the conduct of such Pledgor's business; -98- (viii) surrender or modify any franchise, license or permit subject to the Lien of any of the Security Documents which it may own or under which it may be operating; provided that, after the surrender or modification of -------- any such franchise, license or permit, the relevant Pledgor shall still, in the reasonable opinion of the Board of Directors, be entitled, under some other or without any franchise, license or permit, to conduct its business in the territory in which it is then operating; and provided, further, that -------- ------- if such Pledgor shall be entitled to receive any money or property in excess of such Pledgor's expenses in connection with such surrender or modification as consideration or compensation for such surrender or modification, such money or property, shall be treated as having been received in connection with an Asset Sale and subject to the provisions of Section 4.13; (ix) subject to the provisions of the Security Documents, grant leases or subleases in respect of any Real Property in the event that the relevant Pledgor determines, in its reasonable business judgment, that such Real Property is no longer useful in the conduct of such Pledgor's business and that such lease or sublease would not be reasonably likely to have an adverse effect on the value of the property subject thereto; provided that -------- any such lease or sublease shall by its terms be subject and subordinate to the Lien, and otherwise comply with the provisions, of the Mortgage affecting such Real Property; or (x) in connection with any sale of Second Lien Collateral in accordance with the provisions of Section 7 of the Intercreditor Agreement, execute and deliver any and all instruments evidencing the release of the Lien of the Security Documents in the Second Lien Collateral described to be sold, transferred or disposed of in accordance with the provisions of the Intercreditor Agreement. (b) In the event that a Pledgor has sold, exchanged or otherwise disposed of or proposes to sell, exchange or otherwise dispose of any portion of the Collateral which under the provisions of this Section 12.3 may be sold, exchanged or otherwise disposed of by such Pledgor without any release or consent of the Trustee, and such Pledgor requests the Trustee to furnish a written disclaimer, release or quitclaim of any interest in such property under any of the Security Documents, the Trustee shall promptly execute such an instrument (in recordable form, where appropriate) upon delivery to the Trustee of (i) an Officers' Certificate by such Pledgor reciting the sale, exchange or other disposition made or proposed to be made and describing in reasonable detail the property affected thereby, and stating that such property is property which by the provisions of this Section 12.3 may be sold, exchanged or otherwise disposed of or dealt with by such Pledgor without any release or consent of the Trustee and (ii) an Opinion of Counsel stating that the sale, exchange or other disposition made or proposed to be made was duly taken by such Pledgor in conformity with a designated subsection of Section 12.3(a) and that the execution of such written disclaimer, release or quitclaim is appropriate under this Section 12.3. Any disposition of Collateral made in strict compliance with the provisions of this Section 12.3 shall be deemed not to impair the Security Interests in contravention of the provisions of this Indenture. -99- SECTION 12.4. Possession, Use and Release of Collateral. In addition ----------------------------------------- to their rights under Section 12.3, Issuer and Guarantors shall have the right to obtain a release of items of Collateral (other than Trust Monies (excluding Trust Monies constituting Net Available Proceeds from an Asset Sale or a sale of Principal Property), which Trust Monies are subject to release from the Lien of the Security Documents as provided under Article 13) (the "Released Interests") ------------------ subject to an Asset Sale and the Trustee shall release the Released Interests from the Lien of the Security Documents and reconvey the Released Interests to the appropriate Pledgor, upon compliance with the condition that the appropriate Pledgor deliver to the Trustee the following: (a) Release Notice. A notice (each, a "Release Notice") from the -------------- -------------- appropriate Pledgor requesting the release of the Released Interests (i) describing the proposed Released Interests, (ii) specifying the value of such Released Interests on a date within 60 days of such notice (the "Valuation Date"), (iii) stating that the purchase price to be received is -------------- at least equal to the fair market value of the Released Interests, (iv) confirming the sale of, or an agreement to sell, such Released Interests in a bona fide sale to a Person that is not an Affiliate of any of Issuer or Guarantors or, in the event that such sale is to a Person that is an Affiliate, confirming that such sale is made in compliance with the provisions of Section 4.12, (v) certifying that such Asset Sale complies with the terms and conditions of this Indenture with respect thereto, (vi) in the event that any assets other than cash or Temporary Cash Investments comprise a portion of the consideration received in such Asset Sale, specifically describing such assets and (vii) accompanied by a counterpart of the instruments proposed to give effect to the release fully executed and acknowledged (if applicable) by all parties thereto other than the Trustee; (b) Officers' Certificate. An Officers' Certificate of the appropriate --------------------- Pledgor stating that (i) such Asset Sale covers only the Released Interests and complies with the terms and conditions of this Indenture with respect to Asset Sales, (ii) the release of such Released Interests will not interfere with the Trustee's ability to realize the value of the remaining Collateral and will not impair the maintenance and operation of the remaining Collateral, (iii) all Net Available Proceeds from the sale of the Released Interests will be applied pursuant to the provisions of this Indenture in respect of Asset Sales, (iv) there is no Default in effect or continuing on the date thereof, the Valuation Date or the date of such Asset Sale, (v) the release of the Collateral will not result in a Default and (vi) all conditions precedent in this Indenture and in the Security Documents relating to the release in question have been complied with; (c) Delivery of Net Available Proceeds and Other Property. The Net ----------------------------------------------------- Available Proceeds and other property (other than cash or Temporary Cash Investments) received as consideration from the Asset Sale shall be delivered to the Trustee, together with such instruments of conveyance, assignment and transfer, if any, as may be necessary, in the Opinion of Counsel, to subject to the Lien of this Indenture and the Security Documents all the right, title and interest of the Pledgors in and to such property; (d) Opinions of Counsel. One or more Opinions of Counsel which, when ------------------- considered collectively, shall be delivered substantially to the effect (i) that any obligation included in the consideration for any Released Interest and to be received by the Trustee pursuant to -100- Section 12.4(c) is a valid and binding obligation enforceable in accordance with its terms, subject to such customary exceptions regarding equitable principles, creditors' rights generally and bankruptcy as shall be reasonably acceptable to the Trustee in its sole judgment, and is effectively pledged under the Security Documents, (ii) that any Lien granted by a purchaser to secure a purchase money obligation is a fully perfected Lien and such instrument granting such Lien is enforceable in accordance with its terms, (iii) either (x) that such instruments of conveyance, assignment and transfer as have been or are then delivered to the Trustee are sufficient to subject to the Lien of the Security Documents all the right, title and interest of Issuer in and to any property (other than cash or Temporary Cash Investments) and obligations that is included in the consideration for the Released Interest and is to be received by the Trustee pursuant to Section 12.4(c), or (y) that no instruments of conveyance, assignment or transfer are necessary for such purpose, (iv) that the Pledgor has corporate power to own all property included in the consideration for such release, and (v) that all conditions precedent herein and under any of the Security Documents relating to the release of such Collateral have been complied with; (e) Regarding Real Property. If the Collateral to be released is (i) ----------------------- only a portion of a discrete parcel of Real Property, in the case of Mortgaged Property located in the United States, an endorsement to the title insurance policy and in the case of Mortgaged Property located in a jurisdiction other than the United States or a state thereof or the District of Columbia, an Opinion of Counsel, in each case, confirming that after such release, the Lien of the applicable Mortgage continues unimpaired as a first priority perfected Lien upon the remaining Mortgaged Property subject only to those Liens permitted by the applicable Mortgage; and (ii) Mortgaged Property having a fair value in excess of $1,000,000, Issuer shall have delivered to the Trustee a Survey depicting the Real Property to be released; and (f) Other Documents. All documentation required by the TIA, if any, --------------- prior to the release of Collateral by the Trustee and, in the event there is to be a substitution of property for the Collateral subject to the Asset Sale, all documentation necessary to subject such new Collateral to the Lien of the Security Documents. In connection with any release, Issuer shall (i) execute, deliver and record or file and obtain such instruments as the Trustee may reasonably require, including, without limitation, amendments to the Security Documents, and (ii) deliver to the Trustee such evidence of the satisfaction of the applicable provisions of this Indenture and the Security Documents as the Trustee may reasonably require. Notwithstanding the foregoing provisions of this Section 12.4, Issuer may obtain a release of any Net Available Proceeds required to purchase Notes pursuant to Section 4.13 or 4.15 by directing the Trustee in writing to cause to be applied such Net Available Proceeds to such purchase in accordance with Section 4.13 or Section 4.15, as applicable, and Article 13. In addition, in the event that TNCLP becomes a Wholly Owned Subsidiary, the Trustee shall, concurrently with compliance with Section 4.5, release the limited partnership interests of TNCLP constituting Collateral from the Lien of the Indenture and the Security Documents. -101- In case an Event of Default shall have occurred and be continuing, the Pledgors, while in possession of the Collateral (other than cash, Temporary Cash Investments, securities and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder or under any Security Document or with the trustee, mortgagee or other holder of a Prior Lien permitted by the Security Documents), may do any of the things enumerated in this Section 12.4 only if the Trustee, in its discretion, or the Holders of a majority in aggregate principal amount of the Notes outstanding, by appropriate action of such Holders, shall consent to such action, in which event any certificate filed under this Section 12.4 shall omit the statement to the effect that no Event of Default has occurred and is continuing. This paragraph shall not apply, however, during the continuance of an Event of Default of the type specified in Section 6.1(i) or (ii). All cash or Temporary Cash Investments received by the Trustee pursuant to this Section 12.4 shall be held by the Trustee as Trust Monies subject to application as provided in this Section 12.4 or in Article 13, as appropriate. All purchase money and other obligations received by the Trustee pursuant to this Section 12.4 shall be held by the Trustee as Collateral. Any releases of Collateral made in strict compliance with the provisions of this Section 12.4 shall be deemed not to impair the Security Interests created by the Security Documents in favor of the Trustee, in contravention of the provisions of this Indenture. SECTION 12.5. Eminent Domain and Other Governmental Takings. Should --------------------------------------------- any of the Collateral be subject to a Taking, the Trustee shall release the property so taken or purchased, but only upon receipt by the Trustee of the following: (a) an Officers' Certificate of Issuer stating that such property has been Taken and the amount of the award or payment therefor, that all conditions precedent herein provided for relating to such release have been complied with; and (1) in the case of any Taking by eminent domain, that the award for the property so taken has become final or that the board of directors of the applicable Pledgor has determined that an appeal from such award is not advisable in the interests of Issuer or any other Pledgor, as applicable, or the Holders of the Notes; (2) in the case of any such sale, that the payment with respect to the property so sold is not less than the amount to which the applicable Pledgor is legally entitled under the terms of such right to purchase or designate a purchaser, or under the order or orders directing such sale, as the case may be; (3) in case, pursuant to Section 12.5(b), the award or payment for such property (net of the costs of obtaining such award or payment), or a specified portion thereof, shall be certified to have been deposited with the trustee, mortgagee or other holder of a Prior Lien, that the property to be released, or a specified portion thereof, is or immediately before such Taking was subject to such Prior Lien, and that such deposit is required by such Prior Lien; and -102- (b) the award or payment for such property (net of the costs of obtaining such award or payment) shall be exchanged for Temporary Cash Investments and deposited with the Trustee, to be held as Trust Monies subject to the disposition thereof pursuant to Section 13.3; provided that, -------- in lieu of all or any part of such award or payment, the applicable Pledgor shall have the right to deliver to the Trustee a certificate of the trustee, mortgagee or other holder of a Prior Lien on all or any part of the property to be released, stating that such award or payment (net of the costs of obtaining such award or payment), or a specified portion thereof, has been deposited with such trustee, mortgagee or other holder pursuant to the requirements of such Prior Lien, in which case the balance of the award, if any, shall be delivered to the Trustee; and (c) an Opinion of Counsel substantially to the effect: (1) that such property has been Taken by eminent domain, or has been sold pursuant to the exercise of a right vested in a governmental authority to purchase, or to designate a purchaser or order a sale of, such property; (2) that the instrument or the instruments and the award or payment of such Taking which have been or are therewith delivered to and deposited with the Trustee conform to the requirements of this Indenture and the applicable Security Documents and that, upon the basis of such application, the Trustee is permitted by the terms hereof and of the Security Documents to execute and deliver the release requested, and that all conditions precedent herein and in the Security Documents provided for relating to such release have been complied with. In any proceedings for the Taking of any part of the Collateral, the Trustee may be represented by counsel who may be counsel for Issuer. All cash or Temporary Cash Investments received by the Trustee pursuant to this Section 12.5 shall be held by the Trustee as Trust Monies under Article 13 subject to application as therein provided. All purchase money and other obligations received by the Trustee pursuant to this Section 12.5 shall be held by the Trustee as Collateral subject to application as provided in Section 12.10. SECTION 12.6. Trust Indenture Act Requirements. The release of any -------------------------------- Collateral or Second Lien Collateral, whether pursuant to Article 12 or 13, from the Lien of any of the Security Documents or the release of, in whole or in part, the Liens created by any of the Security Documents will not be deemed to impair the Security Interests in contravention of the provisions hereof if and to the extent the Collateral or Second Lien Collateral or Liens are released pursuant to the applicable Security Documents and pursuant to the terms hereof. The Trustee and each of the Holders of the Notes acknowledge that a release of Collateral or Second Lien Collateral or Liens strictly in accordance with the terms of the Security Documents and the terms hereof will not be deemed for any purpose to be an impairment of the Security Interests in contravention of the terms of this Indenture. To the extent applicable, without limitation, the Pledgors and each obligor on the Notes shall cause TIA (S) 314(d) relating to the release of property or securities from the Liens hereof and of the Security -103- Documents to be complied with. Any certificate or opinion required by TIA (S) 314(d) may be made by an Officer of the appropriate Pledgor, except in cases in which TIA (S) 314(d) requires that such certificate or opinion be made by an independent Person. SECTION 12.7. Suits To Protect the Collateral. Subject to the ------------------------------- provisions of the Security Documents, the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral or Second Lien Collateral by any acts which may be unlawful or in violation of any of the Security Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Trustee and the Holders of the Notes in the Collateral or Second Lien Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Security Interests or be prejudicial to the interests of the Holders of the Notes or the Trustee). SECTION 12.8. Purchaser Protected. In no event shall any purchaser in ------------------- good faith of any property purported to be released hereunder be bound to ascertain the authority of the Trustee to execute the release or to inquire as to the satisfaction of any conditions required by the provisions hereof for the exercise of such authority or to see to the application of any consideration given by such purchaser or other transferee; nor shall any purchaser or other transferee of any property or rights permitted by this Article 12 to be sold be under obligation to ascertain or inquire into the authority of Issuer or any other Pledgor, as applicable, to make any such sale or other transfer. SECTION 12.9. Powers Exercisable by Receiver or Trustee. In case the ----------------------------------------- Collateral or Second Lien Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article 12 upon Issuer or any other Pledgor, as applicable, with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of Issuer or any other Pledgor, as applicable, or of any officer or officers thereof required by the provisions of this Article 12. SECTION 12.10. Disposition of Obligations Received. All purchase money ----------------------------------- or other obligations received by the Trustee under this Article 12 shall be held by the Trustee as a part of the Collateral. Upon payment in cash or Temporary Cash Investments by or on behalf of Issuer or the obligor thereof to the Trustee of the entire unpaid principal amount of any such obligation, the Trustee shall promptly release and transfer such obligation and any mortgage securing the same upon receipt of any documentation that the Trustee may reasonably require. Any cash or Temporary Cash Investments received by the Trustee in respect of the principal of any such obligations shall be held by the Trustee as Trust Monies under Article 13 subject to application as therein provided. Unless and until the Notes are accelerated, pursuant to Section 6.2, all interest and other income on any such obligations, when received by the Trustee, shall be paid to Issuer from time to time in accordance with Section 13.8. If the Notes have been accelerated pursuant to Section 6.2, any such interest or other income not theretofore paid, when collected by the Trustee, shall be applied by the Trustee in accordance with Section 6.10 of this Indenture. -104- SECTION 12.11. Determinations Relating to Collateral. In the event (i) ------------------------------------- the Trustee shall receive any written request from Issuer or any other Pledgor under any Security Document for consent or approval with respect to any matter or thing relating to any Collateral or Second Lien Collateral or Issuer's or any other Pledgor's obligations with respect thereto or (ii) there shall be required from the Trustee under the provisions of any Security Document any performance or the delivery of any instrument or (iii) a Responsible Officer of the Trustee shall become aware of any nonperformance by Issuer or any other Pledgor of any covenant or any breach of any representation or warranty of the Issuer or any other Pledgor set forth in any Security Document, and, in the case of clause (i), (ii) or (iii) above, the Trustee's response or action is not otherwise specifically contemplated hereunder then, in each such event, the Trustee shall, within seven Business Days, advise the Holders of the Notes, in writing, of the matter or thing as to which consent has been requested or the performance or instrument required to be delivered or the nonperformance or breach of which the Trustee has become aware. The Holders of not less than a majority in aggregate principal amount of the outstanding Notes pursuant to Section 6.5 shall have the exclusive authority to direct the Trustee's response to any of the circumstances contemplated in clauses (i), (ii) and (iii) above. In the event the Trustee shall be required to respond to any of the circumstances contemplated in this Section 12.11, the Trustee shall not be required so to respond unless it shall have received written authority by not less than a majority in aggregate principal amount of the outstanding Notes; provided that the Trustee shall be -------- entitled to hire experts, consultants, agents and attorneys to advise the Trustee on the manner in which the Trustee should respond to such request or render any requested performance or response to such nonperformance or breach (the expenses of which shall be reimbursed to the Trustee pursuant to Section 7.7). The Trustee shall be fully protected case may be, should respond to such request or render any requested performance or response to such nonperformance or expert, consultant, agent or attorney or agreed to by Notes pursuant to Section 6.5. SECTION 12.12. Renewal and Refunding. Nothing in this Article 12 shall --------------------- prevent (i) the renewal or extension, without impairment of the Security Interests, at the same or at a lower or higher rate of interest, of any of the obligations or Indebtedness of any Person included in the Collateral or Second Lien Collateral or (ii) the issue in substitution for any such obligations or Indebtedness of other obligations or Indebtedness of such Person for equivalent amounts and of substantially equal or superior rank as to security, if any; provided that every such obligation or Indebtedness as so renewed or extended -------- shall continue to be subject to the Lien of the Security Documents and every substituted obligation of Indebtedness and the evidence thereof shall be deposited and pledged with the Trustee. SECTION 12.13. Release upon Termination of Issuer's Obligations. In ------------------------------------------------ the event that Issuer delivers an Officers' Certificate certifying that its obligations under this Indenture have been satisfied and discharged by complying with the provisions of Article 8, the Trustee shall (i) execute and deliver, in each case without recourse, representation or warranty such releases, termination statements and other instruments (in recordable form, where appropriate) as Issuer or any other Pledgor, as applicable, may reasonably request evidencing the termination of the Security Interests created by the Security Documents and (ii) not be deemed to hold the Security Interests for the benefit of the Trustee and the Holders of the Notes. -105- SECTION 12.14. Certain Actions by Trustee. Any action taken by -------------------------- the Trustee pursuant to this Article 12 or Article 13 in respect of the release, substitution or use of Second Lien Collateral shall be taken by the Trustee as its interest in such Second Lien Collateral may appear, and no provision of this Article 12 or Article 13 is intended to, or shall, excuse compliance with any provision of the Security Documents that create rights in favor of other secured creditors. ARTICLE 13 APPLICATION OF TRUST MONIES SECTION 13.1. Trust Monies. All Trust Monies shall be held by ------------ or delivered to the Trustee, for its benefit and the benefit of the Holders of Notes as a part of the Collateral in accordance with the provisions of this Indenture and the applicable Security Documents and, upon any entry upon or sale or other disposition of the Collateral or Second Lien Collateral or any part thereof pursuant to any of the Security Documents, said Trust Monies shall be applied in accordance with Section 6.10; but, prior to any such entry, sale or other disposition, all or any part of the Trust Monies may be withdrawn, and shall be released, paid or applied by the Trustee, from time to time as provided in Sections 13.2 through 13.6, inclusive. On the Issue Date there shall be established and, at all times hereafter until this Indenture shall have terminated, there shall be maintained with the Trustee an account which shall be entitled the "Collateral Account" (the "Collateral Account"). The Collateral Account shall be established and ------------------ maintained by the Trustee at its corporate trust office located in New York. All Trust Monies that are received by the Trustee shall be held, applied and/or disbursed by the Trustee in accordance with the provisions of this Article 13. SECTION 13.2. Retirement of Notes. Subject to the limitations ------------------- set forth in Section 4.13 and Section 4.15 and paragraph 5 of the Notes, the Trustee shall apply Trust Monies from time to time to the payment of the principal amount of and interest on any Notes, when due or to the redemption thereof or the purchase thereof upon tender pursuant to a Net Proceeds Offer or Section 4.8 or Section 4.15, as Issuer shall request in writing, upon receipt by the Trustee of the following: (a) Board Resolutions directing the application pursuant to this Section 13.2 of a specified amount of Trust Monies and, in case any such moneys are to be applied to the payment of Notes, designating the Notes so to be paid and, in case any such moneys are to be applied to the purchase of Notes, prescribing the method of purchase, the price or prices to be paid and the maximum principal amount of Notes to be purchased and any other provisions of this Indenture governing such purchase; (b) U.S. Legal Tender in the maximum amount of the accrued interest, if any, required to be paid in connection with any such purchase, which cash shall be held by the Trustee in trust for such purpose; (c) an Officers' Certificate, dated not more than five Business Days prior to the date of the relevant application stating -106- (i) that no Default or Event of Default exists unless such Default or Event of Default would be cured thereby; and (ii) that all conditions precedent and covenants herein provided for relating to such application of Trust Monies have been complied with; and (d) an Opinion of Counsel stating that the documents and the cash or Temporary Cash Investments, if any, which have been or are therewith delivered to and deposited with the Trustee conform to the requirements of this Indenture and that all conditions precedent herein provided for relating to such application of Trust Monies have been complied with. Upon compliance with the foregoing provisions of this Section, the Trustee shall apply Trust Monies as directed and specified by such Board Resolution, up to, but not exceeding, the principal amount of the Notes so paid or purchased, using the U.S. Legal Tender deposited pursuant to paragraph (b) of this Section 13.2, to the extent necessary, to pay any accrued interest required in connection with such purchase. A Board Resolution expressed to be irrevocable directing the application of Trust Monies under this Section 13.2 to the payment of the principal of particular Notes shall for all purposes of this Indenture be deemed the equivalent of the deposit of money with the Trustee in trust for such purpose. Such Trust Monies and any U.S. Legal Tender deposited with the Trustee pursuant to paragraph (b) of this Section 13.2 for the payment of accrued interest shall not, after compliance with the foregoing provisions of this Section, be deemed to be part of the Collateral or Trust Monies. SECTION 13.3. Withdrawals of Net Insurance Proceeds. To the ------------------------------------- extent that any Trust Monies consist of either (a) the proceeds of insurance relating to the Destruction of any part of the Collateral or (b) any award or payment relating to the Taking of any of the Collateral, such Trust Monies may, subject to the provisions of Sections 4.13 and 4.15, be withdrawn by Issuer or any Pledgor, as applicable, and shall be paid by the Trustee upon a request by Issuer or the applicable Pledgor by the proper officer or officers of Issuer or the applicable Pledgor to reimburse Issuer or the applicable Pledgor for expenditures made, or to pay costs incurred, by Issuer or the applicable Pledgor to repair, rebuild or replace (including, in the case of any Destruction or Taking of Collateral not constituting a Principal Property, by making a Related Investment and, in the case of any Destruction or Taking of any Principal Property, by acquiring a Replacement Principal Property) the Collateral Destroyed or Taken, upon receipt by the Trustee of the following: (a) an Officers' Certificate of Issuer or the applicable Pledgor dated not more than 30 days prior to the date of the application for the withdrawal and payment of such Trust Monies and (if required by the TIA) signed also, in the case of the following clauses (i), (iv) and (vi), by an Independent Financial Advisor, setting forth: (i) expenditures have been made, or costs incurred, by Issuer or the applicable Pledgor in a specified amount for the purpose of making certain repairs, rebuildings and replacements of the Collateral, which shall be briefly described, and stating the fair market value thereof to Issuer or the applicable Guarantor at the date -107- of the acquisition thereof by Issuer or the applicable Pledgor, except that it shall not be necessary under this clause (i) to state the fair market value of any such repairs, rebuildings or replacements that are separately described pursuant to clause (v) of this paragraph (a) and whose fair market value is stated in the Independent Financial Advisor's certificate under paragraph (b) of this Section 13.3; (ii) that no part of such expenditures in any previous or then pending application, has been or is being made the basis for the withdrawal of any Trust Monies pursuant to this Section 13.3; (iii) that there is no outstanding Indebtedness, other than costs for which payment is being requested, known to Issuer or the applicable Pledgor, after due inquiry, for the purchase price or construction of such repairs, rebuildings or replacements, or for labor, wages, materials or supplies in connection with the making thereof, which, if unpaid, might become the basis of a vendor's, mechanics', laborers', materialmen's, statutory or other similar Lien upon any of such repairs, rebuildings or replacement, which Lien might, in the opinion of the signers of such certificate, materially impair the security afforded by such repairs, rebuildings or replacement; (iv) that the property to be repaired, rebuilt or replaced is necessary or desirable in the conduct of either Issuer's or the applicable Pledgor's business; (v) whether any part of such repairs, rebuildings or replacements within six months before the date of acquisition thereof by Issuer or the applicable Pledgor, has been used or operated by Persons other than Issuer or the applicable Pledgor in a business similar to that in which such property has been or is to be used or operated by Issuer or the applicable Pledgor, and whether the fair market value to Issuer or the applicable Pledgor, at the date of such acquisition, of such part of such repairs, rebuildings or replacement is at least $25,000 or 1% of the aggregate principal amount of the outstanding Notes; and, if all of such facts are present, such part of said repairs, rebuildings or replacements shall be separately described, and it shall be stated that an Independent Financial Advisor's certificate as to the fair market value to Issuer or the applicable Guarantor of such separately described repairs, rebuildings or replacements will be furnished under paragraph (b) of this Section 13.3; (vi) that no Default or Event of Default shall have occurred and be continuing; and (vii) that all conditions precedent herein provided for relating to such withdrawal and payment have been complied with. (b) In case any part of such repairs, rebuildings or replacements is separately described pursuant to the foregoing clause (v) of paragraph (a) of this Section 13.3, a certificate of an Independent Financial Advisor (if required by the TIA) stating the fair market value to -108- Issuer or the applicable Pledgor, in such Independent Financial Advisor's opinion, of such separately described repairs, rebuildings or replacements at the date of the acquisition thereof by Issuer or the applicable Pledgor. (c) (i) In case any part of such repairs, rebuildings or replacements constitutes Real Property: (1) with respect to any such repairs, rebuildings or replacements that are not encompassed within or are not erected upon Mortgaged Property, an instrument or instruments in recordable form sufficient for the Lien of this Indenture and any Mortgage to cover such repairs, rebuildings or replacements which, if such repairs, rebuildings or replacements include leasehold or easement interests, shall include normal and customary provisions with respect thereto and evidence of the filing of all such documents as may be necessary to perfect such Liens; (2) a title Opinion of Counsel in form and substance acceptable to the Trustee, substantially to the effect that the Lien of this Indenture and any Mortgage constitutes a direct and valid and perfected mortgage Lien on such repairs, rebuildings or replacements (subject to no Prior Liens other than Prior Liens which were permitted with respect to the Collateral repaired, rebuilt or replaced); (3) in the event such repairs, rebuildings or replacements have a fair market value in excess of $250,000, a Survey with respect thereto; and (4) evidence of payment or a closing statement indicating payments to be made by Issuer or the applicable Pledgor of all recording charges, transfer taxes and other costs and expenses, including reasonable legal fees and disbursements of counsel for the Trustee (and any foreign counsel), that may be incurred to validly and effectively subject such repairs, rebuildings or replacements to the Lien of any applicable Security Document and to perfect such Lien; and (ii) in case any part of such repairs, rebuildings or replacements constitutes personal property interests: (1) an instrument in recordable form sufficient for the Lien of any applicable Security Document to cover such repairs, rebuildings or replacements; and (2) evidence of payment or a closing statement indicating payments to be made by Issuer or the applicable Guarantor of all filing fees, recording charges, transfer taxes and other costs and expenses, including reasonable legal fees and disbursements of counsel for the Trustee (and any foreign counsel), that may be incurred to validly and effectively subject such repairs, rebuildings or replacements to the Lien of any Security Document and to perfect such Liens. -109- (d) An Opinion of Counsel to the effect: (i) that the instruments that have been or are therewith delivered to the Trustee conform in all material respects to the requirements of this Indenture and any other applicable Security Document, and that, upon the basis of such request of Issuer or the applicable Guarantor and the accompanying documents specified in this Section 13.3, all conditions precedent herein provided for relating to such withdrawal and payment have been complied with, and the Trust Monies whose withdrawal is then requested may be lawfully paid over under this Section 13.3; and (ii) that all of Issuer's or the applicable Guarantor's right, title and interest in and to said repairs, rebuildings or replacements, or combination thereof, are then subject to the Lien of any of the Security Documents. Upon compliance with the foregoing provisions of this Section 13.3, the Trustee shall pay on the written request of Issuer an amount of Trust Monies of the character aforesaid equal to the amount of the expenditures or costs stated in the Officers' Certificate required by clause (i) of paragraph (a) of this Section 13.3, or the fair market value to the Issuer of such repairs, rebuildings and replacements stated in such Officers' Certificate (and in such Independent Financial Advisor's certificate, if required by paragraph (b) of this Section 13.3), whichever is less. SECTION 13.4. Withdrawal of Trust Monies for Reinvestment. To the ------------------------------------------- extent that any Trust Monies consist of Net Available Proceeds received by the Trustee pursuant to Section 4.13 or 4.15 and Issuer or any Guarantor, as applicable, intends to reinvest such Net Available Proceeds in a manner that would constitute a Related Investment, an Alternate Investment or an acquisition of a Replacement Principal Property (a "Principal Property Acquisition"), such ------------------------------ Trust Monies may be withdrawn by Issuer or any Guarantor, as applicable, and shall be paid by the Trustee upon a written request by Issuer by the proper Officer or Officers of Issuer or any Guarantor, as applicable, to reimburse Issuer or any Guarantor, as applicable, for expenditures made or to pay costs incurred by Issuer or any Guarantor, as applicable, in connection with such Related Investment, Alternate Investment or Principal Property Acquisition, upon receipt by the Trustee of the following: (a) An Officers' Certificate, dated not more than 30 days prior to the date of the application for the withdrawal and payment of such Trust Monies, stating in substance as follows: (i) that the Trust Monies to be released constitute Net Available Proceeds from an Asset Sale; (ii) setting forth with particularity the investment or acquisition to be made with such Trust Monies; (iii) that the release of the Trust Monies complies with all applicable terms of this Indenture; -110- (iv) that there is no Default or Event of Default (both before and after giving effect to the Related Investment, the Alternate Investment or Principal Property Acquisition) continuing; and (v) that all conditions precedent herein provided for relating to the release of the Trust Monies in question have been provided. (b) If the Permitted Investment to be made is an investment in Real Property, Issuer shall also deliver to the Trustee: (i) an instrument or instruments in recordable form sufficient for the Lien of this Indenture and any Mortgage to cover such Real Property which, if the Real Property is a leasehold or easement interest, shall include normal and customary provisions with respect thereto and evidence of the filing of all such financing statements and other instruments as may be necessary to perfect such Liens; (ii) a title Opinion of Counsel in form and substance acceptable to the Trustee, substantially to the effect that the Lien of this Indenture and any Mortgage constitutes a direct and valid and perfected mortgage Lien on such Real Property (subject to no Prior Liens other than Prior Liens which were permitted with respect to the Collateral which was the subject of the Asset Sale); (iii) in the event the fair market value of the Real Property is in excess of $250,000, a Survey with respect thereto; and (iv) evidence of payment or a closing statement indicating payments to be made by Issuer or the appropriate Pledgor of all recording charges, transfer taxes and other costs and expenses, including reasonable legal fees and disbursements of one counsel for the Trustee (and any foreign counsel), that may be incurred to validly and effectively subject the Real Property to the Lien of any applicable Security Document and to perfect such Lien. (c) If the Permitted Investment is a personal property interest, the Issuer or the appropriate Pledgor shall deliver to the Trustee: (i) an instrument in recordable form, if necessary, sufficient for the Lien of any applicable Security Document to cover such personal property interest; and (ii) evidence of payment or a closing statement indicating payments to be made by the Issuer or the appropriate Pledgor of all filing fees, recording charges, transfer taxes and other costs and expenses, including reasonable legal fees and disbursements of one counsel for the Trustee (and any foreign counsel), that may be incurred to validly and effectively subject the Related Investment or Principal Property Acquisition to the Lien of any Security Document and to perfect such Lien. -111- (d) An Opinion of Counsel stating that (i) all of Issuer's or the applicable Guarantor's right, title and interest in and to such personal property are then subject to the Lien of the Security Documents and (ii) the documents that have been or are therewith delivered to the Trustee conform to the requirements of this Indenture and that all conditions precedent herein and in the Security Documents relating to such application of Trust Monies have been complied with. SECTION 13.5. Powers Exercisable Notwithstanding Event of ------------------------------------------- Default. In case an Event of Default shall have occurred and shall be ------- continuing, Issuer or any Pledgor, as applicable, while in possession of Collateral (other than cash, Temporary Cash Investments, securities and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder or under the Security Documents or with the trustee, mortgagee or other holder of a Prior Lien), may do any of the things enumerated in Sections 13.2, 13.3 and 13.4 if the Holders of a majority in aggregate principal amount of the Notes outstanding, by appropriate action of such Holders, shall consent to such action, in which event any certificate filed under any of such Sections shall omit the statement to the effect that no Event of Default has occurred and is continuing. This Section 13.5 shall not apply, however, during the continuance of an Event of Default of the type specified in Section 6.1(i) or (ii). SECTION 13.6. Powers Exercisable by Trustee or Receiver. In case ----------------------------------------- the Collateral (other than any cash, Temporary Cash Investments, securities and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder or under the Security Documents or with the trustee, mortgagee or other holder of a Prior Lien) shall be in the possession of a receiver or trustee lawfully appointed, the powers hereinbefore in this Article 13 conferred upon Issuer and any Guarantor, as applicable, with respect to the withdrawal or application of Trust Monies may be exercised by such receiver or trustee, in which case a certificate signed by such receiver or trustee shall be deemed the equivalent of any Officers' Certificate required by this Article 13. If the Trustee shall be in possession of any of the Collateral hereunder or under any of the Security Documents, such powers may be exercised by the Trustee, in its discretion. SECTION 13.7. Disposition of Notes Retired. All Notes received ---------------------------- by the Trustee and for whose purchase Trust Monies are applied under this Article 13, if not otherwise canceled, shall be promptly delivered to the Trustee for cancellation and destruction unless the Trustee shall be otherwise directed in writing by Issuer. Upon destruction of any Notes, the Trustee shall issue a certificate of destruction to Issuer. SECTION 13.8. Investment of Trust Monies. All or any part of any -------------------------- Trust Monies held by the Trustee hereunder (except such as may be held for the account of any particular Notes) shall from time to time be invested or reinvested by the Trustee in any Temporary Cash Investments pursuant to the written direction of Issuer which shall specify the Temporary Cash Investments in which such Trust Monies shall be invested. Unless an Event of Default occurs and is continuing, any interest on such Temporary Cash Investments (in excess of any accrued interest paid at the time of purchase) which may be received by the Trustee shall be forthwith paid to Issuer. Such Temporary Cash Investments shall be held by the Trustee as a part of the Collateral, subject to the same provisions hereof as the cash used by it to purchase such Temporary Cash Investments. -112- The Trustee shall not be liable or responsible for any loss resulting from such investments or sales except only for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct in complying with this Section 13.8. IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. TERRA CAPITAL, INC. By: /s/ Wynn S. Stevenson ------------------------------------- Name: Wynn S. Stevenson Title: Vice President GUARANTORS: BEAUMONT AMMONIA INC. BEAUMONT HOLDINGS CORPORATION BMC HOLDINGS INC. PORT NEAL CORPORATION TERRA CAPITAL HOLDINGS, INC. TERRA INDUSTRIES INC. TERRA INTERNATIONAL, INC. TERRA INTERNATIONAL (OKLAHOMA) INC. TERRA METHANOL CORPORATION TERRA NITROGEN CORPORATION TERRA REAL ESTATE CORP. TERRA (U.K.) HOLDINGS INC. By: /s/ Mark A. Kalafut ------------------------------------- Name: Mark A. Kalafut Title: Vice President S-1 U.S. BANK NATIONAL ASSOCIATION, as Trustee By: /s/ Richard H. Prokosch -------------------------------- Name: Richard H. Prokosch Title: Vice President S-2 EXHIBIT A --------- FACE OF NOTE No. CUSIP No. TERRA CAPITAL, INC. 12 7/8% SENIOR SECURED NOTES DUE 2008 TERRA CAPITAL, INC., a Delaware corporation (the "Company"), ------- promises to pay to Cede & Co., or registered assigns, the principal sum of Dollars on October 15, 2008. Interest Payment Dates: April 15 and October 15. Record Dates: April 1 and October 1. Additional provisions of this Note are set forth on the reverse side of this Note. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by a duly authorized officer. TERRA CAPITAL, INC. By: ________________________________ Name: Title: Dated: A-1 TRUSTEE'S CERTIFICATE OF AUTHENTICATION U.S. Bank National Association, as Trustee, certifies that this is one of the Notes referred to in the within-mentioned Indenture. By: U.S. BANK NATIONAL ASSOCIATION, as Trustee ____________________________________ Authorized Signatory Date of Authentication: A-2 REVERSE OF NOTE 12 7/8% SENIOR SECURED NOTES DUE 2008 1. Interest -------- TERRA CAPITAL, INC., a Delaware corporation (such entity, and its successors and assigns under the Indenture, the "Company"), promises to pay ------- interest on the principal amount of this Note at the rate per annum shown above. The Company will pay interest semiannually on April 15 and October 15 of each year, commencing April 15, 2002. Interest on the Notes will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from October 10, 2001. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at 1% per annum in excess of the rate borne by the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment ----------------- The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered holders of Notes at the close of business on the record date immediately preceding the interest payment date even if Notes are canceled on registration of transfer or registration of exchange (including pursuant to an Exchange Offer (as defined in the Registration Rights Agreement)) after the record date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company ----------------- may pay principal and interest by its check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder's registered address. 3. Paying Agent and Registrar -------------------------- Initially, U.S. Bank National Association, a national banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company ------- may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company may act as Paying Agent, Registrar, co-Registrar or transfer agent. 4. Indenture --------- The Company issued the Notes under an Indenture dated as of October 10, 2001 (the "Indenture"), among the Company, the Guarantors party --------- thereto and the Trustee. This Note is one of a duly authorized issue of Initial Notes of the Company designated as its 12 7/8% Senior Secured Notes due 2008 (the "Initial Notes"). The Notes include the Initial Notes and the Exchange ------------- Notes (as defined in the Indenture) issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes and the Exchange Notes are treated as a single class of Notes under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the A-3 Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S) 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms --- defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of those terms. Any conflict between this Note and the Indenture will be governed by the Indenture. The Notes are senior secured obligations of the Company limited to $200,000,000 aggregate principal amount (subject to Section 2.7 of the Indenture). The Indenture imposes certain limitations on the ability of Parent and its Restricted Subsidiaries to incur Indebtedness, create Liens, pay dividends on or repurchase Capital Stock of Parent and its Affiliates, make Restrictive Payments, make investments, sell Assets or Principal Properties, enter into transactions with Affiliates, limit dividends or other distribution from restricted Subsidiaries, impair Security Interest, enter into Sale and Leaseback Transactions, engage in other businesses or merge, consolidate or transfer all or substantially all of the assets of Parent and its Restricted Subsidiaries. To guarantee the due and punctual payment of the principal, premium and interest, if any, on the Notes and all other amounts payable by the Company under the Indenture and the Notes when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Guarantors have unconditionally guaranteed the obligations of the Company under the Indenture and the Notes on a senior secured basis pursuant to the terms of the Indenture. 5. Optional Redemption ------------------- The Notes may be redeemed at the Company's option, in whole or in part, at any time or from time to time, at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus the Make Whole Amount, if any (as defined in the Indenture) (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the date fixed for redemption). 6. Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at his registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Notes (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Notes (or such portions thereof) called for redemption. If a notice or communication is sent in the manner provided in the Indenture, it is duly given, whether or not the addressee receives it. Failure to send a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. A-4 7. Change of Control ----------------- Upon a Change of Control, each Holder of Notes will have the right to require the Company to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes of such Holder at a purchase price in cash equal to 101% of the principal amount of the Notes to be purchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the date fixed for redemption) as provided in, and subject to the terms of, the Indenture. 8. Registration Rights Agreement ----------------------------- The Holder of this Note is entitled to the benefits of a Registration Rights Agreement, dated as of October 3, 2001, among the Company, the Guarantors and the Initial Purchasers named therein (as such may be amended from time to time, the "Registration Rights Agreement"). Capitalized terms used in this ----------------------------- subsection but not defined herein have the meanings assigned to them in the Registration Rights Agreement. If (i) within 60 days after the Issue Date, neither the Exchange Offer Registration Statement nor the Shelf Registration Statement has been filed with the Commission; (ii) within 120 days after the Issue Date, the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, has not been declared effective; (iii) within 150 days after the Issue Date, the Exchange Offer has not been consummated; or (iv) after either the Exchange Offer Registration Statement or the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or usable (subject, in the case of the Shelf Registration Statement, to the exceptions set forth in the Registration Rights Agreement) in connection with resales of Initial Notes or Exchange Notes in accordance with and during the periods specified in Sections 2 and 3 of the Registration Rights Agreement (each such event referred to in clauses (i) through (iv), a "Registration Default"), -------------------- liquidated damages ("Liquidated Damages") will accrue on the Initial Notes and ------------------ the Exchange Notes from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. Liquidated Damages will accrue at a rate equal to 0.25% per annum of the aggregate principal amount of the Notes during the 90-day period immediately following the occurrence of any Registration Default and shall increase by 0.25% per annum for each subsequent 90-day period during which such Registration Default continues, but in no event shall such Liquidated Damages exceed 1.00% per annum. 9. Denominations; Transfer; Exchange --------------------------------- The Notes are in registered form, without coupons, and in denominations of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture, including any transfer tax or other similar governmental charge payable in connection therewith. The Registrar need not register the transfer of or exchange any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes for a period of 15 days before a selection of Notes to be redeemed or 15 days before an interest payment date. A-5 10. Persons Deemed Owners --------------------- The registered Holder of this Note may be treated as the owner of it for all purposes. 11. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Notes and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be. 13. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Notes may be amended with the consent of the Holders of at least a majority in principal amount outstanding of the Notes and (ii) any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority in principal amount outstanding of the Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company, the Guarantors and the Trustee may amend the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to comply with Article 5 of the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes, to add Guarantees with respect to the Notes, to release Guarantors when permitted by the Indenture and the Security Documents, to add any additional asset as Collateral, to add additional covenants or surrender rights and powers conferred on the Company, to make any change that does not adversely affect the rights of any Holder or to comply with any request of the SEC in connection with qualifying the Indenture under the TIA. 14. Defaults and Remedies --------------------- If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding may declare all the Notes to be due and payable. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes being due and payable immediately upon the occurrence of such Events of Default. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless it is offered reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of principal or interest) if and A-6 so long as a committee of its trust officers determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or any of its Affiliates and may otherwise deal with the Company or any of its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others -------------------------- No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any Guarantor in the Indenture, or in any of the Notes or Guarantees or because of the creation of any Indebtedness represented hereby and thereby, shall be had against any incorporator, stockholder, officer, director, employee, agent or controlling person of the Company or any of its Subsidiaries. Each Holder, by accepting a Note, waives and releases all such liability. 17. Guarantees ---------- This Note will be entitled to the benefits of certain Guarantees, if any, made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders. 18. Security Documents ------------------ In order to secure the due and punctual payment of the principal of and interest on the Securities and all other amounts payable by the Issuer and the Guarantors under the Indenture and the Notes when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Pledgors have granted Liens on the Collateral to the Trustee for the benefit of the Trustee and the Holders of Notes pursuant to the Indenture and the Security Documents. Each Holder, by accepting a Note, agrees to all of the terms and provisions of the Security Documents as the same may be amended from time to time pursuant to the respective provisions thereof and the Indenture. The Trustee and each Holder acknowledge that a release of any of the Collateral or any Lien strictly in accordance with the terms and provisions of any of the Security Documents and the terms and provisions of the Indenture will not be deemed for any purpose to be an impairment of the security under the Indenture. A-7 19. Governing Law ------------- The Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflict of laws to the extent that the application of the laws of another jurisdiction would be required thereby. 20. Authentication -------------- This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 21. Abbreviations ------------- Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with rights of survivorship and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors Act). 22. CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture. Requests may be made as follows: TERRA CAPITAL, INC. Terra Centre 600 Fourth Street P.O. Box 6000 Sioux City, Iowa 51102 Attention: Chief Financial Officer A-8 ASSIGNMENT FORM To assign this Note, fill in the form below: I or we assign and transfer this Note to ------------------------------------------------------------------- (Print or type assignee's name, address and zip code) --------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint __________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________ Your Signature: _________________________ (Sign exactly as your name appears on the other side of the Note) Signature Guarantee: ______________________________ (Signature must be guaranteed) SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or ----- such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act") covering resales of this Security (which -------------- effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) two years from the Issue Date, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer: [Check One] --------- (1) __ to the Company or a subsidiary thereof; or (2) __ pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or A-9 (3) __ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (4) __ outside the United States to a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act of 1933, as amended; or (5) __ pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933, as amended; or (6) __ pursuant to an effective registration statement under the Securities Act of 1933, as amended; or (7) __ pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended; and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): --------- A-10 [_] The transferee is an Affiliate of the Company. Unless one of the items is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if item -------- ------- (3), (4), (5) or (7) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Securities, in their sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended. If none of the foregoing items are checked, the Trustee or Registrar shall not be obligated to register this Security in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.14 of the Indenture shall have been satisfied. Dated: ____________________ Signed: ______________________________ Sign exactly as name appears on the other side of this Note) Signature Guarantee: ____________________________________ (Signature must be guaranteed) SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or ----- such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-11 TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ______________ _______________________________________________ NOTICE: To be executed by an executive officer A-12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.8, 4.13 or 4.15 of the Indenture, check the box: [_] If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.8, 4.13 or 4.15 of the Indenture, state the amount: $ Date: ______________ Your Signature: _____________________________________ (Sign exactly as your name appears on the other side of the Note) Signature Guarantee: _____________________________________________________ (Signature must be guaranteed) SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be ----- determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-13 EXHIBIT B --------- FACE OF NOTE No. CUSIP No. TERRA CAPITAL, INC. 12 7/8% Senior Secured NOTES DUE 2008, Series B TERRA CAPITAL, INC., a Delaware corporation (the "Company"), ------- promises to pay to Cede & Co., or registered assigns, the principal sum of Dollars on October 15, 2008. Interest Payment Dates: April 15 and October 15. Record Dates: April 1 and October 1. Additional provisions of this Note are set forth on the reverse side of this Security. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by a duly authorized officer. TERRA CAPITAL, INC. By: __________________________________ Name: Title: Dated: B-1 TRUSTEE'S CERTIFICATE OF AUTHENTICATION U.S. Bank National Association, as Trustee, certifies that this is one of the Notes referred to in the within-mentioned Indenture. By: U.S. BANK NATIONAL ASSOCIATION, as Trustee _______________________________ Authorized Signatory Date of Authentication: B-2 REVERSE OF NOTE 12 7/8% Senior Secured NOTES DUE 2008, SERIES B 1. Interest -------- TERRA CAPITAL, INC., a Delaware corporation (such entity, and its successors and assigns under the Indenture, the "Company"), promises to pay ------- interest on the principal amount of this Note at the rate per annum shown above. The Company will pay interest semiannually on April 15 and October 15 of each year, commencing April 15, 2002. Interest on the Notes will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from October 10, 2001. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at 1% per annum in excess of the rate borne by the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment ----------------- The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered holders of Notes at the close of business on the record date immediately preceding the interest payment date even if Notes are canceled on registration of transfer or registration of exchange (including pursuant to an Exchange Offer (as defined in the Registration Rights Agreement)) after the record date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company ----------------- may pay principal and interest by its check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder's registered address. 3. Paying Agent and Registrar -------------------------- Initially, U.S. Bank National Association, a national banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company ------- may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company may act as Paying Agent, Registrar, co-Registrar or transfer agent. 4. Indenture --------- The Company issued the Securities under an Indenture dated as of October 10, 2001 (the "Indenture"), among the Company, the Guarantors party --------- thereto and the Trustee. This Note is one of a duly authorized issue of Exchange Notes of the Company designated as its 12 7/8% Senior Secured Notes due 2008 (the "Exchange Notes"). The Notes include the Initial Notes (as defined in the -------------- Indenture) and the Exchange Notes issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes and the Exchange Notes are treated as a single class of securities under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S) 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms --- defined in the Indenture and not B-3 defined herein have meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of those terms. Any conflict between this Note and the Indenture will be governed by the Indenture. The Notes are senior secured obligations of the Company limited to $200,000,000 aggregate principal amount (subject to Section 2.7 of the Indenture). The Indenture imposes certain limitations on the ability of Parent and its Restricted Subsidiaries to incur Indebtedness, create Liens, pay dividends on or repurchase Capital Stock of Parent and its Affiliates, make Restrictive Payments, make investments, sell Assets or Principal Properties, enter into transactions with Affiliates, limit dividends or other distributions from Restricted Subsidiaries, impair Security Interest, enter into Sale and Leaseback Transactions, engage in other businesses or merge, consolidate or transfer all or substantially all of the assets of Parent and its Restricted Subsidiaries. To guarantee the due and punctual payment of the principal, premium and interest, if any, on the Notes and all other amounts payable by the Company under the Indenture and the Notes when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Guarantors have unconditionally guaranteed the obligations of the Company under the Indenture and the Notes on a senior secured basis pursuant to the terms of the Indenture. 5. Optional Redemption ------------------- The Notes may be redeemed at the Company's option, in whole or in part, at any time or from time to time, at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus the Make Whole Amount, if any (as defined in the Indenture) (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the date fixed for redemption). 6. Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at his registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Notes (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Notes (or such portions thereof) called for redemption. If a notice or communication is sent in the manner provided in the Indenture, it is duly given, whether or not the addressee receives it. Failure to send a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. 7. Change of Control ----------------- Upon a Change of Control, each Holder of Notes will have the right to require the Company to purchase all or any part (equal to $1,000 or an integral multiple thereof) of the Notes of such Holder at a purchase price in cash equal to 101% of the principal amount of the Notes to be pur- B-4 -132- chased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the date fixed for redemption) as provided in, and subject to the terms of, the Indenture. 8. Denominations; Transfer; Exchange --------------------------------- The Notes are in registered form, without coupons, and in denominations of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture, including any transfer tax or other similar governmental charge payable in connection therewith. The Registrar need not register the transfer of or exchange any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes for a period of 15 days before a selection of Notes to be redeemed or 15 days before an interest payment date. 9. Persons Deemed Owners --------------------- The registered Holder of this Note may be treated as the owner of it for all purposes. 10. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 11. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Notes and the Indenture if The Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be. 12. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Notes may be amended with the consent of the Holders of at least a majority in principal amount outstanding of the Notes and (ii) any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority in principal amount outstanding of the Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company, the Guarantors and the Trustee may amend the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to comply with Article 5 of the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes, to add Guarantees with respect to the Notes, to release Guarantors when permitted by the Indenture and the Security Documents, to add any additional asset as Collateral, to add additional covenants or surrender rights and powers conferred on the Company, to make any change that B-5 does not adversely affect the rights of any Holder or to comply with any request of the SEC in connection with qualifying the Indenture under the TIA. 13. Defaults and Remedies --------------------- If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding may declare all the Notes to be due and payable. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes being due and payable immediately upon the occurrence of such Events of Default. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless it is offered reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of principal or interest) if and so long as a committee of its trust officers determines that withholding notice is in the interest of the Holders. 14. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or any of its Affiliates and may otherwise deal with the Company or any of its Affiliates with the same rights it would have if it were not Trustee. 15. No Recourse Against Others -------------------------- No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any Guarantor in the Indenture, or in any of the Notes or Guarantees or because of the creation of any Indebtedness represented hereby and thereby, shall be had against any incorporator, stockholder, officer, director, employee, agent or controlling person of The Company or any of its Subsidiaries. Each Holder, by accepting a Note, waives and releases all such liability. 16. Guarantees ---------- This Note will be entitled to the benefits of certain Guarantees, if any, made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders. B-6 17. Security Documents ------------------ In order to secure the due and punctual payment of the principal of and interest on the Securities and all other amounts payable by the Issuer and the Guarantors under the Indenture and the Notes when and at the same time shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture,the Pledgors have granted Liens on the Collateral to the Trustee for the benefit of the Trustee and the Holders of Notes pursuant to the Indenture and the Security Documents. Each Holder, by accepting a Note, agrees to all of the terms and provisions of the Security Documents as the same may be amended from time to time pursuant to the respective provisions thereof and the Indenture. The Trustee and each Holder acknowledge that a release of any of the Collateral or any Lien strictly in accordance with the terms and provisions of any of the Security Documents and the terms and provisions of the Indenture will not be deemed for any purpose to be an impairment of the security under the Indenture. 18. Governing Law ------------- The Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflict of laws to the extent that the application of the laws of another jurisdiction would be required thereby. 19. Authentication -------------- This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 20. Abbreviations ------------- Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with rights of survivorship and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors Act). 21. CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. B-7 The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture. Requests may be made as follows: TERRA CAPITAL, INC. Terra Centre 600 Fourth Street P.O. Box 6000 Sioux City, Iowa 51102 Attention: Chief Financial Officer B-8 ASSIGNMENT FORM To assign this Note, fill in the form below: I or we assign and transfer this Note to -------------------------------------------------------------- (Print or type assignee's name, address and zip code) ----------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint __________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________ Your Signature: ____________________________________ (Sign exactly as your name appears on the other side of this Note.) Signature Guarantee: ___________________________________ (Signature must be guaranteed) SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be ----- determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. B-9 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.8, 4.13 or 4.15 of the Indenture, check the box: [_] If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.8, 4.13 or 4.15 of the Indenture, state the amount: $ Date: ______________ Your Signature: _________________________ (Sign exactly as your name appears on the other side of the Note) Signature Guarantee: ______________________________________________________ (Signature must be guaranteed) SIGNATURE GUARANTEE Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be ----- determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. B-10 EXHIBIT C --------- Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ----------------------------------------- [ ], [ ] U.S. Bank National Association 180 East 5th Street St. Paul, Minnesota 55101 Ladies and Gentlemen: In connection with our proposed purchase of 12 7/8% Senior Secured Notes due 2008 (the "Securities") of TERRA CAPITAL, INC., a Delaware ---------- corporation (the "Company"), we confirm that: ------- 1. We have received a copy of the Offering Memorandum (the "Offering Memorandum"), dated October 3, 2001, relating to the ------------------- Securities and such other information as we deem necessary in order to make our investment decision. We acknowledge that we have read and agreed to the matters stated in the section entitled "Notice to Investors" of such Offering Memorandum. 2. We understand that any subsequent transfer of the Securities is subject to certain restrictions and conditions set forth in the Indenture relating to the Securities (the "Indenture") as --------- described in the Offering Memorandum and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"), and -------------- all applicable State securities laws. 3. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Securities, we will do so only (i) to the Company or any subsidiary thereof, (ii) inside the United States in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined in Rule 144A promulgated under the Securities Act), (iii) inside the United States to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Trustee (as defined in the Indenture) a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Securities (the form of which letter can be obtained from the Trustee), (iv) outside the United States in accordance with Rule 904 of Regulation S promulgated under the Securities Act to non-U.S. persons, (v) pursuant to the exemption from registration provided by Rule C-1 144 under the Securities Act (if available), or (vi) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Securities from us a notice advising such purchaser that resales of the Securities are restricted as stated herein. 4. We understand that, on any proposed resale of any Securities, we will be required to furnish to the Trustee and the Company such certification, legal opinions and other information as the Trustee and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be. 6. We are acquiring the Securities purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. C-2 You, the Company, the Trustee and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: ------------------------------------------ Name: Title: C-3 EXHIBIT D --------- Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S ------------------------ [ ], [ ] U.S. Bank National Association 180 East 5th Street St. Paul, Minnesota 55101 Re: TERRA CAPITAL, INC. (the "Company") ------- 12 7/8% Senior Secured Notes due 2008 (the "Securities") -------------------------------------------------------- Ladies and Gentlemen: In connection with our proposed sale of $[ ] aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: -------------- (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Securities. You, the Company and counsel for the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. D-1 Very truly yours, [Name of Transferor] By: ------------------------------------ Authorized Signature D-2 EXHIBIT E --------- GUARANTEE --------- For value received, the undersigned hereby unconditionally guarantees, as principal obligor and not only as a surety, to the Holder of this Note the cash payments in United States dollars of principal of and interest on this Note in the amounts and at the times when due and interest on the overdue principal of and interest on this Note, if lawful, and the payment or performance of all other obligations of the Company (as defined below) under the Indenture (as defined below) or the Notes, to the Holder of this Note and the Trustee (as defined below), all in accordance with and subject to the terms and limitations of this Note, Article 10 of the Indenture and this Guarantee. This Guarantee will become effective in accordance with Article 10 of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of October 10, 2001, among TERRA CAPITAL, INC., a Delaware corporation, as the Company (the "Company"), the ------- Guarantors party thereto and U.S. Bank National Association, as trustee (the "Trustee"), as amended or supplemented from time to time (the "Indenture"). ------- --------- The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee and all of the other provisions of the Indenture to which this Guarantee relates. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. Each Guarantor hereby agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Guarantee. This Guarantee is subject to release upon the terms set forth in the Indenture. E-1 IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be duly executed. BEAUMONT AMMONIA INC. BEAUMONT HOLDINGS CORPORATION BMC HOLDINGS INC. PORT NEAL CORPORATION TERRA CAPITAL HOLDINGS, INC. TERRA INDUSTRIES INC. TERRA INTERNATIONAL, INC. TERRA INTERNATIONAL (OKLAHOMA) INC. TERRA METHANOL CORPORATION TERRA NITROGEN CORPORATION TERRA REAL ESTATE CORP. TERRA (U.K.) HOLDINGS INC. By: ------------------------------------- Name: Title: E-2 EXHIBIT F --------- FORM OF SUPPLEMENTAL INDENTURE ------------------------------ SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ---------------------- _______________. WHEREAS Terra Capital, Inc. (the "Company"), Terra Industries Inc., a ------- Maryland corporation ("Parent"), certain of Parent's subsidiaries and U.S. Bank National Association, as trustee, are parties to an Indenture (as such may be amended from time to time, the "Indenture"), dated as of October 10, 2001, relating to the Company's 12 7/8% Senior Secured Notes due 2008 (the "Notes"); ----- WHEREAS Section 4.5 of the Indenture requires the Company to cause each new Restricted Subsidiary (other than any Foreign Subsidiary) to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Company's obligations under the Indenture and the Notes. NOW, THEREFORE, for good and valuable consideration, the receipt of which is acknowledged, the undersigned hereby agrees to guarantee the Company's obligations under the Notes on the terms and subject to the conditions set forth in Article 10 of the Indenture. From and after the date hereof, the undersigned shall be a Guarantor for all purposes under the Indenture and the Notes. F-1 IN WITNESS WHEREOF, the undersigned has caused this Supplemental Indenture to be duly executed as of the date first above written. [NEW GUARANTOR] By:_____________________________ Name: Title: F-2 EX-4.2 4 dex42.txt AMENDED AND RESTATED CREDIT AGREEMENT $175,000,000 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of October 10, 2001 among Terra Capital, Inc. Terra Nitrogen (U.K.) Limited Terra Nitrogen, Limited Partnership as Borrowers Terra Industries Inc. as a Guarantor and The Lenders and Issuers Party Hereto and Citicorp USA, Inc. as Administrative Agent and Collateral Agent Salomon Smith Barney Inc. as Lead Arranger and Sole Book Runner Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153-0119 TABLE OF CONTENTS
Page ---- Article I Definitions, Interpretation And Accounting Terms .......................... 2 Section 1.1. Defined Terms .................................................. 2 Section 1.2. Computation of Time Periods .................................... 33 Section 1.3. Accounting Terms and Principles ................................ 33 Section 1.4. Certain Terms .................................................. 34 Article II The Revolving Credit Facility ............................................. 34 Section 2.1. The Revolving Credit Commitments ............................... 34 Section 2.2. Borrowing Procedures ........................................... 35 Section 2.3. Swing Loans .................................................... 36 Section 2.4. Letters of Credit .............................................. 38 Section 2.5. Reduction and Termination of the Revolving Credit Commitments... 42 Section 2.6. Repayment of Loans ............................................. 42 Section 2.7. Evidence of Debt, Obligations of Borrowers ..................... 42 Section 2.8. Optional Prepayments ........................................... 43 Section 2.9. Mandatory Prepayments .......................................... 43 Section 2.10. Interest ....................................................... 44 Section 2.11. Conversion/Continuation Option ................................. 45 Section 2.12. Fees ........................................................... 46 Section 2.13. Payments and Computations; Protective Advances ................. 47 Section 2.14. Special Provisions Governing Eurodollar Rate Loans ............. 49 Section 2.15. Capital Adequacy ............................................... 51 Section 2.16. Taxes .......................................................... 51 Section 2.17. Substitution of Lenders ........................................ 53 Article III Conditions To Effectiveness Of This Agreement ............................. 54 Section 3.1. Conditions Precedent to the Effectiveness of this Agreement .... 54 Section 3.2. Conditions Precedent to Each Loan and Letter of Credit ......... 58 Article IV Representations And Warranties ............................................ 59 Section 4.1. Corporate Existence; Compliance with Law ....................... 59 Section 4.2. Corporate Power; Authorization; Enforceable Obligations ........ 59 Section 4.3. Ownership of Subsidiaries ...................................... 60 Section 4.4. Financial Statements ........................................... 60 Section 4.5. Material Adverse Change ........................................ 61
i TABLE OF CONTENTS (continued)
Page ---- Section 4.6. Solvency ................................................. 61 Section 4.7. Litigation ............................................... 61 Section 4.8. Taxes .................................................... 62 Section 4.9. Full Disclosure .......................................... 62 Section 4.10. Margin Regulations ....................................... 62 Section 4.11. No Burdensome Restrictions; No Defaults .................. 63 Section 4.12. Investment Company Act; Public Utility Holding Company Act ...................................................... 63 Section 4.13. Use of Proceeds .......................................... 63 Section 4.14. Insurance ................................................ 63 Section 4.15. Labor Matters ............................................ 63 Section 4.16. ERISA .................................................... 64 Section 4.17. Environmental Matters .................................... 64 Section 4.18. Intellectual Property .................................... 65 Section 4.19. Title; Real Property ..................................... 66 Section 4.20. Pari Passu Obligations ................................... 67 Section 4.21. No Immunity .............................................. 67 Section 4.22. Canadian and English Requirements ........................ 67 Article V Financial Covenants .............................................. 68 Section 5.1. Minimum Cash Flow ........................................ 68 Section 5.2. Capital Expenditures and Joint Venture Investments ....... 69 Section 5.3. Minimum Liquidity ........................................ 69 Article VI Reporting Covenants .............................................. 69 Section 6.1. Financial Statements ..................................... 69 Section 6.2. Default Notices .......................................... 71 Section 6.3. Litigation ............................................... 71 Section 6.4. Asset Sales .............................................. 71 Section 6.5. SEC Filings; Press Releases .............................. 71 Section 6.6. Labor Relations .......................................... 72 Section 6.7. Tax Returns .............................................. 72 Section 6.8. Insurance ................................................ 72 Section 6.9. ERISA Matters ............................................ 72 Section 6.10. Environmental Matters .................................... 72
ii TABLE OF CONTENTS (continued)
Page ---- Section 6.11. Borrowing Base Determination ................................... 74 Section 6.12. Other Information .............................................. 74 Section 6.13. Material Documents ............................................. 74 Section 6.14. Foreign Benefit Plans .......................................... 74 Article VII Affirmative Covenants ................................................. 75 Section 7.1. Preservation of Corporate Existence, Etc ....................... 75 Section 7.2. Compliance with Laws, Etc ...................................... 75 Section 7.3. Conduct of Business ............................................ 75 Section 7.4. Payment of Taxes, Etc .......................................... 75 Section 7.5. Maintenance of Insurance ....................................... 75 Section 7.6. Access ......................................................... 76 Section 7.7. Keeping of Books ............................................... 76 Section 7.8. Maintenance of Properties, Etc ................................. 76 Section 7.9. Application of Proceeds ........................................ 76 Section 7.10. Environmental .................................................. 76 Section 7.11. Additional Collateral and Guaranties; Further Assurances ....... 77 Section 7.12. Cash Collateral Accounts and Cash Management System ............ 78 Section 7.13. Real Estate .................................................... 81 Section 7.14. Hedging Contracts .............................................. 81 Article VIII Negative Covenants .................................................... 81 Section 8.1. Indebtedness ................................................... 81 Section 8.2. Liens, Etc ..................................................... 82 Section 8.3. Investments .................................................... 83 Section 8.4. Sale of Assets ................................................. 86 Section 8.5. Restricted Payments ............................................ 87 Section 8.6. Restriction on Fundamental Changes ............................. 88 Section 8.7. Change in Nature of Business ................................... 88 Section 8.8. Transactions with Affiliates ................................... 88 Section 8.9. Restrictions on Subsidiary Distributions; No New Negative Pledge ......................................................... 89 Section 8.10. Modification of Constituent Documents .......................... 89 Section 8.11. Modification of Material Documents ............................. 89
iii TABLE OF CONTENTS (continued)
Page ---- Section 8.12. Long-Term Indebtedness ..................................... 89 Section 8.13. Accounting Changes; Fiscal Year ............................ 90 Section 8.14. Margin Regulations ......................................... 91 Section 8.15. Operating Leases; Sale/Leasebacks .......................... 91 Section 8.16. Cancellation of Indebtedness Owed .......................... 91 Section 8.17. No Speculative Transactions ................................ 91 Section 8.18. Compliance with ERISA and Foreign Plans .................... 91 Section 8.19. Environmental .............................................. 91 Section 8.20. Payments to Minority Interests ............................. 91 Article IX Events Of Default ................................................ 92 Section 9.1. Events of Default .......................................... 92 Section 9.2. Remedies ................................................... 94 Section 9.3. Actions in Respect of Letters of Credit .................... 94 Section 9.4. Rescission ................................................. 95 Article X The Administrative Agent; The Other Agents ....................... 95 Section 10.1. Authorization and Action ................................... 95 Section 10.2. Administrative Agent's Reliance, Etc ....................... 96 Section 10.3. The Administrative Agent Individually ...................... 96 Section 10.4. Lender Credit Decision ..................................... 96 Section 10.5. Indemnification ............................................ 97 Section 10.6. Successor Administrative Agent ............................. 97 Section 10.7. Concerning the Collateral and the Collateral Documents ..... 98 Section 10.8. Collateral Matters Relating to Related Obligations ......... 99 Section 10.9. Other Agents ............................................... 100 Article XI Miscellaneous .................................................... 100 Section 11.1. Amendments, Waivers, Etc ................................... 100 Section 11.2. Assignments and Participations ............................. 101 Section 11.3. Costs and Expenses ......................................... 104 Section 11.4. Indemnities ................................................ 105 Section 11.5. Limitation of Liability .................................... 106 Section 11.6. Right of Set-off ........................................... 106 Section 11.7. Sharing of Payments, Etc ................................... 106
iv TABLE OF CONTENTS (continued)
Page ---- Section 11.8. Notices, Etc ............................................... 107 Section 11.9. No Waiver; Remedies ........................................ 108 Section 11.10. Binding Effect ............................................. 108 Section 11.11. Governing Law .............................................. 109 Section 11.12. Submission to Jurisdiction; Service of Process ............. 109 Section 11.13. Waiver of Jury Trial ....................................... 110 Section 11.14. No Immunity ................................................ 110 Section 11.15. Judgment Currency .......................................... 110 Section 11.16. Marshaling; Payments Set Aside ............................. 111 Section 11.17. Section Titles ............................................. 111 Section 11.18. Execution in Counterparts .................................. 111 Section 11.19. Entire Agreement ........................................... 111 Section 11.20. Confidentiality ............................................ 111 Section 11.21. Refund of Tax Credits ...................................... 112
Schedules Schedule I - Revolving Credit Commitments Schedule II - Applicable Lending Offices and Addresses for Notices Schedule III - Projections Schedule 4.2 - Consents Schedule 4.3 - Ownership of Subsidiaries Schedule 4.4 - Pro Forma Balance Sheet Schedule 4.7 - Litigation Schedule 4.8 - Taxes Schedule 4.15 - Labor Matters Schedule 4.16 - List of Plans Schedule 4.17 - Environmental Matters Schedule 4.19 - Real Property Schedule 7.12 - Accounts Schedule 8.1 - Existing Indebtedness Schedule 8.2 - Existing Liens Schedule 8.3 - Existing Investments Exhibits Exhibit A - Form of Assignment and Acceptance Exhibit B - Form of Note Exhibit C - Form of Notice of Borrowing Exhibit D - Form of Letter of Credit Request v TABLE OF CONTENTS (continued) Exhibit E - Form of Borrowing Base Certificate Exhibit F - Form of Notice of Conversion or Continuation Exhibit G -1/-2/-3 - Form of Opinions of Counsel for the Loan Parties Exhibit H - Form of Guaranty Exhibit I - Form of Pledge and Security Agreement Exhibit J - Form of Junior TNLP and TNCLP Pledge and Security Agreement Exhibit K - Form of Junior TNCLP Guaranty Exhibit L - Form of Senior Secured Note Intercreditor Agreement Exhibit M - Form of Loan Purchase Agreement Exhibit N - Form of UK Debenture Exhibit O - Form of Terra Canada Security Agreement vi This Amended and Restated Revolving Credit Agreement, dated as of October 10, 2001 (as amended, supplemented or otherwise modified from time to time, this "Agreement"), among Terra Capital, Inc., Delaware corporation ("Terra Capital"), Terra Nitrogen (U.K.), Limited, a company incorporated in England and Wales ("Terra UK") and Terra Nitrogen, Limited Partnership, a Delaware limited partnership ("TNLP") (Terra Capital, Terra UK and TNLP each a "Borrower" and, collectively, the "Borrowers"), Terra Industries Inc., a Maryland corporation ("Terra Industries"), the Lenders (as defined below), the Issuers (as defined below) and Citicorp USA, Inc. ("CUSA"), as administrative agent and collateral agent for the Lenders and the Issuers (in such capacities, the "Administrative Agent"), amends and restates in its entirety the Existing Credit Agreement (as defined below). W i t n e s s e t h: Whereas, the Borrowers, Terra Industries, the Existing Lenders (as defined below) and Citibank, N.A. ("Citibank"), as administrative agent and collateral agent (respectively in each capacity, the "Existing Administrative Agent" and the "Existing Collateral Agent"), are a party to a Credit Agreement dated as of April 7, 2000 (as amended through the date hereof, the "Existing Credit Agreement"); and Whereas, the Existing Administrative Agent, Existing Collateral Agent, the Administrative Agent and the Borrowers have entered into the Assignment and Release Agreement dated as of October 10, 2001 (the "Assignment and Release Agreement") pursuant to which each of the Existing Administrative Agent and the Existing Collateral Agent has resigned as agent and has assigned all its rights, title and interest in, to and under the Existing Credit Agreement and the "Loan Documents" (as defined in the Existing Credit Agreement) and delegated all its obligations thereunder with respect thereto to the Administrative Agent, and the Administrative Agent has accepted such assignment and delegation; Whereas, on October 10, 2001 Terra Capital issued $200,000,000 of Senior Secured Notes, the net proceeds of which were applied, in part, by the Borrowers in prepayment in full of the Term Loan under the Existing Credit Agreement and the Canadian Term Loan under the Terra Canada Credit Agreement; and Whereas, the Borrowers have requested, among other things, that the Lenders (i) increase the Revolving Credit Commitments from $115,625,000 to $175,000,000 and (ii) extend the Scheduled Termination Date from January 2, 2003 to June 30, 2005; and Whereas, in order to accommodate the amendments to the Existing Credit Agreement requested by the Borrowers and necessitated by the issuance of the Senior Secured Notes, the parties hereto have agreed to amend and restate the Existing Credit Agreement on the terms set forth in this Agreement, which Agreement shall become effective upon satisfaction of certain conditions precedent set forth herein; and Whereas, it is the intent of the parties hereto that this Agreement does not constitute a novation of the rights, obligations and liabilities of the respective parties (including the Obligations) existing under the Existing Credit Agreement or evidence payment of all or any of such obligations and liabilities (other than the repayment in full of the Term Loan and the Canadian Term Loan referred to above) and such rights, obligations and liabilities shall continue and remain outstanding, and that this Agreement amends and restates in its entirety the Existing Credit Agreement; Now, Therefore, in consideration of the premises and the covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I Definitions, Interpretation And Accounting Terms Section 1.1. Defined Terms. As used in this Agreement, the following ------------- terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Account" has the meaning specified in the Pledge and Security Agreement. "Account Debtor" has the meaning specified in the Pledge and Security Agreement. "Account Triggering Event" means with respect to Terra Canada or Terra UK, the occurrence of (i) a Default (relating to the matters referred to in Sections 9.1(f) or (g)), (ii) an Event of Default and (iii) additionally with respect to Terra UK only, any of the events specified in Clause 5.3 of the Debenture. "Administrative Agent" has the meaning specified in the preamble to this Agreement. "Advance Rate" means, at any time, (i) up to 85% in the case of Eligible Receivables, (ii) up to the Seasonal Eligible Inventory Rate in the case of Eligible Non-Spare Parts Inventory, and (iii) up to 5% in the case of Eligible Spare Parts Inventory, in each case as such rates may be increased or decreased from time to time with respect to any class of Eligible Receivables, Eligible Non-Spare Parts Inventory or Eligible Spare Parts Inventory by the Administrative Agent in its sole discretion, with any change in such rates to be effective two (2) Business Days after written notice thereof from the Administrative Agent to the Borrower; provided, however, that the Administrative Agent shall not increase such rates above the rates set forth above as of the Effective Date without the consent of the Lenders. "Affiliate" means, with respect to any Person, any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person, each officer, director, general partner or joint-venturer of such Person, and each Person who is the beneficial owner of 10% or more of any class of Voting Stock of such Person. For the purposes of this definition, "control" means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" has the meaning specified in the preamble to this Agreement. "Ammonium Nitrate Hedging Agreement" means an agreement dated December 31, 1997 between ICI Chemicals and Polymers Limited and Terra Canada pursuant to which Terra Canada agrees to pay certain amounts to ICI Chemicals and Polymers Limited by reference to ammonium nitrate prices. 2 "Anglo American" means Anglo American plc, a company incorporated in England and Wales with company number 03564138. "Applicable Lending Office" means, with respect to each Lender, its Domestic Lending Office in the case of a Base Rate Loan, and its Eurodollar Lending Office in the case of a Eurodollar Rate Loan. "Applicable Margin" means (a) during the period commencing on the Effective Date and ending on the first Business Day after receipt by the Administrative Agent of the Financial Statements required to be delivered by Section 6.1(c) for the Fiscal Quarter ending December 31, 2001, with respect to Loans maintained as (A) Base Rate Loans, a rate equal to 1.75% per annum and (B) Eurodollar Rate Loans, a rate equal to 2.75% per annum and (b) thereafter as of any date of determination, a per annum rate equal to the rate set forth below opposite the applicable type of Loan and the then applicable Leverage Ratio (determined for the twelve-month period ending on the last day of the most recent Fiscal Quarter or Fiscal Year, as applicable, for which Financial Statements have been delivered pursuant to Section 6.1) set forth below: --------------------------------------------------------------------- Base Rate Eurodollar Leverage Ratio Loans Rate Loans --------------------------------------------------------------------- Greater than 5.5 to 1 2.25% 3.25% --------------------------------------------------------------------- Less than or equal to 5.5 to 1 and greater than 5.0 to 1 2.00% 3.00% --------------------------------------------------------------------- Less than or equal to 5.0 to 1 and greater than 4.0 to 1 1.75% 2.75% --------------------------------------------------------------------- Less than or equal to 4.0 to 1 1.50% 2.50% --------------------------------------------------------------------- Subsequent changes in the Applicable Margin resulting from a change in the Leverage Ratio shall become effective as to all Revolving Loans on the first day of the month beginning after delivery by the Borrowers to the Administrative Agent of new consolidated financial statements pursuant to Section 6.1(b) for each of the first three Fiscal Quarters of each Fiscal Year and Section 6.1(c) for each Fiscal Year. Notwithstanding anything to the contrary set forth in this Agreement (including the then effective Leverage Ratio), if the Borrowers shall fail to deliver such financial statements within the time periods specified in Section 6.1(b) or (c), as applicable, the Applicable Margin from and including the 46th day after the end of such Fiscal Quarter or the 91st day after the end of such Fiscal Year, as the case may be, to but not including the date the Borrowers deliver to the Administrative Agent such financial statements shall equal the highest Applicable Margin set forth above. "Approved Deposit Account" means each bank account identified as an "Approved Deposit Account" on Schedule 7.12 and such other receivables collection accounts from time to time maintained by the Borrowers and Terra Canada with a bank acceptable to the Administrative Agent and subject to a Deposit Account Control Agreement. 3 "Approved Fund" means, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Arranger" means Salomon Smith Barney Inc., in its capacity as Lead Arranger and Sole Book Runner for the Revolving Credit Facility. "Asset Sale" has the meaning specified in Section 8.4. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit A. "Availability Reserve" means, with respect to any Borrower effective as of two Business Days after the date of written notice of any determination thereof to Terra Capital by the Administrative Agent, such amounts (without duplication as to amounts included in the determination of any Eligibility Reserve) as the Administrative Agent may from time to time establish against the Available Credit of such Borrower, in the Administrative Agent's sole discretion, in order either (a) to preserve the value of the Collateral or the Administrative Agent's Lien thereon, or (b) to provide for the payment of unanticipated liabilities of such Borrower or its Subsidiaries arising after the Effective Date; provided, however, that the Administrative Agent shall apply criteria in respect of the foregoing in accordance with its customary practice with regard to similar credit facilities. "Available Credit" means at any time in respect of (i) Terra Capital, the Terra Capital Available Credit, (ii) Terra UK, the Terra UK Available Credit, and (iii) TNLP, the TNLP Available Credit. "Bailee's Letter" means a letter in form and substance acceptable to the Administrative Agent executed by any Person (other than a Loan Party) who is in possession of Inventory on behalf of the Borrower pursuant to which such Person acknowledges, among other things, the Administrative Agent's Lien with respect thereto. "Bankruptcy Code" means title 11, United States Code, as amended from time to time. "Base Rate" means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall be equal at all times 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) the sum (adjusted to the nearest 0.25% or, if there is no nearest 0.25%, to the next higher 0.25%) of (i) 0.5% per annum plus (ii) the rate per annum obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day 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 4 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 (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for Citibank in respect of liabilities consisting of or including (among other liabilities) three-month U.S. dollar nonpersonal time deposits in the United States, plus (iii) the average during such three-week period of the maximum annual assessment rates estimated by Citibank for determining the then current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring Dollar deposits in the United States; and (c) the sum of (i) 0.5% per annum plus (ii) the Federal Funds Rate. "Base Rate Loan" means any Loan during any period in which it bears interest based on the Base Rate. "Beaumont Ammonia" means Beaumont Ammonia, Inc., a Delaware corporation and Subsidiary of Terra UK Holdings. "Beaumont Holdings" means Beaumont Holdings Corporation, a Delaware corporation and wholly owned Subsidiary of BMCH. "BMCH" means BMC Holdings, Inc., a Delaware corporation. "Borrowing" means a borrowing consisting of Loans made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments. "Borrowing Base" means, with respect to any Borrower (a) the sum of (i) the product of the Advance Rate then in effect for Eligible Receivables and the face amount of all Eligible Receivables of such Borrower's Borrowing Base Contributors (calculated net of all finance charges, late fees and other fees which are unearned, sales, excise or similar taxes, and credits or allowances granted at such time), (ii) the product of the Advance Rate then in effect for each class of Eligible Non-Spare Parts Inventory and the Eligible Non-Spare Parts Inventory (valued at the lower of cost and market on a first-in, first-out basis) constituting such class at such time of such Borrower's Borrowing Base Contributors, (iii) the product of the Advance Rate then in effect for Eligible Spare Parts Inventory and the Eligible Spare Parts Inventory of such Borrower's Borrowing Base Contributors and (iv) 100% of cash maintained by such Borrower in a cash collateral account opened for such purpose with the Administrative Agent (including the L/C Cash Collateral Account and any other Cash Collateral Account referred to in Section 2.9 or Section 7.12(f)) on terms acceptable to, and subject to a perfected first priority Lien in favor of, the Administrative Agent less (b) any Eligibility Reserves applicable to such Borrower then in effect; provided, however that, for the purposes of calculating any of the foregoing amounts denominated in Sterling, Canadian Dollars or Euros, the Dollar Equivalent of such Sterling, Canadian Dollar or Euro amount shall be used. "Borrowing Base Certificate" means a certificate of the Borrowers substantially in the form of Exhibit E. 5 "Borrowing Base Contributor" means (i) in respect of Terra Capital, each of Terra Oklahoma, Port Neal, BMCH and Beaumont Ammonia, (ii) in respect of Terra UK, Terra UK and Terra Canada and (iii) in respect of TNLP, TNLP only. "Borrowing Base Deficiency" means, at any time with respect to any Borrower, any time during which the Available Credit of such Borrower is less than zero. "Business Day" means a day of the year on which banks are not required or authorized to close in New York City and, if the applicable Business Day relates to notices, determinations, fundings and payments in connection with the Eurodollar Rate or any Eurodollar Rate Loans, a day on which dealings in Dollar deposits are also carried on in the London interbank market. "Canadian Dollars" means the lawful money of Canada. "Canadian Employee Benefit Plan" means any employee benefit, pension, retirement or other equivalent or analogous plan or program established or maintained by the Borrower or any of its Canadian Subsidiaries. "Canadian Term Loan" means the Term Loan (as defined in the Terra Canada Credit Agreement). "Capital Expenditures" means, with respect to any Person for any period, the aggregate of amounts that would be reflected as additions to property, plant or equipment on a consolidated balance sheet of such Person and its Subsidiaries prepared in conformity with GAAP, excluding interest capitalized during construction. "Capital Lease" means, with respect to any Person, any lease of property by such Person as lessee which would be accounted for as a capital lease on a balance sheet of such Person prepared in conformity with GAAP. "Capital Lease Obligations" means, with respect to any Person, the capitalized amount of all obligations of such Person or any of its Subsidiaries under Capital Leases, as determined on a consolidated basis in conformity with GAAP. "Cash Collateral Account" means each Approved Deposit Account maintained at Citibank or an Affiliate of Citibank, each other bank account identified as a "Cash Collateral Account" on Schedule 7.12 and each other account maintained from time to time by any Loan Party with Citibank and designated a "Cash Collateral Account" by the Administrative Agent. "Cash Equivalents" means (a) securities issued or fully guaranteed or insured by the United States government, the United Kingdom government or the Canadian government or any agency thereof acceptable to the Administrative Agent, (b) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers' acceptances of any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies (fully protected against currency fluctuations) which, at the time of acquisition, are rated at least "A-1" by Standard & Poor's Rating Services ("S&P") or "P-1" by Moody's Investors Services, Inc. ("Moody's"), (c) commercial paper of an issuer rated at least "A-1" by S&P or "P-1" by Moody's, (d) Canadian Dollar denominated banker's acceptances of Canadian banks, and Canadian dollar-denominated commercial paper, rated at 6 least R1-mid by Dominion Bond Rating Service and (e) shares of any money market fund that (i) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (a) through (c) above, (ii) has net assets of not less than $1,000,000,000 and (iii) is rated at least "A-1" by S&P or "P-1" by Moody's; provided, however, that the maturities of all obligations of the type specified in clauses (a) and (d) above shall not exceed 1 year and in clauses (b) and (c) above shall not exceed 270 days. "Cash Flow" means, with respect to Terra Industries and its Subsidiaries for any period, an amount equal to EBITDA of Terra Industries and its Subsidiaries for such period minus, to the extent not reflected in the calculation of EBITDA, the sum of (i) TNCLP Minority Interest Payments and (ii) provided such net cash amount is greater than zero, cash (net of cash in-flows in respect thereof) used to finance obligations of discontinued operations of Terra Industries and its Subsidiaries. "Change of Control" means any of the following: (a) any person or group of persons (within the meaning of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) of a greater percentage of the issued and outstanding Voting Stock of Terra Industries than that held directly or indirectly by Anglo American; (b) Anglo American shall cease to own beneficially, directly or indirectly, at least 20% of the issued and outstanding Voting Stock of Terra Industries; (c) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors of Terra Industries (together with any new directors whose election by the board of directors of Terra Industries or whose nomination for election by the stockholders of Terra Industries was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose elections or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; provided, however, that the appointment of any directors which are nominated by Anglo American in replacement of then existing directors which were nominated by Anglo American shall not itself constitute a Change of Control or (d) a "Change of Control" as defined in any Indenture shall have occurred. "Chattel Paper" has the meaning specified in the Pledge and Security Agreement. "Citibank" has the meaning specified in the recitals to this Agreement. "Code" means the Internal Revenue Code of 1986 (or any successor legislation thereto), as amended from time to time. "Collateral" means all property and interests in property and proceeds thereof now owned or hereafter acquired by any Loan Party in or upon which a Lien is granted under any of the Collateral Documents. "Collateral Documents" means the Pledge and Security Agreement, the Debenture, the Senior Secured Note Intercreditor Agreement, the Terra UK Share Mortgage, the Terra Canada Collateral Documents, the Junior Collateral Documents and any other document executed and delivered by a Loan Party granting a Lien on any of its property to secure payment of the Obligations of such Loan Party. 7 "Common Unit Purchase" has the meaning specified in Section 8.3(h). "Common Units" means the common units issued and outstanding under the Agreement of Limited Partnership dated as of December 4, 1991 of TNCLP. "Compliance Certificate" has the meaning specified in Section 6.1(d). "Consolidated Net Income" means, for any Person for any period, the net income (or loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis in conformity with GAAP; provided, however, that (a) the net income of any other Person in which such Person or one of its Subsidiaries has a joint interest with a third party (which interest does not cause the net income of such other Person to be consolidated into the net income of such Person in accordance with GAAP) shall be included only to the extent of the amount of dividends or distributions paid to such Person or Subsidiary, (b) the net income of any Subsidiary of such Person that is subject to any restriction or limitation on the payment of dividends or the making of other distributions shall be excluded to the extent of such restriction or limitation, and (c) any one-time increase or decrease to net income which is required to be recorded because of the adoption of new accounting policies, practices or standards required by GAAP shall be excluded. "Constituent Documents" means, with respect to any Person, (i) the articles/certificate of incorporation (or the equivalent organizational documents) of such Person, (ii) the by-laws (or the equivalent governing documents) of such Person and (iii) any document setting forth the manner of election and duties of the directors or managing members of such Person (if any) and the designation, amount and/or relative rights, limitations and preferences of any class or series of such Person's Stock. "Contaminant" means any material, substance or waste that is classified, regulated or otherwise characterized under any Environmental Law as hazardous, toxic, a contaminant or a pollutant or by other words of similar meaning or regulatory effect, including any petroleum or petroleum-derived substance or waste, asbestos and polychlorinated biphenyls. "Contractual Obligation" of any Person means any obligation, agreement, undertaking or similar provision of any Security issued by such Person or of any agreement, undertaking, contract, lease, indenture, mortgage, deed of trust or other instrument (excluding any Loan Document but including any Material Document) to which such Person is a party or by which it or any of its property is bound or to which any of its properties is subject. "CUSA" has the meaning specified in the preamble to this Agreement. "Customary Permitted Liens" means, with respect to any Person, any of the following Liens: (a) Liens with respect to the payment of taxes, customs duties, assessments or governmental charges in all cases which are not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by GAAP; (b) Liens of landlords arising by statute and liens of suppliers, mechanics, carriers, materialmen, warehousemen or workmen and other liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in 8 good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by GAAP; (c) deposits made in the ordinary course of business in connection with worker's compensation, unemployment insurance or other types of social security benefits or to secure the performance of bids, tenders, sales, contracts (other than for the repayment of borrowed money) and surety, appeal, customs or performance bonds; (d) encumbrances arising by reason of zoning restrictions, easements, licenses, reservations, covenants, rights-of-way, utility easements, building restrictions and other similar encumbrances on the use of real property which do not materially detract from the value of such real property or interfere with the ordinary conduct of the business conducted and proposed to be conducted at such real property; (e) encumbrances arising under leases or subleases of real property which do not in the aggregate materially detract from the value of such real property or interfere with the ordinary conduct of the business conducted and proposed to be conducted at such real property; (f) financing statements of a lessor's rights in and to personal property leased to such Person in the ordinary course of such Person's business; (g) expired financing statements and financing statements filed for precautionary purposes in respect of operating leases; and (h) Liens in favor of banks which arise under Article 4 of the New York UCC on items in collection and documents relating thereto and proceeds thereof. "Debenture" means the Amended and Restated English law Debenture dated as of the Effective Date, in substantially the form of Exhibit N, executed by Terra UK in favor of the Administrative Agent. "Debt Issuance" means the incurrence of Indebtedness of the type specified in clause (a) and (b) of the definition of "Indebtedness" by Terra Industries or any of its Subsidiaries. "Default" means any event which with the passing of time or the giving of notice or both would become an Event of Default. "Deposit Account Control Agreement" has the meaning specified in the Pledge and Security Agreement. "Disbursement Accounts" means the bank accounts identified as such on Schedule 7.12 and each other account maintained from time to time by the Borrowers and Terra Canada with a bank acceptable to the Administrative Agent for the purposes of paying disbursements. "Document" has the meaning specified in the Pledge and Security Agreement. 9 "Documentary Letter of Credit" means any letter of credit issued by an Issuer pursuant to Section 2.4 for the account of the Borrower, which is drawable upon presentation of documents evidencing the sale or shipment of goods purchased by the Borrower or any of its Subsidiaries in the ordinary course of its business. "Dollar Equivalent" means with respect to any amount denominated in a currency other than Dollars, at the time of determination thereof, the equivalent of such currency in Dollars determined by using the rate of exchange quoted by Citibank or an Affiliate thereof in New York, New York at 11:00 a.m. (New York time) on the date of determination to prime banks in New York for the spot purchase in the New York foreign exchange market of such amount of Dollars with such other currency. "Dollars" and the sign "$" each mean the lawful money of the United States of America. "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 II or on the Assignment and Acceptance by which it became a Lender or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Borrowers and the Administrative Agent. "Domestic Subsidiary" means any Subsidiary of Terra Industries organized under the laws of any state of the United States of America or the District of Columbia. "EBITDA" means, with respect to any Person for any period, an amount equal to (a) Consolidated Net Income of such Person for such period plus (b) the sum of, in each case to the extent included in the calculation of such Consolidated Net Income but without duplication, (i) any provision for income taxes, (ii) interest expense including net costs under Interest Rate Contracts, (iii) loss from extraordinary items, (iv) any aggregate net loss from the sale, exchange or other disposition of capital assets by such Person, (v) any other non-cash loss or other items, (vi) depreciation, depletion and amortization of intangibles or financing or acquisition costs and (vii) income allocation to minority interests minus (c) the sum of, in each case to the extent included in the calculation of such Consolidated Net Income but without duplication, (i) any credit for income tax, (ii) interest income, (iii) gains from extraordinary items for such period, (iv) any aggregate net gain from the sale, exchange or other disposition of capital assets by such Person, (v) any other non-cash gains or other items and (vi) loss allocation to minority interests. "Effective Date" has the meaning specified in Section 3.1. "Eligibility Reserves" means, with respect to any Borrower, effective as of two Business Days after the date of written notice of any determination thereof to Terra Capital by the Administrative Agent, such amounts as the Administrative Agent, in its sole discretion, may from time to time establish against the gross amounts of Eligible Receivables, Eligible Non-Spare Parts Inventory and Eligible Spare Parts Inventory of such Borrower's Borrowing Base Contributors to reflect risks or contingencies arising after the Effective Date which may affect any one or class of such items and which have not already been taken into account in the calculation of the Borrowing Base of such Borrower (including in respect of (a) preferential debts which under applicable law would be prior to the claims of the Secured Parties and (b) Inventory which is subject to title retention claims of the suppliers thereof); provided, however, that the 10 Administrative Agent shall apply criteria in respect of the foregoing in accordance with its customary practice with regard to similar credit facilities. "Eligible Assignee" means (a) a Lender or any Affiliate or Approved Fund of such Lender; (b) a commercial bank having total assets in excess of $5,000,000,000; (c) a finance company, insurance company, other financial institution or fund reasonably acceptable to the Administrative Agent, which is regularly engaged in making, purchasing or investing in loans including, with respect to any proposed assignment of all or a portion of a Lender's Revolving Credit Commitment, revolving loans, and having total assets in excess of $250,000,000 or, to the extent assets are less than such amount, a finance company, insurance company, other financial institution or fund, reasonably acceptable to the Administrative Agent and the Borrowers; or (d) a savings and loan association or savings bank organized under the laws of the United States or any State thereof which has a net worth, determined in accordance with GAAP, in excess of $250,000,000. "Eligible Finished Products" means Inventory comprised of finished products (which are classified, in accordance with past practice, as Eligible Finished Products in the Borrowers' accounting systems) and is otherwise Eligible Inventory. "Eligible Inventory" means, in respect of any Borrowing Base Contributor, the Inventory of such Borrowing Base Contributor (other than any Inventory which has been consigned by such Borrowing Base Contributor), including raw materials and finished goods (a) which is owned solely by such Borrowing Base Contributor, (b) with respect to which the Administrative Agent has a valid and perfected first priority Lien, (c) with respect to which no warranty contained in any of the Loan Documents has been breached, (d) which is not, in the Administrative Agent's sole discretion, obsolete or unmerchantable, (e) with respect to which (in respect of any Inventory labeled with a brand name or trademark and sold by such Borrowing Base Contributor pursuant to a trademark owned by such Borrowing Base Contributor or a license granted to such Borrowing Base Contributor) the Administrative Agent would have rights under such trademark or license pursuant to the Pledge and Security Agreement or other agreement satisfactory to the Administrative Agent to sell such Inventory in connection with a liquidation thereof, and (f) which the Administrative Agent deems to be Eligible Inventory based on such credit and collateral considerations as the Administrative Agent may, in its sole discretion, deem appropriate. No Inventory of such Borrowing Base Contributor shall be Eligible Inventory if such Inventory is located, stored, used or held at the premises of a third party or premises that have been mortgaged in favor of a third party unless (i)(A) the Administrative Agent shall have received a Mortgagee Waiver (to the extent the subject Inventory is not located, stored or held at premises covered by the Senior Secured Note Intercreditor Agreement), Landlord Waiver or Bailee's Letter or (B) in the case of Inventory located on a leased or mortgaged premises, an Eligibility Reserve satisfactory to the Administrative Agent shall have been established with respect thereto and (ii) an appropriate UCC-1 financing statement shall have been executed and properly filed in the United States and equivalent filings, as applicable, shall have been made in England & Wales and Canada, as applicable. "Eligible Non-Spare Parts Inventory" means Inventory comprised of Eligible Finished Products and Eligible Raw Materials. "Eligible Raw Materials" means Inventory comprised of raw materials (which are classified in accordance with past practice, as raw materials in the Borrowers' accounting systems) and which is otherwise Eligible Inventory. 11 "Eligible Receivable" means, in respect of any Borrowing Base Contributor, the gross outstanding balance of those Accounts of such Borrowing Base Contributor which arise out of sales of merchandise, goods or services in the ordinary course of business, which are made by such Borrowing Base Contributor to a Person that is not an Affiliate of such Borrowing Base Contributor, which are not in dispute, and which constitute Collateral in which the Administrative Agent has a fully perfected first priority Lien; provided, however, that an Account shall in no event be an Eligible Receivable if: (a) such Account is outstanding more than 60 days past the original due date thereof or more than 90 days from the invoice date thereof; or (b) any warranty contained in this Agreement or any other Loan Document with respect to such specific Account is not true and correct with respect to such Account; or (c) the Account Debtor on such Account has disputed liability or made any claim with respect to any other Account due from such Account Debtor to such Borrowing Base Contributor but only to the extent of such dispute or claim; or (d) the Account Debtor on such Account has: (i) filed a petition for bankruptcy or any other relief under the Bankruptcy Code or any other law relating to bankruptcy, insolvency, reorganization or relief of debtors; (ii) made an assignment for the benefit of creditors; (iii) had filed against it any petition or other application for relief under the Bankruptcy Code or any such other law; (iv) has failed, suspended business operations, become insolvent, called a meeting of its creditors for the purpose of obtaining any financial concession or accommodation; or (v) had or suffered a receiver or a trustee to be appointed for all or a significant portion of its assets or affairs; or (e) the Account Debtor on such Account or any of its Affiliates is also a supplier to or creditor of such Borrowing Base Contributor unless, and to the extent that (in respect of such Account), such supplier or creditor has executed a no-offset letter satisfactory to the Administrative Agent, in its sole discretion; or (f) the sale represented by such Account is to an Account Debtor located outside England, Scotland or Wales in respect of Terra UK or outside the United States or Canada in respect of any other Borrowing Base Contributor, unless the sale is on letter of credit or acceptance terms acceptable to the Administrative Agent, in its sole judgment; or (g) the sale to such Account Debtor on such Account is on a bill-on-hold, guaranteed sale, sale-and-return, sale-on-approval or consignment basis; or (h) such Account is subject to a Lien in favor of any Person other than the Administrative Agent for the benefit of the Secured Parties; or (i) such Account is (but only to the extent that it is) subject to any deduction, offset, counterclaim, return privilege or other conditions other than volume sales discounts given in the ordinary course of such Borrowing Base Contributor's business; or 12 (j) the Account Debtor on such Account is located, in respect of the Borrowing Base Contributors of Terra Capital or TNLP, in New Jersey or Minnesota, unless such Borrowing Base Contributor (i) has received a certificate of authority to do business and is in good standing in such state or (ii) has filed a Notice of Business Activities Report with the appropriate office or agency of such state for the current year; or (k) the Account Debtor on such Account is a Governmental Authority, unless the Borrower has assigned its rights to payment of such Account to the Administrative Agent pursuant to the Assignment of Claims Act of 1940, as amended, in the case of a federal Governmental Authority, and pursuant to applicable law, if any, in the case of any other Governmental Authority, and such assignment has been accepted and acknowledged by the appropriate government officers; or (l) the Administrative Agent, in accordance with its customary criteria, determines, in its sole discretion exercised reasonably, that such Account may not be paid or otherwise is ineligible; or (m) 50% or more of the outstanding Accounts of the Account Debtor have become, or have been determined by the Administrative Agent, in accordance with the provisions hereof, to be, ineligible; or (n) the sale represented by such Account is denominated in a currency other than (i) Dollars or Canadian Dollars in respect of Terra Canada, TNLP or any Borrowing Base Contributor of Terra Capital or (ii) Dollars, Sterling or Euros in respect of Terra UK; or (o) such Account is not evidenced by an invoice or other writing in form acceptable to the Administrative Agent, in its sole discretion; or (p) such Borrowing Base Contributor, in order to be entitled to collect such Account, is required to perform any additional service for, or perform or incur any additional obligation to, the Person to whom or to which it was made. "Eligible Spare Parts Inventory" means Inventory comprised of spare parts (which are classified, in accordance with past practice, as spare parts in the Borrowers' accounting system) and which is otherwise Eligible Inventory. "Environmental Laws" means all applicable Requirements of Law now or hereafter in effect, as amended or supplemented from time to time, relating to pollution or the regulation or protection of occupational health and safety, the environment or natural resources, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S) 9601 et seq.); the Hazardous Material Transportation Act, as amended (49 U.S.C. (S) 180 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. (S) 136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. (S) 6901 et seq.); the Toxic Substance Control Act, as amended (42 U.S.C. (S) 7401 et seq.); the Clean Air Act, as amended (42 U.S.C. (S) 740 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. (S) 1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. (S) 651 et seq.); the Safe Drinking Water Act, as amended (42 U.S.C. (S) 300f et seq.); the Environmental Protection Act (Ontario); the Canadian Environmental Protection Act; the Ontario 13 Water Resources Act; and their state and local counterparts or equivalents and any transfer of ownership notification or approval statute, including the Industrial Site Recovery Act (N.J. Stat. Ann. (S) 13:1K-6 et seq.) and any similar or equivalent Requirement of Law of any relevant jurisdiction. "Environmental Liabilities and Costs" means, with respect to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any other Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, including any thereof arising under any Environmental Law, Permit, order or agreement with any Governmental Authority or other Person, which relate to any environmental, health or safety condition or a Release or threatened Release, and result from the past, present or future operations of, or ownership of property by, such Person or any of its Subsidiaries. "Environmental Lien" means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs. "Equipment" has the meaning specified in the Pledge and Security Agreement. "Equity Issuance" means the issue or sale of any Stock of Terra Industries, any Loan Party or any Subsidiary of any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control or treated as a single employer with the Borrower or any of its Material Subsidiaries within the meaning of Section 414 (b), (c), (m) or (o) of the Code. "ERISA Event" means (i) a reportable event described in Section 4043(b) or 4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a Title IV Plan or a Multiemployer Plan as to which the 30 day notice requirement has not been waived under applicable regulations; (ii) the withdrawal of the Borrower, any of its Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of the Borrower, any of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (iv) notice of reorganization or insolvency of a Multiemployer Plan; (v) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (vi) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (vii) the failure to make any required contribution to a Title IV Plan or Multiemployer Plan; (viii) the imposition of a lien under Section 412 of the Code or Section 302 of ERISA on the Borrower or any of its Subsidiaries or any ERISA Affiliate; or (ix) any other event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA. 14 "Euro" means the single currency of the participating states of the European Union. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Federal Reserve Board, as in effect from time to time. "Eurodollar Base Rate" means the rate determined by the Administrative Agent to be the offered rate for deposits in Dollars for the applicable Interest Period which appears on the Dow Jones Markets Telerate Page 3750 as of 11:00 a.m., London time, on the second full Business Day next preceding the first day of each Interest Period. In the event that such rate does not appear on the Dow Jones Markets Telerate Page 3750 (or otherwise on the Dow Jones Markets screen), the Eurodollar Base Rate for the purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent, or, in the absence of such availability, the Eurodollar Base Rate shall be the rate of interest determined by the Administrative Agent to be the rate per annum at which deposits in Dollars are offered by the principal office of Citibank in London to major banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to the Eurodollar Rate Loan of Citibank for a period equal to such Interest Period. "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 II or on the Assignment and Acceptance by which it became a Lender (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Borrowers and the Administrative Agent. "Eurodollar Rate" means, with respect to any Interest Period for any Eurodollar Rate Loan, an interest rate per annum equal to the rate per annum obtained by dividing (a) the Eurodollar Base Rate by (b) a percentage equal to 100% minus the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities which includes deposits by reference to which the Eurodollar Rate is determined) having a term equal to such Interest Period. "Eurodollar Rate Loan" means any Loan that, for an Interest Period, bears interest based on the Eurodollar Rate. "Event of Default" has the meaning specified in Section 9.1. "Existing Collateral Agent" has the meaning specified in the recitals to this Agreement. "Existing Credit Agreement" has the meaning specified in the recitals to this Agreement. "Existing Lender" means each Revolving Credit Lender (as defined in the Existing Credit Agreement). 15 "Fair Market Value" means (a) with respect to any asset or group of assets (other than a marketable Security) at any date, the value of the consideration obtainable in a sale of such asset at such date assuming a sale by a willing seller to a willing purchaser dealing at arm's length and arranged in an orderly manner over a reasonable period of time having regard to the nature and characteristics of such asset, as reasonably determined by the Board of Directors of the applicable Loan Party, or, if such asset shall have been the subject of a relatively contemporaneous appraisal by an independent third party appraiser, the basic assumptions underlying which have not materially changed since its date, the value set forth in such appraisal, and (b) with respect to any marketable Security at any date, the closing sale price of such Security on the Business Day next preceding such date, as appearing in any published list of any national securities exchange or the Nasdaq Stock Market or, if there is no such closing sale price of such Security, the final price for the purchase of such Security at face value quoted on such business day by a financial institution of recognized standing which regularly deals in securities of such type selected by the Administrative Agent. "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 which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any successor thereto. "Fee Letter" shall mean the letter dated as of the Effective Date, addressed to Terra Industries from CUSA and the Arranger and accepted by Terra Industries, with respect to certain fees to be paid from time to time to the Lenders, CUSA and the Arranger, which letter shall supersede the Fee Letter (as defined in the Existing Credit Agreement). "Financial Statements" means the financial statements of Terra Industries and its Subsidiaries delivered in accordance with Sections 4.4 and 6.1. "Fiscal Quarter" means each of the three month periods ending on March 31, June 30, September 30 and December 31. "Fiscal Year" means the twelve month period ending on December 31. "Foreign Plan" means each Canadian Employee Benefit Plan and each other retirement plan (including any statutory severance obligation requiring a payment upon an employee's termination of employment for any reason other than "cause" based on the employee's length of service) which is not subject to reporting in accordance with GAAP and Financial Accounting Standard Bulletin No. 87 or 106, and as to which Terra Industries or any of its Subsidiaries has any obligation or liability, contingent or otherwise. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the 16 statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination. "General Intangible" has the meaning specified in the Pledge and Security Agreement. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantor" means each of the Terra Capital Guarantors, the Terra UK Guarantors, the TNLP Guarantors. "Guaranty" means the Amended and Restated Guaranty dated as of the Effective Date, in substantially the form of Exhibit H, among each of the Guarantors and the Administrative Agent in respect of each Guarantor's guaranty of certain of the Obligations. "Guaranty Obligation" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness of another Person, if the purpose or intent of such Person in incurring the Guaranty Obligation is to provide assurance to the obligee of such Indebtedness that such Indebtedness will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Indebtedness will be protected (in whole or in part) against loss in respect thereof including, (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of Indebtedness of another Person and (b) any liability of such Person for Indebtedness of another Person through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such Indebtedness or any security therefor, or to provide funds for the payment or discharge of such Indebtedness (whether in the form of a loan, advance, stock purchase, capital contribution or otherwise), (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another Person, (iii) to make take-or-pay or similar payments, if required, regardless of non-performance by any other party or parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, or (v) to supply funds to or in any other manner invest in such other Person (including to pay for property or services irrespective of whether such property is received or such services are rendered), if in the case of any agreement described under subclause (i), (ii), (iii), (iv) or (v) of clause (b) of this sentence the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Guaranty Obligation shall be equal to the amount of the Indebtedness so guaranteed or otherwise supported. "Hedging Contracts" means all Interest Rate Contracts, foreign exchange contracts, currency swap or option agreements, forward contracts, commodity swap, purchase or option agreements, other commodity price hedging arrangements, and all other similar agreements or arrangements designed to alter the risks of any Person arising from fluctuations in currency values or commodity prices. "Indebtedness" of any Person means without duplication (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person evidenced by notes, bonds, 17 debentures or similar instruments or which bear interest, (c) all reimbursement and all obligations with respect to letters of credit, bankers' acceptances, surety bonds and performance bonds, whether or not matured, (d) all indebtedness for the deferred purchase price of property or services, other than trade payables and accrued expenses incurred in the ordinary course of business which are not overdue, (e) all indebtedness of such Person 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), (f) all Capital Lease Obligations and Major Operating Lease Obligations of such Person, (g) all Guaranty Obligations of such Person, (h) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any Stock or Stock Equivalents of such Person, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (i) all payments that such Person would have to make in the event of an early termination on the date Indebtedness of such Person is being determined in respect of Hedging Contracts of such Person and (j) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including Accounts and General Intangibles) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. "Indemnitees" has the meaning specified in Section 11.4. "Indentures" means (a) the Senior Note (2003) Indenture, (b) the Senior Note (2005) Indenture and (c) the Senior Secured Note Indenture. "Initial Closing Date" means the Closing Date (as defined in the Existing Credit Agreement). "Instrument" has the meaning specified in the Pledge and Security Agreement. "Intercompany Indebtedness" means Indebtedness owed by Terra Industries or one of its Subsidiaries to Terra Industries or one of its Subsidiaries. "Interest Period" means, in the case of any Eurodollar Rate Loan, (a) initially, the period commencing on the date such Eurodollar Rate Loan is made or on the date of conversion of a Base Rate Loan to such Eurodollar Rate Loan and ending one, two, three or six months thereafter, as selected by a Borrower in its Notice of Borrowing or Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.2 or 2.11, and (b) thereafter, if such Loan is continued, in whole or in part, as a Eurodollar Rate Loan pursuant to Section 2.11, a period commencing on the last day of the immediately preceding Interest Period therefor and ending one, two, three or six months thereafter, as selected by a Borrower in its Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.11; provided, however, that all of the foregoing provisions relating to Interest Periods in respect of Eurodollar Rate Loans are subject to the following: (i) if any Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless the result of such extension would be to extend such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; 18 (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (iii) no Borrower may select any Interest Period that ends after the date of a scheduled principal payment on the Loans as set forth in Article II unless, after giving effect to such selection, the aggregate unpaid principal amount of the Loans for which Interest Periods end after such scheduled principal payment shall be equal to or less than the principal amount to which the Loans are required to be reduced after such scheduled principal payment is made; and (iv) there shall be outstanding at any one time no more than seven Interest Periods in the aggregate. "Interest Rate Contracts" means all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and interest rate insurance. "Inventory" has the meaning specified in the Pledge and Security Agreement. "Investment" means, with respect to any Person, (a) any purchase or other acquisition by that Person of (i) any Security issued by, (ii) a beneficial interest in any Security issued by, or (iii) any other equity ownership interest in, any other Person, (b) any purchase by that Person of all or a significant part of the assets of a business conducted by another Person, (c) any loan, advance (other than prepaid expenses, accounts receivable and similar items made or incurred in the ordinary course of business as presently conducted), or capital contribution by that Person to any other Person, including all Indebtedness to such Person arising from a sale of property by such Person other than in the ordinary course of its business and (d) any deposit with a financial institution. "Investment Property" has the meaning specified in the Pledge and Security Agreement. "IRS" means the Internal Revenue Service of the United States or any successor thereto. "Issuer" means each Lender or Affiliate of a Lender that (a) is listed on the signature pages hereof as an "Issuer" or (b) hereafter becomes an Issuer with the approval of the Administrative Agent and the Borrower by agreeing pursuant to an agreement with and in form and substance satisfactory to the Administrative Agent and the Borrowers to be bound by the terms hereof applicable to Issuers. "Junior Collateral Documents" means (i) in respect of TNLP's obligations for the TNLP Debt, the Amended and Restated Junior TNLP and TNCLP Pledge and Security Agreement, (ii) in respect of Terra UK's obligations for the Terra UK Debt and the Terra UK Junior Guaranty, the debenture executed by Terra UK in favor of Terra Capital and the related Assignment Agreement and Subordination Agreement, each dated as of the Effective Date, among Terra Capital, Terra UK and the Administrative Agent and (iii) in respect of the Terra Canada Debt and the Terra Canada Junior Guaranty, respectively, the Junior General Security Agreements and Assignments each dated as of the Effective Date, executed by Terra Canada in 19 favor of Terra Capital and accepted and agreed to by the Administrative Agent, each of the foregoing being assigned to the Administrative Agent. "Junior Loan Documents" means (i) in respect of the TNLP Debt, an amended and restated promissory note dated as of April 7, 2000, issued by TNLP in favor of Terra Capital, (ii) in respect of the Terra UK Debt, the Terra UK Debt Note and the Terra Canada Junior Guaranty and (iii) in respect of the Terra Canada Debt, the Terra Canada Debt Note and the Terra UK Junior Guaranty. "Junior TNLP and TNCLP Pledge and Security Agreement" means the Amended and Restated Pledge and Security Agreement dated as of the Effective Date, in substantially the form of Exhibit J, between TNLP, TNCLP, and Terra Capital and accepted and agreed to by the Administrative Agent. "Landlord Waiver" means a letter in form and substance reasonably acceptable to the Administrative Agent, executed by a landlord in respect of Inventory of any Borrowing Base Contributor located at any leased premises of such Borrowing Base Contributor pursuant to which such landlord, among other things, waives or subordinates any Lien such landlord may have in respect of such Inventory. "L/C Cash Collateral Account" has the meaning specified in Section 9.3. "Leases" means, with respect to any Person, all of those leasehold estates in real property of such Person, as lessee, as such may be amended, supplemented or otherwise modified from time to time. "Lender" means each financial institution or other entity that (a) is listed on the signature pages hereof as a "Lender" or (b) from time to time becomes a party hereto by execution of an Assignment and Acceptance. "Letter of Credit" means any letter of credit issued pursuant to Section 2.4. "Letter of Credit Obligations" means, at any time, the aggregate of all liabilities at such time of each Borrower to all Issuers with respect to Letters of Credit, whether or not any such liability is contingent, and includes the sum of (a) the Reimbursement Obligations at such time and (b) the Letter of Credit Undrawn Amounts at such time. "Letter of Credit Reimbursement Agreement" has the meaning specified in Section 2.4(e). "Letter of Credit Request" has the meaning specified in Section 2.4(c). "Letter of Credit Sublimit" has the meaning specified in Section 2.4(a)(iv). "Letter of Credit Undrawn Amounts" means, at any time, the aggregate undrawn face amount of all Letters of Credit outstanding at such time. "Leverage Ratio" means, with respect to any Person for any period, the ratio of (a) Indebtedness of the type specified in clauses (a), (b), (d), (e), (f) and (h) of the definition of 20 "Indebtedness" of such Person as of the last day of such period to (b) Cash Flow for such Person for such period. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, lien (statutory or other), security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever intended to assure payment of any Indebtedness or other obligation, including any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction naming the owner of the asset to which such Lien relates as debtor but excluding any right of set-off. "Loan" means any loan made by any Lender under this Agreement, including each Revolving Loan and Swing Loan. "Loan Documents" means, collectively, this Agreement, any Notes, each Guaranty, the Fee Letter, each Letter of Credit Reimbursement Agreement, each Hedging Contract to which a Lender or an Affiliate of a Lender is a party, each agreement pursuant to which a Lender or an Affiliate of a Lender provides cash management services to a Loan Party, the Loan Purchase Agreement, the Collateral Documents, the Junior Loan Documents, and each Assignment and Acceptance and each certificate, agreement or document executed by a Loan Party and delivered to the Administrative Agent or any Lender in connection with or pursuant to any of the foregoing. "Loan Party" means each Borrower, each Guarantor and each other Subsidiary of Terra Industries that executes and delivers a Loan Document. "Loan Purchase Agreement" means the Amended and Restated Loan Purchase Agreement dated as of the Effective Date, in substantially the form of Exhibit M, between the Administrative Agent and Terra Industries. "Lockbox" has the meaning specified in each applicable Deposit Account Control Agreement. "Major Operating Lease Obligations" means, in respect of 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 property leased thereunder. "Management Agreements" means each management agreement between Terra Industries and/or any of its Subsidiaries and other Persons providing for the performance by Terra Industries or any such Subsidiary of certain treasury, purchasing, legal and/or other services for its Subsidiaries and such other Persons, or such agreements as are in effect from time to time. "Material Adverse Change" means a material adverse change in any of (a) the business, condition (financial or otherwise), operations, performance or properties of any Borrower, individually, or Terra Industries and its Subsidiaries, taken as a whole, (b) the legality, validity or enforceability of any Loan Document, (c) the perfection or priority of the Liens granted pursuant to the Collateral Documents (except as expressly permitted hereby or thereby), 21 (d) the ability of the Borrowers to repay the Obligations or of the Loan Parties to perform their obligations under the Loan Documents, or (e) the rights and remedies of the Administrative Agent or the Lenders under the Loan Documents. "Material Adverse Effect" means an effect that results in or causes, or could reasonably be expected to result in or cause a Material Adverse Change. "Material Documents" means the Management Agreements, the Indentures and the Ammonium Nitrate Hedging Agreement. "Material Subsidiary" means, at any time, each Borrower, each Guarantor, TNCLP and any direct or indirect Subsidiary of Terra Industries owning at least $500,000 of assets or generating at least $100,000 gross income for the Fiscal Year most recently ended. "Maximum Credit" means, at any time, (a) the lesser of (i) the Revolving Credit Commitments in effect at such time and (ii) the sum of the aggregate Borrowing Base of Terra Capital, Terra UK and TNLP at such time, minus (b) the aggregate amount of Availability Reserves in effect at such time. "Maximum Repurchase Amount" means (a) during the first Repurchase Period ending after the Effective Date, an amount equal to the amount (if any) by which the gross proceeds of the issuance of the Senior Secured Notes exceeds $225,000,000 and (b) during each subsequent Repurchase Period an amount (to be reset on the first day of each such Repurchase Period) equal to the excess (if any) of (i) the daily average (for the preceding 30-day period) of (A) the aggregate Borrowing Base of the Borrowers on each day during such preceding period less (B) the aggregate amount of past due payables of the Borrowers and the Guarantors on each such day over (ii) $125,000,000. "Mortgage" means a mortgage, deed of trust, charge, debenture, fixture filing or other real estate security document made or required to be made under the Senior Secured Note Indenture by any Loan Party, pursuant to which such Loan Party grants to the Senior Secured Note Trustee a first priority Lien (subject only to Liens permitted by the applicable mortgage, deed of trust, charge, debenture, fixture filing or other real estate security document) on Real Property. "Mortgage Releases" means the releases and terminations executed by the Existing Collateral Agent releasing or terminating as appropriate the mortgages, deeds of trust, charges, debentures, fixture filings and other Liens it currently holds over Real Property that will be made subject to a Mortgage, duly executed and delivered by the Existing Collateral Agent and acknowledged by the relevant Loan Party mortgagor. "Mortgagee Waiver" means a letter in form and substance reasonably acceptable to the Administrative Agent, executed by a mortgagee in respect of Inventory of any Borrowing Base Contributor located at any mortgaged premises of such Borrowing Base Contributor. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which Terra Industries, any of its Subsidiaries or any ERISA Affiliate has any obligation or liability, contingent or otherwise. 22 "Net Cash Proceeds" means (a) proceeds received by Terra Industries or its Subsidiaries after the Effective Date in cash or Cash Equivalents from any Asset Sale of property constituting Collateral, other than Asset Sales permitted under clauses (a) through (e) of Section 8.4, net of (x) the reasonable cash costs of sale, assignment or other disposition, (y) taxes paid or payable within 22 months of the date of such Asset Sale as a result thereof (provided, however, that any such taxes which are so payable shall be deposited in a Cash Collateral Account acceptable to the Administrative Agent pending payment) and (z) any amount required to be paid or prepaid on Indebtedness (other than the Obligations) secured by the assets subject to such Asset Sale; provided, however, that the evidence of each of (x), (y) and (z) are provided to the Administrative Agent in form and substance satisfactory to it; (b) proceeds of insurance covering property constituting Collateral (net of (i) reasonable expenses incurred directly in the collection thereof and (ii) (to the extent permitted hereby) contractually required payments of Indebtedness (other than the Obligations) secured by a Lien on the insured property (that is prior to any Lien granted under the Collateral Documents)) on account of the loss of or damage to any such assets or property, and payments of compensation for any such assets or property taken by expropriation, condemnation or eminent domain, to the extent such proceeds or payments exceed $2,000,000 in the aggregate; and (c) proceeds received after the Effective Date by Terra Industries or its Subsidiaries in cash or Cash Equivalents from (i) any Equity Issuance (other than any such issuance of common Stock of Terra Industries occurring in the ordinary course of business to any director, member of the management or employee of Terra Industries or its Subsidiaries and other than any such issuance of Stock of TNCLP constituting Senior Secured Note Collateral), or (ii) any Debt Issuance (except for Indebtedness permitted under clauses (c) through (i) of Section 8.1), in each case net of brokers' and advisors' fees and other costs incurred in connection with such transaction; provided, however, that evidence of such costs is provided to the Administrative Agent. "Non-Funding Lender" has the meaning specified in Section 2.2(d). "Non-Material Real Property" means any parcel of Real Property which has a Fair Market Value of less than $500,000 or (if leasehold) the lease rental payments in respect thereof are less than $500,000 per annum. "Non-U.S. Lender" means each Lender or Administrative Agent that is not a United States person as defined in Section 7701(a)(30) of the Code. "Note" means a promissory note of a Borrower (other than Terra UK), substantially in the form of Exhibit B, payable to the order of any Lender in a principal amount equal to the amount of such Lender's Revolving Credit Commitment evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the Revolving Loans owing to such Lender. "Notice of Borrowing" has the meaning specified in Section 2.2(a). "Notice of Conversion or Continuation" has the meaning specified in Section 2.11. "Obligations" means the Loans, the Letter of Credit Obligations and all other advances, debts, liabilities, obligations, covenants and duties owing by the Loan Parties to the Administrative Agent, any Lender, any Issuer, any Affiliate of any of them or any Indemnitee, of every type and description, present or future, arising under this Agreement or under any other 23 Loan Document or under or in respect of any credit cards issued for the account of such Person by the Administrative Agent or any of its Affiliates, by reason of an extension of credit, opening or amendment of a Letter of Credit or payment of any draft drawn thereunder, loan, guaranty, indemnification, foreign exchange transaction, Hedging Contract, cash management service or otherwise, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising (including arising after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or similar proceeding, regardless of whether the same is allowable as a claim in such proceeding or by applicable law) and however acquired and whether or not evidenced by any note, guaranty or other instrument or for the payment of money. The term "Obligations" includes all letter of credit, cash management and other fees and expenses and all interest, charges, expenses, fees, attorneys' fees and disbursements and other sums chargeable to the Loan Parties under this Agreement or any other Loan Document and all obligations of the Loan Parties to cash collateralize Letter of Credit Obligations. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "Permit" means any permit, approval, authorization, license, variance or permission required from a Governmental Authority under an applicable Requirement of Law. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, estate, trust, limited liability company, unincorporated association, joint venture or other entity, or a Governmental Authority. "Pledge and Security Agreement" means the Amended and Restated Pledge and Security Agreement dated as of the Effective Date, in substantially the form of Exhibit I, among Terra Industries, Terra Capital, TNLP, each Guarantor that is a Domestic Subsidiary and the Administrative Agent. "Port Neal" means Port Neal Corporation, a Delaware corporation. "Pro Forma Balance Sheet" has the meaning specified in Section 4.4(d). "Projections" means (i) up until the delivery of any update or restatement thereof pursuant to Section 6.1(e), those financial projections contained in Schedule III, covering the monthly financial projections through December 31, 2002 and Fiscal Years ending in 2003 and 2004, or (ii) thereafter, the most recent update or restatement of such projections delivered pursuant to Section 6.1(e). "Purchase Event" means the occurrence of any of the following: (a) any Subsidiary of Terra Industries has any outstanding Indebtedness owing to Terra Industries or any of its Subsidiaries, other than Indebtedness permitted to be outstanding under Section 8.1 (except clause (k) thereof); or (b) Liens on or with respect to any property of any Subsidiary of Terra Industries have been created in favor of Terra Industries or any of its Subsidiaries, other than Liens permitted under Section 8.2 (except clause (i) thereof); or 24 (c) any Subsidiary of Terra Industries has made any Investments in Terra Industries or any of its Subsidiaries, other than Investments permitted under Section 8.3 (except clause (m) thereof); or (d) any Subsidiary of Terra Industries has sold, transferred or otherwise disposed of any of its property to Terra Industries or any of its Subsidiaries, other than sales, transfers or other dispositions permitted under Section 8.4 (except clause (g) thereof); or (e) Terra Industries or any of its Subsidiaries receive, declare, order, pay, make or set apart any Restricted Payment other than Restricted Payments permitted under Section 8.5 (except clause (g) thereof). "Qualifying Lender" means: (a) a bank as defined in (S) 840A for the purposes of (S) 349(3)(a) of the UK Income and Corporation Taxes Act 1988 which is within the charge to United Kingdom corporation tax in respect of payments of interest received by it under this agreement and which is beneficially entitled to such interest; or (b) a bank, financial institution or corporation which is resident in a country with which the United Kingdom has a double-taxation treaty under which that bank, financial institution or corporation is entitled, subject to completion of any necessary procedural formalities, to receive principal, interest and fees under this agreement without withholding of United Kingdom Income Tax. "Ratable Portion" or "ratably" means, with respect to any Lender, the percentage obtained by dividing (a) the Revolving Credit Commitment of such Lender by (b) the aggregate Revolving Credit Commitments of all Lenders (or, at any time after the Revolving Credit Termination Date, the percentage obtained by dividing the aggregate outstanding principal balance of the Revolving Credit Outstandings owing to such Lender by the aggregate outstanding principal balance of the Revolving Credit Outstandings owing to all Lenders). "Real Property" means all of those plots, pieces or parcels of land now owned, leased or hereafter acquired or leased by any Loan Party or any of its Subsidiaries (the "Land"), together with the right, title and interest of such Loan Party or Subsidiary, if any, in and to the streets, the land lying in the bed of any streets, roads or avenues, opened or proposed, in front of, the air space and development rights pertaining to the Land and the right to use such air space and development rights, all rights of way, privileges, liberties, tenements, hereditaments and appurtenances belonging or in any way appertaining thereto, all fixtures, all easements now or hereafter benefiting the Land and all royalties and rights appertaining to the use and enjoyment of the Land, including all alley, vault, drainage, mineral, water, oil and gas rights, together with all of the buildings and other improvements now or hereafter erected on the Land, and any fixtures appurtenant thereto. "Redemption Notice Period" has the meaning specified in Section 3.1(c). "Register" has the meaning specified in Section 11.2(c). 25 "Reimbursement Obligations" means all matured reimbursement or repayment obligations of the Borrower to any Issuer with respect to amounts drawn under Letters of Credit. "Release" means, with respect to any Person, any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration, in each case, of any Contaminant into the environment or into or out of any property owned by such Person, including the movement of Contaminants through or in the air, soil, surface water, ground water or property. "Remedial Action" means all actions required to (a) clean up, remove, treat or in any other way address any Release of any Contaminant in the environment, (b) prevent the Release or threat of Release or minimize the further Release so that a Contaminant does not migrate or endanger or threaten to endanger public health or welfare or the environment or (c) perform pre-remedial studies and investigations and post-remedial monitoring and care. "Repurchase Period" means each of the following periods during which the Borrowers and the Guarantors may make open market purchases of Senior Notes (2005) and Common Units, subject to the terms of Section 8.3(h) and Section 8.12: (a) the period beginning on the Effective Date and ending on June 30, 2002 and (b) each twelve month period beginning on July 15 of each year prior to the Scheduled Termination Date and ending on July 14 of the following year beginning on July 15, 2002. "Requirement of Law" means, with respect to any Person, all federal, provincial, state, local and foreign laws, rules and regulations, orders, judgments, decrees and other determinations of any Governmental Authority or arbitrator, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Requisite Lenders" means those Lenders having more than fifty percent (50%) of the aggregate outstanding amount of the aggregate Revolving Credit Commitments or, after the Revolving Credit Termination Date, the aggregate Revolving Credit Outstandings. Prior to the Revolving Credit Termination Date, a Non-Funding Lender shall not be included in the calculation of "Requisite Lenders". "Responsible Officer" means, with respect to any Person, any of the principal executive officers, managing members or general partners of such Person, but in any event, with respect to financial matters, the chief financial officer, treasurer or controller of such Person. "Restricted Payment" means (a) any dividend or other distribution, direct or indirect, on account of any Stock or Stock Equivalents of Terra Industries or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in Stock or Stock Equivalents or a dividend or distribution payable solely to any Borrower and/or one or more Subsidiary Guarantors, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Stock or Stock Equivalents of Terra Industries or any of its Subsidiaries now or hereafter outstanding other than one payable solely to Terra Industries and/or one or more Subsidiary Guarantors or any cashless exercise of warrants or options in respect of the foregoing, and (c) any payment or prepayment of principal, premium (if any), interest, fees (including fees to obtain any waiver or consent in connection with any Security) or other charges on, or redemption, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any Subordinated Debt, other than any required redemptions, 26 retirement, purchases or other payments, in each case to the extent permitted to be made by the terms of such Indebtedness after giving effect to any applicable subordination provisions. "Revolving Credit Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans and acquire interests in other Revolving Credit Outstandings in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender's name on Schedule I under the caption "Revolving Credit Commitment," as amended to reflect each Assignment and Acceptance executed by such Lender and as such amount may be reduced pursuant to this Agreement. "Revolving Credit Facility" means the Revolving Credit Commitments and the provisions herein related to the Revolving Loans, Swing Loans and Letters of Credit. "Revolving Credit Outstandings" means, at any particular time, the sum of (a) the principal amount of the Revolving Loans outstanding at such time plus (b) the Letter of Credit Obligations outstanding at such time plus (c) the principal amount of Swing Loans outstanding at such time. "Revolving Credit Termination Date" shall mean the earliest of (a) the Scheduled Termination Date, (b) the date of termination of the Revolving Credit Commitments pursuant to Section 2.5 and (c) the date on which the Obligations become due and payable pursuant to Section 9.2. "Revolving Loan" has the meaning specified in Section 2.1. "Scheduled Termination Date" means June 30, 2005. "Seasonal Eligible Inventory Rate" means, in any calendar month with respect to each type of Eligible Non-Spare Parts Inventory set forth below, the applicable percentage set forth opposite such month under such type of Eligible Non-Spare Parts Inventory:
----------------------------------------------------------------------------------------------- Calendar Ammonia/ Natural Precious Month Ammonia UAN 28 Urea Methanol Gas Metals Other Nitrate ----------------------------------------------------------------------------------------------- January 71% 56% 58% 50% 56% 60% 64% February 75% 59% 60% 53% 56% 60% 68% March 75% 59% 60% 53% 56% 60% 68% April 75% 59% 60% 53% 56% 60% 68% May 75% 59% 60% 53% 56% 60% 68% June 75% 59% 60% 53% 56% 60% 68% July 75% 59% 60% 53% 56% 60% 68% August 71% 56% 58% 50% 56% 60% 64% September 71% 56% 58% 50% 56% 60% 64% October 71% 56% 58% 50% 56% 60% 64% November 71% 56% 58% 50% 56% 60% 64% December 71% 56% 58% 50% 56% 60% 64% -----------------------------------------------------------------------------------------------
"Secured Parties" means the Lenders, the Issuers, the Administrative Agent and any other holder of any of the Obligations. 27 "Security" means any Stock, Stock Equivalent, voting trust certificate, bond, debenture, note or other evidence of Indebtedness, whether secured, unsecured, convertible or subordinated, or any certificate of interest, share or participation in, or any temporary or interim certificate for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing, but shall not include any evidence of the Obligations. "Senior Note (2003) Indenture" means the 10-3/4% Senior Note Indenture dated October 15, 1993 between Terra Industries (as successor to AMCI) and Society National Bank. "Senior Note (2005) Indenture" means the 10-1/2% Senior Note Indenture dated June 22, 1995 between Terra Industries and First Trust National Association. "Senior Note (2005) Purchase" has the meaning specified in Section 8.12. "Senior Notes (2003)" means the 10-3/4% Senior Notes due 2003 issued pursuant to the Senior Note (2003) Indenture. "Senior Notes (2005)" means the 10-1/2% Senior Notes due 2005 issued pursuant to the Senior Note (2005) Indenture. "Senior Secured Note Collateral" has the meaning specified in the Senior Secured Note Intercreditor Agreement. "Senior Secured Note Documents" has the meaning specified in the Senior Secured Note Intercreditor Agreement, and includes the Senior Secured Notes and the Senior Secured Note Indenture. "Senior Secured Note Indenture" means the 12-7/8% Senior Note Indenture dated October 10, 2001 between Terra Capital and the Senior Secured Note Trustee. "Senior Secured Note Intercreditor Agreement" means the Access, Use and Intercreditor Agreement dated as of the Effective Date, in substantially the form of Exhibit L, among the Borrowers and Guarantors, the Administrative Agent and the Senior Secured Note Trustee. "Senior Secured Note Trustee" means the trustee, together with its successors and assigns in such capacity, appointed in accordance with the provisions of the Senior Secured Note Indenture to act for the benefit of the holders of the Senior Secured Notes. "Senior Secured Notes" means the 12-7/8% Senior Secured Notes (including the Initial Notes and the Exchange Notes, as such terms are defined in the Senior Secured Note Indenture) due 2008 issued or to be issued by Terra Capital pursuant to the Senior Secured Note Indenture. "Shared Collateral" has the meaning specified in the Senior Secured Note Intercreditor Agreement. "Solvent" means, with respect to any Person, that the value of the assets of such Person (both at fair value and present fair saleable value) is, on the date of determination, greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such 28 Person as of such date and that, as of such date, such Person is able to pay all liabilities of such Person as such liabilities mature and does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Standby Letter of Credit" means any letter of credit issued pursuant to Section 2.4 which is not a Documentary Letter of Credit. "Sterling" and "(pound)" means the lawful money of the United Kingdom. "Stock" means shares of capital stock (whether denominated as common stock or preferred stock), beneficial, partnership or membership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity, whether voting or non-voting. "Stock Equivalents" means all securities convertible into or exchangeable for Stock and all warrants, options or other rights to purchase or subscribe for any Stock, whether or not presently convertible, exchangeable or exercisable. "Subordinated Debt" means all Indebtedness of Terra Industries and its Subsidiaries which is subordinated in right of payment to the prior payment in full of the Obligations. "Subsidiary" means, with respect to any Person, any corporation, partnership, limited liability company or other business entity (a) of which an aggregate of more than 50% of the outstanding Voting Stock is, at the time, directly or indirectly, owned or controlled by such Person and/or one or more Subsidiaries of such Person, or (b) the ordinary power to appoint the majority of the members of the board of directors, managers, trustees or other controlling Person of which is held by such Person and/or one or more Subsidiaries of such Person. "Subsidiary Guarantor" means, in respect of any Borrower, a Subsidiary of such Borrower which has guaranteed all of such Borrower's Obligations. "Swing Loan" has the meaning specified in Section 2.3. "Swing Loan Borrowing" means a borrowing consisting of a Swing Loan. "Swing Loan Lender" means CUSA. "Swing Loan Request" has the meaning specified in Section 2.3(b). "Syndication Agent" has the meaning specified at the beginning of this Agreement. "Tax Affiliate" means, with respect to any Person, (a) any Subsidiary of such Person, and (b) any Affiliate of such Person with which such Person files or is eligible to file consolidated, combined or unitary Tax Returns. "Tax Return" has the meaning specified in Section 4.8(a). 29 "Taxes" has the meaning specified in Section 2.16(a). "Term Loan" has the meaning specified in the Existing Credit Agreement. "Terra Canada" means Terra International (Canada) Inc., a corporation governed by the laws of Ontario and an indirect wholly owned Subsidiary of Terra Capital. "Terra Canada Collateral Documents" means, collectively, the Terra Canada Security Agreement and each security agreement or other grant of security now or hereafter made by Terra Canada to secure any of its Obligations, and all recordings, registrations and other filings required by this Agreement or any of the foregoing to be filed with respect to the Liens created pursuant thereto. "Terra Canada Credit Agreement" means the Credit Agreement dated as of December 31, 1997 and amended and restated as of March 31, 1998, as of June 25, 1999 and on April 7, 2000 among Terra Canada, the lenders party thereto and Citibank, as administrative agent for said lenders. "Terra Canada Debt" means Intercompany Indebtedness, in an initial principal amount of $47,301,147 outstanding as of the Effective Date, owed by Terra Canada to Terra Capital. "Terra Canada Debt Note" means the promissory note issued by Terra Canada evidencing the Terra Canada Debt, dated as of the Effective Date. "Terra Canada Junior Guaranty" means the Junior Guaranty dated as of the Effective Date, executed by Terra Canada in favor of Terra Capital in respect of the Terra UK Debt, and assigned to the Administrative Agent. "Terra Canada Mortgage" means the collateral charge dated December 31, 1997 in favor of the Administrative Agent covering (inter alia) Terra Canada's Courtright, Ontario manufacturing facility. "Terra Canada Security Agreement" means the Amended and Restated General Security Agreement dated as of the Effective Date, in substantially the form of Exhibit O, executed by Terra Canada in favor of the Administrative Agent. "Terra Capital Available Credit" means, at any time, an amount equal to (a) the lesser of (i) the then effective Revolving Credit Commitments and (ii) the Borrowing Base of Terra Capital at such time minus (b) the sum of (i) the aggregate Revolving Credit Outstandings owing by Terra Capital at such time and (ii) any Availability Reserve applicable to Terra Capital in effect at such time. "Terra Capital Guarantors" means each of (i) Terra Industries, (ii) the Borrowing Base Contributors of Terra Capital, (iii) Terra Capital Holdings, (iv) TNC, (v) TI, (vi) BMCH, (vii) Beaumont Holdings, (viii) TMC, (ix) Terra UK Holdings, (x) Terra Real Estate and (xi) any other Domestic Subsidiary (other than TNCLP and its Subsidiaries) that becomes party to a Guaranty in respect of the Obligations of Terra Capital. 30 "Terra Capital Holdings" means Terra Capital Holdings, Inc., a Delaware corporation. "Terra Oklahoma" means Terra International (Oklahoma) Inc., a Delaware corporation and a wholly owned Subsidiary of TI. "Terra Real Estate" means Terra Real Estate Corp., an Iowa corporation and a wholly owned Subsidiary of TI. "Terra UK Available Credit" means, at any time, an amount equal to (a) the lesser of (i) the then effective Revolving Credit Commitments and (ii) the Borrowing Base of Terra UK at such time minus (b) the sum of (i) the aggregate Revolving Credit Outstandings owing by Terra UK at such time and (ii) any Availability Reserve applicable to Terra UK in effect at such time. "Terra UK Customer Debt" means Indebtedness for borrowed money of a customer of Terra UK owing to Capital Bank Plc or another financial institution in the United Kingdom, provided that: (a) such customer uses the entire principal proceeds of such Indebtedness to pay for goods and services purchased from Terra UK; (b) such customer is required to repay such Indebtedness in full within 12 months of the date on which such Indebtedness is incurred; (c) in the reasonable opinion of Terra UK, such customer is creditworthy; and (d) it is a condition of the extension of credit by Capital Bank Plc (or such other financial institution) to such customer that Terra UK guarantee a portion of such Indebtedness. "Terra UK Debt" means Intercompany Indebtedness, in an initial principal amount of $49,161,408 outstanding as of the Effective Date, owed by Terra UK to Terra Capital, and excluding the Terra UK Fixed Asset Secured Debt. "Terra UK Debt Note" means the promissory note issued by Terra UK evidencing the Terra UK Debt, dated as of the Effective Date. "Terra UK Fixed Asset Secured Debt" means the Intercompany Indebtedness owing from Terra UK to Terra UK Holdings in a maximum principal amount of $100,000,000, the promissory note, guarantees, security interests and other supporting obligations in respect of which constitute Senior Secured Note Collateral. "Terra UK Guarantors" means each of (i) Terra Capital, (ii) the Terra Capital Guarantors and (iii) Terra Canada. "Terra UK Holdings" means Terra (U.K.) Holdings, Inc., a Delaware corporation and a direct Subsidiary of Beaumont Holdings and TMC. 31 "Terra UK Junior Guaranty" means the Junior Guaranty dated as of the Effective Date, executed by Terra UK in favor of Terra Capital in respect of the Terra Canada Debt, and assigned to the Administrative Agent. "Terra UK Share Mortgage" means the share mortgage executed by Terra Canada dated June 30, 1999 in respect of the Stock of Terra UK. "TI" means Terra International, Inc., a Delaware corporation and a wholly owned Subsidiary of Terra Industries. "Title IV Plan" means a pension plan, other than a Multiemployer Plan, which is covered by Title IV of ERISA to which the Borrower, any of its Subsidiaries or any ERISA Affiliate has any obligation or liability (contingent or otherwise). "TMC" means Terra Methanol Corporation, a Delaware corporation. "TNC" means Terra Nitrogen Corporation, a Delaware corporation and a wholly owned Subsidiary of Terra Capital. "TNCLP" means Terra Nitrogen Company, L.P., a Delaware limited partnership and a Subsidiary of Terra Capital. "TNCLP Minority Interest Payments" means dividends and distributions which are legally required to be paid to holders of Common Units (other than Terra Industries and its Subsidiaries). "TNLP Available Credit" means, at any time, an amount equal to (a) the lesser of (i) the then effective Revolving Credit Commitments and (ii) the Borrowing Base of TNLP at such time, minus (b) the sum of (i) the aggregate Revolving Credit Outstandings owing by TNLP at such time and (ii) any Availability Reserve applicable to TNLP in effect at such time. "TNLP Debt" means Intercompany Indebtedness owing from time to time by TNLP to Terra Capital, in an initial principal amount of $20,507,945 as of the Effective Date, but excluding the TNLP Fixed Asset Secured Debt. "TNLP Fixed Asset Secured Debt" means the Intercompany Indebtedness owing from TNLP to Terra Capital in a maximum principal amount of $8,200,000, the promissory note, guarantees, security interests and other supporting obligations in respect of which constitute Senior Secured Note Collateral. "TNLP Guarantors" means (i) Terra Capital, (ii) the Terra Capital Guarantors, (iii) TNCLP and (iv) any subsidiary of TNLP that becomes a party to a Guaranty in respect of the Obligations of TNLP. "Total Assets" of any Person means, at any date, the total assets of such Person and its Subsidiaries at such date determined on a consolidated basis in conformity with GAAP minus (a) any minority interest in non-wholly-owned Subsidiaries that would be reflected on a consolidated balance sheet of such person and its Subsidiaries at such date prepared in conformity with GAAP and (b) any Securities issued by such Person held as treasury securities. 32 "Trustee (2003)" has the meaning specified in Section 3.1(c). "UCC" has the meaning specified in the Pledge and Security Agreement. "Unfunded Pension Liability" means, with respect to the Borrower at any time, the sum of (a) the amount, if any, by which the present value of all accrued benefits under each Title IV Plan (other than any Title IV Plan subject to Section 4063 of ERISA) exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, as determined as of the most recent valuation date for such Title IV Plan using the actuarial assumptions in effect under such Title IV Plan, and (b) the aggregate amount of withdrawal liability that could be assessed under Section 4063 with respect to each Title IV Plan subject to such Section, separately calculated for each such Title IV Plan as of its most recent valuation date and (c) for a period of five years following a transaction reasonably likely to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by the Borrower, any of its Subsidiaries or any ERISA Affiliate as a result of such transaction. "United Kingdom" and "UK" each means the territory known as the United Kingdoms of England, Scotland, Wales and Northern Ireland. "US Concentration Account" means the concentration account opened with Citibank in New York, New York set forth on Schedule 7.12. "Voting Stock" means Stock of any Person having ordinary power to vote in the election of members of the board of directors, managers, trustees or other controlling Persons, of such Person (irrespective of whether, at the time, Stock of any other class or classes of such entity shall have or might have voting power by reason of the happening of any contingency). "Withdrawal Liability" means, with respect to the Borrower at any time, the aggregate liability incurred (whether or not assessed) with respect to all Multiemployer Plans pursuant to Section 4201 of ERISA or for increases in contributions required to be made pursuant to Section 4243 of ERISA. Section 1.2. Computation of Time Periods. In this Agreement, in --------------------------- the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including." Section 1.3. Accounting Terms and Principles. ------------------------------- (a) Except as set forth below, all accounting terms not specifically defined herein shall be construed in conformity with GAAP and all accounting determinations required to be made pursuant hereto shall, unless expressly otherwise provided herein, be made in conformity with GAAP. (b) If any change in the accounting principles used in the preparation of the most recent Financial Statements referred to in Section 6.1 is hereafter required or permitted by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or any successors thereto) and such change is adopted by the Borrower with the agreement of its independent public accountants and results in a change in the results of any of the calculations required by Article V or Article VIII 33 which would not have occurred had such accounting change not occurred, the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such change with the desired result that the criteria for evaluating compliance with such covenants by the Borrower shall be the same after such change as if such change had not been made; provided, however, that no change in GAAP that would affect a calculation that measures compliance with any covenant contained in Article V or Article VIII shall be given effect until such provisions are amended to reflect such changes in GAAP. Section 1.4. Certain Terms. ------------- (a) The words "herein," "hereof" and "hereunder" and similar words refer to this Agreement as a whole, and not to any particular Article, Section, subsection or clause in, this Agreement. (b) References in this Agreement to an Exhibit, Schedule, Article, Section, subsection or clause refer to the appropriate Exhibit or Schedule to, or Article, Section, subsection or clause in this Agreement. (c) Each agreement defined in this Article I shall include all appendices, exhibits and schedules thereto. Unless the prior written consent of the Requisite Lenders (or such other combination of Lenders as may be required hereunder) is required hereunder for an amendment, restatement, supplement or other modification to any such agreement and such consent is not obtained, references in this Agreement to such agreement shall be to such agreement as so amended, restated, supplemented or modified. (d) References in this Agreement to any statute shall be to such statute as amended or modified and in effect at the time any such reference is operative. (e) The term "including" when used in any Loan Document means "including without limitation" except when used in the computation of time periods. (f) The terms "Lender", "Issuer" and "Administrative Agent" include their respective successors. (g) Upon the appointment of any successor Administrative Agent pursuant to Section 10.6, references to CUSA in Section 10.3 and to Citibank in the definitions of Base Rate and Eurodollar Rate shall be deemed to refer to the financial institution then acting as the Administrative Agent or one of its Affiliates if it so designates. ARTICLE II The Revolving Credit Facility Section 2.1. The Revolving Credit Commitments. On the terms and -------------------------------- subject to the conditions contained in this Agreement, each Lender severally agrees to make loans (each a "Revolving Loan") to each Borrower from time to time on any Business Day during the period from the Effective Date until the Revolving Credit Termination Date in an aggregate amount not to exceed at any time outstanding for all such loans by such Lender such Lender's Revolving Credit Commitment; provided, however, that at any time no Lender shall be obligated to make a Revolving Loan to any Borrower (i) in excess of such Lender's Ratable Portion of the 34 Available Credit of such Borrower at such time and (ii) to the extent that the aggregate Revolving Credit Outstandings, after giving effect to such Revolving Loans, would exceed the Maximum Credit in effect at such time. Within the limits of each Lender's Revolving Credit Commitment, amounts of Revolving Loans repaid may be reborrowed under this Section 2.1. Section 2.2. Borrowing Procedures. -------------------- (a) Each Borrowing shall be made on notice given by any Borrower to the Administrative Agent not later than 11:00 A.M. (New York City time) (i) one Business Day, in the case of a Borrowing of Base Rate Loans and (ii) three Business Days, in the case of a Borrowing of Eurodollar Rate Loans, prior to the date of the proposed Borrowing; provided, however, in respect of Revolving Loans made on the Effective Date (x) the Notice of Borrowing (as defined below) in respect thereof may be given by 11:00 A.M. (New York City time) on the Effective Date and (y) such Revolving Loans shall be made as Base Rate Loans and thereafter may be converted to Eurodollar Rate Loans pursuant to Section 2.11. Each such notice shall be in substantially the form of Exhibit C (a "Notice of Borrowing"), specifying (A) the proposed Borrower, (B) the date of such proposed Borrowing, (C) the amount of such Borrower's Available Credit (in respect of which the Borrowing Base component thereof may be calculated by reference to the Borrowing Base Certificate most recently delivered to the Administrative Agent hereunder), (D) the amount of the Revolving Loans then outstanding to each Borrower, (E) the aggregate amount of such proposed Borrowing, (F) whether any portion of the proposed Borrowing will be of Base Rate Loans or Eurodollar Rate Loans and (G) the initial Interest Period or Periods for any such Eurodollar Rate Loans, if applicable. The Revolving Loans shall be made as Base Rate Loans unless (subject to Section 2.14) the Notice of Borrowing specifies that all or a portion thereof shall be Eurodollar Rate Loans. Each Borrowing, or portion thereof, which is a Eurodollar Rate Loan shall be in an aggregate amount of not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof. In the event that a Borrower requests a Base Rate Loan in an amount of less than $5,000,000 the Administrative Agent may (at its option) require such Borrowing, or the relevant portion thereof, to be made as a Swing Loan; provided, however, that to do so would not conflict with the provisions of Section 2.3. (b) The Administrative Agent shall give to each Lender prompt notice of the Administrative Agent's receipt of a Notice of Borrowing and, if Eurodollar Rate Loans are properly requested in such Notice of Borrowing, the applicable interest rate determined pursuant to Section 2.14(a). Each Lender shall, before 11:00 A.M. (New York City time) on the date of the proposed Borrowing, make available to the Administrative Agent at its address referred to in Section 11.8, in immediately available funds, such Lender's Ratable Portion of such proposed Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Sections 3.1 and 3.2, the Administrative Agent will make such funds available to the relevant Borrower in such Borrower's Disbursement Account. (c) Unless the Administrative Agent shall have received notice from any Lender prior to the date of any proposed 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 Ratable Portion available to the Administrative Agent on the date of such Borrowing in accordance with this Section 2.2 and the Administrative Agent may, in reliance upon such assumption, make available to the applicable 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, such Lender and the 35 applicable 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 applicable Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the applicable Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate for the first Business Day and thereafter at the interest rate applicable at the time to the Loans comprising such Borrowing. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. If the applicable Borrower shall repay to the Administrative Agent such corresponding amount, such payment shall not relieve such Lender of any obligation it may have hereunder to such Borrower. (d) The failure of any Lender to make a Revolving Loan or any payment required by it on the date specified (a "Non-Funding Lender"), including any payment in respect of its participation in Swing Loans and Letter of Credit Obligations, shall not relieve any other Lender of its obligations to make such Loan or payment on such date but no such other Lender shall be responsible for the failure of any Non-Funding Lender to make a Revolving Loan or payment required under this Agreement. (e) On the Effective Date, (i) all Revolving Loans under the Existing Credit Agreement shall be deemed to be Revolving Loans outstanding under this Agreement, (ii) the Revolving Credit Commitments shall be increased from $115,625,000 to $175,000,000, (iii) that portion of the Revolving Credit Commitments of the Existing Lenders that are not party to this Agreement shall be deemed to be assigned to the Lenders party to this Agreement, and each such Existing Lender shall cease to be a party to this Agreement, (iv) the Revolving Credit Commitment of each Lender party to the Existing Credit Agreement that is a party to this Agreement shall be adjusted from such Lender's revolving credit commitment under the Existing Credit Agreement to the amount set forth opposite such Lender's name under the heading "Revolving Credit Commitment" on Schedule I and (v) each Lender whose Ratable Portion of the Revolving Loans outstanding on the Effective Date exceeds the amount of the Revolving Loans held by it on such date shall purchase Revolving Loans from such other Lenders such that after giving effect to such purchase, each Lender shall hold Revolving Loans equal to its Ratable Portion of the Revolving Loans outstanding on such date. Section 2.3. Swing Loans. ----------- (a) On the terms and subject to the conditions contained in this Agreement, the Swing Loan Lender may in its sole discretion make loans (each a "Swing Loan") otherwise available to any Borrower under the Revolving Credit Facility from time to time on any Business Day during the period from the Effective Date until the Revolving Credit Termination Date in an aggregate amount at any time outstanding at any time not to exceed the lesser of (i) $15,000,000 and (ii) the Swing Loan Lender's Ratable Portion of the amount by which the Maximum Credit exceeds the Revolving Credit Outstandings at such time; provided, however, that no Swing Loan may be made that, after giving effect thereto, would result in a Borrowing Base Deficiency. The Swing Loan Lender shall be entitled to rely on the most recent Borrowing Base Certificate delivered to the Administrative Agent. Each Swing Loan shall be a Base Rate Loan and (subject to Sections 2.6 and 2.9) shall be repaid upon any Borrowing of a Revolving Loan or from time to time at the discretion of the Swing Loan Lender but in any event no later than the Scheduled 36 Termination Date. Within the limits set forth in the first sentence of this Section 2.3(a), amounts of Swing Loans repaid may be reborrowed under this Section 2.3(a). (b) In order to request a Swing Loan, the relevant Borrower shall telecopy to the Swing Loan Lender a duly completed request setting forth the requested amount and date of the Swing Loan (a "Swing Loan Request"), to be received by the Swing Loan Lender not later than 1:00 p.m. (New York City time) on the day of the proposed Borrowing. Subject to the terms of this Agreement, the Swing Loan Lender shall make its Swing Loan available to the Borrower on the date of the relevant Swing Loan Request. The Swing Loan Lender shall not make any Swing Loan in the period commencing on the first Business Day after it receives written notice from any Lender that one or more of the conditions precedent contained in Section 3.2 shall not on such date be satisfied, and ending when such conditions are satisfied. The Swing Loan Lender shall not otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 3.2 hereof have been satisfied in connection with the making of any Swing Loan. (c) The Swing Loan Lender may demand at any time that each Lender pay to the Swing Loan Lender (for its account), in the manner provided in subsection (d) below, such Lender's Ratable Portion of all or a portion of the outstanding Swing Loans, which demand shall be in writing and shall specify the outstanding principal amount of Swing Loans demanded to be paid. (d) Each demand referred to in clause (c) above to each Lender shall be accompanied by a statement prepared by the Swing Loan Lender specifying the amount of each Lender's Ratable Portion of the aggregate principal amount of the Swing Loans stated to be outstanding in such notice or demanded to be paid pursuant to such demand, and, notwithstanding whether or not the conditions precedent set forth in Section 3.2 shall have been satisfied (which conditions precedent the Lenders for this purpose hereby irrevocably waive), each Lender shall, before 11:00 a.m. (New York City time) on the Business Day next succeeding the date of such Lender's receipt of such written statement, make available to the Swing Loan Lender, in immediately available funds, for the account of the Swing Loan Lender, the amount specified in such statement. Upon such payment by a Lender, such Lender shall, except as provided in clause (f) below, be deemed to have made a Revolving Loan to the applicable Borrower. The Swing Loan Lender shall use such funds to repay the Swing Loans owing to it. To the extent that any Lender fails to make such payment available to the Swing Loan Lender, the applicable Borrower shall repay such Swing Loan on demand. (e) Upon the occurrence of a Default under Section 9.1(g), each Lender shall acquire, without recourse or warranty, an undivided participation in each Swing Loan otherwise required to be repaid by such Lender pursuant to clause (d) above, which participation shall be in a principal amount equal to such Lender's Ratable Portion of such Swing Loan, by paying to the Swing Loan Lender on the date on which such Lender would otherwise have been required to make a payment in respect of such Swing Loan pursuant to clause (d) above, in immediately available funds, an amount equal to such Lender's Ratable Portion of such Swing Loan. If such amount is not in fact made available by such Lender to the Swing Loan Lender on such date, the Swing Loan Lender shall be entitled to recover such amount on demand from such Lender together with interest accrued from such date at the Federal Funds Rate for the first Business Day after such payment was due and thereafter at the rate of interest then applicable to Base Rate Loans. 37 (f) From and after the date on which any Lender is deemed to have made a Revolving Loan pursuant to clause (d) above with respect to any Swing Loan or purchases an undivided participation interest in a Swing Loan pursuant to clause (e) above, the Swing Loan Lender shall promptly distribute to such Lender such Lender's Ratable Portion of all payments of principal of and interest received by the Swing Loan Lender on account of such Swing Loan other than those received from a Lender pursuant to clause (d) or (e) above. Section 2.4. Letters of Credit. ----------------- (a) On the terms and subject to the conditions contained in this Agreement, each Issuer agrees to issue one or more Letters of Credit at the request of any Borrower for the account of such Borrower from time to time during the period commencing on the Effective Date and ending on the earlier of the Revolving Credit Termination Date and 30 days prior to the Scheduled Termination Date; provided, however, that no Issuer shall be under any obligation to issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain such Issuer from issuing such Letter of Credit or any Requirement of Law applicable to such Issuer or any request or directive (whether or not having the force of law but in relation with which such Issuer customarily complies) from any Governmental Authority with jurisdiction over such Issuer shall prohibit, or request that such Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuer with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuer is not otherwise compensated) not in effect on the date of this Agreement or result in any unreimbursed loss, cost or expense which was not applicable, in effect or known to such Issuer as of the date of this Agreement and which such Issuer in good faith deems material to it; (ii) such Issuer shall have received written notice from the Administrative Agent, any Lender or the applicable Borrower, on or prior to the requested date of issuance of such Letter of Credit, that one or more of the applicable conditions contained in Sections 3.1 and 3.2 is not then satisfied; (iii) after giving effect to the issuance of such Letter of Credit, (A) the aggregate Revolving Credit Outstandings would exceed the Maximum Credit in effect at such time or (B) a Borrowing Base Deficiency would result with respect to any Borrower; (iv) after giving effect to the issuance of such Letter of Credit, the sum of (i) the Letter of Credit Undrawn Amounts at such time and (ii) the Reimbursement Obligations at such time exceeds $35,000,000 (the "Letter of Credit Sublimit"); or (v) any fees due in connection with a requested issuance have not been paid. None of the Lenders (other than the Issuers in their capacity as such) shall have any obligation to issue any Letter of Credit. 38 (b) In no event shall the expiration date of any Letter of Credit be more than one year after the date of issuance thereof; provided, however, that (i) any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods and (ii) by not later than the Revolving Credit Termination Date each Borrower shall provide cash collateral in respect of any outstanding Letters of Credit issued for its account at such date in accordance with Section 9.3. (c) In connection with the issuance of each Letter of Credit, the applicable Borrower shall give the relevant Issuer and the Administrative Agent at least two Business Days' prior written notice (a "Letter of Credit Request"), in substantially the form of Exhibit D (or in such other written or electronic form as is acceptable to the Issuer), of the requested issuance of such Letter of Credit. Such notice shall be irrevocable and shall specify the applicable Borrower, the Issuer of such Letter of Credit, the stated amount of the Letter of Credit requested, the date of issuance of such requested Letter of Credit (which day shall be a Business Day), the date on which such Letter of Credit is to expire (which date shall be a Business Day), and the Person for whose benefit the requested Letter of Credit is to be issued. Such notice, to be effective, must be received by the relevant Issuer and the Administrative Agent not later than 11:00 A.M. (New York City time) on the second Business Day prior to the requested issuance of such Letter of Credit. (d) Subject to the satisfaction of the conditions set forth in this Section 2.4, the relevant Issuer shall, on the requested date, issue a Letter of Credit on behalf of any Borrower in accordance with such Issuer's usual and customary business practices. No Issuer shall issue any Letter of Credit in the period commencing on the first Business Day after it receives written notice from any Lender that one or more of the conditions precedent contained in Section 3.2 shall not on such date be satisfied, and ending when such conditions are satisfied. The relevant Issuer shall not otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 3.2 have been satisfied in connection with the issuance of any Letter of Credit. (e) If requested by the relevant Issuer, prior to the issuance of each Letter of Credit by such Issuer, and as a condition of such issuance and of the participation of each Lender in the Letter of Credit Obligations arising with respect thereto, the applicable Borrower shall have delivered to such Issuer a letter of credit reimbursement agreement, in such form as the Issuer may employ in its ordinary course of business for its own account (a "Letter of Credit Reimbursement Agreement"), signed by the applicable Borrower, and such other documents or items as may be required pursuant to the terms thereof. In the event of any conflict between the terms of any Letter of Credit Reimbursement Agreement and this Agreement, the terms of this Agreement shall govern. (f) Each Issuer shall: (i) give the Administrative Agent written notice (or notice by telephone, confirmed promptly thereafter in writing, which may be by telecopier) of the issuance or renewal of a Letter of Credit issued by it, of all drawings under a Letter of Credit issued by it and the payment (or the failure to pay when due) by the applicable Borrower of any Reimbursement Obligation when due (which notice the Administrative Agent shall promptly transmit by telecopy or similar transmission to each Lender). 39 (ii) upon the request of any Lender, furnish to such Lender copies of any Letter of Credit Reimbursement Agreement to which such Issuer is a party and such other documentation as may reasonably be requested by such Lender; and (iii) no later than the first Business Day following the last day of each calendar month, provide to the Administrative Agent (and the Administrative Agent shall provide a copy to each Lender requesting the same) and the Borrowers separate schedules for Documentary and Standby Letters of Credit issued by it, in form and substance reasonably satisfactory to the Administrative Agent, setting forth the aggregate Letter of Credit Obligations outstanding at the end of each month and any information requested by the Borrowers or the Administrative Agent relating thereto. (g) Immediately upon the issuance by an Issuer of a Letter of Credit in accordance with the terms and conditions of this Agreement, such Issuer shall be deemed to have sold and transferred to each Lender, and each Lender shall be deemed irrevocably and unconditionally to have purchased and received from such Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Lender's Ratable Portion of the Revolving Credit Commitments, in such Letter of Credit and the obligations of the Borrowers with respect thereto (including all Letter of Credit Obligations with respect thereto) and any security therefor and guaranty pertaining thereto. (h) Each Borrower agrees to pay to the Issuer of any Letter of Credit the amount of all Reimbursement Obligations owing to such Issuer under any Letter of Credit issued for its account when such amounts are due and payable, irrespective of any claim, set-off, defense or other right which such Borrower may have at any time against such Issuer or any other Person. In the event that any Issuer makes any payment under any Letter of Credit and such Borrower shall not have repaid such amount to such Issuer pursuant to this clause (h) above or such payment is rescinded or set aside for any reason, such Reimbursement Obligation shall be payable on demand with interest thereon computed from the date on which such Reimbursement Obligation arose to the date of repayment in full at the rate of interest applicable to past due Revolving Loans bearing interest at a rate based on the Base Rate during such period, and such Issuer shall promptly notify the Administrative Agent, which shall promptly notify each Lender of such failure, and each Lender shall promptly and unconditionally pay to the Administrative Agent for the account of such Issuer the amount of such Lender's Ratable Portion of such payment in Dollars and in immediately available funds. If the Administrative Agent so notifies such Lender prior to 11:00 A.M. (New York City time) on any Business Day, such Lender shall make available to the Administrative Agent for the account of such Issuer its Ratable Portion of the amount of such payment on such Business Day in immediately available funds. Upon such payment by a Lender, such Lender shall, except during the continuance of a Default or Event of Default under Section 9.1(g) and notwithstanding whether or not the conditions precedent set forth in Section 3.2 shall have been satisfied (which conditions precedent the Lenders hereby irrevocably waive) be deemed to have made a Revolving Loan to the applicable Borrower in the principal amount of such payment. Whenever any Issuer receives from a Borrower a payment of a Reimbursement Obligation as to which the Administrative Agent has received for the account of such Issuer any payment from a Lender pursuant to this clause (h) above, such Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Lender, in immediately available funds, an amount equal to such Lender's Ratable Portion of the amount of such payment adjusted, if necessary, to reflect the respective amounts the Lenders have paid in respect of such Reimbursement Obligation. 40 (i) Each Borrower's obligation to pay each Reimbursement Obligation and the obligations of the Lenders to make payments to the Administrative Agent for the account of the Issuers with respect to Letters of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, including the occurrence of any Default or Event of Default, and irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document; (iii) the existence of any claim, set off, defense or other right that any Borrower, any Loan Party, or other party guaranteeing, or otherwise obligated with, such Borrower, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, Issuer, the Administrative Agent or any Lender or any other Person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction; (iv) any draft or 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 the Issuer under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and (vi) any other act or omission to act or delay of any kind of the Issuer, the Lenders, the Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of any Borrower's obligations hereunder. Any action taken or omitted to be taken by the relevant Issuer under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not put such Issuer under any resulting liability to any Borrower or any Lender. In determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof, the Issuer 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 and, in making any payment under any Letter of Credit the Issuer may rely exclusively on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and any noncompliance in any immaterial respect of the documents presented under such Letter 41 of Credit with the terms thereof shall, in each case, be deemed not to constitute willful misconduct or gross negligence of the Issuer. (j) If and to the extent such Lender shall not have so made its Ratable Portion of the amount of the payment required by clause (i) above available to the Administrative Agent for the account of such Issuer, such Lender agrees to pay to the Administrative Agent for the account of such Issuer forthwith on demand such amount together with interest thereon, for the first Business Day after payment was first due at the Federal Funds Rate, and thereafter until such amount is repaid to the Administrative Agent for the account of such Issuer, at the rate per annum applicable to Base Rate Loans under the Revolving Credit Facility. The failure of any Lender to make available to the Administrative Agent for the account of such Issuer its Ratable Portion of any such payment shall not relieve any other Lender of its obligation hereunder to make available to the Administrative Agent for the account of such Issuer its Ratable Portion of any payment on the date such payment is to be made, but no Lender shall be responsible for the failure of any other Lender to make available to the Administrative Agent for the account of the Issuer such other Lender's Ratable Portion of any such payment. Section 2.5. Reduction and Termination of the Revolving Credit ------------------------------------------------- Commitments. The Borrowers may upon at least three Business Days' prior notice ----------- to the Administrative Agent, terminate in whole or reduce in part ratably the unused portions of the respective Revolving Credit Commitments of the Lenders; provided, however, that each partial reduction shall be in the aggregate amount of not less than $10,000,000 or an integral multiple of $5,000,000 in excess thereof. Section 2.6. Repayment of Loans. Each Borrower shall repay the ------------------ entire unpaid principal amount of its Revolving Loans on the Scheduled Termination Date. Section 2.7. Evidence of Debt, Obligations of Borrowers. ------------------------------------------ (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing Indebtedness of each Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (b) The Administrative Agent shall maintain accounts in accordance with its usual practice in which it will record (i) the amount of each Loan made and, if a Eurodollar Rate Loan, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable by each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from each Borrower and each Lender's share thereof, if applicable. (c) The entries made in the accounts maintained pursuant to clauses (a) and (b) of this Section 2.7 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations recorded therein; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrowers to repay the Loans in accordance with their terms. 42 (d) Notwithstanding any other provision of the Agreement, in the event that any Lender requests that any Borrower execute and deliver a promissory note or notes payable to such Lender in order to evidence the Indebtedness owing to such Lender by such Borrower hereunder, each such Borrower will promptly execute and deliver a Note or Notes to such Lender evidencing any Revolving Loans of such Lender, substantially in the form of Exhibit B, and the interests evidenced by such note or notes shall at all times (including after assignment of all or part of such interests) be evidenced by one or more Notes payable to the order of the payee named therein; provided, however, that Terra UK shall not be required to execute and deliver any promissory note or notes hereunder and that each Existing Lender that was issued a Note previously shall be issued a new Note to reflect the amendment and restatement of the Existing Credit Agreement and any change in the Revolving Credit Commitments of such Existing Lender. (e) Without affecting any guaranty or collateral obligation of any Borrower or other Loan Party under any Loan Document, each Borrower is severally liable in respect of its Obligations hereunder (in respect of principal and interest only) and, as a Borrower, is not obligated in such capacity to repay any Loan (or pay interest thereon) of another Borrower hereunder. All other Obligations of the Borrowers hereunder are joint and several. Section 2.8. Optional Prepayments. The Borrowers may (in addition to the -------------------- obligations under Section 2.9(e)), upon, (i) in respect of Swing Loans, same day notice, (ii) in respect of Base Rate Loans, at least one Business Day's prior notice, and (iii) in respect of Eurodollar Rate Loans, at least four Business Days' prior notice, to the Administrative Agent, stating the proposed date and aggregate principal amount of the prepayment, prepay the outstanding principal amount of the Revolving Loans in whole or in part; provided, however, that if any prepayment of any Eurodollar Rate Loan is made by any Borrower other than on the last day of an Interest Period for such Loan, such Borrower shall also pay any amounts owing pursuant to Section 2.14(e); and, provided, further, that each partial prepayment (other than in respect of Swing Loans or as required under Section 2.9) shall be in an aggregate principal amount not less than $5,000,000 or integral multiples of $1,000,000 in excess thereof. Upon the giving of such notice of prepayment, the principal amount of Loans specified to be prepaid shall become due and payable on the date specified for such prepayment. Section 2.9. Mandatory Prepayments. --------------------- (a) Upon receipt by Terra Industries, the Borrowers or any of their respective Subsidiaries of Net Cash Proceeds arising (i) from an Asset Sale or a Debt Issuance, each Borrower shall immediately prepay its Loans (or provide cash collateral in respect of Letters of Credit) such that the aggregate amount of all such payments is equal to 100% of such Net Cash Proceeds, (ii) from an Equity Issuance each Borrower shall immediately prepay its Loans (or provide cash collateral in respect of Letters of Credit) such that the aggregate amount of all such payments is equal to 50% of such Net Cash Proceeds, or (iii) from an insured loss or casualty event (being, other than proceeds in respect of business interruption, "Insurance Proceeds"), each Borrower shall immediately prepay its Loans (or provide cash collateral in respect of Letters of Credit) such that the aggregate amount of all such payments is equal to 100% of such Net Cash Proceeds; provided, however, any Insurance Proceeds (which do not exceed $20,000,000 in respect of any single loss or event) may (provided, and for so long as, no Default or Event of Default shall have occurred and be continuing), at the request of the Borrowers, be applied in replacing or reinstating the affected assets; provided further that (A) such Net Cash Proceeds are 43 so applied (or contractually committed to be so applied) within 360 days (the "Reinstatement Date") following the occurrence of the event giving rise to such Net Cash Proceeds, (B) such Net Cash Proceeds are deposited in a Cash Collateral Account maintained with, and subject to a perfected first priority Lien in favor of, the Administrative Agent (which cash collateral may be included in the calculation of relevant Borrowing Base pending its application hereunder) and (notwithstanding Section 11.1(a)(ix)) any Net Cash Proceeds deposited in such account for such purpose may not subsequently be withdrawn without the approval of the Administrative Agent and (C) any such Net Cash Proceeds or any portion thereof not applied in replacement or reinstatement of the affected assets (x) by the Reinstatement Date or (y) at any time during the continuance of a Default or Event of Default at any time prior to the Reinstatement Date, shall be applied as mandatory prepayment of the Loans (or as cash collateral in respect of Letters of Credit) at such time. Any such mandatory prepayment shall be applied in accordance with Section 2.9(c) below. (b) Upon receipt by Terra Capital of any proceeds arising from the redemption of Senior Notes (2003) purchased by Terra Capital pursuant to Section 8.12, Terra Capital shall immediately prepay its Loans (or provide cash collateral in respect of Letters of Credit) by the amount of such proceeds. Any such mandatory prepayment shall be applied in accordance with Section 2.9(c) below. (c) Any prepayments made by the Borrowers required to be applied in accordance with this Section 2.9 shall be applied as follows: first, to repay the outstanding principal balance of the Swing Loans until such Swing Loans shall have been repaid in full; second, to repay the outstanding principal balance of the Revolving Loans until such Revolving Loans shall have been paid in full; and then, to provide cash collateral for any Letter of Credit Obligations in the manner set forth in Section 9.3 until all such Letter of Credit Obligations have been fully cash collateralized in the manner set forth therein. (d) If at any time, either (i) the aggregate principal amount of Revolving Credit Outstandings exceeds the Maximum Credit at such time or (ii) a Borrowing Base Deficiency exists in respect of any Borrower, each Borrower shall forthwith (or if such Borrowing Base Deficiency has occurred through Accounts which were previously classified as Eligible Receivables being reclassified as ineligible, in which case upon the expiration of two Business Days during which such Borrowing Base Deficiency remains continuing) prepay its Swing Loans first and then its Revolving Loans then outstanding such that the aggregate amount of all such payments is equal to such excess or otherwise sufficient to eliminate such deficiency. If any such excess or deficiency remains after repayment in full of the aggregate outstanding Swing Loans and Revolving Loans, each Borrower shall provide cash collateral for its Letter of Credit Obligations in the manner set forth in Section 9.3 to the extent required to eliminate such excess or deficiency. (e) Each Borrower agrees that all available funds (others than those funds representing Net Cash Proceeds which are to be otherwise applied pursuant to this Section 2.9) in a Cash Collateral Account of such Borrower shall (subject, in the case of Terra UK, to Section 7.12(d)(iii)) be applied on a daily basis; first to repay the outstanding principal amount of its Swing Loans until its Swing Loans shall have been repaid in full; second to repay the outstanding principal balance of its Revolving Loans until its Revolving Loans shall have been repaid in full; and third to any other Obligations then due and payable. If there are no Loans outstanding and no other Obligations are then due and payable, then the funds in such Cash Collateral Account shall be retained in such Cash Collateral Account, or (if required by the 44 Administrative Agent) transferred to the L/C Cash Collateral Account, to cash collateralize the Letter of Credit Obligations then outstanding and any contingent obligations which such Borrower may have under any Guaranty); provided, however, that (subject to the consent of the Administrative Agent in accordance with Section 7.12(d)(iii) in respect of Terra UK) if on any Business Day after giving effect to the foregoing applications any funds are on deposit in its Cash Collateral Account and no Default or Event of Default shall have occurred and be continuing, the applicable Borrower may direct the Administrative Agent to (and the Administrative Agent shall) disburse such funds to such Borrower's Disbursement Account. Section 2.10. Interest. -------- (a) Rate of Interest. All Loans and the outstanding amount of all other Obligations shall bear interest, in the case of Loans, on the unpaid principal amount thereof from the date such Loans are made and, in the case of such other Obligations, from the date such other Obligations are due and payable until, in all cases, paid in full, except as otherwise provided in Section 2.10(c), as follows: (i) if a Base Rate Loan or such other Obligation, at a rate per annum equal to the sum of (A) the Base Rate as in effect from time to time, plus (B) the Applicable Margin; and (ii) if a Eurodollar Rate Loan, at a rate per annum equal to the sum of (A) the Eurodollar Rate determined for the applicable Interest Period, plus (B) the Applicable Margin in effect from time to time during such Eurodollar Interest Period. (b) Interest Payments. (i) Interest accrued on each Base Rate Loan (including Swing Loans) shall be payable in arrears (A) on the first day of each calendar month, commencing on the first such day following the making of such Base Rate Loan, and (B) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Base Rate Loan; (ii) interest accrued on each Eurodollar Rate Loan shall be payable in arrears (A) on the last day of each Interest Period applicable to such Loan and, in respect of any Interest Period of six months' duration, on the day which is three months following commencement of such Interest Period and also on the last day of such Interest Period, (B) upon the payment or prepayment thereof in full or in part, and (C) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Eurodollar Rate Loan; and (iii) interest accrued on the amount of all other Obligations shall be payable on demand from and after the time such Obligation, becomes due and payable (whether by acceleration or otherwise). (c) Default Interest. Notwithstanding the rates of interest specified in Section 2.10(a) or elsewhere herein, effective immediately upon the occurrence of an Event of Default, and for as long thereafter as such Event of Default shall be continuing, the principal balance of all Loans and the amount of all other Obligations shall bear interest at a rate which is two percent per annum in excess of the rate of interest applicable to such Obligations from time to time. Section 2.11. Conversion/Continuation Option. ------------------------------ (a) The Borrowers may elect (i) at any time to convert Base Rate Loans (other than Swing Loans) or any portion thereof to Eurodollar Rate Loans, or (ii) at the end of any applicable Interest Period, to convert Eurodollar Rate Loans or any portion thereof into Base Rate 45 Loans or to continue such Eurodollar Rate Loans or any portion thereof for an additional Interest Period; provided, however, that the aggregate amount of the Eurodollar Loans for each Interest Period complies with the provisions of Section 2.2(a). Each conversion or continuation shall be allocated among the Loans of each Lender in accordance with its Ratable Portion. Each such election shall be in substantially the form of Exhibit F hereto (a "Notice of Conversion or Continuation") and shall be made by giving the Administrative Agent at least three Business Days' prior written notice specifying (A) the amount and type of Loan being converted or continued, (B) in the case of a conversion to or a continuation of Eurodollar Rate Loans, the applicable Interest Period, and (C) in the case of a conversion, the date of conversion (which date shall be a Business Day and, if a conversion from Eurodollar Rate Loans, shall also be the last day of the applicable Interest Period). (b) The Administrative Agent shall promptly notify each Lender of its receipt of a Notice of Conversion or Continuation and of the options selected therein. Notwithstanding the foregoing, no conversion in whole or in part of Base Rate Loans to Eurodollar Rate Loans, and no continuation in whole or in part of Eurodollar Rate Loans upon the expiration of any applicable Interest Period, shall be permitted at any time at which (i) a Default or an Event of Default shall have occurred and be continuing or (ii) the continuation of, or conversion into, would violate any of the provisions of Section 2.14. If, within the time period required under the terms of this Section 2.11, the Administrative Agent does not receive a Notice of Conversion or Continuation from any Borrower containing a permitted election to continue any Eurodollar Rate Loans for an additional Interest Period or to convert any such Loans, then, upon the expiration of the applicable Interest Period, such Loans will be automatically converted to Base Rate Loans. Each Notice of Conversion or Continuation shall be irrevocable. Section 2.12. Fees. ---- (a) Unused Commitment Fee. The Borrowers agree to pay to each Lender a commitment fee on the actual amount by which the Revolving Credit Commitment of such Lender exceeds the sum of (i) such Lender's Ratable Portion of the outstanding Revolving Loans and outstanding Letter of Credit Obligations and (ii) the outstanding portion of any Swing Loans made by such Lender (the "Unused Commitment Fee") on each day from the date hereof until the Revolving Credit Termination Date equal to 0.50% per annum, payable in arrears (x) on the first day of each calendar month, commencing on the first such day following the date of this Agreement and (y) on the Revolving Credit Termination Date. (b) Letter of Credit Fees. The Borrowers agree to pay the following amounts with respect to Letters of Credit issued by any Issuer: (i) to the Administrative Agent for the account of each Issuer of a Letter of Credit, with respect to each Letter of Credit issued by such Issuer, an issuance fee equal to 0.50% per annum of the maximum amount available from time to time to be drawn under such Letter of Credit, payable in arrears (A) on the first day of each calendar month, commencing on the first such day following the issuance of such Letter of Credit and (B) on the Revolving Credit Termination Date; (ii) to the Administrative Agent for the ratable benefit of the Lenders, with respect to each Letter of Credit, a fee accruing at a rate per annum equal to the Applicable Margin for Revolving Loans that are Eurodollar Rate Loans of the maximum amount available from time to time to be drawn under such Letter of Credit, 46 payable in arrears (A) on the first day of each calendar month commencing on the first such day following the issuance of such Letter of Credit and (B) on the Revolving Credit Termination Date; provided, however that during the continuance of an Event of Default, such fee shall be increased by two percent per annum and shall be payable on demand; and (iii) to the Issuer of any Letter of Credit, with respect to the issuance, amendment or transfer of each Letter of Credit and each drawing made thereunder, documentary and processing charges in accordance with such Issuer's standard schedule for such charges in effect at the time of issuance, amendment, transfer or drawing, as the case may be. (c) Additional Fees. The Borrowers have agreed to pay to the Lenders, the Administrative Agent and the Arranger additional fees, the amount and dates of payment of which are embodied in the Fee Letter. Any cash management fees payable by or on behalf of any Loan Party shall be payable irrespective of whether accounts are opened in the name of any Loan Party or by the Administrative Agent or any of its Affiliates in its name in respect of any Loan Party. Section 2.13. Payments and Computations; Protective Advances. ---------------------------------------------- (a) The Borrowers shall make each payment hereunder (including fees and expenses) not later than 11:00 A.M. (New York City time) (provided, however, that repayments of Swing Loans shall be made not later than 4:00 P.M. (New York City time)) on the day when due, in Dollars, to the Administrative Agent at its address referred to in Section 11.8 in immediately available funds without set-off or counterclaim. The Administrative Agent will promptly thereafter cause to be distributed immediately available funds relating to the payment of principal or interest or fees to the Lenders, in accordance with the application of payments set forth in clauses (e) and (f) of this Section 2.13, as applicable, for the account of their respective Applicable Lending Offices; provided, however, that amounts payable pursuant to Section 2.14(c), 2.14(e), 2.15 or 2.16 shall be paid only to the affected Lender or Lenders and amounts payable with respect to Swing Loans shall be paid only to the Swing Loan Lender. Payments received by the Administrative Agent after 11:00 A.M. (New York City time) shall be deemed to be received on the next Business Day. (b) All computations of interest and fees 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 and fees are payable. Each determination by the Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (c) Whenever any payment hereunder 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 fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of any Eurodollar Rate Loan to be made in the next calendar month, such payment shall be made on the immediately preceding Business Day. All repayments of any Revolving Loans shall be applied first to repay such Loans outstanding as Base Rate Loans and then to repay such Loans outstanding as Eurodollar Rate Loans with those Eurodollar Rate Loans 47 which have earlier expiring Eurodollar Interest Periods being repaid prior to those which have later expiring Eurodollar Interest Periods. (d) Unless the Administrative Agent shall have received notice from the Borrowers to the Lenders prior to the date on which any payment is due hereunder that the Borrowers will not make such payment in full, the Administrative Agent may assume that the Borrowers have 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 Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrowers shall not have made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon at the Federal Funds Rate, for the first Business Day, and, thereafter, at the rate applicable to Base Rate Loans, 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. (e) Subject to the provisions of clause (f) of this Section 2.13 and (except as otherwise provided in Section 2.9), all payments and any other amounts received by the Administrative Agent from or for the benefit of any Borrower shall be applied first, to pay principal of and interest on any portion of the Loans which the Administrative Agent may have advanced to such Borrower pursuant to the express provisions of this Agreement on behalf of any Lender, for which the Administrative Agent has not then been reimbursed by such Lender or such Borrower; second, to pay all other Obligations owing by such Borrower then due and payable; and third, as such Borrower so designate. Payments in respect of Swing Loans received by the Administrative Agent shall be distributed to the Swing Loan Lender; payments in respect of Revolving Loans received by the Administrative Agent shall be distributed to each Lender in accordance with such Lender's Ratable Portion of the Revolving Credit Commitments; and all payments of fees and all other payments in respect of any other Obligation shall be allocated among such of the Lenders and Issuers as are entitled thereto, and, if to the Lenders, in proportion to their respective Ratable Portions. (f) After the occurrence and during the continuance of an Event of Default, each Borrower hereby irrevocably waives the right to direct the application of any and all payments in respect of the Obligations owing by such Borrower and any proceeds of Collateral of such Borrower, and agrees that the Administrative Agent may, and shall upon either (A) the written direction of the Requisite Lenders or (B) the acceleration of the Obligations pursuant to Section 9.2, apply all payments in respect of any Obligations and all funds on deposit in any Cash Collateral Account (including all proceeds arising in connection with a Reinstatement Date that are held in the Cash Collateral Account pending application of such proceeds as specified in Section 2.9(a)) and all other proceeds of Collateral in the following order: (i) first, to pay interest on and then principal of any portion of the Revolving Loans which the Administrative Agent may have advanced on behalf of any Lender for which the Administrative Agent has not then been reimbursed by such Lender or the Borrowers; (ii) second, to pay interest on and then principal of any Swing Loan; (iii) third, to pay Obligations in respect of any expense reimbursements or indemnities then due the Administrative Agent; 48 (iv) fourth, to pay Obligations in respect of any expense reimbursements or indemnities then due to the Lenders and the Issuers; (v) fifth, to pay Obligations in respect of any fees then due to the Administrative Agent, the Lenders and the Issuers; (vi) sixth, to pay interest then due and payable in respect of the Revolving Loans and Reimbursement Obligations; (vii) seventh, to pay or prepay principal payments on the Revolving Loans and Reimbursement Obligations and to provide cash collateral for outstanding Letter of Credit Undrawn Amounts in the manner described in Section 9.3, and to pay Obligations owing to the Administrative Agent with respect to cash management services in connection with Approved Deposit Accounts, Cash Collateral Accounts, and any other collection, disbursement or payroll account, ratably to the aggregate principal amount of such Revolving Loans, Reimbursement Obligations and Letter of Credit Undrawn Amounts and amounts due in respect of such cash management services; (viii) eighth, to the ratable payment of all Obligations owing to any Lender or any Affiliate of a Lender with respect to Hedging Contracts; and (ix) ninth, to the ratable payment of all other Obligations; provided, however, that if sufficient funds are not available to fund all payments to be made in respect of any of the Obligations described in any of the foregoing clauses first through eighth, the available funds being applied with respect to any such Obligations (unless otherwise specified in such clause) shall be allocated to the payment of such Obligations ratably, based on the proportion of the Administrative Agent's and each Lender's or Issuer's interest in the aggregate outstanding Obligations described in such clauses. The order of priority set forth in clauses first through eighth of this Section 2.13(f) may at any time and from time to time be changed by the agreement of the Requisite Lenders without necessity of notice to or consent of or approval by the Borrower, any Secured Party that is not a Lender or Issuer, or any other Person. The order of priority set forth in clauses first through fifth of this Section 2.13(f) may be changed only with the prior written consent of the Administrative Agent in addition to the Requisite Lenders. (g) All payments of Reimbursement Obligations, interest, fees, expenses and other sums due and payable in respect of the Loans of any Borrower and all expenses, disbursements and advances incurred by the Administrative Agent pursuant to the Loan Documents after the occurrence and during the continuance of an Event of Default which the Administrative Agent, in its sole discretion, deems necessary or desirable to preserve or protect the Collateral of such Borrower or any portion thereof or to enhance the likelihood or maximize the amount of repayment of the Obligations owing by such Borrower may, at the option of the Administrative Agent, be paid from the proceeds of Swing Loans or Revolving Loans. Each Borrower hereby authorizes the Swing Loan Lender to make Swing Loans pursuant to Section 2.3(a) and the Lenders to make Revolving Loans pursuant to Section 2.2(a), from time to time in the Swing Loan Lender's or such Lender's discretion, which are in the amounts of any and all principal payable with respect to the interest, fees, expenses and other sums payable in respect of the Loans of such Borrower, and further authorizes the Administrative Agent to give the Lenders notice of any Borrowing with respect to such Loans and to distribute the proceeds of such Loans to pay such amounts. Each Borrower agrees that all such Loans so made shall be deemed to have been requested by it, as applicable, (irrespective of the satisfaction of the conditions in Section 3.2, which conditions the Lenders irrevocably waive) and directs that all proceeds thereof shall be used to pay such amounts. Section 2.14. Special Provisions Governing Eurodollar Rate Loans. -------------------------------------------------- (a) Determination of Interest Rate. The Eurodollar Rate for each Interest Period for Eurodollar Rate Loans shall be determined by the Administrative Agent pursuant to the procedures set forth in the definition of "Eurodollar Rate." The Administrative Agent's determination shall be presumed to be correct, absent manifest error, and shall be binding on the Borrowers. (b) Interest Rate Unascertainable, Inadequate or Unfair. In the event that: (i) the Administrative Agent reasonably determines that adequate and fair means do not exist for ascertaining the applicable interest rates by reference to which the Eurodollar Rate then being determined is to be fixed; or (ii) the Requisite Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period will not adequately reflect the cost to the Lenders of making or maintaining such Loans for such Interest Period, the Administrative Agent shall forthwith so notify the Borrowers and the Lenders, whereupon each Eurodollar Loan will automatically, on the last day of the current Interest Period for such Loan, convert into a Base Rate Loan and the obligations of the Lenders to make Eurodollar Rate Loans or to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended until the Administrative Agent shall notify the Borrowers that the Requisite Lenders have determined that the circumstances causing such suspension no longer exist. (c) Increased Costs. If at any time any Lender shall reasonably determine that the introduction of or any change (where such introduction or change occurs after the date of this Agreement) in or in the interpretation of any law, treaty or governmental rule, regulation or order (other than any change by way of imposition or increase of reserve requirements included in determining the Eurodollar Rate Reserve Percentage and other than any change in the rate of tax on, or determined by reference to, the net income or profits of such Lender (including franchise taxes) or capital of such Lender) or the compliance by such Lender with any guideline, request or directive (where such guideline, request or directive is issued after the date of this Agreement) from any central bank or other Governmental Authority (whether or not having the force of law but in relation to which such Lender customarily complies), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Eurodollar Rate Loans made to any Borrower, then such 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. A certificate as to the amount of such increased cost, submitted to the applicable Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (d) Illegality. Notwithstanding any other provision of this Agreement, if any Lender determines that the introduction of or any change in or in the interpretation of any law, treaty or governmental rule, regulation or order after the date of this Agreement shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to make Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate Loans, then, on notice thereof and demand therefor by such 50 Lender to the Borrowers through the Administrative Agent, (i) the obligation of such Lender to make or to continue Eurodollar Rate Loans and to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended, and each such Lender shall make a Base Rate Loan as part of any requested Borrowing of Eurodollar Rate Loans and (ii) if the affected Eurodollar Rate Loans are then outstanding, each applicable Borrower shall immediately (or, if lawful to do so, on the last day of the current Interest Period relating thereto) convert each such Loan into a Base Rate Loan. If at any time after a Lender gives notice under this Section 2.14(d) such Lender determines that it may lawfully make Eurodollar Rate Loans, such Lender shall promptly give notice of that determination to the applicable Borrower and the Administrative Agent, and the Administrative Agent shall promptly transmit the notice to each other Lender. Each Borrower's right to request, and such Lender's obligation, if any, to make Eurodollar Rate Loans shall thereupon be restored. (e) Breakage Costs. In addition to all amounts required to be paid by the Borrowers pursuant to Section 2.10, each Borrower shall compensate each Lender, upon demand, for all losses, expenses and liabilities (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain such Lender's Eurodollar Rate Loans to such Borrower but excluding any loss of the Applicable Margin on the relevant Loans) which that Lender may sustain (i) if for any reason (other than under Section 2.14(b)) a proposed Borrowing, conversion into or continuation of Eurodollar Rate Loans does not occur on a date specified therefor in a Notice of Borrowing or a Notice of Conversion or Continuation given by such Borrower or in a telephonic request by it for borrowing or conversion or continuation or a successive Interest Period does not commence after notice therefor is given pursuant to Section 2.11, (ii) if for any reason any Eurodollar Rate Loan is prepaid (including mandatorily pursuant to Section 2.9) on a date which is not the last day of the applicable Interest Period, (iii) as a consequence of a required conversion of a Eurodollar Rate Loan to a Base Rate Loan as a result of any of the events indicated in Section 2.14(d), or (iv) as a consequence of any failure by a Borrower to repay Eurodollar Rate Loans when required by the terms hereof. The Lender making demand for such compensation shall deliver to the applicable Borrower concurrently with such demand a written statement as to such losses, expenses and liabilities, and this statement shall be conclusive as to the amount of compensation due to that Lender, absent manifest error. (f) Excluded Period. No Lender or Issuer shall be entitled to make a claim under Clauses 2.14(c), 2.15 or 2.16 unless it has notified the Administrative Agent of its intention to make such claim within 180 days of such Lender or Issuer becoming aware of the circumstances giving rise to such claim. Section 2.15. Capital Adequacy. If at any time any Lender ---------------- reasonably determines that (a) the adoption of or any change in or in the interpretation of any law, treaty or governmental rule, regulation or order after the date of this Agreement regarding capital adequacy, (b) compliance with any such law, treaty, rule, regulation, or order, or (c) compliance with any guideline or request or directive issued after the date hereof from any central bank or other Governmental Authority (whether or not having the force of law) shall have the effect of reducing the rate of return on such Lender's (or any corporation controlling such Lender's) capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change, compliance or interpretation, then, upon demand from time to time by such Lender (with a copy of such demand to the Administrative Agent), the applicable Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by 51 such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to such amounts submitted to the applicable Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes absent manifest error. Section 2.16. Taxes. ----- (a) Subject to Section 2.16(f) below, any and all payments by the Borrowers under each Loan Document shall be made 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 (i) in the case of each Lender and the Administrative Agent (A) taxes imposed on or measured by its net income, and franchise taxes imposed on it, by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or in which it maintains any office or operations and (B) any United States withholding taxes payable with respect to payments under the Loan Documents under laws (including any statute, treaty or regulation) in effect on the Initial Closing Date (or, in the case of an Eligible Assignee, the date of the Assignment and Acceptance) applicable to such Lender or the Administrative Agent, as the case may be, but not excluding any United States withholding payable as a result of any change in such laws occurring after the Initial Closing Date (or the date of such Assignment and Acceptance) (but excluding taxes set forth in clause (A) above) and (ii) in the case of each Lender, taxes imposed on or measured by its net income, and franchise taxes imposed on it, by the jurisdiction in which such Lender's Applicable Lending Office is located (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Taxes shall be required by law to be deducted from or in respect of any sum payable by any Borrower under any Loan Document to 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 2.16) 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 Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (iv) such Borrower shall deliver to the Administrative Agent evidence of such payment. (b) In addition, each Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign jurisdiction, and all liabilities with respect thereto, which arise from any payment made by such Borrower or any of its Subsidiaries under any Loan Document or from the execution, delivery or registration of, or otherwise with respect to, any Loan Document (collectively, "Other Taxes"). (c) Each Borrower will indemnify each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.16) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including for penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. 52 (d) Within 30 days after the date of any payment of Taxes or Other Taxes, the applicable Borrower will furnish to the Administrative Agent, at its address referred to in Section 11.8, the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 2.16 shall survive the payment in full of the Obligations. (f) On the date of the Assignment and Acceptance pursuant to which any Non-U.S. Lender becomes a Lender after the Initial Closing Date, if requested by the Borrowers or the Administrative Agent, each Non-U.S. Lender that is entitled at such time to an exemption from United States withholding tax shall provide the Administrative Agent and the Borrowers with two completed copies of IRS Form W-8 (Ben or ECI as appropriate including any required certifications) or other applicable form, certificate or document prescribed by the IRS certifying as to such Non-U.S. Lender's entitlement to such exemption from United States withholding tax with respect to all payments to be made to such Non-U.S. Lender under the Loan Documents. Unless the Borrowers and the Administrative Agent have received forms or other documents satisfactory to them indicating that payments under any Loan Document to or for a Non-U.S. Lender are not subject to United States withholding tax, the Borrowers or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate. (g) Any Lender claiming any additional amounts payable pursuant to this Section 2.16 shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which would be payable or may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender. If any Lender is not, with reasonable efforts, able to change the jurisdiction of its Applicable Lending Office in accordance with this Section 2.16(g), then such Lender shall use its reasonable efforts to complete such tax forms and make such filings as would avoid the need for, or reduce the amount of, any such additional amounts which would be payable or may thereafter accrue; provided, however, that completion of such forms and making of such filings would not in the sole discretion of such Lender be disadvantageous to it. (h) (i) As at the date of this Agreement, the Administrative Agent and each Lender represents and warrants to the Loan Parties that (to the extent that any payments are to be made to it hereunder by Terra UK) it is a Qualifying Lender, (ii) if a Lender ceases to be a Qualifying Lender (except as a result of the introduction of, change in, or change in the interpretation, administration or application of, any law or regulation or any practice or concession of the United Kingdom Inland Revenue occurring after the date of this Agreement) or any transfer, sale, negotiation or assignment is made pursuant to Section 11.2 to a non-Qualifying Lender, then the Loan Parties shall not be liable to pay any amount under Section 2.16(a) in excess of the amount which it would have been obliged to pay if that Lender had remained a Qualifying Lender. Each Lender shall notify the Administrative Agent who in turn shall notify Terra Capital as soon as reasonably practicable after it becomes aware that it has ceased to be a Qualifying Lender. Section 2.17. Substitution of Lenders. In the event that (a) (i) ----------------------- any Lender makes a claim under Section 2.14 (c) or Section 2.15, or (ii) it becomes illegal for any Lender to 53 continue to fund or make any Eurodollar Rate Loan and such Lender notifies the Borrowers pursuant to Section 2.14(d), or (iii) the Borrowers are required to make any payment pursuant to Section 2.16 that is attributable to any Lender, or (iv) any Lender is a Non-Funding Lender, (b) in the case of clause (a)(i) above, as a consequence of increased costs in respect of which such claim is made, the effective rate of interest payable to such Lender under this Agreement with respect to its Loans materially exceeds the effective average annual rate of interest payable to the Requisite Lenders under this Agreement and (c) Lenders holding at least 75% of the Revolving Credit Commitments are not subject to such increased costs or illegality, payment or proceedings (any such Lender, an "Affected Lender"), the Borrowers may substitute another financial institution for such Affected Lender hereunder, upon reasonable prior written notice (which written notice must be given within 90 days following the occurrence of any of the events described in clauses (a)(i), (ii), (iii) or (iv)) by the Borrowers to the Administrative Agent and the Affected Lender that the Borrowers intend to make such substitution, which substitute financial institution must be an Eligible Assignee and, if not a Lender, reasonably acceptable to the Administrative Agent; provided, however, that if more than one Lender claims increased costs, illegality or right to payment arising from the same act or condition and such claims are received by the Borrowers within 30 days of each other then the Borrowers may substitute all, but not (except to the extent the Borrowers have already substituted one of such Affected Lenders before the Borrowers' receipt of the other Affected Lenders' claim) less than all, Lenders making such claims. In the event that the proposed substitute financial institution or other entity is reasonably acceptable to the Administrative Agent and the written notice was properly issued under this Section 2.17, the Affected Lender shall sell and the substitute financial institution or other entity shall purchase, pursuant to an Assignment and Acceptance, all rights and claims of such Affected Lender under the Loan Documents and the substitute financial institution or other entity shall assume and the Affected Lender shall be relieved of its Revolving Credit Commitments and all other prior unperformed obligations of the Affected Lender under the Loan Documents (other than in respect of any damages (other than exemplary or punitive damages, to the extent permitted by applicable law) in respect of any such unperformed obligations). Upon the effectiveness of such sale, purchase and assumption (which, in any event shall be conditioned upon the payment in full by the Borrowers to the Affected Lender in cash of all fees, unreimbursed costs and expenses and indemnities accrued and unpaid through such effective date), the substitute financial institution or other entity shall become a "Lender" hereunder for all purposes of this Agreement having a Revolving Credit Commitment (if applicable) in the amount of such Affected Lender's Revolving Credit Commitment assumed by it and such Revolving Credit Commitment (if applicable) of the Affected Lender shall be terminated, provided that all indemnities under the Loan Documents shall continue in favor of such Affected Lender. ARTICLE III Conditions To Effectiveness Of This Agreement Section 3.1. Conditions Precedent to the Effectiveness of this ------------------------------------------------- Agreement. This Agreement shall become effective on the date (the "Effective --------- Date") on which all of the following conditions precedent have been first satisfied (unless waived by the Requisite Lenders or the time for satisfaction thereof has been extended by the Administrative Agent): (a) Certain Documents. The Administrative Agent shall have received on the Effective Date each of the following, each dated the Effective Date unless otherwise 54 indicated or agreed to by the Administrative Agent, in form and substance satisfactory to the Administrative Agent and in sufficient originally executed copies for each Lender: (i) this Agreement, duly executed and delivered by the Borrowers, Terra Industries, the Administrative Agent and each Lender; (ii) the Senior Secured Note Intercreditor Agreement, duly executed and delivered by the Borrowers, Guarantors, the Senior Secured Note Trustee and the Administrative Agent; (iii) the Guaranty, duly executed and delivered by the Guarantors and the Administrative Agent; (iv) the Pledge and Security Agreement, duly executed and delivered by Terra Industries, Terra Capital, TNLP, each Guarantor that is a Domestic Subsidiary and the Administrative Agent; (v) the Loan Purchase Agreement, duly executed and delivered by Terra Industries and the Administrative Agent; (vi) the Terra UK Debt Note, duly executed and delivered byTerra UK and Terra Capital; (vii) the Terra Canada Debt Note, duly executed and delivered by Terra Canada and Terra Capital; (viii) the Terra UK Junior Guaranty, duly executed and delivered by Terra UK in favor of Terra Capital; (ix) the Terra Canada Junior Guaranty, duly executed and delivered by Terra Canada in favor of Terra Capital; (x) appropriate amendments or additions to the Terra Canada Collateral Documents, the Debenture and the Junior Collateral Documents (A) to provide for the release of that portion of the collateral described therein that constitutes Senior Secured Note Collateral and (B) to provide collateral security for Terra UK's and Terra Canada's obligations under the Terra UK Debt Note and the Terra UK Junior Guaranty and the Terra Canada Debt Note and the Terra Canada Junior Guaranty, duly executed and delivered by Terra UK or Terra Canada, as the case may be, in favor of the Administrative Agent; (xi) the Mortgage Releases, duly executed and delivered by the Existing Collateral Agent and acknowledged by the relevant Loan Party mortgagor, with respect to (A) each relevant Real Property located in the United States, (B) the Terra Canada Mortgage and (C) the Real Property located in England covered by the Debenture; (xii) such documents duly executed by each Loan Party, to the extent such Loan Party's signature is required under Requirements of Law, as the Administrative Agent may request with respect to the perfection of its security interests, 55 including for the purposes of maintaining and/or continuing the priority thereof, in the Collateral (including (A) "in lieu" financing statements, (B) amending financing statements to name the Administrative Agent as the secured party thereunder and to release that portion of the collateral described therein that constitutes Senior Secured Note Collateral and (C) new financing statements, each under the UCC, with respect to the perfection of Liens created by the Pledge and Security Agreement); (xiii) a satisfactory appraisal report of the Inventory of the Borrowing Base Contributors; (xiv) a favorable opinion of (A) Kirkland & Ellis, counsel to each of the Loan Parties, in substantially the form of Exhibit G-1 and (B) counsel to the Loan Parties in England and Canada, in substantially the form of Exhibit G-2 and Exhibit G-3, respectively, addressed to the Administrative Agent and the Lenders and Issuer; (xv) certified copies of each of the Senior Secured Note Documents and each other document and instrument executed and delivered in connection therewith, duly executed by the parties thereto and each in form and substance reasonably satisfactory to the Administrative Agent, together with a certificate of the Secretary or an Assistant Secretary of Terra Capital that, as at the Effective Date, such Senior Secured Note Documents and other documents and instruments of which are attached thereto (A) are true and complete copies of the originals thereof and (B) are in full force and effect and have not been modified or amended from such attached copies; (xvi) a certificate of the Secretary or an Assistant Secretary of each Loan Party certifying and attaching (A) the names and true signatures of each officer of such Loan Party authorized to execute and deliver any Loan Document or other document required hereunder to be executed and delivered by or on behalf of such Loan Party, (B) the resolutions of such Loan Party's Board of Directors (or equivalent governing body) approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party and the transactions contemplated by this Agreement, (C) the due incorporation and good standing or valid existence of such Loan Party as a corporation organized under the laws of the jurisdiction of its formation, and the absence of any proceeding for the dissolution or liquidation of such Loan Party, together with a certificate, as of recent date, of the Secretary of State of the jurisdiction of its formation and of each jurisdiction in which such Loan Party conducts business, attesting to the good standing of each such Loan Party in each such jurisdiction and (D) a copy of the Constituent Documents of each Loan Party, certified as of a recent date by the Secretary of State of the state or jurisdiction of formation of such Loan Party or by another Person acceptable to the Administrative Agent, to the extent the Secretary or the Assistant Secretary is unable to certify that the Constituent Documents of such Loan Party have not been amended, revised or modified in any way since the Initial Closing Date; (xvii) a certificate of the Chief Financial Officer of each Borrower, stating that such Borrower is Solvent after giving effect to transactions contemplated in this Agreement, including the issuance of the Senior Secured Notes and the application of the proceeds thereof to the repayment of the Term Loan and the Canadian Term Loan and the payment of all estimated legal, accounting and other fees related hereto and thereto; 56 (xviii) a certificate of a Responsible Officer to the effect that (A) the condition set forth in Section 3.2(b) has been satisfied, (B) no litigation not listed on Schedule 4.7 shall have been commenced against any Loan Party or any of its Subsidiaries which is reasonably likely to be adversely determined and, if adversely determined, would have a Material Adverse Effect and (C) no Material Adverse Change has occurred since December 31, 2000; (xix) evidence satisfactory to the Administrative Agent and the Lenders that the insurance policies required by Section 7.5 and any Collateral Documents are in full force and effect, together with (A) in the case where such insurance policies cover property constituting solely Collateral, endorsements naming the Administrative Agent, on behalf of the Secured Parties, (B) in the case where such insurance policies cover property constituting both Collateral and Senior Secured Note Collateral, endorsements naming both the Administrative Agent and the Senior Secured Note Trustee as their respective interests may appear and (C) in the case where such insurance policies cover property constituting solely Senior Secured Note Collateral, endorsements naming the Senior Secured Note Trustee, in each case, as additional insured and/or loss payee under the subject insurance policies to be maintained with respect to the properties of Terra Industries, the Borrowers and each of their Subsidiaries; and (xx) such other certificates, documents, agreements and information respecting any Loan Party as any Lender through the Administrative Agent may reasonably request. (b) Issuance of Senior Secured Notes. The Administrative Agent shall have received evidence that Terra Capital has received from the issuance of the Senior Secured Notes at least (i) $200,000,000 in principal and (ii) gross proceeds, after deducting the applicable initial discount and underwriting commission, of at least $192,860,000. (c) Refinancing of Senior Notes (2003). The Administrative Agent shall have received (A) a copy of the irrevocable redemption notice delivered by the Loan Parties to the trustee under the Senior Note (2003) Indenture (the "Trustee (2003)") in respect of the Loan Parties' intention to use proceeds of the issuance of Senior Secured Notes to repurchase, exchange, repay or otherwise refinance the Senior Notes (2003) following the end of the redemption notice period required by the Senior Note (2003) Indenture for both the noteholders and the Trustee (2003), provided that, with respect to the redemption notice period applicable to the Trustee (2003), the redemption notice period shall be such shorter period as consented to by the Trustee (2003), and in any event shall not be later than November 26, 2001 (the "Redemption Notice Period"), and (B) evidence that sufficient proceeds of the issuance of Senior Secured Notes (and, to the extent proceeds of the issuance of Senior Secured Notes are insufficient after accounting for the repayments set forth in clauses (d) and (e) of this Section 3.1, proceeds of the Loans) have been irrevocably deposited with the Trustee (2003) on terms satisfactory to the Administrative Agent to repurchase, exchange, repay or otherwise refinance all of the Senior Notes (2003) on the redemption date. (d) Repayment of Canadian Term Loan. The Administrative Agent shall have received notice of prepayment of the Canadian Term Loan executed by Terra Canada, together with evidence showing that the Canadian Term Loan and other outstanding obligations (including, without limitation, interest, fees and breakage costs (if any)) which are attributable to 57 the Terra Canada Credit Agreement have been fully paid from proceeds of the issuance of the Senior Secured Notes. (e) Repayment of Term Loan. The Administrative Agent shall have received notice of prepayment of the Term Loan executed by Terra UK and TNLP, together with evidence showing that the Term Loan and other outstanding obligations (including, without limitation, interest, fees and breakage costs (if any) which are attributable to the Term Loan have been fully paid from proceeds of the issuance of the Senior Secured Notes. (f) Fees and Expenses Paid. There shall have been paid to the Administrative Agent, for the account of the Administrative Agent, and the Lenders, as applicable, all fees due and payable on or before the Effective Date (including all such fees described in the Fee Letter), and all expenses due and payable on or before the Effective Date. (g) Consents, Etc. Each Loan Party shall have received all consents and authorizations required pursuant to any material Contractual Obligation with any other Person and shall have obtained all consents and authorizations of, and effected all notices to and filings with, any Governmental Authority, in each case, as may be necessary to allow each of the Loan Parties lawfully (A) to execute, deliver and perform, in all material respects, their respective obligations hereunder, the Loan Documents and Senior Secured Note Documents to which each of them, respectively, is, or shall be, a party and each other agreement or instrument to be executed and delivered by each of them, respectively, pursuant thereto or in connection therewith, and (B) to create and perfect the Liens on the Collateral to be owned by each of them in the manner and for the purpose contemplated by the Loan Documents and the Senior Secured Note Documents. (h) Funds Flow Statement. Terra Capital shall have provided to the Administrative Agent a statement showing the proposed sources and applications of funds on the Effective Date arising from the issuance of the Senior Secured Notes and the other transactions contemplated under this Agreement. Section 3.2. Conditions Precedent to Each Loan and Letter of ----------------------------------------------- Credit. The obligation of each Lender on any date (including the Effective Date) ------ to make any Loan and of each Issuer on any date (including the Effective Date) to issue any Letter of Credit is subject to the satisfaction of all of the following conditions precedent: (a) Request for Borrowing or Issuance of Letter of Credit. With respect to any Loan, the Administrative Agent shall have received a duly executed Notice of Borrowing or, in the case of Swing Loans, a duly executed Swing Loan Request and with respect to any Letter of Credit, the Administrative Agent and the Issuer shall have received a duly executed Letter of Credit Request. (b) Representations and Warranties; No Defaults. The following statements shall be true on the date of such Loan or issuance, both before and after giving effect thereto and to the application of the proceeds from any such Loan and to such issuance: (i) The representations and warranties set forth in Article IV and in the other Loan Documents shall be true and correct on and as of the Effective Date and shall be true and correct in all material respects on and as of any such date after the 58 Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date; (ii) no Default or Event of Default has occurred and is continuing; (iii) there shall have occurred no Material Adverse Change or any event or circumstances which would have a Material Adverse Effect; and (iv) the applicable Borrower shall have delivered the Borrowing Base Certificate required by Section 6.11(a). (c) Borrowing Base. After giving effect to the Revolving Loans or Letters of Credit requested to be made or issued on any such date and the use of proceeds thereof, (i) no Borrowing Base Deficiency shall exist, (ii) the Revolving Credit Outstandings on such date shall not exceed the Maximum Credit in effect on such date and (iii) the aggregate Available Credit of the Borrowers shall not be less than $30,000,000. (d) No Legal Impediments. The making of the Loans or the issuance of such Letter of Credit on such date does not violate any Requirement of Law on the date of or immediately following such Loan or issuance and is not enjoined, temporarily, preliminarily or permanently. Each submission by a Borrower to the Administrative Agent of a Notice of Borrowing or a Swing Loan Request and the acceptance by such Borrower of the proceeds of each Loan requested therein, and each submission by a Borrower to an Issuer of a Letter of Credit Request and the issuance of each Letter of Credit requested therein, shall be deemed to constitute a representation and warranty by such Borrower as to the matters specified in Section 3.2(b) on the date of the making of such Loan or the issuance of such Letter of Credit. ARTICLE IV Representations And Warranties To induce the Lenders, the Issuers and the Administrative Agent to enter into this Agreement, Terra Industries and each of the Borrowers represent and warrant to the Lenders, the Issuers and the Administrative Agent that, on and as of the Effective Date, after giving effect to the making, or the continuation, of the Loans and other financial accommodations on the Effective Date and on and as of each date as required by Section 3.2(b)(i): Section 4.1. Corporate Existence; Compliance with Law. Each Loan ---------------------------------------- Party (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where such qualification is necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect; (c) has all requisite power and authority and the legal right to own, pledge, mortgage and operate its properties, to lease the property it operates under lease and to conduct its business as now or currently proposed to be conducted; (d) is in compliance with its Constituent Documents; (e) is in compliance with all applicable Requirements of Law except where the failure to be in compliance would not in the aggregate have a Material Adverse Effect; and (f) has all necessary licenses, permits, consents or approvals from or by, has made all necessary filings with, and has given all necessary notices to, 59 each Governmental Authority having jurisdiction, to the extent required for such ownership, operation and conduct, except for licenses, permits, consents, approvals or filings which can be obtained or made by the taking of ministerial action to secure the grant or transfer thereof or the failure to obtain or make would not in the aggregate have a Material Adverse Effect. Section 4.2. Corporate Power; Authorization; Enforceable Obligations ------------------------------------------------------- (a) The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby: (i) are within such Loan Party's corporate, limited liability company, partnership or other powers; (ii) have been duly authorized by all necessary corporate action, including the consent of shareholders where required; (iii) do not and will not (A) contravene any Loan Party's or any of its Subsidiaries' respective Constituent Documents, (B) violate any other applicable Requirement of Law applicable to any Loan Party (including Regulations U and X of the Federal Reserve Board), or any order or decree of any Governmental Authority or arbitrator applicable to any Loan Party, (C) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any Contractual Obligation of any Loan Party or any of its Subsidiaries, or (D) result in the creation of imposition of any Lien upon any of the property of any Loan Party or any of its Subsidiaries, other than those in favor of the Secured Parties pursuant to the Collateral Documents; and (iv) do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than those list Schedule 4.2 and which have been obtained or made, copies of which have been or will be delivered to the Administrative Agent pursuant to Section 3.1, and each of which on the Effective Date will be in full force and effect and, with respect to the Collateral, filings required to perfect the Liens created by the Collateral Documents. (b) This Agreement has been, and each of the other Loan Documents will have been upon delivery thereof pursuant to the terms of this Agreement, duly executed and delivered by each Loan Party thereto. This Agreement is, and the other Loan Documents will be, when delivered hereunder, the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms. Section 4.3. Ownership of Subsidiaries. ------------------------- Set forth on Part I of Schedule 4.3 hereto is a complete and accurate list showing, as of the Effective Date, all Material Subsidiaries of Terra Industries and, as to each such Subsidiary, the jurisdiction of its incorporation, the number of shares of each class of Stock authorized (if applicable), the number outstanding on the Effective Date and the number and percentage of the outstanding shares of each such class owned (directly or indirectly) by Terra Industries. No Stock of any Subsidiary of Terra Industries is subject to any outstanding option, warrant, right of conversion or purchase or any similar right (except in respect of the Common 60 Units). All of the outstanding Stock of each Subsidiary of Terra Industries owned (directly or indirectly) by Terra Industries has been validly issued, is fully paid and non-assessable and is owned by Terra Industries or a Subsidiary of Terra Industries, free and clear of all Liens (other than the Lien in favor of the Secured Parties created pursuant to the Collateral Documents and, with respect to the Common Units, other than the Liens securing the Senior Secured Notes created pursuant to the Senior Secured Note Documents). Except as set forth in Schedule 4.3, neither Terra Industries nor any such Subsidiary is a party to, or has knowledge of, any agreement binding on it which restricts the transfer or hypothecation of any Stock of any such Subsidiary, other than the Loan Documents. Terra Industries does not own or hold, directly or indirectly, any Stock of any Person other than such Subsidiaries and Investments permitted by Section 8.3. Section 4.4. Financial Statements. -------------------- (a) The consolidated balance sheet of Terra Industries and its Subsidiaries as at December 31, 2000, and the related consolidated statements of income, retained earnings and cash flows of Terra Industries and its Subsidiaries for the fiscal year then ended, certified by Deloitte & Touche LLP, and the consolidated balance sheets of Terra Industries and its Subsidiaries as at June 30, 2001, and the related consolidated statements of income, retained earnings and cash flows of Terra Industries and its Subsidiaries for the six months then ended, copies of which have been furnished to each Lender, fairly present (in all material respects), subject, in the case of said balance sheets as at June 30, 2001, and said statements of income, retained earnings and cash flows for six months then ended, to the absence of footnote disclosure and normal recurring year-end audit adjustments, the consolidated financial condition of Terra Industries and its Subsidiaries as at such dates and the consolidated results of the operations of Terra Industries and its Subsidiaries for the period ended on such dates, all in conformity with GAAP. (b) Neither Terra Industries nor any of its Subsidiaries has any material obligation, contingent liability or liability for taxes, long-term leases or unusual forward or long-term commitment which is not either (i) reflected in the Financial Statements referred to in clause (a) above or in the notes thereto or (ii) permitted by this Agreement. (c) The Projections have been prepared by Terra Industries in light of the past operations of its business, and reflect projections for the fiscal periods covered thereby on a month by month basis for the first year and on a year by year basis thereafter. The Projections are based upon estimates and assumptions stated therein, all of which Terra Industries believes to be reasonable and fair in light of current conditions and current facts known to Terra Industries and at the time such Projections were prepared and reflect Terra Industries' good faith and reasonable estimates of the future financial performance of Terra Industries and its Subsidiaries and of the other information projected therein for the periods set forth therein (it being understood that no representation is made that such Projections will be realized). (d) The unaudited pro forma consolidated and consolidating balance sheet of Terra Industries and its Subsidiaries (the "Pro Forma Balance Sheet") contained in Schedule 4.4, has been prepared as of June 30, 2001, reflects as of such date, on a pro forma basis, the consolidated financial condition of Terra Industries and its Subsidiaries, and the assumptions expressed therein were reasonable based on the information available to Terra Industries at the time so prepared and on the Effective Date. 61 Section 4.5. Material Adverse Change. Since December 31, 2000, there has ----------------------- been no Material Adverse Change and there have been no events or developments that in the aggregate have had a Material Adverse Effect. Section 4.6. Solvency. Both before and after giving effect to (a) the Loans -------- and Letter of Credit Obligations to be made or extended on the Effective Date or such other date as Loans and Letter of Credit Obligations requested hereunder are made or extended, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of the Borrower, and the consummation of the other financing transactions contemplated hereby and (c) the payment and accrual of all transaction costs in connection with the foregoing, each Loan Party is Solvent. Section 4.7. Litigation. There are no pending or, to the knowledge of Terra ---------- Industries or any Borrower, threatened actions, investigations or proceedings affecting Terra Industries or any of its Material Subsidiaries before any court, Governmental Authority or arbitrator which would reasonably be expected to be adversely determined and which, if adversely determined, would have a Material Adverse Effect. The performance of any action by any Loan Party required or contemplated by any of the Loan Documents is not restrained or enjoined (either temporarily, preliminarily or permanently). Schedule 4.7 lists all litigation pending against any Loan Party at the date hereof which, if adversely determined, would have a Material Adverse Effect. Section 4.8. Taxes. ----- (a) All federal, state, provincial, local and foreign income and franchise and other material tax returns, reports and statements (collectively, the "Tax Returns") required to be filed by Terra Industries and each of its Subsidiaries and its Tax Affiliates have been filed with the appropriate Governmental Authorities in all jurisdictions in which such Tax Returns are required to be filed, all such Tax Returns are true and correct in all material respects, and all material taxes, charges and other impositions reflected therein or otherwise due and payable have been paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof except where contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books of Terra Industries and each of its Subsidiaries or such Tax Affiliate in conformity with GAAP. Except as set forth on Schedule 4.8 (or as otherwise notified from time to time after the Effective Date in writing to the Administrative Agent) no Tax Return is under audit or examination by any Governmental Authority and no notice of such an audit or examination or any assertion of any claim for Taxes has been given or made by any Governmental Authority. Proper and accurate amounts have been withheld by each Loan Party and each of its Tax Affiliates from their respective employees for all periods in compliance (in all material respects) with the tax, social security and unemployment withholding provisions of applicable Requirements of Law and such withholdings have been timely paid to the respective Governmental Authorities. (b) Neither Terra Industries, any of its Subsidiaries or any of its Tax Affiliates has (i) except as set forth on Schedule 4.8 (or as otherwise notified from time to time after the Effective Date in writing to the Administrative Agent) executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for the filing of any Tax Return or the assessment or collection of any charges; (ii) any obligation under any tax sharing agreement or arrangement other than that to which the Administrative Agent has a copy prior to the date hereof; or (iii) been a member of an 62 affiliated, combined or unitary group other than the group of which Terra Industries is the common parent. Section 4.9. Full Disclosure. --------------- The written information prepared or furnished by the Loan Parties or on their behalf (by their officers or advisors (including legal, environmental and financial advisors and consultants)) in connection with this Agreement or the consummation of the financing when taken as a whole does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein not misleading. Section 4.10. Margin Regulations. Neither Terra Industries nor its ------------------ Material Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Federal Reserve Board), and no proceeds of any Borrowing will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock in contravention of Regulation U or X of the Federal Reserve Board. Section 4.11. No Burdensome Restrictions; No Defaults. --------------------------------------- (a) Neither Terra Industries nor any of its Subsidiaries (i) is a party to any Contractual Obligation the compliance with which would have a Material Adverse Effect or the performance of which by any thereof, either unconditionally or upon the happening of an event, will result in the creation of a Lien (other than a Lien permitted under Section 8.2) on the property or assets of any thereof or (ii) is subject to any charter or corporate restriction which would have a Material Adverse Effect. (b) Neither Terra Industries nor any of its Subsidiaries is in default under or with respect to any Contractual Obligation owed by it and, to the knowledge of Terra Industries and the Borrowers, no other party is in default under or with respect to any Contractual Obligation owed to Terra Industries or its Subsidiaries, other than, in either case, those defaults which in the aggregate would not have a Material Adverse Effect. (c) No Default or Event of Default has occurred and is continuing. (d) To the best knowledge of Terra Industries and the Borrowers, there is no Requirement of Law applicable to any Loan Party the compliance with which by such Loan Party would have a Material Adverse Effect. Section 4.12. Investment Company Act; Public Utility Holding Company Act. ---------------------------------------------------------- Neither Terra Industries nor any of its Subsidiaries is (a) 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 or (b) a "holding company," or an "affiliate" or a "holding company" or a "subsidiary company" of a "holding company," as each such term is defined and used in the Public Utility Holding Act of 1935, as amended. Section 4.13. Use of Proceeds. The proceeds of the Loans and the Letters --------------- of Credit are being used by the Borrowers solely to refinance existing Indebtedness of the Borrowers 63 and their Subsidiaries, and for the payment of related transaction costs, fees and expenses; and for their working capital and general corporate purposes. Section 4.14. Insurance. All policies of insurance of any kind or nature of --------- Terra Industries or any of its Subsidiaries, including policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers' compensation and employee health and welfare insurance, are in full force and effect and are of a nature and provide such coverage as is sufficient and as is customarily carried by businesses of the size and character of such Person. None of Terra Industries or any of its Subsidiaries has been refused insurance for any material coverage for which it had applied or had any policy of insurance terminated (other than at its request). Section 4.15. Labor Matters. ------------- (a) There are no strikes, work stoppages, slowdowns or lockouts pending or threatened against or involving Terra Industries or any of its Subsidiaries, other than those which in the aggregate would not have a Material Adverse Effect. (b) There are no unfair labor practices, grievances or complaints pending, or, to the Borrowers' knowledge, threatened against or involving Terra Industries or any of its Subsidiaries, nor are there any arbitrations or grievances threatened involving Terra Industries or any of its Subsidiaries, other than those which, in the aggregate, if resolved adversely to Terra Industries or such Subsidiary, would not have a Material Adverse Effect. (c) Except as set forth on Schedule 4.15, as of the Effective Date, there is no collective bargaining agreement covering any of the employees of Terra Industries or its Subsidiaries. (d) Schedule 4.15 sets forth as of the date hereof, all material consulting agreements, executive employment agreements, executive compensation plans, deferred compensation agreements, employee stock purchase and stock option plans and severance plans of Terra Industries and any of its Subsidiaries. Section 4.16. ERISA. ----- (a) Schedule 4.16 separately identifies as of the date hereof all Title IV Plans, all Multiemployer Plans and all Foreign Plans. (b) Each employee benefit plan of Terra Industries or any of its Subsidiaries which is intended to qualify under Section 401 of the Code does so qualify, and any trust created thereunder is exempt from tax under the provisions of Section 501 of the Code, except where all such failures would not have a Material Adverse Effect. (c) Each Title IV Plan is in compliance in all material respects with applicable provisions of ERISA, the Code and other Requirements of Law except for non-compliances that in the aggregate would not have a Material Adverse Effect. (d) There has been no, nor is there reasonably expected to occur, any ERISA Event which would have a Material Adverse Effect. 64 (e) Except to the extent set forth on Schedule 4.16, none of Terra Industries, any of its Subsidiaries or any ERISA Affiliate would have any Withdrawal Liability as a result of a complete withdrawal as of the date hereof from any Multiemployer Plan. (f) The accrued and vested liability under each Foreign Plan and under all Foreign Plans in the aggregate does not exceed the amount of such liability reflected in the Financial Statements by an amount which could reasonably be expected to have a Material Adverse Effect, after taking into account the availability of any assets of such Foreign Plan or otherwise specifically allocable to such liability. Section 4.17. Environmental Matters. --------------------- (a) Except as set forth on Schedule 4.17, the operations of Terra Industries and each of its Subsidiaries have been and are in compliance with all Environmental Laws, including obtaining and complying in all material respects with all Permits required by Environmental Laws ("Environmental Permits"), other than non-compliances that in the aggregate would not have a reasonable likelihood of Terra Industries and its Subsidiaries incurring Environmental Liabilities and Costs in excess of $1,000,000. (b) Except as set forth on Schedule 4.17, Terra Industries and its Subsidiaries have obtained and currently possess all Environmental Permits necessary for their operations, all such Permits are in good standing and Terra Industries and each of its Subsidiaries is in compliance with the terms and conditions of such Permits except for failures that in the aggregate would not have a reasonable likelihood of Terra Industries and its Subsidiaries incurring Environmental Liabilities and Costs in excess of $1,000,000. (c) Except as set forth on Schedule 4.17, none of Terra Industries or any of its Subsidiaries or any Real Property currently or, to its knowledge, previously owned, operated or leased by or for Terra Industries or any of its Subsidiaries is subject to any pending or, to its knowledge threatened, written claim, order, agreement, notice of violation, notice of potential liability or other allegation or is the subject of any pending or, to its knowledge, threatened proceeding or governmental investigation under or pursuant to Environmental Laws other than those that in the aggregate would not have a reasonable likelihood of Terra Industries and its Subsidiaries incurring Environmental Liabilities and Costs in excess of $1,000,000. (d) Except as set forth on Schedule 4.17, none of Terra Industries or any of its Subsidiaries is a treatment, storage or disposal facility requiring a permit under the Resource Conservation and Recovery Act, 42 U.S.C.(S).6901 et seq., the regulations thereunder or any state analog. (e) Except as set forth on Schedule 4.17, there are no facts, circumstances or conditions arising out of or relating to the operations or ownership of Real Property owned or operated by Terra Industries or any of its Subsidiaries that could reasonably be expected to give rise to Environmental Liabilities and Costs which are not specifically included in the financial information furnished to the Lenders other than those that in the aggregate would not have a reasonable likelihood of resulting in Terra Industries or any of its Subsidiaries incurring Environmental Liabilities and Costs in excess of $1,000,000. (f) Except as set forth on Schedule 4.17, as of the date hereof, no Environmental Lien has attached to any property of Terra Industries or any of its Subsidiaries and 65 to its knowledge no facts, circumstances or conditions exist that could reasonably be expected to result in any such lien attaching to any such property. (g) Except as set forth on Schedule 4.17, Terra Industries and each of its Subsidiaries has provided the Administrative Agent with copies of all material environmental, health or safety audits, studies, assessments, inspections, investigations or other environmental health and safety reports relating to the operations of Terra Industries and its Subsidiaries or their Real Property that are in the possession, custody or control of Terra Industries or any of its Subsidiaries. Section 4.18. Intellectual Property. Terra Industries and its Subsidiaries --------------------- own or license or otherwise have the right to use all licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, copyright applications, franchises, authorizations and other intellectual property rights (including all Intellectual Property as defined in the Pledge and Security Agreement) that are necessary and material to the operations of their respective businesses, without infringement upon or conflict with the rights of any other Person with respect thereto, including all trade names associated with any material private label brands of Terra Industries or any of its Subsidiaries. To the Borrowers' and Terra Industries' knowledge, no slogan or other advertising device, product, process, method, substance, part or component, or other material now employed, or now contemplated to be employed, by Terra Industries or any of its Subsidiaries infringes upon or conflicts in any material respect with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or threatened. Section 4.19. Title; Real Property. -------------------- (a) Schedule 4.19 sets forth all the Real Property (other than Non-Material Real Property) owned by Terra Industries and its Material Subsidiaries at the date hereof and each of Terra Industries and its Subsidiaries has good and marketable title to, or valid leasehold interests in, all such Real Property and good title to all personal property purported to be owned by it, including those reflected on the most recent Financial Statements delivered by the Borrowers, and none of such properties and assets is subject to any Lien, except Liens permitted under Section 8.2. Terra Industries and its Subsidiaries have received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and have duly effected all recordings, filings and other actions necessary to establish, protect and perfect in all material respects Terra Industries' and its Material Subsidiaries' right, title and interest in and to all such property. (b) Set forth on Schedule 4.19 hereto is a complete and accurate list of all Real Property (other than Non-Material Real Property) owned and leased by Terra Industries and its Material Subsidiaries showing as of the Effective Date the street address, county or other relevant jurisdiction, state, and record owner. Each Loan Party has good, indefeasible and marketable fee simple (or, where relevant, leasehold) title to all Real Property purported to be owned by it, which ownership is free and clear of all Liens other than Liens created or permitted by the Loan Documents. (c) Except as set forth on Schedule 4.19 (or otherwise notified in writing to the Administrative Agent in respect of Real Property acquired after the Closing Date), neither Terra Industries nor any of its Subsidiaries owns or holds, or is obligated under or a party to, any 66 option, right of first refusal or other contractual right to purchase, acquire, sell, assign or dispose of any Real Property (other than Non-Material Real Property) owned or leased by Terra Industries or any of its Subsidiaries except as permitted by the Loan Documents. (d) All material components of all improvements included within the Real Property owned or leased by Terra Industries or any of its Subsidiaries (collectively, "Improvements"), including the roofs and structural elements thereof and the heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water, paving and parking equipment, systems and facilities included therein, are in working order and repair to the extent necessary for the effective and orderly conduct of the business, operations and activities of Terra Industries and its Subsidiaries in all material respects (but in any event to a standard not lower than that generally maintained by Terra Industries and its Subsidiaries during the two year period preceding the date hereof). All water, gas, electrical, steam, compressed air, telecommunication, sanitary and storm sewage lines and systems and other similar systems serving the Real Property owned or leased by Terra Industries or any of its Subsidiaries are installed and operating and are sufficient to enable the Real Property owned or leased by Terra Industries or its Subsidiaries to continue to be used and operated in the manner currently being used and operated, and neither Terra Industries nor any of its Subsidiaries has any knowledge of any factor or condition that could result in the termination or material impairment of the furnishing thereof. No Improvement or portion thereof is dependent for its access, operation or utility on any land, building or other Improvement not included in the Real Property owned or leased by Terra Industries or any of its Subsidiaries or over which it has a right of way or easement. (e) No portion of any Real Property owned or leased by Terra Industries or any of its Subsidiaries has suffered any material damage by fire or other casualty loss which has not heretofore been substantially repaired and restored to its original condition except with respect to which repair has been commenced (as set forth on Schedule 4.19 (or otherwise notified in writing to the Administrative Agent after the Effective Date)) and is being diligently progressed. Except as set forth on Schedule 4.19 (or otherwise notified in writing to the Administrative Agent after the Effective Date), no portion of any Real Property owned or leased by Terra Industries or any of its Subsidiaries is located in a special flood hazard area as designated by any federal Governmental Authority. (f) All Permits required to have been issued or appropriate to enable all Real Property owned or leased by Terra Industries or any of its Subsidiaries to be lawfully occupied and used for all of the purposes for which they are currently occupied and used have been lawfully issued and are in full force and effect, other than those which in the aggregate would not have a Material Adverse Effect. (g) None of Terra Industries or any of its Subsidiaries has received any notice, or has any knowledge, of any pending, threatened or contemplated condemnation proceeding affecting any Real Property owned or leased by Terra Industries or any of its Subsidiaries or any part thereof, except those which, in the aggregate, would not have a Material Adverse Effect. Section 4.20. Pari Passu Obligations. This Agreement and the other Loan ---------------------- Documents and the obligations evidenced hereby and thereby are and will at all times be direct and unconditional general obligations of the Borrowers, and rank and will at all times rank in 67 right of payment and otherwise at least pari passu with all unsecured Indebtedness of the Borrowers, whether now existing or hereafter outstanding, subject to statutory priority and the effect of bankruptcy and insolvency law. Section 4.21. No Immunity. Terra UK is subject to civil and commercial law ----------- with respect to its obligations under this Agreement and each of the other Loan Documents. The execution, delivery and performance by Terra UK of this Agreement and each of the other Loan Documents constitute private and commercial acts rather than public or governmental acts. Neither Terra UK nor any of its properties or revenues is entitled to any right of immunity in any jurisdiction from suit, court jurisdiction, judgment, attachment (whether before or after judgment), set-off or execution of a judgment or from any other legal process or remedy relating to the obligations of Terra UK, as the case may be, under this Agreement or any of the other Loan Documents. Section 4.22. Canadian and English Requirements. This Agreement and each of --------------------------------- the other Loan Documents are in proper legal form under the laws of Canada and England for the enforcement thereof against Terra Canada and Terra UK respectively under such laws, and if each of the Loan Documents were stated to be governed by such law, they would constitute legal, valid and binding obligations of Terra Canada and Terra UK, as the case may be, thereunder, enforceable in accordance with their respective terms. All formalities (if any) required under the laws of Canada and England in respect of Terra Canada and Terra UK, for the validity and enforceability of each of the Loan Documents (including, without limitation, any necessary registration, recording or filing with any court or other authority therein), except as otherwise expressly provided herein, have been accomplished, and no Taxes are required to be paid and no notarization is required, for the validity and enforceability thereof. ARTICLE V Financial Covenants As long as any of the Obligations (in respect of Revolving Credit Outstandings, interest or fees thereon and expenses related thereto) or the Revolving Credit Commitments remain outstanding, unless the Requisite Lenders otherwise consent in writing, Terra Industries agrees with the Lenders and the Administrative Agent that: Section 5.1. Minimum Cash Flow. Terra Industries will have, as of the last ----------------- day of each Fiscal Quarter set forth below, Cash Flow for the number of Fiscal Quarters indicated below ending on such day of not less than the following: 68 ------------------------------------------------------------------------ Fiscal Quarters Minimum Cash Flow ------------------------------------------------------------------------ 4 Fiscal Quarters ended September 30, 2001, $40,000,000 December 31, 2001 and March 31, 2002 ------------------------------------------------------------------------ 4 Fiscal Quarters ended June 30, 2002 $60,000,000 ------------------------------------------------------------------------ 4 Fiscal Quarters ended September 30, 2002 $75,000,000 ------------------------------------------------------------------------ 4 Fiscal Quarters ended December 31, 2002 and each $90,000,000 4 Fiscal Quarter period thereafter ------------------------------------------------------------------------ Section 5.2. Capital Expenditures and Joint Venture Investments. -------------------------------------------------- Terra Industries will not permit (a) Capital Expenditures (excluding any Capital Expenditures financed by insurance proceeds to the extent permitted hereunder) to be made or incurred during each period set forth below and (b) the cash Investments in joint ventures made during such period permitted under Section 8.3(l) (i) in the case of clause (a) only, to be less than the minimum amount set forth below and (ii) in the case of clauses (a) and (b) in aggregate to be in excess of the maximum amount set forth below, for such period:
------------------------------------------------------------------------------------------------------ Fiscal Year Maximum Amount Minimum Amount ------------------------------------------------------------------------------------------------------ Fiscal Year ended December 31, 2001 $50,000,000 $15,000,000 ------------------------------------------------------------------------------------------------------ Fiscal Year ended December 31, 2002 $50,000,000 $15,000,000 ------------------------------------------------------------------------------------------------------ Fiscal Year ended December 31, 2003 $50,000,000 $15,000,000 ------------------------------------------------------------------------------------------------------ Fiscal Year ended December 31, 2004 $50,000,000 $15,000,000 ------------------------------------------------------------------------------------------------------ 2 Fiscal Quarters ended June 30, 2005 $30,000,000 $ 5,000,000 ------------------------------------------------------------------------------------------------------
Section 5.3. Minimum Liquidity. The Borrowers shall not permit the ----------------- aggregate Available Credit of the Borrowers to be less than $30,000,000 for more than three consecutive Business Days. ARTICLE VI Reporting Covenants As long as any of the Obligations (in respect of Revolving Credit Outstandings, interest or fees thereon and expenses related thereto) or the Revolving Credit Commitments 69 remain outstanding, unless the Requisite Lenders (except as provided in Section 11.1) otherwise consent in writing, the Borrower agrees with the Lenders and the Administrative Agent that: Section 6.1. Financial Statements. Terra Industries shall furnish to -------------------- the Lenders the following Financial Statements: (a) Monthly Reports. Within 30 days after the end of each fiscal month (other than March, June and September) in each Fiscal Year, financial information regarding Terra Industries and its Subsidiaries consisting of consolidated and consolidating unaudited balance sheets as of the close of such month and the related statements of income and cash flow for such month and that portion of the current Fiscal Year ending as of the close of such month, setting forth in comparative form the figures for the corresponding period in the prior year and the figures contained in the Projections, in each case certified by a Responsible Officer of Terra Industries as fairly presenting the consolidated and consolidating financial position of Terra Industries and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with GAAP (subject to the absence of footnote disclosure and normal year-end audit adjustments). (b) Quarterly Reports. Within 45 days after the end of each Fiscal Quarter (other than a Fiscal Quarter ending December 31) in each Fiscal Year, financial information regarding Terra Industries and its Subsidiaries consisting of consolidated and consolidating unaudited balance sheets as of the close of such quarter and the related statements of income and cash flow for such quarter and that portion of the Fiscal Year ending as of the close of such quarter, setting forth in comparative form the figures for the corresponding period in the prior year and the figures contained in the Projections, in each case certified by a Responsible Officer of Terra Industries as fairly presenting the consolidated and consolidating financial position of Terra Industries and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with GAAP (subject to the absence of footnote disclosure and normal year-end audit adjustments). (c) Annual Reports. Within 90 days after the end of each Fiscal Year, financial information regarding Terra Industries and its Subsidiaries consisting of consolidated and consolidating balance sheets of Terra Industries and its Subsidiaries as of the end of such year and related statements of income and cash flows of Terra Industries and its Subsidiaries for such Fiscal Year, all prepared in conformity with GAAP and certified, in the case of such consolidated financial statements, without qualification as to the scope of the audit by Deloitte & Touche LLP or other independent public accountants acceptable to the Administrative Agent, together with the report of such accounting firm stating that (i) such financial statements fairly present the consolidated financial position of Terra Industries and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except for changes with which such independent certified public accountants shall concur and which shall have been disclosed in the notes to the financial statements), and (ii) the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards, and accompanied by a certificate stating that in the course of the regular audit of the business of Terra Industries and its Subsidiaries such accounting firm has obtained no knowledge that a Default or Event of Default in respect of the financial covenants contained in Article V has occurred and is continuing, or, if in the opinion of such accounting firm, a Default 70 or Event of Default has occurred and is continuing in respect of such financial covenants, a statement as to the nature thereof. (d) Compliance Certificate. Together with each delivery of any financial statement pursuant to clauses (b) and (c) of this Section 6.1, a certificate of a Responsible Officer of a Borrower (each, a "Compliance Certificate") (i) showing in reasonable detail the calculations used in determining the Leverage Ratio (for purposes of determining the Applicable Margin) and demonstrating compliance with each of the financial covenants contained in Article V which is tested on a quarterly basis and (ii) stating that, to the best of such Responsible Officer's knowledge, no Default or Event of Default has occurred and is continuing or, if a Default or an Event of Default has occurred and is continuing, stating the nature thereof and the action which the Borrower proposes to take with respect thereto. (e) Business Plan. Not later than 60 days after the end of each Fiscal Year, and containing substantially the types of financial information contained in the Projections delivered pursuant to clause (i) of the definition of such term in Section 1.1, (i) the annual business plan of Terra Industries for the next succeeding Fiscal Year approved by the Board of Directors of Terra Industries, (ii) forecasts prepared by management of Terra Industries for each fiscal month in the next succeeding Fiscal Year, and (iii) forecasts prepared by management of Terra Industries for each of the succeeding Fiscal Years through Fiscal Year 2005, including, in each instance described in clause (ii) and clause (iii) above, (A) a projected year-end consolidated balance sheet and income statement and statement of cash flows and (B) a statement of all of the material assumptions on which such forecasts are based. (f) Management Letters, Etc. Within five Business Days after receipt thereof by any Loan Party, copies of each management letter, exception report or similar letter or report received by such Loan Party from its independent certified public accountants; (g) Loans and Intercompany Loan Balances. Together with each delivery of any financial statement pursuant to clauses (b) or (c) of this Section 6.1, a summary of the outstanding Loans and the outstanding balance of all Intercompany Indebtedness as of the last day of the fiscal quarter covered by such financial statement (or more frequently as may be required by the Administrative Agent), certified by a Responsible Officer. (h) Additional Information. Promptly, from time to time, such other information regarding the operations, including information regarding specific product categories and lines of business of Terra Industries and its Subsidiaries, business affairs and financial condition of Terra Industries or any of its Subsidiaries, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request. Section 6.2. Default Notices. As soon as practicable, and in any --------------- event within five Business Days after a Responsible Officer of any Loan Party has actual knowledge of the existence of any Default, Event of Default or other event which has had a Material Adverse Effect or which has any reasonable likelihood of causing or resulting in a Material Adverse Change, the Borrowers shall give the Administrative Agent notice specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given by telephone, shall be promptly confirmed in writing on the next Business Day. Section 6.3. Litigation. Promptly after the commencement thereof, ---------- the Borrowers shall give the Administrative Agent written notice of the commencement of all 71 actions, suits and proceedings before any domestic or foreign Governmental Authority or arbitrator, affecting Terra Industries or any of its Subsidiaries and known to a Responsible Officer, which in the reasonable judgment of Terra Industries or such Subsidiary, could reasonably be expected to expose Terra Industries or such Subsidiary to liability in an amount aggregating $500,000 or more or which, if adversely determined, would have a Material Adverse Effect. Section 6.4. Asset Sales. Prior to any Asset Sale anticipated to ----------- generate in excess of $10,000,000 (or its Dollar Equivalent) in Net Cash Proceeds, Terra Industries shall send the Administrative Agent a notice (a) describing such Asset Sale or the nature and material terms and conditions of such transaction and (b) stating the estimated Net Cash Proceeds anticipated to be received by Terra Industries or any of its Subsidiaries. Section 6.5. SEC Filings; Press Releases. Promptly after the sending --------------------------- or filing thereof, the Borrowers shall send the Administrative Agent copies of (a) all reports which Terra Industries or any of its Material Subsidiaries sends to its security holders generally, (b) all reports and registration statements which Terra Industries or any of its Subsidiaries files with the Securities and Exchange Commission or any national or foreign securities exchange or the National Association of Securities Dealers, Inc., (c) all press releases and (d) all other statements concerning material changes or developments in the business of such Loan Party made available by any Loan Party to the public. Section 6.6. Labor Relations. Promptly after a Responsible Officer --------------- becomes aware of the same, the Borrowers shall give the Administrative Agent written notice of (a) any material labor dispute to which Terra Industries or any of its Material Subsidiaries is or may become a party, including any strikes, lockouts or other disputes relating to any of such Person's plants and other facilities, and (b) any Worker Adjustment and Retraining Notification Act or related liability incurred with respect to the closing of any plant or other facility of any of such Person. Section 6.7. Tax Returns. Upon the request of any Lender, through ----------- the Administrative Agent, the Borrowers will provide copies of all federal, state, material local and foreign tax returns and reports filed by Terra Industries or any of its Subsidiaries in respect of taxes measured by income (excluding sales, use and like taxes). Section 6.8. Insurance. As soon as is practicable and in any event --------- within 90 days after the end of each Fiscal Year, the Borrowers will furnish the Administrative Agent (in sufficient copies for each of the Lenders) with (a) a report in form and substance reasonably satisfactory to the Administrative Agent and the Lenders outlining all material insurance coverage maintained as of the date of such report by Terra Industries and its Material Subsidiaries and the duration of such coverage and (b) an insurance broker's statement that all premiums then due and payable with respect to such coverage have been paid. Section 6.9. ERISA Matters. The Borrowers shall furnish the ------------- Administrative Agent (with sufficient copies for each of the Lenders): (a) promptly and in any event within 30 days after a Responsible Officer of Terra Industries, any of its Material Subsidiaries or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred; 72 (b) promptly and in any event within 10 days after a Responsible Officer of Terra Industries, any of its Material Subsidiaries or any ERISA Affiliate knows or has reason to know that a request for a minimum funding waiver under Section 412 of the Code has been filed with respect to any Title IV Plan or Multiemployer Plan, a written statement of a Responsible Officer of Terra Industries describing such ERISA Event or waiver request and the action, if any, which Terra Industries, its Subsidiaries and ERISA Affiliates propose to take with respect thereto and a copy of any notice filed with the PBGC or the IRS pertaining thereto; (c) simultaneously with the date that Terra Industries, any of its Material Subsidiaries or any ERISA Affiliate files a notice of intent to terminate any Title IV Plan, if such termination would require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, a copy of each notice. Section 6.10. Environmental Matters. The Borrowers shall provide the --------------------- Administrative Agent promptly and in any event within 10 days of a Responsible Officer of Terra Industries or any Subsidiary learning of any of the following, written notice of any of the following: (a) that any Loan Party is or may be liable to any Person as a result of a Release or threatened Release which could reasonably be expected to subject such Loan Party to Environmental Liabilities and Costs of $1,000,000 or more; (b) the receipt by any Loan Party of notification that any real or personal property of such Loan Party is subject to any Environmental Lien; (c) the receipt by any Loan Party of any notice of violation of or potential liability under, or knowledge by such Loan Party that there exists a condition which could reasonably be expected to result in a violation of or liability under any Environmental Law, except for violations and liabilities the consequence of which in the aggregate would have no reasonable likelihood of subjecting the Loan Parties collectively to Environmental Liabilities and Costs of $1,000,000 or more; (d) the commencement of any judicial or administrative proceeding or investigation alleging a violation of or liability under any Environmental Law, which in the aggregate, if adversely determined, would have a reasonable likelihood of subjecting the Loan Parties collectively to Environmental Liabilities and Costs of $1,000,000 or more; (e) any proposed acquisition of stock, assets or real estate, or any proposed leasing of property, or any other action by any Loan Party or any of its Subsidiaries the consequences of which in the aggregate have a reasonable likelihood of subjecting the Loan Parties collectively to Environmental Liabilities and Costs of $1,000,000 or more; (f) any proposed action by any Loan Party or any of its Subsidiaries or any proposed change in Environmental Laws which in the aggregate have a reasonable likelihood of requiring the Loan Parties to obtain additional environmental, health or safety Permits or make additional capital improvements to obtain compliance with Environmental Laws that in each case in the aggregate would cost $1,000,000 or more or subject the Loan Parties to additional Environmental Liabilities and Costs of $1,000,000 or more; and 73 (g) upon written request by the Administrative Agent or by any Lender through the Administrative Agent, following (i) the acquisition by a Loan Party or its Subsidiary of a fee interest in any Real Property, (ii) the occurrence of a Default or Event of Default pursuant to Section 7.10 or (iii) the occurrence (or the reasonable belief by the Administrative Agent, following consultation with the Borrowers, of the occurrence) of any of the matters to be notified by the Borrowers under this Section 6.10, a report prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent providing, as appropriate in the circumstances, an assessment of the status of any Environmental Liabilities and Costs and other environmental, health or safety compliance, hazard or liability issue arising in relation thereto, which assessment shall be reasonable in scope in light of the circumstances, perceived risks and the facts known at the time. Without limiting 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 the Borrowers. Section 6.11. Borrowing Base Determination. ---------------------------- (a) The Borrowers shall furnish to the Administrative Agent no later than Wednesday of each week or more frequently as may be requested by the Administrative Agent, a Borrowing Base Certificate for each Borrower as of the immediately preceding Friday (or the relevant third preceding Business Day if requested more frequently) executed by a Responsible Officer of each Borrower together with reasonably detailed supporting information and documentation acceptable to the Administrative Agent. The Administrative Agent shall make reasonable efforts to furnish to the Lenders a copy of each Borrowing Base Certificate following receipt thereof from the Borrowers; provided, however, that failure to furnish such a copy will not give rise to a claim or remedy by the Lenders against the Administrative Agent. (b) Each Borrower shall conduct, or shall cause to be conducted, at its expense, and upon request of the Administrative Agent, and present to the Administrative Agent for approval, such appraisals, investigations and reviews as the Administrative Agent shall reasonably request for the purpose of determining each Borrowing Base, all upon notice and at such times during normal business hours and as often as may be reasonably requested. Each Borrower shall furnish to the Administrative Agent any information which the Administrative Agent may reasonably request regarding the determination and calculation of its Borrowing Base including correct and complete copies of any invoices, underlying agreements, instruments or other documents and the identity of all Account Debtors in respect of Accounts referred to therein. (c) The Borrowers shall notify the Administrative Agent in writing promptly upon any Borrower receiving or otherwise gaining knowledge that the Revolving Credit Outstandings in respect of such Borrower would result in a Borrowing Base Deficiency. (d) The Administrative Agent may, at the Borrowers' sole cost and expense, make test verifications of the Accounts and physical verifications of the Inventory in any manner and through any medium that the Administrative Agent considers advisable, and the Borrowers shall furnish all such assistance and information as the Administrative Agent may reasonably require in connection therewith. 74 Section 6.12. Other Information. The Borrowers will provide the ----------------- Administrative Agent or any Lender with such other information respecting the business, properties, condition, financial or otherwise, or operations of Terra Industries or any of its Subsidiaries as any Lender through the Administrative Agent may from time to time reasonably request. Section 6.13. Material Documents. The Borrowers will provide to the ------------------ Administrative Agent on or before the date of execution, or amendment, waiver or consent (which amendment, waiver or consent shall comply with Section 8.11) in respect of each Material Document, notification thereof together with a certified copy of such Material Document or amendment, waiver or consent as applicable. Section 6.14. Foreign Benefit Plans. The Borrower shall provide to the --------------------- Administrative Agent (with sufficient copies for each Lender) copies of each material report (including applicable schedules) with respect to each Foreign Plan or any trust created thereunder as the Administrative Agent (or any Lender, through the Administrative Agent) may reasonably request. ARTICLE VII Affirmative Covenants As long as any of the Obligations (in respect of Revolving Credit Outstandings, interest or fees thereon and expenses related thereto) or the Revolving Credit Commitments remain outstanding, unless the Requisite Lenders (except as provided in Section 11.1) otherwise consent in writing, each Borrower agrees with the Lenders and the Administrative Agent that: Section 7.1. Preservation of Corporate Existence, Etc. Each of Terra ---------------------------------------- Industries and the Borrowers shall, and shall cause each of its Subsidiaries to, preserve and maintain its corporate or partnership existence, rights (charter and statutory) and franchises, except (i) as permitted by Sections 8.3 and 8.4 and (ii) the abandonment of such rights and franchises which are no longer necessary or desirable to the conduct of the business of Terra Industries or its Subsidiaries and which abandonment would not have a Material Adverse Effect. Section 7.2. Compliance with Laws, Etc. Each of Terra Industries and ------------------------- the Borrowers shall, and shall cause each of its Subsidiaries to, comply with all applicable Requirements of Law, Contractual Obligations and Permits (and maintain in full force and effect all contracts constituting such Contractual Obligations and such Permits), except where the failure so to comply would not in the aggregate have a Material Adverse Effect. Section 7.3. Conduct of Business. Each of Terra Industries and the ------------------- Borrowers shall, and shall cause each of its Subsidiaries to, (a) conduct its business in the ordinary course and substantially in accordance with past practice and (b) use its reasonable efforts, in the ordinary course and substantially in accordance with past practice, to preserve its business and the goodwill and business of the customers, advertisers, suppliers and others having business relations with the Borrower or any of its Subsidiaries, except in each case where the failure to comply with the covenants in each of clauses (a) and (b) above would not in the aggregate have a Material Adverse Effect. 75 Section 7.4. Payment of Taxes, Etc. Each of Terra Industries and the --------------------- Borrowers shall, and shall cause each of its Material Subsidiaries to, pay and discharge before the same shall become delinquent, all material lawful governmental claims, taxes, assessments, charges and levies, except where contested in good faith, by proper proceedings and adequate reserves therefor have been established on the books of such Loan Party or the appropriate Subsidiary in conformity with GAAP. Section 7.5. Maintenance of Insurance. Each of Terra Industries and ------------------------ the Borrowers shall (i) maintain, and cause to be maintained for each other Loan Party and each of its Material Subsidiaries insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which Terra Industries, such Borrower or such Subsidiary operates, and such other insurance as may be reasonably requested by the Requisite Lenders and the Administrative Agent (as a result of any report delivered pursuant to Section 6.8 or the Lenders or Administrative Agent becoming aware of any fact or circumstances following the Initial Closing Date which would indicate that it would be prudent and consistent with industry practice for such additional insurance to be obtained), and, in any event, all insurance required by any Collateral Documents and (ii) cause all such insurance to name the Administrative Agent on behalf of the Secured Parties as additional insured or loss payee, as appropriate as set forth in Section 3.1(a)(xix), and to provide that no cancellation, material addition in amount or material change in coverage shall be effective until after 30 days' written notice thereof to the Administrative Agent. Section 7.6. Access. Each of Terra Industries and the Borrowers shall ------ from time to time, permit, and shall cause each of its Subsidiaries to permit, the Administrative Agent and the Lenders, or any agents or representatives thereof, within one Business Day after written notification of the same (except that during the continuance of an Event of Default, no such notice shall be required) to (a) examine and make copies of and abstracts from the records and books of account of such Loan Party and each of its Subsidiaries, (b) visit the properties of such Loan Party and each of its Subsidiaries, (c) discuss the affairs, finances and accounts of such Loan Party and each of its Subsidiaries with any of their respective officers or directors, and (d) communicate directly with the Borrowers' independent certified public accountants; provided, however, that the Borrowers may participate in such communication unless a Default or Event of Default has occurred and is continuing). Each of Terra Industries and the Borrowers shall authorize their independent certified public accountants to disclose to the Administrative Agent or any Lender any and all financial statements and other information of any kind, as the Administrative Agent or any Lender reasonably requests from the Borrower, any other Loan Party or any of its Subsidiaries and which such accountants may have with respect to the business, financial condition, results of operations or other affairs of such Loan Party or any of its Subsidiaries. Section 7.7. Keeping of Books. Each of Terra Industries and the ---------------- Borrowers shall, and shall cause each other Loan Party and each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made in conformity with GAAP of all financial transactions and the assets and business of Terra Industries, the Borrowers and each such Subsidiary. Section 7.8. Maintenance of Properties, Etc. Each of Terra Industries ------------------------------ and the Borrowers shall, and shall cause each of its Subsidiaries to, maintain and preserve, (a) all of 76 its properties which are necessary in the conduct of its business in such working order and condition to the extent necessary for the effective and orderly conduct of the business, operations and activities of Terra Industries and its Subsidiaries in all material respects (but in any event to a standard not lower than that generally maintained by Terra Industries and its Subsidiaries during the two year period preceding the date hereof), (b) all rights, permits, licenses, approvals and privileges (including all Permits) which are used or necessary in the conduct of its business, and (c) all registered patents, trademarks, trade names, copyrights and service marks with respect to its business; except where the failure to so maintain and preserve in the aggregate would have no Material Adverse Effect. Section 7.9. Application of Proceeds. The Borrowers shall use the ----------------------- entire amount of the proceeds of the Loans as provided in Section 4.13. Section 7.10. Environmental. Each of Terra Industries and the ------------- Borrowers shall, and shall cause each of its Subsidiaries to comply in all material respects with Environmental Laws and, without limiting the foregoing, each of Terra Industries and the Borrowers shall, at their sole cost and expense, upon receipt of a notification or otherwise obtaining knowledge of any Release or other event that has a reasonable likelihood of Terra Industries and its Subsidiaries incurring Environmental Liabilities and Costs in excess of $1,000,000, (i) conduct or pay for consultants to conduct, tests or assessments of environmental conditions at such operations or properties, including the investigation and testing of subsurface conditions and (ii) take such Remedial Action as required by Environmental Laws or as any Governmental Authority lawfully requires or as is appropriate and consistent with good business practice to address the Release or event; provided, however, that Terra Industries and the Borrowers shall not be deemed to be in violation of this Section 7.10 where a failure to comply with any provision hereof would not reasonably be expected to result in Terra Industries and its Subsidiaries incurring Environmental Liabilities and Costs in excess of $1,000,000. Section 7.11. Additional Collateral and Guaranties; Further --------------------------------------------- Assurances. ---------- (a) To the extent not delivered to the Administrative Agent on or before the Effective Date or to the extent the delivery thereof would be covered by clause (b) below, each of Terra Industries and the Borrowers agree promptly to, or ensure that each of its Material Subsidiaries shall promptly (or, to the extent legally restricted from doing so at the date hereof, promptly following the removal of such restriction), (i) execute and deliver to the Administrative Agent such further, and such amendments to the, Collateral Documents as the Administrative Agent deems necessary or advisable in order to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the Stock and Stock Equivalents and other debt Securities of any Material Subsidiary which are owned by Terra Industries or any of its Subsidiaries and requested to be pledged by the Administrative Agent; provided, however, (A) that such Stock, Stock Equivalents or other debt Securities shall not include assets constituting Senior Secured Note Collateral and (B) in no event shall any Loan Party or any of its Subsidiaries be required to pledge in excess of 65% of the outstanding Stock of any first tier Material Subsidiary that is not a Domestic Subsidiary or any of the outstanding stock of any Subsidiary of such first tier Subsidiary (except to the extent that such pledge is to secure the Obligations of Terra UK or the obligations under any Guaranty of such Obligations), or (ii) deliver to the Administrative Agent the certificates (if any) representing such Stock and Stock Equivalents and other debt Securities, together with (A) in the case of such certificated Stock and Stock Equivalents, undated stock powers endorsed in blank, and (B) in the case of such 77 certificated debt Securities, endorsed in blank, in each case executed and delivered by a Responsible Officer of the Borrower or such Subsidiary, as the case may be, (iii) cause such new Material Subsidiary (A) to become a party to a Guaranty and the applicable Collateral Documents and (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Secured Parties a perfected security interest in the Collateral described in the Collateral Documents with respect to such new Material Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Collateral Documents or by law or as may be reasonably requested by the Administrative Agent and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Agent; provided, however, that such new Material Subsidiary, if not a Domestic Subsidiary, shall only be required to guarantee and secure the Obligations of Terra UK. (b) Promptly upon TNCLP becoming, directly or indirectly, a wholly-owned Subsidiary of Terra Industries through the acquisition of Common Units, TNCLP and its Subsidiaries shall execute and deliver to the Administrative Agent (i) a pledge of the equity interests of TNCLP pledged as security for Terra Capital's obligations under the Senior Secured Notes (upon the release of its Lien thereon by the Senior Secured Note Trustee pursuant to the terms of the Senior Secured Note Intercreditor Agreement) and (ii) such additional documents as the Administrative Agent may reasonably request to ensure that any Guaranty and Collateral provided by TNCLP or its Subsidiaries in respect of the Obligations of TNLP shall extend to guaranty and secure all the Obligations. (c) Terra Industries and its Subsidiaries shall ensure that with respect to the Ammonium Nitrate Hedging Agreement, any gas Hedging Contract and any other Hedging Contract nominated by the Administrative Agent, all payments to Terra Industries or its Subsidiaries thereunder by the applicable counterparty thereto shall be made directly to a Cash Collateral Account or Approved Deposit Account (approved for such purpose by the Administrative Agent) and an irrevocable instruction (in form and substance satisfactory to the Administrative Agent) shall have been given by Terra Industries or its relevant Subsidiary to such counterparty to make payments thereunder to such Cash Collateral Account or Approved Deposit Account. (d) Promptly upon the reasonable request by the Administrative Agent, each of Terra Industries and the Borrowers shall, and shall ensure that each of its Subsidiaries shall, take such action as the Administrative Agent may request (including the execution, amendment, delivery, filing and registration of any Loan Document or other document, certificate, agreement or instrument) in order to correct any material defect or error which may be discovered which impairs, or may fail to provide, the intended legality, effectiveness, accuracy, perfection or priority of any Loan Document. 78 Section 7.12. Cash Collateral Accounts and Cash Management System. As --------------------------------------------------- soon as reasonably practicable and in any event (i) in the case of Terra Capital, TNLP and Terra Canada, not later than 30 days following the Effective Date and (ii) in the case of Terra UK, not later than 10 Business Days following the Effective Date (except that, in respect of Terra UK's bank account with Barclays, if Terra UK notifies Barclays promptly following the Effective Date of the need to enter into a Deposit Account Control Agreement and Barclays refuses to execute such Deposit Account Control Agreement, such period may exceed 10 Business Days in the Administrative Agent's sole reasonable discretion in order to allow Terra UK to transfer such banking arrangements to a Deposit Account Bank (as defined in the Pledge and Security Agreement)), Terra Industries and each Borrower shall ensure that the following accounts and cash management systems shall be implemented and maintained: (a) Terra Capital, TNLP, Terra UK and Terra Canada shall maintain Cash Collateral Accounts and Approved Deposit Accounts and Terra Capital shall maintain the US Concentration Account as set forth on Schedule 7.12 or as may otherwise be approved by the Administrative Agent. (b) The Administrative Agent shall (subject as provided below) have a perfected first priority lien on the Cash Collateral Accounts and the US Concentration Account. As long as any of the Obligations or any of the Revolving Credit Commitments remain outstanding, no Loan Party nor any Person or entity claiming by, through or under any Loan Party shall have any control over the use of, or any right to effect a withdrawal from, any Cash Collateral Account or the US Concentration Account; provided, however, that at such times as an Account Triggering Event shall not have occurred and be continuing in respect of any Loan Party, each of Terra UK and Terra Canada may by written notice instruct the Administrative Agent to make payments from its Cash Collateral Account to its Disbursement Account subject to and in accordance with the provisions of clauses (d)(ii) and (iii) below. All amounts in the Cash Collateral Accounts of Terra Capital, TNLP and (for Dollar denominated receivables) Terra Canada shall be applied by the Administrative Agent as specified in clause(d)(i) below. (c) Each Borrower and Terra Canada shall instruct its Account Debtors in respect of the Collateral to mail their remittances to a Lockbox and such Loan Party shall take all steps necessary or desirable, in the Administrative Agent's sole discretion, to cause such Account Debtors to mail their remittances to such Lockbox. Each Borrower and Terra Canada shall mail to its Lockbox any remittances from such Account Debtors received directly by it as soon as possible (but in any event no later than the Business Day immediately following receipt). (d) Notwithstanding Section 11.1(a)(ix), each Borrower shall, and shall cause Terra Canada to, maintain a cash management system acceptable to the Administrative Agent including one or more Lockboxes as follows: (i) In the case of Terra Capital and TNLP, such cash management system shall provide for (A) all funds received by each such Borrower (other than funds constituting Senior Secured Note Collateral) to be deposited in a Lockbox or Approved Deposit Account covered by a Deposit Account Control Agreement, (B) daily deposit of remittances received in the Lockbox to the Approved Deposit Account, (C) daily sweeping of the funds in the Approved Deposit Account to the US Concentration Account and (D) upon receipt of notice from Terra Capital (as provided in the following sentence), allocation and transfer of such amounts in the US Concentration Account to 79 the appropriate Cash Collateral Account of Terra Capital, TNLP or, if applicable (but subject to the last sentence of clause (d)(ii) below), the Disbursement Account of Terra Canada. Terra Capital shall notify the Administrative Agent within two Business Days of the deposit of any proceeds of Collateral in the US Concentration Account which portion of such proceeds is owned by Terra Capital, TNLP or, if applicable, Terra Canada. All funds on deposit in the Cash Collateral Accounts in respect of Terra Capital and TNLP shall be applied in the manner specified in Section 2.9(e) and in respect of Terra Canada shall be applied as specified in clause (d)(ii)below. (ii) In the case of Terra Canada, such cash management system shall provide for (A) all funds received by it (other than funds constituting Senior Secured Note Collateral) to be deposited in a Lockbox or Approved Deposit Account covered by a Deposit Account Control Agreement located in New York (in respect of US Dollar denominated account receivables) and in Sarnia, Ontario (in respect of all other account receivables), (B) daily deposit of remittances received in each Lockbox to each corresponding Approved Deposit Account, (C) daily sweeping of the funds in the New York Approved Deposit Account to the US Concentration Account and (D) upon receipt of notice from Terra Capital (as provided in clause (d)(i) above, but subject to the last sentence of this clause (d)(ii)), allocation and transfer of such amounts owned by Terra Canada in the US Concentration Account to a Disbursement Account of Terra Canada or as Terra Canada may otherwise instruct the Administrative Agent. Terra Canada shall notify the Administrative Agent within two Business Days of the deposit of any proceeds of Collateral in either of the Approved Deposit Accounts. As long as no Account Triggering Event in respect of Terra Canada has occurred and is continuing, all funds on deposit in the Lockbox or in the Approved Deposit Account of Terra Canada or in the US Concentration Account (to the extent owned by it) shall, upon written notice from Terra Canada to the Administrative Agent, be transferred to a Disbursement Account of Terra Canada or as Terra Canada may otherwise direct. Upon and during the continuance of an Account Triggering Event in respect of Terra Canada, no amount in the Lockbox or Approved Deposit Account of Terra Canada or in the US Concentration Account (to the extent owned by it) may be withdrawn therefrom without the approval of the Administrative Agent. (iii) In the case of Terra UK, such cash management system shall provide for (A) all funds received by it (other than funds constituting Senior Secured Note Collateral) to be deposited in a Lockbox or Approved Deposit Account covered by a Deposit Account Control Agreement located in London and (B) daily deposit of remittances received in each Lockbox to each corresponding Approved Deposit Account. Terra UK shall notify the Administrative Agent within two Business Days of the deposit of any proceeds of Collateral in a Lockbox or in an Approved Deposit Account. All or any funds on deposit in an Approved Deposit Account of Terra UK will (in accordance with the request of Terra UK if no Account Triggering Event in respect of Terra UK has occurred and is continuing or otherwise at the discretion of the Administrative Agent), be either: (X) applied in the manner specified in Section 2.9(e); (Y) retained in the Approved Deposit Account or (Z) if the Administrative Agent consents (such consent not to be unreasonably withheld) following a written request of Terra UK to the Administrative Agent, be transferred to a Disbursement Account of Terra UK. Upon and during the continuance of an Account Triggering Event in respect of Terra UK, no amount may be withdrawn from Terra UK's Approved Deposit Account without the 80 approval of the Administrative Agent and all funds on deposit therein shall be applied in the manner specified in Section 2.9(e). (e) Each Borrower and Terra Canada shall, not later than the Effective Date (or such later date as shall be acceptable to the Administrative Agent in its sole discretion), deliver to the Administrative Agent the Deposit Account Control Agreements, covering such accounts (other than accounts constituting Senior Secured Note Collateral) as the Administrative Agent shall direct, each duly executed by each party thereto. (f) Any Loan Party may deposit any cash and Cash Equivalents held by it, which are not required to be applied in any other manner under the Loan Documents or the Senior Secured Note Documents, into such collateral account as may be approved by the Administrative Agent for the purpose of including such cash or Cash Equivalents in the calculation of a Borrowing Base. The Administrative Agent shall have a perfected first priority lien over any such account and (notwithstanding Section 11.1(a)(ix)) any cash or Cash Equivalents deposited in such account for such purpose may not subsequently be withdrawn by a Loan Party without the approval of the Administrative Agent. (g) The Administrative Agent may convert into Dollars any amount not denominated in Dollars which is deposited in any Cash Collateral Account or which is otherwise received by it from or for the account of any Loan Party (which pursuant to the Loan Documents is to be applied to the payment of the Obligations) and each Borrower hereby agrees to indemnify the Administrative Agent and each other Indemnitee (as defined in Section 11.4(a)) from and against any loss, liability, cost or expense incurred by it in connection with such conversion and any Indemnitee entering into any currency exchange contract in the ordinary course of business for such purpose. (h) None of Terra Industries or its Subsidiaries shall, following and during the continuance of an Account Triggering Event, a Default or Event of Default, maintain cash or Cash Equivalents (other than in respect of those funds referred to in Section 8.3(j)) in aggregate in excess of $3,000,000 outside of those accounts which are Approved Deposit Accounts, the US Concentration Account, Cash Collateral Accounts or accounts in which funds constituting Senior Secured Note Collateral are deposited or maintained including, without limitation, the Collateral Account (as defined in the Senior Secured Note Indenture). 81 Section 7.13. Real Estate. Each Borrower shall, and shall cause each ----------- other Loan Party and each of its Subsidiaries to, use all commercially reasonable efforts to, (i) comply in all material respects with all of their respective obligations under all of their respective Leases now or hereafter held respectively by them with respect to Real Property (other than Non-Material Real Property), including the Leases set forth in Schedule 4.19; (ii) not modify, amend, cancel, extend or otherwise change in any materially adverse manner any of the terms, covenants or conditions of any such Leases; (iii) not assign or sublet any other Lease if such assignment or sublet would have a Material Adverse Effect; (iv) provide the Administrative Agent with a copy of each notice of default under any Lease received by such Loan Party or any of its Subsidiaries immediately upon receipt thereof and deliver to the Administrative Agent a copy of each notice of default sent by such Loan Party or any of its Subsidiaries under any Lease simultaneously with its delivery of such notice under such Lease; and (v) notify the Administrative Agent at least 14 days prior to the date the Borrower or any Subsidiary takes possession of, or becomes liable under, any new leased premises or Lease, whichever is earlier. Section 7.14. Hedging Contracts. Terra Industries and its Subsidiaries ----------------- shall at all times maintain on terms and with counterparties reasonably satisfactory to the Administrative Agent natural gas Hedging Contracts in accordance with the hedging policy regarding natural gas which has been and will continue to be adopted by the Board of Directors of Terra Industries and as in effect from time to time, to provide protection to Terra Industries and its Subsidiaries against fluctuations in natural gas prices. ARTICLE VIII Negative Covenants As long as any of the Obligations (in respect of Revolving Credit Outstandings, interest or fees thereon and expenses related thereto) or the Revolving Credit Commitments remain outstanding, without the written consent of (except as provided in Section 11.1) the Requisite Lenders, Terra Industries and each Borrower agree with the Lenders and the Administrative Agent that: Section 8.1. Indebtedness. Terra Industries will not, and will not ------------ permit any of its Subsidiaries to, directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except: (a) the Obligations (but excluding Obligations in respect of Interest Rate Contracts unless otherwise permitted in clause (g) below); (b) Indebtedness existing on the date of this Agreement and disclosed on Schedule 8.1; provided, however, that no Indebtedness in respect of Senior Notes (2003) shall be outstanding following the end of the Redemption Notice Period; (c) Capital Lease Obligations and purchase money Indebtedness incurred by Terra Industries or its Subsidiaries to finance the acquisition of Real Property or Equipment in an aggregate outstanding principal amount not to exceed $10,000,000 at any time; provided, however, that the Capital Expenditure related thereto is otherwise permitted by Section 5.2; 82 (d) Renewals, extensions, refinancings and refundings of Indebtedness permitted by clause (b) or (c) of this Section 8.1; provided, however, that any such renewal extension, refinancing or refunding is in an aggregate principal amount not greater than the principal amount of, and is on terms no less favorable to Terra Industries or such Subsidiary, including as to weighted average maturity, than the Indebtedness being renewed, extended, refinanced or refunded; (e) Intercompany Indebtedness which is a permitted Investment under Section 8.3(e). (f) Indebtedness arising under any performance or surety bond entered into in the ordinary course of business; (g) Obligations under Hedging Contracts required by Section 7.14 or as permitted by Section 8.17; (h) unsecured Indebtedness not otherwise permitted under this Section 8.1 in an aggregate outstanding principal amount not to exceed $5,000,000 at any time; (i) Indebtedness secured by Liens permitted under Section 8.2(h); (j) Guarantees by Terra UK of Terra UK Customer Debt; provided that: (i) the aggregate principal amount of such Debt so guaranteed by Terra UK with respect to any customer at any time shall not exceed 50% of the aggregate principal amount of the Terra UK Customer Debt of such customer outstanding at such time; and (ii) the aggregate principal amount of Terra UK Customer Debt guaranteed by Terra UK at any time during any Fiscal Year shall not exceed (x) (pound)15,000,000 minus (y) the aggregate amount of payments made by Terra UK under all such guarantees during such Fiscal Year; (k) any other Intercompany Indebtedness; and (l) Indebtedness in respect of the Senior Secured Notes; provided, however, that the aggregate principal amount of such Indebtedness shall not exceed at any time $275,000,000. Section 8.2. Liens, Etc. Terra Industries will not, and will not ---------- permit any of its Subsidiaries to, create or suffer to exist, any Lien upon or with respect to any of its properties or assets, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, except for: (a) Liens created pursuant to the Loan Documents; (b) Liens existing on the date of this Agreement and disclosed on Schedule 8.2 or expressly permitted by Section 8.3(e) or constituting cash collateral for a letter of credit issued by Bank of America N.A. (formerly Nationsbank, N.A.), as set forth on Schedule 8.1 83 (the terms and amount of such cash collateral to be reasonably satisfactory to the Requisite Lenders); (c) Customary Permitted Liens of the Borrower and its Subsidiaries; (d) purchase money Liens granted by the Borrower or any Subsidiary of the Borrower (including the interest of a lessor under a Capital Lease and Liens to which any property is subject at the time of the Borrower's or such Subsidiary's acquisition thereof) securing Indebtedness permitted under Section 8.1(c) and limited in each case to the property purchased with the proceeds of such purchase money Indebtedness or subject to such Capital Lease; (e) any Lien securing the renewal, extension, refinancing or refunding of any Indebtedness secured by any Lien permitted by clause (d) of this Section 8.2 without any change in the assets subject to such Lien; (f) Liens in favor of lessors, sublessors or licensors under any lease or license otherwise permitted by this Agreement; (g) Liens not otherwise permitted by the foregoing clauses of this Section 8.2 securing obligations or other liabilities of any Loan Party; provided, however, that the aggregate outstanding amount of such obligations and liabilities secured by such Liens shall not exceed $1,000,000 at any time; (h) Liens which are licenses and sub-licenses granted to Persons that are not Affiliates of Terra Industries or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the business and operations of Terra Industries or any of its Subsidiaries; (i) Liens on property of any of Terra Industries and its Subsidiaries (other than (i) property subject to Liens under the Collateral Documents and (ii) Liens securing Indebtedness of Terra Industries or its Subsidiaries) in favor of Terra Industries or any of its Subsidiaries to secure Intercompany Indebtedness owing to Terra Industries or any of its Subsidiaries; and (j) Liens on the Senior Secured Note Collateral and the Shared Collateral as security for Terra Industries' and its Subsidiaries' obligations in respect of the Senior Secured Notes. Section 8.3. Investments. Terra Industries will not, and will not ----------- permit any of its Subsidiaries to, directly or indirectly make or maintain any Investment except: (a) Investments existing on the date of this Agreement and disclosed on Schedule 8.3; (b) Investments in cash and Cash Equivalents, including those held in bank accounts (but subject to Section 7.12(h)), and which (i) in respect of Terra Industries and Terra Capital Holdings shall not together exceed in aggregate $1,000,000 at any time (provided, however, for as long as no Event of Default has occurred and is continuing, such amount shall be 84 increased (but for a period of not more than three consecutive Business Days) to the extent necessary to permit those Restricted Payments to be made that are due and payable and are permitted to be made under Section 8.5(b)) and (ii) which (at any time while Intercompany Indebtedness is outstanding which is owing to Terra Industries or any of its Domestic Subsidiaries by any Subsidiary of Terra Industries that is not a Domestic Subsidiary) shall not be held outside of the United States in an aggregate amount which is in excess of $20,000,000 for more than 5 consecutive Business Days; (c) Investments in Accounts, contract rights and Chattel Paper, notes receivable and similar items arising or acquired in the ordinary course of business substantially in accordance with the past practice of Terra Industries and its Subsidiaries; (d) Investments received in settlement of amounts due to Terra Industries or any of its Subsidiaries effected in the ordinary course of business; (e) Investments in Intercompany Indebtedness (i) owing by or to Terra Capital or any of the Terra Capital Guarantors (which are wholly-owned Subsidiaries of Terra Capital) to or from Terra Capital or any of the Terra Capital Guarantors (which are wholly-owned Subsidiaries of Terra Capital), (ii) owing by or to Terra Capital to or from TNLP (provided that, (A) if such Intercompany Indebtedness (other than the TNLP Debt up to the principal amount thereof outstanding on the Effective Date and any such Intercompany Indebtedness constituting Senior Secured Note Collateral) is owing by TNLP to Terra Capital, such Indebtedness is evidenced by an intercompany promissory note payable to the order of Terra Capital on terms satisfactory to the Administrative Agent, which note shall constitute Shared Collateral and (B) no such Intercompany Indebtedness shall be permitted for the purpose of TNLP or TNCLP making Restricted Payments), (iii) owing by Terra Capital to Terra UK, or by Terra UK to Terra Capital which is incurred in the ordinary course of business (provided that, if such Intercompany Indebtedness (other than the Terra UK Debt up to the principal amount thereof outstanding on the Effective Date and any such Intercompany Indebtedness constituting Senior Secured Note Collateral) is owing by Terra UK to Terra Capital, such Indebtedness is evidenced by an intercompany promissory note payable to the order of Terra Capital on terms satisfactory to the Administrative Agent, which note shall constitute Shared Collateral), (iv) owing by Terra Capital to Terra Canada, or by Terra Canada to Terra Capital which is incurred in the ordinary course of business (provided that, if such Intercompany Indebtedness (other than the Terra Canada Debt up to the principal amount thereof outstanding on the Effective Date) is owing by Terra Canada to Terra Capital, such Indebtedness is evidenced by an intercompany promissory note payable to the order of Terra Capital on terms satisfactory to the Administrative Agent, which note shall constitute Shared Collateral), or (v) owing by or to Terra UK to or from Terra Canada; (f) loans or advances to employees of any Borrower or any of its Subsidiaries in the ordinary course of business (other than for the purposes of acquiring Stock), which loans and advances shall not exceed the aggregate outstanding principal amount of $500,000 at any time; (g) Investments (other than Intercompany Indebtedness and Indebtedness which is referred to in clause (f) above) not otherwise permitted hereby in an aggregate outstanding amount not to exceed $1,000,000 at any time; (h) Investments by Terra Capital and TNCLP in Common Units purchased, in each case, after the Effective Date; provided, however, Terra Capital may make open market 85 purchases of the Common Units not owned directly or indirectly by it and TNCLP may make such purchases or calls of the Common Units (each a "Common Unit Purchase") if, after giving effect to each Common Unit Purchase, the following conditions are satisfied: (i) the aggregate amount of such purchases, together with the aggregate amount of Senior Note (2005) Purchases, (A) made during any Repurchase Period does not exceed the Maximum Repurchase Amount applicable to such period or (B) made during any calendar year does not exceed $75,000,000; (ii) the aggregate Available Credit of the Borrowers on the date of each Common Unit Purchase, after giving effect to the Common Unit Purchase (or any purchase of Senior Notes (2005)) to be made on such date, shall be at least $125,000,000 with respect to any such purchase; (iii) Terra Industries has, as of the last day of the most recent Fiscal Quarter or Fiscal Year for which Financial Statements have been delivered to the Administrative Agent pursuant to Section 6.1(b)or (c), Cash Flow for the four Fiscal Quarters ending on such day of at least $125,000,000; (iv) no Default or Event of Default shall have occurred and be continuing, both before and after giving effect to the making of any Common Unit Purchase; (v) both before and after the making of any Common Unit Purchase, the representations and warranties set forth in Article IV and in the other Loan Documents shall be true and correct in all material respects on and as of the date of such Common Unit Purchase with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date; (vi) in the case of any Common Unit Purchase made by TNCLP, such Common Unit Purchases shall have been made pursuant to the terms of Article XVII of the Agreement of Limited Partnership of TNCLP dated as of December 4, 1991; (vii) Terra Capital or TNCLP, as the case may be, shall have delivered to the Administrative Agent a certificate executed by an officer of Terra Capital or TNCLP, as the case may be, certifying that the foregoing conditions have been met with respect to such Common Unit Purchase within three Business Days following the making of such purchase. (i) Investments which are permitted Indebtedness under Sections 8.1(a), (b), (c), (d), (f), (g), (h), (i) or (j); (j) Investments to match employee-directed funds under the Deferred Supplemental Savings Plan; (k) Equity Investments by (i) Terra Industries or any of its wholly-owned Domestic Subsidiaries in any of its respective (directly) wholly-owned Domestic Subsidiaries 86 which is a Terra Capital Guarantor, (ii) by TNCLP or any of its wholly-owned Domestic Subsidiaries in any of its respective (directly) wholly-owned Domestic Subsidiaries which is a Borrower or Guarantor in respect of the Obligations of TNLP, (iii) by Terra Canada or any of its wholly-owned Subsidiaries (which is incorporated in Canada) in any of its respective (directly) wholly-owned Subsidiaries (which is incorporated in Canada) which is a Guarantor in respect of the Obligations of Terra Canada or (iv) by Terra UK or any of its wholly-owned Subsidiaries (which is incorporated in England and Wales) in any of its respective (directly) wholly-owned Subsidiaries (which is incorporated in England and Wales) which is a Guarantor in respect of the Obligations of Terra UK; (l) Investments by Terra Industries or its Subsidiaries in any joint venture with any Person which (i) are cash Investments (to the extent permitted under Section 5.2) and (ii) are not cash Investments (to the extent permitted under Section 8.4(f)); (m) Investments by Terra Industries and its Subsidiaries in Terra Industries or any of its Subsidiaries; and (n) Investments in Senior Notes (2003) and Senior Notes (2005) purchased by Terra Capital pursuant to Section 8.12; provided, however, that no Investments in respect of Senior Notes (2003) shall be outstanding following the end of the Redemption Notice Period. Section 8.4. Sale of Assets. Terra Industries will not, and will not -------------- permit any of its Subsidiaries to, sell, convey, transfer, lease or otherwise dispose of, any of its assets or any interest therein (including the sale or factoring at maturity or collection of any accounts) to any Person, or permit or suffer any other Person to acquire any interest in any of its assets or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Stock or Stock Equivalent (any such disposition being an "Asset Sale"), except: (a) the sale or disposition in the ordinary course of business of Inventory, Cash Equivalents and precious metals recovered from spent catalysts; (b) the sale or disposition of Equipment which has become obsolete or is replaced in the ordinary course of business; provided, however, that the aggregate Fair Market Value of all such Equipment disposed of in any Fiscal Year shall not exceed $10,000,000; (c) the lease or sublease of Real Property or personal property which does not constitute a sale and leaseback; (d) assignments and licenses of intellectual property of the Borrower and its Subsidiaries in the ordinary course of business; (e) any sale or disposition of Inventory or Equipment (i) among Terra Capital and any wholly-owned Domestic Subsidiary of Terra Capital which is a Terra Capital Guarantor, (ii) among TNCLP, TNLP and any wholly-owned Domestic Subsidiary of TNCLP which is a Guarantor in respect of the Obligations of TNLP, (iii) among Terra UK and any wholly-owned Subsidiary of Terra UK (which is incorporated in England and Wales) which is a Guarantor in respect of the Obligations of Terra UK, (iv) among Terra Canada and any wholly-owned Subsidiary of Terra Canada (which is incorporated in Canada) which is a Guarantor in respect of the Obligations of Terra Canada, (v) by Terra Industries or one of its wholly-owned Domestic Subsidiaries to TNCLP or one of its wholly-owned Domestic Subsidiaries so long as 87 (in the case of this clause (v)) the consideration is paid in cash to such transferor for all such assets in an amount not less than the Fair Market Value thereof or (vi) by Terra Industries or its Subsidiaries (except TNCLP or any of its Subsidiaries) to its Affiliates so long as (in the case of this clause (vi)) the consideration is paid in cash to such transferor for all such assets in an amount not less than the Fair Market Value thereof; (f) any other Asset Sales (including any disposition of assets to a joint venture by Terra Industries or its Subsidiaries) the aggregate Fair Market Value of which shall not at any time exceed $5,000,000; and (g) additional Asset Sales by Terra Industries and its Subsidiaries (other than in respect of (i) property subject to Liens under the Collateral Documents and (ii) property subject to Liens securing Indebtedness of Terra Industries or such Subsidiary) to Terra Industries or any of its Subsidiaries. Section 8.5. Restricted Payments. Terra Industries will not and it ------------------- will not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Payment except: (a) Restricted Payments by any Subsidiary of a Borrower to such Borrower or any Subsidiary of such Borrower; (b) cash dividends on the Stock of Terra Capital to Terra Capital Holdings and on the Stock of Terra Capital Holdings to Terra Industries, paid and declared in any Fiscal Year solely for the purpose of funding the following: (i) ordinary operating expenses and scheduled debt service of Terra Industries (including in respect of the Indentures) not in excess of $40,000,000 in any Fiscal Year and payments by Terra Industries of the foregoing; (ii) payments by Terra Industries in respect of foreign, federal, state or local taxes owing by Terra Industries in respect of Terra Capital and its Subsidiaries, but not greater than the amount that would be payable by Terra Capital, on a consolidated basis, if Terra Capital were the taxpayer; and (iii) payments (net of cash in-flows) by Terra Industries to finance discontinued operations not exceeding $5,000,000 in any Fiscal year; provided, however, that the Restricted Payments described in clause (b) above shall not be permitted if either (A) an Event of Default or Default shall have occurred and be continuing at the date of declaration or payment thereof or would result therefrom or (B) such Restricted Payment is prohibited under the terms of any Indebtedness (other than the Obligations) of the Loan Parties or any of their respective Subsidiaries; (c) TNCLP Minority Interest Payments; provided, however, that such Restricted Payments shall not be permitted if (i) any Intercompany Indebtedness is outstanding and owing by TNCLP or by TNLP, (ii) an Event of Default or Default shall have occurred and be continuing at the date of declaration or payment thereof or would result therefrom or (iii) such Restricted Payment is prohibited under the terms of any Indebtedness (other than the Obligations) of the Loan Parties or any of their respective Subsidiaries; 88 (d) (i) cash dividends to Terra Industries strictly for the purpose of allowing Terra Industries to consummate Senior Note (2005) Purchases permitted pursuant to Section 8.12 or (ii) dividends of Senior Notes (2005) purchased by Terra Capital pursuant to Section 8.12, but only if such Senior Notes (2005) are immediately cancelled upon receipt thereof by Terra Industries; (e) Restricted Payments permitted under Section 8.3(h); (f) cash dividends to Terra Industries of proceeds of the issuance of the Senior Secured Notes strictly for the purpose of allowing Terra Industries to irrevocably deposit said proceeds with the Trustee (2003) for the purpose of redeeming or repaying the Senior Notes (2003) in accordance with Section 8.1(b); and (g) any other Restricted Payment to Terra Industries by any Subsidiary of Terra Industries. Section 8.6. Restriction on Fundamental Changes. Terra Industries will ---------------------------------- not, and will not permit any of its Material Subsidiaries to, (a) merge with any Person, (b) consolidate with any Person, (c) acquire all or substantially all of the Stock or Stock Equivalents of any Person, (d) acquire all or substantially all of the assets of any Person or all or substantially all of the assets constituting the business of a division, branch or other unit operation of any Person, (e) except as permitted by Section 8.3(l), enter into any joint venture or partnership with any Person or (f) acquire or (unless, after giving effect thereto, Terra Industries and the Borrowers are in compliance with Sections 7.11 and 8.3(k)) create any Subsidiary; provided, however, that any Loan Party may merge or be consolidated with any of its wholly-owned Subsidiaries but only if (i) such Loan Party is the surviving entity and no Material Adverse Change, Default or Event of Default would result from such merger or consolidation and (ii) all such parties to such merger or consolidation are incorporated solely in either the United States (or any state or subdivision thereof), Canada or England and Wales (as the case may be). Section 8.7. Change in Nature of Business. (a) Terra Industries will ---------------------------- not, and will not permit any of its Subsidiaries to, make any material change in the nature or conduct of its business as carried on at the date hereof; (b) each of Terra Industries and Terra Capital Holdings will at no time own any property other than Investments in its Subsidiaries which are its Subsidiaries at the date hereof, cash and Cash Equivalents (to the extent permitted under Section 8.3), other property incidental to its business as a holding company or necessary to the performance of its obligations under the Management Agreements, and (c) Terra Industries shall ensure that TNCLP will at no time own any property other than ownership interests in TNLP, cash and other property incidental to its business as a holding company. Section 8.8. Transactions with Affiliates. Terra Industries will not, ---------------------------- and will not permit any of its Subsidiaries to, except as otherwise expressly permitted herein, do any of the following: (a) make any Investment in any of its Affiliates which is not its Subsidiary; (b) transfer, sell, lease, assign or otherwise dispose of any asset to any of its Affiliates which is not its Subsidiary; (c) merge into or consolidate with or purchase or acquire assets from any of its Affiliates which is not its Subsidiary; (d) repay any Indebtedness to any of its Affiliates which is not its Subsidiary; or (e) enter into any other transaction directly or indirectly with or for the benefit of any of its Affiliates which is not its Subsidiary (including guarantees and assumptions of obligations of any such Affiliate), except for (i) transactions in the ordinary course of business 89 on a basis no less favorable to it as would be obtained in a comparable arm's length transaction with a Person not an Affiliate and (ii) salaries and other employee compensation or fees to officers or directors of Terra Industries or any of its Subsidiaries commensurate with current compensation levels. Section 8.9. Restrictions on Subsidiary Distributions; No New ------------------------------------------------ Negative Pledge. Other than pursuant to the Loan Documents and any agreements --------------- governing any purchase money Indebtedness or Capital Lease Obligations permitted by clause (b), (c), or (d) of Section 8.1(in which latter case, any prohibition or limitation shall only be effective against the assets financed thereby) or in connection with an Asset Sale which is permitted under Section 8.4 (in respect only of the assets subject thereto) or pursuant to customary anti-assignment provisions contained in leases or licenses permitted under this Agreement or as otherwise contained, at the date hereof, in the Indentures and the Senior Secured Note Documents, Terra Industries will not, and will not permit any of its Subsidiaries to, (a) agree to enter into or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of such Subsidiary to pay dividends or make any other distribution or transfer of funds or assets or make loans or advances to or other Investments in, or pay any Indebtedness owed to, Terra Industries or any other Subsidiary of Terra Industries or (b) enter into or suffer to exist or become effective any agreement which prohibits or limits the ability of the Borrowers or any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, to secure the Obligations, including any agreement which requires other Indebtedness or Contractual Obligation to be equally and ratably secured with the Obligations. Section 8.10. Modification of Constituent Documents. Terra Industries ------------------------------------- will not, and will not permit any of its Subsidiaries to, change its capital structure (including in the terms of its outstanding Stock) or otherwise amend its Constituent Documents, except for changes and amendments which (i) do not materially and adversely affect the rights and privileges of Terra Industries or any of its Subsidiaries, or the interests of the Administrative Agent, the Lenders and the Issuers under the Loan Documents or in the Collateral or (ii) are compulsory under any applicable Requirement of Law or to comply with the mandatory requirements of any stock exchange on which Terra Industries or any of its Subsidiaries are listed. Section 8.11. Modification of Material Documents. Terra Industries ---------------------------------- will not, and will not permit any of its Subsidiaries to, (a) alter, rescind, terminate, amend, supplement, waive or otherwise modify any provision of any Material Document (except for modifications which do not materially and adversely affect the rights and privileges of Terra Industries or any of its Subsidiaries under such Material Document, or the interests of the Secured Parties under the Loan Documents or in the Collateral) or (b) permit any material breach or default to exist under any Material Document or take or fail to take any action thereunder, without the prior consent of the Requisite Lenders, which consent shall not be unreasonably withheld. Section 8.12. Long-Term Indebtedness. Terra Industries will not, and ---------------------- will not permit any of its Subsidiaries to 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 the (i) Senior Notes (2005), (ii) the Senior Secured Notes, (iii) the Terra UK Debt or the Terra Canada Debt (below an aggregate 90 outstanding principal amount of $66,000,000) or (iv) any other long-term indebtedness of Terra Industries and its Subsidiaries (other than (A) the redemption or repayment of the Senior Notes (2003) with proceeds of the issuance of the Senior Secured Notes or other available funds and (B) Intercompany Indebtedness, with the exception of the aforementioned Terra UK Debt, Terra Canada Debt and TNLP Debt; provided, however, that no Intercompany Indebtedness of any Loan Party constituting Collateral can be repaid or prepaid, including the Terra UK Debt, Terra Canada Debt and TNLP Debt, unless the Intercompany Indebtedness of such Loan Party constituting Shared Collateral has first been paid in full), in each case except for regularly scheduled payments of principal and interest in respect thereof required pursuant to the Indentures or other instruments evidencing such long-term Indebtedness, or, except with respect to the Indentures, amendments with respect to which are governed by Section 8.11, amend in any manner materially adverse to the interests of the Lenders and the Issuers the documentation creating or evidencing such long-term Indebtedness. Notwithstanding the foregoing, Terra Capital may make open market purchases of the (i) Senior Notes (2003) during the Redemption Notice Period, provided that, upon receipt by Terra Capital of proceeds arising from the redemption of any Senior Notes (2003) purchased pursuant to this Section 8.12, Terra Capital shall by no later than the last day of the Redemption Notice Period prepay its Loans as provided in Section 2.9(b), and (ii) Senior Notes (2005) (each a "Senior Note (2005) Purchase") if, after giving effect to each Senior Note (2005) Purchase, the following conditions are satisfied: (A) the aggregate amount of such purchases, together with the aggregate amount of Common Unit Purchases, (X) made during any Repurchase Period does not exceed the Maximum Repurchase Amount applicable to such period or (Y) made during any calendar year does not exceed $75,000,000; (B) the aggregate Available Credit of the Borrowers on the date of each Senior Note (2005) Purchase, after giving effect to the Senior Note (2005) Purchase (or any purchase of Common Units) to be made on such date, shall be at least $125,000,000 with respect to any such purchase; (C) Terra Industries has, as of the last day of the most recent Fiscal Quarter or Fiscal Year for which Financial Statements have been delivered to the Administrative Agent pursuant to Section 6.1(b)or (c), Cash Flow for the four Fiscal Quarters ending on such day of at least $125,000,000; (D) no Default or Event of Default shall have occurred and be continuing, both before and after giving effect to the making of any Senior Note (2005) Purchase; (E) both before and after the making of any Senior Note (2005) Purchase, the representations and warranties set forth in Article IV and in the other Loan Documents shall be true and correct in all material respects on and as of the date of such Senior Note (2005) Purchase with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date; and (F) Terra Capital shall have delivered to the Administrative Agent a certificate executed by an officer of Terra Capital certifying that the 91 foregoing conditions have been met with respect to such Senior Note (2005) Purchase within three Business Days following the making of such purchase. Section 8.13. Accounting Changes; Fiscal Year. Terra Industries will ------------------------------- not, and will not permit any of its Subsidiaries to, change its (a) accounting treatment and reporting practices or tax reporting treatment, except as required by GAAP or any Requirement of Law and disclosed to the Lenders and the Administrative Agent or (b) Fiscal Year. Section 8.14. Margin Regulations. The Borrowers will not, and will not ------------------ permit any of their Subsidiaries to, use all or any portion of the proceeds of any credit extended hereunder to purchase or carry Margin Stock. Section 8.15. Operating Leases; Sale/Leasebacks. --------------------------------- (a) Terra Industries will not, and will not permit any of its Material Subsidiaries to, become or remain liable as lessee or guarantor or other surety with respect to any operating lease, unless (i) the aggregate amount of all rents paid or accrued under all such operating leases shall not exceed $5,000,000 in any Fiscal Year or (ii) in respect of, or in replacement (upon substantially equivalent terms) of, operating leases existing at the date of this Agreement and disclosed in the consolidated financial statements (including the footnotes thereto) of Terra Industries and its Subsidiaries for the Fiscal Year ended December 31, 1999. (b) Terra Industries will not, and will not permit any of its Material Subsidiaries to, enter into any sale and leaseback transaction. Section 8.16. Cancellation of Indebtedness Owed. Terra Industries will --------------------------------- not, and will not permit any of its Subsidiaries to, cancel any claim or Indebtedness owed to it except (i) in the ordinary course of business consistent with past practice, (ii) Investments permitted by Section 8.3(d), or (iii) in an aggregate amount not exceeding $1,000,000. Section 8.17. No Speculative Transactions. Terra Industries will not --------------------------- and will not permit any of its Material Subsidiaries to, engage in any speculative transaction or in any transaction involving Hedging Contracts except as required by Section 7.14 or for the sole purpose of hedging in the normal course of business and consistent with industry practices. Section 8.18. Compliance with ERISA and Foreign Plans. Terra --------------------------------------- Industries will not, and will not permit any of its Material Subsidiaries to, or cause or permit any ERISA Affiliate to, cause or permit to occur (a) an event which could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or (b) an ERISA Event that would have a Material Adverse Effect or (c) breach any Requirement of Law or obligations pertaining to any Foreign Plan that would have a Material Adverse Effect. Section 8.19. Environmental. Terra Industries will not, and will not ------------- permit any of its Subsidiaries to, dispose of any Contaminant in violation of any Environmental Law; provided, however, that the Loan Parties shall not be deemed in violation of this Section 8.19 if, as the consequence of all such disposals, such Loan Party could not reasonably be expected to incur Environmental Liabilities and Costs in excess of $1,000,000. 92 Section 8.20. Payments to Minority Interests. Terra Industries shall ------------------------------ not 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 (including any TNCLP Minority Interest Payment) with respect to such minority interest in excess of the amount to which such holder is legally entitled, unless Terra Industries 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 Industries and such Subsidiary, on the one hand, and such holder, on the other); provided, however, that a purchase of Common Units permitted by Section 8.3(h) will not constitute a breach of this Section 8.20. ARTICLE IX Events Of Default Section 9.1. Events of Default. Each of the following events shall be ----------------- an Event of Default: (a) Any Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation (other than in connection with a Borrowing Base Deficiency) when the same becomes due and payable; or (b) Any Borrower shall fail to pay any interest on any Loan, any fee under any of the Loan Documents or any other Obligation (other than one referred to in clause (a) above) and such non-payment continues for a period of five Business Days after the due date therefor; (c) any representation or warranty made or deemed made by any Loan Party in any Loan Document or by any Loan Party (or any of its officers) in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; (d) Terra Industries shall fail to pay or perform its obligations under the Loan Purchase Agreement; or (e) any Loan Party shall fail to perform or observe (i) any term, covenant or agreement contained in Article V, Sections 6.1(a) through (e) and (g), 6.2, 7.1, 7.6, 7.11 or 7.12 or Article VIII (except Section 8.19) or (ii) any other term, covenant or agreement contained in this Agreement or in any other Loan Document if such failure under this clause (ii) shall remain unremedied for 30 days after the earlier of the date on which (A) a Responsible Officer of a Borrower becomes aware of such failure or (B) written notice thereof shall have been given to a Borrower by the Administrative Agent or any Lender; or (f) (i) Terra Industries or any of its Subsidiaries shall fail to make any payment on any Indebtedness (other than the Obligations) of Terra Industries or any such Subsidiary (or any Guaranty Obligation in respect of Indebtedness of any other Person) having a principal amount of $10,000,000 or more, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or (iii) any such Indebtedness shall become or be declared 93 to be due and payable, or required to be prepaid or repurchased (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (g) Terra Industries 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 Terra Industries 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 or any similar relief 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 custodian, receiver, trustee, administrative receiver, liquidator, provisional liquidator, administrator, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceedings instituted against Terra Industries or any of its Material Subsidiaries (but not instituted by it), either such proceedings shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceedings shall occur; or Terra Industries or any of its Material Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (g); or (h) one or more judgments or orders (or other similar process) involving, in any single case or in the aggregate, an amount in excess of $10,000,000 (in the case of a money judgment), or which would have a Material Adverse Effect (in the case of a non-money judgment) to the extent not covered by insurance shall be rendered against one or more of Terra Industries and its Subsidiaries and shall remain unpaid and either (i) enforcement proceedings shall have been commenced and be continuing 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 during such period such judgment or order shall have been vacated, satisfied, discharged or bonded pending appeal); or (i) an ERISA Event shall occur or there shall be asserted against the Borrower or any of its Subsidiaries any claim or liability in respect of any Foreign Plan which is reasonably likely to have a Material Adverse Effect or the amount of all liabilities and deficiencies resulting therefrom, whether or not assessed, exceeds $1,000,000 in the aggregate; or (j) any material provision (as determined by the Administrative Agent) of any Collateral Document or any Guaranty after delivery thereof pursuant to this Agreement or any other Loan Document shall for any reason cease to be valid and binding, or enforceable against, on any Loan Party thereto, or Pany Loan arty shall so state in writing; or (k) any Collateral Document shall for any reason cease to create a valid Lien on any of the Collateral purported to be covered thereby or except as permitted by the Loan Documents, such Lien shall cease to be a perfected and first priority Lien or any Loan Party shall so state in writing; or (l) there shall occur any Change of Control; or (m) there shall occur a Borrowing Base Deficiency for two or more consecutive Business Days; or 94 (n) at any time on or after March 31, 2005, there shall be outstanding Senior Notes (2005) in an aggregate principal amount of $15,000,000 or more; or (o) there shall have been asserted (in any action, suit, proceeding or investigation) against Terra Industries or any of its Subsidiaries any violation or liability under any Environmental Law that, in the judgment of the Requisite Lenders, is reasonably likely to be determined adversely to Terra Industries or any of its Subsidiaries, and (either individually or in the aggregate) is reasonably likely to have a Material Adverse Effect (after taking into account any contribution in respect thereof that is reasonably expected to be paid by other creditworthy Persons); or (p) one or more of Terra Industries and its Subsidiaries shall have entered into one or more consent or settlement decrees or agreements or similar arrangements with a Governmental Authority or one or more judgments, orders, decrees or similar actions shall have been entered against one or more of Terra Industries and its Subsidiaries based on or arising from the violation of or pursuant to any Environmental Law, or the generation, storage, transportation, treatment, disposal or Release of any Contaminant and, in connection with all the foregoing, Terra Industries and its Subsidiaries are likely to incur Environmental Liabilities and Costs in excess of $1,000,000 in the aggregate (unless the foregoing is reasonably being appealed by Terra Industries or its Subsidiaries and has been bonded pending appeal). Section 9.2. Remedies. During the continuance of any Event of Default, -------- the Administrative Agent (i) may, and shall at the request of the Requisite Lenders, by notice to the Borrowers declare that all or any portion of the Revolving Credit Commitments be terminated, whereupon the obligation of each Lender to make any Loan and each Issuer to issue any Letter of Credit shall immediately terminate, and/or (ii) may and shall at the request of the Requisite Lenders, by notice to the Borrowers, declare the Loans, all interest thereon and all other amounts and Obligations payable under this Agreement to be forthwith due and payable, whereupon the Loans, all such interest and all such amounts and Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that upon the occurrence of the Event of Default specified in Section 9.1(g) above (except to the extent that such Event of Default has occurred in respect of Terra Industries and/or Terra Capital Holdings), (A) the Revolving Credit Commitments of each Lender to make Revolving Loans and of each Lender and Issuer to issue or participate in Letters of Credit shall automatically be terminated and (B) the Loans, all such interest and all such amounts and Obligations 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. In addition to the remedies set forth above, the Administrative Agent may instruct the Administrative Agent, on behalf of the Secured Parties, to exercise any remedies provided for by the Collateral Documents in accordance with the terms thereof or any other remedies provided by applicable law. Section 9.3. Actions in Respect of Letters of Credit. Upon the --------------------------------------- Revolving Credit Termination Date or as required by Section 2.9, the Borrowers shall pay to the Administrative Agent in immediately available funds at the Administrative Agent's office referred to in Section 11.8, for deposit in a cash collateral account (the "L/C Cash Collateral Account") to be maintained with and in the name of the Administrative Agent on behalf of the Lenders at such place as shall be designated by the Administrative Agent, an amount equal to (a) 110% of the sum of all outstanding Letter of Credit Obligations which are denominated in 95 Dollars and (b) 125% of the sum of all outstanding Letter of Credit Obligations (if any) which are denominated in currencies other than Dollars. The Administrative Agent may, from time to time after funds are deposited in the L/C Cash Collateral Account, apply funds then held in the L/C Cash Collateral Account to the payment of any amounts, in accordance with Section 2.13(f), as shall have become or shall become due and payable by the Borrowers to the Issuers or the Lenders in respect of the Letter of Credit Obligations. The Administrative Agent shall promptly give written notice of any such application; provided, however, that the failure to give such written notice shall not invalidate any such application. Neither the Borrowers nor any Person claiming on behalf of or through the Borrowers shall have any right to withdraw any of the funds held in the L/C Cash Collateral Account at any time prior to the termination of all outstanding Letters of Credit and the payment in full of all then outstanding and payable monetary Obligations. Section 9.4. Rescission. If at any time after termination of the ---------- Revolving Credit Commitments and/or acceleration of the maturity of the Loans, the Borrowers shall pay all arrears of interest and all payments on account of principal of the Loans and Reimbursement Obligations which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified herein) and all Events of Default and Defaults (other than non-payment of principal of and accrued interest on the Loans due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 11.1, then upon the written consent of the Requisite Lenders and written notice to the Borrowers, the termination of the Revolving Credit Commitments and/or the acceleration and their consequences may be rescinded and annulled; but such action shall not affect any subsequent Event of Default or Default or impair any right or remedy consequent thereon. The provisions of the preceding sentence are intended merely to bind the Lenders and the Issuers to a decision which may be made at the election of the Requisite Lenders; they are not intended to benefit the Borrowers and do not give the Borrowers the right to require the Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. ARTICLE X The Administrative Agent; The Other Agents Section 10.1. Authorization and Action. ------------------------ (a) Each Lender and each Issuer hereby appoints CUSA as the Administrative Agent hereunder and each Lender and each Issuer authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent under such agreements and to exercise such powers as are reasonably incidental thereto. Without limitation of the foregoing, each Lender and each Issuer hereby authorizes the Administrative Agent to execute and deliver, and to perform its obligations under each of the Loan Documents to which the Administrative Agent is a party and to exercise all rights, powers and remedies that the Administrative Agent may have under such Loan Documents and recognizes that under the Collateral Documents the Administrative Agent is acting as agent for the Secured Parties. (b) As to any matters not expressly provided for by this Agreement and the other Loan Documents (including enforcement or collection), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain 96 from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Requisite Lenders, and such instructions shall be binding upon all Lenders and each Issuer; provided, however, that the Administrative Agent shall not be required to take any action which (i) the Administrative Agent in good faith believes exposes it to personal liability unless the Administrative Agent receives an indemnification satisfactory to it from the Lenders and the Issuers with respect to such action or (ii) is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender and each Issuer prompt notice of each notice given to it by any Loan Party pursuant to the terms of this Agreement or the other Loan Documents. (c) In performing its functions and duties hereunder and under the other Loan Documents, the Administrative Agent is acting solely on behalf of the Lenders and the Issuers and its duties are entirely administrative in nature. The Administrative Agent does not assume and shall not be deemed to have assumed any obligation other than as expressly set forth herein and in the other Loan Documents or any other relationship as the agent, fiduciary or trustee of or for any Lender, Issuer or holder of any other Obligation. The Administrative Agent may perform any of its duties under any of the Loan Documents by or through its agents or employees. Section 10.2. Administrative Agent's Reliance, Etc. Neither the ------------------------------------ Administrative Agent nor any of its Affiliates or any of the respective directors, officers, agents or employees of the Administrative Agent or any such Affiliate shall be liable for any action taken or omitted to be taken by it, him, her or them under or in connection with this Agreement or the other Loan Documents, except for its, his, her or their own gross negligence or willful misconduct. Without limiting the foregoing, the Administrative Agent (a) may treat the payee of any Note as its holder until such Note has been assigned in accordance with Section 11.2; (b) may rely on the Register to the extent set forth in Section 11.2(c); (c) may consult with legal counsel (including counsel to the Borrowers or any other Loan Party), 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 it in accordance with the advice of such counsel, accountants or experts; (d) makes no warranty or representation to any Lender or Issuer and shall not be responsible to any Lender or Issuer for any statements, warranties or representations made by or on behalf of Terra Industries or any of its Subsidiaries in or in connection with this Agreement or any of the other Loan Documents; (e) shall not have any duty to ascertain or to inquire either as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any of the other Loan Documents or the financial condition of any Loan Party, or the existence or possible existence of any Default or Event of Default; (f) shall not be responsible to any Lender or Issuer for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (g) shall incur no liability under or in respect of this Agreement or any of the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy) or any telephone message believed by it to be genuine and signed or sent by the proper party or parties. Section 10.3. The Administrative Agent Individually. With respect to ------------------------------------- its Ratable Portion, CUSA shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms "Lenders," or "Requisite Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity as a Lender or as one of the Requisite Lenders. CUSA and its Affiliates may accept deposits from, 97 lend money to, and generally engage in any kind of banking, trust or other business with any Loan Party as if it were not acting as the Administrative Agent. Section 10.4. Lender Credit Decision. Each Lender and each Issuer ---------------------- acknowledges that it shall, independently and without reliance upon the Administrative Agent or its Affiliates or any other Lender conduct its own independent investigation of the financial condition and affairs of the Borrower and each other Loan Party in connection with the making and continuance of the Loans and with the issuance of the Letters of Credit. Each Lender and each Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or its Affiliates 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 and other Loan Documents. Section 10.5. Indemnification. Each Lender agrees to indemnify the --------------- Administrative Agent and each of its Affiliates, and each of their respective directors, officers, employees, agents and advisors (to the extent not reimbursed by the Borrowers), from and against such Lender's aggregate Ratable Portion of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements (including fees and disbursements of legal counsel) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against, the Administrative Agent or any of its Affiliates, directors, officers, employees, agents and advisors in any way relating to or arising out of this Agreement or the other Loan Documents or any action taken or omitted by the Administrative Agent under this Agreement or the other Loan Documents; provided, however, 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 Administrative Agent's or such Affiliate's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including fees and disbursements of legal counsel) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights or responsibilities under, this Agreement or the other Loan Documents, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrowers or another Loan Party. Section 10.6. Successor Administrative Agent. (a) Subject to clause ------------------------------ (b) below, the Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Requisite Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent selected from among the Lenders. Each such appointment shall be subject to the prior written approval of the Borrowers (which approval may not be unreasonably withheld and shall not be required upon the occurrence and during the continuance of an Event of Default); (b) Notwithstanding clause (a) above, the Administrative Agent may at any time appoint any Affiliate (or Affiliates) of the Administrative Agent each as (i) a successor Administrative Agent in the event that the Administrative Agent wishes to retire as Administrative Agent or (ii) (in connection with the performance and exercise of its rights and obligations under the Loan Documents) as co-Administrative Agent, which appointment and (if relevant) resignation shall be 98 effective upon the Administrative Agent giving written notice thereof to the Lenders and the Borrowers. Any such appointment and/or resignation under this clause (b) shall not require the consent of any Lender or Borrower. (c) Upon the acceptance of any appointment as Administrative Agent by a successor Administrative Agent or co-Administrative Agent pursuant to clauses (a) or (b) above, each such successor Administrative Agent shall succeed to, and each such co-Administrative Agent shall accede to, and become vested with all the rights, powers, privileges and duties of the retiring or remaining Administrative Agent, and in the case of a retiring Administrative Agent, such Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the retiring Administrative Agent shall continue to have the benefit of this Article X as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. Section 10.7. Concerning the Collateral and the Collateral Documents. ------------------------------------------------------ (a) Each Lender and each Issuer agrees that any action taken by the Administrative Agent or the Requisite Lenders (or, where required by the express terms of this Agreement, a greater or different proportion or combination of the Lenders) in accordance with the provisions of this Agreement or of the other Loan Documents, and the exercise by the Administrative Agent or the Requisite Lenders (or, where so required, such greater or different proportion or combination) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders, Issuers and other Secured Parties. Without limiting the generality of the foregoing, the Administrative Agent shall have the sole and exclusive right and authority to (i) act as the disbursing and collecting agent for the Lenders and the Issuers with respect to all payments and collections arising in connection herewith and with the Collateral Documents; (ii) execute and deliver the Senior Secured Note Intercreditor Agreement and each Loan Document and accept delivery of each such agreement delivered by Terra Industries or any of its Subsidiaries; (iii) manage, supervise and otherwise deal with the Collateral; (iv) take such action as is necessary or desirable to maintain the perfection and priority of the security interests and Liens created or purported to be created by the Collateral Documents; and (v) except as may be otherwise specifically restricted by the terms hereof or of the Senior Secured Note Intercreditor Agreement, or of any other Loan Document, exercise all remedies given to the Administrative Agent, the Lenders, the Issuers and the other Secured Parties and direct the Administrative Agent in accordance with the terms hereof and of the Senior Secured Note Intercreditor Agreement with respect to the Collateral under the Loan Documents relating thereto, applicable law or otherwise. (b) The Administrative Agent hereby appoints, authorizes and directs each Lender and Issuer to act as collateral sub-agent for the Administrative Agent, the Lenders and the Issuers for purposes of the perfection of all security interests and Liens with respect to Terra Industries' and its Subsidiaries' respective deposit accounts maintained with, and cash and Cash Equivalents held by, such Lender or such Issuer. (c) Each of the Lenders and the Issuers hereby directs, in accordance with the terms hereof, the Administrative Agent to release or instruct the Administrative Agent to release (or, in the case of clause (ii) below, release or subordinate) any Lien held by the Administrative Agent for the benefit of the Lenders and the Issuers: 99 (i) against all of the Collateral, upon termination of the Revolving Credit Commitments and payment and satisfaction in full of all Loans, Reimbursement Obligations and all other Obligations which have matured and which the Administrative Agent has been notified in writing are then due and payable (and, in respect of contingent Letter of Credit Obligations, with respect to which cash collateral has been deposited or a back-up letter of credit has been issued, in either case on terms satisfactory to the Administrative Agent and the applicable Issuers); (ii) against any assets that are subject to a Lien permitted by Section 8.2(d) or (e); (iii) against any part of the Collateral sold or disposed of by a Loan Party if such sale or disposition is permitted by this Agreement (or permitted pursuant to a waiver or consent of a transaction otherwise prohibited by this Agreement) or, if not pursuant to such sale or disposition, if such release is consented to by (A) all of the Lenders, if the Collateral subject to such release is a substantial portion of all the Collateral, or (B) the Requisite Lenders, in all other cases; (iv) against any cash collateral to the extent permitted under Section 7.12 or Section 2.9; and (v) as of the Effective Date, against any collateral, but only to the extent such collateral constitutes Senior Secured Note Collateral. Each of the Lenders and the Issuers hereby directs the Administrative Agent to instruct the Administrative Agent to execute and deliver or file such termination and partial release statements and do such other things as are necessary to release Liens to be released pursuant to this Section 10.7 promptly upon the effectiveness of any such release. Section 10.8. Collateral Matters Relating to Related Obligations. The -------------------------------------------------- benefit of the Loan Documents and of the provisions of this Agreement relating to the Collateral shall extend to and be available in respect of any Obligation which arises under any Hedging Contract or which is otherwise owed to Persons other than the Administrative Agent, the Arranger, the Lenders and the Issuers (collectively, "Related Obligations") solely on the condition and understanding, as among the Administrative Agent and all Secured Parties, that (i) the Related Obligations shall be entitled to the benefit of the Loan Documents and the Collateral to the extent expressly set forth in this Agreement and the other Loan Documents and to such extent the Administrative Agent shall hold, and have the right and power to act with respect to, the Guaranty and the Collateral on behalf of and as agent for the holders of the Related Obligations but the Administrative Agent is otherwise acting solely as agent for the Lenders and the Issuers and shall have no fiduciary duty, duty of loyalty, duty of care, duty of disclosure or other obligation whatsoever to any holder of Related Obligations; (ii) all matters, acts and omissions relating in any manner to the Guaranty, the Collateral, or the omission, creation, perfection, priority, abandonment or release of any Lien, shall be governed solely by the provisions of this Agreement, the Senior Secured Note Intercreditor Agreement and the other Loan Documents and no separate Lien, right, power or remedy shall arise or exist in favor of any Secured Party under any separate instrument or agreement or in respect of any Related Obligation; and (iii) each Secured Party shall be bound by all actions taken or omitted, in accordance with the provisions of this Agreement, the Senior Secured Note Intercreditor Agreement and the other Loan Documents, by the Administrative Agent and the Requisite 100 Lenders (or, where required by the express terms of this Agreement, a greater or different proportion or combination of the Lenders), each of whom shall be entitled to act at its sole discretion and exclusively in its own interest given its own Revolving Credit Commitments and its own interest in the Loans, Letter of Credit Obligations and other Obligations to it arising under this Agreement or the other Loan Documents, without any duty or liability to any other Secured Party or as to any Related Obligation and without regard to whether any Related Obligation remains outstanding or is deprived of the benefit of the Collateral or becomes unsecured or is otherwise affected or put in jeopardy thereby; and (iv) no holder of Related Obligations and no other Secured Party (except the Administrative Agent, the Arranger, the Lenders and the Issuers, to the extent set forth in this Agreement) shall have any right to be notified of, or to direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under this Agreement, the Senior Secured Note Intercreditor Agreement or the Loan Documents; and (v) no holder of any Related Obligation shall exercise any right of setoff, banker's lien or similar right except as expressly provided in Section 11.6. Section 10.9. Other Agents. Each party acknowledges that the Person ------------ (except in its capacity as a Lender or Issuer) designated as the Arranger shall have no liability hereunder. ARTICLE XI Miscellaneous Section 11.1. Amendments, Waivers, Etc. ------------------------ (a) No amendment or waiver of any provision of this Agreement or any other Loan Document nor consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be in writing and signed by the Requisite Lenders, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by the relevant Lenders referred to below, in addition to the Requisite Lenders, do any of the following: (i) waive any of the conditions specified in Section 3.1 (without the consent of all Lenders) or 3.2 (without the consent of all Lenders) except with respect to a condition based upon another provision hereof, the waiver of which requires only the concurrence of the Requisite Lenders; (ii) increase the Revolving Credit Commitment of any Lender or subject any Lender to any additional obligations (without the consent of each such Lender); (iii) extend the scheduled final maturity of any Loan owing to any Lender, or waive, reduce or postpone any scheduled date fixed for the payment or reduction of principal of any such Loan (it being understood that Section 2.9 does not provide for scheduled dates fixed for payment) or for the reduction of the Revolving Credit Commitment of such Lender (without the consent of such Lender); 101 (iv) reduce the principal amount of any Loan or Reimbursement Obligation owing to any Lender (other than by the payment or prepayment thereof) (without the consent of such Lender); (v) reduce the rate of interest on any Loan or Reimbursement Obligations owing to any Lender or any fee payable hereunder to such Lender (without the consent of such Lender); (vi) postpone any scheduled date fixed for payment of such interest or fees to such Lender (without the consent of such Lender); (vii) change the percentage of aggregate Revolving Credit Commitments or unpaid principal amount of the Loans or the number or percentage of Lenders which shall be required for the Lenders or any of them to take any action hereunder (without the consent of each Lender); (viii) increase the Advance Rates above the rates set forth in the definition thereof (without the consent of each Lender); (ix) (without limiting Section 7.12) release a substantial portion of Collateral except as otherwise provided in Section 10.7(c) or release any Borrower or Guarantor from its obligations under this Agreement or its Guaranty, as applicable, except in connection with sale or other disposition permitted by this Agreement (or permitted pursuant to a waiver or consent of a transaction otherwise prohibited by this Agreement) (without the consent of each Lender); (x) amend Section 10.7(c) or this Section 11.1 or the definition of the terms "Requisite Lenders" or "Ratable Portion" (without the consent of each Lender affected thereby); and provided, further, that no amendment, waiver or consent shall, unless in writing and 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 or the other Loan Documents. (b) The Administrative Agent may, but shall have no obligation to, with the written concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrowers in any case shall entitle the Borrowers to any other or further notice or demand in similar or other circumstances. (c) In connection with any proposed amendment, modification, waiver or termination (a "Proposed Change") requiring the consent of all Lenders in addition to the Requisite Lenders, the consent of Requisite Lenders is obtained, but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in this Section 11.1 being referred to as a "Non-Consenting Lender"), then, so long as the Lender that is acting as the Administrative Agent is not a Non-Consenting Lender, at the Borrower's request, the Administrative Agent or an Eligible Assignee that is acceptable to the Administrative Agent shall have the right with the Administrative Agent's consent and in the 102 Administrative Agent's sole discretion (but shall have no obligation) to purchase from such Non-Consenting Lender, and such Non-Consenting Lender agrees that it shall, upon the Administrative Agent's request, sell and assign to the Lender that is acting as the Administrative Agent or such Eligible Assignee, all of the Revolving Credit Commitments and Revolving Credit Outstandings of such Non-Consenting Lender for an amount equal to the principal balance of all Revolving Loans held by the Non-Consenting Lender and all accrued interest and fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment and Acceptance. Section 11.2. Assignments and Participations. ------------------------------ (a) Each Lender may sell, transfer, negotiate or assign to one or more Eligible Assignees all or a portion of its rights and obligations hereunder (including all of its rights and obligations with respect to the Revolving Loans, the Swing Loans and the Letters of Credit); provided, however, that (i) if any such assignment shall be of the assigning Lender's Revolving Credit Outstandings and Revolving Credit Commitment, such assignment shall cover the same percentage of such Lender's Revolving Credit Outstandings and Revolving Credit Commitment and (ii) the aggregate amount being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event (if less than the Assignor's entire interest) be less than (in the case of (in aggregate) the Revolving Credit Outstandings (and/or the Revolving Credit Commitments)) $5,000,000 or an integral multiple of $1,000,000 in excess thereof, except, in either case, (A) with the consent of Terra Capital and the Administrative Agent or (B) if such assignment is being made to a Lender or an Affiliate or Approved Fund of such Lender, and (iii) if such Eligible Assignee is not, prior to the date of such assignment, a Lender or an Affiliate or Approved Fund of a Lender, such assignment shall be subject to the prior consent of the Administrative Agent and Terra Capital (which consent shall not be unreasonably withheld or delayed); provided, however, that, notwithstanding any other provision of this Section 11.2, the consent of the Borrowers shall not be required for any assignment which occurs when any Event of Default shall have occurred and be continuing. (b) The parties to each assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording, an Assignment and Acceptance, together with any Note (if the assigning Lender's Loans are evidenced by a Note) subject to such assignment. Upon such execution, delivery, acceptance and recording and the receipt by the Administrative Agent from the assignee of an assignment fee in the amount of $3,500 from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender, and if such Lender were an Issuer, of such Issuer hereunder and thereunder, and (ii) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except those which survive the payment in full of the Obligations) and be released from its obligations to the extent corresponding thereto under the Loan Documents, other than those relating to events or circumstances occurring prior to such assignment (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto). 103 (c) The Administrative Agent shall maintain at its addressreferred to in Section 11.8 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recording of the names and addresses of the Lenders and the Revolving Credit Commitments of and principal amount of the Loans and Letter of Credit Obligations owing 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 Loan Parties, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the Administrative Agent 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, the Administrative Agent shall, if such Assignment and Acceptance has been completed, (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 Borrowers, at their own expense, shall, if requested by such assignee, execute and deliver to the Administrative Agent, new Notes to the order of such assignee in an amount equal to the Revolving Credit Commitments assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has surrendered any Note for exchange in connection with the assignment and has retained Revolving Credit Commitments hereunder, new Notes to the order of the assigning Lender in an amount equal to the Revolving Credit Commitments retained by it hereunder. Such new Notes shall be dated the same date as the surrendered Notes and be in substantially the form of Exhibit B. (e) In addition to the other assignment rights provided in this Section 11.2, each Lender may assign, as collateral or otherwise, any of its rights under this Agreement (including rights to payments of principal or interest on the Loans) to (i) any Federal Reserve Bank pursuant to Regulation A of the Federal Reserve Board without notice to or consent of the Borrowers or the Administrative Agent and (ii) any trustee for the benefit of the holders of such Lender's Securities; provided, however, that no such assignment shall release the assigning Lender from any of its obligations hereunder. (f) Each Lender may sell participations to one or more Persons in or to all or a portion of its rights and obligations under the Loan Documents (including all its rights and obligations with respect to the Revolving Loans and Letters of Credit). The terms of such participation shall not, in any event, require the participant's consent to any amendments, waivers or other modifications of any provision of any Loan Documents, the consent to any departure by any Loan Party therefrom, or to the exercising or refraining from exercising any powers or rights which such Lender may have under or in respect of the Loan Documents (including the right to enforce the obligations of the Loan Parties), except if any such amendment, waiver or other modification or consent would (i) reduce the amount, or postpone any date fixed for, any amount (whether of principal, interest or fees) payable to such participant under the Loan Documents, to which such participant would otherwise be entitled under such participation or (ii) result in the release of all or substantially all of the Collateral other than in accordance with Section 10.7(c). In the event of the sale of any participation by any Lender, (A) such Lender's obligations under the Loan Documents shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties for the performance of such obligations, (C) such Lender shall remain the holder of such Obligations for all purposes of this Agreement, and (D) the Borrower, the Administrative 104 Agent 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. Each participant shall be entitled to the benefits of Sections 2.14(c), 2.14(e), 2.15 and 2.16 as if it were a Lender; provided, however, that anything herein to the contrary notwithstanding, the Borrower shall not, at any time, be obligated to pay to any participant of any interest of any Lender, under Section 2.14(c), 2.14(e), 2.15 or 2.16, any sum in excess of the sum which the Borrowers would have been obligated to pay to such Lender in respect of such interest had such participation not been sold. (g) Any Issuer may at any time assign its rights and obligations hereunder to any other Lender by an instrument in form and substance satisfactory to the Borrowers, the Administrative Agent, such Issuer and such Lender. If any Issuer ceases to be a Lender hereunder by virtue of any assignment made pursuant to this Section 11.2, then, as of the effective date of such cessation, such Issuer's obligations to issue Letters of Credit pursuant to Section 2.4 shall terminate and such Issuer shall be an Issuer hereunder only with respect to outstanding Letters of Credit issued prior to such date. Section 11.3. Costs and Expenses. ------------------ (a) Each Borrower agrees upon demand to pay, or reimburse the Administrative Agent for, all of the Administrative Agent's reasonable internal and external audit, legal, appraisal, valuation, filing, document duplication and reproduction and investigation expenses and for all other reasonable and documented out-of-pocket costs and expenses of every type and nature (including, without limitation, the reasonable and documented fees, expenses and disbursements of the Administrative Agent's New York and English counsel, Weil, Gotshal & Manges LLP and additional local legal counsel, auditors, accountants, appraisers, printers, insurance and environmental advisers, and other consultants and agents) reasonably incurred by the Administrative Agent in connection with (i) the Administrative Agent's audit and investigation of Terra Industries and its Subsidiaries in connection with the preparation, negotiation and execution of the Loan Documents and the Administrative Agent's periodic audits of Terra Industries and its Subsidiaries, as the case may be; (ii) the preparation, negotiation, execution and interpretation of this Agreement (including, without limitation, the satisfaction or attempted satisfaction of any of the conditions set forth in Article III), the Loan Documents and any proposal letter or commitment letter issued in connection therewith and the making of the Loans hereunder; (iii) the creation, perfection or protection of the Liens under the Loan Documents (including, without limitation, any reasonable and documented fees and expenses for local counsel in various jurisdictions); (iv) the ongoing administration of this Agreement and the Loans, including consultation with attorneys in connection therewith and with respect to the Administrative Agent's rights and responsibilities hereunder and under the other Loan Documents; (v) the protection, collection or enforcement of any of the Obligations or the enforcement of any of the Loan Documents; (vi) the commencement, defense or intervention in any court proceeding relating in any way to the Obligations, any Loan Party, any of Terra Industries' Subsidiaries, this Agreement or any of the other Loan Documents; (vii) the response to, and preparation for, any subpoena or request for document production with which the Administrative Agent is served or deposition or other proceeding in which the Administrative Agent is called to testify, in each case, relating in any way to the Obligations, any Loan Party, any of Terra Industries' Subsidiaries, this Agreement or any of the other Loan Documents; and (viii) any amendments, consents, waivers, assignments, restatements, or supplements to any of the Loan Documents and the preparation, negotiation, and execution of the same. 105 (b) Each Borrower further agrees to pay or reimburse the Administrative Agent and each of the Lenders and Issuers upon demand for all reasonable and documented out-of-pocket costs and expenses, including, without limitation, reasonable attorneys' fees (including allocated costs of internal counsel and costs of settlement), incurred by the Administrative Agent, such Lenders or Issuers (i) in enforcing any Loan Document or Obligation or any security therefor or exercising or enforcing any other right or remedy available by reason of an Event of Default; (ii) in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a "work-out" or in any insolvency or bankruptcy proceeding; (iii) in commencing, defending or intervening in any litigation or in filing a petition, complaint, answer, motion or other pleadings in any legal proceeding relating to the Obligations, any Loan Party, any of Terra Industries' Subsidiaries and related to or arising out of the transactions contemplated hereby or by any of the other Loan Documents; and (iv) in taking any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) described in clauses (i) through (iii) above. Section 11.4. Indemnities. ----------- (a) Each Borrower agrees to indemnify and hold harmless the Administrative Agent, each Lender and each Issuer and each of their respective Affiliates, and each of the directors, officers, employees, agents, representatives, attorneys, consultants and advisors of or to any of the foregoing (including those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article III) (each such Person being an "Indemnitee") from and against any and all claims, damages, liabilities, obligations, losses, penalties, actions, judgments, suits, costs, disbursements and expenses of any kind or nature (including reasonable and documented fees and disbursements of counsel to any such Indemnitee, but excluding taxes (other than those covenanted to be paid by the Borrowers under this Agreement) imposed on or measured by the Indemnitee's net income and franchise taxes, imposed on it, by the jurisdiction (or any political subdivision thereof) under the laws of which such Indemnitee is organized or in which its principal office or Applicable Lending Office is located) which may be imposed on, incurred by or asserted against any such Indemnitee in connection with or arising out of any investigation, litigation or proceeding, whether or not any such Indemnitee is a party thereto, whether direct, indirect, or consequential and whether based on any federal, state or local law or other statutory regulation, securities or commercial law or regulation, or under common law or in equity, or in contract, tort or otherwise, relating to or arising out of this Agreement, any other Loan Document, any Obligation, any Letter of Credit, or any act, event or transaction related or attendant to any thereof, or the use or intended use of the proceeds of the Loans or Letters of Credit or in connection with any investigation of any potential matter covered hereby (collectively, the "Indemnified Matters"). Without limiting the foregoing, Indemnified Matters include (i) all Environmental Liabilities and Costs arising from or connected with the past, present or future operations of Terra Industries or any of its Subsidiaries involving any property subject to a Collateral Document, or damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Contaminants on, upon or into such property or any contiguous real estate; (ii) any costs or liabilities incurred in connection with any Remedial Action concerning Terra Industries or any of its Subsidiaries; (iii) any costs or liabilities incurred in connection with any Environmental Lien in respect of any assets or properties of Terra Industries and its Subsidiaries; (iv) any costs or liabilities incurred in connection with any other matter (concerning Terra Industries or any of its Subsidiaries) under any Environmental Law, including CERCLA and applicable state property transfer laws, whether, with respect to any of such matters, such Indemnitee is a mortgagee pursuant to any leasehold 106 mortgage, a mortgagee in possession, the successor in interest to Terra Industries or any of its Subsidiaries, or the owner, lessee or operator of any property of Terra Industries or any of its Subsidiaries by virtue of foreclosure, except, with respect to those matters referred to in clauses (i), (ii), (iii) and (iv) above, to the extent incurred following (A) foreclosure by the Administrative Agent, any Lender or any Issuer, or the Administrative Agent, any Lender or any Issuer having become the successor in interest to Terra Industries or any of its Subsidiaries, and (B) attributable solely to acts of the Administrative Agent, such Lender or such Issuer or any agent on behalf of the Administrative Agent, such Lender or such Issuer; provided, however, that the Borrowers shall not have any obligation under this Section 11.4 to an Indemnitee with respect to any Indemnified Matter caused by or resulting from the gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order. (b) Each Borrower shall indemnify the Administrative Agent, the Lenders and each Issuer for, and hold the Administrative Agent, the Lenders and each Issuer harmless from and against, any and all claims for brokerage commissions, fees and other compensation made against the Administrative Agent, the Lenders and the Issuers for any broker, finder or consultant with respect to any agreement, arrangement or understanding made by or on behalf of any Loan Party or any of its Subsidiaries in connection with the transactions contemplated by this Agreement. (c) Each Borrower agrees that any indemnification or other protection provided to any Indemnitee pursuant to this Agreement (including pursuant to this Section 11.4) or any other Loan Document shall (i) survive payment in full of the Obligations and (ii) inure to the benefit of any Person who was at any time an Indemnitee under this Agreement or any other Loan Document. Section 11.5. Limitation of Liability. Each Borrower agrees that ----------------------- no Indemnitee shall (except for breach by such Indemnitee of its obligations under this Agreement and the other Loan Documents) have any liability (whether direct or indirect, in contract, tort or otherwise) to any Loan Party or any of their respective Subsidiaries or any of their equity holders or creditors for or in connection with the transactions contemplated hereby and in the other Loan Documents, except to the extent such liability is found in a final judgment by a court of competent jurisdiction to have resulted from such Indemnitee's gross negligence or willful misconduct. In no event, however, shall any Indemnitee be liable on any theory of liability for any special, indirect, consequential or punitive damages and each of Terra Industries and each Borrower hereby waives, releases and agrees (for itself and on behalf of its Subsidiaries) not to sue upon any such claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 11.6. Right of Set-off. Upon the occurrence and during ---------------- the continuance of any Event of Default each Lender and each Affiliate of a Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or its Affiliates to or for the credit or the account of any Borrower against any and all of the Obligations now or hereafter existing whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such Obligations may be unmatured. Each Lender agrees promptly to notify the applicable Borrower after any such set-off and application made by such Lender or its 107 Affiliates; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 11.6 are in addition to the other rights and remedies (including other rights of set-off) which such Lender may have. Section 11.7. Sharing of Payments, Etc. ------------------------- (a) If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off or otherwise) on account of the Revolving Loans made by it (other than pursuant to Section 2.14, 2.15 or 2.16) in excess of its Ratable Portion under the Revolving Credit Facility, in respect of payments obtained by the Lenders, on account of such Obligations, such Lender (a "Purchasing Lender") shall forthwith purchase from the other Lenders (each, a "Selling Lender") such participations in their Loans or other Obligations as shall be necessary to cause such Purchasing Lender to share the excess payment ratably with each of them. (b) If all or any portion of any payment received by a Purchasing Lender is thereafter recovered from such Purchasing Lender, such purchase from each Selling Lender shall be rescinded and such Selling Lender shall repay to the Purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Selling Lender's ratable share (according to the proportion of (i) the amount of such Selling 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. (c) Each Borrower agrees that any Purchasing Lender so purchasing a participation from a Selling Lender pursuant to this Section 11.7 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 the Borrower in the amount of such participation. Section 11.8. Notices, Etc. All notices, demands, requests and ------------- other communications provided for in this Agreement shall be given in writing, by any telecommunication device capable of creating a written record or by electronic mail through the internet, and addressed to the party to be notified as follows: (a) if to any Loan Party: c/o Terra Industries, Inc. 600 Fourth Street Sioux City, Iowa 51102 Attention: Francis G. Meyer, Senior Vice President and Chief Financial Officer Telecopy no: (712) 279-8703 email address: fmeyer@terraindustries.com (b) if to any Lender, at its Domestic Lending Office specified opposite its name on Schedule II or on the signature page of any applicable Assignment and Acceptance; (c) if to any Issuer, at the address set forth under its name on the signature page hereof; and 108 (d) if to the Administrative Agent: (i) (for collateral and administrative matters) Citicorp USA, Inc. 388 Greenwich Street 19th Floor New York, New York 10013 Attention: David Jaffe Telecopy No: (212) 816-2613 email address: david.jaffe@citi.com with a copy to (for collateral monitoring matters): Citicorp USA, Inc. 388 Greenwich Street 19th Floor New York, New York 10013 Attention: Hien Nugent Telecopy No: (212) 816-2613 email address: hien.nugent@citi.com And (ii) (for advances) Citicorp USA, Inc. 2 Penns Way Suite 200 New Castle, Delaware 19720 Attention: Annemarie Pavco Telecopy No: (302) 894-6120 email address: annemarie.pavco@citi.com with a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue, New York, New York 10153-0119 Attention: Daniel S. Dokos, Esq. Telecopy no: (212) 310-8007 email address: daniel.dokos@weil.com or at such other address as shall be notified in writing (i) in the case of the Loan Parties and the Administrative Agent, to the other parties and (ii) in the case of all other parties, to the Borrower and the Administrative Agent. All such notices and communications shall be effective upon personal delivery (if delivered by hand, including any overnight courier service), when deposited in the mails (if sent by mail), or when properly transmitted (if sent by a telecommunications device or by electronic mail); provided, however, that notices and communications to the 109 Administrative Agent pursuant to Article II or X shall not be effective until received by the Administrative Agent. Section 11.9. No Waiver; Remedies. No failure on the part of ------------------- any Lender, Issuer or the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any 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. Section 11.10. Binding Effect. This Agreement shall become -------------- effective on the Effective Date and thereafter this Agreement shall be binding upon and inure to the benefit of the Borrowers, the Administrative Agent and each Lender and their respective successors and assigns, except that the Borrowers shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. On the Effective Date, the Existing Credit Agreement shall be amended and restated in its entirety by this Agreement and the Existing Credit Agreement shall thereafter be of no further force and effect except as to evidence the incurrence by the Borrowers' of the Obligations thereunder, as to evidence the representations and warranties made by the Borrowers prior to the Effective Date and as to evidence any failure to comply with the covenants contained in such Existing Credit Agreement occurring prior to the Effective Date. The terms and conditions of this Agreement and the Administrative Agent's, the Lenders' and the Issuers' rights and remedies under this Agreement and the other Loan Documents, shall apply to all of the Obligations incurred under the Existing Credit Agreement and the Notes issued as of April 7, 2000. It is expressly understood and agreed by the parties hereto that this Agreement is in no way intended to constitute a novation of the obligations and liabilities existing under the Existing Credit Agreement or evidence payment of all or any of such obligations and liabilities. Other than with respect to Liens on the assets of the Loan Parties constituting Senior Secured Note Collateral, each Borrower party to the Existing Credit Agreement reaffirms the Liens granted to the Administrative Agent for the benefit of the Lenders and the Issuers pursuant to each of the Loan Documents executed by such Borrower, which Liens shall continue in full force and effect during the term of this Agreement and any renewals thereof and shall continue to secure the Obligations identified in such Loan Documents. All references to the Existing Credit Agreement (or to any amendment or any amendment and restatement thereof) in the Loan Documents shall be deemed to refer to this Agreement. Section 11.11. Governing Law. This Agreement and the rights and ------------- obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. Section 11.12. Submission to Jurisdiction; Service of Process. ---------------------------------------------- (a) Any legal action or proceeding with respect to this Agreement or any other Loan Document may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each Borrower hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. 110 (b) Terra UK hereby irrevocably designates, appoints and empowers Terra Industries (the "Process Agent"), in the case of any suit, action or proceeding brought in the United States of America as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notices and documents that may be served in any action or proceeding arising out of or in connection with this Agreement or any Loan Document. Such service may be made by mailing (by registered or certified mail, postage prepaid) or delivering a copy of such process to Terra UK in care of the Process Agent at the Process Agent's above address, and Terra UK hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. As an alternative method of service, Terra UK irrevocably consents to the service of any and all process in any such action or proceeding by the mailing (by registered or certified mail, postage prepaid) of copies of such process to the Process Agent or Terra UK at its address specified in Section 11.8. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each of Terra Capital and TNLP hereby irrevocably consents to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding brought in the United States of America arising out of or in connection with this Agreement or any of the other Loan Documents by the mailing (by registered or certified mail, postage prepaid) or delivering of a copy of such process to such Borrower at its address specified in Section 11.8. Each such Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (c) Nothing contained in this Section 11.12 shall affect the right of the Administrative Agent or any Lender to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against the Borrower or any other Loan Party in any other jurisdiction. (d) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency at the spot rate of exchange quoted by the Administrative Agent at 11:00 a.m. (New York time) on the Business Day preceding that on which final judgment is given, for the purchase of Dollars, for delivery two Business Days thereafter. Section 11.13. Waiver of Jury Trial. Each of the Administrative -------------------- Agent, the Lenders, the Issuers and the Borrower irrevocably waives trial by jury in any action or proceeding with respect to this Agreement or any other Loan Document. Section 11.14. No Immunity. To the extent that Terra UK may be or ----------- become entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Agreement or any other Loan Document, to claim for itself or its properties or revenues any immunity from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, execution of a judgment or from any other legal process or remedy relating to its respective obligations under this Agreement or any other Loan Document, and to the extent that in any such jurisdiction there may be attributed such an immunity (whether 111 or not claimed), Terra UK hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the fullest extent permitted by the laws of such jurisdiction. Section 11.15. Judgment Currency. This is an international loan ----------------- transaction in which the specification of Dollars is of the essence, and Dollars shall in each instance be the currency of account and payment in all instances. A payment obligation in Dollars hereunder shall not be discharged by an amount paid in another currency (the "Other Currency"), whether pursuant to any judgment expressed in or converted into any Other Currency or in another place except to the extent that such tender or recovery results in the effective receipt by the Lenders of the full amount of Dollars payable to the Administrative Agent and the Lenders under this Agreement. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into the Other Currency, the rate of exchange that shall be applied shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase U.S. Dollars in New York, New York with the Other Currency on the Business Day next preceding the day on which such judgment is rendered. The obligation of Terra UK in respect of any such sum due from it to the Administrative Agent and the Lenders hereunder or under any other Loan Document shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or any Lender of any sum adjudged to be due hereunder in the Other Currency the Administrative Agent may in accordance with normal banking procedures purchase Dollars with the amount of the judgment currency so adjudged to be due; and the Borrower hereby, as a separate obligation and notwithstanding any such judgment, agrees to indemnify the Administrative Agent and the Lenders against, and to pay the Administrative Agent and Lenders on demand, in Dollars, the amount (if any) by which the sum originally due to the Administrative Agent and the Lenders in Dollars hereunder exceeds the amount of the Other Currency so purchased. Section 11.16. Marshaling; Payments Set Aside. None of the ------------------------------ Administrative Agent, any Lender or any Issuer shall be under any obligation to marshal any assets in favor of the Borrowers or any other party or any other Lender which does not have an equivalent interest in the Revolving Credit Facility or against or in payment of any or all of the Obligations. To the extent that the Borrowers make a payment or payments to the Administrative Agent, the Lenders or the Issuers or any of such Persons receives payment from the proceeds of the Collateral or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, right and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Section 11.17. Section Titles. The Section titles contained in -------------- this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. Section 11.18. Execution in Counterparts. This Agreement may be ------------------------- executed in any number of counterparts and by different parties 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. Signature pages may be detached from multiple separate 112 counterparts and attached to a single counterpart so that all signature pages are attached to the same document. Section 11.19. Entire Agreement. This Agreement, together with ---------------- all of the other Loan Documents and all certificates and documents delivered hereunder or thereunder, embodies the entire agreement of the parties and supersedes all prior agreements and understandings relating to the subject matter hereof. Section 11.20. Confidentiality. Each Lender and the --------------- Administrative Agent (a) agrees to keep information obtained by it pursuant hereto and the other Loan Documents confidential in accordance with such Lender's or the Administrative Agent's, as the case may be, customary practices and (b) agrees that it will only use such information in connection with the transactions contemplated by this Agreement and not disclose any of such information other than (i) to such Lender's or the Administrative Agent's, as the case may be, employees, representatives and agents who are or are expected to be involved in the evaluation of such information in connection with the transactions contemplated by this Agreement and who are advised of the confidential nature of such information, (ii) to the extent such information presently is or hereafter becomes available to such Lender or the Administrative Agent, as the case may be, on a non-confidential basis from a source other than the Borrowers, (iii) to the extent disclosure is required by law, regulation or judicial order or requested or required by bank regulators or auditors, or (iv) to assignees or participants or potential assignees or participants who agree to be bound by the provisions of this Section 11.20. Section 11.21. Refund of Tax Credits. If: --------------------- (a) Terra UK makes a payment under Section 2.16(a) (a "Tax Payment") in respect of a payment to a Lender or the Administrative Agent under this agreement; and (b) that Lender or the Administrative Agent determines in its discretion that it has obtained a refund of tax or obtained and used a credit against tax on its overall net income (a "Tax Credit") which that Lender or as appropriate the Administrative Agent in its discretion is able to identify as attributable to that Tax Payment, then if it can do so without any adverse consequences for that Lender or if applicable the Administrative Agent, that Lender or if applicable the Administrative Agent shall reimburse Terra UK such amount as that Lender or if applicable the Administrative Agent determines to be such proportion of that Tax Credit as will leave that Lender or if applicable the Administrative Agent (after that reimbursement) in no better or worse position in respect of its overall tax liabilities than it would have been in if no Tax Payment had been required. A Lender or where applicable the Administrative Agent shall have an absolute discretion as to whether to claim any Tax Credit (and, if it does claim, the extent order and manner in which it does so). Neither the Lender nor the Administrative Agent should be obliged to disclose any of its tax affairs or computations to Terra UK or any other Loan Party. [Signature Pages Follow] 113 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. Borrowers --------- Terra Capital, Inc. By: /s/ Mark A. Kalafut ---------------------------------- Name: Mark A. Kalafut Title: Vice President Terra Nitrogen (U.K.), Limited By: /s/ Mark A. Kalafut ---------------------------------- Name: Mark A. Kalafut Title: Vice President Terra Nitrogen, Limited Partnership By: Terra Nitrogen Corporation, its General Partner By: /s/ Mark A. Kalafut ---------------------------------- Name: Mark A. Kalafut Title: Vice President Guarantor --------- Terra Industries Inc. By: /s/ Mark A. Kalafut ---------------------------------- Name: Mark A. Kalafut Title: Vice President Administrative Agent -------------------- Citicorp USA, Inc. By: /s/ David Jaffe ---------------------------------- Name: David Jaffe Title: Vice President [Signature Page to Amended and Restated Credit Agreement] Issuer ------ Citibank, N.A. By: /s/ David Jaffe ------------------------------- Name: David Jaffe Title: Vice President Lenders ------- Citicorp USA, Inc. By: /s/ David Jaffe ------------------------------- Name: David Jaffe Title: Vice President Foothill Capital Corporation By: /s/ Mike Baranowski ------------------------------- Name: Mike Baranowski Title: Vice President LaSalle Bank National Association By: /s/ Mitchell J. Tarvid ------------------------------- Name: Mitchell J. Tarvid Title: Vice President PNC Business Credit By: /s/ John Sykes ------------------------------- Name: John Sykes Title: Vice President Congress Financial Corp. By: /s/ Thomas A. Martin ------------------------------- Name: Thomas A. Martin Title: Vice President [Signature Page to Amended and Restated Credit Agreement] Heller Financial, Inc. By: /s/ Alfred Scoyni -------------------------------- Name: Alfred Scoyni Title: Vice President The Provident Bank By: /s/ Marshall M. Stuart -------------------------------- Name: Marshall M. Stuart Title: Vice President [Signature Page to Amended and Restated Credit Agreement]