AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TERRA NITROGEN, LIMITED PARTNERSHIP

Exhibit 10.3

 

 

A MENDED AND R ESTATED

 

A GREEMENT OF L IMITED P ARTNERSHIP

 

OF

 

T ERRA N ITROGEN , L IMITED P ARTNERSHIP

 

TABLE OF CONTENTS

 

 

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AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF

TERRA NITROGEN, LIMITED PARTNERSHIP

 

This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TERRA NITROGEN, LIMITED PARTNERSHIP, dated as of September 1, 2005, is entered into by and among Terra Nitrogen Corporation, a Delaware corporation (“TNC”), as General Partner and Limited Partner and Terra Nitrogen Company, L.P., a Delaware limited partnership, as Limited Partner. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows:

 

RECITALS:

 

WHEREAS, TNC and the Organizational Limited Partner organized the Partnership as a Delaware limited partnership pursuant to an Agreement of Limited Partnership dated as of December 4, 1991 (the “Original Agreement”); and

 

WHEREAS, the Partnership, the Investor Partnership and the General Partner have entered into a Reorganization Agreement, dated as of the date hereof (the “Reorganization Agreement”), providing for the change of a portion of the General Partner’s interest in the Partnership into a limited partner interest; and

 

WHEREAS, in order to effect the transactions contemplated by the Reorganization Agreement, it is necessary to amend this Agreement as provided herein; and

 

NOW, THEREFORE, the Investor Partnership and General Partner hereby amend and restate the Original Agreement in its entirety as follows:

 

ARTICLE I

 

ORGANIZATIONAL MATTERS

 

Section 1.1

Formation and Continuation

 

The General Partner and the Organizational Limited Partner previously formed this Partnership as a limited partnership pursuant to the provisions of the Delaware Act. The General Partner and Investor Partnership hereby amend and restate the Original Agreement in its entirety to continue the Partnership as a limited partnership pursuant to the provisions of the Delaware Act and to set forth the rights and obligations of the Partners and certain matters related thereto. This amendment and restatement shall become effective on the date of this Agreement. Except as expressly provided to the contrary in this Agreement, the rights and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Act. The Partnership Interest of each Partner shall be personal property for all purposes.

 

Section 1.2

Name

 

The name of the Partnership is “Terra Nitrogen, Limited Partnership.” The Partnership’s business may be conducted under any other name or names deemed necessary or appropriate by

the General Partner, including, without limitation, the name of the General Partner or any Affiliate thereof. The words “Limited Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole discretion may change the name of the Partnership at any time and from time to time and shall notify each Limited Partner of such change in the next regular communication to the Limited Partners.

 

Section 1.3

Registered Office; Principal Office

 

Unless and until changed by the General Partner, the registered office of the Partnership in the State of Delaware shall be located at The Corporation Trust Center, 1209 Orange Street, New Castle County, Wilmington, Delaware 19801 and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership and the address of the General Partner shall be Terra Centre, 600 Fourth Street, Sioux City, Iowa, 51102, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.

 

Section 1.4

Power of Attorney

 

(a) Each Limited Partner hereby constitutes and appoints each of the General Partner and, if a Liquidator shall have been selected pursuant to Section 13.3, the Liquidator severally (and any successor to either thereof by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to:

 

(i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate of Limited Partnership and all amendments or restatements thereof) that the General Partner or the Liquidator deems necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator deems necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including, without limitation, conveyances and a certificate of cancellation) that the General Partner or the Liquidator deems necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described

 

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in, Article X, XI, XII or XIII or the Capital Contribution of any Partner; and (E) all certificates, documents and other instruments (including, without limitation, agreements and a certificate of merger) relating to a merger or consolidation of the Partnership pursuant to Article XV; and

 

(ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates and other instruments necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or is necessary or appropriate, in the sole discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided that when the consent or approval of the Limited Partners is required by any provision of this Agreement, the General Partner or the Liquidator may exercise the power of attorney made in this Section 1.4(a)(ii) only after the necessary consent or approval of the Limited Partners.

 

Nothing contained in this Section 1.4 shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XIV, or as may be otherwise expressly provided for in this Agreement.

 

(b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of the Limited Partner and the transfer of all or any portion of such Limited Partner’s Partnership Interest and shall extend to such Limited Partner’s heirs, successors, assigns and personal representatives. The Limited Partners hereby agree to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and the Limited Partners hereby waive any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner shall execute and deliver to the General Partner or the Liquidator, within fifteen days after receipt of the General Partner’s or the Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership.

 

Section 1.5

Term

 

The Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until the close of Partnership business on December 31, 2041, or until the earlier termination of the Partnership in accordance with the provisions of Article XIII.

 

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ARTICLE II

 

DEFINITIONS

 

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

 

“ Adjusted Capital Account ” means the Capital Account maintained for each Partner as of the end of each taxable year of the Partnership (a) increased by any amounts that such Partner is obligated to restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), and (b) decreased by (i) the amount of all losses and deductions that, as of the end of such taxable year, are reasonably expected to be allocated to such Partner in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii),and (ii) the amount of all distributions that, as of the end of such taxable year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner’s Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases as a result of a minimum gain chargeback pursuant to Sections 5.1(d)(i) or 5.1(d)(ii) hereof). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704-(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

“ Adjusted Property ” means any property the Carrying Value of which has been adjusted pursuant to Sections 4.6(d)(i) or 4.6(d)(ii).

 

“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, the Person in question.

 

“ Agreed Allocation ” means any allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of Section 5.1 including, without limitation, a Curative Allocation (if appropriate to the context in which the term “Agreed Allocation” is used).

 

“ Agreed Value ” of any Contributed Property means the fair market value of such property or other consideration at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt; provided , however , that the Agreed Value of any property deemed contributed to the Partnership for federal income tax purposes upon termination and reconstitution thereof pursuant to Section 708 of the Code shall be determined in accordance with Section 4.6(c). Subject to Section 4.6(c), the General Partner shall, in its sole discretion, use such method as it deems reasonable and appropriate to allocate the aggregate Agreed Value of Contributed Properties conveyed to the Partnership in a single or integrated transaction among each separate property on a basis proportional to the fair market value of each Contributed Property.

 

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“ Agreement ” means this Amended and Restated Agreement of Limited Partnership of Terra Nitrogen, Limited Partnership, as it may be amended, supplemented or restated from time to time.

 

“ Available Cash ” means, with respect to any calendar quarter, (i) the sum of (A) all cash receipts of the Partnership during such quarter from all sources and (B) any reduction in reserves established in prior quarters, less (ii) the sum of (aa) all cash disbursements of the Partnership during such quarter (excluding cash distributions to Partners, but including, for example, disbursements for taxes of the Partnership as an entity, debt service and capital expenditures) and (bb) any reserves established in such quarter in such amounts as the General Partner determines to be necessary or appropriate in its reasonable discretion (x) to provide for the proper conduct of the business of the Partnership (including reserves for future capital expenditures) or (y) to provide funds for distributions with respect to any of the next four calendar quarters and (cc) any other reserves established in such quarter in such amounts as the General Partner determines in its reasonable discretion to be necessary because the distribution of such amounts would be prohibited by applicable law or by any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Partnership is a party or by which it is bound or its assets are subject. Taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners shall not be considered cash disbursements of the Partnership which reduce “Available Cash,” but the payment or withholding thereof shall be deemed to be a distribution of Available Cash to such Partners. Alternatively, in the discretion of the General Partner, such taxes (if pertaining to all Partners) may be considered to be cash disbursements of the Partnership which reduce “Available Cash,” but the payment or withholding thereof shall not be deemed to be a distribution of Available Cash to such Partners. Notwithstanding the foregoing, “Available Cash” shall not include any cash receipts or reductions in reserves or take into account any disbursements made or reserves established after commencement of the dissolution and liquidation of the Partnership.

 

“ Book-Tax Disparity ” means with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner’s share of the Partnership’s Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner’s Capital Account balance as maintained pursuant to Section 4.6 and the hypothetical balance of such Partner’s Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles.

 

“ Capital Account ” means the capital account maintained for a Partner pursuant to Section 4.6.

 

“ Capital Contribution ” means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership pursuant to Sections 4.1, 4.2, 4.3 or 4.6(c).

 

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“ Carrying Value ” means (a) with respect to a Contributed Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, amortization and cost recovery deductions charged to the Partners’ Capital Accounts, and (b) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Sections 4.6(d)(i) and 4.6(d)(ii) and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner.

 

“ Certificate of Limited Partnership ” means the Certificate of Limited Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 6.2 hereof, as such Certificate may be amended and/or restated from time to time.

 

“ Closing Date ” means the date on which the “First Closing Date” occurs as such term is defined in the Underwriting Agreement.

 

“ Code ” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

 

“ Common Unit ” has the meaning assigned to such term in the Investor Partnership Agreement.

 

“ Contributed Property ” means each property or other asset, in such form as may be permitted by the Delaware Act, but excluding cash, contributed to the Partnership (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 4.6(d)(i), such property shall no longer constitute a Contributed Property, but shall be deemed an Adjusted Property.

 

“ Contributing Partner ” means each Partner contributing (or deemed to have contributed on termination and reconstitution of the Partnership pursuant to Section 708 of the Code or otherwise) a Contributed Property.

 

“ Conveyance Agreement ” means the Conveyance Agreement dated as of December 4, 1991, among Agricultural Minerals Corporation (predecessor to TNC), the Investor Partnership and the Partnership.

 

“ Curative Allocation ” means any allocation of an item of income, gain, deduction, loss or credit pursuant to the provisions of Section 5.1(d)(ix).

 

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“ Delaware Act ” means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §17-101, et seq ., as amended, supplemented or restated from time to time, and any successor to such statute.

 

“ Departing Partner ” means a former General Partner, from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Sections 12.1 or 12.2.

 

“ Economic Risk of Loss ” has the meaning set forth in Treasury Regulation Section 1.752-2(a).

 

“ Event of Withdrawal ” has the meaning assigned to such term in Section 12.1(a).

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time, and any successor to such statute.

 

“General Partner” means Terra Nitrogen Corporation, a Delaware corporation, and its successors as general partner and manager of the Partnership.

 

“ General Partner Equity Value ” means, as of any date of determination, the fair market value of the General Partner’s Partnership Interest, as determined by the General Partner using whatever reasonable method of valuation it may adopt.

 

“ GP Reorganization Agreement ” means the Reorganization Agreement, dated as of                      , 2005, among the Investor Partnership, the Partnership and the General Partner.

 

“ Indemnitee ” means the General Partner, any Departing Partner, any Person who is or was an Affiliate of the General Partner or any Departing Partner, any Person who is or was a member, fiduciary, trustee, officer, director, employee, partner or agent of the General Partner or any Departing Partner or any such Affiliate, or any Person who is or was serving at the request of the General Partner or any Departing Partner or any such Affiliate as a director, fiduciary, trustee officer, employee, partner, member or agent of another corporation, partnership, joint venture, trust, committee or other enterprise; provided, that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services.

 

“ Initial Offering ” means the initial offering of Senior Preference Units to the public, as described in the Registration Statement.

 

“ Investor Partnership ” means Terra Nitrogen Company, L.P., a Delaware limited partnership.

 

“ Investor Partnership Agreement ” means the Amended and Restated Agreement of Limited Partnership of the Investor Partnership.

 

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“ Junior Preference Unit ” has the meaning assigned to such term in the Investor Partnership Agreement.

 

“ Limited Partner ” means the Reorganization Limited Partner, the Investor Partnership, each Substituted Limited Partner, if any, and each other Person, if any, that is admitted to the Partnership as a limited partner pursuant to Section 11.1 and that is shown as a limited partner on the books and records of the Partnership.

 

“ Limited Partner Equity Value ” means, as of any date of determination, the fair market value of the Limited Partners’ Percentage Interest, as determined by the General Partner using whatever reasonable method of valuation it may adopt.

 

“ Liquidator ” means the General Partner or other Person approved pursuant to Section 13.3 who performs the functions described therein.

 

“ Merger Agreement ” has the meaning assigned to such term in Section 15.1.

 

“ National Securities Exchange ” means an exchange registered with the Securities and Exchange Commission under Section 6(a) of the Exchange Act.

 

“ Net Agreed Value ” means, (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed, and (b) in the case of any property distributed to a Partner by the Partnership, the Partnership’s Carrying Value of such property (as adjusted pursuant to Section 4.6(d)(ii)) at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution, in either case, as determined under Section 752 of the Code.

 

“ Net Income ” means, for any taxable period, the excess, if any, of the Partnership’s items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership’s items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Section 4.6(b) and shall not include any items allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to a Required Allocation or a Curative Allocation, the applicable Net Income or Net Loss shall be recomputed without regard to such item.

 

“ Net Loss ” means, for any taxable period, the excess, if any, of the Partnership’s items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership’s items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Loss shall be determined in

 

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accordance with Section 4.6(b) and shall not include any items allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to a Required Allocation or a Curative Allocation, the applicable Net Income or Net Loss shall be recomputed without regard to such item.

 

“ Net Termination Gain ” means, for any taxable period, the sum, if positive, of all items of income, gain or loss recognized by the Partnership from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Gain shall be determined in accordance with Section 4.6(b) and shall not include any items of income, gain or loss allocated under Section 5.1(d). Once an item of income, gain or loss that has been included in the initial computation of Net Termination Gain is subjected to a Required Allocation or a Curative Allocation, the applicable Net Termination Gain or Net Termination Loss shall be recomputed without regard to such item.

 

“ Net Termination Loss ” means, for any taxable period, the sum, if negative, of all items of income, gain or loss recognized by the Partnership from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Loss shall be determined in accordance with Section 4.6(b) and shall not include any items of income, gain or loss allocated under Section 5.1(d). Once an item of gain or loss that has been included in the initial computation of Net Termination Loss is subjected to a Required Allocation or a Curative Allocation, the applicable Net Termination Gain or Net Termination Loss shall be recomputed without regard to such item.

 

“ Nonrecourse Built-in Gain ” means, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Sections 5.2(b)(i)(A), 5.2(b)(ii)(A) or 5.2(b)(iii) if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration.

 

“ Nonrecourse Deductions ” means any and all items of loss, deduction or expenditure (described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-2(b), are attributable to a Nonrecourse Liability.

 

“ Nonrecourse Liability ” has the meaning set forth in Treasury Regulation Section 1.752-1(a)(2).

 

“ Opinion of Counsel ” means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner) acceptable to the General Partner.

 

“ Organizational Limited Partner ” means AMC Holdings Inc., a Delaware corporation, in its capacity as the organizational limited partner of the Partnership pursuant to the Original Agreement.

 

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“ Original Agreement ” has the meaning assigned to such term in the Recitals to this Agreement.

 

“ Outstanding ” means all Partnership Interests that are issued by the Partnership and reflected as outstanding on the Partnership’s books and records as of the date of determination and includes Partnership Interests held by the General Partner and its Affiliates.

 

“ Partner ” means the General Partner and each Limited Partner.

 

“ Partner Nonrecourse Debt ” has the meaning set forth in Treasury Regulation Section 1.704-2(b)(4).

 

“ Partner Nonrecourse Debt Minimum Gain ” has the meaning set forth in Treasury Regulation Section 1.704-2(i)(2).

 

“ Partner Nonrecourse Deductions ” means any and all items of loss, deduction or expenditure (including any expenditure described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-2(i), are attributable to a Partner Nonrecourse Debt.

 

“ Partnership ” means Terra Nitrogen, Limited Partnership, a Delaware limited partnership, and any successor thereto.

 

“ Partnership Assets ” means all assets of the Partnership whether tangible or intangible and whether real, personal or mixed.

 

“ Partnership Inception ” means the Closing Date.

 

“ Partnership Interest ” means the interest of a Partner in the Partnership.

 

“ Partnership Minimum Gain ” means the amount determined in accordance with the principles of Treasury Regulation Section 1.704-2(d).

 

“ Partnership Year ” means the taxable year of the Partnership, which shall be the calendar year.

 

“ Percentage Interest ” means as of the date of such determination (a) as to the General Partner, 0.025%, (b) as to the Investor Partnership, 99% and (b) as to the Reorganization Limited Partner, 0.975%; provided, however, that following any additional Capital Contribution by the Limited Partner in accordance with Section 4.4 hereof, proper adjustment shall be made to the Percentage Interests of the General Partner and the Limited Partners, if necessary.

 

“ Person ” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association or other entity.

 

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“ Recapture Income ” means any gain recognized by the Partnership (computed without regard to any adjustment required by Section 734 or 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset.

 

“ Record Holder ” has the meaning assigned to such term in the Investor Partnership Agreement.

 

“ Registration Statement ” means the Registration Statement on Form S-1 (Registration No. 33-43007), as it has been and as it may be amended or supplemented from time to time, filed by the Investor Partnership with the Securities and Exchange Commission under the Securities Act to register the offering and sale of the Senior Preference Units in the Initial Offering.

 

“ Reorganization Limited Partner ” means Terra Nitrogen Corporation, as holder of the 0.975% limited partner interest obtained in the change provided by the GP Reorganization Agreement, and any successor to such 0.975% limited partner interest.

 

“ Required Allocations ” means any allocation (or limitation imposed on any allocation) of an item of income, gain, deduction or loss pursuant to (a) the proviso-clause of Section 5.1(b)(i) or (b) Sections 5.1(d)(i), 5.1(d)(ii), 5.1(d)(iii), 5.1(d)(iv), 5.1(d)(v), 5.1(d)(vi), 5.1(d)(vii) and 5.1(d)(viii), such allocations (or limitations thereon) being directly or indirectly required by the Treasury Regulations promulgated under Section 704(b) of the Code.

 

“ Residual Gain ” or “ Residual Loss ” means any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of a Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Sections 5.2(b)(i)(A) or 5.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities.

 

“ Second Amended and Restated Credit Agreement ” means the Second Amended and Restated Credit Agreement dated as of November 25, 1991, among the Partnership, various lending institutions party thereto and Chemical Bank, as agent.

 

“ Securities Act ” means the Securities Act of 1933, as amended, supplemented or restated from time to time, and any successor to such statute.

 

“ Senior Preference Unit ” has the meaning assigned to such term in the Investor Partnership Agreement.

 

“ Substituted Limited Partner ” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.1 in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership.

 

“ Surviving Business Entity ” has the meaning assigned to such term in Section 15.2(b).

 

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“ Termination Capital Transaction ” means any sale, transfer or other disposition of assets of the Partnership following commencement of the dissolution and liquidation of the Partnership.

 

“ Underwriter ” means each Person named as an underwriter in the Underwriting Agreement who purchased Senior Preference Units pursuant thereto.

 

“ Underwriting Agreement ” means the Underwriting Agreement dated November 26, 1991 among the Underwriters, the Investor Partnership and the General Partner providing for the purchase of Senior Preference Units by such Underwriters.

 

“ Unit ” has the meaning assigned to such term in the Investor Partnership Agreement.

 

“ Unitholder ” means a Person who holds Units.

 

“ Unrealized Gain ” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under Section 4.6(d)) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.6(d) as of such date).

 

“ Unrealized Loss ” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.6(d) as of such date) over (b) the fair market value of such property as of such date (as determined under Section 4.6(d)).

 

ARTICLE III

 

PURPOSE

 

Section 3.1

Purpose and Business

 

The purpose and nature of the business to be conducted by the Partnership shall be (i) to engage directly in, or to enter into any partnership, joint venture or similar arrangement to engage in, the production and distribution of nitrogen fertilizers and any activities necessarily incidental or ancillary thereto and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity, (ii) to provide general and administrative services to its Affiliates and (iii) to do anything necessary or appropriate to the foregoing.

 

Section 3.2

Powers

 

The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described in Section 3.1 and for the protection and benefit of the Partnership.

 

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ARTICLE IV

 

CAPITAL CONTRIBUTIONS

 

Section 4.1

Organizational Contributions and Return

 

To form the Partnership under the Delaware Act, the General Partner made an initial Capital Contribution and was admitted as the general partner of the Partnership, and the Organizational Limited Partner made an initial Capital Contribution to the Partnership and was admitted as a limited partner of the Partnership.

 

As of the Closing Date, after giving effect to the transactions contemplated by Section 4.2, the interest in the Partnership of the Organizational Limited Partner was terminated, the Capital Contribution by the General Partner and the Capital Contribution by the Organizational Limited Partner as initial Capital Contributions were refunded and the Organizational Limited Partner withdrew as a limited partner of the Partnership. 98/99ths of any interest or other profit that may have resulted from the investment or other use of such initial Capital Contributions was allocated and distributed to the Organizational Limited Partner, and the balance thereof was allocated and distributed to the General Partner.

 

Section 4.2

Contributions by the General Partner and the Investor Partnership

 

(a) On the Closing Date, the General Partner, as more fully provided in the Conveyance Agreement, conveyed, contributed and delivered to the Partnership, as a Capital Contribution, substantially all of its assets (exclusive of certain cash and certain assets necessary to provide general and administrative services to its Affiliates) in exchange for (i) a Partnership Interest as general partner in the Partnership representing an approximate 1.5875% general partner interest, (ii) a Partnership Interest as limited partner in the Partnership representing an approximate 98.4125% limited partner interest and (iii) the Partnership’s assumption of, or taking of assets subject to, certain indebtedness and other liabilities.

 

(b) On the Closing Date, as more fully provided in the Conveyance Agreement, the Investor Partnership conveyed, contributed and delivered to the Partnership as a Capital Contribution the net proceeds from the sale of the Senior Preference Units pursuant to the Underwriting Agreement, after which the Investor Partnership held a 99% limited partner interest in the Partnership, and the Investor Partnership was be admitted to the Partnership as a limited partner of the Partnership.

 

Section 4.3

Recharacterization of the General Partner Interest and Contribution to the Investor Partnership

 

Pursuant to the Reorganization Agreement the 1% Partnership Interest of the General Partner was changed to, and became, (i) a 0.025% general partner interest in the Partnership and (ii) a 0.975% limited partner interest in the Partnership.

 

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Section 4.4

Additional Capital Contribution by the Investor Partnership

 

The Investor Partnership, with the consent of the General Partner, may, but shall not be obligated to, make additional Capital Contributions to the Partnership. Upon any such Capital Contribution by the Investor Partnership, the General Partner shall be obligated to make an additional Capital Contribution to the Partnership such that the General Partner shall at all times have at least a 0.025% interest in each item of Partnership income, gain, loss, deduction and credit. Upon any such Capital Contribution by the Investor Partnership, the Reorganization Limited Partner shall be obligated to make an additional Capital Contribution to the Partnership such that the Reorganization Limited Partner shall at all times have at least a 0.975% interest in each item of Partnership gain, loss, deduction and credit.

 

Section 4.5

Preemptive Rights

 

The Limited Partners shall have preemptive rights with respect to (a) additional Capital Contributions; (b) issuance or sale of any class or series of Partnership Interests, whether unissued, held in the treasury or hereafter created; (c) issuance of any obligations, evidences of indebtedness or other securities of the Partnership convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase or subscribe to, any such Partnership Interests; (d) issuance of any right of subscription to or right to receive, or any warrant or option for the purchase of, any such Partnership Interests; or (e) issuance or sale of any other securities that may be issued or sold by the Partnership.

 

Section 4.6

Capital Accounts

 

(a) The Partnership shall maintain for each Partner a separate Capital Account in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Partnership pursuant to this Agreement and (ii) all items of Partnership income and gain (including, without limitation, income and gain exempt from tax) computed in accordance with Section 4.6(b) and allocated pursuant to Section 5.1 and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 4.6(b) and allocated pursuant to Section 5.1.

 

(b) For purposes of computing the amount of any item of income, gain, loss or deduction to be reflected in the Partners’ Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including, without limitation, any method of depreciation, cost recovery or amortization used for that purpose) : provided that:

 

(i) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under Section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be

 

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treated as an item of deduction at the time such fees and other expenses are incurred and shall be allocated among the Partners pursuant to Section 5.1.

 

(ii) Except as otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(i)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes.

 

(iii) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership’s Carrying Value with respect to such property as of such date.

 

(iv) In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any Contributed Property shall be determined as if the adjusted basis of such property on the date it was acquired by the Partnership were equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 4.6(d) to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (A) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (B) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided , however , that, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method that the General Partner may adopt.

 

(c) A transferee of a Partnership Interest shall succeed to a pro rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred; provided , however , that, if the transfer causes a termination of the Partnership under Section 708(b)(l)(B) of the Code, the Partnership’s properties shall be deemed to have been distributed in liquidation of the Partnership to the Partners (including any transferee of a Partnership Interest that is a party to the transfer causing such termination) pursuant to Sections 13.3 and 13.4 and recontributed by such Partners in reconstitution of the Partnership. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution pursuant to Section 4.6(d)(ii) and such Carrying Values shall then constitute the Agreed Values of such properties upon such deemed contribution to the reconstituted Partnership. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Section 4.6.

 

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(d) (i) Consistent with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or Contributed Property, the Capital Accounts of all Partners and the Carrying Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to the Partners at such time pursuant to Section 5.1. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to the issuance of Partnership Interests shall be determined by the General Partner using such reasonable method of valuation as it may adopt; provided , however , that the General Partner, in arriving at such valuation, must take into account the Limited Partner Equity Value and the General Partner Equity Value at such time. The General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its sole discretion to be reasonable) to arrive at a fair market value for individual properties.

 

(ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Partner of any Partnership property (other than a distribution of cash that is not in redemption or retirement of a Partnership Interest), the Capital Accounts of all Partners and the Carrying Value of each Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value, and had been allocated to the Partners, at such time, pursuant to Section 5.1. Any Unrealized Gain or Unrealized Loss attributable to such property shall be allocated in the same manner as Net Termination Gain or Net Termination Loss pursuant to Section 5.1(c); provided , however , that, in making any such allocation, Net Termination Gain or Net Termination Loss actually realized shall be allocated first. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including, without limitation, cash or cash equivalents) immediately prior to a distribution shall (A) in the case of a deemed distribution occurring as a result of a termination of the Partnership pursuant to Section 708 of the Code, be determined and allocated in the same manner as that provided in Section 4.6(d)(i) or (B) in the case of a liquidating distribution pursuant to Sections 13.3 or 13.4, be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt.

 

Section 4.7

Interest

 

No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners’ Capital Accounts.

 

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Section 4.8

No Withdrawal

 

No Partner shall be entitled to withdraw any part of its Capital Contributions or its Capital Account or to receive any distribution from the Partnership, except as provided herein.

 

Section 4.9

Loans from Partners

 

Loans by a Partner to the Partnership shall not constitute Capital Contributions. If any Partner shall advance funds to the Partnership in excess of the amounts required hereunder to be contributed by it to the capital of the Partnership, the making of such excess advances shall not result in any increase in the amount of the Capital Account of such Partner. The amount of any such excess advances shall be a debt obligation of the Partnership to such Partner and shall be payable or collectible only out of the Partnership Assets in accordance with the terms and conditions upon which such advances are made.

 

ARTICLE V

 

ALLOCATIONS AND DISTRIBUTIONS

 

Section 5.1

Allocations for Capital Account Purposes

 

For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss and deduction (computed in accordance with Section 4.6(b)) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below.

 

(a) Net Income . After giving effect to the allocations set forth in Section 5.1(d), Net Income for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable period shall be allocated as follows:

 

(i) First , 100% to the General Partner until the aggregate Net Income allocated to the General Partner pursuant to this Section 5.1(a)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the General Partner pursuant to Section 5.1(b)(ii) for all previous taxable years; and

 

(ii) Second , the balance, if any, 100% to the General Partner and Limited Partners in accordance with their respective Percentage Interests.

 

(b) Net Losses . After giving effect to the allocations set forth in Section 5.1(d), Net Losses for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated as follows:

 

(i) First , 100% to the General Partner and the Limited Partners, in accordance with their respective Percentage Interests, provided that Net Losses shall not be allocated

 

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to a Limited Partner pursuant to this Section 5.1(b)(i) to the extent that such allocation would cause such Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); and

 

(ii) Second , the balance, if any, 100% to the General Partner.

 

(c) Net Termination Gains and Losses . After giving effect to the allocations set forth in Section 5.1(d), all items of gain and loss taken into account in computing Net Termination Gain or Net Termination Loss for such taxable period shall be allocated in the same manner as such Net Termination Gain or Net Termination Loss is allocated hereunder. All allocations under this Section 5.1(c) shall be made after Capital Account balances have been adjusted by all other allocations provided under this Section 5.1 and after all distributions of Available Cash provided under Section 5.3 have been made with respect to the taxable period ending on the date of the Partnership’s liquidation pursuant to Section 13.3.

 

(i) If a Net Termination Gain is recognized (or deemed recognized pursuant to Section 4.6(d)) from Termination Capital Transactions, such Net Termination Gain shall be allocated between the General Partner and the Limited Partners in the following manner:

 

(A) First , to each Partner having a deficit balance in such Partner’s Capital Account to the extent of and in the proportion that such deficit balance bears to the total deficit balances in the Capital Accounts of all Partners, until each such Partner has been allocated Net Termination Gain equal to any such deficit balance in such Partner’s Capital Account; and

 

(B) Second , 100% to the General Partner and the Limited Partners, in proportion to their respective Percentage Interests.

 

(ii) If a Net Termination Loss is recognized (or deemed recognized pursuant to Section 4.6(d)) from Termination Capital Transactions, such Net Termination Loss shall be allocated to the Partners in the following manner:

 

(A) First , 100% to the General Partner and the Limited Partners, in accordance with their respective Percentage Interests, provided that Net Termination Losses shall not be allocated to a Limited Partner pursuant to this Section 5.1(c)(ii) to the extent that such allocation would cause such Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); and

 

(B) Second , the balance, if any, 100% to the General Partner.

 

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(d) Special Allocations . Notwithstanding any other provision of this Section 5.1, the following allocations shall be made for such taxable period:

 

(i) Partnership Minimum Gain Chargeback . Notwithstanding any other provision of this Section 5.1, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable period, each Partner shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(f)(b), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For purposes of this Section 5.1(d), each Partner’s Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d) with respect to such taxable period. This Section 5.1(d)(i) is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.

 

(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain . Notwithstanding the other provisions of this Section 5.1 (other than Section 5.1(d)(i)), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership taxable period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provision. For purposes of this Section 5.1(d), each Partner’s Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d), other than Section 5.1(d)(i), with respect to such taxable period. This Section 5.1(d)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation Section 1.704-(2)(i)(4) and shall be interpreted consistently therewith.

 

(iii) Qualified Income Offset . Except as provided in Sections 5.1(d)(i) and 5.1(d)(ii), in the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704-l(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible; provided that an allocation pursuant to this Section 5.1(d)(iii) shall be made only if and to the extent that such Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 5.1 have been tentatively made as if this Section 5.1(d)(iii) were not in this Agreement.

 

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(iv) Gross Income Allocations . In the event any Partner has a deficit balance in its Capital Account at the end of any Partnership taxable period that is in excess of the sum of (A) the amount such Partner is obligated to restore pursuant to any provision of this Agreement and (B) the amount such Partner is deemed to be obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided that an allocation pursuant to this Section 5.1(d)(v) shall be made only if and to the extent that such Partner would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Section 5.1 have been tentatively made as if Section 5.1(d)(iii) and this Section 5.1(d)(iv) were not in this Agreement.

 

(v) Nonrecourse Deductions . Nonrecourse Deductions for any taxable period shall be allocated to the Partners in the same ratios that Net Income or Net Losses, as the case may be, is allocated for the taxable year. If the General Partner determines in its good faith discretion that the Partnership’s Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio to the numerically closest ratio that does satisfy such requirements.

 

(vi) Partner Nonrecourse Deductions . Partner Nonrecourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i). If more than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss.

 

(vii) Nonrecourse Liabilities . For purposes of Treasury Regulation Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests.

 

(viii) Code Section 754 Adjustments . To the extent an adjustment to the adjusted tax basis of any Pa