rental to be paid in the manner and at the rates provided in subdivision (1) of Article A hereof; and

(3) Pay to the lessor a royalty of 5 cents per long ton upon all limestone removed by the lessee or its agents from the said Waco limestone quarry, such payments to be made on or before the 10th day of each month for the quantity of such limestone so removed during the preceding month.

C. The lessor covenants and agrees to maintain and keep in repair (as determined by said Secretary of War, subject to the provisions of article N hereof) said dams and locks. The operation of said locks shall be exclusively that of the lessor and the lessee shall not be responsible for any loss, damage or injury resulting from faulty design or construction of the dams, their gates and locks, or negligent operation of said locks. In the event the lessor fails to maintain and keep in repair said dams and locks, the lessee may, upon giving notice to the lessor, make any and all necessary repairs to said dams and locks at the cost and expense of the lessor, and the lessee may deduct and retain out of the payments to be made by it by way of rental hereunder all such sums as it shall pay on account of said repairs. The lessee covenants and agrees to maintain and keep in repair the spillway gates and power houses (substructures and superstructures) and the machinery and appliances appurtenant to the power houses, and the operation thereof shall be exclusively that of the lessee and the lessor shall not be responsible for any loss, damage, or injury resulting from negligent operation thereof. The lessee further covenants and agrees to comply with and observe all local sanitary laws and regulations in respect to its operation of said power developments. In the event the lessee at any time during the term of this lease, fails to maintain and keep in repair the spillway gates and power houses (substructures and superstructures) and the machinery and appliances appurtenant to the power houses, the lessor may, upon giving notice to the lessee, make any and all necessary repairs to such spillway gates, power houses, machinery and appliances, at the cost and expense of the lessee, which the lessee covenants and agrees to pay promptly. D. The lessor for the purposes of navigation improvement, National defense, and to secure the maximum production of fertilizers at Muscle Shoals in time of peace, covenants and agrees to acquire and construct with reasonable promptness the dam generally known and designated as Dam Numbered 3 and described in paragraph (2) of the granting clauses hereof, with the lands, water rights, privileges, power house, structures, fixtures, apparatus, and facilities necessary for the construction, operation, and maintenance of the same as hereinafter provided, and to complete the same within eight years from the date hereof. Said dam shall be of such dimensions and specifications, and have a power house and such installations and equipment for the generation of electric power, as will take full reasonable advantage of the flow and fall of the Tennessee River for utilization of the water power of said river to the best advantage thereof in view of the other water-power developments that may be located on said river and/or its tributaries, as determined by said Secretary of War; and the said dam shall not be constructed in such a way as will materially impair or detract from the use and enjoyment by the lessee of the other properties, or any of them, demised to it by this lease. The total of the sums expended by the lessor in the acquisition and construction of the properties described in paragraph (2) of the granting clauses hereof shall be deemed to be, for the purpose of calculating the payments to be made by the lessee under Article A hereof, the sums actually so expended, but not exceeding $32,500,000 (including the locks and navigation facilities), unless such amount be increased by mutual agreement between said Secretary of War and the lessee.

E. In order to secure the purposes of the lessor as respects national defense the lessee covenants and agrees

(1) To maintain during the term of this lease said United States nitrate plant numbered 2 in at least the equivalent of the condition (except that the lessee may remove limestone from said Waco Quarry upon payment of the royalty as hereinabove provided) in which it shall be turned over to the lessee at the commencement of the lease term in respect of effective capacity for manufacture of ammonium nitrate, available in suitable buildings, until such time as the Congress of the United States shall declare that such maintenance is no longer deemed necessary in the interest of national defense;

(2) To maintain during the term of this lease the buildings of said United States nitrate plant numbered 1 in the condition (ordinary and reasonable wear and tear and damage by force majeure excepted) in which they shall be turned over to the lessee at the commencement of the lease term, but the lessee shall have the right during the lease term to alter and remodel such buildings and to remove, remodel,

substitute, and alter the machinery and equipment contained therein, and upon removal of any such machinery or equipment the lessee shall give written notice of such removal to the Secretary of War, which notice shall state the place upon the land of nitrate plant numbered 1 at which such machinery or equipment is held for delivery to the Secretary of War. If the Secretary of War fails to take possession of such machinery or equipment and to remove the same from the leased premises within 90 days from receipt by him of such notice then the lessee shall store such machinery or equipment in such manner as, in the option of the lessee, is most practicable; (3) Upon demand of the President of the United States, to surrender, whenever war exists, or whenever in his judgment it is imminent and the needs of national defense require, the leased properties, in whole or in part, to the lessor for its war uses during the period of such emergency, upon such just and reasonable compensation to the lessee by way of suspension of payments or obligations hereunder and/or otherwise, as may be fixed and determined by the District Court of the United States for the Northern District of Alabama in accordance with the provisions of Article N hereof; the leased properties to be returned to the lessee upon the termination of the emergency in at least the equivalent of their condition when so surrendered: Provided, That the lessee shall in no way be responsible for any loss, deterioration, damage, or injury of or to person or property, whether or not resulting in death, occurring by reason of such possession and/or use of the surrendered properties during the period of such surrender; and

(4) At all times after the third year of the lease term, to the end that operation in case of war shall be under the direction of a trained force, to retain in its employ at least one competent superintendent and one or more competent foremen of each manufacturing department of said United States nitrate plant numbered 2 for fixation of atmospheric nitrogen, or employ substitutes therefor, until such time as the Secretary of War shall certify in writing that continued maintenance of such force is not deemed necessary in the interest of national defense.

F. In order to secure the purposes of the lessor in respect of the utilization of the demised properties in times of peace for the fixation of atmospheric nitrogen and the production of a concentrated fertilizer and its sale to farmers in the United States at reasonable prices, the lessee covenants and agrees that it will-(1) Produce or cause to be produced at said United States nitrate plant numbered 2 and/or, at the option of the lessee, at such other plants or plants adjacent at or near thereto as it may construct, using the most economical source of power available (such other plant or plants, if any, to be constructed on property owned by the lessor or on property acquired by the lessee and by it conveyed to the lessor prior to such construction, and any such property to become and be, ipso facto and without any further conveyance or assignment, a part of the properties demised by this lease and, as such, subject to all the applicable terms and provisions of this lease for and during the balance of the unexpired said term of fifty (50) years hereinabove mentioned and described, as fully and completely as though specifically leased and demised by this lease), and/or said United States nitrate plant numbered 1, ammonium phosphate or other nitrogeous concentrated fertilizer suitable for use by the farmers both through direct application to the soil and through home-mixing, and containing at least 40 per centum by weight of plant food in the form of ammonia and/or phosphoric acid and/or potash. The production of such concentrated fertilizer will be commenced at said United States nitrate plant numbered 2 by using the cyanamid process. Before the expiration of the second year of the lease term the lessee will make such alterations as are found necessary by the lessee upon inspection and test of the said nitrate plant and will build, on the lands of the lessor, the necessary phosphoric acid and ammonium phosphate plants to produce annually a quantity of such concentrated fertilizer containing not less than ten thousand net tons of fixed nitrogen and not less than forty thousand net tons of plant food in the form of ammonia and/or phosphoric acid and/or potash. The terms "net tons" as used in this article is hereby defined to mean tons of two thousand pounds each. The first unit of the plant for production of such concentrated fertilizer will be operated at full capacity not later than in the third year of the lease term and the product will be offered for sale in the manner hereinafter provided. At any time thereafter when the lessee has for three successive fiscal years succeeded in selling approximately the full product of such first unit at cost plus 8 per centum (as provided in subdivision (2) of this article) the lessee will, upon written request of the farmer board hereinafter described, provide and place in operation a second unit of sufficient size so that there shall be then a total capacity for annual production of such concentrated fertilizer containing at least twenty thousand net tons of fixed nitrogen and at least eighty thousand net tons of plant food in the

form of ammonia and/or phosphoric acid and/or potash. When at any time thereafter the lessee has for three successive fiscal years succeeded in selling approximately the combined full product of such first two units at cost plus 8 per centum (as provided in subdivision (2) of this article) the lessee will, subject to the provisions of Article T hereof, upon written request of the said farmer board, provide and place in operation a third unit of sufficient size so that there shall be then a total capacity for annual production of such concentrated fertilizer containing at least thirty thousand net tons of fixed nitrogen. At any time thereafter when the lessee has for three successive fiscal years succeeded in selling approximately the combined full product of such first three units at cost plus 8 per centum (as provided in subdivision (2) of this article) the lessee will, upon request of said farmer board, provide and place in operation a fourth unit of sufficient size so that there shall be then a total capacity for annual production of such concentrated fertilizer containing at least forty thousand net tons of fixed nitrogen. At any time thereafter when the lessee has for three successive fiscal years succeeded in selling approximately the combined full product of such first four units at cost plus 8 per centum (as provided in subdivision (2) of this article) the lessee will, upon request of the farmer board, increase the annual production of fixed nitrogen to fifty thousand net tons, the amount of such annual production in excess of said forty thousand net tons of fixed nitrogen to be produced in the form of such concentrated fertilizer or, at the option of the lessee, in the form of nitrogenous fertilizer containing at least 30 per centum by weight of plant food in the form of ammonia and/or phosphoric acid and/or potash, and to be offered for sale under the provisions of subdivision (2) of this article. The lessee throughout the term of this lease will annually produce a quantity of such concentrated fertilizer equal to the plant capacity for such production as the same shall exist from time to time as above stated, except when the nitrogen is required for national defense or when satisfaction of market demands is insured through the maintenance in storage of an unsold quantity of such concentrated fertilizers equal to at least 25 per centum of the annual capacity of said first unit. Provided, That whenever said stock in storage shall fall below said 25 per centum such production shall be resumed. Such concentrated fertilizer so maintained in storage shall be in the form of ammonium phosphate unless upon written request of the lessee the farmer board hereinafter described shall approve such concentrated fertilizer so maintained in storage being in some other form, such approval to be evidenced by a resolution of said farmer board to be made a part of the record of its proceedings hereinafter provided for. Nothing herein contained shall deprive the lessee of the privilege of anticipating from time to time the production of, and the increases above mentioned in plant capacity for production of, such concentrated fertilizers.

If at any time during the term of this lease the lessee shall suspend the production of such concentrated fertilizer, no profit shall accrue to the lessee from the sale of power made available to it through such suspension, for any period for which the lessee shall not be required to pay an additional sum as hereinafter in this subdivision (1) of this article provided, but for and during such period of suspension for which such additional sum shall not be required to be paid all profits from the sale of such power over and above the cost thereof (as provided in subdivision (2) of this article) shall be credited by the lessee to the cost of such concentrated fertilizer (as provided in subdivision (2) of this article); and in case the lessee, its subsidiary and/or allied corporations, shall utilize any power to made available such power so utilized shall be deemed, for the purposes of this provision, to have been sold to the lessee and/or such companies at the fair market value thereof as the same shall be fixed and determined by said farmer board, subject to the provisions of Article N hereof;

If at any time after the completion of Cove Creek Dam and delivery of possession thereof to the lessee under the provisions of Article T hereof, and after fifteen years from the date of delivery of possession to the lessee of the properties described in paragraphs (1), (3), and (4) of the granting clauses hereof, the production of such concentrated fertilizer shall be suspended by the lessee for as much as eighteen months in the aggregate during any period of thirty-six months, the farmer board may, within sixty days after the expiration of such thirty-six months period, upon vote of at least four of its members (not including any member appointed by the lessee), file with the Secretary of War and the lessee a certificate that, in its opinion, similar suspensions are likely to continue for an extended period of time. Thereupon, in addition to all other payments to be made by the lessee to the lessor under the provisions of this lease, the lessee shall pay to the lessor annually within fifteen days after

the end of each fiscal year until the lessee shall elect to resume and shall resume production as hereinafter provided, a sum at an annual rate to be determined as hereinafter provided, such additional payments to be applied by the United States Treasury to amortization of the war investment of the United States at or near Muscle Shoals and/or to such objects as will, in the determination of Congress, promote the development of agriculture in the United States and/or such other purposes as the Congress may from time to time designate: Provided, however, That such additional annual payments shall not commence to accrue until thirty days after said certificate shall have been filed with the lessee. From and after the filing with the lessee of the aforesaid certificate of said farmer board all the provisions of this Article F, except those of this and the next succeeding paragraph, shall ipso facto terminate and the lessee shall be relieved from all its obligations under this lease relating to the production of concentrated fertilizer and the building and providing of plants therefor on the leased premises. If, however, by reason of change in market conditions or improvements in processes or otherwise, the lessee, in its discretion, shall determine that the resumption of the production of such concentrated fertilizer is commercially feasible it may, at its option, elect to revive the provisions of this Article F and to resume such production, upon filing with the Secretary of War a written notice of such election. Immediately upon the resumption of such production, following the filing of such notice of election, the provisions of this Article F and the aforesaid obligations of the lessee shall be revived, but the additional payments hereinabove provided for shall cease to accrue in favor of the lessor. The provisions of this paragraph shall likewise apply to any similar suspension of production subsequent to such resumption. The provisions of this and the next succeeding paragraph shall not operate in any way to reduce any payments deferred until after the thirty-fifth year of the lease as provided in Article A, subsection (1), subdivision (b), and Article A, subsection (2), subdivision (b).

The amount of the additional payment hereinabove provided for shall be determined as follows: Within fifteen days from the filing by said farmer board of the aforesaid certificate the Secretary of War and the lessee shall each notify the other in writing of the name and address of a person designated by him or it to act as arbitrator and said two arbitrators shall, within fifteen days after being notified in writing of their designation, designate a third arbitrator. The three arbitrators when designated shall promptly fix a time and place for the hearing, and after hearing the proofs and arguments of the parties, shall, with all reasonable speed, determine a total sum which in their opinion, under all the circumstances, is the fair annual rental value of the demised premises, less all sums paid by the lessee by way of rental: Provided, however, That said total sum (including the additional payment to be made) so determined shall in no event be less than an amount equal to 4 per centum, nor greater than an amount equal to 5 per centum, interest on the amounts on which the payment of rental by way of interest is provided in Article A, subsection (1), subdivision (a); Article A, subsection (2), subdivision (a); and Article T, subsection (a), subject to the proviso thereto. The additional payments hereinabove provided for shall be at the rate of annual payments equal to the amount by which the total sum determined as above provided exceeds the aggregate amounts provided to be paid as rental by way of interest in Article A, subsection (1), subdivision (a); Article A, subsection (2), subdivision (a); and Article T, subsection (a), subject to the proviso thereto. The arbitrators shall notify the Secretary of War and the lessee in writing of their determination, and such determination, when signed by any two of the arbitrators, shall be final and conclusive upon all parties concerned. In the event that any of the arbitrators shall not be designated in the manner and within the time hereinabove fixed, such arbitrator or arbitrators shall upon the application of the Secretary of War or of the lessee, be designated by the District Court of the United States for the Northern District of Alabama, which is hereby given jurisdiction for that purpose.

(2) Such concentrated fertilizer will be offered for sale to farmers and other consumers in the United States at a maximum selling price free on board factory consisting of the fair actual cost (as hereinafter defined) of manufacture and sale, plus 8 per centum thereof. Such cost shall include

(a) All expenses incurred in and/or properly incident to the manufacture and sale of such concentrated fertilizer, including the cost (as hereinafter defined) of power used in such manufacture.

It shall be understood and agreed that in determining cost there shall be deducted any discounts, rebates, or refunds accruing in connection with the concentrated fertilizer business, any miscellaneous receipts from sale of scrap or residue produced in the operation of the concentrated fertilizer business, and the market value, if any, as raw materials before any subsequent processing

thereof, of any by-products produced in the course of the manufacture of such concentrated fertilizer and sold either as such raw materials or after further processing.

It shall be understood and agreed that the lessee shall have the right to purchase, for the manufacture of such concentrated fertilizer, materials, supplies and/or equipment not reasonably capable of being produced at either of said nitrate plants, from American Cyanamid Company, a corporation organized and existing under and by virtue of the laws of the State of Maine, its subsidiary and/or allied companies, at the fair market price thereof, provided said price shall have been approved, subject to the provisions of Article N hereof, by resolution of said farmer board.

(b) Fire, liability, and any other insurance.

(c) Taxes (except Federal income and profit taxes).

(d) Any expenses for research ordered by said farmer bord (as provided in subdivision (4) of this article).

(e) All expenses of administation of the concentrated fertilizer business, including legal expenses properly inidental thereto.

(f) All expenses of maintenance of such part of said nitrate plants, or either of them, as shall be utilized in the manufacture of such concentrated fertilizer. (g) Depreciation and obsolescence at the rate of 10 per centum per annum of the lessee's total expenditures and expenses for construction and/or installation and/or acquisition of buildings and equipment used in the manufacture of such concentrated fertilizer and for acquisition, construction, and/or installation of property for the replacement of presently existing property hereafter used in such manufacture and for any additions, extensions, and/or betterments that may be made from time to time to any property used in such manufacture either existing at the date hereof or which may subsequently be constructed and/or acquired, all such buildings and equipment becoming the property of the lessor pursuant to the provisions of subdivision (2) of article H hereof on the termination of the lease.

It shall be understood and agreed that as a part of such total expenditures and expenses there shall be included interest at the rate of 6 per centum per annum during construction upon monthly balances of expenditures for construction.

It shall be understood and agreed that at not time shall the reserve for accrued depreciation and obsolescence over and above the total of expenditures made therefrom for renewals and replacements of the buildings and equipment provided at the expense of the lessee exceed the total original cost of all the properties depreciated, and that no depreciation or obsolsecence whatever shall be charged in respect of the property built and provided at the cost and expense of the lessor. If any part of the reserve for accrued depreciation and obsolescene be withdrawn from the concentrated fertilizer business, such part so withdrawn shall cease, from the date of such withdrawal, to be considered as capital invested in the concentrated fertilizer business for the purpose of computing interest on the capital invested in such concentrated fertilizer business.

(h) Interest at the rate of 6 per centum per annum on capital invested in the concentrated-fertilizer business, except balances of expenditures for construction on which interest has hereinbefore been provided for and except borrowed money. It shall be understood and agreed that the lessee shal keep departmental accounts which shall at all times show the proportion of its capital invested in such concentrated-fertilizer business, and any expense incurred for the joint benefit of the concentrated-fertilizer business and any other business or businesses of the lessee or of its parent corporation or of its subsidiary or allied corporations shall be equitably apportioned among them.

(i) Interest actually paid (from which shall be deducted interest earned on bank balances) on money borrowed by the lessee and used or held for the purposes of such concentrated-fertilizer business, the gross interest on such borrowed money not to exceed 6 per centum per annum.

(j) Cost of the farmer board and its members as provided in subdivision (6) of this article.

(k) Unless otherwise provided for in, or precluded by, specific provisions of this lease, any expenditure made or obligation incurred, at fair current prices, for the specific purpose of performing the acts and things required to be performed by the lessee in connection with the preparation for manufacture, manufacture of, storage, distribution, and sale of such concentrated fertilizer under this lease, which the accountants hereinafter provided for shall certify to have been reasonably necessary, as of the time incurred, in connection with such performance, shall be considered items of cost.