sc14d9za
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION
STATEMENT UNDER
SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. 1)
Terra Industries Inc.
(Name of Subject
Company)
Terra Industries
Inc.
(Name of Person Filing
Statement)
Common Shares, without par value
(Title of Class of
Securities)
880915103
(CUSIP Number of Class of
Securities)
John W. Huey, Esq.
Vice President, General Counsel and
Corporate Secretary
Terra Industries Inc.
Terra Centre
600 Fourth Street
P.O. Box 6000
Sioux City, Iowa
51102-6000
Telephone:
(712) 277-1340
(Name, address and telephone
numbers of person authorized to receive notices and
communications on behalf of the
persons filing statement)
Copies to:
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Faiza J. Saeed, Esq.
Thomas E. Dunn, Esq.
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Telephone:
(212) 474-1000
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David C. Karp, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telephone: (212) 403-1000
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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TABLE OF CONTENTS
This Amendment No. 1 to
Schedule 14D-9
amends and restates the Solicitation/Recommendation Statement on
Schedule 14D-9
filed with the Securities and Exchange Commission (the
SEC) on March 12, 2010 (as amended and
restated to date, together with any exhibits and annexes
attached hereto, this Statement) by Terra
Industries Inc., a Maryland corporation
(Terra or the Company),
relating to the Offer (as defined below).
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ITEM 1.
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SUBJECT
COMPANY INFORMATION.
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Name and
Address.
The name of the subject company to which this Statement relates
is Terra Industries Inc., a Maryland corporation. Terras
principal executive offices are located at Terra Centre, 600
Fourth Street, P.O. Box 6000, Sioux City, Iowa
51102-6000.
Terras telephone number at this address is
(712) 277-1340.
Securities.
The title of the class of equity securities to which this
Statement relates is the common stock, without par value, of the
Company (the Terra Common Shares). As of
March 17, 2010, there were 100,165,757 Terra Common Shares
issued and outstanding and an additional 4,464,701 Terra Common
Shares were reserved for issuance under Terras equity
compensation plans, of which up to a maximum of 952,736 Terra
Common Shares were issuable or otherwise deliverable in
connection with the vesting of outstanding equity awards of
Terra. As of March 17, 2010, Terra had no shares of 4.25%
Series A Cumulative Convertible Perpetual Preferred Shares,
without par value (the Series A Preferred
Stock), outstanding.
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ITEM 2.
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IDENTITY
AND BACKGROUND OF FILING PERSON.
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Name and
Address.
The name, business address and business telephone number of
Terra, which is the subject company and the person filing this
Statement, are set forth in Item 1 above.
Offer.
This Statement relates to the offer by CF Industries Holdings,
Inc., a Delaware corporation (CF),
through its indirect wholly-owned subsidiary, Composite
Merger Corporation, a Maryland corporation (CF
Sub), as disclosed in the Tender Offer
Statement on Schedule TO, dated March 5, 2010 (as
amended or supplemented from time to time, the
Schedule TO), to exchange each
outstanding Terra Common Share for the Per Share
Consideration, which is equal to (i) $37.15 in
cash, less any applicable withholding taxes and without
interest, and (ii) 0.0953 of a share of common stock, par
value $0.01 per share, of CF (together with the associated
preferred stock purchase rights) (the CF Common
Stock), upon the terms and subject to the
conditions set forth in (a) the Preliminary
Prospectus/Offer to Exchange, dated March 5, 2010 (as
amended or supplemented from time to time, the Exchange
Offer), and (b) the related Letter of Transmittal
(which, together with the Exchange Offer and any amendments or
supplements thereto from time to time, constitute the
Offer). In addition, holders of Terra Common
Shares whose shares are exchanged in the Offer will receive cash
in lieu of any fractional CF Common Stock to which they may be
entitled. CF and CF Sub first filed the Schedule TO with
the SEC on March 5, 2010. On the same date, CF also first
filed with the SEC a Registration Statement on
Form S-4
(as amended or supplemented from time to time, the
Registration Statement) relating to the CF
Common Stock to be issued in connection with the Offer. The
Offer will expire at 12:00 midnight, New York City time, on
April 2, 2010, unless CF or CF Sub extends the Offer in
accordance with the Merger Agreement (as defined below).
On March 12, 2010, Terra, CF and CF Sub entered into an
Agreement and Plan of Merger (the Merger
Agreement), which is filed as Exhibit (a)(8)
hereto and is incorporated herein by reference. Pursuant to the
terms and subject to the conditions of the Merger Agreement,
following the consummation of the Offer, CF Sub will merge with
and into Terra with each remaining Terra Common Share (other
than shares already owned by CF, Terra or their wholly-owned
subsidiaries) being converted into the right to receive the same
Per Share Consideration as is received by Terra stockholders
pursuant to the Offer (the Second-Step
Merger). Upon consummation of the Second-Step Merger,
Terra will be an indirect, wholly-owned subsidiary of CF (the
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Surviving Corporation). For further details
regarding the Merger Agreement, please see Item 3.
Past Contacts, Transactions, Negotiations and
AgreementsRelationship with CF and regarding the
Second-Step Merger, please see Item 8. Additional
InformationSecond-Step Merger.
CF Subs obligation to accept for payment any validly
tendered Terra Common Shares pursuant to the Offer is subject to
the satisfaction or waiver of certain conditions set forth in
the Merger Agreement, including the following:
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the Minimum Tender Condition Terra
stockholders shall have validly tendered and not properly
withdrawn prior to the expiration of the Offer (as it may be
extended and re-extended in accordance with the Merger
Agreement) at least that number of Terra Common Shares which
represents a majority of the Terra Common Shares outstanding on
a fully-diluted basis;
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the Canadian Regulatory Condition any
waiting period (including any extensions thereof) applicable to
the Offer and the Second-Step Merger under the Competition Act
(Canada), as amended, or any no-close period (including any
extensions thereof) applicable to the Offer and the Second-Step
Merger under the Canada Transportation Act, as amended, shall
have expired or been terminated;
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the Registration Statement Condition the
Registration Statement shall have been declared effective by the
SEC under the Securities Act of 1933, as amended (the
Securities Act), no stop order suspending the
effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall have
been initiated or threatened by the SEC; and
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the NYSE Listing Condition the shares of
CF Common Stock to be issued pursuant to the Offer and the
Second-Step Merger and such other shares to be reserved for
issuance in connection with the Offer and the Second-Step Merger
shall have been approved for listing on the New York Stock
Exchange (the NYSE) (subject to official
notice of issuance).
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Further, CF Sub is not required to accept for payment any
validly tendered Terra Common Shares pursuant to the Offer if
any of the following conditions or events exists:
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any law shall have been adopted or promulgated, or any
temporary, preliminary or permanent order shall have been issued
and remain in effect by a governmental entity of competent
jurisdiction having the effect of making the Offer or the
Second-Step Merger illegal or otherwise prohibiting consummation
of the Offer, the Second-Step Merger or the transactions
contemplated by the Merger Agreement (the Restraints
Condition);
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(i) the representations and warranties of Terra in the
Merger Agreement that since January 1, 2010, there has not
been any change, development, event, occurrence, effect or state
of facts that, individually or in the aggregate, has resulted in
or would reasonably be expected to result in a material adverse
effect on Terra (a Terra Material Adverse
Effect) shall not be true and correct in all respects
as of the date of the Merger Agreement or as of the time when CF
Sub pays for all Terra Common shares validly tendered and not
properly withdrawn pursuant to the Offer (the
Acceptance Time) as though made at the
Acceptance Time, (ii) the representations and warranties of
Terra in the Merger Agreement related to Terras
capitalization, authority and approval of the Terra board of
directors (the Board) with respect to the
Offer and the Second-Step Merger and the exemption of the Offer
and Second-Step Merger from the Maryland Business Combination
Act (the MBCA) shall not be true and correct
in all material respects as of the date of the Merger Agreement
or as of the Acceptance Time as though made at the Acceptance
Time (other than representations and warranties that by their
terms speak as of another date, which shall not be true and
correct as of such date) or (iii) all other representations
and warranties of Terra in the Merger Agreement, in each case,
made as if none of such representations and warranties contained
any qualifications or limitations as to materiality
or Terra Material Adverse Effect shall not be true and correct,
in each case, as of the date of the Merger Agreement or as of
the Acceptance Time as though made on and as of the Acceptance
Time (other than representations and warranties that by their
terms speak as of another date, which shall not be true and
correct as of such date), except where the failure of such
representations and warranties to be true and correct as so
made, individually or in the aggregate, does not have and is not
reasonably expected to result in a Terra Material Adverse Effect
(the Reps and Warranties Condition);
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Terra shall not have performed or complied in all material
respects with all agreements and covenants required to be
performed by it under the Merger Agreement at or prior to the
Acceptance Time (the Covenants Condition);
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Terra shall not have converted all of its outstanding shares of
Series A Preferred Stock or any Series A Preferred
Stock shall be outstanding (the Preferred Stock
Condition); or
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the Merger Agreement shall have been terminated in accordance
with its terms (the No-Termination Condition).
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On March 15, 2010, Terra converted all of its outstanding
Series A Preferred Stock into Terra Common Shares pursuant
to the terms and conditions applicable to such series. As of
such date, no shares of Series A Preferred Stock remained
outstanding.
The Merger Agreement provides that Merger Sub reserves the right
to waive any of the conditions to the Offer, other than the
Minimum Tender Condition, the Registration Statement Condition,
the NYSE Listing Condition and the No-Termination Condition.
The Schedule TO states that the principal executive offices
of CF are located at 4 Parkway North, Suite 400, Deerfield,
Illinois 60015.
All information contained in this Statement or incorporated
herein by reference concerning CF, CF Sub or their respective
affiliates, or actions or events with respect to any of them,
was obtained from reports and information filed by CF with the
SEC or provided by CF or CF Sub to Terra and Terra takes no
responsibility for such information or for any failure by CF or
CF Sub to disclose events or circumstances that may have
occurred and may affect the significance, completeness or
accuracy of any such information.
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ITEM 3.
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PAST
CONTACTS, TRANSACTIONS, NEGOTIATIONS AND
AGREEMENTS.
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Except as described in this Statement, as of the date of this
Statement, there are no material agreements, arrangements or
understandings, nor any actual or potential conflicts of
interest, between Terra or any of its affiliates, on the one
hand, and (i) Terra or any of its executive officers,
directors or affiliates, or (ii) CF, CF Sub or any of
their respective executive officers, directors or affiliates, on
the other hand.
Any information contained in the pages incorporated herein by
reference shall be deemed modified or superseded for purposes of
this Statement to the extent that any information contained
herein modifies or supersedes such information.
The
Merger Agreement.
On March 12, 2010, Terra, CF and CF Sub entered into the
Merger Agreement. The following is a summary of certain
provisions of the Merger Agreement. This summary does not
purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, which is filed as Exhibit
(a)(8) hereto and is incorporated herein by reference.
The Merger Agreement is filed as an exhibit to this Statement
to provide Terras stockholders with information regarding
the terms of the Merger Agreement and is not intended to modify
or supplement any factual disclosures about Terra or CF in
Terras or CFs public reports filed with the SEC. In
particular, the Merger Agreement and the summary of terms
contained herein are not intended to be, and should not be
relied upon as, disclosures regarding any facts or circumstances
relating to Terra or CF. The representations and warranties in
the Merger Agreement have been negotiated with the principal
purpose of (i) establishing the circumstances under which
CF Sub may have the right not to consummate the Offer or CF or
Terra may have the right to terminate the Merger Agreement, and
(ii) allocating risk between the parties, rather than
establishing matters as facts. The representations and
warranties also may be subject to a contractual standard of
materiality different from that generally applicable under
federal securities laws.
The
Offer.
The Merger Agreement provides that the Offer will be conducted
on the terms and subject to the conditions set forth in
Item 2. Identity and Background of Filing
Person The Offer.
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The Merger Agreement further provides that, subject to the
applicable rules of the SEC and the terms and conditions of the
Merger Agreement described below, CF Sub expressly reserves the
right (1) to extend the period of time during which the
Offer is open, (2) to delay acceptance for exchange of, or
exchange of, Terra Common Shares in order to comply in whole or
in part with applicable laws, (3) to amend or terminate the
Offer without accepting for exchange of, or exchanging, Terra
Common Shares if any of the conditions of the Offer has not been
satisfied and (4) to amend the Offer or to waive any
conditions of the Offer at any time.
The Merger Agreement provides that if on the initial expiration
date of the Offer or on any subsequent scheduled expiration date
of the Offer, any of the events or conditions to the Offer shall
not have been satisfied and, subject to the provisions of the
Merger Agreement, have not been waived by CF Sub, CF Sub will,
from time to time, extend the Offer for consecutive periods of
not more than five business days each until the earlier of
(i) the date on which all of the events or conditions have
been satisfied or, subject to the provisions of the Merger
Agreement, are waived by CF Sub, (ii) the date on which the
Merger Agreement is terminated in accordance with its terms;
provided that CF Sub is not obligated to so extend the Offer if
(1) the Canadian Regulatory Condition, the Registration
Statement Condition and the NYSE Listing Condition shall have
been satisfied and the Restraints Condition shall have ceased to
exist, or, in each case, subject to the provisions of the Merger
Agreement, been waived by CF Sub, for a period of not less than
ten business days prior to such expiration date and, with
respect to the Canadian Regulatory Condition, the Registration
Statement Condition and the NYSE Listing Condition, such facts
shall be reflected in an amendment to the Offer documents prior
to the start of such ten business day period, (2) the Reps
and Warranties Condition, the Covenants Condition and the
Preferred Stock Condition shall have ceased to exist or, subject
to the provisions of the Merger Agreement, been waived by CF
Sub, as of such expiration date and (3) the Minimum
Condition is not satisfied as of such expiration date.
The Merger Agreement also provides that if on the initial
expiration date of the Offer or on any subsequent scheduled
expiration date of the Offer, Terra shall have delivered to CF a
valid notice of the existence of any event or condition set
forth in the subparagraph following paragraph (iv)(a) of the
section of this Statement entitled
Termination, CF Sub will, from time to
time, extend the Offer for consecutive periods of not more than
five business days each until the earlier of (1) the date
on which all of the events or conditions set forth in such
subparagraph cease to exist or are waived by Terra and
(2) the date on which the Merger Agreement is terminated in
accordance with its terms.
The Merger Agreement also provides that CF Sub may, in its sole
discretion, extend the Offer for any period required by any
rule, regulation, interpretation or position of the SEC (or the
staff thereof) or the NYSE applicable to the Offer.
In the Merger Agreement, CF Sub expressly reserves the right
from time to time to waive any of the conditions to the Offer
(other than the Minimum Condition, the Registration Statement
Condition, the NYSE Listing Condition and the No-Termination
Condition) or to increase the consideration payable in the Offer
or to make any other changes in the terms and conditions of the
Offer; provided that without the prior written consent of Terra,
CF Sub will not decrease the consideration payable in the Offer,
change the form of consideration payable in the Offer, decrease
the number of Terra Common Shares sought to be purchased in the
Offer, change, modify or waive the Minimum Condition, impose
additional conditions to the Offer or modify or change any
condition to the Offer in a manner materially adverse to the
holders of Terra Common Shares or in a manner which would delay
consummation of the Offer, reduce the time period during which
the Offer remains open or, except for any extension required or
permitted under the terms of the Merger Agreement, extend or
otherwise change the expiration date of the Offer, or amend,
modify or supplement any other term of the Offer in any manner
adverse to the holders of Terra Common Shares or in a manner
which would delay consummation of the Offer.
The Merger Agreement also provides that CF Sub may, subject to
certain conditions, elect to provide a subsequent offering
period of at least three business days in length following the
expiration of the Offer on the expiration date and acceptance
for exchange of the Terra Common Shares tendered in the Offer
(we refer to this period in this Statement as a subsequent
offering period). A subsequent offering period would be an
additional period of time, following the first exchange of Terra
Common Shares in the Offer, during which Terra stockholders
could tender Terra Common Shares not tendered in the Offer.
During a subsequent offering
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period, tendering stockholders would not have withdrawal rights
and CF Sub would promptly exchange and pay for any Terra Common
Shares tendered at the same price paid in the Offer.
Terra
Board of Directors.
Upon the payment by CF Sub for Terra Common Shares tendered
pursuant to the Offer representing at least a majority of the
outstanding Terra Common Shares on a fully diluted basis, CF
will be entitled to designate such number of new directors,
rounded up to the next whole number, on the Board as is equal to
the product of the total number of directors on the Board
(determined after giving effect to the new directors elected
pursuant to this sentence) multiplied by the percentage that the
aggregate number of Terra Common Shares beneficially owned by
CF, CF Sub and any of their affiliates bears to the total number
of Terra Common Shares then outstanding, and Terra will be
required to promptly take all actions necessary to cause
CFs designees to be so elected. Terra is required to
obtain the irrevocable resignation, conditioned upon the closing
of the Offer, of a sufficient number of directors to implement
the above provisions. Prior to the effective time of the
Second-Step Merger, the Board must always have at least three
members who were members of the Board as of immediately prior to
the time of the acceptance for payment of any Terra Common
Shares by CF Sub pursuant to the Offer and who are independent
directors for purposes of the continued listing requirements of
the NYSE. Upon CFs request, at each such time CF is
entitled to designate directors on the Board, Terra must also
cause (i) each committee of the Board, (ii) the board
of directors of each of its subsidiaries and (iii) each
committee of such board of directors of each of its subsidiaries
to include persons designated by CF constituting at least the
same percentage of each such committee or board of directors as
CFs designees constitute on the Board.
Conversion
of Terra Common Shares.
Pursuant to the terms of the Merger Agreement, each Terra Common
Shares outstanding immediately prior to the effective time of
the Second-Step Merger will, by virtue of the Second-Step Merger
and without any action on the part of the holder thereof, be
converted into the right to receive the consideration to be paid
in the Second-Step Merger, which consideration will equal the
Offer consideration.
Top-Up
Option.
Subject to the terms and conditions of the Merger Agreement,
Terra has granted to CF and/or CF Sub an irrevocable one-time
top-up option to purchase a number of Terra Common
Shares. The top-up option may be exercised within 10
business days following completion of the Offer. For more
information about the top-up option, please see
Item 8. Additional InformationTop-Up
Option.
Vote
Required to Approve Second-Step Merger.
Under the Maryland General Corporation Law
(MGCL), the Second-Step Merger must be
advised by the Board and, unless the Second-Step Merger is
consummated as a short-form merger as described below, approved
by the affirmative vote of holders of Terra Common Shares
entitled to cast a majority of the votes entitled to be cast on
the matter. The Board by unanimous vote of those directors
voting with one absent director separately indicating agreement
has declared advisable and approved the Second-Step Merger. If
CF acquires, through CF Sub pursuant to the Offer or otherwise,
at least a majority of the outstanding Terra Common Shares, CF
will have sufficient voting power to approve the Second-Step
Merger without the affirmative vote of any other stockholder of
Terra.
Under
Section 3-106
of the MGCL, if CF acquires, through CF Sub pursuant to the
Offer or otherwise, at least 90% of the then outstanding Terra
Common Shares, CF will be able to effect the Second-Step Merger
through a short-form merger, without a vote of Terra
stockholders. In such event, CF, through CF Sub, intends to take
all necessary and appropriate action to cause the Second-Step
Merger to become effective as promptly as reasonably practicable
after such acquisition, without a meeting of Terra stockholders.
However, under
Section 3-106
of the MGCL, if CF Sub owns less than all of the outstanding
Terra Common Shares as of immediately prior to the short-form
merger, CF Sub must have given at least 30 days prior
notice of the short-form merger to each of Terras
stockholders who otherwise would have been entitled to vote on
the merger.
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Unless CF and CF Sub effect a short-form merger pursuant to
Maryland law, Terra will hold a special meeting of its
stockholders as soon as practicable following the consummation
of the Offer for the purpose of approving the Second-Step
Merger. At the special meeting, all of the Terra Common Shares
acquired pursuant to the Offer or otherwise owned by CF or any
of its subsidiaries will be voted in favor of the Second-Step
Merger.
Effect
on Restricted Stock, Phantom Units, Performance Shares and
Phantom Performance Shares.
The Board (or the relevant committee) is required to take such
actions to ensure that, as of the acceptance for payment of any
Terra Common Shares by CF Sub pursuant to the Offer, each Terra
stock-based award will be treated as follows:
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(i)
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each share of restricted stock will become fully vested
immediately prior to the acceptance for payment of any Terra
Common Shares by CF Sub pursuant to the Offer pursuant to its
terms and without any action on the part of any holder of such
restricted stock;
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(ii)
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each phantom unit will be fully vested upon the acceptance for
payment of any Terra Common Shares by CF Sub pursuant to the
Offer and the holder of such phantom unit shall be entitled to
receive, in consideration for such phantom unit, a cash payment
from Terra equal to the product of (a) the number of Terra
Common Shares subject to such phantom unit immediately prior to
the acceptance for payment of any Terra Common Shares by CF Sub
pursuant to the Offer and (B) the Cash Equivalent Amount
(as defined below), which cash payment shall be delivered to
such holder as promptly as practicable following the acceptance
for payment of any Terra Common Shares by CF Sub pursuant to the
Offer); and
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(iii)
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each performance share award and phantom performance award will
be canceled upon the acceptance for payment of any Terra Common
Shares by CF Sub pursuant to the Offer and the holder thereof
will be entitled to receive, in consideration for such
cancellation, the product of (A) the greater of
(1) the number of Terra Common Shares subject to such
performance share award or phantom performance award based on
Terras actual performance calculated using actual quarters
completed through the acceptance for payment of any Terra Common
Shares by CF Sub pursuant to the Offer and (2) the target
number of Terra Common Shares subject to such performance share
award or phantom performance award and (B) the Cash
Equivalent Amount, which cash payment shall be delivered by
Terra to such holder as promptly as practicable following the
acceptance for payment of any Terra Common Shares by CF Sub
pursuant to the Offer.
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For purposes of these provisions, Cash Equivalent
Amount means an amount equal to the sum of (A) $37.15
and (B) the product of (1) the average closing sales
price, rounded to four decimal points, of CF Common Stock on the
NYSE for the period of the 10 consecutive trading days ending on
the second full trading day prior to the acceptance for payment
of any Terra Common Shares by CF Sub pursuant to the Offer and
(2) 0.0953.
Representations
and Warranties.
Each of CF and Terra makes customary and generally reciprocal
representations and warranties to the other party with respect
to: corporate organization and power; subsidiaries;
capitalization; authorization of the Merger Agreement and
related matters; consents and approvals; no violations of law;
SEC reports and financial statements; absence of undisclosed
liabilities; absence of certain changes; litigation;
environmental matters; and compliance with laws and permits.
Terra also makes customary representations and warranties to CF
with respect to tax matters; real property; employee benefits
and labor matters; intellectual property matters; material
contracts; insurance coverage; improper payments; and opinion of
financial advisor.
CF also represents that the net proceeds from the financing
contemplated by the commitment letter between CF and an
affiliate of Morgan Stanley and The Bank of Tokyo-Mitsubishi
UFJ, Ltd., together with other financial resources of CF and
Terra, will be sufficient for CF to pay the cash portion of the
consideration and all other fees and expenses contemplated to be
paid by CF pursuant to the Merger Agreement.
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Consents
and Approvals.
CF and Terra have agreed to cooperate to obtain all consents to
the Offer and the Second-Step Merger. Each of CF and Terra also
agree to use its reasonable best efforts to take all actions and
to do all things necessary or advisable under applicable law to
consummate the Offer and the Second-Step Merger.
In particular, CF agrees that, in the event that any action or
proceeding is instituted (or threatened to be instituted)
challenging the Offer or the Second-Step Merger as violative of
any competition, antitrust, foreign investment or other law, or
if any law is enacted or enforced by a governmental entity that
would make the Offer or the Second-Step Merger illegal or would
otherwise prohibit or materially impair or delay the
consummation of the Offer or the Second-Step Merger, it will use
its best efforts to resolve or resist any such action or
proceeding that prohibits, prevents, delays or restricts
consummation of the Offer or the Second-Step Merger.
Furthermore, CF agrees to (i) sell, hold separate or
otherwise dispose of any assets of CF or its subsidiaries, or
after the closing of the Second-Step Merger, Terra or its
subsidiaries (and certain of its joint venture entities) and
(ii) conduct its business in a specified manner, or propose
and agree or permit CF or its subsidiaries, or after the closing
of the Second-Step Merger, Terra or its subsidiaries (and
certain of its joint venture entities), to conduct its business
in a specified manner. However, in no event is CF required to
agree to take any action that would reasonably be expected to
have, individually or in the aggregate, a material adverse
effect on Terra or CF.
For the purposes of the Merger Agreement, material adverse
effect on Terra or CF means any change, development,
event, occurrence, effect or state of facts that, individually
or in the aggregate with all such other changes, developments,
events, occurrences, effects or states of facts is, or is
reasonably expected to be, materially adverse to the business,
financial condition or results of operations of such person and
its subsidiaries (including, with respect to Terra, certain
joint ventures), taken as a whole. A material adverse
effect will not have occurred, however, as a result of any
change, development, event, occurrence, effect or state of facts
resulting from: (i) capital market conditions generally or
general economic conditions, including with respect to interest
rates or currency exchange rates, (ii) geopolitical
conditions or any outbreak or escalation of hostilities, acts of
war or terrorism occurring after the date of the Merger
Agreement, (iii) any hurricane, tornado, flood, earthquake
or other natural or man-made disaster occurring after the date
of the Merger Agreement, (iv) any change in applicable law,
regulation or GAAP (or authoritative interpretation thereof)
which is proposed, approved or enacted on or after the date of
the Merger Agreement, (v) general conditions in the
industries in which such party and its subsidiaries operate,
(vi) the failure, in and of itself, of such party to meet
any internal or published projections, forecasts, estimates or
predictions with respect to revenues, earnings or other
financial or operating metrics, before, on or after the date of
the Merger Agreement, or changes in the market price, credit
rating or trading volume of such partys securities after
the date of the Merger Agreement (it being understood that the
underlying facts giving rise or contributing to such failure or
change may be deemed either alone or in combination to
constitute, or be taken into account in determining whether
there has been a material adverse effect), (vii) changes in
the price of natural gas, nitrogen, urea, ammonia or any other
product used or sold by such party or any of its subsidiaries
and (viii) the announcement and pendency of the Merger
Agreement and the transactions contemplated thereby, including
any lawsuit in respect of the Merger Agreement or the
transactions contemplated thereby, compliance with the covenants
contained therein, and any loss of or change in relationship
with any customer, supplier, distributor, or other business
partner, or departure of any employee or officer, of such party
or any of its subsidiaries, except that in the cases of (i),
(ii), (iii), (iv) and (v), to the extent that such party
and its subsidiaries, taken as a whole, are materially
disproportionately affected thereby as compared with other
participants in the industries in which such party and its
subsidiaries operate (in which case the incremental
disproportionate impact or impacts may be deemed either alone or
in combination to constitute, or be taken into account in
determining whether there has been, or is reasonably expected to
be, a material adverse effect).
Conduct
of the Business of Terra Pending the Offer or
Merger.
The Merger Agreement provides that from the date of the Merger
Agreement until the earlier to occur of such time as directors
elected or designated by CF constitute at least a majority of
the Board or the effective
8
time of the Second-Step Merger, Terra will, and will cause each
of its subsidiaries to, conduct its business in all material
respects in the ordinary course and in a manner consistent with
past practice, and will use its commercially reasonable efforts
to preserve intact its business organization and goodwill and
relationships with all governmental entities, customers,
suppliers and others having business dealings with it, to keep
available the services of its current officers and key employees
and to maintain its current rights and franchises, in each case,
consistent with past practice.
In addition, during the same time period, Terra will not, and
will not permit any of its subsidiaries to (subject to certain
exceptions), directly or indirectly:
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(i)
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amend or modify any of Terras or its subsidiaries
governing documents or the governing documents of certain joint
venture entities;
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(ii)
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(a) declare or pay any dividend or other distribution in
respect of any of its securities, other than dividends or
distributions by wholly owned subsidiaries of Terra to Terra,
the payment of regular quarterly cash dividends of $0.10 per
Terra Common Share for the fiscal quarters ended
December 31, 2009 and March 31, 2010; (b) split,
combine or reclassify any of its securities or issue, deliver,
sell, grant, dispose of or subject to a lien any securities or
rights to equity; or (c) repurchase, redeem or otherwise
acquire any securities or rights to equity of Terra or any
subsidiary of Terra, except, in each case, as otherwise agreed
to in the Merger Agreement;
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(iii)
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acquire any person or division, business or equity interest of
any person;
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(iv)
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sell, lease, license, subject to a lien (other than a permitted
lien), or encumber or dispose of any material assets, property
or rights, other than as agreed to in the Merger Agreement;
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(v)
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(a) make any loans to or investments in any other person or
(b) create, incur, guarantee or assume any indebtedness, in
each case other than as agreed to in the Merger Agreement;
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(vi)
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other than as set forth in Terras capital budget or in
connection with the repair or replacement of the plant and
equipment at the operating facilities of Terra or any subsidiary
of Terra, make any capital expenditure in excess of
$5 million individually or $10 million in the
aggregate;
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(vii)
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except (a) as required pursuant to the terms of any benefit
plan of Terra, (b) as required to comply with applicable
law or GAAP, (c) as expressly permitted by the Merger
Agreement or (d) solely with respect to (I) below, in
the ordinary course of business, (I) amend or otherwise
modify in any material respect any benefit plan,
(II) accelerate the payment or vesting of benefits or
amounts payable or to become payable under any benefit plan,
(III) terminate, establish or enter into any benefit plan,
(IV) grant any increase in the compensation or benefits of
directors, officers, employees or consultants of Terra or any
subsidiary of Terra (except for increases in base salary or
hourly wage rates to certain employees and subject to certain
parameters and except for certain arrangements for newly hired
or promoted employees) or (V) hire any employee with an
annual base salary in excess of $130,000 except to replace an
existing employee of comparable compensation;
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(viii)
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(a) settle any material claims or litigation, other than in
the ordinary course of business consistent with past practice or
in accordance with the terms of any liability accrued or
disclosed in the most recent financial statements of Terra,
(b) cancel any material indebtedness or (c) waive or
assign any claims or rights of material value;
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(ix)
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except as required by applicable law or in the ordinary course
of business (a) make, revoke or amend any material election
relating to taxes, (b) settle or compromise any material
proceeding relating to taxes or (c) enter into a written
and legally binding material agreement with a taxing authority
relating to taxes;
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(x)
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other than in the ordinary course of business consistent with
past practice (a) amend in any material respect, waive any
material right under or terminate certain material contracts of
Terra or (ii) enter into any new material contracts;
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(xi)
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adopt or implement a plan of liquidation or a dissolution,
restructuring, recapitalization or other reorganization of Terra
or any subsidiary of Terra;
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(xii)
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change any method of financial accounting, except for any such
change required by a change in GAAP;
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(xiii)
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terminate or amend in any material respect, any material
insurance policies covering Terra or any subsidiary of Terra;
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(xiv)
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other than in the ordinary course of business consistent with
past practice, transfer, abandon or otherwise dispose of any
rights to any material intellectual property; or
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(xv)
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authorize, resolve, agree or commit to do any of the foregoing.
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Conduct
of the Business of CF Pending the Offer or Second-Step
Merger.
In addition, the Merger Agreement provides that from the date of
the Merger Agreement until the effective time of the Second-Step
Merger, CF will, and will cause each of its subsidiaries to,
conduct its business in all material respects in the ordinary
course and in a manner consistent with past practice, and will
use its commercially reasonable efforts to preserve intact its
business organization and goodwill and relationships with all
governmental entities, customers, suppliers and others having
business dealings with it and to maintain its current rights and
franchises, in each case, consistent with past practice.
In addition, CF will not directly or indirectly:
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(i)
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amend or modify any of CFs governing documents;
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(ii)
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(a) declare or pay any dividend or other distribution in
respect of any securities of CF, other than quarterly dividends
consistent with past practice, (b) split, combine or
reclassify any securities of CF, (c) issue, deliver or sell
any securities of CF, other than (1) the issuance and
delivery of CF Common Stock pursuant to the Offer or
(2) pursuant to any CF benefit plan in effect on the date
of the Merger Agreement; provided that the foregoing
clause (c) only applies until the acceptance for payment of
Terra Common Shares by CF Sub pursuant to the Offer, or
(d) repurchase, redeem or otherwise acquire any securities
of CF, other than acquisitions of securities pursuant to any
benefit plan of CF;
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(iii)
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acquire any person or division, business or equity interest of
any person, other than acquisitions that would not reasonably be
expected to prevent or delay or impede the consummation of the
transactions contemplated by the Merger Agreement;
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(iv)
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adopt or implement a plan of liquidation or a dissolution,
restructuring, recapitalization or other reorganization of
CF; or
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(v)
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authorize, resolve, agree or commit to do any of the foregoing.
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Financing;
Cooperation of Terra.
CF will use its best efforts to take all actions and to do all
things necessary, proper or advisable to consummate and obtain
the financing on the terms and conditions described in the
Exchange Offer.
In order to assist CF with the arrangement of such financing,
Terra will provide such assistance and cooperation as CF may
reasonably request, including:
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(i)
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furnishing pertinent information with respect to Terra and its
subsidiaries and certain of its joint venture entities;
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(ii)
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requesting its independent accountants to provide reasonable
assistance to CF;
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(iii)
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providing reasonable cooperation with prospective investors,
arrangers and lenders and their respective advisors in
performing their due diligence; and
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(iv)
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providing all required information reasonably available to it
relating to certain indebtedness of Terra or its subsidiaries.
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In no event will Terra or its subsidiaries be required to pay
any commitment or similar fee or incur any other liability in
connection with such financing prior to the effective time of
the Second-Step Merger.
10
Indemnification
and D&O Insurance.
From and after acceptance for payment of Terra Common Shares by
CF Sub pursuant to the Offer, CF will cause Terra to indemnify
and provide advancement of expenses to, all past and present
directors and officers of Terra to the fullest extent permitted
by law for acts or omissions occurring at or prior to the
effective time of the Second-Step Merger and to honor all
existing rights to indemnification in favor or such directors
and officers.
From and after the acceptance for payment of Terra Common Shares
by CF Sub pursuant to the Offer, CF will cause Terra to maintain
for a period of 6 years the current policies of
directors and officers liability insurance and
fiduciary liability insurance maintained by Terra; provided that
Terra may substitute policies of at least the same coverage and
amounts containing terms and conditions which are at least as
protective and no less advantageous to the insured. However,
Terra will not be required to expend in any 1 year more
than 300% of the current annual premium expended by Terra.
Takeover
Proposals.
The Merger Agreement provides that Terra will, and will cause
its subsidiaries and its and their respective representatives
to, immediately cease and cause to be terminated all existing
discussions or negotiations with any person conducted heretofore
with respect to any Takeover Proposal (as defined below).
The Merger Agreement further provides that Terra will not, nor
will it authorize or permit any of its subsidiaries to, and it
will cause its and its subsidiaries respective
representatives not to, directly or indirectly:
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(i)
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initiate or solicit or knowingly facilitate or encourage any
inquiry or the making of any proposal that constitutes a
Takeover Proposal; or
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(ii)
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continue or otherwise participate in any discussions or
negotiations regarding, furnish to any person any information or
data or access to its properties with respect to, or otherwise
cooperate with or knowingly take any other action to facilitate
any proposal that constitutes any Takeover Proposal.
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Notwithstanding the foregoing, the Merger Agreement provides
that, prior to the consummation of the Offer, Terra and its
representatives, in response to a bona fide written Takeover
Proposal that was made after the date of the Merger Agreement
and did not result from a material breach of the Merger
Agreement and that (1) constitutes a Superior Proposal (as
defined below) or (2) the Board determines in good faith
(after consultation with outside counsel and a financial advisor
of nationally recognized reputation) could reasonably be
expected to result in a Superior Proposal, shall be permitted to:
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(i)
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provide access to non-public information to the person making
such Takeover Proposal pursuant to and in accordance with an
executed confidentiality agreement; and
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(ii)
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participate in discussions or negotiations with respect to such
Takeover Proposal with the person making such Takeover Proposal.
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The Merger Agreement further provides that, at any time prior to
the consummation of the Offer, the Board may:
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(i)
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effect a Change in Company Recommendation (as defined below)
provided that the Board determines in good faith, after
consultation with outside counsel, that the failure to do so
would be inconsistent with its duties to the stockholders of
Terra under applicable law; and
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(ii)
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in response to a Superior Proposal that was made after the date
of the Merger Agreement and did not result from a material
breach of the Merger Agreement, cause Terra to terminate the
Merger Agreement and concurrently with such termination, upon
payment of the Termination Fee and the Reimbursement Fee (each
as defined below), enter into a definitive agreement with
respect to such Superior Proposal.
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11
Notwithstanding the foregoing, the Merger Agreement provides
that Terra will not be entitled to exercise its right to effect
a Change in Company Recommendation or its right to terminate the
Merger Agreement pursuant hereto unless:
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(i)
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the Board has first provided prior written notice to CF advising
CF that the Board intends to (x) effect a Change in Company
Recommendation, which notice would contain a description of the
events, facts and circumstances giving rise to such proposed
action or (y) terminate the Merger Agreement in response to
a Superior Proposal, which notice shall contain a description of
the terms and conditions of the Superior Proposal (including a
copy of any such written Superior Proposal); and
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(ii)
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CF does not make, within 5 business days after receipt of such
notice described above, a proposal that would, in the good faith
determination of the Board (after consultation with outside
counsel and a financial advisor of nationally recognized
reputation), cause such events, facts and circumstances to no
longer form the basis for the Board to effect a Change in
Company Recommendation, in the case of a Change in Company
Recommendation, or be at least as favorable to the stockholders
of Terra as such Superior Proposal, in the case of a Superior
Proposal.
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In addition to the obligations of Terra described in the
preceding paragraphs, the Merger Agreement provides that, from
and after the date of the Merger Agreement, as promptly as
practicable after the receipt, directly or indirectly, by Terra
of any Takeover Proposal or any inquiry with respect to, or that
could reasonably be expected to lead to, any Takeover Proposal,
and in any case within 2 business days after the receipt
thereof, Terra will provide oral and written notice to CF of
(i) such Takeover Proposal or inquiry, (ii) the
identity of the person making any such Takeover Proposal or
inquiry and (iii) the material terms and conditions of any
such Takeover Proposal or inquiry. Terra will also keep CF fully
informed on a current basis of the status of any such Takeover
Proposal, including any changes to the terms and conditions
thereof.
The Merger Agreement defines the term Takeover
Proposal as any third party proposal or offer for a direct
or indirect (a) merger, tender offer, exchange offer,
binding share exchange, recapitalization, reorganization,
liquidation, dissolution, business combination or consolidation,
or any similar transaction, involving Terra or one or more of
its subsidiaries, (b) sale, lease exchange, mortgage,
pledge, transfer or other acquisition or assumption of fifteen
percent (15%) or more of the fair value of the assets of Terra
and its subsidiaries, taken as a whole, in one or a series of
related transactions, or (c) purchase, tender offer,
exchange offer or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of beneficial
ownership of securities representing fifteen percent (15%) or
more of the voting power of Terras securities; provided,
that the term Takeover Proposal does not include the
Offer or the Second-Step Merger.
The Merger Agreement defines the term Superior
Proposal as any bona fide written Takeover Proposal
regarding Terra made by any person (other than CF or CF Sub)
that, if consummated, would result in such person acquiring,
directly or indirectly, all or substantially all of the voting
power of Terras securities or all or substantially all of
the assets of Terra and its subsidiaries and that the Board
determines in good faith (after consultation with outside
counsel and a financial advisor of nationally recognized
reputation) is reasonably expected to be consummated and is more
favorable to its stockholders than the Offer, the Second-Step
Merger and the other transactions contemplated by the Merger
Agreement from a financial point of view, taking into account
all financial, regulatory, legal and other aspects of such
proposal.
The Merger Agreement defines the term Change in Company
Recommendation as any direct or indirect withdrawal,
modification, amendment or qualification of Terras
recommendation to its stockholders to accept the Offer and, if
required by applicable law, approve the Second-Step Merger, in a
manner adverse to CF or CF Sub (or any public proposal to take
any of the foregoing actions) or the execution or entry into,
any letter of intent, memorandum of understanding, Merger
Agreement or other written agreement providing for a Takeover
Proposal.
Termination.
The Merger Agreement may be terminated at any time prior to the
effective time of the Second-Step Merger, whether before or
after receipt of the affirmative vote at the Terra stockholders
meeting of holders of
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a majority of the outstanding Terra Common Shares to approve
the Second-Step Merger, to the extent required by applicable law:
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(i)
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by mutual written consent of CF and Terra;
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(ii)
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by either CF or Terra, if:
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(a)
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the Offer shall not have been consummated by July 31, 2010;
provided that the party seeking to terminate is not the primary
cause of the failure of the acceptance for payment of any Terra
Common Shares by CF Sub pursuant to the Offer by such date;
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(b)
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any law or order issued by a governmental entity having the
effect of making the Second-Step Merger illegal or otherwise
prohibiting consummation of the Second-Step Merger is in effect
and has become final and non-appealable; provided that the party
seeking to terminate must have used its best efforts to remove
such law or order as required by the Merger Agreement; or
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(c)
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the Offer shall have expired or been terminated without any
Terra Common Shares being purchased as a result of the failure
to satisfy the Minimum Condition; provided that the party
seeking to terminate is not the primary cause of the failure of
the acceptance for payment of any Terra Common Shares by CF Sub
pursuant to the Offer by such date, as applicable;
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(iii)
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by CF prior to the acceptance for payment of any Terra Common
Shares by CF Sub pursuant to the Offer:
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(a)
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if Terra shall have breached or failed to perform any of its
representations, warranties or covenants contained in the Merger
Agreement, which breach or failure to perform (A) is
incapable of being cured by Terra prior to July 31, 2010 or
is not cured by the earlier of (x) forty (40) business
days following written notice to Terra by CF of such breach or
(y) July 31, 2010 and (B) would result in the
existence of the Reps and Warranties Condition or the Covenants
Condition;
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(b)
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if the Board (A) fails to recommend that Terras
stockholders accept the Offer and tender their Terra Common
Shares to CF Sub in the Offer and, to the extent required by
applicable law, approve the Merger Agreement or include such
recommendation in the Solicitation/Recommendation Statement on
Schedule 14D-9,
(B) fail to publicly reaffirm such recommendation within
ten (10) business days of receipt of a written request by
CF to provide such reaffirmation or (C) effects a Change in
Company Recommendation; or
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(c)
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if Terra or any of its subsidiaries or its or their respective
representatives, directly or indirectly, materially breached any
of their non-solicitation obligations (as described above);
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(iv)
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by Terra prior to the acceptance for payment of any Terra Common
Shares by CF Sub pursuant to the Offer:
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(a)
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if CF or CF Sub has breached or failed to perform any of its
representations, warranties or covenants contained in the Merger
Agreement, which breach or failure to perform (A) is
incapable of being cured by CF or CF Sub prior to July 31,
2010 or is not cured by the earlier of (x) forty
(40) business days following written notice to CF by Terra
of such breach or (y) July 31, 2010 and (B) would
result in the existence of any of the following events or
conditions:
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(i)
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The representation and warranty of CF and CF Sub in the Merger
Agreement that since January 1, 2010, there has not been
any change, development, event, occurrence, effect or state of
facts that, individually or in the aggregate, has resulted in or
would reasonably be expected to result in a material adverse
effect on CF shall not be true and correct in all respects as of
the date of the Merger Agreement or as of immediately prior to
the acceptance time as though made immediately prior to the
acceptance time, (ii) the representations and warranties of
CF in the Merger Agreement related to CFs and CF
Subs capitalization and the authority and approval of the
CF and CF Sub boards of directors related to the Offer and the
Second-Step Merger, shall not be true and correct in
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all material respects as of the date of the Merger Agreement or
as of immediately prior to the acceptance time (other than
representations and warranties that by their terms speak as of
another date, which shall not be true and correct as of such
date), (iii) all other representations and warranties of CF
and CF Sub set forth in the Merger Agreement, in each case, made
as if none of such representations and warranties contained any
qualifications or limitations as to materiality or
material adverse effect, shall not be true and
correct, in each case, as of the date of the Merger Agreement or
as of immediately prior to the acceptance time as though made
immediately prior to the acceptance time (other than
representations and warranties that by their terms speak as of
another date, which shall not be true and correct as of such
date), except where the failure of such representations and
warranties to be true and correct as so made, individually or in
the aggregate, does not have and is not reasonably expected to
result in a material adverse effect on CF, or (iv) each of
CF and CF Sub shall not have performed or complied in all
material respects with all agreement and covenants required to
be performed by it under the Merger Agreement.
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(b)
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to enter into a definitive agreement with respect to a Superior
Proposal.
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Termination
Fees.
Notwithstanding any valid termination, Terra will pay CF certain
fees if the Merger Agreement is terminated due to any of the
following circumstances:
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(i)
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if the Board (A) fails to recommend that Terras
stockholders accept the Offer and tender their Terra Common
Shares to CF Sub in the Offer and, to the extent required by
applicable law, approve the Merger Agreement or include such
recommendation in the Solicitation/Recommendation Statement on
Schedule 14D-9,
(B) fails to publicly reaffirm such recommendation within
ten (10) business days of receipt of a written request by
CF to provide such reaffirmation or (C) effects a Change in
Company Recommendation, then Terra shall pay CF a termination
fee of $123 million (the Termination Fee) and
pay CF $123 million for the reimbursement of the
termination fee paid by CF to terminate the Yara merger
agreement (the Reimbursement Fee);
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(ii)
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if (A) a Terra uncured breach or failure to perform any of
its representations, warranties or covenants contained in the
Merger Agreement would result in the existence of the Reps and
Warranties Condition or the Covenants Condition prior to the
acceptance for payment of any Terra Common Shares by CF Sub
pursuant to the Offer or (B) Terra or any of its
subsidiaries or its or their respective representatives have
materially breached any of their non-solicitation obligations,
then Terra shall pay CF the Reimbursement Fee;
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(iii)
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if Terra enters into a definitive agreement with respect to a
Superior Proposal, then Terra shall pay CF the Termination Fee
and the Reimbursement Fee;
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(iv)
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if (A) the Offer shall have expired or been terminated
without any Terra Common Shares being purchased as a result of
the failure to satisfy the Minimum Condition, (B) a Terra
uncured breach or failure to perform any of its covenants
contained in the Merger Agreement would result in the existence
of the Reps and Warranties Condition or the Covenants Condition
prior to the acceptance for payment of any Terra Common Shares
by CF Sub pursuant to the Offer or (C) Terra or any of its
subsidiaries or its or their respective representatives have
materially breached any of their non-solicitation obligations
(as described above) and, in each case, within 6 months
after the date of termination of the Merger Agreement as a
result of the aforementioned circumstances, Terra enters into a
definitive agreement to consummate or consummates the
transactions contemplated by a Takeover Proposal (for purposes
of this provision, the term Takeover Proposal has the same
meaning as described above, except that all references to 15%
are changed to 50%), then Terra shall pay CF the Termination Fee
and, to the extent not previously paid, the Reimbursement
Fee; or
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(v)
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if (A) the Merger Agreement is not consummated prior to
July 31, 2010 (provided that certain conditions to the
Offer are satisfied at the time of termination), (B) the
Offer shall have expired or been terminated without any Terra
Common Shares being purchased as a result of the failure to
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satisfy the Minimum Condition, (C) a Terra uncured breach
or failure to perform any of its representations, warranties or
covenants contained in the Merger Agreement would result in the
existence of the Reps and Warranties Condition or the Covenants
Condition prior to the acceptance for payment of any Terra
Common Shares by CF Sub pursuant to the Offer or (D) Terra
or any of its subsidiaries or its or their respective
representatives have materially breached any of their
non-solicitation obligations (as described above) and, in each
case, (X) at any time after the date of the Merger
Agreement and prior to the date of termination of the Merger
Agreement as a result of the aforementioned circumstances, a
Takeover Proposal is publicly announced and not subsequently
withdrawn (or any person publicly announces or publicly
communicates an intention, whether or not conditional, to make a
Takeover Proposal and such intention is not subsequently
withdrawn), and (Y) within 18 months after the date of
such termination, Terra enters into a definitive agreement to
consummate or consummates the transactions contemplated by any
Takeover Proposal (for purposes of this provision, the term
Takeover Proposal has the same meaning as described above,
except that all references to 15% are changed to 50%), then
Terra shall pay CF the Termination Fee and, to the extent not
previously paid, the Reimbursement Fee.
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Notwithstanding any valid termination, CF will pay Terra the
Termination Fee if the Merger Agreement is terminated
(A) because the Merger Agreement is not consummated prior
to July 31, 2010 (provided that certain conditions to the
Offer are not satisfied at the time of termination) or
(B) any law or order issued by a governmental entity having
the effect of making the Offer or the Second-Step Merger illegal
or otherwise prohibiting consummation of the Offer or the
Second-Step Merger is in effect and has become final and
non-appealable (other than any such law or order that results
primarily from any breach or violation by Terra or any of its
subsidiaries, affiliates or representative of the Merger
Agreement, any obligation to or right of a third-party or any
law).
Relationship
with CF.
CF discloses in the Schedule TO that (i) during the
period from January 8, 2010 through January 14, 2010,
CF Industries, Inc., a wholly-owned subsidiary of CF,
sold approximately 5 million Terra Common Shares through
ordinary brokerage transactions on the open market, (ii) as
of March 5, 2010, CF Composite, Inc., a wholly-owned
subsidiary of CF (CF Composite), beneficially
owned of record 1,000 Terra Common Shares, representing less
than 1% of the outstanding Terra Common Shares, (iii) CF
shares beneficial ownership of the 1,000 Terra Common Shares
with CF Composite and (iv) the shares beneficially owned by
CF Composite were purchased through an ordinary brokerage
transaction on the open market on January 20, 2009 for an
average price of $19.724 per Terra Common Share.
Pursuant to
Rule 14d-5
under the Securities Exchange Act of 1934, as amended (the
Exchange Act), CF paid Terra $182,260
in 2009 for the approximate cost of mailing materials related to
CFs prior exchange offer to Terra stockholders and CF paid
Terra $125,000 in March 2010 for the approximate cost of mailing
materials related to the Offer to Terra stockholders.
Certain other agreements, arrangements or understandings between
Terra or any of its affiliates and CF, CF Sub or any of their
respective executive officers, directors or affiliates, as
described in Item 3. Past Contacts, Transactions,
Negotiations and Agreements in the
Schedule 14D-9
filed by Terra with the SEC on March 5, 2009, are
incorporated herein by reference.
Arrangements
with Current Executive Officers and Directors of
Terra.
Overview.
The vested Terra Common Shares held by Terras directors
and executive officers as of the Acceptance Time will be treated
in the same manner as vested Terra Common Shares held by other
Terra stockholders.
Aside from their interests as Terra stockholders, Terras
directors and executive officers have interests in the Offer
that may be different from, or in addition to, those of other
Terra stockholders generally. In considering the recommendation
of the Board that you tender your Terra Common Shares into the
Offer, you should be aware of these interests. The members of
the Board were aware of and considered these interests, among
other matters, in
15
making their decision. As described in more detail below, the
interests of Terras executive officers in the Offer that
are different from, or in addition to, those of other Terra
stockholders consist of:
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the accelerated vesting of Terra restricted stock awards
immediately prior to the Acceptance Time, which restricted stock
awards will then be treated in the same manner as vested Terra
Common Shares held by other Terra stockholders;
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the accelerated vesting of equity awards relating to Terra
Common Shares granted pursuant to Terras equity incentive
plans that are subject to performance-based vesting and are
settled in Terra Common Shares pursuant to their terms
(Performance Share Awards), and the
cancellation of such awards in exchange for cash;
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the fixing of the performance metric under Terras annual
incentive compensation plan at the Acceptance Time at the
greater of (i) target performance and (ii) actual
performance during the quarters completed through the Acceptance
Time;
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the receipt of certain payments and benefits under the executive
officers employment severance agreements, as well as
prorated bonuses under Terras annual incentive
compensation plan, upon certain types of terminations of
employment following the Acceptance Time;
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the receipt of
gross-up
payments to make the executive officers whole for any excise tax
imposed as a result of Section 280G of the Internal Revenue
Code of 1986, as amended (the Code), on any
compensation received;
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the funding of a rabbi trust with respect to certain executive
officers supplemental retirement benefits; and
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the continuation of certain compensation and benefits until
December 31, 2011 pursuant to the terms of the Merger
Agreement.
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The Merger Agreement requires CF to cause, from and after the
Acceptance Time, Terra and, if after the consummation of the
Second-Step Merger, the Surviving Corporation, to indemnify all
current and former directors and officers of Terra to the
fullest extent permitted by law for acts or omissions occurring
at or prior to the effective time of the Second-Step Merger and
to honor all existing rights to indemnification in favor of such
directors and officers.
The dates used below to quantify these interests have been
selected for illustrative purposes only. They do not necessarily
reflect the dates on which certain events will occur.
Equity
Awards.
Terras executive officers hold restricted stock awards and
Performance Share Awards. Each share of restricted stock that
remains outstanding as of immediately prior to the Acceptance
Time, including those held by Terras executive officers,
will vest immediately prior to the Acceptance Time and will be
treated in the same manner as Terra Common Shares held by other
Terra stockholders. Each Performance Share Award that remains
outstanding as of immediately prior to the Acceptance Time,
including those held by Terras executive officers, will be
canceled at the Acceptance Time, and the holder of such
Performance Share Award will be entitled to receive the product
of (a) the greater of (i) the number of Terra Common
Shares subject to such Performance Share Award based on
Terras actual performance calculated during the quarters
completed through the Acceptance Time and (ii) the target
number of Terra Common Shares subject to such Performance Share
Award and (b) an amount in cash equal to the sum of
(x) the cash portion of the Per Share Consideration and
(y) the product of (1) the average closing sales
price, rounded to four decimal points, of CF Common Stock
on the NYSE (as reported in the Wall Street Journal, New York
City edition) for the period of the ten consecutive trading days
ending on the second full trading day prior to the Acceptance
Time and (2) the portion of the Per Share Consideration
paid in shares of CF Common Stock.
The following table summarizes the restricted stock and
Performance Share Awards held by Terras executive officers
that will be outstanding as of the Acceptance Time, and the
value of the consideration that each executive officer will
receive pursuant to the Offer or the Second-Step Merger in
connection with the cancellation of such awards, assuming for
these purposes that (i) the Acceptance Time occurs on
April 2,
16
2010, (ii) Performance Share Awards granted for the
2008-2010
and
2009-2011
performance cycles will vest at 200% of target,
(iii) Performance Share Awards granted for the
2010-2012
performance cycle will vest at 100% of target and (iv) the
aggregate value of the Per Share Consideration is $47.40
(calculated based on the closing price of CF Common Stock on
March 1, 2010).
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Number of Shares
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Value of Shares
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Underlying
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Underlying
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Number of
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Value of
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Aggregate
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Performance
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Performance
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Restricted
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Restricted
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Equity Award
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Executive Officers
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Share Awards
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Share Awards
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Shares
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Shares
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Consideration
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Michael L. Bennett
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256,300
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$
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12,148,617
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58,000
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$
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2,749,200
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$
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14,897,817
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Daniel D. Greenwell
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47,149
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$
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2,234,869
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21,200
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$
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1,004,880
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$
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3,239,749
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John W. Huey
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37,893
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$
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1,796,138
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17,800
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$
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843,720
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$
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2,639,858
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Joseph D. Giesler
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31,703
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$
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1,502,740
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15,100
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$
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715,740
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$
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2,218,480
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Richard S. Sanders Jr.
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32,046
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$
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1,518,969
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14,900
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$
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706,260
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$
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2,225,229
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Joe A. Ewing
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31,561
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$
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1,495,992
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14,500
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$
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687,300
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$
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2,183,292
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Douglas M. Stone
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37,551
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$
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1,779,910
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16,400
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$
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777,360
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$
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2,557,270
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Earl B. Smith
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28,153
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$
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1,334,430
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8,400
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$
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398,160
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$
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1,732,590
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Geoffrey J. Obeney
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26,741
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$
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1,267,508
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7,900
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$
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374,460
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$
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1,641,968
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Edward J. Dillon
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19,469
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$
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922,854
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10,000
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$
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474,000
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$
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1,396,854
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Employment
Severance Agreements.
Terra has entered into individual employment severance
agreements with certain officers and key employees, including
all of Terras executive officers, that provide for certain
payments and benefits upon a termination of employment by Terra
without cause or by the employee for good reason (as described
below) any time within the 24 months following a change in
control, such as the consummation of the Offer.
Under the employment severance agreements with Terras
executive officers, good reason following a change
in control means (i) a failure to pay the executive officer
any compensation when due, (ii) a delivery by Terra of a
notice of intent to terminate the executive officers
employment for any reason, other than for cause or
permanent disability, (iii) a 10% or greater reduction in
base salary or target bonus, (iv) a relocation of the
executive officers principal place of employment by more
than 50 miles, (v) a material diminution in titles,
duties, responsibilities or status, (vi) a removal from any
of the offices held immediately prior to the effective time of
the change in control or (vii) a material reduction in
retirement, insurance or fringe benefits.
The employment severance agreements for the executive officers
provide for the following payments and benefits upon a
qualifying termination:
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a lump-sum cash payment equal to two times the sum of
(i) the executive officers then-current annual base
salary and (ii) the executive officers target cash
annual incentive opportunity for the year of termination;
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continuation of company-paid medical and dental benefits for up
to 24 months;
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acceleration of vesting of any unvested equity-based awards;
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outplacement services for one year; and
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crediting of two years of additional age and service credit
under Terras Excess Benefit Plan (the
SERP) for those executive officers who
participate in the SERP (only Messrs. Bennett, Giesler and
Sanders participate in the SERP).
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Pursuant to the employment severance agreements, an executive
officer will not be entitled to the payments and benefits
described above unless he executes and does not revoke a release
of claims in favor of Terra. Executive officers will also be
subject to non-competition and non-solicitation covenants for
one year following termination of employment.
In addition, each executive officer is entitled to a
gross-up
payment to make him whole for any excise tax imposed as a result
of Section 280G of the Code on any of his compensation.
Based on compensation and benefit levels as of March 17,
2010 and assuming that the Acceptance Time occurs on
April 2, 2010 and that each executive officer experiences a
qualifying termination of employment at
17
that time, the executive officers would be entitled to receive
the following cash severance payments and other benefits under
their employment severance agreements.
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Continuation of
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Additional Age
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Medical and
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and Service
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Cash
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Dental
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Credit under
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Outplacement
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280G Tax
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Executive Officer
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Severance
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Benefits(1)
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SERP(2)
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Services(3)
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Gross-up(4)
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Total
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Michael L. Bennett
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$
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3,500,000
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$
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23,753
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$
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473,383
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$
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84,000
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$
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$
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4,081,136
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Daniel D. Greenwell
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$
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1,330,000
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$
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29,674
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$
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$
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45,600
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$
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$
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1,405,274
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John W. Huey
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$
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911,550
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$
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18,346
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$
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$
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36,462
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$
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973,245
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$
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1,797,343
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Joseph D. Giesler
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$
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790,400
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$
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18,346
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$
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99,164
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$
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29,640
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$
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$
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937,550
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Richard S. Sanders Jr.
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$
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806,400
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$
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23,753
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$
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81,204
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$
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30,240
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$
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$
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941,597
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Joe A. Ewing
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$
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816,000
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$
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29,674
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$
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$
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30,600
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$
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$
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876,274
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Douglas M. Stone
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$
|
1,050,000
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$
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29,674
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$
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$
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36,000
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$
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1,039,962
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$
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2,023,505
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Earl B. Smith
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$
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686,400
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$
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23,752
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$
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$
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27,456
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$
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742,392
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$
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1,377,135
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Geoffrey J. Obeney
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$
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652,050
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$
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23,753
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$
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$
|
26,082
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$
|
763,512
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$
|
1,367,912
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Edward J. Dillon
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$
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649,200
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$
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29,674
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$
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|
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$
|
25,968
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|
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$
|
761,936
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|
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$
|
1,389,001
|
|
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|
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(1) |
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Terra determined the value of medical and dental benefits based
on assumptions used for financial reporting purposes under ASC
715, Compensation Retirement Benefits. |
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(2) |
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Terra determined these amounts by adding two years of credited
service to the December 31, 2009 total pension benefit
(i.e., sum of tax qualified pension and SERP) for the executive
officer and then determined the present value of that accrued
benefit deferred to the date the executive officer reaches the
age of 63, which is the earliest age at which unreduced pension
benefits would be available to the executive officer with an
extra two years of age. |
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(3) |
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Terra determined the value of post-termination outplacement
services based on a value equal to approximately 12% of the
executive officers annual base salary as of March 17,
2010. |
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(4) |
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Terra determined the amount of the excise tax payment by
multiplying by 20% the excess parachute payments
that would arise as a result of Section 280G of the Code in
connection with the consummation of the Offer. Terra utilized
the following key assumptions to determine the executive
officers tax
gross-up
payments: |
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based on Terras performance as of March 17, 2010,
Performance Share Awards granted for the
2008-2010
performance cycle and the
2009-2011
performance cycle are currently expected to vest at 200% of
target. Therefore, the amount of excise tax with respect to such
Performance Share Awards was calculated assuming that all
performance goals with respect to such Performance Share Awards
had already been met at the 200% level. The result is that the
amount of the excise tax attributable to both such Performance
Share Awards and the restricted shares is based solely on the
value of accelerated vesting and the lapse of the obligation to
perform future services. Since Terras performance for the
2010-2012
performance cycle is not yet predictable, the amount of the
excise tax with respect to the Performance Share Awards granted
for such cycle was calculated based on the full value for such
awards;
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a statutory federal income tax rate of 35% and a Medicare tax
rate of 1.45%;
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each executive officers Section 280G base
amount was determined based on average
W-2
compensation for the period from 2005 through 2009 (or the
period of the executive officers employment with Terra, if
shorter); and
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the interest rate assumption was 120% of the applicable federal
rate as of February 2010.
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Annual
Incentive Compensation.
Under Terras 2010 Officers and Key Employees Annual
Incentive Plan, upon a change in control, such as the
consummation of the Offer, the performance metric used to
calculate the cash awards will become fixed at the greater of
(i) target performance and (ii) actual performance
during the quarters completed through the
18
effective time of the change in control. A participant who
remains employed through December 31, 2010 will receive his
or her full bonus under the plan calculated in such manner. If a
participants employment is terminated following the
Acceptance Time without cause or for good reason (defined as in
the employment severance agreements), the participant will be
entitled to a prorated bonus for 2010 through the
participants termination date. Each of Terras
executive officers currently participates in the 2010 Officers
and Key Employees Annual Incentive Plan.
Based on compensation levels as of March 17, 2010 and
assuming that (i) the Acceptance Time occurs on
April 2, 2010, (ii) each executive officer experiences
a qualifying termination of employment at that time and
(iii) actual performance during the quarters completed
through the Acceptance Time is less than or equal to target
performance, the executive officers would be entitled to receive
the following prorated bonus payments under the 2010 Officers
and Key Employees Annual Incentive Plan.
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Executive Officer
|
|
Prorated Bonus
|
|
|
Michael L. Bennett
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|
$
|
264,658
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|
Daniel D. Greenwell
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|
$
|
71,836
|
|
John W. Huey
|
|
$
|
38,293
|
|
Joseph D. Giesler
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|
$
|
37,355
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|
Richard S. Sanders Jr.
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$
|
38,111
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|
Joe A. Ewing
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$
|
38,564
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|
Douglas M. Stone
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|
$
|
56,712
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|
Earl B. Smith
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|
$
|
28,835
|
|
Geoffrey J. Obeney
|
|
$
|
27,392
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|
Edward J. Dillon
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|
$
|
27,272
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Rabbi
Trust.
Terra maintains a rabbi trust, which is intended to
provide a source of funds to assist Terra in meeting its
liabilities under the SERP. No later than five days following
the effective time of a change in control, such as the
consummation of the Offer, Terra will be obligated to make an
irrevocable contribution to the trust in an amount such that the
trust will, immediately following such contribution, hold assets
sufficient to pay each SERP participant or beneficiary,
including Messrs. Bennett, Giesler and Sanders, his or her
accrued benefits under the SERP as of the effective time of the
change in control. The trustee has broad investment powers with
respect to the trust assets, but it may not invest in securities
or obligations issued by Terra or any affiliate of Terra.
The following table shows the accrued benefits of each of
Messrs. Bennett, Giesler and Sanders under the SERP as of
December 31, 2009.
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Executive Officer
|
|
Accrued Benefits
|
|
|
Michael L. Bennett
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|
$
|
1,208,251
|
|
Joseph D. Giesler
|
|
$
|
11,276
|
|
Richard S. Sanders Jr.
|
|
$
|
6,549
|
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Director
Compensation.
Under Terras director compensation policy, Mr. Henry
R. Slack, Chairman of the Board, receives an annual cash
retainer of $100,000 (paid quarterly). Terras other
non-employee directors each receive an annual cash retainer of
$27,500 (paid quarterly) and meeting fees of $1,250 per meeting
attended, including committee meetings. Mr. David
E. Fisher receives an additional annual cash retainer of
$10,000 (paid quarterly) for serving as Chairman of the Audit
Committee. Ms. Martha O. Hesse, Chairman of the
Nominating and Corporate Governance Committee, and Mr. Dod
A. Fraser, Chairman of the Compensation Committee, each
receive an additional annual cash retainer of $4,000 (paid
quarterly) for serving as committee
19
chairs. Directors who are employees of Terra, currently only
Mr. Michael L. Bennett, do not receive additional
separate compensation for service on the Board.
Non-employee directors also receive a portion of their
compensation in the form of fully vested Terra Common Shares.
The number of Terra Common Shares awarded to directors under
these stock awards is determined by reference to a fixed-dollar
amount divided by the price for Terra Common Shares for the
previous 20 trading days immediately preceding the date of
grant, rounded up to the next whole Terra Common Share. The
dollar value used in the numerator is $150,000 for all
non-employee directors, except for Mr. Slack, whose
numerator is $225,000. In addition, the Board has determined
that each newly elected outside director will receive,
simultaneously with his or her election to the Board, an initial
grant of Terra Common Shares that is equivalent to the annual
equity grant described above.
Indemnification
of Directors and Officers.
Section 2-418
of the Maryland General Corporation Law (the
MGCL) permits a corporation to indemnify
directors and officers (each an indemnified
person), among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by
them in connection with any proceeding to which they may be a
party by reason of their service in those capacities, unless it
is established that (i) the act or omission of such
indemnified person was material to the matter giving rise to the
proceeding and was either committed in bad faith or was the
result of active and deliberate dishonesty, (ii) the
indemnified person actually received an improper personal
benefit in money, property or services or (iii) in the case
of any criminal proceeding, such indemnified person had
reasonable cause to believe that the act or omission was
unlawful.
Pursuant to Article Seventh of its Charter, Terra
indemnifies (i) its directors to the full extent provided
by the general laws of Maryland, including the advance of
expenses under the procedures provided by such laws,
(ii) its officers to the same extent it indemnifies its
directors and (iii) its officers who are not directors to
such further extent as shall be authorized by the Board and be
consistent with law. Terras Bylaws similarly provide for
mandatory indemnification of Terras directors and officers
to the maximum extent permitted by Maryland law. Terra has also
entered into indemnification agreements with its directors and
executive officers. These agreements provide for the maximum
indemnity available under the MGCL, as well as certain
procedural requirements in order to obtain indemnification, the
timing of required determinations, indemnification payments,
advancement of expenses and the rights of directors and officers
in the event Terra fails to provide indemnification or advance
expenses. Terra has also purchased liability insurance for its
officers and directors, which provides coverage against certain
liabilities for actions taken by such individuals in their
capacities as such, including liabilities under the Securities
Act.
Terras Charter provides that, to the fullest extent
permitted by Maryland law, no director or officer will be
personally liable to the Company or its stockholders for money
damages.
Section 2-405.2
of the MGCL provides that a corporations charter may
include any provision expanding or limiting the liability of its
directors and officers to the corporation or its stockholders as
described under
Section 5-418
of the Courts and Judicial Proceedings Article of the Annotated
Code of Maryland (the CJP Article).
Section 5-418
of the CJP Article provides that the charter of a Maryland
corporation may include any provision expanding or limiting the
liability of its directors and officers to the corporation or
its stockholders for money damages, but may not include any
provision that restricts or limits the liability of its
directors or officers to the corporation or its stockholders:
(i) to the extent that it is proved that the person
actually received an improper benefit or profit in money,
property or services for the amount of the benefit or profit in
money, property or services actually received or (ii) to
the extent that a judgment or other final adjudication adverse
to the person is entered in a proceeding based on a finding in
the proceeding that the persons action, or failure to act,
was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding.
The Merger Agreement requires CF to cause, from and after the
Acceptance Time, Terra and, if after the consummation of the
Second-Step Merger, the Surviving Corporation, to indemnify all
current and former directors and officers of Terra to the
fullest extent permitted by law for acts or omissions occurring
at or prior
20
to the effective time of the Second-Step Merger and to honor all
existing rights to indemnification in favor of such directors
and officers.
The Merger Agreement requires CF to cause, from and after the
Acceptance Time, Terra and, if after the consummation of the
Second-Step Merger, the Surviving Corporation, to maintain the
current directors and officers liability insurance
(or substitute insurance of at least the same coverage and
amounts and on equal or better terms) for six years following
the effective time of the Second-Step Merger. However, the
Surviving Corporation will not be required to pay premiums that
on an annual basis exceed 300% of the current annual aggregate
premiums paid by Terra.
|
|
ITEM 4.
|
THE
SOLICITATION OR RECOMMENDATION.
|
Solicitation
or Recommendation.
For the reasons set forth below, the Board by unanimous vote of
those directors voting with one absent director separately
indicating agreement determined that the Offer, the Second-Step
Merger and the other transactions contemplated by the Merger
Agreement are advisable to, and in the best interests of, Terra
and its stockholders and by unanimous vote of those directors
voting with one absent director separately indicating agreement
approved the Merger Agreement, the Offer, the Second-Step Merger
and the other transactions contemplated by the Merger Agreement.
The Board by unanimous vote of those directors voting with one
absent director separately indicating agreement recommends that
Terra stockholders accept the Offer by tendering their Terra
Common Shares into the Offer and approve the Second-Step Merger
(to the extent such approval is required under Maryland law for
the consummation of the Second-Step Merger).
Background
of the Offer and Reasons for Recommendation.
Background
of the Offer.
During the period from May 2008 to July 2008, Dr. Thorleif
Enger, then President and Chief Executive Officer of Yara
International ASA (Yara), and
Mr. Michael L. Bennett, President and Chief Executive
Officer of Terra, had conversations regarding Yaras
interest in a possible strategic transaction between Yara and
Terra. During this period, Mr. Bennett told Dr. Enger
that he had discussed Yaras interest with the Board,
however the Board was not convinced that it was the right time
for Terra to pursue a business combination transaction and Yara
ultimately turned its attention to an alternative transaction.
On January 15, 2009, CF made an unsolicited proposal to
acquire Terra in exchange for CF Common Stock, and on
February 23, 2009, CF commenced an exchange offer for all
of the outstanding Terra Common Shares. On February 25,
2009, Agrium Inc. (Agrium) made an
unsolicited proposal to acquire CF for a mix of cash and Agrium
common stock, conditioned upon CF not acquiring Terra. During
2009, CF made seven unsolicited proposals for a business
combination with Terra, and Agrium made several revised
proposals for a business combination with CF. CF eventually
changed the form of consideration to a mix of cash and CF Common
Stock in its unsolicited proposal to Terra of November 1,
2009. Under that proposal, CF proposed to acquire Terra on the
basis of $24.50 in cash (net of Terras previously declared
$7.50 per Terra Common Share special cash dividend (as described
below)) and 0.1034 of a share of CF Common Stock for each Terra
Common Share. CFs November 1 proposal had a value of
$33.11 per Terra Common Share, based on CFs closing stock
price on Friday, October 30, 2009.
Each of CFs proposals made during 2009 was carefully
considered by the Board, with the assistance of Terras
legal advisors, Cravath, Swaine & Moore LLP
(Cravath) and Wachtell, Lipton,
Rosen & Katz (Wachtell and together
with Cravath, the Legal Advisors),
Terras financial advisor, Credit Suisse Securities (USA)
LLC (Credit Suisse), and Mr. William R.
Loomis, Jr., the former Chairman of the Board, who had been
engaged by the Board as a consultant in January 2009 (together
with the Legal Advisors and Credit Suisse, the
Advisors). The Board unanimously rejected
each such proposal as being contrary to the best interests of
Terra and its stockholders for, among other things, failure to
appropriately value Terra.
In furtherance of its proposals for a business combination with
Terra, on February 3, 2009 and again on September 9,
2009, CF notified Terra that it had nominated and would solicit
proxies for an opposition slate
21
of three nominees for election as directors at Terras 2009
annual meeting of stockholders. On October 14, 2009, CF
filed a definitive proxy statement with the SEC with respect to
such solicitation.
Following the public announcement of CFs initial proposal
in January 2009, Mr. Jørgen Ole Haslestad, President
and Chief Executive Officer of Yara, telephoned Mr. Bennett
to express Yaras continued interest in Terra. Throughout
the course of 2009, Mr. Bennett engaged in preliminary
conversations with the chief executive officers of several
companies in the industry, including Yara, to gauge their
possible interest in an alternative transaction to a CF/Terra
combination. In furtherance of those conversations, Terra
entered into confidentiality agreements with two such companies
in August and September of 2009.
On August 6, 2009, CF announced that the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), pre-merger waiting period applicable to a
CF/Terra combination had expired at 11:59 p.m., Eastern
time, on August 5, 2009.
On August 31, 2009, CF announced that the exchange offer
commenced in February 2009 had expired and would not be
extended. No Terra Common Shares were purchased by CF pursuant
to the exchange offer.
On September 28, 2009, CF announced that it had acquired
6,985,048 common shares, or approximately 7%, of Terra, in the
open market at a cost of approximately $247 million.
On October 29, 2009, Terra issued a press release
announcing that the Board had declared a $7.50 per Terra Common
Share special cash dividend. The special cash dividend was paid
to Terra stockholders on December 11, 2009.
On November 13, 2009, CF sent a letter to the Board stating
that if Terra stockholders elected CFs three nominees to
the Board at Terras 2009 annual meeting, CF would not
object if the Board decided to reappoint Terras three
incumbent directors.
During the morning of November 20, 2009, Terra held its
2009 annual meeting of stockholders. Later that day, Terra
issued a press release announcing that based on a preliminary
review of the proxies voted at the annual meeting, it appeared
that Terra stockholders had elected to the Board the three
individuals nominated by CF.
On the evening of November 20, 2009, representatives of CF
contacted representatives of Terra to express CFs interest
in negotiating a proposed merger agreement over that weekend.
The next day, a representative of CFs legal advisor,
Skadden, Arps, Slate, Meagher & Flom LLP and
Affiliates (Skadden), provided a draft merger
agreement to a representative of Cravath, reflecting the terms
of CFs proposal of November 1, 2009, and including a
go-shop with a proposed
break-up fee
of $150 million, plus expense reimbursement.
On November 22, 2009, the Board held a meeting by
teleconference to discuss CFs approach of
November 20, 2009, and to review such approach with
Terras Advisors. The Board unanimously rejected engagement
with CF on those terms. At that same meeting, the Board, by a
unanimous vote of those directors whose terms did not expire in
2009, expanded the number of directors constituting the whole
Board to eleven, effective as of the time the results of the
election of directors at the 2009 annual meeting of stockholders
were certified and declared final, and voted to fill the
vacancies created at such time by reappointing Ms. Martha
O. Hesse, Mr. Dennis McGlone and Mr. Henry R. Slack to
the Board.
On December 1, 2009, Mr. Bennett and Mr. Loomis
met with Mr. Haslestad and Mr. Hallgeir Storvik, Chief
Financial Officer and Head of Strategy of Yara, in London,
United Kingdom. They discussed in general terms Yaras
expressions of interest to Terra regarding the possibility of a
strategic transaction. Mr. Storvik described the nature of
the approvals and financing which would be required by Yara if
the parties were to pursue a transaction. There was no
negotiation concerning price or other terms. However,
Mr. Haslestad stated that he believed the value of a Yara
proposal would be competitive with that proposed by CF in its
most recent proposal and that the form of consideration would be
all cash. Mr. Haslestad also stated that Yara had no
interest in participating in a bidding contest.
On the same day, Terra issued a press release confirming that
Terra stockholders had elected CFs three nominees to the
Board.
22
During the morning of December 4, 2009, Mr. Haslestad
telephoned Mr. Bennett to inform him that he had discussed
with Yaras board of directors a potential transaction with
Terra, and that Yara would be in a position to match the value
of the proposal made by CF on November 1, 2009, with an all
cash proposal, if Terra decided it was interested in pursuing a
transaction. Mr. Haslestad again reiterated that while Yara
would be interested in exploring a transaction with Terra, it
would not be drawn into a bidding contest.
During the afternoon of December 4, 2009, CF submitted to
the Board its seventh unsolicited proposal over the course of
the year, pursuant to which CF proposed to acquire all of the
outstanding Terra Common Shares for $29.25 in cash (net of
Terras previously declared $7.50 per Terra Common Share
special cash dividend) and 0.1034 of a share of CF Common Stock
for each Terra Common Share. In its December 4, 2009 letter
to the Board, CF stated that it had previously provided to Terra
a form of merger agreement that it was prepared to enter into,
but proposed a revised
break-up fee
of $1 per Terra Common Share, plus expense reimbursement.
CFs December 4 proposal had a value of $38.41 per Terra
Common Share, based on CFs closing stock price that day.
Later that day, a representative of Skadden submitted to a
representative of Cravath a confirmatory due diligence request
list on behalf of CF. Representatives of CF and Terra engaged in
several general conversations over the course of that weekend,
during which time representatives of CF stated that CFs
most recent proposal was its all in value and that
CF had at most nickels and quarters left in the
context of signing a transaction. Those statements, and the
statement that CF had emptied its pockets, were
repeated in press accounts following public disclosure of
CFs proposal on December 7, 2009, and attributed to
representatives of CF.
On December 5, 2009, Mr. Bennett telephoned
Mr. Haslestad to inform him of CFs revised proposal.
On the same day, Mr. Bennett called the chief executive
officers of the two other companies in the industry with which
Terra had previously entered into confidentiality agreements, to
gauge their interest in a potential business combination
transaction with Terra. Both chief executive officers indicated
that their companies would not be interested in pursuing such a
transaction with Terra.
On December 6, 2009, at a meeting of the Board held by
teleconference, the Board reviewed CFs proposal of
December 4, 2009 with Terras Advisors, and was
provided with an update on communications with CFs
advisors and on Mr. Bennetts conversations with the
chief executive officers of three companies in the industry,
including Yaras Chief Executive Officer,
Mr. Haslestad.
Following some initial due diligence by Yara on December 7,
2009, Messrs. Bennett and Haslestad had several telephone
conversations on December 7 and 8, 2009 to further discuss
Yaras view as to value. Mr. Haslestad indicated to
Mr. Bennett that he felt confident that Yara would be in a
position to make an all-cash offer that would be competitive
with CFs most recent proposal.
On December 9, 2009, at a regularly scheduled meeting of
the Board, and again on December 13, 2009, at a meeting of
the Board held by teleconference, the Board reviewed CFs
proposal of December 4, 2009, with Terras Advisors.
Representatives of Terras Legal Advisors reviewed with the
Board their duties as directors under Maryland law, and Credit
Suisse reviewed with the Board its financial analysis of
CFs proposal. The Board was also provided with an update
on communications with CFs advisors, on
Mr. Bennetts conversations with the chief executive
officers of the three companies in the industry with whom
Mr. Bennett had spoken since CFs latest proposal,
including Yaras Chief Executive Officer,
Mr. Haslestad, and on stockholder reaction to CFs
proposal. On December 13, 2009, the Board unanimously
rejected CFs proposal of December 4, 2009. The Board
also authorized Mr. Bennett to continue his conversations
with Mr. Haslestad in order to determine Yaras
seriousness as a potential bidder and ascertain Yaras
ultimate position on valuation.
On December 15, 2009, CF issued a press release announcing
that it would allow its financing commitments for its proposed
acquisition of Terra to expire on December 31, 2009.
On December 17, 2009, Terra and Yara executed a
confidentiality agreement, which was subsequently amended as of
February 6, 2010. During the next several weeks, Yara
continued its review of Terras business.
23
On January 4, 2010, a representative of CFs financial
advisor, Morgan Stanley & Co. Incorporated
(Morgan Stanley), telephoned a representative
of Credit Suisse to request that Terra provide to CF whatever
information was reviewed by the Board in connection with its
decision to reject CFs proposal of December 4, 2009,
as well as the confirmatory due diligence requested in such
proposal. The representative of Credit Suisse telephoned the
representative of Morgan Stanley on January 12, 2010, to
inform him that Terra had declined to provide CF with the
information requested.
On January 8, 2010, Mr. Haslestad telephoned
Mr. Bennett to inform him that Yaras board of
directors continued to be supportive of a potential transaction
with Terra, but had certain preconditions. Mr. Haslestad
sent a confirming note stating that Yara would be able to match
and add a margin on top of the value of CFs proposal of
December 4, 2009, subject to certain conditions, including
that Terra commit to negotiate exclusively with Yara for a
period of 30 working days. The note also stated that the
definitive merger agreement would need provision for Norwegian
Parliamentary approval of an equity issuance by Yara.
On January 10, 2010, Mr. Bennett telephoned
Mr. Haslestad to tell him that his note did not provide
sufficient clarity as to the terms Yara was prepared to propose
for a potential transaction to merit its consideration by the
Board. Accordingly, Mr. Bennett suggested that the parties
and their respective legal and financial advisors meet in New
York later in the week to discuss with more specificity
Yaras proposal as to price, deal certainty and deal
protection.
On January 13, 2010, Mr. Bennett and representatives
of Terras Legal Advisors met with Mr. Trygve
Faksvaag, Chief Legal Counsel of Yara, and representatives of
Yaras legal advisor, Latham & Watkins LLP
(Latham), to discuss certain of the terms and
conditions in the January 8, 2010 note from
Mr. Haslestad. During the meeting, Terras Legal
Advisors stated that valuation, deal certainty and deal
protection would be critical to the Boards assessment of
whether to even consider Yaras requirement that Terra
enter into exclusive discussions with it.
Later that afternoon, Mr. Bennett and Mr. Haslestad
met at the offices of Cravath in New York, New York and further
discussed certain of the terms and conditions in the
January 8, 2010 note from Mr. Haslestad. In that
discussion, Mr. Haslestad stated that his view as to value
was $40.75 in cash per Terra Common Share, that he was firm in
his view and that he saw no basis for continuing discussions
unless that was understood.
On January 14, 2010, CF announced, without prior notice to
Terra, that it had withdrawn its proposal to acquire Terra, that
it had sold all of its Terra Common Shares and that it was no
longer pursuing a business combination with Terra.
On January 15, 2010, Mr. Haslestad telephoned
Mr. Bennett to inform him that Yaras board of
directors had formally authorized Mr. Haslestad to offer to
acquire all of the outstanding Terra Common Shares for $40.75
per share in cash.
On January 20, 2010, Mr. Haslestad sent
Mr. Bennett a letter outlining Yaras non-binding
expression of interest for the potential acquisition of Terra.
In the letter, Mr. Haslestad stated his expectation that
Terra would agree to negotiate exclusively with Yara for a
period of 20 days, and stated that Yara was interested in
acquiring through a merger all of the outstanding Terra Common
Shares for $40.75 per share in cash. The letter further
indicated that Yara would require a $200 million
break-up fee
if the transaction was not consummated for certain customary
reasons, and that Yara would be willing to agree to a reverse
break-up fee
of equivalent size payable in the event Yaras required
stockholder approval for its proposed equity issuance was not
received.
On January 22, 2010, the Board held a meeting by
teleconference to review Mr. Haslestads letter of
January 20, 2010, with Terras Advisors. Later that
day, Mr. Bennett telephoned Mr. Haslestad to inform
him that the Board had authorized Mr. Bennett to pursue
further discussions with Yara and grant exclusivity to Yara.
Over the next several days, the parties and their respective
legal advisors negotiated the terms of an exclusivity agreement.
Terra and Yara entered into an exclusivity agreement dated as of
January 24, 2010, pursuant to which the parties agreed to
negotiate exclusively with one another for a period starting on
the date
24
of such agreement and ending at 11:59 p.m., New York
City time, on February 14, 2010, which included a right of
Terra, consistent with the duties of the directors, to engage in
discussions with third parties who approached it on an
unsolicited basis during the exclusivity period. No third
parties approached Terra with an unsolicited proposal for a
business combination during the exclusivity period.
On January 24, 2010, Mr. Bennett and
Mr. Haslestad met at the offices of Cravath in New York,
New York to discuss the proposed terms contained in
Mr. Haslestads letter of January 20, 2010.
On February 1, 2010, Mr. Haslestad sent
Mr. Bennett a letter outlining Yaras revised
non-binding expression of interest for the potential acquisition
of Terra. In the letter, Mr. Haslestad indicated that,
subject to the completion of confirmatory due diligence, the
execution of definitive documentation and the receipt of
required approvals for the execution of such definitive
documentation, Yara was interested in acquiring through a merger
all of the outstanding Terra Common Shares for $41.10 per share
in cash, subject to increase in the event Yara did not hold a
stockholders meeting to approve Yaras proposed equity
issuance within 90 days of signing the merger agreement.
The letter stated that the definitive merger agreement would
provide for a
break-up fee
and reverse
break-up fee
symmetrically sized at 3% of the transaction value and that the
transaction would not be subject to any financing condition
beyond the approval of the equity issuance at the Yara
stockholders meeting. The letter further stated that the terms
and conditions contained therein constituted Yaras
best and final offer.
On February 2, 2010, the Board held a meeting by
teleconference to review Mr. Haslestads letter of
February 1, 2010, with Terras Advisors. Later that
day, Mr. Bennett telephoned Mr. Haslestad to inform
him that the Board had authorized him to pursue further
discussions with Yara.
On the evening of February 2, 2010, Terras Legal
Advisors submitted a draft merger agreement to Latham. During
the period from February 5, 2010 through February 11,
2010, negotiations took place between Mr. Bennett and
Terras Legal Advisors, on the one hand, and
Mr. Haslestad, Mr. Faksvaag and Latham, on the other
hand, in respect of issues relating to the merger agreement.
During the afternoon of February 12, 2010, at a special
meeting of the Board, the Board reviewed with its Advisors the
proposed definitive Yara merger agreement that had been
negotiated between representatives of Terra and Yara. At this
meeting, Credit Suisse delivered to the Board an oral opinion,
which opinion was confirmed by delivery of a written opinion
dated February 12, 2010, to the effect that as of that date
and based upon and subject to the qualifications, limitations
and assumptions set forth therein, the $41.10 in cash per share
to be received by the holders of Terra Common Shares pursuant to
the Yara merger agreement was fair, from a financial point of
view, to such holders. Following extensive discussion and
deliberations, the Board unanimously approved the Yara merger
agreement.
Following the February 12, 2010 meeting of the Board, the
parties executed the Yara merger agreement and, on
February 15, 2010, Terra issued a press release announcing
the Yara transaction.
On March 2, 2010, Mr. Stephen R. Wilson, President and
Chief Executive Officer of CF, sent a letter to the Board
setting forth an unsolicited offer from CF to acquire Terra for
consideration consisting of $37.15 in cash and 0.0953 of a share
of CF Common Stock per Terra Common Share. CFs March 2
proposal had a value of $47.40 per Terra Common Share, based on
CFs closing stock price on March 1, 2010.
On the same day, Terra issued a press release confirming receipt
of the above letter and announcing that the Board would evaluate
the terms of the CF proposal and would have no further comment
until the Board had completed this evaluation. Later that day,
Terra sent written notice to Yara of Terras receipt of the
CF proposal.
Over the next several days, Mr. Bennett and
Mr. Haslestad and representatives of Terras and
Yaras respective financial advisors had several telephone
conversations to discuss the CF proposal.
During the afternoon of March 3, 2010, at a meeting of the
Board held by teleconference, the Board reviewed CFs
proposal of March 2, 2010. During that meeting, the Board
unanimously determined that CFs proposal of March 2,
2010 could reasonably be expected to result in a Superior
Proposal (as such term was defined in the Yara merger agreement).
25
On March 5, 2010, CF commenced an exchange offer for all of
the outstanding Terra Common Shares at the same price per share
set forth in its March 2, 2010 letter. On the same day, a
representative of Skadden sent to a representative of Cravath
the draft form of merger agreement included in the exchange
offer materials filed by CF with the SEC. Later that day, Terra
sent written notice to Yara of Terras receipt of the draft
Merger Agreement.
On March 6, 2010, Terras Legal Advisors submitted to
Skadden comments on the draft Merger Agreement and a
confirmatory due diligence request list on behalf of Terra.
On March 7, 2010, Mr. Wilson telephoned
Mr. Bennett and they had a brief conversation.
On March 8, 2010, Mr. Haslestad telephoned
Mr. Bennett to discuss an upcoming meeting they were
scheduled to have relating to integration matters.
On the same day, Terras Legal Advisors had several
telephonic discussions with representatives of Skadden regarding
Terras comments on the draft Merger Agreement. Also that
day, representatives of Terra and Terras Advisors
conducted a due diligence telephone conference with
representatives of CF, Morgan Stanley and Skadden.
On March 9, 2010, at a meeting of the Board held by
teleconference, the Board reviewed the terms and conditions of
the draft Merger Agreement, including the agreed resolution of
Terras comments and remaining open items, with
Terras Advisors, and was provided with an update on
Mr. Bennetts communications with Mr. Haslestad
and Mr. Wilson. After discussion, the Board determined that
CFs proposal was reasonably expected to be consummated and
was more favorable to Terra stockholders than the Yara merger
and the other transactions contemplated by the Yara merger
agreement from a financial point of view, taking into account
all financial, regulatory, legal and other aspects of such
proposal, and, as such, constituted a Superior Proposal (as such
term was defined in the Yara merger agreement). The Board
delegated to a committee of two directors the authority to
execute and deliver the requisite notice to Yara under the Yara
merger agreement upon receipt of a final form of Merger
Agreement from CF reflecting resolution of the remaining open
items in a manner acceptable to the committee.
Later that day, Skadden sent Terras Legal Advisors a
revised form of Merger Agreement. The parties negotiated final
comments to that form of agreement and on March 10, 2010,
it was executed by CF, together with a letter agreement
governing how long CFs binding offer would remain
outstanding and stating that CF would pay (on behalf of Terra)
the termination fee to Yara under the Yara merger agreement.
Terra then notified Yara that the Board had determined that
CFs proposal, as reflected in the form of Merger Agreement
attached to such notice, was a Superior Proposal (as such term
was defined in the Yara merger agreement), that the five
business day match period provided for in the Yara merger
agreement would expire at 5:00 p.m., Eastern time, on
March 17, 2010 and of Terras intent to terminate the
Yara merger agreement following such match period and,
thereafter, Terra notified CF that it provided such notice to
Yara.
On March 10, 2010, Mr. Bennett telephoned
Mr. Haslestad to discuss the notice provided to Yara by the
Board earlier that day.
On March 11, 2010, Terra received a letter from Yara
informing it that Yara did not intend to make a proposal that
would be at least as favorable to the stockholders of Terra as
the CF proposal and waiving its right to exercise the five
business day match right under the Yara merger agreement.
During the afternoon of March 11, 2010, at a meeting of the
Board held by teleconference, the Board discussed the letter
received from Yara earlier that day and the form of Merger
Agreement that had been previously negotiated between
representatives of Terra and CF and executed by CF. At this
meeting, representatives of Terras Legal Advisors reviewed
with the Board their duties as directors under Maryland law.
Also at this meeting, Credit Suisse reviewed with the Board its
financial analysis of the $37.15 in cash and 0.0953 of a
share of CF Common Stock per Terra Common Share to be received
by the holders of such shares and delivered to the Board an oral
opinion, which opinion was confirmed by delivery of a written
opinion dated March 11, 2010, to the effect that as of that
date and based upon and subject to the qualifications,
limitations and assumptions set forth therein, the $37.15 in
cash and 0.0953 of a share of CF
26
Common Stock per Terra Common Share to be received by the
holders of such shares pursuant to the Offer and the Second-Step
Merger is fair, from a financial point of view, to such holders.
Following further discussion, and after consultation with
Terras Advisors, the Board by unanimous vote of those
voting with one absent director separately indicating agreement
(i) approved the Merger Agreement, the Offer, the
Second-Step Merger and the other transactions contemplated by
the Merger Agreement, (ii) declared that the Offer, the
Second-Step Merger and the other transactions contemplated by
the Merger Agreement are advisable to, and in the best interests
of, Terra and its stockholders and (iii) recommended that
Terra stockholders accept the Offer by tendering their Terra
Common Shares into the Offer and approve the Second-Step Merger
(to the extent such approval is required under Maryland law for
the consummation of the Second-Step Merger).
Later that day, Agrium announced that it will no longer pursue
an acquisition of CF or the election of its nominees to the CF
board of directors and will allow its unsolicited exchange offer
for CF to expire on March 22, 2010.
On March 12, 2010, Terra notified Yara and CF that the
Board had elected to terminate the Yara merger agreement. CF
paid (on behalf of Terra) to Yara the termination fee due under
the Yara merger agreement which terminated in accordance with
its terms. Concurrently with the termination of the Yara merger
agreement, Terra executed the Merger Agreement.
Later that day, CF and Terra issued a joint press release
announcing the Merger Agreement. For a summary of certain terms
of the Merger Agreement, please see Item 3. Past
contacts, Transactions, Negotiations and AgreementsMerger
Agreement. Such summary does not purport to be
complete and is qualified in its entirety by reference to the
Merger Agreement, which is filed as Exhibit (a)(8) hereto and is
incorporated herein by reference.
On March 15, 2010, Terra converted all of its outstanding
Series A Preferred Stock into Terra Common Shares pursuant
to the terms and conditions applicable to such series. As of
such date, no shares of Series A Preferred Stock remained
outstanding.
Reasons
for the Recommendation.
After careful consideration, the Board by unanimous vote of
those directors voting with one absent director separately
indicating agreement approved the Merger Agreement, the Offer,
the Second-Step Merger and the other transactions contemplated
by the Merger Agreement, declared that the Offer, the
Second-Step Merger and the other transactions contemplated by
the Merger Agreement are advisable to, and in the best interests
of, Terra and its stockholders and recommended that Terra
stockholders accept the Offer by tendering their Terra Common
Shares into the Offer and approve the Second-Step Merger (to the
extent such approval is required under Maryland law for the
consummation of the Second-Step Merger).
In the course of reaching its decision to approve the Merger
Agreement, the Offer, the Second-Step Merger and the other
transactions contemplated by the Merger Agreement, the Board
consulted with Terra management, as well as its financial and
legal advisors, and considered a number of factors that it
believed supported its decision, including the following:
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recent and historical market prices for Terra Common Shares, as
compared to the financial terms of the Offer, including the fact
that the nominal price to be paid in the Offer (based on
CFs closing stock price on March 11, 2010) represents
a 40.6% premium over Terras closing stock price on
February 12, 2010, the last trading day prior to the
announcement of the Yara merger agreement;
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the fact that Terra had previously entered into the Yara merger
agreement pursuant to which Yara would have acquired Terra at a
purchase price of $41.10 in cash per Terra Common Share and that
the nominal value of the Offer (based on CFs closing stock
price on March 11, 2010) represents a 13.7% premium over
such purchase price;
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that CF has obtained U.S. antitrust clearance and the Offer
does not require EU antitrust approval or review by CFIUS;
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27
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that the Offer is not subject to the approval of CFs
stockholders, otherwise has limited conditions and is expected
to close in April 2010;
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its knowledge of Terras business, operations, financial
condition, earnings and prospects, as well as the risks in
achieving those prospects;
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its knowledge of the current industry environment affecting
Terra, including the trend toward consolidation in the
fertilizer industry and the strong correlation between general
macroeconomic conditions and industry conditions;
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the financial analyses reviewed and discussed with the Board by
representatives of Credit Suisse on March 11, 2010, as well
as the oral opinion of Credit Suisse rendered to the Board on
such date (which was subsequently confirmed in writing by
delivery of Credit Suisses written opinion dated the same
date) to the effect that as of such date and based upon and
subject to the assumptions, limitations and qualifications set
forth therein, the $37.15 in cash and 0.0953 shares of CF Common
Stock per Terra Common Share to be received by the holders of
such shares pursuant to the Offer and the Second-Step Merger was
fair, from a financial point of view, to such stockholders. The
summary of Credit Suisses opinion in this Statement is
qualified in its entirety by the full text of Credit
Suisses opinion, which is attached to this Statement as
Annex B;
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the fact that the Offer consideration consists primarily of
cash, providing Terra stockholders with certainty of value and
liquidity, while the stock consideration included in the Offer
consideration allows Terra stockholders the ability to
participate in the growth and long-term value creation potential
of the combined company, including the expected synergies;
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its assessment of the Offer consideration in light of knowledge
acquired over the past year through CFs public proposals,
Terras negotiations with Yara and managements
private discussions with other industry participants;
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its belief that the Merger Agreement, the Offer, the Second-Step
Merger and the other transactions contemplated by the Merger
Agreement were more favorable to Terra stockholders than other
strategic alternatives reasonably available to Terra and its
stockholders;
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the fact that, subject to compliance with the terms and
conditions of the Merger Agreement, Terra is permitted to
furnish information to and conduct negotiations with any third
party that makes a bona fide written unsolicited acquisition
proposal for Terra;
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the fact that, subject to compliance with the terms and
conditions of the Merger Agreement, Terra is permitted to
terminate the Merger Agreement in order to enter into an
agreement with respect to a superior proposal after giving CF
the opportunity to match the superior proposal and upon the
payment to CF of a termination fee and the reimbursement of the
Yara termination fee paid by CF;
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the fact that the terms and conditions of the Merger Agreement
and the transactions contemplated by the Merger Agreement,
including the level of commitment by CF to obtain competition
approvals and the absence of a financing condition, provide
Terra with reasonable certainty that CF will be required to
purchase Terra Common Shares tendered in the Offer and to close
the Second-Step Merger on a timely basis; and
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the fact that if the Offer fails to close because of
(i) the failure of the Canadian Regulatory Condition, the
failure of the Registration Statement Condition or the failure
of the NYSE Listing Condition or (ii) the imposition of
certain injunctions preventing the closing of the Offer or the
Second-Step Merger, and the Merger Agreement is terminated, CF
would be required to pay Terra a $123 million termination
fee.
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The Board also considered a number of risks and other
potentially negative factors concerning the Merger Agreement,
the Offer, the Second-Step Merger and the other transactions
contemplated by the Merger Agreement, including the following:
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the fact that the Offer consideration consists primarily of
cash, which, while providing certainty of value, would not allow
Terra stockholders to participate more fully in the Surviving
Corporations
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28
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future earnings or growth or to derive a greater benefit from
any appreciation in the value of CF Common Stock after the
consummation of the Offer;
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the fact that the Offer and the Second-Step Merger might not be
completed in a timely manner or at all due to the necessity of
receiving approvals under the applicable competition laws of
Canada;
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the fact that the stock consideration to be received in the
Offer is difficult to value;
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the potential disruption to Terras business that could
result from the announcement and pendency of the Offer or the
Second-Step Merger, including the possible diversion of
management and employee attention, potential employee attrition
and the potential effect on Terras business relationships;
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the restrictions on Terras ability to solicit or engage in
discussions or negotiations regarding alternative business
combination transactions, subject to specified exceptions, and
the requirement that Terra pay a termination fee and reimburse
CF for its payment of the Yara termination fee in order to
accept a superior proposal, which may discourage a competing
proposal to acquire Terra that may be more advantageous to Terra
stockholders;
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the inclusion in the Merger Agreement of a non-solicitation
covenant and provision for Terras payment of a termination
fee of $123 million to CF and the reimbursement of the Yara
termination fee paid by CF in the case of certain events, which
the Board understood, while potentially having the effect of
discouraging third parties from proposing a competing business
combination transaction after the Merger Agreement was signed,
were conditions to CFs willingness to enter into the
Merger Agreement;
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that CF is not obligated to purchase any Terra Common Shares in
the Offer unless, among other things, the Minimum Tender
Condition, the Registration Statement Condition and the NYSE
Listing Condition are satisfied, there shall be no law, order or
injunction that prohibits the consummation of the Offer or the
Second-Step Merger and Terra shall have complied with its
covenants and shall not have breached its representations and
warranties (subject to applicable materiality
qualifiers); and
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the restrictions on Terras business prior to the
consummation of the Offer, requiring Terra to conduct its
business in all material respects only in the ordinary course of
business and consistent with past practice, subject to specified
limitations, which may delay or prevent Terra from undertaking
business opportunities that may arise during the term of the
Merger Agreement, whether or not the Offer is consummated.
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The foregoing discussion of the factors considered by the Board
is not intended to be exhaustive, but, rather, includes the
material factors considered by the Board. In reaching its
decision to approve the Merger Agreement, the Offer, the
Second-Step Merger and the other transactions contemplated by
the Merger Agreement, the Board did not quantify or assign any
relative weights to the factors considered, and individual
directors may have given different weights to different factors.
The Board did not reach any specific conclusion on each factor
considered, but, with the assistance of Terra management and its
financial and legal advisors, conducted an overall review of
these factors.
Intent
to Tender.
To the knowledge of Terra, after making reasonable inquiry, all
of Terras directors, executive officers, affiliates and
subsidiaries currently intend to tender all Terra Common Shares
held of record or beneficially owned by such person pursuant to
the Offer.
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ITEM 5.
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PERSONS/ASSETS
RETAINED, EMPLOYED, COMPENSATED OR USED.
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Terra has retained Credit Suisse to act as Terras
financial advisor in connection with the Offer and related
matters. Terra has agreed to pay Credit Suisse certain customary
fees for its services, portions of which became payable upon its
engagement or will become payable during the course of its
engagement. A significant portion of the fees is payable to
Credit Suisse upon consummation of a transaction with any third
party, including upon consummation of the Offer. Credit Suisse
also became entitled to a fee upon the rendering of each of its
fairness opinion in connection with the Merger Agreement and its
fairness opinion in
29
connection with the Yara merger agreement. Terra also has agreed
to reimburse Credit Suisse for all reasonable and customary
expenses, including reasonable fees and expenses of legal
counsel, and to indemnify Credit Suisse and related persons
against certain liabilities, including liabilities under the
federal securities laws, arising out of such engagement. Credit
Suisse also advised Terra in connection with CFs
unsolicited proposals for Terra in 2009, the proxy contest
between CF and Terra related to Terras 2009 annual meeting
of stockholders and Terras proposed merger with Yara.
Terra has also retained William R. Loomis to act as Terras
advisor in connection with the Offer and related matters. Terra
has agreed to pay Mr. Loomis certain fees for his services,
portions of which became payable upon his engagement or will
become payable during the course of his engagement. A
significant portion of the fees is payable to Mr. Loomis
upon consummation of a transaction with any third party,
including upon consummation of the Offer. Terra also has agreed
to reimburse Mr. Loomis for all reasonable and customary
expenses, including reasonable fees and expenses of legal
counsel, and to indemnify Mr. Loomis against certain
liabilities, including liabilities under the federal securities
laws, arising out of such engagement. Mr. Loomis also
advised Terra in connection with CFs unsolicited proposals
for Terra in 2009, the proxy contest between CF and Terra
related to Terras 2009 annual meeting of stockholders and
Terras proposed merger with Yara.
Terra has engaged MacKenzie Partners, Inc.
(MacKenzie) to assist it in connection with
Terras communications with its stockholders in connection
with the Offer and related matters. Terra has agreed to pay
customary compensation to MacKenzie for such services. In
addition, Terra has agreed to reimburse MacKenzie for its
reasonable out-of-pocket expenses and to indemnify it and
certain related persons against certain liabilities relating to
or arising out of the engagement. MacKenzie also advised Terra
in connection with CFs unsolicited proposals for Terra in
2009, the proxy contest between CF and Terra related to
Terras 2009 annual meeting of stockholders and
Terras proposed merger with Yara.
Terra has also retained Joele Frank, Wilkinson Brimmer Katcher
(Joele Frank) as its public relations advisor
in connection with the Offer and related matters. Terra has
agreed to pay customary compensation to Joele Frank for such
services. In addition, Terra has agreed to reimburse Joele Frank
for its reasonable out-of-pocket expenses and to indemnify it
and certain related persons against certain liabilities relating
to or arising out of the engagement. Joele Frank also advised
Terra in connection with CFs unsolicited proposals for
Terra in 2009, the proxy contest between CF and Terra related to
Terras 2009 annual meeting of stockholders and
Terras proposed merger with Yara.
Except as set forth above, neither Terra nor any person acting
on its behalf has or currently intends to employ, retain or
compensate any person to make solicitations or recommendations
to the stockholders of Terra on its behalf with respect to the
Offer or the Second-Step Merger.
30
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ITEM 6.
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INTEREST
IN SECURITIES OF THE SUBJECT COMPANY.
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Securities
Transactions.
No transactions with respect to Terra Common Shares have been
effected by Terra or, to Terras knowledge after making
reasonable inquiry, by any of its executive officers, directors,
affiliates or subsidiaries during the 60 days prior to the
date of this Statement, except as set forth below:
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Number
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Price
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Nature of
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Name of Person
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Transaction Date
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of Shares
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Per Share
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Transaction
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Michael L. Bennett
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February 12, 2010
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98,237
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See Note(a)
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Vesting of Equity Award
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Michael L. Bennett
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February 12, 2010
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68,039
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$33.25
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Withholding of
Shares(b)
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Joe A. Ewing
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February 12, 2010
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12,386
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See Note(a)
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Vesting of Equity Award
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Joe A. Ewing
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February 12, 2010
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6,987
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$33.25
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Withholding of
Shares(b)
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Joseph D. Giesler
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February 12, 2010
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13,383
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See Note(a)
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Vesting of Equity Award
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Joseph D. Giesler
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February 12, 2010
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7,539
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$33.25
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Withholding of
Shares(b)
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Daniel D. Greenwell
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February 12, 2010
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14,807
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See Note(a)
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Vesting of Equity Award
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John W. Huey
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February 12, 2010
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15,946
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See Note(a)
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Vesting of Equity Award
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John W. Huey
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February 12, 2010
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2,928
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$33.25
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Withholding of
Shares(b)
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Richard S. Sanders, Jr.
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February 12, 2010
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12,671
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See Note(a)
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Vesting of Equity Award
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Richard S. Sanders, Jr.
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February 12, 2010
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7,145
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$33.25
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Withholding of
Shares(b)
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Douglas M. Stone
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February 12, 2010
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10,536
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See Note(a)
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Vesting of Equity Award
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Douglas M. Stone
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February 12, 2010
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5,955
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$33.25
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Withholding of
Shares(b)
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(a) |
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Represents additional Terra Common Shares that were issued
pursuant to 200% vesting on February 12, 2010 of
Performance Share Awards that were granted in 2007. |
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(b) |
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Represents Terra Common Shares that were withheld from the
Performance Share Awards that vested on February 12, 2010
to satisfy tax liability. |
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ITEM 7.
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PURPOSES
OF THE TRANSACTION AND PLANS OR PROPOSALS.
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Subject
Company Negotiations.
Except as set forth in this Statement (including in the exhibits
and annexes to this Statement) or as incorporated in this
Statement by reference, Terra is not currently undertaking or
engaged in any negotiations in response to the Offer that relate
to, or would result in, (i) a tender offer for, or other
acquisition of, Terra Common Shares by Terra, any of its
subsidiaries or any other person, (ii) any extraordinary
transaction, such as a merger, reorganization or liquidation,
involving Terra or any of its subsidiaries, (iii) any
purchase, sale or transfer of a material amount of assets of
Terra or any of its subsidiaries or (iv) any material
change in the present dividend rate or policy, or indebtedness
or capitalization, of Terra.
Except as described above or otherwise set forth in this
Statement (including in the exhibits and annexes to this
Statement) or as incorporated in this Statement by reference,
there are no transactions, resolutions of the Board, agreements
in principle or signed contracts in response to the Offer that
relate to, or would result in, one or more of the events
referred to in the preceding paragraph.
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ITEM 8.
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ADDITIONAL
INFORMATION.
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Section 14(f)
Information Statement.
The Information Statement on
Schedule 14f-1
attached as Annex A is being furnished in connection with
the possible designation by CF of certain persons to be
appointed to Terras Board. Such persons, if appointed,
will constitute a majority of Terras Board.
31
Regulatory
Approvals.
U.S.
Antitrust Approval.
The Offer is subject to review by the Federal Trade Commission
(the FTC) and the Antitrust Division of the
U.S. Department of Justice (the Antitrust
Division). Under the HSR Act, the Offer may not
be completed until certain information has been provided to the
FTC and the Antitrust Division and a required waiting period has
expired or has been terminated. The HSR Act notifications made
in connection with CFs prior exchange offer for Terra
remain applicable to the Offer. On August 5, 2009, the
extended waiting period under the HSR Act expired without any
enforcement action and on August 12, 2009, the FTC provided
CF with written notice that it had closed its investigation. CF
has fulfilled its obligations under the HSR Act and may acquire
a majority of Terra Common Shares without any additional filing
under the HSR Act provided that it does so on or before
August 5, 2010. However, at any time before or after the
Offer is completed, either the Antitrust Division or FTC could
take action under the antitrust laws in opposition to the Offer,
including seeking to enjoin the Offer or seeking divestiture of
substantial assets of CF or Terra or their subsidiaries. Private
parties
and/or state
attorneys general also may seek to take legal action under the
antitrust laws under some circumstances. Based upon an
examination of information available relating to the businesses
in which the companies are engaged, Terra believes that the
completion of the Offer will not violate U.S. antitrust
laws. However, Terra can give no assurance that a challenge to
the Offer on antitrust grounds will not be made, or, if such a
challenge is made, that CF will prevail.
Canadian
Antitrust Considerations.
The Offer is also subject to review pursuant to the Competition
Act (Canada). Under the Competition Act (Canada), the Offer may
not be completed until certain information has been provided to
the Canadian Commissioner of Competition (the
Competition Commissioner) and a required
waiting period has expired or been terminated, provided there is
no order in effect prohibiting completion at the relevant time.
In connection with CFs prior exchange offer for Terra, CF
provided such information to the Competition Commissioner and
the required waiting period under the Competition Act (Canada)
expired on March 24, 2009. On June 19, 2009, the
Competition Commissioner issued a no-action letter stating she
did not intend to challenge the proposed transaction. Under the
Competition Act (Canada), the transaction may be completed
within one year of the date that CF provided the required
information to the Competition Commissioner in connection with
its prior exchange offer to Terras stockholders
(March 10, 2009). This one-year period expired on
March 9, 2010. As the one-year period following CFs
submission of the required information to the Competition
Commissioner in connection with its prior exchange offer to
Terras stockholders expired on March 9, 2010, and in
order to ensure compliance with the Competition Act (Canada), CF
submitted its notification and a request for early termination
of the mandatory waiting period concerning the Offer on
March 2, 2010. The waiting period will expire on
April 1, 2010, unless earlier terminated by the Competition
Commissioner or extended pursuant to request for additional
information.
At any time before a merger (as such term is defined
under the Competition Act (Canada)) is completed, even where the
applicable waiting period has expired or been terminated, the
Competition Commissioner may apply to the Competition Tribunal
for an interim order forbidding any person named in the
application from doing any act or thing where it appears to the
Competition Tribunal that such act or thing may constitute or be
directed toward the completion or implementation of a proposed
merger. The Competition Tribunal may issue such an interim order
where the Competition Commissioner requires more time to
complete her inquiry and the Tribunal finds that, in the absence
of an interim order, a party to the proposed merger or another
person is likely to take an action that would substantially
impair the ability of the Competition Tribunal to remedy the
effect of the proposed merger on competition because that action
would be difficult to reverse.
Canada
Transportation Act.
The Offer may be subject to notification under the Canada
Transportation Act. Under the Canada Transportation Act, if the
Offer is subject to notification, it cannot be completed until
certain information has been provided to the Canadian Minister
of Transport (the Transport Minister) and
either the Transport
32
Minister notifies the parties that he is of the opinion that
the Offer does not raise issues with respect to the public
interest as it relates to national transportation or the
transaction is approved by the Governor in Council. Under the
Canada Transportation Act, if the Transport Minister is of the
opinion that a proposed transaction does not raise issues with
respect to the public interest as it relates to national
transportation, he shall give notice to the parties within
42 days of receiving the required information. If the
Transport Minister is of the opinion that a proposed transaction
raises issues with respect to the public interest as it relates
to national transportation, he can initiate a review of the
transaction.
In order to ensure compliance with the Canada Transportation
Act, in connection with CFs prior exchange offer for
Terra, CF provided the required information to the Transport
Minister. The Transport Minister notified CF on April 7,
2009 that the proposed transaction did not raise public interest
issues as it relates to national transportation. In order to
ensure continued compliance with the Canada Transportation Act,
CF submitted an updated notification to the Transport Minister
on March 2, 2010. The initial
42-day
period under the Canada Transportation Act thus expires on
April 13, 2010, unless the Transport Minister issues an
opinion before that date that the Offer does not raise public
interest issues as it relates to national transportation.
Takeover
Laws.
Maryland
Business Combination Act.
The Merger Agreement provides, among other things, that the
Board has declared advisable and approved the Offer and the
Second-Step Merger, subject to any required stockholder
approval, and irrevocably exempted during the term of the Merger
Agreement the Offer and the Second-Step Merger from the
restrictions imposed by the MBCA.
The MBCA would otherwise apply to the Offer, the Second-Step
Merger or any other business combination (as defined
in the MBCA) involving CF or CF Sub (and any of CFs
subsidiaries) and Terra. If the MBCA applied to the Second-Step
Merger, it could significantly delay CFs or CF Subs
(and any of CFs subsidiaries) ability to acquire the
entire equity interest in Terra. The MBCA, in general, prevents
an interested stockholder (generally, a stockholder
beneficially owning 10% or more of a corporations
outstanding voting stock, or an affiliate or associate of the
corporation who beneficially owned 10% or more of the
corporations outstanding voting stock at any time within
the preceding two years) from engaging in a business combination
(such as a merger or consolidation and certain other
transactions) with a Maryland corporation for a period of five
years following the most recent date on which such stockholder
became an interested stockholder. A person is not an interested
stockholder if the corporations board of directors
approved in advance the transaction by which such person would
otherwise have become an interested stockholder. In approving
such a transaction, the board of directors of a corporation may
provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined
by the board of directors of the corporation.
After the five year period following the most recent date on
which such stockholder became an interested stockholder, any
business combination between the Maryland corporation and the
interested stockholder must be recommended by the board of
directors of the corporation and approved by the affirmative
vote of at least (1) 80% of the votes entitled to be cast
by holders of outstanding shares of voting stock of the
corporation, voting together as a single class and
(2) two-thirds of the votes entitled to be cast by holders
of voting stock of the corporation, other than voting stock held
by the interested stockholder with whom or with whose affiliate
the business combination is to be effected or held by an
affiliate or associate of the interested stockholder. These
super-majority vote requirements do not apply if the holders of
common stock receive a minimum price, as defined under the MBCA,
for their shares in the form of cash or other consideration in
the same form as previously paid by the interested stockholder
for its shares.
The statute permits various exemptions from its provisions,
including business combinations that are exempted by the board
of directors prior to the time that the interested stockholder
becomes an interested stockholder. The approval of the board of
directors may be altered or repealed at any time unless the
resolution adopted by the board of directors is made irrevocable
by its terms.
33
Other
State Takeover Laws.
A number of states have adopted takeover laws and regulations
which purport to varying degrees to be applicable to attempts to
acquire securities of corporations which are incorporated in
such states or which have or whose business operations have
substantial economic effects in such states, or which have
substantial assets, security holders, principal executive
offices or principal places of business in such states. If any
state takeover statute is found to be applicable to the Offer or
the Second-Step Merger, the Merger Agreement provides that Terra
and the Board shall use their reasonable best efforts to ensure
that the Offer and the Second-Step Merger may be consummated as
promptly as practicable on the terms contemplated by the Merger
Agreement.
Maryland
Control Share Acquisition Act.
The Maryland Control Share Acquisition Act (the
MCSAA) provides that control
shares of a Maryland corporation acquired in a
control share acquisition have no voting rights
except to the extent approved by a vote of two-thirds of the
votes entitled to be cast on the matter, excluding shares of
stock as to which the acquiring person, officers of the
corporation and employees of the corporation who are also
directors of the corporation are entitled to exercise or direct
the exercise of the voting power of the shares in the election
of directors.
Control shares are voting shares of stock which, if
aggregated with all other shares of stock owned by the acquiror
or in respect of which the acquiror is entitled to exercise or
direct the exercise of voting power (except solely by virtue of
a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following
ranges of voting power: (i) one-tenth or more but less than
one-third, (ii) one-third or more but less than a majority
or (iii) a majority or more of all voting power.
Control shares do not include shares that the
acquiring person is entitled to vote as a result of having
previously obtained stockholder approval. A control share
acquisition means the acquisition, directly or indirectly,
of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions
(including an undertaking to pay expenses), may compel the board
of directors to call a special meeting of stockholders to be
held within 50 days of such demand to consider the voting
rights of the shares.
If voting rights are not approved at the meeting or if the
acquiror does not deliver an acquiring person statement as
required under the MCSAA, then, subject to certain conditions
and limitations, the corporation may redeem any or all of the
control shares, except those for which voting rights have
previously been approved, for fair value determined, without
regard to voting rights, as of the date of the last control
share acquisition or of any special meeting of stockholders at
which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a
stockholders meeting and the acquiror becomes entitled to
vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of
the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share paid in the
control share acquisition, and certain limitations and
restrictions generally applicable to the exercise of appraisal
rights do not apply in the context of a control share
acquisition.
The MCSAA does not apply to shares acquired in a merger,
consolidation or share exchange if the corporation is a party to
the transaction or to acquisitions approved or exempted by the
charter or the bylaws of the corporation by a provision adopted
at any time before the acquisition of the shares.
Terras Bylaws provide that the MCSAA will not apply to any
acquisition by any person of shares of stock of the Company. The
Merger Agreement provides that, except as set forth in the
Merger Agreement, Terra may not amend its Bylaws prior to the
effective date of the Second-Step Merger.
Top-Up
Option.
Subject to the terms and conditions of the Merger Agreement,
Terra has granted to CF
and/or CF
Sub an irrevocable one-time option (the
Top-Up
Option) to purchase for $47.40 in cash per Terra
Common Share up to that number of Terra Common Shares (the
Top-Up
Shares) equal to the lowest number of Terra Common
34
Shares that, when added to the number of Terra Common Shares
owned by CF Sub at the time of the exercise of the
Top-Up
Option, shall constitute one Terra Common Share more than 90% of
the Terra Common Shares outstanding immediately after the
issuance of the
Top-Up
Shares calculated on a fully-diluted basis, or, at CFs
option, on a primary basis. The
Top-Up
Option is exercisable only one time and only if (i) the
issuance of the
Top-Up
Shares does not require the approval of Terras
stockholders under applicable law, including the rules of the
NYSE, (ii) the exercise of the
Top-Up
Option and the issuance and delivery of the
Top-Up
Shares is not prohibited by any law or order and (iii) the
Top-Up
Option is exercisable for not more than the number of Terra
Common Shares in excess of the number of Terra Common Shares
authorized but unissued or reserved for issuance at the time the
Top-Up
Option is exercised. The
Top-Up
Option may be exercised at any one time within 10 business days
following the completion of the Offer and prior to the earlier
to occur of the completion of the Merger and the termination of
the Merger Agreement.
Second-Step
Merger Provisions.
The purpose of the Offer as stated by CF in the Registration
Statement is for CF to acquire control of, and ultimately the
entire equity interest in, Terra. If the Offer is consummated,
CF will, pursuant to the terms of the Merger Agreement, promptly
after completion of the Offer, consummate the Second-Step Merger
with each remaining Terra Common Share (other than shares
already owned by Terra, CF or their wholly-owned subsidiaries)
being converted into the right to receive the same Per Share
Consideration as is received by Terra stockholders pursuant to
the Offer. After this Second-Step Merger, the former Terra
stockholders will no longer have any ownership interest in Terra.
If, pursuant to the Offer, CF acquires at least 90% of all
outstanding shares of Terra entitled to vote as a group or a
class on the Second-Step Merger, then, pursuant to
Section 3-106
of the MGCL, after consummation of the Offer, CF will be able to
effect the Second-Step Merger without a vote of Terras
stockholders. Such a second-step merger requires that
(i) the board of each corporation which is a party to the
merger has approved such merger by a majority vote of all its
members, (ii) the charter of the successor corporation is
not amended in the merger (other than to change its name, the
name or other designation or the par value of any class or
series of its stock or the aggregate par value of its stock) and
(iii) the contract rights of the shares of CF Common Stock
exchanged for Terra Common Shares are identical to the contract
rights of the Terra Common Shares that were exchanged. In order
to take advantage of the foregoing second-step merger
provisions, unless waived by all stockholders who would have
been entitled to vote on the merger but for the foregoing
provisions, CF must also give notice of the merger to each of
Terras stockholders at least 30 days before the
articles of merger are filed with the State Department of
Assessments and Taxation of Maryland. A Notice of Merger
pursuant to Section
3-106 of the
MGCL was included in the Exchange Offer filed by CF with the SEC
on March 5, 2010. Pursuant to the rules of the SEC for
third-party tender offers, Terra mailed such Exchange Offer and
Notice of Merger to Terra stockholders on March 11, 2010.
Accordingly, as stated by CF in the Schedule TO, the
30 day notice period to stockholders required by
Section 3-106
of the MGCL will expire on April 10, 2010.
If CF, through CF Sub pursuant to the Offer or otherwise, does
not acquire at least 90% of the outstanding shares entitled to
vote as a group or class on the Second-Step Merger, under the
MGCL, the Second-Step Merger must be declared advisable by the
Board and approved by the affirmative vote of stockholders of
Terra holding a majority of the outstanding shares entitled to
vote as a group or class on the Second-Step Merger. If CF
acquires, through CF Sub pursuant to the Offer or otherwise, at
least a majority of the outstanding shares entitled to vote as a
group or class on the Second-Step Merger, CF would have
sufficient voting power to approve the Second-Step Merger
without the affirmative vote of any other stockholder of Terra.
Further, upon consummation of the Offer, CF will have the right
to designate a majority of the directors to the Board.
The Board by unanimous vote of those directors voting with one
director absent separately indicating agreement adopted
resolutions determining that the Second-Step Merger is advisable
to, and in the best interests of, Terra and its stockholders and
approving the Second-Step Merger.
35
Appraisal
Rights.
Terras stockholders do not have appraisal rights in
connection with the Offer and are not expected to have appraisal
rights in connection with the Second-Step Merger. As a general
matter, however,
Section 3-202(a)
of the MGCL provides stockholders with the right to demand and
to receive payment of the fair value of their stock in the event
of (i) a merger or consolidation, (ii) a share
exchange, (iii) a transfer of assets in a manner requiring
stockholder approval, (iv) an amendment to the
corporations charter which alters the contract rights of
any outstanding stock, as expressly set forth in the charter,
and substantially adversely affects the stockholders
rights (unless the right to do so is reserved in the charter) or
(v) certain business combinations with interested
stockholders which are subject to or exempted from the MBCA (as
discussed above under the heading Maryland Business
Combination Act). Except with respect to certain
business combinations, pursuant to
Section 3-202(c)
of the MGCL, the right to demand and receive payment of fair
value does not apply (1) in general, to stock listed on a
national securities exchange, (2) to stock of the successor
corporation in a merger (unless the merger alters the contract
rights of the stock and the charter does not reserve the right
to do so, or converts the stock in whole or in part into
something other than stock of the successor corporation, cash or
certain other interests), (3) to stock that is not entitled
to be voted on the transaction, other than solely because of
Section 3-106
of the MGCL, or that the stockholder did not own on the record
date for determining stockholders entitled to vote on the
transaction, (4) if the corporations charter provides
that the holders of the stock are not entitled to exercise the
rights of an objecting stockholder or (5) if stock is that
of an open-end investment company registered with the SEC under
the Investment Company Act of 1940 and the stock is valued in
the transaction at its net asset value. Except in the case of
appraisal rights existing as a result of the MCSAA (as discussed
above under the heading Maryland Control Share
Acquisition Act), these appraisal rights are available
only when the stockholder files with the corporation a timely,
written objection to the transaction and does not vote in favor
of the transaction. In addition, the stockholder must make a
demand on the successor corporation for payment of the stock
within 20 days of the acceptance of articles by the State
Department of Assessments and Taxation of Maryland, stating the
number and class of shares for which such stockholder is
demanding payment. As such, in connection with any Second-Step
Merger, if Terra Common Shares are not listed on a national
securities exchange on the date notice of the Second-Step Merger
is given to, or waived by, each of Terras stockholders (if
the Second-Step Merger is effected under
Section 3-106
of the MGCL), or the record date for determining the Terra
stockholders entitled to vote on the Second-Step Merger (if the
Second-Step Merger is not effected under
Section 3-106
of the MGCL), and a minority stockholder of Terra has complied
with the foregoing requirements, such minority stockholder will
have appraisal rights with respect to the shares held by such
minority stockholder. A stockholder who fails to comply with
these requirements is bound by the terms of the transaction.
Opinion
of Terras Financial Advisor.
On March 11, 2010, Credit Suisse rendered its oral opinion
to the Board (which was subsequently confirmed in writing by
delivery of Credit Suisses written opinion dated the same
date) to the effect that, as of March 11, 2010, the $37.15
in cash and 0.0953 of a share of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger was
fair, from a financial point of view, to such stockholders.
Credit Suisses opinion was directed to the Board and
only addressed the fairness from a financial point of view of
the $37.15 in cash and 0.0953 of a share of CF Common Stock per
Terra Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger, and did
not address any other aspect or implication of the Offer and the
Second-Step Merger. The summary of Credit Suisses opinion
in this Statement is qualified in its entirety by reference to
the full text of its written opinion, which is included as
Annex B to this Statement and sets forth the
procedures followed, assumptions made, matters considered,
qualifications and limitations on the review undertaken and
other matters considered by Credit Suisse in preparing its
opinion. Holders of Terra Common Shares are encouraged to read
this opinion carefully in its entirety. However, neither Credit
Suisses written opinion nor the summary of its opinion and
the related analyses set forth in this
36
Statement are intended to be, and they do not constitute,
advice or a recommendation to any holder of Terra Common Shares
as to whether such holder should tender any Terra Common Shares
into the Offer or act on any matter relating to the Offer and
the Second-Step Merger.
In arriving at its opinion, Credit Suisse:
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reviewed a draft, dated March 10, 2010, of the Merger
Agreement, certain related agreements, as well as certain
publicly available business and financial information relating
to Terra and CF;
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reviewed certain other information relating to Terra and CF,
including financial forecasts relating to Terra and CF (certain
of which were publicly available), as well as pricing
information related to natural gas and certain other commodities
reflected in such forecasts and data, which were provided to or
discussed with Credit Suisse by Terra;
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met with Terras management to discuss the business and
prospects of Terra and CF;
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considered certain financial and stock market data of Terra and
CF, and compared that data with similar data for other publicly
held companies in businesses Credit Suisse deemed similar to
that of Terra and CF;
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considered, to the extent publicly available, the financial
terms of certain other business combinations and transactions
which have been effected or announced; and
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considered such other information, financial studies, analyses
and investigations and financial, economic and market criteria
which Credit Suisse deemed relevant.
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In connection with its review, Credit Suisse did not
independently verify any of the foregoing information and
assumed and relied on such information being complete and
accurate in all material respects. With respect to the financial
forecasts for Terra and CF and the estimated data for Terra and
CF, the management of Terra advised Credit Suisse, and Credit
Suisse assumed, that such forecasts were reasonably prepared on
bases reflecting the best currently available estimates and
judgments of Terras management as to the future financial
performance of Terra and CF, and that such other data (including
the assumptions related to pricing of natural gas and certain
other commodities) have also been reasonably prepared on bases
reflecting the best currently available estimates of Terra. With
respect to the publicly available financial forecasts for Terra
and CF referred to above, Credit Suisse has reviewed and
discussed such forecasts with the management of Terra and has
assumed, with Terras consent, that such forecasts
represent reasonable estimates and judgments with respect to the
future financial performance of Terra and CF. Credit Suisse also
assumed, with Terras consent, that, in the course of
obtaining any regulatory or third party consents, approvals or
agreements in connection with the Offer and the Second-Step
Merger, no modification, delay, limitation, restriction or
condition would be imposed that would have an adverse effect on
Terra, CF or the Offer and the Second-Step Merger in any respect
material to the analyses of Credit Suisse and that the Offer and
the Second-Step Merger will be consummated in accordance with
the terms of the Merger Agreement without waiver, modification
or amendment of any material term, condition or agreement
thereof. Representatives of Terra advised Credit Suisse, and
Credit Suisse assumed, that the final form of the Merger
Agreement, when executed by the parties thereto, conformed to
the draft reviewed by Credit Suisse in all respects material to
its analyses. Credit Suisse also noted that payment will be made
in full by CF (on behalf of Terra) of the $123 million
termination fee payable to Yara pursuant to
Section 8.2(b)(i) of the Agreement and Plan of Merger,
dated as of February 12, 2010, by and between the Company,
Yara and Yukon Merger Sub, Inc., an indirect wholly owned
subsidiary of Yara (which transaction we refer to as the Yara
Transaction). In addition, Credit Suisse has not been requested
to make, and has not made, an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise)
of Terra or CF, nor has Credit Suisse been furnished with any
such evaluations or appraisals.
Credit Suisses opinion addressed only the fairness, from a
financial point of view, to the holders of Terra common stock of
the $37.15 in cash and 0.0953 of a share of CF Common Stock per
Terra Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger and did
not address any other aspect or implication of the Offer and the
Second-Step Merger or any other
37
agreement, arrangement or understanding entered into in
connection with the Offer and the Second-Step Merger or
otherwise, including, without limitation, the fairness of the
amount or nature of, or any other aspect relating to, any
compensation to any officers, directors or employees of any
party to the Transaction, or class of such persons, relative to
the $37.15 in cash and 0.0953 of a share of CF Common Stock per
Terra Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger or
otherwise. The issuance of Credit Suisses opinion was
approved by its authorized internal committee.
Credit Suisses opinion was necessarily based upon
information made available to it as of the date of its opinion
and financial, economic, market and other conditions as they
existed and could be evaluated on that date and upon certain
assumptions regarding such financial, economic, market and other
conditions, which are currently subject to unusual volatility
and which, if different than assumed, could have a material
impact on Credit Suisses analyses. Credit Suisses
opinion also was based on assumptions provided by Terras
management as to the pricing of natural gas and certain other
commodities, which is subject to significant volatility and
which, if different than assumed, could have a material impact
on Credit Suisses analyses. Credit Suisse did not express
any opinion as to what the value of shares of CF Common Stock
actually will be when issued to holders of Terra Common Shares
pursuant to the Offer and the Second-Step Merger or the prices
at which CF Common Stock will trade at any time. Credit
Suisses opinion did not address the merits of the Offer
and the Second-Step Merger as compared to alternative
transactions or strategies that may be available to Terra, nor
did it address Terras underlying business decision to
proceed with the Offer and the Second-Step Merger.
Credit Suisses opinion was for the information of the
Board in connection with its consideration of the Offer and the
Second-Step Merger and does not constitute advice or a
recommendation to any stockholder of Terra as to whether such
stockholder should tender any Terra Common Shares into the Offer
or act on any matter relating to the proposed Offer and the
Second-Step Merger.
In preparing its opinion, Credit Suisse performed a variety of
analyses, including those described below. The summary of Credit
Suisses valuation analyses is not a complete description
of the analyses underlying Credit Suisses opinion. The
preparation of a fairness opinion is a complex process involving
various quantitative and qualitative judgments and
determinations with respect to the financial, comparative and
other analytic methods employed and the adaptation and
application of those methods to the unique facts and
circumstances presented. As a consequence, neither Credit
Suisses opinion nor the analyses underlying its opinion
are readily susceptible to partial analysis or summary
description. Credit Suisse arrived at its opinion based on the
results of all analyses undertaken by it and assessed as a whole
and did not draw, in isolation, conclusions from or with regard
to any individual analysis, analytic method or factor.
Accordingly, Credit Suisse believes that its analyses must be
considered as a whole and that selecting portions of its
analyses, analytic methods and factors, without considering all
analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.
In performing its analyses, Credit Suisse considered business,
economic, industry and market conditions, financial and
otherwise, and other matters as they existed on, and could be
evaluated as of, the date of its opinion. No company,
transaction or business used in Credit Suisses analyses
for comparative purposes is identical to Terra, CF or the
proposed Offer and the Second-Step Merger. While the results of
each analysis were taken into account in reaching its overall
conclusion with respect to fairness, Credit Suisse did not make
separate or quantifiable judgments regarding individual
analyses. The implied reference range values indicated by Credit
Suisses analyses are illustrative and not necessarily
indicative of actual values nor predictive of future results or
values, which may be significantly more or less favorable than
those suggested by the analyses. In addition, any analyses
relating to the value of businesses or securities do not purport
to be appraisals or to reflect the prices at which businesses or
securities actually may be sold, which may depend on a variety
of factors, many of which are beyond the control Terra, CF and
of Credit Suisse. Accordingly, the estimates used in, and the
results derived from, Credit Suisses analyses are
inherently subject to substantial uncertainty.
38
Credit Suisses opinion and analyses were provided to the
Board in connection with its consideration of the proposed Offer
and the Second-Step Merger and were among many factors
considered by the Board in evaluating the proposed Offer and the
Second-Step Merger. Neither Credit Suisses opinion nor its
analyses were determinative of the Offer and the Second-Step
Merger consideration or of the views of the Board with respect
to the proposed Offer and the Second-Step Merger.
The following is a summary of the material valuation analyses
performed in connection with the preparation of Credit
Suisses opinion and reviewed with the Board on
March 11, 2010. The analyses summarized below include
information presented in tabular format. The tables alone do not
constitute a complete description of the analyses. Considering
the data in the tables below without considering the full
narrative description of the analyses, as well as the
methodologies underlying and the assumptions, qualifications and
limitations affecting each analysis, could create a misleading
or incomplete view of Credit Suisses analyses.
Terra
Analyses.
Discounted
Cash Flow Analysis.
Credit Suisse performed a discounted cash flow analysis to
calculate the estimated net present value of the unlevered
after-tax free cash flows that Terra could generate from
calendar years 2010 through 2014, using projected financial
information that was provided by Terras management, which
excluded the incremental estimated net present value of
Terras Diesel Exhaust Fluid business (which we refer to as
DEF), which Credit Suisse calculated separately. For DEF, Credit
Suisse separately calculated the estimated net present value of
the unlevered after-tax free cash flows that DEF could generate
from calendar years 2010 through 2015, using projected financial
information that was provided by Terras management
forecasts. Credit Suisse calculated a range of estimated
terminal values for Terra by applying a range of terminal
multiples of 4.5x to 7.5x to the average of Terras
estimated annual earnings before interest, taxes, depreciation
and amortization (EBITDA) for the years 2010 through 2014 (and
for the years 2010 through 2015 for the separate calculation of
DEF). The estimated free cash flows and terminal values were
then discounted to present value using discount rates ranging
from 8.5% to 12.5%. The estimated free cash flows and terminal
values of DEF were separately discounted to present value using
discount rates ranging from 10% to 25%.
These analyses indicated the following implied per share equity
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
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Implied per Share Equity Value
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Reference Range for Terra
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Implied Value of Per Share Consideration
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$29.72 to $48.88
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$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
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Selected
Public Companies Analysis.
Credit Suisse reviewed financial and stock market information of
Terra and the following selected publicly traded companies in
the fertilizer industry located in North America and outside of
North America, respectively:
North America
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Agrium Inc.
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Intrepid Potash, Inc.
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The Mosaic Company
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Potash Corporation of Saskatchewan Inc.
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Outside of North America
39
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Incitec Pivot Limited
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K+S Aktiengesellschaft
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Yara
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Although none of the selected public companies is directly
comparable to Terra, the companies included were chosen because
they are publicly traded companies with operations that, for
purposes of analysis, may be considered similar to certain
operations of Terra.
Credit Suisse reviewed the multiples of the selected companies
using closing stock prices as of March 8, 2010, and
information it obtained from public filings, publicly available
research analyst estimates and other publicly available
information. Credit Suisse then applied a range of enterprise
value to estimated 2010 and 2011 EBITDA multiples for the
selected public companies to corresponding financial data for
Terra, using EBITDA estimates provided by Terra management.
This analysis indicated the following implied per share equity
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
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Implied per Share Equity Value
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Reference Range for Terra
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Implied Value of Per Share Consideration
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$33.81 to $49.05
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$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
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Selected
Transactions Analysis.
Credit Suisse reviewed certain transaction values and multiples
in the following selected publicly-announced (or proposed)
transactions, which involved companies with businesses in the
fertilizer industry:
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Acquiror
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Target
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Yara
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Terra Industries Inc.
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Vale S.A.
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Fertilizantes Fofatados S.A. Fosfertil (Bunge
Ltd.s 42.3% stake)
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Agrium Inc.
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CF Industries Holdings, Inc.
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Yara International ASA
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Saskferco Products Inc.
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Incitec Pivot Limited
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Dyno Nobel Limited
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Yara
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Kemira Growhow Oyj
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Incitec Pivot Limited
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Southern Cross Fertilisers Pty Ltd
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Terra Industries Inc.
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Mississippi Chemical Corporation
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Cargill Inc.
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IMC Global Inc.
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IMC Global Inc.
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Harris Chemical Group, Inc.
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Terra Industries Inc.
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Imperial Chemical Industries PLCs fertilizer business
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Agrium Inc.
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Viridian Inc.
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Potash Corporation of Saskatchewan Inc.
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Arcadian Corporation
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While none of the selected transactions are directly comparable
with the proposed Offer and the Second-Step Merger, the selected
transactions involve companies with operations that, for
purposes of analysis, may be considered similar to certain
operations of Terra.
Credit Suisse reviewed, among other things, the enterprise value
to LTM EBITDA multiples implied by the selected transactions for
each of the target companies involved in the selected
transactions based on publicly available financial information
with respect to those target companies. The enterprise value for
each of the target companies was based on the equity value of
those target companies implied by the applicable transaction.
Credit Suisse then applied a range of enterprise value to LTM
EBITDA multiples from the target companies (other than Terra in
the Yara Terra proposed transaction and CF
Industries Holdings, Inc. in the
40
Agrium Inc. CF Holdings Industries, Inc. proposal)
involved in the selected transactions to the following financial
data for Terra:
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2009 EBITDA
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Average EBITDA from
2002-2008
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Peak EBITDA from
2002-2008
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This analysis indicated the following implied per share equity
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
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Implied per Share Equity Value
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Reference Range for Terra
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Implied Value of Per Share Consideration
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$13.60 - $32.97
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$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
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Newco
Analyses.
Discounted
Cash Flow Analysis.
Credit Suisse performed a discounted cash flow analysis to
calculate the estimated net present value of the pro forma
unlevered after-tax free cash flows that CF could generate from
calendar years 2010 through 2014 assuming that the proposed
Offer and the Second-Step Merger are consummated, using
projected financial information that was provided by
Terras management, which excluded the incremental
estimated net present value of the DEF business. Credit Suisse
calculated a range of estimated terminal values for CF after
giving effect to the Offer and the Second-Step Merger by
applying a range of terminal multiples of 4.5x to 7.5x to the
average of Terras and CFs estimated annual EBITDA
for the years 2010 through 2014, which included adjustments for
certain synergies projected by CF and adjusted by Terras
management. The estimated free cash flows and terminal values
were then discounted to present value using discount rates
ranging from 8.5% to 12.5%. The implied equity values were
divided by the number of pro forma shares outstanding for CF
assuming the proposed Offer and the Second-Step Merger are
consummated, and multiplied by 0.0953 (the share consideration
of CF Common Stock to be received per Terra Common Share
pursuant to the proposed Offer and the Second-Step Merger) and
added to the $37.15 in cash to be received per Terra Common
Share pursuant to the Offer and Second-Step Merger.
This analysis indicated the following implied per share offer
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
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Implied per Share Offer Value
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Reference Range for Terra
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Implied Value of Per Share Consideration
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$42.09 - $48.15
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$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
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Selected
Public Companies Analysis.
Credit Suisse reviewed financial and stock market information of
Terra and CF and the selected publicly traded companies listed
above under the heading Terra Analyses
Selected Public Companies Analysis. Although none of the
selected public companies is directly comparable to Terra or CF,
the companies included were chosen because they are publicly
traded companies with operations that, for purposes of analysis,
may be considered similar to certain operations of Terra and CF.
Credit Suisse reviewed the multiples of the selected companies
using closing stock prices as of March 8, 2010, and
information it obtained from public filings, publicly available
research analyst estimates and other publicly available
information. Credit Suisse then applied a range of enterprise
value to estimated 2010 and 2011 EBITDA multiples for the
selected public companies to corresponding financial data for
Terra and CF assuming that the proposed Offer and the
Second-Step Merger are consummated, using EBITDA estimates
41
provided by Terra management, which included adjustments for
certain synergies projected by CF and adjusted by Terras
management. The implied equity values were divided by the number
of pro forma shares outstanding for CF assuming the proposed
Offer and the Second-Step Merger are consummated, and multiplied
by 0.0953 (the share consideration of CF Common Stock to be
received per Terra Common Share pursuant to the proposed Offer
and the Second-Step Merger) and added to the $37.15 in cash to
be received per Terra Common Share pursuant to the Offer and
Second-Step Merger.
This analysis indicated the following implied per share offer
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
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|
|
|
|
Implied per Share Offer Value
|
|
|
Reference Range for Terra
|
|
Implied Value of Per Share Consideration
|
|
$43.50 - $50.65
|
|
|
$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
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|
Other
Matters.
Terra engaged Credit Suisse as its financial advisor in
connection with the proposed Offer and the Second-Step Merger.
Terra selected Credit Suisse based on Credit Suisses
qualifications, experience and reputation, and its familiarity
with Terra and its business. Credit Suisse is an internationally
recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with
mergers and acquisitions, leveraged buyouts, negotiated
underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and
valuations for corporate and other purposes. Pursuant to
Terras engagement letter with Credit Suisse, Terra has
agreed to pay Credit Suisse a customary fee for its services in
connection with the Offer and the Second-Step Merger, a
significant portion of which is contingent upon consummation of
the Offer and the Second-Step Merger. Credit Suisse also became
entitled to a fee upon the rendering of its opinion. Terra has
also agreed to reimburse Credit Suisse for certain expenses and
to indemnify Credit Suisse and certain related parties for
certain liabilities and other items arising out of or relating
to Credit Suisses engagement.
Credit Suisse and its affiliates have in the past provided
investment banking and other financial services to Terra and its
affiliates, for which Credit Suisse and its affiliates have
received compensation, including having acted as
(i) financial advisor to Terra in connection with the Yara
Transaction upon the closing of which Credit Suisse would also
have been entitled to receive a fee, (ii) financial advisor
to Terra in connection with the consideration of various
proposals made by CF for a business combination with Terra,
(iii) financial advisor to Terra in 2008 in connection with
the review of Terras strategic alternatives (which
alternatives included a potential transaction involving CF), and
(iv) joint lead managing underwriter in connection with the
2009 offering by a subsidiary of Terra of $600,000,000 of
7.75% Senior Notes due 2019. Credit Suisse and its
affiliates may in the future provide financial advice and
services to Terra, CF and their respective affiliates or any
company that may be involved in the Offer or Second-Step Merger
for which Credit Suisse and its affiliates would expect to
receive compensation. Credit Suisse is a full service securities
firm engaged in securities trading and brokerage activities as
well as providing investment banking and other financial
services. In the ordinary course of business, Credit Suisse and
its affiliates may acquire, hold or sell, for Credit
Suisses and its affiliates own accounts and the
accounts of customers, equity, debt and other securities and
financial instruments (including bank loans and other
obligations) of Terra, CF and any other companies that may be
involved in the Offer or Second-Step Merger, as well as provide
investment banking and other financial services to such
companies.
Forward-Looking
Statements.
Certain statements in this Statement may constitute
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements
made in connection with the Offer proposed by CF referred to in
this Statement are not subject to the safe harbor protections
provided to forward-looking statements under the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are based upon assumptions as to future events that
may not prove to be accurate. Actual outcomes and results may
42
differ materially from what is expressed or forecasted in these
forward-looking statements. As a result, these statements speak
only as of the date they were made and Terra undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise, except as otherwise required by law. Words
such as expects, intends,
plans, projects, believes,
estimates, and similar expressions are used to
identify these forward-looking statements. The forward-looking
statements contained herein include statements about the Offer
and Second-Step Merger. Forward-looking statements are not
guarantees of future performance and involve risks,
uncertainties and assumptions that are difficult to predict.
These risks, uncertainties and assumptions include, among others:
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|
|
|
|
the possibility that various closing conditions to the Offer and
Second-Step Merger may not be satisfied or waived,
|
|
|
|
uncertainty as to how many Terra Common Shares will be tendered
into the Offer,
|
|
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|
the risk that competing offers will be made,
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|
the risk that the Offer or Second-Step Merger will not close
within the anticipated time periods,
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|
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|
|
|
the risk that disruptions from the Offer and Second-Step Merger
will harm Terras relationships with its customers,
employees and suppliers,
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|
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|
the diversion of management time on issues related to the Offer
and Second-Step Merger,
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|
the outcome of any legal proceedings challenging the Offer or
Second-Step Merger,
|
|
|
|
the amount of the costs, fees, expenses and charges related to
the Offer and Second-Step Merger,
|
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|
|
changes in financial and capital markets,
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|
|
general economic conditions within the agricultural industry,
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|
competitive factors and price changes (principally, sales prices
of nitrogen and methanol products and natural gas costs),
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changes in product mix,
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|
changes in the seasonality of demand patterns,
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changes in weather conditions,
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|
changes in environmental and other government regulations,
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|
changes in agricultural regulations and
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changes in the securities trading markets.
|
Additional information as to these factors can be found in
Terras 2009 Annual Report/10-K and in Terras
subsequent Quarterly Reports on
Form 10-Q
(when available), in each case in the sections entitled
Business, Risk Factors, Legal
Proceedings, and Managements Discussion and
Analysis of Financial Condition and Results of Operations,
and in the Notes to the consolidated financial statements.
43
The following Exhibits are filed herewith or incorporated herein
by reference:
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(a)(1)
|
|
Joint press release issued by CF Industries Holdings, Inc.
and Terra Industries Inc., dated March 12, 2010, filed as
Exhibit 99.1 to Terra Industries Inc.s Form 8-K,
dated March 12, 2010 and incorporated herein by reference.
|
(a)(2)
|
|
Preliminary Prospectus/Offer to Exchange, dated March 5,
2010, filed as Exhibit (a)(4) to CF Industries Holdings,
Inc.s Schedule TO filed on March 5, 2010 and
incorporated herein by reference.
|
(a)(3)
|
|
Form of Letter of Transmittal, filed as Exhibit (a)(1)(A)
to CF Industries Holdings, Inc.s Schedule TO filed on
March 5, 2010 and incorporated herein by reference.
|
(a)(4)
|
|
Form of Notice of Guaranteed Delivery, filed as
Exhibit (a)(1)(B) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated herein by
reference.
|
(a)(5)
|
|
Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees, filed as Exhibit (a)(1)(C) to
CF Industries Holdings, Inc.s Schedule TO filed on March
5, 2010 and incorporated herein by reference.
|
(a)(6)
|
|
Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees, filed as
Exhibit (a)(1)(D) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated herein by
reference.
|
(a)(7)
|
|
Form of Guidelines for Certificate of Taxpayer Identification
Number on Form W-9, filed as Exhibit (a)(1)(E) to CF
Industries Holdings, Inc.s Schedule TO filed on March 5,
2010 and incorporated herein by reference.
|
(a)(8)
|
|
Agreement and Plan of Merger dated as of March 12, 2010 by
and among CF Industries Holdings, Inc., Composite Merger
Corporation and Terra Industries Inc., filed as Exhibit 2.1
to Terra Industries Inc.s Form
8-K dated
March 12, 2010 and incorporated herein by reference.
|
(e)(1)
|
|
Employment Severance Agreement between Terra Industries Inc. and
Michael L. Bennett dated October 5, 2006, filed as
Exhibit 10.1 to Terra Industries Inc.s Form 8-K
dated October 5, 2006 and incorporated herein by reference.
|
(e)(2)
|
|
Form of Employment Severance Agreement for Section 16(b)
Executive Officers, filed as Exhibit 10.2 to Terra
Industries Inc.s Form 8-K dated October 5, 2006 and
incorporated herein by reference.
|
(e)(3)
|
|
Amendment Number One to Employment Severance Agreement, filed as
Exhibit 10.1.31 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2007 and
incorporated herein by reference.
|
(e)(4)
|
|
Trust Agreement, dated as of February 12, 2010, between Terra
Industries Inc. and Wells Fargo Bank, N.A.*
|
(e)(5)
|
|
Form of Indemnity Agreement of Terra Industries Inc., filed as
Exhibit 10.1 to Terra Industries Inc.s Form 8-K
dated July 7, 2006 and incorporated herein by reference.
|
(e)(6)
|
|
Terra Industries Inc. Stock Incentive Plan of 2002, filed as
Exhibit 10.1.18 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2001 and
incorporated herein by reference.
|
(e)(7)
|
|
Revised Form of Restricted Stock Award of Terra Industries Inc.
under its Stock Incentive Plan of 2002, filed as
Exhibit 10.9 to Terra Industries Inc.s Form 10-Q
for the quarter ended September 30, 2005 and incorporated herein
by reference.
|
(e)(8)
|
|
Form of Long-Term Incentive Award for Performance Shares of
Terra Industries Inc. under its Stock Incentive Plan of 2002,
filed as Exhibit 10.1.23 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2005 and
incorporated herein by reference.
|
44
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(e)(9)
|
|
Form of Unrestricted Annual Share Award to Non-Employee
Directors under Terra Industries Inc.s Stock Incentive
Plan of 2002, filed as Exhibit 99.1 to Terra Industries
Inc.s Form 8-K dated August 14, 2006 and
incorporated herein by reference.
|
(e)(10)
|
|
2007 Omnibus Incentive Compensation Plan, adopted by the Board
of Directors of Terra Industries Inc. and subsequently approved
by its stockholders at the annual meeting of Terra Industries
Inc. on May 8, 2007, attached as Appendix A to Terra Industries
Inc.s Proxy Statement on Schedule 14A filed with the
Securities and Exchange Commission on March 15, 2007 and
incorporated herein by reference.
|
(e)(11)
|
|
Amendment to Restricted Share Agreement, filed as
Exhibit 10.1.32 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2007 and
incorporated herein by reference.
|
(e)(12)
|
|
Amendment to Performance Share Award Agreement, filed as
Exhibit 10.1.33 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2007 and
incorporated herein by reference.
|
(e)(13)
|
|
Form of Performance Share Award Agreement, filed as
Exhibit 10.2 to Terra Industries Inc.s Form 10-Q
for the quarter ended June 30, 2008 and incorporated herein by
reference.
|
(e)(14)
|
|
Revised Form of Long-Term Incentive Award for Performance Shares
under the 2007 Terra Industries Inc. Omnibus Stock Incentive
Plan, filed as Exhibit 10.1 to Terra Industries Inc.s
Form 10-Q for the quarter ended March 31, 2009 and
incorporated herein by reference.
|
(e)(15)
|
|
2010 Officers and Key Employees Annual Incentive Plan of Terra
Industries Inc.*
|
(e)(16)
|
|
Item 3 to Terra Industries Inc.s Schedule 14D-9, filed on
March 5, 2009 and incorporated herein by reference.
|
45
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is
true, complete and correct.
TERRA INDUSTRIES INC.
Name: John W. Huey
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Title:
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Vice President, General Counsel and Corporate Secretary
|
Dated: March 18, 2010
46
EXHIBIT INDEX
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(a)(1)
|
|
Joint press release issued by CF Industries Holdings, Inc.
and Terra Industries Inc., dated March 12, 2010, filed as
Exhibit 99.1 to Terra Industries Inc.s
Form 8-K,
dated March 12, 2010 and incorporated herein by reference.
|
(a)(2)
|
|
Preliminary Prospectus/Offer to Exchange, dated March 5,
2010, filed as Exhibit (a)(4) to CF Industries
Holdings, Inc.s Schedule TO filed on March 5,
2010 and incorporated herein by reference.
|
(a)(3)
|
|
Form of Letter of Transmittal, filed as Exhibit (a)(1)(A)
to CF Industries Holdings, Inc.s Schedule TO filed on
March 5, 2010 and incorporated herein by reference.
|
(a)(4)
|
|
Form of Notice of Guaranteed Delivery, filed as
Exhibit (a)(1)(B) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated herein
by reference.
|
(a)(5)
|
|
Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees, filed as
Exhibit (a)(1)(C) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated
herein by reference.
|
(a)(6)
|
|
Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees, filed
as Exhibit (a)(1)(D) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated
herein by reference.
|
(a)(7)
|
|
Form of Guidelines for Certificate of Taxpayer Identification
Number on
Form W-9,
filed as Exhibit (a)(1)(E) to CF Industries Holdings,
Inc.s Schedule TO filed on March 5, 2010 and
incorporated herein by reference.
|
(a)(8)
|
|
Agreement and Plan of Merger dated as of March 12, 2010 by
and among CF Industries Holdings, Inc., Composite Merger
Corporation and Terra Industries Inc., filed as Exhibit 2.1
to Terra Industries Inc.s Form
8-K dated
March 12, 2010 and incorporated herein by reference.
|
(e)(1)
|
|
Employment Severance Agreement between Terra Industries Inc. and
Michael L. Bennett dated October 5, 2006, filed as
Exhibit 10.1 to Terra Industries Inc.s
Form 8-K
dated October 5, 2006 and incorporated herein by reference.
|
(e)(2)
|
|
Form of Employment Severance Agreement for Section 16(b)
Executive Officers, filed as Exhibit 10.2 to Terra
Industries Inc.s
Form 8-K
dated October 5, 2006 and incorporated herein by reference.
|
(e)(3)
|
|
Amendment Number One to Employment Severance Agreement, filed as
Exhibit 10.1.31 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2007 and incorporated
herein by reference.
|
(e)(4)
|
|
Trust Agreement, dated as of February 12, 2010,
between Terra Industries Inc. and Wells Fargo Bank, N.A.*
|
(e)(5)
|
|
Form of Indemnity Agreement of Terra Industries Inc., filed as
Exhibit 10.1 to Terra Industries Inc.s
Form 8-K
dated July 7, 2006 and incorporated herein by reference.
|
(e)(6)
|
|
Terra Industries Inc. Stock Incentive Plan of 2002, filed as
Exhibit 10.1.18 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2001 and incorporated
herein by reference.
|
(e)(7)
|
|
Revised Form of Restricted Stock Award of Terra Industries Inc.
under its Stock Incentive Plan of 2002, filed as
Exhibit 10.9 to Terra Industries Inc.s
Form 10-Q
for the quarter ended September 30, 2005 and incorporated
herein by reference.
|
(e)(8)
|
|
Form of Long-Term Incentive Award for Performance Shares of
Terra Industries Inc. under its Stock Incentive Plan of 2002,
filed as Exhibit 10.1.23 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2005 and incorporated
herein by reference.
|
(e)(9)
|
|
Form of Unrestricted Annual Share Award to Non-Employee
Directors under Terra Industries Inc.s Stock Incentive
Plan of 2002, filed as Exhibit 99.1 to Terra Industries
Inc.s
Form 8-K
dated August 14, 2006 and incorporated herein by reference.
|
47
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(e)(10)
|
|
2007 Omnibus Incentive Compensation Plan, adopted by the Board
of Directors of Terra Industries Inc. and subsequently approved
by its stockholders at the annual meeting of Terra Industries
Inc. on May 8, 2007, attached as Appendix A to Terra
Industries Inc.s Proxy Statement on Schedule 14A
filed with the Securities and Exchange Commission on
March 15, 2007 and incorporated herein by reference.
|
(e)(11)
|
|
Amendment to Restricted Share Agreement, filed as
Exhibit 10.1.32 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2007 and incorporated
herein by reference.
|
(e)(12)
|
|
Amendment to Performance Share Award Agreement, filed as
Exhibit 10.1.33 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2007 and incorporated
herein by reference.
|
(e)(13)
|
|
Form of Performance Share Award Agreement, filed as
Exhibit 10.2 to Terra Industries Inc.s
Form 10-Q
for the quarter ended June 30, 2008 and incorporated herein
by reference.
|
(e)(14)
|
|
Revised Form of Long-Term Incentive Award for Performance Shares
under the 2007 Terra Industries Inc. Omnibus Stock Incentive
Plan, filed as Exhibit 10.1 to Terra Industries Inc.s
Form 10-Q
for the quarter ended March 31, 2009 and incorporated
herein by reference.
|
(e)(15)
|
|
2010 Officers and Key Employees Annual Incentive Plan of Terra
Industries Inc.*
|
(e)(16)
|
|
Item 3 to Terra Industries Inc.s
Schedule 14D-9,
filed on March 5, 2009 and incorporated herein by
reference.
|
48
ANNEX A
TERRA
INDUSTRIES INC.
TERRA CENTRE
600 FOURTH STREET, P.O. BOX 6000
SIOUX CITY, IOWA
51102-6000
INFORMATION
STATEMENT PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14f-1
THEREUNDER
This Information Statement is being mailed on or about
March 18, 2010 to holders of record of common stock,
without par value (the Terra Common Shares),
of Terra Industries Inc., a Maryland corporation
(Terra or the Company), as
part of the Solicitation/Recommendation Statement on
Schedule 14D-9/A
(the
Schedule 14D-9/A)
of Terra with respect to the offer by CF Industries Holdings,
Inc., a Delaware corporation (CF),
through its indirect wholly-owned subsidiary, Composite
Merger Corporation, a Maryland corporation (CF
Sub), as disclosed in the Tender Offer
Statement on Schedule TO, dated March 5, 2010 (as
amended or supplemented from time to time, the
Schedule TO), to exchange each
outstanding Terra Common Share for the Per Share
Consideration, which is equal to (i) $37.15 in
cash, less any applicable withholding taxes and without
interest, and (ii) 0.0953 of a share of common stock, par
value $0.01 per share, of CF (together with the associated
preferred stock purchase rights) (the CF Common
Stock), upon the terms and subject to the
conditions set forth in (a) the Preliminary
Prospectus/Offer to Exchange, dated March 5, 2010 (as
amended or supplemented from time to time, the Exchange
Offer), and (b) the related Letter of Transmittal
(which, together with the Exchange Offer and any amendments or
supplements thereto from time to time, constitute the
Offer). You are receiving this Information
Statement in connection with the possible election of persons
designated by CF to at least a majority of the seats on the
Terra Board of Directors (the Board). Such
designation is to be made pursuant to the Agreement and Plan of
Merger, dated as of March 12, 2010 (as such agreement may
be amended or supplemented from time to time, the
Merger Agreement), among Terra, CF and CF Sub.
The Offer will expire at 12:00 midnight, New York City time, on
April 2, 2010, unless CF or CF Sub extends the Offer in
accordance with the Merger Agreement. Promptly after that time,
if all conditions to the Offer have been satisfied or waived, CF
Sub will purchase all Terra Common Shares validly tendered
pursuant to the Offer and not validly withdrawn. Copies of the
Exchange Offer and the related Letter of Transmittal have been
mailed with the
Schedule 14D-9/A
to Terra stockholders and are filed as exhibits to the
Schedule 14D-9/A
filed by Terra with the Securities and Exchange Commission (the
SEC) on March 18, 2010.
The Merger Agreement provides that, upon the payment by CF Sub
for Terra Common Shares pursuant to and subject to the
conditions of the Offer, CF shall be entitled to designate to
serve on the Board such number of directors as will give CF
representation equal to that number of directors (rounded up to
the next whole number) determined by multiplying (i) the
total number of directors on the Board (giving effect to the
directors elected pursuant to the right of CF described in this
sentence) by (ii) the percentage that (A) the number
of Terra Common Shares beneficially owned by CF, CF Sub and
their affiliates bears to (B) the number of Terra Common
Shares then outstanding. Terra has agreed to take all action
necessary to cause CFs designees to be elected to the
Board, including obtaining resignations of incumbent directors.
As a result, CF will have the ability to designate a majority of
the Board following the consummation of the Offer.
This Information Statement is required by Section 14(f) of
the Securities Exchange Act of 1934, as amended (the
Exchange Act), and
Rule 14f-1
thereunder, in connection with the appointment of CFs
designees to the Board. You are urged to read this
Information Statement carefully. You are not, however, required
to take any action.
The information contained in this Information Statement,
including information incorporated herein by reference,
concerning CFs designees has been furnished to Terra by
CF, and Terra assumes no responsibility for the accuracy or
completeness of such information.
A-1
CF
DESIGNEES
CF has informed Terra that it will choose its designees to the
Board from the executive officers of CF listed in
Schedule I to the Exchange Offer, a copy of which is being
mailed to Terra stockholders. The information with respect to
such individuals in Schedule I to the Exchange Offer is
incorporated herein by reference. CF has informed Terra that
each of the executive officers of CF listed in Schedule I
to the Exchange Offer who may be chosen has consented to act as
a director of Terra, if so designated.
Based solely on the information set forth in the Exchange Offer
and Schedule I thereto, none of the executive officers of
CF listed in Schedule I to the Exchange Offer (i) is
currently a director of, or holds any position with, Terra, or
(ii) has a familial relationship with any directors or
executive officers of Terra. Terra has been advised that, to the
best knowledge of CF and CF Sub, except as disclosed in the
Exchange Offer, none of the executive officers of CF listed in
Schedule I to the Exchange Offer beneficially owns any
equity securities (or rights to acquire such equity securities)
of Terra and none have been involved in any transactions with
Terra or any of its directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the
rules and regulations of the SEC.
Based solely on the information set forth in Schedule I to
the Exchange Offer, and except as described in such schedule,
none of the executive officers of CF listed on Schedule I
to the Exchange Offer has, during the last ten years,
(i) been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) been a
party to any judicial or administrative proceeding that resulted
in a judgment, decree or final order enjoining the person from
future violations of, or prohibiting activities subject to,
federal or state securities laws or a finding of any violation
of such laws.
It is expected that CFs designees may assume office at any
time following the payment by CF Sub for Terra Common Shares
pursuant to the Offer, which payment cannot be earlier than
April 5, 2010, and that, upon assuming office, CFs
designees will thereafter constitute at least a majority of the
Board. It is currently not known which of the current directors
of Terra would resign.
CERTAIN
INFORMATION CONCERNING TERRA
The authorized capital stock of the Company consists of
133,500,000 shares, without par value, of which
(i) 133,380,000 shares have been classified as Terra
Common Shares and (ii) 120,000 shares have been
classified as 4.25% Series A Cumulative Convertible
Perpetual Preferred Shares (the Series A Preferred
Stock). As of March 17, 2010, there were
100,165,757 Terra Common Shares outstanding and no shares of
Series A Preferred Stock outstanding.
The Terra Common Shares constitute the only class of securities
of the Company that is entitled to vote at a meeting of
stockholders of the Company. Each Terra Common Share entitles
the record holder to one vote on all matters submitted to a vote
of the stockholders.
A-2
CURRENT
DIRECTORS AND EXECUTIVE OFFICERS OF TERRA
Directors.
The following sets forth information regarding the members of
the Board:
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First Year as
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Director;
|
|
|
Present Positions and Offices with Terra, Other
Directorships,
|
|
Class and
|
Name and Age
|
|
Principal Occupation During the Past Five Years
|
|
Term
|
|
Henry R. Slack (60)
|
|
Mr. Slack has served as Chairman of Terra since April 2001 and
as the Managing Member of Quarterwatch, LLC, a financial
advisory and related family services company, since 2003. Prior
to his retirement, he was Chief Executive Officer of Minorco SA,
an international mining company, from 1991 until 1999, when that
company merged with Anglo American Corporation to form Anglo
American plc. He has also served as a director of E. Oppenheimer
and Son International Limited, a private investment and holding
company, since 1979; served as Chairman of First Africa Group, a
private investment banking firm, from 2006 until its acquisition
in 2009; and was Chairman of Task (USA) Inc., a private
investment firm, from September 1999 to June 2002. Mr. Slack was
a member of the Board of Directors and the executive committee
of Anglo American Corporation, an international mining company,
from 1981 until 1999. He has also served on the board of
directors of Salomon Brothers Inc., a provider of investment
banking, securities underwriting and foreign exchange trading
services, from 1982 to 1988, SAB Miller plc., one of the
worlds largest brewers, from 1998 to 2002, and for more
than twenty years on the board of Engelhard Corporation, a
supplier of catalysts used in the petroleum, chemical and food
industries, until its acquisition in 2006. The Board selected
Mr. Slack as a director, among other reasons, because of his
extensive knowledge of Terra and the nitrogen fertilizer
business and industry gained through serving on the Board for
27 years, as well as his broad business acumen and
demonstrated ability to serve as Chairman of the Board.
|
|
1983;
Class II Director, term expires at the 2012 annual meeting
|
A-3
|
|
|
|
|
|
|
|
|
First Year as
|
|
|
|
|
Director;
|
|
|
Present Positions and Offices with Terra, Other
Directorships,
|
|
Class and
|
Name and Age
|
|
Principal Occupation During the Past Five Years
|
|
Term
|
|
Michael L. Bennett (56)
|
|
Mr. Bennett, who has been employed by the Company for
36 years, has served as President and Chief Executive
Officer of Terra since April 2001 and as Executive Vice
President and Chief Operating Officer of Terra from February
1997 to April 2001. Mr. Bennett has served as President of
Terra Nitrogen GP Inc. (TNGP) (or its
predecessor), a subsidiary of Terra and the General Partner of
Terra Nitrogen Company, L.P. (TNCLP), since
June 1998, as Chairman of the Board of TNGP since April 2002 and
a director of TNGP (or its predecessor) since 1995. Mr. Bennett
has served as a director of Alliant Energy Corporation
(Alliant Energy), a public utility holding
company, since 2003 and is a member of the Capital Approval,
Audit and Executive Committees, the Chairman of the Nominating
and Governance Committee and the Lead Independent Director.
Mr. Bennett has also served as a director of Interstate
Power and Light Company, Wisconsin Power and Light Company and
Alliant Energy Resources, Inc., each a first tier subsidiary of
Alliant Energy, since 2003. The Board selected Mr. Bennett as a
director, among other reasons, because of his demonstrated
ability as Chief Executive Officer of Terra and extensive
knowledge of the nitrogen fertilizer business and industry,
gained while serving in numerous positions with Terra over a
36-year
career.
|
|
2001;
Class I Director, term expires at the 2011 annual meeting
|
David E. Fisher (67)
|
|
Mr. Fisher served as a director of Falcon Oil & Gas Ltd., a
global energy company, between 2007 and 2009 and was Chairman of
its Audit Committee and a member of its Compensation Committee.
Mr. Fisher is the Chairman of Real Associates Limited, a private
company which invests in commercial and residential property
principally located in Scandinavia, and has served in that
capacity since 2005. He has over 25 years experience in the
natural resources and extractive industries, having served as
Finance Director of Minorco SA, an international mining company,
from 1992 until his retirement in 1999. The Board selected Mr.
Fisher as a director, among other reasons, because of his over
25 years of experience in the natural resources and
extractive industries, his extensive knowledge of Terra and the
nitrogen fertilizer business and industry gained through serving
on the Board for 17 years, as well as his extensive
financial and accounting expertise, enabling him to effectively
chair Terras Audit Committee and to qualify as an
audit committee financial expert as that term has
been defined by the SEC.
|
|
1993; Class III Director, term expires at the 2010 annual
meeting
|
A-4
|
|
|
|
|
|
|
|
|
First Year as
|
|
|
|
|
Director;
|
|
|
Present Positions and Offices with Terra, Other
Directorships,
|
|
Class and
|
Name and Age
|
|
Principal Occupation During the Past Five Years
|
|
Term
|
|
Dod A. Fraser (59)
|
|
Mr. Fraser has served as President of Sackett Partners
Incorporated, a consulting company he established in 2000, upon
retiring from a 27-year career in investment banking.
Previously, Mr. Fraser was a General Partner of Lazard
Frères & Co., which he joined in 1978, and most
recently, from 1995 to 2000, he was with The Chase Manhattan
Bank, now JP Morgan Chase, where he was a Managing Director and
Group Executive leading the global oil and gas group. Mr. Fraser
also has served as a board member of Smith International, Inc.
(Smith), an oilfield service company, since
2004; Forest Oil Corporation (Forest Oil), an
independent oil and gas company, since 2000; and Acergy S.A.
(Acergy), a sub-sea engineering and
construction company, since 2009. He serves as Chairman of the
Audit Committees of both Smith and Forest Oil, a member of the
Compensation Committee of both Smith and Acergy and a member of
the Nominating and Corporate Governance Committee of Forest Oil.
The Board selected Mr. Fraser as a director, among other
reasons, because of his extensive energy industry experience, as
well as his experience as an investment banker and as a director
of Smith, Acergy and Forest Oil, and his experience with
executive compensation issues and demonstrated ability to serve
as chairman of various board committees.
|
|
2003; Class III Director, term expires at the 2010 annual
meeting
|
Martha O. Hesse (67)
|
|
Ms. Hesse founded, owned and was President and Chief Executive
Officer of Hesse Gas Company, a nationwide natural gas marketing
company, from 1992 to 2003. She served as Chairman of the U.S.
Federal Energy Regulatory Commission from 1986 to 1989, the
first woman to hold such position, and previously served as
assistant secretary for Management and Administration for the
U.S. Department of Energy, as well as Senior Vice President of
First Chicago Corporation, a multibank holding company. Ms.
Hesse serves as Chairman of the Boards of Enbridge Energy
Company, Inc., the general partner of Enbridge Energy Partners,
LP, which owns and operates certain crude oil, petroleum and
natural gas-related assets in the United States, and Enbridge
Energy Management, LLC, which manages the business and affairs
of the partnership, and is a member of the Audit, Finance and
Risk Committee of each. She is also a director of AMEC plc, a
supplier of consultancy, engineering and project management
services to the energy, power and process industries, serving as
a member of the Audit Committee and chair of the Compliance and
Ethics Committee, and a director of Mutual Trust Financial
Group, an insurance-based financial services organization,
serving as chair of the Audit Committee. The Board selected Ms.
Hesse as a director, among other reasons, because of her
extensive knowledge of the natural gas industry and its
regulation, as well as her experience with corporate governance
issues and demonstrated ability to serve as chairman of various
board committees.
|
|
2001;
Class I Director, term expires at the 2011 annual meeting
|
A-5
|
|
|
|
|
|
|
|
|
First Year as
|
|
|
|
|
Director;
|
|
|
Present Positions and Offices with Terra, Other
Directorships,
|
|
Class and
|
Name and Age
|
|
Principal Occupation During the Past Five Years
|
|
Term
|
|
Peter S. Janson (62)
|
|
Mr. Janson retired from AMEC Inc., an engineering and
environmental services firm, in 2002. Mr. Janson served as
Chairman and Chief Executive Officer of AMEC Inc. and a director
of AMEC plc from 2000 to 2002 and as President and Chief
Executive Officer of Agra Inc., an engineering and environmental
services firm (which was sold to AMEC Inc. in 2000), from 1999
to 2000. Mr. Janson also serves as a director of Teekay
Corporation, a provider of international crude oil and petroleum
product transportation services, serving on the Audit and
Compensation and Human Resources Committees. Mr. Janson served
as a director of Tembec Industries Inc., a forest products
company, from 2004 to 2008, serving as Chair of the Environment
and Safety Committee, Chair of the Special Committee for
Strategic Purposes and a member of the Corporate Governance and
Human Resources Committee. He also served as a director of ATS
Automation Tooling Systems Inc., a provider of custom designed,
built and installed manufacturing solutions, from 2004 to 2007,
serving as a member of the Human Resources and Compensation
Committee and the Governance Committee. The Board selected Mr.
Janson as a director, among other reasons, because of his
extensive energy industry experience, his general business
experience as a chief executive officer of public and subsidiary
companies, his experience managing projects at a senior
management level and his board experience on audit, compensation
and special committees.
|
|
2005;
Class I Director, term expires at the 2011 annual meeting
|
James R. Kroner (48)
|
|
Mr. Kroner has been a private investor since his retirement in
December 2005. Mr. Kroner served as Chief Financial Officer and
Chief Investment Officer for Endurance Specialty Holdings Ltd.
(Endurance), a publicly traded insurance and
reinsurance company, from December 2001 to December 2005, and as
Managing Director of Fox Paine & Company, a private equity
firm, from January 2000 to December 2001. Mr. Kroner served as a
director of Endurance from 2002 to 2003. Mr. Kroner served
as a director of WJ Communications Inc. from 2000 to 2002. Mr.
Kroner has served as a director of United America Indemnity,
Ltd, a specialty property and casualty insurer, since 2007, and
serves as Chairman of its Investment and Section 162(m)
Committees and a member of its Audit Committee. The Board
selected Mr. Kroner as a director, among other reasons, based on
input from Terra stockholders and because of his past
directorships and extensive financial and accounting expertise,
including that gained from his past experience as a Managing
Director at Fox Paine & Company, JP Morgan & Co. and
Salomon Smith Barney.
|
|
2001;
Class I Director, term expires at the 2011 annual meeting
|
A-6
|
|
|
|
|
|
|
|
|
First Year as
|
|
|
|
|
Director;
|
|
|
Present Positions and Offices with Terra, Other
Directorships,
|
|
Class and
|
Name and Age
|
|
Principal Occupation During the Past Five Years
|
|
Term
|
|
John N. Lilly (56)
|
|
Mr. Lilly has been the President of John Lilly Strategic
Insights, LLC, an advisory service company to the financial
services industry, since 2002. Mr. Lilly was employed by Procter
& Gamble Company (P&G) from 1976 to
1997, working in the laundry, paper, food and beverage brands in
multiple countries. In 1997, Mr. Lilly joined the Pillsbury
Company as President of Pillsbury North American and then as
Chief Executive Officer of the Pillsbury Company worldwide.
After Pillsbury became part of General Mills, Mr. Lilly started
to work as an advisor. He has acted as a senior advisor to TPG
Capital, Duff & Phelps, Lehman Brothers and Compass
Advisors. Mr. Lilly served on the board of Adams Respiratory
Therapeutics until it was sold to Reckitt Benckiser PLC in 2008.
He is an advisor to LEK Consulting, LLC and a Trustee of the
National Public Radio Foundation. Mr. Lilly brings to the Board
extensive strategic corporate insight and corporate governance
expertise through his consulting and advisory experience, his
experience as an officer of P&G, his experience as Chief
Executive Officer of the Pillsbury Company and his past
directorships.
|
|
2009;
Class II Director, term expires at the 2012 annual meeting
|
Dennis McGlone (60)
|
|
Mr. McGlone has been a private investor since October 2005.
Prior to this, Mr. McGlone served as President, Chief Executive
Officer and director of Copperweld Corp., a major North American
producer of steel tubing and fabricated tubular products, from
February 2004 to October 2005; President, Chief Operating
Officer, and director of Copperweld from October 2002 to
February 2004; and Vice President of Copperweld from July 2001
to October 2002. Mr. McGlone served as Vice President,
Corporate Officer of Armco Inc./AK Steel, a leading U.S.
producer and international marketer of steel products for
automotive, appliance, construction, power generation and
distribution, and process industries, from 1996 to March 2001.
The Board selected Mr. McGlone as a director, among other
reasons, based on input from Terra stockholders and his broad
business acumen, including that gained in the specialty steel
industry managing cyclical price-sensitive commodities that are
energy and capital intensive.
|
|
2006; Class III Director, term expires at the 2010 annual
meeting
|
A-7
|
|
|
|
|
|
|
|
|
First Year as
|
|
|
|
|
Director;
|
|
|
Present Positions and Offices with Terra, Other
Directorships,
|
|
Class and
|
Name and Age
|
|
Principal Occupation During the Past Five Years
|
|
Term
|
|
David A. Wilson (68)
|
|
Dr. Wilson has served as President and Chief Executive
Officer of the Graduate Management Admission Council since 1995.
Dr. Wilson was a director of Laureate Education, Inc.
(formerly Sylvan Learning Systems, Inc.), from 2002 to 2007 and
was Chairman of the Audit Committee beginning in 2003.
Dr. Wilson was employed by Ernst & Young LLP (and its
predecessor, Arthur Young & Company) from 1978 to 1994, as
an Audit Partner, Managing Partner, National Director of
Professional Development, Chairman of Ernst & Youngs
International Professional Development Committee and as a
director of the Ernst & Young Foundation. From 1968 to
1978, Dr. Wilson served as a faculty member at Queens
University, the University of Illinois at Urbana-Champaign, the
University of Texas and Harvard Universitys Graduate
School of Business. Dr. Wilson brings to the Board
extensive financial and accounting expertise, including a
Masters of Business Administration, a Ph.D in accounting,
professional accounting certifications in the United States and
Canada, authorship of four books on accounting and financial
reporting and experience gained at Ernst & Young LLP.
|
|
2009; Class II Director, term expires at the 2012 annual
meeting
|
Irving B. Yoskowitz (64)
|
|
Mr. Yoskowitz is Senior Counsel at the law firm of Dickstein
Shapiro LLP and a Senior Partner of Global Technology Partners,
LLC (GTP), an investment banking and
consulting firm. He also is a Centre Operating Partner of Centre
Partners, LLP, a private equity firm. From 2005 to 2008, he was
Executive Vice President and General Counsel of Constellation
Energy Group, Inc., the parent company of Baltimore Gas and
Electric Company, an electric and gas public utility. From 1998
to 2005, Mr. Yoskowitz was a Senior Partner of GTP, and from
2001 to 2005, Mr. Yoskowitz also served as Senior Counsel at the
law firm of Crowell & Moring LLP. From 1981 to 1998, Mr.
Yoskowitz served as Executive Vice President and General Counsel
of United Technologies Corporation (UTC),
where he also was responsible for environmental, health and
safety, government contracts and compliance. Prior to joining
UTC in 1979, Mr. Yoskowitz held a number of positions with
International Business Machines Corporation. Mr. Yoskowitz is a
director of Ross Aviation, Inc. He was a director of Wyle
Holdings, Inc. from 2006 to July 2009. He was a director, chair
of the Strategic Planning Committee and a member of the Audit
and Compensation Committees of Darwin Professional Underwriters,
Inc. from 2007 to 2008, until it was acquired by Allied World
Assurance Company. He was the Lead Independent Director and a
member of the Audit and Compensation Committees of Equant, NV, a
global data networking company, from 1998 to 2005; a director of
Sirva, Inc., from 2004 to 2005, BBA Group, plc from 1995 to 2004
and Executive Risk Insurance, Inc. from 1996 to 1999, until it
was acquired by Chubb. Mr. Yoskowitz brings to the Board
extensive knowledge of the energy industry and broad business
experience through his work for numerous companies in a variety
of industries.
|
|
2009; Class II Director, term expires at the 2012 annual
meeting
|
A-8
Executive
Officers.
The following sets forth information regarding the executive
officers of Terra:
|
|
|
Name and Age
|
|
Present Positions and Offices with Terra and Principal
Occupations During the Past Five Years
|
|
Michael L. Bennett (56)
|
|
See the information provided for Mr. Bennett above under
Directors.
|
Daniel D. Greenwell (47)
|
|
Senior Vice President and Chief Financial Officer of Terra since
July 2007; Vice President, Controller of Terra from April 2005
to July 2007; Director of TNGP, the General Partner of TNCLP,
since March 2008; Vice President and Chief Financial Officer of
TNGP since February 2008; Vice President and Chief Accounting
Officer of TNGP from April 2006 to February 2008; Corporate
Controller for Belden CDT Inc. from 2002 to 2005; and Chief
Financial Officer of Zoltek Companies Inc. from 1996 to 2002.
|
Joseph D. Giesler (51)
|
|
Senior Vice President, Commercial Operations of Terra since
December 2004; Vice President of Industrial Sales and Operations
of Terra from December 2002 to December 2004; Global Director,
Industrial Sales of Terra from September 2001 to December 2002;
Vice President of TNGP, the General Partner of TNCLP, since
April 2006.
|
Douglas M. Stone (44)
|
|
Senior Vice President, Sales and Marketing since September 2007;
Vice President, Corporate Development and Strategic Planning
from 2006 to September 2007; Director, Industrial Sales from
2003 to 2006; Manager, Methanol and Industrial Nitrogen from
2000 to 2003; Vice President of TNGP, the General Partner of
TNCLP, since April 2009.
|
Edward J. Dillon (42)
|
|
Vice President and Controller of Terra since November 2008; Vice
President of TNGP, the General Partner of TNCLP, since April
2009. In 1998, he joined the General Electric Company and served
in numerous roles including Finance Manager for the National
Broadcasting Company in New York City, progressing to Global
Controller for the Consumer & Industrial segment in
Louisville, Kentucky. He joined INVISTA, a subsidiary of Koch
Industries, Inc. (KII) in 2005 in Wichita as Director of
Corporate Finance and in 2007, moved to KII Corporation as
Finance Director.
|
Joe A. Ewing (59)
|
|
Vice President, Investor Relations and Human Resources of Terra
since December 2004; Vice President, Human Resources of
Mississippi Chemical Corporation from April 2003 to December
2004; Vice President, Marketing and Distribution of Mississippi
Chemical Corporation from 1999 to April 2003.
|
John W. Huey (62)
|
|
Vice President, General Counsel and Corporate Secretary of Terra
since October 2006; Vice President, General Counsel and
Corporate Secretary of TNGP, the General Partner of TNCLP, since
October 2006; Counsel with Shughart Thomson &
Kilroy, P.C. from 2005-2006; Attorney with Butler
Manufacturing Company from 1978 to 2004, Vice President of
Administration from 1993 to 1998, Vice President, General
Counsel and Corporate Secretary from 1998 to 2004.
|
Geoffrey J. Obeney (52)
|
|
Vice President, Information Technology of Terra since February
of 2008, a Director and member of the Compensation Committee of
Wireless Ronin (RNIN) from April 2008 to present, Interim CEO of
Spirit Computing Ltd from November 2005 to January 2008; CIO of
SEI LLC, a start-up company from October 2004 to October 2005.
|
Richard S. Sanders Jr. (52)
|
|
Vice President, Manufacturing of Terra since August 2003; Vice
President, Manufacturing of TNGP (or its predecessor), the
General Partner of TNCLP, since October 2003; Plant Manager,
Verdigris, Oklahoma manufacturing facility from 1995 to August
2003.
|
Earl B. Smith (50)
|
|
Vice President, Business Development of Terra since March 2008;
Registered Financial Advisor with UBS from 2006 to 2008. Various
positions with Vulcan Materials Company from 1982 to 2005,
serving last as Global Business Manager from 2003 to 2005.
|
A-9
CORPORATE
GOVERNANCE
General.
Terra strives to uphold the highest standards of ethical
conduct, to follow corporate governance best practices, to
report accurately and transparently and to fully comply with the
laws, rules and regulations that govern Terras business.
The Board currently consists of eleven members. In accordance
with its Corporate Governance Guidelines, the Board has
affirmatively determined that David E. Fisher, Dod A. Fraser,
Martha O. Hesse, Peter S. Janson, James R. Kroner, John N.
Lilly, Dennis McGlone, Henry R. Slack, David A. Wilson and
Irving B. Yoskowitz each meet the criteria for independence
required by the New York Stock Exchange
(NYSE) listing standards. The Boards
independence determination was based on information provided by
our directors and discussions among our officers and directors.
Following its evaluation, the Board concluded that none of the
non-employee directors was involved in any transactions,
relationships or arrangements not otherwise disclosed that would
impair his or her independence. Mr. Bennett did not meet
the independence standards because he is an employee of Terra
and TNGP (or its predecessor), which is the General Partner of
TNCLP and an indirect, wholly owned subsidiary of Terra. The
Nominating and Corporate Governance Committee reviews and
designates director-nominees in accordance with the policies and
principles of its charter and the Corporate Governance
Guidelines.
Except for Mr. Bennetts employment described above
with TNGP, no occupation carried on by any director during the
past five years was carried on with any corporation or
organization that is a parent, subsidiary or other affiliate of
the Company. There are no family relationships among any of the
directors and any executive officer of the Company. Other than
the arrangements between CF and each of Messrs. Lilly,
Wilson and Yoskowitz (the
2009 Directors) described in this
Information Statement, there is not any arrangement or
understanding between any director, executive officer and any
other person pursuant to which that director or executive
officer was selected as a director or executive officer of the
Company, as the case may be. There are no material proceedings
in which any director or executive officer of the Company is a
party adverse to the Company or any of its subsidiaries, or has
a material interest adverse to the Company or any of its
subsidiaries.
Each 2009 Director entered into a letter agreement (each, a
Nomination Agreement) with CF agreeing to
stand for election as a director in CFs proxy solicitation
relating to Terras 2009 annual meeting of stockholders
(the Proxy Solicitation) and to serve as a
director of the Company if elected. In consideration of this
agreement, CF paid each 2009 Director a one-time fee of
$50,000 and agreed to reimburse each 2009 Director for
certain
out-of-pocket
expenses incurred by him in connection with serving as a nominee.
Each Nomination Agreement contains an acknowledgement by CF and
the 2009 Director party thereto that all of such
2009 Directors activities and decisions as a director
of Terra will be governed by applicable law and subject to his
duties to Terra and, as a result, there is not, and cannot be,
any agreement between such 2009 Director and CF that
governs the decisions that such 2009 Director will make as
a director of Terra.
In consideration of the 2009 Directors respective
undertakings in each Nomination Agreement, and subject to
certain exceptions and limitations, CF agreed to indemnify and
hold harmless each 2009 Director from any and all
liabilities, losses, claims, damages, suits, actions, judgments
and reasonable costs and expenses actually incurred resulting
from, based upon, arising out of or relating to (i) serving
as a nominee; (ii) being a participant in connection with
the Proxy Solicitation; (iii) being otherwise involved in
the Proxy Solicitation as a nominee; or (iv) serving as a
director of Terra, but (x) such indemnification pursuant to
this item (iv) will be extended only to the extent that
Terra has declined or failed to indemnify a 2009 Director,
or to provide such 2009 Director with liability insurance
coverage, to the same extent as other directors of Terra and
(y) the indemnification pursuant to this item
(iv) will (1) be limited to those matters as to which
Terra could provide indemnification to such 2009 Director
as a director under applicable law and (2) terminate with
respect to occurrences taking place after the earlier of
(A) the date that Terra offers to enter into an
indemnification agreement with such 2009 Director on
substantially the same terms as those made available to
Terras other directors and (B) the expiration of such
2009 Directors initial term as a director of Terra.
A-10
Terra has structured its Board to provide separate positions for
a non-executive Chairman of the Board and a chief executive
officer, because it believes, due to the different and demanding
nature of these positions and the skill sets they call for, that
this structure provides the most efficient and effective
leadership model for the Company. The Board plans to maintain
these responsibilities as separate positions.
During 2009, in accordance with the Corporate Governance
Guidelines, the independent directors met at regularly scheduled
executive sessions of the Board without management. The Chairman
of the Board, Henry R. Slack, presided at all these executive
sessions, which are held at each of our Board meetings.
The Board currently has three committees: Audit, Compensation,
and Nominating and Corporate Governance. A description of each
committee and its function appears in the Board of
Directors and Committees section of this Information
Statement under the heading Committees of the Board.
The Audit, Compensation, and Nominating and Corporate Governance
Committees are each composed solely of independent directors as
required by the NYSE listing standards. Each committee has its
own charter setting forth the qualifications for membership and
the committees purposes, goals and responsibilities. Each
of these committees has the power to hire independent legal,
financial or other advisors it deems necessary, without
consulting or obtaining the advance approval of any Terra
officer.
The Board has also adopted a Code of Ethics and Standards of
Business Conduct, which outlines the principles, policies and
laws that govern Terras activities and which serve as a
tool for professional conduct in the workplace. The Code of
Ethics and Standards of Business Conduct applies to Terras
principal executive officer and principal financial officer, as
well as all other officers, directors and employees of Terra.
It is the Boards practice to encourage all its members to
attend the Companys annual stockholders meeting, although
no written policy has been adopted in that regard. All Board
members attended the Companys 2009 stockholders meeting
held November 20, 2009, in New York, New York, except for
Messrs. Lilly, Wilson and Yoskowitz, who had not yet been
elected to the Board.
Current versions of Terras Corporate Governance
Guidelines, Code of Ethics and Standards of Business Conduct and
committee charters can be found in the Investors
section under Governance on Terras Web site at
www.terraindustries.com, and are available in print, free of
charge, upon request.
Risk
Oversight.
Terras policy is to avoid unnecessary risk and to limit,
to the extent practical, risks associated with operating
activities. Our management may not engage in activities that
expose us to speculative or non-operating risks and is expected
to limit risks to acceptable levels. The use of derivative
financial instruments is consistent with our overall business
objectives. Derivatives are used to manage operating risk within
the limits established by our Board, and in response to
identified exposures, provided they qualify as hedge activities.
As such, derivative financial instruments are used to manage
exposure to interest rate fluctuations, to hedge specific assets
and liabilities denominated in foreign currency, to hedge firm
commitments and forecasted natural gas purchase transactions, to
set a floor for nitrogen selling prices and to protect against
foreign exchange rate movements between different currencies
that impact revenue and earnings expressed in U.S. dollars.
The use of derivative financial instruments subjects us to some
inherent risks associated with future contractual commitments,
including market and operational risks, credit risk associated
with counterparties, product location (basis) differentials and
market liquidity. We continuously monitor the valuation of
identified risks and adjust the portfolio based on current
market conditions.
The Board established a policy containing certain limits on
managements ability to hedge natural gas purchase prices
in relationship to forward sales commitments of nitrogen
products, and receives weekly reports from management on actual
transactions and commitments in relation to policy limits.
Further review and discussion of these policy limits and actual
practice occur at regular and special Board meetings, along with
review of other significant risk matters pertaining to the
conduct of our business, including reserves for doubtful
accounts and working capital needs.
A-11
Communication.
Interested parties who wish to report questionable practices by
Terra employees may do so by calling Terras toll free,
anonymous hotline at 1-866-551-8010 (in the U.S. and
Canada) or at
011-44-866-551-8010
(in the U.K.). Interested parties who wish to communicate any
message or voice a complaint to the Board, any of its committees
or the non-management directors should address their
communications to: Henry R. Slack, Chairman of the Board; Terra
Industries Inc.; 600 Fourth Street; Sioux City, Iowa 51101. Such
communications can also be made by calling
712-277-1340
or by e-mail
at boardethics@terraindustries.com.
BOARD OF
DIRECTORS AND COMMITTEES
Committees
of the Board.
Audit
Committee.
The Audit Committee met five times in 2009 and is currently
composed of Mr. Fisher (Chairman), Ms. Hesse,
Mr. Kroner and Mr. Wilson. The committee is composed
entirely of non-employee directors, each of whom meets the
independence requirements of the NYSE listing
standards. In accordance with Terras Audit Committee
charter, all members of the committee are financially literate
and the Board has determined that Mr. Fisher meets the
requirements to be named audit committee financial
expert as the term has been defined by the SEC. The Audit
Committee charter is available on Terras website as set
out in the Corporate Governance General
section above.
The Audit Committee reviews Terras procedures for
reporting financial information to the public. The Audit
Committee also reviews Terras internal audits, reports and
related recommendations. Its members are directly responsible
for Terras independent accounting firm and have the sole
authority to appoint or replace the independent accounting firm.
The committee reviews the scope of the annual audit, reviews
related reports and recommendations and preapproves any
non-audit services provided by the independent registered public
accounting firm. In addition, the committee maintains, through
regularly scheduled meetings, open lines of communication
between the Board and Terras financial management,
internal auditors and independent registered public accounting
firm. See Audit Committee Report below.
Compensation
Committee.
The Compensation Committee met twice in 2009 and is currently
composed of Messrs. Fraser (Chairman), Janson, McGlone and
Yoskowitz. Each of the members of the committee meets the
independence requirements of the NYSE listing
standards. The committees functions include establishing
the compensation to be paid to Terras executive officers.
The committee also administers certain employee benefit plans,
establishes and, in consultation with management, administers
compensation guidelines and personnel policies. See the report
on Executive Compensation below. The Compensation
Committee charter is available on Terras website as set
out in the Corporate Governance General
section above.
Nominating
and Corporate Governance Committee.
The Nominating and Corporate Governance Committee met three
times in 2009 and is currently composed of Ms. Hesse
(Chairman) and Messrs. Fraser, Lilly and Slack. Each of the
members of the committee meets the independence
requirements of the NYSE listing standards. The committees
functions include helping the Board fulfill its responsibilities
to stockholders by shaping the Companys corporate
governance and enhancing the quality and independence of the
Board nominees. In addition, the committee identifies and
reviews qualifications of potential Terra director candidates,
to include those recommended by stockholders, and makes
recommendations to the Board for nomination or election. The
Nominating and Corporate Governance Committee generally
identifies nominees for new directors based upon outside
research and recommendations from directors and officers of the
Company. Nominees for director are selected on the basis of
broad experience, wisdom, integrity, ability to make independent
analytical inquiries, understanding of Terras business
environment, and willingness to devote adequate time and energy
to Board duties. The Board
A-12
considers directors of diverse backgrounds, in terms of both the
individuals involved and their various experiences and areas of
expertise. Each Board member must ensure that future commitments
(including commitments to serve on boards of other companies) do
not materially interfere with the members service as a
Terra director. The Board has determined that the above
mentioned policy has been implemented appropriately when, and
has been effective in, determining the qualifications of
potential director candidates to the Board. The Nominating and
Corporate Governance Committee charter is available on
Terras website as set out in the Corporate
Governance General section above.
The Nominating and Corporate Governance Committee charter also
provides that the committee will review candidates who have been
recommended by stockholders. Appropriate materials describing
the personal and professional background and experience of
candidates recommended by stockholders should be communicated to
the Board as set out in the Corporate
Governance Communication section above. The
committee will evaluate all such stockholder recommended
candidates on the basis of the same qualities and
characteristics as described in the preceding paragraph.
The Board establishes special Board committees from time to
time, determining such committees specific functions as
they are established. The Board and its committees occasionally
take action by unanimous written consent in lieu of a meeting.
Meetings
of the Board.
The Board held five regular meetings and 26 special meetings in
2009. Each director attended at least 94 percent of the
total meetings of the Board and its committees of which he or
she was a member.
Compensation
Committee Interlocks and Insider Participation.
The Compensation Committee is composed of the directors named as
signatories to the Compensation Committee Report
below. No director has any direct or indirect material interest
in or relationship with Terra other than shareholdings as
discussed below and as related to his or her position as a
director, except as described under the heading Executive
Compensation and Other Information Transactions with
Related Persons below. During 2009, no officer or other
employee of Terra served on the board of directors of any other
entity, where any officer or director of such entity also served
on the Board.
A-13
SECURITIES
OWNERSHIP OF DIRECTORS, MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
Equity
Security Ownership.
Except as set forth below, the following table sets forth
certain information with respect to the beneficial ownership of
Terra Common Shares as of March 17, 2010 by each of
Terras directors, certain of Terras executive
officers, all executive officers and directors as a group and
the beneficial owners known to Terra of 5% or more of the
outstanding Terra Common Shares. Unless otherwise specified, the
address for each holder is
c/o Terra
Industries Inc., 600 Fourth Street, P.O. Box 6000,
Sioux City, IA 51102.
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|
|
|
Amount of
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|
|
|
|
|
|
Beneficial
|
|
|
Percent of
|
|
Name and Address of Beneficial Owner
|
|
Ownership
|
|
|
Class
|
|
|
BlackRock Inc.
|
|
|
5,879,699
|
(1)
|
|
|
5.9
|
%
|
55 East 52nd Street
|
|
|
|
|
|
|
|
|
New York, New York 10055
|
|
|
|
|
|
|
|
|
Mason Capital Management LLC
|
|
|
5,770,062
|
(2)
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|
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5.8
|
%
|
110 East 59th Street
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|
|
|
|
|
|
|
|
New York, New York 10022
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|
|
|
|
|
|
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|
TPG-Axon Capital Management, LP
|
|
|
5,000,000
|
(3)
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|
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5.0
|
%
|
888 Seventh Avenue
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|
|
|
|
|
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38th Floor
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|
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New York, New York 10019
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|
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|
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Michael L. Bennett, Director, President and Executive Officer
|
|
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685,288
|
(4)
|
|
|
*
|
|
David E. Fisher, Director
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|
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51,853
|
(5)
|
|
|
*
|
|
Dod A. Fraser, Director
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|
|
37,097
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(5)
|
|
|
*
|
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Martha O. Hesse, Director
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|
|
54,775
|
(5)
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|
|
*
|
|
Peter S. Janson, Director
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|
|
25,547
|
(5)
|
|
|
*
|
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James R. Kroner, Director
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|
|
25,647
|
(5)
|
|
|
*
|
|
John N. Lilly, Director
|
|
|
5,055
|
(5)
|
|
|
*
|
|
Dennis McGlone, Director
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|
|
23,647
|
(5)
|
|
|
*
|
|
Hank R. Slack, Director
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|
|
50,221
|
(5)
|
|
|
*
|
|
David A. Wilson, Director
|
|
|
5,055
|
(5)
|
|
|
*
|
|
Irving B. Yoskowitz, Director
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|
|
5,055
|
(5)
|
|
|
*
|
|
Daniel D. Greenwell, Senior Vice President and Chief Financial
Officer
|
|
|
109,699
|
(6)
|
|
|
*
|
|
John W. Huey, Vice President, General Counsel and Corporate
Secretary
|
|
|
58,314
|
(7)
|
|
|
*
|
|
Earl B. Smith, Vice President, Business Development
|
|
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8,500
|
(8)
|
|
|
*
|
|
Douglas M. Stone, Senior Vice President, Sales &
Marketing
|
|
|
44,850
|
(9)
|
|
|
*
|
|
Directors and Executive Officers as a group (20 persons)
|
|
|
1,537,928
|
|
|
|
1.5
|
%
|
|
|
|
(1) |
|
Based on the Schedule 13G filed by BlackRock Inc.
(BlackRock) with the SEC on January 29,
2010, which indicates that BlackRock has sole voting and sole
dispositive power over 5,879,699 Terra Common Shares. BlackRock
reports that on December 1, 2009, BlackRock completed its
acquisition of Barclays Global Investors NA from Barclays Bank
PLC, and that as a result, substantially all of the Barclays
Global Investors entities are now included as subsidiaries of
BlackRock for purposes of Schedule 13G filings. |
|
|
|
(2) |
|
Based on the Schedule 13G filed jointly by Mason Capital
Management LLC (Mason Management), Kenneth M.
Garschina and Michael E. Martino with the SEC on March 15,
2010, which indicates that Mason Management holds sole voting
and dispositive power over 5,770,062 Terra Common Shares and
Mr. Martino and Mr. Garschina hold shared voting and
dispositive power as to such Terra Common Shares. Mason
Management reports that such Terra Common Shares are directly
owned by Mason Capital L.P. |
A-14
|
|
|
|
|
(Mason Capital LP), Mason Capital Master
Fund, L.P. (Mason Capital Master Fund) and
certain other funds and accounts (the Managed
Accounts). Mason Management reports that it is the
investment manager of each of Mason Capital LP, Mason Capital
Master Fund and the Managed Accounts, and Mason Management may
be deemed to have beneficial ownership over the Terra Common
Shares reported on the Schedule 13G by virtue of the
authority granted to Mason Management by Mason Capital LP, Mason
Capital Master Fund and the Managed Accounts to vote and dispose
of such Terra Common Shares. It further reports that
Mr. Garschina and Mr. Martino are managing principals
of Mason Management. |
|
|
|
(3) |
|
Based on the Schedule 13G/A filed by TPG-Axon Capital
Management, LP (TPG-Axon Management) with the
SEC on February 16, 2010, which indicates that TPG-Axon
Capital Management shares voting and dispositive power over
5,000,000 Terra Common Shares. TPG-Axon Capital Management
reports that it is an investment manager to TPG-Axon Partners,
LP (TPG-Axon Domestic) and TPG-Axon Partners
(Offshore), Ltd. (TPG-Axon Offshore), has the
power to direct the disposition and voting of the Terra Common
Shares held by TPG-Axon Domestic and TPG-Axon Offshore, and
further that TPG-Axon Partners GP, LP
(PartnersGP) is the general partner of
TPG-Axon Domestic and TPG-Axon GP, LLC
(GPLLC) is the general partner of PartnersGP
and TPG-Axon Management. It further reports that Dinakar Singh
LLC (Singh LLC) is a Managing Member of GPLLC
and that Mr. Dinakar Singh is the Managing Member of Singh
LLC and in such capacity may be deemed to control Singh LLC,
GPLLC and TPG-Axon Management, and therefore may be deemed the
beneficial owner of the securities held by TPG-Axon Domestic and
TPG-Axon Offshore. |
|
|
|
(4) |
|
Includes 606,192 fully vested Terra Common Shares directly held,
19,281 Terra Common Shares indirectly held in
Mr. Bennetts 401(k) plan account (as of
March 16, 2010), 1,815 Terra Common Shares indirectly held
in Mr. Bennetts wifes 401(k) plan account (as
of March 16, 2010) and 58,000 restricted Terra Common
Shares directly held. |
|
|
|
(5) |
|
All Terra Common Shares are directly held by the director. |
|
|
|
(6) |
|
Includes 86,475 fully vested Terra Common Shares directly held,
2,024 Terra Common Shares indirectly held in
Mr. Greenwells 401(k) plan account (as of
March 16, 2010) and 21,200 restricted Terra Common Shares
directly held. |
|
|
|
(7) |
|
Includes 40,430 fully vested Terra Common Shares directly held,
84 Terra Common Shares indirectly held in Mr. Hueys
401(k) plan account (as of March 16, 2010) and 17,800
restricted Terra Common Shares directly held. |
|
|
|
(8) |
|
Includes 100 fully vested Terra Common Shares directly held and
8,400 restricted Terra Common Shares directly held. |
|
|
|
(9) |
|
Includes 25,029 fully vested Terra Common Shares directly held,
3,421 Terra Common Shares indirectly held in
Mr. Stones 401(k) plan account (as of March 16,
2010) and 16,400 restricted Terra Common Shares directly held. |
Change in
Control.
Except as set forth in this Information Statement, the Company
is not aware of any arrangements, including any pledge by any
person of securities of the Company, the consummation or
operation of which may at a subsequent date result in a change
of control of the Company.
Section 16(a)
Beneficial Ownership Reporting Compliance.
Section 16(a) of the Exchange Act requires Terras
executive officers, directors and beneficial owners of more than
10 percent of the Terra Common Shares to file initial
reports of beneficial ownership and reports of changes in
beneficial ownership of Terra Common Shares with the SEC and the
NYSE. Executive officers and directors are required by SEC
regulations to furnish Terra with copies of all
Section 16(a) reports they file. To Terras knowledge,
all persons who were Terra executive officers, directors and
beneficial owners of more than 10 percent of the Terra
Common Shares at any time during 2009 filed all reports required
under Section 16(a) during and with respect to 2009 in a
timely manner, except Mr. Giesler, who inadvertently filed
one Form 4 late. This conclusion is based solely on a
review of the copies of such filings furnished to Terra and of
written representations from Terras executive officers and
directors.
A-15
EXECUTIVE
COMPENSATION AND OTHER INFORMATION
Compensation
Discussion and Analysis.
Background.
This compensation discussion and analysis discusses the material
elements of compensation of our named executive officers for
2009. In 2009, our named executive officers were:
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Michael L. Bennett, President and Chief Executive Officer
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|
|
|
|
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Daniel D. Greenwell, Senior Vice President and Chief Financial
Officer
|
|
|
|
|
|
Douglas M. Stone, Senior Vice President, Sales &
Marketing
|
|
|
|
|
|
John W. Huey, Vice President, General Counsel and Corporate
Secretary
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|
|
|
|
|
Earl B. Smith, Vice President, Business Development
|
As a producer and marketer of nitrogen products for
agricultural, industrial and environmental customers,
Terras operating results are affected by the volatile
nature of the nitrogen products industry. During 2009, the
nitrogen business was affected by the decline in the global
economy, contributing to a lessened demand for our industrial
nitrogen products. The credit crisis and volatile crop prices
continued to impact the agriculture industry, hampering demand
for agricultural nitrogen products. This resulted in a decline
in net income as compared to 2008 and 2007, albeit returns on
invested capital remained relatively robust. The period of
strong growth that we experienced for 2007 and much of 2008 was
preceded by a period of approximately six years of difficult
market conditions characterized by losses and low returns. We
expect that market volatility will continue to be a factor in
this industry. We have designed our executive compensation
program to reflect these fundamental factors. For additional
details regarding the cyclical nature of the nitrogen products
industry and our performance in light of these conditions, see
the Managements Discussion and Analysis of Financial
Conditions and Results of Operations in our 2009 Annual Report
on
Form 10-K.
Overview.
Objectives.
The Compensation Committees primary objectives in
designing our executive compensation program are to
(i) provide competitive incentive rewards for the
achievement of specific annual goals by Terra;
(ii) minimize fixed costs during cyclical downturns; and
(iii) provide incentives to manage our North American and
United Kingdom asset base as well as new investments to earn
returns in excess of our cost of capital over the long term.
A-16
Elements
of
Compensation.
Our compensation program is comprised of three primary
components:
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|
|
Base Salary
|
|
Base salaries are targeted at the low end of the market range in
order to maintain low fixed-cash costs during cyclical downturns.
|
Annual Incentives
|
|
Annual incentives are paid in cash and provide the opportunity
during periods of average and cyclically robust performance for
management to earn competitive total cash compensation through a
combination of salary and annual incentive payments.
|
Long-Term Incentives
|
|
Long-term incentives are paid in restricted shares and
performance shares in order to align the interests of our
executive officers with those of our shareholders. While a
portion is subject to time-based vesting in order to promote
retention, for our most senior officers, a significant portion
is comprised of performance share grants that will not vest
unless Terra meets specified performance goals and will vest at
above-target levels in the case of superior company
performance. In particular, the vesting criteria for the
performance share grants has significant upside potential tied
to the ability of our senior officers to successfully manage our
existing asset base and invest in new assets to generate returns
in excess of the cost of capital. Together with base salary and
annual cash incentive awards, long-term incentive awards are
intended to provide the opportunity for our executive officers
to achieve total compensation at approximately the
50th percentile of companies in our survey comparison group
if target levels of performance are met.
|
The Compensation Committees approach to executive
compensation is to review all three elements of compensation
together, rather than considering each element separately, and
to compare our total compensation levels to a survey comparison
group of approximately 400 companies, as described in the
next paragraph. On a total compensation basis, the combination
of base salaries, annual cash incentive awards and long-term
incentives should provide our executive officers with
above-average compensation for above-average individual and
company performance and below-average compensation for
below-average performance.
Analysis
of Market
Practices.
In implementing our compensation program, our Compensation
Committee has reviewed studies conducted by its compensation
consultant, Towers Watson (formerly known as Towers Perrin prior
to its merger with Watson Wyatt), which compare our compensation
practices with respect to the levels of compensation and the mix
of types of compensation to those of companies that are similar
to us in revenue, market capitalization or industry profile. For
2009, the survey comparison group, which included approximately
400 companies in the 2009 Towers Watson Compensation Data
Bank (the 2009 Towers Watson Survey), was comprised
of a combination of general industry and
chemical industry companies. The 2009 Towers Watson
Survey is a broad-based, published survey, rather than a survey
that was prepared specifically for the Company. The
general industry group included all companies in the
2009 Towers Watson Survey, other than utilities, energy
companies and financial services companies. The purpose of
Towers Watsons review of the group of general industry
companies was to provide the Compensation Committee with a broad
overview of general market practices. Towers Watson employed
regression analysis to normalize the data relative to companies
similar in size to Terra to ensure comparability.
Towers Watson also reviewed publicly available data on the
compensation paid to the chief executive officers, chief
financial officers and chief legal officers of 21 companies
in our industry or a related industry, including most of the
10 companies included in the Performance Graph that appears
on page 29 of our 2009 Annual Report on
Form 10-K.
The purpose of the review of companies in the chemical industry
group and the group of 21 companies was to determine
whether the compensation practices of these groups differed from
the general industry group in any meaningful respects. For
purposes of reviewing 2009 compensation, Towers Watson did not
identify any meaningful distinctions.
A-17
The general industry group serves as the Compensation
Committees main focus for information on market practices.
We believe that the broader group is appropriate in our case,
because Terra has few direct U.S. competitors, and many of
the companies in our industry do not compete with us in
executive recruitment. In addition, we recruit executive talent
from across a broad range of industries.
The data described above was used to provide the Compensation
Committee with a broad understanding of market practices, rather
than to compare the Companys pay practices to those of any
specific group. When the Compensation Committee targeted 2009
compensation at particular levels, these levels were based on
data regarding general compensation practices.
Internal
Pay
Equity.
Our Compensation Committees approach to determining the
compensation of Michael Bennett, our Chief Executive Officer, is
generally the same approach that is used to determine the
compensation levels of our other senior executives, with two
principal exceptions.
First, the performance measure for Mr. Bennetts
annual incentive award differs from those of our other executive
officers. The individual goals applicable to Mr. Bennett
under our Annual Incentive Plan are based on total company
performance, whereas the individual goals of the executives who
report directly to Mr. Bennett are generally based on their
particular areas of responsibility. This distinction is intended
to reflect Mr. Bennetts level of accountability and
influence with respect to overall company performance.
Additionally, in the case of long-term incentive awards, which
are comprised of a combination of time-based restricted stock
and performance share awards, two-thirds of
Mr. Bennetts awards are comprised of performance
shares, whereas half of the other senior executives awards
are comprised of performance shares. The Compensation Committee
believes that Mr. Bennett has a greater ability to
influence company performance, and, therefore, his awards should
have more upside and downside potential than awards granted to
our other executive officers.
Role
of Our Compensation Consultant.
In 2005, our Compensation Committee selected and retained Towers
Watson to serve as its independent compensation consultant.
Towers Watson advises and consults with the Chairman of our
Compensation Committee in connection with our compensation
programs, including long-term incentive compensation, stock
ownership guidelines and executive severance and change in
control arrangements. While Towers Watson advises our
Compensation Committee in making its decisions, including by
providing our Compensation Committee with information about
current market practices, our Compensation Committee retains
ultimate authority to make all final determinations. Our Vice
President, Investor Relations and Human Resources, Joe Ewing,
often provides Towers Watson with the necessary data and
background information that it needs in order to prepare
materials requested by the Compensation Committee.
At the request of our Compensation Committee, Towers Watson also
assisted us in preparing the executive compensation disclosure
in this Information Statement and in our 2008 and 2009 proxy
statements by reviewing the Compensation Discussion and Analysis
and, based on data we provided, assisting in the preparation of
the tables included in this Information Statement and prior
proxy statements.
2009
Executive Compensation Program.
Our Compensation Committee developed a 2009 executive
compensation program that provided for the following:
Base
Salaries.
For 2009, our executive officers received base salaries at
approximately the 25th percentile of the survey comparison
group of companies. The Compensation Committee determined that
base salaries should be targeted around that level in order to
control fixed costs in light of the volatile nature of the
nitrogen products
A-18
industry. The Summary Compensation Table below details the
annual base salaries paid in 2009 to each of our named executive
officers.
In February 2009, Mr. Bennett proposed increases to the
base salaries of our named executive officers, based on his
evaluation of each of our named executive officers
performance. The Compensation Committee considered the proposed
salary increases for our named executive officers and determined
that salary increases were appropriate in order to maintain base
salaries at approximately the 25th percentile level. The
Compensation Committee also took into account the individual
performance of each of the named executive officers when
determining the amount of salary increase to award.
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|
Executive
|
|
2008 Base Salary
|
|
|
2009 Base Salary
|
|
|
Bennett
|
|
$
|
600,000
|
|
|
$
|
650,000
|
|
Greenwell
|
|
$
|
330,000
|
|
|
$
|
380,000
|
|
Stone
|
|
$
|
270,000
|
|
|
$
|
300,000
|
|
Huey
|
|
$
|
285,000
|
|
|
$
|
295,000
|
|
Smith
|
|
$
|
210,000
|
|
|
$
|
220,000
|
|
Annual
Incentive
Compensation.
The cash incentive awards to be paid to our executive officers
are allocated from an overall pool of available funds that is
established by our Compensation Committee during the first
quarter of each year based on the aggregate value of the
potential awards payable to all participants in our Annual
Incentive Plan. The amount of the overall pool of available
funds is determined by our achievement of return on capital
employed (ROCE) targets, as described below. Beginning in 2008,
the Compensation Committee decided to use ROCE targets for
determining the funding of the incentive pool because ROCE is a
better indicator of the operating and investment decisions of
management and requires management to be disciplined in the use
of Terras capital.
Actual payout levels under the Annual Incentive Plan, however,
are determined based on individual performance against
individual goals. For Messrs. Bennett, Greenwell and Huey,
30% of their individual goals are based on achievement of the
Companys projected annual operating budget as approved by
the Board, while 40% of Messrs. Stone and Smiths
individual goals are based on achievement of the Companys
projected annual operating budget. The Compensation Committee
determined that the lower weighting of achievement of the
Companys projected annual operating budget was appropriate
for Messrs. Bennett, Greenwell and Huey because of the need
for them to focus on driving to the optimum decision on the
unsolicited acquisition offers made by CF during 2009.
Mr. Bennett prepared a proposal for his own individual
performance goals that was reviewed, modified and approved by
the Compensation Committee in the first quarter of 2009. In
addition, during the first quarter of 2009, each other executive
officer worked with Mr. Bennett to establish individual
performance goals for 2009, which focused on the
executives corresponding function, department or business
unit and which tracked Mr. Bennetts own individual
goals from an overall corporate perspective. At the same time,
during the first quarter of 2009, the Compensation Committee
approved the 2009 target annual incentive awards for each of our
executive officers.
While funding of the incentive pool for 2009 was dependent on
2009 ROCE, performance by each executive officer against the
corresponding individual performance goals (including
achievement of the Companys projected 2009 annual
operating budget) based on recommendations by Mr. Bennett
was used by the Compensation Committee to determine the
executives actual award. In its exercise of discretion to
determine individual awards under our Annual Incentive Plan, our
Compensation Committee applied negative discretion to adjust the
amount of certain individual awards downward and also exercised
its discretion in some cases to increase the amount of certain
individual awards above the amount determined by multiplying the
individuals target award by the incentive pool funding
percentage. The aggregate amount of all awards paid, however,
was $760,314 less than the funding of the incentive pool. In a
similar manner, the Board
A-19
evaluates Mr. Bennetts performance at the end of each
year and determines the extent to which he has met his
performance goals and sets his actual bonus.
The following table, which sets forth the target and actual
annual incentive award for each of our named executive officers
under our 2006, 2007, 2008 and 2009 Annual Incentive Plans,
reflects how the cyclical nature of our business affected our
Annual Incentive Plan payouts. Our performance for 2009 was
between target and the maximum level, and our performance 2007
and 2008 exceeded the maximum level, while our performance for
2006 was below target.
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Target 2006
|
|
|
Actual 2006
|
|
|
Target 2007
|
|
|
Actual
|
|
|
Target 2008
|
|
|
Actual 2008
|
|
|
Target 2009
|
|
|
Actual 2009
|
|
|
|
Annual
|
|
|
Annual
|
|
|
Annual
|
|
|
2007 Annual
|
|
|
Annual
|
|
|
Annual
|
|
|
Annual
|
|
|
Annual
|
|
Executive
|
|
Incentives
|
|
|
Incentives
|
|
|
Incentives
|
|
|
Incentives
|
|
|
Incentives
|
|
|
Incentives
|
|
|
Incentives
|
|
|
Incentives
|
|
|
Bennett
|
|
$
|
575,000
|
|
|
$
|
0
|
|
|
$
|
825,000
|
|
|
$
|
1,468,500
|
|
|
$
|
900,000
|
|
|
$
|
1,710,000
|
|
|
$
|
975,000
|
|
|
$
|
955,927
|
|
Greenwell
|
|
$
|
116,000
|
|
|
$
|
0
|
|
|
$
|
150,000
|
|
|
$
|
300,000
|
|
|
$
|
198,000
|
|
|
$
|
396,000
|
|
|
$
|
285,000
|
|
|
$
|
400,000
|
|
Stone
|
|
$
|
42,500
|
|
|
$
|
0
|
|
|
$
|
110,000
|
|
|
$
|
210,000
|
|
|
$
|
162,000
|
|
|
$
|
324,000
|
|
|
$
|
225,000
|
|
|
$
|
250,000
|
|
Huey
|
|
$
|
132,500
|
*
|
|
$
|
0
|
|
|
$
|
137,500
|
|
|
$
|
265,000
|
|
|
$
|
142,500
|
|
|
$
|
275,000
|
|
|
$
|
147,500
|
|
|
$
|
180,000
|
|
Smith
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
105,000
|
|
|
$
|
200,000
|
|
|
$
|
110,000
|
|
|
$
|
125,000
|
|
|
|
|
* |
|
Mr. Hueys 2006 target incentive amount was prorated
to reflect that he was hired on October 25, 2006. |
The target individual award to each of the executive officers
under the Annual Incentive Plan is determined as a percentage of
the executive officers base salary. The target awards to
each of our named executive officers pursuant to the 2009 Annual
Incentive Plan were 150% for Mr. Bennett, 75% for each of
Messrs. Greenwell and Stone and 50% for Messrs. Huey
and Smith. These target awards were chosen to allow our
executive officers to achieve total compensation at
approximately the 50th percentile if target levels of
performance are met. The target awards for Messrs. Bennett,
Huey and Smith are identical to their target awards under the
2008 Annual Incentive Plan, while the target awards for
Messrs. Greenwell and Stone were increased from 60% under
the 2008 Annual Incentive Plan to 75% under the 2009 Annual
Incentive Plan.
The Annual Incentive Plan covers our officers and certain other
key employees. The size of the pool is determined based on the
aggregation of the individual target awards and is funded based
on our achievement of ROCE. The funding of the pool for the 2009
Annual Incentive Plan was determined based on the following
performance measures:
|
|
|
|
|
If Terras 2009 ROCE was less than 9%, the incentive pool
would not have been funded.
|
|
|
|
|
|
If Terras 2009 ROCE was equal to 9%, 50% of the target
annual incentive pool would have been funded.
|
|
|
|
|
|
For each 0.07% by which Terras 2009 ROCE was greater than
9%, an additional 1% of the target annual incentive pool would
have been funded.
|
Under this formula, if Terra had achieved a 2009 ROCE of 12.5%,
the incentive pool would have been funded at 100% of the target
amount, and with a 2009 ROCE of 19.5%, the incentive pool would
have been funded at the maximum level of 200% of the target
amount. The actual 2009 ROCE was 14.988%, resulting in the
funding of the incentive pool with a total amount of $4,497,741,
equal to 135.54% of target level.
The Compensation Committee selected achievement of 12.5% ROCE as
the target for 100% funding of the incentive pool for 2009,
because that level of ROCE, according to outside studies
performed by investment bankers at the request of our Chief
Financial Officer, was approximately equal to our cost of
capital for 2009.
The Compensation Committees approach in determining ROCE
for purposes of the Annual Incentive Plan is that while annual
incentive compensation levels for our executive officers should
reflect operating costs incurred during the relevant year,
decisions made by the Board about Terras capital structure
and expenses that are unusual in nature should neither increase
nor decrease executive compensation levels. This approach was
reflected in the calculation of 2009 ROCE, which excluded
expenses related to the CF Industries Holdings, Inc. unsolicited
acquisition offers. Also in 2009, after an examination of
different scenarios for how the inclusion or exclusion of cash
in the denominator of ROCE would impact managements
decisions and
A-20
affect the level of net income required to generate the target
levels of ROCE under the Annual Incentive Plan and the long-term
incentive program, the Compensation Committee determined that
the formula to determine ROCE would include cash.
Long-Term
Incentives.
In accordance with our philosophy of tying long-term incentive
awards to company performance, the Compensation Committee has
designed our long-term incentive program to accomplish the
following objectives: (1) reward achievement of return on
capital employed (ROCE) targets on a cumulative basis over a
three-year period; (2) provide more substantial incentives
for achieving returns above the cost of capital; (3) assist
with attraction and retention of executives; and (4) align
management incentives with shareholder interests through the use
of equity awards. To these ends, our long-term incentive
compensation is comprised of a combination of performance share
awards, which only vest upon achievement of performance goals
relating to our return on capital employed (ROCE), and
restricted shares, which vest based on continued employment.
Each year, the Compensation Committee sets an annual target
award for each executive officer who participates in our
long-term incentive plan. For 2009, in the case of executive
officers other than Mr. Bennett, target grants were 130% of
annual base salary. Mr. Bennetts target grant was set
at 300% of his annual base salary. The Compensation Committee
determined that these target levels were appropriate for 2009
based on market data with respect to the comparison group of
companies and the objective of setting long-term compensation to
allow our executive officers to achieve total compensation at
approximately the 50th percentile if target levels of
performance are met. The target value of the long-term incentive
awards for 2009 for each of the named executive officers
(expressed as a percentage of base salary) is set forth in the
narrative following the Summary Compensation Table on
page A-29.
The Compensation Committee determined that in the case of
executive officers other than Mr. Bennett, 50% of the value
of the 2009 long-term incentive grant should be subject to
time-based vesting criteria to assist in executive retention,
while the remaining 50% should be subject to performance-based
vesting criteria. As previously noted, Mr. Bennett received
one-third of his grant in restricted shares and two-thirds in
performance share grants. The performance share grants for 2009
were approved by the Compensation Committee on February 17,
2009 and were made on that same day, and the restricted share
grants for 2009 were approved by the Compensation Committee on
July 14, 2009 and were made July 15, 2009.
In accordance with applicable disclosure rules, the Summary
Compensation Table on
page A-29
reflects the aggregate grant-date fair value of the
performance-based shares and restricted shares granted in 2009,
calculated in accordance with FASB ASC Topic 718, Stock
Compensation. When determining the long-term incentive award
grants, the Compensation Committee considered the fair market
value of the shares on the grant date and, in the case of
performance share awards, the value of potential payouts based
on achievement of the performance targets described below. The
fair market value of these awards, based on our stock price of
$32.19 per share as of December 31, 2009, is set forth in
the Outstanding Equity Awards at Fiscal Year End Table on
page A-36.
2009
Performance Share Awards.
For purposes of the 2009 performance share grants, the number of
shares to be issued will depend on Terras annualized
average return on capital employed (ROCE) over the three-year
performance period ending on December 31, 2011. We use ROCE
as the performance metric because ROCE is a critical indicator
of good operating and investment decisions by management, is an
important measurement for judging success of Terras
strategic initiatives, and is a critical metric for investors.
A-21
The following table illustrates target and actual achievement of
ROCE as of December 31, 2009, with respect to the
2007-2009,
2008-2010
and
2009-2011
performance periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level of Payout for
|
|
|
|
|
|
Actual
|
|
|
Actual Average
|
|
|
Performance Share
|
|
|
|
|
|
Achievement
|
|
|
Annual ROCE (as of
|
|
|
Awards (as a % of
|
Performance Period
|
|
Target ROCE
|
|
|
of ROCE (by year)
|
|
|
12/31/09)
|
|
|
target)
|
|
|
|
|
|
|
|
|
2007 27.499
|
%
|
|
|
|
|
|
|
2007-2009
|
|
|
9
|
%
|
|
|
2008 74.121
|
%
|
|
|
44.404
|
%
|
|
200%
|
|
|
|
|
|
|
|
2009 30.382
|
%
|
|
|
|
|
|
|
2008-2010
|
|
|
10
|
%
|
|
|
2008 74.121
|
%
|
|
|
53.750
|
%
|
|
To be determined
after 12/31/10
|
|
|
|
|
|
|
|
2009 30.382
|
%
|
|
|
|
|
|
|
2009-2011
|
|
|
12.5
|
%
|
|
|
2009 14.988
|
%
|
|
|
14.988
|
%
|
|
To be determined after 12/31/11
|
The performance share grant payouts for the 2009 grant cycle
(with a performance period ending in 2011) will be
determined based on the following measures:
|
|
|
|
|
If Terras annualized average ROCE for the period is less
than 7.5%, no shares will be delivered.
|
|
|
|
|
|
If Terras annualized average ROCE for the period is
between 7.5% and 12.5%, 1% of the target number of shares will
be delivered for each 0.05% by which annualized average ROCE
exceeds 7.5%. Thus, if annualized average ROCE is equal to
12.5%, 100% of the target number of shares will be delivered.
|
|
|
|
|
|
If Terras annualized average ROCE for the period exceeds
12.5%, an additional 1% of the target number of shares will be
delivered for each 0.025% by which annualized average ROCE
exceeds 12.5%, up to a maximum of 200% of the target number of
shares.
|
Annualized average ROCE of 12.5% over a cumulative three-year
period was determined by the Compensation Committee to be an
appropriate goal, as outside studies performed by investment
bankers indicated that it is approximately equal to our cost of
capital. As noted above in the description of the Annual
Incentive Plan, the Compensation Committee believes that while
long-term performance awards to our executive officers should
reflect operating costs incurred during the relevant performance
period, decisions made by the Board about Terras capital
structure and expenses that are unusual in nature should not
affect executive compensation levels.
Achievement of ROCE is the performance goal that determines both
the funding of the 2009 Annual Incentive Plan bonus pool and
payout of the 2009 performance share awards. In selecting
performance metrics for both arrangements, the Compensation
Committee considered the objectives of each type of arrangement
and set threshold, target and maximum levels for both
arrangements accordingly. While achievement of 12.5% ROCE was
determined to be the appropriate target level under both
arrangements, the Compensation Committee determined that unlike
the Annual Incentive Plan, which provides no awards to any
participants if the performance for the year is below the level
that would fund the target incentive pool at 50%, participants
who hold performance shares may earn as few as 1% of the target
number of shares for performance that is at the threshold level
over the three-year term of the performance period. This
approach is intended to ensure that poor performance during an
early part of the performance period will not discourage
participants by causing the performance measurements to be
impossible to achieve but allows participants to earn some
portion of the performance shares if performance in the later
part of the performance period has improved. In addition, while
achievement of ROCE under the Annual Incentive Plan provides for
a straight-line increase in the percentage at which
the bonus pool is funded, the performance share awards provide
for a two tiered approach, pursuant to which
achievement of ROCE above the target level results in a greater
increase in the total percentage of shares awarded. The
Compensation Committee determined that this distinction was
appropriate in order to provide additional incentives to
encourage our officers to excel in creating long-term value for
our shareholders.
A-22
Performance share grants vest at the end of a three-year
performance period, based on achievement of performance goals
and assuming that the participant remains employed by Terra.
Upon vesting of a performance share grant, the holder is
entitled to receive a number of shares ranging from 0% to 200%
of the target number of shares subject to the award, based on
achievement of ROCE. Individual performance does not play a part
in determining the level of vesting. Except in the case of
death, total disability or termination of employment without
cause or for good reason (both as defined in the award
agreement) following a change in control of Terra (as described
below) or other special circumstances identified by the
Compensation Committee, the performance share grants will be
forfeited if employment terminates for any reason prior to
vesting. In the event of termination of employment due to death
prior to a change in control, the holder will become entitled to
a number of performance shares based on actual performance prior
to death. In the event of termination of employment due to total
disability prior to a change in control, performance shares will
continue to vest following termination based on achievement of
performance goals.
Unlike prior grants of performance shares, which vest
automatically upon a change in control at the greater of the
target number of shares subject to the award and a number based
on actual company performance during the actual quarters
completed prior to the change in control, the 2009 performance
share grants do not vest automatically upon a change in control
of Terra. Instead, for the 2009 performance share grants and
grants in future years, following a change in control of Terra,
the number of shares that each holder will be entitled to
receive will become fixed as of the date of the change in
control at the greater of the target number of shares subject to
the award and a number based on actual company performance
during the actual quarters completed prior to the change in
control. Each holder of performance shares will receive such
performance shares on the earlier of the date that such award
would otherwise vest or the date that such holder is terminated
without cause or for good reason (both as defined in the
performance share award agreement) or due to death or total
disability on or following a change in control.
Under the merger agreement with CF, all performance shares will
be canceled at the time CF pays for shares tendered in the Offer
in consideration for a cash payment equal to the greater of the
target number of shares subject to the award and a number based
on actual Company performance during the actual quarters
completed prior to the time CF pays for shares tendered in the
Offer, multiplied by an amount in cash equal to the sum of
(x) the cash portion of the per share merger consideration
and (y) the product of (1) the average closing sales
price, rounded to four decimal points, of CF common stock on the
NYSE (reported in the Wall Street Journal, New York City
edition) for the period of the ten consecutive trading days
ending on the second full trading day prior to the time CF pays
for shares tendered in the Offer and (2) the portion of the
offer price paid in CF common stock. The awards will
automatically vest at the time CF pays for shares tendered in
the Offer pursuant to their terms because CF has chosen not to
assume outstanding performance shares.
2009
Restricted Share Awards.
The restricted shares are subject to cliff vesting with 100% of
the award vesting on the third anniversary of the grant date,
assuming that the participant remains employed by Terra at such
time. Except in the case of death, total disability or
termination of employment without cause or for good reason (both
as defined in the award agreement) following a change in control
of Terra or in other special circumstances identified by the
Compensation Committee, the restricted shares will be forfeited
if employment terminates for any reason prior to vesting. In the
event of termination of employment due to death or total
disability, the vesting of restricted shares will accelerate in
full. Grants of restricted shares made prior to 2008 vest in
full automatically upon a change in control of Terra. In 2008,
the Compensation Committee considered the issue of vesting of
restricted shares upon a change in control and determined that
automatic vesting upon a change in control might not be in the
shareholders best interests, and that full vesting of the
restricted shares upon certain terminations following a change
in control of Terra would provide more retention value while
still providing appropriate protection to the holder of the
restricted shares. As a result, the Compensation Committee
decided that, following a change in control of Terra, the
vesting of restricted shares granted in 2008 and later years
shall only accelerate if the holder is terminated without cause
or for good reason.
A-23
Under the merger agreement with CF, all restricted shares will
vest immediately prior to the time CF pays for shares tendered
in the Offer and will be treated in the same manner as vested
shares of Terra common stock held by other stockholders pursuant
to their terms because CF has chosen not to assume restricted
shares.
Changes
to Incentive Compensation Programs for 2010.
For 2010, in light of the uncertainty created for executives due
to the unsolicited acquisition offers by CF, the Compensation
Committee decided to approve changes to the annual incentive
awards to protect recipients of such awards in the event of a
change in control of Terra. In the event of a change in control
of Terra during 2010, the performance metric used to calculate
the cash awards (ROCE) will become fixed at the greater of
target performance and actual performance during the quarters
completed through the date of the change in control. Fixing the
performance metric in the event of a change in control is
consistent with the calculation of the number of performance
shares in the event of a change in control. A participant who
remains employed through December 31, 2010 will receive his
or her full bonus under the plan calculated in such manner. If a
participants employment is terminated following a change
in control of Terra without cause or for good reason (each as
defined in the plan), the participant will be entitled to a
prorated bonus for 2010 through the participants
termination date.
The Compensation Committee selected performance targets for the
2010 Annual Incentive Plan and the 2010 performance share grants
that are slightly lower than the levels for the 2009 grants. The
Compensation Committee selected a target of 11.5% ROCE for both
the 2010 Annual Incentive Plan and the 2010 performance share
grants because annualized average ROCE of 11.5% over a
cumulative three-year period is approximately equal to our cost
of capital, as indicated in outside studies performed by
investment bankers.
The funding of the pool for the 2010 Annual Incentive Plan will
be determined based on the following performance measures:
|
|
|
|
|
If Terras 2010 ROCE is less than 8%, the incentive pool
will not be funded.
|
|
|
|
|
|
If Terras 2010 ROCE is equal to 8%, 50% of the target
annual incentive pool will be funded.
|
|
|
|
|
|
For each 0.07% by which Terras 2010 ROCE is greater than
8%, an additional 1% of the target annual incentive pool will be
funded.
|
Under this formula, if Terra achieves 2010 ROCE of 11.5%, the
incentive pool will be funded at 100% of the target amount, and
with 2010 ROCE of 18.5%, the incentive pool will be funded at
the maximum level of 200% of the target amount.
The performance share grant payouts for the
2010-2012
grant cycle (with a performance period ending December 31,
2012) will be determined based on the following measures:
|
|
|
|
|
If Terras annualized average ROCE for the period is less
than 6.5%, no shares will be delivered.
|
|
|
|
|
|
If Terras annualized average ROCE for the period is
between 6.5% and 11.5%, 1% of the target number of shares will
be delivered for each 0.05% by which annualized average ROCE
exceeds 6.5%. Thus, if annualized average ROCE is equal to
11.5%, 100% of the target number of shares will be delivered.
|
|
|
|
|
|
If Terras annualized average ROCE for the period exceeds
11.5%, an additional 1% of the target number of shares will be
delivered for each 0.025% by which annualized average ROCE
exceeds 11.5%, up to a maximum of 200% of the target number of
shares for an annualized average ROCE of 14% or higher.
|
The Compensation Committee approved an anti-dilution adjustment
to the number of outstanding unvested performance shares and to
the number of outstanding phantom shares and phantom performance
shares (which are held by certain of our employees who are not
officers) held as of December 11, 2009, in order to reflect
the payment of the special cash dividend of $7.50 per common
share. These awards did not participate in the special dividend.
Restricted shares, however, did participate in the special
dividend, and therefore were not adjusted. In addition, the
Compensation Committee approved an adjustment to the number
A-24
of shares available under the Terra Industries Inc. 2007
Omnibus Incentive Compensation Plan in connection with the
special dividend. The Grants of Plan-Based Awards in 2009 Table
on page A-31, the Outstanding Equity Awards at 2009 Fiscal
Year End Table on page A-36 and the Options Exercised and
Stock Vested Table beginning on page A-37 all reflect this
adjustment to our equity-based awards.
Severance.
Prior to 2006, we were a party to executive retention agreements
with our senior executives that provided for payments and
benefits in the event of a termination of employment following a
change in control, but no executives were covered by employment
agreements or other severance arrangements that established the
level of payments and benefits to be provided in connection with
a termination that was not related to a change in control.
During this period, executive severance was generally determined
through individual negotiations, which often led to a variety of
inconsistent results. In 2006, the Compensation Committee
decided that a standard form of severance agreement covering
non-change in control severance was needed to promote additional
stability, ensure equitable treatment and avoid the need for
individual negotiations. At the same time, the Compensation
Committee decided to review its change in control severance
practices. In connection with the Compensation Committees
review of our severance practices, Towers Watson provided the
Compensation Committee with information about severance benefits
that are generally provided in the event of an involuntary
termination of a senior executives employment, both in the
change in control and non-change in control contexts.
Based on the Compensation Committees review, on
October 5, 2006, we entered into employment severance
agreements with each individual who was an executive officer of
Terra at that time. In addition, we entered into an employment
severance agreement with Mr. Huey in October 2006 when he
became an executive officer and with Mr. Smith in March
2008 when he became an executive officer.
All employment severance agreements with our executive officers
are identical except that Mr. Bennetts agreement
provides for an initial term of five years rather than three,
and the approval of three-quarters of our Board is required in
order to terminate Mr. Bennett for cause. Our
Compensation Committee considered these distinctions appropriate
in order to reflect Mr. Bennetts unique role within
our company. For a thorough description of the material terms of
the agreements with each of our named executive officers, see
the narrative following the Summary Compensation Table beginning
on page A-29. For a description and quantification of the
payments and benefits that may be provided to the named
executive officers under these agreements, see
Post-Employment Payments beginning on page A-40.
The Compensation Committee selected the severance multiples and
levels of benefits based on information that Towers Watson
provided in 2006 regarding current market practices relating to
executive severance. Annually, the Compensation Committee
considers and may extend the term of the agreements by one year.
Should the Compensation Committee decide not to extend their
terms, the agreements will expire one year thereafter.
In July 2008, the Compensation Committee reviewed the key terms
of the employment severance agreements with our executives and
the potential impact of the agreements upon a change in control
of Terra, including information provided by Towers Watson
regarding the potential amounts of excise tax
gross-ups
that would be payable under different stock price scenarios. The
Compensation Committee decided to extend the terms of the
agreements (other than Mr. Bennetts agreement, which
expires in 2011) by one year from the originally scheduled
expiration date of October 2009, without changes to the key
terms of the agreements other than the addition of the willful
breach of the Companys code of conduct and failure to
comply with government investigations to the definition of
cause.
In July 2009, the Compensation Committee considered whether to
extend the terms of the agreements (other than
Mr. Bennetts agreement, which expires in
2011) by one year from the scheduled expiration date of
October 2010 and decided to defer any action relative to the
extension of such agreements.
The extent and nature of the severance compensation and benefits
are identified and quantified in the disclosure entitled
Post-Employment Payments, beginning on
page A-40.
A-25
Defined
Benefit Pension
Plans.
We do not offer defined benefit pension plans to our employees
who were hired on or after July 1, 2003. We do, however,
maintain the Terra Industries Inc. Employees Retirement
Plan, which is a tax-qualified defined benefit pension plan
maintained for the benefit of all U.S. employees hired
before July 1, 2003 (which includes Mr. Bennett and
Stone). In 2003, Mr. Stone elected to receive the direct
company contribution under the 401(k) Plan instead of accruing
additional benefits after July 1, 2003 under the Retirement
Plan.
On January 1, 1992, we adopted a supplemental executive
retirement plan, which we refer to as the SERP. The Compensation
Committee and the Board established the SERP so that certain
management and highly compensated employees would be eligible
for the benefits that would have been provided to them under our
tax-qualified defined benefit pension plan but for the limits
imposed by the Internal Revenue Code and the Employee Retirement
Income Security Act. The SERP is an unfunded plan. Participants
in the SERP have the status of unsecured creditors of Terra. As
of December 31, 2009, the only named executive officer who
had accrued benefits under the SERP was Mr. Bennett.
In February 2010, the Compensation Committee and the Board
approved the adoption of a rabbi trust, which is intended to
provide a source of funds to assist Terra in meeting its
liabilities under the SERP. No later than five days following a
change in control of Terra, Terra will be obligated to make an
irrevocable contribution to the trust in an amount such that the
trust will, immediately following such contribution, hold assets
sufficient to pay each SERP participant or beneficiary his or
her accrued benefits under the SERP as of the consummation of a
change in control. The trustee has broad investment powers with
respect to the trust assets, but it may not invest in securities
or obligations issued by Terra or any affiliate of Terra.
For a description of the benefits accrued by
Messrs. Bennett and Stone under our defined benefit pension
plans as of December 31, 2009, see the Pension Benefits
table on page A-38.
Defined
Contribution
Plans.
We maintain a 401(k) plan, which is a tax-qualified defined
contribution plan maintained for the benefit of all
U.S. employees, including our named executive officers. The
401(k) plan permits employees to contribute a portion of their
pay to the plan on a pre-tax basis. We also provide for a
company matching contribution as well as a direct company
contribution in the case of employees who are not eligible to
participate in the Terra Industries Inc. Employees
Retirement Plan. The amount of our 2009 contribution to the
401(k) on behalf of each of our named executive officers is set
forth in the explanation of the All Other Compensation column of
the Summary Compensation Table.
Employee
Welfare and Fringe Benefit
Plans.
Our named executive officers are eligible to participate in our
welfare and fringe benefit plans on the same basis as all of our
other full-time employees. These benefits include our medical,
dental and vision plans, life insurance, short-term and
long-term disability plans, business travel accident insurance,
tuition reimbursement, healthcare spending accounts, and
dependent care spending accounts. In addition, due to
limitations on the level of base salary covered by our primary
long-term disability policy and in order to provide executive
officers with long-term disability coverage equal to 60% of base
salary (which is the rate of coverage provided to all
U.S. employees), we maintain supplemental long-term
disability policies.
Perquisites.
The named executive officers are provided company-paid
memberships in a local country club of their choice. We cover
any costs associated with this perquisite, including taxes. This
perquisite is provided in order to allow the executives to
entertain business associates of Terra, such as partners in
joint ventures, customers and suppliers. The named executive
officers are also permitted to use the club amenities for
personal and family activities.
A-26
Other
Matters.
Stock
Ownership/Retention
Guidelines.
The Compensation Committee reviewed market data assembled by
Towers Watson to arrive at a recommendation with respect to
stock ownership by our executive officers. The purpose of the
guidelines is to encourage our executive officers to own and
retain shares of our stock, thereby aligning their interests
with those of our other shareholders. Although these guidelines
are not mandatory, executive officers are strongly encouraged to
follow them. However, special circumstances may require an
executive officer to depart from the guidelines on occasion.
Current ownership guidelines are as follows:
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Chief Executive Officer
Senior Vice Presidents
Vice Presidents
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4 times annual base salary
3 times annual base salary
1 times annual base salary
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Fifty percent of unvested restricted shares will count toward
the ownership guidelines prior to vesting. After satisfying the
ownership guidelines described above, the executive officers are
asked to hold an additional 50% of any shares awarded to them
under our long-term incentive programs (including restricted
shares and performance share grants) for a minimum of
12 months following vesting.
As of December 31, 2009, Mr. Bennetts share
ownership exceeded 25 times his annual base salary. The other
named executive officers, with the exception of
Messrs. Stone and Smith, also exceeded their respective
guideline multiples as of December 31, 2009.
Mr. Stones share ownership of approximately 2.64
times his annual base salary as of December 31, 2009 was
below the guidelines due to a recent promotion from Vice
President to Senior Vice President and Mr. Smiths
share ownership of approximately 0.63 times his annual base
salary as of December 31, 2009 was below the guidelines due
to the fact that he was only recently hired.
Indemnity
Agreements.
Terras charter and bylaws provide indemnification for its
officers and directors to the maximum extent permitted by law.
In general, we will pay the costs of legal defense, settlements
or judgments on behalf of the officer or director relating to
actions taken in the course of employment or service with Terra,
as long as conduct meets applicable standards. We have entered
into Indemnity Agreements with the executive officers and
directors, including the named executive officers. The
agreements provide the maximum indemnity available under
Maryland General Corporation Law, which is substantially the
same as that provided under our charter and bylaws, and provide
for certain procedural requirements in order to obtain
indemnification, the timing of required determinations,
indemnification payments, advancement of expenses, and the
rights of officers and directors in the event that we fail to
provide indemnification or to advance expenses.
Role
of Executive Officers in Determining
Compensation.
Executive officers who are directly involved in administering
the executive compensation program include Mr. Bennett and
Mr. Ewing, who is our Vice President, Investor Relations
and Human Resources. Mr. Bennett is excluded from
discussions and decisions regarding his own compensation.
Mr. Ewing manages the administrative aspects of the
Compensation Committees relationship with Towers Watson,
as well as the calculation and presentation to the Compensation
Committee of proposed executive annual salaries, annual
incentive awards, and long-term incentive awards. Mr. Ewing
corresponds frequently with Mr. Fraser, the Chairman of our
Compensation Committee. Mr. Ewing communicates frequently
with Mr. Bennett in all matters relating to executive
compensation, other than those matters that relate to
Mr. Bennetts own compensation. Mr. Ewing also
occasionally relies on Mr. Greenwell, our Senior Vice
President and Chief Financial Officer, to calculate and review
Terras return on capital employed (ROCE), which is the
relevant performance measure under any long-term incentive
program and to determine the level of funding of the incentive
pool under our Annual Incentive Plan. Mr. Huey, Vice
President, General Counsel and Corporate Secretary, is engaged
with respect to legal and SEC issues relating to executive
compensation, including reporting and disclosure issues.
A-27
Pursuant to its charter, the Compensation Committee is required
to meet at least twice annually but will meet more frequently to
the extent necessary. In 2009, the Compensation Committee met
two times. Generally, executive officers who attend the meetings
are Mr. Bennett, Mr. Ewing, and Mr. Huey, who
acts as secretary of the meeting. Mr. Bennett and
Mr. Ewing present the recommendations for any changes to
compensation of our executive officers, except that no
recommendations are made with respect to Mr. Bennett.
Mr. Bennett makes recommendations to the Compensation
Committee regarding the level of annual and long-term incentive
awards for executive officers other than himself and reviews the
performance of such executive officers with regard to payout
levels of incentive awards, but the Compensation Committee makes
the final determinations regarding grants and payout levels of
awards. Mr. Bennetts
day-to-day
knowledge of the performance of the executives of Terra enables
him to better evaluate the performance of the executives. The
Compensation Committee considers the recommendations of
Mr. Bennett as well as market data and the overall
compensation objectives of Terra in making its determinations.
Final decisions regarding compensation for Mr. Bennett are
made by the Compensation Committee in executive session,
excluding all members of management. Decisions regarding
Mr. Bennett are then communicated by Messrs. Slack and
Fraser to Mr. Bennett and subsequently to Mr. Ewing.
Mr. Ewing is responsible for implementing all approved
changes. Decisions regarding the other executive officers are
communicated by Mr. Bennett to Mr. Ewing.
Deductibility
of
Compensation.
As part of its role, the Compensation Committee reviews and
considers the deductibility of executive compensation under
Section 162(m) of the Internal Revenue Code.
Section 162(m) provides that the Company may not deduct
compensation of more than $1,000,000 paid in any year to the CEO
or any of the three other most highly compensated officers
(excluding the Chief Financial Officer), to the extent that such
compensation is not performance-based as defined in
Section 162(m). To qualify as performance-based
compensation, certain pre-established objective performance
goals and certain other conditions must be met. We have
considered the potential impact of Section 162(m) on
Terras compensation plans and have determined that it is
consistent with Terras best interests for the compensation
of our executives to qualify for the deduction available under
Section 162(m) where possible. Therefore, we have designed
certain of our plans and programs, including the 2009 Annual
Incentive Plan and the 2009 performance share grants, as
described above, to qualify for deductibility under
Section 162(m).
In 2008, the Internal Revenue Service released guidance
affecting the deductibility pursuant to Section 162(m) of
certain bonuses or other programs if the bonus or program is
referred to in the severance formula of an employees
employment agreement. We considered the impact of this guidance
on our plans and programs and on the employment severance
agreements described above, and decided to revise the language
contained in the employment severance agreements to comply with
this guidance.
A-28
Compensation
Committee Report.
We have reviewed and discussed the Compensation Discussion and
Analysis with management. Based on such review and discussions,
we recommended to the Board that the Compensation Discussion and
Analysis be included in Terras Annual Report on
Form 10-K
and this Information Statement filed pursuant to
Section 14(f) of the Securities Exchange Act of 1934 and
Rule 14f-1
thereunder.
Members of the Compensation Committee
of the Board of Directors
Dod A. Fraser, Chairman
Peter S. Janson
Dennis McGlone
Irving B. Yoskowitz
Executive
Compensation.
Summary
Compensation Table
The following table summarizes the compensation of each of our
named executive officers for the fiscal year ended
December 31, 2009. The named executive officers are our
Chief Executive Officer, Chief Financial Officer and three other
most highly compensated executive officers ranked by their total
compensation in the table below.
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Change in
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Pension
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Non-
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Value &
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Equity
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Nonqualified
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Incentive
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Deferred
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Stock
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Option
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Plan
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Compensation
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All Other
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Name & Principal
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Position
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Year
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($)
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($)(1)
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($)(2)
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($)(2)
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($)(3)
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($)(4)(5)
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($)(6)
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($)
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M. Bennett,
President & CEO
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2009
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$
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667,308
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$
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$
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3,435,065
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$
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$
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955,927
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$
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597,697
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$
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27,681
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$
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5,683,678
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2008
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$
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592,308
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$
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$
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3,235,924
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$
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$
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1,710,000
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$
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184,533
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$
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25,028
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$
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5,747,792
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2007
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$
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540,385
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$
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$
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2,945,640
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$
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$
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1,468,500
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$
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96,713
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$
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24,166
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$
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5,075,404
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D. Greenwell,
SVP & CFO
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2009
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$
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386,923
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$
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$
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782,567
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$
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$
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400,000
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$
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$
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35,910
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$
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1,605,400
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2008
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$
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325,385
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$
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$
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667,642
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$
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$
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396,000
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$
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$
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23,800
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$
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1,412,827
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2007
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$
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268,404
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$
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1,250
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$
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552,680
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$
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$
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298,750
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$
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$
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35,285
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$
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1,156,369
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D. Stone,
SVP Sales & Marketing(7)
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2009
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$
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306,923
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$
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$
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617,228
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$
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$
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250,000
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$
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12,983
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$
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29,492
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$
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1,216,626
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2008
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2007
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J. Huey,
VP, General Counsel & Corporate Secretary
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2009
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$
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304,808
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$
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$
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605,453
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$
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$
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180,000
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$
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$
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29,999
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$
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1,120,259
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2008
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$
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283,462
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$
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$
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582,478
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$
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$
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275,000
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$
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$
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21,403
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$
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1,162,342
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2007
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$
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273,077
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$
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$
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564,790
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$
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$
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265,000
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$
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$
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26,919
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$
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1,129,786
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E. Smith,
VP Corporate Development(7)
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2009
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$
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226,923
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$
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$
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454,560
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$
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$
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125,000
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$
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$
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238,482
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$
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1,044,966
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2008
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2007
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(1) |
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Represents annual incentive payments in excess of the named
executive officers maximum opportunity under the annual
incentive plan. |
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(2) |
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Represents the grant-date fair value of equity grants made
during the year under ASC Topic 718, rather than an amount paid
to or realized by the named executive officer. Assumes maximum
payout of 200% on performance share plan grants; see the
Companys Annual Report on
Form 10-K
for other assumptions |
A-29
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made in determining ASC Topic 718 values. For additional
information about stock-based grants made in 2009, see the
Grants of Plan-Based Awards table and accompanying footnotes and
narrative. |
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(3) |
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Reflects amount earned for 2009 performance under the annual
incentive plan, up to the individuals maximum incentive
opportunity. Amounts in excess of the maximum incentive
opportunity are shown in the Bonus column. 2009
amounts were earned in 2009 and paid in 2010, 2008 amounts were
earned in 2008 and paid in 2009 and 2007 amounts were earned in
2007 and paid in 2008. |
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(4) |
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In the case of each of our named executive officers, amounts
shown are solely an estimate of the annual increase in the
actuarial present value of the named executive officers
age 65 accrued benefit under the Terra Industries Inc.
Employees Retirement Plan (Retirement Plan)
and, in the case of Mr. Bennett, under the Terra Industries
Inc. Excess Benefit Plan (SERP). No amount is
payable under these plans before a participant attains
age 55. |
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(5) |
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Assumptions used to calculate the actuarial present value of the
accrued benefits of the named executive officers are further
described in the narrative to the Pension Benefits in Fiscal
Year 2009 Table on page A-38. The Change in Pension Value
and Non-qualified Deferred Compensation Earnings column also
reports the amount of above market earnings on compensation that
is deferred outside of tax-qualified plans. No amount is
reported because above market rates are not permitted under the
Supplemental Deferred Compensation Plan and no named executive
officer has an outstanding balance under such plan. |
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(6) |
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See All Other Compensation disclosure for details. |
|
(7) |
|
Messrs. Stone and Smith were not named executive officers
in 2007 and 2008. |
All
Other Compensation Table
The following table describes each component of the All Other
Compensation column in the Summary Compensation Table.
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Registrant
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Perquisite
|
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Perquisites
|
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Payments/
|
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Contributions to
|
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|
|
|
Tax
|
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|
|
|
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Taxable
|
|
|
|
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& Other
|
|
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Accruals on
|
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Defined
|
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Insurance
|
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Reimbursements/
|
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Moving
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Lump-Sum
|
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Personal
|
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Termination
|
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Contribution
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Premiums
|
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Gross-
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Expenses
|
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Payments
|
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Name
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Benefits(1)
|
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Plans
|
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Plans(2)
|
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(3)
|
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Ups(4)
|
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(5)
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(6)
|
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Other(7)
|
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M. Bennett,
President & CEO
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$
|
7,565
|
|
|
$
|
|
|
|
$
|
11,836
|
|
|
$
|
3,175
|
|
|
$
|
5,045
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
60
|
|
D. Greenwell,
SVP & CFO
|
|
$
|
7,645
|
|
|
$
|
|
|
|
$
|
22,922
|
|
|
$
|
603
|
|
|
$
|
4,680
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
60
|
|
D. Stone,
SVP Sales & Marketing
|
|
$
|
4,829
|
|
|
$
|
|
|
|
$
|
21,097
|
|
|
$
|
306
|
|
|
$
|
3,200
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
60
|
|
J. Huey,
VP, General Counsel & Corporate Secretary
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$
|
3,536
|
|
|
$
|
|
|
|
$
|
21,215
|
|
|
$
|
2,003
|
|
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$
|
3,185
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|
|
$
|
|
|
|
$
|
|
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$
|
60
|
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E. Smith,
VP Corporate Development
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$
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3,432
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|
$
|
|
|
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$
|
15,529
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|
|
$
|
315
|
|
|
$
|
56,870
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|
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$
|
101,976
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|
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$
|
60,300
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|
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$
|
60
|
|
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|
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(1) |
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Amounts include only country club dues for each executive. |
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(2) |
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Includes company contributions to each executives 401(k)
account. |
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(3) |
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Includes group life insurance premiums for coverage in excess of
$50,000. |
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(4) |
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Includes tax
gross-ups
paid by the company in 2009 on perquisites and other benefits
from 2008. These
gross-ups
are based only on taxes from company payment of country club
dues for all of the named executive officers, with the exception
of Mr. Smith, whose figure includes a $16,482 tax
gross-up on
moving expenses and a $40,388 tax
gross-up on
losses and commissions on the sale of his home. |
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(5) |
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Includes a moving allowance of $18,333, moving expenses of
$24,249, a loss on sale of his home of $36,000 and commissions
on sale of his home of $23,394. |
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(6) |
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Payment to compensate for loss of deferred compensation at
previous employer. |
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(7) |
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Value of gift card given to each of the named executive officers
during 2009. |
A-30
Grants
of Plan-Based Awards in 2009
The following table provides information on awards under the
Annual Incentive Plan and restricted share and performance share
awards granted in 2009 to each of our named executive officers.
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All
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Other
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Stock
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Awards:
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All
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Number
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Other
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Exercise
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of
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Option
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or
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Grant
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Shares
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Awards:
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Base
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Date
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of
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Number
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Price
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Fair
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|
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|
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|
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Estimated Future Payouts
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Estimated Future Payouts
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Stock
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of
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of
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Market
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Value
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Under Non-Equity Incentive
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|
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Under Equity Incentive
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or
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Securities
|
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Option
|
|
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Price
|
|
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of
|
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|
|
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Date of
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|
|
Type
|
|
|
Plan Awards(4)
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|
|
Plan Awards(5)
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|
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Units
|
|
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Underlying
|
|
|
Awards
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|
|
on
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|
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Stock &
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|
|
Grant
|
|
|
Action
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of
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Threshold
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Target
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Maximum
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Threshold
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Target
|
|
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Maximum
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(#)
|
|
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Options
|
|
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($ /
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|
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Grant
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|
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Option
|
|
Name
|
|
Date(1)
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|
|
(2)
|
|
|
Award(3)
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|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
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|
|
(#)
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(6)
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(#)
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Sh)
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Date
|
|
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Awards(7)
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|
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M. Bennett,
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|
|
15-Jul-09
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|
|
14-Jul-09
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|
|
|
RS
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,500
|
|
|
|
|
|
|
|
NA
|
|
|
$
|
26.71
|
|
|
$
|
681,105
|
|
President &
|
|
|
17-Feb-09
|
|
|
|
17-Feb-09
|
|
|
|
PS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,318
|
|
|
|
146,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22.76
|
|
|
$
|
3,337,425
|
|
CEO
|
|
|
17-Feb-09
|
|
|
|
|
|
|
|
AI
|
|
|
|
487,500
|
|
|
|
975,000
|
|
|
|
1,950,000
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|
|
|
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|
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|
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NA
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|
D. Greenwell,
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|
|
15-Jul-09
|
|
|
|
14-Jul-09
|
|
|
|
RS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
9,700
|
|
|
|
|
|
|
|
NA
|
|
|
$
|
26.71
|
|
|
$
|
259,087
|
|
SVP & CFO
|
|
|
17-Feb-09
|
|
|
|
17-Feb-09
|
|
|
|
PS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,936
|
|
|
|
27,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22.76
|
|
|
$
|
634,387
|
|
|
|
|
17-Feb-09
|
|
|
|
|
|
|
|
AI
|
|
|
|
142,500
|
|
|
|
285,000
|
|
|
|
570,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Stone,
|
|
|
15-Jul-09
|
|
|
|
14-Jul-09
|
|
|
|
RS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,600
|
|
|
|
|
|
|
|
NA
|
|
|
$
|
26.71
|
|
|
$
|
202,996
|
|
SVP Sales
|
|
|
17-Feb-09
|
|
|
|
17-Feb-09
|
|
|
|
PS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,028
|
|
|
|
22,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22.76
|
|
|
$
|
501,993
|
|
& Marketing
|
|
|
17-Feb-09
|
|
|
|
|
|
|
|
AI
|
|
|
|
112,500
|
|
|
|
225,000
|
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Huey,
|
|
|
15-Jul-09
|
|
|
|
14-Jul-09
|
|
|
|
RS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
NA
|
|
|
$
|
26.71
|
|
|
$
|
200,325
|
|
VP, General
|
|
|
17-Feb-09
|
|
|
|
17-Feb-09
|
|
|
|
PS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,786
|
|
|
|
21,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22.76
|
|
|
$
|
490,960
|
|
Counsel &
|
|
|
17-Feb-09
|
|
|
|
|
|
|
|
AI
|
|
|
|
73,750
|
|
|
|
147,500
|
|
|
|
295,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA
|
|
Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Smith,
|
|
|
15-Jul-09
|
|
|
|
14-Jul-09
|
|
|
|
RS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,600
|
|
|
|
|
|
|
|
NA
|
|
|
$
|
26.71
|
|
|
$
|
149,576
|
|
VP Corporate
|
|
|
17-Feb-09
|
|
|
|
17-Feb-09
|
|
|
|
PS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,119
|
|
|
|
16,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22.76
|
|
|
$
|
369,599
|
|
Development
|
|
|
17-Feb-09
|
|
|
|
|
|
|
|
AI
|
|
|
|
55,000
|
|
|
|
110,000
|
|
|
|
220,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA
|
|
|
|
|
(1) |
|
Reflects the date grants were actually made. |
|
(2) |
|
Reflects the date grants were approved by the Compensation
Committee. |
|
(3) |
|
For purposes of this table, RS means a grant of Restricted
Stock, PS means a grant of Performance Stock and AI means a
grant under the Annual Incentive Plan. |
|
(4) |
|
Reflects grants made under Terras annual incentive plan.
Actual payouts under this plan are based on performance versus
financial targets over the corresponding fiscal year and
individual performance. Cash payouts are made after completion
of the one-year performance period. Threshold awards are 50% of
target and maximum awards are 200% of target. |
|
|
|
(5) |
|
Reflects grants of performance shares made under Terras
long-term incentive performance plan. Actual payouts under this
plan are based on performance versus financial targets over a
three-year period and depend on actual performance versus
targets over the performance period, except that in the event of
a change in control, the number of performance shares will be
fixed at the higher of target or actual performance level for
the quarters completed prior to the change in control and each
holder will receive such performance shares on the earlier of
the date that such award would otherwise vest or the date that
such holder is terminated without cause or for good reason (both
as defined in the award agreement) or due to death or total
disability on or following the change in control. Threshold
award is zero shares and maximum award is 200% of targeted
shares. The number of performance shares granted in 2009 were
adjusted to reflect the antidilution adjustment for our special
cash dividend of $7.50 per common share paid on
December 11, 2009 (as described on pages A-24 and A-25
of the Compensation Discussion and Analysis). |
|
|
|
(6) |
|
Reflects grants of restricted shares that time vest 100% on the
third anniversary of the grant date or immediately upon a change
in control and subsequent qualifying termination. |
|
(7) |
|
Amounts reflect maximum payouts for the performance share grants
and stock price on the date of grant. |
A-31
The following is a description of material factors necessary to
understand the information disclosed in the Summary Compensation
Table and the Grants of Plan-Based Awards Table. This
description is intended to supplement the information discussed
in the Compensation Discussion and Analysis.
Employment
Severance Agreements.
Background.
On October 5, 2006, we entered into an employment severance
agreement with each of our named executive officers other than
Mr. Huey, with whom we entered into an employment severance
agreement on October 25, 2006 and Mr. Smith, with whom
we entered into an employment and severance agreement on
March 3, 2008. The employment severance agreements provide
for severance and other benefits in the event of a termination
of employment under circumstances that are both related to and
unrelated to a change in control.
Term.
Each employment severance agreement has a three-year term, with
the exception of the agreement with Mr. Bennett, which has
a five-year term. The term may be extended for additional
one-year periods in the Boards sole discretion. The
employment severance agreements may not be terminated during the
two-year period following a change in control of Terra without
the executives consent. Severance and Post-Termination
Benefits
The employment severance agreements provide that the executives
will be entitled to certain compensation and benefits upon a
qualifying termination of employment. The extent and nature of
the compensation and benefits are identified and quantified in
the disclosure entitled Post-Employment Payments,
beginning on
page A-40
of this Information Statement.
Excise
Tax
Gross-Up.
The employment severance agreements provide that the executives
will be entitled to a
gross-up
payment to make the executives whole for any excise taxes
imposed as a result of Section 280G of the Internal Revenue
Code. Entitlement to a
gross-up
payment is not contingent on an executives termination of
employment. The estimated amount of the excise tax
gross-up for
each named executive officer is quantified in the disclosure
entitled Post-Employment Payments, beginning on
page A-40
of this Information Statement.
Restrictive
Covenants.
The employment severance agreements contain restrictive
covenants that apply following termination of a named executive
officers employment with Terra and are described in the
disclosure entitled Post-Employment Payments,
beginning on
page A-40
of this Information Statement.
Annual
Incentive Compensation.
2009
Officer and Key Employee Incentive
Plan.
We maintain an Annual Incentive Plan in which our officers and
other key employees selected by Mr. Bennett are entitled to
participate. As described in the Compensation Discussion and
Analysis, the Annual Incentive Plan provides participants,
including the named executive officers, the opportunity to earn
annual cash incentive awards based upon the achievement of
certain performance goals. Awards are paid from a pool
established by the Compensation Committee. Funding of the pool
for 2009 was based on performance targets relating to return on
capital employed. A description of performance target levels and
corresponding funding levels is set forth in the Compensation
Discussion and Analysis.
Each named executive officers threshold, target and
maximum incentive award amounts are disclosed in the Grants of
Plan-Based Awards table. Annual incentive payments for the named
executive officers other than Mr. Greenwell may not be
increased to an amount greater than the named executive
officers target bonus
A-32
times the pool funding percentage, but may be decreased in the
discretion of the Compensation Committee. Payment of an annual
incentive award is made as soon as practicable following our
determination of whether and to what extent performance goals
have been satisfied, subject to approval by the Compensation
Committee. Generally, in order to be entitled to receive an
annual incentive award payment, an employee must be employed
during the applicable fiscal year and until the date of payment.
For 2009, our Compensation Committee set the following target
annual incentive award amounts for the named executive officers:
|
|
|
|
|
Mr. Bennetts target annual incentive award was equal
to 150% of base salary;
|
|
|
|
The target annual incentive award for each of
Messrs. Greenwell and Stone was equal to 75% of base
salary; and
|
|
|
|
The target annual incentive award for each of Messrs. Huey
and Smith was equal to 50% of base salary.
|
In 2009, the incentive pool under the Annual Incentive Plan was
funded at 135.54% of target level. Each of our named executive
officers was eligible to receive an amount of up to 200% of
their target annual incentive award amounts. The actual awards
granted to each of our named executive officers was determined
by our Compensation Committee, based on its determination of
each named executive officers fulfillment of his
individual performance goals. For Mr. Bennett, the
Compensation Committee, in its discretion, granted an award that
was less than his target bonus times his individual performance
times the pool funding percentage. For Mr. Greenwell, the
Compensation Committee, in its discretion, granted an award that
was greater than his target bonus times the pool funding
percentage.
Long-Term
Incentive Awards.
We maintain the Terra Industries Inc. Stock Incentive Plan of
2002, which we refer to as the 2002 Plan, and the 2007 Omnibus
Incentive Compensation Plan, which we refer to as the 2007 Plan,
under which the Compensation Committee may grant to the named
executive officers, as well as other eligible employees, stock
options, stock appreciation rights, restricted shares,
performance shares and other forms of stock-based compensation.
2009
Long-Term Incentive
Grants.
For 2009, the Compensation Committee granted each of our named
executive officers an award based on a combination of restricted
shares and performance shares. Each named executive
officers target grant was determined as a percentage of
base salary. For 2009, our Compensation Committee set the
following target long-term incentive award values for the named
executive officers:
|
|
|
|
|
Mr. Bennetts target long-term incentive award was
equal to 300% of base salary;
|
|
|
|
|
|
The target long-term incentive award for Messrs. Greenwell,
Stone, Huey and Smith was equal to 130% of base salary.
|
With the exception of Mr. Bennett, all executive officers
were expected to receive one half of their grants in the form of
restricted shares and the other half in the form of performance
share grants. Mr. Bennett received one-third of his grant
in restricted shares and two-thirds in performance share grants.
In all cases, the number of shares subject to the grant was
calculated by dividing the target dollar value of the award by
the average of Terras closing stock price during the
twenty trading days prior to the date that the awards were
approved by the Compensation Committee. The average stock price
was rounded to the nearest fifty cents, and the target number of
shares was rounded to the nearest 100 shares.
The number of shares of Terra common stock subject to each grant
and the grant date fair value of these awards is reflected in
the Grants of Plan-Based Awards table.
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|
Restricted share grants. We granted
restricted shares to each of our named executive officers on
July 15, 2009. The principal terms and conditions of these
grants are described below.
|
A-33
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|
Vesting. Each restricted share grant is
subject to cliff vesting with respect to 100% of the restricted
shares subject to the award on the third anniversary of the
grant date. However, in the event of a termination of employment
without cause or for good reason following a change in control
of Terra (within the meaning of the restricted share award
agreements) or termination of employment due to death or total
disability, all restricted shares will become immediately
vested. The Compensation Committee has the authority to extend
or accelerate the vesting period at any time, in its discretion.
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Forfeiture. Upon an executives
termination of employment for any reason other than death, total
disability, termination without cause or for good reason
following a change in control of Terra or such other
circumstances as determined by the Compensation Committee in its
sole discretion, any unvested restricted shares held by the
executive will be immediately forfeited and terminated.
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Voting and Dividend Rights. Holders of
restricted shares are entitled to all rights of a shareholder of
Terra, including the right to vote and receive dividends with
respect to the restricted shares. However, if any distribution
is made to our shareholders other than a cash dividend, then any
securities or other property received by other shareholders will
be subject to the same restrictions applicable to the restricted
shares.
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Performance share grants. We granted
performance shares to each of our named executive officers on
February 27, 2009. The principal terms and conditions of
these grants are described below.
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Vesting. Each performance share grant
is subject to cliff vesting with respect to all shares subject
to the award after December 31, 2011, based on achievement
of the performance goals during the period from January 1,
2009 through December 31, 2011, as described in the
Compensation Discussion and Analysis. Upon vesting, a holder
will become entitled to receive a number of shares ranging from
0% to 200% of the target number of shares subject to the award,
based on achievement of performance goals. In the event of a
change in control of Terra (within the meaning of the
performance share award agreements), the number of shares that
each holder will be entitled to receive will become fixed as of
the date of the change in control at the greater of the target
number of shares subject to the award and a number based on
actual company performance during the actual quarters completed
prior to the change in control. Each holder of performance
shares will receive such performance shares on the earlier of
the date that such award would otherwise vest or the date that
such holder is terminated without cause or for good reason (both
as defined in the performance share award agreement) or due to
death or total disability on or following a change in control.
In the event of termination of employment due to death prior to
a change in control, the holder will become entitled to a number
of performance shares based on actual performance prior to
death. In the event of termination of employment due to total
disability prior to a change in control, performance shares will
continue to vest following termination based on achievement of
performance goals. In special circumstances, as determined by
the Compensation Committee, the Compensation Committee may
extend the period for earning all or a portion of a
holders performance shares.
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|
Forfeiture. Upon an executives
termination of employment prior to the end of the performance
period for any reason other than death, total disability,
termination without cause or for good reason following a change
in control of Terra or such other circumstances as determined by
the Compensation Committee in its sole discretion, any unvested
performance shares held by the executive will be immediately
forfeited and terminated.
|
Pre-2008
Long-Term Incentive
Grants.
In accordance with applicable disclosure rules, the Stock Awards
column of the Summary Compensation Table reflects the aggregate
grant-date fair value of the performance-based shares and
restricted shares granted in each of 2007, 2008 and 2009. We
granted time-based restricted shares in 2007 and 2008 on terms
and conditions that are substantially the same as the grants
made in 2009 and described above, except that the grants of
restricted shares in 2007 will vest in full upon the change in
control of Terra. We also made performance share grants in 2007
and 2008. These grants, which were made on February 28,
2007 and
A-34
February 22, 2008, were subject to three-year performance
periods ending on December 31, 2009 and December 31,
2010, respectively, and will vest automatically upon a change in
control at the greater of the target number of shares subject to
the award and a number based on actual company performance
during the actual quarters completed prior to the change in
control.
Retirement
Benefits.
Defined
Benefit Pension
Plans.
We maintain a U.S. tax-qualified defined benefit plan, and
an excess benefit plan, which we refer to as the SERP which
covers certain named executive officers. For a description of
the material terms of these plans and the present value of each
named executive officers accumulated benefits under these
plans as of December 31, 2009, see the Pension Benefit in
Fiscal Year 2009 Table and accompanying disclosure, beginning on
page A-38.
Defined
Contribution
Plans.
We maintain a 401(k) plan, which is a tax-qualified defined
contribution plan maintained for the benefit of all
U.S. employees, including each of our named executive
officers. The 401(k) plan permits employees to contribute a
portion of eligible pay to the plan on a pre-tax basis. During
2009, we matched 100% of the first 3% of eligible compensation
that an employee contributed to the 401(k) plan and 60% of the
next 3% of pay contributed. In addition, in the case of
employees hired after June 30, 2003 and who are therefore
ineligible to participate in the U.S. tax-qualified defined
benefit plan, we made an additional non-elective contribution
for 2009 equal to 3.2% of eligible compensation. The amount of
our 2009 contribution to the 401(k) on behalf of each of our
named executive officers is set forth in the explanation of the
All Other Compensation column of the Summary Compensation Table.
A-35
Outstanding
Equity Awards at 2009 Fiscal Year-End
Option Awards
The following table provides information on the holdings of
stock option and stock awards by each of our named executive
officers as of December 31, 2009.
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Option Awards
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Stock Awards
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Equity
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Incentive
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Plan
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Equity
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Awards:
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Equity
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Incentive
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Market or
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Incentive
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Plan Awards:
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Payout
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Plan
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Number
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Value of
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Awards:
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Number of
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Market
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of Unearned
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Unearned
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Number of
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Number of
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Number
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Shares or
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Value of
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Shares,
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Shares,
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Securities
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Securities
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of Securities
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Units of
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Shares or
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Units or
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Units or
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Underlying
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Underlying
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Underlying
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Stock
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Units of
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Other
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Other
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Unexercised
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Unexercised
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Unexercised
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Option
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That
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Stock That
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Rights That
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Rights That
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Options
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Options
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Unearned
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Exercise
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Option
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Have Not
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Have Not
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Have Not
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Have Not
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(#)
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(#)
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Options
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Price
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Expiration
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Vested
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Vested
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Vested
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Vested
|
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Name
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Exercisable
|
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Unexercisable
|
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(#)
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|
($)
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Date
|
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(#)
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($)(1)
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(#)
|
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($)(1)
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M. Bennett,
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20,400
|
(2)
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|
$
|
656,676
|
|
|
|
|
|
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|
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President & CEO
|
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|
|
|
|
|
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|
|
|
|
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12,100
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(3)
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$
|
389,499
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|
|
|
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|
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|
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|
|
|
|
|
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|
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|
|
|
|
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25,500
|
(4)
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|
$
|
820,845
|
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|
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|
|
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67,864
|
(5)
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|
$
|
2,184,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
146,636
|
(6)
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|
$
|
4,720,198
|
|
D. Greenwell,
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7,200
|
(2)
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|
$
|
231,768
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SVP & CFO
|
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4,300
|
(3)
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|
$
|
138,417
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9,700
|
(4)
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|
$
|
312,243
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11,876
|
(5)
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|
$
|
382,297
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27,873
|
(6)
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|
$
|
897,228
|
|
D. Stone,
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|
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5,300
|
(2)
|
|
$
|
170,607
|
|
|
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|
|
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|
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|
SVP Sales& Marketing
|
|
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|
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|
|
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|
|
|
3,500
|
(3)
|
|
$
|
112,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,600
|
(4)
|
|
$
|
244,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,695
|
(5)
|
|
$
|
312,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,056
|
(6)
|
|
$
|
709,980
|
|
J. Huey,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,600
|
(2)
|
|
$
|
212,454
|
|
|
|
|
|
|
|
|
|
VP, General Counsel &
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,700
|
(3)
|
|
$
|
119,103
|
|
|
|
|
|
|
|
|
|
Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
(4)
|
|
$
|
241,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,422
|
(5)
|
|
$
|
335,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,571
|
(6)
|
|
$
|
694,376
|
|
E. Smith,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
VP Corporate Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,800
|
(3)
|
|
$
|
90,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,600
|
(4)
|
|
$
|
180,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,514
|
(5)
|
|
$
|
241,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,239
|
(6)
|
|
$
|
522,733
|
|
|
|
|
(1) |
|
Based on a year-end closing price of $32.19 per share. |
|
(2) |
|
Restricted shares will time-vest on July 26, 2010 or
earlier upon a change in control. |
|
(3) |
|
Restricted shares will time-vest on July 18, 2011 or
earlier upon a change in control and subsequent qualifying
termination. |
|
(4) |
|
Restricted shares will time-vest on July 16, 2012 or
earlier upon a change in control and subsequent qualifying
termination. |
|
|
|
(5) |
|
This performance plan cycle will end December 31, 2010. The
actual number of shares paid out subsequent to that time will
depend on actual performance versus targets over the performance
period, except that in the event of a change in control, the
number of performance shares will be fixed at the higher of
target or actual performance level for the quarters completed
prior to the change in control and each holder will receive such
performance shares on the earlier of the date that such award
would otherwise vest or the date that such holder is terminated
without cause or for good reason (both as defined in the award
agreement) or due to death or total disability on or following
the change in control. The threshold award is zero; therefore,
the number of shares and market value shown in the Equity
Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights that have not Vested column are
based on performance through December 31, 2009 (200% of
target) for the 2008 performance plan grant. The number of
performance shares is adjusted to reflect the antidilution
adjustment for our special cash dividend of $7.50 per common
share paid on December 11, 2009 (as described on
pages A-24
and A-25 of
the Compensation Discussion and Analysis). |
|
|
|
(6) |
|
This performance plan cycle will end December 31, 2011. The
actual number of shares paid out subsequent to that time will
depend on actual performance versus targets over the performance
period, except that in the event of a change in control, the
number of performance shares will be fixed at the higher of |
A-36
|
|
|
|
|
target or actual performance level for the quarters completed
prior to the change in control and each holder will receive such
performance shares on the earlier of the date that such award
would otherwise vest or the date that such holder is terminated
without cause or for good reason (both as defined in the award
agreement) or due to death or total disability on or following
the change in control. The threshold award is zero; therefore,
the number of shares and market value shown in the Equity
Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights that have not Vested column are
based on performance through December 31, 2009 (200% of
target) for the 2009 performance plan grant. The number of
performance shares is adjusted to reflect the antidilution
adjustment for our special cash dividend of $7.50 per common
share paid on December 11, 2009 (as described on
pages A-24
and A-25 of
the Compensation Discussion and Analysis). |
Option
Exercises and Stock Vested
The following table provides information, for each of our named
executive officers, on the number of restricted shares and
performance share awards that became vested in 2009 and the
value realized before payment of any applicable withholding
taxes and broker commissions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
Number of
|
|
|
|
|
Number of Shares
|
|
Value
|
|
Shares
|
|
|
|
|
Acquired on
|
|
Realized on
|
|
Acquired
|
|
Value Realized
|
|
|
Exercise
|
|
Exercise
|
|
on Vesting
|
|
on Vesting
|
Name
|
|
(#)(1)
|
|
($)(2)
|
|
(#)
|
|
($)
|
|
M. Bennett,
President & CEO
|
|
|
|
|
|
|
|
|
|
|
77,000
|
(3)
|
|
|
2,286,130
|
|
|
|
|
|
|
|
|
|
|
|
|
167,237
|
(4)
|
|
|
5,383,359
|
|
D. Greenwell,
SVP & CFO
|
|
|
|
|
|
|
|
|
|
|
21,400
|
(3)
|
|
|
635,366
|
|
|
|
|
|
|
|
|
|
|
|
|
25,207
|
(4)
|
|
|
811,413
|
|
D. Stone,
SVP Sales & Marketing
|
|
|
|
|
|
|
|
|
|
|
18,000
|
(3)
|
|
|
534,420
|
|
|
|
|
|
|
|
|
|
|
|
|
17,936
|
(4)
|
|
|
577,359
|
|
J. Huey,
VP, General Counsel & Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
24,000
|
(3)
|
|
|
712,560
|
|
|
|
|
|
|
|
|
|
|
|
|
27,146
|
(4)
|
|
|
873,829
|
|
E. Smith,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VP Corporate Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects stock options exercised in 2009. |
|
(2) |
|
Based on the intrinsic value of the stock option at date of
exercise. |
|
(3) |
|
Reflects time-vesting restricted shares vesting on
August 3, 2009, at a price of $29.69. Shares were granted
on August 1, 2006, except for Mr. Hueys shares,
which were granted on October 25, 2006. |
|
|
|
(4) |
|
Performance share awards for performance from January 1,
2007 through December 31, 2009. Shares were not actually
delivered until February 12, 2010 when the Compensation
Committee determined the level of performance achieved. Number
of shares based on performance through December 31, 2009
(200% of target) and share price based on December 31, 2009
closing price of $32.19. The number of performance shares
delivered reflect the antidilution adjustment for our special
cash dividend of $7.50 per common share paid on
December 11, 2009 (as described on
pages A-24
and A-25 of
the Compensation Discussion and Analysis). |
A-37
Pension
Benefits in Fiscal Year 2009
The following table sets forth information on the pension
benefits for each of our named executive officers as of
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
|
|
|
|
Payments
|
|
|
|
|
|
Credited
|
|
|
Present Value of
|
|
|
During Last
|
|
|
|
|
|
Service (#)
|
|
|
Accumulated Benefit
|
|
|
Fiscal Year
|
|
Name
|
|
Plan Name
|
|
(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
M. Bennett,
President & CEO
|
|
Terra Industries Inc. Employees Retirement Plan
|
|
|
37
|
|
|
$
|
762,023
|
|
|
$
|
|
|
|
|
Terra Industries Inc. Excess Benefit Plan
|
|
|
37
|
|
|
$
|
1,208,251
|
|
|
$
|
|
|
D. Greenwell,
SVP & CFO(3)
|
|
Terra Industries Inc. Employees Retirement Plan
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Terra Industries Inc. Excess Benefit Plan
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
D. Stone,
SVP Sales & Marketing
|
|
Terra Industries Inc. Employees Retirement Plan
|
|
|
14
|
|
|
$
|
46,367
|
|
|
$
|
|
|
|
|
Terra Industries Inc. Excess Benefit Plan
|
|
|
14
|
|
|
$
|
|
|
|
$
|
|
|
J. Huey,
VP, General Counsel & Corporate Secretary(3)
|
|
Terra Industries Inc. Employees Retirement Plan
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Terra Industries Inc. Excess Benefit Plan
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
E. Smith,
VP Corporate Development(3)
|
|
Terra Industries Inc. Employees Retirement Plan
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
Terra Industries Inc. Excess Benefit Plan
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
(1) |
|
Credited service is the period of the executives actual
service with Terra. |
|
(2) |
|
Actuarial present value for the Retirement Plan and SERP was
determined in accordance with the following assumptions: |
|
|
|
|
|
Discount rate equals 5.79%.
|
|
|
|
Postretirement mortality was projected using the 2009 Static
Mortality Table for Annuitants Per §1.430(h)(3)-1(e).
|
|
|
|
Employees are assumed to have elected benefits in the form of a
single life annuity.
|
|
|
|
Benefits commence at age 65.
|
|
|
|
(3) |
|
Messrs. Greenwell, Huey and Smith are not participants in
the Terra Industries Inc. Employees Retirement Plan or
Excess Benefit Plan. |
We maintain a U.S. tax-qualified defined benefit plan (the
Terra Industries Inc. Employees Retirement Plan or the
Retirement Plan) for the benefit of all
U.S. employees hired before July 1, 2003, including
Messrs. Bennett and Stone. In 2003, Mr. Stone elected
to receive the additional non-elective contribution under the
401(k) plan instead of accruing additional benefits under the
Retirement Plan. The Retirement Plan is closed to employees
hired on or after July 1, 2003.
A-38
We also maintain an excess benefit plan (the SERP).
The purpose of the SERP is to restore those benefits that a
participant would otherwise lose in the tax-qualified plan due
to Internal Revenue Code compensation limits and benefit limits.
Retirement
Plan.
Benefit
Accrual
Formula.
The Retirement Plan provides an unreduced single life annuity at
age 65 equal to an amount which:
Multiplies
|
|
|
|
|
1.55% of the highest 60 month average pensionable
compensation by
|
|
|
|
Years of credited service and
|
Subtracts
|
|
|
|
|
0.6% of the highest 60 month average pensionable
compensation up to the social security compensation limit
multiplied by years of credited service (up to a maximum of
35 years).
|
Prior to 2004, pensionable compensation included total salary
and wages paid to the participant for services rendered in the
period considered as service, including bonuses, overtime,
commissions and salary deferrals under a Section 401(k) or
Section 125 plan. Effective January 1, 2004, bonuses
are no longer considered as part of pensionable compensation.
Vesting.
An employee hired prior to July 1, 2003 became eligible to
participate once he or she had completed a 12 consecutive month
period of at least 1,000 hours of service. Benefits under
the Retirement Plan cliff vest after five years of service.
Early
Retirement.
Eligibility for early retirement under the Retirement Plan is
age 55 with 5 years of vesting service. For a
participant who commences pension benefits directly from active
status, the early retirement reductions are 3% per year from
age 65, 10% per year from age 60, 8% per year from
age 59, 6% per year from age 58 and 5% per year from
age 56. All other participants who commence pension
benefits prior to age 65 are subject to an actuarial
reduction of 6.67% per year from age 65 and 3.33% per year
from age 60. As of the date of this Information Statement,
only Mr. Bennett is eligible for early retirement under the
Retirement Plan.
Forms
of
Benefit.
Participants in the Retirement Plan generally can choose among
the following optional forms of benefit:
|
|
|
|
|
Single life annuity;
|
|
|
|
50% joint and survivor annuity;
|
|
|
|
75% joint and survivor annuity;
|
|
|
|
100% joint and survivor annuity;
|
|
|
|
10 year or 15 year certain and life annuity; and
|
|
|
|
Social Security level income benefit.
|
Each option is provided on an actuarially equivalent basis.
A-39
SERP.
The Retirement Plan benefits are limited by various constraints
by the Internal Revenue Code. The SERP is an unfunded plan
maintained to provide benefits to a certain group of management
and highly compensated employees. The terms of the SERP, as they
relate to our named executive officers, with respect to benefit
accrual formula, vesting, early retirement and forms of benefit
are the same as the Retirement Plan, except that under the SERP,
pensionable compensation is not subject to the limits imposed by
the Internal Revenue Code and deferred compensation is not
excluded from the definition of pensionable compensation under
the SERP. In 2010, the Compensation Committee and the Board
approved the adoption of a rabbi trust, which is intended to
provide a source of funds to assist Terra in meeting its
liabilities under the SERP following a change in control.
Post-Employment
Payments
This section describes and quantifies potential payments that
may be made to each named executive officer at, following, or in
connection with the resignation, severance, retirement, or other
termination of the named executive officers employment or
a change in control of Terra on December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Bennett, President & CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Change in
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrelated to
|
|
|
Control
|
|
|
Control &
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a Change in
|
|
|
Without
|
|
|
Qualifying
|
|
Benefit
|
|
Death
|
|
|
Disability
|
|
|
For Cause
|
|
|
Voluntary
|
|
|
Control
|
|
|
Termination
|
|
|
Termination
|
|
|
Cash Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,437,500
|
|
|
$
|
|
|
|
$
|
3,250,000
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
$
|
1,867,020
|
|
|
$
|
1,867,020
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
656,676
|
|
|
$
|
1,867,020
|
|
Performance Share Awards
|
|
$
|
5,697,630
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,697,630
|
|
|
$
|
5,697,630
|
|
Unexercisable Options
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
7,564,650
|
|
|
$
|
1,867,020
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,354,306
|
|
|
$
|
7,564,650
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
473,383
|
|
DC Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
473,383
|
|
Unvested Deferred Compensation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
23,753
|
|
|
$
|
|
|
|
$
|
23,753
|
|
Outplacement
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
78,000
|
|
|
$
|
|
|
|
$
|
78,000
|
|
Perquisites
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Long-Term Disability
|
|
$
|
|
|
|
$
|
1,666,384
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Tax Gross-Ups
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
|
$
|
1,666,384
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
101,753
|
|
|
$
|
|
|
|
$
|
101,753
|
|
Total
|
|
$
|
7,564,650
|
|
|
$
|
3,533,404
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,539,253
|
|
|
$
|
6,354,306
|
|
|
$
|
11,389,786
|
|
|
|
|
(1) |
|
Please see narrative accompanying these tables for details and
key assumptions. |
A-40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Greenwell, SVP & CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Change in
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrelated to a
|
|
|
Control
|
|
|
Control &
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Without
|
|
|
Qualifying
|
|
Benefit
|
|
Death
|
|
|
Disability
|
|
|
For Cause
|
|
|
Voluntary
|
|
|
Control
|
|
|
Termination
|
|
|
Termination
|
|
|
Cash Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
997,500
|
|
|
$
|
|
|
|
$
|
1,330,000
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
$
|
682,428
|
|
|
$
|
682,428
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
231,768
|
|
|
$
|
682,428
|
|
Performance Share Awards
|
|
$
|
1,055,832
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,055,832
|
|
|
$
|
1,055,832
|
|
Unexercisable Options
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
1,738,260
|
|
|
$
|
682,428
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,287,600
|
|
|
$
|
1,738,260
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
DC Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Unvested Deferred Compensation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
29,674
|
|
|
$
|
|
|
|
$
|
29,674
|
|
Outplacement
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
45,600
|
|
|
$
|
|
|
|
$
|
45,600
|
|
Perquisites
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Long-Term Disability
|
|
$
|
|
|
|
$
|
2,155,145
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Tax Gross-Ups
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
872,768
|
|
Total
|
|
$
|
|
|
|
$
|
2,155,145
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
75,274
|
|
|
$
|
|
|
|
$
|
948,042
|
|
Total
|
|
$
|
1,738,260
|
|
|
$
|
2,837,573
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,072,774
|
|
|
$
|
1,287,600
|
|
|
$
|
4,016,302
|
|
|
|
|
(1) |
|
Please see narrative accompanying these tables for details and
key assumptions. |
A-41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Stone, SVP Sales & Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Change in
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrelated to a
|
|
|
Control
|
|
|
Control &
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
Without
|
|
|
Qualifying
|
|
Benefit
|
|
Death
|
|
|
Disability
|
|
|
For Cause
|
|
|
Voluntary
|
|
|
in Control
|
|
|
Termination
|
|
|
Termination
|
|
|
Cash Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
720,000
|
|
|
$
|
|
|
|
$
|
1,050,000
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
$
|
527,916
|
|
|
$
|
527,916
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
170,607
|
|
|
$
|
527,916
|
|
Performance Share Awards
|
|
$
|
843,378
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
843,378
|
|
|
$
|
843,378
|
|
Unexercisable Options
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
1,371,294
|
|
|
$
|
527,916
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,013,985
|
|
|
$
|
1,371,294
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
DC Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Unvested Deferred Compensation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
29,674
|
|
|
$
|
|
|
|
$
|
29,674
|
|
Outplacement
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36,000
|
|
|
$
|
|
|
|
$
|
36,000
|
|
Perquisites
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Long-Term Disability
|
|
$
|
|
|
|
$
|
631,759
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Tax Gross-Ups
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
803,108
|
|
Total
|
|
$
|
|
|
|
$
|
631,759
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
65,674
|
|
|
$
|
|
|
|
$
|
868,782
|
|
Total
|
|
$
|
1,371,294
|
|
|
$
|
1,159,675
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
785,674
|
|
|
$
|
1,013,985
|
|
|
$
|
3,290,076
|
|
|
|
|
(1) |
|
Please see narrative accompanying these tables for details and
key assumptions. |
A-42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Huey, VP, General Counsel & Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Change in
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrelated to a
|
|
|
Control
|
|
|
Control &
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Without
|
|
|
Qualifying
|
|
Benefit
|
|
Death
|
|
|
Disability
|
|
|
For Cause
|
|
|
Voluntary
|
|
|
Control
|
|
|
Termination
|
|
|
Termination
|
|
|
Cash Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
663,750
|
|
|
$
|
|
|
|
$
|
885,000
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
$
|
572,982
|
|
|
$
|
572,982
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
212,454
|
|
|
$
|
572,982
|
|
Performance Share Awards
|
|
$
|
849,816
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
849,816
|
|
|
$
|
849,816
|
|
Unexercisable Options
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
1,422,798
|
|
|
$
|
527,982
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,062,270
|
|
|
$
|
1,422,798
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
DC Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Unvested Deferred Compensation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
18,346
|
|
|
$
|
|
|
|
$
|
18,346
|
|
Outplacement
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
35,400
|
|
|
$
|
|
|
|
$
|
35,400
|
|
Perquisites
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Long-Term Disability
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Tax Gross-Ups
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
721,485
|
|
Total
|
|
$
|
|
|
|
$
|
631,759
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
53,746
|
|
|
$
|
|
|
|
$
|
775,231
|
|
Total
|
|
$
|
1,422,798
|
|
|
$
|
572,982
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
717,496
|
|
|
$
|
1,062,270
|
|
|
$
|
3,083,029
|
|
|
|
|
(1) |
|
Please see narrative accompanying these tables for details and
key assumptions. |
A-43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Smith, VP Corporate Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Change in
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrelated to a
|
|
|
Control
|
|
|
Control &
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Without
|
|
|
Qualifying
|
|
Benefit
|
|
Death
|
|
|
Disability
|
|
|
For Cause
|
|
|
Voluntary
|
|
|
Control
|
|
|
Termination
|
|
|
Termination
|
|
|
Cash Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
495,000
|
|
|
$
|
|
|
|
$
|
660,000
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
$
|
270,396
|
|
|
$
|
270,396
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
270,396
|
|
Performance Share Awards
|
|
$
|
630,924
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
630,924
|
|
|
$
|
630,924
|
|
Unexercisable Options
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
901,320
|
|
|
$
|
270,396
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
630,924
|
|
|
$
|
901,320
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
DC Plan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Unvested Deferred Compensation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
23,752
|
|
|
$
|
|
|
|
$
|
23,752
|
|
Outplacement
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
26,400
|
|
|
$
|
|
|
|
$
|
26,400
|
|
Perquisites
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Long-Term Disability
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Tax Gross-Ups
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
567,561
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
50,152
|
|
|
$
|
|
|
|
$
|
617,713
|
|
Total
|
|
$
|
901,320
|
|
|
$
|
270,396
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
545,152
|
|
|
$
|
630,924
|
|
|
$
|
2,179,033
|
|
|
|
|
(1) |
|
Please see narrative accompanying these tables for details and
key assumptions. |
Named
Executive Officers Employed by the Company as of
December 31, 2009.
We have entered into executive severance agreements and maintain
certain plans that will require us to pay compensation and
provide certain benefits to each of our named executive officers
at, following, or in connection with the executives
termination of employment or a change in control of Terra. The
material terms and conditions relating to these payments and
benefits are described below. Unless otherwise specifically
noted, the terms described below apply to each named executive
officer on an identical basis.
Involuntary
Termination Without Cause or Voluntary Termination
for Good Reason on December 31, 2009, Other
Than During the Two-Year Period Following a Change in
Control.
If a named executive officers employment with Terra had
been involuntarily terminated by Terra without cause
or voluntarily terminated by the executive for good
reason on December 31, 2009, the executive would have
been entitled to the following payments and benefits:
|
|
|
|
|
A lump-sum cash severance payment in an amount equal to 1.5
times the sum of his annual base salary at termination and his
target annual incentive award for 2009;
|
|
|
|
|
|
Continuation of medical and dental benefits until the earlier of
two years following the date of termination or the date the
executive becomes covered by another employers major
medical plan; and
|
|
|
|
|
|
Outplacement services at our expense until the earlier of the
first anniversary of termination and the date that the executive
becomes employed by a new employer.
|
A-44
Termination
Due to Death on December 31,
2009.
If a named executive officers employment with Terra was
terminated due to death on December 31, 2009, then his
estate would have been entitled to the following payments and
benefits:
|
|
|
|
|
Immediate vesting of all unvested restricted shares; and
|
|
|
|
|
|
Immediate vesting of all unvested performance shares at a level
based on actual performance during the performance period
through December 31, 2009.
|
Termination
Due to Disability on December 31,
2009.
If a named executive officers employment with Terra was
terminated due to his disability on December 31, 2009, he
would have been entitled to the following payments and benefits:
|
|
|
|
|
Immediate vesting of all unvested restricted shares; and
|
|
|
|
|
|
Payment of monthly disability benefits.
|
Change
in Control Without a Qualifying Termination on
December 31,
2009.
If a change in control of Terra occurred on
December 31, 2009, each named executive officer would have
been entitled to the following benefits:
|
|
|
|
|
Immediate vesting of all unvested restricted shares granted
prior to July 2008;
|
|
|
|
|
|
Immediate vesting of a number of performance shares granted
prior to February 2009 equal to the greater of the target number
of shares subject to each outstanding performance share grant
and a number based on actual performance during the performance
period through December 31, 2009; and
|
|
|
|
|
|
Payment of a
gross-up to
make the executive whole for any excise tax imposed as a result
of Section 280G of the Internal Revenue Code.
|
Involuntary
Termination Without Cause or Voluntary Termination
for Good Reason on December 31, 2009 During the
Two-Year Period Following a Change in
Control.
If a named executive officers employment with Terra was
involuntarily terminated by Terra without cause or
voluntarily terminated by the executive for good
reason on December 31, 2009 and during the two-year
period following a change in control of Terra, he
would have been entitled to the following payments and benefits:
|
|
|
|
|
A lump-sum cash severance payment in an amount equal to two
times the sum of his annual base salary at termination and the
target annual incentive award for 2009 (or, for officers who are
covered by Section 162(m) of the Code, the product of their
annual base salary at termination and their target annual
incentive award opportunity for 2008);
|
|
|
|
|
|
Continuation of medical and dental benefits until the earlier of
two years following the date of termination or the date the
executive becomes covered by another employers major
medical plan;
|
|
|
|
|
|
Outplacement services at our expense until the earlier of the
first anniversary of termination and the date that the executive
becomes employed by a new employer;
|
|
|
|
|
|
Immediate vesting of all benefits accrued under the SERP and two
years of additional age and service credit for purposes of
calculating such benefits (only applicable to Mr. Bennett,
because Messrs. Greenwell, Stone, Huey, and Smith do not
participate in the SERP);
|
|
|
|
|
|
Immediate vesting of all unvested restricted shares;
|
|
|
|
|
|
Immediate vesting of a number of performance shares equal to the
greater of the target number of shares subject to each
outstanding performance share grant and a number based on actual
performance during the performance period through
December 31, 2009; and
|
A-45
|
|
|
|
|
Payment of a
gross-up to
make the executive whole for any excise tax imposed as a result
of Section 280G of the Internal Revenue Code.
|
Material
Defined
Terms.
The terms cause and good reason as used
above are defined under the employment severance agreements and
mean the following:
Cause means (i) the willful and
continued failure of the executive to perform substantially the
executives duties with Terra (other than any such failure
resulting from incapacity due to physical or mental illness);
(ii) the willful engaging by the executive in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to Terra; (iii) the executives willful and
material breach of the employment severance agreement;
(iv) the executives willful violation of any material
provision of Terras code of ethics and standards of
business conduct or (v) the executives willful
failure to cooperate with a government investigation.
Good Reason means, other than during the
two-year period following a change in control (as
defined in the employment severance agreements), (i) our
failure to pay the executive any compensation when due (other
than an inadvertent failure that is remedied within 10 business
days following notice by the executive) and (ii) delivery
by Terra to the executive of a notice to terminate the
executives employment other than for cause or
permanent disability (as defined in the employment
severance agreements).
Good Reason means, during the two-year period
following a change in control (as defined in the
employment severance agreements), (i) our failure to pay
the executive any compensation when due (other than an
inadvertent failure that is remedied within 10 business days
following notice by the executive); (ii) delivery by Terra
to the executive of a notice to terminate the executives
employment other than for cause or permanent
disability (as defined in the employment severance
agreements); (iii) a reduction in the executives
annual base salary of 10% or more from the level in effect
immediately prior to the change in control;
(iv) the relocation of the executives principal place
of employment to a location more than 50 miles from
immediately prior to the change; (v) a reduction in the
executives target annual incentive award of more than 10%
from the level in effect immediately prior to the change
in control; (vi) a material diminution in the
executives titles, duties, responsibilities or status from
those in effect immediately prior to the change in
control; (vii) the removal of the executive from, or
any failure to re-elect the executive to, any of the offices the
executive held immediately prior to the change in
control; or (viii) any material reduction in
executives retirement, insurance or fringe benefits from
the levels in effect immediately prior to the change in
control.
The term change in control, as defined under
the employment severance agreements, means, in general, the
occurrence of any one of the following events: (i) certain
changes in the membership of a majority of the Board;
(ii) consummation of certain mergers or consolidations of
Terra with any other corporation following which our
shareholders hold less than 60% of the combined voting power of
the surviving entity; (iii) approval by our shareholders of
a plan of complete liquidation or dissolution of Terra; or
(iv) certain acquisitions by a third-party or
third-parties, acting in concert, of at least 25% of our then
outstanding voting securities.
The definition of change in control for
purposes of the restricted share agreements and the performance
share agreements is substantially the same as that definition
for purposes of the employment severance agreements.
Release
Requirement.
Pursuant to the employment severance agreements, an executive
will not be entitled to severance and other separation benefits
unless he executes a release of claims in favor of Terra and the
release becomes effective and irrevocable.
Post-Employment
Covenants.
In exchange for the above described payments and benefits to the
extent provided for under the employment severance agreements,
following termination of employment, the executive will remain
subject to
A-46
confidentiality, cooperation and
non-solicitation/non-competition covenants that are set forth in
the employment severance agreements. The confidentiality
covenant prohibits the executive from disclosing
confidential information as defined under the
employment severance agreements. The cooperation covenant
requires the executive to cooperate with Terra in connection
with any lawsuit or investigation that related to the
executives employment with Terra. The
non-solicitation/non-competition covenant prohibits the
executive, for a period of one year following his termination of
employment, from (i) engaging in any activity that is in
competition with Terra (including any business relating to the
production or marketing of nitrogen products) and
(ii) soliciting or hiring any of our employees without our
consent.
Methodologies
and Assumptions used for Calculating Other Potential
Post-Employment Payments.
For purposes of quantifying the other potential post-employment
payments disclosed in the following tables, we utilized the
following assumptions and methodologies:
|
|
|
|
|
Date of triggering event. The date of
each triggering event is December 31, 2009.
|
|
|
|
|
|
Determination of cash
severance. Following a qualifying triggering
event, each named executive officer is entitled to cash
severance equal to the sum of the named executive officers
current base salary and target annual incentive award multiplied
by the appropriate severance multiple. The severance multiple is
1.5 in the case of a termination other than within two years
following a change in control of Terra, and is two in the case
of a termination during the two-year period following a change
in control. In accordance with this formula, each named
executive officers cash severance was determined based on
the following:
|
|
|
|
|
|
Mr. Bennett. Annual base salary of
$650,000 as of December 31, 2009, and 2009 target annual
incentive award of $975,000.
|
|
|
|
|
|
Mr. Greenwell. Annual base salary
of $380,000 as of December 31, 2009, and 2009 target annual
incentive award of $285,000.
|
|
|
|
|
|
Mr. Stone. Annual base salary of
$300,000 as of December 31, 2009, and 2009 target annual
incentive award of $225,000 and solely for the purpose of a
termination other than within two years following a change in
control, $180,000.
|
|
|
|
|
|
Mr. Huey. Annual base salary of
$295,000 as of December 31, 2009, and 2009 target annual
incentive award of $147,500.
|
|
|
|
|
|
Mr. Smith. Annual base salary of
$220,000 as of December 31, 2009, and 2009 target annual
incentive award of $110,000.
|
|
|
|
|
|
Number of performance shares subject to vesting in the
event of a change in control. The performance
share award agreements for grants prior to February 2009 provide
that in the event of a change in control of Terra, a
number of performance shares equal to the greater of the target
number of shares subject to each outstanding performance share
grant and a number based on actual performance during the
performance period through December 31, 2009 will become
vested. For performance share awards granted in 2009, the number
of shares that each holder will receive will become fixed at the
greater of the target number of shares subject to the award and
a number based on actual performance during the performance
period through December 31, 2009. Each holder will receive
such performance shares on the earlier of the date that such
award would otherwise vest or the date that such holder is
terminated without cause or for good reason (both as defined in
the performance share award agreement) or due to death or total
disability on or following a change in control. Based on company
performance as of December 31, 2009, the actual performance
number for each of the outstanding performance share grants is
at least equal to the maximum level of performance, and
therefore, we have assumed vesting at the maximum level (200% of
target).
|
|
|
|
|
|
Number of restricted shares subject to vesting in the
event of death or disability. The restricted
share award agreements for the outstanding grants of restricted
shares provide that in the event of a
|
A-47
|
|
|
|
|
termination of employment due to death or disability, the
restricted shares subject to such grant will vest in full.
|
|
|
|
|
|
Number of performance shares subject to vesting in the
event of death. The performance share award
agreements provide that in the event of a termination of
employment due to death prior to a change in control,
performance shares will vest at a level based on actual
performance during the performance period through the date of
death. Based on company performance as of December 31,
2009, the actual performance number for each of the outstanding
performance share grants is at least equal to the maximum level
of performance, and therefore, we have assumed vesting at the
maximum level (200% of target).
|
|
|
|
|
|
Value of restricted shares and performance shares subject
to vesting. The value of each restricted
share and performance share that was subject to vesting upon a
triggering event was determined by multiplying the number of
shares subject to vesting by the closing price of Terra common
stock on December 31, 2009, the last trading day of 2009
(i.e., $32.19).
|
|
|
|
|
|
Value of continuation of health and dental
benefits. The value of health and dental
benefits which are continued for a two-year period following
certain qualifying triggering events was determined based on
assumptions used for financial reporting purposes under
Financial Accounting Standards Board ASC Topic 715,
Retirement Benefits.
|
|
|
|
|
|
Value of post-termination outplacement
services. The value of post-termination
outplacement services was determined based on a value equal to
approximately 12% of an executives annual base salary as
of the date of termination of employment.
|
|
|
|
|
|
Incremental value of accelerated vesting of SERP benefits
and additional age/service credit in the event of a change
in control. These amounts, which are
applicable to Mr. Bennett, were calculated by adding two
years of credited service to the year-end 2009 total pension
benefit (i.e., sum of tax-qualified pension and SERP) for the
named executive officer and then determining the present value
of that accrued benefit deferred to the date the executive
reaches age 63, which is the earliest age at which
unreduced pension benefits would be available to the executive
with an extra two years of age. The actuarial basis for these
determinations is the same as the basis used in the Pension
Benefits Table.
|
|
|
|
|
|
Value of monthly disability
benefits. The value of monthly disability
benefits is based on the present value of the excess of each
named executive officers monthly disability benefit under
our long-term disability plan that covers the executive as of
December 31, 2009, over the monthly disability benefit that
would be payable under our long-term disability plan that is
generally available to all employees. Amounts are calculated
using a 7% discount rate and assuming that each named executive
officer continues to receive monthly disability benefits until
age 65.
|
|
|
|
|
|
Determination of excise tax payments and tax
gross-up
payments made in connection with a change in
control. We determined the amount of the
excise tax payment by multiplying by 20% the excess
parachute payment that would arise in connection with
payments made to the applicable named executive officers upon
either (i) a change in control of Terra or (ii) a
qualifying termination of employment following a change in
control. The excess parachute payment was determined in
accordance with the provisions of Section 280G of the
Internal Revenue Code. We utilized the following key assumptions
to determine the applicable named executive officers tax
gross-up
payment:
|
|
|
|
|
|
Based on our performance through December 31, 2009, all of
our outstanding performance share awards are currently expected
to vest at 200% of the target level. Therefore, the amount of
the excise tax with respect to the performance share awards was
calculated assuming that all performance goals with respect to
the performance share awards had already been met at the 200%
level. The result is that the amount of the excise tax
attributable to both the performance share awards and the
restricted shares is based solely on the value of the
accelerated vesting and the lapse of the obligation to perform
future services;
|
A-48
|
|
|
|
|
A statutory federal income tax rate of 35%, a Medicare tax rate
of 1.45% and a state income tax rate of 8.98%, which is the
maximum individual income tax rate for Iowa;
|
|
|
|
|
|
Each named executive officers Section 280G base
amount was determined based on average
W-2
compensation for the period from
2004-2008
(or the period of the executives employment with Terra, if
shorter); and
|
|
|
|
|
|
The interest rate assumption was 120% of the applicable federal
rate for December 2009.
|
Director
Compensation.
The following table summarizes the compensation of each of our
non-employee directors for the fiscal year ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value &
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
in Cash
|
|
|
Stock Awards
|
|
|
Option
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)(1)
|
|
|
($)(2)(3)
|
|
|
Awards
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Fisher, D.
|
|
$
|
83,750
|
|
|
$
|
164,690
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
248,440
|
|
Fraser, D.
|
|
$
|
75,250
|
|
|
$
|
164,690
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
239,940
|
|
Hesse, M.
|
|
$
|
79,000
|
|
|
$
|
164,690
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
243,690
|
|
Janson, P.
|
|
$
|
72,500
|
|
|
$
|
164,690
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
237,190
|
|
Kroner, J.
|
|
$
|
72,500
|
|
|
$
|
164,690
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
237,190
|
|
Lilly, J.
|
|
$
|
10,625
|
|
|
$
|
190,656
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
201,281
|
|
McGlone, D.
|
|
$
|
68,750
|
|
|
$
|
164,690
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
233,440
|
|
Slack, H.
|
|
$
|
100,000
|
|
|
$
|
247,050
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
347,050
|
|
Wilson, D.
|
|
$
|
10,625
|
|
|
$
|
190,656
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
201,281
|
|
Yoskowitz, I.
|
|
$
|
10,625
|
|
|
$
|
190,656
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
201,281
|
|
|
|
|
(1) |
|
For information about the nature of the fees earned during the
fiscal year, see the narrative accompanying this table. |
|
(2) |
|
This column sets forth the amount of fees earned by each
director from Terra during 2009. These amounts represent the
grant-date fair value of stock-based compensation granted in
2009. |
|
(3) |
|
Includes a share award of 8,321 shares to the Chairman of
the Board (Mr. Slack) on August 3, 2009; share awards
of 4,025 shares (on December 1, 2009) and
1,030 shares (on December 17, 2009) to
Messrs. Lilly, Wilson and Yoskowitz, and a share award of
5,547 shares (on August 3, 2009) to the other
directors. Grants are immediately vested. |
In May 2003, the board of directors voted to compensate
non-employee directors using a combination of cash and shares.
In 2007, the board of directors again reviewed the compensation
plan and structure for non-employee directors and made certain
revisions thereto while leaving intact the mix of cash and
shares.
Director
Fees Paid in Cash.
Under the director compensation policy, in 2009, Mr. Slack,
Chairman of the Board, received an annual cash retainer of
$100,000 (paid quarterly). The other non-employee directors each
received an annual retainer of $27,500 (paid quarterly) and
meeting fees of $1,250 per meeting attended, including committee
meetings. Mr. Fisher received an additional annual cash
retainer of $10,000 (paid quarterly) for serving as Chairman of
the Audit Committee. Ms. Hesse, Chairman of the Nominating
and Corporate Governance Committee, and Mr. Fraser,
Chairman of the Compensation Committee, each received an
additional annual cash retainer of $4,000 (paid quarterly) for
serving as committee chairs.
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Director
Stock Awards.
2009
Stock
Awards.
Pursuant to a resolution of the Board of Directors dated
August 16, 2006, the Board determined that beginning in
2006 and on a going-forward basis, director stock awards would
be delivered in the form of fully vested shares of Terra common
stock. By resolution of the Board of Directors dated
October 23, 2007, the Board determined that new equity
grants should be made August 1 (or the following business day)
each year, and that starting August 2008, the number of shares
awarded shall be determined by reference to a fixed dollar
amount divided by the share price of Terra shares for the
previous 20 trading days immediately preceding the date of
grant, rounded up to the next whole share. The dollar value used
in the numerator is $150,000 for all non-employee directors
except for Mr. Slack, the chairman, in which case the
numerator is the sum of $225,000. This level of stock award was
selected based on a prior market study of compensation paid to
non-employee directors of public companies. In addition, the
Board determined that each newly elected outside director will
receive, simultaneously with his or her election to the Board,
an initial grant of Terra shares that is equivalent to the
annual equity grant as described above. On August 3, 2009,
each director serving on the Board on that date other than
Mr. Slack received a grant of 5,547 shares of Terra
common stock, and Mr. Slack received a grant of
8,321 shares of Terra common stock.
On December 1, 2009, newly elected directors
Messrs. Lily, Wilson and Yoskowitz each received a grant of
4,025 shares of Terra common stock upon their election to
the Board. On December 17, 2009, Terra issued a subsequent
grant to each such newly elected directors of 1,030 shares
of Terra common stock to ensure that the directors initial
grant was not diminished as a result of the $7.50 special cash
dividend paid by Terra on December 11, 2009.
Director
Stock Ownership
Guidelines.
Pursuant to resolution of the Board of Directors dated
October 23, 2007, the Board implemented, effective
immediately, Terra stock ownership guidelines for all
non-employee directors. The guide for all non-employee directors
is 20,000 shares for all except the Chairman, which guide
is 30,000 shares. All newly elected directors are to be
allowed a five year period from election to satisfy the new
guidelines.
Other
Director Compensation.
We reimburse all directors for reasonable travel and other
necessary business expenses incurred in the performance of their
services for Terra. Non-employee directors do not receive any
additional payments or perquisites. A director who is a Terra
employee, such as Mr. Bennett, does not receive any
additional compensation for service as a director.
Transactions
with Related Persons.
During 2009, the Company was engaged in no transactions, nor are
any such transactions currently proposed, in which a related
party, as that term is defined in Title 17,
Chapter II, Subpart § 229.404 of the Code of
Federal Regulations, had or will have a direct or indirect
material interest and which involves an amount exceeding
$120,000.
Policies
and Procedures.
The Audit Committee of the Board reviews all material
transactions with any related person as identified by
management. Related persons include any of our
directors, executive officers, certain of our stockholders and
immediate family members of any of the foregoing.
At its February 2008 meeting, the Audit Committee and Board
adopted a written policy for evaluating related person
transactions. To identify related person transactions under such
policy, each year we submit and require our directors and
officers to complete Director and Officer Questionnaires
identifying any transactions with us in which the officer or
director or their family members have an interest. Additionally,
all material undertakings by the Company are reviewed by
management, with a view, in part, to identify if a related
person
A-50
is involved. Pursuant to our policy, we periodically compile a
list of related persons (Related Person List)
based on information gathered from responses to the Director and
Officer Questionnaire along with information concerning
stockholders who beneficially own more than five percent (5%) of
the voting securities of Terra, and distribute the list to key
members of management for review. Management is instructed to
review the Related Person List and promptly inform the General
Counsel of any current or proposed transactions with any person
on the list. The General Counsel is to report to the Audit
Committee any potential related person transaction so
identified. We review related person transactions due to the
potential for a conflict of interest. A conflict of interest
occurs when an individuals private interest interferes, or
appears to interfere, in any way with the Companys
interest. Our Code of Ethics and Standards of Business Conduct
requires all directors, officers and employees who may have a
potential or apparent conflict of interest to immediately notify
our General Counsel.
We expect our directors, officers and employees to act and make
decisions that are in the Companys best interests and
encourage them to avoid situations which present a conflict
between our interests and their own personal interests. Our
directors, officers and employees are prohibited from taking any
action that may make it difficult for them to perform their
duties, responsibilities and services to Terra in an objective
and fair manner. The Nominating and Corporate Governance
Committee is charged with responsibility to bring before the
Board all requests for a waiver of the Companys Code of
Ethics and Standards of Business Conduct.
AUDIT
COMMITTEE REPORT
The responsibilities of the Audit Committee, which are set forth
in the Audit Committee charter adopted by the Board of
Directors, include providing oversight to Terras financial
reporting process through periodic meetings with Terras
independent auditors, internal auditors and management to review
accounting, auditing, internal controls and financial reporting
matters. Terra management is responsible for the preparation and
integrity of the financial reporting information and related
systems of internal controls. The Audit Committee, in carrying
out its role, relies on Terras senior management,
including its senior financial management, its internal audit
function, and its independent auditors.
The Audit Committee appointed Deloitte & Touche LLP
(Deloitte & Touche) as the
independent registered public accounting firm for Terra for 2010.
The Audit Committee has reviewed and discussed with senior
management Terras audited financial statements included in
the 2009 Annual Report to Stockholders. Management has confirmed
to us that the data in such financial statements (i) has
been prepared with integrity and objectivity and is
managements responsibility, and (ii) has been
prepared in conformity with generally accepted accounting
principles.
The Audit Committee has discussed with Deloitte &
Touche, Terras independent registered accounting firm, the
matters required to be discussed by the Statement on Auditing
Standards No. 61 (SAS 61) Communications
with Audit Committees. SAS 61 requires Terras independent
registered accounting firm to provide us with additional
information regarding the scope and results of their audit of
Terras financial statements, including with respect to
(i) their responsibility under generally accepted auditing
standards, (ii) significant accounting policies,
(iii) management judgments and estimates, (iv) any
significant audit adjustments, (v) any disagreements with
management, and (vi) any difficulties encountered in
performing the audit.
The Audit Committee has received from Deloitte &
Touche a letter providing the disclosures required by the
applicable requirements of the Public Company Accounting
Oversight Board regarding Deloitte & Touches
communications with the Audit Committee concerning its
independence. Deloitte & Touche has discussed its
independence with us and has confirmed in such letter that, in
its professional judgment, it is independent of Terra within the
meaning of the Federal securities laws and other applicable
requirements. Deloitte & Touche has also discussed
with us its findings related to its review of Terras
internal control procedures as required by Section 404 of
the Sarbanes-Oxley Act.
Based on the review and discussions described above with respect
to Terras audited financial statements for the year ended
December 31, 2009, the Audit Committee has recommended to
the Board of Directors that
A-51
such financial statements be included in Terras Annual
Report for 2009 on
Form 10-K
for filing with the SEC.
The Audit Committee has a policy concerning the approval of
audit and non-audit services to be provided by Terras
independent registered public accounting firm. A copy of this
policy can be found in Terras Audit Committee charter on
our website at www.terraindustries.com. Select the
Investors link, followed by Terra Industries
(TRA) and choose Governance. The policy
requires that all services provided by Terras independent
auditors to Terra, including audit services and permitted
audit-related and non-audit related services, be pre-approved by
the Audit Committee.
In giving our recommendation to the Board of Directors, we have
relied on (i) managements representation that the
data in such financial statements has been prepared with
integrity and objectivity and in conformity with generally
accepted accounting principles, and (ii) the report of
Terras independent registered accounting firm with respect
to such financial statements.
Members of the Audit Committee of the Board of Directors
D.E. Fisher, Chairman
M.O. Hesse
J.R. Kroner
D.A. Wilson
A-52
ANNEX B
March 11, 2010
Board of Directors
Terra Industries Inc.
Terra Center
600 Fourth Street
P.O. Box 6000
Sioux City, Iowa 51102
Members of the Board:
You have asked us to advise you with respect to the fairness to
the holders of common stock, without par value (Company
Common Stock), of Terra Industries Inc. (the
Company), from a financial point of view, of
the Consideration (as defined below) to be received by such
stockholders pursuant to the terms of the Agreement and Plan of
Merger, to be entered into (the Merger
Agreement) by and among CF Industries Holdings, Inc.
(Parent), Composite Merger Corporation, an
indirect wholly owned subsidiary of Parent (Merger
Sub) and the Company. The Merger Agreement provides
for, among other things, (i) the exchange offer (the
Offer) by Merger Sub to purchase all of the
outstanding shares of Company Common Stock at a per share
purchase price of $37.15 in cash (the Cash
Consideration), and 0.0953 shares of common
stock, par value $0.01 per share (Parent Common
Stock), of Parent (the Stock
Consideration and, together with the Cash
Consideration, the Consideration), and
(ii) the subsequent merger (the Merger
and, together with the Offer, the
Transaction) of Merger Sub with and into the
Company, whereby the Company will become a wholly owned
subsidiary of Parent and each outstanding share of Company
Common Stock not acquired in the Offer, other than those shares
owned by Parent, Merger Sub and the Company or any wholly owned
subsidiary of Parent or the Company, will be converted into the
right to receive the Consideration.
In arriving at our opinion, we have reviewed a draft of the
Merger Agreement, dated March 10, 2010, certain related
agreements, as well as certain publicly available business and
financial information relating to the Company and Parent. We
also have reviewed certain other information relating to the
Company and Parent, including financial forecasts relating to
the Company and Parent (certain of which were publicly
available), as well as pricing information related to natural
gas and certain other commodities reflected in such forecasts
and data, which were provided to or discussed with us by the
Company. We also have met with the management of the Company to
discuss the business and prospects of the Company and Parent. We
have also considered certain financial and stock market data of
the Company and Parent, and we have compared that data with
similar data for other publicly held companies in businesses we
deemed similar to that of the Company and Parent and we have
considered, to the extent publicly available, the financial
terms of certain other business combinations and transactions
which have been effected or announced. We also considered such
other information, financial studies, analyses and
investigations and financial, economic and market criteria which
we deemed relevant.
In connection with our review, we have not independently
verified any of the foregoing information and have assumed and
relied on such information being complete and accurate in
B-1
Board of
Directors
Terra Industries Inc.
March 11, 2010
Page 2
all material respects. With respect to the financial forecasts
for the Company and Parent and the estimated data for the
Company and Parent that we have reviewed, the management of the
Company has advised us, and we have assumed, that such forecasts
have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the
Companys management as to the future financial performance
of the Company and Parent, and that such other data (including
the assumptions related to pricing of natural gas and certain
other commodities) have also been reasonably prepared on bases
reflecting the best currently available estimates of the
Company. With respect to the publicly available financial
forecasts for the Company and Parent referred to above, we have
reviewed and discussed such forecasts with the management of the
Company and have assumed, with your consent, that such forecasts
represent reasonable estimates and judgments with respect to the
future financial performance of the Company and Parent. We have
also assumed, with your consent, that in the course of obtaining
any regulatory or third party consents, approvals or agreements
in connection with the Transaction, no modification, delay,
limitation, restriction or condition will be imposed that would
have an adverse effect on the Company, Parent or the Transaction
in any respect material to our analyses and that the Transaction
will be consummated in accordance with the terms of the Merger
Agreement without waiver, modification or amendment of any
material term, condition or agreement thereof. Representatives
of the Company have advised us, and we have assumed, that the
terms of the Merger Agreement, when executed, will conform in
all respects material to our analyses to the terms reflected in
the draft reviewed by us. We also noted that payment will be
made in full by Parent (on behalf of the Company) of the
$123 million termination fee payable to Yara International
ASA (Yara) pursuant to Section 8.2(b)(i)
of the Agreement and Plan of Merger, dated as of
February 12, 2010, by and between the Company, Yara and
Yukon Merger Sub, Inc., an indirect wholly owned subsidiary of
Yara (the Yara Merger Agreement). In
addition, we have not been requested to make, and have not made,
an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or Parent,
nor have we been furnished with any such evaluations or
appraisals.
Our opinion addresses only the fairness, from a financial point
of view, to the holders of Company Common Stock of the
Consideration to be received in the Transaction and does not
address any other aspect or implication of the Transaction or
any other agreement, arrangement or understanding entered into
in connection with the Transaction or otherwise, including,
without limitation, the fairness of the amount or nature of, or
any other aspect relating to, any compensation to any officers,
directors or employees of any party to the Transaction, or class
of such persons, relative to the Consideration or otherwise. The
issuance of this opinion was approved by our authorized internal
committee.
Our opinion is necessarily based upon information made available
to us as of the date hereof and financial, economic, market and
other conditions as they exist and can be evaluated on the date
hereof and upon certain assumptions regarding such financial,
economic, market and other
B-2
Board of Directors
Terra Industries Inc.
March 11, 2010
Page 3
conditions, which are currently subject to unusual volatility
and which, if different than assumed, could have a material
impact on our analyses. Our opinion also is based on assumptions
provided by the Companys management as to the pricing of
natural gas and certain other commodities, which is subject to
significant volatility and which, if different than as assumed,
could have a material impact on our analyses. We are not
expressing any opinion as to what the value of shares of
Parent Common Stock actually will be when issued to the holders
of the Company Common Stock pursuant to the Transaction or the
prices at which shares of Parent Common Stock will trade at any
time. Our opinion does not address the merits of the Transaction
as compared to alternative transactions or strategies that may
be available to the Company, nor does it address the underlying
business decision of the Company to proceed with the Transaction.
We have acted as financial advisor to the Company in connection
with the Transaction and will receive a fee for our services, a
significant portion of which is contingent upon the consummation
of the Transaction. We also became entitled to receive a fee
upon the rendering of our opinion. In addition, the Company has
agreed to indemnify us and certain related parties for certain
liabilities and other items arising out of or related to our
engagement. We and our affiliates have in the past provided
investment banking and other financial services to the Company
and its affiliates, for which we and our affiliates have
received compensation, including having acted as
(i) financial advisor to the Company in connection with its
entry into the Yara Merger Agreement upon the closing of which
we would have also been entitled to receive a fee,
(ii) financial advisor to the Company in connection with
the consideration of various proposals made by Parent for a
business combination with the Company, (iii) financial
advisor to the Company in 2008 in connection with the review of
the Companys strategic alternatives (which alternatives
included a potential transaction involving Parent), and
(iv) joint lead managing underwriter in connection with a
subsidiary of the Companys offering in 2009 of
$600,000,000 of 7.75% Senior Notes due 2019. We and our
affiliates may in the future provide financial advice and
services, to the Company, Parent and their respective affiliates
or any company that may be involved in the Transaction for which
we and our affiliates would expect to receive compensation. We
are a full service securities firm engaged in securities trading
and brokerage activities as well as providing investment banking
and other financial services. In the ordinary course of our
business, we and our affiliates may acquire, hold or sell, for
our and our affiliates own accounts and for the accounts
of customers, equity, debt and other securities and financial
instruments (including bank loans and other obligations) of the
Company, Parent and any other companies that may be involved in
the Transaction, as well as provide investment banking and other
financial services to such companies.
It is understood that this letter is for the information of the
Board of Directors of the Company in connection with its
evaluation of the Transaction and does not constitute a
recommendation to any stockholder as to whether such stockholder
should tender any shares of Company Common Stock into the Offer
or act on any matter relating to the proposed Transaction.
B-3
Board of Directors
Terra Industries Inc.
March 11, 2010
Page 4
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Consideration to be received by the
holders of Company Common Stock in the Transaction is fair, from
a financial point of view, to such stockholders.
Very truly
yours,
CREDIT SUISSE SECURITIES (USA) LLC
By: /s/ David
A. DeNunzio
Title: Managing Director
B-4