FORM 425
Filed by Terra Industries Inc.
pursuant to Rule 425 under the
Securities Act of 1933 and deemed
filed pursuant to Rule 14a-12 of
the Securities Exchange Act of 1934
Subject Company: Terra Industries Inc.
Commission File No.: 001-08520
Important information and where to find it
On March 10, 2009, Terra filed with the Securities and Exchange Commission (the SEC) a
preliminary proxy statement in connection with its 2009 Annual Meeting, which is available free of
charge at the SECs website at www.sec.gov and Terras website at www.terraindustries.com. Terra
plans to file with the SEC and mail to its stockholders a definitive proxy statement in connection
with its 2009 Annual Meeting. Investors and security holders are urged to read the preliminary
proxy statement, which is available now, and the definitive proxy statement relating to the 2009
Annual Meeting and any other relevant documents filed with the SEC when they become available,
because they will contain important information. Investors and security holders may obtain a free
copy of the definitive proxy statement and other documents (when available) that Terra files with
the SEC at the SECs website at www.sec.gov and Terras website at www.terraindustries.com. In
addition, the definitive proxy statement and other documents filed by Terra with the SEC may be
obtained from Terra free of charge by directing a request to Terra Industries Inc., Attn: Investor
Relations, Terra Industries Inc., 600 Fourth Street, P.O. Box 6000, Sioux City, IA 51102-6000.
This communication is neither an offer to purchase nor the solicitation of an offer to sell any
securities. In response to the exchange offer proposed by CF Holdings Industries, Inc. referred to
in this communication, Terra has filed a Solicitation/Recommendation Statement on Schedule 14D-9
with the SEC. Investors and security holders are urged to read the Solicitation/Recommendation
Statement on Schedule 14D-9 because it contains important information. Investors and security
holders may obtain a free copy of the Solicitation/Recommendation Statement on Schedule 14D-9 and
other documents that Terra files with the SEC in connection with the exchange offer at the SECs
Web site at www.sec.gov and Terras Web site at www.terraindustries.com. In addition, the
Solicitation/Recommendation Statement on Schedule 14D-9 and other documents filed by Terra with the
SEC in connection with the exchange offer may be obtained from Terra free of charge by directing a
request to Terra Industries Inc., Attn: Investor Relations, Terra Industries Inc., 600 Fourth
Street, P.O. Box 6000, Sioux City, IA 51102-6000.
Certain information concerning participants
Terra, its directors and executive officers may be deemed to be participants in the solicitation of
Terras security holders in connection with its 2009 Annual Meeting. Security holders may obtain
information regarding the names, affiliations and interests of such individuals in Terras Annual
Report on Form 10-K for the year ended December 31, 2008, which was filed with the SEC on February
27, 2009, and its preliminary proxy statement for the 2009 Annual Meeting, which was filed with the
SEC on March 10, 2009. To the extent holdings of Terra securities have changed since the amounts
printed in the preliminary proxy statement for the 2009 Annual Meeting, such changes have been or
will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Additional
information regarding the interests of such individuals can also be obtained from the preliminary
proxy statement relating to the 2009 Annual Meeting, which is available now, and the definitive
proxy statement relating to the 2009 Annual Meeting when it is filed by Terra with the SEC. These
documents (when available) may be obtained free of charge from the SECs Web site at www.sec.gov
and Terras Web site at www.terraindustries.com.
*****
On March 5, 2009, Terra Industries Inc. filed a Solicitation/Recommendation Statement (the
Statement) on Schedule 14D-9 pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934,
as amended. A copy of the Statement follows:
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
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
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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
Solicitation/Recommendation Statement on
Schedule 14D-9
(together with any exhibits attached hereto, this
Statement) relates is Terra Industries Inc.,
a Maryland corporation (Terra or the
Company). 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 Companys Common Shares, without
par value (the Terra Common Shares). As of
March 3, 2009, there were 99,700,706 Terra Common Shares
issued and outstanding, an additional 4,163,689 Terra Common
Shares were reserved for issuance under Terras equity
compensation plans, of which up to a maximum of 690,200 Terra
Common Shares were issuable or otherwise deliverable in
connection with the vesting of outstanding equity awards of
Terra. In addition, as of March 3, 2009, Terra had
1,600 shares of 4.25% Series A Cumulative Convertible
Perpetual Preferred Shares (the 4.25% Preferred
Shares) outstanding. The 4.25% Preferred Shares are
convertible into Terra Common Shares, subject to the terms and
conditions applicable to such series.
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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 unsolicited offer by CF Industries
Holdings, Inc., a Delaware corporation (CF),
through its wholly owned subsidiary, Composite Acquisition
Corporation, a Maryland corporation (CF Sub),
as disclosed in the Tender Offer Statement on Schedule TO,
dated February 23, 2009 (as amended or supplemented from
time to time, the Schedule TO), to
exchange each outstanding Terra Common Share for 0.4235 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 Shares and such ratio, the
Exchange Ratio), upon the terms and subject
to the conditions set forth in (i) the Preliminary
Prospectus/Offer to Exchange, dated February 23, 2009 (the
Exchange Offer), and (ii) 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 Shares to
which they may be entitled. CF and CF Sub filed the
Schedule TO with the Securities and Exchange Commission
(the SEC) on February 23, 2009. On the
same date, CF also filed with the SEC a Registration Statement
on
Form S-4
(the Registration Statement) relating to
securities to be issued in connection with the Offer. According
to the Schedule TO, the Offer will expire at
5:00 p.m., New York City Time, on May 15, 2009, unless
CF or CF Sub extends the Offer.
The purpose of the Offer as stated by CF in the Schedule TO
is to acquire control of, and ultimately the entire equity
interest in, Terra. CF has also indicated that it intends,
promptly after completion of the Offer, to consummate a merger
of a wholly owned subsidiary of CF with and into Terra, with
holders of Terra Common Shares receiving the same consideration
in CF Common Shares as in the Offer (the Second-Step
Merger). For further details regarding the Second-Step
Merger, please see Item 8. Additional Information.
Second-Step Merger.
The Exchange Offer further states that CF nominated three
persons to be considered for election to the Board of Directors
of Terra (the Board) at Terras 2009
annual meeting of stockholders in an attempt to advance the
Offer. Specifically, CF intends to solicit proxies from
Terras stockholders to vote in favor of the election of
CFs nominees at Terras 2009 annual meeting of
stockholders (the Proxy Solicitation). The
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Board currently consists of eight directors, divided into three
separate classes which are elected in staggered three-year
terms. Only one class of directors is elected per year. As a
result, if CFs nominees are elected to the Board, they
will not constitute a majority of the Board. CF has also
indicated that, if necessary, it intends to nominate additional
persons to be considered for election to the Board at
Terras 2010 annual meeting of stockholders and to
ultimately replace a majority of the directors of Terra with its
own nominees.
According to the Exchange Offer, CFs obligation to
exchange CF Common Shares for Terra Common Shares pursuant to
the Offer is subject to numerous conditions, including the
following:
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the Merger Agreement Condition Terra
shall have entered into a definitive merger agreement with CF
with respect to the Second-Step Merger which shall provide,
among other things, that (i) the Board has approved the
Offer and approved the Second-Step Merger and irrevocably
exempted the Offer and the Second-Step Merger from the
restrictions imposed by the Maryland Business Combination Act
(the MBCA); (ii) Terra agrees to
exercise its right pursuant to its Articles of Restatement (the
Charter) to require all holders of the 4.25%
Preferred Shares to exchange such shares for convertible
subordinated debentures of Terra and that, prior to the
consummation of the Second-Step Merger, no 4.25% Preferred
Shares shall be outstanding; and (iii) the Board has
removed any other impediment to the consummation of the Offer or
the Second-Step Merger;
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the Regulatory Condition any applicable
waiting period under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act) and the Canadian Competition Act shall have
expired or been terminated prior to the expiration of the Offer
and, if the Offer is subject to pre-merger notification under
the Canada Transportation Act, the transaction shall have been
cleared by the Canadian Minister of Transport or the Governor in
Council;
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the Minimum Tender Condition
Terras stockholders shall have validly tendered and not
withdrawn prior to the expiration of the Offer at least that
number of Terra Common Shares that, when added to the Terra
Common Shares then owned by CF or any of its subsidiaries, shall
constitute a majority of the then outstanding Terra Common
Shares on a fully diluted basis;
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the Stockholder Approval Condition
CFs stockholders shall have approved the issuance of
shares of CF Common Shares pursuant to the Offer and the
Second-Step Merger as required under the rules of the New York
Stock Exchange (the NYSE);
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the Market Index Condition there shall
not exist any decline in either the Dow Jones Industrial
Average, the Standard & Poors Index of 500
Industrial Companies or the NASDAQ-100 Index by an amount in
excess of 15% measured from the close of business at the time of
commencement of the Offer or any material adverse change in the
market price in the Terra Common Shares; and
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the Due Diligence Condition CF shall
have completed to its satisfaction confirmatory due diligence of
Terras non-public information on Terras business,
assets and liabilities and shall have concluded, in its
reasonable judgment, that there are no material adverse facts or
developments concerning or affecting Terras business,
assets and liabilities that have not been publicly disclosed
prior to the commencement of the Offer.
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Further, according to the Exchange Offer, if any of the
following conditions exists which, in the reasonable judgment of
CF in any such case, and regardless of the circumstances
(including any action or omission by CF) giving rise to any such
condition, makes it inadvisable to proceed with the Offer
and/or with
acceptance for exchange, or exchange, of Terra Common Shares, CF
shall not be obligated to consummate the Offer:
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any threatened, instituted or pending action or proceeding
before any court, government or governmental authority or agency
challenging or seeking to restrain or prohibit or adversely
affecting the Offer, the Second-Step Merger or the Proxy
Solicitation;
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any final order, approval, authorization, favorable review or
consent of any governmental authority that results in a
significant diminution in the benefits expected to be derived by
CF as a result of the transactions contemplated by the Exchange
Offer;
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any event, condition, development, circumstance, change or
effect since February 23, 2009 that is or may be materially
adverse to the business, properties, condition (financial or
otherwise), assets, liabilities, results of operations or
prospects of Terra or any of its affiliates;
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any general suspension of trading in, or limitation on prices
for, securities on any national securities exchange or in the
over-the-counter market in the United States;
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a declaration of a banking moratorium or any suspension of
payments in respect of banks by Federal or state authorities in
the United States;
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any limitation (whether or not mandatory) by any governmental
authority or agency on, or other event which, in the reasonable
judgment of CF, might materially adversely affect, the extension
of credit by banks or other lending institutions;
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the commencement of a war, armed hostilities or the occurrence
of any other national or international calamity directly or
indirectly involving the United States or any attack on, or
outbreak or act of terrorism involving, the United States;
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a material change in the United States dollar or any other
currency exchange rates or a suspension of, or limitation on,
the markets therefor;
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any change in the general political, market, economic or
financial conditions in the United States or other jurisdictions
in which Terra or its affiliates do business;
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any tender offer or exchange offer by another person for all or
some of the Terra Common Shares;
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Terra or any of its subsidiaries has split, combined or
otherwise changed, or authorized or proposed the split,
combination or other change of, the Terra Common Shares or its
capitalization;
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Terra has authorized, proposed or entered into an agreement with
respect to any business combination (other than the merger
agreement described under the Merger Agreement
Condition above);
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Terra has amended, or authorized or proposed any amendment to,
Terras Charter or its Amended and Restated Bylaws (the
Bylaws); and
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certain other conditions contained in the Exchange Offer.
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The Exchange Offer also states that the conditions described
above are for the sole benefit of CF and CF Sub and, other than
certain limited conditions, may be waived by CF or CF Sub in
whole or in part at any time prior to the expiration of the
Offer in its discretion.
For a full description of the conditions to the Offer, please
see Annex A attached hereto. The foregoing summary of the
conditions to the Offer does not purport to be complete and is
qualified in its entirety by reference to the contents of
Annex A attached hereto.
The Schedule TO states that the principal executive offices
of CF are located at 4 Parkway North, Suite 400, Deerfield,
Illinois 60015.
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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.
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Relationship
with CF.
According to the terms of the Exchange Offer, as of
February 23, 2009, CF and CF Composite, Inc., a wholly
owned subsidiary of CF, were the beneficial owners of 1,000
Terra Common Shares, which represent less than 1% of the
outstanding Terra Common Shares on a fully diluted basis.
Terra leases storage space at CFs distribution facility in
Fremont, Nebraska. Under the lease, Terra pays CF a fixed
monthly rent, plus additional amounts based on the amount of
product moved through the facility. The term of the lease runs
through June 2009. Terra paid CF approximately $170,000 during
each of 2007 and 2008 pursuant to this arrangement.
During 2008, CF paid Terra approximately $120,000 in connection
with demurrage charges arising from a 2007 product shipment.
During 2007, CF purchased approximately $5.4 million of
fertilizer from Terra.
CF and Terra were parties to certain product exchange agreements
that terminated at the end of 2008. The agreements provided for
the physical exchange of similar product between the parties on
mutually satisfactory terms. During 2007 and 2008, the parties
engaged in a number of product exchanges pursuant to the
exchange agreement. As a result of these exchanges, Terra
supplied CF, on a net basis, with approximately 9,600 tons of
ammonia during 2008, and CF supplied Terra, on a net basis, with
approximately 3,400 tons of ammonia and approximately 250 tons
of urea ammonium nitrate solution (UAN)
during 2007.
In addition, in the ordinary course of their respective
businesses, Terra and CF participate together in a number of
industry groups.
Consideration
Payable Pursuant to the Offer and the Second-Step
Merger.
If Terras directors and executive officers were to tender
any Terra Common Shares they own pursuant to the Offer, they
would receive CF Common Shares at the same Exchange Ratio and on
the same terms and conditions as Terras other
stockholders. As of March 3, 2009, Terras directors
and executive officers set forth on Annex B hereto owned an
aggregate of 957,498 Terra Common Shares (excluding any Terra
Common Shares issuable to Terras executive officers
pursuant to the vesting of any Company restricted stock or
Company performance share awards). If such directors and
executive officers were to tender all of such Terra Common
Shares pursuant to the Offer and each Terra Common Share was
exchanged for 0.4235 of a CF Common Share, such directors and
executive officers would receive an aggregate of approximately
405,500 CF Common Shares.
As of March 3, 2009, Terras executive officers set
forth on Annex B hereto held an aggregate of
301,200 shares of restricted stock. Immediately upon a
change in control of Terra such as would occur if the Offer is
consummated, 258,200 shares of restricted stock held by
Terras executive officers would vest. An additional
43,000 shares of restricted stock held by Terras
executive officers would vest if such executive officers were
terminated without cause or for good
reason (as defined in the restricted stock award
agreement) following a change in control of Terra. Additionally,
certain of Terras executive officers have been awarded
performance share grants, pursuant to which, upon vesting, each
such officer will be entitled to receive a number of Terra
Common Shares ranging from 0% to 200% of the target number of
shares subject to the particular award, based on achievement of
performance goals. As of March 3, 2009, the aggregate
number of such Terra Common Shares subject to outstanding
performance share awards assuming target performance was 314,900
and the aggregate number of such Terra Common Shares subject to
outstanding performance share awards assuming maximum
performance was 629,800. Immediately upon a change in control of
Terra such as would occur if the Offer is consummated, vesting
of performance share awards granted prior to 2009 will
accelerate and holders of such performance share awards will be
entitled to a number of Terra Common Shares equal to the greater
of the target number of shares subject to the award and a number
based on actual company performance prior to the change in
control. Performance share awards granted in 2009 will not vest
automatically upon a change in control, but the number of shares
that each holder will be entitled to receive will be fixed as of
the date of the change of control at the greater of the target
number of shares subject to the award and a number based on
actual company performance prior to the change in control. Each
holder of the performance shares granted in 2009 will receive
such performance shares on the earlier of the date that such
award would otherwise vest or the date that such holders
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employment terminates without cause or for
good reason (both as defined in the performance
share award agreement).
Potential
Severance and Change in Control Benefits.
Terra has previously entered into severance agreements with each
of its executive officers, pursuant to which such executive
officers are entitled to certain benefits and severance payments
upon a termination of their employment under certain
circumstances in connection with a change in control of Terra,
as described below and more fully described in Exhibits (e)(1),
(e)(2) and (e)(3) to this Statement and incorporated herein by
reference. The Offer, if consummated, would constitute a
change in control for purposes of each of these
severance agreements. All of the severance agreements with
Terras executive officers are identical, except that the
agreement with Mr. Bennett, President and Chief Executive
Officer of Terra, is scheduled to expire in October 2011, rather
than October 2010, and the approval of three-quarters of the
Board is required in order to terminate Mr. Bennetts
employment for cause. Mr. Bennetts
severance agreement is filed as Exhibit (e)(1) to this
Statement. The form of severance agreement (as amended) for
Terras executive officers, other than Mr. Bennett, is
filed as Exhibits (e)(2) and (e)(3) to this Statement.
Under the severance agreements, in the event that an
executives employment was involuntarily terminated by
Terra without cause, or voluntarily terminated by
the executive for good reason (cause and
good reason as defined in such severance
agreements), in each case during the two-year period following a
change in control, the applicable executive would be entitled to
the following benefits, subject to the executives
execution and non-revocation of a waiver and release of claims:
(i) a lump-sum cash severance payment in an amount equal to
two times the sum of his or her annual base salary at
termination and his or her target annual incentive award for the
applicable year, (ii) continuation of medical and dental
benefits (subject to the executives payment of the normal
premium, if any, then in effect at the time of payment for
Terras employees generally) until the earlier of two years
following the date of termination or the date the executive
becomes covered by another employers major medical plan,
(iii) outplacement services at Terras expense until
the earlier of the first anniversary of termination and the date
that the executive becomes employed by a new employer,
(iv) immediate vesting of any benefits accrued by the
executive under Terras supplemental executive retirement
plan and two years of additional age and service credit for
purposes of calculating such benefits, (v) immediate
vesting of all restricted stock, (vi) immediate vesting of
a number of performance shares equal to the target number of
shares subject to any outstanding performance share grants and
(vii) a
gross-up
payment to make the executive whole for any excise tax imposed
as a result of Section 280G of the Internal Revenue Code
(such
gross-up to
be payable to the executive regardless of whether or not the
executives employment is terminated following the change
in control).
The above summary and description of the severance agreements is
qualified in its entirety by reference to the severance
agreements filed as Exhibits (e)(1), (e)(2) and (e)(3) to this
Statement and incorporated herein by reference.
Director
Compensation.
Under Terras director compensation policy, Mr. Slack,
Chairman of the Board, receives an annual cash retainer of
$100,000 (paid quarterly). Terras other non-employee
directors each receive an annual retainer of $27,500 (paid
quarterly) and meeting fees of $1,250 per meeting attended.
Mr. Fisher receives 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 receive an additional annual
cash retainer of $4,000 (paid quarterly) for serving as
committee chairs. Directors who are employees of Terra, such as
Mr. Bennett, do not receive additional separate
compensation for services 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 share price for Terra Common 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, whose
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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. This description of the indemnification agreements
entered into between Terra and each of its directors and
officers is qualified in its entirety by reference to the form
of indemnification agreement filed as Exhibit (e)(4) to this
Statement and incorporated herein by reference. 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 of 1933, as amended (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.
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ITEM 4.
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THE
SOLICITATION OR RECOMMENDATION.
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Solicitation
or Recommendation.
After careful consideration, including a thorough review of the
terms and conditions of the Offer in consultation with
Terras financial and legal advisors, the Board, by
unanimous vote at a meeting held on March 3, 2009,
concluded that the Offer does not present a compelling case to
create additional value for the stockholders of either Terra or
CF, substantially undervalues Terra on an absolute basis and
relative to CF and is not in the best interests of Terra and its
stockholders.
7
Accordingly, for the reasons described in more detail below,
the Board unanimously recommends that Terras stockholders
reject the Offer and NOT tender their Terra Common Shares in the
Offer.
If you have tendered your Terra Common Shares, you can withdraw
them. For assistance in withdrawing your Terra Common Shares,
you can contact your broker or Terras information agent,
MacKenzie Partners, Inc. (MacKenzie), at the
address, phone number and email address below.
MacKenzie
Partners, Inc.
105
Madison Avenue
New York, New York 10016
Telephone:
(800) 322-2885
(Toll-Free)
(212) 929-5500
(Collect)
Email: terraproxy@mackenziepartners.com
Please see Reasons for
Recommendation below for further detail.
Background
of the Offer and Reasons for Recommendation.
Background
of the Offer
On the evening of January 15, 2009, while in attendance at
a fertilizer industry function, Mr. Bennett was approached
by Mr. Stephen R. Wilson, President and Chief Executive
Officer of CF. During their conversation, Mr. Wilson
delivered a letter to Mr. Bennett proposing a business
combination between Terra and CF, whereby CF would acquire all
outstanding Terra Common Shares at a fixed exchange ratio of
0.4235 CF Common Shares for each Terra Common Share.
Mr. Wilson also noted that CF was preparing to make public
the contents of the letter in short order. The text of this
letter is set forth below:
January 15, 2009
Board of Directors
Terra Industries Inc.
Terra Centre
600 Fourth Street
P.O. Box 6000
Sioux City, Iowa
51102-6000
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Attention:
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Henry R. Slack, Chairman of the Board
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Michael L. Bennett, President and Chief Executive Officer
Dear Members of the Board:
I am writing on behalf of the Board of Directors of CF
Industries Holdings, Inc. to make a proposal for a business
combination between CF and Terra Industries Inc. Under our
proposal, CF would acquire all of the outstanding shares of
Terra common stock at a fixed exchange ratio of 0.4235 CF shares
for each Terra common share. Our proposal represents a premium
of 34% based on the
30-day
volume weighted average prices for the shares of our two
companies, and a 29% premium based on the
10-day
volume weighted average. Our proposal also represents a 23%
premium over the closing price of your shares today.
Since you first approached us several years ago regarding a
combination of our companies, we believe that we have developed
mutual respect for the two organizations and have both
recognized that a combination makes strategic sense. Combining
the talents and creative energy of our respective workforces
will substantially enhance our ability to maximize value for
shareholders going forward. CF respects the strong culture of
Terra, an attribute we believe is highly complementary to our
business, and we believe there are attractive opportunities at
the combined company for Terras employees.
We anticipate annual run-rate operating synergies from the
combination will be in excess of $100 million and your
shareholders will share in the value of those synergies through
their continued ownership of the combined company. In addition,
the resulting company would emerge a global leader in
8
nitrogen fertilizer production. Together we would create a
company with greater scale and an improved strategic platform
better able to compete in a global commodity industry. The
combination creates a larger and better capitalized company than
either company currently. A combination would provide
shareholders greater market liquidity, a stronger and more
flexible balance sheet and improved access to capital. An
enhanced financial profile could support additional
opportunities to pursue value-creating projects and attractive
new investment opportunities. Furthermore, the combination
provides Terra shareholders with important diversification from
a single crop nutrient, nitrogen, into a strong new position in
phosphate and participation in and global market insights
through our 50% interest in KEYTRADE AG.
We have dedicated considerable time and resources to an
analysis of a potential transaction and are confident that the
combination will receive all necessary regulatory approvals. We
are confident that you agree with this assessment given that you
initially approached us regarding a combination.
Our proposal is subject to the negotiation of a definitive
merger agreement and receipt of the necessary board and
shareholder approvals. Because our proposal is based solely on
publicly available information, it is subject to our having the
opportunity to conduct limited confirmatory due diligence. In
addition, because the merger consideration is payable in CF
stock, we would provide you with an opportunity to conduct
appropriate due diligence with respect to CF. We are prepared to
send you a draft merger agreement and to begin discussions and
due diligence immediately.
We understand that Terras debt may need to be
refinanced as a result of the combination. Our proposal is not
subject to any financing contingency.
In light of the significance of this proposal to your
shareholders and ours, as well as the potential for selective
disclosures, our intention is to release the text of this letter
to the public.
My leadership team and I would be happy to make ourselves
available to meet with your management team and Board at your
earliest convenience.
We believe this proposal represents a unique opportunity to
create significant value for Terras shareholders and
employees, and that the combined company will be better
positioned to provide an enhanced value proposition to
customers. We hope that you share our enthusiasm, and we look
forward to a favorable reply. We respectfully request that you
respond no later than January 30, 2009.
Sincerely yours,
Chairman, President and Chief Executive Officer
CF Industries Holdings, Inc.
That same evening, CF issued a press release publicly disclosing
Mr. Wilsons letter.
On the same evening, Mr. Bennett notified Terras
Board and other members of senior management of CFs
unsolicited public proposal.
On January 16, 2009, by way of press release, Terra
publicly confirmed receipt of CFs unsolicited proposal.
That same day, Terras Board met by telephone with members
of senior management, as well as representatives from Cravath,
Swaine & Moore LLP (Cravath) and
Wachtell, Lipton, Rosen & Katz
(Wachtell and together with Cravath, the
Legal Advisors), Terras legal advisors,
and Credit Suisse Securities (USA) LLC (Credit
Suisse and together with the Legal Advisors, the
Advisors), Terras financial advisors.
During this meeting, the participants discussed CFs
proposal, the fiduciary duties of the Board members in relation
to the proposal and the process for evaluating the proposal. At
the conclusion of the meeting, the Board directed management and
the Advisors to continue working diligently with respect to
their review of CFs proposal.
9
On January 26, 2009, the Board convened a special meeting
with members of senior management and representatives of the
Advisors at the offices of Cravath. Also in attendance was
Mr. William R. Loomis, Jr., the former Chairman of the
Board, who had been engaged by the Board as a consultant in
connection with CFs unsolicited proposal. At this meeting,
management and the Advisors presented to the Board an overview
of CFs proposal and the Legal Advisors provided a review
of the fiduciary duties of a board of directors upon receipt of
an unsolicited proposal, such as the one received from CF, and
reviewed with the Board certain actions that Terra was permitted
to take pursuant to Terras Charter and its Bylaws and
applicable law. The Board carefully considered the full range of
strategic, industrial, financial and legal aspects of CFs
proposal and the nature and timing of the proposal. After a
lengthy discussion, the Board unanimously concluded that such
proposal did not present a compelling case for creation of
additional value for stockholders of either Terra or CF, and
that such proposal substantially undervalued Terra on an
absolute basis and relative to CF. Accordingly, the Board
unanimously determined to reject CFs proposal.
On the morning of January 28, 2009, Messrs. Bennett
and Slack sent the following letter to Mr. Wilson:
January 28, 2009
Mr. Stephen R. Wilson
Chairman, President and Chief Executive Officer
CF Industries Holdings, Inc.
4 Parkway North, Suite 400
Deerfield, IL 60015
Dear Mr. Wilson:
The Board of Directors of Terra Industries Inc., with the
assistance of its financial and legal advisors, has carefully
considered your unsolicited proposal to combine our companies.
Although we are perplexed by your decision to make a public
approach that is conditioned on and subject to due diligence, we
have nonetheless examined thoroughly the full range of
strategic, industrial, financial and legal aspects of the
combination you propose.
We concluded that your proposal does not present a compelling
case to create additional value for the shareholders of either
company, and that it substantially undervalues Terra on an
absolute basis and relative to your company. Accordingly, our
Board has unanimously concluded that your proposal is not in the
best interests of Terra and our shareholders and we decline to
accept it.
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Sincerely,
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/s/ Michael L.
Bennett
Michael L. Bennett
President and Chief
Executive Officer
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/s/ Henry R. Slack
Henry R. Slack
Chairman of the Board
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cc:
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Board of Directors of CF Industries Holdings, Inc.,
c/o Corporate
Secretary, CF Industries Holdings, Inc.
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Shortly after delivering the above letter, Terra issued a press
release disclosing the letter.
Later that day, CF issued a press release reiterating its
proposal and announcing that it remained committed to a
combination with Terra and would consider its options to that
end.
On or about February 2, 2009, Mr. Wilson telephoned
Mr. Bennett to request a meeting between the two executives
to discuss CFs proposal, without providing any further
details.
On February 3, 2009, CF delivered a notice to Terra and
issued a press release stating that it submitted a slate of
three nominees for election to Terras Board at
Terras 2009 annual meeting of stockholders and intended to
commence an exchange offer for all of the outstanding Terra
Common Shares at the same Exchange Ratio as disclosed in
CFs proposal of January 15, 2009.
10
Later that evening, Terra issued a press release in response to
CFs press release, in which it acknowledged that CF had
submitted a slate of nominees and noted that Terras Board
is composed of eight highly qualified directors, seven of whom
are independent. In addition, Terra restated the Boards
view that CFs proposal did not present a compelling case
to create additional value for the stockholders of either
company, and that it substantially undervalued Terra on an
absolute basis and relative to CF. In the press release, Terra
noted that Terras Board and management remained committed
to enhancing stockholder value by continuing to execute
Terras strategic plan which the Board believes would
deliver significantly more value to Terras stockholders
than CFs proposal. Terra also noted that many of
Terras major stockholders had expressed to Terra their
disinterest in CFs proposal and their support of
Terras strategy.
On February 5, 2009, the Board convened a special meeting
with the representatives of the Advisors at the offices of
Cravath. Also in attendance was Mr. Loomis. During this
meeting, the Board discussed in-depth various strategic
alternatives that were available to Terra. The Board also
considered Mr. Wilsons request for a meeting with
Mr. Bennett and decided that the two executives should meet.
On February 9, 2009, Mr. Bennett, along with
Mr. Loomis, had a meeting with Mr. Wilson and
Mr. Robert Kindler of Morgan Stanley, CFs financial
advisor, in Sioux City, Iowa. During the meeting,
Mr. Wilson reiterated CFs interest in the business
combination with Terra and its merits, indicated CFs
interest in having Mr. Bennett and other members of the
Board join CFs board of directors and noted CFs
desire to have Mr. Bennett serve as the Executive Vice
Chairman of the combined company. Mr. Wilson further stated
that the value provided in CFs proposal was full and fair.
Mr. Bennett agreed to inform the Board of the details of
their meeting at Terras upcoming Board meeting.
On February 17 and 18, 2009, the Board met at regularly
scheduled meetings at the offices of Cravath. During the meeting
on February 18, 2009, attended by the members of
management, Terras Advisors, Mr. Loomis and the
representatives of MacKenzie, the Board was apprised of the
recent developments relating to CFs proposal and discussed
Terras ongoing strategic plan. The Board was also provided
with the details of the meeting among Messrs. Bennett,
Wilson, Loomis and Kindler. Following the meeting,
Mr. Loomis telephoned Mr. Kindler and stated that the
details of the February 9th meeting were discussed with the
Board and that the Boards position with respect to
CFs proposal had not changed since its rejection of the
proposal on January 28, 2009.
On February 18, 2009, CF filed the Notification and Report
Form with the Department of Justice, Antitrust Division (the
Antitrust Division) and the Federal Trade
Commission (FTC) relating to its proposed
acquisition of Terra.
On February 23, 2009, CF and CF Sub commenced the Exchange
Offer by filing the Schedule TO and the Registration
Statement with the SEC. CF also issued a press release regarding
the commencement of the Exchange Offer.
11
At the same time, Mr. Wilson sent a letter to the Board,
which read as follows:
February 23, 2009
Board of Directors
Terra Industries Inc.
Terra Centre
600 Fourth Street
P.O. Box 6000
Sioux City, Iowa
51102-6000
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Attention:
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Henry R. Slack, Chairman of the Board
Michael L. Bennett, President and Chief Executive Officer
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Dear Members of the Board:
As you are aware, it has been over one month since we made
our offer for a business combination with Terra Industries. Our
offer has been very well received in the market. Terras
shares are up over 50% since the offer, which is over three
times the percentage increase of the peer group. The market
clearly has recognized that the combination is compelling.
As we have communicated to you and your advisors since we
made our offer, we view the transaction as a merger in which
your stockholders are receiving stock and sharing in the future
upside of the combined company, including over $100 million
of annual operating synergies. We believe that the elements of
your strategy of which we are aware, including expansion of
industrial nitrogen applications, would only be enhanced through
a combination. As we also have communicated, we would welcome
having a number of your board members join the board of the
combined company. It is important to us that Mike Bennett be one
of those board members and that he continue to serve in a senior
executive capacity. Also, we would consider locating some
functions of the combined company in the Sioux City area, while
preserving the synergies in the transaction.
Given the significant premium we have offered, and the very
positive market reaction, we have not seen any reason to
consider changing the terms of our proposal. Our conversations
with our stockholders (who significantly overlap with your
stockholders) also lead us to believe that we have no reason to
consider changing the terms. However, we have communicated to
you that we are prepared to review any information you can
provide us that you believe justifies a change in terms, and we
are prepared to keep an open mind in that regard.
We are going forward with our proxy contest to replace three
of your directors at the upcoming Annual Meeting. We are
confident that your stockholders will show their support for a
combination by voting for our slate. We also are commencing an
exchange offer under which each share of Terra common stock
would be exchanged for .4235 shares of CF Industries common
stock. The exchange offer is subject to entering into a
negotiated merger agreement since, as you are aware, under
Maryland law we cannot close a transaction without the approval
of your board. The exchange offer is scheduled to expire on
May 15, 2009, which is the last date that your bylaws
permit you to hold your Annual Meeting. By that time we believe
your stockholders will have shown their support of a combination
by voting for our slate.
We remain interested in entering into meaningful discussions
for a negotiated transaction, and we are open to reviewing any
information you believe we should consider.
Sincerely yours,
Chairman, President and Chief Executive Officer
CF Industries Holdings, Inc.
12
Later that same day, Terra issued a press release advising its
stockholders to take no action with respect to the Exchange
Offer.
On February 25, 2009, Mr. Michael M. Wilson, President
and Chief Executive Officer of Agrium Inc., a corporation
incorporated under the Canada Business Corporations Act
(Agrium), submitted a proposal by Agrium to
the board of directors of CF to acquire all of the capital stock
of CF for cash and Agrium shares at $72.00 per CF Common Share,
or a total of $3.6 billion, based on the February 24,
2009 closing price of Agriums shares (the Agrium
Offer). According to Agriums proposal, the
Agrium Offer is conditioned upon CFs termination of the
Offer.
On the same day, by way of press release, CF publicly confirmed
receipt of Agriums proposal.
On March 3, 2009, the Board met by telephone with members
of senior management, representatives of the Advisors and
Mr. Loomis. After a thorough review of the terms and
conditions of the Offer, the Board unanimously concluded that
the Offer does not present a compelling case to create
additional value for the stockholders of either Terra or CF,
substantially undervalues Terra on an absolute basis and
relative to CF and is not in the best interests of Terra and its
stockholders. Accordingly, the Board unanimously determined to
recommend that Terras stockholders reject the Offer and
not tender their Terra Common Shares in the Offer, and approved
the filing of this Statement.
Reasons
for Recommendation
The Offer is based on the same economic terms as the unsolicited
proposal submitted by CF to Terra on January 15, 2009.
Additional terms and conditions of the CF proposal are included
in the Exchange Offer. The Board has conducted a thorough review
and consideration of the Offer after consultation with
management and the Advisors. After considering its fiduciary
duties under applicable law, the Board unanimously determined
that the Offer is not in the best interests of Terra and its
stockholders and that Terras stockholders should reject
the Offer and not tender their Terra Common Shares in the Offer.
The Board considered the following factors in its evaluation of
the Offer and in support of its recommendation that Terras
stockholders reject the Offer and not tender their Terra Common
Shares in the Offer:
A
combination with CF runs counter to Terras strategic
objectives which are designed to provide substantial value
differentiators to Terras stockholders.
The past interactions between Terra and CF over the years have
allowed Terras management to develop a solid understanding
of CF, its business and management. Terra believes that the
industrial logic behind the Offer is not compelling and is
inconsistent with Terras strategic plan for the following
reasons:
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For several years, Terra has deliberately pursued a strategy of
lowering its dependence on agricultural urea and ammonia sales
by, among other things, upgrading its product mix to UAN and
industrial ammonium nitrate (AN) and
increasing its sales into the industrial and environmental
markets. A combination with CF would shift that focus back to
agricultural urea and ammonia, which represent 70% of CFs
nitrogen sales and only 16% of Terras. The Board believes
that maintaining Terras focus on UAN and AN markets and
continuing to move toward an increased percentage of
higher-value upgraded products in accordance with current
strategy will deliver significantly more value to Terras
stockholders. The relative value premiums of UAN and AN over
urea and ammonia, and market trends underlying these premiums,
support this view.
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A key element of Terras strategic plan is broad geographic
diversification. For example, Terra has deliberately located its
core manufacturing assets away from the U.S. Gulf Coast,
where import competition is most severe. In addition,
Terras geographic plant positions in Oklahoma and Iowa
provide Terra with favorable transportation cost to its
customers as compared to its U.S. Gulf Coast competitors,
and its joint venture in Trinidad provides it with access to
advantaged natural gas. Of CFs total ammonia production
volumes, 73% is located on the U.S. Gulf Coast whereas 65%
of Terras is located inland or in gas advantaged
countries. As part of its strategy, Terra also invests in plants
outside
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13
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of North America, such as its GrowHow joint venture in the
United Kingdom, so as to minimize the inherent risk of business
concentration in a single region.
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Terra has spent much of the last nine years developing its
environmental services business in both stationary and, more
recently, automotive markets so as to diversify its customer
base outside of core agricultural markets. This business
diversification approach has not been evident at CF and a
combination of its business with Terra may jeopardize the focus
necessary to grow this business.
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The Offer
is opportunistic and substantially undervalues Terra on both an
absolute basis and relative to CF.
The Board believes that the Offer substantially undervalues
Terra as it does not fully reflect the underlying fundamental
value of Terras assets, operations and strategic plan,
including its strong market position, large cash position (net
of customer prepayments) of approximately $857 million, or
$8.55 per share (at March 3, 2009), and future growth
prospects. Furthermore, the Board believes that the Offer is
opportunistic and disadvantageous to Terras stockholders
for the following reasons:
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On a combined nitrogen-only basis, Terra would have generated
59% of 2008 nitrogen results of the combined entity since
Terras nitrogen business gross margin, plus equity in
earnings of unconsolidated affiliates less minority interest,
generated $947 million in 2008, while CFs nitrogen
business gross margin, plus equity in earnings of unconsolidated
affiliates less minority interest, provided $658 million.
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The Offer was made at a time when Terras stock price was
temporarily depressed relative to CFs stock price. From
early 2006 through early 2008, Terras stock relative to CF
was trading at a price that exceeds the exchange ratio offered
by CF. CFs opportunistically timed Offer does not provide
a premium relative to the historic average trading prices. The
Board believes that the divergence in relative trading prices of
the companies during most of 2008 is temporary and primarily due
to the performance of CFs phosphate business over that
comparatively brief period. This recent increase in the relative
profitability of the phosphate business compared to the nitrogen
business is driving a temporary value discrepancy that the Board
does not believe reflects the relative value of the companies
over an appropriate evaluation period.
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If the two companies were combined on the terms of the Offer,
Terras stockholders would not realize the full benefits of
their contribution to the combined entity. For example, based on
2008 earnings, Terra would contribute 48% of reported net income
to the combined enterprise, yet Terras stockholders would
only receive 46% of the combined enterprise in the Offer.
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As of February 24, 2009, the day prior to the announcement of
the Agrium Offer, Terras stock price was trading at an
exchange ratio of 0.4466 relative to CFs stock price which
is 5.4% above CFs Offer.
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Under the terms of the Offer, Terra has an implied equity value
of approximately $2.6 billion (as of March 3, 2009).
However, as of such date the value of Terras 75.3%
interest in Terra Nitrogen Company, L.P. alone (approximately
$1.6 billion), together with its cash balance as of
March 3, 2009 of $857 million (net of customer
prepayments), is equal to $2.5 billion, resulting in
CFs Offer valuing the remainder of Terra at only
approximately $0.1 billion.
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The total consideration proposed by CF to stockholders under the
transaction is less than one-third of Terras estimated
replacement cost of assets.
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CFs
projected synergies claims are aggressive and the combination is
subject to substantial execution risk.
Terras management team has lead four significant
acquisition integration efforts and is fully aware of the
difficulty in achieving acquisition synergies. CFs
management, by contrast, does not have experience effecting
business combinations like the one proposed by the Offer.
14
Terras management and the Board believe CFs current
synergy claims are opaque and that CF offers no convincing basis
to conclude its synergy estimates are achievable, particularly
given that even on a combined basis, the two companies
selling, general and administrative expenses for 2008 were only
approximately $139 million.
Moreover, the Board believes CFs claimed synergies are not
sufficient to mitigate or compensate Terras stockholders
for the integration and other execution risks that are inherent
in such a transaction and are not compelling relative to the
size of the combined enterprise. The financial performance and
share price of Terra, as well as CF, are more sensitive to
product and feedstock pricing and less sensitive to any
potential cost savings that may be realized from a combination
of the two companies. Even assuming CFs estimated
synergies are correct, the Board estimates that the cost savings
from these synergies, on an after-tax basis, would yield less
than approximately $0.30 per share annually. The Board believes
the value of synergies claimed by CF is insufficient to
compensate Terras stockholders for the risks of execution,
particularly given CFs lack of experience in acquisitions.
Terra, on
a stand-alone basis, will deliver greater value for its
stockholders than CFs Offer.
The Board believes that Terras stand-alone prospects are
strong and will deliver more value to stockholders than
CFs proposal with significantly less risk. Among the
factors which result in Terra being well positioned in the
current environment include Terras:
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Strong balance sheet with cash reserves of approximately
$857 million, or $8.55 per share, net of customer
prepayments (at March 3, 2009), that provide Terra with
financial flexibility to pursue its strategic objectives of
adding ammonia-based production assets, continuing to pursue
system-wide reductions in merchant ammonia through upgrade
projects and pursuing opportunities to further diversify the
sources and cost of feedstock;
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Product mix oriented to the growth trends in upgraded products
for agricultural and industrial markets;
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Environmental Technologies business, which is uniquely
positioned for revenue and margin growth: Terra Environmental
Technologies is a leader in nitrogen oxide abatement chemistry,
the leading North American diesel exhaust fluid
(DEF) producer, maintains a dedicated
technical support staff to assist customers with application of
Terras products and provides robust supply chain oversight
for the critical automotive application of DEF. Terras
geographic and product mix diversifications are important assets
to this business;
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Pure play focus on nitrogen products: Terra currently operates
nine ammonia-based nitrogen chemical complexes on three
continents, while CF operates two nitrogen complexes and one
phosphate production facility, all in North America;
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Sufficient scale to efficiently manage supply in the context of
demand fluctuations;
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Diverse customer and market mix without significant customer or
market concentrations; and
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Geographic asset diversification and lower transportation costs
to end-users.
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The Board believes that Terras experienced management team
is critical to the Companys current and future
performance. Terra is led by a seasoned nitrogen industry
management team that has successfully navigated the Company
through numerous industry cycles. They have strategically
positioned Terra for current and future market environments
through a series of significant, effectively integrated
acquisitions and investments in plant efficiencies. At the same
time, they have maintained a highly disciplined cost structure
with a rigorous focus on value creation and maximizing
stockholder returns. Over the past three years, Terra has
returned 35% of its net income to stockholders in the form of
share repurchases and dividends.
The Board believes that a combination with CF may dilute, and
possibly derail, the effective implementation of Terras
strategic plans.
15
A
combination with CF would expose Terras stockholders to
risks associated with the phosphate fertilizer market without
compelling scale in that nutrient.
If consummated, the Offer would expose Terras stockholders
to the phosphate fertilizer market and the risks associated with
it. In the Boards view, the phosphate business is less
attractive than the nitrogen business:
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Terra manufactures only ammonia-based nitrogen chemicals
resulting in a straightforward investment value proposition.
Stockholders wishing to diversify into phosphate can accomplish
this through their own investments without the risks associated
with a combination with CF.
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Terra does not believe CF will have sufficient assets or scale
to be a leading participant in the phosphate market.
Participation in such a non-core market dilutes the value
proposition of a pure nitrogen investment and introduces risks
that may reduce the value of Terras stockholders
investment in the nitrogen business if the two companies were
combined. Moreover, diversification into phosphate fits neither
Terras core business growth strategy nor its short-term
growth strategies. Terras management believes that there
are no marketing synergies between nitrogen and phosphate
because dealer customers do not perceive multiple nutrient
offerings by a single supplier to be advantageous. In
Terras view, they prefer to utilize credit line
availability from multiple suppliers and they value focused
market insight from a single-nutrient sales representative.
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The Offer
is highly conditional and, in light of the Agrium Offer, the
stockholders of CF are unlikely to approve CFs bid for
Terra, rendering the Offer illusory and creating significant
uncertainty for Terra.
The Offer is highly conditional, resulting in substantial
uncertainty for Terras stockholders as to whether it will
be completed and, if completed, a risk of substantial delay and
associated expense. This uncertainty is significantly elevated
by the Agrium Offer, which is conditioned, among other things,
on CF terminating its bid for Terra. The existence of the Agrium
Offer creates substantial doubt that CF will be able to obtain
the necessary approval from its stockholders to permit it to
consummate the Offer, presenting Terras stockholders with
what is effectively an illusory proposal.
In addition, CF has included a condition that there be no
decline in either the Dow Jones Industrial Average, the
Standard & Poors Index of 500 Industrial
Companies or the NASDAQ-100 Index by an amount in excess of 15%
measured from the close of business at the time of commencement
of the Offer. Given the current volatility of the market, this
condition alone creates substantial risk that the Offer will not
be consummated.
In total there are over twenty conditions, each of which must be
satisfied before CF will be obligated to purchase any Terra
Common Shares tendered into the Offer, including the Due
Diligence Condition, the Merger Agreement Condition, the
Stockholder Approval Condition and the Regulatory Condition.
The conditions are ambiguously drafted and many important
conditions allow CF to make subjective determinations as to the
occurrence of circumstances which would enable CF not to
consummate the Offer. For example, the Due Diligence Condition
and the Merger Agreement Condition effectively provide CF with
an option to accept Terras shares in the
Offer. If CF determines that it is unsatisfied with its due
diligence review or that a merger agreement beneficial to CF
cannot be entered into, then CF can unilaterally decide not to
accept Terras shares. Further, CF would have the right to
declare a condition not satisfied even if the failure to be
satisfied was caused by the action or inaction of CF or any of
its affiliates.
The foregoing discussion of the information and factors
considered by the Board is not intended to be exhaustive, but
includes the material information, factors and analyses
considered by the Board in reaching its conclusions and
recommendations. Board members evaluated the various factors
listed above in light of their knowledge of the business,
financial condition and prospects of Terra and after taking into
account the advice of the Advisors. In view of the number and
wide variety of factors considered, Board members did not find
it practical to, and did not attempt to, quantify, rank or
otherwise assign relative weights to the above factors. Rather,
the recommendation of the Board was made after considering the
totality of the information and
16
factors involved. In addition, individual members of the Board
may have given differing weights to the various factors or may
have had different reasons for their ultimate determination.
Accordingly, the Board unanimously recommends that
Terras stockholders reject the Offer and NOT tender their
Terra Common Shares in the Offer.
Intent
to Tender.
To the knowledge of Terra, after making reasonable inquiry, none
of Terras directors, executive officers, affiliates or
subsidiaries currently intends to tender any Terra Common Shares
held of record or beneficially owned by such person pursuant to
the Offer.
|
|
ITEM 5.
|
PERSONS/ASSETS
RETAINED, EMPLOYED, COMPENSATED OR USED.
|
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, and in the
event Terra does not consummate the Offer or certain other
transactions with any party before a certain date. 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.
Terra has engaged MacKenzie to assist it in connection with
Terras communications with its stockholders in connection
with the Offer. Terra has agreed to pay customary compensation
to MacKenzie for such services. In addition, Terra has agreed to
reimburse McKenzie 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.
Terra has also retained Joele Frank, Wilkinson Brimmer Katcher
(Joele Frank) as its public relations advisor
in connection with the Offer. 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.
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.
17
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ITEM 6.
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INTEREST
IN SECURITIES OF THE SUBJECT COMPANY.
|
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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|
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Number
|
|
|
Price
|
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Nature of
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Name of Person
|
|
Transaction Date
|
|
of Shares
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|
|
Per Share
|
|
Transaction
|
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Michael L. Bennett
|
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February 17, 2009
|
|
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308,000
|
|
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See Note(a)
|
|
Vesting of Equity Award
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Michael L. Bennett
|
|
February 17, 2009
|
|
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126,389
|
|
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$22.76
|
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Withholding of Shares(b)
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Michael L. Bennett
|
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February 17, 2009
|
|
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60,500
|
|
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See Note(c)
|
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Equity Award
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Edward J. Dillon
|
|
February 17, 2009
|
|
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6,300
|
|
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See Note(c)
|
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Equity Award
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Joe A. Ewing
|
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February 17, 2009
|
|
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36,400
|
|
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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 17, 2009
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12,005
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|
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$22.76
|
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Withholding of Shares(b)
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Joe A. Ewing
|
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February 17, 2009
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7,600
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|
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See Note(c)
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Equity Award
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Joseph D. Giesler
|
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February 17, 2009
|
|
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48,200
|
|
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See Note(a)
|
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Vesting of Equity Award
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Joseph D. Giesler
|
|
February 17, 2009
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|
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16,257
|
|
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$22.76
|
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Withholding of Shares(b)
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Joseph D. Giesler
|
|
February 17, 2009
|
|
|
7,500
|
|
|
See Note(c)
|
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Equity Award
|
Daniel D. Greenwell
|
|
February 17, 2009
|
|
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42,800
|
|
|
See Note(a)
|
|
Vesting of Equity Award
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Daniel D. Greenwell
|
|
February 17, 2009
|
|
|
14,040
|
|
|
$22.76
|
|
Withholding of Shares(b)
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Daniel D. Greenwell
|
|
February 17, 2009
|
|
|
11,500
|
|
|
See Note(c)
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Equity Award
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John W. Huey
|
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February 17, 2009
|
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8,900
|
|
|
See Note(c)
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Equity Award
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Geoffrey J. Obeney
|
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February 17, 2009
|
|
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6,300
|
|
|
See Note(c)
|
|
Equity Award
|
Richard S. Sanders, Jr.
|
|
February 17, 2009
|
|
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40,000
|
|
|
See Note(a)
|
|
Vesting of Equity Award
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Richard S. Sanders, Jr.
|
|
February 17, 2009
|
|
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13,168
|
|
|
$22.76
|
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Withholding of Shares(b)
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Richard S. Sanders, Jr.
|
|
February 17, 2009
|
|
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7,600
|
|
|
See Note(c)
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Equity Award
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Earl B. Smith
|
|
February 17, 2009
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6,700
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|
|
See Note(c)
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Equity Award
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Douglas M. Stone
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February 17, 2009
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9,100
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See Note(c)
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Equity Award
|
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(a) |
|
Represents Terra Common Shares that were issued pursuant to the
vesting on February 17, 2009 of performance shares that
were granted in 2006. |
|
(b) |
|
Represents Terra Common Shares that were withheld from the
performance shares that vested on February 17, 2009 to
satisfy tax liability in accordance with
Rule 16b-3
of the Securities Exchange Act of 1934, as amended (the
Exchange Act). |
|
(c) |
|
Represents the target number of performance shares pursuant to
awards made on February 17, 2009 pursuant to the Terra 2007
Omnibus Incentive Compensation Plan. The performance shares will
vest and be issued in 2012 (or at such earlier time as described
in Item 3. Past Contacts, Transactions, Negotiations and
Agreements. Consideration Payable Pursuant to the Offer and the
Second-Step Merger) based on performance for the period from
January 1, 2009 through December 31, 2011. The number
of performance shares issued will be half of the number stated
if the performance measurements reach a threshold level, and
will be between 50% and 100% of the number stated if performance
is between the threshold level and target level. If the
performance measurements are greater than the target level, the
number of performance shares issued will be greater than the
number stated, up to 200% of the number of performance shares
stated if performance equals or exceeds a maximum level. |
18
|
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ITEM 7.
|
PURPOSES
OF THE TRANSACTION AND PLANS OR PROPOSALS.
|
Subject
Company Negotiations.
Terra routinely maintains contact with other participants in its
industry regarding a wide range of business transactions. It has
not ceased, and has no intention in ceasing, such activity as a
result of the Offer. Terras policy has been, and continues
to be, not to disclose the existence or content of any such
discussions with third parties (except as may be required by
law) as any such disclosure could jeopardize any future
negotiations that Terra may conduct.
Except as described in the preceding paragraph or otherwise set
forth in this Statement (including in the Exhibits 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 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.
|
Regulatory
Approvals.
U.S.
Antitrust Approval
On February 18, 2009, CF filed the Notification and Report
Form with the Antitrust Division and the FTC relating to its
proposed acquisition of Terra. As a result, Terra is required to
submit a Premerger Notification and Report Form with the FTC and
the Antitrust Division on or before 5:00 p.m. on
March 5, 2009.
Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Terra Common Shares pursuant to the Offer may be
consummated following the expiration of a
30-day
waiting period following the filing by CF of its Premerger
Notification and Report Form with respect to the Offer, unless
CF receives a request for additional information or documentary
material from the Antitrust Division or the FTC or unless early
termination of the waiting period is granted. If, within the
initial
30-day
waiting period, either the Antitrust Division or the FTC
requests additional information or documentary material
concerning the Offer, the waiting period will be extended
through the 30th day after the date of substantial
compliance by CF. Complying with a request for additional
information or documentary material may take a significant
amount of time.
At any time before or after CFs acquisition of Terra
Common Shares pursuant to the Offer, the Antitrust Division or
the FTC could take such action under the antitrust laws as
either deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Terra Common Shares
pursuant to the Offer, or seeking the divestiture of Terra
Common Shares acquired by CF or the divestiture of substantial
assets of Terra or its subsidiaries or CF or its subsidiaries.
State attorneys general may also bring legal action under both
state and federal antitrust laws, as applicable. Private parties
may also bring legal action under the antitrust laws under
certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made,
or, if such a challenge is made, the result thereof.
If any waiting period under the HSR Act applicable to the Offer
has not expired or been terminated prior to the expiration date
of the Offer, CF will not be obligated to proceed with the Offer
or the purchase of any Terra Common Shares not previously
purchased pursuant to the Offer.
19
Canadian
Antitrust Considerations
The Offer is also subject to notification pursuant to the
Canadian Competition Act. Under the Canadian Competition Act,
the Offer may not be consummated until certain information has
been provided to the Canadian Commissioner of Competition (the
Competition Commissioner) by CF, and a
required waiting period has expired or has been terminated or
waived.
The Registration Statement states that CF intends to file with
the Competition Commissioner a short-form notification with
respect to the Offer. Upon receipt of CFs short-form
notification, the Competition Commissioner will require that
Terra submit a short-form notification within ten days. The
applicable waiting period under the Canadian Competition Act for
the consummation of the Offer will expire 14 days after the
day on which the required short-form notification information
from CF has been received by the Competition Commissioner,
unless earlier terminated or waived. Prior to such time,
however, the Competition Commissioner may extend the waiting
period by requiring that CF and Terra submit additional
long-form notifications. In the event of such a request, the
waiting period would be extended until 42 days after the
day on which CF has submitted its complete long-form
notification, unless earlier terminated or waived.
The Competition Commissioners review of the Offer may take
longer than the statutory waiting period. Upon completion of the
Competition Commissioners review of a proposed
transaction, the Commissioner may decide (i) that grounds
do not then exist to initiate proceedings before the Competition
Tribunal under the merger provisions of the Canadian Competition
Act in respect of the proposed transaction or (ii) if the
Competition Commissioner concludes that the proposed transaction
is likely to prevent or lessen competition substantially, to
challenge the proposed transaction by applying to the
Competition Tribunal for an order (1) prohibiting the
completion of the proposed transaction on an interim or
permanent basis or (2) with the consent of the person
against whom the order is directed, requiring that person to
take any other action.
If the Competition Commissioner requires more time to complete
her inquiry into a proposed transaction, she can apply to the
Competition Tribunal for an order or orders forbidding any
person from doing any act or thing constituting or directed
toward the completion or implementation of the proposed
transaction for up to 60 days where the Competition
Tribunal finds that, in the absence of such interim order, a
person is likely to take an action that would substantially
impair the ability of the Competition Tribunal to remedy the
effect of the proposed transaction on competition because that
action would be difficult to reverse.
The obligation of CF to complete the Offer is subject to any
applicable waiting period under the Canadian Competition Act
having expired or been terminated prior to the expiration of the
Offer. If CF completes the Offer after the expiry of the waiting
period but before the Competition Commissioner has completed her
review, the Competition Commissioner retains jurisdiction to
apply to the Competition Tribunal at any time during the
three-year period following completion of the Offer. If,
following completion of the Offer, the Competition Commissioner
were to establish that the Offer is likely to prevent or lessen
competition substantially, the Competition Tribunal could issue
an order to dissolve the merger, dispose of designated assets or
shares, or, with the consent of the person against whom the
order is directed and the Competition Commissioner, take any
other action.
On February 6, 2009, the Budget Implementation Act,
2009 (the Bill) was introduced in the
Canadian Parliament. The Bill, which could become law before the
Offer is consummated, includes, among other things, amendments
to the waiting periods under the Canadian Competition Act.
Accordingly, depending on the timing of CFs filing(s) and
the implementation of the Bill, the timing of the expiration of
the waiting period for the consummation of the Offer may change.
Canada
Transportation Act
Pursuant to the Canada Transportation Act, any proposed
transaction that is subject to notification under the Canadian
Competition Act and involves a transportation undertaking must
be notified to the Canadian Minister of Transport,
Infrastructure and Communities (the Canadian
Minister) at the same time a notice is filed under the
Canadian Competition Act. Within 42 days of receipt of such
notice, the Canadian Minister must determine whether the
proposed transaction raises issues with respect to the public
interest as it relates to national transportation. If the
Canadian Minister so determines, an examination is conducted by
a person or
20
entity designated by the Canadian Minister and by the
Competition Commissioner. A proposed transaction subject to the
Canada Transportation Act cannot be completed until the Canadian
Minister determines that the proposed transaction does not raise
issues with respect to the public interest as it relates to
national transportation or the proposed transaction is approved
by the Governor in Council.
The Offer states that, if it is subject to pre-merger
notification under the Canada Transportation Act, the Offer must
be cleared by the Canadian Minister or the Governor in Council.
If the Offer is subject to
pre-merger
notification under the Canada Transportation Act and the
Canadian Minister determines that it raises issues with respect
to the public interest as it relates to national transportation,
there can be no assurance whether or when the Governor in
Council would approve the Offer, or on what terms and conditions
the Offer might be approved.
Takeover
Laws.
Maryland
Business Combination Act
If CF or any of its affiliates acquires and beneficially owns
10% or more of the voting power of Terra, including pursuant to
the Offer, without obtaining the prior approval of the Board, CF
will be an interested stockholder and any business combination
between CF (or any of its affiliates) and Terra, including the
Second-Step Merger, thereafter will be subject to the provisions
of the MBCA. The MBCA, described in
Sections 3-601
to 3-605 of the MGCL, prohibits a business
combination between a corporation and any interested
stockholder or any affiliate of an interested
stockholder for five years following the most recent date
upon which the interested stockholder became an interested
stockholder. These business combinations include a
merger, consolidation, share exchange or, in certain
circumstances, an asset transfer or issuance or reclassification
of equity securities. Generally, an interested
stockholder is any person who beneficially owns 10% or
more of the voting power of the corporations shares or any
affiliate or associate of the corporation who, at any time
within the two-year period prior to the date in question,
beneficially owned 10% or more of the voting power of the
corporations then outstanding voting stock. A person is
not an interested stockholder under Maryland law if the board of
directors approved in advance the transaction by which a
stockholder otherwise would have become an interested
stockholder. However, in approving a transaction, the board of
directors 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.
After the five-year prohibition, any business combination
between the Maryland corporation and an interested stockholder
generally must be recommended by the board of directors of the
corporation and approved by the affirmative vote of at least
(i) 80% of the votes entitled to be cast by holders of
outstanding shares of voting stock of the corporation and
(ii) two-thirds of the votes entitled to be cast by holders
of voting stock of the corporation other than shares 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 corporations common
stockholders 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 MBCA permits various exceptions from its provisions,
including business combinations that are exempted by the board
of directors before the time that the interested stockholder
becomes an interested stockholder.
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,
CF may be unable to accept Terra Common Shares tendered pursuant
to the Offer or be delayed in continuing or consummating the
Offer.
21
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.
Terras Bylaws provide that the MCSAA will not apply to any
acquisition by any person of shares of stock of the Company.
However, this provision may be repealed, in whole or in part, at
any time, whether before or after an acquisition of control
shares and, upon such repeal, may, to the extent provided by any
successor bylaw, apply to any prior or subsequent control share
acquisition.
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.
Second-Step
Merger Provisions.
The purpose of the Offer as stated by CF in the Schedule TO
is to acquire control of, and ultimately the entire equity
interest in, Terra. CF has indicated that it intends, promptly
after completion of the Offer, to consummate a Second-Step
Merger, with holders of Terra Common Shares receiving 0.4235 CF
Common Shares for each outstanding Terra Common Share.
If the Board approves the proposed Offer prior to its
consummation and CF thereafter 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 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
22
of CF Common Shares 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.
If, however, the Board approves the proposed Offer prior to its
consummation and 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 approved
by the Board and 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 the Board
approves the proposed Offer prior to its consummation and 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 and the Second-Step
Merger is approved by the Board, CF would have sufficient voting
power to approve the Second-Step Merger without the affirmative
vote of any other stockholder of Terra.
Appraisal
Rights.
Terras stockholders do not have appraisal rights in
connection with the Offer. 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 or a national market system
security designated on an interdealer quotation system by the
National Association of Securities Dealers, Inc., or designated
for trading on the Nasdaq Small Cap Market, (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 or on a national market system security
designated on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or designated for
trading of the Nasdaq Small Cap Market on the date notice of the
Second-Step Merger is given to each of Terras
stockholders, and the stockholder has complied with the
foregoing requirements, the minority stockholders of Terra will
have appraisal rights with respect to their shares. A
stockholder who fails to comply with these requirements is bound
by the terms of the transaction.
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.
Forward-looking statements are based upon assumptions
23
as to future events that may not prove to be accurate. These
statements are not guarantees of future performance and involve
risks, uncertainties and assumptions that are difficult to
predict. Actual outcomes and results may 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. Words such as expects,
intends, plans, projects,
believes, estimates, and similar
expressions are used to identify these forward-looking
statements. These include, among others, statements relating to
changes in financial markets, general economic conditions within
the agricultural industry, competitive factors and price changes
(principally, sales prices of nitrogen and methanol products and
natural gas costs), changes in product mix, changes in the
seasonality of demand patterns, changes in weather conditions,
changes in environmental and other government regulation and
changes in agricultural regulations. Additional information as
to these factors can be found in Terras 2008 Annual Report
on
Form 10-K,
in the section entitled Business, Legal
Proceedings, and Managements Discussion and
Analysis of Financial Condition and Results of Operations
and in the notes to the Companys consolidated financial
statements.
The following Exhibits are filed herewith or incorporated herein
by reference:
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|
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Exhibit
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|
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Number
|
|
Description
|
|
(a)(1)
|
|
Press release issued by Terra, dated March 5, 2009.
|
(a)(2)
|
|
Letter to stockholders of Terra dated March 5, 2009.
|
(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)
|
|
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)(5)
|
|
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.
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(e)(6)
|
|
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.
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(e)(7)
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|
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.
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(e)(8)
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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.
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(e)(9)
|
|
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.
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24
|
|
|
Exhibit
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|
|
Number
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|
Description
|
|
(e)(10)
|
|
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.
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(e)(11)
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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.
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(e)(12)
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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.
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25
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.
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By:
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/s/ Michael
L. Bennett
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Name: Michael L. Bennett
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Title:
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President and Chief Executive Officer
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Dated: March 5, 2009
26
EXHIBIT INDEX
|
|
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Exhibit
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|
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Number
|
|
Description
|
|
(a)(1)
|
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Press release issued by Terra, dated March 5, 2009.
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(a)(2)
|
|
Letter to stockholders of Terra dated March 5, 2009.
|
(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)
|
|
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)(5)
|
|
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)(6)
|
|
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.
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(e)(7)
|
|
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)(8)
|
|
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.
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(e)(9)
|
|
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)(10)
|
|
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)(11)
|
|
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)(12)
|
|
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.
|
27
ANNEX A
Conditions
to the Offer
According to the Exchange Offer, CFs obligation to
exchange CF Common Shares for Terra Common Shares pursuant to
the Offer is subject to numerous conditions, including the
following:
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the Merger Agreement Condition Terra
shall have entered into a definitive merger agreement with CF
with respect to the Second-Step Merger which shall provide,
among other things, that (i) the Board has approved the
Offer and approved the Second-Step Merger and irrevocably
exempted the Offer and the Second-Step Merger from the
restrictions imposed by the MBCA; (ii) Terra agrees to
exercise its right pursuant to its Charter to require all
holders of the 4.25% Preferred Shares to exchange such shares
for convertible subordinated debentures of Terra and that, prior
to the consummation of the Second-Step Merger, no 4.25%
Preferred Shares shall be outstanding; and (iii) the Board
has removed any other impediment to the consummation of the
Offer or the Second-Step Merger;
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the Regulatory Condition any applicable
waiting period under the HSR Act and the Canadian Competition
Act shall have expired or been terminated prior to the
expiration of the Offer and, if the Offer is subject to
pre-merger notification under the Canada Transportation Act, the
transaction shall have been cleared by the Canadian Minister of
Transport or the Governor in Council;
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the Minimum Tender Condition
Terras stockholders shall have validly tendered and not
withdrawn prior to the expiration of the Offer at least that
number of Terra Common Shares that, when added to the Terra
Common Shares then owned by CF or any of its subsidiaries, shall
constitute a majority of the then outstanding Terra Common
Shares on a fully-diluted basis;
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the Registration Statement Condition the
Registration Statement shall have become effective under the
Securities Act, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or
threatened by the SEC and CF shall have received all necessary
state securities law or blue sky authorizations;
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the Stockholder Approval Condition
CFs stockholders shall have approved the issuance of
shares of CF Common Shares pursuant to the Offer and the
Second-Step Merger as required under the rules of the NYSE;
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the NYSE Listing Condition the CF Common
Shares to be issued pursuant to the Offer and the Second-Step
Merger shall have been approved for listing on the NYSE; and
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the Due Diligence Condition CF shall
have completed to its satisfaction confirmatory due diligence of
Terras non-public information on Terras business,
assets and liabilities and shall have concluded, in its
reasonable judgment, that there are no material adverse facts or
developments concerning or affecting Terras business,
assets and liabilities that have not been publicly disclosed
prior to the commencement of the Offer.
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The Exchange Offer states that notwithstanding any other
provision of the Offer and in addition to (and not in limitation
of) CFs and CF Subs right to extend and amend the
Offer at any time, in their discretion, CF or CF Sub shall not
be required to accept for exchange any Terra Common Shares
tendered pursuant to the Offer or, subject to any applicable
rules and regulations of the SEC, including
Rule 14e-1(c)
under the Exchange Act, make any exchange for Terra Common
Shares accepted for exchange and may extend, terminate or amend
the Offer, if (i) immediately prior to the expiration of
the Offer, in the reasonable judgment of CF, any one or more of
the Merger Agreement Condition, the Regulatory Condition, the
Minimum Tender Condition, the Registration Statement Condition,
the Stockholder Approval Condition, the NYSE Listing Condition
or the Due Diligence Condition shall not have been satisfied or
(ii) at any time on or after February 23, 2009 and
prior to the expiration of the Offer, any of the conditions
described in paragraphs (a) through (i) below exists
which, in the reasonable judgment of CF in any such case, and
regardless of the
A-1
circumstances (including any action or omission by CF) giving
rise to any such condition, makes it inadvisable to proceed with
the Offer
and/or with
acceptance for exchange, or exchange, of Terra Common Shares:
(a) there shall have been threatened, instituted or be
pending any litigation, suit, claim, action, proceeding or
investigation before any supra-national, national, state,
provincial, municipal or local government, governmental,
regulatory or administrative authority, agency, instrumentality
or commission or any court, tribunal or judicial or arbitral
body (each of which is referred to in this Statement as a
Governmental Authority) (1) challenging
or seeking to, or which, in the reasonable judgment of CF, is
reasonably likely to, make illegal, delay or otherwise, directly
or indirectly, restrain or prohibit or make more costly, or in
which there are allegations of any violation of law, rule or
regulation relating to, the making of or terms of the Offer or
the provisions of the Offer or, the acceptance for exchange of
any or all of the Terra Common Shares by CF Sub, CF or any other
affiliate of CF, or seeking to obtain material damages in
connection with the Offer or the Second-Step Merger;
(2) seeking to, or which in the reasonable judgment of CF
is reasonably likely to, individually or in the aggregate,
prohibit or limit the full rights of ownership or operation by
Terra, CF or any of their affiliates of all or any of the
business or assets of Terra, CF or any of their affiliates
(including in respect of the capital stock or other equity of
their respective subsidiaries) or to compel Terra, CF or any of
their subsidiaries to dispose of or to hold separate all or any
portion of the business or assets of Terra, CF or any of their
affiliates; (3) seeking to, or which in the reasonable
judgment of CF is reasonably likely to, impose or confirm any
voting, procedural, price or other requirements in addition to
those required by federal securities laws and the MGCL (as in
effect on February 23, 2009) in connection with the
making of the Offer, the acceptance for exchange, or exchange,
of some or all of the Terra Common Shares by CF or any other
affiliate of CF or the consummation by CF or any other affiliate
of CF of the Second-Step Merger or other business combination
with Terra, including, without limitation, the right to vote any
Terra Common Shares acquired by CF pursuant to the Offer or
otherwise on all matters properly presented to Terras
stockholders; (4) seeking to require divestiture by CF or
any other affiliate of CF of any Terra Common Shares;
(5) seeking, or which in the reasonable judgment of CF is
reasonably likely to result in, any material diminution in the
benefits expected to be derived by CF, CF Sub or any other
affiliate of CF as a result of the transactions contemplated by
the Offer, the Second-Step Merger or any other business
combination with Terra; (6) relating to the Offer or the
Proxy Solicitation which, in the reasonable judgment of CF,
might materially adversely affect Terra or any of its affiliates
or CF or any other affiliate of CF or the value of the Terra
Common Shares or (7) which in the reasonable judgment of CF
could otherwise prevent, adversely affect or materially delay
consummation of the Offer, the Second-Step Merger or the ability
of CF to conduct the Proxy Solicitation;
(b) (1) any final order, approval, permit,
authorization, waiver, determination, favorable review or
consent of any Governmental Authority including those referred
to or described in the Registration Statement in the section
entitled The Exchange Offer Certain Legal
Matters; Regulatory Approvals shall contain terms that, in
the reasonable judgment of CF, results in, or is reasonably
likely to result in, individually or in the aggregate with such
other final orders, approvals, permits, authorizations, waivers,
determinations, favorable reviews or consents, a significant
diminution in the benefits expected to be derived by CF or any
affiliate of CF as a result of the transactions contemplated by
the Offer, the Second-Step Merger or any other business
combination with Terra; or (2) any final order, approval,
permit, authorization, waiver, determination, favorable review
or consent of any Governmental Authority, including those
referred to or described in the Registration Statement in the
section entitled The Exchange Offer Certain
Legal Matters; Regulatory Approvals and including that CF
shall have been advised in writing by the Competition
Commissioner that the Competition Commissioner has determined
not to make an application for an order under Part VIII of
the Canadian Competition Act in respect of the Offer, other than
in connection with the Regulatory Condition, shall not have been
obtained, and on terms reasonably satisfactory to CF, or any
applicable waiting periods for such clearances or approvals
shall not have expired;
(c) there shall have been action taken or any statute,
rule, regulation, legislation, order, decree or interpretation
enacted, enforced, promulgated, amended, issued or deemed, or
which becomes, applicable
A-2
to (1) CF, Terra or any subsidiary or affiliate of CF or
Terra or (2) the Offer, the Second-Step Merger or any other
business combination with Terra, by any legislative body or
Governmental Authority with appropriate jurisdiction, other than
the routine application of the waiting period provisions of the
HSR Act to the Offer, that in the reasonable judgment of CF
might result, directly or indirectly, individually or in the
aggregate, in any of the consequences referred to in
clauses (1) through (7) of paragraph (a) above;
(d) any event, condition, development, circumstance, change
or effect shall have occurred or be threatened that,
individually or in the aggregate with any other events,
condition, development, circumstances, changes and effects
occurring after February 23, 2009, is or may be materially
adverse to the business, properties, condition (financial or
otherwise), assets (including leases), liabilities,
capitalization, stockholders equity, licenses, franchises,
operations, results of operations or prospects of Terra or any
of its affiliates or CF shall have become aware of any facts
that, in its reasonable judgment, have or may have material
adverse significance with respect to either the value of Terra
or any of its affiliates or the value of the Terra Common Shares
to CF or any of its affiliates;
(e) there shall have occurred (1) any general
suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market in the United States, (2) a
declaration of a banking moratorium or any suspension of
payments in respect of banks by Federal or state authorities in
the United States, (3) any limitation (whether or not
mandatory) by any Governmental Authority or agency on, or other
event which, in the reasonable judgment of CF, might materially
adversely affect, the extension of credit by banks or other
lending institutions, (4) commencement of a war, armed
hostilities or the occurrence of any other national or
international calamity directly or indirectly involving the
United States or any attack on, or outbreak or act of terrorism
involving, the United States, (5) a material change in the
United States dollar or any other currency exchange rates or a
suspension of, or limitation on, the markets therefor,
(6) any change in the general political, market, economic
or financial conditions in the United States or other
jurisdictions in which Terra or its affiliates do business that
could, in the reasonable judgment of CF, have a material adverse
effect on the business, properties, assets, liabilities,
capitalization, stockholders equity, condition (financial
or otherwise), operations, licenses, franchises, results of
operations or prospects of Terra or any of its affiliates or the
trading in, or value of, the Terra Common Shares, (7) any
decline in either the Dow Jones Industrial Average, or the
Standard & Poors Index of 500 Industrial
Companies or the NASDAQ-100 Index by an amount in excess of 15%
measured from the close of business at the time of commencement
of the Offer or any material adverse change in the market price
in the Terra Common Shares or (8) in the case of any of the
foregoing existing at the time of commencement of the Offer, a
material acceleration or worsening thereof;
(f) (1) a tender or exchange offer for some or all of
the Terra Common Shares has been publicly proposed to be made or
has been made by another person (including Terra or any of its
subsidiaries or affiliates), or has been publicly disclosed, or
CF otherwise learns that any person or group (as
defined in Section 13(d)(3) of the Exchange Act) has
acquired or proposes to acquire beneficial ownership of more
than 5% of any class or series of capital stock of Terra
(including the Terra Common Shares), through the acquisition of
stock, the formation of a group or otherwise, or is granted any
option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 5% of any class or series of
capital stock of Terra (including the Terra Common Shares) and
other than as disclosed in a Schedule 13D or 13G on file
with the SEC on or prior to February 23, 2009, (2) any
such person or group which, on or prior to February 23,
2009, had filed such a Schedule 13D or 13G with the SEC has
acquired or proposes to acquire beneficial ownership of
additional shares of any class or series of capital stock of
Terra, through the acquisition of stock, the formation of a
group or otherwise, constituting 1% or more of any such class or
series, or is granted any option, right or warrant, conditional
or otherwise, to acquire beneficial ownership of additional
shares of any class or series of capital stock of Terra
constituting 1% or more of any such class or series,
(3) any person or group has entered into a definitive
agreement or an agreement in principle or made a proposal with
respect to a tender or exchange offer of some or all of the
Terra Common Shares or a merger, consolidation or other business
combination with or involving Terra or any of its subsidiaries
or (4) any person (other than CF) has filed a Notification
and
A-3
Report Form under the HSR Act (or amended a prior filing to
increase the applicable threshold set forth therein) or made a
public announcement reflecting an intent to acquire Terra or any
assets, securities or subsidiaries of Terra;
(g) Terra or any of its subsidiaries has (1) split,
combined or otherwise changed, or authorized or proposed the
split, combination or other change of, the Terra Common Shares
or its capitalization, (2) acquired or otherwise caused a
reduction in the number of, or authorized or proposed the
acquisition or other reduction in the number of, outstanding
Terra Common Shares or other securities; (3) issued,
distributed or sold, or authorized or proposed the issuance,
distribution or sale of, any additional Terra Common Shares,
shares of any other class or series of capital stock, other
voting securities or any securities convertible into, or
options, rights or warrants, conditional or otherwise, to
acquire, any of the foregoing (other than (i) the issuance
of Terra Common Shares pursuant to, and in accordance with,
their publicly disclosed terms in effect as of February 23,
2009, of employee stock options or other equity awards, in each
case publicly disclosed by Terra as outstanding prior to such
date and (ii) the issuance of Terra Common Shares or
convertible subordinated debentures in exchange for outstanding
4.25% Preferred Shares pursuant to the terms and conditions of
the Charter in existence as of February 23, 2009), or any
other securities or rights in respect of, in lieu of, or in
substitution or exchange for any shares of its capital stock;
(4) permitted the issuance or sale of any shares of any
class of capital stock or other securities of any subsidiary of
Terra; (5) other than cash dividends required to be paid on
the shares of the 4.25% Preferred Shares that have been publicly
disclosed by Terra as outstanding prior to February 23,
2009 and regular quarterly cash dividends on Terra Common
Shares, declared, paid or proposed to declare or pay any
dividend or other distribution on any shares of capital stock of
Terra, including by adoption of a stockholders rights plan;
(6) altered or proposed to alter any material term of any
outstanding security, issued or sold, or authorized or proposed
the issuance or sale of, any debt securities or otherwise
incurred or authorized or proposed the incurrence of any debt
other than in the ordinary course of business consistent with
past practice or any debt containing, in the reasonable judgment
of CF, burdensome covenants or security provisions;
(7) authorized, recommended, proposed, announced its intent
to enter into or entered into an agreement with respect to or
effected any merger, consolidation, recapitalization,
liquidation, dissolution, business combination, acquisition of
assets, disposition of assets or release or relinquishment of
any material contract or other right of Terra or any of its
subsidiaries or any comparable event not in the ordinary course
of business consistent with past practice (other than the merger
agreement described in the Registration Statement entitled
The Exchange Offer Conditions of the
Offer Merger Agreement Condition);
(8) authorized, recommended, proposed, announced its intent
to enter into or entered into any agreement or arrangement with
any person or group that, in CFs reasonable judgment, has
or may have material adverse significance with respect to either
the value of Terra or any of its subsidiaries or affiliates or
the value of the Terra Common Shares to CF or any of its
subsidiaries or affiliates; (9) entered into or amended any
employment, severance or similar agreement, arrangement or plan
with any of its employees other than in the ordinary course of
business consistent with past practice or entered into or
amended any such agreements, arrangements or plans that provide
for increased benefits to employees as a result of or in
connection with the making of the Offer, the acceptance for
exchange, or exchange, some of or all the Terra Common Shares by
CF or the consummation of any merger or other business
combination involving Terra and CF (and/or any of CFs
subsidiaries); (10) except as may be required by law, taken
any action to terminate or amend any employee benefit plan (as
defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended) of Terra or any of its
subsidiaries, or CF shall have become aware of any such action
which was not previously announced; or (11) amended, or
authorized or proposed any amendment to, its Charter or Bylaws
(or other similar constituent documents), including any
amendment that would cause any acquisition by any person of
Terra Common Shares to be subject to the provisions of Subtitle
7 of Title 3 of the MGCL, or the MCSAA, or CF becomes aware
that Terra or any of its subsidiaries shall have amended, or
authorized or proposed any amendment to, its Charter or Bylaws
(or other similar constituent documents), including any
amendment that would cause any acquisition by any person of
Terra Common Shares to be subject to the provisions of the
MCSAA, which has not been publicly disclosed prior to
February 23, 2009;
A-4
(h) CF or any of its affiliates enters into a definitive
agreement or announces an agreement in principle with Terra
providing for a merger or other business combination with Terra
or any of its subsidiaries or the purchase or exchange of
securities or assets of Terra or any of its subsidiaries, or CF
and Terra reach any other agreement or understanding, in either
case, pursuant to which it is agreed that the Offer will be
terminated; or
(i) Terra or any of its subsidiaries shall have
(1) granted to any person proposing a merger or other
business combination with or involving Terra or any of its
subsidiaries or the purchase or exchange of securities or assets
of Terra or any of its subsidiaries any type of option, warrant
or right which, in CFs reasonable judgment, constitutes a
lock-up
device (including, without limitation, a right to acquire or
receive any Terra Common Shares or other securities, assets or
business of Terra or any of its subsidiaries) or (2) paid
or agreed to pay any cash or other consideration to any party in
connection with or in any way related to any such business
combination, purchase or exchange.
The Exchange Offer also states that the conditions described
above are for the sole benefit of CF and CF Sub and may be
asserted by CF or CF Sub regardless of the circumstances giving
rise to any such condition or, other than the Regulatory
Condition, Stockholder Approval Condition,
Registration Statement Condition and NYSE
Listing Condition, may be waived by CF or CF Sub in whole
or in part at any time and from time to time prior to the
expiration of the Offer in its discretion. To the extent CF or
CF Sub waives any of the conditions described above with respect
to one tender, CF or CF Sub will waive that condition with
respect to all other tenders. The failure by CF or CF Sub at any
time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right; the waiver of any such right with
respect to particular facts and other circumstances shall not be
deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing
right that may be asserted at any time and from time to time
until the expiration of the Offer. Any determination by CF or CF
Sub concerning any condition or event described in the
Registration Statement shall be final and binding on all parties
to the fullest extent permitted by law.
A-5
ANNEX B
Directors,
Executive Officers and Affiliates
of Terra Industries Inc.
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Directors
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David E. Fisher
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Dod A. Fraser
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Martha O. Hesse
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Peter S. Janson
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James R. Kroner
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Dennis McGlone
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Henry R. Slack
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Executive Officers
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Michael L. Bennett*
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Edward J. Dillon
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Joe A. Ewing
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Joseph D. Giesler
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Daniel D. Greenwell
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John W. Huey
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Geoffrey J. Obeney
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Richard S. Sanders Jr.
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Earl B. Smith
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Douglas M. Stone
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B-1