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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993 Commission file number: 1-8520
TERRA INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
52-1145429
(I.R.S. Employer
Identification No.)
Terra Centre
600 Fourth Street
P. O. Box 6000
Sioux City, Iowa
(Address of principal executive offices)
51102-6000
(Zip Code)
Registrant's telephone number, including area code: (712) 277-1340
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Common Shares, without par value New York Stock Exchange
Toronto Stock Exchange
8- 1/2% Convertible Subordinated New York Stock Exchange
Debentures Due 2012
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Securities registered pursuant to Section 12(g) of the Act: None
______________
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained to the best of Registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of Registrant's voting stock held by
non-affiliates of Registrant, at January 31, 1994, was approximately
$244,500,000.
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On January 31, 1994, Registrant's outstanding voting stock
consisted of 69,594,773 Common Shares, without par value.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders of Registrant for the fiscal year ended December
31, 1993. Certain information therein is incorporated by reference into Part
I, Part II and Part IV hereof.
Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held
on May 3, 1994. Certain information therein is incorporated by reference into
Part III hereof.
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TABLE OF CONTENTS
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PART I
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ITEMS 1 and 2. BUSINESS AND PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
EXECUTIVE OFFICERS OF TERRA INDUSTRIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II
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ITEM 5. MARKET FOR TERRA INDUSTRIES' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . . 10
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF TERRA INDUSTRIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 11. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
INDEX TO FINANCIAL STATEMENT SCHEDULES, REPORTS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
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PART I
Items 1 and 2. BUSINESS AND PROPERTIES.
Terra Industries Inc., a Maryland corporation ("Terra Industries"),
conducts its ongoing operations in the United States through its wholly owned
subsidiary, Terra International, Inc., a Delaware corporation ("Terra
International"), and in Canada, through Terra International (Canada) Inc.
("Terra Canada"), an Ontario corporation and a wholly owned subsidiary of Terra
International. The principal corporate office of both Terra Industries and
Terra International is located at Terra Centre, 600 Fourth Street, Sioux City,
Iowa 51102-6000 and their telephone number is 712-277-1340. Unless otherwise
referred to herein or the context otherwise requires, Terra International and
Terra Canada are together referred to as "Terra International."
Terra International is a leading producer of fertilizer, and a leading
marketer of fertilizer and crop protection products. Terra International also
markets seed and provides various agricultural and other related services both
in support of its product sales and on a stand-alone basis.
GENERAL
Terra International, directly in the United States and in Canada, is
engaged in the retail and wholesale marketing and distribution of fertilizers,
crop protection, seed and other crop production products, some of which are
proprietary and marketed under Terra International's own brand names. Terra
International is also engaged in the production of fertilizer and the
formulation of agricultural chemicals. Terra International's distribution
network is comprised of approximately:
o 350 farm service centers in North America;
o 58 fertilizer storage facilities; and
o 770 affiliated dealers serving growers in the 48 contiguous states.
Terra International's production facilities are comprised of:
o 3 nitrogen fertilizer plants located in Oklahoma (the "Woodward
Facility"), Iowa (the "Port Neal Facility") and Ontario (the
"Courtright Facility"),
o 1 crop protection chemical formulation plant located in Arkansas (the
"Blytheville Facility"); and
o 7 additional liquid chemical formulation facilities.
Terra International's Canadian operations were acquired, effective
March 31, 1993, as a result of the acquisition by Terra International from ICI
Canada Inc. ("ICI") of ICI's interest in the Agromarts(R) and the Courtright
Facility. Terra Canada's farm service centers operate under the trademark
"Agromart(R)," two of which are wholly owned by Terra Canada. The others are
operated by corporations in which Terra Canada owns a 50% interest.
On December 31, 1993, Terra International acquired from The Upjohn
Company the business and most of the assets of Asgrow Florida Company
("Asgrow"), a leading distributor of fertilizer, crop protection products and
seed to
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the vegetable, citrus and ornamental markets in Florida. These retail
locations are initially being operated under the name "Terra Asgrow Florida."
Terra International is organized and conducts its operations through
two primary business units: Distribution and Manufactured Fertilizer.
DISTRIBUTION
Terra International's Distribution business, which employed approximately
1,775 people as of December 31, 1993, manages a network of farm
service centers and a distribution system for crop protection products,
fertilizer and other crop production products and services. Through these
operations, Terra International markets a comprehensive line of crop protection
products (herbicides, insecticides, fungicides, adjuvants, plant growth
regulators, defoliants and desiccants), fertilizers (nitrogen, phosphates,
potash and micronutrients), seed and crop production services to farmers and
dealers primarily in the midwestern, southern, southwestern and southeastern
regions of the United States, and eastern regions of Canada. Approximately 60%
of the Distribution business' revenues were attributable to retail sales to
growers in 1993 while approximately 40% were attributable to wholesale sales to
dealers. Terra International operates the largest independently-owned farm
service center network in North America and is the second largest supplier
(based on revenue) of crop production inputs.
In addition to selling products required to grow crops, Terra
International's sales representatives provide services to grower customers
through Terra International's approximately 350 farm service center locations.
These services include soil and plant tissue analysis and crop production
program recommendations; custom blending of fertilizers; custom field
application services for fertilizer and crop protection products; and field
inspections for pest control and crop program performance follow-up.
Terra International markets its products primarily to agricultural
customers, including both dealers and growers. In connection with its product
sales, the Company provides warehousing and delivery services and makes
available to its dealer customers many of the services and training courses
utilized by company-operated locations in support of the sales programs.
Terra International also markets its products through its Professional
Products group to non-farm customers, including turf growers, nurseries, golf
courses, parks and athletic facilities. Terra International offers these
customers herbicides, insecticides, fungicides, fertilizer, adjuvants, plant
growth regulators, seed and agronomic services. Terra International's
Professional Products personnel generally work through existing farm service
center locations using established delivery systems and product lines.
Terra International's Distribution operations are organized into the
Northern and Southern Divisions and 13 regions. Field personnel receive
regular training through Terra University(R), a series of courses designed to
develop skills in agronomy, management, sales, environmental and personal
safety, and field application. The field salespeople are supported by a
full-service soil and plant tissue analysis laboratory, a staff of agronomists
and a research station where the efficacy of various crop protection products
and the performance of numerous seed varieties are tested.
Terra International markets several major seed brands and, in its U.S.
marketing area, is the largest independent seed distributor. Terra
International focuses particular marketing efforts on its proprietary brand of
corn hybrids, soybean and cotton seed varieties, which provide higher margins
and represented approximately 20% of total seed sales in 1993. Terra
International also sells DEKALB brand seed under a unique marketing and
distribution agreement through Terra International's Corn Belt distribution
network.
Although most agricultural chemicals marketed by Terra International
are manufactured by unaffiliated suppliers, Terra International also markets
its own Riverside(R) brand agricultural chemicals. Terra International's
Riverside(R) line includes
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over 100 products, nine of which were added in 1993. The Riverside(R)
product line consists of herbicides, insecticides, fungicides, adjuvants, seed
treatments, plant growth regulators, defoliants and desiccants. Terra
International possesses and processes the registrations required by the United
States Environmental Protection Agency (the "EPA") for its Riverside(R)
pesticide products. Riverside(R) products represented approximately 16% of
total crop protection product sales in 1993. The majority of Riverside(R)
products are formulated and packaged in facilities owned by the Company. The
Riverside(R) line includes several formulations produced exclusively by Terra
International, but does not include proprietary agricultural chemicals.
Riverside(R) products provide higher gross margins than most products
manufactured by unaffiliated suppliers, but the sale of such products also
involves additional indirect costs, including the cost of maintaining and
disposing of excess inventory and potentially greater liability for product
defects.
Terra International offers its customers a complete production program,
consisting of fertilizer, seed and chemicals for major field crops. Terra
International's farm service centers utilize its Ag Analytical Services lab in
Elida, Ohio to analyze nutrient levels of customer soil and plant tissue
samples. The results of these tests are analyzed by Terra International's
proprietary CropMaster(R) program, which provides specific, localized soil
fertility recommendations for specific crops on a field-by-field basis. Crop
input recommendations are provided via computer terminals at most Terra
International locations, which are linked to a mainframe computer located at
Terra International's headquarters in Sioux City, Iowa. Recommendations can be
made for substantially all crops grown in Terra International's marketing
geography. The program also provides "least cost" nutrient blending formula
recommendations, makes seed variety recommendations based on hybrid
characteristics and other factors important to the individual grower, and
maintains crop input records for grower customers.
For selected dealer customers, Terra International offers a services
package called MarketMasterTM to enhance Terra International's relationship
with these key dealers and increase sales. The package includes environmental
and safety audits, special training courses, access to Terra International's Ag
Analytical Services lab, use of CropMaster(R) and other services. There were
approximately 475 MarketMasterTM dealer sites at December 31, 1993, and
additional dealer sites are expected in 1994.
PRODUCT FORMULATIONS
Terra International's Blytheville Facility formulates dry flowable
("DF") crop protection products and liquid crop protection chemicals in
separate production lines at the same location. DF formulations are small,
dry, water-dispersible granules that are mixed with water before application.
Because of their dry form, the granules have several benefits compared with
liquid formulations, including: easier package disposal, easier cleanup of
accidental spills, absence of toxic solvents, no fumes, less weight, less space
required for storage, and no product loss from freezing temperatures or
settling. Because of these benefits, Terra International expects more
agricultural chemicals will be offered to growers in DF form in the future.
The Blytheville Facility is one of 13 known DF plants in the U.S. and
formulates eight DF products and six liquid products. Approximately 40% of the
plant's volume in 1993 was attributable to Terra International's own
Riverside(R) brand product line. Terra International has developed several DF
formulations not available from any other producer or formulator. Terra
International has also developed DF formulations for a number of companies that
contract all or portions of their production at the Blytheville Facility.
In 1988, Terra International formulated a fungicide for E. I. du Pont
de Nemours and Company ("DuPont") at the Blytheville Facility. The fungicide
was recalled and claims in excess of $90 million, plus punitive damages, were
filed by third parties alleging damages from product use. Terra International
originally assumed responsibility for the claims and, through its insurers,
paid nearly $60 million in settlements to growers. Terra International later
discovered evidence that it was not responsible for the claims and filed a
lawsuit against DuPont in Iowa state court for reimbursement of prior claim
payments to growers. During the fourth quarter of 1993, Terra International
and DuPont reached a comprehensive settlement pursuant to which DuPont assumed
responsibility for all pending product claims, and all litigation between the
parties was dismissed. In addition, Terra International has resumed
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its role as a wholesale and retail distributor of DuPont agricultural products,
a status that was interrupted during the product liability litigation.
MANUFACTURED FERTILIZER
Terra International's Manufactured Fertilizer business, which employed
521 people as of December 31, 1993, produces, sells and delivers nitrogen
fertilizers and selected animal feed ingredients to wholesale agribusiness
customers and anhydrous ammonia products to industrial customers. Its
principal customers are large independent dealers, national retail chains,
cooperatives and industrial consumers. Its competitors are typically large
national fertilizer distributors or producers of nitrogen fertilizers. Terra
International is North America's fifth largest producer of anhydrous ammonia
(the basic raw material for nitrogen fertilizers) and the fourth largest
nitrogen solutions manufacturer. In 1993, fertilizer and feed ingredients
manufactured by Terra International accounted for approximately 18% of Terra
International's total sales.
Terra International's nitrogen fertilizer manufacturing facilities,
consisting of the Woodward Facility, the Port Neal Facility and the Courtright
Facility (together, the "Manufacturing Facilities"), are integrated facilities
for the production of anhydrous ammonia, urea liquor and nitrogen fertilizer
solutions. In addition, the Port Neal and Courtright Facilities produce solid
urea for both the feed and fertilizer markets.
Each Manufacturing Facility is designed to operate continuously except for
planned biennial shutdowns for maintenance or installation of efficiency
improvements. The average utilization of the Port Neal, Woodward and
Courtright Facilities over the last three years was approximately 92%, 95%, and
91%, respectively. Utilization for the Port Neal Facility during 1992 was
adversely affected by an extended shutdown for capital improvements and planned
maintenance, which took longer to complete than originally scheduled. As a
result of the capital improvements, annual anhydrous ammonia production
capacity increased by approximately 70,000 tons in 1993.
Approximately 90% of Terra International's fertilizer production is
sold to independent dealers, national retail chains, cooperatives and
industrial consumers. The remaining ten percent is sold through Terra
International's farm service centers to retail customers.
During 1993, Terra International began implementation of plans to
co-produce methanol and ammonia at its Woodward Facility. The total project is
expected to be completed in the first half of 1994 and will enable the Company
to convert a portion of that plant's ammonia production to up to 400 tons per
day of methanol, depending on the relative demand of ammonia and methanol. The
project cost is estimated to be $15 million.
The acquisition of the Courtright Facility in the second quarter of
1993 added approximately 450,000 tons of capacity to the Company's production
of anhydrous ammonia, 130,000 tons of urea liquor capacity, 140,000 tons of UAN
capacity and 115,000 tons of ammonium nitrate capacity. The Courtright
Facility's urea liquor and granulation capacity are expected to increase as a
result of a plant upgrade project, announced in February 1994. The project is
expected to be completed in 1995 and will enable Terra Canada to replace 65,000
tons of annual industrial ammonia sales with higher value urea and nitrogen
solution sales. The project cost is estimated to be approximately $20 million
and is expected to be funded through lease financing.
CREDIT
A substantial portion of Terra International's sales to its grower and
dealer customers is made on credit terms customary in the industry. During the
third quarter of 1992, Terra International established a grower financing
program to provide crop input financing to certain grower customers for all
operating requirements on extended payment terms. In 1993 Terra International
provided approximately $25 million in financing to grower customers under this
program and expects to finance about $50 million in 1994.
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SUPPLY
Reliable sources for supply of crop inputs at competitive prices are
critical to Terra International's Distribution business. Terra International
purchases products from various chemical and fertilizer suppliers at prevailing
market prices. Terra International has entered into purchase agreements with
basic chemical and fertilizer manufacturers to help ensure an adequate supply
of products for its grower and dealer customers through 1994. Terra
International also purchases various chemicals and catalysts used in
manufacturing and formulation. Availability of these materials is currently
considered adequate to meet production needs.
The principal raw material used by Terra International in its nitrogen
fertilizer manufacturing operations at its Manufacturing Facilities is natural
gas. Natural gas costs comprised approximately 50% of the total costs and
expenses associated with Terra International's Manufactured Fertilizer
operations during 1993.
Terra International currently purchases natural gas from various
suppliers, principally under 12-month gas supply contracts with a combination
of fixed and market price terms, and engages in the use of other forward
pricing mechanisms to protect against significant unexpected increases in the
price of natural gas. Terra International has minimized the risk of
interruption or curtailment of its natural gas supply during the heating season
of 1993-1994 by securing firm contracts for the majority of the natural gas
requirements for its Manufacturing Facilities. Approximately 40% of Terra
International's 1994 natural gas requirements have been set by forward
pricing mechanisms.
TRANSPORTATION
Terra International uses several modes of transportation to receive and
distribute products to customers and its own locations, including railroad and
tank cars, common carrier trucks, barges, common carrier pipelines and
company-owned or leased vehicles. During 1993, Terra International operated 35
liquid, 21 dry and two anhydrous ammonia fertilizer terminal storage facilities
strategically located in 18 states and Ontario to help ensure efficient
movement and seasonal product availability. Terra International also has
varying amounts of warehouse space at each of its farm service center
locations.
Through Terra Express, Inc. and Terra Express of Oklahoma, Inc., wholly
owned truck transportation subsidiaries of Terra International (together,
"Terra Express"), Terra International provides transportation services to its
own facilities and customers as a contract carrier. Terra Express utilizes
approximately 90 owner-operated units and twenty company-owned units to deliver
fertilizer, crop protection products, seed, feed ingredients and other products
for its customers and Terra International's own locations. At its
Manufacturing Facilities, its Blytheville Facility and liquid fertilizer
storage locations, Terra International utilizes railcars as the major method of
transportation. All of Terra International's approximately 1,100 railcars are
leased.
Purchased gas is transported to the Port Neal Facility via an
interstate pipeline operating as an open access natural gas transporter. Under
a Federal Energy Regulatory Commission order, Terra International maintains
facilities for direct access to its interstate pipeline shipper, avoiding
additional costs of local utility services. Terra International transports
purchased natural gas for its Woodward Facility through an intrastate pipeline
that is not an open access carrier; however, Terra International is able to
transport gas supplies from any in-state source connected to the widespread
pipeline system. The Courtright Facility utilizes local gas storage service
provided by a local utility, and purchased gas is transported from western
Canada through the TransCanada Pipeline under various delivery contracts.
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RESEARCH AND DEVELOPMENT
Terra International operates a 70-acre Agronomy Research Station near
its Port Neal Facility for product and program development and testing, and
routinely conducts product evaluation and testing with growers and
universities. Terra International also develops DF and other chemical
formulations for its Riverside(R) product line and for basic chemical products
at its product development laboratory located in Blytheville, Arkansas.
CAPITAL EXPENDITURES
Terra International made capital expenditures of approximately $21.6
million in 1993, of which approximately $6.9 million was used to modify the
Woodward Facility to permit the co-production of methanol (the "Methanol
Project"), and the balance for routine replacements of property, plant and
equipment, and farm service center expansion. In 1994, Terra International
expects to make capital expenditures of approximately $27 million, consisting
of approximately $8 million to complete the Methanol Project, and the balance
for routine replacements of property, plant and equipment, energy efficiency
improvements to each of the Manufacturing Facilities, and for the expansion of
farm service centers. Capital expenditures in 1993 exclude capital costs
associated with the acquisition by Terra International of its Canadian
operations from ICI and the acquisition of certain assets from Asgrow, and the
acquisition of additional farm service centers. Expected 1994 capital
expenditures exclude capital costs associated with significant acquisitions
that may be made in 1994.
PROPERTIES
Terra Industries and Terra International maintain their headquarters in
Sioux City, Iowa, in an office building owned by Terra Real Estate Corporation,
a wholly owned subsidiary of Terra International. Terra International owns the
Port Neal and Woodward Facilities, and Terra Canada leases the Courtright
Facility. The Courtright Facility lease is for a four-year term expiring in
April 1997, and provides Terra Canada with an option to purchase the facility
during the term of the lease and upon expiration thereof. If at the end of the
lease-term Terra Canada elects not to exercise its purchase option, Terra
International must pay to the lessor approximately $40 million (Canadian)
subject to reimbursement based on the proceeds realized on the sale of the
Courtright Facility by the lessor.
The Blytheville Facility was purchased from the City of Blytheville,
Arkansas at the expiration of the lease term in December 1993, for a nominal
amount.
Terra International's farm service centers are located on a combination
of owned and leased property. The leases have varying expiration dates through
2007. All but two of the Agromarts acquired by Terra Canada during the second
quarter of 1993 are owned by corporations in which Terra Canada owns a 50%
interest, and are owned in fee by such corporations.
Terra International leases space at 40 liquid and dry fertilizer
storage locations with an average remaining lease life of 12 months from
December 31, 1993. Each location may have several leases respecting different
products distributed by Terra International. Terra International owns six
fertilizer solution storage facilities. In addition, Terra International
maintains certain contractual relationships with terminal facilities respecting
the distribution of dry bulk product, anhydrous ammonia and other manufactured
and distributed products.
EMPLOYEES
Terra International had approximately 2,390 full-time employees at
December 31, 1993, none of whom were covered by a collective bargaining
agreement. In addition, Terra International, which annually hires temporary
employees on a seasonal basis, hired approximately 1,500 temporary employees
during its spring selling season in 1993.
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SEASONALITY
The agricultural products business is seasonal, based upon the planting,
growing and harvesting cycles. As a result, inventories must be accumulated in
the first few months of the calendar year to be available for seasonal sales,
requiring significant storage capacity. Inventory accumulations are financed
by suppliers or short-term borrowings, which are retired with the proceeds of
the sales of such inventory. In times of lower demand, Terra International can
reduce purchases, thereby decreasing inventory carrying costs.
COMPETITIVE POSITION
The market for fertilizer, crop protection products, seed and services
for agriculture is highly competitive. Nationally, sales attributable to Terra
International's farm service centers accounted for less than 10% of total crop
production products. However, within the specific market areas served by its
farm service centers, Terra International's share of the market was
substantially higher. Terra Internatonal's competitors include cooperatives,
divisions of diversified agribusiness companies, regional distributors and
independent dealers. Terra International competes primarily by providing a
comprehensive line of product offerings and by providing value-added services
to growers and dealers.
Terra International competes with other manufacturers of nitrogen fertilizer
principally on the basis of price, delivery terms and availability of products.
ENVIRONMENTAL PROTECTION AND OTHER REGULATORY MATTERS
Terra International's operations are subject to various federal, state
and local environmental protection regulations, including EPA guidelines for
effluent limitations on the waste water discharged by processing units and the
emissions control requirements of the Clean Air Act. Terra Canada's operations
are subject to various federal and provincial regulations, including the
Canadian Environmental Protection Act administered by Environment Canada, and
the Ontario Environmental Protection Act. Terra International and Terra Canada
are also involved in the manufacture, handling, transportation and storage of
materials that are classified as hazardous or toxic by federal, provincial or
other regulatory agencies. Precautions are taken to reduce the likelihood of
accidents involving these materials.
Terra International has been notified by the EPA that it is a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA") in the Matter of
Valley Chemical Site, Greenville, Mississippi. Other companies have been named
PRPs. Under CERCLA, all PRPs may be held jointly and severally liable for the
costs of investigation and remediation of an environmentally damaged site. The
EPA has requested that the PRPs remove and dispose of contaminated soils and
other materials at the site but has not at this time required the PRPs to
develop and implement a permanent remediation plan. Terra International leased
a portion of this site for part of 1986 and 1987, and information obtained by
Terra International indicates the soil contamination occurred prior to the
commencement of such lease. Current estimates of the cost to remove and dispose
of the contaminated materials and the portion, if any, of which Terra
International may be liable are not deemed by management to be material.
Terra International has also been designated as PRPs under CERCLA or
its analogues under similar state and other legislation and regulations in
connection with its respective ownership of other sites. After consideration
of such factors as the number and levels of financial responsibility of other
PRPs, the existence of contractual indemnities, the availability of defenses
and the speculative nature of the costs involved, Terra International's
management believes that its liability with respect to these matters will not
be material.
Certain state regulatory agencies have enacted requirements to provide
secondary containment for bulk agricultural chemical storage facilities present
at Terra International's farm service centers. The remaining states are
expected to adopt similar requirements pursuant to federal mandate. Terra
International has commenced
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construction of these facilities at its farm service centers and estimates that
the future cost of complying with these regulations will be approximately $5
million.
Terra International endeavors to comply in all material respects with
applicable environmental, safety and health regulations. Terra International
does not expect its continued operation in compliance with such regulations to
have a material adverse effect on its earnings or competitive position.
DISCONTINUED OPERATIONS
During 1993 Terra Industries disposed of its leasing and substantially
all of its construction materials businesses for approximately $24.4 million,
and substantially completed the liquidation of its remaining non-agribusiness
properties. A discussion of each of Terra Industries' remaining discontinued
businesses follows.
CONSTRUCTION MATERIALS
In September 1993 Terra Industries sold its interest in LTM,
Incorporated, Rogue Aggregates, Inc. and W.B.R., Inc., which did business under
the name "Concrete, Inc.", for approximately $18.5 million. Terra Industries'
remaining construction materials business, El Rancho Rock & Sand, Inc. ("El
Rancho") is currently being liquidated and reclaimed as required under its
reclamation plan with San Joaquin County, California. Terra Industries'
management does not expect the net proceeds, if any, from the liquidation of El
Rancho to be material.
METALS MINING
Beryllium. During the third quarter of 1993, Terra Industries acquired
the remaining 50% interest in Alloy Research, Inc. ("ARI") not already owned
by Terra Industries. ARI, directly and indirectly, through its wholly owned
subsidiary Specialloy, Inc. ("Specialloy"), produces metal alloys, including
beryllium copper alloys. The original 50% interest in ARI was acquired
by Terra Industries in 1990. Terra Industries is currently attempting to sell
its interest in ARI and Specialloy.
Gold. Subsidiaries of Terra Industries and Minorco (U.S.A.) Inc., a
majority shareholder of Terra Industries, are partners of Western Gold
Exploration and Mining Company, Limited Partnership ("WestGold"), a limited
partnership. In 1990, WestGold commenced the liquidation of its operations,
which is now substantially complete. Terra Industries' management does not
expect the net proceeds, if any, from the liquidation of WestGold to be
material.
ITEM 3. LEGAL PROCEEDINGS.
Various legal proceedings are pending against Terra Industries and its
subsidiaries. Management of Terra Industries considers that the aggregate
liability, if any, resulting from these proceedings will not be material to
Terra Industries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No items were submitted to a vote of security holders of Terra Industries
during the fourth quarter of the 1993 fiscal year.
8
<PAGE> 13
EXECUTIVE OFFICERS OF TERRA INDUSTRIES
The following paragraphs set forth the name, age and offices with
Terra Industries of each present executive officer of Terra Industries, the
period during which each executive officer has served as such and each
executive officer's business experience during the past five years:
<TABLE>
<CAPTION>
Present positions and offices with Terra Industries
Name and age and principal occupations during the past five years
------------ ----------------------------------------------------
<S> <C>
John S. Burchfield (53) Vice President - Human Resources of Terra Industries since April,
1992; Vice President - Human Resources of Aon Corporation from
January 1989 to August 1991; Vice President - Human Resources of
Denny's International prior thereto.
Gregory J. Duerksen (36) Vice President - Business Development of Terra International since
November, 1993; Vice President - Marketing & Development thereof
from February 1988 to November 1993.
Burton M. Joyce (52) President and Chief Executive Officer of Terra Industries since May
1991; Executive Vice President and Chief Operating Officer thereof
from February 1988 to May 1991.
Francis G. Meyer (42) Vice President - Chief Financial Officer and Treasurer of Terra
Industries since November 1993; Controller thereof from August 1991
to November 1993; Vice President - Controller of Terra International
from June 1986 to August 1991.
Reuben F. Richards (64) Chairman of the Board of Terra Industries since December 1982; Chief
Executive Officer thereof from December 1982 to May 1991; President
thereof from July 1983 to May 1991.
W. Mark Rosenbury (46) Executive Vice President and Chief Operating Officer of Terra
Industries since November 1993; Vice President, Chief Financial
Officer and Treasurer thereof since August 1991; Vice President and
Corporate Controller thereof from January 1987 to August 1991.
George H. Valentine (45) Vice President, General Counsel and Corporate Secretary of Terra
Industries since November 1993; Assistant General Counsel of
Household International, Inc. from February 1986 to November 1993.
</TABLE>
There are no family relationships among the executive officers and
directors of Terra Industries or arrangements or understandings between any
executive officer and any other person pursuant to which any executive officer
was selected as such. Officers of Terra Industries are elected annually to
serve until their respective successors are elected and qualified.
9
<PAGE> 14
PART II
ITEM 5. MARKET FOR TERRA INDUSTRIES' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information with respect to the market for Terra Industries' common
equity and related stockholder matters contained in Terra Industries' 1993
Annual Report to Stockholders under the caption "Quarterly Financial and Stock
Market Data (Unaudited)" is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Information with respect to selected financial data contained in Terra
Industries' 1993 Annual Report to Stockholders under the caption "Financial
Summary" is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Information with respect to management's discussion and analysis of
financial condition and results of operations contained in Terra Industries'
1993 Annual Report to Stockholders under the caption "Financial Review" is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the report of
independent accountants thereon, the information contained under the caption
"Quarterly Financial and Stock Market Data (Unaudited)" contained in Terra
Industries' 1993 Annual Report to Stockholders are incorporated herein by
reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF TERRA INDUSTRIES.
Information with respect to directors of Terra Industries under
the caption "Election of Directors" in the Proxy Statement for the Annual
Meeting of Stockholders of Terra Industries to be held on May 3, 1994, is
incorporated herein by reference. Information with respect to executive
officers who are not also directors of Terra Industries appears under the
caption "Executive Officers of Terra Industries" in Part I hereof and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation under the
caption "EXECUTIVE COMPENSATION AND OTHER INFORMATION" in the Proxy Statement
for the Annual Meeting of Stockholders of Terra Industries to be held on May 3,
1994, is incorporated herein by reference.
10
<PAGE> 15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to security ownership of certain
beneficial owners and management under the caption "Equity Security Ownership"
in the Proxy Statement for the Annual Meeting of Stockholders of Terra
Industries to be held on May 3, 1994, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to certain relationships and related
transactions under the caption "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"
in the Proxy Statement for the Annual Meeting of Stockholders of Terra
Industries to be held on May 3, 1994, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
1. Consolidated Financial Statements of Terra Industries and its
subsidiaries (incorporated herein by reference to Terra
Industries' 1993 Annual Report to Stockholders).
Consolidated Statements of Financial Position at December 31,
1993 and 1992.
Consolidated Statements of Income for the years ended December
31, 1993, 1992 and 1991.
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991.
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 1993, 1992 and 1991.
Notes to the Consolidated Financial Statements.
Independent Auditors' Report.
Quarterly Production Data (Unaudited).
Quarterly Financial and Stock Market Data (Unaudited).
Stockholders and Dividends.
Financial Summary.
2. Index to Financial Statement Schedules
See Index to Financial Statement Schedules of Terra Industries
and its subsidiaries at page S-1.
11
<PAGE> 16
3. Other Financial Statements
Individual financial statements of Terra Industries'
subsidiaries are omitted because all such subsidiaries are
included in the consolidated financial statements being filed.
Individual financial statements of 50% or less owned persons
accounted for on the equity method have been omitted because
such 50% or less owned persons considered in the aggregate, as
a single subsidiary, would not constitute a significant
subsidiary.
(b) EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
1. Amended and Restated Deferred Compensation Agreement made as of
May 1, 1991, by and between Terra Industries and R. F. Richards
filed as Exhibit 10 to Terra Industries' Form 8-K dated September
30, 1991.
2. Resolution adopted by the Personnel Committee of the Board of
Directors of Terra Industries with respect to supplemental
retirement benefits for certain senior executive officers of Terra
Industries, filed as Exhibit 10.4.2 to Terra Industries' Form 10-Q
for the fiscal quarter ended March 31, 1991.
3. 1992 Executive Incentive Plan of Terra Industries filed as Exhibit
10.1.12 to Terra Industries' Form 10-K for the year ended December
31, 1991.
4. 1992 Stock Incentive Plan of Terra Industries filed as Exhibit
10.1.6 to Terra Industries' Form 10-K for the year ended December
31, 1992.
5. Form of Restricted Stock Agreement of Terra Industries under its
1992 Stock Incentive Plan filed as Exhibit 10.1.7 to Terra
Industries' Form 10-K for the year ended December 31, 1992.
6. Form of Incentive Stock Option Agreement of Terra Industries under
its 1992 Stock Incentive Plan filed as Exhibit 10.1.8 to Terra
Industries' Form 10-K for the year ended December 31, 1992.
7. Form of Nonqualified Stock Incentive Agreement of Terra Industries
under its 1992 Stock Incentive Plan filed as Exhibit 10.1.9 to
Terra Industries' Form 10-K for the year ended December 31, 1992.
8. 1993 Incentive Award Program for Officers and Key Executives of
Terra Industries filed as Exhibit 10.1.10 to Terra Industries'
Form 10-K for the year ended December 31, 1992.
9. Excess Benefit Plan of Terra Industries as amended effective as of
January 1, 1992, filed as Exhibit 10.1.13 to Terra Industries'
Form 10-K for the year ended December 31, 1992.
10. Restricted Stock Agreement of Burton M. Joyce dated May 1, 1991,
filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for the
year ended December 31, 1992.
11. Terra Industries Inc. Supplemental Deferred Compensation Plan
effective as of December 20, 1993, filed as Exhibit 10.1.9 to Terra
Industries' Form 10-K for the year ended December 31, 1993.
12. Retirement/Consulting Agreement, dated as of May 13, 1993 by and
between Paul D. Foster and Terra International, filed as Exhibit
10.1.2 to Terra Industries' Form 10-K for the year ended December
31, 1993.
12
<PAGE> 17
13. Consulting Agreement dated as of December 30, 1993, by and between
Paul D. Foster and Terra International, filed as Exhibit 10.1.13 to
Terra Industries' Form 10-K for the year ended December 31, 1993.
14. 1994 Incentive Award Program for Officers and Key Executives of
Terra Industries filed as Exhibit 10.1.14 to Terra Industries' Form
10-K for the year ended December 31, 1993.
(c) REPORTS ON FORM 8-K
The following report on Form 8-K was filed during the fourth quarter of
1993:
Form 8-K dated October 26, 1993, Item 5.
(d) Exhibits
3.1.1 Articles of Restatement of Terra Industries filed with the State
of Maryland on September 11, 1990, filed as Exhibit 3.1 to Terra
Industries' Form 10-K for the year ended December 31, 1990, is
incorporated herein by reference. [8 pages].
3.1.2 Articles of Amendment of Terra Industries filed with the State of
Maryland on May 6, 1992, filed as Exhibit 3.1.2 to Terra
Industries' Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference. [2 pages].
3.2 By-Laws of Terra Industries, as amended through August 7, 1991,
filed as Exhibit 3 to Terra Industries' Form 8-K dated September
30, 1991, is incorporated herein by reference. [12 pages].
4.1.1 Indenture dated as of May 31, 1987, from Terra Industries to
Mellon Bank, N.A., as Trustee, including form of Debenture, filed
as Exhibit 4 to Amendment No. 2 to the Registration Statement on
Form S-3 (Registration No. 33-14171) filed by Terra Industries on
June 11, 1987, is incorporated herein by reference. [105 pages].
4.1.2 Revolving Credit Agreement dated as of November 24, 1992, among
Terra International, Inc., CitiCorp USA, Inc., Mellon Bank, N.A.,
Continental Bank N.A., First Bank National Association,
NationsBank of Texas, N.A. and Rabobank Nederland, filed as
Exhibit 4.1.2 to Terra Industries' Form 10-K for the year ended
December 31, 1992, is incorporated herein by reference.
4.1.3 First Amendment Agreement, dated as of March 26, 1993, by and
between Terra International, Inc., the Lenders listed on the
signature page thereto, and CitiCorp USA, Inc., as agent to
Lenders. [17 pages].
4.1.4 Second Amendment Agreement, dated as of December 30, 1993, by and
between Terra International, Inc., the Lenders listed on the
signature page thereto, and CitiCorp USA, Inc., as agent for the
Lenders. [13 pages].
Other instruments defining the rights of holders of long-term debt
of Terra Industries and its subsidiaries are not being filed
because the total amount of securities authorized under any such
instrument does not exceed 10 percent of the total assets of Terra
Industries and its subsidiaries on a consolidated basis. Terra
Industries agrees to furnish a copy of any instrument to the
Securities and Exchange Commission upon request.
13
<PAGE> 18
10.1.1 Amended and Restated Deferred Compensation Agreement made as of
May 1, 1991, by and between Terra Industries and R. F. Richards
filed as Exhibit 10 to Terra Industries' Form 8-K dated September
30, 1991, is incorporated herein by reference. [4 pages].
10.1.2 Resolution adopted by the Personnel Committee of the Board of
Directors of Terra Industries with respect to supplemental
retirement benefits for certain senior executive officers of Terra
Industries, filed as Exhibit 10.4.2 to Terra Industries' Form 10-Q
for the fiscal quarter ended March 31, 1991, is incorporated
herein by reference. [1 page]
10.1.3 1992 Executive Incentive Plan of Terra Industries filed as Exhibit
10.1.12 to Terra Industries' Form 10-K for the year ended December
31, 1991, is incorporated herein by reference. [3 pages].
10.1.4 1992 Stock Incentive Plan of Terra Industries filed as Exhibit
10.1.6 to Terra Industries' Form 10-K for the year ended December
31, 1992, is incorporated herein by reference. [8 pages].
10.1.5 Form of Restricted Stock Agreement of Terra Industries under its
1992 Stock Incentive Plan filed as Exhibit 10.1.7 to Terra
Industries' Form 10-K for the year ended December 31, 1992, is
incorporated. herein by reference. [4 pages].
10.1.6 Form of Incentive Stock Option Agreement of Terra Industries under
its 1992 Stock Incentive Plan, filed as Exhibit 10.1.8 to Terra
Industries' Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference. [4 pages].
10.1.7 Form of Nonqualified Stock Incentive Agreement of Terra Industries
under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.9 to
Terra Industries' Form 10-K for the year ended December 31, 1992,
is incorporated herein by reference. [4 pages].
10.1.8 1993 Incentive Award Program for Officers and Key Executives of
Terra Industries, filed as Exhibit 10.1.10 to Terra Industries'
Form 10-K for the year ended December 31, 1992, is incorporated
herein by reference. [3 pages].
10.1.9 Terra Industries Inc. Supplemental Deferred Compensation Plan
effective as of December 20, 1993. [19 pages.]
10.1.10 Excess Benefit Plan of Terra Industries as amended effective as of
January 1, 1992, filed as Exhibit 10.1.13 to Terra Industries'
Form 10-K for the year ended December 31, 1992, is incorporated
herein by reference. [2 pages].
10.1.11 Restricted Stock Agreement of Burton M. Joyce dated May 1, 1991,
filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for the
year ended December 31, 1992, is incorporated herein by reference.
[2 pages].
10.1.12 Retirement/Consultant Agreement, dated as of May 13, 1993, by and
between Paul D. Foster and Terra International. [4 pages].
10.1.13 Consulting Agreement, dated as of December 30, 1993, by and
between Paul D. Foster and Terra International. [2 pages].
10.1.14 1994 Incentive Award Program for Officers and Key Executives of
Terra Industries. [3 pages].
14
<PAGE> 19
10.2 Asset Sale and Purchase Agreement among Inspiration Consolidated
Copper Company and Cyprus Miami Mining Corporation and Cyprus
Christmas Mine Corporation dated as of June 30, 1989, filed as
Exhibit 10.19 to Terra Industries' Form 10-Q for the quarter ended
September 30, 1989, is incorporated herein by reference. [83
pages].
10.3.1 Stock Purchase Agreement, dated as of June 14, 1991, among
Minorco, Kirkdale Investments Limited, Terra Industries and Hudson
Holdings Corporation, filed as Exhibit 2 to Terra Industries' Form
8-K dated June 14, 1991, is incorporated herein by reference. [55
pages].
10.3.2 Amended and Restated Stock Purchase Agreement, dated as of July
31, 1991, among Minorco, Kirkdale Investments Limited, Terra
Industries and Hudson Holdings Corporation, filed as Exhibit 1 to
Terra Industries' Form 8-K dated July 31, 1991, is incorporated
herein by reference. [62 pages].
10.3.3 Option Agreement, dated as of June 14, 1991, among Kirkdale
Investments Limited and Terra Industries, filed as Exhibit 3 to
Terra Industries' Form 8-K dated June 14, 1991, is incorporated
herein by reference. [16 pages].
10.3.4 Amendment to Stock Option Agreement, dated July 31, 1991, among
Minorco, Kirkdale Investments Limited and Terra Industries, filed
as Exhibit 2 to Terra Industries' Form 8-K dated July 31, 1991, is
incorporated herein by reference. [3 pages].
10.4 Asset and Sale Purchase Agreement, dated as of April 8, 1993, by
and between Terra International, Inc., Terra International
(Canada) Inc. and ICI Canada Inc., filed as Exhibit A to Terra
Industries' Form 8-K dated April 8, 1993, is incorporated herein
by reference. [95 pages].
10.5 Asset Purchase Agreement, dated as of December 30, 1993, by and
between Terra International, Inc., The Upjohn Company and Asgrow
Florida Company, filed as Exhibit A to Terra Industries' Form 8-K
dated December 31, 1993, is incorporated herein by reference. [71
pages].
10.6 Lease, dated as of April 8, 1993, between W. Patrick Moroney and
Terra International (Canada) Inc. [42 pages].
13 Financial Review and Consolidated Financial Statements as
Contained in the Annual Report to Stockholders of Terra Industries
for the fiscal year ended December 31, 1993. [32 pages].
21 Subsidiaries of Terra Industries. [3 pages].
24 Powers of Attorney [8 pages].
15
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Terra Industries has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
TERRA INDUSTRIES INC.
By: /s/ George H. Valentine
-------------------------
George H. Valentine
Vice President, General Counsel and
Corporate Secretary
Date: March 3, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
Terra Industries and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Chairman of the Board March 3, 1994
- -------------------------------
Reuben F. Richards
* Chief Executive Officer, President March 3, 1994
- ------------------------------- and Director
Burton M. Joyce (Principal Executive Officer)
* Vice President, Chief Financial March 3, 1994
- ------------------------------- Officer
Francis G. Meyer (Principal Financial Officer and
Principal Accounting Officer)
* Director March 3, 1994
- -------------------------------
Carol L. Brookins
* Director March 3, 1994
- -------------------------------
Edward M. Carson
* Director March 3, 1994
- -------------------------------
David E. Fisher
* Director March 3, 1994
- -------------------------------
Basil T.A. Hone
* Director March 3, 1994
- -------------------------------
John R. Norton III
* Director March 3, 1994
- -------------------------------
Henry R. Slack
*By: /s/ Francis G. Meyer
----------------------------------------
Francis G. Meyer
Attorney-in-Fact
</TABLE>
16
<PAGE> 21
INDEX TO FINANCIAL STATEMENT SCHEDULES, REPORTS AND CONSENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Deloitte & Touche on Financial Statement Schedules . . . . . . . . . . . . . . . . . . S-2
Consent of Deloitte & Touche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Report of Price Waterhouse on Financial Statements for Fiscal Year Ended
December 31, 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Consent of Price Waterhouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Schedule No.
- ------------
II Amounts Receivable from Related Parties and Employees, Underwriters
Promoters, Employees Other than Related Parties:
Years Ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . S-5
III Condensed Financial Information of Registrant . . . . . . . . . . . . . . . . . S-6
V Property, Plant & Equipment:
Years Ended December 31, 1993, 1992 and 1991. . . . . . . . . . . . . . . . . . S-10
VI Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment:
Years Ended December 31, 1993, 1992 and 1991. . . . . . . . . . . . . . . . . . S-11
VIII Valuation and Qualifying Accounts:
Years Ended December 31, 1993, 1992 and 1991. . . . . . . . . . . . . . . . . . S-12
IX Short-Term Borrowings:
Years Ended December 31, 1993, 1992 and 1991. . . . . . . . . . . . . . . . . . S-13
X Supplementary Income Statement Information:
Years Ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . S-14
</TABLE>
Financial statement schedules not included in this report have been omitted
because they are not applicable or the required information is shown in the
consolidated financial statements or the notes thereto.
S-1
<PAGE> 22
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULES
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF TERRA INDUSTRIES INC.:
We have audited the consolidated financial statements of Terra Industries
Inc. as of December 31, 1993 and 1992, and for each of the two years then
ended, and have issued our report thereon dated February 1, 1994; such
financial statements and report are included in the 1993 Annual Report to
Stockholders of Terra Industries Inc. and are incorporated herein by reference.
Our audits also included the Financial Statement Schedules of Terra Industries
Inc. listed in Item 14(a) of this Form 10-K. These Financial Statement
Schedules are the responsibility of the management of Terra Industries Inc.
Our responsibility is to express an opinion based on our audits. In our
opinion, such Financial Statement Schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE
Omaha, Nebraska
February 1, 1994
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Prospectuses constituting
part of the Registration Statements on Form S-8 (Registration Nos. 33-46735,
33-46734, 33-30058 and 33-4939) and Registration Statements on Form S-3
(Registration Nos. 2-90808, 2-84876 and 2-84669) of Terra Industries Inc. of
our report dated February 1, 1994, included in the 1993 Annual Report to
Stockholders of Terra Industries Inc. which is incorporated by reference in
this Form 10-K. We also consent to the incorporation by reference in such
Prospectuses of our report on the Financial Statement Schedules, appearing
above.
DELOITTE & TOUCHE
Omaha, Nebraska
February 28, 1994
S-2
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Terra Industries Inc.
In our opinion, the consolidated financial statements listed in the index under
Item 14(a)(1) and (2) on page 11 of the 1993 Annual Report on Form 10-K present
fairly, in all material respects, the results of operations, cash flows and
changes in stockholders' equity of Terra Industries Inc. and its subsidiaries
for the year ended December 31, 1991, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of Terra Industries Inc. for any period
subsequent to December 31,1991.
PRICE WATERHOUSE
February 13, 1992
New York, New York
S-3
<PAGE> 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Registration Nos.
2-90808, 2-84876 and 2-84669) and Form S-8 (Registration Nos. 33-30058,
33-4939, 33-46734 and 33-46735) of Terra Industries Inc. of our report dated
February 13, 1992 appearing on page S-3 of this Annual Report on Form 10-K.
PRICE WATERHOUSE
New York, New York
March 1, 1994
S-4
<PAGE> 25
SCHEDULE II
TERRA INDUSTRIES INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Years Ended December 31, 1993, 1992, and 1991
---------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Ending Balance
----------------------
Beginning Non-
Name of Debtor Balance Additions Deductions Current Current
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
- -----------------------------
Not applicable
Year ended December 31, 1992:
- -----------------------------
Alloy Research, Inc. $ 5,000 $ 1,500 $ (6,500) (a) $ - $ -
Employees as a group 12 - (12) - -
------- ------- -------- ------- -------
TOTAL $ 5,012 $ 1,500 $ (6,512) $ - $ -
------- ------- -------- ------- -------
------- ------- -------- ------- -------
Year ended December 31, 1991:
- -----------------------------
Alloy Research, Inc. $ - $ 5,000 $ - $ 5,000 $ -
Employees as a group 29 - (17) (b) 12 -
------- ------- -------- ------- -------
Total U.S. Subsidiaries 29 5,000 (17) 5,012 -
------- ------- -------- ------- -------
NON-UNITED STATES
Officers/Directors
S. R. Horne 128 - (128) (b) - -
Employees as a group 1,065 - (1,065) (b) - -
------- ------- -------- ------- -------
Total Non-U.S. Subsidiaries 1,193 - (1,193) - -
------- ------- -------- ------- -------
TOTAL $ 1,222 $ 5,000 $ (1,210) $ 5,012 $ -
------- ------- -------- ------- -------
------- ------- -------- ------- -------
</TABLE>
(a) For 1992 the Corporation reclassified the accounts receivable of
Alloy Research, Inc. to Net Assets of Discontinued Operations.
(b) Represents amounts collected.
S-5
<PAGE> 26
TERRA INDUSTRIES INC.
(Parent Company)
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(in thousands) December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and short-term investments $ 24,249 $ 84,495
Accounts receivable, net 1,016 323
Deferred tax asset - current 26,011 22,660
Other current assets 4,337 226
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 55,613 107,704
- ------------------------------------------------------------------------------------------------------------------------------------
Investment in and advances to Terra International, Inc. 259,961 153,269
Deferred tax asset - non-current 24,742 23,599
Investment in and advances to discontinued subsidiaries 3,488 43,693
Other assets 9,226 2,057
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 353,030 $ 330,322
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Income taxes payable $ 12,912 $ 10,656
Accrued and other liabilities 8,466 9,980
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 21,378 20,636
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt 72,057 72,057
Other liabilities 16,127 16,153
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 109,562 108,846
- ------------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock 122,257 106,243
Paid-in capital 516,128 531,609
Accumulated deficit (394,917) (416,376)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 243,468 221,476
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 353,030 $ 330,322
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Condensed Financial Statements.
S-6
<PAGE> 27
TERRA INDUSTRIES INC.
(Parent Company)
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
(in thousands, except per-share amounts) For the Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Equity in earnings of Terra International, Inc. $ 26,691 $ 10,029 $ 17,749
Interest and other income 140 2,808 950
- ------------------------------------------------------------------------------------------------------------------------------------
Total income 26,831 12,837 18,699
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Selling, general and administrative expense 5,929 4,813 8,480
Depreciation and amortization --- --- 99
Interest expense 5,853 5,760 8,040
Income tax benefit (7,796) (2,430) (9,953)
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 3,986 8,143 6,666
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 22,845 4,694 12,033
Discontinued operations:
Equity in operations of discontinued
subsidiaries, net of taxes --- (4,025) 1,192
Gain (loss) on disposition, net of taxes --- 2,360 (170,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary items and
cumulative effect of accounting changes 22,845 3,029 (156,775)
Extraordinary gain on early retirement of debt --- --- 5,115
Cumulative effect of accounting changes --- 28,000 ---
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) 22,845 31,029 (151,660)
Cash dividends paid to common stockholders (1,386) --- ---
Accumulated deficit - beginning of year (416,376) (447,405) (295,745)
- ------------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED DEFICIT - END OF YEAR $ (394,917) $ (416,376) $ (447,405)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE:
Continuing operations $ 0.33 $ 0.06 $ 0.18
Discontinued operations --- (0.02) (2.51)
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary items 0.33 0.04 (2.33)
Extraordinary gain on early retirement of debt --- --- 0.07
Cumulative effect of accounting changes --- 0.41 ---
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 0.33 $ 0.45 $ (2.26)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Condensed Financial Statements.
S-7
<PAGE> 28
TERRA INDUSTRIES INC.
(Parent Company)
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands) For the Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 22,845 $ 31,029 $ (151,660)
Adjustments to reconcile net income to
net cash used by operations:
Equity in earnings of subsidiaries (26,691) (10,029) (17,749)
Loss from discontinued operations --- 1,665 168,808
Gain on early retirement of debentures --- --- (5,115)
Cumulative effect of accounting change --- (28,000) ---
Deferred income taxes (4,494) (19,643) (300)
Other non-cash items 81 81 200
Change in working capital components (4,062) 7,995 (385)
Other (7,256) 1,164 (2,459)
- ------------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY OPERATIONS (19,577) (15,738) (8,660)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from asset sales and
discontinued operations 40,205 30,425 99,582
Capital contributions to subsidiaries (30,000) --- ---
Dividends from unconsolidated subsidiaries --- 30 4,092
- ------------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 10,205 30,455 103,674
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term debt decrease --- --- (600)
Retirement of convertible debentures --- --- (14,430)
Dividend paid to common stockholders (1,386) --- ---
Stock issuance/repurchase - net 513 --- ---
Advances (to) from subsidiaries - net (50,001) 4,207 (14,447)
- ------------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (50,874) 4,207 (29,477)
- ------------------------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH (60,246) 18,924 65,537
CASH AND INVESTMENTS AT BEGINNING OF YEAR 84,495 65,571 34
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND INVESTMENTS AT END OF YEAR $ 24,249 $ 84,495 $ 65,571
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST PAID $ 6,229 $ 6,208 $ 8,595
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TAXES PAID $ 3,320 $ 4,208 $ 9
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Condensed Financial Statements.
S-8
<PAGE> 29
TERRA INDUSTRIES INC.
(Parent Company)
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The Condensed Financial Statements include the Registrant only and reflect the
equity method of accounting for its wholly owned subsidiary, Terra
International, Inc. (International). Equity in International's 1992 earnings
includes the deduction of $5.7 million for the cumulative effect of accounting
changes to recognize the prior service cost of providing post-retirement
medical benefits to International's employee's.
Equity in the financial results of the base metals, coal, leasing and other
discontinued businesses have been included in discontinued operations.
2. LONG-TERM DEBT
Long-term debt at December 31, 1993 and 1992 consists of 8.5% Convertible
Subordinated Debentures (Debentures) of $72,057,000 that is due 2012. Sinking
fund payments of $5,175,000 per year begin in 1998. The fair value, based upon
redemption provisions, at December 31, 1993 is $74.4 million and at December
31, 1992 was $75.3 million.
The Debentures are convertible into Common Shares any time prior to maturity,
unless previously redeemed, at a conversion price of $8.083 per share. The
Debentures are subject to redemption, upon not less than 20 days notice by
mail, at any time, as a whole or in part, at the election of the Registrant.
The redemption price, expressed as a percent of the principal amount of the
Debentures to be redeemed, is 103.40% until May 31, 1994, 102.55% until May 31,
1995 and decreasing yearly thereafter to 100% at June 1, 1997.
3. COMMITMENTS AND CONTINGENCIES
The Registrant is committed to a non-cancelable office lease expiring in 1998.
Total minimum rental payments, are: 1994, $3.1 million; 1995, $3.1 million;
1996, $3.2 million; 1997, $3.3 million and 1998, $1.7 million. These amounts
are not reduced by sublease rentals, which in 1993 were $2.0 million.
The Registrant is contingently liable for retiree medical benefits of employees
of coal mining operations sold on January 12, 1993. Under the purchase
agreement, the purchaser agreed to indemnify the Registrant against its
obligations under certain employee benefit plans. Due to the Coal Industry
Retiree Health Benefit Act of 1992, certain retiree medical benefits of union
coal miners have become statutorily mandated, and all companies owning 50
percent or more of any company liable for such benefits as of certain specified
dates becomes liable for such benefits if the company directly liable is unable
to pay them. As a result, if the purchaser becomes unable to pay its retiree
medical obligations assumed pursuant to the sale, the Registrant may have to
pay such amount. The Registrant has estimated that the present value of
liabilities for which it retains contingent responsibility approximates $12
million at December 31, 1993. In the event the Registrant would be required to
assume this liability, mineral reserves associated with the sold coal
subsidiary would revert to the Registrant.
The Registrant had letters of credit outstanding totaling $13.0 million at
December 31, 1993 and $14.1 million at December 31, 1992, guaranteeing various
insurance and financing activities. Short-term investments of $13.0 million at
December 31, 1993 and 1992 are restricted to collateralize certain of the
letters of credit.
4. INCOME TAXES
The Registrant files a consolidated U.S. federal tax return. The principal
operating subsidiaries provide for federal income taxes according to tax
sharing agreements which allocate the benefits of operating losses and
differences between financial reporting and income tax basis results to the
Registrant.
S-9
<PAGE> 30
SCHEDULE V
TERRA INDUSTRIES INC.
PROPERTY, PLANT & EQUIPMENT
Years Ended December 31, 1993, 1992, and 1991
----------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Balance at Balance at
Beginning Additions Discontinued End of
Classification of Period at Cost Retirements Other Operations Period
- -------------------------------------------------------------------------------------------------------------------------------
(a)
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
- -----------------------------
Land and buildings $ 59,589 $ 6,960 $ (206) $ - $ - $ 66,343
Plant and equipment 152,766 28,694 (b) (2,365) - - 179,095
Mine developement - - - - - -
-------- -------- --------- ------- ---------- ----------
Total $ 212,355 $ 35,654 $ (2,571) $ - $ - $ 245,438
-------- -------- --------- ------- ---------- ----------
-------- -------- --------- ------- ---------- ----------
Year Ended December 31, 1992:
- -----------------------------
Land and buildings $ 58,688 $ 4,751 $ (382) $ (296) $ (3,172) $ 59,589
Plant and equipment 162,303 13,093 (2,360) 274 (20,544) 152,766
Mine development 4,565 - - - (4,565) -
-------- -------- --------- ------- ---------- ----------
Total $ 225,556 $ 17,844 $ (2,742) $ (22) $ (28,281) $ 212,355
-------- -------- --------- ------- ---------- ----------
-------- -------- --------- ------- ---------- ----------
Year Ended December 31, 1991:
- -----------------------------
Land and buildings $ 56,249 $ 2,615 $ (176) $ - $ - $ 58,688
Plant and equipment 427,611 13,182 (2,749) - (275,741) 162,303
Mine developement 140,314 522 - - (136,271) 4,565
-------- -------- --------- ------- ---------- ----------
Total $ 624,174 $ 16,319 $ (2,925) $ - $(412,012) $ 225,556
-------- -------- --------- ------- ---------- ----------
-------- -------- --------- ------- ---------- ----------
</TABLE>
(a) Discontinued operations include the Leasing and Construction
Materials segments in 1992 and the Base Metals segment in 1991.
(b) Amounts included in related to acquisitions during 1993 are $12,301.
S-10
<PAGE> 31
SCHEDULE VI
TERRA INDUSTRIES INC.
ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Years Ended December 31, 1993, 1992, and 1991
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance at
Beginning Costs and Discontinued End of
Classification of Period Expenses Retirements Other Operations Period
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
- -----------------------------
Land and buildings $ 24,201 $ 2,546 $ (77) $ - $ - $ 26,670
Plant and equipment 96,185 14,360 (2,447) - - 108,098
Mine development - - - - - -
-------- ------- -------- ------- ------- ------
Total $ 120,386 $ 16,906 $ (2,524) $ - $ - $ 134,768
-------- ------- -------- ------- ------- ------
-------- ------- -------- ------- ------- ------
Year Ended December 31, 1992:
- -----------------------------
Land and buildings $ 22,397 $ 2,556 $ (193) $ - $ (559) $ 24,201
Plant and equipment 90,964 12,438 (2,223) - (4,994) 96,185
Mine development - - - - - -
-------- ------- -------- ------- ------- ------
Total $ 113,361 $ 14,994 $ (2,416) $ - $ (5,553) $ 120,386
-------- ------- -------- ------- ------- ------
-------- ------- -------- ------- ------- ------
Year Ended December 31, 1991:
- -----------------------------
Land and buildings $ 19,295 $ 2,720 $ (72) $ 454 (a) $ - $ 22,397
Plant and equipment 209,454 13,547 (2,449) - (129,588) 90,964
Mine development 68,206 - - - (68,206) -
-------- ------- -------- ------- ------- ------
Total $ 296,955 $ 16,267 $ (2,521) $ 454 $(197,794) $ 113,361
-------- ------- -------- ------- ------- ------
-------- ------- -------- ------- ------- ------
</TABLE>
(a) Discontinued operations included the Leasing and Construction
Materials segments in 1992 and the Base Metals segment in 1991.
S-11
<PAGE> 32
SCHEDULE VIII
TERRA INDUSTRIES INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1993, 1992, and 1991
---------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:
- -----------------------------
Allowance for Doubtful Accounts $ 6,427 $ 1,758 $ (2,397) (a) $ 5,788
Year Ended December 31, 1992:
- -----------------------------
Allowance for Doubtful Accounts $ 6,296 $ 4,026 $ (3,895) (a) $ 6,427
Year Ended December 31, 1991:
- -----------------------------
Allowance for Doubtful Accounts $ 4,557 $ 5,108 $ (3,369) (a) $ 6,296
</TABLE>
(a) Write-offs, net of recoveries.
S-12
<PAGE> 33
SCHEDULE IX
TERRA INDUSTRIES INC.
SHORT-TERM BORROWINGS
Years Ended December 31, 1993, 1992, and 1991
---------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Average
Maximum Daily Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
Category of Aggregate at End Interest During the During the During the
Short-term Borrowings of Period Rate Period Period (a) Period (a)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 Bank and Other Borrowings $ 7,313 4.65% $ 79,660 $ 23,163 4.5%
1992 Bank and Other Borrowings $ - - $ 36,000 $ 8,324 5.0%
1991 Bank and Other Borrowings $ 200 6.5% $ 51,030 $ 11,680 8.0%
</TABLE>
(a) Based on number of days during the year.
S-13
<PAGE> 34
SCHEDULE X
TERRA INDUSTRIES INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended December 31, 1993, 1992, and 1991
---------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Charged to Cost and Expenses
-------------------------------------------------------------------
Item 1993 1992 1991 (b)
- ---- ---- ---- --------
<S> <C> <C> <C>
1. Maintenance and repairs (a) (a) (a)
2. Amortization of intangible assets,
preoperating costs and similar deferrals $ 13,618 $ 13,142 $ 12,899
3. Taxes, other than payroll and income taxes (a) (a) (a)
4. Royalties (a) (a) (a)
5. Advertising (a) (a) (a)
</TABLE>
(a) Less than one percent of total revenues.
(b) Amounts have been restated to reflect discontinued operations.
S-14
<PAGE> 35
EXHIBIT INDEX
3.1.1 Articles of Restatement of Terra Industries filed with the State
of Maryland on September 11, 1990, filed as Exhibit 3.1 to Terra
Industries' Form 10-K for the year ended December 31, 1990, is
incorporated herein by reference. [8 pages].
3.1.2 Articles of Amendment of Terra Industries filed with the State of
Maryland on May 6, 1992, filed as Exhibit 3.1.2 to Terra
Industries' Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference. [2 pages].
3.2 By-Laws of Terra Industries, as amended through August 7, 1991,
filed as Exhibit 3 to Terra Industries' Form 8-K dated September
30, 1991, is incorporated herein by reference. [12 pages].
4.1.1 Indenture dated as of May 31, 1987, from Terra Industries to
Mellon Bank, N.A., as Trustee, including form of Debenture, filed
as Exhibit 4 to Amendment No. 2 to the Registration Statement on
Form S-3 (Registration No. 33-14171) filed by Terra Industries on
June 11, 1987, is incorporated herein by reference. [105 pages].
4.1.2 Revolving Credit Agreement dated as of November 24, 1992, among
Terra International, Inc., CitiCorp USA, Inc., Mellon Bank, N.A.,
Continental Bank N.A., First Bank National Association,
NationsBank of Texas, N.A. and Rabobank Nederland, filed as
Exhibit 4.1.2 to Terra Industries' Form 10-K for the year ended
December 31, 1992, is incorporated herein by reference.
4.1.3 First Amendment Agreement, dated as of March 26, 1993, by and
between Terra International, Inc., the Lenders listed on the
signature page thereto, and CitiCorp USA, Inc., as agent to
Lenders. [17 pages].
4.1.4 Second Amendment Agreement, dated as of December 30, 1993, by and
between Terra International, Inc., the Lenders listed on the
signature page thereto, and CitiCorp USA, Inc., as agent for the
Lenders. [13 pages].
Other instruments defining the rights of holders of long-term debt
of Terra Industries and its subsidiaries are not being filed
because the total amount of securities authorized under any such
instrument does not exceed 10 percent of the total assets of Terra
Industries and its subsidiaries on a consolidated basis. Terra
Industries agrees to furnish a copy of any instrument to the
Securities and Exchange Commission upon request.
10.1.1 Amended and Restated Deferred Compensation Agreement made as of
May 1, 1991, by and between Terra Industries and R. F. Richards
filed as Exhibit 10 to Terra Industries' Form 8-K dated September
30, 1991, is incorporated herein by reference. [4 pages].
10.1.2 Resolution adopted by the Personnel Committee of the Board of
Directors of Terra Industries with respect to supplemental
retirement benefits for certain senior executive officers of Terra
Industries, filed as Exhibit 10.4.2 to Terra Industries' Form 10-Q
for the fiscal quarter ended March 31, 1991, is incorporated
herein by reference. [1 page]
10.1.3 1992 Executive Incentive Plan of Terra Industries filed as Exhibit
10.1.12 to Terra Industries' Form 10-K for the year ended December
31, 1991, is incorporated herein by reference. [3 pages].
10.1.4 1992 Stock Incentive Plan of Terra Industries filed as Exhibit
10.1.6 to Terra Industries' Form 10-K for the year ended December
31, 1992, is incorporated herein by reference. [8 pages].
<PAGE> 36
10.1.5 Form of Restricted Stock Agreement of Terra Industries under its
1992 Stock Incentive Plan filed as Exhibit 10.1.7 to Terra
Industries' Form 10-K for the year ended December 31, 1992, is
incorporated. herein by reference. [4 pages].
10.1.6 Form of Incentive Stock Option Agreement of Terra Industries under
its 1992 Stock Incentive Plan, filed as Exhibit 10.1.8 to Terra
Industries' Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference. [4 pages].
10.1.7 Form of Nonqualified Stock Incentive Agreement of Terra Industries
under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.9 to
Terra Industries' Form 10-K for the year ended December 31, 1992,
is incorporated herein by reference. [4 pages].
10.1.8 1993 Incentive Award Program for Officers and Key Executives of
Terra Industries, filed as Exhibit 10.1.10 to Terra Industries'
Form 10-K for the year ended December 31, 1992, is incorporated
herein by reference. [3 pages].
10.1.9 Terra Industries Inc. Supplemental Deferred Compensation Plan
effective as of December 20, 1993. [19 pages.]
10.1.10 Excess Benefit Plan of Terra Industries as amended effective as of
January 1, 1992, filed as Exhibit 10.1.13 to Terra Industries'
Form 10-K for the year ended December 31, 1992, is incorporated
herein by reference. [2 pages].
10.1.11 Restricted Stock Agreement of Burton M. Joyce dated May 1, 1991,
filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for the
year ended December 31, 1992, is incorporated herein by reference.
[2 pages].
10.1.12 Retirement/Consultant Agreement, dated as of May 13, 1993, by and
between Paul D. Foster and Terra International. [4 pages].
10.1.13 Consulting Agreement, dated as of December 30, 1993, by and
between Paul D. Foster and Terra International. [2 pages].
10.1.14 1994 Incentive Award Program for Officers and Key Executives of
Terra Industries. [3 pages].
10.2 Asset Sale and Purchase Agreement among Inspiration Consolidated
Copper Company and Cyprus Miami Mining Corporation and Cyprus
Christmas Mine Corporation dated as of June 30, 1989, filed as
Exhibit 10.19 to Terra Industries' Form 10-Q for the quarter ended
September 30, 1989, is incorporated herein by reference. [83
pages].
10.3.1 Stock Purchase Agreement, dated as of June 14, 1991, among
Minorco, Kirkdale Investments Limited, Terra Industries and Hudson
Holdings Corporation, filed as Exhibit 2 to Terra Industries' Form
8-K dated June 14, 1991, is incorporated herein by reference. [55
pages].
10.3.2 Amended and Restated Stock Purchase Agreement, dated as of July
31, 1991, among Minorco, Kirkdale Investments Limited, Terra
Industries and Hudson Holdings Corporation, filed as Exhibit 1 to
Terra Industries' Form 8-K dated July 31, 1991, is incorporated
herein by reference. [62 pages].
10.3.3 Option Agreement, dated as of June 14, 1991, among Kirkdale
Investments Limited and Terra Industries, filed as Exhibit 3 to
Terra Industries' Form 8-K dated June 14, 1991, is incorporated
herein by reference. [16 pages].
<PAGE> 37
10.3.4 Amendment to Stock Option Agreement, dated July 31, 1991, among
Minorco, Kirkdale Investments Limited and Terra Industries, filed
as Exhibit 2 to Terra Industries' Form 8-K dated July 31, 1991, is
incorporated herein by reference. [3 pages].
10.4 Asset and Sale Purchase Agreement, dated as of April 8, 1993, by
and between Terra International, Inc., Terra International
(Canada) Inc. and ICI Canada Inc., filed as Exhibit A to Terra
Industries' Form 8-K dated April 8, 1993, is incorporated herein
by reference. [95 pages].
10.5 Asset Purchase Agreement, dated as of December 30, 1993, by and
between Terra International, Inc., The Upjohn Company and Asgrow
Florida Company, filed as Exhibit A to Terra Industries' Form 8-K
dated December 31, 1993, is incorporated herein by reference. [71
pages].
10.6 Lease, dated as of April 8, 1993, between W. Patrick Moroney and
Terra International (Canada) Inc. [42 pages].
13 Financial Review and Consolidated Financial Statements as
Contained in the Annual Report to Stockholders of Terra Industries
for the fiscal year ended December 31, 1993. [32 pages].
21 Subsidiaries of Terra Industries. [3 pages].
24 Powers of Attorney [8 pages].
<PAGE> 1
EXHIBIT 4.1.3
FIRST AMENDMENT AGREEMENT
FIRST AMENDMENT AGREEMENT dated as of March 26, 1993 (the
"Execution Date") among TERRA INTERNATIONAL, INC., a Delaware corporation (the
"Borrower"), the Lenders listed on the signature page hereof, and CITICORP USA,
INC., as agent for the Lenders (the "Agent").
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders and the Agent are parties to a
U.S. $130,000,000 Revolving Credit Agreement dated as of November 24, 1992 (the
"Agreement"; capitalized terms not otherwise defined herein shall have the
meanings attributed to them in the Agreement).
(2) Terra International (Canada) Inc., a wholly-owned
Canadian subsidiary of the Borrower ("Terra Canada") has entered, or will
enter, into a lease agreement (as amended from time to time in accordance with
the terms thereof, the "Canada Lease") pursuant to which Terra Canada will
lease an ammonia plant located in the province of Ontario, Canada (the
"Plant"). The Canada Lease is structured to be, and it is the intention of the
Borrower that the Canada Lease will constitute, an operating lease and not a
financing lease under both U.S. and Canadian generally accepted accounting
principles.
(3) The Borrower has guaranteed, or will guaranty, certain
payment obligations of Terra Canada under the terms of the Canada Lease (as the
same may be amended from time to time in accordance with the terms thereof, the
"Canada Lease Guarantee").
(4) Terra Canada intends to enter into an unsecured revolving
credit agreement with one or more banks (together with their respective
successors and assigns, the "Revolver Banks") for a maximum aggregate principal
amount of up to a maximum of C$40,000,000 (as the same may be amended from time
to time in accordance with the terms thereof, the "Terra Canada Revolving
Credit Agreement").
(5) The Borrower has guaranteed, or will guaranty, all of the
payment obligations of Terra Canada under the Terra Canada Revolving Credit
Agreement pursuant to a guarantee agreement (as amended from time to time in
accordance with the terms thereof, the "Canada Revolver Guarantee") between the
Borrower and the Revolver Banks.
(6) After the completion of the transactions contemplated by
an asset and share purchase agreement between ICI Canada Inc. ("ICI"), the
Borrower and Terra Canada (the "Purchase Agreement"), Terra Canada will own two
"Agromart" businesses and an equity interest in approximately twenty other
corporations engaged in the "Agromart" business in Canada (each such
corporation, an "Agromart Corporation" and collectively, the "Agromart
Corporations"). Terra Canada will own at least 50% of the outstanding capital
stock of each Agromart Corporation.
<PAGE> 2
(7) The Bank of Montreal and the Canadian Imperial Bank of
Commerce (together with their successors and assigns, "BOM" and/or "CIBC") are
or will be parties to a series of short-term revolving credit and term loan
agreements (each, as amended from time to time in accordance with the terms
thereof, and together with each revolving promissory note executed by an
Agromart Corporation to the order of BOM or CIBC pursuant thereto, an "Agromart
Credit Agreement") with the Agromart Corporations.
(8) The Borrower will execute a letter of comfort (each, as
amended from time to time in accordance with the terms hereof and substantially
in the form of Exhibit F hereto, an "Agromart Comfort Letter") in favor of BOM,
CIBC and/or ICI in connection therewith pursuant to which the Borrower will, on
the terms and conditions set forth therein, undertake to purchase any
inventories of fertilizer products and resale items which have been pledged as
security to BOM, CIBC and/or which have been purchased by ICI pursuant to a
letter of comfort from ICI in favor of BOM, CIBC or pursuant to the Comfort
Letter Indemnity (collectively, the "Agromart Inventory") at a maximum price
equal to 95% of the book value of such Agromart Inventory.
(9) In order to permit the Borrower to consummate the
transactions contemplated by the foregoing, the Borrower, the Majority Lenders
and the Agent have agreed to amend the Agreement as set forth below.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Amendments to Agreement. Subject to the
conditions precedent set forth in Section 2 hereof, the Agreement shall be
amended as follows if and only if the Borrower notifies the Agent in writing
that the transactions contemplated by the Purchase Agreement have been
consummated, as set forth therein, such amendment to be effective on the
effective date (the "Amendment Date") set forth in such notice:
(a) The Table of Contents to the Agreement is hereby
amended by adding references to the following Schedules to the list of
Schedules at the end thereof:
"Schedule IV - Agromart Corporations
Schedule V - Agromart Credit Agreements
Schedule VI - Authorizations, Approvals,
Actions, Notices and Filings".
(b) The Table of Contents to the Agreement is hereby
amended by adding references to the following Exhibits to the list of
Exhibits at the end thereof:
"Exhibit F - Form of Agromart Comfort Letter".
(c) Section 1.01 of the Agreement is hereby amended
by adding the following definitions thereto in the proper alphabetical
order:
'C$' means the lawful money of Canada.
2
<PAGE> 3
'Canada Documents' means, collectively (i) the
Purchase Agreement, (ii) upon its execution and delivery by
Terra Canada, the Canada Lease, (iii) upon its execution and
delivery by the Borrower, each Agromart Comfort Letter, (iv)
upon its execution and delivery by the relevant Agromart
Corporation, each Agromart Credit Agreement, (v) upon its
execution and delivery by Terra Canada, the Terra Canada
Revolving Credit Agreement, (vi) upon its execution and
delivery by the Borrower, the Canada Lease Guarantee, and
(vii) upon its execution and delivery by the Borrower, the
Canada Revolver Guarantee.
'Cash Equivalents' means investments having a
maturity of not greater than 90 days from the date of
acquisition thereof in:
(a) readily marketable direct obligations of
the Government of the United States of America or any
agency or instrumentality thereof or any obligations
guaranteed by the full faith and credit of the
Government of the United States of America, in each
case maturing within 90 days after the date of
investment therein;
(b) certificates of deposit of, bankers
acceptances of, or time deposits with, any commercial
bank which is a member of the Federal Reserve System
and is organized and existing under the laws of the
United States or any State thereof or the District of
Columbia and having combined capital and surplus of
at least $500 million and in each case maturing
within 90 days after the date of purchase, acceptance
or deposit;
(c) commercial paper in an aggregate amount
of no more than $5,000,000 per issuer outstanding at
any time with a rating of at least "Prime-1" by
Moody's Investors Service, Inc. or "A-1" by Standard
& Poor's Corporation;
(d) money market mutual funds; or
(e) repurchase agreements with dealers in
U.S. government securities pursuant to which the
Borrower agrees to purchase specified U.S. government
securities and the dealer agrees to repurchase such
securities at an agreed upon price and at a stated
time within 30 days after the date of such purchase.
'Closing Date' means the date of the consummation of
the transactions contemplated by the Purchase Agreement, as
set forth therein.
'Comfort Letter Indemnity' shall be an agreement
under which the Borrower agrees to perform any obligations of
ICI under comfort letters delivered by ICI in such form to the
extent such obligations arise after completion of the
transactions set forth in the Purchase Agreement.
3
<PAGE> 4
'dollars' and the sign '$' each means the lawful
money of the United States.
'Long-Term Leverage Ratio' means:
(i) at all times from November 24,
1992 until March 10, 1993 and at all times
from September 30, 1994 and thereafter, the
ratio of (A) Consolidated Funded Debt to (B)
Consolidated Tangible Net Worth; and
(ii) from March 10, 1993 through
September 29, 1994, the ratio of (A)
Consolidated Funded Debt minus, to the extent
owned by the Borrower free and clear of all
Liens, cash on hand and Cash Equivalents up
to a maximum of $30,000,000 to (B)
Consolidated Tangible Net Worth."
(d) The definition of "Environmental Laws" in
Section 1.01 of the Agreement is amended by adding the phrase "U.S.
and/or Canadian, as applicable," before the world "federal" in the
first line thereof.
(e) Subsection (b) of the definition of "Priority
Debt" in Section 1.01 of the Agreement is amended in full to read as
follows:
"(b) all Debt of any Priority Subsidiary
other than (i) Debt owing to the Borrower or another Priority
Subsidiary and (ii) in the case of Terra Canada any contingent
liability of Terra Canada, as obligor, guarantor or otherwise,
or in respect of which Terra Canada otherwise assures a
creditor against loss, in an aggregate amount up to
$40,000,000; and".
(f) The definition of "Short-Term Debt" in Section
1.01 of the Agreement is amended by inserting the phrase ", without
duplication," after the word "means" in the first line thereof, and
the last sentence thereof is amended in full to read as follows:
"Without limiting the generality of the foregoing, (i)
"Short-Term Debt" of a Person shall not include Debt of such
Person owing to suppliers of goods or services arising in the
ordinary course of business and not past due and (ii) the
following item shall constitute "Short-Term Debt" of the
Borrower:
(A) Debt of the Borrower arising under an
Agromart Comfort Letter or a Comfort Letter Indemnity.
(g) Section 2.05(b) of the Agreement is amended by
inserting the phrase "other than Short-Term Debt of the Borrower
arising under (A) an Agromart Comfort Letter, (B) the Canada Lease
Guarantee or (C) the Canada Revolver Guarantee" after the phrase
"Short-Term Debt" in the sixth line thereof.
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<PAGE> 5
(h) Section 5.01(m) of the Agreement is amended in
full to read as follows:
"(m) Long-Term Leverage Ratio. The Borrower
will maintain at all times a Long-Term Leverage Ratio
of not greater than 0.50: 1.0."
(i) Section 5.01 of the Agreement is amended by
adding new subsections (p) and (q) thereto to read in full as follows:
"(p) Canada Lease Guaranty. The Borrower
will promptly notify the Agent of (i) any material default by
any party with respect to the Canada Lease and (ii) any demand
for payment by the lessor made under the Canada Lease
Guaranty.
(q) Agromart Credit Agreements. In
connection with the Agromart Credit Agreements, the Borrower
will:
(i) cause each Agromart Corporation to
keep complete and accurate books and records with
respect to the business of such Agromart Corporation
and the Agromart Inventory of such Agromart
Corporation consistent with good business practice,
including current stock, cost, and sales records of
such Agromart Inventory, accurately itemizing and
describing the kinds, types, and quantities of such
Agromart Inventory, and the book value thereof;
(ii) notify the Agent of any material
default by any party with respect to any Agromart
Credit Agreement or under any Agromart Note;
(iii) as soon as reasonably possible,
and in any event within 60 days after the close of
each quarter of each fiscal year of the Borrower,
deliver to the Agent updated copies of Schedule IV
and/or Schedule V so that the Agent has a complete
and accurate list of all of the Agromart Corporations
and all of the Agromart Credit Agreements;
(iv) deliver to the Agent as soon as
reasonably possible, and in any event within 60 days
after the close of each fiscal quarter of the
Borrower, a summary report of all Agromart Inventory
setting forth the book value thereof and the
potential liability of the Borrower under each
Agromart Comfort Letter in respect thereof and at the
request of the Agent and, as reasonably available, a
copy of the most recent balance sheet, statement of
income and shareholders' equity of each Agromart
Corporation, certified, subject to year-end audit and
adjustment, by an officer of such Agromart
Corporation; and
5
<PAGE> 6
(v) from time to time upon request by
the Agent, deliver to the Agent such information and
reports regarding the Agromart Credit Agreements as
the Agent may reasonably request."
(j) Section 5.02(a) of the Agreement is amended by
deleting the figure $150,000,000" in the seventh line thereof and
replacing it with the amount "$170,000,000".
(k) Section 5.02(a) of the Agreement is amended by
inserting the phrase "and provided, further, that to the extent that
any portion of the Terra Canada Revolving Credit Agreement constitutes
"Short-Term Debt" of Terra Canada under the Agreement, the obligations
of the Borrower under the Canada Revolver Guarantee shall not
constitute "Short-Term Debt" of the Borrower for purposes of this
Section 5.02(a)" after the phrase "Exhibit E-2 hereto" in the last
line thereof.
(l) Section 5.02(i) of the Agreement is amended by
adding the phrase "and (C) for the Canada Lease" at the end thereof.
(m) Section 5.02 is amended by adding thereto a new
subsection (n) to read in full as follows:
"(n) The Borrower will not amend, modify or
change in any manner any term or condition of any Canada
Document that increases the monetary obligations of the
Borrower or Terra Canada, materially and adversely affects
their rights or impairs the interests of the Agent or any
Lender, or permit Terra Canada to do any of the foregoing."
(n) Section 6.01(h) of the Agreement is amended by
adding the phrase ", or the Borrower shall no longer own 100% of the
outstanding capital stock of Terra Canada" after the word "Borrower"
in the second line thereof.
(o) Schedule II to the Agreement (Restricted
Subsidiaries) is deleted and replaced with a new Schedule II, attached
hereto, which indicates that Terra Canada is also a Restricted
Subsidiary.
SECTION 2. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) Terra Canada is a corporation duly organized, validly
existing and in good standing under the laws of the province of
Ontario, Canada.
(b) The execution, delivery and performance by the Borrower
of this Amendment and each Canada Document to which the Borrower is or
will be a party are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not
contravene (i) the Borrower's charter or by-laws or (ii) law or any
contractual restriction binding on or affecting the Borrower and will
not result in or require the creation of any Lien upon or with respect
to any of its property.
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<PAGE> 7
(c) The execution, delivery and performance by Terra Canada
of each Canada Document to which Terra Canada is or will be a party
are within Terra Canada's corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene (i) Terra
Canada's charter or by-laws or (ii) law or any contractual restriction
binding on or affecting Terra Canada.
(d) No authorization or approval or other action by, and no
notice to or filing with, any U.S. or Canadian governmental authority
or regulatory body is required for (i) the due execution, delivery and
performance by the Borrower of this Amendment or any Canada Document
to which the Borrower is or will be a party or (ii) the due execution,
delivery and performance by Terra Canada of any Canada Document to
which Terra Canada is or will be a party, except, in the case of the
Canada Documents, for the authorizations, approvals, actions, notices
and filings listed on Schedule VI hereto, all of which will have been
duly obtained, taken, given or made and be in full force and effect
prior to the execution, delivery or performance by the Borrower or
Terra Canada, as the case may be, of the relevant Canada Document.
(e) This Amendment is the legal, valid and binding obligation
of the Borrower enforceable against the Borrower in accordance with
its terms except to the extent that enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally.
(f) Each Canada Document to which Terra Canada is or will be
a party is, or when delivered will be, legal, valid and binding
obligations of Terra Canada enforceable against Terra Canada in
accordance with their respective terms except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
(g) Subject to any adjustment, pursuant to Article II of the
Purchase Agreement, to the working capital and the aggregate
shareholders' equity of the Agromart Corporations on the Closing Date,
which adjustment will, in accordance with Article II of the Purchase
Agreement, be made within time frame outlined in the Purchase
Agreement and be based upon an audit of such items as outlined in the
Purchase Agreement, the consolidated pro forma balance sheet of the
Borrower and its Subsidiaries as at February 28, 1993 taking into
account the transactions contemplated by the Canada Documents,
certified by a principal financial officer of the Borrower, copies of
which have been furnished to each Lender, fairly present the
consolidated pro forma financial condition of the Borrower and its
Subsidiaries in all material respects as at such date, giving effect
to the transactions contemplated by the Canada Documents and this
Amendment, all in accordance with GAAP.
(h) The pro forma balance sheet of the Borrower and its
Subsidiaries referred to in subsection (g) above were prepared in good
faith on the basis of certain representations and warranties of ICI in
the Purchase Agreement as to the book value
7
<PAGE> 8
of the Agromart Inventory owned by the Agromart Corporations on the
Closing Date; in the course of the Borrower's due diligence in
connection with the negotiation of the Purchase Agreement, no facts
came to the attention of the Borrower which would cause the Borrower
to believe that such representations and warranties are materially
incorrect.
(i) There is no pending or, to the best of our knowledge,
threatened action or proceeding affecting the Borrower or any of its
Subsidiaries or Terra Canada before any court, governmental agency or
arbitrator that purports to affect the legality, validity or
enforceability of any Canada Document or this Amendment.
(j) Except for the authorizations, approvals, actions,
notices and filings listed on Schedule VI hereto (all of which will
have been duly obtained, taken, given or made and will be in full
force and effect prior to the execution, delivery or performance by
the Borrower or Terra Canada, as the case may be, of the relevant
Canada Document), the Borrower and each of its Subsidiaries have each
obtained all permits, licenses and other authorizations which are
required under all U.S. and Canadian laws in order to enter and
perform their respective obligations under the Canada Documents.
(k) No information, exhibit or report furnished to the Agent
by or on behalf of the Borrower or the Parent in connection with this
Amendment contained any material misstatement of fact or omitted to
state a material fact or any fact necessary to make the statements
contained therein not misleading.
(l) The Seller is not an Affiliate of the Borrower or the
Parent.
(m) Terra Canada is a wholly-owned subsidiary of the Borrower
and has been designated as a Restricted Subsidiary pursuant to Section
5.02(j) of the Agreement.
(n) Set forth on Schedule IV on or after the date hereto is a
complete and accurate list of all of the Agromart Corporations,
showing as of the Closing Date (as to each such Agromart Corporation)
the percentage of the outstanding shares of each class of capital
stock of such Agromart Corporation to be owned or prepared to be
acquired (directly or indirectly) by the Borrower on the Closing Date.
(o) Set forth on Schedule V hereto is a complete and accurate
list of all of the Agromart Credit Agreements, showing as of the
Closing Date (as to each such Agromart Corporation) the maximum
principal amount (in Canadian dollars) that can be made available to
such Agromart Corporation under such Agromart Credit Agreement.
SECTION 3. Conditions Precedent. The effectiveness of this
Amendment is subject to the conditions precedent that:
(a) The Agent shall have received on or before the Amendment
Date first above written:
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<PAGE> 9
(i) Counterparts of this Amendment executed by each
of the Borrower, the Majority Lenders and the Agent;
(ii) Certified copies of the resolutions of the
Board of Directors of the Borrower approving this Amendment,
each Canada Document to which it is or is to be a party, and
of all other documents evidencing other necessary corporate
action of the Borrower and governmental approvals, if any,
with respect to this Amendment and each such Canada Document;
(iii) Certified copies of the resolutions of the
Board of Directors of Terra Canada approving each Canada
Document to which it is or is to be a party, and of all other
documents evidencing other necessary corporate action of Terra
Canada and governmental approvals, if any, with respect to
such Canada Document;
(iv) A copy of the articles of incorporation of
Terra Canada and each amendment thereto, certified (as of a
date reasonably near the Amendment Date) by the Ministry of
Consumer and Commercial Relations of the province of Ontario,
Canada as being a true and correct copy thereof;
(v) Certified copies of each Canada Document,
entered into as of the date hereof, duly executed by each of
the parties thereto and in form and substance satisfactory to
the Agent, together with all agreements, instruments, and
other documents delivered in connection therewith;
(vi) A certificate, dated the Amendment Date and in
form and substance satisfactory to the Agent, signed by a duly
authorized officer of the Borrower stating that:
(A) The representations and warranties
contained in Section 4.01 of the Agreement and in
Section 2 of this Amendment are correct on and as of
the Amendment Date as though made on and as of such
date, both before and after giving effect to this
Amendment and the transactions contemplated by the
Canada Documents, and
(B) No event has occurred and is continuing,
both before and after giving effect to this Amendment
and the transactions contemplated by the Canada
Documents which constitutes an Event of Default or
would constitute an Event of Default but for the
requirement that notice be given or time elapse or
both;
(vii) A favorable opinion of Ben L. Keisler, Esq.,
counsel for the Borrower, in form and substance reasonably
acceptable to the Agent, as to such matters with respect to
this Amendment and the Canada Documents and the transactions
contemplated hereby and thereby as the Agent may reasonably
request;
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<PAGE> 10
(viii) A favorable opinion of Kaye, Scholer,
Fierman, Hays & Handler, counsel for the Agent, to the effect
that, while they have not independently considered the matters
covered by the opinions furnished pursuant to the preceding
provisions of this Section 3 to the extent necessary to enable
them to express the conclusions stated therein, (i) such
opinions, this Amendment and the other documents furnished
pursuant to the preceding provisions of this Section 3 appear
to be in substantially acceptable legal form and (ii) such
opinions and other documents are substantially responsive to
the requirements of this Amendment;
(ix) Such financial, business and other information
regarding Terra Canada or any Agromart Corporation as the
Agent shall have requested; and
(x) Such other approvals, opinions or documents as
the Agent may reasonably request;
(b) The Borrower shall have paid, on the Execution Date, a
non-refundable amendment fee to each Lender equal to 0.10% of the
entire amount of such Lender's Commitment (whether used or unused),
which amendment fee shall be payable regardless of whether the
Borrower gives the Agent the written notice referred to in Section 1
above; and
(c) The Borrower shall have paid all accrued fees and
expenses of the Agent and the Lenders (including accrued fees and
expenses of counsel to the Agent).
SECTION 4. Confirmation of Agreement. Except as herein
expressly amended, the Agreement is ratified and confirmed in all respects and
shall remain in full force and effect in accordance with its terms. Each
reference in the Agreement to "this Agreement", "the Agreement", "hereunder",
"hereof" or words of like import referring to the Agreement, and each reference
in the Notes or in any other documents delivered in connection with the
Agreement to "the Agreement", "thereunder", "thereof" or words of like import
referring to the Agreement, shall (unless otherwise specifically provided) mean
the Agreement as amended by this Amendment, and as hereinafter amended or
restated. Each reference in the Agreement to "the representations and
warranties contained in Section 4.01" shall include the representations and
warranties of the Borrower set forth in Section 2 of this Amendment.
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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<PAGE> 11
SECTION 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by any combination of the parties
hereto in separate counterparts, each of which counterparts shall be an
original and all of which when taken together shall constitute one and the same
Amendment Agreement. Delivery of an executed counterpart of a signature page
to this Amendment by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment.
IN WITNESS WHEREOF, the parties have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
Execution Date.
TERRA INTERNATIONAL, INC.
By: /S/ FRANCIS G. MEYER
Francis G. Meyer
Title: Vice President - Controller
CITICORP USA, INC., individually
and as Agent
By /s/ Jim Simpson
--------------------
Vice President
MELLON BANK, N.A.
By /s/ C.F.A. Erdoes
--------------------
Vice President
CONTINENTAL BANK N.A.
By /S/ M.H. CLAGGETT
M.H. Claggett
Vice President
FIRST BANK NATIONAL ASSOCIATION
By /S/ K. ROBERT LEA
K. Robert Lea
Vice President
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<PAGE> 12
NATIONSBANK OF TEXAS, N.A.
By /s/ FRANK JOHNSON
---------------------
Vice President
RABOBANK NEDERLAND
By /S/ JOANNA M. SOLOWSKI
Joanna M. Solowski
Vice President
<PAGE> 1
Exhibit 4.1.4
SECOND AMENDMENT AGREEMENT
SECOND AMENDMENT AGREEMENT dated as of December 30, 1993 (the "Second
Amendment") among TERRA INTERNATIONAL, INC., a Delaware corporation (the
"Borrower"), the Lenders listed on the signature page hereof, and CITICORP USA,
INC., as agent for the Lenders (the "Agent").
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders and the Agent are parties to a U.S.
$130,000,000 Revolving Credit Agreement dated as of November 24, 1992, as
amended by the First Amendment dated as of March 26, 1993 (the "Agreement";
capitalized terms not otherwise defined herein shall have the meanings
attributed to them in the Agreement).
(2) The Borrower, the Lenders and the Agent have agreed to amend the
Agreement as set forth below.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Amendments to Agreement. The Agreement shall be amended as
follows, such amendments to be effective on the date on which the conditions
precedent set forth in Section 3.02 of the Agreement and Section 3 hereof have
been satisfied (the "Second Amendment Date"):
(a) Section 1.01 of the Agreement is hereby amended by
deleting the definitions "Debt", "Long-Term Leverage Ratio" and
"Short-Term Debt" and adding the following definitions thereto in the
proper alphabetical order:
"'Debt' of any Person or entity means, without duplication,
(i) indebtedness for borrowed money or for the deferred
purchase price of property or services;
(ii) obligations under leases which shall have been or should
be recorded as capital leases in accordance with GAAP; and
(iii) all guaranties, and all other direct or indirect
liabilities, contingent or otherwise, with respect to clauses (i) and
(ii) above.
<PAGE> 2
Without limiting the generality of the foregoing, Debt of a person
shall not include Debt of the Borrower arising under an Agromart Comfort Letter
or a Comfort Letter Indemnity."
"'Long-Term Leverage Ratio' means the ratio of (A) Consolidated Funded
Debt to (B) Consolidated Tangible Net Worth."
"'Short-Term Debt' means, without duplication, (i) the Debt hereunder
and under the Notes, (ii) Debt which is payable on demand, and (iii) Debt
maturing one year or less after the date of creation, Debt which is renewable
or extendible, at the option of the creditor, to a date more than one year from
such date or arises under a revolving credit or similar agreement which
obligates the lender or lenders to extend credit during a period of more than
one year from such date (but not including the current portion of Debt maturing
more than one year after the date of creation). Without limiting the
generality of the foregoing, "Short-Term Debt" of a Person shall not include
Debt of such Person owing to suppliers of goods or services arising in the
ordinary course of business and not past due."
(b) Section 1.01 of the Agreement is further amended by
deleting from the last line of subsection (b) of the definition of
"Priority Debt" the figure $40,000,000" and inserting in lieu thereof
the figure "$60,000,000".
(c) Section 2.05(b) of the Agreement is amended by deleting
the phrase (commencing on the sixth line of said Section) "other than
Short-Term Debt of the Borrower arising under (A) an Agromart Comfort
Letter, (B) the Canada Lease Guarantee or (C) the Canada Revolver
Guarantee" and inserting in lieu thereof the following phrase:
"other than Short-Term Debt of the Borrower
arising under (A) the Canada Lease Guarantee or (B) the Canada
Revolver Guarantee".
(d) Section 5.01(j) of the Agreement is amended by inserting
the words "or Parent" on the last line of said Section after the word
"Borrower."
(e) Section 5.01(l) of the Agreement is amended by deleting
the figure $125,000,000" on the
2
<PAGE> 3
third line of said Section and inserting in lieu thereof
"$140,000,000."
(f) Section 5.01(m) of the Agreement is amended in full to read as
follows:
"(m) Long-Term Leverage Ratio. The Borrower will maintain a
Long-Term Leverage Ratio as follows:
(i) at all times from the date of this Second
Amendment through June 29, 1995 of not greater than 0.60:1.0;
and
(ii) at all times from June 30, 1995 and thereafter of
not greater than 0.55:1.0."
(g) Section 5.01(q) of the Agreement is hereby deleted in its
entirety, and the following is inserted in lieu thereof:
"(q) Agromart Credit Agreements. In connection with the
Agromart Credit Agreements, the Borrower will:
(i) cause each Agromart Corporation to keep complete
and accurate books and records with respect to the business of
such Agromart Corporation and the Agromart Inventory of such
Agromart Corporation consistent with good business practice,
including current stock, cost, and sales records of such
Agromart Inventory, accurately itemizing and describing the
kinds, types, and quantities of such Agromart Inventory, and
the book value thereof;
(ii) notify the Agent of any material default by any
party with respect to any Agromart Credit Agreement or under
any Agromart Note; and
(iii) from time to time upon request by the Agent,
deliver to the Agent such information and reports regarding the
Agromart Credit Agreements as the Agent may reasonably
request."
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<PAGE> 4
(h) Section 5.02(b) of the Agreement is amended in full to
read as follows:
"(b) Sales, Etc. of Assets. The Borrower will not
sell, lease, transfer or otherwise dispose of, or permit any of
its Subsidiaries to sell, lease, transfer or otherwise dispose
of (in either case whether in one transaction or in a series of
transactions), assets having an aggregate fair market value of
more than $35,000,000, except (i) the sale of inventory in the
ordinary course of its business or in connection with a
transaction authorized by subsection (g) below or (ii) the sale
of receivables or interests therein referenced in this Section
(in accordance with GAAP) which individually or in the
aggregate do not exceed $65,000,000 at any one time
outstanding."
(i) Section 5.02(h) of the Agreement is amended by deleting
the words "33 1/3% of cash" on the thirteenth line of said Section and
inserting in lieu thereof the words "100% of".
(j) Section 5.02(h) of the Agreement is also amended by
inserting the following phrase on the twenty-eighth line of said
Section after the words "this Agreement":
"; provided, however, that if Borrower makes any
Restricted Payment hereunder to Parent, the aggregate
amount of dividends Borrower may declare or pay
hereunder shall be reduced by 100% of the amount of
such Restricted Payment."
SECTION 2. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The execution, delivery and performance by the Borrower
of this Second Amendment are within the Borrower's corporate powers,
have been duly authorized by all necessary corporate action, and do
not contravene (i) the Borrower's charter or by-laws or (ii) any law
or any contractual restriction binding on or affecting the Borrower
and will not result in or require the creation of any Lien upon or
with respect to any of its property.
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<PAGE> 5
(b) No authorizations or approvals or other action by, and no
notice to or filing with, any U.S. governmental authority or
regulatory body is required for the due execution, delivery and
performance by the Borrower of this Second Amendment.
(c) This Second Amendment is the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in
accordance with its terms except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally.
(d) There is no pending or, to the best of Borrower's
knowledge, threatened action or proceeding affecting the Borrower or
any of its Subsidiaries before any court, governmental agency or
arbitrator that purports to affect the legality, validity or
enforceability of this Second Amendment.
(e) No information, exhibit or report furnished to the Agent
by or on behalf of the Borrower or the Parent in connection with this
Second Amendment contained any material misstatement of fact or
omitted to state a material fact or any fact necessary to make the
statements contained therein not misleading.
SECTION 3. Conditions Precedent. The effectiveness of this Second
Amendment is subject to the conditions precedent that:
(a) The Agent shall have received on or before the Second
Amendment Date:
(i) Counterparts of this Second Amendment executed by
each of the Borrower, the Lenders and the Agent;
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving this Second Amendment, and
of all other documents evidencing other necessary corporate
action of the Borrower and governmental approvals, if any,
with respect to this Second Amendment;
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<PAGE> 6
(iii) A certificate, dated the Second Amendment Date and
in form and substance satisfactory to the Agent, signed by a
duly authorized officer of the Borrower stating that:
(A) The representations and warranties
contained in Section 4.01 of the Agreement and in
Section 2 of this Second Amendment are correct on and
as of the Second Amendment Date as though made on and
as of such date, both before and after giving effect
to this Second Amendment, and
(B) No event has occurred and is continuing,
both before and after giving effect to this Second
Amendment which constitutes an Event of Default or
would constitute an Event of Default but for the
requirement that notice be given or time elapse or
both;
(iv) A favorable opinion of George H. Valentine, Esq.,
counsel for the Borrower, in form and substance reasonably
acceptable to the Agent, as to such matters with respect to
this Second Amendment and the transactions contemplated hereby
as the Agent may reasonably request;
(v) A favorable opinion of Chadbourne & Parke, counsel
for the Agent, to the effect that, while they have not
independently considered the matters covered by the opinions
furnished pursuant to the preceding provision of this Section
3 to the extent necessary to enable them to express the
conclusions stated therein, (i) such opinions, this Second
Amendment and the other documents furnished pursuant to the
preceding provisions of this Section 3 appear to be in
substantially acceptable legal form and (ii) such opinions and
other documents are substantially responsive to the
requirements of this Second Amendment; and
(vi) Such other approvals, opinions or documents as the
Agent may reasonably request;
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<PAGE> 7
(b) The Borrower shall have paid all accrued fees and expenses of
the Agent and the Lenders (including accrued fees and expenses of
counsel to the Agent).
SECTION 4. Confirmation of Agreement. Except as herein expressly
amended, the Agreement is ratified and confirmed in all respects and shall
remain in full force and effect in accordance with its terms. Each reference
in the Agreement to "this Agreement", "the Agreement", "hereunder", "hereof" or
words of like import referring to the Agreement, and each reference in the
Notes or in any other documents delivered in connection with the Agreement to
"the Agreement", "thereunder", "thereof" or words of like import referring to
the Agreement, shall (unless otherwise specifically provided) mean the
Agreement as amended by this Second Amendment, and as hereinafter amended or
restated. Each reference in the Agreement to "the representations and
warranties contained in Section 4.01" shall include the representations and
warranties of the Borrower set forth in Section 2 of this Second Amendment.
SECTION 5. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. Execution in Counterparts. This Second Amendment may be
executed in any number of counterparts and by any combination of the parties
hereto in separate counterparts, each of which counterparts shall be an
original and all of which when taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Second Amendment by telecopier shall be effective as delivery of a manually
executed counterpart of this Second Amendment.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
TERRA INTERNATIONAL, INC.
By: /s/ F.G. MEYER
Name: F.G. MEYER
Title: Vice President
7
<PAGE> 8
CITICORP USA, INC., individually
and as Agent
By: /s/ CAROLYN R. BODMER
Name: CAROLYN R. BODMER
Title: Vice President
MELLON BANK, N.A.
By: /s/ M.E. BAKER
Name: M.E. Baker
Title: Vice President
CONTINENTAL BANK N.A.
By: /s/ M.H CLAGGETT
Name: M.H. Claggett
Title: Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ JEFFREY R. TORRISON
Name: Jeffrey R. Torrison
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ ELLIS MOSELEY
Name: Ellis Moseley
Title: Vice President
RABOBANK NEDERLAND
By: /s/ ROBERT B. BENOIT
Name: ROBERT B. BENOIT
Title: Senior Vice President
By: /s/ LARRY SIDWELL
Name: Lawernce W. Sidwell
Title: Vice President
8
<PAGE> 1
Exhibit 10.1.9
TERRA INDUSTRIES INC.
SUPPLEMENTAL DEFERRED
COMPENSATION PLAN
December 20, 1993
<PAGE> 2
TERRA INDUSTRIES INC.
TABLE OF CONTENTS
ARTICLE SECTION PAGE
- ------- ------- ----
I Purpose and Effective Date 1
1.01 Title 1
1.02 Purpose 1
1.03 Effective Date 1
II Definitions and Construction of the Plan Document 2
2.01 Administrator 2
2.02 Beneficiary 2
2.03 Bookkeeping Account 2
2.04 Committee 2
2.05 Company 2
2.06 Compensation 2
2.07 Deferral Agreement 2
2.08 Deferred Compensation 2
2.09 Disability 2
2.10 Election Date 3
2.11 Executive 3
2.12 Gender and Number 3
2.13 Participant 3
2.14 Plan 3
2.15 Plan Year 3
2.16 Qualified Plan 3
2.17 Termination of Service 3
2.18 Titles 3
2.19 Valuation Date 3
III Eligibility and Participation 4
3.01 Eligibility 4
3.02 Participation 4
-i-
<PAGE> 3
TABLE OF CONTENTS
(Continued)
ARTICLE SECTION PAGE
- ------- ------- ----
IV Deferral of Compensation 5
4.01 Salary Deferral 5
4.02 Bonus Deferral 5
4.03 Deferral Agreement 5
4.04 No Deferral Without Agreement 5
4.05 Duration of Deferral Agreement 5
4.06 Effect of Deferral 5
V Deferral Account and Crediting Rate 6
5.01 Bookkeeping Account 6
5.02 Interest 6
5.03 Crediting Rate 6
VI Distribution 7
6.01 Distribution of Account Balance 7
6.02 Change in Tax Rates 7
6.03 Nonforfeitable Right To Employee Contributions 7
6.04 Form of Distribution 7
6.05 Distribution Before Termination of Service 7
VII Hardship Distributions 8
7.01 Hardship 8
VIII Beneficiary 9
8.01 Beneficiary Designation 9
8.02 Proper Beneficiary 9
8.03 Minor or Incompetent Beneficiary 9
-ii-
<PAGE> 4
TABLE OF CONTENTS
(Continued)
ARTICLE SECTION PAGE
- ------- ------- ----
IX Administration of the Plan 10
9.01 Majority Vote 10
9.02 Finality of Determination 10
9.03 Certificates and Reports 10
9.04 Indemnification and Exculpation 10
9.05 Expenses 10
X Claims Procedure 11
10.01 Written Claim 11
10.02 Denied Claim 11
10.03 Review Procedure 11
10.04 Committee Review 11
XI Nature of Company's Obligation 12
11.01 Company's Obligation 12
11.02 Creditor Status 12
XII Miscellaneous 13
12.01 Written Notice 13
12.02 Change of Address 13
12.03 Merger, Consolidation or Acquisition 13
12.04 Amendment and Termination 13
12.05 Employment 13
12.06 Non-transferability 14
12.07 Tax Withholding 14
12.08 Applicable Law 14
-iii-
<PAGE> 5
ARTICLE I
PURPOSE AND EFFECTIVE DATE
1.01 Title. This Plan shall be known as the Terra
Industries Inc. Supplemental Deferred Compensation Plan (hereinafter
referred to as the "Plan").
1.02 Purpose. The purpose of the Plan is to permit certain
members of management and highly compensated employees to defer
current Compensation which cannot be contributed to the Company's
Qualified Plan.
1.03 Effective Date. The effective date of this Plan shall
be December 20, 1993.
-1-
<PAGE> 6
ARTICLE II
DEFINITIONS AND CONSTRUCTION OF THE PLAN DOCUMENT
2.01 Administrator. "Administrator", for purposes of the
claims procedure of this Plan, shall mean the Pension and Savings
Plan Committee of the Company.
2.02 Beneficiary. "Beneficiary" shall mean the person or
persons or the entity designated by a Participant in accordance with
the Plan to receive any benefits under this Plan at the time of the
Participant's death, or if no such beneficiary is alive or in
existence or has been designated at such time, the legal
representative of the Participant's estate.
2.03 Bookkeeping Account. A "Bookkeeping Account" will be
established as a bookkeeping record for each Participant who elects
to defer Compensation under this Plan.
2.04 Committee. "Committee" means the Administrator.
2.05 Company. "Company" shall mean Terra Industries Inc.
and any subsidiary and affiliated companies that adopt the Plan for
its employees.
2.06 Compensation. Compensation means a Participant's base
salary and/or bonus for the calendar year before reduction for
contributions made to the Company's Qualified Plan.
2.07 Deferral Agreement. "Deferral Agreement" means the
written form which is submitted to the Administrator before the
relevant Election Date which indicates whether the Executive wishes
to defer a portion of Compensation and indicates the amount to be
deferred. No Deferral Agreement shall be effective until
acknowledged by the Company.
2.08 Deferred Compensation. "Deferred Compensation" means
the portion of a Participant's Compensation for any calendar year, or
part thereof, that has been deferred pursuant to the Plan.
2.09 Disability. Disability means long-term disability as
defined under the Qualified Plan.
-2-
<PAGE> 7
2.10 Election Date. The "Election Date" is the date
established by this Plan as the date before which an Executive must
submit a valid Deferral Agreement to the Committee. The applicable
Election Dates are as follows: (a) 30 days after adoption of the
Plan for employees who are eligible to participate at the time the
Plan is adopted, (b) 30 days after an employee becomes eligible to
participate in the Plan, or (c) December 20 of any calendar year if
(a) or (b) above do not apply.
2.11 Executive. "Executive" shall mean any member of
management or highly compensated employee who is eligible to
participate in the Company's Qualified Plan.
2.12 Gender and Number. Wherever the context so requires,
masculine pronouns include the feminine and singular words shall
include the plural.
2.13 Participant. "Participant" means an Executive who has
deferred a portion of Compensation pursuant to the terms of this
Plan, and whose account balance has not yet been fully distributed.
2.14 Plan. "Plan" means the Terra Industries Inc.
Supplemental Deferred Compensation Plan as described in this
instrument and as amended from time to time.
2.15 Plan Year. The "Plan Year" is the twelve month period
commencing January 1 and ending on December 31.
2.16 Qualified Plan. "Qualified Plan" shall mean the Terra
Industries Inc. Employees' Savings and Investment Plan, as amended
from time to time.
2.17 Termination of Service. "Termination of Service" or
similar expression means the termination of the Participant's
employment as a regular employee of the Company and any division,
subsidiary or affiliate thereof.
2.18 Titles. Titles of the Articles of this Plan are
included for ease of reference only and are not to be used for the
purpose of construing any portion or provision of this Plan document.
2.19 Valuation Date. "Valuation Date" shall mean the last
day of each month. By appropriate action, the Committee may provide
for Valuation Dates at such other times as it deems necessary or
expedient.
-3-
<PAGE> 8
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.01 Eligibility. Eligibility for participation in this
Plan shall be determined by the Committee, in its sole discretion,
but all Participants must be a member of a select group of management
or a highly-compensated employee of the Company.
3.02 Participation. An Executive, after having been
selected for participation by the Committee, shall, as a condition to
participation, complete and return to the Committee a duly executed
Deferral Agreement.
-4-
<PAGE> 9
ARTICLE IV
DEFERRAL OF COMPENSATION
4.01 Salary Deferral. Each Participant in the Plan may have
a percentage of Salary (determined without regard to any
contributions to the Qualified Plan or tax-deferred deposits under
this Plan) deferred in accordance with the terms and conditions of
this Plan. The percentage of Salary deferred cannot exceed 10% of
the Participant's Salary offset by amounts deferred into the
Qualified Plan.
4.02 Bonus Deferral. Each Participant may defer up to 10%
of any cash bonuses paid by the Company so long as such deferral is
in accordance with the terms and conditions of this Plan.
4.03 Deferral Agreement. An eligible Executive desiring to
participate in the Plan must submit a written Deferral Agreement to
the Administrator on or before the applicable Election Date. Valid
Deferral Agreements filed by the applicable Election Date as provided
in Section 2.10 (a) or (b) shall cause Compensation for services to
be performed after such date to be deferred in the calendar year in
which such Agreement is made. Deferral Agreements entered into under
the conditions of 2.10(c) shall cause Compensation to be deferred
beginning January 1 of the next calendar year.
4.04 No Deferral Without Agreement. A Participant who has
not submitted a valid Deferral Agreement to the Administrator before
the relevant Election Date may not defer any Compensation under this
Plan for the applicable Plan Year.
4.05 Duration of Deferral Agreement. Deferral Agreements
remain in effect until the year following the year in which they are
amended or rescinded, but shall be irrevocable as to the amounts
deferred while they were in effect.
4.06 Effect of Deferral. Compensation of any Participant
that is deferred under the Plan, and benefits payable under the Plan,
shall be disregarded for purposes of determining the benefits under
the Terra International, Inc. Employees Retirement Plan, the
Qualified Plan, and any other employee benefit plan that is
maintained for the benefit of the Participant.
-5-
<PAGE> 10
ARTICLE V
DEFERRAL ACCOUNT AND CREDITING RATE
5.01 Bookkeeping Account. Compensation deferred by a
Participant under a written Deferral Agreement shall be credited in a
dollar amount to a separate Bookkeeping Account for each Participant.
Compensation deferred under subsequent written election agreements by
a Participant shall be added to the Participant's Bookkeeping
Account.
5.02 Interest. Amounts deferred under a written Deferral
Agreement of a Participant plus an amount equal to the Participant's
deemed interest and earnings shall be credited to the Bookkeeping
Account on the same schedule and with the same frequency as interest
and earnings that are credited to Qualified Plan accounts.
5.03 Crediting Rate. The amount in the Participant's
Bookkeeping Account shall be credited at a rate that reflects the
gains, losses and income computed as if the Bookkeeping Account were
invested in certain investment funds available under the Qualified
Plan, as selected by the Participant in the Deferral Agreement.
Compensation deferred shall be deemed to be so invested on the date
the amounts deferred are credited to the Bookkeeping Account. The
Company reserves the right to change the basis for determining the
crediting rate from time to time.
-6-
<PAGE> 11
ARTICLE VI
DISTRIBUTION
6.01 Distribution of Account Balance. Distribution of the
value of a Participant's Bookkeeping Account balance shall be made
according to the terms of this Plan described in 6.01(a) or 6.01(b)
and as specified in the Participant's Deferral Agreement.
6.01(a) Payment shall be made in a cash lump sum as soon as
administratively practicable after the first of
the month next following the date of the
Participant's Termination of Service (but not later
than six months), or
6.01(b) Payment shall be made annually in up to ten
installments as elected by the Participant in
the Deferral Agreement beginning as soon as possible
after January 1 next following the date of the
Participant's Termination of Service and subsequent
installments shall be paid as soon as possible
following January 1 of the applicable year. Each
payment shall be made as soon as is administratively
possible. The amount of each payment shall equal the
Participant's Bookkeeping Account divided by the
number of remaining payments (including the payment
being determined).
6.02 Change in Tax Rates. Notwithstanding the provisions of
6.01, in the event a Participant's Bookkeeping Account is being paid
in installment payments and during said pay-out period, Federal
personal income tax rates for the highest marginal rate are scheduled
to increase by five or more percentage points, any remaining
installments to be paid after the effective date of such increase
shall be paid in one lump sum prior to such effective date.
6.03 Nonforfeitable Right to Employee Contributions. The
Participant shall have a nonforfeitable right to the value of the
Bookkeeping Account attributable to the Participant's contributions
plus interest under the terms of this Plan. Notwithstanding the
Participant's nonforfeitable right to the value of the Bookkeeping
Account, the Company has no obligation to fund the account.
Likewise, any assets which the Company may set aside to help cover
its financial liabilities are general assets. Refer to Sections
11.01 and 11.02 for further explanation.
6.04 Form of Distribution. All distributions of a
Participant's Bookkeeping Account shall be made in cash only.
6.05 Distribution Before Termination of Service. In the
event the Company fails to pay a material amount of any of its
indebtedness when due and such failure continues after any applicable
grace period, or permits any material default under any agreement or
instrument relating to its indebtedness, the Bookkeeping Account
shall be payable in a lump sum within seven working days.
-7-
<PAGE> 12
ARTICLE VII
HARDSHIP DISTRIBUTIONS
7.01 Hardship. At the request of a Participant before or
after the Participant's Retirement or Termination of Service, or at
the request of any of the Participant's beneficiaries after the
Participant's death, the Committee may, in its sole discretion,
accelerate and pay all or part of the value of a Participant's
Bookkeeping Account due under this Plan. Accelerated distributions
at the request of the Participant or a Participant's Beneficiaries
may be allowed only in the event of an unanticipated emergency that
is caused by an event beyond the Participant's or Beneficiary's
control and only if disallowance of a distribution would result in a
severe financial hardship for the Participant or Beneficiary. An
accelerated distribution must be limited to only that amount
necessary to meet the emergency.
-8-
<PAGE> 13
ARTICLE VIII
BENEFICIARY
8.01 Beneficiary Designation. A Participant shall designate
a Beneficiary to receive benefits under the Plan by completing the
appropriate space on the Beneficiary Designation Form. If more than
one Beneficiary is named, the shares and/or precedence of each
Beneficiary shall be indicated. A Participant shall have the right
to change the Beneficiary by submitting to the Committee a Change of
Beneficiary form. However, no Change of Beneficiary shall be
effective until acknowledged in writing by the Committee.
8.02 Proper Beneficiary. If the Company has any doubt as to
the Proper Beneficiary to receive payments hereunder, the Company
shall have the right to withhold such payments until the matter is
finally adjudicated. However, any payment made by the Company, in
good faith and in accordance with this Plan, shall fully discharge
the Company from all further obligations with respect to that
payment.
8.03 Minor or Incompetent Beneficiary. In making any
payments to or for the benefit of any minor or an incompetent
Beneficiary, the Committee, in its sole and absolute discretion may
make a distribution to a legal or natural guardian or other relative
of a minor or court appointed trustee of such incompetent. Or, it
may make a payment to any adult with whom the minor or incompetent
temporarily or permanently resides. The receipt by a guardian,
trustee, relative or other person shall be a complete discharge to
the Company. Neither the Committee nor the Company shall have any
responsibility to see to the proper application of any payments so
made.
-9-
<PAGE> 14
ARTICLE IX
ADMINISTRATION OF THE PLAN
9.01 Majority Vote. All resolutions or other actions taken
by the Committee shall be by vote of a majority of those present at a
meeting at which a majority of the members are present, or in writing
by all the members at the time in office if they act without a
meeting.
9.02 Finality of Determination. Subject to the Plan, the
Committee shall, from time to time, establish rules, forms and
procedures for the administration of the Plan. Except as herein
otherwise expressly provided, the Committee shall have the exclusive
right to interpret the Plan and to decide any and all matters arising
thereunder or in connection with the administration of the Plan, and
it shall endeavor to act, whether by general rules or by particular
decisions, so as not to discriminate in favor of or against any
person. The decisions, actions and records of the Committee shall be
conclusive and binding upon the Company and all persons having or
claiming to have any right or interest in or under the Plan.
9.03 Certificates and Reports. The members of the Committee
and the officers and directors of the Company shall be entitled to
rely on all certificates and reports made by any duly appointed
accountants, and on all opinions given by any duly appointed legal
counsel, which legal counsel may be counsel for the Company.
9.04 Indemnification and Exculpation. The Company shall
indemnify and hold harmless each member of the Committee against any
and all expenses and liabilities arising out of membership on the
Committee. Expenses against which a member of the Committee shall be
indemnified hereunder shall include, without limitation, the amount
of any settlement or judgment, costs, counsel fees and related
charges reasonably incurred in connection with a claim asserted, or a
proceeding brought or settlement thereof. The foregoing right of
indemnification shall be in addition to any other rights to which any
such member of the Committee may be entitled as a matter of law.
9.05 Expenses. The expenses of administering the Plan shall
be borne by the Company.
-10-
<PAGE> 15
ARTICLE X
CLAIMS PROCEDURE
10.01 Written Claim. Benefits shall be paid in accordance
with the provisions of this Plan. The Participant, or a designated
recipient or any other person claiming through the Participant shall
make a written request for benefits under this Plan. This written
claim shall be mailed or delivered to the Administrator. Such claim
shall be reviewed by the Administrator or a delegate.
10.02 Denied Claim. If the claim is denied, in full or in
part, the Administrator shall provide a written notice within ninety
(90) days setting forth the specific reasons for denial, and any
additional material or information necessary to perfect the claim,
and an explanation of why such material or information is necessary,
and appropriate information and explanation of the steps to be taken
if a review of the denial is desired.
10.03 Review Procedure. If the claim is denied and a review
is desired, the Participant (or Beneficiary) shall notify the
Administrator in writing within sixty (60) days after receipt of the
written notice of denial. In requesting a review, the Participant or
Beneficiary may request a review of the Plan Document or other
pertinent documents with regard to the employee benefit Plan created
under this agreement, may submit any written issues and comments, may
request an extension of time for such written submission of issues
and comments, and may request that a hearing be held, but the
decision to hold a hearing shall be within the sole discretion of the
Committee.
10.04 Committee Review. The decision on the review of the
denied claim shall be rendered by the Committee within sixty (60)
days after the receipt of the request for review (if no hearing is
held) or within sixty (60) days after the hearing if one is held.
The decision shall be written and shall state the specific reasons
for the decision including reference to specific provisions of this
Plan on which the decision is based.
-11-
<PAGE> 16
ARTICLE XI
NATURE OF COMPANY'S OBLIGATION
11.01 Company's Obligation. The Company's obligations under
this Plan shall be an unfunded and unsecured promise to pay. The
Company shall not be obligated under any circumstances to separately
fund its financial obligations under this Plan.
11.02 Creditor Status. Any assets which the Company may
acquire or set aside to help cover its financial liabilities are and
must remain general assets of the Company subject to the claims of
its creditors. Neither the Company nor this Plan gives the
Participant any beneficial ownership interest in any asset of the
Company. All rights of ownership in any such assets are and remain
in the Company. Participants shall have the status of general
unsecured creditors of the Company.
-12-
<PAGE> 17
ARTICLE XII
MISCELLANEOUS
12.01 Written Notice. Any notice which shall be or may be
given under the Plan or a Deferral Agreement shall be in writing and
shall be mailed by United States mail, postage prepaid. If notice is
to be given to the Company, such notice shall be addressed to the
Company at 600 Fourth Street, P. O. Box 6000, Sioux City, Iowa
51102-6000, marked for the attention of the Administrator or if
notice to an Executive, addressed to the address shown on such
Executive's Deferral Agreement.
12.02 Change of Address. Any party may, from time to time,
change the address to which notices shall be mailed by giving written
notice of such new address.
12.03 Merger, Consolidation or Acquisition. The Plan shall
be binding upon the Company, its assigns, and any successor Company
which shall succeed to substantially all of its assets and business
through merger, acquisition or consolidation, and upon an Executive,
the Beneficiary, assigns, heirs, executors and administrators.
12.04 Amendment and Termination. The Company retains the
sole and unilateral right to terminate, amend, modify, or supplement
this Plan, in whole or part, at any time. This right includes the
right to make retroactive amendments. However, no Company action
under this right shall reduce the Bookkeeping Account of any
Participant or Beneficiary or reduce benefits that are in payment
status or shall deprive the Participant without his consent of the
right to receive the Bookkeeping Account at the time or times
thereafter elected, with interest.
12.05 Employment. This Plan does not provide a contract of
employment between the Company and the Participant, and the Company
reserves the right to terminate the Participant's employment for any
reason, at any time, notwithstanding the existence of this Plan.
-13-
<PAGE> 18
12.06 Non-transferability. Except insofar as prohibited by
applicable law, no sale, transfer, alienation, assignment, pledge,
collateralization or attachment of any benefits under this Plan shall
be valid or recognized by the Company. Neither the Participant,
spouse, or designated Beneficiary shall have any power to
hypothecate, mortgage, commute, modify, anticipate, or otherwise
encumber in advance any of the benefits payable hereunder, nor shall
any of said benefits be subject to garnishment by creditors of any
Participant or Beneficiary or seizure for the payment of any debts,
judgments, alimony, maintenance, owed by the Participant or
Beneficiary, or be transferable by operation of law in the event of
bankruptcy, insolvency or otherwise.
12.07 Tax Withholding. The Company may withhold from a
payment any federal, state or local taxes required by law to be
withheld with respect to such payment and such sum as the Company may
reasonably estimate as necessary to cover any taxes for which the
Company may be liable and which may be assessed with regard to such
payment.
12.08 Applicable Law. This Plan shall be governed by the
laws of the state of Iowa except to the extent they are pre-empted by
ERISA. It is the intention of the Company that the Plan be unfunded
for tax purposes and for purposes of Title I of ERISA.
-14-
<PAGE> 19
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer on this day of
December, 1993, effective as of the day of December, 1993.
TERRA INDUSTRIES INC.
BY /s/ Burton M. Joyce
Burton M. Joyce, President and
Chief Executive Officer
ATTEST:
By /s/ Jane A. Rice
Jane A. Rice
Assistant Secretary
[SEAL]
-15-
<PAGE> 1
Exhibit 10.1.12
RETIREMENT/CONSULTING AGREEMENT
This Retirement/Consulting Agreement ("Agreement") made and entered
into this ____ day of May, 1993, by and between PAUL D. FOSTER (hereinafter
"Foster"), and TERRA INTERNATIONAL, INC. (hereinafter "Terra"), a Delaware
corporation, having offices at 600 Fourth Street, Sioux City, IA 51101.
WHEREAS, Foster has voluntarily decided to retire and terminate his
position as an employee and officer of Terra and its subsidiaries and
affiliates as of December 31, 1993; and
WHEREAS, the parties desire Foster to work as a consultant for Terra,
its subsidiaries and affiliates under specified terms and conditions after his
retirement; and
WHEREAS, the parties now wish to enter into an agreement specifying
the terms of Foster's retirement and the terms under which Foster will act as a
consultant for Terra after his retirement;
NOW, THEREFORE, the parties hereto mutually agree as follows:
RETIREMENT
1. Retirement/Service to Terra in 1993. Foster shall remain a
full-time Terra employee obtaining full benefits and full salary through a date
mutually agreed by Terra and Foster. Such date (the "transfer date") shall be
no later than July 1, 1993. Foster shall relocate to Florida on or before his
transfer date. Terra shall reimburse Foster for his moving expenses from Sioux
City to Florida. Foster shall participate in Terra's 1993 Executive Incentive
Plan.
Beginning on the transfer date through December 31, 1993, Foster shall
work on projects as designated by Terra's CEO and be paid at a rate of fifty
percent (50%) of Foster's January 1, 1993 salary. Foster shall maintain Terra
benefits as a full-time employee through December 31, 1993.
Foster shall have until December 31, 1996 to exercise all stock
options granted to him under the 1983 Stock Option Plan and 1987 Stock
Incentive Plan; except that the stock options granted August 5, 1986 must be
exercised not later than August 5, 1996; the stock options granted Foster
August 8, 1985 must be exercised not later than August 8, 1995; the stock
options granted Foster August 9, 1984 must be exercised not later than August
9, 1994; and the stock options granted Foster November 10, 1983 must be
exercised not later than November 10, 1993.
Foster shall retire from Terra, its subsidiaries and affiliates, on
December 31, 1993, and shall cease the benefits of an active employee on that
date. Beginning January 1, 1994, Foster shall become an independent consultant
of Terra according to the terms and conditions stated below.
<PAGE> 2
CONSULTING
2. Appointment. Terra hereby retains Foster, as of January 1, 1994,
to provide marketing and consulting services as specified from time to time by
Terra's President and Chief Executive Officer ("CEO"). Foster's appointment
shall terminate on December 31, 1994 unless extended by the parties.
Unless specifically authorized in writing by Terra's CEO, Foster shall
have no authority to enter into any agreements of any kind on Terra's behalf
and shall not hold himself out as having such authority. Foster shall
indemnify Terra for any claims, obligations or damages that Terra pays or
becomes obliged to pay arising from any agreements entered into by Foster,
whether written or oral, on behalf, or for the benefit of, Terra, other than
those specifically authorized as set forth in the preceding sentence. Foster
shall have no authority to spend, or commit to spend, funds on behalf of Terra.
Terra's CEO or CEO's designee will determine and communicate to Foster all work
priorities. Foster shall report to Terra's CEO or his designee.
3. Relationship to Terra. In undertaking work described in Section
2 hereof, Foster shall not, as of January 1, 1994, be considered for any
purposes an employee of Terra, its subsidiaries, or affiliated corporations.
Foster agrees that he shall not hold himself out as an employee or officer of
Terra, its subsidiaries, or affiliated corporations, to any person or entity.
Foster agrees to accept exclusive liability for payment of any and all payroll
taxes or contributions for unemployment insurance measured by the remuneration
paid by Terra after January 1, 1994 under this Agreement. The parties agree
that it is their intent, through this Agreement, to establish a relationship of
client-independent contractor, and not that of employer-employee. The parties
agree to and do hereby waive for themselves, which waiver shall be binding on
their successors, heirs and assigns, the right to make any claim in any form,
that this Agreement establishes an employer-employee relationship. The parties
agree that by Terra's execution of this Agreement, Terra in no way adopts
liability or responsibility for any action taken by Foster outside the term or
scope of this Agreement.
4. Consulting Fee. Beginning January 1, 1994, Foster agrees to work
on projects as assigned by Terra's CEO or his designee. In return, Terra
hereby agrees to compensate Foster at a rate of $375 per each half day of work.
Total hours worked shall be subject to approval in advance by Terra's
CEO or his designee. Foster shall submit a bill to Terra's CEO by the last day
of each calendar month setting forth all hours worked. Foster's total
compensation shall be tendered by Terra to Foster on the 15th day of the
following month, by negotiable instrument.
5. Travel Approval and Expenses. All travel or other expenses
undertaken by Foster pursuant to this Agreement must be authorized in advance
by Terra. Terra agrees to reimburse Foster for all reasonable expenses
incurred by Foster. Terra's Administration Policy Manual shall govern all
aspects of Foster's undertaking and reimbursement of travel expenses.
6. Performance of Services for Other Persons. During the term of
this agreement, Foster shall not consult or work for other persons, companies
or organizations whose businesses significantly compete with Terra. For
purposes of this section, companies or organizations that are small relative to
Terra or who do not derive a major portion of their income from the sale
2
<PAGE> 3
or development of agricultural chemicals shall be deemed not to significantly
compete with Terra. Foster shall advise Terra in writing of the name of each
person or organization for whom he proposes to perform services during the term
of this Agreement.
GENERAL
7. Term. This agreement shall commence on the 1st day of January,
1993, and shall continue until December 31, 1994. Foster's confidentiality
agreement set forth in Section 9 is a significant consideration for Terra
entering into this Agreement and shall survive termination of this Agreement.
8. Notices. All notices under this Agreement shall be addressed as
follows, or to such other addresses designated by the parties.
To Terra: President and Chief Executive Officer
Terra Industries, Inc.
600 Fourth Street
Sioux City, Iowa 51101
To Foster: Mr. Paul D. Foster
4020 Galt Ocean Mile
Apt. 604
Ft. Lauderdale, FL 33308
CONFIDENTIALITY
9. Confidentiality.
a. Foster acknowledges that during his employment with Terra he
has seen, worked with, and had access to information relating to products owned
or developed by Terra and its subsidiaries, label information, and other
information relating to Terra's business not available to the general public
("Confidential Information"). The term "Confidential Information" shall
include only information relating specifically to Terra's products or business
not available to the general public and shall not include general,
publicly-available information it being the intent of the parties that Foster
may provide consulting services to third parties, so long as Foster does not
disclose Confidential Information. Foster certifies that upon termination of
his employment with Terra (December 31, 1993) he will take no papers, records,
documents or tangible records of any kind containing or referring to
Confidential Information.
b. Foster agrees he shall not use the Confidential Information
or his knowledge of Confidential Information for any purpose other than his
employment with Terra or services provided to Terra under this Agreement, nor
shall he disclose any Confidential Information to any third party or use or
disclose the Confidential Information or his knowledge thereof in working for
future clients or employers.
3
<PAGE> 4
c. Foster agrees that at the conclusion of this Agreement, he
shall promptly return all of the Confidential Information which may be in
writing or other concrete form, including any drafts, working documents or
reports containing Confidential Information.
In recognition whereof, the parties hereto do affix their
signatures, on this day of May, 1993.
TERRA INTERNATIONAL, INC. PAUL D. FOSTER
/s/ Burton M. Joyce /s/ Paul D. Foster
- ------------------------------------ ------------------------------------
May 13, 1993 May 13, 1993
- ------------------------------------ ------------------------------------
Date Date
4
<PAGE> 1
Exhibit 10.1.13
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") made and entered into this
30th day of December, 1993, by and between PAUL D. FOSTER (hereinafter
"Foster"), and TERRA INTERNATIONAL, INC. (hereinafter "Terra"), a Delaware
corporation, having offices at 600 Fourth Street, Sioux City, IA 51101.
1. Appointment. Terra hereby retains Foster, as of January 1,
1994, to provide marketing and consulting services as specified from time to
time by Terra's President and Chief Executive Officer ("CEO"). Foster's
appointment shall terminate on December 31, 1994.
Unless specifically authorized in writing by Terra's CEO, Foster shall
have no authority to enter into any agreements of any kind on Terra's behalf
and shall not hold himself out as having such authority. Foster shall
indemnify Terra for any claims, obligations or damages that Terra pays or
becomes obliged to pay arising from any agreements entered into by Foster,
whether written or oral, on behalf, or for the benefit of, Terra, other than
those specifically authorized as set forth in the preceding sentence. Foster
shall have no authority to spend, or commit to spend, funds on behalf of Terra.
Terra's CEO or CEO's designee will determine and communicate to Foster all work
priorities. Foster shall report to Terra's CEO or his designee.
2. Relationship to Terra. Foster shall not be considered for any
purposes an employee of Terra, its subsidiaries, or affiliated corporations.
Foster agrees that he shall not hold himself out as an employee or officer of
Terra, its subsidiaries, or affiliated corporations, to any person or entity.
Foster agrees to accept exclusive liability for payment of any and all payroll
taxes or contributions for unemployment insurance measured by the remuneration
paid by Terra after January 1, 1994 under this Agreement. The parties agree
that it is their intent, through this Agreement, to establish a relationship of
client-independent contractor, and not that of employer-employee.
3. Consulting Fee. Beginning January 1, 1994, Foster agrees to
provide up to 50 days of consulting services as assigned by Terra's CEO or his
designee. In return, shall compensate Foster $50,000 (Fifty Thousand Dollars),
as follows:
Terra shall pay Foster $4,166.67 monthly for each
1994 calendar month.
All days in excess of 50 worked by Foster under this
Agreement shall be compensated at the rate of $1,000 (One
Thousand Dollars) per day, and shall be reimbursed during
December, 1994.
Total days worked shall be subject to approval in
advance by Terra's CEO or his designee. Foster shall submit a
recap to Terra's CEO by the last day of each quarter setting
forth all days worked.
4. Travel Approval and Expenses. All travel or other expenses
undertaken by Foster pursuant to this Agreement must be authorized in advance
by Terra. Terra agrees to reimburse Foster for all reasonable expenses
incurred by Foster. Terra's Administrative Policy Manual shall govern all
aspects of Foster's undertaking and reimbursement of travel expenses.
<PAGE> 2
5. Performance of Services for Other Persons. During the term of
this agreement, Foster shall not consult or work for other persons, companies
or organizations whose businesses significantly compete with Terra. For
purposes of this section, companies or organizations that are small relative to
Terra or who do not derive a major portion of their income from the sale or
development of agricultural chemicals shall be deemed not to significantly
compete with Terra. Foster shall advise Terra in writing of the name of each
person or organization for whom he proposes to perform services during the term
of this Agreement.
6. Term. This Agreement shall commence on the 1st day of
January, 1994, and shall continue until December 31, 1994. Foster's
confidentiality agreement set forth in Section 7 is a significant consideration
for Terra entering into this Agreement and shall survive termination of this
Agreement.
7. Confidentiality.
a. Foster acknowledges that he has seen, worked with,
and had access to information relating to products owned or developed by Terra
and its subsidiaries, label information, and other information relating to
Terra's business not available to the general public ("Confidential
Information"). The term "Confidential Information" shall include only
information relating specifically to Terra's products or business not available
to the general public and shall not include general, publicly-available
information it being the intent of the parties that Foster may provide
consulting services to third parties, so long as Foster does not disclose
Confidential Information.
b. Foster agrees he shall not use the Confidential
Information or his knowledge of Confidential Information for any purpose other
than his employment with Terra or services provided to Terra under this
Agreement, nor shall he disclose any Confidential Information to any third
party or use or disclose the Confidential Information or his knowledge thereof
in working for future clients or employers.
c. Foster agrees that at the conclusion of this
Agreement, he shall promptly return all of the Confidential Information which
may be in writing or other concrete form, including any drafts, working
documents or reports containing Confidential Information.
8. Other. This Agreement supersedes the agreement between Foster
and Terra dated May 13, 1993 to the extent, and only to the extent, that the
May 13, 1993 agreement relates to consulting services to be provided by Foster.
However, all provisions of the May 13, 1994 agreement not related to consulting
by Foster shall continue and shall not be affected by this Agreement.
In recognition whereof, the parties hereto do affix their
signatures, on this 30th day of December, 1993.
TERRA INTERNATIONAL, INC. PAUL D. FOSTER
/s/ Burton M. Joyce /s/ Paul D. Foster
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
Date Date
2
<PAGE> 1
Exhibit 10.1.14
TERRA INDUSTRIES, INC.
TERRA INTERNATIONAL, INC.
INCENTIVE AWARD PROGRAM
OFFICER & KEY EXECUTIVE
1994
I. Purpose of the Plan
The purpose of this Incentive Award Program is to motivate
officers and key executives of the company toward achievement
of planned annual goals and improved results.
II. Eligibility in the Plan
Participation in this Incentive Award Program is limited to
officers and key executives of Terra Industries Inc. and
Terra International, Inc., where participation is expected to
contribute directly to the company's performance and success
in accomplishment of its planned goals.
III. Special Provisions and Considerations
All incentive plan years coincide with the company's fiscal
year. The incentive award for officers and key executives
will be based on goals set at the discretion of the President.
The importance of the officer and key executive level
financial and business planning goals will be reflected in the
weighting of each identified individual goal by a percentage
relative to one hundred percent (100%).
The President will be responsible for the development of the
officer and key executive goals and will reach mutual
agreement with each officer and key executive on the full set
of incentive goals as soon as possible in the fiscal year.
Each officer and key executive must execute a goals document
that is approved and signed by the President.
<PAGE> 2
-2-
IV. Funding the Officer and Key Executive Incentive Award Program
The funding for the officer and key executive incentive award
pool is based on the accomplishment of Terra Industries Inc.
approved income and return-on-equity objectives which will
fund the incentive pool. The income goal will receive sixty
percent (60%) weight and the return-on-equity goal will
receive forty percent (40%) weight.
V. Basis of the Incentive Award
The basis of each officer's and key executive's individual
incentive award will be base salary as of December 31, 1994.
The President has established a set percent of base salary for
each officer's and key executive's target incentive award.
The maximum incentive award to any officer or key executive
will be set at two (2) times that officer's or key executive's
targeted award. There is no incentive payout for goal yield
of less than seventy-five percent (75%). The President, at
his discretion, may increase the incentive pool by an
additional twenty percent (20%) to award
outstanding/exceptional individual contributions to company
performance. The President may also choose to award less than
the full amount of the pool.
VI. Review, Revision and Modification of the Goals
Under normal business conditions, the goals will not be
altered or revised once established for the year. Unexpected
and unforeseen developments during the course of the incentive
award year may prompt re-examination of an officer's or key
executive's established goals. It is the responsibility of
each officer and key executive to note the conditions of
change which would prompt such a review and take timely
action. Such action would include review with the President
for need of revision of an established goal as soon as
possible after the detected change. The change(s) is subject
to final approval of the President.
<PAGE> 3
-3-
VII. Payment of Award
The incentive award will be paid each officer and key
executive in cash as soon as possible after the close of the
fiscal year and after approval of the President's
recommendations by the Personnel Committee of the Board of
Directors.
To be eligible for full payment, the officer or key executive
must have been in the employ of Terra Industries Inc. or one
(1) of its subsidiaries January 1 of the incentive plan year
and must be actively employed by the corporation on the date
the incentive award is paid.
VIII. Special Provision
A newly elected officer or key executive will participate in
the officer's and key executive's incentive program in
proportion to the number of full months worked as an officer
or key executive during the incentive program year.
An officer or key executive who retires, becomes permanently
disabled or dies shall cease to participate in the officer's
and key executive's incentive program as of the end of the
month coincident with retirement, disability or death. The
proportionate incentive award will be paid as soon as possible
after the close of the fiscal year. While it is the intent of
the company to make awards under this plan and to continue the
plan from year to year, it reserves the right to amend or
terminate the plan entirely at its discretion.
<PAGE> 1
Exhibit 10.6
LEASE
Dated as of April 8, 1993,
Between
W. PATRICK MORONEY,
Lessor
and
TERRA INTERNATIONAL (CANADA) INC.,
Lessee
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Lease)
<TABLE>
<CAPTION>
Paragraph Page
<S> <C>
1. Lease of Property; Title and Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Use; Quiet Enjoyment; Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Net Lease; Non-Terminability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. Taxes and Assessments; Compliance with Law; Certain Agreements . . . . . . . . . . . . . . . . . . 7
7. Matters of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. Certain Zoning Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. Maintenance and Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. Additional Improvements; Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. Lessee's Right to Contest Real Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12. Expropriation and Casualty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
13. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
14. Lessee Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15. Procedure Upon Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15A. Lessee's Option to Purchase Urea Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
17. Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
18. Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18A. Unwind Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
19. Default and Remedies Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
20. Additional Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
21. Notices, Demands, and Other Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Paragraph Page
<S> <C>
22. Status Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
23. Surrender, Redelivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
24. Separability; Binding Effect; Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 34
25. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
26. Lessor's Right to Cure Lessee's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
27. Lessee's Options Upon Expiration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
28. Limitations on Amounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
29. Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
30. Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
31. [Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
32. Registration of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
33. Partial Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
34. No Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
35. Obligations as Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
36. Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
37. Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
38. Unavoidable Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
Schedule A - Legal Description
Schedule B - Fixed Rent and Additional Rent Schedule
Schedule C - Termination Value
Schedule D - Joint Election Allocation
ii
<PAGE> 4
LEASE dated as of April 8, 1993 (this "Lease"), between W. PATRICK
MORONEY (the "Lessor") not in his individual capacity but solely as Trustee
having an address at 40 West Glen Crescent, Etobicoke, Ontario, M9B 4R1 and
TERRA INTERNATIONAL (CANADA) INC., a corporation governed by the laws of Ontario
(the "Lessee"), having an address at 252 Pall Mall Street, London, Ontario, N6A
5P6.
Preliminary Statement
The Lessor has acquired title to the Property (as defined below) and
wishes to lease the Property to the Lessee and the Lessee wishes to lease the
same from the Lessor. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed thereto in the InterParty
Agreement dated as of the date hereof by and among the Lessor, the Lessee, Terra
International, Inc., a corporation organized under the laws of Delaware,
Montreal Trust Company of Canada, a trust company organized under the laws of
Canada, as Paying Agent and the financial institutions named therein, as the
same may be amended, modified or supplemented from time to time (the "InterParty
Agreement").
NOW, THEREFORE, the parties do hereby covenant and agree as follows:
1. Lease of Property; Title and Condition. (a) In consideration of
the rents and covenants herein stipulated to be paid and performed by the Lessee
and upon the terms and conditions herein specified, the Lessor hereby leases to
Lessee the parcel of land, more particularly described on Schedule A hereto,
together with all easements, rights and appurtenances relating thereto (herein
called the "Parcel") and all structures, buildings and other improvements now or
hereafter located thereon and affixed thereto, including, without limitation,
the Facility (collectively, the "Improvements"), and the Lessee hereby leases
from the Lessor the Improvements and the Parcel. The Improvements and the
Parcel are sometimes herein collectively called the "Property".
(b) THE LESSEE SHALL TAKE POSSESSION OF THE PROPERTY ON AN "AS IS"
BASIS. THE LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PROPERTY OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION
THEREOF, OR THE LOCATION, USE, DESCRIPTION, DESIGN, MERCHANTABILITY, FITNESS FOR
USE FOR ANY PARTICULAR PURPOSE, CONDITION, OR DURABILITY THEREOF OR AS TO THE
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, OR AS TO THE LESSOR'S TITLE
THERETO OR OWNERSHIP THEREOF OR OTHERWISE IT BEING AGREED THAT ALL RISKS
INCIDENT THERETO ARE TO BE BORNE BY THE LESSEE. IN THE EVENT OF ANY DEFECT OR
DEFICIENCY OF ANY NATURE IN THE
<PAGE> 5
PROPERTY, OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF,
WHETHER PATENT OR LATENT, THE LESSOR SHALL HAVE NO RESPONSIBILITY OR LIABILITY
WITH RESPECT THERETO. THE PROVISIONS OF THIS SUBPARAGRAPH 1(b) HAVE BEEN
NEGOTIATED BY THE PARTIES HERETO AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND
NEGATION OF ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, BY THE LESSOR WITH
RESPECT TO THE PROPERTY OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION
THEREOF, WHETHER ARISING PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT. LESSEE
ACKNOWLEDGES THE PERMITTED ENCUMBRANCES (AS DEFINED IN THE INTERPARTY AGREEMENT)
AND AGREES TO BE BOUND BY THE SAME. THE PROPERTY IS LEASED TO THE LESSEE
SUBJECT TO (A) ALL APPLICABLE LEGAL REQUIREMENTS AND ALL INSURANCE REQUIREMENTS
NOW OR HEREAFTER IN EFFECT; AND (B) ALL PERMITTED ENCUMBRANCES. THE LESSEE HAS
EXAMINED THE PROPERTY AND TITLE THERETO AND HAS FOUND THE SAME SATISFACTORY FOR
ALL PURPOSES OF THIS LEASE.
2. Use; Quiet Enjoyment; Hazardous Materials. (a) The Lessee shall
use the Property solely as an anhydrous ammonia production and upgrading
facility (and for the production of by-products and co-products related
thereto), storage facilities and related business offices (or any other use
lawfully permitted and to which the Lessor has consented) in a first class and
reputable manner. The Lessee shall not in any event use or allow the use of the
Property, or any part thereof, for any other purpose without the prior written
consent of the Lessor. The Lessee covenants that it will cause the Improvements
at all times to be located on the Parcel.
(b) Subject to the terms of this Lease (and unless a Default, an Event
of Default or an Unwind Event has occurred and is continuing), the Lessee is
entitled to peaceably and quietly hold and enjoy the Property for the Lessee
without interruption by the Lessor, or any other person lawfully claiming by,
through or under the Lessor; provided, however, that the Lessor and the
Purchasers and their respective successors, assigns, representatives, agents,
employees, consultants and contractors (including, without limitation, the
Environmental Consultant) (the "Lessor Group"), may, at all reasonable times
upon reasonable notice to the Lessee enter upon and examine the Property or any
portion thereof and the Lessee's books and records relating to the Property or
such portion thereof and its operation therefrom and perform such tests and
procedures to conduct an environmental audit on the Property as the Lessor Group
may require except that if the Lessor acting reasonably has reason to believe
that a Default, an Event of Default or an Unwind Event has occurred, any
reasonable entrance, examination and testing may be conducted at any time
without notice. Any such entrance and examination pursuant to this paragraph
2(b) shall not constitute a breach of the Lessor's covenant for quiet enjoyment.
The Lessor shall use reasonable efforts to cause
2
<PAGE> 6
any member of the Lessor Group to use reasonable efforts when exercising
rights under this subparagraph (b) to avoid, or where unavoidable, to minimize
any interference or disruption of business operations being carried out on the
Property.
(c) Lessor, at Lessee's sole cost and expense, shall cooperate or
assist with Lessee's efforts to obtain all services, Permits and contracts
necessary and useful for the lawful operation and maintenance of the Property
for the intended purposes thereof and the Lessor shall execute such documents or
instruments as may be reasonably necessary for such purposes. Lessee covenants
that it shall at its own cost and expense, obtain and maintain during the Term,
all Permits required in order to permit the lawful occupation and operation of
the Property for the intended purposes hereof. Lessee further covenants that it
shall at its own cost and expense on behalf of and in the name of the Lessor,
apply for, obtain and maintain all Permits required in order to permit the
lawful ownership of the Property by the Lessor.
(d) Any failure by the Lessor or such other Person referred to in
paragraph 2(b) to comply with the foregoing provisions of this paragraph 2 or
any other provision of this Lease shall not give the Lessee any right to cancel
or terminate this Lease, or to abate, reduce or make deduction from or offset
against any Fixed Rent, Additional Rent or other sum payable under this Lease,
and shall not relieve Lessee from its obligation to perform or observe any other
covenant, agreement or obligation hereunder.
(e) The Lessee shall, and it shall require and ensure that any and all
employees, contractors, subcontractors, agents, representatives, affiliates,
consultants, permitted assignees and sublessees, occupants and any and all other
Persons, (i) comply with all Environmental Laws applicable to operations on the
Property, and (ii) manufacture, distribute, treat, use, employ, process, emit,
generate, store, handle, transport, dispose of and/or arrange for the disposal
of any and all Hazardous Materials in, on, under or about or, directly or
indirectly, related to or in connection with the Property or any part thereof in
compliance with all applicable Environmental Laws and in a manner consistent
with prudent industry practice and which does not pose a significant risk to
human health and safety (including occupational health and safety) or the
environment.
3. Term. The Property is leased for a term (the "Term") of four (4)
years commencing on April 8, 1993 and ending on April 8, 1997 (the "Expiration
Date"), or such earlier date as this Lease shall be terminated pursuant to any
provision hereof; provided however, this Lease may be extended for the Extended
Term pursuant and subject to paragraph 27(c) hereof or may be extended pursuant
to paragraph 15(b) hereof,
3
<PAGE> 7
in which event the definition of "Term" shall include the Extended Term and
such extension pursuant to paragraph 15(b).
4. Rent. (a) During the Term, Lessee shall pay to the Paying Agent on
behalf of the Lessor on each Payment Date Fixed Rent in the amounts determined
in accordance with Schedule B hereto. All payments of Fixed Rent hereunder
shall be allocated as to .326% to the Parcel and as to 99.674% to the
Improvements, respectively.
(b) All amounts that the Lessee is required to pay to the Lessor or the
Paying Agent pursuant to this Lease (other than Fixed Rent), including, but not
limited to, any and all amounts payable upon transfer or purchase of the
Property and every fine, penalty, interest and cost that may be added for
non-payment or late payment thereof, shall constitute "Additional Rent." Each
of Lessor and the Paying Agent shall give Lessee notice of any Additional Rent
due hereunder promptly after it has knowledge of such Additional Rent, and shall
use reasonable efforts to notify Lessee in advance of the due date and amount of
such Additional Rent; provided that failure to give such prompt notice shall not
relieve the Lessee of its obligation to pay such Additional Rent. In the event
that the Lessee shall pay Additional Rent in excess of amounts actually due and
payable to the Lessor, the excess shall, at the option of the Lessor, be
forthwith paid to the Lessee or be applied in payment of other amounts owing by
the Lessee or in reduction of future payments due under this Lease. In the
event that the Lessee shall pay Additional Rent in an amount less than the
actual amount due and payable to the Lessor, the Lessee shall forthwith upon
demand from the Lessor or the Paying Agent pay such deficiency. The Lessor and
the Lessee agree that all payments of Additional Rent in respect of a period
which extends beyond the Expiration Date or earlier termination of this Lease
shall be prorated.
(c) All amounts payable by the Lessee to the Lessor hereunder shall
bear interest at the Default Rate from the due date thereof until paid in full,
both before and after demand, default and judgment, with interest on overdue
interest at the same rate, and such interest shall be payable on demand.
(d) All amounts payable by the Lessee hereunder shall be paid in lawful
money of Canada and in immediately available funds by 10:00 A.M. (Toronto time)
on the date when due, unless any such due date is not a Business Day in which
case payment shall be due and payable on the next succeeding Business Day at the
Paying Agent's Office.
(e) The Lessee shall perform all of its obligations under this Lease at
its sole cost and expense and shall pay, when due and without notice or demand
(except as otherwise
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provided in this Lease), all amounts due hereunder. The Lessee agrees
to pay, or cause to be paid, on demand (i) all Impositions (subject to Lessee's
rights pursuant to paragraphs 11 and 18) and (ii) all charges, fees, costs and
expenses of the Lessor, the Purchasers, Lessor's counsel, the Paying Agent, the
Paying Agent's counsel, the Appraiser, the Environmental Consultant and Special
Counsel, in connection with the preparation, execution, delivery,
administration, performance, modification and amendment of this Lease and the
other Operative Documents and any other documents to be delivered in connection
herewith or therewith or in connection with or arising out of any refinancing or
refunding thereof, including, without limitation, the fees and expenses of
Trustee's Counsel and Special Counsel for the holders from time to time of the
Instruments with respect hereto or thereto, with respect to advising any of them
as to their respective rights and responsibilities hereunder or thereunder, and
all costs and expenses, if any (including, without limitation, legal fees and
expenses), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of any of the Operative Documents and such other
documents.
5. Net Lease; Non-Terminability. (a) The Lessee acknowledges and
agrees that it is intended that this Lease shall be a completely carefree and
triple net lease for the Lessor and that the Lessor shall not be responsible
during the Term for any costs, charges, expenses, payments and outlays of any
nature whatsoever arising from or relating to the Property, whether foreseen or
unforeseen and whether or not within the contemplation of the parties at the
commencement of the Term, so as to provide the Lessor an absolutely net rent,
free and clear of all deductions, compensation, abatement or set-off throughout
the Term. It is intended that the Lessee shall pay all costs, charges,
expenses, payments and outlays of any nature whatsoever arising from or relating
to the Property, whether foreseen or unforeseen, and whether or not within the
contemplation of the parties at the commencement of the Term. Except as
otherwise expressly provided in this Lease, and notwithstanding any present or
future Law to the contrary the Lease shall not terminate, nor shall the Lessee
be entitled to any abatement, reduction, set-off, counterclaim, defense or
deduction with respect to any Fixed Rent, Additional Rent or other sum payable
hereunder. Except as otherwise expressly provided in this Lease, the
obligations of the Lessee hereunder shall be absolute and unconditional and
shall not be affected by reason of: (i) any damage to or destruction of the
Property or any part thereof by any cause whatsoever (including, without
limitation, by fire, Casualty or act of God or enemy or any other force majeure
event); (ii) any Expropriation, including, without limitation, a temporary
Expropriation of the Property or any part thereof; (iii) any prohibition,
limitation, restriction
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<PAGE> 9
or prevention of the Lessee's use, occupancy or enjoyment of the
Property or any part thereof by any Person; (iv) any matter affecting title to
the Property or any part thereof; (v) any eviction of the Lessee from, or loss
of possession by the Lessee of, the Property or any part thereof, by reason of
title paramount or otherwise; (vi) any default by the Lessor hereunder or under
any other Operative Document or agreement; (vii) the invalidity or
unenforceability of any provision hereof or the impossibility or illegality of
performance by the Lessor or the Lessee or both; (viii) any action of any
federal, provincial or local governmental authority; or (ix) any other cause or
occurrence whatsoever, whether similar or dissimilar to the foregoing. The
parties intend that the obligations of the Lessee hereunder shall continue
unaffected unless such obligations shall have been modified or terminated
pursuant to an express provision of this Lease.
(b) The Lessee shall remain obliged under this Lease in accordance with
its terms and shall not take any action to terminate, rescind or avoid this
Lease, notwithstanding any bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding affecting the Lessor or any action with respect
to this Lease which may be taken by any trustee, receiver or liquidator or by
any court. Except as expressly permitted in this Lease, the Lessee waives all
rights to terminate or surrender this Lease, or to any abatement or deferment of
Fixed Rent, Additional Rent or other sums payable hereunder. The Lessee shall
remain obliged under this Lease in accordance with its terms and the Lessee
hereby waives any and all rights now or hereafter conferred by Law or otherwise
to modify or to avoid strict compliance with its obligations under this Lease.
All payments made by the Lessee to the Lessor or the Paying Agent hereunder as
required hereby shall be final and the Lessee shall not seek to recover any such
payment or any part thereof for any reason whatsoever, absent manifest error,
subject to any adjustment of Additional Rent permitted by this Lease.
(c) Lessee hereby acknowledges that parts of the Property are comprised
of the Easement Lands and are subject to the Easement Agreements. Lessee
covenants that it shall observe and perform all covenants and obligations on the
part of the Lessor to be observed and performed pursuant to the Easement
Agreements and Lessee shall indemnify and save harmless the Lessor, his
representatives and agents, from and against all claims, demands, actions,
suits, proceedings, fines, liabilities, costs and expenses of any nature or kind
whatsoever caused or arising, directly or indirectly, or related to the
performance or non-performance of the Lessor's obligations under the Easement
Agreements.
6. Taxes and Assessments; Compliance with Law; Certain Agreements. (a)
The Lessee shall pay or cause to be
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<PAGE> 10
paid, subject to paragraph 18, all Impositions when due and before any
fine, penalty, interest or cost may be added or any default may be claimed or
any termination or foreclosure or forfeiture procedures for nonpayment may be
commenced. If any Imposition may legally be paid in installments, such
Imposition may be so paid in installments; provided, however, that all such
installments which may be due from time to time shall be paid by the Lessee by,
on or before the Expiration Date or earlier termination of this Lease.
(b) The Lessee shall comply with, and cause the Property (and all
assignees and sublessees of any part of the Property) to comply with, all Legal
Requirements. "Legal Requirements" means (i) all Laws, including, without
limitation, all Environmental Laws, foreseen or unforeseen, ordinary or
extraordinary, or arising from any restriction registered on title to the
property record or otherwise, which now or at any time hereafter may be
applicable to the Lessor, as owner of the Property, the Lessee, as lessee
hereunder, the Property or any part thereof, or any of the adjoining sidewalks
or other property, or the ownership, construction, operation, mortgaging,
occupancy, possession, use, non-use or condition of the Property or any part
thereof; (ii) any other governmental rules, regulations, orders, directives and
determinations now or hereafter enacted, made, issued or promulgated, and
applicable to the Lessor, as owner of the Property, the Lessee, as lessee
hereunder, the Property or any part thereof, or any of the adjoining sidewalks
or other property, or the ownership, construction, operation, mortgaging,
occupancy, possession, use, non-use or condition of the Property or any part
thereof whether or not presently contemplated; and (iii) all agreements,
Permits, covenants, and restrictions applicable to the Property or any part
thereof or the ownership, construction, operation, mortgaging, occupancy,
possession, use, non-use or condition thereof.
(c) Lessee shall promptly, but in any case within five (5) Business
Days of the receipt thereof, forward to Lessor and the Paying Agent copies of
any written notices, orders, directives, complaints, claims, demands, or any
other communications received by Lessee relating to violations or alleged
violations of any Environmental Law or potential adverse actions in any way
involving environmental, health, or safety matters affecting the Property or any
part thereof in which the clean-up obligations or corrective action or the
liability under any Environmental Law could exceed $100,000. Lessee shall
promptly notify Lessor and the Paying Agent when it becomes aware of any spill,
discharge, deposit, emission, leak or any other release of any Hazardous
Material, whether or not such spill, discharge, deposit, emission, leak or other
release occurred prior to, on or after the date hereof, at, in, on, under or
from the Property or any part thereof or at, in, on, under or from any adjacent
property that is required
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<PAGE> 11
to be reported to any governmental authority or in respect of which the
clean-up obligations or corrective action or the liability under any
Environmental Law could exceed $100,000. Lessee shall promptly notify Lessor
and the Paying Agent when it becomes aware of any spill, discharge, deposit,
emission, leak or other release of any Hazardous Material, whether or not such
spill, discharge, deposit, emission, leak or other release occurred prior to, on
or after the date hereof at, in, on, under or from any real property adjoining
or in the vicinity of the Property that could impair the value of the Property.
Irrespective of whether Lessee is to give notice of any of the matters set forth
in this paragraph 6(c), Lessee shall immediately initiate, at its sole cost and
expense, such actions as may be necessary to comply in all respects with all
applicable Environmental Laws and to alleviate any significant risk to human
health or the environment. Once Lessee commences such actions, Lessee shall
thereafter diligently and expeditiously proceed to comply in a timely manner
with all Environmental Laws and to eliminate any significant risk to human
health or the environment and shall, at the request of the Lessor, the Paying
Agent or any Purchaser, give periodic progress reports on its compliance efforts
and actions.
(d) Tax Matters. (i) The Lessor and the Lessee hereby agree to
jointly elect under subsection 16.1(1) of the Income Tax Act (Canada), in the
prescribed form and within the prescribed time for the purposes of the Income
Tax Act (Canada) in respect of such part of the Property in respect of which
such an election may be made. For the purpose of such election, the Lessor and
the Lessee hereby agree that the fair market value to be assigned to the items
contained in the various classes of depreciable property subject to the election
is as outlined in the attached Schedule D. The Lessee and the Lessor covenant
and agree to join in or make such other joint elections under the Income Tax Act
(Canada) as the other may from time to time reasonably require in order to
protect its economic interests under this Lease; provided, however, that the
Lessor or the Lessee may refuse to join in or make any other joint election if
such other election would be to the detriment of its economic interests under
this Lease.
(ii) The Lessor is not a non-resident of Canada for the
purposes of the Income Tax Act (Canada) and during the Term will be a
resident of Canada for purposes of the Income Tax Act (Canada).
(iii) The Trust is and will remain throughout the Term a
registrant under Subdivision d of Division V of Part IX of the Excise
Tax Act (Canada).
7. Matters of Title. (a) The Lessee shall not create or permit to be
created or exist, and shall promptly
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remove and discharge, any Lien upon this Lease or the Property or any part
thereof or interest therein, or upon any Fixed Rent, Additional Rent or other
sum payable hereunder, which Lien arises for any reason, including, without
limitation, any and all Liens which arise out of the ownership, use, condition,
occupancy, construction, possession, repair or rebuilding of the Property or
any part thereof or by reason of labor or materials furnished or claimed to
have been furnished to the Lessee or for the Property or any part thereof, but
excluding Permitted Encumbrances.
(b) Nothing contained in this Lease shall be considered as
constituting the consent or request of the Lessor, express or implied, to or for
the performance by any contractor, laborer, materialman, or vendor of any labor
or services or for the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to the Property or any part
thereof. NOTICE IS HEREBY GIVEN THAT THE LESSOR IS NOT AND SHALL NOT BE LIABLE
FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE,
OR TO ANYONE HOLDING OR POSSESSING THE PROPERTY OR ANY PART THEREOF THROUGH OR
UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER SIMILAR STATUTORY LIENS FOR
ANY LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE PROPERTY OR ANY
PART THEREOF.
(c) The Lessor shall not create any Lien upon this Lease or the
Property or any part thereof except (i) Permitted Encumbrances, (ii) those Liens
created by this Lease and the Declaration, and (iii) in respect of any action
taken by the Lessor or the holders from time to time of the Instruments in
connection with the enforcement of any rights under any Operative Document.
(d) The Lessor may at any time, without the consent of the Lessee,
transfer, sell, assign or otherwise dispose of its interest in the Property or
any part thereof (subject always to this Lease and all rights of the Lessee
hereunder) or its right, title and interest in this Lease provided that, unless
such transfer is made in order to enforce any rights of the Lessor or the
Holders from time to time of the Instruments under any Operative Document or
such transfer is the result of the Lessee's purchase of the Property pursuant to
paragraphs 14 or 27 hereof (or pursuant to the Lessor's rights to sell or
dispose of the Property if the Lessee does not purchase the Property pursuant to
paragraph 27 hereof), such transfer shall be made as part of a transfer of the
Lessor's interest in all of the Operative Documents in accordance with the terms
of the InterParty Agreement and prior to completion of the transfer, the
transferee shall covenant with the Lessee to assume all of the Lessor's
obligations hereunder and under the other Operative Documents, including, but
not limited to, a covenant that (i) the
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transferee is not a non-resident of Canada for the purposes of the Income Tax
Act (Canada) and during the Term will be a resident of Canada for
the purposes of the Income Tax Act (Canada) and (ii) the Trust is and will
remain throughout the Term a registrant under Subdivision d of
Division V of Part IX of the Excise Tax Act (Canada).
8. Certain Zoning Matters. Lessor agrees that Lessee during the Term
shall have the exclusive right (so long as no Default, Event of Default or
Unwind Event has occurred and is continuing) to secure subdivision approvals,
site plan approvals, annexation or de-annexation approvals, zoning amendments or
minor variances, and Permits necessary or desirable for the development, use,
operation, maintenance or condition of the Property or any part thereof;
provided that the fair market value or use of the Property is not lessened
thereby. Lessor agrees to execute such documents and take all other actions as
shall be reasonably necessary, and otherwise cooperate with Lessee, in
connection with the matters described above, including without limitation, such
conveyances, consents, releases and other assurances as may be reasonably
required by the Lessee to transfer to any governmental agency or authority, or
any utility, such part or parts of the Property, or any easements in respect
thereof as may be required for municipal, governmental or public utility
purposes, such as roads, road widenings, walkways, one-foot reserves, utility
easements and other like purposes; provided that the fair market value or use of
the Property is not lessened thereby; provided, however, that all costs and
expenses incurred by the Lessor in connection therewith shall be borne by Lessee
and that Lessor shall not be required to execute any documents which would, in
the opinion of the Lessor, adversely affect the value or use of the Property or
otherwise adversely affect the transactions contemplated by the Operative
Documents or the interests of the Lessor or the holders from time to time of the
Instruments.
9. Maintenance and Repair. (a) The Lessee, at its own expense, will
manage and maintain the Property in good working order and in good mechanical
condition and repair, in accordance with prudent industry practice and in a
manner consistent with that of other similar properties owned or operated by it
or its Affiliates, and will take all action, and will make all changes and
repairs, structural and nonstructural, foreseen and unforeseen, ordinary and
extraordinary, capital and non-capital, which may be required to maintain the
Property as aforesaid, or which may be required pursuant to any Legal
Requirement or Insurance Requirement at any time in effect. Lessee shall, in
accordance with prudent industry practice, repair or replace each item
comprising part of the Improvements that shall have become worn out, obsolete,
damaged or inoperative in whole or in part; provided, however, that the fair
market value of the
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Property shall not be lessened thereby and that such replacements shall be of a
type currently used in the industry for the same purpose and
having a useful life at least as long as that of the Improvements repaired or
replaced (prior to obsolescence, loss or damage and the like).
All repairs, replacements and rebuilding by the Lessee hereunder shall
immediately become and shall remain part of the Property of the Lessor,
subject to this Lease. The Lessor shall not be required to, and Lessee hereby
waives any right to require the Lessor to, manage, maintain,
replace, repair or rebuild the Property or any part thereof and Lessor shall
not be responsible for paying the cost of such management,
maintenance, replacements, repairs or rebuilding and the Lessee waives any and
all rights it may now or hereafter have to make any repairs or
replacements at the expense of the Lessor pursuant to any Legal Requirement or
Insurance Requirement, at any time in effect or otherwise.
(b) In the event that all or any part of the Improvements shall
encroach upon any property or right-of-way adjoining or adjacent to the Parcel
or any part thereof, or shall violate any agreements or conditions affecting the
Property or any part thereof, or shall obstruct any easement or right-of-way to
which the Property or any part thereof may be subject, then the Lessee shall, at
its sole cost and expense, either (i) contest such matter pursuant to paragraph
18 hereof, (ii) obtain valid and effective Permits for or consents to such
encroachments and/or violations (without any liability to Lessor or the holders
of the Instruments for which such parties are not indemnified by the Lessee) or
waivers or settlements of all claims, liabilities and damages resulting
therefrom, or (iii) make such changes, including alteration or removal, to the
Improvements and take such other action as shall be reasonably necessary to
rectify such encroachments, violations, hindrances, obstructions or impairments,
subject to the Lessor's consent if and to the extent required by paragraph 10(a)
hereof.
(c) The Lessee shall give the Lessor and the Paying Agent at least ten
(10) Business Days' notice prior to any scheduled maintenance or reconditioning
which requires shutdown of operations of the anhydrous ammonia production
facility described on Schedule 3 to the InterParty Agreement for a period of
time in excess of five (5) Business Days.
10. Additional Improvements; Removal. (a) At any time, so long as no
Default, Event of Default or Unwind Event shall have occurred, the Lessee may,
at its own expense, make Additional Improvements to the Property or any part
thereof; provided, however, that (i) the fair market value of the Property prior
to the construction of the Additional Improvements shall not be lessened
thereby; (ii) such Additional Improvements shall not diminish the capacity,
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<PAGE> 15
efficiency or useful life of the Improvements which exist prior to the
construction of the Additional Improvements; and (iii) such work shall
be completed in a good and workmanlike manner free and clear of any Liens for
labor, services or materials and in compliance with all
applicable Legal Requirements and Insurance Requirements. Nothing in this
paragraph 10(a) shall prevent the Lessee from making whatever
changes may be required by Legal Requirements or Insurance Requirements or from
proceeding with the Water Separation Project.
(b) The Lessee shall be permitted at any time during, or upon the
expiration or termination of, the Term, and at its sole cost and expense, to
remove or demolish any Additional Improvements to the Property in accordance
with prudent industry practices; provided, however, that, any such removal shall
not (i) impair the intended use or reduce the fair market value of the Property
or any part thereof below its fair market value immediately prior to the
construction of the Additional Improvements (ii) diminish the capacity,
efficiency or useful life of the Improvements or any part thereof below the
capacity, efficiency or useful life as of the commencement of the Term; or (iii)
cause a violation of any Legal Requirement or Insurance Requirement or
significantly increase any risk of liability under any Environmental Law or any
risk to human health or the environment. Any damage to the Property or any part
thereof caused by such removal or demolition shall promptly be repaired by the
Lessee and the Property or any part thereof shall be restored to its condition
(or the reasonable equivalent thereof) as it existed immediately prior to the
construction of such removed Additional Improvements, at the Lessee's sole cost
and expense. The Lessee may place upon the Parcel or any part thereof any
inventory, fixtures, machinery, equipment or other property belonging to the
Lessee or third parties and remove the same at any time during the Term and at
the request of the Lessor shall remove the same at the expiration or termination
hereof unless the Lessee shall have purchased the Property pursuant to the terms
hereof; provided that any damage to the Property or any part thereof caused by
such removal shall promptly be repaired by the Lessee, and the Property or such
part thereof restored to its condition (or the equivalent thereof) as it existed
immediately prior to the placement of any such property upon the Parcel, all at
the Lessee's sole cost and expense.
(c) The Lessee shall notify the Lessor and the Paying Agent of any
Additional Improvements, the cost of which is anticipated to exceed in the
aggregate $1,000,000 in any calendar year with respect to the Property, which
notice shall include a reasonably detailed description of the work that will be
done. All Additional Improvements shall become and remain part of the Property
of the Lessor and shall be subject
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to this Lease, unless and until removed by the Lessee in accordance with
paragraph 10(b).
11. Lessee's Right to Contest Real Property Taxes. The Lessee, at its
own cost and expense and in compliance with paragraph 18, shall have the sole
right, at any time, to seek a reduction in the assessed valuation of the
Property or any part thereof or to contest any real property taxes for the
Property or any part thereof. Lessor shall not be required to join in any
proceeding or contest brought by Lessee unless the provisions of any Legal
Requirement require that the proceeding or contest be brought by or in the name
of the owner of the Property. In that case Lessor shall join in the proceeding
or contest or permit it to be brought in Lessor's name as long as Lessee
indemnifies the Lessor for any and all costs and expenses incurred by Lessor in
connection therewith. Lessee, on a final non-appealable determination of the
proceeding or contest, shall immediately pay, discharge and satisfy any decision
or judgment rendered, together with all costs, interest, additions to tax and
penalties incidental to the decision or judgment.
12. Expropriation and Casualty. (a) General. The Lessee hereby
irrevocably assigns to the Lessor any award or compensation or insurance
proceeds (other than general public liability insurance proceeds and business
interruption insurance proceeds) or other payment (including, without
limitation, any indemnity payments payable by the Seller pursuant to the Asset
and Share Purchase Agreement and the Assignment Agreement as the result of any
damage to or destruction of, or any other diminution of the value of, the
Property or any part thereof) to which the Lessee may become entitled by reason
of its interest in the Property or any part thereof if (i) the Property or any
part thereof is damaged or destroyed by fire or other casualty (each, a
"Casualty") or (ii) the use, occupancy or title of the Property or any part
thereof is taken or requisitioned or sold in, or on account of any actual or
threatened condemnation, expropriation or eminent domain proceedings, or other
action by any Person having the power of expropriation (each, an
"Expropriation"). Such awards, compensation, insurance proceeds or other
amounts paid in connection with any such Expropriation or Casualty, as the case
may be, are hereinafter collectively called the "Proceeds". The Lessor and the
Lessee covenant that if any Expropriation Proceeding shall be commenced, they
shall cooperate in order to obtain the maximum expropriation award to which each
is entitled at law, and subject to the terms of this Lease, the respective
rights of the Lessor and the Lessee shall be governed by the provisions of the
Expropriation Act (Ontario); provided, however, that nothing in this sentence
shall be interpreted as affecting the Lessee's obligation to pay the full Offer
Purchase Price for the Property when required pursuant to paragraph 12(b)
hereof.
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The Lessee shall promptly notify the Lessor and the Paying Agent in
writing of any such Casualty or Expropriation and shall appear in any proceeding
or action to defend, negotiate, prosecute or adjust any claim for any award or
compensation or insurance proceeds or other payment on account of any Casualty
or Expropriation and shall take all appropriate action in connection with any
Casualty or Expropriation, including the employment of counsel reasonably
satisfactory to the Lessor. The Lessor shall have the right to appear and
participate and to employ counsel in any such proceeding or action, and the fees
and expenses of such counsel shall be paid by the Lessee. If the Lessee shall
elect not to appear in or shall fail to prosecute diligently such proceeding or
action, the Lessor may assume the prosecution thereof and the Lessee shall pay
all of the costs and expenses of the Lessor (including, but not limited to, fees
and expenses of Lessor's counsel) and the fees and expenses of the Special
Counsel. No settlement of any such proceeding or action shall be made by the
Lessee or the Lessor without the written consent of the other party hereto,
which consent shall not unreasonably be withheld or delayed.
The Proceeds shall be paid over to the Proceeds Trustee (as defined
below) to be held in trust by such Proceeds Trustee and distributed pursuant to
paragraph 12 or pursuant to the InterParty Agreement and paragraph 15 hereof, as
appropriate, (all such Proceeds, less the costs and expenses incurred by the
Lessor and the Lessee in collecting such amounts, but including any
reimbursement by the Lessee for costs and expenses in connection therewith to
which the Lessor and the holders from time to time of the Instruments are
entitled pursuant to this Lease or the other Operative Documents, are the "Net
Proceeds"). Any and all Proceeds received by the Lessee in connection with any
such proceeding or action shall be received and held in trust for the benefit of
the Lessor, shall be segregated from other funds of the Lessee and shall be
forthwith paid over to the Proceeds Trustee. The Lessee and the Lessor agree
that this Lease shall control the rights of the Lessor and the Lessee in any
such Proceeds, and any present or future Law to the contrary is hereby waived.
Any and all reasonable charges, fees and expenses of the Proceeds Trustee shall
be paid from the Net Proceeds. "Proceeds Trustee" shall mean the Paying Agent
or such Canadian chartered bank or trust company as may be designated by the
Lessor, with the consent of the Purchasers.
(b) Expropriation or Casualty with Termination.
(i) If a Casualty or an Expropriation shall in the good faith
opinion of the Lessee affect the Property in such a manner as to render
it unsuitable for restoration or for continued use, in whole or in part,
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<PAGE> 18
and occupancy by the Lessee for the intended purposes hereof, then
the Lessee may deliver to the Lessor and the Paying Agent, not later
than thirty (30) days after such occurrence a written notice (herein
called a "Termination Notice") describing the event giving rise to such
termination and describing the status of any proceeding or action and
the amount of any Proceeds received or expected to be received in
connection therewith, together with the date, or anticipated date, of
such receipt; or
(ii) If an Expropriation or Casualty shall result in damage to
or the destruction or taking of all or part of the Property representing
twenty-five percent (25%) or more of the fair market value prior to such
Casualty or Expropriation, as determined pursuant to the Appraisal
Procedure, of the Property, then the Lessee shall be deemed to have
delivered a Termination Notice to the Lessor and the Paying Agent as of
the date of such occurrence. Either the Lessor, the Paying Agent or the
Lessee may initiate the Appraisal Procedure by submitting a written
request that an appraiser be appointed.
(iii) Simultaneously with the delivery of a Termination Notice
pursuant to clause (i) above, the Lessee shall deliver, or in the case
of clause (ii) above shall be deemed to have delivered, to the Lessor
and the Paying Agent written notice of its offer to purchase the
Property (each, an "Offer to Purchase"), and the provisions of
paragraphs 14 and 15 shall apply.
(c) Expropriation or Casualty Without Termination. If, after a
Casualty or Expropriation, the Lessee has not given or been deemed to have given
a Termination Notice in accordance with subparagraph 12(b), then this Lease
shall continue in full force and effect, and the Lessee shall, at its sole cost
and expense, promptly commence and diligently pursue to completion the
rebuilding, replacement and repair of any damage to the Property caused by such
event in conformity with the requirements of paragraphs 9 and 10, as applicable,
in order to restore the Property (in the case of an Expropriation, as nearly as
practicable) to the value and operating condition (assuming Lessee's compliance
with the terms of this Lease prior to the occurrence of the Expropriation or
Casualty) thereof immediately prior to such event. In connection with such
restoration the Lessee shall, before beginning such restoration, submit plans
and specifications for such restoration, together with an estimate of the cost
thereof, and all necessary construction contracts therefor for the Lessor's and
the Independent Engineer's approval, which will not be unreasonably withheld;
provided that (i) the capacity, efficiency and useful life of the Improvements,
shall not, after such restoration, be less than the capacity, efficiency and
useful life prior to such
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Casualty or Expropriation; (ii) the fair market value of the Property shall
not, after such restoration, be less than its fair market value
prior to such Casualty or Expropriation and (iii) if the estimated cost to
complete such restoration exceeds the amount of Net Proceeds, the
Lessor is, in its sole judgment, satisfied that the Lessee shall have
sufficient funds (the "Excess Funds") available to pay such excess, which
Excess Funds shall be deposited by the Lessee with the Proceeds Trustee and
distributed to the Lessee as hereinafter provided. Such work shall
be completed in a good and workmanlike manner free and clear of all Liens for
labor, services or materials and in compliance with all
applicable Legal Requirements and Insurance Requirements. All fees and
expenses of the Independent Engineer in connection with any rebuilding
and restoration shall be at the Lessee's sole cost and expense.
The Lessee shall be entitled to receive payment from the Net Proceeds or
the Excess Funds, as the case may be, from time to time as such work of
rebuilding, replacement or repair progresses, but only after presentation of
certificates of the Independent Engineer, delivered by the Lessee to the
Proceeds Trustee (with a copy to the Lessor and the Paying Agent) from time to
time as such work of rebuilding, replacement or repair progresses. Each such
certificate of the Independent Engineer shall describe the work for which the
Lessee is requesting payment and the cost incurred by the Lessee in connection
therewith and shall state that such work has been properly completed and that
the Lessee has not theretofore received payment for such work, and shall be
accompanied by an Officer's Certificate of the Lessee certifying that no
Default, Event of Default or Unwind Event has occurred and is continuing and
that the undisbursed Net Proceeds and Excess Funds held by the Proceeds Trustee
are adequate to complete such rebuilding, replacement or repair in accordance
with the requirements of this paragraph 12(c). The Proceeds Trustee shall
deliver, or cause to be delivered, payment within ten (10) days after its
receipt of the certificates required above. In connection with such payments,
the Proceeds Trustee shall first disburse all Excess Funds for the cost of such
restoration prior to disbursing any Net Proceeds. Upon receipt by the Proceeds
Trustee (with a copy to the Lessor and the Paying Agent) of an Officer's
Certificate from the Lessee, to the effect that final payment has been made for
any such work and stating that the rebuilding, replacement or repair has been
completed in compliance with the terms and conditions of this Lease, the
Proceeds Trustee shall deliver payment of any remaining costs incurred by the
Lessee in connection therewith and the remaining amount of such Net Proceeds, if
any, shall be paid to the Lessee. The Lessee shall be responsible for the cost
of any repair, rebuilding or restoration of the Property in excess of Net
Proceeds and
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Excess Funds, for which cost the Lessee shall make adequate provision
acceptable to the Lessor.
(d) Temporary Expropriation or Lease Termination. Notwithstanding any
provision to the contrary contained in this paragraph 12, in the event of any
temporary Expropriation this Lease shall remain in full force and effect, and
provided no Default, Event of Default or Unwind Event has occurred and is
continuing, the Lessee shall be entitled to receive the Net Proceeds allocable
to such temporary Expropriation, except that if this Lease shall expire or
terminate during such temporary Expropriation, then Lessee shall be entitled to
the Net Proceeds allocable to the period after the termination or expiration of
this Lease only if it has paid the Offer Purchase Price for the Property.
13. [Intentionally Omitted.]
14. Lessee Options. (a) At any time during the Term but prior to
exercising its options pursuant to paragraph 27(a) hereof, Lessee may (unless
otherwise required to do so, in which case it shall) deliver to Lessor and the
Paying Agent an Offer to Purchase the Property upon and subject to the
applicable terms of this Lease.
(b) Any Offer to Purchase delivered or deemed to be delivered by the
Lessee shall, notwithstanding anything to the contrary set forth therein, be
irrevocable and unconditional and shall set forth the Termination Value (as
defined in Schedule C hereto) for the Property to be paid by Lessee.
(c) The Lessor shall promptly accept any Offer to Purchase the
Property. The procedure for the purchase of the Property and the purchase price
therefor shall be governed by paragraph 15 hereof.
15. Procedure Upon Purchase. (a) If the Lessee shall deliver an Offer
to Purchase pursuant to paragraph 27(a)(i), the date of the closing of the
Lessee's purchase of the Property (the "Closing Date") shall be the Expiration
Date. Otherwise, the Closing Date shall be on the first Payment Date occurring
at least fifteen (15) Business Days following (i) the date of Lessor's
acceptance of such Offer to Purchase; or (ii) if the Lessee has paid over to the
Paying Agent the Offer Purchase Price pursuant to paragraph 19(h) hereof, the
date on which Lessee delivers a request for a Closing Date. On the Closing
Date, upon receipt of the Offer Purchase Price, the Lessor shall convey, or
cause to be conveyed, the Property (or, in the case of Casualty or
Expropriation, the remaining portion thereof) to the Lessee or its nominee by an
appropriate transfer/deed of land in form suitable for registration containing
no representation or
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<PAGE> 21
warranty (expressed or implied) except that the Property or such
remaining portion, is free and clear of any encumbrance, mortgage, lease, or
Lien or other adverse interest of any kind created or caused by the Lessor or
any Person claiming by, through or under the Lessor (except Permitted
Encumbrances and except in connection with the arrangements contemplated by the
Operative Documents or as otherwise consented to or created or caused by the
Lessee and except as to any interest created by the Lessor upon the exercise of
any right hereunder upon any Event of Default or Unwind Event).
(b) Notwithstanding any provisions of this Lease or the InterParty
Agreement to the contrary, Lessee shall not be required to acquire title to the
Property until such time that all necessary filings and notifications under the
HSR Act shall have been made (including any filing or provision of required
additional information or documents) and the waiting period referred to in the
HSR Act applicable to such purchase shall have expired or been terminated
(without any objection or prohibition of such purchase). Lessee hereby
covenants to use its best efforts to secure the prompt termination of such
waiting period without objection or prohibition. Notwithstanding the foregoing,
if the Lessee is precluded from acquiring the Property pursuant to the HSR Act,
Lessee shall pay the Offer Purchase Price within the time and in the manner
described in this paragraph 15 as a consequence of an obligation of Lessee's
exercise or deemed exercise of its purchase option pursuant hereto and the
Lessor shall have no obligation to convey the Property unless the Lessee is no
longer precluded from purchasing the Property. However, if the Lessee pays the
Offer Purchase Price for the Property in compliance with the preceding sentence,
then the Lessee shall be entitled to continue to lease the Property for an
additional rental payment of $1 per annum and otherwise under the terms and
provisions of this Lease including Lessee's obligation to pay Additional Rent
and other amounts payable hereunder, for an extended term expiring on the
earlier to occur of (i) three (3) years from the date the Lessee delivers (or is
deemed to have delivered) the Offer to Purchase or (ii) the date that the Lessee
is no longer precluded from purchasing the Property pursuant to the HSR Act. If
the Lessee does not purchase the Property prior to the expiration of such
extended term, the Lessor shall, at the direction of the Lessee, thereafter sell
the Property and distribute the proceeds from such sale in accordance with the
InterParty Agreement.
(c) On the Closing Date, the Lessee shall pay, or cause to be paid, to
the Paying Agent the Termination Value for the Property, as specified in the
Offer to Purchase related thereto, plus (without duplication) all Fixed Rent
then due and payable and other sums then due and payable hereunder relating to
the Property or pursuant to the
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<PAGE> 22
Operative Documents up to and including such Closing Date plus (without
duplication) all Closing Costs (as hereinafter defined) (such amounts, are
herein collectively referred to as the "Offer Purchase Price"), and the Lessor
shall simultaneously (i) deliver to the Lessee or its nominee (A) a
transfer/deed of land in form suitable for registration with respect to the
Property and any other instruments reasonably necessary to convey to the Lessee
or its nominee the Property and assign any other related property then required
to be assigned pursuant hereto, and included in such transfer/deed of land
shall, if requested by Lessee, be the statements contemplated by clauses
50(22)(a) and (b) of the Planning Act (Ontario), contemplated by the Lessor and
the Lessor's Counsel, (B) a statutory declaration of the Lessor that the Lessor
is a resident of Canada within the meaning of the Income Tax Act (Canada), or a
Certificate of the Minister under that section, failing which the Lessee shall
be credited towards the Offer Purchase Price with the amount, if any, which it
shall be necessary for the Lessee to pay to the Receiver General Of Canada in
order to satisfy the Lessee's liability in respect of tax payable by the Lessor
under the non-residency provisions of the Income Tax Act (Canada) by reason of
the sale, and (C) an agreement executed by the Lessor (and to be executed by the
Lessee) in registrable form terminating the Lease, and (ii) convey, or cause to
be conveyed, to the Lessee or its nominee any Net Proceeds related to the
Property and/or the right to receive the same. "Closing Costs" means all
charges incident to such conveyance, including fees and disbursements of Special
Counsel, Lessor's counsel and Paying Agent's counsel and escrow fees,
registration fees, broker's fees, any fees, costs or expenses incurred by the
Lessor and the Paying Agent in connection with the same and with the release of
the Declaration, and all applicable land transfer taxes and registration fees
which may be imposed by reason of such conveyance and the delivery of said
instruments.
(d) Upon the completion of any purchase of the Property pursuant to
this paragraph 15, but not prior thereto, this Lease shall terminate except with
respect to obligations and liabilities of the Lessee actual or contingent which
have arisen with respect to the Property on or prior to the Closing Date and
except as otherwise expressly provided herein.
15A. Lessee's Option to Purchase Urea Plant. (a) At any time during
the Term but prior to exercising its options pursuant to paragraph 27(a) hereof,
Lessee may deliver to Lessor an offer to purchase the urea processing plant and
related improvements (the "Urea Plant") described on Schedule 3-A to the
InterParty Agreement (the "Urea Plant Offer") and the Lessor shall accept such
offer and convey the Urea Plant to the Lessee upon and subject to the following
terms and conditions:
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(i) The Lessee shall deliver the Urea Plant Offer to the Lessor six
months prior to the proposed date of purchase which shall be a Payment Date (the
"Urea Plant Closing Date");
(ii) The Urea Plant Offer shall be accompanied by an Officer's
Certificate of the Lessee stating that the Lessee intends to spend at least
$5,000,000 for Additional Improvements to the Urea Plant;
(iii) The purchase price for the Urea Plant will be $6,100,000 plus
the Urea Plant Closing Costs (the "Urea Plant Purchase Price") payable to the
Paying Agent on behalf of the Lessor on the Urea Plant Closing Date;
(iv) No Default or Event of Default or Unwind Event shall have occurred
and be continuing on the date that the Urea Plant Offer is made or on the Urea
Plant Closing Date;
(v) Any Urea Plant Offer delivered by the Lessee shall,
notwithstanding anything to the contrary set forth therein, be irrevocable
and unconditional; and
(vi) The Lessee shall have made arrangements satisfactory to the Lessor
for the provision of such utility services, rights of way, easements and related
rights to the Lessor, at no cost to the Lessor, as may be necessary for the full
and efficient operation of the Facility as an anhydrous ammonia production
facility.
(b) On the Urea Plant Closing Date, upon receipt by the Paying Agent of
the Urea Plant Purchase Price and, subject to the following paragraph 15A(c), an
amount equal to the fair market value of the parcel of land related to the Urea
Plant (the "Urea Plant Land"), the Lessor shall convey, or cause to be conveyed,
the Urea Plant and, subject to the following paragraph 15A(c), the Urea Plant
Land to the Lessee by an appropriate transfer/deed of land in form suitable for
registration containing no representation or warranty (expressed or implied)
except that each of the Urea Plant and the Urea Plant Land is free and clear of
any encumbrance, mortgage, lease, or Lien or other adverse interest of any kind
created or caused by the Lessor or any Person claiming by, through or under the
Lessor (except Permitted Encumbrances and except in connection with the
arrangements contemplated by this Lease or by the Operative Documents or as
otherwise consented to or created or caused by the Lessee and except as to any
interest created by the Lessor upon the exercise of any right hereunder upon any
Event of Default or Unwind Event) and shall deliver any other instruments
(including, without limitation, those referred to in paragraph 15(c) to the
extent
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applicable) reasonably necessary to convey to the Lessee the Urea Plant Land.
(c) After the delivery of a Urea Plant Offer, the Lessee will use
commercially reasonable efforts to obtain prior to the Urea Plant Closing Date
all governmental authorizations necessary to convey to the Lessee the Urea Plant
Land, including, without limitation, the consent and approval required to
subdivide the Parcel under the Planning Act (Ontario), and the Lessor agrees to
take such actions as shall be reasonably requested by the Lessee, and otherwise
cooperate with the Lessee, at the Lessee's sole cost and expense, in connection
with such authorizations. If such authorizations are received prior to the Urea
Plant Closing Date, the Urea Plant Land will be conveyed on the Urea Plant
Closing Date as provided in paragraph 15A(b); otherwise, the conveyance of the
Urea Plant Land will be effected as soon as practicable after such
authorizations are received pursuant to documentation mutually acceptable to the
Lessor and the Lessee for a price equal to the fair market value thereof. From
and after the Expiration Date or the date of any earlier termination of the
Lease if the Lessee has not purchased the Property, the Lessor will lease the
Urea Plant Land to the Lessee for an amount equal to the fair market value of
such rental and on such other terms and conditions as are mutually acceptable to
the Lessor and the Lessee. The fair market value of the Urea Plant Land will,
for rental and conveyance purposes, be determined by an independent appraiser
selected by the Lessee and acceptable to the Lessor.
(d) On the Urea Plant Closing Date (and, without duplication, on any
other date on which the Urea Plant Land is conveyed to the Lessee), the Lessee
shall pay, or cause to be paid, to the Paying Agent on behalf of the Lessor the
Urea Plant Purchase Price and the fair market value of the Urea Plant Land plus
(without duplication) all Fixed Rent and other sums then due and payable
hereunder relating to the Property or pursuant to the Operative Documents up to
and including such Urea Plant Closing Date. "Urea Plant Closing Costs" means
all charges incident to such conveyance, including fees and disbursements of
Special Counsel, Lessor's counsel and Paying Agent's counsel and escrow fees,
registration fees, broker's fees, any fees, costs or expenses incurred by the
Lessor or the Paying Agent in connection with the same, and all applicable land
transfer taxes and registration fees which may be imposed by reason of such
conveyance and the delivery of all instruments related thereto.
(e) The Lessor and the Lessee shall enter into such amendments to this
Lease as may be reasonably necessary or proper in connection with the purchase
of the Urea Plant pursuant to this paragraph 15A.
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16. Insurance. (a) The Lessee will purchase and maintain, or cause to
be purchased and maintained, insurance of the following types and in the
following amounts or in such greater amounts as may become necessary from time
to time to prevent the Lessor, the Lessee, and the holders from time to time of
the Instruments from becoming co-insurers of any loss but in no event in amounts
less than those maintained by the Lessee or its Affiliates for other similar
plants owned and/or operated by them:
(i) Property Insurance: Insurance against physical damage to the
Property and Lessee's leasehold improvements caused by perils now or hereafter
embraced by or defined in a standard "all risks" insurance policy, including,
without limitation, flood and earthquake and business interruption coverage;
(ii) General Public Liability Insurance: Comprehensive general
liability insurance against claims for bodily injury (including death), personal
injury and property damage occurring on, in or about the Property or resulting
from activities on or related to the Property, in the minimum combined single
limit amount of $100,000,000, in the annual aggregate and $100,000,000, for each
occurrence for bodily injury (or death) and/or property damage;
(iii) Builder's Insurance: During the period of construction of any
Additional Improvements, builders "all risks" and "general risks" insurance
including, without limitation, flood and earthquake with respect to the Property
and any on-site and off-site work and materials related thereto protecting the
Lessee and Lessor and all contractors and sub-contractors, in an amount not less
than the full replacement cost of the Property and such on-site and off-site
work, materials and equipment related thereto in the case of on-site, and with
customary limits in the case of off-site, which policy shall make provision for
vacancy;
(iv) Boiler and Machinery Insurance: Broad form boiler and
machinery insurance on objects defined in a standard broad form boiler and
machinery policy including, without limitation, the Lessee's leasehold
improvements, against accidents (as defined therein), with limits of not less
than an amount equal to the Property Cost, which coverage shall include, without
limitation, loss or damage of whatsoever kind or nature by reason of explosion
or collapse by vacuum or cracking, burning, or bulging of any steam or hot water
boilers, pipes or accessories;
(v) Other Insurance: Such other insurance, including automobile
liability, in such amounts and against such risks, as is either (x) customarily
carried by companies owning, operating or leasing property or conducting
businesses
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similar and/or similarly situated to the Property and/or the Lessee, or (y)
reasonably requested from time to time by the Lessor or the Paying
Agent.
Such insurance shall be written by companies selected by the Lessee and
qualified to issue such insurance that are acceptable to the Lessor. Such
insurance shall be in a form acceptable to Lessor and shall name the Lessor and
the holders from time to time of the Instruments and their successors and
assignees, as additional insureds, as their interests may appear. At the
request of the Lessee, the Lessor may consent, in its sole discretion, to the
modification of the insurance coverages required hereby to reflect coverages
customarily carried and the general availability of insurance at commercially
reasonable premiums.
(b)(i) The insurance referred to in clauses 16(a)(i), (iii) and (iv)
for the Property may be a blanket policy and shall (1) at all times be in an
amount at least equal to one hundred percent (100%) of the full replacement cost
value (without depreciation) of the Property and the Lessee's leasehold
improvements, and (2) include a loss payable endorsement in favor of the Lessor
to the effect that any loss or damage under such insurance policies shall be
payable solely to the Paying Agent on behalf of Lessor to be held and applied
pursuant to the terms of this Lease and the InterParty Agreement.
(ii) Every policy required under paragraph 16(a) shall: (1) expressly
(A) provide that it will not be cancelled or terminated or changed except upon
sixty (60) days' prior written notice to the Lessor and the Paying Agent and the
Lessee, except in the case of cancellation or termination due to a lapse for
non-payment, in which case only ten (10) days' prior written notice shall be
required; (B) provide that the interests of the Lessor and the holders from time
to time of the Instruments shall be insured regardless of any breach or
violation by the Lessee of any warranties, declarations or conditions contained
in such insurance or any application therefor; (C) provide that such insurance
shall not be invalidated by any act, omission or negligence of the Lessee or the
Lessor or the holders from time to time of the Instruments, nor by any
foreclosure or other proceedings or notices thereof relating to the Property or
any part thereof, nor by legal title to, or ownership of the Property or any
part thereof becoming vested in or by Lessor or its agents, nor by occupancy or
use of the Property or any part thereof for purposes more hazardous than
permitted by such policy; (D) provide that all insurance claims pertaining to
the Property or any part thereof shall be adjusted by the insurers thereunder
with the Lessee but that the Lessor must consent to any such adjusted claim; (E)
include a waiver of all rights of subrogation against the Lessor and the holders
from time
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to time of the Instruments and any recourse against the Lessor or the
holders from time to time of the Instruments for payment of any premiums or
assessments under any policy; and (2) not contain a provision relieving the
insurer thereunder of liability for any loss by reason of the existence of other
policies of insurance covering the Property or any part thereof against the
peril involved, whether collectible or not, if such other policies do not name
the Lessor and the holders from time to time of the Instruments as additional
insureds. The Lessee shall advise the Lessor and the Paying Agent promptly of
any policy cancellation or any change adversely affecting the coverage provided
thereby. All property damage and liability insurance shall contain provisions
for cross liability and severability of interests as between the Lessor and the
Lessee.
(c) The Lessee shall deliver to the Paying Agent (with photocopies
thereof to the Lessor) certificates of insurance and any other documentation
necessary to evidence the existence of all insurance which is required to be
maintained by the Lessee hereunder including descriptions of the previously
mentioned Insurance Requirements not customarily found in a standard insurance
policy as well as descriptions of the exceptions to coverage under such
policies, such delivery to be made (i) on or before the commencement of the Term
hereof, (ii) within thirty (30) days of the issuance of any additional policies
or amendments or supplements to any of such insurance, and (iii) at least thirty
(30) days prior to the expiration date of any such insurance. The Lessee shall
notify Lessor, the Paying Agent and the holders from time to time of the
Instruments of any nonrenewal of any policy required hereunder and shall cause
each insurer under each policy required hereunder to give the Lessor and the
Paying Agent notice of any lapse under any such policy. The Lessee shall not
obtain or carry separate insurance concurrent in form, or contributing in the
event of loss, with that required by this paragraph 16 unless the Lessor and the
holders from time to time of the Instruments are named as additional insureds
therein, with loss payable as provided in this Lease. The Lessee shall
immediately notify the Lessor, the Paying Agent and the holders from time to
time of the Instruments whenever any such separate insurance is obtained and
shall deliver to the Paying Agent (with photocopies thereof to the Lessor) the
certificates of insurance evidencing the same as is required hereunder.
(d) The requirements of this paragraph 16 shall not be construed to
negate or modify the Lessee's obligations under Section 10.15 of the InterParty
Agreement.
17. Subletting. (a) The Lessee shall not sublet the Property or any
part thereof, unless (i) at the time of any such sublease, no Default, Event of
Default or Unwind
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Event shall have occurred and be continuing; (ii) any such sublease
shall by its terms be expressly made subject and subordinate to the terms of
this Lease; (iii) the Lessee shall provide the Lessor and the Paying Agent 15
days prior to the effective date of such sublease with a conformed copy of the
instrument creating such sublease and (iv) in the case of a sublease to a party
other than an Affiliate of the Lessee, the Lessor has consented to such
sublease. Notwithstanding the foregoing, Lessor acknowledges that Lessee, as
sublessor, has entered into a sublease (the "Sublease") of even date herewith
with Art Hen, as sublessee, pursuant to which Lessee has sublet to Art Hen those
parts of the Property comprised of the Farm Lands. Lessor hereby consents to
the Sublease and acknowledges receipt of a copy of same. Lessee hereby
covenants that it will not amend, modify or replace the Sublease without the
prior written consent of the Lessor.
(b) No sublease pursuant to this paragraph 17 shall modify or limit any
right or power of the Lessor hereunder or affect or reduce any obligation of the
Lessee hereunder, and all such obligations shall continue in full force and
effect as obligations of a principal and not of a guarantor or surety, as though
no subletting had been made or occupancy permitted.
(c) If the Lessee shall request, in connection with any sublease, that
the Lessor execute an attornment and non-disturbance agreement with respect to
such sublease, the Lessor shall consider each such sublease on a case-by-case
basis and may give its consent to its execution and delivery of an attornment
and non-disturbance agreement. The Lessee shall not mortgage, pledge or
otherwise encumber its interest in and to this Lease or in and to any sublease
or the rentals payable thereunder without the prior written consent of the
Lessor. Any sublease made otherwise than as expressly permitted by this
paragraph 17 and any mortgage, pledge or assignment of the Lessee's interest
hereunder or under any such sublease shall be null and void.
(d) The Lessor and Lessee acknowledge that part of the Property is
subject to existing leases as follows: (i) a lease dated as of February 1, 1988
between C-I-L Inc. ("CIL"), a predecessor in interest of the Lessor, and Liquid
Carbonic Inc.; (ii) a lease dated March 10, 1986 between CIL and Canadian Liquid
Air Ltd.; and (iii) a lease dated March 5, 1987 between CIL and Canadian Oxygen
Limited (collectively, the "Existing Leases"; Liquid Carbonic Inc., Canadian
Liquid Air Ltd. and Canadian Oxygen Limited are hereinafter collectively
referred to as the "Sub-Tenants"). The Lessor hereby assigns the Existing
Leases and all of the Lessor's rights, benefits and entitlements thereunder to
the Lessee and the Lessee hereby accepts such assignment and covenants and
agrees that during the Term and any extension thereof, it
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shall perform and fulfill all of the covenants and shall assume all of the
liabilities and obligations of the Lessor contained therein. It is
the intention of the parties hereto that as a result of such assignment and
assumption the Lessor and the Lessee shall be in the same position
as if the Existing Leases were subleases made between the Lessee and each of
the Sub-Tenants and that all of the Lessee's rights, benefits and
entitlements thereunder shall be automatically re-assigned to the Lessor
without further action on the part of the Lessee, such re-assignment
to be effective immediately upon the termination of this Lease, either upon the
Expiration Date or earlier termination of the Lease. The
Lessee shall, upon the request of the Lessor, execute and deliver all such
instruments, notices, agreements and documents to the Lessor and
each of the Sub-Tenants as may reasonably be required to effect the foregoing
assignment and assumption and re-assignment upon the termination
of this Lease and generally to carry out the purposes of this paragraph.
During the Term, if no Default, Event of Default or Unwind Event
shall have occurred and be continuing, the Trustee shall not take any steps
without the concurrence of the Lessee to terminate the Existing
Leases, interfere with the Sub-Tenants' quiet possession or otherwise exercise
any rights or remedies of the Lessor under the Existing Leases.
18. Permitted Contests. (a) So long as no Default, Event of Default
or Unwind Event has occurred, the Lessee shall not be required, nor shall the
Lessor have the right, to pay, discharge or remove any Imposition, or to comply
or cause the Property or any part thereof to comply with any applicable Legal
Requirement or to pay any undischarged or unremoved Lien, as long as the Lessee
shall at its sole cost and expense contest, or cause to be contested, diligently
and in good faith, the existence, amount or validity thereof by appropriate
proceedings; provided, however, that such proceedings shall not (i) in the case
of an unpaid Imposition or undischarged or unremoved Lien, result in the
collection thereof from the Lessor and the holders from time to time of the
Instruments or against the Property or any part thereof, (ii) result in the
sale, forfeiture or loss of the Property or any part thereof, and (iii) in the
case of a Legal Requirement, subject the Lessor or the holders from time to time
of the Instruments to the risk of any criminal liability or civil liability for
failure to comply therewith. The Lessee shall give such security as may be
reasonably demanded by the Lessor and the Paying Agent to insure ultimate
payment of such Imposition or the discharge or removal of any Lien or to insure
compliance with such Legal Requirement and to prevent any sale or forfeiture of
the Property or any part thereof, or any interference with or deductions from
any Fixed Rent, Additional Rent or any other sum required to be paid by the
Lessee hereunder by reason of such non-payment, non-discharge, non-removal or
non-compliance.
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(b) The Lessor shall cooperate with the Lessee in any contest and shall
allow the Lessee to conduct such contest in the name of the Lessor, if necessary
at the Lessee's sole cost and expense. The Lessee shall notify the Lessor and
the Paying Agent of each such proceeding at least ten (10) Business Days prior
to the commencement thereof, which notice shall describe such proceeding in
reasonable detail.
(c) The Lessee shall, promptly after the final determination (including
appeals) of any contest brought by it pursuant to this paragraph 18, pay and
discharge all amounts which shall be determined to be payable therein and shall
be entitled to receive and retain for its own account all amounts refunded
and/or rebated as a result of any such contest and if the Lessor or the Paying
Agent receives any amount as a result of such contest to which it is not
otherwise entitled pursuant to this Lease, it shall promptly return such amount
to the Lessee.
18A. Unwind Event. Upon payment by the Lessee of the Unwind Fee and
the surrender of the Property pursuant to procedures similar to those specified
in paragraph 15 to the extent applicable, this Lease shall terminate.
19. Default and Remedies Provisions. (a) Any of the following
occurrences or acts shall constitute an event of default (each, an "Event of
Default") under this Lease:
(i) if the Lessee shall fail to pay (a) any Fixed Rent within five
(5) Business Days after the date on which payment is due or (b) any Additional
Rent within five (5) Business Days after the earlier to occur of (x) written
notice that such Additional Rent is due has been given to the Company by the
Lessor, the Paying Agent or any Purchaser and (y) the date on which the Lessee
becomes aware, or reasonably should have become aware, that such Additional Rent
is due or (c) any other sum required to be paid hereunder on the date on which
such payment is due;
(ii) subject to paragraph 18, if the Lessee shall fail to pay any
Imposition when such payment shall become due or within any grace period
provided for payment of such Imposition;
(iii) if the Lessee shall fail to comply with any Insurance
Requirement or if any insurance policy covering any part of the Property is, or
is threatened to be cancelled or adversely changed as a result of any act or
omission of the Lessee or any Person for whom it is legally responsible;
(iv) if the Lessee shall grant, suffer to exist or create any Lien
(other than Permitted Encumbrances) upon
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this Lease or the Property or any part thereof or interest therein or upon any
Fixed Rent, Additional Rent or other sum payable hereunder;
(v) if the Lessee shall fail to comply with the requirements of
paragraph 27 (b) (i) within the time periods provided therein;
(vi) if the Lessee has elected to terminate this Lease pursuant to and
in compliance with paragraph 27 (a) (ii) and if, five (5) Business Days before
the Expiration Date either (a) the Company is then rebuilding or restoring
the Property pursuant to paragraph 12 (c) hereof or (b) a temporary
Expropriation has occurred and is scheduled to continue after the Expiration
Date (provided, however, that it shall not be an Event of Default hereunder
if (A) amount necessary to complete the rebuilding or restoration of the
Property shall not exceed $1,000,000, or, in the case of a temporary
Expropriation, the economic loss to the Lessor due to such Expropriation
whether by the diminishment of the fair market value of the Property, as
determined by the Appraisal Procedure, or otherwise, will not exceed
$1,000,000, (B) the Lessor has received such evidence as it reasonably requests
to such effect, (C) such amount has been paid over to the Proceeds Trustee and
(D) the Lessee has provided an indemnity to the Lessor, in form and substance
satisfactory to the Lessor, with respect to any additional amounts necessary to
restore or rebuild the Property or to make up for the economic loss to the
Lessor due to such temporary Expropriation);
(vii) if the Lessee shall fail to observe or perform any provision
hereof which is not otherwise listed in this subparagraph 19(a) and such failure
shall continue for thirty (30) days after the earlier of (a) the date on which
the Lessee becomes aware of such failure or (b) notice by the Lessor or the
Paying Agent to the Lessee of such failure;
(viii) if an Event of Default shall have occurred under any Operative
Document; or
(ix) if the Lessee shall have abandoned the Property or if the
Property becomes vacant for a period of thirty (30) consecutive days.
(b) The Lessor may take all steps to protect and enforce the rights of
the Lessor or obligations of the Lessee hereunder, whether by action, suit or
proceeding at law or in equity (for the specific performance of any covenant,
condition or agreement contained in this Lease, or in aid of the execution of
any power herein granted or for any foreclosure, or for the enforcement of any
other appropriate legal or equitable remedy) or otherwise as the Lessor shall
deem necessary or advisable.
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(c) (i) If an Event of Default shall have occurred and be
continuing, then upon five (5) days' written notice by the Lessor to the Lessee,
in addition to all other rights, remedies or recourses available, the Lessor may
terminate this Lease and the Lessee's right to possession of the Property or any
part thereof. This Lease and the estate hereby granted shall expire and
terminate at midnight on the fifth (5th) day (or such later date as may be
specified therein) after the date of such notice, as fully and completely and
with the same effect as if such date were the date herein fixed for the
expiration of the Term and all rights of the Lessee shall terminate but the
Lessee shall remain liable as hereinafter provided.
(ii) Should the Lessor elect not to terminate this Lease, this Lease
shall continue in full force and effect and Lessor may enforce all Lessor's
rights and remedies under this Lease including the right to recover the Fixed
Rent and Additional Rent as it becomes due under this Lease. For the purposes
hereof, the following do not constitute a termination of this Lease:
(A) Acts of maintenance or preservation of the Property or
any part thereof or efforts to relet the Property or any part thereof,
including, without limitation, termination of any sublease of the
Property and removal of such subtenant from the Property; and/or
(B) The appointment of a receiver for the Property upon the
initiative of the Lessor to protect the Lessor's interest under this
Lease.
(d) If an Event of Default shall have occurred and be continuing, and
in addition to the Lessor's right to terminate this Lease, upon five (5) days'
notice, Lessor shall have (i) the right, whether or not this Lease shall have
been terminated pursuant to paragraph 19(c) hereof, to re-enter and repossess
the Property or any part thereof, as the Lessor may elect, by summary
proceedings, ejectment, any other legal action or in any other lawful manner the
Lessor determines to be necessary or desirable and (ii) the right to remove all
Persons and property therefrom. The Lessor shall be under no liability by
reason of any such re-entry, repossession or removal. No such re-entry or
repossession of the Property or any part thereof shall be construed as an
election by the Lessor to terminate this Lease unless a notice of such
termination is given to the Lessee pursuant to paragraph 19(c) hereof, or unless
such termination is decreed by a court or other governmental tribunal of
competent jurisdiction. Should the Lessor elect to re-enter the Property as
herein provided or should the Lessor take possession pursuant to legal
proceedings or pursuant to any notice provided for by Law or
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<PAGE> 33
upon termination of this Lease pursuant to paragraph 19(c) hereof or otherwise
as permitted by Law, the Lessee shall peaceably quit and
surrender the Property or any part thereof to the Lessor. In any such event,
neither the Lessee nor any Person claiming through or under the
Lessee, by virtue of any Law, shall be entitled to possession or to remain in
possession of the Property or any part thereof, but shall
forthwith quit and surrender the Property to the Lessor.
(e) At any time or from time to time after the Lessor's re-entry or
repossession of the Property or any part thereof pursuant to paragraph 19(d)
hereof, whether or not this Lease shall have been terminated pursuant to
paragraph 19(c) hereof, the Lessor may (but shall be under no obligation to)
relet the Property or any part thereof, for the account of the Lessee, without
notice to the Lessee, for such term or terms and on such conditions and for such
uses as the Lessor, in its sole and absolute discretion, may determine and to
make alterations to the Property to facilitate such reletting. The Lessor may
collect and receive any rents payable by reason of such reletting. The Lessor
shall not be liable for any failure to relet the Property or any part thereof or
for any failure to collect any rent due upon any such reletting.
(f) No termination of this Lease pursuant to paragraph 19(c) hereof, or
by operation of Law, and no re-entry or repossession of the Property or any part
thereof, pursuant to paragraph 19(d) hereof, and no reletting of the Property or
any part thereof pursuant to paragraph 19(e) hereof, shall relieve the Lessee of
its liabilities and obligations hereunder, all of which shall survive such
termination, re- entry, repossession or reletting.
(g) In the event of any termination of this Lease or of the Lessee's
right to possession of the Property or any part thereof by reason of the
occurrence of any Event of Default, the Lessee shall pay to the Paying Agent all
Fixed Rent and Additional Rent and other sums required to be paid to and
including the date of such termination of this Lease or of the Lessee's right to
possession; and thereafter, until the end of the Term, whether or not the
Property or any part thereof shall have been relet, the Lessee to the extent
permitted by applicable Law shall be liable to the Lessor for, and shall pay to
the Paying Agent on behalf of the Lessor, on the days on which such amounts
would be payable under this Lease in the absence of such termination, re-entry
or repossession as agreed current damages and not as a penalty: all Fixed Rent,
all Additional Rent and other sums which would be payable under this Lease by
the Lessee, in the absence of such termination, re- entry or repossession, and
all costs (including legal fees and expenses) incurred by the Lessor or the
Paying Agent hereunder (payable on demand) and all costs of any environmental
remediation required by Environmental
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Law. To the extent permitted by Law, at such time after the termination or
expiration of this Lease as the Lessee shall have paid all amounts
required to be paid by it under this Lease and the Lessor shall have discharged
any and all obligations to the holders from time to time of the
Instruments, then the Paying Agent on behalf of the Lessor shall pay to the
Lessee, when received, the net proceeds, if any, of any reletting
effected for the account of the Lessee pursuant to paragraph 19(e), after
deducting from such proceeds all the Lessor's and Paying Agent's
expenses in connection with such reletting (including, but not limited to, all
repossession costs, brokerage commissions, legal fees and
expenses, employees' expenses, alteration costs and expenses of preparation for
such reletting and all costs of environmental remediation
required by Environmental Law).
(h) Notwithstanding the foregoing, if an Event of Default shall have
occurred, the Lessee may within five (5) Business Days of the earlier of the
Lessor's or the Paying Agent's notice of such occurrence thereafter pay to the
Paying Agent an amount equal to the Offer Purchase Price in which event the
Lessor shall be obliged to convey the Property to Lessee in compliance with
paragraph 15.
(i) At any time after any termination of this Lease or re-entry or
repossession of the Property by reason of the occurrence of an Event of Default,
the Lessor shall be entitled to recover from the Lessee, and the Lessee will pay
to the Paying Agent on demand by the Lessor, in lieu of all liquidated damages
in respect of Fixed Rent beyond the date of such demand (but in addition to any
claim for current damages in respect of Fixed Rent prior to the date of such
demand), an amount equal to the Termination Value on the date of such demand
(and upon such payment, the Lessor agrees to transfer the Property to the Lessee
or its nominee).
20. Additional Rights. (a) No right or remedy hereunder shall be
exclusive of any other right or remedy, but shall be cumulative and in addition
to any other right or remedy hereunder or now or hereafter existing by Law or in
equity and the exercise by the parties hereto of any one or more of such rights,
powers or remedies shall not preclude the simultaneous exercise of any or all of
such other rights, powers or remedies. Failure to insist upon the strict
performance of any provision hereof or to exercise any option, right, power or
remedy contained herein shall not constitute a waiver or relinquishment thereof
for the future or with respect to a future Default, Event of Default or Unwind
Event. Receipt by the Lessor or the Paying Agent of any Fixed Rent, Additional
Rent or other sum payable hereunder with knowledge of the breach by Lessee of
any provision hereof shall not constitute waiver of such breach, and no waiver
by the Lessor of any provision hereof shall be deemed to have been made
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unless made in writing. The parties shall be entitled to injunctive relief in
case of the violation or attempted or threatened violation of
any of the provisions hereof, a decree compelling performance of any of the
provisions hereof or any other remedy allowed to the parties by Law
or in equity.
(b) The Lessee hereby waives and surrenders for itself and all
those claiming under it, including creditors of all kinds, (i) any right and
privilege which they may have to redeem the Property or any part thereof or to
have a continuance of this Lease after termination of the Lessee's right of
occupancy by Law or by any legal process or writ, or under the terms of this
Lease, or after the termination of the Term of this Lease as herein provided
and (ii) the benefits of any Law which exempts property from liability for debt
or for distress for rent. If the Lessor makes any claim against the property
of the Lessee by way of distress this provision may be pleaded as an estoppel
against the Lessee in any action brought to test the right of the Lessor to
levy such distress.
(c) If an Event of Default exists hereunder, the Lessee shall
pay to the Paying Agent on demand of the Lessor, all damages, costs, fees and
expenses including legal fees and expenses on a solicitor and his own client
basis incurred by the Lessor in enforcing its rights under this Lease, or with
respect to any other matter or thing which is the obligation of the Lessee
hereunder or in respect of which the Lessee has agreed to indemnify the Lessor.
(d) The parties hereto intend that this agreement shall
constitute a lease of real and personal property and nothing herein contained
nor any acts of the Lessor or the Lessee shall be deemed or construed as
creating any relationship other than the relationship of landlord and tenant or
lessor and lessee arising out of and pursuant to the provisions of this Lease.
(e) TIME IS OF THE ESSENCE IN THIS LEASE AND THE TERMS HEREIN
SHALL BE SO CONSTRUED.
(f) [Intentionally Omitted.]
21. Notices, Demands, and Other Instruments. All notices,
offers, consents and other instruments given pursuant to this Lease shall be
sent to the parties hereto at the addresses set forth on Schedule 1 to the
InterParty Agreement and shall be given in the manner and shall be effective at
the times and under the terms set forth in Section 10.02 of the InterParty
Agreement; provided that, each of the Lessor and the Lessee may from time to
time specify, by giving not less than fifteen (15) days' prior notice thereof
to the other party (i) any other address in Canada as its address for purposes
of this Lease and (ii) any other Person that is to
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receive copies of notices, offers, consents and other instruments hereunder;
provided that neither party shall be entitled to designate more
than two other Persons to receive copies of notices hereunder.
22. Status Certificate. Each party hereto shall, at the
reasonable request of the other party hereto, deliver to such other party or as
the other party may direct within five (5) days after it is requested a
certificate stating whether such other party has knowledge of, or has received
notice from any person of, any Casualty, Expropriation, Default, Event of
Default or Unwind Event.
23. Surrender, Redelivery. If, upon the expiration or
termination of the Term of this Lease or the termination of Lessee's possession
of the Property, Lessee or its nominee has not purchased the Property as
provided hereunder, the Lessee shall surrender (i) the Parcel to the Lessor in
the condition in which the Parcel was upon the commencement of the Term hereof
(with the exception that the Property shall have been remediated in accordance
with Section 9.18 of the Asset and Share Purchase Agreement and Section 6.01(j)
of the InterParty Agreement) and (ii) the Improvements in the operating
condition, efficiency and with the useful life, they were or had been upon the
commencement of the Term, except as repaired, rebuilt, altered, added to or
built as permitted or required hereby and except for ordinary wear and tear.
To the extent that the Property is not in compliance with the above upon such
expiration or termination, the Lessee shall pay to the Paying Agent on behalf
of the Lessor such additional amounts as are required to place it in compliance
therewith, including the cost of any necessary environmental remediation. The
Lessee shall also surrender the Property to the Lessor free and clear of all
Liens, easements, consents and restrictive covenants and agreements affecting
the Property which the Lessee is obliged hereunder to remove. The Lessee shall
also surrender the Property in a condition such that the Property is in
compliance with all applicable Environmental Laws at surrender (irrespective of
whether the deadline for such compliance would otherwise expire before the end
of the Term). Nothing contained in this paragraph 23 shall relieve or
discharge or in any way affect the obligation of the Lessee to cure promptly
pursuant to this Lease any violations of Legal Requirements referred to in this
Lease, or to pay and discharge as required by this Lease any Liens and
Impositions against the Property. Lessee shall cooperate, to the fullest
extent, with the Lessor, its subsequent lessees, operators or purchasers to
effect the transfer of all of Lessee's intellectual property, know-how, manuals
and Applicable Permits required for the operation of the Property to such
Persons. The Lessee, at its sole cost and expense, shall remove from the
Property on or prior to the thirtieth (30th) day following such expiration or
termination all property
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situated thereon which is not owned by the Lessor and shall repair any damage
caused by such removal and shall restore the Property to the condition and
working order (or reasonable equivalent thereof) in which they existed
immediately prior to the installation of such property, except for ordinary
wear and tear. Lessee shall indemnify and hold harmless the Lessor, its
successors and assigns against any loss, liability or claim arising out of the
Lessee's removal of such property from the Property. Any such property of the
Lessee not so removed shall become the property of the Lessor, and the Lessor
may cause such property to be removed from the Property and disposed of, and
the cost of any such removal and disposition of the Lessee's property and of
repairing any damage caused by such removal and of the restoration of the
Property to the condition and working order (or reasonable equivalent thereof)
in which it existed immediately prior to the installation of such property,
ordinary wear and tear excepted, shall be borne by the Lessee. The obligations
of the Lessee under this paragraph 23 shall survive the expiration or any
termination of this Lease (whether by operation of Law or otherwise) for all
matters described herein which occur or arise prior to such expiration or
termination or arise out of or result from facts, events, claims, liabilities,
actions or conditions occurring, arising or existing on or before such
expiration or termination.
24. Separability; Binding Effect; Governing Law. (a) Each
provision hereof shall be separate and independent and the breach of any such
provision by the Lessor shall not discharge or relieve the Lessee from its
obligations to perform each and every covenant to be performed by the Lessee
hereunder. If any provision hereof or the application thereof to any Person or
circumstance shall be invalid or unenforceable, the remaining provisions
hereof, or the application of such provision to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each provision hereof shall be valid and shall be enforceable to
the extent permitted by Law. All provisions contained in this Lease shall be
binding upon, inure to the benefit of, and be enforceable by, the respective
permitted successors and assigns of the Lessor and the Lessee to the same
extent as if each successor and assignee were named as a party hereto. The
Lessee may not assign its rights hereunder or any interest herein except in
accordance with paragraph 17 hereof. The Lessor may assign all or any part of
the Property and/or its rights under this Lease. This Lease may not be
changed, modified or discharged except by a writing signed by the Lessor and
the Lessee in compliance with the requirements for the same under the
InterParty Agreement. Any change, modification or discharge made otherwise
than as expressly permitted by this paragraph 24 shall be null and void. THIS
LEASE SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
PROVINCE
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OF ONTARIO AND THE LAWS OF CANADA APPLICABLE THEREIN. Jurisdiction hereunder
shall be governed by the provisions governing jurisdiction set forth in Section
10.23 of the InterParty Agreement, which provisions are hereby incorporated
herein, mutatis mutandis, by reference as if fully set forth herein. This
Lease may be executed in any number of counterparts, each of which shall be an
original, and all of which together shall constitute but one and the same
instrument; provided, however, that this Lease, when delivered, shall
constitute an original, fully enforceable counterpart for all purposes.
25. No Recourse. No recourse shall be had against the Lessor or
any holder of any Instrument or their employees, agents, beneficiaries or
shareholders, for any claim based on any failure by the Lessor in the
performance or observance of any of the agreements, covenants or provisions
contained in this Lease and in the event of any such failure, recourse shall be
had solely against the Property or the proceeds therefrom; provided, however,
that nothing contained in this paragraph 25 shall be taken to prevent
enforcement of (i) any right of the Lessee to injunctive relief under paragraph
20(a) hereof or (ii) any claim against the Lessor or any other Person arising
out of or in connection with this Lease based on fraud, gross negligence or
willful misconduct of the Lessor and nothing shall prevent enforcement against
any other Person to which any part of the Property shall have been transferred,
or by whom any obligations in respect of the Property shall have been
undertaken or assumed in writing; provided, further, that no recourse shall be
made against the Property or the Trust Estate or the proceeds therefrom or any
Holder of an Instrument for any claim against the Lessor or any Person arising
out of or in connection with this Lease based on fraud, gross negligence or
willful misconduct of the Lessor, or arising out of or in connection with a
breach of the Lessor's obligations under the Operative Documents, unless such
claim arises from any action or failure to act by the Lessor which was directed
or consented to by the Majority Holders of the Instruments.
26. Lessor's Right to Cure Lessee's Default. If the Lessee
shall fail to make any payment or perform any act required to be made or
performed under this Lease, the Lessor, without waiving any default or
releasing Lessee from any obligation, may (but shall be under no obligation to)
make such payment or perform such act for the account and at the expense of the
Lessee, and may enter upon the Property for such purpose and take all such
action thereon as, at the Lessor's sole discretion, may be necessary or
appropriate therefor. No such entry shall be deemed an eviction of the Lessee
or a breach of the Lessor's covenant for quiet possession pursuant to paragraph
2(b) hereof. All sums so paid by the Lessor or the Paying Agent and all costs
and
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expenses (including, without limitation, legal fees and expenses so incurred,
together with interest thereon to the extent permitted by Law)
shall be paid by the Lessee to the Paying Agent on demand by the Lessor as
Additional Rent.
27. Lessee's Options Upon Expiration. (a) In
addition to its rights under paragraph 14 hereof, Lessee shall, by notice given
not less than twelve (12) months prior to the Expiration Date, elect to (i)
deliver an Offer to Purchase the Property and purchase the Property as of the
Expiration Date against payment of an amount equal to the Offer Purchase Price,
in which case the transfer of the Property shall be governed by the terms of
paragraph 15, (ii) terminate this Lease and abandon the Property as of the
Expiration Date upon payment to the Lessor on the Expiration Date of Fixed
Rent, Additional Rent and any other amounts then due and payable to the Lessor
hereunder or (iii) subject to the conditions set forth in paragraph 27(c),
extend the Lease for the Extended Term.
(b) (i) Upon the election of the Lessee to terminate
this Lease pursuant to paragraph 27(a)(ii) hereof, Lessee shall, as a condition
to its right to proceed as provided in paragraph 27(a)(ii) hereof, provide or
accomplish, or cause to be provided or accomplished, at the sole expense of the
Lessee, to or for the benefit of the Lessor and the holders of the Instruments,
at least thirty (30) days but not more than sixty (60) days prior to the
Expiration Date:
(A) (x) The Property to be in an environmental condition
satisfactory to the Lessor and the Purchasers, in their sole discretion
(and regardless of the condition of the Property at the beginning of the
Term) and (y) an environmental audit of the Property, together with a copy
of the Environmental Consultant's report on its audit, the scope of which
audit and which report shall be satisfactory, in form and substance, to
the Lessor and the Purchasers, in their sole discretion (in each case
irrespective of the Property's compliance with any and all Legal
Requirements); the status of the remedial action undertaken by the Seller
pursuant to the Asset and Share Purchase Agreement as established by such
audit shall be satisfactory to the Lessor and the Purchasers in their sole
discretion.
(B) A report of the Appraiser and/or the Independent
Engineer, satisfactory in form and substance to the Lessor and the B- Note
and Certificate Purchasers, in their sole discretion, to the effect that
the Property has been maintained in accordance with the terms and
conditions of the Lease and that the Improvements, at the Expiration Date,
are capable of operating at their
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intended capacity in accordance with original design specifications;
(C) Evidence satisfactory to the Lessor and the Purchasers that the
Lessee is, and (as of the Expiration Date) will be, in full compliance with
the Services Agreement and has made arrangements satisfactory to the Lessor
and the Purchasers, in their sole discretion, for the provision of services
required thereunder;
(D) A title opinion from Lessee's counsel, which counsel shall be
satisfactory to the Lessor and the Purchasers, confirming that there have been
no Liens created upon the Property or any part thereof or interest therein
since the Financing Closing Date other than Permitted Encumbrances;
(E) If the Lessee has purchased the Urea Plant pursuant to paragraph
15A hereof, evidence satisfactory to the Trustee and the Purchasers, in their
sole discretion, that the Lessee has expended the sums specified in paragraph
15A(a)(ii) hereof for the purpose of making Additional Improvements to the
Urea Plant or has committed itself to expending such funds for such purpose;
(F) If the Lessee has purchased the Urea Plant pursuant to paragraph
15A hereof, the Trustee and the Lessee shall have entered into such reciprocal
services agreements or arrangements between the Urea Plant and the Facility as
shall be satisfactory to the Trustee and the Purchasers, in their sole
discretion. Such services agreements and arrangements shall provide for such
matters as, without limitation, (i) the granting of necessary utility
services, rights of way, easements and related rights by the Urea Plant to the
Facility and by the Facility to the Urea Plant, in each case at no cost to the
recipient, as may be necessary for the full and efficient operation of the
Urea Plant and the Facility for their respective purposes, (ii) the agreement
by the Lessee and its successors and assigns to purchase, at fair market
value, ammonia produced by the Facility as well as carbon dioxide, steam or
other feedstock produced by the Facility to the extent the Urea Plant has
requirements therefor and to the extent that the Facility is capable of
supplying such products, (iii) the agreement by the Lessor and its successors
and assigns to purchase, at fair market value, such feedstock or materials as
are produced by the Urea Plant to the extent the Facility has requirements
therefor and to the extent that the Urea Plant is capable of supplying such
products and (iv) the agreement by the Lessee and its successors and assigns
to negotiate in good faith toward
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arrangements, if requested by the Lessor, at competitive market rates, for the
tolling at the Urea Plant of ammonia produced at the Facility to the extent the
Urea Plant has unused capacity therefor; and
(G) Each of (i) the Firm Service Contract by and between the Seller and
TransCanada Pipelines Limited ("TCPL") dated as of April 23, 1990, (ii) the Firm
Service Contract by and between Seller and TCPL dated as of November 1, 1990 and
(iii) the Gas Transportation/Carriage Agreement by and between Seller and Union
Gas Limited dated as of April 14, 1989 (as each of the foregoing may be revised,
amended or renewed from time to time or substituted with similar contracts on
commercially reasonable terms for the transportation and/or storage of gas, the
"Gas Transport Contracts") shall have been assigned to the Lessor or its
designated assignee with the consent of the transporter or shipper under such
contracts; provided, however, this clause (G) shall only be a condition to the
Lessee's right to proceed as provided in paragraph 27(a)(ii) hereof if the
Lessor or its designated assignee shall have satisfied the customary and
standard preconditions to the consent to assignment of the Gas Transport
Contracts required by TCPL or Union Gas Limited, or such other transporter or
shipper, as the case may be.
(H) Each of (i) the Purchase Agreement by and between Seller and Liquid
Carbonic Inc. ("Liquid Carbonic") dated as of December 19, 1978, (ii) the Carbon
Dioxide Supply and Purchase Agreement by and between Seller and Canadian Liquid
Air Ltd. ("Canadian Liquid") dated as of November 11, 1985, (iii) the Purchase
Agreement by and between Seller and Airco Gases Canada, a division of Canadian
Oxygen Limited ("Airco") dated as of June 1, 1986 and (iv) the Plant Operating
Agreement by and between Seller and Airco dated as of June 1, 1986 (as each of
the foregoing may be revised, amended or renewed from time to time, the "Air
Supply Contracts") shall have been assigned to the Lessor or its designated
assignee pursuant to an assignment and acknowledgment agreement by and among the
Seller, the Lessor or its designated assignee, the Company and Liquid Carbonic,
Canadian Liquid and Airco, as the case may be, in form and substance
satisfactory to the Lessor in his sole discretion; provided, however, this
clause (H) shall only be a condition to the Lessee's right to proceed as
provided in paragraph 27(a)(ii) hereof if the Lessor or his designated assignee
shall have taken such actions as may be reasonably required to effect such
assignment of the Air Supply Contracts.
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(b) (ii) Upon the Lessee's election to terminate this
Lease pursuant to and in compliance with paragraph 27(a)(ii) hereof, the Lessor
shall have the sole and exclusive right to sell or dispose of the Property and,
as of the Expiration Date, the Lessee shall have no further claim thereto. The
proceeds of any sale or disposition of the Property pursuant to this paragraph
27(b)(ii) (herein called a "Qualified Sale") shall be applied by the Lessor as
follows: first, to pay all Closing Costs in connection with the Qualified
Sale; and second, as provided in Section 3.04 of the InterParty Agreement.
(c) The Lessee may request that the Lessor extend this Lease
for an additional term of five (5) years (the "Extended Term") and the Lessor
and the Purchasers may agree to extend this Lease in their sole discretion and
upon the mutual agreement of the Lessor and the Lessee as to the amounts and
dates of payment of Fixed Rent for the Extended Term, and upon the Lessee
undertaking to enter into all amendments and supplements to the Operative
Documents and such other agreements as the Lessor in its sole discretion
determines to be necessary and appropriate in connection therewith. Within
sixty days of receipt of Lessee's request to extend this Lease pursuant to this
paragraph 27, the Lessor and Purchasers shall give notice to the Lessee as to
whether or not such an extension has been granted. In the event that the
Lessor and the Purchasers do not agree to extend this Lease, the Lessee shall,
within thirty (30) days of such notification, give notice of its alternative
election pursuant to paragraph 27(a)(i) or (ii) hereof.
(d) If, after the delivery of notice under paragraph
27(a)(ii), Lessee fails or is unable to satisfy the conditions set forth in
paragraph 27(b)(i) within the time period set forth therein, then Lessee shall
be deemed to have delivered an Offer to Purchase and shall purchase the
Lessor's interest in the Property as of the Expiration Date as provided in
paragraph 15.
28. Limitations on Amounts Payable. Notwithstanding anything to
the contrary contained in this Lease or any of the other Operative Documents,
the amounts which the Lessee is obliged to pay pursuant to this Lease and the
other Operative Documents, and the amounts which Lessor, the Paying Agent and
the Purchasers are entitled to receive pursuant to this Lease and other
Operative Documents, are subject to limitations pursuant to Section 10.18 of
the InterParty Agreement.
29. Headings and Table of Contents. The table of contents and
the headings of the various paragraphs and Schedules of this Lease are for
convenience only and shall not affect the meaning of the terms and conditions
of this Lease.
39
<PAGE> 43
30. Schedules. Schedules A, B, C and D referred to in this
Lease are hereby incorporated by reference herein.
31. [Intentionally Omitted.]
32. Registration of Lease. The Lessor may, in its discretion,
register a notice or copy of this Lease against the Parcel and the Lessee, upon
request of the Lessor, shall join in the execution of a notice of this Lease
solely for the purpose of supporting an application for registration of a
notice of this Lease or any subsequent dealing therewith. Neither the Lessee
nor anyone on the Lessee's behalf or claiming under the Lessee shall register
this Lease or any other instrument pertaining to this Lease against the Parcel.
Notwithstanding the foregoing but subject to the Lessor's prior written
consent, Lessee shall be entitled to register a document against the Parcel
solely for the purpose of giving notice of this Lease. The form of notice of
lease shall be prepared by the Lessee's solicitors at the Lessee's cost and
expense, approved by the Lessor and the holders from time to time of the
Instruments and shall describe only:
(a) the parties;
(b) the Parcel;
(c) the date of the Lease;
(d) the Term and expiry date of the Lease;
(e) any right or option to purchase the Parcel;
(f) any option to renew the Lease; and
(g) the addresses of the Lessor and the Lessee.
33. Partial Payment of Rent. Acceptance by the Lessor or the
Paying Agent of a lesser amount than the monthly payment of Fixed Rent and
Additional Rent herein stipulated and any endorsement or statement on any
cheque or documentation accompanying any payment of Fixed Rent and Additional
Rent shall not be deemed an acknowledgement of full payment or an accord and
satisfaction, and the Lessor or the Paying Agent on behalf of the Lessor may
accept such payment without prejudice to the Lessor's right to recover the
balance of such Fixed Rent and Additional Rent or to pursue any other remedy
provided in this Lease.
34. No Limitation. Whenever a statement or provision in this
Lease is followed by words denoting inclusion or example (such as "including"
or "such as") and then a list of, or reference to, specific matters or items,
such list or reference shall not be read so as to limit or restrict the
generality of such statement or provision, even though words such as "without
limitation" or "without limiting the generality of the foregoing" do not
precede such list or reference.
40
<PAGE> 44
35. Obligations as Covenants. Each obligation of the Lessor or
the Lessee expressed in this Lease shall be a covenant for all purposes.
36. Currency. All Fixed Rent and Additional Rent and other
amounts of money in this Lease are expressed in and refer to Canadian dollars
and shall be paid in the lawful currency of Canada.
37. Survival of Indemnities. The indemnity provisions of this
Lease and Lessor's rights in respect of any failure of the Lessee to perform
any of its obligations under this Lease shall remain in full force and effect
notwithstanding the expiration or earlier termination of the Term.
38. Unavoidable Delay. Subject to paragraph 5, if and to the
extent that either the Lessor or the Lessee shall be prevented, delayed or
restricted by reason of Unavoidable Delay (as defined below) in the fulfillment
of any obligation hereunder, then either the Lessor or the Lessee, as the case
may be, shall be deemed not to be in default in the performance of such
covenant or obligation and any period for the performance of such obligation
shall be extended accordingly and the other party to this Lease shall not be
entitled to compensation for any loss, inconvenience, nuisance or discomfort
thereby occasioned, provided that in no event will the Lessee be relieved of
its obligation to pay Fixed Rent, Additional Rent or any other sum payable
hereunder or under the other Operative Documents as it becomes due. For the
purposes of this paragraph, "Unavoidable Delay" means any cause beyond the
control of the party affected thereby which prevents the performance by such
party of any obligations hereunder and not caused by its default or act of
commission or omission and not avoidable by the exercise of reasonable care,
including without limitation strikes, lockouts or other labour disputes, the
enactment, amendment or repeal of any Laws, and shortages or unavailability of
labour materials, but excluding lack of funds or financial inability.
41
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this Lease to
be duly executed and delivered as of the date and year first above written.
W. PATRICK MORONEY, not in his individual
capacity, but solely as Trustee
/s/ W.P. Moroney
TERRA INTERNATIONAL (CANADA) INC.,
as Lessee
By: /s/ Gregory J. Duerksen
Title: Vice President
<PAGE> 1
1
EXHIBIT 13
TERRA INDUSTRIES INC.
1993 ANNUAL REPORT
FINANCIAL SECTION
FINANCIAL TABLE OF CONTENTS
Financial Review
Consolidated Statements of Financial Position
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders' Equity
Notes to the Consolidated Financial Statements
Responsibility for Financial Statements
Independent Auditors' Report
Quarterly Production Data
Quarterly Financial and Stock Market Data
Revenues
Stockholders and Dividends
Six-Year Financial Summary
<PAGE> 2
2
FINANCIAL REVIEW
CONSOLIDATED RESULTS
The Corporation's 1993 income from continuing operations was $22.8 million, or
$0.33 per share, compared with 1992 income from continuing operations of $10.4
million, or $0.15 per share, and 1991 income from continuing operations of
$12.0 million, or $0.18 per share. The Corporation's 1993 net income was $22.8
million, or $0.33 per share, compared with 1992 net income of $31.0 million, or
$0.45 per share, and a 1991 net loss of $151.7 million, or $2.26 per share.
Net income for 1992 included a credit of $22.3 million, or $0.32 per share, to
recognize the combined effect of changes in accounting for income taxes and
retiree medical benefits. Losses from discontinued businesses were $1.7
million and $168.8 million in 1992 and 1991, respectively. The 1991 results
included an extraordinary gain of $5.1 million related to the retirement of
Convertible Subordinated Debentures.
FINANCIAL COMPARABILITY AND OVERVIEW
During 1993, the Corporation expanded its operations through the acquisition of
manufacturing and distribution businesses in Canada. Properties acquired in
Canada were comprised of the lease of an anhydrous ammonia production and
upgrading facility located near Sarnia, Ontario and ownership interests in 32
farm service centers in Ontario, New Brunswick and Nova Scotia. Two of the
farm service centers are owned by the Corporation and 30 are operated by
companies in which the Corporation has a 50% ownership interest. The Canadian
properties, acquired as of March 31, 1993, contributed $98.3 million in
revenues and $8.9 million in net income to the Corporation's 1993 results.
The Corporation also purchased assets associated with 12 farm service centers
in Florida (Terra Asgrow) on December 31, 1993. This acquisition had no effect
on 1993 results of operations.
During 1992, the Corporation adopted Statement of Financial Accounting
Standards (SFAS) 106, "Employers' Accounting for Post-Retirement Benefits Other
than Pensions" and SFAS 109, "Accounting for Income Taxes." The cumulative
prior years' effect of these accounting changes as of January 1, 1992 was a
credit of $22.3 million, or $0.32 per share. The credit resulted principally
from the recognition of income tax benefits expected to be realized by the
Corporation from its net operating loss (NOL) and tax credit carryforwards.
The effect on 1992 income from continuing operations for these changes versus
the methods used in 1991 was a reduction of $7.2 million, or $0.10 per share.
As a result of the decision to focus on agribusiness as its sole operating
segment and a gain on the sale of remaining coal properties discontinued in
1990, the Corporation realized a $2.4 million gain on disposition of
discontinued
<PAGE> 3
3
operations in 1992. During 1991, the Corporation realized a loss of $170
million on the sale of its base metals segment for $87 million.
Operating results for 1992 and 1991 (there was no effect on operating results
for 1993) for the base metals, leasing, construction materials, beryllium and
gold businesses have been included in discontinued operations for all periods
presented and were as follows:
<TABLE>
<CAPTION>
(in thousands) 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Base metals $ --- $ 176,760
Leasing 5,915 8,285
Construction materials 27,809 29,429
- --------------------------------------------------------------------------------------------------------------
$ 33,724 $ 214,474
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Net income (loss) from operations:
Base metals $ --- $ (4,827)
Leasing (2,801) 3,760
Construction materials (825) (195)
Other (399) 2,454
- --------------------------------------------------------------------------------------------------------------
$ (4,025) $ 1,192
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
FACTORS THAT AFFECT OPERATING RESULTS
Factors that may affect the Corporation's future operating results include:
the number of planted acres; the types of crops planted; the effects general
weather patterns have on the timing and duration of field work for crop
planting and harvesting; the supply of crop inputs; the relative balance of
supply and demand for nitrogen fertilizers; the availability and cost of
natural gas; management's ability to control selling, general and
administrative expenses; and the availability and cost of financing sources to
fund seasonal working capital needs.
The number of planted acres and the types of crops planted are influenced by
government programs designed to manage carryover stocks and commodity prices of
certain crops. Due to the higher cost of crop inputs per acre for corn and
cotton, compared with other major crops, changes in corn and cotton acreages
have a more significant effect on the demand for the Corporation's products and
services than changes in other crops. Significant declines in corn carryover
stocks have lowered 1994 government corn acreage set-asides. As a result, and
assuming more favorable weather conditions than experienced during 1993, the
U.S.D.A. forecasts and the Corporation expects planted corn acreage to increase
from 74 million acres to 80 million acres in 1994.
Weather can have a significant effect on operations. Weather conditions that
delay or intermittently disrupt field work during the planting season may
result in fewer crop inputs being applied than normal and/or shift plantings to
crops with shorter growing seasons. Similar conditions following harvest may
delay or eliminate opportunities
<PAGE> 4
4
to apply fertilizers in the fall of the year. Weather can also have an adverse
effect on crop yields, which lowers the income of the Corporation's customers
and could impair their ability to pay for inputs purchased from the
Corporation. During 1993, excessive moisture through much of the Midwest
resulted in higher-than-normal unplanted acreage and fewer applications of crop
inputs. Soil moisture levels remain high in some Midwest areas and early
spring precipitation could disrupt field work during the 1994 planting season.
Reliable sources for supply of crop inputs at competitive prices are critical
to the distribution portion of the Corporation's business. The Corporation's
sources for fertilizer, agricultural chemicals and seed are typically basic
manufacturers of the products without an internal capability to distribute
products to the North American grower. The Corporation has entered into
purchase agreements which should ensure an adequate supply of products for its
grower and dealer customers through 1994.
Prices for manufactured fertilizers and feed products are influenced by the
world supply and demand balance for ammonia and nitrogen derivatives and may be
temporarily influenced by regional changes in supply and demand levels.
The principal raw material used to produce nitrogen fertilizer is natural gas.
Natural gas costs comprise almost 50 percent of the total costs and expenses
associated with Manufactured Fertilizer operations. The Corporation believes
there is sufficient supply of natural gas to allow stable costs over the
long-term and has entered into firm contracts to minimize the risk of
interruption or curtailment of natural gas supplies during the heating season.
At December 31, 1993, the Corporation had fixed prices for approximately 40% of
its 1994 natural gas requirements for its nitrogen fertilizer plants using
supply contracts or financial derivatives. During 1993, most of the natural
gas used at the Corporation's Courtright plant was obtained pursuant to fixed
price contracts that were considerably favorable compared with U.S. contracts.
The favorable gas supply contracts expired during the 1993 fourth quarter.
Compared with spot prices for natural gas, the Corporation estimates the
Courtright fixed price contracts reduced 1993 costs by $7.0 million.
The Corporation's business is highly seasonal with the majority of sales
occurring during the second quarter in conjunction with spring planting
activity. Due to the seasonality of the business and the relatively brief
periods products can be used by customers, the Corporation builds inventories
during the first quarter in order to ensure timely product availability during
the peak sales season. The Corporation's ability to purchase product at
off-season prices and carry inventory until periods of peak demand generally
contributes to gross profits. For its current level of sales, the Corporation
requires lines of credit to fund inventory increases as well as to support
customer credit terms. The Corporation believes that its revolving credit
facilities, approximating $156 million, which expire during 1995 are adequate
for expected 1994 sales levels.
<PAGE> 5
5
RESULTS OF CONTINUING OPERATIONS
1993 COMPARED WITH 1992
CONSOLIDATED RESULTS
The Corporation reported income from continuing operations of $22.8 million, or
$0.33 per share, on revenues of $1,238.0 million in 1993, compared with income
from continuing operations of $10.4 million, or $0.15 per share, on revenues of
$1,082.2 million in 1992. The 1993 results include nine months of operation of
the Canadian acquisition which added $98.3 million to revenues and $8.9 million
to income from continuing operations.
The Corporation's operations are classified into two major
categories--Distribution and Manufactured Fertilizer. The Distribution
category includes sales of products purchased from manufacturers and resold by
the Corporation. Distribution revenues are derived primarily from grower and
dealer customers through sales of chemicals, fertilizer, seed and related
services. The Manufactured Fertilizer category represents only those
operations directly related to wholesale sales of nitrogen fertilizer and feed
ingredients manufactured at the Corporation's Woodward, Port Neal and
Courtright (Canadian) facilities.
Total revenues and pretax income from continuing operations for the years ended
December 31, 1993 and 1992 by major operating category were as follows:
<TABLE>
<CAPTION>
Revenues Pretax Income
- --------------------------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distribution $ 1,019,438 $ 958,725 $ 16,903 $ 16,568
Manufactured Fertilizer 228,910 125,659 28,654 14,841
Other - net of intercompany eliminations (10,347) (2,193) 3,523 (877)
- --------------------------------------------------------------------------------------------------------------
Operating income 49,080 30,532
Non-operating expenses and net
interest expense (16,935) (12,346)
- --------------------------------------------------------------------------------------------------------------
Total from continuing operations $ 1,238,001 $ 1,082,191 $ 32,145 $ 18,186
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTION
Distribution revenues of $1.02 billion in 1993 increased $60.7 million from
1992 sales or 6.3%. Approximately $17.7 million of the sales increase
reflected a 3% increase in chemical sales, while the acquisition of the
Canadian business added $20.1 million of the sales increase, or 2.1%.
Distributed fertilizer sales increased $18.3 million and seed revenues
approximated 1992 levels. Revenue increases in 1993 were less than expected
due to weather conditions, especially the flooding and wet conditions in the
central United States, which reduced planted acres and input application rates.
Operating income for the Distribution business was $16.9 million in 1993,
compared with $16.6 million in 1992. The acquisition of the Canadian business
added $4.0 million to Distribution operating income. Domestic operating
<PAGE> 6
6
income included a $12.1 million increase in gross profits which was more than
offset by $15.8 million of higher direct selling expenses. The increase in
gross profits includes $5.4 million from higher sales volumes of chemicals as
well as margin improvements resulting primarily from the Corporation's
increased distribution of its Riverside proprietary brand products. Gross
profits increased $4.3 million due to higher sales volumes for distributed
fertilizer; gross profits related to sales of other products and services
increased $2.4 million. Increases in 1993 direct selling expenses from 1992
were primarily due to a $8.1 million increase in compensation costs, which
related principally to normal wage increases and additional personnel, and
increased equipment leasing, operating and maintenance expenses of $3.7 million
related to the increased number of locations and excessively wet field
conditions. Advertising and promotional expenditures increased $1.3 million
from 1992.
MANUFACTURED FERTILIZER
Domestic Manufactured Fertilizer revenues increased 20% to $150.7 million in
1993 from $125.7 million in 1992. In addition, the acquisition of the Canadian
plant added $78.2 million of manufactured fertilizer sales. Increased domestic
fertilizer sales volumes added 15% to revenues and higher selling prices for
nitrogen fertilizer and feed products increased revenues by 5%. The additional
sales volume and higher selling prices were principally the result of increased
demand for nitrogen solution fertilizers which were heavily used in the
shortened planting season.
Operating income for the Manufactured Fertilizer business in 1993 was $28.7
million, compared with $14.8 million in 1992. The Canadian plant contributed
$9.5 million to the increase in 1993 operating income. Higher domestic sales
volumes contributed $4.0 million to earnings for 1993. Expanded domestic
ammonia production and 1992 maintenance turnarounds on both domestic plants
improved 1993 gas conversion efficiency which added $2.0 million to operating
income while excess 1992 turnaround costs of $3.0 million were not repeated.
Higher selling prices for domestic production increased earnings by $6.6
million but were more than offset in 1993 by $11.3 million of cost increases
caused mainly by natural gas price increases.
OTHER OPERATING INCOME
Other operating income was $3.5 million in 1993, compared with a 1992 loss of
$.9 million, as the result of reversing $4.2 million of product liability
reserves expensed in 1989, reflecting the settlement of litigation with DuPont
over the fungicide, Benlate.
NON-OPERATING EXPENSES AND NET INTEREST EXPENSE
Non-operating expenses, which include corporate and unallocated expenses and
interest expense, net of interest income, totaled $16.9 million in 1993,
compared with $12.3 million in 1992. Corporate and unallocated expenses
increased $4.6 million in 1993 from 1992 as a result of additional interest
expense due to the November 1992 issuance of $30.0 million of unsecured notes
and short-term bond trading losses.
<PAGE> 7
7
INCOME TAXES
For 1993, the income tax provision rate was lower than statutory rates due to
the utilization of previously unrecognized capital loss carryforwards. For
federal income tax reporting purposes, the Corporation has remaining NOLs of
$55 million and tax credits of $1.7 million to offset taxable income and
regular tax liabilities, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During 1993, cash was provided primarily through operating activities and the
sale of assets discontinued in prior years and was utilized for two major
acquisitions, the continued upgrading of production facilities, funding of
sales growth and repayment of debt.
Cash was used to fund increases in accounts receivable of $50.8 million and
inventory of $46.4 million, including $26.8 million in accounts receivable and
$30.1 million in inventory related to acquisitions. Higher fourth quarter 1993
sales than in 1992 caused the majority of the remaining increase in the
accounts receivable balance. The remaining increases in inventory resulted
from off-season purchases to obtain discounts, increased crop protection
chemicals stocked under the Corporation's Riverside label and higher fertilizer
inventory in anticipation of seasonal price increases.
Asset sales during 1993 generated $24.4 million, including $18.5 million from
the sale of the construction materials business and $5.9 million from the sale
of the remaining leasing business. Asset sales generated $23.1 million of cash
during 1992, which included $12.0 million from the sale of coal properties and
$10.0 million from the sale of a leasing subsidiary.
The 1993 Canadian acquisition was funded through an operating lease for the
production facilities and $19.9 million in cash. A $35 million Canadian dollar
revolving credit facility is available to provide for their working capital
needs. The Terra Asgrow (Florida) purchase was closed December 31, 1993 with
$31.0 million paid from available cash. Payments for the Canadian and Florida
acquisitions included $20.5 million for non-current assets.
Purchases of property, plant and equipment totaled $21.6 million in 1993
compared with $17.6 million in 1992. Except for $6.9 million spent for a
methanol manufacturing plant at the Woodward, Oklahoma facility, the 1993
capital expenditures were for routine replacements of property, plant and
equipment and service center expansions. The Corporation expects 1994 capital
expenditures to approximate $27 million, of which $8 million relates to
completing the methanol manufacturing plant. The remaining $19 million of
capital expenditures will be used for routine replacements of property, plant
and equipment, expansion of service centers, and efficiency improvements at the
fertilizer production plants.
<PAGE> 8
8
Repayment of long-term debt during 1993 and 1992 was limited to scheduled
repayments. Consolidated debt, including the portion due within one year, as a
percentage of total capital was 35% at December 31, 1993 and 38% as of December
31, 1992. During 1992, the Corporation issued $30 million of long-term debt
through a private placement to be used for general operating purposes.
In July 1993, the Board of Directors authorized a share repurchase program for
up to 2.0 million shares. During 1993, 106,900 shares were repurchased for
$0.5 million. In November 1993, the Board of Directors declared a $0.02 per
share regular quarterly dividend. This will represent a 1994 cash outlay of
$5.6 million, which will be funded from current operations.
The ratio of current assets to current liabilities at December 31, 1993 was
2.1, unchanged from December 31, 1992. The Corporation's current ratio will
generally decline through June as seasonal increases in inventories and
receivables are funded by increases in current liabilities.
Current financial resources are expected to be adequate to meet normal
requirements during 1994. Cash balances at December 31, 1993 were $65.1
million, of which $13.0 million is used to collateralize letters of credit
supporting recorded liabilities. The Corporation has a $130 million revolving
credit facility to fund seasonal increases in inventories and receivables. The
facility expires December 31, 1995. Credit agreements outstanding at December
31, 1993 contain certain restrictions, which are described in Notes 8 and 10 to
the Consolidated Financial Statements. In addition, these agreements restrict
the transfer of cash and other assets from certain operating subsidiaries to
the Corporation.
The Corporation plans to grow internally and through acquisitions. Management
believes the present working capital position combined with projected cash
flows and available borrowing capacity will be sufficient to meet anticipated
cash requirements for operating needs, capital expenditures and expansion
strategies.
RESULTS OF CONTINUING OPERATIONS
1992 COMPARED WITH 1991
CONSOLIDATED RESULTS
Income from continuing operations was $10.4 million, or $0.15 per share, for
1992 compared with $12.0 million, or $0.18 per share, for 1991. The 1992
income tax provision was $6.7 million higher than in 1991 primarily as the
result of the Corporation's change in accounting for income taxes. The
Corporation recorded 1992 income from continuing operations before income taxes
of $18.2 million compared with $13.1 million in 1991. Total revenues were
$1,082.2 million in 1992 compared with $1,022.6 million in 1991.
<PAGE> 9
9
Total revenues and pretax income from continuing operations for the years ended
December 31, 1992 and 1991 by major operating category were as follows:
<TABLE>
<CAPTION>
Revenues Pretax Income
- --------------------------------------------------------------------------------------------------------------
(in thousands) 1992 1991 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distribution $ 958,725 $ 899,250 $ 16,568 $ 9,991
Manufactured Fertilizer 125,659 126,664 14,841 26,703
Other - net of intercompany eliminations (2,193) (3,317) (877) (2,085)
- --------------------------------------------------------------------------------------------------------------
Operating income 30,532 34,609
Non-operating expenses and net
interest expense (12,346) (21,503)
- --------------------------------------------------------------------------------------------------------------
Total from continuing operations $ 1,082,191 $ 1,022,597 $ 18,186 $ 13,106
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTION
Distribution revenues of $958.7 million in 1992 increased $59.4 million from
1991 sales of $899.3 million. Chemical sales increased $64.7 million, or 11%,
during 1992 principally as the result of increased sales volumes in the market
area that covers Mississippi, Arkansas, Tennessee, Louisiana and portions of
Missouri. Within this market area, demand for cotton insecticide showed the
largest increase. Retail fertilizer volumes increased $14.1 million, or 7%, in
1992 due to increased application rates and market share growth. Total
distributed fertilizer sales declined, however, due to the expiration of a
dealer supply agreement for phosphate fertilizers and a 4% reduction in selling
prices. Seed sales increased $4.6 million, or 10%, over 1991 levels.
Operating income for the Distribution business was $16.6 million in 1992,
compared with $10.0 million in 1991. The increase in 1992 operating income
reflected a $12.4 million increase in gross profits offset by a 5%, or $5.8
million, increase in direct selling expenses. The higher gross profits
resulted primarily from increased sales volumes as overall gross margins
approximated 1991 levels. Increases in 1992 direct selling expenses from 1991
were primarily due to a $4.7 million increase to compensation costs that
reflected normal wage increases, higher medical benefit costs and added
headcount. Expenses compared with 1991 also increased by $1.0 million as the
result of the accounting change to recognize retiree medical costs over the
employee's service period.
MANUFACTURED FERTILIZER
Manufactured Fertilizer revenues totaled $125.7 million in 1992 compared with
$126.7 million in 1991. Selling prices for fertilizer and feed ingredients
manufactured by the Corporation declined by $2.3 million, or 2%, in 1992 due
primarily to a higher proportion of off-season sales of ammonia, when prices
are generally lower. The pricing reductions were partially offset by increased
ammonia volumes.
Operating income for Manufactured Fertilizer operations declined $11.9 million
to $14.8 million in 1992 from $26.7 million in 1991. Lower selling prices
combined with a 10% increase in natural gas costs reduced 1992 operating income
by $7.5 million. Natural gas costs increased significantly over 1991 levels
during the last six months of
<PAGE> 10
10
1992 as the result of lower industry-wide inventories and increased regulatory
tariffs. Manufacturing costs for 1992 were also increased by $3.0 million for
higher-than-anticipated costs of maintenance turnarounds at both nitrogen
production facilities. Manufacturing costs for 1991 were reduced $1.3 million
by insurance proceeds.
NON-OPERATING EXPENSES AND NET INTEREST EXPENSE
Non-operating expenses, which include corporate and unallocated expenses and
interest expense, net of interest income, totaled $12.3 million in 1992
compared with $21.5 million in 1991. Corporate and unallocated expenses
declined to $4.8 million in 1992 from $8.9 million in 1991 primarily as the
result of the August 1991 closing of the New York corporate office. Interest
expense was reduced from $14.4 million in 1991 to $10.6 million in 1992 due to
lower seasonal borrowings, the retirement of $31.4 million of Convertible
Subordinated Debentures during the last half of 1991, scheduled debt repayments
and lower interest rates. Interest income increased to $3.1 million in 1992
from $1.8 million in 1991 due to higher average cash balances as the result of
1991 asset sales.
<PAGE> 11
11
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(in thousands) At December 31,
- -------------------------------------------------------------------------------------------------------------------
1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and short-term investments $ 65,102 $ 121,789
Accounts receivable, less allowance for doubtful
accounts of $5,788 and $6,427 122,774 71,995
Inventories 244,995 198,621
Deferred tax asset - current 26,011 22,660
Other current assets 10,586 7,611
- -------------------------------------------------------------------------------------------------------------------
Total current assets 469,468 422,676
- -------------------------------------------------------------------------------------------------------------------
Equity and other investments 2,218 480
Property, plant and equipment, net 110,670 91,969
Deferred tax asset - non-current 24,742 23,599
Net assets of discontinued operations 3,488 32,369
Other assets 23,896 9,099
- -------------------------------------------------------------------------------------------------------------------
Total assets $ 634,482 $ 580,192
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES
Debt due within one year $ 9,636 $ 12,508
Accounts payable 99,886 86,941
Accrued and other liabilities 128,659 107,410
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 238,181 206,859
- -------------------------------------------------------------------------------------------------------------------
Long-term debt 119,061 121,171
Deferred income taxes 451 ---
Other liabilities 33,809 30,686
Commitments and contingencies (Note 11) --- ---
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 391,502 358,716
- -------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock
Common Shares, authorized 114,375 shares;
69,455 and 65,346 shares outstanding 1993 and 1992, respectively 122,257 83,931
Trust Shares, authorized 16,500 shares;
none and 4,010 shares outstanding 1993 and 1992, respectively --- 22,312
Paid-in capital 516,128 531,609
Cumulative translation adjustment (488) ---
Accumulated deficit (394,917) (416,376)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 242,980 221,476
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 634,482 $ 580,192
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE> 12
12
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(in thousands, except per-share amounts) Year ended December 31,
- -------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $ 1,212,510 $1,062,045 $ 1,003,766
Other income, net 25,491 20,146 18,831
- -------------------------------------------------------------------------------------------------------------------
1,238,001 1,082,191 1,022,597
- -------------------------------------------------------------------------------------------------------------------
COST AND EXPENSES
Cost of sales 1,021,187 904,246 849,684
Depreciation and amortization 15,470 14,994 14,399
Selling, general and administrative expense 161,791 137,232 132,845
Equity in unconsolidated affiliates (2,275) --- ---
Interest income (3,261) (3,084) (1,789)
Interest expense 12,944 10,617 14,352
- -------------------------------------------------------------------------------------------------------------------
1,205,856 1,064,005 1,009,491
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 32,145 18,186 13,106
Income tax provision 9,300 7,757 1,073
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations 22,845 10,429 12,033
Loss from discontinued operations:
(Loss) income from operations, net of taxes --- (4,025) 1,192
Gain (loss) on disposition, net of taxes --- 2,360 (170,000)
- -------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary items and
cumulative effect of accounting changes 22,845 8,764 (156,775)
Extraordinary gain on early retirement of debt --- --- 5,115
Cumulative effect of accounting changes --- 22,265 ---
- -------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 22,845 $ 31,029 $ (151,660)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 69,064 69,103 67,103
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE:
Continuing operations $ 0.33 $ 0.15 $ 0.18
Discontinued operations --- (0.02) (2.51)
- -------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary items 0.33 0.13 (2.33)
Extraordinary gain on early retirement of debt --- --- 0.07
Cumulative effect of accounting changes --- 0.32 ---
- -------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 0.33 $ 0.45 $ (2.26)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE> 13
13
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands) Year ended December 31,
- -------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 22,845 $ 31,029 $ (151,660)
Adjustments to reconcile income from
continuing operations to net cash (used in)
provided by operating activities:
Depreciation and amortization 15,470 14,994 14,399
Income taxes 5,500 6,313 (345)
Cumulative effect of accounting changes --- (22,265) ---
Loss from discontinued operations --- 1,665 168,808
Gain on early retirement of debt --- --- (5,115)
Unfunded retiree medical costs 723 1,161 ---
Equity in unconsolidated affiliates (2,275) --- ---
Other non-cash items 713 --- ---
Change in current assets and liabilities, excluding
working capital purchased/sold:
Accounts receivable (24,540) (1,764) (30,847)
Inventories (6,718) (32,136) (30,452)
Other current assets (2,893) (875) 917
Accounts payable (9,945) (2,071) 12,693
Accrued and other liabilities 2,452 38 20,048
Other (2,354) 684 (4,891)
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (1,022) (3,227) (6,445)
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from asset sales 24,391 23,065 124,983
Discontinued operations 5,630 (5,504) (42,755)
Purchase of property, plant and equipment (21,620) (17,620) (12,728)
Acquisitions (58,260) --- ---
Dividends of unconsolidated affiliates 537 --- ---
- -------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (49,322) (59) 69,500
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term borrowings 7,313 --- ---
Retirement of convertible debentures --- --- (14,430)
Proceeds from issuance of long-term debt 250 30,000 ---
Principal payments on long-term debt (12,545) (5,842) (5,832)
Dividends (1,386) --- ---
Stock issuance/repurchase - net 513 --- ---
- -------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (5,855) 24,158 (20,262)
- -------------------------------------------------------------------------------------------------------------------
Foreign Exchange Effect on Cash and
Short-Term Investments (488) --- ---
- -------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND
SHORT-TERM INVESTMENTS (56,687) 20,872 42,793
- -------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF YEAR 121,789 100,917 58,124
- -------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT
END OF YEAR $ 65,102 $ 121,789 $ 100,917
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
INTEREST PAID $ 11,800 $ 10,400 $ 14,700
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TAXES PAID $ 3,800 $ 6,000 $ 1,100
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE> 14
14
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Common Class A Trust Paid-In Translation Accumulated
(in thousands) Shares Shares Shares Capital Adjustment Deficit Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1990 $ 52,203 $ 17,898 $ 28,821 $ 527,607 $ (8,823) $ (295,745) $ 321,961
Exchange of HBMS Special
Shares 1,366 --- (796) (570) --- --- ---
Translation adjustment --- --- --- --- 8,823 --- 8,823
Retirement of convertible
debentures 2,626 --- --- 8,533 --- 5,115 16,274
Conversion of Class A Shares 17,898 (17,898) --- --- --- --- ---
Stock Incentive Plan 4 --- --- 9 --- --- 13
Net Loss --- --- --- --- --- (156,775) (156,775)
- --------------------------------------------------------------------------------------------------------------------
December 31, 1991 74,097 --- 28,025 535,579 --- (447,405) 190,296
Exchange of HBMS Special Shares 9,791 --- (5,713) (4,078) --- --- ---
Exercise of stock options 36 --- --- 95 --- --- 131
Stock Incentive Plan 7 --- --- 13 --- --- 20
Net Income --- --- --- --- --- 31,029 31,029
- --------------------------------------------------------------------------------------------------------------------
December 31, 1992 83,931 --- 22,312 531,609 --- (416,376) 221,476
Exchange of HBMS Special Shares 38,213 --- (22,312) (15,901) --- --- ---
Exercise of stock options 213 --- --- 767 --- --- 980
Stock repurchase (107) --- --- (360) --- --- (467)
Translation adjustment --- --- --- --- (488) --- (488)
Stock Incentive Plan 7 --- --- 13 --- --- 20
Dividends --- --- --- --- --- (1,386) (1,386)
Net Income --- --- --- --- --- 22,845 22,845
- ---------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1993 $122,257 $ --- $ --- $ 516,128 $ (488) $ (394,917) $ 242,980
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE> 15
15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation:
The Consolidated Financial Statements include the accounts of Terra Industries
Inc., formerly Inspiration Resources Corporation, and all majority-owned
subsidiaries (the Corporation).
Operating results and, where appropriate, other data presented for prior years
have been reclassified to reflect discontinued operations described in Note 4.
Business segment:
The Corporation operates in the agribusiness industry through its wholly owned
subsidiary, Terra International, Inc., a marketer and producer of fertilizer,
crop protection products, seed and services for agriculture.
Foreign Exchange:
Results of operations for the Canadian subsidiary are translated using average
currency exchange rates during the period, while assets and liabilities are
translated using current rates. Resulting translation adjustments are recorded
as currency translation adjustments in stockholders' equity.
Cash and short-term investments:
The Corporation considers short-term investments with an original maturity of
three months or less to be cash equivalents which are reflected at their
approximate fair value.
Inventories:
Inventories are stated at the lower of cost or estimated net realizable value.
The cost of inventories is determined using the first-in, first-out method.
Property, plant and equipment:
Expenditures for plant and equipment additions, replacements and major
improvements are capitalized. Related depreciation is charged to expense on a
straight-line basis over estimated useful lives. Maintenance and repair costs
are expensed as incurred.
Reclassifications:
Certain reclassifications have been made to prior years' financial statements
to conform with current year presentation.
Per-share results:
Earnings-per-share data are based on the weighted average number of Common
Shares that would become outstanding after allowing for the full exchange of
Hudson Bay Mining and Smelting Co., Limited Special Shares held by the public
and exercise of outstanding stock options. All previously unexchanged Special
Shares were automatically exchanged for Common Shares of the Corporation on
July 6, 1993. The dilutive effect of the Corporation's outstanding restricted
shares, stock options and convertible debentures was not significant.
2. ACQUISITIONS
On April 8, 1993, a wholly owned subsidiary of the Corporation, Terra
International (Canada) Inc. (Terra Canada) acquired rights to an anhydrous
ammonia manufacturing plant and related upgrading facilities (the nitrogen
plant) located at Courtright, Ontario effective as of March 31, 1993. In
addition, Terra Canada purchased working capital associated with the nitrogen
plant and interests in 32 farm service centers operating under the trademark,
Agromart(TM). All but two
<PAGE> 16
16
of the Agromarts(TM) are owned by corporations in which Terra Canada has a 50%
interest, and the remaining 50% interests are owned by local management and
other investors. The remaining two Agromarts(TM) are wholly owned by Terra
Canada. The amount paid in connection with the transaction was approximately
$73 million (Cdn) of which approximately $47 million (Cdn) was provided through
lease financing and the remainder was funded by a working capital line of
credit and cash.
On December 31, 1993, Terra International, Inc. purchased net assets of certain
operations of Asgrow Florida Company, Inc. (Terra Asgrow Florida), a
distributor of fertilizer, chemicals and seed, for $39 million. Terra Asgrow
Florida operates 12 distribution centers and is a supplier to the vegetable and
ornamental markets, mostly in Florida. The amount paid at closing was
approximately $31 million which was provided from available cash.
Terra Canada's operating results from the date of acquisition are included in
the Consolidated Statements of Income. The following represents unaudited pro
forma summary results of operations as if both acquisitions had occurred at the
beginning of 1992:
<TABLE>
<CAPTION>
(in thousands, except per-share data) Year Ended December 31
- -----------------------------------------------------------------------------------------------------------------
1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 1,351,000 $ 1,282,800
Income before extraordinary items and
cumulative effect of accounting changes $ 25,500 $ 14,300
Net income $ 25,500 $ 36,600
Net income per share $ 0.37 $ 0.53
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The pro forma operating results were adjusted to include lease expense rather
than depreciation for the nitrogen plant, increased costs of seed sales,
amortization of intangibles, interest expense on the acquisition borrowings and
the effect of income taxes.
The pro forma information listed above does not purport to be indicative of the
results that would have been obtained if the operations were combined during
the above period. In addition, they are not intended to be a projection of
future operating results or trends.
3. ACCOUNTING CHANGES
In 1992, the Corporation adopted Statement of Financial Accounting Standard
(SFAS) 106, "Employers Accounting for Post-Retirement Benefits Other than
Pensions" and SFAS 109, "Accounting for Income Taxes." In connection with the
adoption of SFAS 106, the Corporation elected to recognize immediately the
prior service cost of providing post-retirement medical benefits during the
active service of the employee. This resulted in a one-time charge of $5.7
million, net of income taxes of $3.5 million. Net income from continuing
operations for 1992 was reduced $0.7 million from that which would have been
reported under the Corporation's previous accounting method. The pro forma
effect of the change on prior years is not determinable. Prior to 1992, the
Corporation recognized expense in the period the benefits were paid. These
benefit costs were not significant in 1991.
Accounting for income taxes under SFAS 109 requires recognition of deferred tax
assets and liabilities for the effect of future tax consequences of events
recognized in the Corporation's financial statements or tax returns. SFAS 109
requires the Corporation to recognize the income tax benefit of operating loss
and tax credit carryforwards expected to be realized; such recognition was
prohibited under SFAS 96, the Corporation's previous method of accounting for
income taxes. A $28.0 million credit was recorded as the effect at January 1,
1992 of a change in accounting principle. Income tax expense from continuing
operations was increased $6.5 million for 1992 pursuant to SFAS 109.
<PAGE> 17
17
4. DISCONTINUED OPERATIONS
During 1993, the Corporation sold the leasing business and the construction
materials businesses, discontinued in 1992.
As of December 31, 1992, the Corporation's Board of Directors approved plans to
sell the leasing and construction materials businesses as well as equity
interests in a copper alloy producer, an undeveloped beryllium mine property
and its gold mining affiliate. As a result of this decision and a gain on the
sale of remaining coal properties, discontinued in 1990, the Corporation
realized a $2.4 million gain on disposition of discontinued operations during
1992.
During the 1991 third quarter, the Corporation sold its interests in its base
metals segment consisting of Hudson Bay Mining and Smelting Co., Limited (HBMS)
and related metals marketing and trading operations. The base metals segment
was sold to Minorco, the Corporation's majority stockholder, for $87 million.
The Corporation recognized a $170 million loss on the disposal of the base
metals segment.
Financial results of the base metals, coal, leasing and other discontinued
businesses for 1993 have been applied against their respective reserves and
1992 and 1991 amounts have been included in discontinued operations and are as
follows:
<TABLE>
<CAPTION>
(in millions) 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Base metals $ -- $ 176.8
Leasing 5 .9 8.3
Construction materials 27.8 29.4
- -------------------------------------------------------------------------------------------------------------------
$ 33.7 $ 214.5
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from operations,
net of income taxes:
Base metals $ -- $ (4.8)
Leasing (2.8) 3.8
Construction materials (0.8) (0.2)
Other (0.4) 2.4
- -------------------------------------------------------------------------------------------------------------------
$ (4.0) $ 1.2
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
5. RELATIONSHIP WITH MAJORITY STOCKHOLDER
Minorco, through its beneficial ownership of Common Shares, owns approximately
53 percent of the equity of the Corporation. In 1992, the Corporation
discontinued its remaining operations in the gold mining business conducted
through its 50 percent interest in Western Gold Exploration and Mining Company,
Limited Partnership (WestGold). The remaining 50 percent interest is owned by
Minorco. During 1991, the Corporation sold its base metals segment to Minorco
as described in Note 4. The Corporation subleases office space to Minorco,
procures certain insurance coverages for Minorco and related companies and
shares the cost of an executive of both organizations. Payments in settlement
of these services are made on an ongoing basis.
6. INVENTORIES
Inventories consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 22,983 $ 14,770
Finished goods 222,012 183,851
- -------------------------------------------------------------------------------------------------------------------
Total $ 244,995 $ 198,621
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
18
7. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 66,343 $ 59,589
Plant and equipment 179,095 152,766
- -------------------------------------------------------------------------------------------------------------------
245,438 212,355
Less accumulated depreciation
and amortization (134,768) (120,386)
- -------------------------------------------------------------------------------------------------------------------
Total $ 110,670 $ 91,969
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
8. DEBT DUE WITHIN ONE YEAR
Debt due within one year consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings $ 7,313 $ ---
Current maturities of long-term debt 2,323 12,508
- -------------------------------------------------------------------------------------------------------------------
Total $ 9,636 $ 12,508
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation has short-term domestic bank lines of credit consisting of a
$130 million revolving credit facility, which is used primarily to provide for
domestic seasonal working capital needs, a $26.2 million ($35 million Cdn)
revolving credit facility used to provide for working capital needs for its
Canadian operations, and a $15 million uncommitted line for working capital
needs. There was $7.3 million outstanding at December 31, 1993 under the
Canadian facility. Interest on borrowings under these lines is charged at
current market rates.
Under both the domestic and Canadian facility, the Corporation has agreed,
among other things, to maintain certain levels of working capital and net
worth, adhere to maximum debt leverage limitations and restrict payments to the
Corporation from operating subsidiaries. The Corporation's $130 million
revolving credit agreement expires December 31, 1995. A commitment fee of 1/4
percent is paid on the unused portion of the facility, and no borrowings were
outstanding at December 31, 1993. The Corporation's $35 million (Cdn)
revolving credit agreement expires January 5, 1995 and is renewable every 120
days for a 360-day term. A commitment fee of 1/8 percent is paid on the
facility. The Corporation's $15.0 million line is subject to periodic review
and may be withdrawn by the bank at any time.
9. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Customer deposits $ 50,714 $ 41,714
Payroll and benefit costs 17,072 15,167
Income taxes 17,025 9,551
Other 43,848 40,978
- -------------------------------------------------------------------------------------------------------------------
Total $ 128,659 $ 107,410
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 19
19
10. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
8.5% Convertible Subordinated Debentures,
due 2012 $ 72,057 $ 72,057
Unsecured Senior Notes, 8.48%, due 2005 30,000 30,000
Industrial Development Revenue Bonds
bearing interest at an average 6.78% with
increasing payments from 1994 to 2011 9,355 9,485
Industrial Development Revenue Bonds
bearing a variable interest rate repaid December, 1993 --- 5,000
Unsecured Notes, 8.75% to 9.63%,
due 1996 to 1998 8,500 10,500
Bank Note, floating rate repaid January, 1993 --- 5,258
Other 1,472 1,379
- -------------------------------------------------------------------------------------------------------------------
121,384 133,679
Less current maturities (2,323) (12,508)
- -------------------------------------------------------------------------------------------------------------------
Total $ 119,061 $ 121,171
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Estimated Fair Value $ 121,500 $ 121,000
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Scheduled principal payments for each of the five years 1994 through 1998 are
$2.3 million, $2.3 million, $2.8 million, $1.3 million and $6.5 million,
respectively.
The Corporation's 8.5 percent Convertible Subordinated Debentures (Debentures)
are convertible into Common Shares any time prior to maturity, unless
previously redeemed, at a conversion price of $8.083 per share. The Debentures
are subject to redemption, upon not less than 20 days notice by mail, at any
time, as a whole or in part, at the election of the Corporation. The
redemption price, expressed as a percent of the principal amount of the
Debentures to be redeemed, is 103.40% until May 31, 1994, 102.55% until May 31,
1995 and decreasing yearly thereafter to 100% at June 1, 1997.
During 1992, the Corporation entered into a long-term note purchase agreement
of $30 million in 8.48 percent Senior Notes requiring semi-annual payments
through May 1, 2005. The Corporation has executed interest rate swap
agreements to convert one-half of these notes to LIBOR-based floating rate
instruments. The interest rate agreements became effective on April 15, 1993
and terminates on April 15, 2003. The debt agreement includes covenants
similar to the Revolving Credit Agreement described in Note 8 and a requirement
for rental and interest obligations coverage.
The Industrial Development Revenue Bonds due in 2011 are secured by a letter of
credit guaranteed by the Corporation and, along with other long-term debt due
in 2003, by the Corporation's headquarters building located in Sioux City,
Iowa.
The fair value of long-term debt was established by reference to the
public exchange market for the publicly traded long-term securities of the
Corporation and consideration of redemption provisions. Estimates of fair
value developed by the Corporation were utilized for other long-term debt.
<PAGE> 20
20
11. COMMITMENTS AND CONTINGENCIES
The Corporation and its subsidiaries are committed to various non-cancelable
operating leases for agricultural equipment, and office, production, and
storage facilities expiring on various dates through 2001. Total minimum
rental payments are as follows:
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
1994 $ 25,178
1995 21,329
1996 16,998
1997 11,244
1998 and thereafter 5,061
- -------------------------------------------------------------------------------------------------------------------
Total $ 79,810
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation entered a lease financing agreement in connection with the
purchase of an ammonia manufacturing plant and related upgrading facilities
located near Sarnia, Ontario. The agreement is for a four-year term requiring
annual lease payments of approximately $4.0 million (Cdn). Terra Canada has an
option to purchase the nitrogen plant during the term of the lease and at
expiration for approximately $47 million (Cdn). If, at the end of the lease
term, Terra Canada elects not to exercise its purchase option, the Corporation
must pay to the lessor approximately $40 million (Cdn), subject to
reimbursement based on the proceeds realized upon the sale of the nitrogen
plant by the lessor. Terra Canada has entered into certain agreements in order
to convert its obligations with respect to the nitrogen plant set forth above
from Canadian dollar and fixed rental obligations to U.S. dollar and variable
rental obligations based on interest rate changes tied to LIBOR.
Total rental expense under all leases, including short-term cancelable
operating leases, was approximately $24.7 million, $19.4 million and $18.9
million for the years ended December 31, 1993, 1992 and 1991, respectively.
In 1988, the Corporation formulated a fungicide for E. I. DuPont de Nemours and
Company ("DuPont") at the Blytheville facility. The fungicide was recalled and
claims in excess of $90 million, plus punitive damages, have been filed by
third parties alleging damages from product use. During 1993, the Corporation
reached a settlement with DuPont whereby DuPont will assume responsibility for
all related pending product claims and will reimburse the Corporation for
claims previously settled and not reimbursed by insurers. As a result of this
settlement, reserves established in 1989 to cover expected recall and claims
costs will not be required. Accordingly, the Corporation reduced 1993 costs in
the fourth quarter by $4.2 million, the remaining amount of such reserves.
A subsidiary of the Corporation has been notified by the United States
Environmental Protection Agency (EPA) that it is a potentially responsible
party (PRP) in the Matter of Valley Chemical Site, Greenville, Mississippi.
Ten other companies have also been named as PRPs. Based on discussions with
the EPA and review of information from other PRPs, the Corporation believes its
responsibility is limited to a portion of material removal costs which should
not be significant to its operating results.
The Corporation is contingently liable for retiree medical benefits of
employees of coal mining operations sold on January 12, 1993. Under the
purchase agreement, the purchaser agreed to indemnify the Corporation against
its obligations under certain employee benefit plans. Due to the Coal Industry
Retiree Health Benefit Act of 1992, certain retiree medical benefits of union
coal miners have become statutorily mandated, and all companies owning 50
percent or more of any company liable for such benefits as of certain specified
dates becomes liable for such benefits if the company directly liable is unable
to pay them. As a result, if the purchaser becomes unable to pay its retiree
medical obligations assumed pursuant to the sale, the Corporation may have to
pay such amount. The Corporation has estimated that the present value of
liabilities for which it retains contingent responsibility approximates $12
million at December 31, 1993. In the event the Corporation would be required
to assume this liability, mineral reserves associated with the sold coal
subsidiary would revert to the Corporation.
<PAGE> 21
21
The Corporation and certain of its subsidiaries are involved in the above
mentioned and various other legal actions and claims, including environmental
matters, arising from the normal course of business. Although it is not
possible to predict with any certainty the outcome of such matters, it is the
opinion of management that these matters will not have a material adverse
effect on the Corporation.
12. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
FINANCIAL INSTRUMENTS - The Corporation enters into foreign exchange forward
and option contracts to manage exposure to currency fluctuations. These
agreements are entered as designated hedges of fixed obligations and hedges of
net foreign currency transaction exposures. At December 31, 1993, the notional
amounts for all foreign exchange forward and foreign currency option contracts
totaled $98.2 million. These amounts are a reflection of the extent of such
activity and are disclosed for informational purposes only. They do not
indicate the significantly smaller credit or economic risks involved in these
agreements.
These contracts had a carrying amount of $0.1 million and a fair value of $0.9
million. Fair value of foreign exchange forward contracts is based on
quotations received from a quotation service and on computations prepared by
the Corporation which are based on current rates of exchange. Maturities,
which are consistent with the settlement dates of items being hedged, extend
through April 1997. The gains and losses on these contracts are deferred and
included as a component of the related transaction.
The Corporation fixes some natural gas supply prices through the use of swap
agreements and financial derivatives. The Corporation had gas contracts with a
computed value of $24.7 million and a fair value of $24.2 million based on
contract prices and rates in effect at December 31, 1993. Gains and losses on
futures contracts and swap agreements are credited or charged to manufacturing
cost in the month to which the hedged transaction relates.
At December 31, 1993, the Corporation had letters of credit outstanding
totaling $19.5 million, guaranteeing various insurance and financing
activities. Short-term investments of $13.0 million at December 31, 1993 and
1992 are restricted to collateralize certain of the letters of credit.
The Corporation enters into the above agreements with a limited number of major
international financial institutions. The Corporation does not expect any
losses from credit exposure due to review and control procedures established by
corporate policy.
CONCENTRATIONS OF CREDIT RISK - The Corporation is subject to credit risk
through trade receivables and short-term investments. Although a substantial
portion of its debtors' ability to pay is dependent upon the agribusiness
economic sector, credit risk with respect to trade receivables is minimized due
to a large customer base and its geographic dispersion. Short-term cash
investments are placed with well capitalized, high quality financial
institutions and in short duration corporate and government debt securities
funds. By policy, the Corporation limits the amount of credit exposure in any
one type of investment instrument.
13. STOCKHOLDERS' EQUITY
The Corporation allocates $1.00 per share upon the issuance of Common Shares to
the Common Share capital account.
On July 6, 1993, the outstanding HBMS Special Exchangeable Non-Voting Shares
(HBMS Special Shares) were each automatically exchanged for one Common Share of
the Corporation. Through the Corporation's Trust Shares, each HBMS Special
Share had a vote equivalent to one Common Share of the Corporation. For Common
Shares issued upon the exchange of HBMS Special Shares subsequent to August 31,
1986, the Corporation allocated $9.53 per share to the Common Share capital
account, representing the average historical capitalization of the HBMS Special
Shares.
<PAGE> 22
22
In 1992, the Corporation issued 375,500 restricted Common Shares under its 1992
Stock Incentive Plan to certain key employees of the Corporation. During 1993
an additional 38,500 shares were issued and 45,500 shares were forfeited. At
December 31, 1993, 368,500 of the unvested shares remain outstanding. Under
terms of the issuance, vesting of stock granted is contingent upon the
attainment, prior to March 1999, of pre-established market price objectives for
the Corporation's shares and/or, for approximately 31 percent of participants,
specified regional or divisional three-year operating profit objectives. In
1991, the Corporation issued 33,300 restricted Common Shares under its 1987
Stock Incentive Plan. The agreement restricts the shares to vesting in equal
annual installments over five years. The shares issued are entitled to normal
voting rights and earn dividends as declared during the performance periods.
Compensation expenses are accrued on ratable bases through the performance
periods.
The Corporation has authorized 16,500,000 Trust Shares for issuance. All Trust
Shares previously outstanding were cancelled in July 1993.
In addition to the Common and Trust Shares, the Corporation has authorized
19,125,000 Class A Shares for issuance. All Class A Shares previously
outstanding were converted to Common Shares in 1991.
A summary of changes in the Corporation's outstanding capital stock follows:
<TABLE>
<CAPTION>
Common Class A Trust Total
(in thousands) Shares Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1990 43,207 17,898 5,181 66,286
Exchanges of HBMS Special Shares 144 --- (144) ---
Retirement of Convertible Debentures 2,626 --- --- 2,626
Conversion of Class A Shares 17,898 (17,898) --- ---
Stock Incentive Plan 33 --- --- 33
- -------------------------------------------------------------------------------------------------------------------
December 31, 1991 63,908 --- 5,037 68,945
Exchange of HBMS Special Shares 1,027 --- (1,027) ---
Exercise of stock options 36 --- --- 36
Stock Incentive Plan 375 --- --- 375
- -------------------------------------------------------------------------------------------------------------------
December 31, 1992 65,346 --- 4,010 69,356
Exchange of HBMS Special Shares 4,010 --- (4,010) ---
Exercise of stock options 213 --- --- 213
Repurchase of shares (107) --- --- (107)
Stock Incentive Plan (7) --- --- (7)
- -------------------------------------------------------------------------------------------------------------------
December 31, 1993 69,455 --- --- 69,455
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1993, 12.5 million Common Shares were reserved for issuance
upon award of restricted shares, exercise of employee stock options and
conversion of convertible debentures.
14. STOCK OPTIONS
The Corporation's 1992 Stock Incentive Plan authorized granting key employees
options to purchase Common Shares at not less than fair market value on the
date of grant and also authorizes the award of performance units and restricted
shares. The Corporation's 1983 Stock Option Plan and 1987 Stock Incentive Plan
authorized granting key employees similar options to purchase Common Shares.
No further options may be granted under the 1983 and 1987 Plan. Awards to a
maximum of 2.5 million Common Shares may be granted under the 1992 Plan.
Options generally may not be exercised prior to one year or more than ten years
from the date of grant. At December 31, 1993, 1,763,500 Common
<PAGE> 23
23
Shares were available for grant under the 1992 Plan. A summary of activity
under the 1992, 1987 and 1983 Plans follows:
<TABLE>
<CAPTION>
Shares Price Range
(in thousands) Under Option Per Share
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1990 2,603 $4.13 to $13.11
Granted 356 3.38
Expired/terminated 505 3.38 to 13.11
Exercised --- ---
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 2,454 $3.38 to $13.11
Granted 328 5.00
Expired/terminated 163 3.38 to 11.15
Exercised 36 3.38 to 4.13
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 2,583 $3.38 to $13.11
Granted 41 5.00
Expired/terminated 266 4.125 to 13.11
Exercised 213 3.38 to 6.75
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 2,145 $3.38 to $11.38
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The number of options exercisable at December 31 for each of the past three
years follows:
<TABLE>
<CAPTION>
Price Range
(in thousands) Options Per Share
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1991 2,101 $4.13 to $13.11
1992 2,255 3.38 to 13.11
1993 1,777 3.38 to 11.38
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
15. RETIREMENT PLANS
The Corporation and its subsidiaries maintain non-contributory pension plans
that cover substantially all salaried and hourly employees. Benefits are based
on a final pay formula for the salaried plans and a flat benefit formula for
the hourly plans. The plans' assets consist principally of equity securities
and corporate and government debt securities. The Corporation and its
subsidiaries also have certain non-qualified pension plans covering
executives, which are unfunded. The Corporation accrues pension costs based
upon annual independent actuarial valuations for each plan and funds these
costs in accordance with statutory requirements. The components of net
periodic pension expense (credit) were as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current service cost $ 2,627 $ 2,019 $ 1,914
Interest on projected benefit obligation 3,539 2,322 2,077
Actual return on assets (4,629) (2,290) (4,251)
Net amortization and other 853 28 2,395
- -------------------------------------------------------------------------------------------------------------------
Pension expense $ 2,390 $ 2,079 $ 2,135
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 24
24
The following table reconciles the plans' funded status to amounts
included in the Consolidated Statements of Financial Position at
December 31:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- --------------------------------------------------------------------------------------------------------------
Plans with Plans with
Plans with accumulated Plans with accumulated
assets in excess benefits in assets in excess benefits in
of accumulated excess of of accumulated excess of
benefits plan assets benefits plan assets
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligations $ (32,550) $ (1,532) $ (21,764) $ (1,069)
Accumulated benefit obligations $ (36,213) $ (1,680) $ (24,376) $ (1,109)
Projected benefit obligations $ (51,173) $ (1,993) $ (33,558) $ (1,155)
Plan assets at fair value 45,626 --- 30,732 ---
- -------------------------------------------------------------------------------------------------------------------
Funded status (5,547) (1,993) (2,826) (1,155)
Unrecognized net experience loss (gain) 4,061 295 1,673 (386)
Unrecognized prior service cost 636 107 667 116
Unrecognized net transition (asset) obligation (3,469) 645 (3,835) 705
Additional minimum liability --- (734) --- (389)
- -------------------------------------------------------------------------------------------------------------------
Pension liability included in the Consolidated
Statements of Financial Position $ (4,319) $ (1,680) $ (4,321) $ (1,109)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Under the terms of the Canadian purchase agreement, the Corporation established
a pension plan for transferring employees, whereby the seller will transfer
assets, which approximate the projected benefit obligation of $9.8 million.
The assumptions used to determine the actuarial present value of benefit
obligations and pension expense during each of the years in the three- year
period ended December 31, 1993 were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rates to determine:
Pension expense 7.5% 8.5% 8.5%
Present value of benefit obligations 7.5% 8.5% 8.5%
Long-term per annum compensation increase 5.0% 6.0% 6.0%
Long-term return on plan assets 9.5% 9.5% 9.5%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation also sponsors a qualifying savings plan covering most full-time
employees. Contributions made by participating employees are matched based on
a specified percentage of employee contributions to 6% of the employees' pay
base. The cost of the Corporation's matching contribution to the savings plan
totaled $1.4 million in 1993, and $1.1 million in 1992 and 1991.
16. POST-RETIREMENT BENEFITS
The Corporation also provides health care benefits for eligible retired
employees of its agribusiness subsidiary. Participants generally become
eligible after reaching retirement age with ten years of service. The plan
pays a stated percentage of most medical expenses reduced for any deductible
and payments made by government programs. The plan is unfunded.
Employees hired prior to January 1, 1990 are eligible for participation in the
plan. Participant contributions and co-payments are subject to escalation.
<PAGE> 25
25
The following table indicates the components of the post-retirement medical
benefits obligation included in the Corporation's Consolidated Statement of
Financial Position at December 31, 1993:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement medical benefit obligation:
Retirees $ 2,054 $ 2,168
Fully eligible active plan participants 1,946 2,075
Other active participants 5,305 6,205
- -------------------------------------------------------------------------------------------------------------------
Funded status (9,305) (10,448)
Unrecognized net (gain) loss 149 37
Unrecognized prior service (benefit) (2,040) ---
- -------------------------------------------------------------------------------------------------------------------
(Accrued) post-retirement benefit cost $ (11,196) $ (10,411)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Net periodic post-retirement medical benefit cost consisted of the following
components:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost of benefits earned $ 526 $ 723
Interest cost on accumulated post-retirement medical
benefit obligation 614 730
Net amortization and other (127) ---
- -------------------------------------------------------------------------------------------------------------------
Net periodic post-retirement medical benefit cost $ 1,013 $ 1,453
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation limits its future obligation for post-retirement medical
benefits by capping at 5% the annual rate of increase in the cost of claims it
assumes under the Plan. The weighted average discount rate used in determining
the accumulated post-retirement medical benefit obligation is 7.5% and was 8.0%
in 1992. The determination of the Corporation's accumulated post-retirement
benefit obligation as of December 31, 1993 utilizes the annual limit of 5% for
increases in claims costs.
17. OTHER INCOME, NET
Other income consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fertilizer service revenue $ 13,531 $ 10,354 $ 9,743
Service charge income 3,930 3,963 3,833
Other, net 8,030 5,829 5,255
- -------------------------------------------------------------------------------------------------------------------
Total $ 25,491 $ 20,146 $ 18,831
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 26
26
18. INCOME TAXES
Components of the income tax provision (benefit) applicable to continuing
operations are as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 4,884 $ 640 $ 600
Foreign 3,750 --- ---
State 4,709 804 818
- -------------------------------------------------------------------------------------------------------------------
13,343 1,444 1,418
- -------------------------------------------------------------------------------------------------------------------
Deferred:
Federal (4,126) 6,288 (119)
Foreign 451 --- ---
State (368) 25 (226)
- -------------------------------------------------------------------------------------------------------------------
(4,043) 6,313 (345)
- -------------------------------------------------------------------------------------------------------------------
Total income tax provision $ 9,300 $ 7,757 $ 1,073
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Effective January 1, 1992, the Corporation adopted SFAS 109 to account for
income taxes as described in Note 3 above. The Corporation has accumulated net
operating loss (NOL) carryforwards and, in prior years under provisions of its
previous accounting method, the benefits from loss carryforwards had been
included as a reduction of income tax expense in the year utilized.
The income tax provision differs from the federal statutory provision for the
following reasons:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from continuing
operations before taxes:
U.S. $ 19,046 $ 18,186 $ 13,106
Canada 13,099 --- ---
- -------------------------------------------------------------------------------------------------------------------
$ 32,145 $ 18,186 $ 13,106
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Statutory income tax:
U.S. $ 6,666 $ 6,183 $ 4,456
Canada 4,978 --- ---
- -------------------------------------------------------------------------------------------------------------------
11,644 6,183 4,456
Non-deductible expenses 698 710 705
State and local income taxes 3,061 547 391
Benefit of loss carryforwards (4,494) --- (5,036)
Change in federal tax rates (1,233) --- ---
Undistributed equity earnings (865) --- ---
Other 489 317 557
- -------------------------------------------------------------------------------------------------------------------
Income tax provision $ 9,300 $ 7,757 $ 1,073
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Deferred tax assets totaled $50.8 million and $46.3 million at December 31,
1993 and 1992, respectively. At December 31, 1993, undistributed earnings of
the Canadian subsidiary, considered permanently invested, for which
<PAGE> 27
27
deferred income taxes have not been provided, was $8.9 million. The tax effect
of NOL and tax credit carryforwards and significant temporary differences
between reported and taxable earnings that gave rise to net deferred tax assets
were as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NOL capital loss and tax credit carryforwards $ 28,937 $ 31,209
Discontinued business costs 7,295 8,992
Unfunded employee benefits 8,146 8,354
Accrued liabilities 8,658 5,705
Inventory valuation 4,059 3,418
Account receivable allowances 2,176 2,286
Depreciation (6,297) (4,020)
Valuation allowance (2,765) (9,554)
Other 93 (131)
- -------------------------------------------------------------------------------------------------------------------
$ 50,302 $ 46,259
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Remaining unutilized NOL carryforwards were approximately $55 million
and $51 million at December 31, 1993 and 1992, respectively. NOL carryforwards
that have not been utilized expire in 2005. Investment tax credits of
approximately $1.7 million expire in varying amounts from 1998 through 2000.
Alternative minimum taxes paid of $5.2 million are available to offset future
tax liabilities and have an indefinite life. The Corporation's capital loss
carryforwards totalled $7.9 million and $28.1 million at December 31, 1993 and
1992, respectively. Capital loss carryforwards that are not utilized will
expire in 1997. The change in the valuation allowance reflects current
utilization of capital losses against capital gains and changes in tax rates. A
valuation allowance is provided since the realization of tax benefits of capital
loss carryforwards is not assured.
Components of income tax provision (benefit) included in net income other than
from continuing operations are as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ --- $ 120 $ 2,496
State and local --- 5,479 1,992
- -------------------------------------------------------------------------------------------------------------------
--- 5,599 4,488
- -------------------------------------------------------------------------------------------------------------------
Deferred:
Federal --- (18,887) 554
State and local --- (2,001) (629)
- -------------------------------------------------------------------------------------------------------------------
--- (20,888) (75)
- -------------------------------------------------------------------------------------------------------------------
$ --- $ (15,289) $ 4,413
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
28
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying Consolidated Financial Statements of Terra Industries Inc. and
its subsidiaries have been prepared in conformity with generally accepted
accounting principles appropriate in the circumstances. The integrity and
objectivity of data in these financial statements and supplemental data,
including estimates and judgments related to matters not concluded by year end,
are the responsibility of management.
The Corporation has a system of internal accounting controls that provides
management with reasonable assurance that transactions are recorded and
executed in accordance with its authorizations, that assets are properly
safeguarded and accounted for, and that financial records are maintained to
permit preparation of financial statements in accordance with generally
accepted accounting principles. This system includes written policies and
procedures, and organizational structure that segregates duties, and a
comprehensive program of periodic audits by the internal auditors. The
Corporation also has instituted policies and guidelines that require employees
to maintain the highest level of ethical standards.
The Audit Committee of the Board of Directors is responsible for the review and
oversight of the internal audit function, the financial statements and
reporting practices of the Corporation. The Audit Committee meets periodically
with management, internal auditors and the independent accountants. The
independent accountants and internal auditors have access to the Audit
Committee and, without management present, have the opportunity to discuss the
adequacy of internal accounting controls and to review the quality of financial
reporting.
The Consolidated Financial Statements contained in this Annual Report have been
examined by our independent accountants. Their examinations included a review
of internal accounting controls to establish a basis for reliance thereon in
determining the nature, extent and timing of audit tests applied in their
examinations of the Consolidated Financial Statements.
/s/ Burton M. Joyce /s/ Francis G. Meyer
Burton M. Joyce Francis G. Meyer
President and Chief Financial Officer and
Chief Executive Officer Chief Accounting Officer
<PAGE> 29
29
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Terra Industries Inc.
We have audited the accompanying consolidated statement of financial position
of Terra Industries Inc. and its subsidiaries as of December 31, 1993 and 1992,
and the related consolidated statements of income, cash flows and changes in
stockholders' equity for the years then ended. These financial statements are
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits. The
financial statements of the Corporation for the year ended December 31, 1991
were audited by other auditors whose report, dated February 13, 1992, expressed
an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such 1993 and 1992 consolidated financial statements present
fairly, in all material respects, the financial position of the Corporation at
December 31, 1993 and 1992, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 3 to the financial statements, the Corporation changed its
method of accounting for post-retirement medical benefits and income taxes
effective January 1, 1992 to conform with Statements of Financial Accounting
Standards No. 106 and 109.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Omaha, Nebraska
February 1, 1994
<PAGE> 30
30
QUARTERLY PRODUCTION DATA (unaudited)
<TABLE>
<CAPTION>
Quarter Quarter Quarter Quarter Year
Ended Ended Ended Ended Ended
March 31 June 30 Sept. 30 Dec. 31 Dec. 31
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MANUFACTURED FERTILIZER
1993 Net Production (tons):
Anhydrous ammonia 122,772 192,962 170,344 200,011 686,089
Nitrogen solutions 230,219 238,332 256,659 262,123 987,333
Urea 43,290 64,441 49,763 65,105 222,599
1992 Net Production (tons):
Anhydrous ammonia 104,252 101,187 92,935 105,849 404,223
Nitrogen solutions 192,053 204,017 159,276 204,409 759,755
Urea 37,435 31,314 19,823 38,159 126,731
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
31
QUARTERLY FINANCIAL AND STOCK MARKET DATA (unaudited)
<TABLE>
<CAPTION>
(in thousands, except
per-share data and stock prices) March 31, June 30, Sept. 30, Dec. 31,
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Total revenues $ 167,110 $ 653,231 $ 250,464 $ 167,196
Gross profit $ 23,026 $ 107,947 $ 35,376 $ 34,995
(Loss) income from continuing
operations $ (8,736) $ 39,573 $ (2,466) $ (5,526)
Net income (loss) $ (8,736) $ 39,573 $ (2,466) $ (5,526)
Per Share:
(Loss) income from continuing
operations $ (0.13) $ 0.57 $ (0.04) $ (0.08)
Net income (loss) $ (0.13) $ 0.57 $ (0.04) $ (0.08)
Common Share price:
High $ 4.88 $ 4.13 $ 4.88 $ 7.88
Low $ 3.88 $ 3.63 $ 3.75 $ 4.63
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
1992
Total revenues $ 195,427 $ 588,195 $ 190,724 $ 107,845
Gross profit $ 24,195 $ 96,163 $ 24,493 $ 18,100
(Loss) income from continuing
operations $ (5,293) $ 28,987 $ (4,970) $ (8,295)
(Loss) income before effect
of accounting changes $ (5,901) $ 27,543 $ (6,524) $ (6,354)
Net income (loss) $ 16,364 (a) $ 27,543 $ (6,524) $ (6,354)
Per Share:
(Loss) income from continuing
operations $ (0.08) $ 0.42 $ (0.07) $ (0.12)
(Loss) income before effect
of accounting changes $ (0.09) $ 0.40 $ (0.09) $ (0.09)
Net income (loss) $ 0.24 $ 0.40 $ (0.09) $ (0.09)
Common Share price:
High $ 6.00 $ 5.88 $ 5.38 $ 5.25
Low $ 4.38 $ 5.00 $ 4.50 $ 4.25
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Amounts have been restated as appropriate to reflect continuing operations.
(a) The 1992 first quarter includes $22.3 million credit for the cumulative
effect of the changes in accounting methods.
REVENUES
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Manufactured fertilizer $ 228,910 $ 125,590 $ 126,552
Resale fertilizer 257,585 229,136 240,803
Crop protection products 660,616 641,021 576,325
Seed 50,599 51,059 46,467
Other 40,291 35,385 32,450
- -------------------------------------------------------------------------------------------------------------------
Total $ 1,238,001 $ 1,082,191 $ 1,022,597
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 32
32
STOCKHOLDERS AND DIVIDENDS
The Corporation's Common Shares are traded principally on the New York Stock
Exchange. At January 31, 1994, 69.6 million Common Shares were outstanding and
held by 6,065 stockholders.
During 1989, the Corporation instituted a regular quarterly dividend of $0.03
per share. Dividends paid amounted to $0.12 and $0.09 per share during 1990
and 1989, respectively. The Corporation suspended dividends in 1991 and
resumed its quarterly dividend, at $0.02 per share, in the fourth quarter of
1993.
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
(in thousands, except
per-share and employee data) 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Working capital $ 231,287 $ 215,817 $ 156,587 $ 135,374 $ 158,329 $ 181,827
Total assets $ 634,482 $ 580,192 $ 517,162 $ 805,279 $ 915,068 $ 841,750
Long-term debt $ 121,384 $ 133,679 $ 114,805 $ 184,324 $ 153,212 $ 157,295
Stockholders' equity $ 242,980 $ 221,476 $ 190,296 $ 321,961 $ 439,056 $ 414,588
RESULTS OF OPERATIONS
Revenues $ 1,238,001 $ 1,082,191 $1,022,597 $ 962,202 $ 949,458 $ 851,372
Costs and expenses (1,196,173) (1,056,472) (996,928) (960,084) (937,277) (836,655)
Interest income 3,261 3,084 1,789 573 509 459
Interest expense (12,944) (10,617) (14,352) (17,629) (17,643) (23,158)
Income tax
(provision) benefit (9,300) (7,757) (1,073) 816 316 523
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from
continuing operations 22,845 10,429 12,033 (14,122) (4,637) (7,459)
Discontinued operations --- (1,665) (168,808) (94,379) 29,808 49,435
Extraordinary items --- --- 5,115 --- --- ---
Cumulative effect of
accounting changes --- 22,265 --- --- --- ---
- -----------------------------------------------------------------------------------------------------------------
Net income (loss) $ 22,845 $ 31,029 $ (151,660) $ (108,501) $ 25,171 $ 41,976
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE:
Continuing operations $ 0.33 $ 0.15 $ 0.18 $ (0.21) $ (0.07) $ (0.11)
Discontinued operations --- (0.02) (2.51) (1.43) 0.45 0.74
Extraordinary items --- 0.32 0.07 --- --- ---
- -----------------------------------------------------------------------------------------------------------------
Total $ 0.33 $ 0.45 $ (2.26) $ (1.64) $ 0.38 $ 0.63
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Continuing operations $ 21,620 $ 17,620 $ 12,728 $ 10,689 $ 13,568 $ 21,142
Discontinued operations --- 2,231 8,432 55,139 74,274 59,266
- -----------------------------------------------------------------------------------------------------------------
Total $ 21,620 $ 19,851 $ 21,160 $ 65,828 $ 87,842 $ 80,408
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Employees 2,400 2,000 1,950 1,850 1,800 1,700
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Amounts have been restated as appropriate to reflect continuing operations.
<PAGE> 1
EXHIBIT 21
TERRA INDUSTRIES INC.
LIST OF MAJORITY OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NAME OF COMPANY HELD BY TRA HELD BY SUB JURISDICTION
------------------- --------------- ---------------- --------------
<S> <C> <C> <C>
Hudson Holdings Corporation 100.0 Delaware
Hudson Bay Gold Inc. 100.0 Canada
Inspiration Coal Inc. 100.0 Delaware
Inspiration Coal Development Company 100.0 Delaware
which owns
-------------
Ashland Mining Corporation 100.0 W. Virginia
Briarwood Mining Inc. 100.0 Virginia
Plateau Fuels, Inc. 100.0 Kentucky
Southern Floyd Coal, Inc. 100.0 Kentucky
Inspiration Gold Incorporated 100.0 Delaware
Terra International, Inc. 100.0 Delaware
which owns
Farmbelt Chemicals, Inc. 100.0 Delaware
Farmers Agricultural Credit Corporation 100.0 Iowa
Northern Agricultural Credit Corporation 100.0 Minnesota
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NAME OF COMPANY HELD BY TRA HELD BY SUB JURISDICTION
------------------- ------------- ------------- ---------------
<S> <C> <C> <C>
Riverside/Terra Corporation 100.0 Delaware
Alloy Research, Inc. 100.0 Illinois
Specialloy, Inc. 100.0 Illinois
Terra International (Oklahoma) Inc. 100.0 Delaware
Terra Real Estate Corporation 100.0 Iowa
Terra Real Estate Development Corporation 100.0 Iowa
Terra Express, Inc. 100.0 Delaware
Terra Express, of Oklahoma, Inc. 100.0 Oklahoma
Terra International (Canada) Inc. 100.0 Ontario, Canada
ILI Lone Star, Inc. 100.0 Delaware
El Rancho Rock & Sand, Inc. 100.0 California
Inspiration Consolidated 100.0 Maine
Copper Company
which owns
Black Pine Mining Company 100.0 Montana
Inspiration Development Company 100.0 Delaware
</TABLE>
2
<PAGE> 3
TERRA INDUSTRIES INC.
LIST OF PARTIALLY OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NAME OF COMPANY HELD BY TRA HELD BY SUB JURISIDICTION
------------------ -------------- ------------- ----------------
<S> <C> <C> <C>
Terra International (Canada) Inc. 100.0 Ontario
which owns
Belmont Farm Supply Inc. 50.0 Federal
Bluewater Agromart Limited 50.0 Ontario
Brussels Agromart Ltd. 50.0 Ontario
Cardinal Farm Supply Limited 50.0 Ontario
Fingal Farm Supply Limited 50.0 Ontario
Grand Falls Agromart Ltd. 50.0 Federal
Hartland Agromart Ltd. 50.0 Federal
Harvex Agromart Inc. 50.0 Ontario
Hoegy's Farm Supply Limited 50.0 Ontario
Lakeside Grain & Feed Limited 50.0 Ontario
Macroblend Limited 50.0 Ontario
Maple Farm Supply Limited 50.0 Ontario
Munro Agromart Ltd. 50.0 Ontario
Oakwood Agromart Ltd. 50.0 Ontario
Oxford Agropro Ltd. 50.0 Ontario
Scotland Agromart Ltd. 50.0 Ontario
Setterington's Fertilizer Service Limited 50.0 Ontario
Sprucedale Agromart Limited 50.0 Ontario
Tri-County Agromart Ltd. 50.0 Ontario
Max Underhill's Farm Supply Limited 50.0 Ontario
</TABLE>
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
CAROL L. BROOKINS
hereby constitute and appoint George H. Valentine, Francis G. Meyer and
Burton M. Joyce, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company")
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 and any amendments or supplements thereto, and to file said
Annual Report and any amendment or supplement thereto, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them,
or his substitute or substitutes, have done or shall lawfully do by virtue
of this Power of Attorney.
WITNESS my hand this 2nd day of March, 1994.
/s/ CAROL L. BROOKINS
___________________________________
CAROL L. BROOKINS
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
EDWARD M. CARSON
hereby constitute and appoint George H. Valentine, Francis G. Meyer and
Burton M. Joyce, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company")
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and any amendments or supplements thereto, and to file said Annual
Report, and any amendment or supplement thereto, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them,
or his substitute or substitutes, have done or shall lawfully do by virtue of
this Power of Attorney.
WITNESS my hand this 2nd day of March, 1994.
/s/ EDWARD M. CARSON
-----------------------
EDWARD M. CARSON
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
DAVID E. FISHER
hereby constitute and appoint George H. Valentine, Francis G. Meyer and
Burton M. Joyce, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company")
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and any amendments or supplements thereto, and to file said Annual
Report and any amendment or supplement thereto, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them,
or his substitute or substitutes, have done or shall lawfully do by virtue of
this Power of Attorney.
WITNESS my hand this 2nd day of March, 1994.
/s/ DAVID E. FISHER
------------------------------------------
DAVID E. FISHER
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
BASIL T.A. HONE
hereby constitute and appoint George H. Valentine, Francis G. Meyer and
Burton M. Joyce, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company")
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and any amendments or supplements thereto, and to file said Annual
Report and any amendment or supplement thereto, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them,
or his substitute or substitutes, have done or shall lawfully do by virtue of
this Power of Attorney.
WITNESS my hand this 2nd day of March, 1994.
/s/ BASIL T.A. HONE
__________________________________________________
BASIL T.A. HONE
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
BURTON M. JOYCE
hereby constitute and appoint George H. Valentine, Francis G. Meyer and
Burton M. Joyce, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company")
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993, and any amendments or supplements thereto, and to file said Annual
Report, and any amendment or supplement thereto, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them,
or his substitute or substitutes, have done or shall lawfully do by virtue of
this Power of Attorney.
WITNESS my hand this 2nd day of March, 1994.
/s/ BURTON M. JOYCE
__________________________________________________
BURTON M. JOYCE
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
FRANCIS G. MEYER
hereby constitute and appoint George H. Valentine, Francis G. Meyer and
Burton M. Joyce, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company")
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31,1993 and any amendments or supplements thereto, and to file said Annual
Report and any amendment or supplement thereto, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them,
or his substitute or substitutes, have done or shall lawfully do by virtue of
this Power of Attorney.
WITNESS my hand this 2nd day of March, 1994.
/s/ FRANCIS G. MEYER
________________________________
FRANCIS G. MEYER
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
JOHN R. NORTON III
hereby constitute and appoint George H. Valentine, Francis G. Meyer and
Burton M. Joyce, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company")
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and any amendments or supplements thereto, and to file said Annual
Report, and any amendment or supplement thereto, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them,
or his substitute or substitutes, have done or shall lawfully do by virtue of
this Power of Attorney.
WITNESS my hand this 2nd day of March, 1994.
/s/ JOHN R. NORTON III
________________________________________________
JOHN R. NORTON III
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
REUBEN F. RICHARDS
hereby constitute and appoint George H. Valentine, Francis G. Meyer and
Burton M. Joyce, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company")
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and any amendments or supplements thereto, and to file said Annual
Report and any amendment or supplement thereto, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them,
or his substitute or substitutes, have done or shall lawfully do by virtue of
this Power of Attorney.
WITNESS my hand this 2nd day of March, 1994.
/s/ REUBEN F. RICHARDS
_______________________________________________
REUBEN F. RICHARDS
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT I,
HENRY R. SLACK
hereby constitute and appoint George H. Valentine, Francis G. Meyer and
Burton M. Joyce, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company")
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and any amendments or supplements thereto, and to file said Annual
Report and any amendment or supplement thereto, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them,
or his substitute or substitutes, have done or shall lawfully do by virtue of
this Power of Attorney.
WITNESS my hand this 2nd day of March, 1994.
/s/ HENRY R. SLACK
___________________________________________________
HENRY R. SLACK
