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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, 1994 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:
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
10 3/4% SENIOR NOTES DUE 2003 N/A
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, 1995, was approximately $432,220,000.
On January 31, 1995, Registrant's outstanding voting stock consisted of
80,980,502 Common Shares, without par value.
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DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders of Registrant for the fiscal year ended December
31, 1994. 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 2, 1995. Certain information therein is incorporated by reference into
Part III hereof.
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TABLE OF CONTENTS
PART I
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ITEMS 1 AND 2. BUSINESS AND PROPERTIES................................... 1
ITEM 3. LEGAL PROCEEDINGS......................................... 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....... 10
EXECUTIVE OFFICERS OF THE COMPANY......................... 10
PART II
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ITEM 5. MARKET FOR TERRA INDUSTRIES' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................... 12
ITEM 6. SELECTED FINANCIAL DATA................................... 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............... 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE....................... 12
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY............ 12
ITEM 11. EXECUTIVE COMPENSATION..................................... 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................. 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............. 13
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K................................................... 13
SIGNATURES................................................................. 19
INDEX TO FINANCIAL STATEMENT SCHEDULES, REPORTS AND CONSENTS............... S-1
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PART I
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ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
Terra Industries Inc., a Maryland corporation ("Terra" or the "Company"),
conducts its ongoing operations in North America primarily through its
subsidiaries. The Company's principal operating subsidiaries include Terra
International, Inc., an indirect wholly owned subsidiary ("Terra
International"), Terra International (Canada) Inc., a wholly owned subsidiary of
Terra International ("Terra Canada"), Beaumont Methanol, Limited Partnership, an
indirect wholly owned subsidiary ("BMLP"), Terra Nitrogen Corporation, an
indirect wholly owned subsidiary ("TNC"), and Terra Nitrogen, Limited
Partnership ("TNLP"). TNC is TNLP's sole general partner and owns, directly or
indirectly, approximately 60% of TNLP. Approximately 40% of TNLP is indirectly
owned by other limited partners in the form of publicly traded Senior Preference
Units of Terra Nitrogen Company, L.P. ("TNCLP"). Unless otherwise referred to
herein or the context otherwise requires, references to the "Company" or "Terra"
shall mean Terra Industries Inc., including, where the context so requires, its
direct and indirect subsidiaries. The principal corporate office of the Company
is located at Terra Centre, 600 Fourth Street, Sioux City, Iowa 51102-6000 and
its telephone number is 712-277-1340.
GENERAL
The Company is a leading producer of nitrogen fertilizer and marketer of
fertilizer, crop protection products, seed and services for agricultural, turf,
ornamental and other growers. The Company also produces nitrogen products and
methanol for industrial customers.
The Company owns and operates the largest independent farm service center
network in North America and is the second largest supplier of crop production
inputs in the United States. After giving effect to the acquisition of
Agricultural Minerals and Chemicals Inc., a Delaware corporation ("AMCI"), in
October 1994, the Company became the third largest producer of anhydrous ammonia
and one of the two largest producers of nitrogen solutions in the United States
and Canada. The Company also substantially increased its participation in the
methanol production industry with the acquisition of AMCI.
The Company's distribution network serves the United States and eastern region
of Canada and has grown over the last several years to include approximately:
. 355 farm service centers;
. 100 fertilizer storage facilities, most of which are leased and
approximately half of which are operated by TNLP; and
. 770 affiliated dealer locations.
The Company's production facilities are comprised of:
. three nitrogen fertilizer plants, which are located in Oklahoma (the
"Woodward Facility"), Iowa (the "Port Neal Facility") and Ontario, Canada
(the "Courtright Facility");
. two TNLP nitrogen fertilizer plants, which are located in Oklahoma (the
"Verdigris Facility") and Arkansas (the "Blytheville Facility");
. a methanol production plant, which is located in Texas (the "Beaumont
Facility") (the Woodward Facility also includes some methanol production
capacity);
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. a crop protection chemical formulation plant, which is located in
Arkansas (the "Blytheville Formulation Facility"); and
. seven additional liquid chemical formulation facilities.
The Port Neal Facility suffered a major explosion on December 13, 1994.
The Company has decided to rebuild the facility, but does not expect it to be
fully operational again until 1996.
For certain financial information regarding the Company's industry
segments (Distribution, Nitrogen Products and Methanol), see Note 20 to the
Company's Consolidated Financial Statements incorporated herein.
DISTRIBUTION
The Company's farm service center network is a distribution and marketing
system for a comprehensive line of fertilizers, crop protection products, seeds
and services. The Company's customers are primarily farmers and dealers located
in the midwestern and southern regions of the United States, and the eastern
region of Canada.
Products. The Company markets a comprehensive line of crop protection products
(herbicides, insecticides, fungicides, adjuvants, plant growth regulators,
defoliants, desiccants and other agricultural chemicals), fertilizer (nitrogen,
phosphates, potash and micronutrients) and seed.
Although most crop protection products marketed by the Company are
manufactured by unaffiliated suppliers, the Company also markets its own
Riverside(R) brand products. Riverside products represented approximately 15%
of the Company's total crop protection product sales in 1994. The Riverside line
includes approximately 130 products, of which 23 were added in 1994, and
consists of herbicides, insecticides, fungicides, adjuvants, seed treatments,
plant growth regulators, defoliants and desiccants. The majority of Riverside
products are formulated or packaged in facilities owned by the Company. The
Riverside line includes several formulations produced exclusively by the
Company, but does not include proprietary agricultural chemicals. Riverside
products generally provide higher margins for the Company than products
manufactured by unaffiliated suppliers. The sale of such products, however,
involves additional indirect costs, including the cost of maintaining and
disposing of excess inventory and potentially greater liability for product
defects. The Company possesses and processes the registrations required by the
EPA for Riverside pesticide products.
The Company markets several major seed brands and, in its United States
marketing area, is the largest independent seed distributor. The Company focuses
particular marketing efforts on its proprietary brand of corn hybrids, soybean
and cotton seed varieties, which provide higher margins. These products
represented approximately 15% of total seed sales in 1994. The Company also has
an exclusive retail storefront marketing and distribution agreement for DEKALB
brand seed in the Midwest, which accounted for approximately 10% of total 1994
seed sales.
Services. In addition to selling products required to grow crops, the
Company's farm service centers offer a wide variety of services to grower
customers. These services include soil and plant tissue analysis, crop
production program recommendations, custom blending of fertilizers, field
application services, field inspections for pest control and crop program
performance follow-up. The farm service centers utilize the Company's Ag
Analytical Services laboratory in Elida, Ohio to analyze nutrient levels in soil
and plant tissue samples. The results of these tests are used by the Company's
proprietary CropMaster(R) program to provide specific, localized soil
fertility recommendations for specific crops on a field-by-field basis. Crop
input recommendations are provided through computer terminals at most farm
service center locations, which are linked to a mainframe computer located at
the Company's headquarters in Sioux City, Iowa. Recommendations can be made for
substantially all crops grown in the Company's markets. 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.
In connection with product sales to dealers, the Company provides warehousing
and delivery services. For selected dealer customers, the Company offers a
service package called MarketMaster/TM/. The package includes environmental and
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safety audits, business management and agronomic training courses, access to the
Company's Ag Analytical Services laboratory, use of the CropMaster program and
other services. There were approximately 510 MarketMaster dealer sites at
December 31, 1994.
Marketing and Distribution. The Company markets its products primarily to
agricultural customers, including both dealers and growers. For 1994,
approximately 65% of the Company's distribution revenues were attributable to
retail sales through farm service center locations and approximately 35% were
attributable to wholesale sales to dealers.
The Company also markets its products through its Professional Products(R)
group to non-farm customers, including turf growers, nurseries, golf courses,
parks, athletic facilities and utility companies. The Company offers these
customers herbicides, insecticides, fungicides, fertilizer, adjuvants, plant
growth regulators, seed and agronomic services. The Professional Products
personnel generally work through the Company's farm service centers, using
established delivery systems and product lines.
The Company's distribution operations are organized into Northern and
Southern Divisions, which include 14 separate 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 the Ag
Analytical Services laboratory, a staff of Technical Service Representatives and
a research station where the efficacy of various crop protection products and
the performance of numerous seed varieties are tested.
Properties. The Company's farm service centers are located on a combination
of owned and leased properties and a majority of the buildings and other
improvements thereon are owned in fee. The leases have varying expiration dates
through 2007.
Product Formulations. The Company's Blytheville Formulation Facility
formulates dry flowable ("DF") crop protection products and liquid crop
protection chemicals in separate production lines at the same location. DF
formulations are dry, water-dispersible granules that are mixed with water
before application. Because of their dry form, 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, the Company expects more
agricultural chemicals will be offered to growers in DF form in the future. The
Blytheville Formulation Facility is one of 13 known DF plants in the U.S. and
formulates eight DF products and six liquid products. Approximately 50% of the
plant's volume in 1994 was attributable to the Company's own Riverside brand
product line. The Company has developed several DF formulations not available
from any other producer or formulator. The Company has also developed DF
formulations for a number of companies that contract all or portions of their
production at the Blytheville Formulation Facility. The Blytheville Formulation
Facility is owned in fee.
NITROGEN PRODUCTS
Nitrogen is one of three primary nutrients essential for plant growth.
Nitrogen fertilizer products must be reapplied each year in areas of extensive
agricultural usage because of absorption by crops and its tendency to escape
from the soil. There are no substitutes for nitrogen fertilizer in the
cultivation of high-yield crops.
The Company is a major producer and distributor of nitrogen products,
principally fertilizers. The Company's principal nitrogen products are
ammonia, urea and urea ammonium nitrate solution ("UAN"). A significant portion
of the Company's ammonia production is upgraded into other nitrogen fertilizer
products such as urea and UAN.
Products. Although, to some extent, the various nitrogen fertilizer products
are interchangeable, each has its own distinct characteristics which produce
agronomic preferences among end users. Farmers decide which type of nitrogen
fertilizer to apply based on the crop planted, soil and weather conditions,
regional farming practices, relative nitrogen fertilizer prices and the cost
and availability of appropriate storage, handling and application equipment.
Ammonia. Anhydrous ammonia is the simplest form of nitrogen fertilizer and
is the feedstock for the production of most other nitrogen fertilizers,
including urea and UAN. It is produced by reacting natural gas with steam and
air at high temperatures and pressures in the presence of catalysts. It has a
nitrogen content of 82% by weight and is generally the least expensive form of
fertilizer per unit of nitrogen.
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Urea. Solid urea is produced for both the feed and fertilizer market by
converting ammonia into liquid urea, which can then be turned into a solid which
is either prilled or granulated. Urea has a nitrogen content of 46% by weight,
the highest level for any solid nitrogen product. Granular urea is generally
sold as fertilizer and prilled urea is generally sold as a feed supplement. The
Company produces both granular and prilled urea.
UAN Solution. The Company produces UAN at all five of its fertilizer
manufacturing facilities. The Verdigris Facility in Oklahoma is the largest UAN
production facility in the United States. UAN is produced by combining liquid
urea and ammonium nitrate in water. The nitrogen content of UAN is typically 28%
to 32% by weight. UAN is a liquid fertilizer and, unlike ammonia, is generally
odorless and does not need to be refrigerated or pressurized for transportation
or storage.
UAN may be applied separately or may be mixed with various crop protection
products, permitting the application of several materials simultaneously, and
thus reducing energy and labor costs. In addition, UAN may be applied from
ordinary tanks and trucks and can be sprayed or injected into the soil, or
applied through irrigation systems, throughout the growing season. UAN is
relatively expensive to transport and store because of its high water content.
Due to its stable nature, UAN may be used for no-till row crops where fertilizer
is spread upon the surface but may be subject to volatilization losses. The use
of conservation tilling, which reduces erosion, is increasing in the United
States, and the Company believes this trend, if continued, should have a
positive impact on UAN demand.
The Company's sales mix of nitrogen products for the years ended December 31,
1992, 1993 and 1994 (including TNLP on a pro forma basis) were approximately as
follows (based on tons sold):
1992 1993 1994
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Ammonia 21% 23% 25%
Urea 15% 16% 16%
UAN 64% 61% 59%
Plants. The Company's Woodward Facility, Port Neal Facility and Courtright
Facility are integrated facilities for the production of ammonia, liquid urea
and UAN and other nitrogen fertilizer solutions. In addition, the Port Neal
Facility and the Courtright Facility produce solid urea. TNLP's Verdigris
Facility and Blytheville Facility are also integrated facilities. The Verdigris
Facility produces primarily ammonia and UAN and the Blytheville Facility
produces ammonia, urea and UAN.
The Woodward Facility and the Port Neal Facility are owned in fee.
The Courtright Facility is operated under a lease financing agreement. The
agreement expires in April 1997 and requires annual lease payments. The Company
has a purchase option during the term of the lease and at expiration for
approximately $47 million (Cdn). If, at the end of the lease term, the purchase
option is not exercised, the Company must pay to the lessor approximately $40
million (Cdn), subject to reimbursement based on the proceeds realized upon the
sale of the facility by the lessor.
Located at the Verdigris Facility are two ammonia plants, two nitric acid
plants and two UAN solution plants and the Port Terminal. The plants are owned
in fee by TNLP, while the Port Terminal is leased from the Tulsa-Rogers County
Port Authority. The leasehold interest is scheduled to expire in April 1999,
and TNLP has the option to renew the lease for two additional, consecutive
terms of five years each.
The Blytheville Facility consists of an anhydrous ammonia plant, a granular
urea plant and UAN solution plant. The UAN plant began production in late 1994.
The ammonia plant at the Blytheville Facility is leased from the City of
Blytheville at a nominal annual rental. The lease term is scheduled to expire
in November 1999, and TNLP has the option to extend the lease for twelve
successive terms of five years each at the same rental rate. TNLP has the
unconditional right to purchase the plant for a nominal price at the end of the
lease term (including any renewal term). The urea plant is also leased from the
City of Blytheville. The lease is scheduled to expire in November 1999, and TNLP
has the option to renew the lease for four successive periods of five years each
at a nominal annual rental. TNLP also has an option to purchase the property for
a nominal price.
Each of the Company's five fertilizer manufacturing facilities is designed to
operate continuously, except for planned biennial shutdowns for maintenance and
installation of efficiency improvements. Capacity utilization (gross tons
produced divided by capacity tons at expected operating rates and on stream
factors) of Terra International's manufacturing facilities for the years ended
December 31, 1994, 1993 and 1992, in the aggregate, was approximately 93%, 102%,
and 99%, respectively. Capacity utilization of TNLP's manufacturing facilities
for the years ended December 31, 1994, 1993, and 1992, in the aggregate, was
approximately 96%, 101%, and 107%, respectively.
The Courtright Facility's liquid urea and granulation capacities are expected
to increase as a result of a plant upgrade project, announced in February 1994.
The project is expected to be completed in the 1995 fourth quarter and will
enable the replacement of 65,000 tons of annual ammonia sales with urea and UAN
sales. The project cost is estimated to be approximately $20 million and is
expected to be funded through lease financing.
The Port Neal Facility suffered a major explosion on December 13, 1994 and is
not expected to be fully operational again until 1996. At the time of the
explosion, the Port Neal Facility accounted for approximately 15% of the
Company's
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total nitrogen fertilizer production. The Company will recover
insurance proceeds for substantially all its property damage, third-party
liability claims and business interruption. The Company reserved $7 million
during the 1994 fourth quarter to cover insurance deductibles and uninsured
costs related to the explosion.
Marketing and Distribution. The Company's principal customers for its
manufactured nitrogen products are large independent dealers, national retail
chains, cooperatives and industrial customers. Industrial customers accounted
for approximately 26% of the Company's total sales of its manufactured nitrogen
products. Less than 15% of the Company's fertilizer production is sold through
its farm service center locations to retail customers, while the rest is sold to
outside customers. In 1994, no customer accounted for greater than 10% of total
manufactured nitrogen fertilizer sales.
The Company has production facilities and significant storage capacity in
major fertilizer consuming regions which allow it to be a major supplier of
nitrogen fertilizers.
METHANOL
The Company substantially increased its participation in the methanol
production industry in October 1994 with the acquisition of the BMLP Beaumont
Facility. The Company has approximately 320 million gallons of annual methanol
production capacity, representing approximately 20% of the total United States
rated capacity in production at the end of 1994.
Product. Methanol is a liquid petrochemical made primarily from natural gas.
It is used as a feedstock in the production of other chemical products such as
formaldehyde, acetic acid and chemicals used in the building products industry.
Methanol is also used as a feedstock in the production of MTBE, an oxygenate and
octane enhancer used as an additive in reformulated gasoline. Reformulated
gasoline has lower volatility and is less aromatic than gasoline. The methanol
manufacturing process involves heating the natural gas feedstock, mixing it with
steam and passing it over a nickel-based catalyst, which breaks it down into
carbon monoxide, carbon dioxide and hydrogen. This reformed gas is then cooled,
compressed and passed over a copper-zinc based catalyst to produce crude
methanol. Crude methanol consists of approximately 80% methanol and 20% water.
In order to convert it to high-purity chemical grade methanol suitable for sale,
the crude methanol is distilled to remove the water and other impurities.
Plants. During the first half of 1994, the Company completed the capital
improvements necessary to produce methanol instead of ammonia for a portion of
the Woodward Facility's capacity. The project cost approximately $15 million and
gives the Company approximately 40 million gallons of annual methanol capacity
at the Woodward Facility.
The Beaumont Facility is the largest methanol production plant in the United
States, with approximately 280 million gallons of annual methanol capacity. The
plant and processing equipment are owned by BMLP and the land is leased from
E.I. du Pont de Nemours and Company ("DuPont"), from which the methanol business
associated with the Beaumont Facility originated, for a nominal annual rental
under a lease agreement which expires in 2090. Because the Beaumont Facility is
entirely contained in a complex owned and operated by DuPont (the "Beaumont
Complex"), BMLP depends on DuPont for access to the Beaumont Facility. BMLP also
relies on DuPont for access and certain essential services relating to the wharf
located at the Beaumont Complex through which most of the finished methanol
product is shipped to customers and the pipelines used to transport it and to
obtain natural gas, as well as for certain utilities and waste water treatment
facilities and other essential services.
Marketing and Distribution. The marketing of methanol from the Beaumont
Facility had been conducted for over a year on an exclusive basis by
Trammochem, a division of Transammonia, Inc., pursuant to a Marketing Services
Agreement. The services provided by Trammochem included analysis of market
conditions for methanol, marketing and sales on a contract basis and sales on a
spot basis, arrangement of transportation of methanol to customers and customer
relations activities. BMLP retained responsibility for the invoicing and
collection of payments from customers and for loading transportation equipment
in accordance with customer requirements. BMLP paid Trammochem a fee based on
the
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Beaumont Facility's earnings and sales. The Marketing Services Agreement was
terminated by BMLP effective as of February 2, 1995. Company employees have
assumed all functions previously provided by Trammochem.
Methanol customers are primarily large chemical or MTBE producers located in
the United States; however, some sales have been made to customers in Central
and South America.
Methanol Contracts. BMLP has a number of long-term methanol sales contracts,
the most significant of which is with DuPont (the "DuPont Contract"). In 1994,
BMLP sold approximately 60% of its production under such contracts. For 1995,
BMLP has contracted to sell approximately 75% of its production at prices
indexed to published sources. Most of the these sales contracts (other than the
DuPont Contract) cover fixed volumes and have terms of up to three years.
Under the DuPont Contract, DuPont has agreed to purchase 108 million gallons
of methanol each year until 2001 (representing 39% of the Beaumont Facility
capacity). The DuPont Contract will continue in effect after the initial term
unless terminated by either party on two years' notice. Commencing in 1998, BMLP
and DuPont will each have the unilateral right (exercisable one time only for
the remaining term of the contract) to permanently reduce the contract quantity
required to be delivered by BMLP to DuPont in any contract year by up to 54
million gallons. The price for the methanol delivered under the DuPont Contract
is generally indexed to published sources.
BMLP is a party to a methanol hedging agreement pursuant to which it received
a $4 million lump sum payment in exchange for agreeing to make payments based on
the market prices of methanol and natural gas through 1997. BMLP will be
required to make payments under the methanol hedging agreement if methanol
prices remain high relative to natural gas prices as compared with historical
price levels. For the year ended December 31, 1994, BMLP accrued certain amounts
for purposes of potential payments under this agreement. Through the Beaumont
Facility and the Company's other methanol production capabilities, the Company
will benefit from such market price differences at any time at which it is
required to make payments under such agreement. As a result of making such
payments, BMLP will not benefit fully from increases in the price of methanol
during the term of the methanol hedging agreement.
CREDIT
A substantial portion of the Company's sales to its grower and dealer
customers is made on credit terms customary in the industry. During the third
quarter of 1992, the Company established a grower financing program to provide
secured, interest bearing financing to qualified grower customers for their
operating and crop input requirements on extended payment terms. The Company
provided approximately $25 million in 1993 and $65 million in 1994 in credit
lines to grower customers under this program. Although the Company does not
expect, and has not experienced, significant bad debts in its grower finance
program, the Company does not believe it has sufficient experience with the
program to provide a meaningful evaluation of the associated credit risk.
SEASONALITY AND VOLATILITY
The agricultural products business is seasonal, based upon the planting,
growing and harvesting cycles. Inventories must be accumulated 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, the Company can reduce purchases of crop inputs for the distribution
portion of its business, thereby decreasing inventory carrying costs. In the
past, over half of the Company's sales generally occurred during the second
quarter of each year. This seasonality also generally results in higher
fertilizer prices during peak periods, with prices typically reaching their
highest point in the spring, dropping in the summer, increasing in the fall (as
depleted inventories are restored) through the spring.
The agricultural products business can also be volatile as a result of a
number of other factors, the most important of which, for U.S. markets, are
weather patterns and field conditions (particularly during periods of high
fertilizer consumption), current and projected grain inventories and prices,
and the U.S. government's agricultural policy. Among the
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governmental policies that influence the markets for fertilizer are those
directly or indirectly influencing the number of acres planted, the level of
grain inventories, the mix of crops planted and crop prices.
As with any commodity chemical, the price of methanol is volatile. The
industry has experienced cycles of oversupply resulting in depressed prices and
idled capacity, followed by periods of shortage and rapidly rising prices.
During 1994, increased world demand for methanol combined with a large number of
plant shutdowns and turnarounds in the industry and the phase-in of federally
mandated standards for oxygenated gasoline to create a tight market and
dramatically increased prices over 1993 levels. There can be no assurances that
such conditions will continue. In part, future demand for methanol will depend
on the regulatory environment with respect to oxygenated gasoline. Most methanol
sold in the U.S. is sold pursuant to long-term contracts based on market index
pricing and a fixed volume.
RAW MATERIALS
The principal raw material used to produce nitrogen fertilizer and methanol is
natural gas. The Company estimates that natural gas costs comprised nearly 50%
of the total costs and expenses associated with the Company's manufactured
fertilizer operations in 1994. The Company estimates that natural gas represents
over 50% of the costs and expenses associated with its methanol operations. A
significant increase in the price of natural gas that could not be recovered
through an increase in nitrogen fertilizer or methanol prices could have a
material adverse effect on the Company's profitability and cash flow. The
Company's general policy is to fix or cap the unit cost for 40% to 80% of its
natural gas requirements for the upcoming 12 months using supply contracts and
various forward pricing or hedging techniques. Under certain circumstances, the
Company may fix or cap the unit cost for up to 25% of such requirements beyond
one year. The settlement dates are scheduled to coincide with gas purchases
during such future periods.
Reliable sources for supply of crop inputs at competitive prices are critical
to the distribution portion of the Company's business. The Company's sources for
fertilizer, agricultural chemicals and seed are typically manufacturers of the
products without an internal capability to distribute products to the North
American grower.
TRANSPORTATION
The Company uses several modes of transportation to receive and distribute
products to customers and its own locations, including railroad cars, common
carrier trucks, barges, common carrier pipelines and Company-owned or leased
vehicles. The Company utilizes approximately 100 liquid, dry and anhydrous
ammonia fertilizer terminal storage facilities (some of which are in the same
locations and some of which are operated by TNLP) in over 20 states
and in Ontario, Canada. The Company also has varying amounts of warehouse space
at each of its farm service centers and has one methanol storage facility in
Beaumont, Texas.
Through Terra Express, Inc. and Terra Express of Oklahoma, Inc., wholly-owned
truck transportation subsidiaries of Terra International (together, "Terra
Express"), the Company provides transportation services to its own facilities
and customers as a contract carrier. Terra Express uses approximately 90 owner-
operated trucks and 20 Company-owned trucks to deliver fertilizer, crop
protection products, seed, feed ingredients and other products to its own
facilities and customers. At its manufacturing facilities, Blytheville
Formulation Facility and liquid fertilizer storage locations, the Company
utilizes railcars as the major method of transportation. All of the Company's
approximately 2,000 railcars are leased.
Purchased natural 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, the Company maintains facilities for
direct access to its interstate pipeline shipper; however, the Company has
retained its alternative connection to a local utility service to preserve some
flexibility. The Company transports purchased natural gas for the Woodward
Facility and the Verdigris Facility through an intrastate pipeline that is not
an open access carrier; however, the Company is able to transport gas supplies
from any in-state source connected to the widespread pipeline system, and has
limited access to
7
<PAGE>
supplies outside the state. 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. The Company transports purchased natural gas for the Blytheville
Facility through a natural gas pipeline company under an agreement that extends
for more than two years.
The Company transports methanol primarily by marine transport via the Neches
River to the Intercoastal Canal and the Gulf of Mexico and via pipeline to
selected customers. Access to the wharf and the pipeline used at the Beaumont
Facility is provided through agreements with DuPont.
RESEARCH AND DEVELOPMENT
The Company operates a 70-acre Agronomy Research Station near its Port Neal
Facility for program development and product testing, and routinely conducts
product evaluation and testing with growers and universities. The Company also
develops DF and other chemical formulations for its Riverside product line and
for basic chemical products at its Blytheville Formulation Facility.
COMPETITION
Nitrogen fertilizer is a global commodity and customers, including end-users,
dealers and other fertilizer producers, base their purchasing decisions
principally on the delivered price of the product. The Company competes with a
number of U.S. producers, and producers in other countries, including state-
owned and government-subsidized entities. Some of the Company's principal
competitors may have greater total resources and may be less dependent on
earnings from nitrogen fertilizer sales than is the Company. Some foreign
competitors may have access to lower cost or government-subsidized natural gas
supplies. The Company believes that it competes with other manufacturers of
nitrogen fertilizer on the basis of delivery terms and availability of products
as well as on price.
The market for the fertilizer, crop protection products and seed distributed
by the Company is highly competitive. In 1994, sales attributable to the
Company's farm service centers accounted for less than 10% of total crop
production products sold in the U.S. Within the specific market areas served by
its farm service centers, however, the Company's share of the market was
substantially higher in most instances. The Company's competitors include
cooperatives, divisions of diversified agribusiness companies, regional
distributors and independent dealers, some of which have substantially greater
financial and other resources than the Company. The Company competes primarily
by providing a comprehensive line of products and by providing what the Company
believes to be superior services to growers and dealers.
The methanol industry, like the fertilizer industry, is highly competitive and
such competition is based largely on price, reliability and deliverability. The
relative cost and availability of natural gas and the efficiency of production
facilities are important competitive factors. Significant determinants of a
plant's competitive position are the natural gas acquisition and transportation
contracts that a plant negotiates with its major suppliers. Domestic competitors
for methanol include a number of large integrated petrochemical producers, many
of which are better capitalized than the Company. In addition, the production
and trade of methanol has become increasingly global, and a number of foreign
competitors produce methanol primarily for the export market.
8
<PAGE>
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
The Company's operations are subject to various federal, state and local
environmental, safety and health laws and regulations, including laws relating
to air quality, hazardous and solid wastes and water quality. Terra Canada's
operations are subject to various federal and provincial regulations regarding
such matters, including the Canadian Environmental Protection Act administered
by Environment Canada, and the Ontario Environmental Protection Act administered
by the Ontario Ministry of the Environment. The Company is also involved in the
manufacture, handling, transportation and storage of materials that are or may
be classified as hazardous or toxic by federal, state, provincial or other
regulatory agencies. Precautions are taken to reduce the likelihood of accidents
involving these materials. If such materials have been or are disposed of at
sites that are targeted for cleanup by federal or state regulatory authorities,
the Company may be among those responsible under CERCLA or analogous state laws
for all or part of the costs of such cleanup.
Terra International has been designated as a potentially responsible party
("PRP") under CERCLA or its state analogues with respect to various sites. Under
CERCLA, all PRPs may be held jointly and severally liable for the costs of
investigation and remediation of an environmentally damaged site. 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, the
Company'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 the Company's farm service centers and terminals. It is expected that other
states will adopt similar requirements pursuant to federal mandate. The Company
has commenced construction of these facilities at its farm service centers and
terminals, and estimates that the future cost of complying with these
regulations in 1995 and beyond will be approximately $6.5 million.
With respect to the Verdigris Facility and Blytheville Facility, Freeport-
McMoRan Resource Partners, Limited Partnership ("FMRP") (a former owner and
operator of such facilities) retains liability for certain environmental
matters.
With respect to the Beaumont Facility, DuPont retains responsibility for certain
environmental costs and liabilities stemming from conditions or operations to
the extent such conditions or operations existed or occurred prior to the 1991
acquisition from DuPont. The Company does not believe that any such
environmental matters, whether or not retained by FMRP or DuPont, will have a
material effect on the Company's financial condition or results of operations.
Insulation and other construction or building materials at certain Company
plants contain asbestos. Over 400 suits have been filed by contractors'
employees against DuPont based on exposure to asbestos-containing material at
the complex in which the Beaumont Facility is located. At least nine of these
are directly related to the Beaumont Facility. An estimate of potential
liability associated with these suits is not available. DuPont will retain
responsibility for all claims based on exposure to hazardous materials,
including asbestos, prior to an acquisition in 1991 from DuPont. Although no
suits relating to asbestos exposure have been filed against the Company to date,
the possibility exists that liability could be incurred in the future for claims
based on exposure to asbestos-containing material after such acquisition.
The Company may be required to install additional air and water quality
control equipment, such as low nitrous oxide burners, scrubbers, ammonia sensors
and continuous emission monitors, at certain of its facilities in order to
maintain compliance with Clean Air Act and Clean Water Act requirements. These
equipment requirements are also typically applicable to competitors as well. The
Company estimates that the cost of complying with these requirements will be
approximately $11 million to $13 million through 1997.
The Company endeavors to comply (and has incurred substantial costs in
connection with such compliance) in all material respects with applicable
environmental, safety and health regulations. The Company does not expect its
continued compliance with such regulations to have a material adverse effect on
its earnings or competitive position.
9
<PAGE>
EMPLOYEES
The Company had approximately 3,200 full-time employees at December 31, 1994,
none of whom were covered by a collective bargaining agreement. In addition, the
Company, which annually hires temporary employees on a seasonal basis, hired
approximately 1,500 temporary employees during its spring selling season in
1994.
ITEM 3. LEGAL PROCEEDINGS.
Various legal proceedings are pending against the Company and its
subsidiaries. Management of the Company considers that the aggregate liability
resulting from these proceedings will not be material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No items were submitted to a vote of security holders of the Company during
the fourth quarter of 1994.
EXECUTIVE OFFICERS OF THE COMPANY
The following paragraphs set forth the name, age and offices of each
present executive officer of Terra, 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 the Company
and principal occupations during the past five
Name and age years
------------ ----------------------------------------------
<S> <C>
Michael L. Bennett (41) Senior Vice President, Distribution of Terra since
February 1995; Senior Vice President, Distribution
of Terra International since October 1994; Vice
President, Northern Division thereof from January
1992 to October 1994; Vice President, Wholesale
Fertilizer Division thereof from January 1990 to
January 1992.
John S. Burchfield (54) Vice President, Human Resources of Terra since
March 1992; Vice President, Human Resources of AON
Corporation from January 1989 to November 1991;
Vice President, Human Resources for Denny's
International, National Education Corp. and
American Hospital Supply Corp. prior thereto.
Burton M. Joyce (53) President and Chief Executive Officer of Terra
since May 1991; Executive Vice President and Chief
Operating Officer thereof from February 1988 to
May 1991.
Francis G. Meyer (43) Vice President and Chief Financial Officer of
Terra since November 1993; Controller thereof from
August 1991 to November 1993; Vice President,
Controller of Terra International from June 1986
to August 1991.
Paula C. Norton (49) Vice President, Corporate and Investor Relations
of Terra since February 1995; Director, Corporate
Relations of Terra from January 1993 to February
1995; Director, Corporate Communication of
Universal Foods Corp. prior thereto.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Present positions and offices with the Company
and principal occupations during the past five
Name and age years
------------ ----------------------------------------------
<S> <C>
Reuben F. Richards (65) Chairman of the Board of Terra since December
1982; Chief Executive Officer thereof from December
1982 to May 1991 and President thereof from July
1983 to May 1991; Director of Engelhard Corporation
since prior to 1990 and Chairman of the Board
thereof from May 1985 to December 1994; Chairman of
the Board of Minorco USA since May 1990 and Chief
Executive Officer and President thereof since
February 1994.
W. Mark Rosenbury (47) President of Terra Nitrogen Corporation since
November 1994; Executive Vice President of Terra
since November 1993; Chief Operating Officer
thereof from November 1993 to November 1994; Vice
President and Chief Financial Officer thereof from
August 1991 to November 1993; Vice President and
Corporate Controller thereof from January 1987 to
August 1991.
Robert E. Thompson (43) Vice President, Controller of Terra since February
1995, after joining Terra in November 1994; Vice
President, Finance and Controller of Ameritech
Custom Business Services from April 1993 to June
1994; Controller of Ameritech Services, Inc. from
October 1990 to April 1993; Controller of
Ameritech Applied Technologies prior thereto.
George H. Valentine (46) Vice President, General Counsel and Corporate
Secretary of Terra 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 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 are elected annually to serve until their
respective successors are elected and qualified.
11
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information with respect to the market for the Company's common equity
and related stockholder matters contained in Terra's 1994 Annual Report to
Stockholders under the captions "Quarterly Financial and Stock Market Data
(Unaudited)" and "Stockholders and Dividends" is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA.
Information with respect to selected financial data contained in Terra's
1994 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's 1994 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 notes thereto
and the report of independent auditors thereon, and the information set forth
under the caption "Quarterly Financial and Stock Market Data (Unaudited)"
contained in Terra's 1994 Annual Report to Stockholders are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Information with respect to directors of the Company under the caption
"Election of Directors" in the Proxy Statement for the Annual Meeting of
Stockholders of Terra to be held on May 2, 1995, is incorporated herein by
reference. Information with respect to executive officers who are not also
directors of the Company appears under the caption "Executive Officers of the
Company" 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 to be held on May 2, 1995, is
incorporated herein by reference.
12
<PAGE>
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 to be held on May 2,
1995, 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 to be
held on May 2, 1995, 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 and its subsidiaries
(incorporated herein by reference to Terra's 1994 Annual Report to
Stockholders).
Consolidated Statements of Financial Position at December 31, 1994 and
1993.
Consolidated Statements of Income for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1994, 1993 and 1992.
Notes to the Consolidated Financial Statements.
Independent Auditors' Report.
Quarterly Production Data (Unaudited).
Quarterly Financial and Stock Market Data (Unaudited).
Revenues.
Stockholders and Dividends.
Financial Summary.
2. Index to Financial Statement Schedules
See Index to Financial Statement Schedules of Terra and its
subsidiaries at page S-1.
13
<PAGE>
3. Other Financial Statements
Individual financial statements of Terra's 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 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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. 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.
13. 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.
14
<PAGE>
14. 1995 Incentive Award Program for Officers and Key Executives of Terra
Industries filed as Exhibit 10.1.14 to Terra Industries' Formal 10-K for
the year ended December 31, 1994.
(C) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the fourth quarter of
1994:
Form 8-K/A dated November 3, 1994, Items 2 and 7 including financial
information incorporated therein.
Form 8-K dated December 19, 1994, Items 2 and 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.
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.
3.1.3 Articles Supplementary of Terra Industries filed with the State of
Maryland on October 13, 1994, filed as Exhibit 4.1.3 to Terra
Industries' Form 8-K/A dated November 3, 1994, is incorporated herein
by reference.
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.
4.1 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.
4.2 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.
4.3 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, filed as Exhibit
4.1.3 to Terra Industries' Form 10-K for the year ended December 31,
1993, is incorporated herein by reference.
4.4 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, filed
as Exhibit 4.1.4 to Terra Industries' Form 10-K for the year ended
December 31, 1993, is incorporated herein by reference.
4.5 Indenture dated as of October 15, 1993 among Terra Industries (as
successor by merger to Agricultural Minerals and Chemicals Inc.) and
Society National Bank, including form of Senior Note (the "Senior Notes
Indenture"), filed as Exhibit 99.2 to Terra Industries' Registration
Statement on Form S-3, as amended, (File No. 33-52493), is incorporated
herein by reference.
15
<PAGE>
4.6 Credit Agreement among Terra Industries Inc., Terra Capital, Inc.,
Agricultural Minerals, L.P., Certain Guarantors, Certain Lenders,
Certain Issuing Banks and Citibank, N.A. without exhibits or schedules
(the "October 1994 Credit Agreement"), form of which previously filed
as Exhibit 99.5 to Terra Industries' Registration Statement on Form
S-3, as amended (File No. 33-52493).
4.7 Amendment No. 1 to the October 1994 Credit Agreement dated as of
December 28, 1994.
4.8 Amendment No. 2 to the October 1994 Credit Agreement dated as of
December 28, 1994, without exhibits.
4.9 Amendment No. 3 to the October 1994 Credit Agreement dated as of
February 1, 1995.
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.
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.
10.1.3 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.
10.1.4 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.
10.1.5 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.
10.1.6 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.
10.1.7 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.
10.1.8 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, is incorporated herein
by reference.
16
<PAGE>
10.1.9 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, is incorporated herein by
reference.
10.1.10 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, is incorporated herein by reference.
10.1.11 Retirement/Consultant Agreement, dated as of May 13, 1993, by and
between Paul D. Foster and Terra International, filed as Exhibit
10.1.12 to Terra Industries' Form 10-K for the year ended December 31,
1993, is incorporated herein by reference.
10.1.12 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, is
incorporated herein by reference.
10.1.13 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, is incorporated herein by reference.
10.1.14 1995 Incentive Award Program for Officers and Key Executives of Terra
Industries.
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, 1988, filed as Exhibit 10.19 to Terra
Industries' Form 10-K for the year ended December 31, 1988, is
incorporated herein by reference.
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.
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.
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.
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.
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.
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.
10.6 Lease, dated as of April 8, 1993, between W. Patrick Moroney and Terra
International (Canada) Inc., filed as Exhibit 10.6 to Terra Industries'
Form 10-K for the year ended December 31, 1993, is incorporated herein
by reference.
17
<PAGE>
10.7 Merger Agreement dated as of August 8, 1994 among Terra Industries Inc.,
AMCI Acquisition Corp. and Agricultural Minerals and Chemicals Inc.
without exhibits or schedules, filed as Exhibit 2 to Terra Industries'
Registration Statement on Form S-3, as amended, (File No. 33-52493), is
incorporated herein by reference.
10.8 Methanol Hedging Agreement among BMLP (as successor by merger to Beaumont
Methanol Corporation) and The Morgan Stanley Leveraged Equity Fund II,
L.P. as Counterparty, form of which filed as Exhibit 99.1 to Terra
Industries' Registration Statement on Form S-3, as amended, (File No. 33-
52493), is incorporated herein by reference.
10.9 Agreement of Limited Partnership of TNCLP (formerly known as Agricultural
Minerals Company, L.P.) dated as of December 4, 1991, filed as Exhibit
99.3 to Terra Industries' Registration Statement on Form S-3, as amended,
(File No. 33-52493), is incorporated herein by reference.
10.10 Agreement of Limited Partnership of TNLP (formerly known as Agricultural
Minerals, Limited Partnership) dated as of December 4, 1991, filed as
Exhibit 99.4 to Terra Industries' Registration Statement on Form S-3, as
amended, (File No. 33-52493), is incorporated herein by reference.
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, 1994.
18 Deloitte & Touche LLP letter regarding changes in accounting principles
dated February 1, 1995.
21 Subsidiaries of Terra Industries.
24 Powers of Attorney.
27 Financial Data Schedule. [EDGAR filing only]
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant 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 15, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Chairman of the Board March 15, 1995
- ------------------
Reuben F. Richards
* Chief Executive Officer, President March 15, 1995
- ------------------ and Director
Burton M. Joyce (Principal Executive Officer)
* Vice President and Chief Financial Officer March 15, 1995
- ------------------ (Principal Financial Officer)
Francis G. Meyer
* Vice President, Controller March 15, 1995
- ------------------ (Principal Accounting Officer)
Robert E. Thompson
* Director March 15, 1995
- ------------------
Edward G. Beimfohr
* Director March 15, 1995
- ------------------
Carol L. Brookins
* Director March 15, 1995
- ------------------
Edward M. Carson
* Director March 15, 1995
- ------------------
David E. Fisher
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
* Director March 15, 1995
- ------------------
Basil T.A. Hone
* Director March 15, 1995
- ------------------
Anthony W. Lea
* Director March 15, 1995
- ------------------
John R. Norton III
* Director March 15, 1995
- ------------------
Henry R. Slack
*By: /S/Francis G. Meyer
-------------------------------
Francis G. Meyer
Attorney-in-Fact
</TABLE>
20
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES, REPORTS AND CONSENTS
------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Deloitte & Touche LLP on Financial Statement Schedules.. S-2
Consent of Deloitte & Touche LLP.................................. S-2
Schedule No.
- ------------
I Condensed Financial Information of Registrant........ S-3
II Valuation and Qualifying Accounts:
Years Ended December 31, 1994, 1993 and 1992......... S-8
</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>
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, 1994 and 1993 and for each of the three years in the
period ended December 31, 1994, and have issued our report thereon dated
February 1, 1995; such financial statements and report are included in the 1994
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 LLP
Omaha, Nebraska
February 1, 1995
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, 1995, included in the 1994 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 LLP
Omaha, Nebraska
February 1, 1995
S-2
<PAGE>
SCHEDULE I
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
---------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF FINANCIAL POSITION
- ----------------------------------------------------------------------------------------
(in thousands) December 31,
- ----------------------------------------------------------------------------------------
1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and short-term investments $ 10,511 $ 24,249
Accounts receivable, net 3,069 1,016
Deferred tax asset - current 43,992 26,011
Other current assets 4,516 4,337
- ----------------------------------------------------------------------------------------
Total current assets 62,088 55,613
Investment in and advances to Terra Capital, Inc. 530,327 259,961
Deferred tax asset - non-current --- 24,742
Investment in and advances to discontinued subsidiaries --- 3,488
Other assets 13,769 9,226
- ----------------------------------------------------------------------------------------
Total assets $ 606,184 $ 353,030
========================================================================================
LIABILITIES
Income taxes payable $ 1,914 $ 12,912
Accrued and other liabilities 12,901 8,466
- ----------------------------------------------------------------------------------------
Total current liabilities 14,815 21,378
Long-term debt 158,755 72,057
Deferred income taxes 6,235 ---
Other liabilities 6,691 16,127
- ----------------------------------------------------------------------------------------
Total liabilities 186,496 109,562
- ----------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock 133,770 122,257
Paid-in capital 630,111 516,128
Accumulated deficit (344,193) (394,917)
- ----------------------------------------------------------------------------------------
Total stockholders' equity 419,688 243,468
- ----------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 606,184 $ 353,030
========================================================================================
</TABLE>
See accompanying Notes to the Condensed Financial Statements.
S-3
<PAGE>
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
---------------------------------------------
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
- ---------------------------------------------------------------------------------------------------
(in thousands, except per-share amounts) For the Year Ended December 31,
- ---------------------------------------------------------------------------------------------------
1994 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Equity in earnings of Terra Capital, Inc. $ 64,065 $ 26,691 $ 10,029
Interest and other income (49) 140 2,808
- ---------------------------------------------------------------------------------------------------
Total income 64,016 26,831 12,837
- ---------------------------------------------------------------------------------------------------
EXPENSES
Selling, general and administrative expense 3,788 5,929 4,813
Interest expense 6,382 5,853 5,760
Income tax benefit (5,329) (7,796) (2,430)
- ---------------------------------------------------------------------------------------------------
Total expenses 4,841 3,986 8,143
- ---------------------------------------------------------------------------------------------------
Income from continuing operations 59,175 22,845 4,694
Discontinued operations:
Equity in operations of discontinued
subsidiaries, net of taxes --- --- (4,025)
Gain (loss) on disposition, net of taxes --- --- 2,360
- ---------------------------------------------------------------------------------------------------
Income before extraordinary items and
cumulative effect of accounting changes 59,175 22,845 3,029
Extraordinary loss on early retirement of debt (2,614) --- ---
Cumulative effect of accounting changes --- --- 28,000
- ---------------------------------------------------------------------------------------------------
Net income 56,561 22,845 31,029
Cash dividends paid to common stockholders (5,837) (1,386) ---
Accumulated deficit - beginning of year (394,917) (416,376) (447,405)
- ---------------------------------------------------------------------------------------------------
ACCUMULATED DEFICIT - END OF YEAR $(344,193) $(394,917) $(416,376)
===================================================================================================
INCOME (LOSS) PER COMMON SHARE:
Continuing operations $ 0.81 $ 0.33 $ 0.06
Discontinued operations --- --- (0.02)
- ---------------------------------------------------------------------------------------------------
Income before extraordinary items 0.81 0.33 0.04
Extraordinary loss on early retirement of debt (0.03) --- ---
Cumulative effect of accounting changes --- --- 0.41
- ---------------------------------------------------------------------------------------------------
NET INCOME $ 0.78 $ 0.33 $ 0.45
===================================================================================================
</TABLE>
See accompanying Notes to the Condensed Financial Statements.
S-4
<PAGE>
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
---------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------
(in thousands) For the Year Ended December 31,
- -----------------------------------------------------------------------------------------------------
1994 1993 1992
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 56,561 $ 22,845 $ 31,029
Adjustments to reconcile net income to
net cash used by operations:
Equity in earnings of subsidiaries (64,065) (26,691) (10,029)
Loss from discontinued operations --- --- 1,665
Gain on early retirement of debentures 2,614 --- ---
Cumulative effect of accounting change --- --- (28,000)
Deferred income taxes 15,291 (4,494) (19,643)
Other non-cash items 48 81 81
Change in working capital components (9,538) (4,062) 7,995
Other 344 (7,256) 1,164
- -----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,255 (19,577) (15,738)
- -----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from asset sales and
discontinued operations 541 40,205 30,425
Capital contributions to subsidiaries (113,000) (30,000) ---
Proceeds from investments 500 --- 30
- -----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES (111,959) 10,205 30,455
- -----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term debt decrease (82,395) --- ---
Loss on early retirement of debt (2,533) --- ---
Debt issuance costs (2,873) --- ---
Issuance of common shares 113,000 --- ---
Dividend paid to common stockholders (5,837) (1,386) ---
Stock issuance/repurchase - net 4,666 513 ---
Advances from (to) subsidiaries - net 72,938 (50,001) 4,207
- -----------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 96,966 (50,874) 4,207
- -----------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH (13,738) (60,246) 18,924
CASH AND INVESTMENTS AT BEGINNING OF YEAR 24,249 84,495 65,571
- -----------------------------------------------------------------------------------------------------
CASH AND INVESTMENTS AT END OF YEAR $ 10,511 $ 24,249 $ 84,495
=====================================================================================================
INTEREST PAID $ 6,285 $ 6,229 $ 6,208
=====================================================================================================
TAXES PAID $ 16,065 $ 3,320 $ 4,208
=====================================================================================================
</TABLE>
See accompanying Notes to the Condensed Financial Statements.
S-5
<PAGE>
TERRA INDUSTRIES INC.
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 beneficially owned subsidiaries, Terra
Capital, Inc., Terra International, Inc. (TII), Terra Nitrogen Corporation (TNC)
and Beaumont Methanol Limited Partnership (BMLP). Equity in TII's, 1994
earnings includes a net credit of $3.4 million for the cumulative effect of
accounting changes to recognize costs of major maintenance turnarounds on a
deferral rather than accrual method and to recognize a liability for the
estimated cost of benefits provided to TII's disabled employees. Equity in
TII'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 TII's employees.
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, 1994 consists of $158.8 million of unsecured
10.75% Senior Notes due in full September 30, 2003 which were assumed in
conjunction with the October 1994 acquisition of American Minerals and Chemicals
Inc. (AMCI). Following the Registrant's acquisition of AMCI, $16.2 million of
Senior Notes were redeemed. The 10.75% Senior Notes are redeemable at the
option of the Registrant, in whole or part, at any time on or after September
30, 1998, as more fully detailed in Note 10 to the Consolidated Financial
Statements.
Long-term debt at December 31, 1993 consisted of 8.5% Convertible Subordinated
Debentures (Debentures) of $72,057,000 that was due 2012. The Debentures were
convertible into Common Shares any time prior to maturity, unless previously
redeemed, at a conversion price of $8.083 per share. The Debentures were
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. During March 1994,
the Registrant gave notice to holders of its intent to redeem the Debentures at
the redemption price of 103.4% of par value. During the 20-day notice period,
holders of $5.9 million chose to convert their debentures into Common Stock of
the Registrant. The Registrant issued 730,768 Common Shares and paid cash for
fractional shares.
3. COMMITMENTS AND CONTINGENCIES
The Registrant is committed to a non-cancelable office lease expiring in 1998.
Total minimum rental payments are: 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 1994 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, 1994. 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 $9.7 million at
December 31, 1994 and $13.0 million at December 31, 1993, guaranteeing various
insurance and financing activities. Short-term investments of $9.6 million at
December 31, 1994 and $13.0 million at December 31, 1993 are restricted to
collateralize certain of the letters of credit.
S-6
<PAGE>
4. INCOME TAXES
The Registrant files a consolidated U.S. federal tax return. Certain 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. The
subsidiaries acquired in connection with the October 1994 acquisition of AMCI
provide for federal taxes according to a separate return basis with any
additional benefits of the Registrant's operating loss utilization allocated to
the Registrant.
S-7
<PAGE>
SCHEDULE II
TERRA INDUSTRIES INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1994, 1993, and 1992
---------------------------------------------
(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, 1994:
- -----------------------------
Allowance for Doubtful Accounts $ 5,788 $ 2,231 (a) $ 205 (b) $ 8,224
Year Ended December 31, 1993:
- -----------------------------
Allowance for Doubtful Accounts $ 6,427 $ 1,758 $ (2,397) (b) $ 5,788
Year Ended December 31, 1992:
- -----------------------------
Allowance for Doubtful Accounts $ 6,296 $ 4,026 $ (3,895) (b) $ 6,427
</TABLE>
(a) Includes $100 as a result of AMCI acquisition.
(b) Write-offs, net of recoveries.
S-8
<PAGE>
EXHIBIT INDEX
4.6 Credit Agreement among Terra Industries Inc., Terra Capital, Inc.,
Agricultural Minerals, L.P., Certain Guarantors, Certain Lenders,
Certain Issuing Banks and Citibank, N.A. without exhibits or schedules
(the "October 1994 Credit Agreement"), form of which previously filed
as Exhibit 99.5 to Terra Industries' Registration Statement on Form
S-3, as amended (File No. 33-52493).
4.7 Amendment No. 1 to the October 1994 Credit Agreement dated as of
December 28, 1994.
4.8 Amendment No. 2 to the October 1994 Credit Agreement dated as of
December 28, 1994, without exhibits.
4.9 Amendment No. 3 to the October 1994 Credit Agreement dated as of
February 1, 1995.
10.1.14 1995 Incentive Award Program for Officers and Key Executives of Terra
Industries.
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, 1994.
18 Deloitte & Touche LLP letter regarding changes in accounting principles
dated February 1, 1995.
21 Subsidiaries of Terra Industries.
24 Powers of Attorney.
27 Financial Data Schedule. [EDGAR filing only]
<PAGE>
EXHIBIT 4.6
[EXECUTION COUNTERPART]
================================================================================
CREDIT AGREEMENT
dated as of October 20, 1994
among
TERRA INDUSTRIES INC.,
TERRA CAPITAL, INC.
and
AGRICULTURAL MINERALS,
LIMITED PARTNERSHIP
(the name of which will hereafter
be changed to TERRA NITROGEN,
LIMITED PARTNERSHIP),
as Borrowers
CERTAIN GUARANTORS
CERTAIN LENDERS
CERTAIN ISSUING BANKS
and
CITIBANK, N.A.,
as Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience of reference
only.
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms..................... 3
Section 1.02. Computation of Time Periods............... 38
Section 1.03. Accounting Terms.......................... 38
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
Section 2.01. The Advances.............................. 38
Section 2.02. Making the Advances....................... 43
Section 2.03. Repayment................................. 45
Section 2.04. Termination or Reduction of the
Commitments............................. 48
Section 2.05. Prepayments............................... 49
Section 2.06. Interest.................................. 53
Section 2.07. Fees...................................... 54
Section 2.08. Conversion and Continuation of Advances... 55
Section 2.09. Increased Costs, Illegality, Etc.......... 56
Section 2.10. Payments and Computations................. 58
Section 2.11. Taxes..................................... 60
Section 2.12. Sharing of Payments, Etc.................. 63
Section 2.13. Letters of Credit......................... 64
Section 2.14. Assumption................................ 69
Section 2.15. Replacement of Lender..................... 69
<PAGE>
Page
----
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Documentary Conditions Precedent to
Initial Borrowing....................... 71
Section 3.02. Additional Conditions Precedent to
Initial Borrowing....................... 76
Section 3.03. Conditions Precedent to Initial AMLP
Borrowing............................... 76
Section 3.04. Conditions Precedent to Initial Terra
Facility C Borrowing.................... 77
Section 3.05. Conditions Precedent to Each Borrowing
and Issuance............................ 77
Section 3.06. Determinations Under Sections 3.01 and
3.02.................................... 77
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the
Company................................. 78
ARTICLE V
COVENANTS OF TERRA
Section 5.01. Affirmative Covenants..................... 85
Section 5.02. Negative Covenants........................ 91
Section 5.03. Reporting Requirements.................... 99
Section 5.04. Financial Covenants....................... 104
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default......................... 105
Section 6.02. Actions in Respect of the Letters of
Credit Upon Default..................... 109
(ii)
<PAGE>
Page
----
ARTICLE VII
THE AGENT
Section 7.01. Authorization and Action.................. 110
Section 7.02. Agent's Reliance, Etc..................... 110
Section 7.03. Citibank and Affiliates................... 111
Section 7.04. Lender Credit Decision.................... 111
Section 7.05. Indemnification........................... 112
Section 7.06. Collateral Duties......................... 112
Section 7.07. Successor Agent........................... 113
ARTICLE VIII
THE GUARANTEE
Section 8.01. The Guarantee............................. 114
Section 8.02. Obligations Unconditional................. 115
Section 8.03. Reinstatement............................. 116
Section 8.04. Subrogation............................... 116
Section 8.05. Remedies.................................. 117
Section 8.06. Instrument for the Payment of Money....... 117
Section 8.07. Continuing Guarantee...................... 117
Section 8.09. General Limitation on Guarantee
Obligations............................. 118
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, Consents, Etc................. 119
Section 9.02. Notices, Etc.............................. 120
Section 9.03. No Waiver; Remedies....................... 121
Section 9.04. Costs, Expenses and Indemnification....... 121
Section 9.05. Right of Setoff........................... 123
Section 9.06. Governing Law; Submission to
Jurisdiction............................ 124
Section 9.07. Assignments and Participations............ 124
Section 9.08. Execution in Counterparts................. 128
Section 9.09. No Liability of the Issuing Banks......... 128
Section 9.10. Confidentiality........................... 129
Section 9.11. WAIVER OF JURY TRIAL...................... 129
(iii)
<PAGE>
Page
----
Section 9.12. Survival.................................. 129
Section 9.13. Captions.................................. 130
Section 9.14. Successors and Assigns.................... 130
(iv)
<PAGE>
SCHEDULES
---------
SCHEDULE 2.01 List of Commitments and Lending
Offices
SCHEDULE 3.01(d) Terminated Facilities
SCHEDULE 3.01(g)(iv) List of Good Standing Jurisdictions
SCHEDULE 4.01(b) Subsidiaries
SCHEDULE 4.01(c) List of Conflicts with Credit Instruments
SCHEDULE 4.01(d) List of Required Authorizations, Consents
SCHEDULE 4.01(j) Plans and Multiemployer Plans
SCHEDULE 4.01(q) Environmental Compliance Schedule
SCHEDULE 4.01(u) Open Tax Years
SCHEDULE 4.01(y) Existing Debt
SCHEDULE 5.02(a)(iii) Existing Liens
SCHEDULE 5.02(f) Existing Investments
SCHEDULE 5.03(j) UCC Filings
EXHIBITS
--------
EXHIBIT A-1 Form of Terra Facilities Note
EXHIBIT A-2 Form of Terra Facility B Note
EXHIBIT A-3 Form of AMLP Facilities Note
EXHIBIT B-1 Form of Holdings Pledge Agreement
EXHIBIT B-2 Form of Terra Capital Pledge Agreement
EXHIBIT B-3 Form of Subsidiary Pledge and
Security Agreement
EXHIBIT B-4 Form of AMLP Pledge and Security Agreement
EXHIBIT C Form of Notice of Borrowing
EXHIBIT D Form of Opinion of Special Counsel
for the Obligors
EXHIBIT E Form of Loan Purchase Agreement
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Provisions Relating to Certain Investments
(v)
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of October 20, 1994 among:
(1) TERRA INDUSTRIES INC., a Maryland corporation ("Terra");
(2) TERRA CAPITAL, INC., a Delaware corporation and wholly owned
subsidiary of Terra Capital Holdings ("Terra Capital");
(3) AGRICULTURAL MINERALS, LIMITED PARTNERSHIP, a Delaware limited
partnership and indirect subsidiary of AMC, the name of which will
hereafter be changed to Terra Nitrogen, Limited Partnership ("AMLP");
(4) each of the corporations listed on the signature pages hereof under
the caption "TERRA AND AMLP GUARANTORS";
(5) each of the lenders (the "Initial Lenders") listed on the signature
pages hereof; and
(6) CITIBANK, N.A., as agent (together with its successor in such capacity
appointed pursuant to Article VII, the "Agent") for the Lenders and
the Issuing Banks hereunder.
PRELIMINARY STATEMENTS:
(1) Terra, AMCI Acquisition Corporation, a Delaware corporation and
wholly owned subsidiary of Terra ("Acquisition Corp."), and Agricultural
Minerals and Chemicals Inc., a Delaware corporation ("AMCI"), are parties to the
Merger Agreement dated as of August 8, 1994 (as from time to time amended, the
"Merger Agreement") providing, on the terms and conditions set forth therein,
for the merger of Acquisition Corp. with and into AMCI (the "Initial Merger"),
with AMCI being the corporation surviving the Initial Merger.
(2) Immediately after the consummation of the Initial Merger, (a)
Terra will contribute to AMCI all of the issued and
Credit Agreement
----------------
<PAGE>
-2-
outstanding capital stock of Terra International, Inc., a Delaware corporation
("TI"); (b) AMCI will merge (the "Second Merger" and, collectively with the
Initial Merger, the "Merger") with and into Terra, with Terra being the
corporation surviving the Second Merger; (c) Terra will have formed Terra
Capital Holdings, Inc. as a Delaware corporation and a wholly owned Subsidiary
of Terra ("Terra Capital Holdings"); (d) Terra Capital Holdings will have formed
Terra Capital as a Delaware corporation and a wholly owned Subsidiary of Terra
Capital Holdings; and (e) Terra will contribute to Terra Capital Holdings, and
Terra Capital Holdings will thereupon contribute to Terra Capital, all of the
issued and outstanding capital stock of Agricultural Minerals Corporation, a
Delaware corporation, the name of which will hereafter be changed to Terra
Nitrogen Corporation ("AMC"), BMC Holdings Inc., a Delaware corporation
("BMCH"), and TI (the Merger and the other transactions referred to above being
herein collectively called the "Transactions").
(3) Terra has asked the Lenders to make available credit to finance
the consummation of the Initial Merger, to pay fees and expenses in connection
with the Transactions, to repurchase or refinance certain outstanding
indebtedness and to provide for the ongoing working capital needs of Terra
Capital and certain subsidiaries, all on the terms and conditions provided
herein, and AMLP has asked the Lenders to make available credit to refinance
certain outstanding indebtedness and to provide for its ongoing working capital
needs, all on the terms and conditions provided herein.
(4) The Obligors, the Lenders, the Issuing Banks and the Agent have
entered into this Agreement pursuant to which (a) the Lenders propose to make
advances to, and the Issuing Banks propose to issue letters of credit for
account of, Terra and Terra Capital and certain subsidiaries thereof, (b) the
Lenders propose to make advances to, and the Issuing Banks propose to issue
letters of credit for account of, AMLP and certain of its subsidiaries, (c) each
Terra Guarantor will guarantee the credit so extended to Terra Capital, (d) each
AMLP Guarantor will guarantee the credit so extended to AMLP and (e) certain
Obligors will agree to execute and deliver pledge agreements and security
agreements providing for security
Credit Agreement
----------------
<PAGE>
-3-
interests and liens to be granted by such Obligors on certain of their
respective properties as collateral security for the obligations of such
Obligors to the Lenders, the Issuing Banks and the Agent hereunder, all on and
subject to the terms and conditions of this Agreement.
(5) Each of the Obligors expects to derive benefit, directly or
indirectly, from the credit so extended, both in its separate capacity and as a
member of the Consolidated Group, since the successful operation of each of such
Obligors is dependent on the continued successful performance of the functions
of the Consolidated Group as a whole.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acquisition Amount" means, for any fiscal year of Terra, $15,000,000;
provided, that the Acquisition Amount for any such fiscal year shall
automatically be increased to $50,000,000 from and after the Trigger Date.
"Acquisition Corp." has the meaning specified in the Preliminary
Statements.
"Advance" means any Terra Advance or AMLP Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
Credit Agreement
----------------
<PAGE>
-4-
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 10% or more of the
voting stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting stock, by contract or otherwise.
"Agent" has the meaning specified in the recital of parties to this
Agreement.
"Agent's Account" means the account of the Agent maintained by the
Agent at its office at 1 Court Square, Long Island City, New York 11120,
Account No. 368-52248, Attention: Robert Alto, or such other account
maintained by the Agent as may be designated by the Agent in a written
notice to the Lenders, each Issuing Bank and the Borrowers.
"Allowance for Projected Common Dividends" means, for purposes of the
definition of "Specified Payments", the following respective amounts for
the following respective fiscal years of Terra:
Fiscal Year Allowance
----------- ---------
1995 $10,000,000
1996 $13,000,000
1997 $17,000,000
1998 $20,000,000
1999 and each
fiscal year
thereafter $23,000,000
"Allowance for Working Capital Increases/Decreases" means, for
purposes of the definition of "Excess Cash Flow", the following respective
amounts for the following respective fiscal years of Terra:
Fiscal Year Allowance
----------- ---------
1995 $15,000,000
1996 $25,000,000
Credit Agreement
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1997 $25,000,000
1998 and each
fiscal year
thereafter $30,000,000
"AMC" has the meaning specified in the Preliminary Statements.
"AMCI" has the meaning specified in the Preliminary Statements.
"AMCI Change of Control Redemption" means the redemption by Terra of
the AMCI Senior Notes pursuant to Section 4.11 of the AMCI Senior Note
Indenture.
"AMCI Senior Note Indenture" means the Indenture dated as of October
15, 1993 between AMCI and Society National Bank, as Trustee, providing for
the issuance of the AMCI Senior Notes, as from time to time amended.
"AMCI Senior Notes" mean the 10-3/4% senior notes of AMCI due 2003
issued pursuant to the AMCI Senior Note Indenture.
"AMLP" has the meaning specified in the recital of parties to this
Agreement.
"AMLP Advance" means an AMLP Facility A Advance or an AMLP Facility B
Advance, "AMLP Borrowing" means an AMLP Facility A Borrowing or an AMLP
Facility B Borrowing, "AMLP Commitment" means an AMLP Facility A Commitment
or an AMLP Facility B Commitment, "AMLP Facility" means AMLP Facility A
or AMLP Facility B, and "AMLP Note" means an AMLP Facilities Note.
"AMLP Facilities Note" means a promissory note of AMLP payable to the
order of a Lender, in substantially the form of Exhibit A-3, as from time
to time amended.
"AMLP Facility A" means the term credit facility provided hereunder in
respect of the AMLP Facility A
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Commitments, "AMLP Facility A Advance" means an Advance pursuant to Section
2.01(f), "AMLP Facility A Borrowing" means a borrowing consisting of
simultaneous AMLP Facility A Advances of the same Type, and "AMLP Facility
A Commitment" has the meaning specified in Section 2.01(f).
"AMLP Facility A Principal Payment Date" means the Quarterly Date
occurring in October, 1999.
"AMLP Facility B" means the revolving credit facility provided
hereunder in respect of the AMLP Facility B Commitments, "AMLP Facility B
Advance" means an Advance pursuant to Section 2.01(g), "AMLP Facility B
Borrowing" means a borrowing consisting of simultaneous AMLP Facility B
Advances of the same Type, and "AMLP Facility B Commitment" has the meaning
specified in Section 2.01(g).
"AMLP Facility B Commitment Termination Date" means the earlier of (a)
the date five years after the Closing Date (provided, that if such day is
not a Business Day, the AMLP Facility B Commitment Termination Date shall
be the immediately preceding Business Day), and (b) the termination or
cancellation of the AMLP Facility B Commitments pursuant to the terms of
this Agreement.
"AMLP Guaranteed Obligations" has the meaning specified in Section
8.01(b).
"AMLP Guarantors" means Terra, Terra Capital Holdings, Terra Capital,
AMC, BMCH and BMC.
"AMLP L/C Cash Collateral Account" means the "AMLP L/C Cash Collateral
Account" under the AMLP Pledge and Security Agreement.
"AMLP Letter of Credit" means a letter of credit issued by an Issuing
Bank for account of AMLP or any of its Subsidiaries pursuant to Section
2.13(a).
"AMLP Letter of Credit Commitment" means, with respect to any Issuing
Bank at any time, the amount set forth
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opposite such Issuing Bank's name on Schedule 2.01 under the caption "AMLP
Letter of Credit Commitment", as such amount may be reduced pursuant to
Section 2.04.
"AMLP Letter of Credit Liability" means, as of any date, all of the
liabilities of AMLP to the Issuing Banks in respect of AMLP Letters of
Credit, whether such liability is contingent or fixed, and shall consist of
the sum of (a) the aggregate Available Amount of all AMLP Letters of Credit
then outstanding, plus (b) the aggregate amount that has then been paid by,
and has not been reimbursed to, any Issuing Bank under AMLP Letters of
Credit.
"AMLP Letter of Credit Sublimit" means $15,000,000.
"AMLP Obligors" mean AMLP and the AMLP Guarantors.
"AMLP Pledge and Security Agreement" means a Pledge and Security
Agreement in substantially the form of Exhibit B-4 between AMLP and the
Agent, as from time to time amended.
"Applicable Commitment Fee Rate" means 0.50% per annum; provided,
that, if for any Rolling Period ending after the first anniversary of the
Closing Date the Debt to Cash Flow Ratio for such Rolling Period shall be
less than or equal to 2.50 to 1, then, subject to the delivery to the Agent
of a certificate of the Senior Financial Officer demonstrating the same
prior to the end of the next succeeding fiscal quarter, the "Applicable
Commitment Fee Rate" shall be reduced to 0.375% per annum during the period
commencing on the Quarterly Date on or immediately following the date of
the Agent's receipt of such certificate until the next succeeding Quarterly
Date thereafter.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"Applicable Letter of Credit Fee Rate" means, at any time, a rate per
annum equal to the Applicable Margin for
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Eurodollar Rate Advances (other than Terra Facility B Advances) in effect
at such time.
"Applicable Margin" means, (a) (i) with respect to all Base Rate
Advances (other than Terra Facility B Advances), 1.00% per annum and (ii)
with respect to all Eurodollar Rate Advances (other than Terra Facility B
Advances), 2.00% per annum; provided, that if the principal of and interest
on the Terra Facility D Advances shall be paid in full prior to the first
anniversary of the Closing Date, the Applicable Margin with respect to all
Base Rate Advances and Eurodollar Rate Advances (in each case other than
Terra Facility B Advances) shall, from the date of such payment in full,
until the first anniversary of the Closing Date, be 0.50% per annum (in the
case of such Base Rate Advances) and 1.50% per annum (in the case of such
Eurodollar Rate Advances); and provided, further, that if for any Rolling
Period ending after the first anniversary of the Closing Date the Debt to
Cash Flow Ratio for such Rolling Period shall be within any of the ranges
specified in the schedule below, then, subject to the delivery to the Agent
of a certificate of the Senior Financial Officer demonstrating the same
prior to the end of the next succeeding fiscal quarter, the "Applicable
Margin" shall be reduced to the percentage per annum for the respective
Type of Advance set forth opposite the reference to such range in such
schedule during the period commencing on the Quarterly Date on or
immediately following the date of the Agent's receipt of such certificate
until the next succeeding Quarterly Date thereafter:
Applicable Margin (% p.a.)
----------------------------
Range of Debt Base Rate Eurodollar Rate
to Cash Flow Ratio Advances Advances
------------------ --------- ---------------
Greater than 3.00 to 1 1.00% 2.00%
Less than or equal to
3.00 to 1 and greater
than 2.50 to 1 0.50% 1.50%
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Less than or equal to
2.50 to 1 and greater
than 2.00 to 1 0.25% 1.25%
Less than or equal to
2.00 to 1 0.00% 1.00%
(b) with respect to Terra Facility B Advances (i) that are Base Rate
Advances, 1.50% per annum and (ii) that are Eurodollar Rate Advances, 2.50%
per annum.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the Agent, in
accordance with Section 9.07 and in substantially the form of Exhibit F.
"Assumption Time" has the meaning set forth in Section 2.14.
"Available Amount" of any Letter of Credit means the maximum amount
available to be drawn under such Letter of Credit (assuming compliance with
all conditions to drawing specified therein).
"Base Rate" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the
highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) 0.50% per annum above the Federal Funds Rate; and
(c) the sum (adjusted to the nearest 0.25% or, if there is no
nearest 0.25%, to the next higher 0.25%) of (i) 0.50% per annum plus
(ii) the rate obtained by dividing (x) the latest three-week moving
average of
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secondary market morning offering rates in the United States for
three-month certificates of deposit of major United States money
center banks, such three-week moving average (adjusted to the bases of
a year of 360 days) being determined weekly on each Monday (or, if
such date is not a Business Day, on the next succeeding Business Day)
for the three-week period ending on the previous Friday by Citibank on
the basis of such rates reported by certificate of deposit dealers to
and published by the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected by
Citibank by (y) a percentage equal to 100% minus the average of the
daily percentages specified during such three-week period by the Board
of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal reserve
requirement) for Citibank with respect to liabilities consisting of or
including (among other liabilities) three-month Dollar non-personal
time deposits in the United States plus (iii) the average during such
three-week period of the annual assessment rates estimated by Citibank
for determining the then current annual assessment rate payable by
Citibank to the Federal Deposit Insurance Corporation (or any
successor) for insuring Dollar deposits of Citibank in the United
States.
Each change in any interest rate provided for herein based upon the Base
Rate resulting from a change in the Base Rate shall take effect at the time
of such change in the Base Rate.
"Base Rate Advance" means an Advance that bears interest as provided
in Section 2.06(a)(i).
"BMC" means Beaumont Methanol Corporation, a Delaware corporation and
a wholly owned Subsidiary of BMCH.
Credit Agreement
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"BMCH" has the meaning specified in the Preliminary Statements.
"Borrower" means each of the Company and AMLP; provided, that when
reference is made in this Agreement or in any other Loan Document to the
"relevant" Borrower in connection with any Facility, such reference shall
be deemed to refer (a) in the case of any Terra Facility, to the Company,
and (b) in the case of any AMLP Facility, to AMLP.
"Borrower's Account" means (a) in the case of the Company, the account
of the Company maintained with Citibank at its office at 399 Park Avenue,
New York, New York 10043, Account No. 4065-6098, and (b) in the case of
AMLP, the account of AMLP maintained with Citibank at its office at 399
Park Avenue, New York, New York 10043, Account No. 4065-6071; or, in either
case, such other account maintained by the relevant Borrower with Citibank
and designated by such Borrower in a written notice to the Agent.
"Borrowing" means a Terra Borrowing or an AMLP Borrowing.
"Business Day" means a day on which banks are not required or
authorized to close in New York City and, if such Business Day relates to a
Eurodollar Rate Advance, on which dealings are carried on in the London
interbank market.
"Capital Expenditures" means, for any period with respect to any
Person, the sum of all expenditures during such period (whether paid in
cash or accrued as liabilities during such period) that, in conformity with
GAAP, are required to be included in or reflected on the balance sheet of
such Person in respect of equipment, fixed assets, real property or
improvements, or for replacements or substitutions therefor or additions
thereto, plus (without duplication) the amount of expenditures deemed to be
made in connection with equipment that is purchased simultaneously with the
trade-in of existing equipment owned by such Person
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to the extent the gross amount of the purchase price of such purchased
equipment exceeds the fair market value (as determined in good faith by
such Person) of the equipment then being traded in, but excluding
expenditures made in connection with the replacement or restoration of
assets to the extent such replacement or restoration is financed from
insurance proceeds paid on account of loss or damage to the assets so
replaced or restored.
"Capital Lease Obligations" means, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) property to the extent such
obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP, and, for purposes of
this Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP.
"Cash Interest Expense" means, with respect to Terra and its
Subsidiaries on a Consolidated basis, for any period (without duplication),
interest expense net of interest income, whether paid or accrued (including
the interest component of Capital Lease Obligations), on all Debt of Terra
and its Subsidiaries on a Consolidated basis for such period, including,
without limitation, (a) interest expense in respect of the Advances, (b)
commissions, discounts and other fees and charges payable in connection
with letters of credit (including, without limitation, any Letter of
Credit) and (c) the net payment, if any, payable in connection with any
Hedge Agreement; excluding, in each case, interest not payable in cash
(including, without limitation, amortization of original issue discount and
the interest portion of any deferred payment obligation); all as determined
in accordance with GAAP for such period.
"Casualty Event" means, with respect to any property of any Person,
any loss of or damage to, or any condemnation or other taking of, such
property for which such Person or any of its Subsidiaries receives
insurance proceeds, or proceeds of a condemnation award or other
compensation.
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"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Change in Non-Cash Working Capital" means, for any period, the non-
cash working capital of Terra and its Subsidiaries on a Consolidated basis
as at the last day of such period minus the non-cash working capital of
Terra and its Subsidiaries on a Consolidated basis as at the first day of
such period (which difference may be positive or negative), but excluding
in each case customer deposits and prepayments.
"Citibank" means Citibank, N.A., a national banking association.
"Closing Date" means the date of the initial Advances hereunder.
"Collateral" means all "Collateral" referred to in the Security
Documents and all other property that is subject to any Lien created by any
Security Document in favor of the Agent, the Lenders and the Issuing Banks.
"Commitment" means a Terra Commitment or an AMLP Commitment.
"Company" means (a) prior to the Assumption Time, Terra and (b) from
and after the Assumption Time, Terra Capital.
"Confidential Information" means information identified as such that
Terra or any of its Subsidiaries furnishes to the Agent, any Issuing Bank
or any Lender, but does not include any such information once such
information has become generally available to the public or once such
information has become available to the Agent, any Issuing Bank or any
Lender from a source other than Terra and its Subsidiaries (unless, in
either case, such information becomes so available as a result of the
breach by the Agent, an Issuing Bank or a Lender of its duty of
confidentiality set forth in Section 9.10).
Credit Agreement
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"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Consolidated Group" means, collectively, Terra and its Consolidated
Subsidiaries, and a "member" of the Consolidated Group means Terra or any
such Subsidiary.
"Continuation", "Continue" and "Continued" each refers to a
continuation of Eurodollar Rate Advances from one Interest Period to the
next Interest Period pursuant to Section 2.08.
"Conversion", "Convert" and "Converted" each refers to a conversion of
Advances of one Type into Advances of the other Type pursuant to Section
2.08 or 2.09.
"Credit Parties" means Terra, Terra Capital Holdings, Terra Capital,
AMCI, AMC, AMLP, BMCH, BMC and TI; provided, that after the Assumption
Time, any reference herein to AMCI as a "Credit Party" shall be a reference
to Terra as the successor thereto.
"Current Assets" of any Person means, on any date, all assets of such
Person on such date that would, in accordance with GAAP, be classified as
current assets of a company conducting a business the same as or similar to
that of such Person, after deducting adequate reserves in each case in
which a reserve is proper in accordance with GAAP.
"Current Liabilities" of any Person, on any date, means the following
(determined in accordance with GAAP): (a) all Debt (other than Funded
Debt) of such Person on such date, (b) all amounts of Funded Debt of such
Person required to be paid or prepaid within one year after such date and
(c) all other items (including taxes accrued as estimated) that in
accordance with GAAP would be classified as current liabilities of such
Person on such date; provided, that the term "Current Liabilities" shall
not include Obligations under Hedge Agreements.
Credit Agreement
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"Debt" of any Person means (without duplication): (a) all
indebtedness of such Person for borrowed money, (b) all Obligations of such
Person for the deferred purchase price of property or services (other than
any trade payable having a tenor of not more than 365 days, or any like
item arising from the purchase of equipment or services having a tenor of
not more than 90 days, in each case incurred in the ordinary course of
business and on normal business terms and in each case not overdue by more
than 30 days, and other than any Obligations in respect of letters of
credit supporting any such trade payable or like item), (c) all Obligations
of such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired
by such Person (even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or
sale of such property), (e) all Capital Lease Obligations and Major
Operating Lease Obligations of such Person, (f) all Obligations, contingent
or otherwise, of such Person under acceptance, letter of credit or similar
facilities (other than Obligations in respect of letters of credit referred
to in clause (b) of this definition), (g) all Obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment in respect
of any Redeemable capital stock, which Obligations shall be valued at the
greater of its voluntary or involuntary liquidation preference plus accrued
and unpaid dividends, (h) all Obligations of such Person in respect of
Hedge Agreements, (i) all Debt of others referred to in clauses (a) through
(h) above guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Debt or to advance or supply funds
for the payment or purchase of such Debt, (ii) to purchase, sell or lease
(as lessee or lessor) property, or to purchase or sell services, primarily
for the purpose of enabling the debtor to make payment of such Debt or to
assure the holder of such Debt against loss, (iii) to supply funds to or in
any other manner invest in the debtor (including any agreement to pay
Credit Agreement
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for property or services irrespective of whether such property is received
or such services are rendered) or (iv) otherwise to assure a creditor
against loss, and (j) all Debt referred to in clauses (a) through (i) above
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of
such Debt.
"Debt to Capital Ratio" means, on any date, the ratio of (i) Funded
Debt of Terra and its Subsidiaries on a Consolidated basis on such date to
(ii) Total Capital of Terra and its Subsidiaries on a Consolidated basis on
such date.
"Debt to Cash Flow Ratio" means, for any period, the ratio of (i)
Funded Debt of Terra and its Subsidiaries on a Consolidated basis as of the
last day of such period to (ii) EBITDA of Terra and its Subsidiaries on a
Consolidated basis for such period.
"Default" means any event that would constitute an Event of Default
but for the requirement that notice be given or time elapse or both.
"Disposition" means any sale, assignment, transfer or other
disposition of any property (whether now owned or hereafter acquired) by
Terra or any of its Subsidiaries, but excluding any sale, assignment,
transfer or other disposition of any property (i) sold or disposed of in
the ordinary course of business and on ordinary business terms, or (ii) by
any Obligor to another Obligor or by any Obligor to a wholly owned
Subsidiary of an Obligor, or (iii) that consists of outmoded or obsolete
items, provided, that the aggregate value of all such excluded outmoded or
obsolete items with a value of $1,000,000 or more each shall not exceed
$10,000,000.
Credit Agreement
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"Dividend Payments" means dividends (in cash, property or obligations)
on, or other payments or distributions on account of, or the setting apart
of money for a sinking or other analogous fund for, or the purchase,
redemption, retirement or other acquisition of, any shares of any class of
stock of Terra Capital or Terra or of any warrants, options or other rights
to acquire the same (or to make any payment to any Person, such as "phantom
stock" payments, where the amount thereof is calculated with reference to
the fair market or equity value of Terra, Terra Capital or any of their
Subsidiaries, other than any such payment made in the ordinary course of
business of such Person in connection with an executive compensation plan
approved by the Board of Directors of such Person), but excluding dividends
payable solely in shares of common stock of Terra or Terra Capital.
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule 2.01 or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such Lender as such
Lender may from time to time specify to the Agent.
"EBITDA" means the following, determined in accordance with GAAP for
Terra and its Subsidiaries on a Consolidated basis, for any period: net
income (or net loss) plus the sum of (a) interest expense, (b) income tax
expense and (c) depreciation expense, amortization expense and other non-
cash charges deducted in arriving at such net income (or loss).
"Eligible Assignee" means (a) any other Lender or any affiliate of any
Lender; (b) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$1,000,000,000; (c) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof, and
having a net worth in excess of $100,000,000; (d) a commercial bank
organized under the laws of any other country that is a member of the OECD
or has concluded special lending arrangements with the International
Monetary
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Fund associated with its General Arrangements to Borrow, or a political
subdivision of any such country, and having total assets in excess of
$1,000,000,000, so long as such bank is acting through a branch or agency
located in the country in which it is organized or another country that is
described in this clause (d); (e) the central bank of any country that is a
member of the OECD; (f) a finance company, insurance company or other
financial institution or fund (whether a corporation, partnership, trust or
other entity) that is engaged in making, purchasing or otherwise investing
in commercial loans in the ordinary course of its business and having total
assets in excess of $100,000,000; and (g) any other Person (other than an
Affiliate of the Company) approved by the Agent and the Company, such
approval of the Company not to be unreasonably withheld or delayed.
"Environmental Action" means any administrative, regulatory or
judicial suit, demand, demand letter, claim, notice of non-compliance or
violation, consent order or consent agreement relating in any way to any
violation of or liability under any Environmental Law or any Environmental
Permit, including without limitation (a) any claim by any governmental or
regulatory authority for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any Environmental Law, (b) any
claim by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to the
environment and (c) any notice by any governmental or regulatory authority
alleging that Terra or any of its Subsidiaries is or may be responsible
for, or is a potentially responsible party with respect to, any cleanup,
removal, response, remedial or other actions or damages pursuant to any
Environmental Law.
"Environmental Law" means any federal, state or local governmental
law, rule, regulation, order, writ, judgment, injunction or decree relating
to pollution or protection of the environment or the treatment, storage,
disposal, release, threatened release or handling of Hazardous
Credit Agreement
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Materials, including, without limitation, CERCLA, the Resource Conservation
and Recovery Act, the Hazardous Materials Transportation Act, the Clean
Water Act, the Toxic Substances Control Act, the Clean Air Act, the Safe
Drinking Water Act, the Atomic Energy Act and the Federal Insecticide,
Fungicide and Rodenticide Act, in each case, as amended from time to time.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"Equity Issuance" means (a) any issuance or sale by Terra or any of
its Subsidiaries after the Closing Date of (i) any capital stock
(including, without limitation, New Terra Equity), (ii) any warrants or
options exercisable in respect of capital stock (other than any warrants or
options issued to directors, officers or employees of Terra or any of its
Subsidiaries pursuant to employee benefit plans established in the ordinary
course of business and any capital stock of Terra issued upon the exercise
of such warrants or options) or (iii) any other security or instrument
representing an equity interest (or the right to obtain any equity
interest) in Terra or any of its Subsidiaries or (b) the receipt by Terra
or any of its Subsidiaries after the Closing Date of any capital
contribution (whether or not evidenced by any equity security issued by the
recipient of such contribution); provided, that the term "Equity Issuance"
shall not include (x) any such issuance or sale by any Subsidiary of Terra
to Terra or to any wholly owned Subsidiary of Terra or (y) any capital
contribution by Terra or any wholly owned Subsidiary of Terra to any
Subsidiary of Terra.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" of any Person means any other Person that for
purposes of Title IV of ERISA is a member of such Person's controlled
group, or under common control with such
Credit Agreement
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Person, within the meaning of Sections 414(b), (c), (m) and (o) of the
Internal Revenue Code.
"ERISA Event" with respect to any Person means (a) the occurrence of a
reportable event, within the meaning of Section 4043 of ERISA, with respect
to any Plan of such Person or any of its ERISA Affiliates unless the 30-day
notice requirement with respect to such event has been waived pursuant to
regulations under Section 4043 of ERISA and excluding a reportable event
under Section 4043(b)(7) of ERISA; (b) the provision by the administrator
of any Plan of such Person or any of its ERISA Affiliates of a notice of
intent to terminate such Plan, pursuant to Section 4041(c) of ERISA as a
distress termination; (c) the cessation of operations at a facility of such
Person or any of its ERISA Affiliates in the circumstances described in
Section 4062(e) of ERISA; (d) the withdrawal by such Person or any of its
ERISA Affiliates from a Multiple Employer Plan during a plan year for which
it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(e) the satisfaction of the conditions set forth in Sections 302(f)(1)(A)
and (B) of ERISA to the creation of a lien upon property or rights to
property of such Person or any ERISA Affiliate for failure to make a
required payment to a Plan; (f) the adoption of an amendment to a Plan of
such Person or any of its ERISA Affiliates requiring the provision of
security to such Plan, pursuant to Section 307 of ERISA; or (g) the
institution by the PBGC of proceedings to terminate a Plan of such Person
or any of its ERISA Affiliates, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that constitutes grounds for the termination of, or the appointment of a
trustee to administer, such Plan.
"Eurocurrency Liabilities" has the meaning specified in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on
Credit Agreement
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Schedule 2.01 or in the Assignment and Acceptance pursuant to which it
became a Lender (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time
to time specify to the Agent.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
Rate Advance comprising part of the same Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the average
(rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if
such average is not such a multiple) of the rates per annum at which
deposits in U.S. dollars are offered by the principal office of each of the
Reference Banks in London, England to prime banks in the London interbank
market at approximately 5:00 P.M. (London time) two Business Days before
the first day of such Interest Period in an amount substantially equal to
such Reference Bank's Eurodollar Rate Advance comprising part of such
Borrowing (determined without giving effect to any assignments or
participations by such Reference Bank) and for a period equal to such
Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage for such Interest Period. The Eurodollar Rate for each
Interest Period for each Eurodollar Rate Advance comprising part of the
same Borrowing shall be determined by the Agent on the basis of applicable
rates furnished to and received by the Agent from the Reference Banks two
Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 2.09.
"Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.06(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Borrowing means the
reserve percentage (if any) applicable two Business Days before the first
day of such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve
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requirement (including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for a member bank of the Federal
Reserve System in New York City with deposits exceeding $1,000,000,000 with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities that
includes deposits by reference to which the interest rate on Eurodollar
Rate Advances is determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excess Cash Flow" means, for any fiscal year of Terra, determined in
accordance with GAAP for Terra and its Subsidiaries on a Consolidated
basis:
(a) EBITDA for such fiscal year, minus
(b) the sum of
(i) Cash Interest Expense plus
(ii) minority interest payments for such fiscal year, plus
(iii) the aggregate amount of Capital Expenditures made by
Terra or any of its Subsidiaries during such fiscal year (but not
exceeding the amount permitted to be made in such fiscal year
pursuant to Section 5.02(h)) plus (or, if negative, minus)
(iv) the Change in Non-Cash Working Capital (but not
exceeding the applicable Allowance for Working Capital
Increase/Decreases) for such fiscal year, plus
(v) the aggregate amount of Specified Payments in such
fiscal year plus
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(vi) scheduled payments of principal of Debt of Terra and
its Subsidiaries in such fiscal year plus
(vii) cash taxes paid by Terra and its Subsidiaries in such
fiscal year.
"Excluded Period" means, with respect to any additional amount payable
under Section 2.09 or 2.13, the period ending 120 days prior to the
applicable Lender's delivery of a certificate referenced in Section
2.09(a), 2.09(b) or 2.13(d), as applicable, with respect to such additional
amount.
"Facility" means a Terra Facility or an AMLP Facility.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Agent from three Federal funds brokers of recognized standing selected
by it.
"Fee Letter" means the letter agreement dated August 25, 1994 between
Terra and Citibank.
"Funded Debt" of any Person means, on any date, the sum (determined
without duplication) of: (a) all Debt of such Person that would be listed
as long-term debt (including Capital Lease Obligations and Major Operating
Lease Obligations) of such Person on a balance sheet of such Person
prepared in accordance with GAAP (including, without limitation, the
current portion of such Debt), plus (b) the aggregate principal amount of
all Advances outstanding under Terra Facility E and AMLP Facility B, plus
(c) the aggregate
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amount of all Letters of Credit to the extent of unreimbursed drawings
thereunder; provided, that the term "Funded Debt" shall include letters of
credit issued in connection with the insurance program of Terra and its
Subsidiaries only to the extent of unreimbursed drawings thereunder; and
provided, further, that the term "Funded Debt" shall not include
Obligations under Hedge Agreements.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of, and used in, the
preparation of the audited financial statements referred to in Section
4.01(f).
"Grower Notes Receivable" means notes receivable that arise from the
sale of chemicals, fertilizers or similar products or services to dealers
or growers, and, in the case of growers, receivables that arise from
advances to pay expenses of such growers incurred in the production of
crops.
"Guaranteed Obligations" means the Terra Guaranteed Obligations and
the AMLP Guaranteed Obligations.
"Guarantors" means the Terra Guarantors and the AMLP Guarantors.
"Hazardous Materials" means (a) petroleum or petroleum products,
natural or synthetic gas, asbestos in any form that is or could become
friable, and radon gas, (b) any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants," "contaminants" or "pollutants," or
words of similar meaning and regulatory effect, under any Environmental Law
and (c) any other substance exposure to which is regulated under any
Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar agreements,
interest rate future or option contracts, currency swap agreements,
currency future or option
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contracts, commodity future or option agreements and other similar
agreements designed to hedge against fluctuations in interest rates,
foreign exchange rates or commodity prices, including, without limitation,
the Methanol Hedging Agreement.
"Holdings Pledge Agreement" means a Pledge Agreement in substantially
the form of Exhibit B-1 hereto between Terra Capital Holdings and the
Agent, as from time to time amended.
"Immaterial Subsidiary" means, as of any date of determination, any
Subsidiary of Terra with not more than $500,000 of assets on such date nor
more than $100,000 of gross income for the fiscal year of Terra ended on or
most recently ended prior to such date.
"Indemnified Party" has the meaning specified in Section 9.04(b).
"Initial Lenders" has the meaning specified in the recital of the
parties to this Agreement.
"Initial Merger" has the meaning specified in the Preliminary
Statements.
"Initial Merger Date" means the date of consummation of the Initial
Merger.
"Insufficiency" means, with respect to any Plan at any time, the
amount, if any, by which the "accumulated benefit obligation" (as defined
in Statement of Financial Accounting Standards 87) exceeds the fair market
value of the assets of such Plan as of the date of the most recent
actuarial valuation for such Plan, calculated using the actuarial methods,
factors and assumptions used in such valuation.
"Interest Coverage Ratio" means, for any Rolling Period for which such
ratio is to be determined, the ratio of (i) EBITDA of Terra and its
Subsidiaries for the immediately
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preceding Rolling Period to (ii) Cash Interest Expense for the Rolling
Period for which such ratio is to be determined.
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Base Rate
Advance into such Eurodollar Rate Advance, and ending on the last day of
the period selected by the relevant Borrower pursuant to the provisions
below and, thereafter, each subsequent period commencing on the last day of
the immediately preceding Interest Period and ending on the last day of the
period selected by the relevant Borrower pursuant to the provisions below.
The duration of each such Interest Period shall be one, three or six
months, as the relevant Borrower may, upon notice received by the Agent not
later than 10:00 A.M. (New York City time) on the second Business Day prior
to the first day of such Interest Period, select; provided, that:
(a) a Borrower may not select any Interest Period that ends
after any Principal Payment Date for a Facility relating to such
Borrower unless, after giving effect to such selection, the aggregate
principal amount of Base Rate Advances and Eurodollar Rate Advances
under such Facility having Interest Periods that end on or prior to
such Principal Payment Date shall be at least equal to the principal
amount of Advances under such Facility due and payable on or prior to
such Principal Payment Date;
(b) no Interest Period for any Working Capital Advance may end
after the Commitment Termination Date for the relevant Facility;
(c) Interest Periods commencing on the same date for Eurodollar
Rate Advances comprising part of the same Borrowing shall be of the
same duration;
(d) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be
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extended to occur on the next succeeding Business Day, provided, that,
if such extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day; and
(e) whenever the first day of any Interest Period occurs on the
last day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month), such Interest Period shall end on the last Business Day of the
appropriate subsequent calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock, warrants, rights,
options, obligations or other securities of such Person, any capital
contribution to such Person or any other investment in such Person,
including, without limitation, (a) any arrangement pursuant to which the
investor incurs Debt of the types referred to in clauses (i) and (j) of the
definition of "Debt" in respect of such Person, (b) the acquisition of all
or substantially all of the assets of such Person or of any division of
such Person, and (c) any merger of or consolidation with such Person.
"Issuing Bank" means each Lender specified on the signature pages
hereof as an "Issuing Bank", together with its successors in such capacity.
"L/C Cash Collateral Account" means the Terra L/C Cash Collateral
Account and the AMLP L/C Cash Collateral Account.
"L/C Related Documents" has the meaning specified in Section 2.13(e).
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"Lenders" means the Initial Lenders listed on the signature pages
hereof and each Eligible Assignee that shall become a party hereto pursuant
to Section 9.07. When reference is made in this Agreement or any other
Loan Document to any "relevant" Lender in connection with any Facility,
such reference shall be deemed to refer to a Lender that has a Commitment
or that has outstanding Advances under such Facility.
"Letter of Credit Commitment" means the Terra Letter of Credit
Commitment or the AMLP Letter of Credit Commitment, "Letter of Credit
Liability" means a Terra Letter of Credit Liability or an AMLP Letter of
Credit Liability, and "Letter of Credit Sublimit" means the Terra Letter of
Credit Sublimit or the AMLP Letter of Credit Sublimit.
"Letters of Credit" has the meaning specified in Section 2.13(a).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Security Documents and the Loan Purchase Agreement.
"Loan Purchase Agreement" means an agreement between the Agent and
Terra in substantially the form of Exhibit E, as from time to time amended.
"Major Operating Lease Obligations" means, for any Person, all
obligations of such Person under an operating lease to pay required
termination payments or like payments in an amount exceeding $7,000,000 and
in an amount at least equal to 75% of the original acquisition cost of the
leased property under such operating lease.
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"Margin Stock" has the meaning specified in Regulations G, U and X.
"Material Adverse Change" means, with respect to any Person, any
material adverse change in the business, assets, operations, properties or
financial condition of such Person and its Subsidiaries taken as a whole,
or any material adverse change in the contingent liabilities of such Person
which could reasonably be expected to result in any of the foregoing, other
than any of the foregoing resulting solely from a general economic change
in the industry of such Person and its Subsidiaries.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, properties or financial condition of Terra
and its Subsidiaries taken as a whole, or a material adverse effect on the
contingent liabilities of such Person which could reasonably be expected to
result in any of the foregoing, (b) the rights and remedies of the Agent,
any Issuing Bank or any Lender under any Loan Document or (c) the ability
of any Obligor to perform its Obligations under any Loan Document to which
it is or is to be a party.
"Material Contract" means:
(A) each Hedge Agreement;
(B) each contract to which Terra or any of its Subsidiaries is a
party (a "Specified Party") that (a) provides for the provision of
goods or services by the Specified Party or the receipt of goods or
services by the Specified Party, (b) has a term of more than one year
(unless such contract may be cancelled at the sole option of another
Person party to such contract), (c) involves the payment or receipt by
the Specified Party of consideration having a fair market value in
excess of $1,000,000 in any fiscal year of Terra and (d) provides for
either: (i) the provision of goods or services to another Person that
is obligated to purchase from the Specified Party a specified quantity
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of such goods or services (but only to the extent that, if such other
Person did not purchase such quantity of such goods or services, the
Specified Party would not be readily able to sell such goods or
services at a price equal to or higher than the price set in such
contract) or (ii) the receipt of goods or services from another Person
that is obligated to supply to the Specified Party a specified
quantity of such goods or services (but only to the extent that, if
such other Person did not supply such quantity of such goods or
services, the Specified Party would not be readily able to purchase
such goods or services at a price less than or equal to the price set
in such contract); and
(C) each contract to which Terra or any of its Subsidiaries is a
party that, if such contract were to be terminated or the obligations
of any other Person party to such contract were to fail to be in full
force and effect, could reasonably be expected, either individually or
in the aggregate with any other such event, to have a Material Adverse
Effect.
"Material Subsidiary" means any Subsidiary of Terra other than an
Immaterial Subsidiary.
"Merger" has the meaning specified in the Preliminary Statements.
"Merger Agreement" has the meaning specified in the Preliminary
Statements.
"Methanol Hedging Agreement" means the Methanol Hedging Agreement
dated as of the Closing Date between BMC and Morgan Stanley Leveraged
Equity Fund II, as Agent, as from time to time amended.
"Minorco" means Minorco, a Luxembourg corporation, and its successors.
"Minorco USA" means Minorco (U.S.A.) Inc., a Colorado corporation, and
its successors.
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"Minorco USA Put Option Agreement" means the Put Option Agreement
dated as of August 8, 1994 between Terra and Minorco USA, as from time to
time amended.
"Multiemployer Plan" of any Person means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which such Person or any of its
ERISA Affiliates is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" of any Person means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of such Person or any of its ERISA Affiliates and at least one
Person other than such Person and its ERISA Affiliates or (b) was so
maintained and in respect of which such Person or any of its ERISA
Affiliates has or would have liability under Section 4064 or 4069 of ERISA
in the event such plan has been or were to be terminated.
"Net Available Proceeds" means:
(i) in the case of any Disposition, the amount of Net Cash
Payments received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation
received by Terra and its Subsidiaries (and, in the case of business
interruption insurance, not contractually required to be paid over to
Morgan Stanley Leveraged Equity Fund II, as agent, or its successors
or assigns) in respect of such Casualty Event net of (A) reasonable
expenses incurred by Terra and its Subsidiaries in connection
therewith, (B) contractually required repayments of Indebtedness to
the extent secured by a Lien on the property suffering such Casualty
Event and any income and transfer taxes payable by Terra or any of its
Subsidiaries in respect of such Casualty Event and
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(C) amounts promptly applied or set aside to the repair or replacement
of the property suffering such Casualty Event; provided, that the
proceeds of business interruption insurance shall not be deemed to be
Net Available Proceeds for purposes of this clause (ii) if and to the
extent they are otherwise included in the calculation of Excess Cash
Flow for the relevant period;
(iii) in the case of any Equity Issuance, the aggregate amount
of all cash received by Terra and its Subsidiaries in respect of such
Equity Issuance net of reasonable expenses (including reasonable
registration fees, underwriting fees and discounts and similar
expenses) incurred by Terra and its Subsidiaries in connection
therewith; and
(iv) in the case of any issuance of any New Terra Debt, the
aggregate amount of all cash received by Terra and its Subsidiaries in
respect thereof net of reasonable expenses incurred by Terra and its
Subsidiaries in connection therewith.
"Net Cash Payments" means, with respect to any Disposition, the
aggregate amount of all cash payments, and the fair market value of any
non-cash consideration, received by Terra and its Subsidiaries directly or
indirectly in connection with such Disposition; provided, that (a) Net Cash
Payments shall be net of (i) the amount of any legal, title and recording
tax expenses, commissions and other reasonable fees and expenses (including
reasonable expenses of preparing the relevant property for sale) paid by
Terra and its Subsidiaries in connection with such Disposition and (ii) any
Federal, state and local income or other taxes estimated in good faith to
be payable by Terra and its Subsidiaries as a result of such Disposition
and (b) Net Cash Payments shall be net of any repayments by Terra or any of
its Subsidiaries of Debt to the extent that (i) such Debt is secured by a
Lien on the property that is the subject of such Disposition and (ii) the
transferee of (or holder of a Lien on) such property requires that such
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Debt be repaid as a condition to the purchase of such property.
"Net Worth" means, at any time, the sum of the following for Terra and
its Subsidiaries on a Consolidated basis:
(a) the amount of capital stock; plus
(b) the amount of surplus and retained earnings (or, in the case of a
surplus or retained earnings deficit, minus the amount of such deficit).
"New Terra Equity" means any convertible Preferred Stock or other
equity securities issued by Terra after the Closing Date, the proceeds of
which are used to prepay Terra Facility D Advances pursuant to Section
2.05(b).
"New Terra Debt" means any Debt incurred by Terra or any of its
Subsidiaries under Section 5.02(b)(vi).
"Note" means a Terra Note or an AMLP Note.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Issuance" has the meaning specified in Section 2.13(b)(i).
"Obligation" means, with respect to any Person, any obligation of such
Person of any kind, including, without limitation, any liability of such
Person on any claim, whether or not the right of any creditor to payment in
respect of such claim is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, disputed, undisputed, legal, equitable, secured
or unsecured, and whether or not such claim is discharged, stayed or
otherwise affected by any proceeding referred to in Section 6.01(g).
Without limiting the generality of the foregoing, the Obligations of the
Obligors under the Loan Documents include (a) their respective obligations
to pay principal, interest,
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Letter of Credit commissions, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable under any Loan
Document and (b) their respective obligations to reimburse any amount in
respect of any of the foregoing that any Lender, in its sole discretion,
may elect to pay or advance on behalf of such Obligor.
"Obligors" means the Terra Obligors and the AMLP Obligors.
"OECD" means the Organization for Economic Cooperation and
Development.
"Other Taxes" has the meaning specified in Section 2.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Investments" means (a) direct obligations of the United
States of America, or of any agency thereof, or obligations guaranteed as
to principal and interest by the United States of America, or by any agency
thereof, in either case maturing not more than 270 days from the date of
acquisition thereof, (b) certificates of deposit issued by, and repurchase
and reverse repurchase agreements with, any Initial Lender or any bank or
trust company organized under the laws of the United States of America or
any state thereof, having capital, surplus and undivided profits of at
least $500,000,000 and whose unsecured, unguaranteed long-term senior debt
obligations are rated at least A by Standard & Poor's Ratings Group and at
least A2 by Moody's Investors Service, Inc., maturing not more than 270
days from the date of acquisition thereof, (c) commercial paper and
variable rate demand notes, in each case rated A-1 or better by Standard &
Poor's Ratings Group and P-1 or better by Moody's Investors Service, Inc.
and maturing not more than 270 days from the date of acquisition thereof,
and (d) obligations of not more than $100,000 in the aggregate at any one
time of any bank or bank holding company with a capital and surplus of less
than $500,000,000 or whose
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unsecured, unguaranteed long-term senior debt obligations are rated less
than A by Standard & Poor's Ratings Group or less than A2 by Moody's
Investors Service, Inc.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced (or, if such a proceeding has been commenced, such
proceeding is being contested in good faith by appropriate proceedings and
enforcement of any Lien has been and is stayed):
(a) Liens for taxes, assessments and governmental charges or
levies to the extent not required to be paid under Section 5.01(b),
(b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens, statutory landlord's Liens
and other similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of more than 30
days or which are being contested in good faith and by appropriate
proceedings,
(c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations,
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases (other than capital leases),
surety and appeal bonds, and performance bonds and other obligations
of a like nature incurred, in each case arising in the ordinary course
of business,
(e) as to any particular property at any time, such easements,
encroachments, covenants, rights of way, minor defects, irregularities
or encumbrances on title which do not materially impair the use of
such property for the purpose for which it is held by the owner
thereof,
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(f) municipal and zoning ordinances that are not violated in any
material respect by the existing improvements and the present use made
by the owner thereof, and
(g) real estate taxes and assessments not yet delinquent.
"Permitted TI Receivables Facilities" means, collectively, (a) the
Receivables Purchase Agreement dated as of March 31, 1994 among TI, as
Seller, the financial institutions party thereto, as Purchasers, and Bank
of America Illinois, successor to Continental Bank N.A., as agent, as from
time to time amended, or any replacement or refinancing thereof, provided,
that the principal amount under such replacement or refinancing shall not
exceed the principal amount under the facility so replaced or refinanced;
and (b) an additional facility entered into by TI (which may be effected by
an amendment to the facility referred to in clause (a) of this definition)
providing for the sale by TI of Receivables, provided, that (i) no amounts
may be outstanding thereunder unless the then aggregate principal amount of
Grower Notes Receivable exceeds $50,000,000, (ii) the aggregate amount
outstanding thereunder may not at any time exceed $50,000,000 plus
reasonable reserves, and (iii) no amount shall be outstanding thereunder
for more than 90 days during any calendar year, nor for more than two
periods during any calendar year, nor for any single period in excess of 60
days during any calendar year.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
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"Post-Default Rate" means a rate per annum equal to 2% plus the
Applicable Margin plus the Base Rate as in effect from time to time.
"Preferred Stock" means, with respect to any corporation, capital
stock issued by such corporation that is entitled to a preference or
priority over any other capital stock issued by such corporation upon any
distribution of such corporation's assets, whether by dividend or upon
liquidation.
"Principal Payment Date" means any of the Terra Facility A Principal
Payment Dates, the Terra Facility B Principal Payment Dates, the Terra
Facility C Principal Payment Dates, the Terra Facility D Principal Payment
Dates and the AMLP Facility A Principal Payment Date.
"Pro Rata Share" of any amount means, with respect to any Lender under
any Facility at any time, the product of (a) a fraction the numerator of
which is the amount of such Lender's Advances under such Facility (or,
prior to the Commitment Termination Date for such Facility, the amount of
such Lender's Commitment thereunder), and the denominator of which is the
aggregate Advances or Commitments, as the case may be, under such Facility
at such time, multiplied by (b) such amount.
"Purchase Event" means that for any fiscal year of Terra, the
aggregate amount of Dividend Payments with respect to the capital stock of
Terra Capital exceeds the sum of (a) the aggregate amount of Specified
Payments plus (b) 50% of the portion of Excess Cash Flow for the prior
fiscal year that is not required to be applied to the prepayment of
Advances (provided, that advances by Terra Capital to Terra (indirectly
through Terra Capital Holdings) of the proceeds of (i) the Terra Facility C
Advances to the extent required to finance the AMCI Change of Control
Redemption and (ii) other Advances to the extent such proceeds are used by
Terra to prepay an existing loan in the amount of $40,000,000 shall not be
included in computing such sum).
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"Quarterly Dates" shall mean January 20, April 20, July 20 and October
20 in each year, the first of which shall be the first such day after the
date of this Agreement, provided, that, if any such day is not a Business
Day, the relevant Quarterly Date shall be the immediately preceding
Business Day.
"Receivables" means accounts and notes receivable and Grower Notes
Receivable, and, in each case, related reserves.
"Redeemable" means any capital stock, Debt or other right or
Obligation that (a) the issuer thereof has undertaken to redeem at a fixed
or determinable date or dates prior to the final Principal Payment Date
hereunder, whether by operation of a sinking fund or otherwise, or upon the
occurrence of a condition not solely within the control of the issuer or
(b) is redeemable on any date prior to said final Principal Payment Date at
the option of the holder thereof.
"Reference Banks" means Citibank, Bank of America and NationsBank of
Texas, N.A. (or their respective Applicable Lending Offices, as the case
may be).
"Register" has the meaning specified in Section 9.07(c).
"Regulation G", "Regulation U" and "Regulation X" mean Regulations G,
U and X of the Board of Governors of the Federal Reserve System,
respectively, as in effect from time to time.
"Related Document" means the Merger Agreement, the Minorco USA Put
Option Agreement and the Methanol Hedging Agreement.
"Required Lenders" means at any time Lenders owed or holding in the
aggregate at least 51% of the sum of the then aggregate unpaid principal
amount of the Advances, the then aggregate unused Commitments under all the
Facilities, and
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the aggregate Available Amount of all Letters of Credit. For purposes of
this definition, the Available Amount of each Letter of Credit shall be
considered to be owed to the relevant Lenders according to their respective
Pro Rata Shares of the Working Capital Facility under which such Letter of
Credit has been issued.
"Rolling Period" means any period of four consecutive fiscal quarters
of Terra.
"Second Merger" has the meaning specified in the Preliminary
Statements.
"Security Documents" means the Holdings Pledge Agreement, the Terra
Capital Pledge Agreement, the Subsidiary Pledge and Security Agreement, the
AMLP Pledge and Security Agreement, each security agreement or other grant
of security now or hereafter made by any Obligor to secure any of the
Obligations hereunder and under the other Loan Documents, and all Uniform
Commercial Code financing statements required by this Agreement or any of
the foregoing to be filed with respect to the security interests in
personal property created pursuant thereto.
"Senior Financial Officer" means the Chief Financial Officer of Terra.
"Single Employer Plan" of any Person means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of
ERISA and that (a) is maintained for employees or former employees of such
Person or any of its ERISA Affiliates and no Person other than such Person
and its ERISA Affiliates or (b) was so maintained and in respect of which
such Person or any of its ERISA Affiliates has or would have liability
under Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the
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total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the
assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature and (d) such Person is
not engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would
constitute an unreasonably small capital.
"Specified Payments" means, for any fiscal year of Terra, (a) all
interest due and payable on the AMCI Senior Notes during such fiscal year,
(b) all dividends paid on shares of common stock of Terra during such
fiscal year in an aggregate amount not exceeding the Allowance for
Projected Common Dividends for such fiscal year, (c) all scheduled
dividends on New Terra Equity payable during such fiscal year, (d) all
scheduled dividends payable during such fiscal year on convertible
Preferred Stock or other equity securities (other than New Terra Equity)
issued and applied to prepay the Advances, (e) ordinary and necessary
expenses incurred by Terra as a result of its operations as a publicly-held
holding company and (f) other payments in an aggregate amount up to
$5,000,000 per year to the extent required under pre-existing obligations.
"Subordinated Indebtedness" means Debt of Terra or any of its
Subsidiaries the payment of which is subordinated in right of payment to
the prior payment in full of the Advances.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, trust or estate of which (or in which) more than 50% of (a) the
issued and outstanding capital stock having ordinary voting power to elect
a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might
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have voting power upon the occurrence of any contingency), (b) the interest
in the capital or profits of such partnership or joint venture or (c) the
beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Subsidiary Guarantor" means AMC, BMCH and BMC.
"Subsidiary Pledge and Security Agreement" means a Pledge and Security
Agreement in substantially the form of Exhibit B-3 hereto between certain
of the Terra Guarantors and the Agent, as from time to time amended.
"Term Advances" means each of the Terra Facility A Advances, the Terra
Facility B Advances, the Terra Facility C Advances, the Terra Facility D
Advances and the AMLP Facility A Advances, "Term Commitment" means each of
the Terra Facility A Commitments, the Terra Facility B Commitments, the
Terra Facility C Commitments, the Terra Facility D Commitments and the AMLP
Facility A Commitments, and "Term Facility" means each of Terra Facility A,
Terra Facility B, Terra Facility C, Terra Facility D and AMLP Facility A.
"Term Facility Commitment Termination Date" means the earlier of (a)
November 15, 1994 and (b) the termination or cancellation of the Term
Commitments pursuant to this Agreement.
"Terminated Facilities" means, collectively, the credit facilities
identified in Schedule 3.01(d) hereto.
"Terra" has the meaning specified in the recital of parties to this
Agreement.
"Terra Advance" means an Advance under any Terra Facility, "Terra
Borrowing" means a Borrowing under any Terra Facility, "Terra Commitment"
means a Commitment under any Terra Facility, and "Terra Facility" means
Terra
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Facility A, Terra Facility B, Terra Facility C, Terra Facility D or Terra
Facility E.
"Terra Capital" has the meaning specified in the recital of parties to
this Agreement.
"Terra Capital Holdings" has the meaning specified in the Preliminary
Statements.
"Terra Capital Pledge Agreement" means a Pledge Agreement in
substantially the form of Exhibit B-2 hereto between Terra Capital and the
Agent, as from time to time amended.
"Terra Facilities Note" means a promissory note of the Company payable
to the order of a Lender, in substantially the form of Exhibit A-1, as from
time to time amended.
"Terra Facility A" means the term credit facility provided hereunder
in respect of the Terra Facility A Commitments, "Terra Facility A Advance"
means an Advance pursuant to Section 2.01(a), "Terra Facility A Borrowing"
means a borrowing consisting of simultaneous Terra Facility A Advances of
the same Type, and "Terra Facility A Commitment" has the meaning specified
in Section 2.01(a).
"Terra Facility A Principal Payment Dates" means the Quarterly Dates
falling on or nearest to April 20 and October 20 of each year, commencing
with April 20, 1995 through and including October 20, 1999.
"Terra Facility B" means the term credit facility provided hereunder
in respect of the Terra Facility B Commitments, "Terra Facility B Advance"
means an Advance pursuant to Section 2.01(b), "Terra Facility B Borrowing"
means a borrowing consisting of simultaneous Terra Facility B Advances of
the same Type, and "Terra Facility B Commitment" has the meaning specified
in Section 2.01(b).
"Terra Facility B Note" means a promissory note of the Company payable
to the order of a Lender, in substantially
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the form of Exhibit A-2 hereto, as from time to time amended.
"Terra Facility B Principal Payment Dates" means the Quarterly Dates
falling on or nearest to April 20 and October 20 of each year, commencing
with April 20, 1995 through and including October 20, 2001.
"Terra Facility C" means the term credit facility provided hereunder
in respect of the Terra Facility C Commitments, "Terra Facility C Advance"
means an Advance pursuant to Section 2.01(c), "Terra Facility C Borrowing"
means a borrowing consisting of simultaneous Terra Facility C Advances of
the same Type, and "Terra Facility C Commitment" has the meaning specified
in Section 2.01(c).
"Terra Facility C Commitment Termination Date" means the earlier of
(a) 106 days after the Closing Date (provided, that if such day is not a
Business Day, the Terra Facility C Commitment Termination Date shall be the
next succeeding Business Day) and (b) the termination or cancellation of
the Terra Facility C Commitments pursuant to this Agreement.
"Terra Facility C Principal Payment Dates" mean the first anniversary
of the date of the AMCI Change of Control Redemption and each semi-annual
anniversary thereof to and including the first such date in 2001, and the
Quarterly Date falling nearest to October 20, 2001.
"Terra Facility D" means the term credit facility provided hereunder
in respect of the Terra Facility D Commitments, "Terra Facility D Advance"
means an Advance pursuant to Section 2.01(d), "Terra Facility D Borrowing"
means a borrowing consisting of simultaneous Terra Facility D Advances of
the same Type, and "Terra Facility D Commitment" has the meaning specified
in Section 2.01(d).
"Terra Facility D Principal Payment Dates" mean the Quarterly Dates
falling on or nearest to April 20 and
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October 20 of each year, commencing with April 20, 1995 through and
including October 20, 2001.
"Terra Facility E" means the revolving credit facility provided
hereunder in respect of the Terra Facility E Commitments, "Terra Facility E
Advance" means an Advance pursuant to Section 2.01(e), "Terra Facility E
Borrowing" means a borrowing consisting of simultaneous Terra Facility E
Advances of the same Type, and "Terra Facility E Commitment" has the
meaning specified in Section 2.01(e).
"Terra Facility E Commitment Termination Date" means the earlier of
(a) the date five years after the Closing Date (provided, that if such day
is not a Business Day, the Terra Facility E Commitment Termination Date
shall be the immediately preceding Business Day), and (b) the termination
or cancellation of the Terra Facility E Commitments pursuant to the terms
of this Agreement.
"Terra Guaranteed Obligations" has the meaning specified in Section
8.01(a).
"Terra Guarantors" means, from and after the Assumption Time, Terra
Capital Holdings, AMC, BMCH, BMC and Terra.
"Terra L/C Cash Collateral Account" means the "Terra L/C Cash
Collateral Account" under the Terra Capital Pledge Agreement and the "Terra
L/C Cash Collateral Account" under the Subsidiary Pledge and Security
Agreement.
"Terra Letter of Credit" means a letter of credit issued by an Issuing
Bank for account of Terra Capital or any of its Subsidiaries (other than
AMLP or any of its Subsidiaries) pursuant to Section 2.13(a).
"Terra Letter of Credit Commitment" means, with respect to any Issuing
Bank at any time, the amount set forth opposite such Issuing Bank's name on
Schedule 2.01 under the caption "Terra Letter of Credit Commitment", as
such amount may be reduced pursuant to Section 2.04.
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"Terra Letter of Credit Liability" means, as of any date of
determination, all of the liabilities of Terra Capital to the Issuing Banks
in respect of Terra Letters of Credit, whether such liability is contingent
or fixed, and shall consist of the sum of (a) the aggregate Available
Amount of all Terra Letters of Credit then outstanding, plus (b) the
aggregate amount that has then been paid by, and has not been reimbursed
to, any Issuing Bank under Terra Letters of Credit.
"Terra Letter of Credit Sublimit" means $30,000,000.
"Terra Note" means a Terra Facilities Note or a Terra Facility B Note.
"Terra Obligors" means the Terra Guarantors and the Company.
"TI" has the meaning specified in the Preliminary Statements.
"Total Capital" means, on any date, the sum of (i) Funded Debt of
Terra and its Subsidiaries on a Consolidated basis on such date plus (ii)
Net Worth of Terra and its Subsidiaries on a Consolidated basis on such
date.
"Total Commitment" means, with respect to each Lender, the aggregate
of such Lender's Terra Commitments and AMLP Commitments.
"Transactions" has the meaning specified in the Preliminary
Statements.
"Trigger Date" means the earliest date as of which each of the
following is true:
(a) the principal of and interest on the Terra Facility C
Advances and the Terra Facility D Advances have been paid in full;
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(b) the aggregate outstanding principal amount of the Terra
Facility A Advances and the Terra Facility B Advances does not exceed
$100,000,000; and
(c) the Debt to Cash Flow Ratio for the most recently completed
four fiscal quarters of Terra ending on or most recently ended prior
to the date of determination does not exceed 2.50 to 1.
"Type" refers to the distinction between Advances bearing interest at
the Base Rate and Advances bearing interest at the Eurodollar Rate.
"Unused AMLP Working Capital Commitment" means, with respect to any
Lender at any time, (a) such Lender's AMLP Facility B Commitment at such
time minus (without duplication) (b) the sum of (i) the aggregate
outstanding principal amount of all AMLP Facility B Advances made by such
Lender and (ii) such Lender's Pro Rata Share of the aggregate Available
Amount of all AMLP Letters of Credit outstanding at such time and of all
unreimbursed drawings thereunder.
"Unused Terra Working Capital Commitment" means, with respect to any
Terra Facility E Lender at any time, (a) such Lender's Terra Facility E
Commitment at such time minus (without duplication) (b) the sum of (i) the
aggregate outstanding principal amount of all Terra Facility E Advances
made by such Lender and (ii) such Lender's Pro Rata Share of the aggregate
Available Amount of all Terra Letters of Credit outstanding at such time
and of all unreimbursed drawings thereunder.
"U.S. Dollars" and "$" means lawful money of the United States of
America.
"Working Capital Advance" means a Terra Facility E Advance or an AMLP
Facility B Advance, "Working Capital Borrowing" means a Terra Facility E
Borrowing or an AMLP Facility B Borrowing, "Working Capital Commitment"
means a Terra Facility E Commitment or AMLP Facility B Commitment, "Working
Capital Commitment Termination Date" means the Terra Facility E Commitment
Termination Date or the AMLP
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Facility B Commitment Termination Date, and "Working Capital Facility"
means Terra Facility E or AMLP Facility B.
Section 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" mean
"to but excluding".
Section 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
Section 2.01. The Advances.
(a) Terra Facility A.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make a single advance (a "Terra Facility A
Advance") to Terra on the Initial Merger Date in an amount not to exceed
the amount set forth opposite such Lender's name on Schedule 2.01 hereof
under the caption "Terra Facility A Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, set forth for such
Lender in the Register as such Lender's "Terra Facility A Commitment" (such
amount being such Lender's "Terra Facility A Commitment"), and, as to all
Lenders, in an aggregate amount not to exceed $150,000,000.
(ii) The Terra Facility A Advances shall be made by the Lenders
ratably according to their respective Terra Facility A Commitments.
(iii) Amounts borrowed under this Section 2.01(a) and repaid or prepaid
may not be reborrowed.
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(iv) The proceeds of the Terra Facility A Advances shall be used by
Terra solely to make a capital contribution to Acquisition Corp. on the
Initial Merger Date in order to assist in financing the consummation of the
Merger and to pay fees and expenses in connection therewith.
(b) Terra Facility B.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make a single advance (a "Terra Facility B
Advance") to Terra on the Initial Merger Date in an amount not to exceed
the amount set forth opposite such Lender's name on Schedule 2.01 hereof
under the caption "Terra Facility B Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, set forth for such
Lender in the Register as such Lender's "Terra Facility B Commitment" (such
amount being such Lender's "Terra Facility B Commitment"), and, as to all
Lenders, in an aggregate amount not to exceed $80,000,000.
(ii) The Terra Facility B Advances shall be made by the Lenders
ratably according to their respective Terra Facility B Commitments.
(iii) Amounts borrowed under this Section 2.01(b) and repaid or prepaid
may not be reborrowed.
(iv) The proceeds of the Terra Facility B Advances shall be used by
Terra solely to make a capital contribution to Acquisition Corp. on the
Initial Merger Date in order to assist in financing the consummation of the
Merger and to pay fees and expenses in connection therewith.
(c) Terra Facility C.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make a single advance (a "Terra Facility C
Advance") to the Company on the date of the AMCI Change of Control
Redemption, if any, but in any event before the Terra Facility C Commitment
Termination Date, in an amount not to exceed the amount set forth
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opposite such Lender's name on Schedule 2.01 hereof under the caption
"Terra Facility C Commitment" or, if such Lender has entered into one or
more Assignments and Acceptances, set forth for such Lender in the Register
as such Lender's "Terra Facility C Commitment" (such amount being such
Lender's "Terra Facility C Commitment"), and, as to all Lenders, in an
aggregate amount not to exceed $177,000,000.
(ii) The Terra Facility C Advances shall be made by the Lenders
ratably according to their respective Terra Facility C Commitments.
(iii) Amounts borrowed under this Section 2.01(c) and repaid or prepaid
may not be reborrowed.
(iv) The proceeds of the Terra Facility C Advances shall be used by
the Company solely to finance payments, if any, required to be made as a
result of any AMCI Change of Control Redemption.
(d) Terra Facility D.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make a single advance (a "Terra Facility D
Advance") to Terra on the Initial Merger Date in an amount not to exceed
the amount set forth opposite such Lender's name on Schedule 2.01 hereof
under the caption "Terra Facility D Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, set forth for such
Lender in the Register as such Lender's "Terra Facility D Commitment" (such
amount being such Lender's "Terra Facility D Commitment"), and, as to all
Lenders, in an aggregate amount not to exceed $80,000,000.
(ii) The Terra Facility D Advances shall be made by the Lenders
ratably according to their respective Terra Facility D Commitments.
(iii) Amounts borrowed under this Section 2.01(d) and repaid or prepaid
may not be reborrowed.
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(iv) The proceeds of the Terra Facility D Advances shall be used by
Terra solely to make a capital contribution to Acquisition Corp. on the
Initial Merger Date in order to assist in financing the consummation of the
Merger and to pay fees and expenses in connection therewith, and to
refinance certain indebtedness of Terra.
(e) Terra Facility E.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances ("Terra Facility E Advances") to
the Company from time to time on any Business Day during the period from
the Assumption Time until the Terra Facility E Commitment Termination Date
in an aggregate amount at any one time outstanding not to exceed the amount
set forth opposite such Lender's name on Schedule 2.01 under the caption
"Terra Facility E Commitment" or, if such Lender has entered into one or
more Assignments and Acceptances, set forth for such Lender in the Register
as such Lender's "Terra Facility E Commitment" (such amount being such
Lender's "Terra Facility E Commitment"), and, as to all Lenders, in an
aggregate amount at any one time outstanding not to exceed $175,000,000.
(ii) The Terra Facility E Advances shall be made by the Lenders
ratably according to their respective Terra Facility E Commitments.
(iii) Within the limits of each Lender's Terra Facility E Commitment in
effect from time to time, the Company may borrow under this Section 2.01(e)
and/or obtain the issuance of Letters of Credit under Section 2.13, prepay
pursuant to Section 2.05(a) and reborrow under this Section 2.01(e);
provided, that the aggregate outstanding principal amount of Terra Facility
E Advances when added to the aggregate Terra Letter of Credit Liability may
not at any time exceed the aggregate amount of the Terra Facility E
Commitments at such time.
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(iv) The proceeds of the Terra Facility E Advances shall be used
solely to finance the ongoing working capital needs of the Company, TI and
BMC.
(v) Notwithstanding the foregoing provisions of Section 2.01(e), the
Company agrees that, for a period of 30 consecutive days during each period
of 12 consecutive months commencing on the date of the initial Terra
Facility E Borrowing or the last day of the previous such 12-month period
and ending one year thereafter, no Terra Facility E Borrowings may be made
or outstanding under this Section 2.01(e); provided, that this Section
2.01(e)(v) shall not prevent the Company from requesting the issuance of
Terra Letters of Credit during any such period pursuant to Section 2.13, or
the Lenders from making Terra Facility E Advances in respect thereof
pursuant to Section 2.13(c), which Terra Facility E Advances (subject to
the other terms and conditions of this Agreement) may remain outstanding
during such period.
(f) AMLP Facility A.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make a single advance (an "AMLP Facility A
Advance") to AMLP on the Initial Merger Date in an amount not to exceed the
amount set forth opposite such Lender's name on Schedule 2.01 under the
caption "AMLP Facility A Commitment" or, if such Lender has entered into
one or more Assignments and Acceptances, set forth for such Lender in the
Register as such Lender's "AMLP Facility A Commitment" (such amount being
such Lender's "AMLP Facility A Commitment"), and, as to all Lenders, in an
aggregate amount not to exceed $35,000,000.
(ii) The AMLP Facility A Advances shall made by the Lenders ratably
according to their respective AMLP Facility A Commitments.
(iii) Amounts borrowed under this Section 2.01(f) and repaid or prepaid
may not be reborrowed.
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(iv) The proceeds of the AMLP Facility A Advances shall be used solely
to refinance outstanding indebtedness of AMLP.
(g) AMLP Facility B.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances ("AMLP Facility B Advances") to
AMLP from time to time on any Business Day during the period from the
Assumption Time until the AMLP Facility B Commitment Termination Date in an
aggregate amount at any one time outstanding not to exceed the amount set
forth opposite such Lender's name on Schedule 2.01 under the caption "AMLP
Facility B Commitment" or, if such Lender has entered into one or more
Assignments and Acceptances, set forth for such Lender in the Register as
such Lender's "AMLP Facility B Commitment" (such amount being such Lender's
"AMLP Facility B Commitment"), and, as to all Lenders, in an aggregate
amount at any one time outstanding not to exceed $50,000,000.
(ii) The AMLP Facility B Advances shall be made by the Lenders ratably
according to their respective AMLP Facility B Commitments.
(iii) Within the limits of each Lender's AMLP Facility B Commitment in
effect from time to time, AMLP may borrow under this Section 2.01(g) and/or
obtain the issuance of Letters of Credit under Section 2.13, prepay
pursuant to Section 2.05(a) and reborrow under this Section 2.01(g);
provided, that the aggregate outstanding principal amount of AMLP Facility
B Advances when added to the aggregate AMLP Letter of Credit Liability may
not at any time exceed the aggregate amount of the AMLP Facility B
Commitments at such time.
(iv) The proceeds of the AMLP Facility B Advances shall be used solely
for the ongoing working capital needs of AMLP.
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(v) Notwithstanding the foregoing provisions of Section 2.01(g), AMLP
agrees that, for a period of 30 consecutive days during each period of 12
consecutive months commencing on the date of the initial AMLP Facility B
Borrowing or the last day of the previous such 12-month period and ending
one year thereafter, no AMLP Facility B Borrowings may be made or
outstanding under this Section 2.01(g); provided, that this Section
2.01(g)(v) shall not prevent AMLP from requesting the issuance of AMLP
Letters of Credit during such period pursuant to Section 2.13, or the
Lenders from making AMLP Facility B Advances in respect thereof pursuant to
Section 2.13(c), which AMLP Facility B Advances (subject to the other terms
and conditions of this Agreement) may remain outstanding during such
period.
(h) Minimum Amounts. Each Working Capital Borrowing shall be in an
aggregate amount at least equal to $3,000,000 or an integral multiple of
$1,000,000 in excess thereof.
(i) No Responsibility to Third Parties. Neither the Agent nor any
Lender nor any Issuing Bank shall have any responsibility as to the
application or use of any of the proceeds of any Advance.
Section 2.02. Making the Advances.
(a) (i) Except as otherwise provided in Section 2.13, each Borrowing
shall be made on notice, given not later than 11:00 A.M. (New York City
time) on the Business Day of (or, with respect to a Borrowing of Eurodollar
Rate Advances, 10:00 A.M. (New York City time) on the second Business Day
prior to the date of) the proposed Borrowing, by the relevant Borrower to
the Agent, which shall give to each Lender prompt notice thereof by telex,
telecopier or cable. Each such notice of a Borrowing (a "Notice of
Borrowing") shall be by telex, telecopier or cable, confirmed immediately
in writing, in substantially the form of Exhibit C, specifying therein (1)
the requested date of such Borrowing, (2) the Facility under which such
Borrowing is to be made, (3) the requested Type of Advances comprising such
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Borrowing (subject to clause (ii) below), (4) the requested aggregate
amount of such Borrowing and (5) in the case of a Borrowing consisting of
Eurodollar Rate Advances, the requested initial Interest Period for each
such Advance.
(ii) The Terra Facility A Advances, Terra Facility B Advances and
Terra Facility D Advances and the AMLP Facility A Advances shall initially
be made as Base Rate Advances.
(iii) In the case of a proposed Borrowing comprised of Eurodollar Rate
Advances, the Agent shall promptly notify each relevant Lender of the
applicable interest rate under Section 2.06(a)(ii).
(iv) Each Lender shall, before 1:00 P.M. (New York City time) on the
date of each Borrowing, make available for the account of its Applicable
Lending Office to the Agent at the Agent's Account, in same day funds, such
Lender's ratable portion of such Borrowing. After the Agent's receipt of
such funds and upon fulfillment of the applicable conditions set forth in
Article III, the Agent will transfer same day funds to the relevant
Borrower's Account; provided, that (i) in the case of any Terra Facility E
Borrowing, the Agent shall first make a portion of such funds equal to any
unreimbursed drawing under any Terra Letter of Credit available to each
Issuing Bank having issued any such Letter of Credit for reimbursement of
such drawing, and (ii) in the case of any AMLP Facility B Borrowing, the
Agent shall first make a portion of such funds equal to any unreimbursed
drawing under any AMLP Letter of Credit available to each Issuing Bank
having issued any such Letter of Credit for reimbursement of such drawing.
(b) Anything in subsection (a) above to the contrary notwithstanding,
(i) no Borrower may select Eurodollar Rate Advances (y) for any Borrowing
if the aggregate amount of such Borrowing is less than $3,000,000 or (z) if
the obligation of the relevant Lenders to make Eurodollar Rate Advances
shall then be suspended pursuant to Section 2.08 or 2.09, and (ii)
Eurodollar Rate Advances may not be
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outstanding under more than (x) 15 separate Interest Periods under either
Working Capital Facility at any one time and (y) three separate Interest
Periods under any Term Facility at any one time.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
relevant Borrower. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the
relevant Borrower shall indemnify each relevant Lender against any loss,
cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Borrowing for
such Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such
Advance, as a result of such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a relevant
Lender prior to 12:00 Noon (New York City time) on the date of any
Borrowing under a Facility under which such Lender has a Commitment that
such Lender will not make available to the Agent such Lender's ratable
portion of such Borrowing, the Agent may assume that such Lender has made
such portion available to the Agent on the date of such Borrowing in
accordance with Section 2.02(a) and the Agent may, in reliance upon such
assumption, make available to the relevant Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have
so made such ratable portion available to the Agent and the Agent shall
have made available such corresponding amount to the relevant Borrower,
such Lender and the relevant Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
relevant Borrower until the date such amount is repaid to the Agent, at (i)
in the case of the relevant Borrower, the interest rate applicable at such
time under Section 2.06
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to Advances comprising such Borrowing and (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Lender's
Advance as part of such Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Advance on the date of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the date of any Borrowing.
Section 2.03. Repayment.
(a) Terra Term Advances. The Company hereby promises to pay to the
Agent for the account of each Lender the full outstanding principal amount of
such Lender's Advances under each Term Facility for Terra as follows:
(i) in the case of the Terra Facility A Advances, in 10 consecutive
semi-annual installments, one such installment to be payable on each Terra
Facility A Principal Payment Date set forth below in a principal amount
equal to the amount set forth below opposite such Terra Facility A
Principal Payment Date:
Terra Facility A
Principal Payment Date
Falling on or
Nearest To Amount
---------------------- ------
April 20, 1995 $15,000,000
October 20, 1995 15,000,000
April 20, 1996 15,000,000
October 20, 1996 15,000,000
April 20, 1997 15,000,000
October 20, 1997 15,000,000
April 20, 1998 15,000,000
October 20, 1998 15,000,000
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April 20, 1999 15,000,000
October 20, 1999 15,000,000
(ii) in the case of the Terra Facility B Advances, in 14 consecutive
semi-annual installments, one such installment to be payable on each Terra
Facility B Principal Payment Date set forth below in a principal amount
equal to the amount set forth below opposite such Terra Facility B
Principal Payment Date:
Terra Facility B
Principal Payment Date
Falling on or
Nearest To Amount
---------------------- ------
April 20, 1995 $ 500,000
October 20, 1995 500,000
April 20, 1996 500,000
October 20, 1996 500,000
April 20, 1997 500,000
October 20, 1997 500,000
April 20, 1998 500,000
October 20, 1998 500,000
April 20, 1999 500,000
October 20, 1999 15,100,000
April 20, 2000 15,100,000
October 20, 2000 15,100,000
April 20, 2001 15,100,000
October 20, 2001 15,100,000
(iii) in the case of the Terra Facility C Advances, in 13 consecutive
semi-annual installments, one such installment to be payable on each Terra
Facility C Principal Payment Date set forth below in a principal amount
equal to the amount set forth below opposite such Terra Facility C
Principal Payment Date:
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Terra Facility C
Principal Payment Date Amount
---------------------- ------
First such Date $13,615,384.62
Second such Date 13,615,384.62
Third such Date 13,615,384.62
Fourth such Date 13,615,384.62
Fifth such Date 13,615,384.62
Sixth such Date 13,615,384.62
Seventh such Date 13,615,384.62
Eighth such Date 13,615,384.62
Ninth such Date 13,615,384.62
Tenth such Date 13,615,384.62
Eleventh such Date 13,615,384.62
Twelfth such Date 13,615,384.62
Thirteenth such Date 13,615,384.56
(iv) in the case of the Terra Facility D Advances, in 14 consecutive
semi-annual installments, one such installment to be payable on each Terra
Facility D Principal Payment Date set forth below in a principal amount
equal to the amount set forth below opposite such Terra Facility D
Principal Payment Date:
Terra Facility D
Principal Payment Date
Falling on or
Nearest To Amount
---------------------- ------
April 20, 1995 $5,714,285.72
October 20, 1995 5,714,285.72
April 20, 1996 5,714,285.72
October 20, 1996 5,714,285.72
April 20, 1997 5,714,285.72
October 20, 1997 5,714,285.72
April 20, 1998 5,714,285.72
October 20, 1998 5,714,285.72
April 20, 1999 5,714,285.72
October 20, 1999 5,714,285.72
April 20, 2000 5,714,285.72
October 20, 2000 5,714,285.72
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April 20, 2001 5,714,285.72
October 20, 2001 5,714,285.64
(b) Terra Facility E Advances. The Company hereby promises to pay to
the Agent for the account of each Lender the full outstanding principal amount
of the Terra Facility E Advances of such Lender on the Terra Facility E
Commitment Termination Date.
(c) AMLP Facility A Advances. AMLP hereby promises to pay to the
Agent for the account of each Lender the full outstanding principal amount of
the AMLP Facility A Advances of such Lender on the AMLP Facility A Principal
Payment Date.
(d) AMLP Facility B Advances. AMLP hereby promises to pay to the
Agent for the account of each Lender the full outstanding principal amount of
the AMLP Facility B Advances of such Lender on the AMLP Facility B Commitment
Termination Date.
(e) All Advances.
(i) All repayments of principal under this Section 2.03 shall be made
together with interest accrued to the date of such repayment on the
principal amount repaid.
(ii) If any Principal Payment Date falls on a day that is not a
Business Day, such Principal Payment Date shall be the immediately
preceding Business Day.
(iii) If the amount of the Borrowing under any Term Facility is less
than the aggregate amount of the initial Commitments under such Facility,
the shortfall shall be applied to reduce ratably the installments of such
Facility payable under Section 2.03(a).
Section 2.04. Termination or Reduction of the Commitments.
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(a) Optional. The Borrowers may, upon not less than two Business
Days' notice to the Agent, terminate in whole or reduce in part the Commitments
of the Lenders as follows:
(i) The Company shall have the right at any time or from time to time
(x) at any time prior to the Closing Date to terminate in full the Terra
Commitments, (y) at any time to terminate in full or reduce the Terra
Facility C Commitments, and (z) at any time to terminate in full or reduce
the aggregate unused amount of the Terra Facility E Commitments; and
(ii) AMLP shall have the right at any time or from time to time (x)
prior to the first borrowing under this Agreement by AMLP, to terminate in
full the AMLP Commitments, and (y) at any time to terminate in full or
reduce the aggregate unused amount of the AMLP Facility B Commitments;
provided, that (i) each partial reduction of the Commitments under any Facility
shall be in an aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (ii) the aggregate amount of the Commitments
under any Working Capital Facility shall not be reduced below the Letter of
Credit Commitment for such Facility.
(b) Mandatory.
(i) Each Term Commitment other than the Terra Facility C Commitments
shall be automatically and permanently reduced to zero on the Term Facility
Commitment Termination Date, and any portion of such Term Commitments not
used on the Initial Merger Date shall be automatically and permanently
terminated at the close of business (New York City time) on the Initial
Merger Date. The Terra Facility C Commitments shall be automatically and
permanently reduced to zero on the Terra Facility C Commitment Termination
Date, and any portion thereof not used on the date of the AMCI Change of
Control Redemption shall be automatically and permanently terminated at the
close of business (New York City time) on said date.
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(ii) The Terra Facility E Commitments shall be automatically and
permanently reduced to zero on the Terra Facility E Commitment Termination
Date.
(iii) The AMLP Facility B Commitments shall be automatically and
permanently reduced to zero on the AMLP Facility B Commitment Termination
Date.
(iv) Commitments once terminated or reduced may not be reinstated.
(c) Reductions Pro Rata. Each reduction of the Commitments under any
Facility shall be applied to the respective Commitments of the Lenders according
to their respective Pro Rata Shares of such Facility.
Section 2.05. Prepayments.
(a) Optional Prepayments. (i) Either Borrower may, upon at least two
Business Days' notice (in the case of prepayment of Eurodollar Rate
Advances) or upon the notice given on the date of prepayment (in the case
of prepayments of Base Rate Advances) to the Agent (which notice shall
state the Facilities to be prepaid and the proposed date and aggregate
principal amount of the prepayment), and if such notice is given such
Borrower shall, prepay the outstanding principal amount of the Advances
under the specified Facilities in the aggregate amount and on the date
specified in such notice, together with accrued interest to the date of
such prepayment on the principal amount prepaid; provided, that (x) each
partial prepayment shall be in an aggregate principal amount of $3,000,000
or an integral multiple of $1,000,000 in excess thereof, (y) any such
prepayment of a Eurodollar Rate Advance other than on the last day of the
Interest Period therefor shall be accompanied by, and subject to, the
payment of any amount payable under Section 9.04(c) in respect of such
prepayment and (z) each such notice shall be made on the relevant day not
later than, in the case of prepayments of Eurodollar Rate Advances, 10:00
A.M. (New York City time) and, in the
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case of prepayments of Base Rate Advances, 12:00 Noon (New York City time).
(ii) Each prepayment of Advances under this Section 2.05(a) shall be
made for account of the relevant Lenders according to their respective Pro
Rata Shares of the principal amount of the Advances then outstanding under
such Facility.
(b) Mandatory Prepayments.
(i) Excess Cash Flow. Not later than the date 90 days after the end
of each fiscal year of the Company commencing with the fiscal year ending
December 31, 1995, the Company (and, after the prepayment in full of the
principal of and interest on the Term Advances under the Terra Facilities,
AMLP) shall prepay the Advances in an aggregate amount equal to 75% of
Excess Cash Flow for such fiscal year; provided, that once an aggregate
amount of $20,000,000 or more has been prepaid pursuant to this clause (i),
the figure 75% set forth above shall automatically be deemed to be reduced
to 50%.
(ii) Sale of Assets. Without limiting the obligation of the Company
to obtain the consent of the Required Lenders pursuant to Section 5.02(e)
to any Disposition not otherwise permitted hereunder, upon the occurrence
of any Disposition, the Company (and, after the prepayment in full of the
principal of and interest on the Term Advances under the Terra Facilities,
AMLP) shall prepay the Advances in an aggregate amount equal to 100% of the
Net Available Proceeds of such Disposition; provided, that (x) for purposes
of this clause (ii) the aggregate Net Available Proceeds of all such
Dispositions in such Fiscal Year shall be deemed to be reduced by
$10,000,000 (but shall not be deemed to be less than zero); (y) the sale by
TI of Receivables under a Permitted TI Receivables Facility shall not be
deemed to be a Disposition for purposes of this clause (ii); and (z) upon
the payment in full of the principal of and interest on the Terra Facility
C Advances and the Terra Facility D Advances,
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the figure 100% set forth above shall automatically be deemed to be reduced
to 75%.
(iii) Equity Issuance. Upon the making of any Equity Issuance or
any other public issuance of securities (including without limitation the
New Terra Equity), the Company (and, after the prepayment in full of the
principal of and interest on the Term Advances under the Terra Facilities,
AMLP) shall prepay the Advances in an aggregate amount equal to 100% of the
Net Available Proceeds thereof; provided, that this clause (iii) shall
cease to apply upon the payment in full of the principal of and interest on
the Terra Facility C Advances and the Terra Facility D Advances.
(iv) Casualty Events. Upon the date 90 days following the receipt by
Terra or any of its Subsidiaries of the proceeds of insurance, condemnation
award or other compensation in respect of any Casualty Event affecting any
property of Terra or any of its Subsidiaries (or upon such earlier date as
Terra or such Subsidiary, as the case may be, shall have determined not to
repair or replace the property affected by such Casualty Event), the
Borrowers shall prepay the Advances in an aggregate amount, if any, equal
to 100% of the Net Available Proceeds of such Casualty Event not
theretofore applied to the repair or replacement of such property;
provided, that upon the payment in full of the principal of and interest on
the Terra Facility C Advances and the Terra Facility D Advances, the figure
100% set forth above shall automatically be deemed to be reduced to 75%.
Nothing in this clause (iv) shall be deemed to limit any obligation of
Terra or any of its Subsidiaries pursuant to any of the Security Documents
to remit to a collateral or similar account (including, without limitation,
a Collateral Account) maintained by the Agent pursuant to any of the
Security Documents the proceeds of insurance, condemnation award or other
compensation received in respect of any Casualty Event.
(v) Non-Consummation of Merger. If on the Closing Date the
Transactions are not consummated, Terra hereby promises
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to pay on demand to the Agent for account of the Lenders the full
outstanding principal amount of the Advances.
(c) Application.
(i) Prepayments described in Section 2.05(b) shall (except as
provided in clauses (ii), (iii) and (iv) below) be applied as follows:
(w) first, to the prepayment of the Terra Facility A Advances
and the Terra Facility B Advances ratably according to the respective
aggregate outstanding principal amounts thereof and to the respective
installments thereof ratably;
(x) second, after the payment in full of the Terra Facility A
Advances and the Terra Facility B Advances, to the prepayment of the Terra
Facility C Advances and the Terra Facility D Advances ratably according to
the respective aggregate outstanding principal amounts thereof and to the
respective installments thereof ratably; and
(y) third, after the payment in full of the Terra Facility C
Advances and the Terra Facility D Advances, to the prepayment of the
AMLP Facility A Advances and to the installments thereof ratably.
(ii) Prepayments hereunder in respect of any issuance of New Terra
Equity under Section 2.05(b) shall be applied as follows:
(x) first, to the prepayment of the Terra Facility D Advances
and to the installments thereof in the inverse order of their
maturities; and
(y) second, to the prepayment of the Terra Facility C Advances
and to the installments thereof in the inverse order of their
maturities.
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(iii) Prepayments hereunder in respect of the public issuance of
securities other than the New Terra Equity shall be applied first to the
prepayment of the Terra Facility C Advances and to the installments thereof
in the inverse order of their maturities and, thereafter, if such
securities are debt securities, in accordance with clause (c)(i) above.
(iv) Prepayments hereunder in respect of any Disposition of, or
Casualty Event in respect of, any property of AMLP or any of its
Subsidiaries shall be applied to the prepayment of the AMLP Facility A
Advances.
(d) Cover for Letter of Credit Liabilities. In the event that a
Borrower shall be required pursuant to Section 6.02 to cash collateralize
Letters of Credit or otherwise provide cover for Letter of Credit Liabilities,
such Borrower shall effect the same by paying to the Agent immediately available
funds in an amount equal to the required amount, which funds shall be retained
by the Agent in the L/C Collateral Account for the relevant Facility (as
provided therein as collateral security for the Letter of Credit Liabilities
under such Facility) until such time as the Letters of Credit under such
Facility shall have been terminated and all of such Letter of Credit Liabilities
paid in full.
(e) Payments with Interest. All prepayments under this Section 2.05
shall be made together with accrued interest to the date of such prepayment on
the principal amount prepaid.
Section 2.06. Interest.
(a) Ordinary Interest. The Company shall pay interest on the unpaid
principal amount of each Terra Advance owing to each Lender from the date of
such Advance until such principal amount shall be paid in full, and AMLP shall
pay interest on the unpaid principal amount of each AMLP Advance owing to each
Lender from the date of such Advance until such principal amount shall be paid
in full, in each case at the following rates per annum:
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(i) Base Rate Advances. While such Advance is a Base Rate Advance, a
rate per annum equal at all times to the sum of (1) the Base Rate in effect
from time to time plus (2) the Applicable Margin in effect from time to
time, payable in arrears quarterly on each Quarterly Date and on the date
such Base Rate Advance shall be Converted (but only on the amount
Converted) or paid in full.
(ii) Eurodollar Rate Advances. While such Advance is a Eurodollar
Rate Advance, a rate per annum equal at all times during each Interest
Period for such Advance to the sum of (1) the Eurodollar Rate for such
Interest Period for such Advance plus (2) the Applicable Margin in effect
from time to time, payable in arrears on the last day of such Interest
Period and, if such Interest Period has a duration of more than three
months, on each three-month anniversary of the first day of such Interest
Period occurring during such Interest Period.
(b) Post-Default Interest. If (a) any Obligor shall fail to pay when
due (by acceleration or otherwise) any amount payable under any Loan Document
after any applicable grace period provided in Section 6.01(a), or (b) (i) an
Event of Default shall have occurred and be continuing during any period and
(ii) the Agent or the Required Lenders, through the Agent, shall have notified
the Company thereof, each Borrower shall, notwithstanding anything else in this
Agreement to the contrary, pay to the Agent for account of each Lender interest,
during such period, at the applicable Post-Default Rate on any principal of any
Advance made by such Lender to such Borrower, and on any other amount whatsoever
then due and payable by such Borrower hereunder or under the Notes held by such
Lender to or for account of such Lender, such interest to be payable from time
to time on demand.
Section 2.07. Fees.
(a) Commitment Fee. Each Borrower hereby promises to pay to the
Agent for the account of each Lender a commitment fee (i) in the case of the
Company, on the average daily unused portion of such Lender's Commitment under
each Terra Facility and
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(ii) in the case of AMLP, on the average daily unused portion of such Lender's
Commitment under each AMLP Facility, in each case for the period from the date
specified in the Fee Letter (or from the effective date specified in the
Assignment and Acceptance pursuant to which it became a Lender in the case of
each other Lender other than the Initial Lenders) until the Commitment
Termination Date for such Facility at the Applicable Commitment Fee Rate,
payable in arrears (x) on the Closing Date, (y) quarterly thereafter on each
Quarterly Date (in the case of a Working Capital Facility) and (z) on the
Commitment Termination Date for such Facility.
(b) Letter of Credit Commission, Etc.
(i) The Company hereby promises to pay to the Agent (A) for the
account of each Issuing Bank a non-refundable fronting fee of 1/4% per
annum of the face amount of each Terra Letter of Credit issued by it for
the period from the date of issuance thereof until such Letter of Credit
has been drawn in full, expires or is terminated and (B) for the account of
each Lender a non-refundable commission on such Lender's Pro Rata Share of
the average daily aggregate Available Amount of all Terra Letters of Credit
then outstanding at the Applicable Letter of Credit Fee Rate, such fees to
be payable in arrears on each Quarterly Date and on the Terra Facility E
Commitment Termination Date and calculated, for any day, after giving
effect to any payments made under such Letter of Credit on such day.
(ii) AMLP hereby promises to pay to the Agent (A) for the account of
each Issuing Bank a non-refundable fronting fee of 1/4% per annum of the
face amount of each AMLP Letter of Credit issued by it for the period from
the date of issuance thereof until such Letter of Credit has been drawn in
full, expires or is terminated and (B) for the account of each Lender a
non-refundable commission on such Lender's Pro Rata Share of the average
daily aggregate Available Amount of all AMLP Letters of Credit then
outstanding at the Applicable Letter of Credit Fee Rate, such fees to be
payable quarterly in arrears on each Quarterly Date and on the AMLP
Facility B Commitment Termination Date and
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calculated, for any day, after giving effect to any payments made under
such Letter of Credit on such day.
(c) Letter of Credit Expenses. Each Borrower shall pay to each
Issuing Bank, for its own account, such commission, issuance fees, transfer fees
and other fees and charges in connection with the issuance or administration of
the Letters of Credit issued by it as such Borrower and such Issuing Bank shall
agree; provided, that all fees and other charges payable pursuant to this
Section 2.07(c) shall be the customary amounts charged by such Issuing Bank in
connection with the issuance or administration of similar letters of credit and
the amounts so determined shall be adjusted as necessary to avoid a duplicative
payment hereunder.
(d) Other Fees. Terra shall, on the Closing Date, pay to the Agent
the fees payable pursuant to the Fee Letter.
Section 2.08. Conversion and Continuation of Advances.
(a) Optional Conversion. Each Borrower may on any Business Day, upon
notice given to the Agent not later than 10:00 A.M. (New York City time) on the
second Business Day prior to the date of the proposed Conversion and subject to
the provisions of Sections 2.09 and 2.10, Convert all or any portion of the
Advances of one Type outstanding under any Facility (and, in the case of
Eurodollar Rate Advances, having the same Interest Period); provided, that any
Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made
only on the last day of an Interest Period for such Eurodollar Rate Advances,
any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in
an amount not less than the minimum amount specified in Section 2.02(b)(i) and
no Conversion of any Advances shall result in a greater number of separate
Interest Periods in respect of Eurodollar Rate Advances under any Facility than
permitted under Section 2.02(b)(ii). Each such notice of Conversion shall,
within the restrictions specified above, specify (i) the date of such
Conversion, (ii) the aggregate amount, Type and Facility of the Advances (and,
in the case of Eurodollar Rate Advances, the Interest Period therefor) to be
Converted and (iii) if such Conversion is into Eurodollar Rate
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Advances, the duration of the initial Interest Period for such Advances. Each
notice of Conversion shall be irrevocable and binding on the relevant Borrower.
(b) Certain Mandatory Conversions.
(i) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $3,000,000 such Advances
shall automatically Convert into Base Rate Advances.
(ii) If a Borrower shall fail to select the duration of any Interest
Period for any outstanding Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01
and in clause (a) or (c) of this Section 2.08, the Agent will forthwith so
notify such Borrower and the relevant Lenders, whereupon each such
Eurodollar Rate Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance.
(iii) Upon the occurrence and during the continuance of any Event of
Default and upon notice from the Agent to the Borrowers at the request of
the Required Lenders, (x) each Eurodollar Rate Advance will automatically,
on the last day of the then existing Interest Period therefor, Convert into
a Base Rate Advance and (y) the obligation of the Lenders to make, or to
Convert Advances into, or to Continue, Eurodollar Rate Advances shall be
suspended.
(c) Continuations. Each Borrower may, on any Business Day, upon
notice given to the Agent not later than 10:00 A.M. (New York City time) on the
second Business Day prior to the date of the proposed Continuation and subject
to the provisions of Sections 2.09, Continue all or any portion of the
Eurodollar Rate Advances outstanding under a relevant Facility having the same
Interest Period as such Eurodollar Rate Advances; provided, that any such
Continuation shall be made only on the last day of an Interest Period for such
Eurodollar Rate Advances, any Continuation of Eurodollar Rate Advances shall be
in an amount
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not less than the minimum Borrowing amount specified in Section 2.02(b)(i) and
no Continuation of any Eurodollar Rate Advances shall result in a greater number
of separate Interest Periods in respect of Eurodollar Rate Advances under any
Facility than permitted under Section 2.02(b)(ii). Each such notice of
Continuation shall, within the restrictions specified above, specify (i) the
date of such Continuation, (ii) the aggregate amount and Facility of, and the
Interest Period for, the Advances being Continued and (iii) the duration of the
initial Interest Period for the Eurodollar Rate Advances subject to such
Continuation. Each notice of Continuation shall be irrevocable and binding on
the relevant Borrower.
Section 2.09. Increased Costs, Illegality, Etc.
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of (to the extent any such introduction or change occurs
after the date hereof) any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
adopted or made after the date hereof (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Rate Advances under any Facility, then
the relevant Borrower shall from time to time, upon demand by such Lender (with
a copy of such demand to the Agent), pay to the Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost; provided, that, before making any such demand, each Lender
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable Lending Office
if the making of such a designation would avoid the need for, or reduce the
amount of, such increased cost and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender. A certificate as to the
amount of such increased cost, submitted to the relevant Borrower by such
Lender, shall be conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines in good faith that compliance with any
law or regulation enacted or introduced after the date hereof or any guideline
or request from any central bank
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or other governmental authority adopted or made after the date hereof (whether
or not having the force of law) affects or would affect the amount of capital
required or expected to be maintained by such Lender or any corporation
controlling such Lender and that the amount of such capital is increased by or
based upon the existence of such Lender's commitment to lend hereunder and other
commitments of this type or the issuance of the Letters of Credit (or similar
contingent obligations), then, upon demand by such Lender (with a copy of such
demand to the Agent), each Borrower shall pay to the Agent for the account of
such Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender in the light of such circumstances, to the
extent that such Lender reasonably determines such increase in capital to be
allocable to the existence of such Lender's commitment to lend hereunder or to
the issuance or maintenance of any Letters of Credit. A certificate as to such
amounts submitted to the relevant Borrower by such Lender, shall be conclusive
and binding for all purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances, (i) the
Required Lenders reasonably determine and notify the Agent that the Eurodollar
Rate for any Interest Period for such Advances will not adequately reflect the
cost to such Required Lenders of making, funding or maintaining their respective
Eurodollar Rate Advances for such Interest Period, or (ii) if fewer than two
Reference Banks furnish timely information to the Agent for determining the
Eurodollar Rate for any Eurodollar Rate Advances, the Agent shall forthwith so
notify the Borrowers and the Lenders, whereupon (x) each Eurodollar Rate Advance
will automatically, on the last day of any then existing Interest Period
therefor, Convert to a Base Rate Advance, and (y) the obligation of the Lenders
to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances
shall be suspended until the Agent shall notify the Borrowers and such Lenders
that the circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of (to the extent any
such introduction or change occurs after the date hereof) any law or regulation
shall make it
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unlawful, or any central bank or other governmental authority having appropriate
jurisdiction shall assert in writing that it is unlawful, for any Lender or its
Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances hereunder, then, on notice thereof and demand therefor by such Lender
to the Borrowers through the Agent, (i) each Eurodollar Rate Advance under each
Facility under which such Lender has a Commitment will automatically, upon such
demand, Convert to a Base Rate Advance and (ii) the obligation of such Lender to
make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances
shall be suspended until the Agent shall notify the Borrowers that such Lender
has determined that the circumstances causing such suspension no longer exist;
provided, that, before making any such demand, such Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Eurodollar Lending Office if the making
of such a designation would allow such Lender or its Eurodollar Lending Office
to continue to perform its obligations to make Eurodollar Rate Advances or to
continue to fund or maintain Eurodollar Rate Advances and would not, in the
judgment of such Lender, be otherwise disadvantageous to such Lender.
(e) Neither Borrower shall be obligated to pay any additional amounts
arising pursuant to clauses (a) and (b) of this Section 2.09 that are
attributable to the Excluded Period with respect to such additional amount;
provided, that if an applicable law, rule, regulation, guideline or request
shall be adopted or made on any date and shall be applicable to the period (a
"Retroactive Period") prior to the date on which such law, rule, regulation,
guideline or request is adopted or made, the limitation on the Borrowers'
obligations to pay such additional amounts hereunder shall not apply to the
additional amounts payable in respect of such Retroactive Period.
Section 2.10. Payments and Computations.
(a) Each Borrower shall make each payment hereunder and under the
Notes not later than 12:00 Noon (New York City time) on the day when due in U.S.
Dollars to the Agent at the
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Agent's Account in same day funds and, except as expressly set forth herein,
without deduction, set-off or counterclaim. The Agent will promptly thereafter
cause to be distributed like funds relating to the payment of principal or
interest or commitment fees under or in respect of a particular Facility ratably
(other than amounts payable pursuant to Section 2.09(a), 2.09(b), 2.11, 2.13(d)
or 9.04(c), or amounts payable to an Issuing Bank in respect of Letters of
Credit) to the relevant Lenders for the account of their Applicable Lending
Offices, and like funds relating to the payment of any other amount payable to
any Lender to such Lender for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this Agreement. Upon its
acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 9.07(d), from and after
the effective date of such Assignment and Acceptance, the Agent shall make all
payments hereunder and under the Notes in respect of the interest assigned
thereby to the Lender assignee thereunder, and the parties to such Assignment
and Acceptance shall make all appropriate adjustments in such payments for
periods prior to such effective date directly between themselves.
(b) If the Agent receives funds for application to the Obligations
under the Loan Documents under circumstances for which the Loan Documents do not
specify the Advances or the Facility to which, or the manner in which, such
funds are to be applied, and neither Borrower has otherwise directed how such
funds are to be applied (which direction is consistent with the terms of the
Loan Documents), the Agent may, but shall not be obligated to, elect to
distribute such funds to each Lender ratably in accordance with such Lender's
proportionate share of the principal amount of all outstanding Advances and the
Available Amount of all Letters of Credit then outstanding, in repayment or
prepayment of such of the outstanding Advances or other Obligations owed to such
Lender, and for application to such principal installments, as the Agent shall
direct.
(c) Each Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due hereunder or under any Note
held by such Lender, to charge from time to time against any or all of such
Borrower's accounts
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with such Lender any amount so due (with notice to the Agent and the relevant
Borrower promptly following such charge).
(d) Each Reference Bank agrees to furnish to the Agent timely
information for the purpose of determining each Eurodollar Rate. If any one or
more of the Reference Banks shall not furnish such timely information to the
Agent for the purpose of determining any such interest rate, the Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks.
(e) All computations of interest, fees and Letter of Credit
commissions shall be made by the Agent on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest, fees or
commissions are payable. Each determination by the Agent of an interest rate,
fee or commission hereunder made in accordance with the provisions of this
Agreement shall be conclusive and binding for all purposes, absent manifest
error.
(f) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, that, if such extension would cause payment of interest
on or principal of Eurodollar Rate Advances to be made in the next following
calendar month, such payment shall be made on the immediately preceding Business
Day.
(g) Unless the Agent shall have received notice from a Borrower prior
to the date on which any payment is due to any Lender hereunder that such
Borrower will not make such payment in full, the Agent may assume that such
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each such
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent such Borrower shall not have so made such payment in full to
the Agent, each such Lender shall repay to the Agent forthwith on demand such
amount
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distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Federal Funds Rate.
Section 2.11. Taxes.
(a) Any and all payments by each Obligor hereunder or under the
relevant Notes shall be made, in accordance with Section 2.10, free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Issuing Bank, each Lender and the Agent, net
income taxes that are imposed by the United States and franchise taxes and net
income taxes that are imposed on such Issuing Bank, such Lender or the Agent by
the state or foreign jurisdiction under the laws of which such Issuing Bank,
such Lender or the Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of such Issuing Bank and each Lender,
franchise taxes and net income taxes that are imposed on it by the state or
foreign jurisdiction of such Issuing Bank's or such Lender's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If an Obligor shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Issuing Bank, any Lender or the Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.11) such Issuing Bank, such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Obligor shall make such deductions and (iii) such Obligor shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, each Obligor agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any
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payment made by it hereunder or under the Notes or from the execution, delivery
or registration of this Agreement or the Notes (hereinafter referred to as
"Other Taxes").
(c) Each Obligor will indemnify each Issuing Bank, each Lender and
the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.11) paid by such Issuing Bank, such Lender or the
Agent (as the case may be) and any liability (including penalties, additions to
tax, interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from such date such Issuing Bank,
such Lender or the Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, each
Obligor will furnish to the Agent, at its address referred to in Section 9.02,
appropriate evidence of payment thereof. If such Obligor shall make a payment
hereunder or under the Notes through an account or branch outside the United
States, or a payment is made on behalf of such Obligor by a payor that is not a
United States Person, such Obligor will, if no taxes are payable in respect of
such payment, furnish, or will cause such payor to furnish, to the Agent, at
such address, a certificate from the appropriate taxing authority or
authorities, or an opinion of counsel acceptable to the Agent, in either case
stating that such payment is exempt from or not subject to Taxes. For purposes
of this subsection (d) and subsection (e), the terms "United States" and "United
States Person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside
the United States shall, on or prior to the date of its execution and delivery
of this Agreement (in the case of each Initial Lender) and on the date of the
Assignment and Acceptance pursuant to which it became a Lender (in the case of
each other Lender), and from time to time thereafter if requested in writing by
either Borrower or the Agent (but only so long as such Lender remains lawfully
able to do so after the date such Lender becomes a Lender hereunder), provide
the Agent and the Borrowers with either (i) Internal Revenue Service form 1001
or
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4224, as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an income tax
treaty to which the United States is a party that reduces the rate of
withholding tax on payments under this Agreement and the Notes or certifying
that the income receivable pursuant to this Agreement and the Notes is
effectively connected with the conduct of a trade or business in the United
States or (ii) Internal Revenue Service form W-8, upon which each Borrower is
entitled to rely, from a Lender that has not at the time such Lender becomes a
Lender hereunder been named in any notice issued by the Secretary of the
Treasury (or such Secretary's authorized delegate) pursuant to Sections
881(c)(2)(B) or 871(h)(5) of the Internal Revenue Code, or any successor form or
statement prescribed by the Internal Revenue Service in order to establish that
such Lender is entitled to treat the interest payments under this Agreement and
the Notes as portfolio interest that is exempt from withholding tax under the
Internal Revenue Code, together with a certificate stating that such Lender is
not described in Section 881(c)(3) of the Internal Revenue Code. If the form
provided by a Lender at the time such Lender first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero (or if the Lender cannot provide at such time such form because it is not
entitled to reduced withholding under a treaty, the payments are not effectively
connected income and the payments do not qualify as portfolio interest),
withholding tax at such rate (or at the then existing U.S. statutory rate if the
Lender cannot provide the form) shall be excluded from Taxes unless and until
such Lender provides the appropriate form certifying that a lesser rate applies,
whereupon withholding tax at such lesser rate only shall be excluded from Taxes
for periods governed by such form; provided, that, if at the date of the
Assignment and Acceptance pursuant to which a Lender assignee becomes a party to
this Agreement, the Lender assignor was entitled to payments under subsection
(a) in respect of United States withholding tax with respect to interest paid at
such date, then, to the extent such tax results in liability for such payments,
the term Taxes shall include (in addition to withholding taxes that may be
imposed in the future or other amounts otherwise includable in Taxes) United
States interest withholding tax, if any, applicable with respect to the Lender
assignee on such date.
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(f) For any period with respect to which a Lender has failed to
provide the Borrowers and the Agent with the appropriate form described in
Section 2.11(e) (other than if such failure is due to a change in law occurring
after the date on which a form originally was required to be provided or if such
form otherwise is not required under subsection (e)), such Lender shall not be
entitled to indemnification under subsection (a) or (c) with respect to Taxes
imposed by the United States.
(g) Any Lender or any Issuing Bank claiming any additional amounts
payable pursuant to this Section 2.11 shall use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office(s) if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender or Issuing Bank, be otherwise disadvantageous to such Lender or Issuing
Bank.
(h) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 2.11 shall survive the payment in full of principal and interest
hereunder and under the Notes.
Section 2.12. Sharing of Payments, Etc. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Advances owing to it under any
Facility (other than pursuant to Section 2.09(a), 2.09(b), 2.11, 2.13(d) or
9.04(c), or payments to an Issuing Bank in respect of Letters of Credit) in
excess of its ratable share of payments on account of the Advances under such
Facility obtained by all the relevant Lenders, such Lender shall forthwith
purchase from the other relevant Lenders such participations in the Advances
under such Facility owing to them as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of them; provided, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each relevant Lender shall be rescinded
and such Lender shall repay to the purchasing Lender the purchase price to
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the extent of such recovery together with an amount equal to such Lender's
ratable share (according to the proportion of (i) the amount of such Lender's
required repayment to (ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing Lender
in respect of the total amount so recovered. Each Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section 2.12 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of such
Borrower in the amount of such participation.
Section 2.13. Letters of Credit.
(a) Issuance of Letters of Credit. Each Borrower may request one or
more Issuing Banks to issue, on the terms and conditions hereinafter set forth,
letters of credit for the account of such Borrower under its respective Working
Capital Facility (letters of credit so issued under Terra Facility E being
herein called "Terra Letters of Credit" and letters of credit so issued under
AMLP Facility B being herein called "AMLP Letters of Credit"; the Terra Letters
of Credit and the AMLP Letters of Credit being collectively called the "Letters
of Credit") from time to time on any Business Day during the period from the
Closing Date until the date 90 days prior to the Commitment Termination Date for
the relevant Facility; provided, that:
(i) the Terra Facility E Commitments shall be utilized under this
Section 2.13 solely for the issuance of Terra Letters of Credit for the
account of Terra Capital and, to the extent specified by Terra Capital, any
of its Subsidiaries (other than AMLP or any of its Subsidiaries);
(ii) the AMLP Facility B Commitments shall be utilized under this
Section 2.13 solely for the issuance of AMLP Letters of Credit for the
account of AMLP and, to the extent specified by AMLP, any of its
Subsidiaries;
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(iii) the aggregate Available Amount of all Letters of Credit issued by
all Issuing Banks under either Working Capital Facility shall not exceed at
any time the Letter of Credit Sublimit for such Facility, and the aggregate
outstanding principal amount of all Working Capital Advances under such
Facility when added to the aggregate amount of Letter of Credit Liabilities
under such Facility shall not exceed the aggregate Working Capital
Commitments of the relevant Lenders under such Facility on such Business
Day;
(iv) the aggregate amount of all Letter of Credit Liabilities under
Letters of Credit issued by any Issuing Bank under either Working Capital
Facility shall not exceed at any time the Letter of Credit Commitment of
such Issuing Bank for such Facility; and
(v) no Letter of Credit shall have an expiration date later than, or
shall permit the account party or the beneficiary to the require renewal
thereof to a date beyond, the date 30 days prior to the Commitment
Termination Date for the relevant Facility.
On each day during the period commencing with the issuance by an Issuing Bank
of any Terra Letter of Credit and until such Letter of Credit shall have been
drawn in full or expired or been terminated, the Terra Facility E Commitment of
each Lender shall be deemed to be utilized for all purposes of this Agreement in
an amount equal to such Lender's Pro Rata Share of the then undrawn amount of
such Letter of Credit. On each day during the period commencing with the
issuance by an Issuing Bank of any AMLP Letter of Credit and until such Letter
of Credit shall have been drawn in full or expired or been terminated, the AMLP
Facility B Commitment of each Lender shall be deemed to be utilized for all
purposes of this Agreement in an amount equal to such Lender's Pro Rata Share of
the then undrawn amount of such Letter of Credit.
(b) Request for Issuance.
(i) Each Letter of Credit shall be issued upon notice, given not
later than 1:00 P.M. (New York City time) two
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Business Days prior to the date of the proposed issuance of such Letter of
Credit, by the relevant Borrower to the relevant Issuing Bank, which shall
give to the Agent and each Lender prompt notice thereof by telex or
telecopier. Each such notice of issuance of a Letter of Credit (a "Notice
of Issuance") shall be by telex or telecopier, confirmed promptly in
writing, specifying therein (A) the requested date of such issuance (which
shall be a Business Day), (B) the Available Amount requested for such
Letter of Credit, (C) the expiration date of such Letter of Credit, (D) the
account party or parties for such Letter of Credit, (E) the name and
address of the issuer and the beneficiary of such Letter of Credit, and (F)
the form of such Letter of Credit, together with a description of the
nature of the transactions or obligations proposed to be supported thereby.
If the requested form of such Letter of Credit is acceptable to such
Issuing Bank in its discretion, such Issuing Bank will, upon fulfillment of
the applicable conditions set forth in Article III, make such Letter of
Credit available to the relevant Borrower at its office referred to in
Section 9.02 or as otherwise agreed with such Borrower in connection with
such issuance.
(ii) Each Issuing Bank shall furnish (A) to the Agent on the first
Business Day of each week a written report summarizing the issuance and
expiration dates of Letters of Credit issued by such Issuing Bank during
the previous week and drawings during such week under all Letters of Credit
issued by such Issuing Bank, (B) to each Lender and to the relevant
Borrower on the first Business Day of each month, a written report
summarizing the issuance and expiration dates of the Letters of Credit
issued by such Issuing Bank under the relevant Facility during the
preceding month and drawings during such month under all Letters of Credit
under such Facility issued by the Issuing Bank and (C) to the Agent and
each Lender on the first Business Day of each calendar quarter, a written
report setting forth the average daily aggregate Available Amount during
the preceding calendar quarter of all Letters of Credit issued by such
Issuing Bank under the relevant Facility.
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(c) Drawing and Reimbursement.
(i) The payment by an Issuing Bank of a draft drawn under any Letter
of Credit shall constitute for all purposes of this Agreement the making by
such Issuing Bank of an advance to the relevant Borrower in the amount of
such payment, which the relevant Borrower agrees to repay on demand and, if
not paid on demand, shall bear interest, from the date demanded to the date
paid in full (and which interest shall be payable on demand), (x) from and
including the date of demand to but not including the second Business Day
thereafter at the Base Rate in effect for each such day plus the Applicable
Margin in effect for each such day, and (y) from and including said second
Business Day thereafter at the Post-Default Rate. Without limiting the
obligations of such Borrower hereunder, upon demand by such Issuing Bank
through the Agent, each Lender having a Commitment under the relevant
Facility shall make Working Capital Advances under such Facility in an
aggregate amount equal to the amount of such Lender's Pro Rata Share of
such advance by making available for the account of its Applicable Lending
Office to the Agent for the account of such Issuing Bank, by deposit to the
Agent's Account, in same day funds, an amount equal to the sum of (A) its
Pro Rata Share of the outstanding principal amount of such advance plus (B)
interest accrued and unpaid to and as of such date on the outstanding
principal amount of such advance.
(ii) Each Lender agrees to make such Working Capital Advances on the
Business Day on which demand therefor is made by the relevant Issuing Bank
through the Agent (provided, that notice of such demand is given not later
than 12:00 Noon (New York City time) on such Business Day) or (if notice of
such demand is given after such time) the first Business Day next
succeeding such demand.
(iii) If and to the extent that any relevant Lender shall not have so
made the amount of such Working Capital Advance available to the Agent for
account of such Issuing Bank, such Lender agrees to pay to the Agent
forthwith on demand such amount together with interest thereon, for each
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day from the date of demand by the relevant Issuing Bank until the date
such amount is paid to the Agent, at the Federal Funds Rate.
(iv) The Working Capital Advances provided for in this Section 2.13
shall be made by the Lenders irrespective of whether there has occurred and
is continuing any Default or Event of Default or of whether any other
condition precedent specified in Article III has not been satisfied, and
the obligation of each Lender under each relevant Facility to make such
Working Capital Advances is absolute and unconditional.
(d) Increased Costs.
(i) If any change in any law or regulation or in the interpretation
thereof (to the extent any such change occurs after the date hereof) by any
court or administrative or governmental authority charged with the
administration thereof shall either (x) impose, modify or deem applicable
any reserve, special deposit or similar requirement against letters of
credit or guarantees issued by, or assets held by, or deposits in or for
the account of, any Issuing Bank or any Lender or (y) impose on any Issuing
Bank or any Lender any other condition regarding this Agreement or such
Issuing Bank or such Lender or any Letter of Credit, and the result of any
event referred to in the preceding clause (x) or (y) shall be to increase
the cost to such Issuing Bank or Lender of issuing or maintaining any
Letter of Credit or any commitment hereunder in respect of Letters of
Credit, then, upon demand by such Issuing Bank or such Lender, the
Borrowers shall immediately pay to such Issuing Bank or such Lender, from
time to time as specified by such Issuing Bank or such Lender, additional
amounts that shall be sufficient to compensate such Issuing Bank or such
Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrowers by such Issuing Bank or such
Lender shall be conclusive and binding for all purposes, absent manifest
error.
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(ii) Neither Borrower shall be obligated to pay any additional amounts
arising pursuant to this Section 2.13(d) that are attributable to the
Excluded Period with respect to such additional amounts; provided, that if
an applicable law, rule, regulation, guideline or request shall be adopted
or made on any date and shall be applicable to the period (a "Retroactive
Period") prior to the date on which such law, rule, regulation, guideline
or request is adopted or made, the limitation on the Borrower's obligation
to pay such additional amounts hereunder shall not apply to the additional
amounts payable in respect of such Retroactive Period.
(e) Obligations Absolute. The Obligations of each Borrower under
this Agreement and any other agreement or instrument relating to any Letter of
Credit (as hereafter amended, supplemented or otherwise modified from time to
time, collectively, the "L/C Related Documents") shall, to the extent permitted
by law, be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of such L/C Related Document under all circumstances,
including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of any one or more of such
other documents and agreements, including, but not limited to, the L/C
Related Documents;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of such Borrower in respect of
any L/C Related Document or any other amendment or waiver of or any consent
to departure from all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other right that
such Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), any Issuing Bank or any
other Person, whether in connection with the transactions contemplated by
the L/C Related Documents or any unrelated transaction;
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(iv) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by an Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not comply with the terms
of such Letter of Credit, except to the extent that such payment resulted
from such Issuing Bank's willful misconduct or gross negligence in
determining whether such draft or certificate complies on its face with the
terms of such Letter of Credit;
(vi) any exchange, release or nonperfection of any Collateral or other
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Obligations of such
Borrower in respect of the L/C Related Documents; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, such Borrower or a guarantor.
Section 2.14. Assumption.
(a) The Lenders, the Issuing Banks, the Agent and Terra hereby agree
that, upon the execution and delivery of this Agreement by each of them, this
Agreement shall be effective and binding on them, notwithstanding the fact that
Terra Capital Holdings, Terra Capital, AMC, AMLP, BMCH and BMC shall not have
then executed and delivered this Agreement.
(b) Each of Terra and Terra Capital agrees that until the
consummation of the Initial Merger it shall hold the proceeds of the initial
Borrowing in trust for the Lenders, and shall cause them to be immediately paid
to the Agent for application in accordance with Section 2.05(b)(v) if the
Initial Merger does not occur on the Closing Date.
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(c) Terra unconditionally agrees that immediately upon the
consummation of the Initial Merger it will cause each of the other Transactions
to occur, and that immediately upon the consummation of the Transactions (the
time of such consummation being herein called the "Assumption Time"), it will
cause Terra Capital Holdings, Terra Capital, AMC, AMLP, BMCH and BMC to execute
and deliver this Agreement.
(d) Terra Capital hereby agrees that, effective at the Assumption
Time, Terra Capital shall be the "Company" for all purposes hereof and shall be
bound by, and shall assume, all of the obligations of Terra hereunder, without
prejudice, however, to the obligations of Terra under Article VIII.
(e) Each Credit Party agrees to take such actions and execute such
other documents as may be reasonably requested by the Agent or any Lender to
effectuate the purposes of this Section 2.14.
Section 2.15. Replacement of Lender.
(a) Subject to clause (c) below, in the event that any Lender
requests compensation pursuant to Section 2.09(a), 2.09(b) or 2.13(d), or the
obligation of any Lender to make, or to Convert Base Rate Advances into, or to
Continue, Eurodollar Rate Advances shall be suspended pursuant to Section
2.09(c) or 2.09(d) (such Lender being herein called an "Affected Lender"), then,
so long as such condition exists, the Borrowers may, after the date 30 days
after the date of such request or suspension, either:
(i) (x) designate an Eligible Assignee acceptable to the Agent and
each Issuing Bank (which acceptance will not be unreasonably withheld) that
is not an Affiliate of the Borrowers (such Eligible Assignee being herein
called a "Replacement Lender") to assume the Affected Lender's Commitments
and other obligations hereunder and to purchase the Affected Lender's
Advances and other rights under the Loan Documents (all without recourse to
or representation or warranty by, or expense to, the Affected Lender) for a
purchase price equal to the aggregate principal amount of
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the outstanding Advances held by the Affected Lender plus all accrued but
unpaid interest on such Advances and accrued but unpaid fees owing to the
Affected Lender (and upon such assumption, purchase and substitution, and
subject to the execution and delivery to the Agent by the Replacement
Lender of documentation satisfactory to the Agent, and, in the case of an
Affected Lender that has made a Terra Facility B Advance, compliance with
the requirements of Section 9.07(c), the Replacement Lender shall succeed
to the rights and obligations of the Affected Lender hereunder and the
other Loan Documents), and (y) pay to the Affected Lender all amounts
payable to such Affected Lender under Section 9.04(c), calculated as if the
purchase by the Replacement Lender constituted a mandatory prepayment of
Advances by the Borrowers, and (z) pay to the Agent the processing and
recordation fee specified in Section 9.07(a)(vii) with respect to such
assignment; or
(ii) (x) terminate the Commitments of the Affected Lender and (y)
pay to the Affected Lender the aggregate principal amount of the
outstanding Advances held by the Affected Lender plus all accrued but
unpaid interest on such Advances and accrued but unpaid fees owing to the
Affected Lender plus all amounts payable to the Affected Lender under
Section 9.04(c) as a result of such prepayment.
In the event that the Borrowers exercise their rights under the preceding
sentence, the Affected Lender shall no longer be a party hereto or have any
rights or obligations hereunder or under the other Loan Documents; provided,
that the obligations of the Borrowers to the Affected Lender under Sections
2.09, 2.11 and 9.04 with respect to events occurring or obligations arising
before or as a result of such replacement shall survive such exercise.
(b) If the Borrowers exercise their rights under clause (a)(ii)
above, the Borrowers may, not later than the date 60 days after such exercise,
designate an Eligible Assignee acceptable to the Agent and each Issuing Bank
(which acceptance will not be unreasonably withheld) that is not an Affiliate of
the Borrowers (such Eligible Assignee being herein called a
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"Substitute Lender") to assume Commitments hereunder and to make Advances
hereunder in an amount equal to the respective Commitments and Advances of the
Affected Lender under each of the Facilities and, subject to (x) the execution
and delivery to the Agent by the Substitute Lender of documentation satisfactory
to the Agent and (y) the payment by the Borrowers to the Agent of the processing
and recordation fee specified in Section 9.07(a)(vii) with respect to such
assignment, and (z) in the case of a Substitute Lender that will assume a Terra
Facility B Commitment or acquire Terra Facility B Advances, compliance with
Section 9.07(c), the Substitute Lender shall succeed to the rights and
obligations of the Affected Lender hereunder and under the other Loan Documents.
Upon the Substitute Lender so becoming a party hereto, the relevant Borrowers
shall borrow Advances from the Substitute Lender and/or prepay the principal of
the Advances of the other Lenders in such manner as will result in the
outstanding principal amount of the Advances under each Facility being held by
the Lenders according to their respective Pro Rata Shares of the relevant
Facilities.
(c) The Borrowers may not exercise their rights under this Section
2.15:
(i) with respect to any Affected Lender unless the Borrowers
simultaneously exercise such rights with respect to all Affected Lenders,
(ii) if a Default or an Event of Default has occurred and is then
continuing, or
(iii) with respect to any exercise of rights under clause (b) above,
if, at the time of such exercise, the aggregate amount of the Commitments
that shall have been terminated pursuant to said clause (b) (including the
Commitments then proposed to be terminated) shall exceed 30% of the
aggregate amount of the Commitments in effect on the Closing Date.
ARTICLE III
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CONDITIONS OF LENDING
Section 3.01. Documentary Conditions Precedent to Initial Borrowing.
The obligation of each Lender to make an Advance on the occasion of the initial
Borrowing is subject to the conditions precedent that the Agent shall have
received the following, each in form and substance satisfactory to it (provided,
that the documents hereinafter referred to as being executed and delivered by
Terra Capital Holdings, Terra Capital, AMC, AMLP, BMCH and BMC shall be deemed
to be delivered at the Assumption Time):
(a) The Notes, duly executed by each Borrower.
(b) Evidence that all conditions precedent to the consummation of the
Merger set forth in the Merger Agreement have been satisfied or, with the
prior written approval of the Agent, modified or waived. For the purposes
of this Section 3.01(b), any such condition precedent required in the
Merger Agreement to be satisfactory to, or subject to the discretion of,
Terra or Acquisition Corp. shall be required to be reasonably satisfactory
to, or subject to the reasonable discretion of, the Agent.
(c) Evidence that Terra has received a cash equity contribution from
Minorco USA pursuant to the Minorco USA Put Option Agreement, or cash
proceeds of a public offering of stock, in an amount not less than
$100,000,000 and that Terra has contributed the full amount thereof to
Acquisition Corp.
(d) Evidence of the cancellation of all commitments and letters of
credit under, of the payment in full of all amounts owing under, and of the
termination of all security interests securing indebtedness under, the
Terminated Facilities.
(e) Evidence of receipt of all governmental and third party consents
and approvals necessary in connection with the Transactions, this Agreement
and the related grants of security interest (without the imposition of any
conditions
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except those that are acceptable to the Lenders) and that the same remain
in effect, and that all applicable waiting periods have expired without any
action being taken by any competent authority and that no law or regulation
exists, in the judgment of the Lenders, that restrains, prevents or imposes
adverse conditions upon the Transactions, this Agreement or the other
transactions contemplated by this Agreement.
(f) Evidence of payment by Terra of all accrued fees and expenses of
the Agent (including the reasonable and documented fees and expenses of
counsel to the Agent in connection with this Agreement to the extent that
statements for such fees and expenses have been delivered to the Borrower
at least one Business Day prior to the date of the initial Borrowing).
(g) The following documents, each dated such day (unless otherwise
specified), in form and substance satisfactory to the Agent (unless
otherwise specified) and in sufficient copies for the Agent, each Lender
and each Issuing Bank:
(i) certified copies of the resolutions of the Board of
Directors of each Obligor approving the Transactions, this Agreement,
the Notes, each other Loan Document and each Related Document to which
such Obligor is or is to be a party, and of all documents evidencing
other necessary corporate action and governmental approvals, if any,
with respect to the Transactions, this Agreement, the Notes, each
other Loan Document and each Related Document;
(ii) a copy of the charter or articles of incorporation or
articles of limited partnership, as the case may be, of each Obligor
and each amendment thereto, certified (as of a date reasonably near
the date of the initial Borrowing) by the Secretary of State of the
state of its incorporation or organization as being a true and correct
copy thereof;
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(iii) a copy of a certificate of the Secretary of State of the
state of each Obligor's incorporation or organization, dated a date
reasonably near the date of the initial Borrowing, specifying the date
of incorporation or organization of each Obligor, stating that such
Obligor has filed all annual reports and paid all fees with respect to
such reports and stating that such Obligor has legal existence and is
in good standing with the office of said Secretary of State;
(iv) for each Obligor, a copy of a certificate of the Secretary
of State of each state set forth on Schedule 3.01(g)(iv) opposite the
name of such Obligor, each dated a date reasonably near the date of
the initial Borrowing, confirming that such Obligor is duly qualified
to conduct business and in good standing as a foreign corporation in
such state;
(v) a certificate of each Obligor, signed on its behalf by its
President or a Vice President and its Secretary or any Assistant
Secretary, dated the date of the initial Borrowing (the statements
made in which certificate shall be true on and as of the date of the
initial Borrowing), certifying as to (A) the absence, except to the
extent provided in said certificate, of any amendments to the charter
or articles of incorporation or organization of such Obligor since the
date of the Secretary of State's certificate referred to in Section
3.01(g)(iii), (B) a true and correct copy of the bylaws of such
Obligor as in effect on the date of the initial Borrowing, and (C) the
due incorporation or organization and good standing of such Obligor as
a corporation or limited partnership, as the case may be, organized
under the laws of its state of incorporation or organization, and the
absence of any proceeding for the dissolution or liquidation of such
Obligor;
(vi) a certificate of Terra, signed on its behalf by its
President or a Vice President and its Secretary or any Assistant
Secretary, dated the date of the initial Borrowing (the statements
made in which
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certificate shall be true on and as of the date of the initial
Borrowing), certifying as to (A) the truth of the representations and
warranties contained in the Loan Documents as though made on and as of
the date of the initial Borrowing (or, if any such representation or
warranty is expressly stated to have been made as of a specific date,
as of such specific date) and (B) the absence of any event occurring
and continuing, or resulting from the initial Borrowing, that
constitutes a Default or Event of Default; and
(vii) a certificate of the Secretary or an Assistant Secretary of
each Obligor certifying the names and true signatures of the officers
of such Obligor authorized to sign this Agreement, the Notes (if
applicable), each other Loan Document and each Related Document to
which it is or is to be a party and the other documents to be
delivered hereunder and thereunder.
(h) The Holdings Pledge Agreement, the Terra Capital Pledge
Agreement, the Subsidiary Pledge and Security Agreement and the AMLP Pledge
and Security Agreement, in each case duly executed by each of the intended
parties thereto, together with:
(i) instruments evidencing the Pledged Stock referred to therein
indorsed in blank,
(ii) such appropriately completed and duly executed copies of
Uniform Commercial Code financing statements as the Agent shall have
requested in order to perfect and protect the Liens created by such
Security Documents and covering the Collateral described therein,
(iii) executed and delivered documents for recordation and filing
of or with respect to such Security Documents that the Agent may deem
necessary or desirable in order to perfect and protect the Liens
created thereby, and
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(iv) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Liens
created by such Security Documents has been or will be taken,
including, but not limited to, (x) evidence of the termination of any
and all Liens against the property of the respective Obligors in
respect of existing Debt terminated or satisfied and extinguished in
accordance with Section 3.01(d) and (y) evidence of the termination of
any and all existing Permitted Liens (except such Permitted Liens, if
any, that the Lenders will permit to survive the Closing Date, as set
forth on Part II of Schedule 5.02(a)(iii)).
(i) The Loan Purchase Agreement, duly executed by Terra and the
Agent.
(j) Financial projections and a budget for Terra and its Subsidiaries
after giving effect to the Transactions, for each fiscal year of Terra from
and including the current fiscal year to and including the fiscal year in
which the final Principal Payment Date is scheduled to occur.
(k) Certified copies of each of the Related Documents, duly executed
by the parties thereto and in form and substance satisfactory to the Agent,
the Lenders and each Issuing Bank, together with copies of all agreements,
instruments and other documents delivered in connection therewith.
(l) Letters and certificates, in form and substance satisfactory to
the Lenders, attesting to the Solvency of (1) Terra, after giving effect to
the Transactions and the other transactions contemplated hereby, (2) AMCI,
after giving effect to the Initial Merger, and (3) Terra Capital, after
giving effect to the Transactions and the other transactions contemplated
hereby, from Valuation Research Corporation and from the Senior Financial
Officer, respectively.
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(m) Evidence of insurance naming the Agent as loss payee in respect
of tangible Collateral with such responsible and reputable insurance
companies or associations, and in such amounts and covering such risks, as
is satisfactory to the Agent.
(n) A favorable opinion of Kirkland & Ellis, special counsel for the
Obligors, in substantially the form of Exhibit D and as to such other
matters as the Agent, any Issuing Bank or any Lender through the Agent may
reasonably request.
(o) A favorable opinion of Milbank, Tweed, Hadley & McCloy, special
New York counsel for the Agent, in form and substance satisfactory to the
Agent.
(p) Such other approvals, opinions and documents relating to this
Agreement and the transactions contemplated hereby as any Lender or any
Issuing Bank may, through the Agent, reasonably request.
Section 3.02. Additional Conditions Precedent to Initial Borrowing.
The obligation of each Lender to make an Advance on the occasion of the initial
Borrowing is also subject to the conditions precedent that (a) the initial
Borrowing shall occur no later than the Term Facility Commitment Termination
Date; (b) there shall not have occurred since March 31, 1994 any material
adverse change in the business, assets, operations, properties or financial
condition of Terra and its Subsidiaries taken as a whole, AMCI and its
Subsidiaries taken as a whole or TI and its Subsidiaries taken as a whole (or in
the contingent liabilities of the relevant Person and its Subsidiaries, taken as
a whole, which could reasonably be expected to result in any of the foregoing),
other than any of the foregoing resulting solely from a general economic change
in the industry of Terra or AMCI and their respective Subsidiaries; (c) the
Agent shall be satisfied with the sources and uses of the financing for the
Merger and the aggregate amount of unused Commitments immediately after giving
effect thereto; (d) the Lenders shall be satisfied with the final terms and
conditions of the Transactions (including, without limitation, the Merger
Agreement and the
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legal structure and capitalization of each Obligors); and (e) there shall exist
no action, suit, investigation, litigation or proceeding affecting any Obligor
pending or threatened before any court, governmental agency or arbitration that
could reasonably be expected to have a Material Adverse Effect or purports to
affect the legality, validity, binding effect or enforceability of this
Agreement, any Note, any other Loan Document, any Related Document, the
Transactions or the consummation of the transactions contemplated hereby.
Section 3.03. Conditions Precedent to Initial AMLP Borrowing. The
obligation of each Lender to make an Advance on the occasion of the initial AMLP
Borrowing, and the right of AMLP to request the issuance of any AMLP Letter of
Credit, is subject to the conditions precedent that (a) the Terra Facility A
Advances, the Terra Facility B Advances and the Terra Facility D Advances shall
have been made, (b) each of Terra Capital Holdings, Terra Capital, AMLP, AMC,
BMC and BMCH shall have executed and delivered this Agreement and each other
Loan Document to which it is intended to be a party, and (iii) the Transactions
shall have been consummated.
Section 3.04. Conditions Precedent to Initial Terra Facility C
Borrowing. The obligation of each Lender to make its Terra Facility C Advance
is subject to the conditions precedent that the conditions precedent set forth
in Sections 3.02(b), 3.02(e) and 3.03 shall be satisfied with respect to and as
of the date of such Terra Facility C Advance and that Terra shall certify to the
Agent that such Advances are required to finance payments by Terra in respect of
the AMCI Change of Control Redemption.
Section 3.05. Conditions Precedent to Each Borrowing and Issuance.
The obligation of each Lender to make an Advance on the occasion of each
Borrowing (including, without limitation, the initial Borrowing, but excluding
the making of any Working Capital Advance pursuant to Section 2.13), and the
right of each Borrower to request the issuance of Letters of Credit under any
Working Capital Facility, shall be subject to the further conditions precedent
that on the date of such Borrowing or issuance the following statements shall be
true (and each of the
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giving of the applicable Notice of Borrowing or Notice of Issuance and the
acceptance by the relevant Borrower of the proceeds of such Borrowing or of such
Letter of Credit shall constitute a representation and warranty by such Borrower
that on the date of such Borrowing or issuance such statements are true):
(i) the representations and warranties contained in each Loan
Document are correct on and as of the date of such Borrowing or issuance,
before and after giving effect to such Borrowing or issuance and to the
application of the proceeds therefrom, as though made on and as of such
date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date); and
(ii) no event has occurred and is continuing, or would result from
such Borrowing or issuance or from the application of the proceeds
therefrom, that constitutes a Default or an Event of Default.
Section 3.06. Determinations Under Sections 3.01 and 3.02. For
purposes of determining compliance with the conditions specified in Sections
3.01 and 3.02, each Lender shall be deemed to have consented to, approved or
accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Lenders unless an officer of the Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
prior to the initial Borrowing specifying its objection thereto and such Lender
shall not have made available to the Agent such Lender's ratable portion of such
Borrowing.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Company. The
Company represents and warrants as follows (provided, that until the
consummation of the Merger, each representation and warranty herein with respect
to AMC, AMCI, AMLP, BMCH or BMC or any of their respective Subsidiaries shall be
to the best knowledge of the Company):
(a) Each Obligor (i) is a corporation (or, in the case of AMLP, a
limited partnership) duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (ii) is duly
qualified and in good standing as a foreign corporation (or limited
partnership, as the case may be) in each other jurisdiction in which it
owns or leases property or in which the conduct of its business requires it
to so qualify or be licensed and where, in each case, failure so to qualify
and be in good standing could reasonably be expected to have a Material
Adverse Effect and (iii) has all requisite power (corporate or other) and
authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
list of all Material Subsidiaries of each Obligor as of the date of the
initial Borrowing, both before and after giving effect to the Transactions,
showing as of such date (as to each such Subsidiary) the jurisdiction of
its organization, the number of shares of each class of capital stock or
partnership interests authorized, and the number outstanding and the
percentage of the outstanding shares or interests of each such class owned
(directly or indirectly) by such Obligor and the number of shares covered
by all outstanding options, warrants, rights of conversion or purchase and
similar rights. All of the outstanding capital stock or partnership
interests of all of such Subsidiaries has been validly issued, is fully
paid and non-assessable and is owned by such Obligor or one or more
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of its Subsidiaries free and clear of all Liens, except those created by
the Security Documents. Each Material Subsidiary (i) is a corporation (or,
in the case of AMLP, a limited partnership) duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified and in good standing as a foreign
corporation or limited partnership, as the case may be, in each other
jurisdiction in which it owns or leases property or in which the conduct of
its business requires it to so qualify or be licensed and where, in each
case, failure to so qualify and be in good standing could reasonably be
expected to have a Material Adverse Effect and (iii) has all requisite
power (corporate or other) and authority to own or lease and operate its
properties and to carry on its business as now conducted and as proposed to
be conducted.
(c) The execution, delivery and performance by each Obligor of this
Agreement, the Notes, each other Loan Document and each Related Document to
which it is or is intended to be a party, and the consummation of the
Transactions and the other transactions contemplated hereby, are within
such Obligor's powers (corporate or other), have been (or will, prior to
the initial Borrowing, be) duly authorized by all necessary corporate
action, and do not (i) contravene such Obligor's charter, by-laws or in the
case of AMLP, its agreement of limited partnership, (ii) violate any
applicable law (including, without limitation, the Securities Exchange Act
of 1934 and the Racketeer Influenced and Corrupt Organizations Chapter of
the Organized Crime Control Act of 1970), rule, regulation (including,
without limitation, Regulation X), order, writ, judgment, injunction,
decree, determination or award (except for any such violation, by action or
inaction of any Obligor, that could not reasonably be expected to have a
Material Adverse Effect and that could not result in any liability of any
Lender), (iii) except as set forth on Schedule 4.01(c), conflict with or
result in the breach of, or constitute a default under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument
binding on or affecting any Obligor, any of its
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Subsidiaries or any of their properties (except for any such conflict,
breach or default, caused by action or inaction of any Obligor, that could
not reasonably be expected to have a Material Adverse Effect and that could
not result in any liability of any Lender) or (iv) except for the Liens
created by the Security Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of any
Obligor or any of its Subsidiaries. No Obligor or any of its Subsidiaries
is in violation of any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument, the violation or breach of which could be reasonably
expected to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for (i) the due execution, delivery, recordation,
filing or performance by any Obligor of this Agreement, the Notes, any
other Loan Document or any Related Document to which it is or is to be a
party, or for the consummation of the Transactions or the other
transactions contemplated hereby, (ii) the grant by any Obligor of the
Liens granted by it pursuant to the Security Documents, (iii) the
perfection or maintenance of the Liens created by the Security Documents
(except for the filings required to be made pursuant to Section 3.01(h)) or
(iv) the exercise by the Agent or any Lender or Issuing Bank of its rights
under the Loan Documents or the remedies in respect of the Collateral
pursuant to the Security Documents, except for the authorizations,
approvals, actions, notices and filings listed on Schedule 4.01(d), all of
which have been duly obtained, taken, given or made and are in full force
and effect. On the date of initial Borrowing, all applicable waiting
periods in connection with the Transactions and the other transactions
contemplated hereby have expired without any action having been taken by
any competent authority restraining, preventing or imposing materially
adverse
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conditions upon the Transactions or the rights of the Obligors or their
Subsidiaries.
(e) This Agreement has been, and each of the Notes, each other Loan
Document and each Related Document when delivered will have been, duly
executed and delivered by each Obligor that is intended to be a party
thereto. This Agreement is, and each of the Notes, each other Loan
Document and each Related Document when delivered will be, the legal, valid
and binding obligation of each Obligor that is intended to be a party
thereto, enforceable against such Obligor in accordance with its terms.
(f) The balance sheet of Terra as at December 31, 1993 and the
related statements of income and cash flows of Terra for the twelve months
then ended, accompanied by an opinion of Deloitte & Touche, independent
public accountants, and the balance sheet of Terra as at June 30, 1994, and
the related statements of income and cash flows of Terra for the six months
then ended, duly certified by the chief financial officer of Terra, copies
of which have been furnished to each Lender, present fairly, in all
material respects, subject, in the case of said balance sheet as at June
30, 1994, and said statements of income and cash flows for the six months
then ended, to year-end audit adjustments, the financial condition of Terra
as at such dates and the results of the operations of Terra for the periods
ended on such dates, all in accordance with generally accepted accounting
principles applied on a consistent basis. Since March 31, 1994, there has
been no Material Adverse Change with respect to Terra.
(g) (A) No written information, exhibit or report (as at the date of
the initial Borrowing) furnished by any officer of Terra to the Agent, any
Issuing Bank or any Lender in connection with the negotiation of the Loan
Documents (when taken together) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements made therein not misleading and (B) none of the information,
exhibits or reports furnished by any Obligor to the Agent, any Issuing
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Bank or any Lender pursuant to Section 5.03 contained (on the date of
delivery thereof) any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements made therein not
misleading.
(h) There is no action, suit, litigation or proceeding against any
Obligor or any of its Subsidiaries or any of their respective property,
including any Environmental Action, pending before any court, governmental
agency or arbitrator, or (to the knowledge of any Obligor) threatened, nor
(to the knowledge of any Obligor) is there any investigation pending in
respect of any Obligor, that (i) could reasonably be expected to have a
Material Adverse Effect, or (ii) on the date of the initial Borrowing could
reasonably be expected to affect the legality, validity or enforceability
of this Agreement, any Note, any other Loan Document, any Related Document,
the Transactions or the consummation of the transactions contemplated
hereby.
(i) No Obligor is engaged in the business of extending credit for the
purpose of purchasing or carrying Margin Stock, and no proceeds of any
Advance will be used to purchase or carry any Margin Stock or to extend
credit to others for the purpose of purchasing or carrying any Margin
Stock.
(j) Set forth on Schedule 4.01(j) hereto is a complete and accurate
list, as of the date of the initial Borrowing, of each Plan that is subject
to Title IV of ERISA and each Multiemployer Plan with respect to any
employees or former employees of any Obligor or any of its ERISA
Affiliates.
(k) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan of any Obligor or any of its ERISA Affiliates that
could reasonably be expected to have a Material Adverse Effect.
(l) Since the date of the Schedule B (Actuarial Information) to the
most recent annual report (Form 5500 Series) for each Plan of any Obligor
or any of its ERISA Affiliates, there has been no change in the funding
status
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of any such Plan except to the extent that such change is not reasonably
expected to have a Material Adverse Effect.
(m) Neither any Obligor nor any of its ERISA Affiliates has incurred
or is reasonably expected to incur any withdrawal liability to any
Multiemployer Plan except to the extent such withdrawal liability is not
reasonably expected to have a Material Adverse Effect.
(n) Neither any Obligor nor any of its ERISA Affiliates has been
notified by the sponsor of a Multiemployer Plan of any Obligor or any of
its ERISA Affiliates that such Multiemployer Plan is in reorganization or
has been terminated, within the meaning of Title IV of ERISA.
(o) As of the Closing Date, the aggregate annualized cost on a pay-
as-you-go basis (including, without limitation, the cost of insurance
premiums) with respect to post-retirement benefits under welfare plans
(other than post-retirement benefits required to be provided by Section
4980B of the Code or applicable state law) for which Terra and its
Subsidiaries is liable does not exceed $1,000,000.
(p) Neither the business nor the properties of any Obligor or any of
its Subsidiaries are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or of the public enemy or other casualty (whether or not covered
by insurance) that could reasonably be expected to have a Material Adverse
Effect.
(q) Except as set forth on Part I of Schedule 4.01(q) and except to
the extent any of the following could not reasonably be expected to have a
Material Adverse Effect, the operations and properties of each Obligor and
each of its Subsidiaries comply in all respects with all Environmental
Laws, all necessary Environmental Permits have been obtained and are in
effect for the operations and properties of each Obligor and its
Subsidiaries, each Obligor and its Subsidiaries are in compliance in all
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respects with all such Environmental Permits, and no circumstances exist
that could (i) form the basis of an Environmental Action against any
Obligor or any of its Subsidiaries or any properties described in the
Mortgages or (ii) cause any such property to be subject to any material
restrictions on ownership, occupancy, use or transferability under any
Environmental Law.
(r) Except as set forth on Part II of Schedule 4.01(q) and except to
the extent any of the following could not reasonably be expected to have a
Material Adverse Effect, as of the date of the initial Borrowing none of
the properties of any Obligor or any of its Subsidiaries is listed or
proposed for listing on the National Priorities List under CERCLA or on the
Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the Environmental Protection Agency or any
analogous state list of sites requiring investigation or cleanup, and no
underground storage tanks, as such term is defined in 42 U.S.C. 6901, are
located on any property of any Obligor or any of its Subsidiaries.
(s) Except as set forth on Part III of Schedule 4.01(q) and except to
the extent any of the following could not reasonably be expected to have a
Material Adverse Effect, as of the date of the initial Borrowing neither
any Obligor nor any of its Subsidiaries has been notified in writing by any
federal, state or local governmental agency or any other Person that any
Obligor or any of its Subsidiaries is potentially liable for the remedial
or other costs with respect to treatment, storage, disposal, release,
arrangement for disposal or transportation of any Hazardous Substance
generated by any Obligor or any of its Subsidiaries, and Hazardous
Materials have not been generated, used, treated, handled, stored or
disposed of on, or released or transported to or from, any property of such
Obligor (or, to its knowledge, any adjoining property) except in compliance
in all material respects with all Environmental Laws and Environmental
Permits, and all other wastes generated at any such properties by any
Obligor or any of its Subsidiaries (and
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their respective agents, employees and contractors) have been disposed of
in compliance with all Environmental Laws and Environmental Permits.
(t) Each Obligor and each of its Subsidiaries has filed, has caused
to be filed or has been included in, all federal and state income tax
returns and all other material tax returns (federal, state, local and
foreign) required to be filed and has paid (or is contesting in good faith
by appropriate proceedings) all taxes shown thereon to be owing, together
with applicable interest and penalties.
(u) Set forth on Schedule 4.01(u) hereto is a complete and accurate
list, as of the date hereof, of each taxable year of Terra for which
federal income tax returns have been filed and for which the expiration of
the applicable statute of limitations for assessment or collection has not
occurred by reason of extension or otherwise (an "Open Year").
(v) As of the date of the initial Borrowing, there are no adjustments
to the federal income tax liability of Terra proposed by the Internal
Revenue Service with respect to Open Years. No issues have been raised by
the Internal Revenue Service in respect of Open Years that, in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(w) Neither any Obligor nor any of its Subsidiaries is an "investment
company," or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended. Neither any Obligor nor any of
its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Neither the making of any Advances, nor the issuance of any Letters of
Credit, nor the application of the proceeds or repayment thereof by the
Borrowers, nor the consummation of the other transactions contemplated
hereby, will violate any provision
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of such Act or any rule, regulation or order of the Securities and Exchange
Commission thereunder.
(x) Each of Terra and Terra Capital (both individually and
collectively with their respective Subsidiaries) (i) is Solvent, and (ii)
will be Solvent after giving effect to the Transactions.
(y) Set forth on Part I of Schedule 4.01(y) hereto is a complete and
accurate list, as of the date of the initial Borrowing, of all existing
Debt of each Obligor, after giving effect to the cancellations and payments
contemplated by Section 3.01(d), showing as of the date of the initial
Borrowing (i) the principal amount outstanding thereunder, (ii) whether
such Debt is secured by any Lien and (iii) the aggregate principal amount
of such Debt scheduled to be paid during each fiscal year of Terra to and
including the fiscal year of Terra in which the final Principal Payment
Date is scheduled to occur.
ARTICLE V
COVENANTS OF TERRA
Section 5.01. Affirmative Covenants. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder, Terra will, and will cause each of the Obligors
to:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, with all applicable laws, rules, regulations and
orders, such compliance to include, without limitation, compliance with
ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the
Organized Crime Control Act of 1970 (except to the extent that non-
compliance with any thereof could not reasonably be expected to have a
Material Adverse Effect).
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(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed upon
it or upon its property and (ii) all lawful claims that, if unpaid, might
by law become a Lien upon its property; provided, that neither such Obligor
nor any of its Subsidiaries shall be required to pay or discharge any such
tax, assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being
maintained to the extent required by GAAP, unless and until any Lien
resulting therefrom attaches to its property and becomes enforceable
against its other creditors.
(c) Compliance with Environmental Laws. Comply, and cause each of
its Subsidiaries and all lessees and other Persons occupying its properties
to comply, with all Environmental Laws and Environmental Permits applicable
to its operations and properties; obtain and renew, and cause each of its
Subsidiaries to obtain and renew, all Environmental Permits necessary for
its operations and properties; and conduct, and cause each of its
Subsidiaries to conduct, any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action necessary to
remove and clean up all Hazardous Materials from any of its properties, in
accordance with the requirements of all Environmental Laws; provided, that
(i) neither such Obligor nor any of its Subsidiaries shall be required to
undertake any such cleanup, removal, remedial or other action to the extent
that its obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves to the extent required by GAAP are
being maintained with respect to such circumstances and (ii) no such
compliance with laws and permits, obligation to obtain or renew permits or
obligation to undertake any such investigation, study, sampling, testing,
removal, remedial or other action shall be required hereunder to the extent
no Material Adverse Effect could reasonably be expected to result from any
failure to so comply, obtain, renew or undertake, either individually or in
the aggregate.
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(d) Maintenance of Insurance. Maintain, and cause each of its
Material Subsidiaries to maintain, with responsible and reputable insurance
companies or associations, insurance, including business interruption
insurance with respect to each manufacturing plant, in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses.
(e) Preservation of Corporate Existence, Etc. Subject to Section
5.02(d) and (e), preserve and maintain, and cause each of its Material
Subsidiaries to preserve and maintain, its corporate existence, rights
(charter and statutory) and franchises; provided, that the Obligors may
consummate the Merger and the other Transactions, and that neither any
Obligor nor any of its Subsidiaries shall be required to preserve any right
or franchise if the Board of Directors of such Obligor or such Subsidiary
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of such Obligor or such Subsidiary, as the case may
be, and that the loss thereof will not have a Material Adverse Effect.
(f) Visitation Rights. At any reasonable time and as may be
reasonably requested from time to time, permit the Agent, any Issuing Bank
or any of the Lenders or any agents or representatives thereof to examine
and make copies of and abstracts from the records and books of account of,
and visit the properties of, such Obligor and any of its Subsidiaries (in
the presence of an appropriate officer or representative of the relevant
Obligor), and to discuss the affairs (including, but not limited to, the
compliance by such Obligor and its Subsidiaries with all Environmental
Laws), finances and accounts of such Obligor and any of its Subsidiaries
with any of their officers or directors and with their independent
certified public accountants.
(g) Preparation of Environmental Reports. Upon either (i) the
acquisition of any real property by such Obligor or any of its Subsidiaries
the purchase price of which exceeds $500,000 or (ii) the occurrence and
during the continuance of a Default or Event of Default arising under
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Section 5.01(c), and in each case at the written request of the Agent, such
Obligor shall provide to the Agent, each Issuing Bank and each Lender
within a reasonable time after such acquisition or request, as the case may
be, at the expense of such Obligor, an environmental site assessment report
for the acquired property (in the case of an acquisition as described in
clause (i)) or for any properties of such Obligor which are the subject of
any such Default or Event of Default (in the case of an event as described
in clause (ii)) prepared by an environmental consulting firm reasonably
acceptable to the Agent, indicating the presence or absence of Hazardous
Materials and the estimated cost of any compliance, removal or remedial
action in connection with any Hazardous Materials on such properties.
Without limiting the generality of the foregoing, if the Agent determines
at any time that a material risk exists that any such report will not be
provided within a reasonable time following such request, the Agent may
retain an environmental consulting firm to prepare such report at the
expense of such Obligor, such Obligor and each of its Subsidiaries hereby
granting to the Agent, each Issuing Bank, each Lender, such firm and any
agents or representatives thereof an irrevocable non-exclusive license,
subject to the rights of tenants, to enter onto its properties to undertake
such an assessment.
(h) Keeping of Books. Keep, and cause each of its Material
Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets
and business of such Obligor and each such Subsidiary in accordance with
GAAP.
(i) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Material Subsidiaries to maintain and preserve, except to the
extent the failure to do so could not reasonably be expected to have a
Material Adverse Effect, all of its properties that are used or useful in
the conduct of its business in good working order and condition, ordinary
wear and tear excepted.
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(j) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real
property, keep such leases in full force and effect and not allow such
leases to lapse or be terminated or any rights to renew such leases to be
forfeited or canceled, except to the extent any such lease is no longer
used or useful in the conduct of its business or which, in the exercise of
the reasonable judgment of the relevant Obligor, is to be refinanced and
except to the extent failure to comply with the foregoing would not have a
Material Adverse Effect, and cause each of its Material Subsidiaries to do
so.
(k) Performance of Related Documents. Perform and observe all of the
terms and provisions of each Related Document to be performed or observed
by it, maintain each such Related Document in full force and effect and
enforce such Related Document in accordance with its terms, except to the
extent the failure to do any of the foregoing could not reasonably be
expected to have a Material Adverse Effect.
(l) Performance and Compliance with Material Contracts. Perform and
observe, and cause each of its Subsidiaries to perform and observe, all the
terms and provisions of each Material Contract to be performed or observed
by it, maintain each such Material Contract in full force and effect and
enforce each such Material Contract in accordance with its terms, except to
the extent the failure to do any of the foregoing could not reasonably be
expected to have a Material Adverse Effect.
(m) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of its Affiliates on terms that are fair and
reasonable and no less favorable to such Obligor or such Subsidiary than
would obtain in a comparable arm's-length transaction with a
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Person that is not an Affiliate; provided, that this Section 5.01(m) shall
not be applicable to
(i) the Transactions expressly contemplated by the Related
Documents;
(ii) transactions between such Obligor and its wholly owned
Subsidiaries or between wholly owned Subsidiaries of such Obligor
unless otherwise prohibited by this Agreement; and
(iii) compensation paid for services rendered by any director or
officer of such Obligor or any director or officer of a Subsidiary of
such Obligor serving at the direction or request of such Obligor to
the extent such compensation is determined in the good faith exercise
of business judgment by the Board of Directors of such Obligor to be
reasonable and appropriate to the functions of such office.
(n) Further Assurances. (i) Promptly upon reasonable request by the
Agent or any Lender or Issuing Bank through the Agent correct, and cause
each Subsidiary promptly to correct, any material defect or error that may
be discovered in any Loan Document, which material defect or error is the
result of any untrue statement of material fact under any Loan Document or
the omission to state a material fact necessary to make the statements made
therein not misleading, or in the execution, acknowledgment or recordation
of any Loan Document, and (ii) promptly upon reasonable request by the
Agent or any Lender or Issuing Bank through the Agent do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and re-
register, and cause any such Subsidiary promptly to do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and re-
register, any and all such further acts, deeds, conveyances, pledge
agreements, assignments, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as the Agent or any Lender or Issuing Bank
through the Agent may reasonably require
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from time to time in order to (A) subject to the Liens created by any of
the Security Documents any of such Obligor's and its Subsidiaries'
properties, rights or interests covered or now or hereafter intended to be
covered by any of the Security Documents, (B) perfect and maintain the
validity, effectiveness and priority of any of the Security Documents and
the Liens intended to be created thereby and (C) assure, convey, grant,
assign, transfer, preserve, protect and confirm more effectively unto the
Agent, the Lenders and any Issuing Bank the rights granted or now or
hereafter intended to be granted to the Agent, the Lenders and the Issuing
Banks under any Security Document or under any other instrument executed in
connection with any Security Document to which such Obligor, any other
Obligor or any of their respective Subsidiaries is or may become a party.
(o) Interest Rate Hedging. Within 90 days after the Closing Date,
cause Terra Capital to enter into, and thereafter maintain in full force
and effect until December 31, 1997, one or more interest rate Hedge
Agreements with Persons acceptable to the Lenders in their reasonable
determination with respect to a notional amount equal to 80% of the amount
of the Relevant Debt providing effective protection against the Average
Rate exceeding a rate per annum equal to 10% during the hedging period.
For the purposes of this Section 5.01(o), the following terms have the
following respective meanings:
"Average Rate means, on any date, the weighted average rate of
interest per annum payable on all Relevant Debt, excluding the
Applicable Margin.
"Relevant Debt" means Debt under Terra Facility A and Terra
Facility B.
(p) Ownership of the Obligors. Take, and will cause each of its
Subsidiaries to take, such action from time to time as shall be necessary
to ensure that (i) Terra will at all times own, beneficially and of record,
all of the issued and outstanding capital stock (other than directors'
qualifying shares) of Terra Capital Holdings; (ii) Terra
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Capital Holdings will at all times own, beneficially and of record, all of
the issued and outstanding capital stock (other than directors' qualifying
shares) of Terra Capital, and will own no other property (other than cash
and other property incidental to its business as a holding company); (iii)
Terra Capital will at all times own, beneficially and of record, all of the
issued and outstanding capital stock (other than directors' qualifying
shares) of TI, AMC and BMCH, and will own no other property (other than
cash and other property incidental to its business as a holding company);
(iv) BMCH will at all times own, beneficially and of record, all of the
issued and outstanding capital stock (other than directors' qualifying
shares) of BMC, and will own no other property (other than cash and other
property incidental to its business as a holding company); (v) AMC will own
no property other than ownership interests of Agricultural and Minerals
Company, L.P., a Delaware limited partnership, the name of which will
hereafter be changed to Terra Nitrogen Company, L.P. ("AMCLP") and a
general partnership interest in AMLP (other than cash and other property
incidental to its business as a holding company); and (vi) AMCLP will own
no property other than ownership interests of AMLP (other than cash and
other property incidental to its business as a holding company). In the
event that any such additional shares of stock or other ownership interests
shall be issued to an Obligor by any Subsidiary, the respective Obligor
agrees forthwith to deliver to the Agent pursuant to the Security Documents
the certificates (if any) evidencing such ownership interests accompanied
by undated powers executed in blank and to take such other action as the
Agent shall request to perfect the security interest created therein
pursuant to the Security Documents. Without limiting the foregoing, in the
event that AMLP shall at any time convert to a corporate form, Terra shall,
and shall cause each of its Subsidiaries owning shares of such corporation
to, subject always to compliance with Regulation U and other applicable
laws and governing documents, (i) pledge all such shares owned by Terra or
such Subsidiary, as the case may be, to the Agent pursuant to a written
instrument in form and substance satisfactory to the Agent, (ii) deliver to
the Agent all certificates representing such shares of stock, accompanied
by undated
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stock powers executed in blank, and (iii) deliver such proof of corporate
action, incumbency of officers, opinions of counsel and other documents as is
consistent with those delivered by each Obligor pursuant to Section 3.01 hereof
upon the Closing Date or as any Lender or Issuing Bank or the Agent shall have
requested.
Section 5.02. Negative Covenants. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder, Terra will not, and will not permit any of its
Material Subsidiaries to:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Material Subsidiaries to create, incur, assume or suffer to
exist, any Lien on or with respect to any of its properties of any
character (including, without limitation, accounts) whether now owned or
hereafter acquired, or sign or file, or permit any of its Subsidiaries to
sign or file, under the Uniform Commercial Code of any jurisdiction, a
financing statement that names such Obligor or any of its Subsidiaries as
debtor, or sign, or permit any of its Subsidiaries to sign, any security
agreement authorizing any secured party thereunder to file such financing
statement, or assign, or permit any of its Subsidiaries to assign, any
accounts or other right to receive income, excluding from the operation of
the foregoing restrictions the following:
(i) Liens created by the Loan Documents;
(ii) Permitted Liens;
(iii) the existing Liens described on Schedule 5.02(a)(iii);
(iv) Liens on cash (in an aggregate amount, for Terra and its
Subsidiaries taken as a whole, not exceeding $10,000,000 at any time)
to secure the
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Obligations in respect of letters of credit permitted under Section
5.02(b)(iv);
(v) Liens on Receivables of TI to secure TI's Obligations under
the Permitted TI Receivables Facilities;
(vi) purchase money Liens upon or in property acquired or held by
Terra or such Subsidiary in the ordinary course of business to secure
the purchase price of such property or to secure Debt (including,
without limitation, commercial letters of credit) incurred solely for
the purpose of financing the acquisition, construction or improvement
of any such property to be subject to such Liens, or Liens existing on
any such property at the time of acquisition (and not created in
anticipation thereof), or extensions, renewals or replacements of any
of the foregoing for the same or a lesser amount; provided, that (x)
no such Lien shall extend to or cover any property other than the
property being acquired, constructed or improved, and no such
extension, renewal or replacement shall extend to or cover any
property not theretofore subject to the Lien being extended, renewed
or replaced; and (y) the Debt secured by any such Lien shall at no
time exceed 80% of the fair market value (as determined in good faith
by the Senior Financial Officer) of such property at the time it was
acquired (provided, that upon the payment in full of the principal of
and interest on the Terra Facility C Advances and the Terra Facility D
Advances, the figure 80% set forth above shall automatically be deemed
to be increased to 90%);
(vii) Any Lien arising after the date of this Agreement in favor
of any state of the United States of America or any agency, political
subdivision or instrumentality thereof, upon any pollution abatement
or control facilities being financed in compliance with Section
103(c)(4)(F) of the Internal Revenue Code of 1986, as in effect on the
date of this Agreement (or any successor statute which is similar in
all
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substantive respects), the interest payable in respect of which
financing is excluded from gross income under said Section 103,
provided, however, that (x) the Debt secured by such Lien is not
prohibited by clause (b) of this Section 5.02, and (y) such Lien does
not cover any other property at any time owned by Terra or any
Material Subsidiary;
(viii) Liens on property that is the subject of a capital lease
to secure the performance of the Capital Lease Obligations relating
thereto;
(ix) Liens upon property of a Person that becomes a Subsidiary of
Terra after the date hereof, each of which Liens existed on such
property before the time such Person became a Subsidiary of Terra and
was not created in anticipation thereof; provided, that no such Lien
shall extend to or cover any property of Terra or any of its
Subsidiaries other than the property subject to such Liens at the time
such Person became a Subsidiary of Terra and improvements thereon;
(x) Leases or subleases, and licenses or sublicenses, granted to
third Persons not interfering in any material respect with the
business of Terra or such Subsidiary;
(xi) Easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of Terra or such Subsidiary;
(xii) Liens arising from Uniform Commercial Code financing
statements regarding operating leases permitted by this Agreement;
(xiii) any interest or title of a lessor or sublessor or licensor
under any lease or license permitted or not prohibited by this
Agreement;
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(xiv) additional Liens upon property created after the date
hereof, provided, that the aggregate Debt secured thereby and incurred
on and after the date hereof shall not exceed $7,000,000 in the
aggregate at any one time outstanding; and
(xv) the replacement, extension or renewal of any Lien permitted
by clauses (iii), (iv), (v), (ix) and (xiv) above upon or in the same
property theretofore subject thereto or the replacement, extension or
renewal (without increase in the principal amount or change in any
direct or contingent obligor) of the Debt secured thereby.
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt
other than:
(i) Debt under the Loan Documents;
(ii) Debt in respect of Hedge Agreements permitted by Section
5.02(c);
(iii) Debt in respect of unsecured trade payables (and Obligations
in respect of letters of credit supporting such trade payables);
(iv) Debt (including, without limitation, Obligations in respect
of letters of credit) not secured by any Lien (other than Liens
permitted by Section 5.02(a)(iv)), so long as, on the date of the
incurrence thereof, the aggregate principal amount (or the U.S. Dollar
equivalent of the aggregate principal amount) of all Debt of Terra and
its Subsidiaries on a Consolidated basis (as reasonably determined by
the Senior Financial Officer on and as of the date of such incurrence)
then outstanding under this clause (iv) (including, without
limitation, the Debt proposed to be incurred on such date) does not
exceed $35,000,000;
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(v) Obligations of TI under the Permitted TI Receivables
Facilities;
(vi) Debt securities of Terra issued in a public offering
pursuant to an effective registration statement the terms of which
(including, without limitation, as to interest rates, amortization
(provided, that in any event no payments of principal, redemptions,
sinking fund payments or the like shall be scheduled to be made before
the final Principal Payment Date), redemption, average life to
maturity, covenants, events of default and other terms) are reasonably
satisfactory to the Required Lenders, the proceeds of which are used
first to repay the Terra Facility C Advances and, after the repayment
in full of the Terra Facility C Advances, to repay Advances in the
manner specified in Section 2.05(c)(i);
(vii) Debt outstanding (or committed to be made available) as at
June 30, 1994 and set forth on Schedule 4.01(y);
(viii) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(ix) in the case of any of its Subsidiaries, Debt owed to Terra
or to a wholly owned Subsidiary of Terra;
(x) Debt secured by Liens permitted under Section 5.02(a)(vi);
purchase money Debt secured by Liens permitted under 5.02(a)(ix); and
Debt in an aggregate principal amount not exceeding $7,000,000 at any
one time outstanding secured by Liens permitted under Section
5.02(a)(xiv);
(xi) Debt of Subsidiaries of Terra acquired by Terra or any of
its Subsidiaries after the date hereof in an aggregate principal
amount not exceeding $15,000,000 at any one time outstanding
(provided, that after the Trigger Date the figure $15,000,000 set
forth
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above shall be deemed to be increased to $50,000,000); and
(xii) renewals, refinancings and replacements of the Debt
permitted under clauses (vi), (vii) and (ix) above (without increase
in the principal amount or change in any direct or contingent obligor
and not including any Debt to be paid or prepaid with the proceeds of
Advances).
(c) Hedge Agreements. Enter into or permit to be outstanding, or
permit any of its Subsidiaries to enter into or permit to be outstanding,
any Hedge Agreement other than (x) Hedge Agreements entered into pursuant
to Section 5.01(o), (y) the Methanol Hedging Agreement, and (z) other Hedge
Agreements entered into in the ordinary course of business and in a
reasonably prudent manner and not for speculative purposes, in each case in
order to protect against the fluctuation in interest rates, foreign
exchange rates or commodity prices.
(d) Mergers, Etc. Merge with or into or consolidate with or into any
Person, or permit any of its Material Subsidiaries to do so, except that:
(i) if no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (x) any Subsidiary of Terra
Capital may be merged or consolidated with or into Terra Capital
(provided, that Terra Capital shall be the continuing or surviving
corporation) or any other wholly owned Subsidiary of Terra Capital and
(y) Terra Capital or any of its Subsidiaries may merge or consolidate
with any other Person; provided, that (1) in the case of a merger or
consolidation of Terra Capital, Terra Capital is the continuing or
surviving corporation, and (2) in any other case, the continuing or
surviving corporation is a wholly owned Subsidiary of Terra Capital;
and
(ii) nothing herein shall be deemed to prohibit any of the
Transactions.
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(e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise
dispose of (including, without limitation, in a sale-leaseback
transaction), or permit any of its Subsidiaries to sell, lease, transfer or
otherwise dispose of (including, without limitation, in a sale-leaseback
transaction), any of its assets, including (without limitation) any
manufacturing plant or substantially all assets constituting the business
of a division, branch or other unit operation, except:
(i) sales of inventory in the ordinary course of its business;
(ii) sales or other dispositions of obsolete or worn-out
equipment no longer used or useful in its business;
(iii) Dispositions of assets by one Obligor to another and by an
Obligor to one of its or any other Obligor's wholly owned
Subsidiaries, and other Dispositions in an aggregate amount not to
exceed $10,000,000 in any period of 12 consecutive months, provided,
that, in the case of all Dispositions under this clause (iii), (A)
each such asset is sold for an amount not less than its fair market
value, (B) no such asset may be sold to the extent that it is,
individually or when considered with any other asset or assets sold or
expected to be sold in such period, material to the business, assets,
operations, properties or financial condition of Terra and its
Subsidiaries taken as a whole, and (C) the Net Available Proceeds of
such Disposition are applied in accordance with and to the extent
required by Section 2.05(b), and to the extent the assets subject to
the Disposition constituted part of the Collateral, all other cash and
non-cash proceeds of such Disposition become subject to the Lien
created by the Security Documents in accordance with the terms
thereof; and
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(iv) nothing in this Section 5.02(e) shall prohibit TI from
selling Receivables of TI under any Permitted TI Receivables Facility
(subject to the restrictions specified in the definition of said
term).
(f) Investments. Make or hold, or permit any of its Subsidiaries to
make or hold, any Investment, other than:
(i) Investments by Terra and its Subsidiaries in cash and
Permitted Investments;
(ii) Investments constituting (A) operating deposit accounts with
banks and (B) Receivables arising in the ordinary course of business
on ordinary business terms, in each case in accordance with, and
subject to the terms of, the Security Documents;
(iii) Investments described in Schedule 5.02(f);
(iv) Investments arising solely by reason of any merger or
consolidation expressly permitted by Section 5.02(d)(i)(x);
(v) Subject to the terms set forth on Exhibit G, Investments
(including, without limitation, Investments arising by reason of any
merger or consolidation permitted under Section 5.02(d)(i)(y)) in any
fiscal year of Terra consisting of acquisitions of ownership interests
in one or more entities engaged in the same or allied line or lines of
business as Terra and its Subsidiaries, taken as a whole, in an
aggregate amount not exceeding the sum of (x) the Acquisition Amount
for such fiscal year (to the extent not utilized to make Capital
Expenditures pursuant to Section 5.02(h)) plus (y) 50% of the unused
Acquisition Amount for the prior fiscal year;
(vi) Investments consisting of acquisitions of property
(including, without limitation, ownership interests in any Person) by
Terra or any of its Subsidiaries so long as (x) the aggregate fair
market
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value of all such property acquired in any fiscal year of Terra shall
not exceed $25,000,000 (provided, that after the Trigger Date the
figure $25,000,000 set forth above shall be deemed to be increased to
$50,000,000), and (y) the consideration paid by Terra and its
Subsidiaries for each such acquisition consists solely of equity
securities issued by Terra;
(vii) Investments in respect of Hedge Agreements permitted by
Section 5.02(c);
(viii) Investments in Lynn Seeds, Inc. in an aggregate amount not
exceeding $4,000,000;
(ix) Investments in Agro-Terra Internacional, S.A. de C.V., a
joint venture between TI and Grupo Acerero del Norte, S.A. de C.V., in
an aggregate amount not exceeding $5,000,000; and
(x) Investments made pursuant to Terra's Supplemental Deferred
Compensation Plan as in effect on the date hereof.
(g) Payments to Minority Interests. Pay or cause to be paid, or
permit any of its Subsidiaries to pay or cause to be paid, to any holder of
a minority interest any amount with respect to such minority interest in
excess of the amount to which such holder is legally entitled, unless Terra
or such Subsidiary simultaneously receives payment in an amount equal to or
greater than its ratable share of the amount of the related distribution
(determined in accordance with the respective interests then held by Terra
and such Subsidiary, on the one hand, and such holder, on the other).
(h) Capital Expenditures. Make Capital Expenditures in any fiscal
year in an aggregate amount, for Terra and its Subsidiaries on a
Consolidated basis, exceeding the sum of (i) $40,000,000 plus (ii) an
amount equal to the portion (if any) of the Acquisition Amount for such
fiscal year not used to make Investments pursuant to Section 5.02(f)(v),
provided, that if the aggregate amount of such Capital
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Expenditures made in any fiscal year shall be less than $40,000,000, then
the shortfall shall be added to the amount of Capital Expenditures
permitted hereunder for the immediately succeeding (but not any other)
fiscal year.
(i) Change in Nature of Business. Make, or permit any of its
Material Subsidiaries to make, any material change in the nature of the
business of Terra and its Subsidiaries taken as a whole (after giving
effect to the Transactions) as carried on at the date hereof.
(j) Charter Amendments. Amend, or permit any of its Material
Subsidiaries to amend, its articles of incorporation or bylaws, or amend
any partnership agreement to which it or any of its Subsidiaries is a party
(except for amendments to authorize the issuance of preferred or common
stock), in each case to the extent any such amendment could reasonably be
expected to have a Material Adverse Effect.
(k) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally accepted
accounting principles in effect in the United States; provided, that in the
event of any change in generally accepted accounting principles from the
date of the financial statements referred to in Section 4.01(f) and upon
delivery of any financial statement and accompanying certificate of
compliance required to be furnished under subsections (b) and (c) of
Section 5.03, Terra shall deliver to the Lenders a statement of
reconciliation conforming any information contained in such financial
statement and a certificate of compliance required to be furnished pursuant
to subsections (b) through (c) of Section 5.03 with GAAP (it being
understood that compliance with financial covenants herein shall be
measured and determined on the basis of GAAP).
(l) Amendment of Related Documents. Cancel or terminate any Related
Document or consent to or accept any cancellation or termination thereof,
amend, modify or change
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in any manner any term or condition of any Related Document or give any
consent, waiver or approval thereunder, waive any default under or any
breach of any term or condition of any Related Document or agree in any
manner to any other amendment, modification or change of any term or
condition of any Related Document to the extent any of the foregoing could
reasonably be expected to have a Material Adverse Effect, or permit any of
its Subsidiaries to do any of the foregoing.
(m) Certain Obligations Respecting Subsidiaries. Enter into, or
permit any of its Subsidiaries to enter into, after the date of this
Agreement, any indenture, agreement, instrument or other arrangement that,
directly or indirectly, prohibits or restrains, or has the effect of
prohibiting or restraining, or imposes materially adverse conditions upon,
the declaration or payment of dividends or the making of loans or advances
to or Investments in or the sale, assignment, transfer or other disposition
of property to Terra or any Subsidiary thereof.
(n) Subordinated Indebtedness. Purchase, redeem, retire or otherwise
acquire for value, or set apart any money for a sinking, defeasance or
other analogous fund for the purchase, redemption, retirement or other
acquisition of, or make any voluntary payment or prepayment of the
principal of or interest on, or any other amount owing in respect of, any
Subordinated Indebtedness (and such Obligor will not permit any of its
Subsidiaries to do any of the foregoing), in each case except for regularly
scheduled payments of principal and interest in respect thereof required
pursuant to the instruments evidencing such Subordinated Indebtedness, or
amend the documentation creating or evidencing Subordinated Indebtedness.
(o) Transactions with Affiliates. Except to the extent otherwise
expressly permitted hereunder, enter into any transaction with any
Affiliate on terms less favorable than would pertain in a transaction
entered into with a third party on an arm's-length basis.
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Section 5.03. Reporting Requirements. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder:
(a) Default Notice. Each Obligor will furnish to the Agent, as soon
as possible and in any event within five Business Days after such Obligor
knows or has reason to believe that a Default or Event of Default has
occurred (which Default or Event of Default is continuing on the date of
the following statement), a statement of the Senior Financial Officer
setting forth details of such Default or Event of Default and the action
that such Obligor has taken and proposes to take with respect thereto.
(b) Quarterly Financials. As soon as available and in any event
within 45 days after the end of each of the first three quarters of each
fiscal year of each of Terra, Terra Capital and AMLP, Terra will furnish to
the Agent, with sufficient copies for each Lender and each Issuing Bank,
Consolidated balance sheets of Terra, Terra Capital and AMLP and their
respective Subsidiaries as of the end of such quarter and Consolidated
statements of income and cash flows, and statements of earnings by product
line, of Terra, Terra Capital and AMLP and their respective Subsidiaries
for the period commencing at the end of the previous fiscal year and ending
with the end of such quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the
preceding fiscal year in reasonable detail and duly certified (subject to
year-end audit adjustments) by the Senior Financial Officer as having been
prepared in accordance with GAAP, together with (i) a certificate of said
officer (A) stating that no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action that Terra,
Terra Capital or AMLP (as the case may be) has taken and proposes to take
with respect thereto, (B) stating that since March 31, 1994, there has been
no Material Adverse Change with respect to Terra and (C) providing a
comparison
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between the financial position and results of operations set forth in such
financial statements with the comparable information set forth in the
financial projections and budget most recently delivered pursuant to
Section 3.01(j) or Section 5.03(m) and (ii) a schedule in form satisfactory
to the Agent of the computations used by Terra in determining compliance
with the covenants contained in Section 5.04.
(c) Annual Financials. As soon as available and in any event within
90 days after the end of each fiscal year of each of Terra, Terra Capital
and AMLP, Terra will furnish to the Agent, with sufficient copies for each
Lender and each Issuing Bank, a copy of the annual audit report for such
year for Terra, Terra Capital and AMLP and their respective Subsidiaries,
including therein a Consolidated balance sheet of Terra, Terra Capital and
AMLP and their respective Subsidiaries as of the end of such fiscal year
and Consolidated statements of income and cash flows, and statements of
earnings by product line, of Terra, Terra Capital and AMLP and their
respective Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year
accompanied by an unqualified opinion of Deloitte & Touche or other
independent public accountants of nationally recognized standing stating
that, except as expressly disclosed therein, said Consolidated financial
statements present fairly, in all material respects, the Consolidated
financial position and results of operations of Terra, Terra Capital and
AMLP and their respective Consolidated Subsidiaries as of the last day of,
and for, such fiscal year, together with (i) a certificate of such
accounting firm to the Lenders stating that in the course of the regular
audit of the business of Terra, Terra Capital and AMLP and their respective
Subsidiaries, which audit was conducted by such accounting firm in
accordance with generally accepted auditing standards, such accounting firm
has obtained no knowledge that a Default or Event of Default has occurred
and is continuing, or if, in the opinion of such accounting firm, a Default
or Event of Default has occurred and is continuing, a statement as to the
nature
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thereof (it being understood that said accountants shall have no liability
to the Agent, the Lenders or the Issuing Banks for failure to obtain
knowledge of any Default or Event of Default), (ii) a schedule in form
satisfactory to the Agent of the computations used by such accountants in
determining, as of the end of such fiscal year, compliance with the
covenants contained in Section 5.04 and (iii) a certificate of the Senior
Financial Officer (A) stating that no Default or Event of Default has
occurred and is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and the
action that Terra, Terra Capital or AMLP, as the case may be, has taken and
proposes to take with respect thereto, (B) stating that since March 31,
1994, there has been no Material Adverse Change with respect to Terra and
(C) providing a comparison between the financial position and results of
operations set forth in such financial statements with the comparable
information set forth in the financial projections and budget most recently
delivered pursuant to Section 3.01(j) or Section 5.03(m).
(d) ERISA Events. Promptly and in any event within 10 Business Days
after any Obligor knows or has reason to know that any ERISA Event
(including, for this purpose, a reportable event listed in Section
4043(b)(7) of ERISA) with respect to any Obligor or any of its ERISA
Affiliates has occurred, Terra will furnish to the Agent a statement of the
Senior Financial Officer describing such ERISA Event and the action, if
any, that such Obligor or such ERISA Affiliate has taken and proposes to
take with respect thereto.
(e) Plan Terminations. Promptly and in any event within 10 Business
Days after receipt thereof by any Obligor or any of its ERISA Affiliates,
such Obligor will furnish to the Agent copies of each notice from the PBGC
stating its intention to terminate any Plan of any Obligor or any of its
ERISA Affiliates or to have a trustee appointed to administer any such
Plan.
(f) Plan Annual Reports. Promptly and in any event within 30 days
after the filing thereof with the Internal
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Revenue Service, each Obligor will furnish to the Agent copies of such
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Plan of each Obligor or any of its ERISA Affiliates
that is then being maintained for employees or former employees of such
Person.
(g) Multiemployer Plan Notices. Promptly and in any event within five
Business Days after receipt thereof by any Obligor or any of its ERISA
Affiliates from the sponsor of a Multiemployer Plan of any Obligor or any
of its ERISA Affiliates, such Obligor will furnish to the Agent copies of
each notice concerning (i) the imposition of withdrawal liability by any
such Multiemployer Plan, (ii) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the
amount of liability incurred, or that is reasonably expected to be
incurred, by such Obligor or any of its ERISA Affiliates in connection with
any event described in clause (i) or (ii).
(h) Litigation. Promptly after the commencement thereof, Terra will
furnish to the Agent notice of all actions, suits, investigations,
litigation and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting any Obligor or any of its Subsidiaries of the type described in
Section 4.01(h).
(i) Environmental Conditions. Promptly after receiving notice
thereof, Terra will furnish to the Agent notice of any condition or
occurrence on any property of any Obligor that results in a material
noncompliance by any Obligor or any of its Subsidiaries with any
Environmental Law or Environmental Permit which noncompliance could
reasonably be expected to have a Material Adverse Effect, or could (i) form
the basis of an Environmental Action against any Obligor or any of its
Subsidiaries or such property that could reasonably be expected to have a
Material Adverse Effect or (ii) cause any such property to be subject to
any restrictions on ownership, occupancy, use or transferability
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under any Environmental Law that could reasonably be expected to have
Material Adverse Effect.
(j) Delivery of Acknowledgment Copies and Search Reports. Terra shall:
(i) on or before the 30th day after the Closing Date, deliver, or
cause to be delivered, to the Agent acknowledgment copies or stamped
receipt copies of the UCC financing statements and other filings
required to be filed thereunder as set forth on Schedule 5.03(k),
including, to the extent applicable, filings required to be made with
the United States Patent and Trademark Office as promptly as
practicable following the delivery thereof to Terra by the United
States Patent and Trademark Office, and
(ii) on or before the 30th day after the Closing Date, deliver to
the Agent completed requests for information, dated on or before such
day, listing the financing statements referred to in clause (i) above
and all other effective financing statements that name an Obligor as
debtor, together with copies of such other financing statements,
together with all such other evidence that the Agent may reasonably request
in respect of the foregoing.
(k) Public Filings. Terra shall, promptly upon their becoming
available, deliver to the Agent, each Issuing Bank and each Lender copies
of all registration statements and regular periodic reports, if any, that
Terra, Terra Capital or AMLP shall have filed with the Securities and
Exchange Commission (or any governmental agency substituted therefor) or
any national securities exchange.
(l) Shareholder Reports, Etc. Terra shall deliver to the Agent, each
Issuing Bank and each Lender promptly upon the mailing thereof to the
shareholders of Terra or AMLP generally or to holders of Subordinated
Indebtedness or New
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Terra Debt generally, copies of all financial statements and proxy
statements so mailed.
(m) Financial Projections and Budget. As soon as available and in
any event within 90 days after the first day of each fiscal year of Terra,
Terra will furnish to the Agent, with sufficient copies for each Lender and
each Issuing Bank, financial projections and a budget for such fiscal year
and each subsequent fiscal year of Terra to and including the later of (i)
the fiscal year in which the final Principal Payment Date is scheduled to
occur and (ii) the fifth fiscal year ending after the date of
determination, in each case, in form and detail similar to the financial
projections and budget delivered under Section 3.01(j).
(n) Other Information. Each Obligor shall furnish to the Lenders
through the Agent such other information respecting the business, condition
(financial or otherwise), operations, performance, properties or prospects
of any Obligor or any of its Subsidiaries as the Agent, any Issuing Bank or
any Lender may from time to time reasonably request.
Section 5.04. Financial Covenants. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder, Terra will:
(a) Debt to Cash Flow Ratio. Until the payment in full of the
Facility C Advances and the Facility D Advances, maintain the Debt to Cash
Flow Ratio at not more than the ratio set forth below for each day during
each Rolling Period ending in the respective fiscal years of Terra set
forth below:
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Each
Rolling Period
Ending In Ratio
-------------- -----
1994 or 1995 3.75 to 1.00
1996 and each fiscal 3.00 to 1.00
year thereafter
(b) Debt to Capital Ratio. From and after the payment in full of the
principal of and interest on the Facility C Advances and the Facility D
Advances, maintain the Debt to Capital Ratio at not more than the ratio set
forth below for each day in the respective periods set forth below:
Period Ratio
------ -----
From the Closing Date 0.65 to 1.00
to September 30, 1995
From October 1, 1995 0.60 to 1.00
to September 30, 1996
From October 1, 1996 0.55 to 1.00
to September 30, 1997
From and after 0.50 to 1.00
October 1, 1997
(c) Current Ratio. Maintain the ratio of Consolidated Current Assets
of Terra and its Subsidiaries (determined in accordance with GAAP) to
Consolidated Current Liabilities of Terra and its Subsidiaries (determined
in accordance with GAAP) at not less than the ratio set forth below for
each day during each fiscal quarter occurring in the respective fiscal
years of Terra set forth below:
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Each Fiscal
Quarter In Ratio
----------- -----
1994 1.25 to 1.00
1995 1.25 to 1.00
1996 1.25 to 1.00
1997 1.25 to 1.00
1998 and each fiscal 1.50 to 1.00
year thereafter
(d) Interest Coverage Ratio. Maintain the Interest Coverage Ratio at
not less than the ratio set forth below for each Rolling Period ending in
the respective fiscal years of Terra set forth below:
Each
Rolling Period
Ending In Ratio
-------------- -----
1994 4.00 to 1.00
1995 4.00 to 1.00
1996 4.00 to 1.00
1997 4.00 to 1.00
1998 4.50 to 1.00
1999 4.50 to 1.00
2000 4.50 to 1.00
2001 5.00 to 1.00
(e) Net Worth. Maintain Net Worth on each day of not less than (i)
$375,000,000 plus (ii) the aggregate increase in the amount of capital
stock and additional paid-in capital of Terra subsequent to the Closing
Date, plus (iii) 50% of net income (if positive) for each fiscal year of
Terra ending on or after December 31, 1994.
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ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) either Borrower (i) shall fail to pay when due any principal of
any Advance made to it or (ii) shall fail for two Business Days to pay when
due any interest on any Advance made to it or any other amount payable by
it under any Loan Document; or
(b) any representation or warranty made by any Obligor (or any of its
officers) under or in connection with any Loan Document shall prove to have
been incorrect in any material respect when made; or
(c) any Obligor shall fail to perform or observe any term, covenant or
agreement contained in Section 2.14 or clause (e), (o) or (p) of Section
5.01, or clause (a), (b), (c), (d), (e), (g) or (i) of Section 5.02, or
clause (a), (e) or (i) of Section 5.03, or Section 5.04; or
(d) Terra shall fail to pay and perform its obligations under the Loan
Purchase Agreement; or
(e) any Obligor shall fail to perform any other term, covenant or
agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for a period of 30 days;
or
(f) any Obligor or any of its Material Subsidiaries shall fail to pay
any principal of, premium or interest on or any other amount payable in
respect of any Debt that is outstanding in a principal or notional amount
of at least $5,000,000 in the aggregate (but excluding Debt outstanding
hereunder) of such Obligor or such Subsidiary (as the case may be), when
the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration,
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demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to
such Debt; or any other event shall occur or condition shall exist under
any agreement or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or
to permit the acceleration of, the maturity of such Debt or otherwise to
cause, or to permit the holder or holders (or an agent or trustee on its or
their behalf) thereof to cause, such Debt to mature; or any such Debt shall
be declared to be due and payable or required to be prepaid or redeemed
(other than by a regularly scheduled required prepayment or redemption),
purchased or defeased, or an offer to prepay, redeem, purchase or defease
such Debt shall be required to be made, in each case prior to the stated
maturity thereof; or
(g) any Obligor or any of its Material Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against any Obligor or any of its Material Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official
for it or for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it) that is
being diligently contested by it in good faith, either such proceeding
shall remain undismissed or unstayed for a period of 60 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of its
property) shall occur; or any
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Obligor or any of its Material Subsidiaries shall take any corporate action
to authorize any of the actions set forth above in this subsection (g); or
(h) any judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against any Obligor or any of its Material
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect, unless such judgment or order shall have been vacated,
satisfied or dismissed or bonded pending appeal; or
(i) any non-monetary judgment or order shall be rendered against any
Obligor or any of its Subsidiaries that could be reasonably likely to have
a Material Adverse Effect, and there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect unless such
judgment or order shall have been vacated, satisfied, discharged or bonded
pending appeal; or
(j) any Security Document after delivery thereof pursuant to Section
3.01 shall for any reason (other than pursuant to the terms hereof and
thereof) cease to create a valid and perfected first priority Lien (subject
only to Permitted Liens) on the Collateral purported to be covered thereby;
or
(k) (i) prior to the payment in full of the principal of and interest
on the Facility C Advances and the Facility D Advances, Minorco ceases to
own, directly or indirectly, a majority of the issued and outstanding
shares of voting capital stock of Terra; or (ii) after the payment in full
of the principal of and interest on the Facility C Advances and the
Facility D Advances, (y) Minorco ceases to own, directly or indirectly, at
least 20% of the issued and outstanding shares of voting capital stock of
Terra, or (z) Minorco ceases to hold, directly or indirectly, a plurality
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of the issued and outstanding shares of capital stock of Terra; or
(l) any ERISA Event shall have occurred with respect to a Plan of any
Obligor or any of its ERISA Affiliates and the amount (determined as of the
date of occurrence of such ERISA Event) of the Insufficiency of such Plan
and the Insufficiency of any and all other Plans of the Obligors and their
ERISA Affiliates with respect to which an ERISA Event shall have occurred
and then exist (or the liability of the Obligors and their ERISA Affiliates
related to such ERISA Event) could reasonably be expected to have a
Material Adverse Effect; provided, that with respect to any Multiple
Employer Plan, such Insufficiency shall include only the portion thereof
attributable to such Obligor or its ERISA Affiliates; or
(m) any Obligor or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan of any Obligor or any of
its ERISA Affiliates that it has incurred withdrawal liability to such
Multiemployer Plan in an amount that, when aggregated with all other
amounts required to be paid to Multiemployer Plans by the Obligors and
their ERISA Affiliates as withdrawal liability (determined as of the date
of such notification), could reasonably be expected to have a Material
Adverse Effect; or
(n) any Obligor or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan of any Obligor or any of
its ERISA Affiliates that such Multiemployer Plan is in reorganization or
is being terminated, within the meaning of Title IV of ERISA, and as a
result of such reorganization or termination the aggregate annual
contributions of the Obligors and their ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount that could reasonably be expected to have a
Material Adverse Effect; or
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(o) there shall have been asserted against Terra or any of its
Subsidiaries an Environmental Claim that, in the judgment of the Required
Lenders, is reasonably likely to be determined adversely to Terra or any of
its Subsidiaries, and the amount thereof (either individually or in the
aggregate) is reasonably likely to have a Material Adverse Effect (insofar
as such amount is payable by Terra or any of its Subsidiaries but after
deducting any portion thereof that is reasonably expected to be paid by
other creditworthy Persons);
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrowers, declare the
obligation of each Lender to make Advances and of each Issuing Bank to issue
Letters of Credit to be terminated, whereupon the same shall forthwith terminate
(and this clause (i) shall also be applicable if there shall occur a Purchase
Event), and (ii) shall at the request, or may with the consent, of the Required
Lenders, by notice to the Borrowers, declare the Advances and the Notes, all
interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Advances and
the Notes, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrowers; provided, that
in the event of an actual or deemed entry of an order for relief with respect to
any Obligor or any of its Subsidiaries under the Federal Bankruptcy Code, (x)
the obligation of each Lender to make Advances and of any Issuing Bank to issue
Letters of Credit shall automatically be terminated and (y) the Advances and the
Notes, all such interest and all such amounts shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrower.
Section 6.02. Actions in Respect of the Letters of Credit Upon
Default. If any Event of Default shall have occurred and be continuing, the
Agent may, irrespective of whether it is taking any of the actions described in
Section 6.01 or otherwise, make demand upon the Borrowers to, and forthwith upon
such demand
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the Borrowers will, pay to the Agent on behalf of the Lenders in same day funds
at the Agent's Office, for deposit in the relevant L/C Cash Collateral Account,
an amount equal to the aggregate Available Amount of all Letters of Credit then
outstanding.
If at any time the Agent determines that any funds held in the
relevant L/C Cash Collateral Account are subject to any right or claim of any
Person other than the Agent and the Lenders or that the total amount of such
funds is less than the aggregate Available Amount of all Letters of Credit, the
Borrowers will, forthwith upon demand by the Agent, pay to the Agent, as
additional funds to be deposited and held in the relevant L/C Cash Collateral
Account, an amount equal to excess of (a) such aggregate Available Amount over
(b) total amount of funds, if any, then held in such L/C Cash Collateral Account
that the Agent determines to be free and clear of any such right and claim.
ARTICLE VII
THE AGENT
Section 7.01. Authorization and Action. Each Lender and each Issuing
Bank hereby appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement and
the other Loan Documents as are delegated to the Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto.
As to any matters not expressly provided for by the Loan Documents, including,
without limitation, enforcement or collection of the Notes, the Agent shall not
be required to exercise any discretion or take any action, and shall not be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) except upon the instructions of the Required
Lenders, and such instructions shall be binding upon all Lenders and all holders
of the Notes; provided, that the Agent shall not be required to take any action
that exposes it to personal liability or that is contrary to this Agreement or
applicable law. The Agent agrees to give to each Issuing Bank and each Lender
prompt notice of each notice given to it by the Borrowers or Terra pursuant to
the terms of this
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Agreement. Each Lender and Issuing Bank hereby authorizes the Agent (i) to
execute and deliver each of the Security Documents and (ii) to execute and
deliver the Loan Purchase Agreement (and each Lender and Issuing Bank agrees
that, upon such execution and delivery, it will be bound by the Loan Purchase
Agreement as if such Lender or Issuing Bank, as the case may be, were a
signatory thereto). Chemical Bank as Co-Arranger shall, in such capacity, have
no duties, responsibilities or liabilities whatsoever under this Agreement or
any other Loan Document.
Section 7.02. Agent's Reliance, Etc. Neither the Agent nor any of
its respective directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
the Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent (i)
may treat the payee of any Note as the holder thereof until the Agent receives
and accepts an Assignment and Acceptance entered into by the Lender that is the
payee of such Note, as assignor, and an Eligible Assignee, as assignee, as
provided in Section 9.07; (ii) may consult with legal counsel (including counsel
for any Obligor), independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in good
faith by them in accordance with the advice of such counsel, accountants or
experts; (iii) makes no warranty or representation to any Issuing Bank or any
Lender and shall not be responsible to any of them for any statements,
warranties or representations made in or in connection with the Loan Documents;
(iv) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of any Loan Document on
the part of any Obligor or to inspect the property (including the books and
records) of any Obligor; (v) shall not be responsible to any Issuing Bank or any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of any Loan Document or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in respect
of any Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopy, cable
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or telex) believed by it to be genuine and signed or sent by the proper party or
parties.
Section 7.03. Citibank and Affiliates. With respect to its
Commitments, the Advances made by it and the Notes issued to it, Citibank shall
have the same rights and powers under the Loan Documents as any other Lender and
may exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures for, accept investment banking
engagements from and generally engage in any kind of business with, any Obligor,
any of its Subsidiaries, any of its Affiliates and any Person who may do
business with or own securities of any Obligor or any such Subsidiary or
Affiliate, all as if Citibank were not the Agent and without any duty to account
therefor to the Lenders or any Issuing Bank.
Section 7.04. Lender Credit Decision. Each Lender and each Issuing
Bank acknowledges that it has, independently and without reliance upon the
Agent, any Issuing Bank or any other Lender and based on the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender and each Issuing Bank also acknowledges that it
will, independently and without reliance upon the Agent, any Issuing Bank or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
Section 7.05. Indemnification. The Lenders agree to indemnify the
Agent (to the extent not promptly reimbursed by the Borrowers), ratably
according to the principal amounts of the Notes then held by each of them (or if
no Advances are at the time outstanding, ratably according to the amounts of
their Commitments), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted
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against any of them in any way relating to or arising out of the Loan Documents
or any action taken or omitted by any of them under the Loan Documents;
provided, that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent. Without limitation of the foregoing, each Lender agrees
to reimburse the Agent promptly upon demand for its ratable share of any costs
and expenses payable by the Borrowers under Section 9.04 of this Agreement,
under the Holdings Pledge Agreement, under the Terra Capital Pledge Agreement,
under the Subsidiary Pledge and Security Agreement, and under the AMLP Pledge
and Security Agreement, to the extent that the Agent is not promptly reimbursed
for such costs and expenses by the Borrowers.
Section 7.06. Collateral Duties.
(a) Except for action expressly required of the Agent hereunder and
under the Security Documents, the Agent shall in all cases be fully justified in
refusing to act hereunder and thereunder unless it shall be further indemnified
to its satisfaction by the Lenders and the Issuing Banks proportionately in
accordance with the Obligations then due and payable to each of them against any
and all liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
(b) Except as expressly provided herein, the Agent shall have no duty
to take any affirmative steps with respect to the collection of amounts payable
in respect of the Collateral. The Agent shall incur no liability as a result of
any private sale of the Collateral.
(c) The Lenders and the Issuing Banks hereby consent, and agree upon
written request by the Agent to execute and deliver such instruments and other
documents as the Agent may deem desirable to confirm such consent, to the
release of the Liens on any of the Collateral, including any release in
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connection with any sale, transfer or other disposition of the Collateral or any
part thereof in accordance with the Loan Documents.
(d) The Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the Agent
accords its own property, it being understood that none of the Agent, any Lender
or any Issuing Bank shall have responsibility for (a) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Collateral, whether or not the Agent, any Lender
or any Issuing Bank has or is deemed to have knowledge of such matters, or (b)
taking any necessary steps to preserve rights against any parties with respect
to any Collateral.
Section 7.07. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Issuing Banks, the Lenders and the
Borrowers and may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint (subject, so long as no Default or Event of Default has
occurred and is continuing, to the consent of the Company, which consent shall
not be unreasonably withheld) a successor Agent. If no successor Agent shall
have been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation or the Required Lenders' removal of the Agent, as the case may be,
then the retiring Agent may, on behalf of the Issuing Banks and the Lenders,
appoint (subject, so long as no Default or Event of Default has occurred and is
continuing, to the consent of the Company, which consent shall not be
unreasonably withheld) a successor Agent, which shall be an Initial Lender or a
commercial bank organized under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent
such successor Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Agent, as the case may
be, and such retiring Agent
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shall be discharged from its duties and obligations under the Loan Documents.
After any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Article VII shall inure to the benefit of the Agent as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement and under the Security Documents.
ARTICLE VIII
THE GUARANTEE
Section 8.01. The Guarantee.
(a) The Terra Guarantors hereby jointly and severally guarantee to
each Lender, each Issuing Bank and the Agent and their respective successors and
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest on the Terra
Advances made by the Lenders to, and the Notes held by each Lender of, the
Company and all other amounts from time to time owing to the Lenders, each
Issuing Bank or the Agent by the Company under this Agreement and under the
Notes and by any Terra Obligor under any of the other Loan Documents, in each
case strictly in accordance with the terms thereof (such obligations being
herein collectively called the "Terra Guaranteed Obligations"). The Terra
Guarantors hereby further jointly and severally agree that if the Company shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Terra Guaranteed Obligations, the Terra Guarantors will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Terra
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, by acceleration or otherwise) in accordance with the terms
of such extension or renewal.
(b) The AMLP Guarantors hereby jointly and severally guarantee to
each Lender, each Issuing Bank and the Agent and their respective successors and
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or
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otherwise) of the principal of and interest on the AMLP Advances made by the
Lenders to, and the Notes held by each Lender of, AMLP and all other amounts
from time to time owing to the Lenders, each Issuing Bank or the Agent by AMLP
under this Agreement and under the Notes and by any AMLP Obligor under any of
the other Loan Documents, in each case strictly in accordance with the terms
thereof (such obligations being herein collectively called the "AMLP Guaranteed
Obligations"). The AMLP Guarantors hereby further jointly and severally agree
that if AMLP shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the AMLP Guaranteed Obligations, the AMLP
Guarantors will promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of
the AMLP Guaranteed Obligations, the same will be promptly paid in full when due
(whether at extended maturity, by acceleration or otherwise) in accordance with
the terms of such extension or renewal.
Section 8.02. Obligations Unconditional.
(a) The obligations of the Terra Guarantors under Section 8.01 are
absolute and unconditional, joint and several, irrespective of the value,
genuineness, validity, regularity or enforceability of the obligations of the
Company under this Agreement, the Notes or any other agreement or instrument
referred to herein or therein, or any substitution, release or exchange of any
other guarantee of or security for any of the Terra Guaranteed Obligations, and,
to the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 8.02 that the obligations of the Terra Guarantors hereunder shall be
absolute and unconditional, joint and several, under any and all circumstances.
(b) The obligations of the AMLP Guarantors under Section 8.01 are
absolute and unconditional, joint and several, irrespective of the value,
genuineness, validity, regularity or enforceability of the obligations of AMLP
under this Agreement,
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the Notes or any other agreement or instrument referred to herein or therein, or
any substitution, release or exchange of any other guarantee of or security for
any of the AMLP Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 8.02 that the obligations of the
AMLP Guarantors hereunder shall be absolute and unconditional, joint and
several, under any and all circumstances.
(c) Without limiting the generality of the foregoing clauses (a) and
(b), it is agreed that the occurrence of any one or more of the following shall
not alter or impair the liability of the Guarantors hereunder which shall remain
absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement
or the Notes or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Agent, any Issuing Bank or any Lender as security for any of the Guaranteed
Obligations shall fail to be perfected.
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The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Agent, any
Issuing Bank or any Lender exhaust any right, power or remedy or proceed against
either Borrower under this Agreement or the Notes or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.
Section 8.03. Reinstatement. The obligations of the Guarantors under
this Section 8 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the relevant Borrower in respect of
the relevant Guaranteed Obligations is rescinded or must be otherwise restored
by any holder of any of the relevant Guaranteed Obligations, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise, and the
relevant Guarantors jointly and severally agree that they will indemnify the
Agent, each Issuing Bank and each Lender on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by the Agent,
such Issuing Bank or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
Section 8.04. Subrogation. To the extent that, as a result of this
Article VIII, any Lender or Issuing Bank would be subject to an extended
preference period under Section 547 of the Bankruptcy Code, each Guarantor
hereby waives all rights of subrogation, whether arising by contract or
operation of law (including, without limitation, any such right arising under
the Bankruptcy Code) or otherwise, by reason of any payment by it pursuant to
the provisions of this Section 8 and agrees with the relevant Borrower for the
benefit of each of its creditors (including, without limitation, each Lender,
each Issuing Bank and the Agent) that any such payment by it shall constitute a
contribution of capital by such Guarantor to the relevant Borrower (or an
investment in the equity capital of the relevant Borrower by such Guarantor).
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Section 8.05. Remedies. The Guarantors jointly and severally agree
that, as between the Guarantors and the Lenders and the Issuing Banks, the
obligations of the Borrowers under this Agreement and the Notes may be declared
to be forthwith due and payable as provided in Section 6 (and shall be deemed to
have become automatically due and payable in the circumstances provided in said
Section 6) for purposes of Section 8.01 notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the relevant Borrower and that, in the
event of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and payable
by the relevant Borrower) shall forthwith become due and payable by the
Guarantors for purposes of said Section 8.01.
Section 8.06. Instrument for the Payment of Money. Each Guarantor
hereby acknowledges that the guarantee in this Section 8 constitutes an
instrument for the payment of money, and consents and agrees that any Lender,
any Issuing Bank or the Agent, at its sole option, in the event of a dispute by
such Guarantor in the payment of any moneys due hereunder, shall have the right
to bring motion-action under New York CPLR Section 3213.
Section 8.07. Continuing Guarantee. The guarantee in this Section 8
is a continuing guarantee, and shall apply to all Guaranteed Obligations
whenever arising.
Section 8.08. Rights of Contribution. The Subsidiary Guarantors
hereby agree, as between themselves, that if any Subsidiary Guarantor shall
become an Excess Funding Guarantor (as defined below) by reason of the payment
by such Subsidiary Guarantor of any Guaranteed Obligations, each other
Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor (but
subject to the next sentence), pay to such Excess Funding Guarantor an amount
equal to such Subsidiary Guarantor's Pro Rata Portion (as defined below and
determined, for this purpose, without reference to the properties, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined
below) in respect of such Guaranteed Obligations. The payment
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obligation of a Subsidiary Guarantor to any Excess Funding Guarantor under this
Section 8.08 shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of such Subsidiary Guarantor under the other
provisions of this Section 8 and such Excess Funding Guarantor shall not
exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all of such obligations.
For purposes of this Section 8.08, (i) "Excess Funding Guarantor"
shall mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor
that has paid an amount in excess of its Pro Rata Portion of such Guaranteed
Obligations, (ii) "Excess Payment" shall mean, in respect of any Guaranteed
Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro
Rata Portion of such Guaranteed Obligations and (iii) "Pro Rata Portion" shall
mean, for any Subsidiary Guarantor, the ratio (expressed as a percentage) of (x)
the amount by which the aggregate present fair saleable value of all properties
of such Subsidiary Guarantor (excluding any shares of stock of any other
Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of
such Subsidiary Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder and any obligations of any other Subsidiary Guarantor that
have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which
the aggregate fair saleable value of all properties of the Company and all of
the Subsidiary Guarantors exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of the Company and the Subsidiary Guarantors
hereunder) of the Company and all of the Subsidiary Guarantors, all as of the
Closing Date. If any Subsidiary becomes a Subsidiary Guarantor hereunder
subsequent to the Closing Date, then for purposes of this Section 8.08 such
subsequent Subsidiary Guarantor shall be deemed to have been a Subsidiary
Guarantor as of the Closing Date and the aggregate present fair saleable value
of the properties, and the amount of the debts and liabilities, of such
Subsidiary Guarantor as of the Closing Date shall be deemed to be equal to such
value and amount
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on the date such Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder.
Section 8.09. General Limitation on Guarantee Obligations. In any
action or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under Section 8.01
would otherwise, taking into account the provisions of Section 8.08, be held or
determined to be void, invalid or unenforceable, or subordinated to the claims
of any other creditors, on account of the amount of its liability under said
Section 8.01, then, notwithstanding any other provision hereof to the contrary,
the amount of such liability shall, without any further action by such
Guarantor, any Lender, any Issuing Bank, the Agent or any other Person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, Consents, Etc.
(a) No amendment or waiver of any provision of this Agreement, the
Notes or the other Loan Documents, nor any consent to any departure by any
Obligor from any provision of this Agreement, the Notes or the other Loan
Documents, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that (i) no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (1) waive any of
the conditions specified in Section 3.01 or 3.02 or, in the case of the initial
Borrowing or the Terra Facility C Borrowing, Section 3.03, (2) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Advances, or the number or
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percentage of Lenders, that shall be required for the Lenders or any of them to
take any action hereunder, (3) amend this Section 9.01, (4) reduce the principal
of, or interest on, the Notes or any fees or other amounts payable hereunder,
(5) postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees or other amounts payable hereunder or amend Section 2.03 or
2.05, or (6) release any Guarantor from its obligations under Article VIII and
(ii) no amendment, waiver or consent shall, unless in writing and signed by the
Required Lenders and each Lender that has a Commitment under the Facility
affected by such amendment, waiver or consent, (1) increase the Commitments of
such Lender or subject such Lender to any additional obligations, (2) reduce the
principal of, or interest on, the Notes held by such Lender or any fees or other
amounts payable hereunder to such Lender, (3) postpone any date fixed for any
payment of principal of, or interest on, the Notes held by such Lender or any
fees or other amounts payable hereunder to such Lender or (4) change the order
of application of any prepayment set forth in Section 2.05 in any manner that
materially affects such Lender; and provided, further, that no amendment, waiver
or consent shall, unless in writing and (x) signed by the Agent in addition to
the Lenders required above to take such action, affect the rights or duties of
the Agent under this Agreement, any Note or any other Loan Document, and (y)
signed by each Issuing Bank in addition to the Lenders required to take such
action, amend Section 2.07, 2.13 or 3.02, increase the Letter of Credit Sublimit
or otherwise affect the rights or obligations of any Issuing Bank under this
Agreement.
(b) Except as otherwise provided in the Security Documents, the Agent
shall not consent to release any Collateral (except as contemplated by the
Security Documents) or terminate any Lien under any Security Document unless
such release or termination shall be consented to in writing by Lenders owed or
holding in the aggregate at least 75% of the sum of the then aggregate unpaid
principal amount of the Advances, the then aggregate unused Commitments under
all the Facilities, and the aggregate Available Amount of all Letters of Credit
(for which purposes the Available Amount of each Letter of Credit shall be
considered to be owed to the relevant Lenders according to their respective Pro
Rata Shares of the Working Capital Facility under
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which such Letter of Credit has been issued); provided, that the consent of all
Lenders shall be required to release all or substantially all of the Collateral,
except upon the termination of the Liens created by each of the Security
Documents in accordance with the terms thereof.
Section 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopy communication)
and mailed, telecopied or delivered:
(a) if to the Company, care of Terra Industries Inc., 600 Fourth
Street, Sioux City, Iowa 51102, Attention: Francis G. Meyer, Vice
President and Chief Financial Officer, telephone number (712) 279-8790;
telecopier number (712) 279-8703;
(b) if to any Initial Lender, at its Domestic Lending Office specified
opposite its name on Schedule 2.01;
(c) if to any other Lender, at its Domestic Lending Office specified
in the Assignment and Acceptance pursuant to which it became a Lender;
(d) if to any Issuing Bank, at its address beneath its signature
hereto;
(e) if to the Agent, at its address at 1 Court Square, Long Island
City, New York 11120, Attention: Robert Alto, telephone number (718) 248-
4504, telecopier number (718) 248-4844;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed or telecopied, be effective when deposited in the mails or
transmitted by telecopier, respectively, except that notices and communications
to the Agent pursuant to Article II, III or VII shall not be effective until
received by the Agent.
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Section 9.03. No Waiver; Remedies. No failure on the part of any
Lender, any Issuing Bank or the Agent to exercise, and no delay in exercising,
any right hereunder or under any Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
Each Obligor irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the Agent,
any Issuing Bank or any Lender relating in any way to this Agreement should be
dismissed or stayed by reason, or pending the resolution, of any action or
proceeding commenced by any Obligor relating in any way to this Agreement
whether or not commenced earlier. To the fullest extent permitted by applicable
law, the Obligors shall take all measures necessary for any such action or
proceeding commenced by the Agent, any Issuing Bank or any Lender to proceed to
judgment prior to the entry of judgment in any such action or proceeding
commenced by any Obligor.
Section 9.04. Costs, Expenses and Indemnification.
(a) Each Borrower agrees to pay on demand (i) all costs and expenses
of the Agent, the Issuing Banks and the Lenders in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents including, without limitation, (A) all due diligence,
syndication (including printing, distribution and bank meetings),
transportation, computer, duplication, appraisal, insurance, consultant, search,
filing and recording fees and expenses, ongoing audit expenses and all other
reasonable out-of-pocket expenses incurred by the Agent (including the
reasonable and documented fees and expenses of Milbank, Tweed, Hadley & McCloy,
special counsel to the Agent, but not, under this clause (A) or clause (B)
below, of any other counsel) whether or not any of the transactions contemplated
by this Agreement are consummated, (B) the reasonable and documented fees and
expenses of counsel for the Agent with respect thereto, with respect to advising
the Agent as to its rights and responsibilities, or the perfection,
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protection or preservation of rights or interests, under the Loan Documents, and
(C) with respect to negotiations with any Obligor or with other creditors of any
Obligor or any of its Subsidiaries arising out of any Default or Event of
Default or any events or circumstances that may reasonably be expected to give
rise to a Default or Event of Default and with respect to presenting claims in
or otherwise participating in or monitoring any bankruptcy, insolvency or other
similar proceeding involving creditors' rights generally and any proceeding
ancillary thereto) and (ii) all costs and expenses of the Agent, the Issuing
Banks and the Lenders in connection with the enforcement of the Loan Documents,
whether in any action, suit or litigation, any bankruptcy, insolvency or other
similar proceeding affecting creditors' rights generally or otherwise
(including, without limitation, the reasonable and documented fees and expenses
of counsel for the Agent, each Issuing Bank and each Lender with respect
thereto).
(b) Each Borrower agrees to indemnify and hold harmless the Agent,
each Issuing Bank and each Lender and each of their Affiliates and their
officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against any and all claims, damages, losses, liabilities and
expenses (including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with (i) the
Transactions or any part thereof (including, without limitation, the Initial
Merger, the Second Merger and any of the other transactions contemplated hereby)
or (ii) the actual or alleged presence of Hazardous Materials on any property
owned by an Obligor or any Environmental Action relating in any way to any
Obligor or any of its Subsidiaries, in each case whether or not such
investigation, litigation or proceeding is brought by any Obligor, its
directors, shareholders or creditors or an Indemnified Party or any Indemnified
Party is otherwise a party thereto and whether or not the Transactions or the
other transactions contemplated hereby are consummated, except to the extent
such claim, damage, loss, liability or expense is found in a final, non-
appealable judgment by a court of competent
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jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct. Each Borrower also agrees not to assert any claim against
the Agent, any Issuing Bank, any Lender, any of their Affiliates, or any of
their respective directors, officers, employees, attorneys and agents, on any
theory of liability, for special, indirect, consequential or punitive damages
arising out of or otherwise relating to any of the Transactions or the other
transactions contemplated herein or in any other Loan Document or the actual or
proposed use of the proceeds of the Advances. For purposes of this Section
9.04(b), the term "non-appealable" includes any judgment as to which all appeals
have been taken or as to which the time for taking an appeal shall have expired.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by a Borrower to or for the account of a relevant Lender
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.03, 2.05, 2.08(b)(i) or 2.09(d)
or as the result of acceleration of the maturity of the Notes pursuant to
Section 6.01 or for any other reason, such Borrower shall, upon demand by such
Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses that it may reasonably incur as a result of
such payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Advance.
(d) If any Obligor fails to pay when due any costs, expenses or other
amounts payable by it under any Loan Document, including, without limitation,
reasonable and documented fees and expenses of counsel and indemnities, such
amount may be paid on behalf of such Obligor by the Agent or any Lender, in its
sole discretion.
Section 9.05. Right of Setoff. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Agent to
declare the
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Notes due and payable pursuant to the provisions of Section 6.01, each Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and otherwise apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of each Borrower against any and all of the Obligations of such Borrower
now or hereafter existing under this Agreement and the Note held by such Lender,
irrespective of whether such Lender shall have made any demand under this
Agreement or such Note and although such obligations may be unmatured. Each
Lender agrees promptly to notify the relevant Borrower after any such setoff and
application; provided, that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of setoff) that such Lender may have.
Section 9.06. Governing Law; Submission to Jurisdiction. This
Agreement and the Notes shall be governed by, and construed in accordance with,
the law of the State of New York. Each Obligor hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in New York City
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Obligor irrevocably
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 9.07. Assignments and Participations.
(a) Each Lender may assign to one or more banks or other entities all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Advances owing to it
and the Note or Notes held by it); provided, that:
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(i) except in the case of an assignment to a Person that, immediately
prior to such assignment, was a Lender or an affiliate of a Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being
assigned pursuant to each such assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no
event be less than the lesser of (x) such Lender's Commitments hereunder
and (y) $5,000,000 or an integral multiple of $1,000,000 in excess thereof
(except as otherwise agreed by the relevant Borrower and the Agent),
(ii) except in the case of an assignment to a Person that, immediately
prior to such assignment, was a Lender or an affiliate of a Lender, each
such assignment shall be made only upon the prior written approval of the
Company, the Agent and each Issuing Bank, such approval not to be
unreasonably withheld,
(iii) each such assignment shall be to an Eligible Assignee,
(iv) each such assignment by a Lender of its Advances, Note or
Commitment under any Facility shall be made in such manner so that the same
portion of its Advances, Note and Commitment under such Facility is
assigned to the respective assignee,
(v) each such assignment by a Lender of its Advances, Note or
Commitment under any of the Terra Facilities (other than Terra Facility B)
shall be made in such manner so that the same portion of its Advances, Note
and Commitment under all such Facilities is assigned to the respective
assignee,
(vi) each such assignment by a Lender of its Advances, Note or
Commitment under the AMLP Facilities shall be made in such manner so that
the same portion of its Advances, Note and Commitment under the AMLP
Facilities is assigned to the respective assignee,
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(vii) the parties to each such assignment shall execute and deliver to
the Agent, for its acceptance and recording in the Register, an Assignment
and Acceptance, together with any Note or Notes subject to such assignment
and a processing and recordation fee of $3,000, and
(viii) each such assignment that is to be effected by a Lender on or
prior to January 1, 1995 shall be effective only if arranged by or through
Citicorp Securities, Inc. for the purpose of effecting a pooled sell-down
of Advances and Commitments.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in such Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any Obligor
or the performance or observance by the Obligors of any of their respective
obligations under this Agreement or any other
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instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is an
Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to the Agent by the terms hereof, together
with such powers and discretion as are reasonably incidental thereto; and (vii)
such assignee agrees that it will perform in accordance with their terms all of
the obligations that by the terms of this Agreement are required to be performed
by it as a Lender.
(c) The Agent, acting for this purpose as an agent of the Borrowers,
shall maintain at its address referred to in Section 9.02 a copy of each
Assignment and Acceptance delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and the Commitment under
each Facility of, and principal amount of the Advances owing under each Facility
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrowers, the Agent and the Lenders shall treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. No assignment of any Terra Facility B Advance shall be effective
until it is recorded in the Register pursuant to this Section 9.07(c). The
Register shall be available for inspection by the Borrowers or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee, together with any Note or Notes subject to
such assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in
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substantially the form of Exhibit F hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, the relevant Borrower, at its own expense,
shall execute and deliver to the Agent in exchange for the surrendered Note or
Notes a new Note or Notes to the order of such assignee in an amount equal to
the Commitments assumed by it under the relevant Facilities pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained Commitments
under such Facilities, a new Note or Notes to the order of the assigning Lender
in an amount equal to the Commitments retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit A-1, A-2 or A-3, as the case may be.
(e) Each Lender may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitments, the Advances owing to it and the Note or
Notes held by it); provided, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitments) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of any such Note for all purposes of this Agreement, (iv) the
Obligors, the Agent, the Issuing Banks and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and (v) no participant under any
such participation shall have any right to approve any amendment or waiver of
any provision of any Loan Document, or any consent to any departure by any
Obligor therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other
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amounts payable hereunder, in each case to the extent subject to such
participation, or release all or substantially all of the Collateral.
(f) Any Issuing Bank may (subject to the prior written consent of
Terra, such consent not to be unreasonably withheld) assign all, but not less
than all, of its rights and obligations under this Agreement to a successor
Issuing Bank that is a commercial bank organized under the laws of the United
States, or any state thereof, and having total assets in excess of
$1,000,000,000 and, upon the acceptance of such assignment, the successor
Issuing Bank shall succeed to such rights and obligations and such assigning
Issuing Bank shall be discharged from its duties and obligations under this
Agreement, including, without limitation, its Letter of Credit Commitment.
(g) Any Issuing Bank and any Lender may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 9.07, disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Borrower furnished to such
Lender by or on behalf of the Borrower; provided, that, prior to any such
disclosure, the assignee or participant or proposed assignee or participant
shall agree in writing to preserve the confidentiality of any Confidential
Information received by it from such Issuing Bank or Lender.
(h) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and the Note or Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
(i) Anything in this Section 9.07 to the contrary notwithstanding,
each Terra Facility B Lender shall be permitted to pledge all or any part of its
right, title and interest in, to and under the Advances and Notes held by it to
any trustee for the benefit of the holders of such Lender's securities.
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(j) Anything in this Section 9.07 to the contrary notwithstanding,
neither Terra nor any of its Subsidiaries or Affiliates may acquire (whether by
assignment, participation or otherwise), and no Lender or Issuing Bank shall
assign or participate to Terra or any of its Subsidiaries or Affiliates, any
interest in any Commitment, Advance or other amount owing hereunder without the
prior consent of each Lender; provided, that the Lenders and the Issuing Banks
may assign all of their interests in the Commitments, Advances and such other
amounts pursuant to the Loan Purchase Agreement.
Section 9.08. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 9.09. No Liability of the Issuing Banks. Each relevant
Borrower assumes all risks of the acts or omissions of any beneficiary or
transferee of any Letter of Credit with respect to its use of such Letter of
Credit. Neither the relevant Issuing Bank nor any of its officers or directors
shall be liable or responsible for: (a) the use that may be made of any Letter
of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement thereon, even if such documents should prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c) payment by such
Issuing Bank against presentation of documents that do not comply with the terms
of a Letter of Credit, including failure of any documents to bear any reference
or adequate reference to the Letter of Credit; or (d) any other circumstances
whatsoever in making or failing to make payment under any Letter of Credit,
except that the relevant Borrower shall have a claim against such Issuing Bank,
and such Issuing Bank shall be liable to such Borrower, to the extent of any
direct, but not consequential, damages suffered by such Borrower that such
Borrower proves were caused by (i) such Issuing Bank's willful
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misconduct or gross negligence in determining whether documents presented under
any Letter of Credit comply with the terms of the Letter of Credit or (ii) such
Issuing Bank's willful failure to make lawful payment under a Letter of Credit
after the presentation to it of a draft and certificates strictly complying with
the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, such Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
Section 9.10. Confidentiality. Neither the Agent, any Issuing Bank
nor any Lender shall disclose any Confidential Information to any Person without
the prior consent of the Company, other than (a) to the Agent's, such Issuing
Bank's or such Lender's Affiliates and their officers, directors, employees,
agents and advisors (including independent auditors and counsel) and to actual
or prospective assignees and participants, and then only on a confidential
basis, (b) as required by any law, rule or regulation or judicial process, (c)
as requested or required by any state, federal or foreign authority or examiner
regulating or having authority over Lenders or the Lenders' respective
activities and (d) in connection with credit inquiries from suppliers of the
Borrowers and/or their Subsidiaries and other Persons who, from time to time,
inquire as to the creditworthiness of the Borrowers.
Section 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
AGENT, THE LENDERS AND THE ISSUING BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS, THE ADVANCES, THE LETTERS OF CREDIT OR THE ACTIONS OF THE AGENT, ANY
LENDER OR ANY ISSUING BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.
Section 9.12. Survival. The obligations of the Borrowers under
Sections 2.09, 2.11 and 9.04, the obligations of each Guarantor under Section
8.03, and the obligations of the Lenders under Section 7.05, shall survive the
repayment of the Advances and the termination of the Commitments. In addition,
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each representation and warranty made, or deemed to be made by a notice of any
extension of credit (whether by means of an Advance or a Letter of Credit),
herein or pursuant hereto shall survive the making of such representation and
warranty, and no Lender or Issuing Bank shall be deemed to have waived, by
reason of making any extension of credit hereunder (whether by means of an
Advance or a Letter of Credit), any Default or Event of Default that may arise
by reason of such representation or warranty proving to have been false or
misleading, notwithstanding that such Lender, such Issuing Bank or the Agent may
have had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such extension of credit was made.
Section 9.13. Captions. The table of contents and captions and
section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
Section 9.14. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, provided, that no Obligor may assign any of
its rights or obligations hereunder or under the other Loan Documents without
the prior consent of all of the Lenders, the Issuing Banks and the Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
TERRA INDUSTRIES INC.
By____________________________
Title:
TERRA CAPITAL, INC.
By____________________________
Title:
AGRICULTURAL MINERALS, LIMITED
PARTNERSHIP (the name of which
will hereafter be changed to
Terra Nitrogen, Limited
Partnership)
By Agricultural Minerals
Corporation (the name of which
will hereafter be changed to
Terra Nitrogen Corporation),
its General Partner
By_______________________
Title:
TERRA AND AMLP GUARANTORS
-------------------------
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AGRICULTURAL MINERALS CORPORATION
(the name of which will hereafter
be changed to Terra Nitrogen
Corporation)
By____________________________
Title:
BEAUMONT METHANOL CORPORATION
By____________________________
Title:
BMC HOLDINGS, INC.
By____________________________
Title:
TERRA CAPITAL HOLDINGS
By____________________________
Title:
THE AGENT
---------
CITIBANK, N.A.
By____________________________
Title:
CO-ARRANGER
-----------
CHEMICAL BANK
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By____________________________
Title:
THE ISSUING BANKS
-----------------
CITIBANK, N.A.
By____________________________
Title:
THE LENDERS
-----------
CITIBANK, N.A.
By____________________________
Title:
CHEMICAL BANK
By____________________________
Title:
BANK OF AMERICA ILLINOIS
By____________________________
Title:
THE BANK OF NOVA SCOTIA
By____________________________
Title:
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NATIONSBANK OF TEXAS, N.A.
By____________________________
Title:
COOPERATIVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By____________________________
Title:
By____________________________
Title:
CAISSE NATIONAL DE CREDIT AGRICOLE
By____________________________
Title:
ARAB BANKING CORPORATION
By____________________________
Title:
FIRST BANK NATIONAL ASSOCIATION
By____________________________
Title:
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THE FUJI BANK, LIMITED
By____________________________
Title:
DRESDNER BANK AG, CHICAGO AND GRAND
CAYMAN BRANCHES
By____________________________
Title:
By____________________________
Title:
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By____________________________
Title:
PROTECTIVE LIFE INSURANCE COMPANY
By____________________________
Title:
Credit Agreement
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<PAGE>
EXHIBIT 4.7
[EXECUTION COUNTERPART]
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of December 28, 1994, among TERRA INDUSTRIES
INC., a Maryland corporation ("Terra"); TERRA CAPITAL, INC., a Delaware
corporation ("Terra Capital"); TERRA NITROGEN, LIMITED PARTNERSHIP, a Delaware
limited partnership formerly known as Agricultural Minerals, Limited Partnership
("AMLP"); each of the corporations listed on the signature pages hereof under
the caption "TERRA AND AMLP GUARANTORS" (each such corporation, and each of
Terra, Terra Capital and AMLP, an "Obligor" and, collectively, the "Obligors");
each of the lenders (the "Lenders") listed on the signature pages hereof; and
CITIBANK, N.A., as agent for the Lenders and the "Issuing Banks" under the
Credit Agreement referred to below (in such capacity, the "Agent").
PRELIMINARY STATEMENTS:
Terra, Terra Capital, AMLP, the other Obligors, the Lenders, certain
"Issuing Banks" and the Agent are parties to a Credit Agreement dated as of
October 20, 1994 (as heretofore amended, the "Credit Agreement"), providing,
subject to the terms and conditions thereof, for extensions of credit (by making
of loans and issuing letters of credit) to be made by said Lenders and Issuing
Banks to (1) the Company (as defined in the Credit Agreement) in an aggregate
principal or face amount not exceeding $662,000,000, and (2) AMLP in an
aggregate principal or face amount not exceeding $85,000,000.
The Obligors and the Lenders wish to amend the Credit Agreement in
certain respects, all on the terms and conditions herein. Accordingly, the
parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.
Amendment No. 1
---------------
<PAGE>
- 2 -
Section 2. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 4 below, but effective as of the date hereof, the
Credit Agreement shall be amended as follows:
A. General. References in the Credit Agreement and the other Loan
Documents (including references to the Credit Agreement as amended hereby) to
"this Agreement" (and indirect references such as "hereunder", "hereby",
"herein" and "hereof") shall be deemed to be references to the Credit Agreement
as amended hereby.
B. Definitions. Section 1.01 of the Credit Agreement shall be
amended:
(1) by inserting the following new definition in its appropriate
alphabetical location:
"Management Agreements" means one or more management agreements
entered into after December 15, 1994 between Terra Capital and certain
of its Affiliates providing for the performance by Terra Capital of
certain treasury, purchasing, legal and/or other services for such
Affiliates, as such agreements are in effect from time to time.
(2) by deleting the period at the end of clause (vii) in paragraph
(b) of the definition of "Excess Cash Flow" therein and substituting "plus"
therefor, and by adding in said definition new clauses (b)(viii) and
(b)(ix) reading in their entirety as follows:
"(viii) the aggregate amount of all optional prepayments of Term
Advances made pursuant to Section 2.05(a) during such fiscal year,
provided, that each such optional prepayment (other than the optional
prepayments of Terra Facility C Advances contemplated in clause (ix)
below) is applied to the Advances in the manner specified in Section
2.05(c)(i), plus
(ix) for purposes of determining Excess Cash Flow for the
fiscal year ending December 31, 1995, the aggregate amount of all
optional prepayments of
Amendment No. 1
---------------
<PAGE>
- 3 -
Terra Facility C Advances made pursuant to Section 2.05(a) during the
fiscal year ending December 31, 1994 or the fiscal year ending
December 31, 1995."
(3) by amending clause (b) in the definition of "Specified Payments"
therein to read in its entirety as follows:
"(b) all dividends paid on shares of common stock of Terra during
such fiscal year, and all payments made by Terra in respect of the
purchase, redemption, retirement or other acquisition of shares of
common stock of Terra during such fiscal year, in an aggregate
amount, as to all such dividends and payments, not exceeding the
Allowance for Projected Common Dividends for such fiscal year,".
C. Terra Facility E. Section 2.01(e) of the Credit Agreement shall
be amended by amending clause (iv) therein to read in its entirety as follows:
"(iv) The proceeds of the Terra Facility E Advances shall be used
solely to finance the ongoing working capital needs of the Company, TI and
BMC, and may also be used to prepay Terra Facility C Advances pursuant to
Section 2.05(a)."
D. Ownership of the Obligors. Section 5.01(p) of the Credit
Agreement shall be amended by amending clause (iii) therein to read in its
entirety as follows:
"(iii) Terra Capital will at all times own, beneficially and of
record, all of the issued and outstanding capital stock (other than
directors' qualifying shares) of TI, AMC and BMCH, and will own no
other property (other than cash and other property incidental to its
business as a holding company and other property used solely in
connection with its performance of services pursuant to the terms of
the Management Agreements);"
Amendment No. 1
---------------
<PAGE>
- 4 -
E. Delivery of Management Agreements. Section 5.01 of the Credit
Agreement shall be amended by adding the following new paragraph (q) therein
reading in its entirety as follows:
"(q) Delivery of Management Agreements. On or prior to the date of
execution of each Management Agreement, notify the Agent thereof (and the
Agent shall notify the Lenders thereof promptly) and shall deliver to the
Agent, in sufficient quantities for each Lender and Issuing Bank, a
certified copy thereof (each such Management Agreement to be in form and
substance reasonably satisfactory to the Agent). Promptly following each
amendment, waiver and consent relating to a Management Agreement, Terra
shall give the Agent notice thereof (and the Agent shall notify the Lenders
thereof promptly), and shall deliver to the Agent a certified or conformed
copy of each such amendment, waiver and consent."
F. Amendments to Management Agreements. Section 5.02 of the Credit
Agreement shall be amended by adding the following new paragraph (p) therein
reading in its entirety as follows:
"(p) Amendments to Management Agreements. Without the consent of
the Agent, amend, modify or change in any material respect the terms or
conditions of any Management Agreement."
G. Investments. Section 5.02(f) of the Credit Agreement shall be
amended:
(1) by deleting "and" at the end of clause (ix) therein;
(2) by amending clause (x) therein to read in its entirety as
follows:
"(x) Investments made pursuant to Terra's Supplemental Deferred
Compensation Plan, and its Excess Benefit Plan, each as in effect on
the date hereof; and"; and
Amendment No. 1
---------------
<PAGE>
- 5 -
(3) by adding a new clause (xi) therein reading in its entirety as
follows:
"(xi) Investments by Terra consisting of the purchase,
redemption, retirement or other acquisition of shares of common stock
of Terra."
Section 3. Representations and Warranties. The Company hereby
represents and warrants to the Lenders, the Issuing Banks and the Agent that:
A. the representations and warranties contained in each Loan
Document (after giving effect to the amendments thereto contemplated hereby) are
correct on and as of the date hereof as if made on and as of such date (or, if
any such representation and warranty is expressly stated to be made as of a
specific date, as of such specific date) and as if each reference in said
representations and warranties to "this Agreement" or "the Credit Agreement"
included reference to this Amendment No. 1; and
B. no event has occurred and is continuing that constitutes a
Default or an Event of Default.
Section 4. Conditions Precedent. As provided in Section 2 above, the
amendments to the Credit Agreement set forth in said Section 2 shall become
effective, as of the date hereof, upon the satisfaction of the condition
precedent that the Agent shall have received this Amendment No. 1, duly executed
by Terra, Terra Capital, AMLP, each of the other Obligors, each Lender and the
Agent.
Section 5. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 1 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 1 by signing any such counterpart. This
Amendment No. 1 shall be governed by, and construed in accordance with, the law
of the State of New York.
Amendment No. 1
---------------
<PAGE>
- 6 -
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
TERRA INDUSTRIES INC.
By____________________________
Title:
TERRA CAPITAL, INC.
By____________________________
Title:
TERRA NITROGEN, LIMITED
PARTNERSHIP (formerly known as
Agricultural Minerals, Limited
Partnership)
By Terra Nitrogen Corporation
(formerly known as Agricultural Minerals
Corporation), its General Partner
By_______________________
Title:
Amendment No. 1
---------------
<PAGE>
- 7 -
TERRA AND AMLP GUARANTORS
-------------------------
TERRA NITROGEN CORPORATION
(formerly known as Agricultural
Minerals Corporation)
By____________________________
Title:
BEAUMONT METHANOL CORPORATION
By____________________________
Title:
BMC HOLDINGS, INC.
By____________________________
Title:
TERRA CAPITAL HOLDINGS, INC.
By____________________________
Title:
THE AGENT
---------
CITIBANK, N.A.
Amendment No. 1
---------------
<PAGE>
- 8 -
By____________________________
Title:
THE LENDERS
-----------
CITIBANK, N.A.
By____________________________
Title:
CHEMICAL BANK
By____________________________
Title:
BANK OF AMERICA ILLINOIS
By____________________________
Title:
THE BANK OF NOVA SCOTIA
By____________________________
Title:
Amendment No. 1
---------------
<PAGE>
- 9 -
NATIONSBANK OF TEXAS, N.A.
By____________________________
Title:
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By____________________________
Title:
By____________________________
Title:
CAISSE NATIONAL DE CREDIT AGRICOLE
By____________________________
Title:
ARAB BANKING CORPORATION
By____________________________
Title:
Amendment No. 1
---------------
<PAGE>
- 10 -
FIRST BANK NATIONAL ASSOCIATION
By____________________________
Title:
THE FUJI BANK, LIMITED
By____________________________
Title:
DRESDNER BANK AG, CHICAGO AND GRAND
CAYMAN BRANCHES
By____________________________
Title:
By____________________________
Title:
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By____________________________
Title:
Amendment No. 1
---------------
<PAGE>
- 11 -
PROTECTIVE LIFE INSURANCE COMPANY
By____________________________
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By____________________________
Title:
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
By____________________________
Title:
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS 2 (ROSA2)
By____________________________
Title:
Amendment No. 1
---------------
<PAGE>
EXHIBIT 4.8
[EXECUTION COUNTERPART]
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of December 28, 1994, among TERRA INDUSTRIES
INC., a Maryland corporation ("Terra"); TERRA CAPITAL, INC., a Delaware
corporation ("Terra Capital"); TERRA NITROGEN, LIMITED PARTNERSHIP, a Delaware
limited partnership formerly known as Agricultural Minerals, Limited Partnership
("AMLP"); each of the corporations listed on the signature pages hereof under
the caption "TERRA AND AMLP GUARANTORS" (each such corporation, and each of
Terra, Terra Capital and AMLP, an "Obligor" and, collectively, the "Obligors");
each of the lenders (the "Lenders") listed on the signature pages hereof; and
CITIBANK, N.A., as agent for the Lenders and the "Issuing Banks" under the
Credit Agreement referred to below (in such capacity, the "Agent").
PRELIMINARY STATEMENTS:
Terra, Terra Capital, AMLP, the other Obligors, the Lenders, certain
"Issuing Banks" and the Agent are parties to a Credit Agreement dated as of
October 20, 1994 (as heretofore amended, the "Credit Agreement"), providing,
subject to the terms and conditions thereof, for extensions of credit (by making
of loans and issuing letters of credit) to be made by said Lenders and Issuing
Banks to (1) the Company (as defined in the Credit Agreement) in an aggregate
principal or face amount not exceeding $662,000,000, and (2) AMLP in an
aggregate principal or face amount not exceeding $85,000,000.
The Obligors wish to amend the Credit Agreement and certain of the
Security Documents in order to permit the conversion of BMC (as defined in the
Credit Agreement) from a Delaware corporation to a Delaware limited partnership,
and to amend the Credit Agreement in certain other respects, all on the terms
and conditions herein. Accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 2, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 4 below, but effective as of the date hereof, the
Credit Agreement shall be amended as follows:
A. General. References in the Credit Agreement and the other Loan
Documents (including references to the Credit Agreement as amended hereby) to
"this
Amendment No. 2
---------------
<PAGE>
-2-
Agreement" (and indirect references such as "hereunder", "hereby", "herein" and
"hereof") shall be deemed to be references to the Credit Agreement as amended
hereby.
B. Definitions. Section 1.01 of the Credit Agreement shall be
amended:
(1) by inserting the following new definitions in their respective
alphabetical locations:
"Amendment No. 2" means Amendment No. 2 hereto, dated as of
December 28, 1994.
"BMLP" means Beaumont Methanol, Limited Partnership, a Delaware
limited partnership and indirect Subsidiary of Terra Capital.
"BMLP Transaction" means, collectively: (a) the formation of TMC
by Terra Capital; (b) the formation of BMLP by TMC and BMCH (with TMC
holding a 1% general partnership interest in BMLP and BMCH holding a
99% limited partnership interest in BMLP); and (c) the merger (which
shall be substantially contemporaneous with, but not prior to, the
BMLP Transaction Time) of BMC with and into BMLP, with BMLP being the
survivor.
"BMLP Transaction Time" means the time as of which each of the
conditions set forth in Exhibit H have been satisfied.
"TMC" means Terra Methanol Corporation, a Delaware corporation
and wholly owned Subsidiary of Terra Capital.
(2) by amending the definitions of "AMLP Guarantors", "Credit
Parties", "Subsidiary Guarantor" and "Terra Guarantors" therein to read in
their entirety as follows:
"AMLP Guarantors" means Terra, Terra Capital Holdings, Terra
Capital, AMC, BMCH, BMC and (from and after the BMLP Transaction Time)
TMC and BMLP.
"Credit Parties" means Terra, Terra Capital Holdings, Terra
Capital, AMCI, AMC, AMLP, BMCH, BMC, TI and (from and after the BMLP
Transaction Time) TMC and BMLP; provided, that (a) after the
Assumption
Amendment No. 2
---------------
<PAGE>
-3-
Time, any reference herein to AMCI as a "Credit Party" shall be a
reference to Terra as the successor thereto, and (b) after the BMLP
Transaction Time, any reference herein to BMC as a "Credit Party"
shall be a reference to BMLP as the successor thereto.
"Subsidiary Guarantor" means AMC, BMCH, BMC and (from and after
the BMLP Transaction Time) TMC and BMLP.
"Terra Guarantors" means, from and after the Assumption Time,
Terra Capital Holdings, AMC, BMCH, BMC, Terra and (from and after the
BMLP Transaction Time) TMC and BMLP.
C. Terra Facility E. Section 2.01(e) of the Credit Agreement shall
be amended by amending clause (iv) therein to read in its entirety as follows:
"(iv) The proceeds of the Terra Facility E Advances shall be used
solely to finance the ongoing working capital needs of the Company, TI, BMC
and (from and after the BMLP Transaction Time) BMLP, and may also be used
to prepay Terra Facility C Advances pursuant to Section 2.05(a)."
D. Representations and Warranties. Section 4.01 of the Credit
Agreement shall be amended:
(1) by amending clause (i) in paragraph (a) thereof to read in its
entirety as follows:
"(i) is a corporation (or, in the case of AMLP or BMLP, a limited
partnership) duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization,";
(2) by amending clause (i) in the third sentence of paragraph (b)
thereof to read in its entirety as follows:
"(i) is a corporation (or, in the case of AMLP or BMLP, a limited
partnership) duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization,"; and
Amendment No. 2
---------------
<PAGE>
-4-
(3) by amending clause (i) in paragraph (c) thereof to read in its
entirety as follows:
"(i) contravene such Obligor's charter, by-laws or in the case of
AMLP or BMLP, its agreement of limited partnership,".
E. Ownership of the Obligors. Section 5.01(p) of the Credit
Agreement shall be amended:
(1) by amending clauses (iii) and (iv) therein to read in their
entirety as follows:
"(iii) Terra Capital will at all times own, beneficially and of
record, all of the issued and outstanding capital stock (other than
directors' qualifying shares) of TI, AMC, BMCH and (from and after the
formation of TMC) TMC, and will own no other property (other than cash
and other property incidental to its business as a holding company and
other property used solely in connection with its performance of
services pursuant to the terms of the Management Agreements);
(iv) BMCH will own, beneficially and of record, (x) at all times
prior to the BMLP Transaction Time, all of the issued and outstanding
capital stock (other than directors' qualifying shares) of BMC, and
(y) at all times from and after the formation of BMLP, a 99% limited
partnership interest in BMLP; and at all times BMCH will own no other
property (other than cash and other property incidental to its
business as a holding company);" and
(2) by deleting the "and" at the end of clause (v) therein, by
deleting the period at the end of clause (vi) therein and substituting a
semicolon therefor, and by adding new clauses (vii) and (viii) therein
reading in their entirety as follows:
"(vii) TMC will own no property other than ownership interests of
BMLP (other than cash and other property incidental to its business as
a holding company); and
(viii) prior to the BMLP Transaction Time, BMLP will own no
property (other than its initial, nominal capitalization) and will
have no operations."
F. Exhibit H. The Credit Agreement shall be amended by adding a new
Exhibit H thereto in the form attached as Exhibit H to this Amendment No. 2.
Amendment No. 2
---------------
<PAGE>
-5-
G. Schedule 5.02(f). Schedule 5.02(f) to the Credit Agreement shall
be amended by adding, at the end thereof, the following items 18 and 19:
"18. Terra Methanol Corporation
19. Beaumont Methanol, Limited Partnership".
Section 3. Representations and Warranties. The Company hereby
represents and warrants to the Lenders, the Issuing Banks and the Agent that:
A. the representations and warranties contained in each Loan Document
(after giving effect to the amendments thereto contemplated hereby) are
correct on and as of the date hereof as if made on and as of such date (or,
if any such representation and warranty is expressly stated to be made as
of a specific date, as of such specific date) and as if each reference in
said representations and warranties to "this Agreement" or "the Credit
Agreement" included reference to this Amendment No. 2;
B. no event has occurred and is continuing that constitutes a Default
or an Event of Default; and
C. the BMLP Transaction will comply with all applicable laws and
regulations.
Section 4. Conditions Precedent. As provided in Section 2 above, the
amendments to the Credit Agreement set forth in said Section 2 shall become
effective, as of the date hereof, upon the satisfaction of the condition
precedent that the Agent shall have received this Amendment No. 2, duly executed
by Terra, Terra Capital, AMLP, each of the other Obligors, the Required Lenders
and the Agent.
Section 5. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 2 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 2 by signing any such counterpart. This
Amendment No. 2 shall be governed by, and construed in accordance with, the law
of the State of New York.
Amendment No. 2
---------------
<PAGE>
-6-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
2 to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
TERRA INDUSTRIES INC.
By____________________________
Title:
TERRA CAPITAL, INC.
By____________________________
Title:
TERRA NITROGEN, LIMITED
PARTNERSHIP (formerly known as
Agricultural Minerals, Limited
Partnership)
By Terra Nitrogen Corporation (formerly
known as Agricultural Minerals
Corporation), its General Partner
By_______________________
Title:
Amendment No. 2
---------------
<PAGE>
-7-
TERRA AND AMLP GUARANTORS
-------------------------
TERRA NITROGEN CORPORATION
(formerly known as Agricultural
Minerals Corporation)
By____________________________
Title:
BEAUMONT METHANOL CORPORATION
By____________________________
Title:
BMC HOLDINGS, INC.
By____________________________
Title:
TERRA CAPITAL HOLDINGS, INC.
By____________________________
Title:
THE AGENT
---------
CITIBANK, N.A.
By____________________________
Title:
Amendment No. 2
---------------
<PAGE>
-8-
THE LENDERS
-----------
CITIBANK, N.A.
By____________________________
Title:
CHEMICAL BANK
By____________________________
Title:
BANK OF AMERICA ILLINOIS
By____________________________
Title:
THE BANK OF NOVA SCOTIA
By____________________________
Title:
NATIONSBANK OF TEXAS, N.A.
By____________________________
Title:
Amendment No. 2
---------------
<PAGE>
-9-
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By____________________________
Title:
By____________________________
Title:
CAISSE NATIONAL DE CREDIT AGRICOLE
By____________________________
Title:
ARAB BANKING CORPORATION
By____________________________
Title:
FIRST BANK NATIONAL ASSOCIATION
By____________________________
Title:
THE FUJI BANK, LIMITED
By____________________________
Title:
Amendment No. 2
---------------
<PAGE>
-10-
DRESDNER BANK AG, CHICAGO AND GRAND
CAYMAN BRANCHES
By____________________________
Title:
By____________________________
Title:
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By____________________________
Title:
PROTECTIVE LIFE INSURANCE COMPANY
By____________________________
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By____________________________
Title:
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
By____________________________
Title:
Amendment No. 2
---------------
<PAGE>
-11-
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS 2 (ROSA2)
By____________________________
Title:
Amendment No. 2
---------------
<PAGE>
EXHIBIT H
Conditions Precedent to BMLP Transaction Time
---------------------------------------------
1. Definitions. Terms used herein and not otherwise defined have
the meanings given to them in the Credit Agreement (the "Credit Agreement") to
which this Exhibit H is attached.
2. Conditions Precedent. The occurrence of the BMLP Transaction
Time is subject to the condition precedent that the Agent shall have received,
no later than the date five Business Days after the Company shall have notified
the Agent of the formation of TMC (but in any event no later than February 1,
1995 or such later date as the Required Lenders may agree in writing), the
following, each in form and substance satisfactory to the Agent:
(1) Charter Documents, Etc. The following documents, each dated a
date reasonably near the date of delivery thereof (unless otherwise
specified) and in sufficient copies for the Agent and each Lender:
(i) certified copies of the resolutions of the Board of
Directors of Terra Capital, BMCH and BMC approving the BMLP
Transaction; of each of TMC and BMLP (each, a "New Obligor") approving
the BMLP Transaction, the Credit Agreement and each other Loan
Document to which it is or is to be a party; and of all documents
evidencing other necessary corporate action and governmental
approvals, if any, with respect to such matters;
(ii) a copy of the charter or articles of incorporation or
articles of limited partnership, as the case may be, of each New
Obligor and each amendment thereto, certified by the Secretary of
State of the state of its incorporation or organization as being a
true and correct copy thereof;
(iii) a copy of a certificate of the Secretary of State of the
state of each New Obligor's incorporation or organization specifying
the date of incorporation or organization of each New Obligor, stating
that such New Obligor has legal existence and is in good standing with
the office of said Secretary of State;
(iv) for each New Obligor, a copy of a certificate of the
Secretary of State of each state reasonably requested by the Agent
confirming that such New Obligor is duly qualified to conduct business
and in good standing as a foreign corporation in such state;
Amendment No. 2
---------------
<PAGE>
-2-
(v) a certificate of each New Obligor, signed on its behalf by
its President or a Vice President and its Secretary or any Assistant
Secretary, certifying as to (A) the absence, except to the extent
provided in said certificate, of any amendments to the charter or
articles of incorporation or organization of such New Obligor since
the date of the Secretary of State's certificate referred to in clause
(ii) above, (B) a true and correct copy of the bylaws of such New
Obligor as in effect on such date, and (C) the due incorporation or
organization and good standing of such New Obligor as a corporation or
limited partnership, as the case may be, organized under the laws of
its state of incorporation or organization, and the absence of any
proceeding for the dissolution or liquidation of such New Obligor; and
(vi) a certificate of the Secretary or an Assistant Secretary of
each New Obligor certifying the names and true signatures of the
officers of such New Obligor authorized to sign each Loan Document to
which it is or is to be a party and the other documents to be
delivered under the Credit Agreement and the other Loan Documents.
(2) Security Documents. The following documents:
(i) an amendment to the Terra Capital Pledge Agreement, duly
executed by Terra Capital and the Agent, pursuant to which, inter
alia, TMC shall be added as an "Issuer" thereunder, together with
instruments representing the shares of capital stock of TMC indorsed
in blank;
(ii) an amendment to the Subsidiary Pledge and Security
Agreement, duly executed by BMCH, BMC, TMC, BMLP and the Agent,
pursuant to which, inter alia, TMC and BMLP will become "Grantors"
thereunder, BMC will, effective at the BMLP Transaction Time, cease to
be an "Issuer" thereunder, and BMCH will pledge its ownership
interests in BMLP to the Agent for the benefit of the "Secured
Parties" thereunder;
(iii) such appropriately completed and duly executed copies of
Uniform Commercial Code financing statements as the Agent shall have
requested in order to perfect and protect the Liens created by the
Security Documents referred to in clauses (i) and (ii) above and
covering the Collateral described therein;
Amendment No. 2
---------------
<PAGE>
-3-
(iv) such executed and delivered documents for recordation and
filing of or with respect to the Security Documents referred to in
clauses (i) and (ii) above that the Agent may deem necessary or
desirable in order to perfect and protect the Liens created thereby;
and
(v) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Liens
created by the Security Documents referred to in clauses (i) and (ii)
above has been or will be taken.
(3) Opinion of Special Counsel to the Obligors. A favorable opinion
of Kirkland & Ellis, special counsel for the Obligors and the New Obligors,
covering Amendment No. 2 (and the Credit Agreement as amended by Amendment
No. 2), the Security Documents and other matters referred to in clause (2)
above (and the Terra Capital Pledge Agreement and the Subsidiary Pledge and
Security Agreement as so amended), and such other matters with respect to
Amendment No. 2, the BMLP Transaction and the other transactions
contemplated thereby as the Agent may reasonably request.
(4) Opinion of Special Counsel to the Agent. A favorable opinion of
Milbank, Tweed, Hadley & McCloy, special New York counsel for the Agent, in
form and substance satisfactory to the Agent.
(5) Assumption. An instrument pursuant to which each New Obligor
shall, effective as at the BMLP Transaction Time, become a "Subsidiary
Guarantor", a "Terra Guarantor" and an "AMLP Guarantor" (and, thereby a
"Guarantor", a "Terra Obligor", an "AMLP Obligor" and an "Obligor") under
the Credit Agreement and the other Loan Documents, and shall be bound by,
and shall assume all of the obligations of a "Subsidiary Guarantor", a
"Terra Guarantor" and an "AMLP Guarantor" (and, thereby, all of the
obligations of a "Guarantor", a "Terra Obligor", an "AMLP Obligor" and an
"Obligor") under, the Credit Agreement and the other Loan Documents.
(6) Miscellaneous. Such other approvals, opinions and documents
relating to the BMLP Transaction and the other transactions contemplated
thereby as any Lender may, through the Agent, reasonably request.
Amendment No. 2
---------------
<PAGE>
EXHIBIT 4.9
[EXECUTION COUNTERPART]
AMENDMENT NO. 3
AMENDMENT NO. 3 dated as of February 1, 1995, among TERRA INDUSTRIES
INC., a Maryland corporation ("Terra"); TERRA CAPITAL, INC., a Delaware
corporation ("Terra Capital"); TERRA NITROGEN, LIMITED PARTNERSHIP, a Delaware
limited partnership formerly known as Agricultural Minerals, Limited Partnership
("AMLP"); each of the corporations listed on the signature pages hereof under
the caption "TERRA AND AMLP GUARANTORS" (each such corporation, and each of
Terra, Terra Capital and AMLP, an "Obligor" and, collectively, the "Obligors");
each of the lenders (the "Lenders") listed on the signature pages hereof; and
CITIBANK, N.A., as agent for the Lenders and the "Issuing Banks" under the
Credit Agreement referred to below (in such capacity, the "Agent").
The Obligors, the Lenders, certain "Issuing Banks" and the Agent are
parties to a Credit Agreement dated as of October 20, 1994 (as heretofore
amended, the "Credit Agreement"). The Obligors wish to amend the Credit
Agreement in certain respects, all on the terms and conditions herein.
Accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 3, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 3 below, but effective as of the Closing Date,
the Credit Agreement shall be amended as follows:
A. General. References in the Credit Agreement and the other Loan
Documents (including references to the Credit Agreement as amended hereby) to
"this Agreement" (and indirect references such as "hereunder", "hereby",
"herein" and "hereof") shall be deemed to be references to the Credit Agreement
as amended hereby.
Amendment No. 3
---------------
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B. Definitions. Section 1.01 of the Credit Agreement shall be
amended by adding, at the end of the definition of "Investment" therein, the
following:
"; provided, that the purchase of equipment, fixed assets, real
property and improvements from such Person do not constitute Investments to
the extent the same constitute Capital Expenditures."
Section 3. Conditions Precedent. As provided in Section 2 above, the
amendments to the Credit Agreement set forth in said Section 2 shall become
effective, as of the date hereof, upon the satisfaction of the condition
precedent that the Agent shall have received this Amendment No. 3, duly executed
by each of the Obligors, the Required Lenders and the Agent.
Section 4. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 3 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 3 by signing any such counterpart. This
Amendment No. 3 shall be governed by, and construed in accordance with, the law
of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
3 to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
TERRA INDUSTRIES INC.
By____________________________
Title:
Amendment No. 3
---------------
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TERRA CAPITAL, INC.
By____________________________
Title:
TERRA NITROGEN, LIMITED
PARTNERSHIP
By Terra Nitrogen
Corporation, its General Partner
By_______________________
Title:
TERRA AND AMLP GUARANTORS
-------------------------
TERRA NITROGEN CORPORATION
By____________________________
Title:
Amendment No. 3
---------------
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BEAUMONT METHANOL, LIMITED
PARTNERSHIP
By Terra Methanol
Corporation, its General Partner
By_______________________
Title:
TERRA METHANOL CORPORATION
By____________________________
Title:
BMC HOLDINGS, INC.
By____________________________
Title:
TERRA CAPITAL HOLDINGS, INC.
By____________________________
Title:
THE AGENT
---------
CITIBANK, N.A.
By____________________________
Title:
Amendment No. 3
---------------
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THE LENDERS
-----------
CITIBANK, N.A.
By____________________________
Title:
CHEMICAL BANK
By____________________________
Title:
ARAB BANKING CORPORATION
By____________________________
Title:
BANK OF AMERICA ILLINOIS
By____________________________
Title:
THE BANK OF NOVA SCOTIA
By____________________________
Title:
CAISSE NATIONAL DE CREDIT AGRICOLE
By____________________________
Title:
Amendment No. 3
---------------
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COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By____________________________
Title:
By____________________________
Title:
CREDIT LYONNAIS CHICAGO BRANCH and
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By____________________________
Title:
DRESDNER BANK AG, CHICAGO AND GRAND
CAYMAN BRANCHES
By____________________________
Title:
FIRST BANK NATIONAL ASSOCIATION
By____________________________
Title:
Amendment No. 3
---------------
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THE FUJI BANK, LIMITED
By____________________________
Title:
By____________________________
Title:
MELLON BANK, N.A.
By____________________________
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset
Management, L.P., as
investment advisor
By_______________________
Title:
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By____________________________
Title:
Amendment No. 3
---------------
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NATIONSBANK OF TEXAS, N.A.
By____________________________
Title:
PROTECTIVE LIFE INSURANCE COMPANY
By____________________________
Title:
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
By Chancellor Senior Secured
Management, Inc., its
Portfolio Advisor
By_______________________
Title:
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS 2 (ROSA2)
By Chancellor Senior Secured
Management, Inc., its
Portfolio Advisor
By_______________________
Title:
Amendment No. 3
---------------
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UNION BANK OF SWITZERLAND, CHICAGO
BRANCH
By____________________________
Title:
By____________________________
Title:
Amendment No. 3
---------------
<PAGE>
EXHIBIT 10.1.14
TERRA INDUSTRIES INC.
INCENTIVE AWARD PROGRAM
OFFICER & KEY EXECUTIVE
1995
----
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., Terra Distribution and
Terra Nitrogen 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
-------------------------------------
Terra's incentive plan year coincides with the company's fiscal year.
The Chief Executive Officer will establish the corporate financial
goals, which are approved by the Board of Directors, which will be
used to establish the 1995 incentive pool. Each officer and key
executive participating in this plan will be assigned an index which
establishes their target incentive as a percentage of year-end base
salary. Each officer and key executive participating in this plan
will also establish a set of individual goals or objectives, the
importance of each is reflected in their weight which sums to one-
hundred percent (100%).
The Chief Executive Officer is responsible for approving each plan
participant's individual goals or objectives and will reach mutual
agreement with each participant on the full set of incentive goals as
soon as possible in the 1995 fiscal year. Each plan participant must
execute and periodically report on a goal document approved and signed
by the Chief Executive Officer.
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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 fifty percent (50%) weight and the
return-on-equity goal will receive fifty percent (50%) weight.
The pool starts to fund at seventy-five percent (75%) when the
company's composite performance reaches seventy-five percent (75%) and
increases on a percentage basis where one-hundred percent (100%) of
composite performance equals a one-hundred percent (100%) funding of
the pool. Over-achievement is calculated in the same manner with the
pool capped at two-hundred percent (200%) of plan attainment. The
pool may be increased by up to twenty percent (20%) at the Chief
Executive Officer's discretion.
V. Basis of the Incentive Award
----------------------------
The starting point in determining each participant's individual
incentive award is the evaluation of the individual objectives. The
participant's individual raw award is calculated by taking each
participant's year-end salary, times their individual index and then
adjusted by their individual performance.* This adjusted raw pool is
then compared with the sum of the plan participant's year-end salary,
times their index which is then adjusted by the corporation's
composite performance. This adjusted raw pool is adjusted up or down
to match the incentive pool. All participant incentives are paid from
the incentive pool.
The Chief Executive Officer has the discretion to adjust any
individual's participation up or down to reflect unusual or unplanned
events and may increase the incentive pool by an additional twenty
percent (20%) to award outstanding/exceptional individual
contributions to company performance. The Chief Executive Officer may
also choose to award less than the full amount of the pool.
*Example:
- ---------
Year-end Salary ($) X Individual Index (%) X Individual Goal Achievement (%) =
Adjusted Raw Award ($)
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VI. Review, Revision and Modification of the Goals
----------------------------------------------
Under normal business conditions, the corporate goals or individual
objectives 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.
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>
CONFIDENTIAL
1
FINANCIAL REVIEW
CONSOLIDATED RESULTS
From an earnings perspective, 1994 was the most successful year in the
Corporation's history. 1994 net income increased to $56.6 million from $22.8
million in 1993 and $31.0 million in 1992 with per share earnings of $0.78,
$0.33 and $0.45, respectively. Revenues increased to $1.67 billion in 1994 from
$1.24 billion in 1993 and $1.08 billion in 1992.
1994 net income included a non-recurring pretax charge of $7.0 million, or $0.06
per share, for the estimated costs associated with an explosion at the
Corporation's Port Neal manufacturing plant and an extraordinary loss of $3.1
million, or $0.04 per share, for the early retirement of debt. Additionally,
1994 net income included a net gain of $3.4 million, or $0.05 per share, to
recognize the cumulative effect of a change in the method of accounting for
plant turnaround costs and adoption of Statement of Financial Accounting
Standards (SFAS) 112, "Employers Accounting for Post-Employment Benefits." 1992
net income included a credit of $22.3 million or $0.32 per share to recognize
the combined effects of changes in accounting for income taxes and retiree
medical benefits. The credit resulted principally from the recognition of
income tax benefits from net operating loss (NOL) and tax credit carryforward
positions.
FINANCIAL COMPARABILITY AND OVERVIEW
The Corporation has expanded its operations over the last two years by
increasing its manufacturing capability, expanding its distribution business and
increasing the volume of higher margin value-added products.
On October 20, 1994, the Corporation acquired the stock of Agricultural Minerals
and Chemicals Inc. (AMCI), for $400 million in cash plus working capital
adjustments approximating $100 million. Through the AMCI acquisition, the
Corporation is the general partner and has acquired a 60% ownership interest in
ammonia production and upgrading facilities located in Verdigris, Oklahoma and
Blytheville, Arkansas and has acquired a methanol production facility located in
Beaumont, Texas.
On September 15, 1994, the Corporation acquired a 34% interest in Royster-Clark,
Inc. for $12 million in cash. Royster-Clark is a 100 location distributor of
crop input and protection products in the mid-Atlantic region.
<PAGE>
CONFIDENTIAL
2
On December 31, 1993, the Corporation purchased the assets and business of
Asgrow Florida, Inc. (Terra Asgrow Florida), a distributor of crop input and
protection products, for $39 million. Terra Asgrow Florida operates 12
distribution centers and is a supplier to the vegetable and ornamental plant
markets, primarily in Florida.
On March 31, 1993, for $19.9 million in cash plus an operating lease, the
Corporation acquired the rights to an ammonia production and upgrading facility
near Sarnia, Ontario and ownership interests in 32 farm service centers in
Ontario, New Brunswick and Nova Scotia. Thirty of the farm service centers are
50% owned and two are 100% owned.
FACTORS THAT AFFECT OPERATING RESULTS
Factors that may affect the Corporation's future operating results include: the
relative balance of supply and demand for nitrogen fertilizers and methanol, 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 availability and cost of natural gas,
the effect of environmental legislation on demand for the Corporation's
products, the availability of financing sources to fund seasonal working capital
needs, and the potential for interruption to operations due to accident or
natural disaster.
Prices for nitrogen products are influenced by the world supply and demand
balance for ammonia and nitrogen-based products. Demand is affected by
population growth and increasing living standards that determine food
consumption. Supply is affected by worldwide capacity and the availability of
nitrogen product exports from major producing regions such as the former Soviet
Union, the Middle East and South America.
Methanol is used as a raw material in the production of formaldehyde, methyl
tertiary butyl ether (MTBE), acetic acid and numerous other chemical
derivatives. The price of methanol has been greatly influenced by the demand
for MTBE, an oxygen and octane enhancer used in reformulated gasoline.
Beginning in 1992, federally-mandated standards (the Clean Air Act Amendments)
require the use of oxygenated gasoline in over 30 metropolitan areas during the
portion of the year, generally the winter months, when maximum allowable carbon
monoxide levels are likely to be exceeded. Effective January 1, 1995, the
second phase of the Clean Air Act Amendments require the year-round use of
reformulated gasoline in the nine metropolitan areas having the highest levels
of ozone pollution plus any non-attainment areas in a state that elects to
participate in
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CONFIDENTIAL
3
the reformulated gasoline program. Future demand for MTBE and methanol will
depend on the degree to which the Clean Air Act Amendments are implemented and
enforced, potential additional legislation, the effect of health concerns
regarding the use of MTBE as a fuel additive, the willingness of regulatory
agencies to grant waivers, and the demand for reformulated gasolines in areas
where it is not required. Additionally, future demand will be impacted by the
availability and use of alternative oxygenates, principally ethyl tertiary butyl
ether (ETBE) which is manufactured from ethanol, a renewable resource. The EPA
has mandated that, effective January 1, 1995, 15%, and effective January 1,
1996, 30%, of reformulated gasoline use an oxygenate from a renewable resource,
which for all practical purposes is ethanol. Although there is a current market
preference for MTBE, there can be no assurance that MTBE will not be replaced by
alternative oxygenates as a result of price, regulatory changes, or other
factors.
With the acquisition of AMCI, the Corporation has raised its annual production
capacity for methanol from 40 million to 320 million gallons. Approximately 45%
of the Corporation's production capacity is subject to a methanol hedge
agreement (see Note 12 to the Consolidated Financial Statements) which will
affect margins on this portion of the Corporation's methanol production through
December 31, 1997 should average methanol prices exceed average natural gas
prices by certain amounts.
The number of acres planted and types of crops planted are influenced by
government programs designed to manage carryover stocks and commodity prices of
certain crops. Due to the higher quantities 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. 1994 was a record year for corn in both
the number of planted acres and crop yields, resulting in a high level of crop
carryovers into 1995. The Corporation expects planted corn acreage to decrease
from 79.2 million acres in 1994 to about 77 million acres in 1995. Planted
cotton acreage is expected to increase to 15.8 million acres in 1995 from 14.1
million acres in 1994.
Weather can have a significant effect on operations. Weather conditions that
delay or intermittently disrupt field work during the planting and growing
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 to apply fertilizer in the fall.
Weather can also have an adverse effect on crop yields, which lowers the income
of growers and could impair their ability to pay for inputs purchased from the
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CONFIDENTIAL
4
Corporation. During 1994, favorable conditions prevailed during most of the
spring and fall allowing for unimpeded application of fertilizer and other crop
inputs.
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
manufacturers without the 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 1995.
The principal raw material used to produce manufactured nitrogen products and
methanol is natural gas. Natural gas costs comprise almost 50% of the total
costs and expenses associated with nitrogen production and in excess of 50% of
the total costs and expenses associated with methanol. The Corporation believes
that there is sufficient supply to allow stable costs for the foreseeable future
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,
1994, the Corporation had fixed prices for approximately 60% of its 1995 natural
gas requirements using supply contracts or financial derivatives. Liquidation
of these financial derivatives based on December 31, 1994 market prices would
have resulted in a loss of $21.3 million. Realized losses of $4.5 million
relating to future periods have been deferred.
The Corporation's distribution business segment 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 during which products can be used by customers, the Corporation
builds inventories during the first quarter of the year 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 higher margins. 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 credit facilities are adequate for expected 1995 sales levels.
The Corporation's operations may be subject to significant interruption if one
or more of its facilities were to experience a major accident or were damaged by
severe weather or other natural disaster. The Corporation currently maintains
insurance (including business interruption insurance) and expects that it will
continue to do
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CONFIDENTIAL
5
so in an amount which it believes is sufficient to allow the Corporation to
withstand major damage to any of its facilities.
DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation uses derivative financial instruments to manage risk in the
areas of (a) foreign currency fluctuations, (b) changes in natural gas supply
prices, (c) changes in interest rates and (d) the effect of methanol prices
relative to natural gas prices. See Note 12 to the Consolidated Financial
Statements for information on the use of derivative financial instruments.
RESULTS OF CONTINUING OPERATIONS
1994 COMPARED WITH 1993
CONSOLIDATED RESULTS
The Corporation reported income from continuing operations of $56.2 million, or
$0.77 per share, on revenues of $1.67 billion in 1994 compared with income from
continuing operations of $22.8 million or $0.33 per share on revenues of $1.24
billion in 1993. 1994 results include the operations of Terra Asgrow Florida
subsequent to its acquisition on December 31, 1993 and AMCI subsequent to its
acquisition on October 20, 1994. These acquisitions added approximately $190
million to revenue and $21 million to income from continuing operations.
Excluding the impact of these acquisitions, revenues increased 19% over 1993 and
income from continuing operations increased 46%.
With the acquisition of AMCI, the Corporation has classified its operations into
three business segments: Distribution, Nitrogen Products and Methanol. The
Distribution segment includes sales of products purchased from manufacturers,
including the Corporation, and resold by the Corporation. Distribution revenues
are derived primarily from grower and dealer customers through sales of
chemicals, fertilizers, seed and related services. The Nitrogen Products
category represents only those operations directly related to the wholesale
sales of nitrogen products from the Corporation's ammonia manufacturing and
upgrading facilities. The Methanol category represents only wholesale sales of
methanol from the Corporation's two methanol manufacturing facilities.
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CONFIDENTIAL
6
Total revenues and operating income from continuing operations for the years
ended December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
Pro Forma
1994
(in thousands) (unaudited - see below) 1994 1993
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Distribution $1,318,416 $1,318,416 $1,019,438
Nitrogen Products 539,152 296,557 228,910
Methanol 246,404 70,274 ---
Other - net (19,145) (19,300) (10,347)
- ---------------------------------------------------------------------------------------------
$2,084,827 $1,665,947 $1,238,001
=============================================================================================
OPERATING INCOME:
Distribution $ 33,784 $ 33,784 $ 16,903
Nitrogen Products 111,961 48,369 28,654
Methanol 129,888 42,679 ---
Other expense - net (9,466) (9,537) (3,729)
- ---------------------------------------------------------------------------------------------
266,167 115,295 41,828
Interest expense -net (49,367) (16,541) (9,683)
Minority interest (34,916) (8,809) ---
- ---------------------------------------------------------------------------------------------
Total from continuing operations $ 181,884 $ 89,945 $ 32,145
=============================================================================================
</TABLE>
The unaudited, pro forma results of operations have been prepared to give effect
to the Corporation's (i) acquisition of AMCI, (ii) issuance of 9.7 million
Common Shares, and (iii) borrowing under a new credit agreement entered into in
connection with the acquisition, assuming that all such transactions had
occurred on January 1, 1994. The pro forma financial data are presented for
informational purposes only and are not necessarily indicative of the results
that actually would have been obtained if the transactions had occurred on
January 1, 1994. In addition, the pro forma results are not intended to be a
projection of future operating results or trends.
DISTRIBUTION
Distribution revenues of $1.32 billion in 1994, increased $298 million, or 29%,
over 1993 results. Approximately $198 million of the growth relates to a 30%
increase in chemical sales resulting principally from the acquisition of Terra
Asgrow Florida, which added approximately $80 million, expansion into new
locations and higher planted acreage. Growth in the Corporation's own brand of
Riverside products accounted for $22 million of the increase. Distributed
fertilizer sales increased $55 million and seed and other sales and services
increased $45 million as a result of higher planted acreage in 1994 and
favorable weather conditions. 1993 revenues were generally reduced by the
flooding and wet weather conditions in the central United States which reduced
planted acres and input application rates.
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CONFIDENTIAL
7
Operating income for the Distribution business was $33.8 million in 1994
compared with $16.9 million in 1993. Gross margin percentages within the
Distribution business remained relatively constant. Overall gross profit
increased approximately $46.5 million. Selling and general and administrative
expenses increased $24.4 million. This includes an increase in compensation
costs of $17.4 million due to additional personnel resulting from expansion
activities and normal wage increases. In addition, equipment leasing and
facilities costs increased $4.2 million.
NITROGEN PRODUCTS
Nitrogen Products revenues increased 29.6% to $296.6 million in 1994 from $228.9
million in 1993. Through the acquisition and merger with AMCI on October 20,
1994, the Corporation acquired a 60.2% partnership interest in, and operates as
the general partner, two ammonia production facilities located in Blytheville,
Arkansas and Verdigris, Oklahoma. The Blytheville and Verdigris plants, which
increased the Corporation's annual production capacity from 1.3 million to 2.7
million tons of ammonia (including the Port Neal plant), accounted for $60.4
million of revenue growth. Excluding the impact of the acquisition, revenues
increased $7.3 million or 3.2%. 1994 revenues were reduced by approximately $10
million due to the conversion of 30% of the capacity of the Corporation's
Woodward, Oklahoma plant from ammonia to methanol production.
Operating income for the Nitrogen Products business was $48.4 million in 1994
compared with $28.7 million in 1993. The acquisition of AMCI contributed $18.9
million to the increase in operating income. Excluding the AMCI acquisition and
before the $7 million non-recurring charge described below, operating earnings
increased $7.8 million due to price increases of $15.3 million, partially offset
by higher natural gas costs and the conversion of ammonia capacity to methanol.
On December 13, 1994, the Corporation's Port Neal facility in Iowa was
extensively damaged as a result of an explosion. In addition, there were four
employee fatalities plus injuries or damages to other people and property. The
Port Neal facility had an annual production capacity of 350,000 tons of ammonia.
As of the date of loss, insurance was in force to cover damage to the
Corporation's property, business interruption and third party liability claims.
The Corporation has recognized a $7 million charge against 1994 earnings to
cover its aggregate expected unrecoverable costs associated with the incident,
including deductibles and other uninsured costs.
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CONFIDENTIAL
8
METHANOL
In April 1994, about 30% of the production capacity of the Woodward, Oklahoma
plant was converted from the production of ammonia to methanol. Additionally,
on October 20, 1994, through the acquisition and merger with AMCI, the
Corporation acquired a methanol production facility in Beaumont, Texas. The
annual methanol production capacity of the Woodward facility is 40 million
gallons and the methanol production capacity of the Beaumont facility is 280
million gallons. The Corporation had no methanol operations in 1993.
Methanol revenues were $70.3 million and operating income for the Methanol
business was $42.7 million in 1994. Gross profit on methanol was $44.8 million
and selling and general and administrative expenses were $2.1 million.
The market price for methanol increased significantly in the second half of 1994
as a result of sharply higher production of MTBE, an oxygen and octane enhancer
used in reformulated gasoline. The Corporation's expansion of its methanol
business resulting from the acquisition of AMCI and the increased market price
for methanol have had a significant positive impact on the Corporation's
earnings. Future demand for methanol and market prices are subject to a variety
of factors (see Factors That Affect Operating Results) and management cannot
predict with any certainty what 1995 methanol market prices will be.
In October 1994, Terra Methanol Corporation (TMC), a wholly owned subsidiary of
the Corporation, entered into a methanol hedging agreement. TMC received $4
million in cash in exchange for a commitment to make payments should the market
price of methanol increase in relation to the cost of natural gas for defined
quantities of production. Due to the increase in methanol prices relative to
natural gas subsequent to the agreement, $15.9 million has been recorded as
payable under the methanol hedge agreement as of December 31, 1994 (see Note 12
to Consolidated Financial Statements).
OTHER OPERATING EXPENSE - NET
Other operating expense was $9.5 million in 1994 compared with $3.7 million in
1993. Other operating expense includes corporate level expenses not directly
related to individual business segments, including certain insurance coverages,
corporate finance fees and other costs. The increase over 1993 is primarily the
result of a non-recurring 1993 gain of $4.2 million on the settlement of a
dispute with a vendor.
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CONFIDENTIAL
9
INTEREST EXPENSE - NET
Interest expense, net of interest income, totaled $16.5 million in 1994 compared
with $9.7 million in 1993. The increase is principally the result of higher
interest expense due to the assumption of $175 million of long-term debt and the
issuance of $270 million of additional debt, both in connection with the
acquisition of AMCI.
INCOME TAXES
The income tax provision increased in 1994 due to higher pretax book income and
the utilization during 1993 of previously unrecognized capital loss
carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's primary uses for cash will be to fund its working capital
needs, make payments on its indebtedness and other obligations, make quarterly
distributions on TNCLP's Senior Preference Units and make capital expenditures.
Its principal sources of funds will be cash flow from operations and borrowings
under its current bank facility. The Corporation believes that cash from
operations and available financing sources will be sufficient to meet
anticipated cash requirements for seasonal operating needs, capital expenditures
and expansion strategies.
During 1994, the Corporation utilized cash from operations, proceeds from a
stock issuance and cash available under a new bank facility to purchase AMCI,
retire existing debt, fund capital expenditures, invest in additional farm
service centers and provide for seasonal working capital requirements. AMCI was
acquired for $400 million plus working capital adjustments of approximately $100
million. The Corporation assumed from AMCI $175 million of 10-3/4% Senior
Notes. The issuance of 9.7 million Common Shares raised $113 million which was
used for the AMCI acquisition. The bank facility was used to finance the
remainder of the AMCI acquisition, retire $75 million of debt, replace certain
revolving credit agreements and redeem $16.2 million of the 10-3/4% Senior
Notes. At December 31, 1994, borrowings under the bank facility totaled $359
million. The facility allows for additional borrowings of $211 million.
Interest charged under the facility is based on LIBOR. The Corporation has
acquired an interest rate collar that has the effect of capping interest costs
at 8.5% to 9% on a cumulative basis through December 31, 1997 for $190 million.
The amount of debt principal subject to the interest rate collar declines over a
three-year period of borrowing.
<PAGE>
CONFIDENTIAL
10
As a result of financing the AMCI acquisition, the Corporation's debt, including
current maturities, as a percentage of total capital was 57% at December 31,
1994 compared with 35% at December 31, 1993. The Corporation plans to pay down
debt during 1995 and, in addition to scheduled maturities, the Corporation is
required under its new bank facility to use 50-75% of excess annual cash flows,
as defined, to repay the bank facility.
In addition to the AMCI acquisition, the Corporation funded $16.3 million of
farm service center acquisitions from available cash. In 1993, the Corporation
acquired the rights to a Canadian ammonia production facility and interests in
32 farm service centers through an operating lease and payment of $19.9 million
cash. Additionally, Terra Asgrow Florida was purchased on December 31, 1993
with $39 million paid from available cash.
Purchases of property, plant and equipment totaled $31.2 million in 1994
compared with $21.6 million in 1993. The capital expenditures in 1994 included
$16.4 million for expansions and routine equipment replacements within the
distribution business and $14.8 million for improvements at manufacturing
facilities. The capital expenditures in 1993 included $14.7 million for
expansions and routine replacements within the distribution business and $6.9
million for improvements at manufacturing facilities. The improvements at
manufacturing facilities included $8.6 million in 1994 and $6.9 million in 1993
for the conversion of a portion of the capacity of the Corporation's Woodward,
Oklahoma plant from ammonia to methanol production.
The Corporation expects 1995 capital expenditures to be approximately $40
million consisting of the expansion of service centers, routine replacement of
equipment and efficiency improvements at manufacturing facilities.
Asset sales in 1993 generated $24.4 million including $18.5 million from the
sale of the Corporation's construction materials business and $5.9 million from
the sale of the remaining leasing business, both of which were discontinued
businesses.
Accounts receivable increased by $34.3 million due, in part, to $53.8 million of
receivables added through acquisitions. Excluding the impact of acquisitions,
accounts receivable declined due to the sale of $50 million of a designated pool
of outstanding receivables which more than offset the effect of increased fourth
quarter sales. Inventories increased $88.0 million including $28.6 million
related to acquisitions. The remaining
<PAGE>
CONFIDENTIAL
11
increase is the result of off-season purchasing to obtain discounts and to meet
anticipated product demand. Accounts payable have also increased as a result of
the year-end purchases. The ratio of current assets to current liabilities
declined from 2.0 to 1 at December 31, 1993 to 1.6 to 1 at December 31, 1994
primarily as the result of 1994 acquisition activity.
In July 1993, the Board of Directors authorized a share repurchase program for
up to 2.0 million shares. No shares were repurchased in 1994. During 1993,
106,900 shares were repurchased for $0.5 million. Quarterly dividends of $0.02
per share have been declared during 1994 representing a cash outlay of $5.8
million.
Cash generated from operations during 1995 is expected to be adequate to meet
normal business requirements and pay down debt. Cash balances at December 31,
1994 were $158.4 million of which $9.6 million is used to collateralize letters
of credit supporting recorded liabilities. The Corporation's bank facility
contains certain restrictions, which are described in Notes 8 and 10.
Additionally, in connection with the acquisition of AMCI, the holders of TNCLP's
Senior Preference Units representing a 39.8% interest in the Corporation's
Blytheville, Arkansas and Verdigris, Oklahoma ammonia plants are entitled to
receive a minimum quarterly distribution of $0.605 per unit, or $4.6 million,
plus arrearages before any distribution to the Corporation as limited partner.
At December 31, 1994 there were no distributions in arrears.
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 $1.24 billion in 1993, compared with income from
continuing operations of $10.4 million, or $0.15 per share, on revenues of $1.08
billion 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.
<PAGE>
CONFIDENTIAL
12
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>
(in thousands) 1993 1992
- ---------------------------------------------------------------
<S> <C> <C>
REVENUES:
Distribution $1,019,438 $ 958,725
Nitrogen Products 228,910 125,659
Other - net (10,347) (2,193)
- ---------------------------------------------------------------
$1,238,001 $1,082,191
===============================================================
OPERATING INCOME:
Distribution $ 16,903 $ 16,568
Nitrogen Products 28,654 14,841
Other expense - net (3,729) (5,690)
- ---------------------------------------------------------------
41,828 25,719
Interest expense - net (9,683) (7,533)
- ---------------------------------------------------------------
Total from continuing operations $ 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 income
also 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 an $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
<PAGE>
CONFIDENTIAL
13
increased number of locations and excessively wet field conditions. Advertising
and promotional expenditures increased $1.3 million from 1992.
NITROGEN PRODUCTS
Domestic Nitrogen Products 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 nitrogen sales. Increased domestic 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 Nitrogen Products 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. Additional higher domestic
sales volumes contributed $4.0 million to earnings for 1993. Expanded 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 EXPENSE - NET
Other operating expense was $3.7 million in 1993, compared with $5.7 million in
1992. The $2 million reduction was primarily 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, and a $2.4
million increase in corporate and unallocated expenses, including $1.4 million
related to losses on dispositions of short-term investments prior to maturity
and $0.8 million in compensation expense tied to increases in the market price
of the Corporation's stock.
INTEREST EXPENSE - NET
Interest expense, net of interest income, totaled $9.7 million in 1993, compared
with $7.5 million in 1992. Interest expense increased due to the November 1992
issuance of $30.0 million of unsecured notes.
<PAGE>
CONFIDENTIAL
14
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 net
operating loss carryforwards of $55 million and tax credits of $1.7 million to
offset taxable income and regular tax liabilities, respectively.
<PAGE>
CONFIDENTIAL
15
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
======================================================================================================
(in thousands) At December 31,
- ------------------------------------------------------------------------------------------------------
1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and short-term investments $ 158,384 $ 65,102
Accounts receivable, less allowance for doubtful
accounts of $8,224 and $5,788 157,026 122,774
Inventories 332,952 244,995
Deferred tax asset -- current 43,992 26,011
Other current assets 31,069 10,586
- ------------------------------------------------------------------------------------------------------
Total current assets 723,423 469,468
- ------------------------------------------------------------------------------------------------------
Equity and other investments 14,181 2,218
Property, plant and equipment, net 552,843 110,670
Deferred tax asset -- non-current --- 24,742
Excess of cost over net assets of acquired businesses 320,559 12,353
Partnership distribution reserve fund 18,480 ---
Net assets of discontinued operations --- 3,488
Other assets 58,484 11,543
- ------------------------------------------------------------------------------------------------------
Total assets $1,687,970 $ 634,482
======================================================================================================
LIABILITIES
Debt due within one year $ 67,658 $ 9,636
Accounts payable 181,050 99,886
Accrued and other liabilities 200,774 128,659
- ------------------------------------------------------------------------------------------------------
Total current liabilities 449,482 238,181
- ------------------------------------------------------------------------------------------------------
Long-term debt 511,706 119,061
Deferred income taxes 84,246 451
Other liabilities 53,477 33,809
Minority interest 170,630 ---
Commitments and contingencies (Note 11) --- ---
- ------------------------------------------------------------------------------------------------------
Total liabilities 1,269,541 391,502
- ------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock
Common Shares, authorized 133,500 shares;
80,965 and 69,455 shares outstanding 133,770 122,257
Paid-in capital 630,111 516,128
Cumulative translation adjustment (1,259) (488)
Accumulated deficit (344,193) (394,917)
- -------------------------------------------------------------------------------------------------------
Total stockholders' equity 418,429 242,980
- -------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,687,970 $ 634,482
=======================================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
CONFIDENTIAL
16
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
===============================================================================================
(in thousands, except per-share amounts) Year ended December 31,
- -----------------------------------------------------------------------------------------------
1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $1,633,499 $1,212,510 $1,062,045
Other income, net 32,448 25,491 20,146
- -----------------------------------------------------------------------------------------------
1,665,947 1,238,001 1,082,191
- -----------------------------------------------------------------------------------------------
COST AND EXPENSES
Cost of sales 1,330,202 1,021,187 904,246
Depreciation and amortization 27,218 15,470 14,994
Selling, general and administrative expense 193,975 161,791 137,232
Equity in earnings of unconsolidated affiliates (743) (2,275) ---
- -----------------------------------------------------------------------------------------------
1,550,652 1,196,173 1,056,472
- -----------------------------------------------------------------------------------------------
Income from operations 115,295 41,828 25,719
Interest income 5,541 3,261 3,084
Interest expense (22,082) (12,944) (10,617)
Minority interest (8,809) --- ---
- -----------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 89,945 32,145 18,186
Income tax provision 33,700 9,300 7,757
- -----------------------------------------------------------------------------------------------
Income from continuing operations 56,245 22,845 10,429
Loss from discontinued operations:
Loss from operations, net of taxes --- --- (4,025)
Gain on disposition, net of taxes --- --- 2,360
- -----------------------------------------------------------------------------------------------
Income before extraordinary items and
cumulative effect of accounting changes 56,245 22,845 8,764
Extraordinary loss on early retirement of debt (3,060) --- ---
Cumulative effect of accounting changes 3,376 --- 22,265
- -----------------------------------------------------------------------------------------------
NET INCOME $ 56,561 $ 22,845 $ 31,029
===============================================================================================
Weighted average number of shares outstanding 72,870 69,064 69,103
===============================================================================================
INCOME PER SHARE:
Continuing operations $ 0.77 $ 0.33 $ 0.15
Discontinued operations --- --- (0.02)
- -----------------------------------------------------------------------------------------------
Income before extraordinary items 0.77 0.33 0.13
Extraordinary loss on early retirement of debt (0.04) --- ---
Cumulative effect of accounting changes 0.05 --- 0.32
- -----------------------------------------------------------------------------------------------
NET INCOME $ 0.78 $ 0.33 $ 0.45
===============================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
CONFIDENTIAL
17
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C><C> <C><C> <C> <C>
==================================================================================================
(in thousands) Year ended December 31,
- --------------------------------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 56,561 $ 22,845 $ 31,029
Adjustments to reconcile income from continuing operations
to net cash provided by (used in) operating activities:
Depreciation and amortization 27,218 15,470 14,994
Income taxes 20,956 5,500 6,313
Cumulative effect of accounting changes (3,376) -- (22,265)
Minority interest in earnings 8,809 -- --
Other non-cash items 10,923 (839) 2,826
Change in current assets and liabilities, excluding
working capital purchased/sold:
Accounts receivable 19,615 (24,540) (1,764)
Inventories (59,303) (6,718) (32,136)
Other current assets (13,056) (2,893) (875)
Accounts payable 60,478 (9,945) (2,071)
Accrued and other liabilities 39,405 2,452 38
Other 212 (2,354) 684
- --------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 168,442 (1,022) (3,227)
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (373,722) (58,260) --
Purchase of property, plant and equipment (31,213) (21,620) (17,620)
Proceeds from asset sales -- 24,391 23,065
Discontinued operations (2,138) 5,630 (5,504)
Proceeds from investments 690 537 --
- --------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (406,383) (49,322) (59)
- --------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term borrowings 13,795 7,313 --
Proceeds from issuance of long-term debt 326,407 250 30,000
Principal payments on long-term debt (101,416) (12,545) (5,842)
Debt issuance costs (13,581) -- --
Stock issuance/repurchase -- net 117,666 513 --
Distribution to minority interests (5,040) -- --
Dividends (5,837) (1,386) --
- --------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 331,994 (5,855) 24,158
- --------------------------------------------------------------------------------------------------
Foreign Exchange Effect on Cash
and Short-Term Investments (771) (488) --
- --------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 93,282 (56,687) 20,872
- --------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF YEAR 65,102 121,789 100,917
- --------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 158,384 $ 65,102 $121,789
==================================================================================================
INTEREST PAID $ 16,500 $ 11,800 $ 10,400
==================================================================================================
TAXES PAID $ 22,600 $ 3,800 $ 6,000
==================================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
CONFIDENTIAL
18
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
======================================================================================================================
Cumulative
Common Trust Paid-In Translation Accumulated
(in thousands) Shares Shares Capital Adjustment Deficit Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
Conversion of debentures 731 --- 5,176 --- --- 5,907
Exercise of stock options 847 --- 3,819 --- --- 4,666
Issuance of Common Shares 9,700 --- 103,300 --- --- 113,000
Translation adjustment --- --- --- (771) --- (771)
Stock Incentive Plan 235 --- 1,688 --- --- 1,923
Dividends --- --- --- --- (5,837) (5,837)
Net Income --- --- --- --- 56,561 56,561
- ----------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994 $133,770 $ --- $630,111 $(1,259) $(344,193) $418,429
======================================================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
CONFIDENTIAL
19
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. 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 -
Discontinued Operations.
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.
Plant turnaround costs:
Costs related to the periodic scheduled major maintenance of continuous process
production facilities (plant turnarounds) are deferred and charged to product
costs on a straight-line basis during the period to the next scheduled
turnaround, generally two years.
Hedging transactions:
Realized gains and losses from hedging activities are deferred and recognized in
the month to which the hedge transactions relate.
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 outstanding. The dilutive effect of the Corporation's outstanding
restricted shares, stock options and convertible debentures was not significant.
<PAGE>
CONFIDENTIAL
20
2. ACQUISITIONS
On October 20, 1994, the Corporation acquired Agricultural Minerals and
Chemicals Inc. (AMCI) for $400 million plus an estimated working capital
adjustment approximating $100 million. AMCI, through its subsidiaries
manufactures nitrogen-based fertilizers and industrial use products, and
methanol. The subsidiaries controlled by the Corporation as a result of the
AMCI acquisition include Terra Nitrogen Corporation (TNC) and Terra Methanol
Corporation (TMC). TNC has a 60.2 percent ownership interest in Terra Nitrogen
Company, L.P. (TNCLP), formerly Agricultural Minerals Company, L.P., which
operates nitrogen products manufacturing facilities in Verdigris, Oklahoma and
Blytheville, Arkansas through an investment in an operating partnership, Terra
Nitrogen, Limited Partnership (TNLP), formerly Agricultural Minerals, Limited
Partnership. TMC is the general partner of Beaumont Methanol Limited
Partnership (BMLP) which operates a methanol production facility in Beaumont,
Texas. The acquisition has been accounted for using the purchase method of
accounting. The excess of purchase price over the fair value of net assets
acquired will be amortized on a straight-line basis over 18 years which is
estimated to be the average remaining useful life of the manufacturing plants
acquired.
To finance the acquisition of AMCI, the Corporation issued 9.7 million Common
Shares for aggregate net proceeds of approximately $113 million, entered into
credit arrangements to issue $310 million of long-term debt, and refinanced
certain bank debt and credit lines of the Corporation, AMCI and AMCI's
subsidiaries aggregating $260 million of which $152 million in borrowings were
outstanding. The Corporation used $40 million of the new debt issue to
refinance short-term debt. The credit agreement provides for a $175 million
revolving line of credit for use by Terra International, Inc. and BMLP and a $50
million revolving line of credit for TNLP. As a result of the acquisition of
AMCI, the Corporation also assumed AMCI's obligations including its $175 million
in aggregate principal of 10.75% Senior Notes due 2003 (see Note 10 - Long Term
Debt).
On September 15, 1994, the Corporation acquired a 34% interest in Royster-Clark,
Inc. for $12 million in cash. Royster-Clark is a 100 location distributor of
crop input and protection products in the mid-Atlantic region.
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 plant markets, mostly in Florida.
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 interest in 32 farm service centers operating under the trademark,
Agromart(TM). All but two 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.
Operating results of the acquired businesses subsequent to the respective dates
of each acquisition are included in the Consolidated Statements of Income. The
following represents unaudited pro forma summary results of
<PAGE>
CONFIDENTIAL
21
operations as if the acquisitions of AMCI, Terra Asgrow Florida and Terra Canada
had occurred at the beginning of 1993:
<TABLE>
<CAPTION>
(in thousands, except per-share data) Year ended December 31
- -------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Revenues $2,084,800 $1,716,300
Income before extraordinary items and
cumulative effect of accounting changes $ 110,370 $ 14,060
Net income $ 110,680 $ 11,510
Income per share before extraordinary items $ 1.37 $ 0.18
Net income per share $ 1.37 $ 0.15
- -------------------------------------------------------------------------------
</TABLE>
The pro forma operating results were adjusted to include lease expense rather
than depreciation for the Terra Canada nitrogen plant, increased costs of seed
sales, depreciation of the fair value of capital assets acquired based on
estimated useful lives at respective acquisition dates, amortization of
intangibles, reduction of incentive compensation expense for plans terminated at
acquisition, interest expense on the acquisition borrowings, the issuance of
common stock 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 periods, and is not intended to be a projection of future operating
results or trends.
3. ACCOUNTING CHANGES
Coincident with the 1994 acquisition of AMCI (see Note 2 - Acquisitions), the
Corporation changed its method of accounting for major maintenance turnarounds
at manufacturing facilities and recorded a $4.2 million credit, net of income
taxes of $2.7 million, as the cumulative effect at January 1, 1994 of the change
in accounting principle. Excluding the cumulative effect, this change increased
net income for 1994 by approximately $1.0 million or $0.01 per share. Under the
new accounting principle the Corporation defers the cost of turnarounds when
incurred and charges the costs to production ratably over the period until the
next scheduled turnaround. Previously, estimated costs of turnarounds were
charged to product costs over the period preceding each scheduled major
maintenance, generally two years. The change was made to charge turnaround
costs to production over the period most clearly benefited by the turnaround.
In 1994, the Corporation adopted Statement of Financial Accounting Standard
(SFAS) 112, "Employers Accounting for Post-Employment Benefits." This change
required the Corporation to recognize future liabilities of $0.8 million, net of
income taxes of $0.5 million, for benefits to disabled employees. In 1992, the
Corporation adopted SFAS 106, "Employers Accounting for Post-Retirement Benefits
Other than Pensions." 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 the changes in accounting for SFAS 106 and 112,
the Corporation recognized expense in the period the benefits were paid. These
benefit costs were not significant in prior years.
In 1992, the Corporation also adopted SFAS 109, "Accounting for Income Taxes."
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
<PAGE>
CONFIDENTIAL
22
expected to be realized. A $28.0 million credit was recorded as the cumulative
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.
4. DISCONTINUED OPERATIONS
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 in 1992. During
1993, the Corporation sold the leasing and construction materials businesses.
Financial results of the coal, leasing and other discontinued businesses for
1994 and 1993 have been applied against their respective reserves and 1992
amounts have been included in discontinued operations and are as follows:
<TABLE>
<CAPTION>
(in millions) 1992
- ---------------------------------------------------------------
<S> <C>
Revenues:
Leasing $ 5.9
Construction materials 27.8
- ---------------------------------------------------------------
$33.7
===============================================================
Income (loss) from operations, net of income taxes:
Leasing $(2.8)
Construction materials (0.8)
Other (0.4)
- ----------------------------------------------------------------
$(4.0)
===============================================================
</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 1994, Minorco purchased 56% of
the Corporation's common share offering at the offering price less underwriter's
discount. 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. 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) 1994 1993
- -----------------------------------------
<S> <C> <C>
Raw materials $ 38,988 $ 22,983
Finished goods 293,964 222,012
- -----------------------------------------
Total $332,952 $244,995
=========================================
</TABLE>
<PAGE>
CONFIDENTIAL
23
7. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 89,154 $ 66,343
Plant and equipment 605,900 179,095
Finance leases 7,471 ---
- ----------------------------------------------------------------------------
702,525 245,438
Less accumulated depreciation and amortization (149,682) (134,768)
- ----------------------------------------------------------------------------
Total $ 552,843 $ 110,670
============================================================================
</TABLE>
8. DEBT DUE WITHIN ONE YEAR
Debt due within one year consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- ----------------------------------------------------------------
<S> <C> <C>
Short-term borrowings $21,108 $ 7,313
Current maturities of long-term debt 46,550 2,323
- ----------------------------------------------------------------
Total $67,658 $ 9,636
================================================================
Weighted average short-term borrowings $49,242 $23,163
================================================================
Weighted average interest rate 6.5% 4.5%
================================================================
</TABLE>
The Corporation has entered into a credit agreement to provide Bank Term Loans
(see Note 10 - Long-Term Debt) and $225 million in short-term domestic revolving
credit facilities, which are used primarily to provide for domestic seasonal
working capital needs. The Corporation also has a $24.9 million ($35 million
Cdn) revolving credit facility used to provide for working capital needs for its
Canadian operations. There was $14 million outstanding at December 31, 1994
under the domestic facilities and $7.1 million outstanding under the Canadian
facility. Interest on borrowings under these lines is charged at current market
rates.
Under the credit agreement, the Corporation has agreed, among other things, to
maintain certain financial covenants including minimum net worth and maximum
debt leverage as well as minimum current and interest coverage ratios, and to
adhere to certain limitations on additional debt, capital expenditures,
acquisitions, liens, asset sales, investments, prepayment of subordinated
indebtedness, changes in lines of business and transactions with affiliates.
The Corporation's domestic revolving credit facilities expire October 20, 1999.
A commitment fee is charged on the unused portion of the facilities under the
credit agreement, initially 1/2 percent reducing to 3/8 percent when a certain
debt to cash flow ratio is achieved. The credit agreement is secured by the
stock of certain of the Corporation's principal subsidiaries as well as the
personal property of the acquired subsidiaries.
Under the 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 Canadian facility expires November 23, 1995 and is renewable
every 120 days for a 360-day term. A commitment fee of 1/8 percent is paid on
the facility.
<PAGE>
CONFIDENTIAL
24
9. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- ----------------------------------------------------
<S> <C> <C>
Customer deposits $ 66,470 $ 50,714
Payroll and benefit costs 45,630 17,072
Income taxes 8,727 17,025
Other 79,947 43,848
- ----------------------------------------------------
Total $200,774 $128,659
====================================================
</TABLE>
10. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Unsecured Senior Notes, 10.75%, due 2003 $158,755 $ ---
Bank term loans, floating rate, due in installments through 2001 310,000 ---
Bank term loan, floating rate, due 1999 35,000 ---
8.5% Convertible Subordinated Debentures --- 72,057
Unsecured Senior Notes, 8.48%, due 2005 30,000 30,000
Industrial Development Revenue Bonds bearing interest at an
average 6.8% with increasing payments from 1995 to 2011 9,210 9,355
Unsecured Notes, 8.75% to 9.63%, due 1996 to 1998 6,500 8,500
Other 8,791 1,472
- --------------------------------------------------------------------------------------------
558,256 121,384
Less current maturities (46,550) (2,323)
- --------------------------------------------------------------------------------------------
Total $511,706 $119,061
============================================================================================
</TABLE>
Scheduled principal payments for each of the five years 1995 through 1999 are
$46.5 million, $46.8 million, $44.9 million, $44.9 million and $93.4 million,
respectively.
In conjunction with the October 1994 acquisition of AMCI, the Corporation
assumed the obligations under the $175 million unsecured 10.75% Senior Notes due
in full September 30, 2003. Under the 10.75% Senior Notes Indenture, the
holders have a 30-day option to require the Corporation to purchase their notes
at a price of 101% of the principal amount upon a change of control. Following
the Corporation's acquisition of AMCI, $16.2 million of notes were redeemed.
The 10.75% Senior Notes are redeemable at the option of the Corporation, in
whole or part, at any time on or after September 30, 1998, initially at 105.375%
of their principal amount, plus accrued interest, declining to 102.688% on or
after September 30, 1999, and declining to 100% on or after September 30, 2000.
In addition, at any time prior to September 30, 1996, the Corporation may, at
its option, redeem up to $61.25 million aggregate principal amount out of the
proceeds of one or more public offerings of equity securities at a redemption
price of 110% of their principal amount, plus accrued interest. The 10.75%
Senior Notes Indenture contains certain restrictions, including the issuance of
additional debt, payment of dividends, issuance of capital stock, certain
transactions with affiliates, incurrence of liens, sale of assets, and sale-
leaseback transactions.
The Corporation entered into a credit agreement with financial institutions to
provide several Bank Term Loans (Loans) to finance a portion of its acquisition
of AMCI and to refinance existing debt of $40 million at the Corporation and $35
million at TNLP. Interest on the Loans is at current market rates, a portion of
which
<PAGE>
CONFIDENTIAL
25
has been fixed (see Note 12 - Derivative Financial Instruments). Loans are
secured by the stock of certain of the Corporation's principal subsidiaries as
well as the personal property of subsidiaries acquired from AMCI. The Loans are
generally to be repaid over their five- to seven-year terms in semi-annual
payments and can be repaid without penalty or premium at any time at the option
of the Corporation. The Loans are required to be reduced by mandatory
prepayments based on certain cash flow levels as defined in the credit
agreement. The credit agreement also contains covenants similar to the domestic
revolving credit agreement described in Note 8 - Debt Due Within One Year.
The Corporation's 8.5% Convertible Subordinated Debentures (Debentures) were
convertible into Common Shares any time prior to maturity at a conversion price
of $8.083 per share. The Debentures were 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. During March 1994, the Corporation redeemed $72.1 million
of the Debentures at the redemption price of 103.4% of par value. During the
20-day notice period, holders of $5.9 million chose to convert their debentures
into Common Stock of the Corporation. The Corporation issued 730,768 Common
Shares and paid cash for fractional shares.
During 1992, the Corporation entered into a long-term note purchase agreement of
$30 million in 8.48% 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 terminate on April 15,
2003. The debt agreement includes covenants similar to the revolving credit
agreement described in Note 8 - Debt Due Within One Year 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.
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>
1995 $ 39,840
1996 32,606
1997 26,909
1998 11,723
1999 and thereafter 16,531
- ------------------------------------------------------------------------------
Total $ 127,609
==============================================================================
</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. Additionally, Terra Canada has entered into an agency agreement to act
as construction agent to make certain plant improvements not to exceed $31
million (Cdn). Terra Canada has entered into certain agreements in order to
convert its obligations with respect to the
<PAGE>
CONFIDENTIAL
26
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 $37.3 million, $24.7 million and $19.4 million for the
years ended December 31, 1994, 1993 and 1992, respectively.
On December 13, 1994, the Corporation's Port Neal facility in Iowa was
extensively damaged as a result of an explosion. The Corporation and regulatory
officials are investigating the cause of the explosion. It is possible that the
regulatory agencies may assess fines and penalties against the Corporation as a
result of their investigations. As of the date of loss, insurance was in force
to cover damage to the Corporation's property, business interruption, and third
party liability claims. The Corporation has recognized a $7 million pretax
charge against 1994 earnings to cover its aggregate expected unrecoverable costs
associated with the incident, including deductibles and other uninsured costs.
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, 1994. 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.
During March 1994, the Corporation entered into an agreement to sell its
receivables. Under this agreement, which expires March 31, 1996, the
Corporation may sell with limited recourse an undivided interest in a designated
pool of its accounts receivable and receive up to $50 million in proceeds.
Undivided interests in new receivables may be sold as collections reduce
previously sold interests. The undivided interests are sold at a discount that
is included in selling general and administrative expense in the Consolidated
Statements of Income. At December 31, 1994, the proceeds of the uncollected
balance of receivables sold totaled $50 million. The Corporation retains
collection and administrative responsibility on the participating interests
sold.
The Corporation is involved in various legal actions and claims, including
environmental matters, arising from the normal course of business. It is the
opinion of management that the ultimate resolution of these matters will not
have a material adverse effect on either the results of operations or financial
position of the Corporation.
12. DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation manages four categories of risk using derivative financial
instruments: (a) foreign currency fluctuations (b) changes in natural gas
supply prices (c) interest rate fluctuations and (d) the effect of fluctuations
in methanol prices relative to natural gas prices.
FOREIGN CURRENCY FLUCTUATIONS - The Corporation enters into foreign exchange
forward and option contracts to manage risk associated with foreign currency
exchange rate fluctuations. The contracts are designated as hedges of fixed
obligations and hedges of net foreign currency positions. Contract maturities
are consistent with the settlement dates of items being hedged. Gains and
losses on these contracts are deferred and included
<PAGE>
CONFIDENTIAL
27
as a component of the related transaction. The contracts have no recorded value
and would cost $0.8 million to liquidate at December 31, 1994. The contracts had
a recorded value of $0.1 million and a fair value of $0.9 million at December
31, 1993. Fair value of foreign exchange contracts is based on quotations
received from a quotation service and computations prepared by the Corporation.
The following describes the specific areas of risk being managed:
(a) Canadian dollar lease commitments under the Corporation's Canadian
nitrogen plant lease, aggregating $81.1 million (Cdn), which extend
through April 1997, have been hedged (converted into U.S. dollar
obligations) with forward exchange and basis swap contracts.
(b) A significant portion of the Corporation's Canadian production is sold in
the U.S., or is based on U.S. prices, but many of the production costs
are in Canadian dollars. As a result, the Corporation's earnings will
decline when the Canadian dollar increases in value compared with the
U.S. dollar. Consequently, the Corporation buys Canadian dollars forward,
or uses derivatives to fix future exchange rates, for about 50% of its
estimated net Canadian dollar requirements over a twelve-month period.
Estimated 1995 and 1994 net Canadian dollar cash disbursements were
approximately $30 million (Cdn) and $38 million (Cdn), respectively, as
of December 31, 1994 and 1993.
NATURAL GAS PRICES - Natural gas supplies to fill production requirements at the
Corporation's production facilities are purchased at market prices. Natural gas
market prices, as with other commodities, are volatile and the Corporation fixes
prices for a portion of its natural gas requirements through the use of swap
agreements, futures contracts and options. These contracts are traded up to
eighteen months forward and settlement dates are scheduled to coincide with gas
purchases during that future period. A swap agreement is an agreement between
the Corporation and a third party to exchange cash based on a designated price,
which price is referenced to market natural gas prices or appropriate NYMEX
futures contract prices. Option contracts are agreements giving the holder of
the contract the right to either own or sell a futures or swap contract at a
designated price. The futures contracts require maintenance of cash balances
generally 10% to 20% of the contract value while option contracts also require
initial premiums payments ranging from 2% to 5% of contract value.
The following summarizes open natural gas contracts at December 31, 1994 and
1993:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- --------------------------------------------------------------------------------
Contract Unrealized Contract Unrealized
MMBtu Gain (Loss) MMBtu Gain (Loss)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Futures 5,080 $ (1,838) 12,020 $ (545)
Swaps 59,855 (18,793) --- ---
Options 11,926 (709) --- ---
- --------------------------------------------------------------------------------
76,861 $ (21,340) 12,020 $ (545)
================================================================================
Projected required MMBtu 126,000 30,000
================================================================================
Percent hedged 61% 40%
================================================================================
</TABLE>
Gains and losses on settlement of these contracts and agreements are credited or
charged to manufacturing cost in the month in which the hedged transaction
relates. The risk associated with outstanding natural gas positions is directly
related to increases or decreases in natural gas prices in relation to the
underlying NYMEX natural gas contract prices. Realized losses on closed
contracts of $4.5 million relating to future periods have been deferred.
<PAGE>
CONFIDENTIAL
28
During 1994, natural gas related hedging activities resulted in average cost
increases compared with spot prices of approximately $15.5 million, or 11%, for
total natural gas purchases. During 1993, natural gas related hedging
activities resulted in average cost reductions compared with spot prices of
approximately $5.8 million, or 6%, for total natural gas purchases, including an
estimated $7.0 million effect of favorable purchase contracts for the Courtright
plant.
INTEREST RATE FLUCTUATIONS - The Corporation has limited the effect of interest
rate fluctuations for a portion of its debt through the use of interest rate
collar agreements. The agreements require payments to the Corporation for the
amount, if any, that interest costs, on a cumulative basis, exceed 8.5% to 9.0%
(LIBOR) and requires payments by the Corporation for the amount that interest
costs fall below 5.65% (LIBOR). At December 31, 1994, the Corporation had
$366.0 million of debt subject to variable interest at the LIBOR rate. The
interest rate collar agreements, with an initial notional amount of $190 million
(which declines over a 3-year period), cover 52% of the variable interest rate
debt at December 31, 1994.
The unamortized cost of the collar agreements is $1.1 million at December 31,
1994 and is carried in other assets in the consolidated statement of financial
position. No payments are receivable or due under the agreements at December
31, 1994. The unamortized cost approximates market value.
The Corporation has also entered into interest rate swap agreements to convert
$15 million of its fixed-rate, long-term borrowings to variable rates through
April 15, 2003. For 1993, the net interest rate effect of the swap arrangements
totaled 2.9% effectively reducing the interest rate on its $30 million of 8.48%
Senior Notes to 7.0%. For 1994, the net interest rate effect of the swap
arrangements totaled 2.2% effectively reducing the interest rate to 7.39%.
Additionally, the Corporation has entered into an interest rate swap agreement
to convert fixed U.S. dollar lease payments to variable rates based on LIBOR
through April 8, 1997. At December 31, 1994, the notional amount of the swap
agreement was approximately $36.6 million and would cost $2.2 million to
liquidate.
As a result of debt retirement in previous years, BMLP has an interest rate swap
agreement which is no longer associated with outstanding debt. Under the
interest rate swap agreement, BMLP makes 6.1% fixed rate payments and receives
variable-rate interest rate payments (6.5% at December 31, 1994). At December
31, 1994, the notional amount of the swap agreement was $29 million and the
agreement expires March 31, 1995.
METHANOL PRICES - TMC entered into a methanol hedging agreement (the Methanol
Hedging Agreement) effective October 1994. Pursuant to the agreement, TMC
received $4 million in cash and agreed to make payments to the extent that
average methanol prices exceed the sum of $0.65 per gallon plus 0.113 times the
average spot price index, in cents per MMBtu for natural gas during the periods
October 20, 1994 to December 31, 1995, calendar year 1996, and calendar year
1997. The quantities subject to the agreement for each of these periods are
155.5 million, 140 million and 130 million gallons, respectively. TMC's
methanol production facilities have a production capacity of 320 million gallons
of methanol per year. Payments are due five days after the end of each period.
The $4 million received pursuant to the Methanol Hedging Agreement is being
recognized as income over the term of the agreement. Accruals for payments are
recorded as a reduction of revenue. As of December 31, 1994, $15.9 million has
been recorded as payable under the Methanol Hedging Agreement based on average
prices, for the period October 20, 1994 through December 31, 1994. The actual
amount that will be paid is dependent upon average methanol and natural gas
prices during each of the periods. The estimated fair value of the agreement
representing the amount that TMC would expect to pay at December 31, 1994 to
liquidate the agreement for its remaining term, is approximately $41 million,
based on an appraisal.
<PAGE>
CONFIDENTIAL
29
13. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The following table presents the carrying amounts and estimated fair values of
the Corporation's financial instruments at December 31, 1994 and 1993. SFAS
107, "Disclosures about Fair Value of Financial Instruments," defines the fair
value of a financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties.
<TABLE>
<CAPTION>
1994 1993
- ---------------------------------------------------------------------------
Carrying Fair Carrying Fair
(in millions) Amount Value Amount Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets
Cash and short-term investments $ 158.4 $ 158.4 $ 65.1 $ 65.1
Receivables 157.0 157.0 122.8 122.8
Equity and other investments 14.2 16.6 2.2 4.0
Other assets 16.0 16.2 11.6 12.0
Financial Liabilities
Long-term debt (558.3) (555.4) (121.4) (121.5)
===========================================================================
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and receivables: The carrying amounts approximate fair value because of the
short maturity of those instruments.
Equity and other investments: Investments in untraded companies are valued on
the basis of management's estimates and comparisons with similar companies whose
shares are publicly traded when available.
Other assets: The amounts reported relate to notes receivable obtained from sale
of previous operating assets. The fair value is estimated based on current
interest rates and repayment terms of the individual notes.
Long-term debt: The fair value of the Corporation's long-term debt is estimated
based on the quoted market prices for similar issues or by discounting expected
cash flows at the rates currently offered to the Corporation for debt of the
same remaining maturities.
CONCENTRATION 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.
FINANCIAL INSTRUMENTS - At December 31, 1994, the Corporation had letters of
credit outstanding totaling $27.6 million, guaranteeing various insurance and
financing activities. Short-term investments of $9.6 million and $13.0 million
at December 31, 1994 and 1993, respectively, are restricted to collateralize
certain of the letters of credit.
14. STOCKHOLDERS' EQUITY
The Corporation allocates $1.00 per share upon the issuance of Common Shares to
the Common Share capital account.
<PAGE>
CONFIDENTIAL
30
In 1994, the Corporation issued 372,000 restricted Common Shares under its 1992
Stock Incentive Plan to certain key employees of the Corporation. During 1994,
229,218 shares issued in 1992 vested with plan participants and 139,282 shares
were canceled. At December 31, 1994, all of the 1994 issued unvested shares
remain outstanding. Under terms of the issuance, vesting of stock granted is
contingent upon the attainment, prior to February 2001, of pre-established
market price objectives for the Corporation's shares. 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.
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.
The Corporation has authorized 16,500,000 Trust Shares for issuance. All Trust
Shares previously outstanding were canceled in July 1993.
A summary of changes in the Corporation's outstanding capital stock follows:
<TABLE>
<CAPTION>
Common Trust Total
(in thousands) Shares Shares Shares
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
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
Issuance of common shares 9,700 --- 9,700
Exercise of stock options 847 --- 847
Convertible debt redemption 731 --- 731
Stock Incentive Plan 232 --- 232
- ----------------------------------------------------------------------------
December 31, 1994 80,965 --- 80,965
============================================================================
</TABLE>
At December 31, 1994, 2.1 million Common Shares were reserved for issuance upon
award of restricted shares and exercise of employee stock options.
15. 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
<PAGE>
CONFIDENTIAL
31
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, 1994, 1,251,982
Common 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> <S> <C>
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 4.13 to 13.11
Exercised 213 3.38 to 6.75
- -------------------------------------------------------------------
Balance at December 31, 1993 2,145 $3.38 to $11.38
Granted 289 10.50
Expired/terminated 54 3.38 to 11.38
Exercised 847 3.38 to 9.63
- -------------------------------------------------------------------
Balance at December 31, 1994 1,533 $3.38 to $10.50
===================================================================
</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> <S> <C>
1992 2,255 $3.38 to $13.11
1993 1,777 3.38 to 11.38
1994 1,244 3.38 to 9.63
===================================================================
</TABLE>
16. 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) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current service cost $ 3,248 $ 2,627 $ 2,019
Interest on projected benefit obligation 3,971 3,539 2,322
Actual loss (return) on assets 361 (4,629) (2,290)
Net amortization and other (4,764) 853 28
- --------------------------------------------------------------------------------
Pension expense $ 2,816 $ 2,390 $ 2,079
================================================================================
</TABLE>
Net periodic pension expense for 1994 includes components of expense for the
former AMCI plan for the period from acquisition through December 31, 1994.
<PAGE>
CONFIDENTIAL
32
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) 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
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 $(35,301) $ (1,780) $(32,550) $ (1,532)
Accumulated benefit obligations $(39,084) $ (1,933) $(36,213) $ (1,680)
Projected benefit obligations $(53,344) $ (2,257) $(51,173) $ (1,993)
Plan assets at fair value 48,312 --- 45,626 ---
- -----------------------------------------------------------------------------------------------------------------------
Funded status (5,032) (2,257) (5,547) (1,993)
Unrecognized net experience loss (gain) (219) (333) 4,061 295
Unrecognized prior service cost 254 347 636 107
Unrecognized net transition (asset) obligation (3,103) 586 (3,469) 645
Additional minimum liability --- (276) --- (734)
- -----------------------------------------------------------------------------------------------------------------------
Pension liability included in the Consolidated
Statements of Financial Position $ (8,100) $ (1,933) $ (4,319) $ (1,680)
=======================================================================================================================
</TABLE>
Under the terms of the Canadian purchase agreement, the Corporation
established a pension plan for transferring employees, whereby the seller
transferred assets, which approximated 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, 1994 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rate 8.5% 7.5% 8.5%
Long-term per annum compensation increase 5.0% 5.0% 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
$1.9 million in 1994, $1.4 million in 1993 and $1.1 million in 1992.
17. POST-RETIREMENT BENEFITS
The Corporation also provides health care benefits for eligible retired
employees of one of its wholly owned subsidiaries. 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>
CONFIDENTIAL
33
The following table indicates the components of the post-retirement medical
benefits obligation included in the Corporation's Consolidated Statements of
Financial Position at December 31, 1994:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement medical benefit obligation:
Retirees $ (2,133) $(2,054)
Fully eligible active plan participants (1,615) (1,946)
Other active participants (4,430) (5,305)
- -------------------------------------------------------------------------------
Funded status (8,178) (9,305)
Unrecognized net gain (loss) (2,071) 149
Unrecognized prior service benefit (1,912) (2,040)
- -------------------------------------------------------------------------------
Accrued post-retirement benefit cost $(12,161) $(11,196)
===============================================================================
</TABLE>
Net periodic post-retirement medical benefit cost
consisted of the following components:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 534 $ 526 $ 723
Interest cost on accumulated post-retirement
medical benefit obligation 624 614 730
Net amortization and other (127) (127) ---
- -------------------------------------------------------------------------------
Net periodic post-retirement medical benefit cost $1,031 $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 8.5% in 1994, 7.5%
in 1993 and 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.
18. OTHER INCOME, NET
Other income consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Fertilizer service revenue $17,294 $13,531 $10,354
Service charge income 6,008 3,930 3,963
Other, net 9,146 8,030 5,829
- -------------------------------------------------------------------------------
Total $32,448 $25,491 $20,146
===============================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
34
19. INCOME TAXES
Components of the income tax provision (benefit) applicable to continuing
operations are as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 9,925 $ 4,884 $ 640
Foreign 2,416 3,750 ---
State 4,291 4,709 804
- -----------------------------------------------------------------------------
16,632 13,343 1,444
- -----------------------------------------------------------------------------
Deferred:
Federal 15,197 (4,126) 6,288
Foreign 2,533 451 ---
State (662) (368) 25
- -----------------------------------------------------------------------------
17,068 (4,043) 6,313
- -----------------------------------------------------------------------------
Total income tax provision $ 33,700 $ 9,300 $ 7,757
=============================================================================
The income tax provision differs from the federal statutory provision for the
following reasons:
(in thousands) 1994 1993 1992
- -----------------------------------------------------------------------------
Income from continuing
operations before taxes:
U.S. $ 75,842 $ 19,046 $ 18,186
Canada 14,103 13,099 ---
- -----------------------------------------------------------------------------
$ 89,945 $ 32,145 $ 18,186
=============================================================================
Statutory income tax:
U.S. $ 26,545 $ 6,666 $ 6,183
Canada 5,359 4,978 ---
- -----------------------------------------------------------------------------
31,904 11,644 6,183
Non-deductible expenses 650 698 710
State and local income taxes 2,545 3,061 547
Benefit of loss carryforwards (613) (4,494) ---
Change in federal tax rates --- (1,233) ---
Undistributed equity earnings (430) (865) ---
Other (356) 489 317
- -----------------------------------------------------------------------------
Income tax provision $ 33,700 $ 9,300 $ 7,757
=============================================================================
</TABLE>
Deferred tax assets totaled $44.0 million and $50.8 million at December 31, 1994
and 1993, respectively, while deferred tax liabilities totaled $84.2 million and
$0.5 million at December 31, 1994 and 1993, respectively. Undistributed
earnings of the Canadian subsidiary, considered permanently invested, for which
deferred income taxes have not been provided, were $18.0 million at December 31,
1994. The tax effect of
<PAGE>
CONFIDENTIAL
35
net operating loss (NOL) and tax credit carryforwards and significant temporary
differences between reported and taxable earnings that gave rise to net deferred
tax (liabilities) assets were as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
NOL, capital loss and tax credit carryforwards $ 41,402 $ 28,937
Discontinued business costs 5,792 7,295
Unfunded employee benefits 10,130 8,146
Accrued liabilities 10,497 8,658
Inventory valuation 4,899 4,059
Account receivable allowances 3,091 2,176
Investments in subsidiaries 6,008 ---
Depreciation (120,770) (6,297)
Valuation allowance (2,170) (2,765)
Other 867 93
- -------------------------------------------------------------------------------
$ (40,254) $ 50,302
===============================================================================
</TABLE>
Remaining unutilized NOL carryforwards were approximately $4.8 million and $55
million at December 31, 1994 and 1993, 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 (AMT) paid of $36.7 million are available to offset future tax
liabilities and have an indefinite life. The Corporation acquired $26.9 million
of its AMT credits with the AMCI acquisition. The Corporation's capital loss
carryforwards totaled $6.2 million and $7.9 million at December 31, 1994 and
1993, 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. 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) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ (1,647) $ --- $ 120
State (44) --- 5,479
- -------------------------------------------------------------------------------
(1,691) --- 5,599
- -------------------------------------------------------------------------------
Deferred:
Federal 1,816 --- (18,887)
State 331 --- (2,001)
- -------------------------------------------------------------------------------
2,147 --- (20,888)
- -------------------------------------------------------------------------------
$ 456 $ --- $ (15,289)
===============================================================================
</TABLE>
Current tax benefits in 1994 result from losses on early retirement or
refinancing of long-term debt. Deferred income taxes in 1994 are provided for
the net cumulative effect of changes in accounting principles.
20. INDUSTRY SEGMENT DATA
The Corporation operates in three principal industry segments - Distribution,
Nitrogen Products and Methanol. The Distribution segment sells crop inputs -
fertilizer, crop protection products, seed and services - through its farm
service center network. These inputs include both Terra's own brands and vendor
products from virtually all other agricultural chemical and seed suppliers.
Terra has the largest company-operated farm
<PAGE>
CONFIDENTIAL
36
service center network in North America. The Nitrogen Products business produces
and distributes ammonia, urea, urea ammonium nitrate solution, and urea feed
which are used by farmers to provide crops with nitrogen, an essential nutrient
for plant growth and as a feed additive for livestock. The Methanol business
manufactures and distributes methanol, which is principally used as a raw
material in the production of a variety of chemical derivatives and in the
production of methyl tertiary butyl ether (MTBE), an oxygenate and an octane
enhancer for gasoline. Segment revenues and costs for Distribution, Nitrogen
Products and Methanol include inter-segment transactions. Included in Other are
eliminations of inter-segment sales and unallocated portions of the business.
The following summarizes additional information about the Corporation's industry
segments:
<TABLE>
<CAPTION>
Nitrogen
(in thousands) Distribution Products Methanol Other Total
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Sales $ 1,318,416 $ 296,557 $ 70,274 $ (19,300) $ 1,665,947
Operating earnings 33,784 48,369 42,679 (9,537) 115,295
Identifiable assets 502,921 713,209 347,147 124,693 1,687,970
Depreciation and amortization 9,497 9,575 4,263 3,883 27,218
Capital expenditures 16,374 6,086 8,732 21 31,213
- --------------------------------------------------------------------------------------------------
1993
Sales $ 1,019,438 $ 228,910 $ --- $ (10,347) $ 1,238,001
Operating earnings 16,903 28,654 --- (3,729) 41,828
Identifiable assets 379,268 91,887 --- 163,327 634,482
Depreciation and amortization 6,427 5,139 --- 3,904 15,470
Capital expenditures 9,818 2,349 6,903 2,550 21,620
- --------------------------------------------------------------------------------------------------
1992
Sales $ 958,725 $ 125,659 $ --- $ (2,193) $ 1,082,191
Operating earnings 16,568 14,841 --- (5,690) 25,719
Identifiable assets 266,190 95,880 --- 218,122 580,192
Depreciation and amortization 6,495 4,609 --- 3,890 14,994
Capital expenditures 7,974 9,042 --- 604 17,620
==================================================================================================
</TABLE>
21. AGREEMENTS OF LIMITED PARTNERSHIP
In accordance with the Agreement of Limited Partnership of TNCLP, quarterly
distributions to Unitholders and the General Partner are made in an amount equal
to 100% of its Available Cash, as defined, unless Available Cash is required to
fund a reserve amount. TNCLP must fund and maintain a reserve of $18.5 million
to support Minimum Quarterly Distributions on the Senior Preference Units (the
Reserve Amount). Such Reserve Amount was fully funded at December 31, 1994 and
is invested in Eurodollar deposits at a major financial institution.
During the period which commenced December 4, 1991, and not ending prior to
December 31, 1996 (the Preference Period), Senior Preference, Junior Preference
and Common Units participate equally in distributions after each class of units
has received its Minimum Quarterly Distribution, subject to the General
Partner's right to receive cash distributions.
The General Partner receives a combined minimum 2% of total cash distributions,
and as an incentive, the General Partner's participation increases if cash
distributions exceed specified target levels. During the Preference Period,
distributions are subject to the rights of Senior Preference Units to receive
the Minimum Quarterly Distribution of $0.605 per unit plus any arrearages,
before any other distributions. After such amounts have been paid, the Reserve
Amount must be funded before distributions to Junior or Common
<PAGE>
CONFIDENTIAL
37
Unitholders. Distributions to Common Unitholders are subject to the preferential
rights of the Junior Preference Units to receive Minimum Quarterly Distributions
plus arrearages. Subject to certain conditions, the Junior Preference Units will
become Senior Preference Units on December 31, 1995. As a result of this
conversion, distributions on the converted Junior Preference Units will be made
with, and not after, distributions on the Senior Preference Units and payment of
the Minimum Quarterly Distributions on the converted Junior Preference Units
will also be supported by the Reserve Amount. In addition, the converted Junior
Preference Units will be entitled to receive Minimum Quarterly Distributions
before funds are set aside, if necessary, to restore the Reserve Amount to its
required level.
After the Preference Period the Senior Units will still be entitled to the
Minimum Quarterly Distribution, but will not participate with the Common Units
in any distributions above the Minimum Quarterly Distribution.
For a 90-day period after the end of the Preference Period, the holders of
Senior Preference Units will have the right, subject to fulfillment of certain
stock exchange listing requirements, to convert their Senior Preference Units
into fully participating Common Units.
To maintain classification as a partnership for federal income tax purposes,
TNC, as General Partner, must maintain a minimum level of net worth without
regard to its interest in TNCLP. To meet the requirement, TNC maintains certain
cash and short-term investment balances.
<PAGE>
CONFIDENTIAL
38
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
audited by our independent accountants. Their audits 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.
Burton M. Joyce Francis G. Meyer Robert E. Thompson
President and Chief Financial Officer Chief Accounting Officer
Chief Executive Officer
<PAGE>
CONFIDENTIAL
39
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Terra Industries Inc.
We have audited the accompanying consolidated statements of financial position
of Terra Industries Inc. and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, cash flows and changes in
stockholders' equity for each of the three years in the period ended December
31, 1994. 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. 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 consolidated financial statements present fairly, in all
material respects, the financial position of Terra Industries Inc. and
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note 3 to the financial statements, the Corporation changed its
method of accounting for major maintenance turnarounds and post-employment
benefits effective January 1, 1994.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 1, 1995
<PAGE>
CONFIDENTIAL
40
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>
1994 Net Production (tons):
Anhydrous ammonia 205,426 184,397 137,503 253,286 780,612
Nitrogen solutions 243,628 221,039 211,012 619,512 1,295,191
Urea 55,268 50,493 42,487 149,628 297,876
Methanol (million gallons) --- 6.4 5.6 69.2 81.2
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
===============================================================================
</TABLE>
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>
1994
Total revenues $ 259,504 $ 818,252 $ 287,905 $ 300,286
Gross profit $ 33,074 $ 137,937 $ 43,590 $ 93,926
Income (loss) before extraordinary items $ (6,285) $ 47,902 $ 699 $ 13,929
Net income (loss) $ (5,523) $ 47,902 $ 699 $ 13,483
Per Share:
Income (loss) before extraordinary items $ (0.09) $ 0.68 $ 0.01 $ 0.18
Net income (loss) $ (0.08) $ 0.68 $ 0.01 $ 0.17
Dividends $ 0.02 $ 0.02 $ 0.02 $ 0.02
Common Share price:
High $ 8.75 $ 8.25 $ 13.13 $ 13.00
Low $ 6.25 $ 6.63 $ 5.88 $ 8.75
====================================================================================================
1993
Total revenues $ 167,110 $ 653,231 $ 250,464 $ 167,196
Gross profit $ 23,026 $ 107,947 $ 35,376 $ 34,995
Income (loss) before extraordinary items $ (8,736) $ 39,573 $ (2,466) $ (5,526)
Net income (loss) $ (8,736) $ 39,573 $ (2,466) $ (5,526)
Per Share:
Income (loss) before extraordinary items $ (0.13) $ 0.57 $ (0.04) $ (0.08)
Net income (loss) $ (0.13) $ 0.57 $ (0.04) $ (0.08)
Dividends $ --- $ --- $ --- $ 0.02
Common Share price:
High $ 4.88 $ 4.25 $ 5.00 $ 7.88
Low $ 3.88 $ 3.50 $ 3.63 $ 4.50
====================================================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
41
REVENUES
<TABLE>
<CAPTION>
===============================================================================
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Manufactured nitrogen products $ 296,557 $ 228,910 $ 125,590
Methanol 70,274 --- ---
Resale fertilizer 307,400 257,585 229,136
Crop protection products 859,151 660,616 641,021
Seed 71,355 50,599 51,059
Other 61,210 40,291 35,385
- -------------------------------------------------------------------------------
Total $1,665,947 $1,238,001 $1,082,191
===============================================================================
</TABLE>
STOCKHOLDERS AND DIVIDENDS
- -------------------------------------------------------------------------------
The Corporation's Common Shares are traded principally on the New York Stock
Exchange. At January 31, 1995, 81.0 million Common Shares were outstanding and
held by 5,575 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.
<PAGE>
CONFIDENTIAL
42
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands, except
per-share and employee data) 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Working capital $ 273,941 $ 231,287 $ 215,817 $ 156,587 $ 135,374 $ 158,329
Total assets $ 1,687,970 $ 634,482 $ 580,192 $ 517,162 $ 805,279 $ 915,068
Long-term debt $ 558,256 $ 121,384 $ 133,679 $ 114,805 $ 184,324 $ 153,212
Stockholders' equity $ 418,429 $ 242,980 $ 221,476 $ 190,296 $ 321,961 $ 439,056
RESULTS OF OPERATIONS
Revenues $ 1,665,947 $ 1,238,001 $ 1,082,191 $ 1,022,597 $ 962,202 $ 949,458
Costs and expenses (1,550,652) (1,196,173) (1,056,472) (996,928) (960,084) (937,277)
Interest income 5,541 3,261 3,084 1,789 573 509
Interest expense (22,082) (12,944) (10,617) (14,352) (17,629) (17,643)
Minority interest (8,809) --- --- --- --- ---
Income tax
(provision) benefit (33,700) (9,300) (7,757) (1,073) 816 316
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from
continuing operations 56,245 22,845 10,429 12,033 (14,122) (4,637)
Discontinued operations --- --- (1,665) (168,808) (94,379) 29,808
Extraordinary items (3,060) --- --- 5,115 --- ---
Cumulative effect of
accounting changes 3,376 --- 22,265 --- --- ---
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 56,561 $ 22,845 $ 31,029 $ (151,660) $ (108,501) $ 25,171
=============================================================================================================================
EARNINGS (LOSS) PER SHARE:
Continuing operations $ 0.77 $ 0.33 $ 0.15 $ 0.18 $ (0.21) $ (0.07)
Discontinued operations --- --- (0.02) (2.51) (1.43) 0.45
Extraordinary (loss) gain on
early retirement of debt (0.04) --- --- 0.07 --- ---
Cumulative effect of
accounting changes 0.05 --- 0.32 --- --- ---
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 0.78 $ 0.33 $ 0.45 $ (2.26) $ (1.64) $ 0.38
=============================================================================================================================
DIVIDENDS PER SHARE $ 0.08 $ 0.02 $ --- $ --- $ 0.12 $ 0.09
=============================================================================================================================
CAPITAL EXPENDITURES
Continuing operations $ 31,213 $ 21,620 $ 17,620 $ 12,728 $ 10,689 $ 13,568
Discontinued operations --- --- 2,231 8,432 55,139 74,274
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 31,213 $ 21,620 $ 19,851 $ 21,160 $ 65,828 $ 87,842
=============================================================================================================================
Permanent employees
at end of period 3,210 2,570 2,020 2,000 1,910 1,800
=============================================================================================================================
</TABLE>
Amounts have been restated as appropriate to reflect continuing operations.
<PAGE>
February 1, 1995
Terra Industries Inc.
Sioux City, Iowa
We have audited the consolidated financial statements of Terra Industries Inc.
as of December 31, 1994 and 1993, and for each of the three years in the period
ended December 31, 1994, included in your Annual Report, which is incorporated
by reference in your Form 10-K to the Securities and Exchange Commission and
have issued our report thereon dated February 1, 1995. Note 3 to such
consolidated financial statements contains a description of your change in
accounting during the year ended December 31, 1994, for major maintenance
turnarounds at manufacturing facilities from accruing such costs prior to the
turnarounds to capitalizing such costs and amortizing them ratably over the
period until the next scheduled turnaround. In our judgment, such change is to
an alternative accounting principle that is preferable under the circumstances.
Deloitte & Touche LLP
<PAGE>
TERRA INDUSTRIES INC.
LIST OF SUBSIDIARIES
March 1, 1995
<TABLE>
<CAPTION>
Percentage Percentage
Name of Company Held by TRA Held by Sub Jurisdiction
- --------------- ----------- ----------- ------------
<S> <C> <C> <C>
I. El Rancho Rock & Sand, Inc. 100.0 California
II. Hudson Holdings Corporation 100.0 Delaware
III. Hudson Bay Gold Inc. 100.0 Canada
IV. Inspiration Coal Inc. 100.0 Delaware
V. Inspiration Coal Development Company 100.0 Delaware
which owns
A. Ashland Mining Corporation 100.0 W. Virginia
B. Briarwood Mining Inc. 100.0 Virginia
C. Plateau Fuels, Inc. 100.0 Kentucky
D. Southern Floyd Coal, Inc. 100.0 Kentucky
VI. Inspiration Consolidated Copper Company 100.0 Maine
which owns
A. Black Pine Mining Company 100.0 Montana
B. Inspiration Development Company 100.0 Delaware
VII. Inspiration Gold Incorporated 100.0 Delaware
VIII. Terra Capital Holdings, Inc. 100.0 Delaware
which owns
A. Terra Capital, Inc. 100.0 Delaware
which owns
1. Terra Methanol Corporation 100.0 Delaware
2. Terra International, Inc. 100.0 Delaware
which owns
a. Farmbelt Chemicals, Inc. 100.0 Delaware
b. Farmers Agricultural Credit Corporation 100.0 Iowa
c. Northern Agricultural Credit Corporation 100.0 Minnesota
d. Riverside/Terra Corporation 100.0 Delaware
e. Terra International (Oklahoma) Inc. 100.0 Delaware
</TABLE>
<PAGE>
TERRA INDUSTRIES INC.
LIST OF SUBSIDIARIES
MARCH 1, 1995
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NAME OF COMPANY HELD BY TRA HELD BY SUB JURISDICTION
- --------------- ----------- ----------- ------------
<S> <C> <C> <C>
A. Terra Capital, Inc. (continued)
-------------------------------------
2. Terra International, Inc. (continued)
-------------------------------------------
f. Terra Real Estate Corporation 100.0 Iowa
g. Terra Real Estate Development Corporation 100.0 Iowa
h. Terra Express, Inc. 100.0 Delaware
i. Terra Express of Oklahoma, Inc. 100.0 Oklahoma
j. Terra International (Canada) Inc. 100.0 Ontario, Canada
which owns
----------
1. Belmont Farm Supply Inc. 50.0 Federal
2. Bluewater Agromart Limited 50.0 Ontario
3. Brussels Agromart Ltd. 50.0 Ontario
4. Cardinal Farm Supply Limited 50.0 Ontario
5. Fingal Farm Supply Limited 50.0 Ontario
6. Grand Falls Agromart Ltd. 50.0 Federal
7. Hartland Agromart Ltd. 50.0 Federal
8. Harvex Agromart Inc. 50.0 Ontario
9. Hoegy's Farm Supply Limited 50.0 Ontario
10. Lakeside Grain & Feed Limited 50.0 Ontario
11. Macroblend Limited 50.0 Ontario
12. Maple Farm Supply Limited 50.0 Ontario
13. Max Underhill's Farm Supply Limited 50.0 Ontario
14. Munro Agromart Ltd. 50.0 Ontario
15. Oakwood Agromart Ltd. 50.0 Ontario
16. Oxford Agropro Ltd. 50.0 Ontario
17. Scotland Agromart Ltd. 50.0 Ontario
18. Setterington's Fertilizer Service Limited 50.0 Ontario
19. Sprucedale Agromart Limited 50.0 Ontario
20. Tri-County Agromart Ltd. 50.0 Ontario
</TABLE>
<PAGE>
TERRA INDUSTRIES INC.
LIST OF SUBSIDIARIES
MARCH 1, 1995
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NAME OF COMPANY HELD BY TRA HELD BY SUB JURISDICTION
- --------------- ----------- ----------- ------------
<S> <C> <C> <C>
A. Terra Capital, Inc. (continued)
-------------------------------------
2. Terra International, Inc. (continued)
-------------------------------------------
k. ILI Lone Star, Inc. 100.0 Delaware
l. Royster-Clark, Inc. 34.14 Delaware
3. BMC Holdings, Inc. 100.0 Delaware
which owns
----------
a. Beaumont Methanol, Limited Partnership/1/ 99.0 Delaware
4. Terra Nitrogen Corporation 100.0 Delaware
which owns
----------
a. Terra Nitrogen Company, L.P./2/ 60.2 Delaware
which owns
----------
1. Terra Nitrogen, Limited Partnership/3/ 99.0 Delaware
</TABLE>
- -------------------------
/1/Terra Methanol Corporation is 1% General Partner.
/2/Terra Nitrogen Corporation's interest includes 1.0101% as General Partner.
/3/Terra Nitrogen Corporation is 1% General Partner.
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
EDWARD G. BEIMFOHR
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, 1994 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 11th day of February, 1995.
/s/ Edward G. Beimfohr
-----------------------------------
EDWARD G. BEIMFOHR
<PAGE>
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, 1994 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 14th day of February, 1995.
/s/ Carol L. Brookins
----------------------------------------
CAROL L. BROOKINS
<PAGE>
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, 1994 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 16th day of February, 1995.
/s/ Edward M. Carson
---------------------------------------
EDWARD M. CARSON
<PAGE>
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, 1994 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 13th day of February, 1995.
/s/ David E. Fisher
---------------------------------------
DAVID E. FISHER
<PAGE>
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, 1994 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 14th day of February, 1995.
/s/ Basil T.A. Hone
---------------------------------------
BASIL T.A. HONE
<PAGE>
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 W. Mark
Rosenbury, 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, 1994 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 February, 1995.
/s/ Burton M. Joyce
--------------------------------------
BURTON M. JOYCE
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
ANTHONY W. LEA
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, 1994 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 13th day of February, 1995.
/s/ Anthony W. Lea
--------------------------------------
ANTHONY W. LEA
<PAGE>
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, 1994 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 16th day of February, 1995.
/s/ John R. Norton III
---------------------------------------
JOHN R. NORTON III
<PAGE>
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, 1994 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 13th day of February, 1995.
/s/ Reuben F. Richards
---------------------------------------
REUBEN F. RICHARDS
<PAGE>
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, 1994 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 15th day of February, 1995.
/s/ Henry R. Slack
---------------------------------------
HENRY R. SLACK
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
FRANCIS G. MEYER
hereby constitute and appoint George H. Valentine, W. Mark Rosenbury 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 Vice President and Chief Financial Officer of Terra Industries Inc. (the
"Company") to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 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 10th day of February, 1995.
/s/ Francis G. Meyer
---------------------------------------
FRANCIS G. MEYER
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
ROBERT E. THOMPSON
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, 1994 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 21st day of February, 1995.
/s/ Robert E. Thompson
---------------------------------------
ROBERT E. THOMPSON
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF TERRA INDUSTRIES
INC. AS OF DECEMBER 31, 1994 AND THE RELATED CONSOLIDATED STATEMENT OF
INCOME FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 88,114
<SECURITIES> 70,270
<RECEIVABLES> 165,250
<ALLOWANCES> 8,224
<INVENTORY> 332,952
<CURRENT-ASSETS> 723,423
<PP&E> 712,432
<DEPRECIATION> 159,589
<TOTAL-ASSETS> 1,687,970
<CURRENT-LIABILITIES> 449,482
<BONDS> 511,706
<COMMON> 133,770
0
0
<OTHER-SE> 284,659
<TOTAL-LIABILITY-AND-EQUITY> 1,687,970
<SALES> 1,633,499
<TOTAL-REVENUES> 1,665,947
<CGS> 1,339,240
<TOTAL-COSTS> 1,346,904
<OTHER-EXPENSES> 204,491
<LOSS-PROVISION> 2,131
<INTEREST-EXPENSE> 22,082
<INCOME-PRETAX> 89,945
<INCOME-TAX> 33,700
<INCOME-CONTINUING> 56,245
<DISCONTINUED> 0
<EXTRAORDINARY> (3,060)
<CHANGES> 3,376
<NET-INCOME> 56,561
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.00
</TABLE>
