<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
TERRA INDUSTRIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
MARYLAND 2873 52-1145429
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION) TERRA CENTRE
600 FOURTH STREET, P.O. BOX 6000
SIOUX CITY, IOWA 51102-6000
(712) 277-1340
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
GEORGE H. VALENTINE
VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY
TERRA CENTRE
600 FOURTH STREET, P.O. BOX 6000
SIOUX CITY, IOWA 51102-6000
(712) 277-1340
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
CARTER W. EMERSON
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 861-2052
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/2% Senior Notes due 2005,
Series B....................... $200,000,000 100% $200,000,000 $68,965.52
</TABLE>
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- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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EXHIBIT INDEX APPEARS ON PAGE
<PAGE>
TERRA INDUSTRIES INC.
CROSS REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-4)
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
----------------------- ---------------------------------
<C> <S> <C>
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus..... Outside Front Cover Page
2. Inside Front and Outside Back Inside Front Cover Page; Outside Back Cover
Cover Pages of Prospectus.... Page
3. Risk Factors, Ratio of Summary; Risk Factors; The Company;
Earnings to Fixed Charges and Selected Financial Data; Exchange Offer;
Other Information............ Tax Considerations
4. Terms of the Transaction...... Outside Front Cover Page; Summary; Exchange
Offer; Description of Exchange Notes; Tax
Considerations
5. Pro-Forma Financial Summary--Summary Financial Data; Selected
Information.................. Financial Data
6. Material Contracts with the
Company Being Acquired....... Inapplicable
7. Additional Information
Required..................... Inapplicable
8. Interests of Named Experts and
Counsel...................... Legal Matters; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities.................. Inapplicable
10. Information with Respect to S- Incorporation of Certain Documents by
3 Registrants................ Reference
11. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference..... Reference
12. Information with Respect to S-
3 or S-2 Registrants......... Inapplicable
13. Incorporation of Certain
Information by Reference..... Inapplicable
14. Information with Respect to
Registrants other than S-3 or
S-2 Registrants.............. Inapplicable
15. Information with Respect to S-
3 Companies.................. Inapplicable
16. Information with Respect to S-
3 or S-2 Companies........... Inapplicable
17. Information with Respect to
Companies Other Than S-3 or
S-2 Companies................ Inapplicable
18. Information if Proxies,
Consents or Authorizations
are to be Solicited.......... Inapplicable
19. Information if Proxies,
Consents or Authorizations
are not to be Solicited or in Incorporation of Certain Documents by
an Exchange Offer............ Reference
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 3, 1995
PROSPECTUS
TERRA INDUSTRIES INC.
OFFER TO EXCHANGE ITS 10 1/2% SENIOR NOTES DUE 2005, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING 10 1/2% SENIOR NOTES DUE 2005, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1995, UNLESS EXTENDED.
-----------
Terra Industries Inc., a Maryland corporation (the "Company"), hereby offers
(the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 10 1/2%
Senior Notes due 2005, Series B (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which this Prospectus is a part, for
each $1,000 principal amount of its outstanding 10 1/2% Senior Notes due 2005,
Series A (the "Notes"), of which $200,000,000 principal amount is outstanding.
The form and terms of the Exchange Notes are the same as the form and terms of
the Notes (which they replace), except that as of the date hereof the Exchange
Notes have been registered under the Securities Act and, therefore, will not
bear legends restricting their transfer and will not contain certain provisions
included in the terms of the Notes relating to an increase in the interest rate
in certain circumstances relating to the timing of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Notes (which they replace)
and will be issued under and be entitled to the benefits of the Indenture,
dated as of June 22, 1995 (the "Indenture"), between the Company and First
Trust National Association, as Trustee (the "Trustee"), which also governs the
Notes. See "The Exchange Offer" and "Description of Exchange Notes."
The Company will accept for exchange any and all Notes duly tendered and not
validly withdrawn prior to 5:00 p.m., New York City time, on , 1995,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Notes may be withdrawn at any time prior to 5:00 p.m. New York City
time on the Expiration Date. The Exchange Offer is subject to certain customary
conditions. The Notes were sold by the Company on June 22, 1995 to the Initial
Purchasers (as defined) in transactions not registered under the Securities Act
in reliance upon an exemption from registration under the Securities Act (the
"Offering"). The Initial Purchasers subsequently resold the Notes to qualified
institutional buyers in reliance upon Rule 144A under the Securities Act and to
a limited number of institutional accredited investors that agreed to comply
with certain transfer restrictions and other conditions. Accordingly, the Notes
may not be reoffered, resold or otherwise transferred in the United States
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The
Exchange Notes are being offered hereunder in order to satisfy the obligations
of the Company under the Registration Rights Agreement (as defined) entered
into by the Company in connection with the offering of the Notes. See "Exchange
Offer."
Based on no-action letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties, the Company believes the
Exchange Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. See "Exchange Offer"
and "--Resale of the Exchange Notes." Each broker-dealer (a "Participating
Broker-Dealer") that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes received in exchange for Notes where
such Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities. The Company has agreed
that it will make this Prospectus available to any Participating Broker-Dealer
for use in connection with any such resale and Participating Broker-Dealers
shall be authorized to deliver this Prospectus for a period not exceeding 180
days after the Expiration Date. See "Plan of Distribution."
Holders of Notes not tendered and accepted in the Exchange Offer will
continue to hold such Notes and will be entitled to all the rights and benefits
and will be subject to the limitations applicable thereto under the Indenture
and with respect to transfer under the Securities Act. Holders of Notes not
tendered in the Exchange Offer will not retain any rights under the
Registration Rights Agreement, except in limited circumstances. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"Exchange Offer."
There has not previously been any public market for the Exchange Notes. The
Company does not intend to list the Exchange Notes on any securities exchange
or to seek approval for quotation through any automated quotation system. There
can be no assurance that an active market for the Exchange Notes will develop.
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citicorp Securities,
Inc. (the "Initial Purchasers") have informed the Company that they currently
intend to make a market in the Exchange Notes, but are not obligated to do so
and any such market making may be discontinued at any time without notice. The
Initial Purchasers may act as principal or as agent in such transactions. If a
market for the Exchange Notes should develop, the Exchange Notes could trade at
a discount from their principal amount. See "Risk Factors--Absence of Public
Market ." Moreover, to the extent that Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Notes could be adversely affected.
-----------
SEE "RISK FACTORS" ON PAGE 14 HEREIN FOR A DESCRIPTION OF CERTAIN RISKS TO BE
CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1995
<PAGE>
[MAP OF PRINCIPAL FACILITIES APPEARS HERE]
This map contains the principal facilities associated with the nitrogen products
and methanol business segments of the Company as of March 1995 and does not
contain farm service centers or affiliated dealer locations associated with the
distribution of the Company. The Company's distribution segment serves the
United States and eastern region of Canada and, as of March 1995, includes
approximately 370 farm service centers and 780 affiliated dealer locations.
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and consolidated financial
statements (and notes thereto) included and incorporated by reference elsewhere
in this Prospectus. Except as otherwise indicated, all financial information is
presented on the basis of generally accepted accounting principles. 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. Terms defined in
this Summary shall have the same meanings when used elsewhere in this
Prospectus. Prospective investors are urged to read this Prospectus in its
entirety. See "Risk Factors" for a discussion of certain factors that should be
considered carefully by holders who tender their Notes in the Exchange Offer.
THE COMPANY
The Company is a leader in each of its three business segments: (i) the
distribution of crop production inputs and services, (ii) the manufacture of
nitrogen products and (iii) the manufacture of methanol. 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. The Company is also the third largest producer of anhydrous ammonia and
one of the two largest producers of nitrogen solutions in the United States and
Canada. In addition, the Company is one of the largest U.S. manufacturers and
marketers of methanol. In October 1994, the Company acquired Agricultural
Minerals and Chemicals Inc. ("AMCI"), a manufacturer and marketer of both
nitrogen products and methanol. In 1994, on a pro forma basis including AMCI's
operations for the full year, the Company generated revenues and operating
income of $2.1 billion and $266.2 million, respectively.
The Company's distribution network for fertilizer, crop protection products
and seed has grown over the last several years to include, as of March 31,
1995, approximately 370 farm service centers, 100 fertilizer storage facilities
and 780 affiliated dealer locations serving the United States and the eastern
region of Canada. This growth generally has been the result of a healthy farm
economy, acquisitions, additional facilities and aggressive marketing. The
Company's distribution network is supplied by both independent sources and the
Company's own production facilities, which presently include one crop
protection chemical dry flowable and liquid formulation plant and seven other
liquid chemical formulation facilities in addition to its nitrogen production
facilities. In 1994, on a pro forma basis including AMCI's operations for the
full year, distribution revenues constituted approximately 63% of the Company's
total revenues.
Nitrogen fertilizer is a basic crop nutrient which is applied seasonally by
farmers to improve crop yield and quality. Nitrogen fertilizer is produced by
combining gaseous nitrogen with hydrogen to form anhydrous ammonia, the
simplest form of nitrogen fertilizer, which can be further processed or
upgraded into other fertilizer products such as urea and nitrogen solutions.
The Company presently owns five nitrogen fertilizer facilities with total
annual gross production capacity of 2.7 million tons of ammonia. In 1994,
approximately 10% of the Company's fertilizer production tonnage was sold
through its farm service center locations to retail customers, while the rest
was sold to outside customers. The Company believes that it is among the lowest
cost providers of nitrogen fertilizer in the markets it serves, benefiting from
favorable transportation logistics and other operating synergies, in part as a
result of the AMCI acquisition which provided the Company with two fertilizer
plants and 1.4 million tons of annual gross production capacity of ammonia. The
Company suffered a major explosion in December 1994 at one of its nitrogen
fertilizer facilities, for which it was insured. The Company expects the
facility, representing approximately 15% of its annual ammonia production
capacity, to be fully operational in mid-1996. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Factors Affecting
Operating Results." In 1994, on a pro forma basis including AMCI's operations
for the full year, nitrogen products revenues (including intercompany sales)
constituted approximately 25% of the Company's total revenues.
Methanol is used primarily as a feedstock in the production of other chemical
products such as formaldehyde, acetic acid, adhesives and plastics. Methanol is
also used as a feedstock in the production of
3
<PAGE>
methyl tertiary butyl ether ("MTBE"), an oxygenate and octane enhancer used as
an additive in reformulated gasoline to provide cleaner burning fuels. The
Company's methanol production capacity is currently approximately 320 million
gallons per year, representing approximately 15% of the total United States
rated capacity. The Company's methanol facility in Beaumont, Texas (the
"Beaumont Facility") is the largest such facility in the U.S. In 1994, on a pro
forma basis including AMCI's operations for the full year, methanol revenues
constituted approximately 12% of the Company's total revenues.
The Company's long-term strategy for growth is to: (i) acquire and upgrade
production and distribution facilities, (ii) increase distribution volumes by
expanding sales from Company-operated locations and its affiliated dealer
network, (iii) change its product mix to include more profitable value-added
products and (iv) continue to build customer loyalty by providing value-added
services. As part of this strategy, in April 1993, the Company acquired a
fertilizer manufacturing facility and 32 farm service centers in Canada; in
December 1993, the Company acquired 12 farm service centers in Florida; in
September 1994, the Company acquired a minority interest in a 100 location
distributor of crop input and protection products in the mid-Atlantic region;
and in October 1994, the Company acquired AMCI.
Terra's common shares are traded on the NYSE and the Toronto Stock Exchange
under the symbol "TRA." As of March 31, 1995, Minorco, an international natural
resources company with operations in gold, base metals, industrial minerals,
paper and packaging and agribusiness ("Minorco"), owned approximately 53% of
Terra's outstanding common shares. Six of the Company's ten directors are also
officers and/or directors of Minorco or its affiliates.
RECENT DEVELOPMENTS
On March 27, 1995, the Company offered to acquire by merger all of the
outstanding Senior Preference Units ("Senior Preference Units" or "SPUs") of
Terra Nitrogen Company, L.P., a subsidiary of the Company ("TNCLP"), for $30.00
per SPU (less the amount of any distributions declared per SPU in excess of
$0.66 per SPU for the quarter ended March 31, 1995). The SPUs, which represent
preferred limited partner interests in TNCLP, are publicly held and traded on
the NYSE under the symbol "TNH." See "Company Structure" and "Description of
Other Indebtedness--TNCLP Senior Preference Units." The Company and an
independent committee of the Board of Directors of Terra Nitrogen Corporation
("TNC") designated to represent the holders of the SPUs were unable to reach an
agreement on price and, on May 11, 1995, the Company withdrew its offer.
On May 11, 1995, the Board of Directors of the Company approved an open
market purchase program pursuant to which the Company may purchase up to five
million SPUs from time to time at prices and in quantities determined by the
Company's management. As of , 1995, the Company had purchased SPUs for an
aggregate purchase price of $ . See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Open
Market Purchase Program for TNCLP SPUs."
The Company reported total revenues for the five-month period ended May 31,
1995 of $1.10 billion, a 32% increase over total revenues of $833.7 million for
the comparable period in 1994 and a 7% increase over total revenues of $1.02
billion for the comparable period in 1994 including AMCI (which was acquired by
the Company in October 1994) on a pro forma basis. Pro forma revenues reflect
the Company's acquisition of AMCI as though the acquisition had occurred as of
January 1, 1994. See "Selected Financial Data." Results for 1995 include the
operations of AMCI and do not include any revenues from the Company's nitrogen
fertilizer facility located in Iowa which was the site of a major explosion in
December 1994. The increase over 1994 results was achieved despite an extremely
late planting season in the Midwest. Based on published sources, only 71% of
the U.S. corn crop and 31% of the U.S. soybean crop had been planted as of May
28, 1995, as compared to 97% and 75%, respectively, as of the comparable date
in 1994.
4
<PAGE>
Total revenues by business segment for the five-month periods ended May 31,
1995 and 1994 and for the five-month period ended May 31, 1994 including AMCI
on a pro forma basis were as follows:
<TABLE>
<CAPTION>
FIVE MONTHS ENDED MAY 31,
---------------------------
PRO FORMA
FOR AMCI
ACQUISITION
1994 1994 1995
------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues:
Distribution............................... $ 730.1 $ 730.1 $ 745.6
Nitrogen Products.......................... 110.0 239.1 273.2
Methanol................................... 0.7 62.2 96.2
Other--net................................. (7.1) (7.1) (16.8)
------- -------- --------
$ 833.7 $1,024.3 $1,098.2
======= ======== ========
</TABLE>
The Company's business is seasonal and is affected by weather and other
factors. Results for the five-month period ended May 31, 1995 may not be
indicative of results for the quarter ended June 30, 1995 or the full year. See
"Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
SOURCES AND USES OF FUNDS
The Company will not receive any cash proceeds from the Exchange Offer. The
net proceeds from the Offering are available to finance any open market
purchases of SPUs through December 31, 1995. On or prior to December 31, 1995,
the Company will apply the net proceeds from the Offering less the amount used
to purchase SPUs to reduce term loans under the Credit Agreement (as defined in
"Description of Other Indebtedness--Credit Agreement"). See "Use of Proceeds."
5
<PAGE>
COMPANY STRUCTURE
The following chart represents the organization of the Company and certain of
its subsidiaries as of the date hereof. Terra Capital Holdings, Inc. ("Terra
Holdings") and Terra Capital, Inc. ("Terra Capital") are wholly owned
subsidiaries of the Company formed in connection with the acquisition of AMCI
and the financing thereof. Terra International, Inc. ("Terra International")
owns three of the Company's five nitrogen fertilizer plants and also conducts
the distribution segment of the Company's business. Terra International
(Canada) Inc. ("Terra Canada"), a wholly owned subsidiary of Terra
International, conducts the Company's Canadian operations. TNC owns a general
partner interest and limited partner interests consisting of all the
outstanding Junior Preference Units and Common Units (as defined in TNCLP's
limited partnership agreement) of TNCLP, for a total 60.2% equity interest in
TNCLP. The other 39.8% limited partner interest in TNCLP is represented by the
Senior Preference Units. See "Description of Other Indebtedness--TNCLP Senior
Preference Units." All of the operating assets of TNCLP, which include two of
the Company's five nitrogen fertilizer plants, are owned by Terra Nitrogen,
Limited Partnership ("TNLP"), in which TNC holds a 1% general partner interest
and TNCLP holds a 99% limited partner interest. The methanol business of the
Company is conducted principally through Beaumont Methanol, Limited Partnership
("BMLP"). BMC Holdings, Inc. ("BMCH") is the sole limited partner of BMLP and
holds a 99% limited partner interest in BMLP and Terra Methanol Corporation
("TMC") is the general partner of BMLP and holds a 1% general partner interest
in BMLP. The Company acquired the operations of BMLP together with TNC in the
AMCI acquisition. Terra Capital owns 100% of the capital stock of Terra
International, TNC, BMCH and TMC.
[COMPANY STRUCTURE CHART]
6
<PAGE>
THE OFFERING
Notes..................... The Notes were sold by the Company on June 22,
1995 to Merrill Lynch, Pierce, Fenner & Smith
Incorporated and to Citicorp Securities, Inc.
(the "Initial Purchasers") pursuant to a
Purchase Agreement, dated as of June 15, 1995
(the "Purchase Agreement"). The Initial
Purchasers subsequently resold the Notes to
qualified institutional buyers pursuant to Rule
144A under the Securities Act and to a limited
number of institutional accredited investors
that agreed to comply with certain transfer
restrictions and other conditions.
Registration Rights Pursuant to the Purchase Agreement, the Company
Agreement................ and the Initial Purchasers entered into a
Registration Rights Agreement, dated as of June
22, 1995 (the "Registration Rights Agreement"),
which grants the holders of the Notes certain
exchange and registration rights. The Exchange
Offer is being made pursuant to the
Registration Rights Agreement and such exchange
rights terminate upon the consummation of the
Exchange Offer.
THE EXCHANGE OFFER
Securities Offered........ $200,000,000 aggregate principal amount of 10
1/2% Senior Notes due 2005, Series B.
The Exchange Offer........ $1,000 principal amount of the Exchange Notes
in exchange for each $1,000 principal amount of
Notes. As of the date hereof, $200,000,000
aggregate principal amount of Notes are
outstanding. The Company will issue the
Exchange Notes on or promptly after the
Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that the Exchange Notes issued pursuant to the
Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired
in the ordinary course of such holder's
business and that such holder has no
arrangement or understanding with any person to
participate in the distribution of such
Exchange Notes.
Each Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with
any resale of such Exchange Notes. The Letter
of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that
it is an "underwriter" within the meaning of
the Securities Act. This
7
<PAGE>
Prospectus, as it may be amended or
supplemented from time to time, may be used by
a Participating Broker-Dealer in connection
with resales of Exchange Notes received in
exchange for Notes where such Notes were
acquired by such Participating Broker-Dealer as
a result of market-making activities or other
trading activities. The Company has agreed that
it will make this Prospectus available to any
Participating Broker-Dealer for use in
connection with any such resale and
Participating Broker-Dealers shall be
authorized to deliver this Prospectus for a
period not exceeding 180 days after the
Expiration Date. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the Exchange Notes cannot rely on the position
of the staff of the Commission enunciated in
no-action letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which
the holder is not indemnified by the Company.
Expiration Date........... 5:00 p.m., New York City time, on ,
1995, unless the Exchange Offer is extended by
the Company in its sole discretion, in which
case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended.
Accrued Interest on the
Exchange Notes and
Notes....................
Interest on each Exchange Note will accrue from
the last date on which interest was paid on the
Notes surrendered in exchange therefor or, if
no interest has been paid on the Notes, from
the date of original issuance of such Note. No
interest will be paid on the Notes accepted for
exchange, and holders of Notes whose Notes are
accepted for exchange will be deemed to have
waived the right to receive any payment in
respect of interest on the Notes accrued up to
the date of the issuance of the Exchange Notes.
Holders of Notes that are not exchanged will
receive the accrued interest payable on
December 15, 1995 in accordance with the
Indenture. See "Exchange Offer--Interest on the
Exchange Notes."
Conditions to the The Exchange Offer is subject to certain
Exchange Offer........... customary conditions, which may be waived by
the Company. See "Exchange Offer--Conditions."
Procedures for Tendering Each holder of Notes wishing to accept the
Notes.................... Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
the Notes to be exchanged and any other
required documentation to the Exchange Agent
(as defined) at the address set forth herein or
effect a tender of such Notes pursuant to the
procedures for book-entry transfer as provided
herein. By executing the Letter of Transmittal,
each holder
8
<PAGE>
will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder, that neither the
holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such
Exchange Notes and that neither the holder nor
any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act,
of the Company. See "Exchange Offer--Purpose
and Effect of the Exchange Offer" and "--
Procedures for Tendering." Each broker-dealer
that receives Exchange Notes for its own
account in exchange for Notes, where such Notes
were acquired by such broker-dealer as a result
of market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such Exchange Notes. See "Exchange
Offer--Procedures for Tendering" and "Plan of
Distribution."
Untendered Notes.......... Following the consummation of the Exchange
Offer, holders of Notes eligible to participate
but who do not tender their Notes will not have
any further registration rights and such Notes
will continue to be subject to certain
restrictions on transfer. Accordingly, the
liquidity of the market for such Notes could be
adversely affected.
Consequences of Failure
to Exchange..............
The Notes that are not exchanged pursuant to
the Exchange Offer will remain outstanding and
continue to accrue interest and will also
remain restricted securities. Accordingly, such
Notes may be resold only (i) to the Company,
(ii) pursuant to Rule 144A or Rule 144 under
the Securities Act or pursuant to some other
exemption from registration under the
Securities Act, (iii) outside the United States
to a foreign person pursuant to the
requirements of Regulation S under the
Securities Act, or (iv) pursuant to an
effective registration statement under the
Securities Act. See "Exchange Offer--
Consequences of Failure to Exchange."
Shelf Registration In the event that any changes in law or the
Statement................ applicable interpretations of the staff of the
Commission do not permit the Company to effect
the Exchange Offer, if for any other reason the
Exchange Offer is not consummated within 120
days after the original issuance of the Notes,
upon the request of the Initial Purchasers
under certain circumstances or if a holder of
Notes is not permitted to participate in the
Exchange Offer or would not receive fully
tradable Exchange Notes if it were to
participate in the Exchange Offer, subject to
certain conditions, the Company will use its
best efforts to cause to become effective by
the 120th day after the original issue of the
Notes a shelf registration statement with
respect to the resale of the Notes (the "Shelf
Registration Statement") and to keep the Shelf
Registration Statement effective for up to
three years after the date of the original
issue of the Notes. See "Exchange Offer--
Purpose and Effect of the Exchange Offer."
9
<PAGE>
Special Procedures for
Beneficial Owners........
Any beneficial owner whose Notes are registered
in the name of a broker, dealer, commercial
bank, trust company or other nominee and who
wishes to tender should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering its Notes,
either make appropriate arrangements to
register ownership of the Notes in such owner's
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable
time.
Guaranteed Delivery Holders of Notes who wish to tender their Notes
Procedures............... and whose Notes are not immediately available
or who cannot deliver their Notes, the Letter
of Transmittal or any other documents required
by the Letter of Transmittal to the Exchange
Agent (or comply with the procedures for book-
entry transfer) prior to the Expiration Date
must tender their Notes according to the
guaranteed delivery procedures set forth in
"Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights......... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Notes and
Delivery of Exchange
Notes.................... The Company will accept for exchange any and
all Notes which are duly tendered in the
Exchange Offer and not validly withdrawn prior
to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be
delivered promptly following the Expiration
Date. See "Exchange Offer--Terms of the
Exchange Offer."
Certain Tax Consequences.. The exchange pursuant to the Exchange Offer
should not be a taxable event for Federal
income tax purposes. See "Tax Considerations."
Use of Proceeds........... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer. See "Use of Proceeds."
Exchange Agent............ First Trust National Association.
THE EXCHANGE NOTES
General................... The form and terms of the Exchange Notes are
the same as the form and terms of the Notes
(which they replace) except that (i) the
Exchange Notes have been registered under the
Securities Act and, therefore, will not bear
legends restricting the transfer thereof, (ii)
the Exchange Notes do not include provisions
providing for an increase in the interest rate
in certain circumstances relating to the timing
of the Exchange Offer and (iii) the holders of
Exchange Notes will not be entitled to certain
rights under the Registration Rights
10
<PAGE>
Agreement, which rights will terminate when the
Exchange Offer is consummated. The Exchange
Notes will evidence the same debt as the Notes
and will be entitled to the benefits of the
Indenture. See "Description of Exchange Notes."
Securities Offered........ $200,000,000 principal amount of 10 1/2% Senior
Notes due 2005, Series B.
Maturity Date............. June 15, 2005.
Interest Payment Dates.... June 15 and December 15 of each year,
commencing December 15, 1995.
Optional Redemption....... The Exchange Notes will be redeemable at the
option of the Company, in whole or in part, on
or after June 15, 2000, at the redemption
prices set forth herein, together with accrued
and unpaid interest, if any, to the date of
repurchase.
Change of Control......... Upon the occurrence of a Change of Control (as
defined below), each holder of the Exchange
Notes may require the Company to repurchase all
or a portion of such holder's Exchange Notes at
a cash purchase price equal to 101% of the
principal amount thereof, together with accrued
and unpaid interest, if any, to the date of
repurchase.
Ranking................... The Exchange Notes will be senior unsecured
obligations of the Company and will rank pari
passu in right of payment with all senior
indebtedness of the Company and senior in right
of payment to all subordinated indebtedness of
the Company. In addition, the business
operations of the Company are conducted
substantially through its subsidiaries and,
accordingly, the Exchange Notes will be
effectively subordinated to all existing and
future obligations of such subsidiaries. As of
March 31, 1995, on a pro forma basis after
giving effect to the Offering and the Exchange
Offer and the application of the net proceeds
from the Offering to repay bank indebtedness of
the Company's subsidiaries, the Company would
have had $158.8 million in aggregate principal
amount of indebtedness outstanding which ranked
pari passu in right of payment with the
Exchange Notes and no indebtedness outstanding
which ranked subordinate in right of payment to
the Exchange Notes and the aggregate principal
amount of indebtedness of the Company's
subsidiaries would have been approximately
$236.1 million (excluding intercompany
indebtedness), approximately $192.9 million of
which was secured. As of March 31, 1995, the
Company's subsidiaries also had trade payables
of approximately $301.0 million. The Company's
businesses are seasonal and historically the
borrowings and other liabilities of the Company
and its subsidiaries are greatest in the late
spring and fall. Amounts payable to holders of
SPUs also will be effectively senior to the
Exchange Notes. See "Risk Factors--Holding
Company Structure" and "--Leverage."
Restrictive Covenants..... The Indenture contains certain covenants,
including, but not limited to, covenants with
respect to the following matters: (i)
limitation on
11
<PAGE>
indebtedness; (ii) limitation on restricted
payments; (iii) limitation on transactions with
affiliates; (iv) limitation on liens; (v)
limitation on sale-leaseback transactions; (vi)
limitation on asset sales; (vii) limitation on
the issuance of capital stock of subsidiaries;
(viii) limitation on dividend and other payment
restrictions affecting subsidiaries; and (ix)
restriction on consolidation, merger and sale
of assets.
Absence of a Public
Market for the Notes.....
The Exchange Notes will be new securities for
which there currently is no market. Although
Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Citicorp Securities, Inc. have
informed the Company that they currently intend
to make a market in the Exchange Notes, they
are not obligated to do so, and any such market
making may be discontinued at any time without
notice. Accordingly, there can be no assurance
as to the development or liquidity of any
market for the Exchange Notes. The Company does
not intend to apply for listing of the Exchange
Notes on any securities exchange or for
quotation through the National Association of
Securities Dealers Automated Quotation System.
RISK FACTORS
Before purchasing the Notes offered hereby, potential investors should
consider the factors described in "Risk Factors."
SUMMARY FINANCIAL DATA
The following table presents: (i) summary consolidated historical financial
data for the years ended December 31, 1990, 1991, 1992, 1993 and 1994 derived
from the Company's audited consolidated financial statements, (ii) summary
consolidated historical financial data for the three months ended March 31,
1994 and 1995 derived from the Company's unaudited consolidated financial
statements for such period, and (iii) unaudited pro forma consolidated data for
each of the periods indicated. The historical data includes the Company's
Canadian acquisition effective as of March 31, 1993, the Company's Florida
acquisition since January 1, 1994 and AMCI from October 20, 1994. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--General." The pro forma data for 1994 and the three months ended
March 31, 1994 was prepared to illustrate and give effect to the acquisition of
AMCI and related transactions, including (i) the issuance of 9.7 million common
shares of the Company for aggregate net proceeds of $113.7 million, (ii) the
assumption of the 10 3/4% Senior Notes due 2003 (the "10 3/4% Notes") of AMCI,
and (iii) the incurrence of $310.0 million of debt under the Credit Agreement,
as if such transactions had occurred as of January 1, 1994. In addition, the
unaudited pro forma interest expense and related ratios presented under the
caption "Other Data and Selected Ratios" give effect to the Offering and the
application of the net proceeds therefrom as of January 1, 1994. The unaudited
pro forma financial data are presented for informational purposes only and are
not necessarily indicative of the results that actually would have occurred had
the transactions been consummated on the dates indicated or the results that
may occur or be obtained in the future. In addition, quarterly results may not
be indicative of results for the full year. The following information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Selected Financial Data" and the
consolidated financial statements of the Company and related notes thereto
included elsewhere and incorporated by reference herein.
12
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------- --------------------------------
PRO FORMA PRO FORMA
FOR AMCI FOR AMCI
ACQUISITION ACQUISITION
1990 1991 1992 1993 1994 1994 1994 1994 1995
-------- ---------- ---------- ---------- ---------- ----------- -------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Total revenues...... $962,202 $1,022,597 $1,082,191 $1,238,001 $1,665,947 $2,084,827 $259,504 $356,088 $ 443,340
Cost of sales....... 806,772 849,684 904,246 1,021,187 1,330,202 1,543,212 221,974 280,444 291,772
Depreciation and
amortization....... 14,997 14,399 14,994 15,470 27,218 60,567 4,456 15,006 15,559
Selling, general and
administrative
expenses........... 138,315 132,845 137,232 161,791 193,975 215,624 40,306 45,537 52,995
Operating income.... 2,118 25,669 25,719 41,828 115,295 266,167 (7,786) 14,547 81,817
Net interest
expense............ (17,056) (12,563) (7,533) (9,683) (16,541) (49,367) (2,079) (12,700) (11,341)
Income (loss) from
continuing
operations before
income taxes....... (14,938) 13,106 18,186 32,145 89,945 181,884 (9,865) (3,879) 53,883
Income tax
(provision)
benefit............ 816 (1,073) (7,757) (9,300) (33,700) (71,517) 3,580 1,410 (20,930)
Income (loss) from
continuing
operations......... $(14,122) $ 12,033 $ 10,429 $ 22,845 $ 56,245 $ 110,367 $ (6,285) $ (2,469) $ 32,953
Per Common Share:
Income (loss) from
continuing
operations........ $ (0.21) $ 0.18 $ 0.15 $ 0.33 $ 0.77 $ 1.37 $ (0.09) $ (0.03) $ 0.41
Dividends.......... $ 0.12 -- -- $ 0.02 $ 0.08 $ 0.08 $ 0.02 $ 0.02 $ 0.02
SUMMARY OPERATING
DATA:
Net fertilizer production
(thousands of tons)
Ammonia............ 393.6 399.3 404.2 686.1 780.6 1,217.1 205.4 323.4 262.0
Urea............... 145.3 138.7 126.7 222.6 297.9 623.4 55.3 171.0 154.1
UAN................ 765.1 810.0 759.8 987.3 1,295.2 2,757.3 243.6 760.9 662.5
Methanol production
(millions of
gallons)........... -- -- -- -- 81.2 310.3 -- 69.2 64.9
Revenues by business
segment (1)
Distribution....... $841,742 $ 899,250 $ 958,725 $1,019,438 $1,318,416 $1,318,416 $206,478 $206,478 $ 238,454
Nitrogen Products.. 120,751 126,664 125,659 228,910 296,557 539,152 54,156 114,670 147,188
Methanol........... -- -- -- -- 70,274 246,404 -- 36,096 65,874
OTHER DATA AND
SELECTED RATIOS:
Capital
expenditures....... $ 10,689 $ 12,728 $ 17,620 $ 21,620 $ 31,213 $ 40,509 $ 10,463 $ 11,443 $ 14,007
EBITDA (2).......... 17,115 40,068 40,713 55,023 141,770 325,991 (2,776) 30,107 98,573
EBITDA less SPU
distributions...... 17,115 40,068 40,713 55,023 136,730 305,831 (2,776) 25,067 93,533
Pro forma net
interest expense
(3)................ -- -- -- -- -- 55,753 -- 14,296 12,487
EBITDA/Net interest
expense............ 1.00x 3.19x 5.40x 5.68x 8.57x 6.60x -- 2.37x 8.69x
EBITDA/Pro forma net
interest expense
(3)................ -- -- -- -- -- 5.85 -- 2.11 7.89
EBITDA less SPU
distributions/Pro
forma net interest
expense (3)........ -- -- -- -- -- 5.49 -- 1.75 7.49
Long-term
debt/EBITDA (4).... 10.77 2.87 3.28 2.21 3.94 1.71 -- -- --
Long-term
debt/EBITDA less
SPU distributions
(4)................ 10.77 2.87 3.28 2.21 4.08 1.83 -- -- --
Ratio of earnings to
fixed charges (5).. -- 1.63 2.06 2.35 3.45 3.47 -- -- 4.06
BALANCE SHEET DATA (AT END OF PERIOD):
Net working capital....................................................................................... $ 315,963
Net property, plant and equipment......................................................................... 569,348
Total assets.............................................................................................. 1,964,427
Minority interest......................................................................................... 182,183
Long-term debt (including current maturities)............................................................. 560,522
Total stockholders' equity................................................................................ 450,088
</TABLE>
- -------
(1) Includes intercompany sales and excludes revenues not included in any of
the three business segments.
(2) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
represents income (loss) from continuing operations before income taxes,
plus minority interest, plus net interest expense, less equity in earnings,
or plus equity in losses, of unconsolidated affiliates, plus depreciation
and amortization. EBITDA should not be considered as an alternative to net
income as an indicator of the Company's operating performance or to cash
flow as a measure of liquidity, but rather to provide additional
information related to the Company's ability to service debt.
(3) Pro forma net interest expense is calculated assuming the net proceeds of
the Offering of the Notes were applied to repay term loans under the Credit
Agreement as of January 1, 1994. To the extent such net proceeds are
applied to make open market purchases of SPUs, the amount of such term loan
repayments will be decreased commensurately. Minority interest and SPU
distributions to unaffiliated third parties would also decrease as a result
of any open market purchases of SPUs.
(4) Long-term debt includes current maturities.
(5) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) from continuing operations before income taxes
plus fixed charges. Fixed charges consist of interest expense on all debt,
amortization of deferred financing costs and the portion of operating lease
rental expense that is representative of the interest factor (deemed to be
one-third of minimum operating lease rentals). Earnings available for fixed
charges were insufficient to cover fixed charges by $14.9 million for the
year ended December 31, 1990, and $9.2 million and $3.3 million for the
historical and pro forma three-month periods ended March 31, 1994,
respectively. As a result, the financial ratios for such periods are not
meaningful and, therefore, not included.
13
<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information in this Prospectus, the following factors before tendering their
Notes in the Exchange Offer.
HOLDING COMPANY STRUCTURE
The Company's assets consist primarily of investments in its subsidiaries. As
a result, the Company's rights, and the rights of its creditors (including
holders of the Exchange Notes), to participate in the distribution of assets of
any subsidiary upon such subsidiary's liquidation or reorganization will be
subject to the prior claims of such subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would
still be subject to the claims of any secured creditor of such subsidiary and
of any holder of indebtedness of such subsidiary senior to that held by the
Company. In addition, TNCLP's assets (including cash generated by its business)
are subject to the rights of the holders of Senior Preference Units under the
terms of TNCLP's limited partnership agreement. See "--Rights of TNCLP Limited
Partners." As of March 31, 1995, the Company's subsidiaries had trade payables
of approximately $301.0 million and approximately $430.1 million of
indebtedness (excluding intercompany liabilities and not including amounts
payable with respect to the Senior Preference Units). Indebtedness of the
Company outstanding at March 31, 1995 consisted of $158.8 million in aggregate
principal of the 10 3/4% Notes. The Exchange Notes will rank pari passu with
the Notes, if any, and the 10 3/4% Notes.
The Exchange Notes are obligations exclusively of the Company. Since the
operations of the Company are currently conducted through subsidiaries, the
Company's cash flow and its ability to service its debt, including the Exchange
Notes, the Notes, if any, and the 10 3/4% Notes, is dependent upon the earnings
of its subsidiaries and the distribution of those earnings to the Company or
upon loans or other payments of funds by those subsidiaries to the Company. The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay amounts due pursuant to the Exchange Notes, the
Notes, if any, or the 10 3/4% Notes or to make any funds available therefor,
whether by dividends, loans or other payments. In addition, the Company and
certain of its wholly-owned subsidiaries have guaranteed the obligations of
Terra Capital and TNLP under the Credit Agreement. See "Description of Other
Indebtedness--Credit Agreement." Moreover, the payment of dividends and the
making of loan advances to the Company by its subsidiaries are contingent upon
the earnings of those subsidiaries and are subject to various business
considerations and restrictive loan covenants. See "Description of Other
Indebtedness."
RIGHTS OF TNCLP LIMITED PARTNERS
TNCLP's limited partnership agreement requires the quarterly distribution to
the partners of TNCLP of all "Available Cash," which is generally defined to
mean all cash receipts from all sources, less the sum of all cash
disbursements, adjusted for changes in certain reserves established as TNC (as
general partner of TNCLP) determines to be necessary or appropriate in its
reasonable discretion to provide for the proper conduct of the business of
TNCLP or TNLP (including reserves for future capital expenditures) or to
provide funds for distributions with respect to any of the next four calendar
quarters. The Senior Preference Units (which represent a 39.8% interest in
TNCLP) are entitled to receive a minimum quarterly distribution of $0.605 per
unit, plus arrearages, before any amounts are paid to TNC as distributions on
its Junior Preference Units and Common Units. The Senior Preference Units also
participate in distributions greater than $0.605 per unit. Based on the number
of Senior Preference Units currently outstanding, the minimum annual
distributions on Senior Preference Units aggregates $18.5 million. In 1994, an
aggregate of $20.2 million was paid as distributions on the Senior Preference
Units. See "Description of Other Indebtedness--TNCLP Senior Preference Units."
The Indenture will not limit the amount of distributions that may be paid on
the Senior Preference Units pursuant to the terms of TNCLP's limited
partnership agreement or purchases of SPUs by the Company and its subsidiaries.
See "Description of Exchange Notes--Covenants--Limitation on Restricted
Payments." See also "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Open Market Purchase Program
for TNCLP SPUs."
14
<PAGE>
The nature of the businesses of the Company and TNCLP may give rise to
conflicts of interest between the two. Conflicts could arise, for example, with
respect to transactions involving purchases, sales and transportation of
fertilizer and natural gas and potential acquisitions of businesses or
properties.
LEVERAGE
As of March 31, 1995, the Company had outstanding long-term debt of $512.8
million and debt due within one year of $76.0 million. See "Capitalization."
The Indenture permits, subject to certain limitations, the Company and its
subsidiaries to incur additional indebtedness, some of which may be secured by
the assets of the Company and its subsidiaries and all of which may be borrowed
at subsidiary levels with the result that such indebtedness would effectively
rank senior to the Exchange Notes. See "Description of Exchange Notes--
Covenants--Limitation on Indebtedness."
The degree to which the Company is leveraged could have important
consequences to holders of the Exchange Notes, including the following: (i) a
substantial portion of the Company's cash flow from operations must be
dedicated to the payment of the principal of and interest on indebtedness; (ii)
the Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or general corporate purposes may
be limited; (iii) the Indenture and other agreements governing the Company's
long-term indebtedness contain certain restrictive financial and operating
covenants, including limitations on the amount of acquisitions (which have been
an important part of the Company's growth strategy over the last several
years); (iv) the Company will be more leveraged than certain of its
competitors, which might place the Company at a competitive disadvantage; (v)
pursuant to the Credit Agreement and other debt agreements, a substantial
portion of the Company's borrowings are at floating rates of interest, causing
the Company to be sensitive to increases in interest rates; and (vi) the
Company could be more sensitive to a downturn in general economic conditions or
in the agricultural or methanol industries.
VOTING CONTROL BY PRINCIPAL STOCKHOLDER
As of March 31, 1995, Minorco and its affiliates owned approximately 53% of
the outstanding common shares of the Company. Since the Company became
publicly-owned in 1983, Minorco and its affiliates have owned a majority of the
Company's outstanding equity securities. As a result of its beneficial
ownership of common shares of the Company, Minorco and its affiliates are able
to control the election of the Company's directors and the management and
policies of the Company. As of the date hereof, six of the Company's ten
directors are also officers and/or directors of Minorco or its affiliates.
DEPENDENCE ON NATURAL GAS; INDUSTRY CONSIDERATIONS
The principal raw material used to produce manufactured nitrogen products and
methanol is natural gas. Natural gas costs comprise almost 50% of the Company's
total costs and expenses associated with nitrogen production and in excess of
50% of the Company's total costs and expenses associated with methanol
production. 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 natural gas procurement policy is to fix or cap the price
of approximately 40% to 80% of its natural gas requirements for a 12-month
period through various supply contracts, financial derivatives and other
forward-pricing techniques. Depending on market conditions, the Company may
also fix or cap the price for natural gas for longer periods of time. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Factors Affecting Operating Results" and "Business--Raw Materials."
The Company's future operating results are also subject to other external
factors which are beyond the Company's control, including the number of planted
acres; the types of crops planted; the effects of general weather patterns on
the timing and duration of field work for crop planting and harvesting; the
supply of crop inputs; the relative balance of worldwide supply and demand for
nitrogen fertilizers and methanol; the U.S. government's agricultural policy;
and market prices of methanol. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
15
<PAGE>
CYCLICAL MARKETS FOR PRODUCTS
The markets for and profitability of the Company's products have been, and
are likely to continue to be, cyclical. Periods of high demand, high capacity
utilization and increasing operating margins tend to result in new plant
investment and increased production until supply exceeds demand, followed by
periods of declining prices and declining capacity utilization until the cycle
is repeated. In addition, markets for the Company's products are affected by
general economic conditions. The cyclicality of the Company's products or a
downturn in the economy could materially adversely affect the Company,
including its ability to service its debt obligations, including the Exchange
Notes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
SEASONALITY AND VOLATILITY
The agricultural products business is seasonal, based upon the planting,
growing and harvesting cycles. Inventories must be accumulated in the first few
months of the calendar year to be available for seasonal sales, requiring
significant storage capacity. Inventory accumulations are financed by suppliers
or short-term borrowings, which are retired with the proceeds of the sales of
such inventory. In times of lower demand, the Company can reduce purchases,
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) and 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 stocks and prices and the
U.S. government's agricultural policy. Among the governmental policies that
influence the markets for fertilizer are those directly or indirectly
influencing the number of acres planted, the level of grain stocks, the mix of
crops planted and crop prices. In 1994, nitrogen product prices increased
dramatically and have remained at a high level to date. There can be no
assurances that such conditions will continue.
As with any commodity chemical, the price of methanol is volatile. During
1994, increased world demand for methanol combined with a large number of plant
shutdowns and maintenance turnarounds in the industry and the phase-in of U.S.
federally mandated standards for oxygenated gasoline resulted in a tight market
and dramatically increased prices over 1993 levels. Demand for methanol also
increased due to increased demand for wood building products in the
construction industry. Since January 1995, however, methanol prices have
decreased markedly due to lower demand for MTBE production and increased
methanol imports that resulted from the 1994 price increases. See also "--
Factors Affecting Demand For Methanol and MTBE."
FACTORS AFFECTING DEMAND FOR METHANOL AND MTBE
Methanol is used as a feedstock in the production of MTBE, an oxygenate and
octane enhancer used in reformulated gasoline. Reformulated gasoline has lower
volatility and is less aromatic than gasoline. The price of methanol has been
greatly influenced by the demand for MTBE, and future MTBE demand is dependent
on a number of market and regulatory forces that are beyond the control of the
Company and difficult to predict. Demand for methanol also increases with
increases in demand for wood building products in the construction industry.
Federally mandated standards promulgated under amendments to the Clean Air
Act (the "Clean Air Act Amendments") mandate comprehensive specifications for
motor vehicle fuel, including increased oxygenate content and lower volatility.
Since 1992, the Clean Air Act Amendments have required the use of oxygenated
gasoline in over 30 metropolitan areas during the portion of the year,
generally the winter months,
16
<PAGE>
when maximum allowable carbon monoxide levels are likely to be exceeded.
Effective January 1, 1995, the second phase of the Clean Air Act Amendments
requires the year-round use of reformulated gasoline in the nine metropolitan
areas having the highest levels of ozone pollution plus non-attainment areas in
a state that elects to participate in the reformulated gasoline program. The
areas in which reformulated gasoline is required to be sold represented
approximately 30% of total U.S. gasoline demand as of February 1994.
Future demand for MTBE and methanol will depend, in part, 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 for
specific cities or regions, and the extent to which regions not required to
sell reformulated gasoline opt-in to the program. Certain of the areas that had
initially opted-in to the reformulated gasoline program have already requested
approval from the United States Environmental Protection Agency (the "EPA") to
opt-out of the program, alleging either conflicts with other pollution control
requirements or that they are no longer non-attainment areas. Representatives
of such areas are in discussions with the EPA with respect to these matters.
Additionally, future demand for MTBE will be impacted by the availability and
use of alternative oxygenates, principally 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. The EPA anticipates that oxygenates
derived from ethanol feedstocks will be the most utilized renewable oxygenates.
This mandate, however, was reversed by a federal appeals court on April 28,
1995, which ruled that the EPA lacked authority to promulgate a renewable
oxygenate requirement. On June 12, 1995, the EPA appealed the ruling.
Currently, MTBE is the oxygenate most used in the U.S. refining industry.
However, there are alternative oxygenates, principally ethanol, ETBE, an
ethanol derivative, and tertiary amyl methyl ether, a methanol derivative.
Although there is a petroleum industry 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.
COMPETITION
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.
Nitrogen fertilizer is a global commodity, and customers, including end-
users, dealers and other fertilizer producers and distributors, base their
purchasing decisions principally on the delivered price and availability 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 the Company.
Some foreign competitors may have access to lower cost or government-subsidized
natural gas supplies.
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. See "--Factors Affecting Demand for Methanol and MTBE" and
"Business-- Competition."
17
<PAGE>
DAMAGE TO FACILITIES; NATURAL HAZARDS
The operations of the Company 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. However, the Company
currently maintains, and expects that it will, to the extent economically
feasible, continue to maintain, insurance (including business interruption
insurance) in an amount which the Company believes is sufficient to allow the
Company to withstand major damage to any of its facilities.
The Company's nitrogen fertilizer plant in Iowa (the "Port Neal Facility")
was the site of a major explosion on December 13, 1994. The Company has decided
to repair the facility and expects it to be fully operational in mid-1996. At
the time of the explosion, the Port Neal Facility accounted for approximately
15% of the Company's annual ammonia production capacity. The Company will
recover insurance proceeds for substantially all of its property damage, third
party liability claims and business interruption losses. The Company has
reserved $7.0 million to cover insurance deductibles and uninsured costs
related to the explosion. As a result of an investigation of the explosion by
the Iowa Occupational Safety and Health Administration ("IOSHA") the Company
received allegations of safety and health violations from IOSHA on May 25,
1995. The allegations of violation were accompanied by a proposed fine of
$461,900. The Company intends to contest vigorously the alleged violations and
the proposed fine. The Company believes that the IOSHA allegations, including
the proposed fine, will not have a material adverse effect on the Company's
business or financial condition.
ENVIRONMENTAL REGULATION
The Company's business activities are subject to stringent U.S. and foreign
environmental regulations. The Company is also involved in the manufacture,
handling, transportation, storage and disposal of materials that are or may be
classified as hazardous or toxic by applicable laws and regulations. If such
materials have been or are disposed of at sites that are targeted for
investigation and remediation by regulatory authorities, the Company or
subsidiaries thereof, as applicable, may be among those responsible under such
laws for all or part of the costs of such cleanup. The Company has been
designated as a potentially responsible party ("PRP") under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), and analogous state laws with respect to a number of sites. Under
such laws, certain classes of persons, including generators of hazardous
substances, are subject to claims for response costs, regardless of fault or
the legality of original disposal. Such persons may be held jointly and
severally liable for such claims. In addition, there can be no assurance that
existing environmental regulations will not be revised or that new regulations
will not be adopted or become applicable so as to have a material adverse
affect on the Company's business or financial condition. See "Business--
Environmental and Other Regulatory Matters."
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 operation in compliance with such regulations to have a material
adverse effect on its earnings or competitive position.
ABSENCE OF PUBLIC MARKET
The Exchange Notes will be new securities for which there currently is no
market. Although the Initial Purchasers have informed the Company that they
currently intend to make a market in the Exchange Notes, they are not obligated
to do so, and any such market making may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Notes. The Company does not intend to
apply for listing of the Exchange Notes on any securities exchange or for
quotation through the National Association of Securities Dealers Automated
Quotation System.
18
<PAGE>
THE COMPANY
The Company is a leader in each of its three business segments: (i) the
distribution of crop production inputs and services, (ii) the manufacture of
nitrogen products and (iii) the manufacture of methanol. 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. The Company is also the third largest producer of anhydrous ammonia and
one of the two largest producers of nitrogen solutions in the United States and
Canada. In addition, the Company is one of the largest U.S. manufacturers and
marketers of methanol. In October 1994, the Company acquired AMCI, a
manufacturer and marketer of both nitrogen products and methanol. In 1994, on a
pro forma basis including AMCI's operations for a full year, the Company
generated revenues and operating income of $2.1 billion and $266.2 million,
respectively.
The Company's distribution network for fertilizer, crop protection products
and seed has grown over the last several years to include, as of March 31,
1995, approximately 370 farm service centers, 100 fertilizer storage facilities
and 780 affiliated dealer locations serving the United States and the eastern
region of Canada. This growth generally has been the result of a healthy farm
economy, acquisitions, additional facilities and aggressive marketing. The
Company's distribution network is supplied by both independent sources and the
Company's own production facilities, which presently include one crop
protection chemical dry flowable and liquid formulation plant and seven other
liquid chemical formulation facilities in addition to its nitrogen production
facilities. In 1994, on a pro forma basis including AMCI's operations for the
full year, distribution revenues constituted approximately 63% of the Company's
total revenues.
Nitrogen fertilizer is a basic crop nutrient which is applied seasonally by
farmers to improve crop yield and quality. Nitrogen fertilizer is produced by
combining gaseous nitrogen with hydrogen to form anhydrous ammonia, the
simplest form of nitrogen fertilizer, which can be further processed or
upgraded into other fertilizer products such as urea and nitrogen solutions.
The Company presently owns five nitrogen fertilizer facilities with total
annual gross production capacity of 2.7 million tons of ammonia. In 1994,
approximately 10% of the Company's fertilizer production tonnage was sold
through its farm service center locations to retail customers, while the rest
was sold to outside customers. The Company believes that it is among the lowest
cost providers of nitrogen fertilizer in the markets it serves, benefiting from
favorable transportation logistics and other operating synergies, in part as a
result of the AMCI acquisition which provided the Company with two fertilizer
plants and 1.4 million tons of annual gross production capacity of ammonia. The
Company suffered a major explosion in December 1994 at the Port Neal Facility,
for which it was insured. The Company expects the facility, representing
approximately 15% of its annual ammonia production capacity, to be fully
operational in mid-1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Factors Affecting Operating Results." In
1994, on a pro forma basis including AMCI's operations for the full year,
nitrogen products revenues (including intercompany sales) constituted
approximately 25% of the Company's total revenues.
Methanol is used primarily as a feedstock in the production of other chemical
products such as formaldehyde, acetic acid, adhesives and plastics. Methanol is
also used as a feedstock in the production of MTBE, an oxygenate and octane
enhancer used as an additive in reformulated gasoline to provide cleaner
burning fuels. The Company's methanol production capacity is currently
approximately 320 million gallons per year, representing approximately 15% of
the total United States rated capacity. The Beaumont Facility is the largest
such facility in the U.S. In 1994, on a pro forma basis including AMCI's
operations for the full year, methanol revenues constituted approximately 12%
of the Company's total revenues.
The Company's long-term strategy for growth is to: (i) acquire and upgrade
production and distribution facilities, (ii) increase distribution volumes by
expanding sales from Company-operated locations and its affiliated dealer
network, (iii) change its product mix to include more profitable value-added
products and (iv) continue to build customer loyalty by providing value-added
services. As part of this strategy, in April 1993, the Company acquired a
fertilizer manufacturing facility and 32 farm service centers in Canada; in
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<PAGE>
December 1993, the Company acquired 12 farm service centers in Florida; in
September 1994, the Company acquired a minority interest in a 100 location
distributor of crop input and protection products in the mid-Atlantic region;
and in October 1994, the Company acquired AMCI.
The Company's principal executive offices are located at Terra Centre, 600
Fourth Street, P. O. Box 6000, Sioux City, Iowa 51102-6000 and its telephone
number is (712) 277-1340.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the Exchange Offer. The
net proceeds from the sale of the Notes, after deducting expenses of the
Offering, including any commissions paid to the Initial Purchasers and any
expenses in connection with the Exchange Offer, are estimated to be
approximately $194.0 million. The net proceeds from the Offering are available
to finance purchases of SPUs through December 31, 1995. As of , 1995, the
Company had purchased SPUs for an aggregate purchase price of $ . See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Open Market Purchase Program of TNCLP SPUs." On or prior to
December 31, 1995, the Company will apply the net proceeds of the Offering less
the amount used to purchase SPUs to reduce term loans under the Credit
Agreement. Until so applied, amounts may be used from time to time to repay
temporarily revolving loans under the Credit Agreement. For a description of
the Credit Agreement, see "Description of Other Indebtedness--Credit
Agreement."
20
<PAGE>
CAPITALIZATION
Set forth below is the capitalization of the Company as of March 31, 1995 and
as adjusted to reflect: (i) the issuance and sale by the Company of the Notes
and the issuance of the Exchange Notes pursuant to the Exchange Offer and (ii)
the application of the net proceeds of the Offering to the prepayment of
outstanding term loans under the Credit Agreement. The Company may, however,
use such net proceeds to fund purchases of Senior Preference Units through
December 31, 1995. To the extent such net proceeds are applied to fund open
market purchases of SPUs, the amount of such term loan repayments will be
decreased proportionately. Minority interest and SPU distributions to
unaffiliated third parties would also decrease as a result of any open market
purchases of SPUs. The unaudited information set forth below should be read in
conjunction with the consolidated financial statements of the Company and the
related notes and other financial information included elsewhere and
incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1995
---------------------
AS
ACTUAL ADJUSTED
---------- ----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Long-term debt (including current maturities):
Credit Agreement term loans..................... $ 345,000 $ 151,000
Exchange Notes and Notes, if any................ -- 200,000
10 3/4% Notes................................... 158,755 158,755
Other long-term debt............................ 56,767 56,767
---------- ----------
Total long-term debt.......................... 560,522 566,522
Minority interest................................. 182,183 182,183
Stockholders' equity(1)........................... 450,088 447,388
---------- ----------
Total capitalization(2)....................... $1,192,793 $1,196,093
========== ==========
</TABLE>
- --------
(1) Adjusted to reflect write-off of pro-rata portion of deferred financing
fees for prepayment of Credit Agreement term loans.
(2) Excludes short-term borrowings under revolving credit agreements of $28.3
million and cash and short-term investments of $133.1 million.
21
<PAGE>
EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were originally sold by the Company on June 22, 1995 to the Initial
Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Notes to qualified institutional buyers in reliance on
Rule 144A under the Securities Act and to a limited number of institutional
accredited investors that agreed to comply with certain transfer restrictions
and other conditions. As a condition to the closing under the Purchase
Agreement, the Company entered into the Registration Rights Agreement with the
Initial Purchasers, pursuant to which the Company agreed, for the benefit of
the holders of the Notes, at the Company's cost, among other things, (i) to use
its best efforts to cause a registration statement on Form S-4 (the "Exchange
Offer Registration Statement," which term shall encompass all amendments,
exhibits, annexes and schedules thereto and of which this Prospectus is a part)
to be declared effective under the Securities Act within 90 days after the date
of the original issue of the Notes and (ii) to use its best efforts to cause
the Exchange Offer to be consummated not later than 120 days after the date of
the original issue of the Notes. Promptly after the Exchange Offer Registration
Statement has been declared effective, the Company agreed to offer the Exchange
Notes in exchange for Notes.
The Company will keep the Exchange Offer open until the Expiration Date. For
each Note validly tendered to the Company pursuant to the Exchange Offer and
not withdrawn by the holder thereof, the holder of such Note will receive an
Exchange Note having a principal amount equal to that of the tendered Note.
Interest on each Exchange Note will accrue from the last interest payment date
on which interest was paid on the tendered Note in exchange therefor or, if no
interest has been paid on such Note, from the date of the original issue of the
Note.
Based on an interpretation of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof without further compliance with
the registration and prospectus delivery provisions of the Securities Act.
However, any Purchaser of Notes who is an "affiliate" of the Company or who
intends to participate in the Exchange Offer for the purpose of distributing
the Exchange Notes (i) will not be able to rely on the interpretation by the
staff of the Commission set forth in the above referenced no-action letters,
(ii) will not be able to tender Notes in the Exchange Offer and (iii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the Notes, unless
such sale or transfer is made pursuant to an exemption from such requirements.
Each holder of the Notes who wishes to exchange Notes for Exchange Notes in
the Exchange Offer will be required to make certain representations, including
that (i) it is neither an affiliate of the Company nor a broker-dealer
tendering Notes acquired directly from the Company for its own account, (ii)
any Exchange Notes to be received by it will be acquired in the ordinary course
of its business and (iii) at the time of commencement of the Exchange Offer, it
has no arrangement with any person to participate in the distribution (within
the meaning of the Securities Act) of the Exchange Notes. In addition, in
connection with any resales of Exchange Notes, any broker-dealer (a
"Participating Broker-Dealer") who acquired the Notes for its own account as a
result of market-making activities or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The Commission has
taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the Exchange Notes (other than
a resale of an unsold allotment from the original sale of the Notes) with the
prospectus contained in the Exchange Offer Registration Statement. Under the
Registration Rights Agreement, the Company agreed that it will make this
Prospectus available to any Participating Broker-Dealer for use in connection
with any such resale and Participating Broker-Dealers shall be authorized to
deliver this Prospectus for a period not exceeding 180 days after the
Expiration Date.
In the event that any changes in law or the applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer,
if for any other reason the Exchange Offer is not
22
<PAGE>
consummated within 120 days after the original issue of the Notes, upon the
request of the Initial Purchasers under certain circumstances or if a holder of
Notes is not permitted to participate in the Exchange Offer or would not
receive fully tradable Exchange Notes if it were to participate in the Exchange
Offer, subject to certain conditions, the Company will, at its cost, (a) as
promptly as practicable, file with the Commission the Shelf Registration
Statement covering resales of the Notes, (b) use its best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
as promptly as praticable and (c) use its best efforts to keep effective the
Shelf Registration Statement for a period of three years after its effective
date (or for a period of one year after such effective date if such Shelf
Registration Statement is filed at the request of the Initial Purchasers or,
for such shorter period, when all of the Notes covered by the Shelf
Registration Statement have been sold pursuant thereto or cease to be
outstanding). The Company will, in the event of the filing of a Shelf
Registration Statement, provide to each holder of the Notes copies of the
prospectus which is a part of the Shelf Registration Statement, notify each
such holder when the Shelf Registration Statement for the Notes has become
effective and take certain other actions as are required to permit unrestricted
resales of the Notes. A holder of Notes who sells such Notes pursuant to the
Shelf Registration Statement generally will be required to be named as a
selling securityholder in the related prospectus and to deliver the prospectus
to purchasers, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each
holder of the Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Notes included in the
Shelf Registration Statement.
The summary herein of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company and which
is filed as an exhibit to this Exchange Offer Registration Statement. See
"Available Information."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal, the Company will accept any and all Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Notes
accepted in the Exchange Offer. Holders may tender some or all of their Notes
pursuant to the Exchange Offer. However, Notes may be tendered only in integral
multiples of $1,000. The Company has fixed the close of business on
, 1995 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes (which they replace), except that as of the date hereof the
Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting their transfer and will not contain certain
provisions included in the terms of the Notes relating to an increase in the
interest rate in certain circumstances relating to the timing of the Exchange
Offer. The holders of the Exchange Notes will not be entitled to certain rights
under the Registration Rights Agreement, which rights will terminate when the
Exchange Offer is consummated. The Exchange Notes will evidence the same debt
as the Notes and will be entitled to the benefits of the Indenture.
Holders of Notes do not have any appraisal or dissenters' rights under the
General Corporation Law of Maryland or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
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<PAGE>
The Company shall be deemed to have accepted validly tendered Notes when, as
and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the Exchange Notes from the Company.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned to the
tendering holder thereof, at the Company's expense, as promptly as practicable
after the Expiration Date.
Holders who tender Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Notes pursuant to
the Exchange Offer. The Company will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1995, unless the Company in its sole discretion extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent, or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
Interest on each Exchange Note will accrue from the last date on which
interest was paid on the Notes surrendered in exchange therefor or, if no
interest has been paid on the Notes, from the date of original issuance of such
Note. No interest will be paid on the Notes accepted for exchange, and holders
of Notes whose Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Notes accrued up
to the date of the issuance of the Exchange Notes. Holders of Notes whose Notes
are not exchanged will receive the accrued interest payable thereon on December
15, 1995, on such date in accordance with the Indenture.
Interest on the Exchange Notes is payable semi-annually on each June 15 and
December 15, commencing on December 15, 1995.
PROCEDURES FOR TENDERING
Only a holder of Notes may tender such Notes in the Exchange Offer. To tender
in the Exchange Offer, a holder must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Notes and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. To be tendered effectively, the Notes, Letter of
Transmittal and other required documents must be completed and received by the
Exchange Agent at the address set forth below under "Exchange Agent" prior to
5:00 p.m., New York City time, on the
24
<PAGE>
Expiration Date. Delivery of the Notes may be made by book-entry transfer in
accordance with the procedures described below. Confirmation of such book-entry
transfer must be received by the Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Company
the representations set forth above in the fourth paragraph under "Purpose and
Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF
THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instruction
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an other "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an
"Eligible Institution"), unless the Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. In
the event that signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be by an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Notes listed therein, such Notes must be endorsed or accompanied
by a properly completed bond power, signed by such registered holder as such
registered holder's name appears on such Notes with the signature thereon
guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Notes at the book-entry transfer facility, The Depository Trust Company (the
"Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange
Offer, and subject to the establishment thereof, any financial institution that
is a participant in the Book-Entry Transfer Facility's system may make book-
entry delivery of Notes by causing such Book-Entry Transfer Facility to
transfer such Notes into the Exchange Agent's account with respect to the Notes
in accordance with the
25
<PAGE>
Book-Entry Transfer Facility's procedures for such transfer. Although delivery
of the Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are compiled with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right in its sole discretion to waive any defects, irregularities
or conditions of tender as to particular Notes. The Company's interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Notes must
be cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Notes, neither the Company, the Exchange Agent nor any other person shall
incur any liability for failure to give such notification. Tenders of Notes
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering
holders, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Notes and principal amount of Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent upon three New York Stock Exchange
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
26
<PAGE>
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Notes in the Exchange Offer, a telegram, telex,
facsimile transmission or letter must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such delivered Notes, or, in the case of Notes transferred
by book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) state that such Depositor is
withdrawing its election to have the Notes exchanged and specify the name in
which any such Notes are to be registered, if different from that of the
Depositor and (iv) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Notes register the
transfer of such Notes into the name of the person withdrawing the tender. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Notes so withdrawn are
validly retendered. Any Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Notes may be retendered
by following one of the procedures described above under "Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Notes, if:
(a) the Exchange Offer or the making of any exchange by a holder of Notes
violates applicable law or any applicable interpretation by the Staff of
the Commission; or
(b) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the judgment of the Company, would reasonably be expected to
impair the ability of the Company to proceed with the Exchange Offer; or
(c) any law, statute, rule or regulation is adopted or enacted which, in
the judgment of the Company, would reasonably be expected to impair
materially the ability of the Company to proceed with the Exchange Offer.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Notes and return
all tendered Notes to the tendering holders, (ii) extend the Exchange Offer and
retain all Notes theretofore tendered in the Exchange Offer, subject, however,
to the rights of holders to withdraw such Notes (see "Withdrawal of Tenders")
or (iii) waive such unsatisfied conditions with respect to the Exchange Offer
and accept all properly tendered Notes which have not been withdrawn.
27
<PAGE>
EXCHANGE AGENT
First Trust National Association has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
By Registered or Certified Mail, Facsimile Transmission:
Overnight Courier or Hand: (612) 244-1145
First Trust National Association Attention: Theresa Shackett,
180 East Fifth Street Specialized Finance
St. Paul, Minnesota 55101
Attention: Theresa Shackett, Confirm by Telephone:
Specialized Finance (612) 244-1196
For general information contact the Exchange Agent's Bondholder Relations
Department at (612) 244-0444.
Delivery to an address other than as set forth above, or transmission of
instructions via a facsimile number other than the one set forth above, will
not constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Notes that are not exchanged for Exchange Notes pursuant to the Exchange
Offer will remain outstanding and continue to accrue interest and will also
remain restricted securities. Accordingly, such Notes may be resold only (i) to
the Company, (ii) pursuant to a registration statement which has been declared
effective under the Securities Act, (iii) for so long as the Notes are eligible
for resale pursuant to Rule 144A under the Securities Act, to a person the
seller reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A that purchases for its own account or for the account of a
qualified institutional buyer and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (iv) pursuant to offers and sale to non-
U.S. persons that occur outside the United States within the meaning of
Regulation S under the Securities Act, (v) to an institutional "accredited
investor" within the meaning of subparagraphs
28
<PAGE>
(a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities Act that is
acquiring the Notes for its own account or for the account of such an
institutional "accredited investor" for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act or (vi) pursuant to any other available exemption from the
registration requirements of the Securities Act, in each case in accordance
with any applicable securities laws of any state of the United States and in
accordance with the Indenture. Holders of Notes not tendered in the Exchange
Offer will not retain any rights under the Registration Rights Agreement,
except in limited circumstances.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on an interpretation by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Company with the meaning of Rule 405 under the Securities
Act), who receives Exchange Notes in exchange for Notes in the ordinary course
of business and who is not participating, does not intend to participate, and
has no arrangement or understanding with a person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange
Notes to the public without further registration under the Securities Act and
without delivering to the purchasers of the Exchange Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires Exchange Notes in the Exchange Offer for the purpose of
distributing or participating in a distribution of the Exchange Notes, such
holder cannot rely on the position of the staff of the Commission enunciated in
such no-action letters or any similar interpretive letters, and must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction, unless an exemption from
registration is otherwise available. Further, each Participating Broker-Dealer
that receives Exchange Notes for its own account in exchange for Notes, where
such Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
29
<PAGE>
SELECTED FINANCIAL DATA
The following table presents (i) selected consolidated historical financial
data for the years ended December 31, 1990, 1991, 1992, 1993 and 1994 derived
from the Company's audited consolidated financial statements, (ii) selected
consolidated historical financial data as of and for the three months ended
March 31, 1994 and 1995 derived from the Company's unaudited consolidated
financial statements for such period, and (iii) unaudited pro forma
consolidated data for each of the periods indicated. The historical data
includes the Company's Canadian acquisition effective as of March 31, 1993, the
Company's Florida acquisition since January 1, 1994 and AMCI from October 20,
1994. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--General." The pro forma data was prepared to illustrate
and give effect to the acquisition of AMCI and related transactions, including
(i) the issuance of 9.7 million common shares of the Company for aggregate net
proceeds of $113.7 million, (ii) the assumption of the 10 3/4% Notes, and (iii)
the incurrence of $310.0 million of debt under the Credit Agreement as if such
transactions had occurred as of January 1, 1994. In addition, the unaudited pro
forma interest expense and related ratios presented under the caption "Other
Data and Selected Ratios" give effect to the Offering and the application of
the net proceeds therefrom as of January 1, 1994. The unaudited pro forma
financial data are presented for informational purposes only and are not
necessarily indicative of the results that actually would have occurred had the
transactions been consummated on the dates indicated or the results that may
occur or be obtained in the future. In addition, quarterly results may not be
indicative of results for the full year. The information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company and related notes thereto and other financial information included
elsewhere and incorporated by reference herein.
30
<PAGE>
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------- --------------------------------
PRO FORMA PRO FORMA
FOR AMCI FOR AMCI
ACQUISITION ACQUISITION
1990 1991 1992 1993 1994 1994 1994 1994 1995
-------- ---------- ---------- ---------- ---------- ----------- -------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Total revenues...... $962,202 $1,022,597 $1,082,191 $1,238,001 $1,665,947 $2,084,827 $259,504 $356,088 $ 443,340
Cost of sales....... 806,772 849,684 904,246 1,021,187 1,330,202 1,543,212 221,974 280,444 291,772
Depreciation and
amortization....... 14,997 14,399 14,994 15,470 27,218 60,567 4,456 15,006 15,559
Selling, general and
administrative
expenses........... 138,315 132,845 137,232 161,791 193,975 215,624 40,306 45,537 52,995
Equity in (earnings)
loss of
unconsolidated
affiliates......... -- -- -- (2,275) (743) (743) 554 554 1,197
-------- ---------- ---------- ---------- ---------- ---------- -------- -------- ----------
Income (loss) from
operations......... 2,118 25,669 25,719 41,828 115,295 266,167 (7,786) 14,547 81,817
Net interest
expense............ (17,056) (12,563) (7,533) (9,683) (16,541) (49,367) (2,079) (12,700) (11,341)
Minority interest... -- -- -- -- (8,809) (34,916) -- (5,726) (16,593)
-------- ---------- ---------- ---------- ---------- ---------- -------- -------- ----------
Income (loss) from
continuing
operations before
income taxes....... (14,938) 13,106 18,186 32,145 89,945 181,884 (9,865) (3,879) 53,883
Income tax provision
(benefit).......... 816 (1,073) (7,757) (9,300) (33,700) (71,517) 3,580 1,410 (20,930)
-------- ---------- ---------- ---------- ---------- ---------- -------- -------- ----------
Income (loss) from
continuing
operations......... $(14,122) $ 12,033 $ 10,429 $ 22,845 $ 56,245 $ 110,367 $ (6,285) $ (2,469) $ 32,953
======== ========== ========== ========== ========== ========== ======== ======== ==========
Per Common Share:
Income (loss) from
continuing
operations......... $ (0.21) $ 0.18 $ 0.15 $ 0.33 $ 0.77 $ 1.37 $ (0.09) $ (0.03) $ 0.41
Dividends........... $ 0.12 -- -- $ 0.02 $ 0.08 $ 0.08 $ 0.02 $ 0.02 $ 0.02
SUMMARY OPERATING
DATA:
Net fertilizer production
(thousands of tons)
Ammonia............ 393.6 399.3 404.2 686.1 780.6 1,217.1 205.4 323.42 262.0
Urea............... 145.3 138.7 126.7 222.6 297.9 623.4 55.3 171.0 154.1
UAN................ 765.1 810.0 759.8 987.3 1,295.2 2,757.3 243.6 760.9 662.5
Methanol Production
(millions of gallons). -- -- -- -- 81.2 310.3 -- 69.2 64.9
Revenues by business
segment (1)
Distribution....... $841,742 $ 899,250 $ 958,725 $1,019,438 $1,318,416 $1,318,416 $206,478 $206,478 $ 234,454
Nitrogen Products.. 120,751 126,664 125,659 228,910 296,557 539,152 54,156 114,670 147,188
Methanol........... -- -- -- -- 70,274 246,404 -- 36,096 65,874
OTHER DATA AND
SELECTED RATIOS:
Capital
Expenditures....... $ 10,689 $ 12,728 $ 17,620 $ 21,620 $ 31,213 $ 40,509 $ 10,463 $ 11,443 $ 14,007
EBITDA (2).......... 17,115 40,068 40,713 55,023 141,770 325,991 (2,776) 30,107 98,573
EBITDA less SPU
distributions...... 17,115 40,068 40,713 55,023 136,730 305,831 (2,776) 25,067 93,533
Pro forma net
interest expense
(3)................ -- -- -- -- -- 55,753 -- 14,296 12,487
EBITDA/Net interest
expense............ 1.00x 3.19x 5.40x 5.68x 8.57x 6.60x -- 2.37x 8.69x
EBITDA/Pro forma net
interest expense (3) -- -- -- -- -- 5.85 -- 2.11 7.89
EBITDA less SPU
distributions/Pro
forma net interest
expense (3)........ -- -- -- -- -- 5.49 -- 1.75 7.49
Long-term
debt/EBITDA (4).... 10.77 2.87 3.28 2.21 3.94 1.71 -- -- --
Long-term
debt/EBITDA less
SPU distributions
(4)................ 10.77 2.87 3.28 2.21 4.08 1.83 -- -- --
Ratio of earnings to
fixed charges (5).. -- 1.63 2.06 2.35 3.45 3.47 -- -- 4.06
BALANCE SHEET DATA
(AT END OF PERIOD):
Net working capital. $135,374 $ 156,587 $ 215,817 $ 231,287 $ 273,941 -- $150,618 -- $ 315,963
Net property, plant
and equipment...... 327,219 112,195 91,969 110,670 552,843 -- 116,583 -- 569,348
Total assets........ 805,279 517,162 580,192 634,482 1,687,970 -- 817,504 -- 1,964,427
Minority interest... -- -- -- -- 170,630 -- -- -- 182,183
Long-term debt
(including current
maturities)........ 184,324 114,805 133,679 121,384 558,256 -- 48,307 -- 560,522
Total stockholders'
equity............. 321,961 190,296 221,476 242,980 418,429 -- 243,610 -- 450,088
</TABLE>
- -------
(1) Includes intercompany sales and excludes revenues not included in any of
the three business segments.
(2) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
represents income (loss) from continuing operations before income taxes,
plus minority interest, plus net interest expense, less equity in
earnings, or plus equity in losses, of unconsolidated affiliates, plus
depreciation and amortization. EBITDA should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flow as a measure of liquidity, but rather to
provide additional information related to the Company's ability to service
debt.
(3) Pro forma net interest expense is calculated assuming the net proceeds of
the Offering of the Notes were applied to repay term loans under the
Credit Agreement as of January 1, 1994. To the extent such net proceeds
are applied to make open market purchases of SPUs, the amount of such term
loan repayments will be decreased commenserately. Minority interest and
SPU distributions to unaffiliated third parties would also decrease as a
result of any open market purchases of SPUs.
(4) Long-term debt includes current maturities.
(5) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) from continuing operations before income taxes
plus fixed charges. Fixed charges consist of interest expense on all debt,
amortization of deferred financing costs and the portion of operating
lease rental expense that is representative of the interest factor (deemed
to be one-third of minimum operating lease rentals). Earnings available
for fixed charges were insufficient to cover fixed charges by $14.9
million for the year ended December 31, 1990, and $9.2 million and $3.3
million for the historical and pro forma three-month periods ended March
31, 1994, respectively. As a result, the financial ratios for such periods
are not meaningful and, therefore, not included.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion is intended to provide information to facilitate the
understanding and assessment of significant changes and trends related to the
financial condition and results of operations of the Company. This discussion
and analysis should be read in conjunction with the Company's consolidated
financial statements and the notes thereto included elsewhere and incorporated
by reference herein.
The Company has expanded its operations over the last two years by increasing
its manufacturing capability, expanding its distribution business and
increasing the volume of more profitable value-added products.
On October 20, 1994, the Company acquired the stock of AMCI for $400.0
million in cash plus working capital adjustments approximating $100 million.
Through the AMCI acquisition, the Company acquired TNC, which owns interests in
TNCLP and TNLP. TNLP owns ammonia production and upgrading facilities located
in Verdigris, Oklahoma (the "Verdigris Facility") and Blytheville, Arkansas
(the "Blytheville Facility"). In the AMCI acquisition, the Company also
acquired the Beaumont Facility.
On September 15, 1994, the Company acquired an approximate one-third interest
in Royster-Clark, Inc. ("Royster-Clark") for $12.2 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, the Company's Florida operations ("Terra Asgrow
Florida") purchased the assets and business of Asgrow Florida, Inc. ("Asgrow"),
a distributor of crop input and protection products, for $39 million. Terra
Asgrow Florida operates 16 distribution centers and is a supplier to the
vegetable and ornamental plant markets, primarily in Florida.
Effective as of March 31, 1993, for $19.9 million in cash plus an operating
lease, the Company acquired the rights to an ammonia production and upgrading
facility near Sarnia, Ontario (the "Canadian Facility") 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.
With the acquisition of AMCI, the Company 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 Company, and resold by the Company. Distribution revenues are
derived primarily from grower and dealer customers through sales of chemicals,
fertilizer, seed and related services. The Nitrogen Products segment represents
only those operations directly related to wholesale sales of nitrogen products
from the Company's five ammonia manufacturing and upgrading facilities
(including two owned by TNLP). The Methanol segment represents only wholesale
sales of methanol from the Company's two methanol manufacturing facilities.
FACTORS AFFECTING OPERATING RESULTS
Factors that may affect the Company's future operating results include: the
relative balance of world-wide 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
Company'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
32
<PAGE>
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, 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 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 extent to which other regions voluntarily opt-in to the reformulated
gasoline program. Additionally, future demand will be impacted by the
availability and use of alternative oxygenates, principally ETBE which is
manufactured from ethanol, a renewable resource. The EPA anticipates that
oxygenates derived from ethanol feedstocks will be the most utilized renewable
oxygenates. The EPA mandated that, effective January 1, 1995, 15%, and
effective January 1, 1996, 30%, of reformulated gasoline use an oxygenate from
a renewable resource. This mandate, however, was reversed by a federal appeals
court on April 28, 1995, which ruled that the EPA lacked the authority to
promulgate a renewable oxygenate requirement. On June 12, 1995 the EPA appealed
the ruling. Although there is a petroleum industry 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.
As with any commodity chemical, the price of methanol is volatile. During
1994, increased world demand for methanol combined with a large number of plant
shutdowns and maintenance turnarounds in the industry and the phase-in of U.S.
federally-mandated standards for oxygenated gasoline resulted in a tight market
and dramatically increased prices over 1993 levels. Demand for methanol also
increased due to increased demand for wood building products in the
construction industry. Since January 1995, however, methanol prices have
decreased markedly due to lower demand for MTBE production and increased
methanol imports that resulted from the 1994 price increases. See also "Risk
Factors--Factors Affecting Demand For Methanol and MTBE."
With the acquisition of AMCI, the Company raised its annual production
capacity for methanol from 40 million to 320 million gallons. BMLP is a party
to a methanol hedging agreement (the "Methanol Hedging Agreement") entered into
in October 1994, at which time the Company received $4 million in cash.
Approximately 45% of the Company's methanol production capacity is subject to
the Methanol Hedging Agreement, which will affect margins on this portion of
the Company's methanol production through December 31, 1997 should average
methanol prices exceed average natural gas prices by certain amounts. See
"Business--Methanol--Methanol Contracts" and Note 12 to the Company's
consolidated financial statements included elsewhere and incorporated by
reference herein.
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 Company'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. Based upon industry
sources, the Company expects planted corn acreage to decrease from 79.2 million
acres in 1994 to no more than 77 million acres in 1995 and planted cotton
acreage to increase from 14.1 million acres in 1994 to 16.2 million acres in
1995.
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
33
<PAGE>
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 Company. During 1994, favorable conditions prevailed
during most of the spring and fall and allowed 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 Company's business. The Company's sources
for fertilizer, agricultural chemicals and seed are typically manufacturers
without the capability to distribute products to the North American grower. The
Company has entered into annual purchase agreements intended to provide 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 production. The Company's
natural gas procurement policy is to fix or cap the price of approximately 40%
to 80% of its natural gas requirements for a 12-month period through various
supply contracts, financial derivatives and other forward pricing techniques.
Depending on market conditions, the Company may also fix or cap the price for
natural gas for longer periods of time. In the first quarter of 1995, due to
the decline in natural gas prices, the Company extended its forward pricing
positions for natural gas. The Company 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. As of March 31, 1995, the Company had fixed
prices for approximately 65% of its natural gas requirements for the remainder
of 1995, 42% for 1996 and 22% for 1997. At March 31, 1995, liquidation of these
financial derivatives based on market prices would have resulted in a loss of
$10.0 million. As of March 31, 1995, realized losses of $3.1 million relating
to future periods had been deferred.
The Company'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
Company builds inventories during the first quarter of the year in order to
ensure timely product availability during the peak sales season. The Company'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 Company requires lines of credit to fund inventory
increases as well as to support customer credit terms. The Company believes
that its credit facilities are adequate for expected 1995 sales levels.
The Company'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 Company currently maintains
insurance (including business interruption insurance) and expects that it will
continue to do so in an amount which it believes is sufficient to allow the
Company to withstand major damage to any of its facilities.
The Port Neal Facility was the site of a major explosion on December 13,
1994. The Company has decided to repair the facility and expects it to be fully
operational in mid-1996. At the time of the explosion, the Port Neal Facility
accounted for approximately 15% of the Company's annual ammonia production
capacity. The Company will recover insurance proceeds for substantially all its
property damage, third party liability claims and business interruption losses.
The Company has reserved $7.0 million to cover insurance deductibles and
uninsured costs related to the explosion. As a result of an investigation of
the explosion by IOSHA the Company received allegations of safety and health
violations from IOSHA on May 25, 1995. The allegations of violation were
accompanied by a proposed fine of $461,900. The Company intends to contest
vigorously the alleged violations and the proposed fine. The Company believes
that the IOSHA allegations, including the proposed fine, will not have a
material adverse effect on the Company's business or financial condition.
34
<PAGE>
DERIVATIVE FINANCIAL INSTRUMENTS
The Company 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 Company's consolidated financial
statements included elsewhere and incorporated by reference herein for
information on the use of derivative financial instruments.
RESULTS OF CONTINUING OPERATIONS
First Quarter 1995 Compared with First Quarter 1994
Consolidated Results. The Company reported income from continuing operations
of $33.0 million on revenues of $443.3 million for the first quarter of 1995,
compared with a loss from continuing operations before extraordinary items of
$6.3 million on revenues of $259.5 million in the first quarter of 1994. 1995
results include the operations of AMCI, which was acquired by the Company in
October 1994. The AMCI acquisition added approximately $144.0 million to
revenues and $25.0 million to operating income during the first quarter 1995.
Excluding the impact of the AMCI acquisition, revenues increased $40.0 million,
or 15%, over the comparable period in 1994 and operating income increased $14.2
million primarily as a result of improved selling prices for nitrogen products
caused by tight supplies.
Total revenues and operating income (loss) by business segment and income
(loss) from continuing operations before income taxes for the three month
periods ended March 31, 1994 and 1995 were as set forth below. Pro forma
results for the 1994 period including AMCI are included in "Selected Financial
Data."
<TABLE>
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Distribution........................................ $206,478 $238,454
Nitrogen Products................................... 54,156 147,188
Methanol............................................ -- 65,874
Other--net.......................................... (1,130) (8,176)
-------- --------
$259,504 $443,340
======== ========
Operating income (loss):
Distribution........................................ $(12,899) $(14,635)
Nitrogen Products................................... 6,988 57,384
Methanol............................................ -- 39,608
Other expense--net.................................. (1,875) (540)
-------- --------
(7,786) 81,817
Interest expense--net............................... (2,079) (11,341)
Minority interest................................... -- (16,593)
-------- --------
Income (loss) from continuing operations before
income taxes..................................... $ (9,865) $ 53,883
======== ========
</TABLE>
Distribution. Distribution revenues were $238.5 million during the first
quarter of 1995, an increase of $32 million, or 15%, over 1994 results for the
comparable period. Approximately $10 million of the growth relates to a 7.6%
increase in chemical sales resulting principally from sales to new dealer
affiliates and expansion into new locations. Growth in the Company's own brand
of Riverside(R) chemical products accounted for $5 million of the increase.
Distributed fertilizer, seed and other sales and services increased $22.0
million primarily as a result of expansion of the Company's distribution
network.
35
<PAGE>
The operating loss for the Distribution business was $14.6 million in the
first quarter of 1995 compared with an operating loss of $12.9 million in the
first quarter of 1994. Higher volumes added $5.9 million to operating income
which was more than offset by a $7.6 million increase in selling and general
and administrative expenses. The increased expenses included an increase in
compensation costs of $2.8 million due to additional personnel resulting from
expansion activities and normal wage increases. In addition, equipment leasing,
facilities costs, and operating and maintenance expenses increased $2.5
million. The Distribution segment's operations are seasonal, coincident with
crop plantings, which generally results in an operating loss for the first
calendar quarter.
Nitrogen Products. Nitrogen Products revenues increased 172% to $147.2
million in the first quarter of 1995 from $54.2 million in the first quarter of
1994. The acquisition of the Blytheville Facility and the Verdigris Facility as
part of the AMCI acquisition increased the Company's annual production capacity
from 1.3 million tons to 2.7 million tons of ammonia (including the Port Neal
Facility). The AMCI acquisition contributed $89.8 million to first quarter
revenue growth. Excluding the impact of the AMCI acquisition, revenues
increased $3.2 million or 5.9%. Due to the conversion of approximately 30% of
the capacity of the Company's Woodward, Oklahoma plant (the "Woodward
Facility") from ammonia production to methanol production, Nitrogen Products
revenues for the first quarter of 1995 were reduced by $1.7 million. In
addition, revenues for the first quarter of 1995 were reduced approximately $10
million due to the loss of production at the Port Neal Facility as a result of
the December 1994 explosion. See "--Factors Affecting Operating Results."
Operating income for the Nitrogen Products business was $57.4 million in the
first quarter of 1995 compared with $7 million in the 1994 first quarter. The
acquisition of AMCI contributed $37.3 million to the increase in operating
income. Excluding the AMCI acquisition, operating income increased $13.1
million due to price increases of $12.4 million and lower natural gas costs of
$4.2 million, offset by higher manufacturing costs for salaries and wages and
maintenance expenses.
Methanol. As described above, in April 1994, approximately 30% of the
production capacity of the Woodward Facility was converted from the production
of ammonia to the production of methanol. Additionally, through the acquisition
of AMCI in October 1994, the Company acquired the Beaumont Facility. Currently,
the annual methanol production capacity of the Woodward Facility is 40 million
gallons and of the Beaumont Facility is 280 million gallons. The Company had no
methanol operations in the first quarter of 1994.
Methanol revenues were $65.9 million and operating income for the Methanol
business was $39.6 million in the first quarter of 1995. Methanol revenues in
the first quarter of 1995 attributable to the conversion of the Woodward
Facility were $11.6 million. The market price for methanol increased
significantly in the second half of 1994 as a result of sharply higher
production of MTBE. During the first quarter of 1995, methanol prices have
decreased substantially from the unprecedented high levels reached in late
1994. Average realized prices (including the effect of the Methanol Hedging
Agreement) were $0.98 in the first quarter of 1995 as compared to $1.14 in the
fourth quarter of 1994. As of March 31, 1995, $31.3 million was reserved as
payable under the Methanol Hedging Agreement based on average prices of
methanol and natural gas for the period from October 20, 1994 through March 31,
1995. The actual amount payable for the period ending December 31, 1995
(payable in 1996) will depend on average prices for the full period of October
20, 1994 through December 31, 1995. See "Business--Methanol--Methanol
Contracts" and Note 12 to the Company's consolidated financial statements
included elsewhere and incorporated by reference herein.
The Company sold 67.2 million gallons of methanol during the 1995 first
quarter, of which 57.8 million gallons were produced at the Beaumont Facility.
During the second quarter of 1995, a scheduled maintenance turnaround was
performed at the Beaumont Facility. The costs incurred to perform the
turnaround are estimated to be $5.0 million and will be deferred and amortized
based on the Company's accounting policies.
36
<PAGE>
Other Operating Expense--Net. Other operating expense was $0.5 million in the
1995 first quarter compared with $1.9 million in the comparable 1994 period.
Other operating expense includes expenses not directly related to individual
business segments, including certain insurance coverages, corporate finance
fees and other costs. The decrease in 1995 is primarily the result of lower
costs for general administrative functions, including reduced incentive
compensation expense.
Interest Expense--Net. Interest expense, net of interest income, totaled
$11.3 million in the first quarter of 1995, compared with $2.1 million in the
first quarter of 1994. The increase is principally the result of the assumption
of the 10 3/4% Notes and the incurrence of $270 million of additional debt in
connection with the acquisition of AMCI.
Income Taxes. First quarter 1995 income tax expense was recorded at an
effective rate of 38.8% as compared with 36.3% in the first quarter of 1994.
The increased rate is the result of goodwill amortization which is not
deductible for income tax purposes.
1994 Compared With 1993
Consolidated Results. The Company reported income from continuing operations
of $56.2 million on revenues of $1.67 billion in 1994 compared with income from
continuing operations of $22.8 million on revenues of $1.24 billion in 1993.
1994 results include a full year of the operations of Asgrow acquired by Terra
on December 31, 1993, and operations of AMCI subsequent to its acquisition on
October 20, 1994. These operations added approximately $190 million to revenue
and $21 million to income from continuing operations in 1994. Excluding the
impact of these acquisitions, revenues increased 19% over 1993 and income from
continuing operations increased 46%.
Total revenues and operating income by business segment and income from
continuing operations before income taxes for the years ended December 31, 1993
and 1994 are set forth below. Results of operations for AMCI are included only
from the date of the Company's acquisition of AMCI (October 20, 1994). Pro
forma results of operations including AMCI for a full year in 1994 are included
in "Selected Financial Data."
<TABLE>
<CAPTION>
1993 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Distribution..................................... $1,019,438 $1,318,416
Nitrogen Products................................ 228,910 296,557
Methanol......................................... -- 70,274
Other--net....................................... (10,347) (19,300)
---------- ----------
$1,238,001 $1,665,947
========== ==========
Operating income:
Distribution..................................... $ 16,903 $ 33,784
Nitrogen Products................................ 28,654 48,369
Methanol......................................... -- 42,679
Other expense--net............................... (3,729) (9,537)
---------- ----------
41,828 115,295
Interest expense--net............................ (9,683) (16,541)
Minority interest................................ -- (8,809)
---------- ----------
Income from continuing
operations before income taxes................ $ 32,145 $ 89,945
========== ==========
</TABLE>
Distribution. Distribution revenues were $1.32 billion in 1994, an increase
of $298 million, or 29%, over 1993 results of $1.02 billion. Approximately $198
million of the growth relates to a 30% increase in chemical sales resulting
principally from the operations of Asgrow acquired by Terra on December 31,
1993, which
37
<PAGE>
added approximately $80 million, expansion into new locations and higher
planted acreage. Growth in the Company's own brand of Riverside(R) 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.
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. The AMCI acquisition in October
1994 accounted for $60.4 million of revenue growth. Excluding the impact of the
AMCI 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 Woodward Facility from ammonia production 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 $7.0 million non-recurring charge related to the Port Neal Facility
explosion, operating income increased $7.8 million due to price increases of
$15.3 million, partially offset by higher natural gas costs and the conversion
of ammonia production capacity to methanol production. Operating results were
also affected by the explosion at the Port Neal Facility which occurred on
December 13, 1994.
Methanol. In 1994, Methanol revenues were $70.3 million and operating income
for the Methanol business was $42.7 million in 1994. Methanol revenues in 1994
attributable to the conversion of the Woodward Facility were $20.7 million.
Gross profit on methanol was $44.8 million and selling and general and
administrative expenses were $2.1 million. The Company had no methanol
operations in 1993.
The market price for methanol increased significantly in the second half of
1994 as a result of sharply higher production of MTBE. As of December 31, 1994,
$15.9 million was recorded as payable under the Methanol Hedging Agreement.
(See "Business--Methanol--Methanol Contracts" and Note 12 to the Company's
consolidated financial statements included elsewhere and incorporated by
reference herein).
Other Operating Expense--Net. Other operating expense was $9.5 million in
1994 compared with $3.7 million in 1993. 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.
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 the
10 3/4% Notes and the incurrence 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.
Extraordinary Loss. 1994 net income included an extraordinary loss of $3.1
million for the early retirement of debt.
Accounting Changes. 1994 net income includes a net gain of $3.4 million 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."
38
<PAGE>
1993 Compared With 1992
Consolidated Results. The Company reported income from continuing operations
of $22.8 million on revenues of $1.24 billion in 1993, compared with income
from continuing operations of $10.4 million on revenues of $1.08 billion in
1992. The 1993 results include nine months of operation of the Canadian
Facility and farm service centers acquired in Canada effective as of March
1993, which added $98.3 million to revenues and $8.9 million to income from
continuing operations.
Total revenues and operating income by segment and income from continuing
operations before income taxes for the years ended December 31, 1992 and 1993
by segment were as set forth in the table below. The Company had no methanol
operations in 1992 or 1993.
<TABLE>
<CAPTION>
1992 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Distribution.................................... $ 958,725 $1,019,438
Nitrogen Products............................... 125,659 228,910
Other--net...................................... (2,193) (10,347)
---------- ----------
$1,082,191 $1,238,001
========== ==========
Operating income:
Distribution.................................... $ 16,568 $ 16,903
Nitrogen Products............................... 14,841 28,654
Other expense--net.............................. (5,690) (3,729)
---------- ----------
25,719 41,828
Interest expense--net........................... (7,533) (9,683)
---------- ----------
Income from continuing operations before
income taxes................................. $ 18,186 $ 32,145
========== ==========
</TABLE>
Distribution. Distribution revenues were $1.02 billion in 1993, an increase
of $60.7 million or 6.3% from 1992 Distribution revenues of $959 million.
Approximately $17.7 million of the sales increase reflected a 3% increase in
chemical sales, while the acquisition of the Canadian Facility 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 Facility
added $4.0 million to Distribution operating income. U.S. 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 Company's increased
distribution of its Riverside(R) 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
increased number of locations and excessively wet field conditions. Advertising
and promotional expenditures increased $1.3 million from 1992.
Nitrogen Products. Nitrogen Products revenues increased 82% to $228.9 million
in 1993 from $125.7 million in 1992. The acquisition of the Canadian Facility
added $78.2 million of manufactured nitrogen sales. Excluding such acquisition,
Nitrogen Products revenues increased 20% to $150.7 million, with sales volumes
39
<PAGE>
adding 15% to revenues and higher selling prices for nitrogen fertilizer and
feed products increasing 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 Facility contributed
$9.5 million to the increase in 1993 operating income. Additional higher U.S.
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 $2.0 million reduction was
primarily the result of reversing $4.2 million of product liability reserves
expensed in 1989, reflecting the settlement of litigation with E.I. du Pont de
Nemours and Company ("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
Company'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.
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 Company 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.
Accounting Changes. 1992 net income included a credit of $22.3 million to
recognize the combined effect 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses for cash are to fund its working capital needs,
make payments on its indebtedness and other obligations, pay quarterly
dividends to the Company's stockholders and make quarterly distributions on
TNCLP's Senior Preference Units, and make capital expenditures. The Company's
principal sources of funds are cash flow from operations and borrowings under
the Credit Agreement. The Company 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. Cash generated from operations during 1995 is expected to be
adequate to meet normal business requirements and pay down debt. Cash balances
as of March 31, 1995 and December 31, 1994 were $133.1 million and $158.4
million, respectively, of which $9.6 million was used to collateralize letters
of credit supporting recorded liabilities.
Quarterly dividends on the Company's common shares of $0.02 per share were
paid during 1994 and the first quarter of 1995, representing cash outlays of
$5.8 million and $1.6 million, respectively. The holders of TNCLP's Senior
Preference Units are entitled to receive a minimum quarterly distribution of
$0.605 per unit, or $4.6 million, plus arrearages before any distribution to
the Company with respect to its Junior Preference Units or Common Units. In the
first quarter of 1995, distributions to holders of the SPUs were $0.66 per SPU
or $5.0 million in the aggregate. In addition, a distribution has been declared
payable May 30, 1995 of $1.14 per SPU or approximately $8.7 million in the
aggregate. As of March 31, 1995, there were no distributions on SPUs in
arrears.
40
<PAGE>
During 1994, the Company utilized cash from operations, proceeds from a stock
issuance and cash available under the Credit Agreement 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. As part of the AMCI acquisition, the Company assumed $175 million
aggregate principal amount of the 10 3/4% Notes. The Company received net
proceeds of $113.0 million from the issuance of 9.7 million of the Company's
common shares, which was used to fund in part the AMCI acquisition. The Credit
Agreement 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% Notes. Cash used for acquisitions in the first quarter
of 1995 included a $6.1 million payment made as the final working capital
adjustment in connection with the AMCI acquisition.
As of March 31, 1995 and December 31, 1994, borrowings under the Credit
Agreement totaled $369.0 million and $359.0 million, respectively. Interest
charged under the Credit Agreement is based on LIBOR. The Company 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 $190.0 million of
outstanding indebtedness. The amount of principal subject to the interest rate
collar declines over such period. Principally as a result of financing the AMCI
acquisition, the Company's debt, including current maturities, as a percentage
of total capital, including minority interest, was 48% and 50% as of March 31,
1995 and December 31, 1994, respectively, as compared with 35% as of December
31, 1993. See "Capitalization" and "Description of Other Indebtedness."
In addition to amounts related to the AMCI acquisition, the Company funded
from available cash $4.2 million to acquire new locations for its distribution
network in the first quarter of 1995 and $16.3 million of farm service center
acquisitions (including the interest in Royster-Clark) in 1994. In 1993, the
Company acquired interests in 32 farm service centers and the rights to the
Canadian Facility through an operating lease and payment of $19.9 million cash.
Additionally, the Company purchased the assets and business of Asgrow 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 Woodward Facility from
ammonia production to methanol production.
The Company expects 1995 capital expenditures to be approximately $40
million, consisting of the acquisition of service centers, routine replacement
of equipment and efficiency improvements at manufacturing facilities. In
addition, the Company expects capital expenditures in 1995 of approximately $20
million for expansion and design improvements at the Port Neal Facility.
Furthermore, as a result of an ongoing plant upgrade project, the Canadian
Facility's liquid urea and granulation capacities are expected to increase. 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 higher margin urea
and UAN sales. The project cost is estimated to be approximately $20 million
and is expected to be funded principally through lease financing.
Asset sales in 1993 generated $24.4 million, including $18.5 million from the
sale of the Company'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 from year end 1993 to year end 1994 by $34.3
million due, in part, to $53.8 million in receivables added through
acquisitions. Excluding the impact of acquisitions, accounts
41
<PAGE>
receivable declined due to the sale of $50.0 million of a designated pool of
outstanding receivables which more than offset the effect of increased fourth
quarter sales. Accounts receivables were $213.9 million as of March 31, 1995 as
compared to $157.0 million as of December 31, 1994. The increase was due to
seasonal first quarter sales of the Company's nitrogen fertilizer and chemical
products as well as higher nitrogen fertilizer prices. Inventories increased
$88.0 million in 1994 as compared to 1993, including $28.6 million related to
acquisitions. The remaining increase is the result of off-season purchasing to
obtain discounts and to meet anticipated product demand. Accounts payable also
increased as a result of such purchases. Inventories were $538.1 million at
March 31, 1995 as compared to $333.0 million at December 31, 1994. The
inventory increase was attributable to the seasonal inventory build-up in
anticipation of the spring planting season and the higher cost of nitrogen
products purchased from manufacturers other than the Company. 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. The ratio of current assets to current liabilities was
1.5 to 1 at March 31, 1995.
The Company's 8.5% Convertible Subordinated Debentures (the "Debentures")
were convertible into common shares of the Company 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 Company. During March 1994, the Company
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 Company. The Company issued
730,768 of its common shares and paid cash for fractional shares. No Debentures
remain outstanding.
In July 1993, the Company's Board of Directors authorized a share repurchase
program for up to two million of the Company's common shares. No shares were
repurchased in 1994 or in the first quarter of 1995. During 1993, 106,900
shares were repurchased for $0.5 million.
OPEN MARKET PURCHASE PROGRAM FOR TNCLP SPUS
On March 27, 1995, the Company proposed to the Board of Directors of TNC a
transaction in which the Company would acquire by merger all of the outstanding
Senior Preference Units of TNCLP for $30.00 per Senior Preference Unit (less
the amount of any distributions declared per SPU in excess of $0.66 per SPU for
the quarter ended March 31, 1995). The Company and an independent committee of
the Board of Directors of TNC designated to represent the holders of the SPUs
were unable to reach an agreement on price and, on May 11, 1995, the Company
withdrew its offer. For a description of certain projections provided to the
TNC independent committee and its representatives in connection with such
proposal, see the Company's Current Report on Form 8-K dated May 11, 1995
incorporated by reference herein.
On May 11, 1995, the Board of Directors of the Company approved an open
market purchase program pursuant to which the Company may purchase up to five
million SPUs from time to time at prices and in quantities as determined by the
Company's management. As of March 31, 1995, there were 7,636,364 SPUs
outstanding. Prior to the commencement of the open market purchase program, the
Company and its subsidiaries did not own any SPUs. As of 1995, the
Company has purchased SPUs for an aggregate purchase price of $ . The net
proceeds of the Offering are available to finance purchases of SPUs through
December 31, 1995. In addition, the Company may use up to $40 million under the
revolving credit facility pursuant to the Credit Agreement to finance SPU
purchases through December 31, 1995. See "Use of Proceeds" and "Description of
Other Indebtedness."
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BUSINESS
GENERAL
The Company is a leader in each of its three business segments: (i) the
distribution of crop production inputs and services, (ii) the manufacture of
nitrogen products and (iii) the manufacture of methanol. 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. The Company is also the third largest producer of anhydrous ammonia and
one of the two largest producers of nitrogen solutions in the United States and
Canada. In addition, the Company is one of the largest U.S. manufacturers and
marketers of methanol.
The Company's distribution network serves the United States and eastern
region of Canada and has grown over the last several years to include, as of
March 31, 1995, approximately:
. 370 farm service centers;
. 100 fertilizer storage facilities, most of which are leased and
approximately half of which are operated by TNLP; and
. 780 affiliated dealer locations.
The Company's production facilities are comprised of:
. five nitrogen fertilizer plants, which are located in Oklahoma (the
Woodward Facility and the Verdigris Facility), Iowa (the Port Neal
Facility), Ontario, Canada (the Canadian Facility) and Arkansas (the
Blytheville Facility) (the Verdigris Facility and the Blytheville
Facility are owned by TNLP);
. a methanol production plant, which is located in Texas (the Beaumont
Facility) (the Woodward Facility also includes some methanol
production capacity);
. 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 was the site of a major explosion on December 13, 1994
and is expected to be fully operational again in mid-1996. At the time of the
explosion, the Port Neal Facility accounted for approximately 15% of the
Company's annual ammonia fertilizer production capacity. The Company will
recover insurance proceeds for substantially all of its property damage, third-
party liability claims and business interruption losses. The Company has
reserved $7 million to cover insurance deductibles and uninsured costs related
to the explosion.
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(R) products represented
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approximately 15% of the Company's total crop protection product sales in 1994.
As of March 31, 1995, the Riverside(R) line includes approximately 150
products, of which 30 were added in the past twelve months, and consists of
herbicides, insecticides, fungicides, adjuvants, seed treatments, plant growth
regulators, defoliants and desiccants. The majority of Riverside(R) products
are formulated or packaged in facilities owned by the Company. The Riverside(R)
line includes several formulations produced exclusively by the Company, but
does not include proprietary agricultural chemicals. Riverside(R) 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(R)
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
safety audits, business management and agronomic training courses, access to
the Company's Ag Analytical Services laboratory, use of the CropMaster(R)
program and other services. There were 517 MarketMaster(TM) dealer sites at
March 31, 1995.
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(R)
personnel generally work through the Company's farm service centers, using
established delivery systems and product lines.
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The Company's distribution operations are organized into Northern and
Southern Divisions, which include 13 separate geographical 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 the
year 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 the 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(R) brand product line. The
Company has developed several DF formulations which are 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.
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 currently 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 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 fertilizer, 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 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 (including TNLP on a pro forma
basis) for the years ended December 31, 1992, 1993 and 1994 were approximately
as follows (based on tons sold):
<TABLE>
<CAPTION>
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Ammonia.................................................... 21% 23% 25%
Urea....................................................... 15% 16% 16%
UAN........................................................ 64% 61% 59%
</TABLE>
Plants
All of the Company's Facilities, are integrated facilities for the production
of ammonia, liquid urea and UAN and other nitrogen fertilizer solutions. In
addition, the Canadian Facility produces solid urea. The total annual gross
ammonia production capacity of the Company's nitrogen fertilizer facilities is
currently 2.7 million tons, including the Port Neal Facility which was damaged
by an explosion in December 1994. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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 Canadian Facility's liquid urea and granulation capacities are expected
to increase as a result of an ongoing plant upgrade project. 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.
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 13% of the
Company's total 1994 sales of its manufactured nitrogen products. In 1994,
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approximately 10% of the Company's fertilizer production was sold through its
farm service center locations to retail customers, while the rest was 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 Beaumont
Facility as part of the acquisition of AMCI. The Company has approximately 320
million gallons of annual methanol production capacity, representing
approximately 15% 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 primarily 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 unique design of the Woodward Facility enabled this
conversion to be accomplished for $16.0 million of capital spending, which the
Company believes is approximately half the capital cost required to convert
other ammonia plants to methanol production. The Company currently has
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 at the Beaumont facility are owned by BMLP, and
the land is leased from E.I. du Pont de Nemours and Company ("DuPont") 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
Effective February 2, 1995, BMLP terminated a marketing services agreement
pursuant to which 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. 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,
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<PAGE>
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 Beaumont
Facility's earnings and sales. Employees of the Company have assumed all
functions previously provided by Trammochem. The Company does not believe that
its aggregate marketing costs for methanol will be materially different from
those under the Trammochem agreement.
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 year's notice. Commencing in 1998,
BMLP and DuPont will each have the unilateral right (exercisable one time only
for the remaining term of the contract on not less than two years prior written
notice) to reduce permanently the contract quantity to be delivered by BMLP to
DuPont in any year by up to 54 million gallons. The price for the methanol
delivered under the DuPont Contract is generally indexed to a published source.
Under the Methanol Hedging Agreement, BMLP received a $4 million lump sum
payment in exchange for agreeing to make payments based on the market prices of
methanol and natural gas for the periods October 20, 1994 to December 31, 1995,
calendar year 1996 and calendar year 1997. Payments are generally due five
business days after the end of the applicable period. 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.
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 the Methanol Hedging
Agreement. As a result of making such payments, however, BMLP will not benefit
fully from increases in the price of methanol during the term of the Methanol
Hedging Agreement. As of March 31, 1995, $31.3 million was reserved as payable
under the Methanol Hedging Agreement based on average prices of methanol and
natural gas for the period from October 20, 1994 through March 31, 1995. The
actual amount payable for the period October 20, 1994 through December 31, 1995
(payable in 1996) will depend on average prices for the full period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Factors Affecting Operating Results." See also Note 12 to the
Company's consolidated financial statements included elsewhere and incorporated
by reference herein.
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
believe it has sufficient experience with the program to provide a meaningful
evaluation of the associated credit risk, to date it has not experienced any
significant bad debts in its grower finance program.
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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 natural gas procurement policy is to fix or cap the price
of approximately 40% to 80% of its natural gas requirements for a 12-month
period through various supply contracts, financial derivatives and other
forward pricing techniques. Depending on market conditions, the Company may
also fix or cap the price for natural gas for longer periods of time. In the
first quarter of 1995, due to the decline in natural gas prices, the Company
extended its forward pricing positions for natural gas. The settlement dates
are scheduled to coincide with gas purchases during such future periods. The
Company 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.
As of March 31, 1995, the Company had fixed prices for approximately 65% of its
natural gas requirements for the remainder of 1995, 42% for 1996 and 22% for
1997. Liquidation of these financial derivatives based on March 31, 1995 market
prices would have resulted in a loss of $10.0 million.
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 numerous 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-
operators and 15 Company drivers 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 supplies outside the state. The Canadian 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 through September 1998.
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For the Beaumont Facility, the Company transports products 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(R) product line
and for basic chemical products at its Blytheville Formulation Facility.
COMPETITION
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 in its
Distribution business primarily on the basis of providing a comprehensive line
of products and by providing what the Company believes to be superior services
to growers and dealers as well as on the basis of price.
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 and availability 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 the Company. Some
foreign competitors may have access to lower cost or governmental-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 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.
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. The operations of
Terra Canada 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, storage and
disposal 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
investigation and remediation by federal or state regulatory authorities, the
Company may be responsible under CERCLA or analogous state laws for all or part
of the costs of such investigation and remediation.
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Terra International has been designated as a PRP under CERCLA and its state
analogues with respect to various sites. Under such laws, all PRP's may be held
jointly and severally liable for the costs of investigation and remediation of
an environmentally damaged site regardless of fault or legality of original
disposal. After consideration of such factors as the number and levels of
financial responsibility of other PRP's, 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 disposition by DuPont. The Company does not believe that such
environmental costs and liabilities 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 retains
responsibility for all claims based on exposure to hazardous materials,
including asbestos, occurring prior to the 1991 disposition by DuPont. Although
no suit relating to asbestos exposure has 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 total 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.
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.
LITIGATION
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.
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MANAGEMENT
Set forth below is certain information with respect to the directors and
executive officers of the Company as of March 31, 1995.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Reuben F. 65 Chairman and Director
Richards
Burton M. 53 President, Chief Executive Officer and Director
Joyce
Michael L. 41 Senior Vice President, Distribution
Bennett
John S. 54 Vice President, Human Resources
Burchfield
Francis G. 43 Vice President and Chief Financial Officer
Meyer
Paula C. 49 Vice President, Corporate and Investor Relations
Norton
W. Mark Ro- 47 Executive Vice President (and President of TNC)
senbury
Robert E. 43 Vice President, Controller
Thompson
George H. 46 Vice President, General Counsel and Corporate Secretary
Valentine
Edward G. 62 Director
Beimfohr
Carol L. 51 Director
Brookins
Edward M. 65 Director
Carson
David E. 52 Director
Fisher
Basil T. A. 68 Director
Hone
Anthony W. 46 Director
Lea
John R. Nor- 65 Director
ton III
Henry R. 45 Director
Slack
</TABLE>
Reuben F. Richards has been a director of the Company since 1982. Mr.
Richards has served as Chairman since December 1982 and was Chief Executive
Officer from December 1982 to May 1991 and President from July 1983 to May
1991. He has been a director of Engelhard Corporation since prior to 1990 and
served as Chairman of the Board thereof from May 1985 to December 1994. He has
served as Chairman of the Board of Minorco (U.S.A.) Inc. since May 1990 and
Chief Executive Officer and President thereof since February 1994.
Burton M. Joyce has been a director of the Company since 1986. Mr. Joyce has
served as President and Chief Executive Officer since May 1991 and served as
Executive Vice President and Chief Operating Officer from February 1988 to May
1991.
Michael L. Bennett has served as Senior Vice President, Distribution of the
Company since February 1995. Mr. Bennett has served as Senior Vice President,
Distribution of Terra International since October 1994 and served as Vice
President, Northern Division from January 1992 to October 1994 and Vice
President, Wholesale Fertilizer Division from January 1990 to January 1992.
John S. Burchfield has served as Vice President, Human Resources of the
Company since March 1992. Mr. Burchfield served as Vice President, Human
Resources of AON Corporation from January 1989 to November 1991 and Vice
President, Human Resources for Denny's International, National Education Corp.
and American Hospital Supply Corp. prior thereto.
Francis G. Meyer has served as Vice President and Chief Financial Officer of
the Company since November 1993. Mr. Meyer served as Controller from August
1991 to November 1993. He served as Vice President, Controller of Terra
International from June 1986 to August 1991.
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<PAGE>
Paula C. Norton has served as Vice President, Corporate and Investor
Relations of the Company since February 1995. Ms. Norton served as Director,
Corporate Relations from January 1993 to February 1995. She served as Director,
Corporate Communication of Universal Foods Corp. prior thereto.
W. Mark Rosenbury has served as President of TNC since November 1994 and
Executive Vice President of the Company since November 1993. Mr. Rosenbury
served as Chief Operating Officer of the Company from November 1993 to November
1994. He served as Vice President and Chief Financial Officer from August 1991
to November 1993 and Vice President and Corporate Controller from January 1987
to August 1991.
Robert E. Thompson has served as Vice President, Controller of the Company
since February 1995. Mr. Thompson joined the Company in November 1994. He
served as 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 and Controller of Ameritech Applied
Technologies prior thereto.
George H. Valentine has served as Vice President, General Counsel and
Corporate Secretary of the Company since November 1993. Mr. Valentine served as
Assistant General Counsel of Household International, Inc. from February 1986
to November 1993.
Edward G. Beimfohr has been a director of the Company since 1994. Mr.
Beimfohr has been partner in the law firm of Lane & Mittendorf since prior to
1990.
Carol L. Brookins has been a director of the Company since 1993. Ms. Brookins
founded World Perspectives, Incorporated and has served as Chairman and Chief
Executive Officer thereof since 1980.
Edward M. Carson has been a director of the Company since 1983. Mr. Carson
has served as Chairman of the Board and Chief Executive Officer of First
Interstate Bancorp since June 1990 and served as President thereof from January
1985 to May 1990.
David E. Fisher has been a director of the Company since 1993. Mr. Fisher has
served as Finance Director of Minorco since January 1990.
Basil T. A. Hone has been a director of the Company since 1986. Mr. Hone was
serving as Vice President, Metal Division of Union Carbide Corporation at his
retirement in 1984.
Anthony W. Lea has been a director of the Company since 1994. Mr. Lea has
served as Executive Director and a member of the Executive Committee of Minorco
since prior to 1990 and served as Joint Managing Director thereof from January
1990 to December 1992.
John R. Norton III has been a director of the Company since 1993. Mr. Norton
has served as Chairman and Chief Executive Officer of J.R. Norton Company since
1972. Between May 1985 and February 1986, Mr. Norton served as a U.S. Deputy
Secretary of Agriculture and was not an officer of J. R. Norton Company during
that period.
Henry R. Slack has been a director of the Company since 1983. Mr. Slack has
served as Chief Executive of Minorco since December 1992 and President thereof
since September 1985.
53
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DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued under an Indenture, dated as of June 22,
1995 (the "Indenture"), between Terra Industries Inc. (the "Company") and First
Trust National Association, as trustee (the "Trustee"), which also governs the
Notes. The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Indenture, including the definitions
of certain terms therein. On the effective date of this Exchange Offer
Registration Statement, the Indenture will be subject to and governed by the
provisions of the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). Wherever particular Sections or defined terms of the Indenture not
otherwise defined herein are referred to, such Sections or defined terms shall
be incorporated herein by reference, and those terms made a part of the
Indenture by the Trust Indenture Act are also incorporated herein by reference.
For purposes of the following description, the Exchange Notes and Notes are at
times collectively referred to as the "Notes." A copy of the form of Indenture
will be made available to holders of Notes upon request, and is filed as an
exhibit to this Exchange Offer Registration Statement. See "Available
Information."
The Exchange Notes will be unsecured senior obligations of the Company and
will mature on June 15, 2005. The Exchange Notes will be limited to $200
million in aggregate principal amount. Interest on the Exchange Notes is
payable semiannually (to Holders of record at the close of business on June 1
or December 1 immediately preceding the Interest Payment Date) on June 15 and
December 15 of each year, commencing December 15, 1995. (Sections 2.01, 2.04
and 2.06). Each Exchange Note will bear interest at the rate per annum shown on
the front cover of this Prospectus from the last date on which interest was
paid on the Notes surrendered in exchange therefor or, if no interest has been
paid on the Notes, from the date of original issuance of the Notes. No interest
will be paid on the Notes accepted for exchange, and holders of Notes whose
Notes are accepted for exchange will be deemed to have waived the right to
receive any payment in respect of interest on the Notes accrued up to the date
of the issuance of the Exchange Notes.
The Exchange Notes and any Notes that remain outstanding after consummation
of the Exchange Offer will be treated as a single class of securities under the
Indenture.
RANKING
The Notes will be senior unsecured obligations of the Company and will rank
pari passu in right of payment with all senior indebtedness of the Company and
senior in right of payment to all subordinated indebtedness of the Company. In
addition, the business operations of the Company are conducted substantially
through its subsidiaries and, accordingly, the Notes will be effectively
subordinated to all existing and future obligations of such subsidiaries. As of
March 31, 1995, on a pro forma basis, after giving effect to the Offering and
the application of the estimated net proceeds therefrom to repay bank
indebtedness of the Company's subsidiaries, the Company would have had $158.8
million in aggregate principal amount of indebtedness outstanding which ranked
pari passu in right of payment with the Notes and no indebtedness outstanding
which ranked subordinate in right of payment to the Notes and the aggregate
principal amount of indebtedness of the Company's subsidiaries would have been
approximately $236.1 million (excluding intercompany indebtedness),
approximately $192.9 million of which was secured. As of March 31, 1995, the
Company's subsidiaries also had trade payables of $301.0 million. The Company's
businesses are seasonal and historically the borrowings and other liabilities
of the Company and its subsidiaries are greatest in late spring and fall.
Amounts payable to holders of SPUs are also effectively senior to the Notes.
See "Risk Factors--Holding Company Structure."
OPTIONAL REDEMPTION
General. The Notes will be redeemable, at the Company's option, in whole or
in part, at any time on or after June 15, 2000, and prior to maturity, upon not
less than 30 nor more than 60 days' prior notice mailed
54
<PAGE>
by first class mail to each Holder's last address as it appears in the Security
Register, at the following Redemption Prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period beginning June 15 of
the years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000.......................... 105.250%
2001.......................... 102.625%
2002 and thereafter........... 100.000%
</TABLE>
plus accrued and unpaid interest, if any, to the Redemption Date.
Selection. In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, on a
pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem fair and appropriate; provided, however, that no Note of
$1,000 in original principal amount or less shall be redeemed in part. If any
Note is to be redeemed in part only, the notice of redemption relating to such
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Note. (Sections 3.03, 3.04 and 3.08)
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all such terms as well as any other
capitalized terms used herein for which no definition is provided. (Section
1.01)
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person became a Subsidiary and not Incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of any Person and its consolidated Subsidiaries for such
period determined in conformity with GAAP; provided, however, that the
following items shall be excluded in computing Adjusted Consolidated Net Income
(without duplication): (a) the net income (or loss) of such Person (other than
net income (or loss) attributable to a Subsidiary of such Person) in which any
other Person (other than such Person or any of its Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other
distributions actually paid to such Person or any of its Subsidiaries by such
other Person during such period; (b) solely for the purposes of calculating the
amount of Restricted Payments that may be made pursuant to clause (iii) of the
first paragraph of the "Limitation on Restricted Payments" covenant described
below (and in such case, except to the extent includable pursuant to the
foregoing clause (a)), the net income (or loss) of such Person accrued prior to
the date it becomes a Subsidiary of any other Person or is merged into or
consolidated with such other Person or any of its Subsidiaries or all or
substantially all the property and assets of such Person are acquired by such
other Person or any of its Subsidiaries; (c) the net income (or loss) of any
Subsidiary of any Person to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary of such net income is not
at the time permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary; (d) any gains or losses (on an after-
tax basis) attributable to Asset Sales; (e) except for purposes of calculating
the amount of Restricted Payments that may be made pursuant to clause (iii) of
the first paragraph of the "Limitation on Restricted Payments" covenant
described below, any amounts paid or accrued as dividends on Preferred Stock of
such Person or Preferred Stock of any Subsidiary (other than the Partnerships)
of such Person owned by Persons other than such Person or any of its
Subsidiaries; (f) all extraordinary gains and extraordinary losses; and (g) all
noncash charges reducing net income of such Person that relate to stock options
or stock
55
<PAGE>
appreciation rights and all cash payments reducing net income of such Person
that relate to stock options or stock appreciation rights; provided, however,
that, solely for the purpose of calculating the Interest Coverage Ratio (and in
such case, except to the extent includable pursuant to the foregoing clause
(a)), "Adjusted Consolidated Net Income" of such Person shall include the
amount of all cash dividends or other cash distributions received by such
Person or any Subsidiary of such Person from an Unrestricted Subsidiary.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (a) an investment by the Company or any of its
Subsidiaries in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged or
consolidated with the Company or any of its Subsidiaries; or (b) an acquisition
by the Company or any of its Subsidiaries of the assets of any Person other
than the Company or any of its Subsidiaries that constitutes substantially all
of a division or line of business of such Person.
"Asset Disposition" means the sale or other disposition by the Company or any
of its Subsidiaries (other than to the Company or another Subsidiary of the
Company) of (a) all or substantially all the Capital Stock of any Subsidiary of
the Company or (b) all or substantially all the assets that constitute a
division or line of business of the Company or any of its Subsidiaries.
"Asset Sale" means, with respect to any Person, any sale, transfer or other
disposition (including by way of merger, consolidation or sale-leaseback
transaction) in one transaction or a series of related transactions by such
Person or any of its Subsidiaries to any Person other than the Company or any
of its Subsidiaries of (a) all or any of the Capital Stock of any Subsidiary of
such Person; (b) all or substantially all the assets of an operating unit or
business of such Person or any of its Subsidiaries; or (c) any other assets of
such Person or any of its Subsidiaries outside the ordinary course of business
of such Person or such Subsidiary and, in each case, that is not governed by
the provisions of the Indenture applicable to mergers, consolidations and
transfers of all or substantially all the assets of the Company; provided,
however, that, for purposes of determining the restrictions under the
"Limitation on Asset Sales" covenant described below, sales, transfers or other
dispositions of inventory, receivables and other current assets shall not be
included within the meaning of "Asset Sale."
"Attributable Indebtedness" means, when used in connection with a sale-
leaseback transaction referred to in the "Limitation on Sale-Leaseback
Transactions" covenant described below, at any date of determination, the
product of (a) the net proceeds from such sale-leaseback transaction, and (b) a
fraction, the numerator of which is the number of full years of the term of the
lease relating to the property involved in such sale-leaseback transaction
(without regard to any options to renew or extend such term) remaining at the
date of the making of such computation, and the denominator of which is the
number of full years of the term of such lease (without regard to any options
to renew or extend such term) measured from the first day of such term.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (a) the sum of the product of (i)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security multiplied by (ii)
the amount of such principal payment, by (b) the sum of all such principal
payments.
"Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under the
Indenture.
56
<PAGE>
"Business Day" means any day except a Saturday, Sunday or other day on which
commercial banks in The City of New York, or in the city of the Corporate Trust
Office of the Trustee, are authorized or obligated by law to be closed.
"Canadian Credit Agreement" means the Revolving Term Credit Facility dated as
of April 2, 1993, as amended, between Terra Canada and The Bank of Nova Scotia
(or any successors thereto), together with all the other documents related
thereto (including, without limitation, any Guarantees and security documents),
in each case as such agreements may be amended (including any amendment and
restatement thereof), supplemented, extended, renewed, replaced or otherwise
modified from time to time, including, without limitation, any agreement
increasing the amount thereof in accordance with the limitations in the
Indenture and any agreement extending the maturity of, refinancing or otherwise
restructuring (including, but not limited to, the inclusion of additional
borrowers or Guarantors thereunder that are Subsidiaries of the Company) all or
any portion of the Indebtedness under such agreements or any successor
agreements.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or nonvoting) of such Person's capital stock or equity interests in a
partnership, joint venture, limited liability company or other equity that is
outstanding or issued on or after the date of the Indenture, including, without
limitation, all Common Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) the discounted present value of the
rental obligations of such Person as lessee of which, in conformity with GAAP,
is required to be capitalized on the balance sheet of such Person; and
"Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.
"Change of Control" means such time as (a) a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than Minorco
or any of its Affiliates, becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 50% of the total voting power of the
then outstanding Voting Stock of the Company; or (b) individuals who at the
beginning of any period of two consecutive calendar years constituted the board
of directors of the Company (together with any new directors whose election by
the board of directors of the Company or whose nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
members of the board of directors of the Company then still in office who
either were members of the board of directors of the Company at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
board of directors of the Company then in office.
"Closing Date" means the date on which the Notes are originally issued under
the Indenture.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or nonvoting) of such Person's common stock, whether now outstanding or
issued after the date of the Indenture, or common equity interests in a
partnership, including, without limitation, all series and classes of such
common stock, all the Common Units and the general partnership interests in the
Partnerships.
"Common Unit" means a Common Unit as defined in the TNCLP Limited Partnership
Agreement.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum of the amounts for such period of (a) Adjusted Consolidated Net Income, (b)
Consolidated Interest Expense, (c) income taxes (other than income taxes
(either positive or negative) attributable to extraordinary and nonrecurring
gains or losses or sales of assets), (d) depreciation expense, (e) amortization
expense, (f) minority interest and (g) all other noncash items reducing
Adjusted Consolidated Net Income, less all noncash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for such
Person and its Subsidiaries in conformity with GAAP; provided, however, that,
if a Person has any Subsidiary (other than the Partnerships)
57
<PAGE>
that is not a Wholly Owned Subsidiary of such Person, Consolidated EBITDA of
such Person shall be reduced (to the extent not otherwise excluded by the
definition of Adjusted Consolidated Net Income) by an amount equal to (i) the
Adjusted Consolidated Net Income of such Subsidiary multiplied by (ii) the
quotient of (A) the number of shares of outstanding Common Stock of such
Subsidiary not owned on the last day of such period by such Person or any
Subsidiary of such Person divided by (B) the total number of shares of
outstanding Common Stock of such Subsidiary on the last day of such period; and
provided further, however, that Consolidated EBITDA of such Person shall be
reduced by amounts paid as distributions on limited partnership interests of
either Partnership owned by Persons other than the Company or any of its
Subsidiaries.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate amount of interest in respect of Indebtedness (including
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation (excluding, without limitation,
amounts deferred by trade creditors until the occurrence of certain events)
calculated in accordance with the effective interest method of accounting; all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing; the net costs associated with
Interest Rate Agreements; and Indebtedness that is Guaranteed by such Person)
and all but the principal component of rentals in respect of Capitalized Lease
Obligations paid, accrued or scheduled to be paid or to be accrued by such
Person and its consolidated Subsidiaries during such period; excluding,
however, (a) any amount of such interest of any Subsidiary of such Person if
the net income (or loss) of such Subsidiary is excluded in the calculation of
Adjusted Consolidated Net Income for such Person pursuant to clause (c) of the
proviso in the definition thereof (but only in the same proportion as the net
income (or loss) of such Subsidiary is excluded from the calculation of
Adjusted Consolidated Net Income for such Person pursuant to clause (c) of the
proviso in the definition thereof) and (b) any premiums, fees and expenses (and
any amortization thereof) payable in connection with the recapitalization of
the Company consummated in 1994, the Company's proposal to acquire all of the
outstanding Senior Preference Units which was terminated in May 1995 and the
Company's open market purchase program for up to five million Senior Preference
Units approved in May 1995, all as determined on a consolidated basis in
conformity with GAAP.
"Consolidated Net Tangible Assets" means the total amount of assets of the
Company and its Subsidiaries (less applicable depreciation, amortization and
other valuation reserves), except to the extent resulting from write-ups of
capital assets (excluding write-ups in connection with accounting for
acquisitions in conformity with GAAP), after deducting therefrom (a) all
current liabilities of the Company and its consolidated Subsidiaries (excluding
intercompany items) and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recently available quarterly or year-end consolidated balance
sheet of the Company and its consolidated Subsidiaries, prepared in conformity
with GAAP.
"Consolidated Net Worth" means, at any date of determination, shareholders'
equity as set forth on the most recently available quarterly or year-end
consolidated balance sheet of the Company and its consolidated Subsidiaries,
less any amounts attributable to Redeemable Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of
Capital Stock of the Company or any Subsidiary of the Company, each item to be
determined in accordance with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Credit Agreements" means the Terra Credit Agreement and the Canadian Credit
Agreement.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to
or under which the Company or any of its Subsidiaries is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
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"GAAP" means generally accepted accounting principles in the United States of
America as in effect as of the date of the Indenture, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession. All ratios and computations
based on GAAP contained in the Indenture shall be computed in conformity with
GAAP, except that calculations made for purposes of determining compliance with
the terms of the covenants described below and with other provisions of the
Indenture shall be made without giving effect to (a) the amortization of any
expenses incurred in connection with the recapitalization of the Company
consummated in 1994, the Company's proposal to acquire all of the outstanding
Senior Preference Units which was terminated in May 1995 and the Company's open
market purchase program for up to five million Senior Preference Units approved
in May 1995; and (b) except as otherwise provided, the amortization of any
amounts required or permitted by Accounting Principles Board Opinion Nos. 16
and 17.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (b)
entered into for purposes of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Holder" or "Securityholder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness;
provided, however, that neither the accrual of interest (whether such interest
is payable in cash or in kind) nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of determination
(without duplication), (a) all indebtedness of such Person for borrowed money;
(b) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments; (c) all obligations of such Person in respect of
letters of credit, banker's acceptances, or other similar instruments
(including reimbursement obligations with respect thereto); (d) all obligations
of such Person to pay the deferred and unpaid purchase price of property or
services, which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, except Trade Payables; (e) all obligations of such
Person as lessee under Capitalized Leases; (f) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person, provided, however, that the amount of
such Indebtedness shall be the lesser of (i) the fair market value of such
asset at such date of determination and (ii) the amount of such Indebtedness;
(g) all Indebtedness of other Persons Guaranteed by such Person to the extent
such Indebtedness is Guaranteed by such Person; (h) all obligations in respect
of borrowed money under the Credit Agreements and any Guarantees thereof; (i)
to the extent not otherwise included in this definition, obligations under
Currency Agreements and Interest Rate Agreements; and (j) any Redeemable Stock.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability determined by such Person's board of directors, in good
faith, as reasonably likely to occur, upon the occurrence of the contingency
giving rise to the obligation, of any contingent obligations at such date;
provided, however, that the amount outstanding at any time of any Indebtedness
issued with original issue discount is the face amount of such Indebtedness
less the remaining unamortized portion of the original issue discount of such
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Indebtedness at such time as determined in conformity with GAAP; and provided
further, however, that Indebtedness shall not include (x) any liability for
Federal, state, local or other taxes, (y) obligations of the Company or any of
its Restricted Subsidiaries pursuant to Receivables Programs, or (z)
obligations of the Company or any of its Restricted Subsidiaries pursuant to
contracts for, or options, puts or similar arrangements relating to, the
purchase of raw materials or the sale of inventory at a time in the future.
"Interest Coverage Ratio" means, with respect to any Person on any
Transaction Date, the ratio of (x) the aggregate amount of Consolidated EBITDA
of such Person for the four fiscal quarters for which financial statements in
respect thereof are available immediately prior to such Transaction Date to (y)
the aggregate Consolidated Interest Expense of such Person during such four
fiscal quarters. In making the foregoing calculation (which shall be made
without duplication), (a) pro forma effect shall be given to (i) any
Indebtedness Incurred subsequent to the end of the four-fiscal-quarter period
referred to in clause (x) and prior to the Transaction Date (other than
Indebtedness Incurred under a revolving credit or similar arrangement to the
extent of the commitment thereunder (or under any predecessor revolving credit
or similar arrangement) on the last day of such period), (ii) any Indebtedness
Incurred during such period to the extent such Indebtedness is outstanding at
the Transaction Date (with Indebtedness Incurred under a revolving credit or
similar arrangement calculated as described in clause (c) below), and (iii) any
Indebtedness to be Incurred on the Transaction Date (excluding Indebtedness to
be Incurred under a revolving credit or similar arrangement in connection with
an acquisition to the extent that Indebtedness under a revolving credit or
similar arrangement was theretofore repaid with the proceeds of an offering of
Capital Stock (other than Redeemable Stock) in which it was contemplated that
the amount of such repayment would later be Incurred in connection with such
acquisition), in each case as if such Indebtedness had been Incurred on the
first day of such four-fiscal-quarter period and after giving pro forma effect
to the application of the proceeds thereof as if such application had occurred
on such first day; (b) Consolidated Interest Expense attributable to interest
on any Indebtedness (whether existing or being Incurred) computed on a pro
forma basis and bearing a floating interest rate shall be computed as if the
average borrowing rate in effect during such four-fiscal-quarter period (taking
into account any Interest Rate Agreement applicable to such Indebtedness) had
been the applicable rate for the entire period; (c) Consolidated Interest
Expense attributable to interest on any Indebtedness under a revolving credit
or similar facility computed on a pro forma basis shall be computed based upon
the average daily balance of such Indebtedness during the applicable period, as
adjusted to eliminate the effects of any temporary repayment of such
Indebtedness from proceeds of an offering of Capital Stock (other than
Redeemable Stock) later applied to an acquisition as described in clause
(a)(iii) above; (d) there shall be excluded on a pro forma basis from
Consolidated Interest Expense any Consolidated Interest Expense related to any
amount of Indebtedness that was outstanding during such four-fiscal-quarter
period or thereafter but that is not outstanding or is to be repaid on the
Transaction Date, except for Consolidated Interest Expense accrued (as adjusted
pursuant to clause (b)) during such four-fiscal-quarter period under a
revolving credit or similar arrangement to the extent of the commitment
thereunder (or under any successor revolving credit or similar arrangement) on
the Transaction Date; (e) pro forma effect shall be given to Asset Dispositions
and Asset Acquisitions (including giving pro forma effect to the application of
proceeds of any Asset Disposition) that occur during such four-fiscal-quarter
period or thereafter and prior to the Transaction Date as if they had occurred
and such proceeds had been applied on the first day of such four-fiscal-quarter
period; (f) with respect to any such four-fiscal-quarter period commencing
prior to the Closing Date, the Closing Date shall be deemed to have taken place
on the first day of such period; and (g) pro forma effect shall be given to
Asset Dispositions and Asset Acquisitions (including giving pro forma effect to
the application of proceeds of any asset disposition) that have been made by
any Person that has become a Subsidiary of the Company or has been merged with
or into the Company or any Subsidiary of the Company during the four-fiscal-
quarter period referred to above or subsequent to such period and prior to the
Transaction Date and that would have been Asset Dispositions or Asset
Acquisitions had such transactions occurred when such Person was a Subsidiary
of the Company as if such asset dispositions or asset acquisitions were Asset
Dispositions or Asset Acquisitions that occurred on the first day of such
period; provided, however, that, to the extent that clause (e) or (g) of this
sentence requires that pro forma effect be given to an Asset Acquisition or an
Asset Disposition, such pro forma calculation shall be based upon the four full
fiscal
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quarters immediately preceding the Transaction Date of the Person, or division
or line of business of the Person, that is acquired for which financial
statements are available.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement
designed to protect the Company or any of its Subsidiaries against fluctuations
in interest rates to or under which the Company or any of its Subsidiaries is a
party or a beneficiary on the date of the Indenture or becomes a party or a
beneficiary thereafter.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of such
Person or its Subsidiaries) or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, any other Person. For purposes of the definition
of "Unrestricted Subsidiary" and the "Limitation on Restricted Payments"
covenant described below, (a) the designation of a Subsidiary of the Company as
an Unrestricted Subsidiary shall be deemed an "Investment" by the Company in
such newly designated Unrestricted Subsidiary in an amount (the "Investment
Amount") equal to the fair market value of the assets of such Subsidiary that
are required to be reflected on such Subsidiary's balance sheet in accordance
with GAAP, less the total liabilities of such Subsidiary that are required to
be reflected on such Subsidiary's balance sheet in accordance with GAAP, in
each case on a consolidated basis, at the time that such Subsidiary is
designated an Unrestricted Subsidiary, (b) the designation of an Unrestricted
Subsidiary as a Restricted Subsidiary shall be deemed a reduction of
Investments by the Company in Unrestricted Subsidiaries in an amount equal to
the Investment Amount with respect to such Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated a Restricted Subsidiary of the
Company and (c) any property, other than cash or services, transferred to or
from an Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, with such value to be determined by the Board of
Directors in good faith (whose determination shall be conclusive and evidenced
by a Board Resolution) in any case in which the value of the properties
transferred individually or in a series of related transactions exceeds $10
million.
"Junior Preference Unit" means a Junior Preference Units as defined in the
TNCLP Limited Partnership Agreement.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest).
"Limited Partnership Agreement" means either the TNCLP Limited Partnership
Agreement or the TNLP Limited Partnership Agreement.
"Minorco" means Minorco, a company incorporated under the laws of Luxembourg
as a societe anonyme.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds of
such Asset Sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company) and
proceeds from the conversion of other property received when converted to cash
or cash equivalents, net of (a) brokerage commissions and other fees and
expenses (including fees and expenses of counsel and investment bankers)
related to such Asset Sale; (b) provisions for all taxes (whether
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or not such taxes will actually be paid or are payable) as a result of such
Asset Sale without regard to the consolidated results of operations of the
Company and its Subsidiaries, taken as a whole; (c) payments made to repay
unsubordinated Indebtedness of the Company or Indebtedness of any Restricted
Subsidiary outstanding at the time of such Asset Sale that either (i) is
secured by a Lien on the property or assets sold or (ii) is required to be paid
as a result of such sale; and (d) appropriate amounts to be provided by the
Company or any Subsidiary of the Company as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP.
"Operating Lease" means, as applied to any Person, any lease of any property
(whether real, personal or mixed) that is not a Capitalized Lease.
"Partnership" means either TNCLP or TNLP.
"Permitted Distribution" means (a) the declaration and payment of any
dividend or distribution by either Partnership on any of the Capital Stock of
either thereof pursuant to the terms of either Limited Partnership Agreement;
or (b) the purchase, redemption, retirement or other acquisition for value of
outstanding Senior Preference Units, Junior Preference Units or Common Units
(or any successor equity interest of either Partnership or any successor
limited partnership, including any such equity interest received upon
conversion or exchange of any Senior Preference Unit, Junior Preference Unit or
Common Unit).
"Permitted Investment" means (a) the making of an Investment by the Company
or any Restricted Subsidiary (other than the general partner of the
Partnerships) in a Restricted Subsidiary that is not a Wholly Owned Subsidiary
of the Company, so long as such Investment is for a valid business purpose and
not for the primary purpose of making distributions on the Senior Preference
Units from the proceeds of such Investment to any Person other than the Company
or any of its Restricted Subsidiaries (as determined in good faith by the Board
of Directors, whose determination shall be conclusive and evidenced by a Board
Resolution); (b) the making of an Investment by the general partner of either
Partnership in either thereof; or (c) the making of an Investment by one
Partnership in the other Partnership.
"Permitted Liens" means (a) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (b) statutory Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (c) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (d) Liens incurred
or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers' acceptances, surety and appeal bonds,
governmental contracts, performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (e) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Subsidiaries; (f) Liens (including extensions and renewals thereof) upon real
or tangible personal property acquired after the Closing Date; provided,
however, that (i) such Lien is created solely for the purpose of securing
Indebtedness Incurred (A) to finance the cost (including the cost of
improvement or construction) of the item of property or assets subject thereto
and such Lien is created prior to, at the time of or within 12 months after the
later of the acquisition, the completion of construction or the commencement of
full operation of such property or (B) to refinance any Indebtedness previously
so secured, (ii) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such cost and (iii) any such Lien shall not extend to
or cover any
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property or assets other than such item of property or assets and any
improvements on such item; (g) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company or
any of its Subsidiaries; (h) Liens encumbering property or assets under
construction arising from progress or partial payments by a customer of the
Company or any of its Subsidiaries relating to such property or assets; (i) any
interest or title of a lessor in the property subject to any Capitalized Lease
or Operating Lease; provided, however, that any sale-leaseback transaction
related thereto complies with the "Limitation on Sale-Leaseback Transactions"
covenant described below; (j) Liens arising from filing Uniform Commercial Code
financing statements regarding leases; (k) Liens on property of, or on Capital
Stock or Indebtedness of, any entity existing at the time such entity becomes,
or becomes a part of, any Restricted Subsidiary; (l) Liens in favor of the
Company or any Restricted Subsidiary; (m) Liens securing any real property or
other assets of the Company or any Subsidiary of the Company in favor of the
United States of America or any State, or any department, agency,
instrumentality or political subdivision thereof, in connection with the
financing of industrial revenue bond facilities or of any equipment or other
property designed primarily for the purpose of air or water pollution control;
provided, however, that any such Lien on such facilities, equipment or other
property shall not apply to any other assets of the Company or such Subsidiary
of the Company; (n) Liens arising from the rendering of a final judgment or
order against the Company or any Subsidiary of the Company that does not give
rise to an Event of Default; (o) Liens securing reimbursement obligations with
respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (p)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(q) Liens encumbering customary initial deposits and margin deposits, and other
Liens that are either within the general parameters customary in the industry
and incurred in the ordinary course of business or otherwise permitted under
the terms of the Credit Agreements, in each case securing Indebtedness under
Interest Rate Agreements and Currency Agreements and forward contracts,
options, futures contracts, futures options or similar agreements or
arrangements designed to protect the Company or any of its Subsidiaries from
fluctuations in the price of commodities; (r) Liens arising out of conditional
sale, title retention, consignment or similar arrangements for the sale of
goods entered into by the Company or any of its Subsidiaries in the ordinary
course of business in accordance with the past practices of the Company and its
Subsidiaries prior to the Closing Date; and (s) Liens on or sales of
receivables and other Liens reasonably related to a Receivables Program.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means any employee benefit plan, pension plan, management equity plan,
stock option plan or similar plan or arrangement of the Company or any
Subsidiary of the Company, or any successor plan thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or nonvoting) of such Person's preferred or preference stock, or
preference equity interests in a partnership, whether now outstanding or issued
after the date of the Indenture, including, without limitation, all series and
classes of such preferred or preference stock, all the Senior Preference Units
and all the Junior Preference Units.
"Principal Property" means any real property (including related fixtures),
plant or equipment owned or leased by the Company or any Restricted Subsidiary,
other than real property, plant or equipment that, in the good faith
determination of the Board of Directors (whose determination shall be
conclusive and evidenced by a Board Resolution), is not of material importance
to the respective businesses conducted by the Company or any Restricted
Subsidiary as of the date of such determination; provided, however, that,
unless otherwise specified by the Board of Directors, any real property
(including related fixtures), plant or equipment with a fair market value of
less than $5 million shall not be a "Principal Property."
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"Receivables Program" means, with respect to any Person, obligations of such
Person or its Subsidiaries pursuant to accounts or notes receivable
securitization programs and any extension, renewal, modification or replacement
of such programs, including, without limitation, any agreement increasing the
amount of, extending the maturity of, refinancing or otherwise restructuring
all or any portion of the obligations under such programs or any successor
agreement or agreements.
"Redeemable Stock" means any class or series of Capital Stock of any Person
that by its terms or otherwise is (a) required to be redeemed prior to the
Stated Maturity of the Notes, (b) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (c) convertible into or exchangeable for Capital Stock referred
to in clause (a) or (b) above or Indebtedness having a scheduled maturity prior
to the Stated Maturity of the Notes.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Senior Preference Units" means a Senior Preference Unit as defined in the
TNCLP Limited Partnership Agreement.
"Significant Subsidiary" means, at any date of determination, any Subsidiary
of the Company that, together with its Subsidiaries, (a) for the most recent
fiscal year of the Company, accounted for more than 10% of the consolidated
revenues of the Company; or (b) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company, in each case
as reflected on the most recently available quarterly or year end consolidated
financial statements of the Company for such fiscal year.
"Stated Maturity" means, (a) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (b) with
respect to any scheduled installment of principal or interest on any debt
security, the date specified in such security as the fixed date on which such
installment of principal or interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation of which more
than 50% of the outstanding Voting Stock is owned, directly or indirectly, by
the Company or by one or more other Subsidiaries of the Company, or by such
Person and one or more other Subsidiaries of such Person, and any partnership,
association, joint venture, limited liability company or other entity in which
the Company or one or more other Subsidiaries of the Company, or such Person
and one or more other Subsidiaries of such Person, owns a general partnership
interest or more than 50% of the equity interests; provided, however, that,
except as the term "Subsidiary" is used in the definitions of "Significant
Subsidiary" and "Unrestricted Subsidiary," an Unrestricted Subsidiary shall not
be deemed to be a direct or indirect Subsidiary of the Company for purposes of
the Indenture.
"Terra Canada" means Terra International (Canada) Inc., an Ontario
corporation, and its successors.
"Terra Capital" means Terra Capital, Inc., a Delaware corporation, and its
successors.
"Terra Credit Agreement" means the Amended and Restated Credit Agreement
dated as of May 12, 1995, among Terra Capital, TNLP, certain guarantors, the
issuing banks and the lenders and the agent named therein (or any successors
thereto), together with all the other documents related thereto (including,
without limitation, any Guarantees and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented, extended, renewed, replaced or otherwise modified from
time to time, including, without limitation, any agreement increasing the
amount thereof in accordance with the limitations of the Indenture and any
agreement extending the maturity of, refinancing or otherwise restructuring
(including, but not limited to, the inclusion of additional borrowers or
Guarantors thereunder that are Subsidiaries of the Company and whose
obligations are Guaranteed by the Company thereunder) all or any portion of the
Indebtedness under such agreements or any successor agreements.
"TNC" means Terra Nitrogen Corporation, a Delaware corporation, and its
successors.
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"TNCLP" means Terra Nitrogen Company, L.P., a Delaware limited partnership,
and its successors.
"TNCLP Limited Partnership Agreement" means the Agreement of Limited
Partnership of Terra Nitrogen Company, L.P. (formerly Agricultural Minerals
Company, L.P.), dated as of December 4, 1991, among TNC (formerly Agricultural
Minerals Corporation), the Company and any other persons who become partners in
TNCLP as provided therein, as such agreement may be amended, supplemented, or
otherwise modified from time to time as permitted by the Indenture.
"TNLP" means Terra Nitrogen, Limited Partnership, a Delaware limited
partnership, and its successors.
"TNLP Limited Partnership Agreement" means the Agreement of Limited
Partnership of Terra Nitrogen, Limited Partnership, dated as of December 4,
1991, among TNC (formerly Agricultural Minerals Corporation), the Company and
TNCLP (formerly Agricultural Minerals Company, L.P.) as such agreement may be
amended, supplemented or otherwise modified from time to time as permitted by
the Indenture.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services and shall specifically include amounts owed to but deferred by trade
creditors until the occurrence of certain events.
"Transaction Date" means, with respect to the Incurrence of any Indebtedness
by the Company or any of its Subsidiaries, the date such Indebtedness is to be
Incurred and, with respect to any Restricted Payment, the date such Restricted
Payment is to be made.
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company that, at
the time of determination, shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below; and (b) any Subsidiary of
an Unrestricted Subsidiary; provided that, in case of clauses (a) and (b),
neither the Company nor any of its other Subsidiaries (other than another
Unrestricted Subsidiary) (i) provides credit support for, or Guarantees of, any
Indebtedness of such Subsidiary or any Subsidiary of such Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness) or (ii)
is directly or indirectly liable for any Indebtedness of such Subsidiary or any
Subsidiary of such Subsidiary, except to the extent that the Company and its
Restricted Subsidiaries would otherwise, in each case, be permitted to make a
Restricted Payment pursuant to, or an Investment in such Subsidiary permitted
by, the "Limitation on Restricted Payments" covenant. The Board of Directors
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary,
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided, however, that
either (i) the Subsidiary to be so designated has total assets of $1,000 or
less at the time of designation or (ii) if such Subsidiary has assets greater
than $1,000 at the time of designation, that such designation would be
permitted under the "Limitation on Restricted Payments" covenant described
below. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary of the Company; provided, however, that immediately after
giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant described below and (y) no Event of Default, or event
that after notice or passage of time or both would become an Event of Default,
shall have occurred and be continuing. All such designations by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors or
other governing body of such Person, or any general partnership interest in any
partnership.
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"Wholly Owned Subsidiary" means, with respect to any Person, any Subsidiary
of such Person if all the Common Stock or other similar equity ownership
interests (but not including Preferred Stock) in such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated
by applicable law) is owned directly or indirectly by such Person.
COVENANTS
Limitation on Indebtedness
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness; provided, however, that
the Company and its Restricted Subsidiaries may Incur Indebtedness if, after
giving effect to the Incurrence of such Indebtedness and the receipt and
application of the proceeds therefrom, the Interest Coverage Ratio of the
Company would be greater than 2:1x.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary may
Incur each and all of the following: (a)(i) Indebtedness outstanding at any
time under any term loan portion of the Credit Agreements; provided, however,
that the aggregate principal amount of such Indebtedness outstanding at any
time under this clause (a)(i) shall not exceed $300 million, (ii) Indebtedness
outstanding at any time under any revolving credit facility under the Credit
Agreements or under any other revolving credit or similar arrangements;
provided, however, that the aggregate principal amount of such Indebtedness
outstanding at any time under this clause (a)(ii) shall not exceed the greater
of (x) $250 million and (y) the sum of 75% of the Company's and its Restricted
Subsidiaries' accounts and notes receivables and 40% of the Company's and its
Restricted Subsidiaries' inventory (based on the average accounts and notes
receivables (excluding, without duplication, accounts and notes receivables
subject to a Receivables Program) and inventory over the last twelve months
preceding the date of incurrence), and (iii) additional Indebtedness
outstanding at any time in an aggregate principal amount not to exceed $50
million; (b) Indebtedness of the Company to any of its Restricted Subsidiaries,
or of a Restricted Subsidiary to the Company or to any other Restricted
Subsidiary; (c) Indebtedness the net proceeds of which are used to refinance
outstanding Indebtedness of the Company or any of its Restricted Subsidiaries,
other than Indebtedness Incurred under clause (a), (d) or (e) and any
refinancings thereof, in an amount (or, if such new Indebtedness provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, with an original issue price) not to
exceed the amount so refinanced (plus premiums, accrued interest, fees and
expenses); provided, however, that Indebtedness the proceeds of which are used
to refinance the Notes or other Indebtedness of the Company that is
subordinated in right of payment to the Notes shall only be permitted under
this clause (c) if (i) in case the Notes are refinanced in part, such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, is expressly made pari passu
with, or subordinate in right of payment to, the Notes, (ii) in case the
Indebtedness to be refinanced is subordinated in right of payment to the Notes,
such Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, is expressly made subordinate in
right of payment to the Notes, at least to the extent that the Indebtedness to
be refinanced is subordinated to the Notes, and (iii) in case the Notes are
refinanced in part or the Indebtedness to be refinanced is subordinated in
right of payment to the Notes, such Indebtedness, determined as of the date of
Incurrence of such new Indebtedness, does not mature prior to six months after
the Stated Maturity of the Notes and the Average Life of such Indebtedness is
six months greater than the remaining time before the Stated Maturity of the
Notes; and provided further, however, that in no event may Indebtedness of the
Company that is pari passu with, or subordinated in right of payment to, the
Notes be refinanced by means of Indebtedness of any Restricted Subsidiary of
the Company pursuant to this clause (c); (d) Indebtedness directly or
indirectly Incurred to finance capital expenditures of the Company or any of
its Restricted Subsidiaries in an aggregate principal amount not to exceed $10
million in any fiscal year of the Company, and any refinancing of any such
Indebtedness; provided, however, that the amount of the Indebtedness that may
be Incurred in any fiscal year of the Company pursuant to this clause (d) shall
be increased by the amount of Indebtedness that could have been Incurred in the
prior fiscal year (including by reason of this proviso) of the Company pursuant
to
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this clause (d) but was not so Incurred; (e) Indebtedness of the Company
outstanding at any time in an aggregate amount not to exceed $20 million;
provided, however, that such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, (i) is
expressly made subordinate in right of payment to the Notes, and (ii) provides
that no payments of principal of such Indebtedness by way of sinking fund,
mandatory redemption or otherwise (including defeasance) may be made by the
Company (including, without limitation, at the option of the holder thereof,
other than an option given to such holder pursuant to an "asset sale" or
"change of control" provision that is no more favorable (except with respect to
any premium payable) to the holders of such Indebtedness than the provisions
contained in the "Limitation on Asset Sales" and "Repurchase of Notes upon
Change of Control" covenants described below and such Indebtedness specifically
provides that the Company will not repurchase or redeem such Indebtedness
pursuant to such provisions prior to the Company's repurchase of the Notes
required to be repurchased by the Company under the "Limitation on Asset Sales"
and "Repurchase of Notes upon Change of Control" covenants) at any time prior
to the Stated Maturity of the Notes; (f) Indebtedness Incurred by the Company
in connection with the purchase, redemption, acquisition, cancelation or other
retirement for value of shares of Capital Stock of the Company, options on any
such shares or related stock appreciation rights or similar securities, or the
satisfaction of put, call, liquidity or other similar rights with respect to
any such securities, held by officers, directors or employees or former
officers, directors or employees (or their estates or beneficiaries under their
estates or their permitted transferees) or by any Plan, upon death, disability,
retirement, termination of employment or pursuant to the terms of such Plan or
any other agreement under which such shares of stock or related rights were
issued or otherwise exist; provided, however, that (i) such Indebtedness, by
its terms or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, is expressly made subordinate in right of payment to
the Notes, (ii) such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, provides
that no payments of principal of such Indebtedness by way of sinking fund,
mandatory redemption or otherwise (including defeasance) may be made by the
Company at any time prior to the Stated Maturity of the Notes, and (iii) the
scheduled maturity of all principal of such Indebtedness is after the Stated
Maturity of the Notes; and provided further, however, that any such
Indebtedness may provide for payment or prepayment of principal and interest
which when aggregated with all principal and interest payable or prepayable on
all other such Indebtedness (plus all cash payments permitted to be made under
clause (c) of the second paragraph of the "Limitation on Restricted Payments"
covenant) does not exceed $10 million in any fiscal year; (g) Indebtedness (i)
in respect of performance bonds, bankers' acceptances, letters of credit and
surety or appeal bonds provided in the ordinary course of business, (ii) under
Currency Agreements and Interest Rate Agreements; provided, however, that, in
the case of Currency Agreements that relate to other Indebtedness, such
Currency Agreements do not increase the Indebtedness of the Company outstanding
at any time other than as a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities and compensation payable thereunder,
and (iii) arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of credit,
surety bonds or performance bonds securing any obligations of the Company or
any Subsidiary of the Company pursuant to such agreements, in any case Incurred
in connection with the acquisition or disposition of any business, assets or
Subsidiary of the Company, other than Guarantees of Indebtedness Incurred by
any Person acquiring all or any portion of such business, assets or Subsidiary
of the Company for the purpose of financing such acquisition; (h) Indebtedness
under Guarantees Incurred by the Company or any of its Restricted Subsidiaries
in respect of obligations of Unrestricted Subsidiaries outstanding at any time
in an aggregate amount not to exceed $5 million; (i) Indebtedness of the
Company or any of its Restricted Subsidiaries the net proceeds of which are
used to pay Federal, state or local taxes arising as a result of any
recharacterization of either Partnership as an association taxable as a
corporation; (j) Acquired Indebtedness; provided, however, that, at the time of
the Incurrence thereof, after giving pro forma effect to such Incurrence, the
Company could Incur at least $1.00 of Indebtedness under the first paragraph of
this "Limitation on Indebtedness" covenant and refinancings of any thereof;
provided, however, that such refinancing Indebtedness may not be Incurred by
any Person other than the Company or the Restricted Subsidiary that is the
obligor on such Acquired Indebtedness; and (k) Indebtedness outstanding or as
to which commitments are in place on the date of the Indenture other than
Indebtedness described in clause (a)(i) or (ii) above.
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Notwithstanding any other provision of this "Limitation on Indebtedness"
covenant, (a) the maximum amount of Indebtedness that the Company or any
Restricted Subsidiary may Incur pursuant to this "Limitation on Indebtedness"
covenant shall not be deemed to be exceeded due solely to the result of
fluctuations in the exchange rates of currencies; (b) the Company shall not
Incur any Indebtedness that is expressly subordinated to any other Indebtedness
of the Company, unless such Indebtedness, by its terms or the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is also
expressly made subordinate to the Notes at least to the extent it is
subordinated to such other Indebtedness; and (c) upon any refinancing of any
Indebtedness permitted to be Incurred under clause (c) or clause (j) of the
second paragraph of this "Limitation on Indebtedness" covenant, the amount of
Indebtedness permitted to be Incurred pursuant to such clause shall be
increased by the amount of premiums, fees and expenses incurred in connection
with such refinancing and by the amount of accrued interest on such
Indebtedness at the time of such refinancing.
For purposes of determining any particular amount of Indebtedness under this
"Limitation on Indebtedness" covenant, the following amounts shall not be
included: (a) Guarantees of, contingent obligations (including obligations of a
general partner for liabilities of a partnership) with respect to, or
obligations with respect to letters of credit supporting, Indebtedness
otherwise included in the determination of such particular amount; and (b) any
Liens granted pursuant to the equal and ratable provisions referred to in the
first paragraph of the "Limitation on Liens" covenant. For purposes of
determining compliance with this "Limitation of Indebtedness" covenant, (a) in
the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described in the above clauses, the Company, in its
sole discretion, shall classify such item of Indebtedness and only be required
to include the amount and type of such Indebtedness in one of such clauses; (b)
Indebtedness permitted under this "Limitation on Indebtedness" covenant need
not be permitted solely by reference to one provision permitting such
Indebtedness but may be permitted in part by reference to one such provision
and in part by reference to one or more other provisions of this "Limitation on
Indebtedness" covenant permitting such Indebtedness; and (c) the amount of
Indebtedness issued at a price that is less than the principal amount thereof
shall be equal to the amount of the liability in respect thereof determined in
conformity with GAAP. (Section 4.03)
Limitation on Restricted Payments
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, (a) declare or pay any
dividend or make any distribution on its Capital Stock (other than (i) on the
Capital Stock of Restricted Subsidiaries that are Wholly Owned Subsidiaries of
the Company, and (ii) dividends or distributions payable solely in shares of
its, or any Restricted Subsidiary's, Capital Stock (other than Redeemable
Stock) of the same class held by such holders or in options, warrants or other
rights to acquire such shares of Capital Stock) held by Persons other than the
Company or another Restricted Subsidiary, (b) purchase, redeem, retire or
otherwise acquire for value any shares of Capital Stock of the Company, any
Restricted Subsidiary or any Unrestricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by
Persons other than the Company or another Restricted Subsidiary, (c) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company that is subordinated in right of payment to the
Notes, (d) make any Investment in any Restricted Subsidiary that is not a
Wholly Owned Subsidiary of the Company, other than a Permitted Investment, or
(e) make any Investment in any Unrestricted Subsidiary (such payments or any
other actions described in clauses (a) through (e) being collectively
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment: (i) an Event of Default or event that, after
notice or passage of time or both, would become an Event of Default, shall have
occurred and be continuing, (ii) the Company could not Incur at least $1.00 of
Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant, or (iii) the aggregate amount expended for all Restricted Payments
(the amount so expended, if other than in cash, to be determined in good faith
by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) after the Closing Date shall exceed the sum of
(A) 50% of the aggregate
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amount of the Adjusted Consolidated Net Income (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of such amount) of the Company
(determined by excluding income resulting from the transfers of assets received
by the Company or a Restricted Subsidiary from an Unrestricted Subsidiary)
accrued on a cumulative basis during the period (taken as one accounting
period) beginning on January 1, 1995 and ending on the last day of the last
fiscal quarter preceding the Transaction Date, plus (B) the aggregate net
proceeds (including the fair market value of noncash proceeds as determined in
good faith by the Board of Directors) received by the Company or any of its
Restricted Subsidiaries from any issuance and sale permitted by the Indenture
of its Capital Stock (not including Redeemable Stock) to a Person that is not a
Subsidiary of the Company, including an issuance or sale permitted by the
Indenture for cash or other property upon the conversion of any Indebtedness of
the Company or any of its Restricted Subsidiaries subsequent to the Closing
Date, or from the issuance of any options, warrants or other rights to acquire
Capital Stock of the Company or any of its Restricted Subsidiaries (in each
case, exclusive of any Redeemable Stock or any options, warrants or other
rights that are redeemable at the option of the holder, or are required to be
redeemed, prior to the Stated Maturity of the Notes), plus (C) an amount equal
to the net reduction in Investments in Unrestricted Subsidiaries (other than
Unrestricted Subsidiaries so designated pursuant to clause (g) of the second
paragraph of this "Limitation on Restricted Payments" covenant and other than
Investments made in Unrestricted Subsidiaries pursuant to such clause (g))
resulting from payments of interest on Indebtedness, dividends, repayments of
loans or advances, or other transfers of assets, in each case to the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries, or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investments"), not to exceed in
the case of any Unrestricted Subsidiary the amount of Investments previously
made by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary, plus (D) $25 million.
The foregoing provision shall not take into account, and shall not be
violated by reason of: (a) the payment of any dividend within 120 days after
the date of declaration thereof if, at such date of declaration, such payment
would comply with the foregoing provision; (b) the redemption, repurchase,
defeasance or other acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Notes, including premium, if any, and
accrued and unpaid interest, with the proceeds of Indebtedness Incurred under
the first paragraph of the "Limitation on Indebtedness" covenant or clause (c)
or (e) of the second paragraph of the "Limitation on Indebtedness" covenant;
(c) the repurchase, redemption, acquisition, cancelation or other retirement
for value of shares of Capital Stock of the Company, any Restricted Subsidiary
or any Unrestricted Subsidiary, options on any such shares or related stock
appreciation rights or similar securities, or the satisfaction of put, call,
liquidity or other similar rights with respect to any such securities, held by
officers, directors or employees or former officers, directors or employees (or
their estates or beneficiaries under their estates or their permitted
transferees) or by any Plan, upon death, disability, retirement, termination of
employment or pursuant to the terms of such Plan or any other agreement under
which such shares of stock or related rights were issued or otherwise exist;
provided, however, that the aggregate cash payment made for all such
repurchases, redemptions, acquisitions, cancellations, retirements or other
satisfactions of or with respect to such shares, options or other rights after
the Closing Date (plus payments or prepayments of principal and interest
permitted on Indebtedness Incurred under clause (f) of the second paragraph of
the "Limitation on Indebtedness" covenant) does not exceed $10 million in any
fiscal year and that any consideration in excess of such $10 million is in the
form of Indebtedness that would be permitted to be Incurred under clause (f) of
the second paragraph of the "Limitation on Indebtedness" covenant; (d) the
repurchase, redemption or other acquisition of Capital Stock of the Company in
exchange for, or out of the proceeds of a substantially concurrent offering of,
shares of Capital Stock of the Company (other than Redeemable Stock); (e) the
repurchase, redemption, retirement or other acquisition of Indebtedness of the
Company that is subordinated in right of payment to the Notes in exchange for,
or out of the net proceeds of a substantially concurrent offering of, shares of
Capital Stock of the Company (other than Redeemable Stock); (f) payments or
distributions pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially all
the property and assets of the Company; (g) the making of (i) up to $10 million
of Investments in Unrestricted Subsidiaries plus the amount of any reduction in
such
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Investments in such Unrestricted Subsidiaries made pursuant to this clause (g)
resulting from payments of interest on Indebtedness, dividends, repayments of
loans or advances, or other transfers of assets, in each case to the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries, or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investments"), not to exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments previously
made by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary pursuant to this clause (g), (ii) Investments in the Company,
Unrestricted Subsidiaries or Restricted Subsidiaries with the proceeds of any
sale of Capital Stock of the Company or (in the case of Investments in the
Company or any Restricted Subsidiaries) of any Restricted Subsidiary permitted
by the Indenture, and (iii) Investments in Unrestricted Subsidiaries in the
form of loans or advances from the Company or any Restricted Subsidiary
representing capitalized labor costs for services performed by the Company or
any Restricted Subsidiary to such Unrestricted Subsidiaries in the ordinary
course of business; (h) the purchase, redemption, acquisition, cancellation or
other retirement for a nominal value per right of any rights granted to all the
holders of Common Stock of the Company pursuant to any shareholders' rights
plan adopted for the purpose of protecting shareholders from unfair takeover
tactics; provided, however, that any such purchase, redemption, acquisition,
cancellation or other retirement of such rights shall not be for the purpose of
evading the limitations of this "Limitation on Restricted Payments" covenant
(all as determined in good faith by the Board of Directors); (i) any Permitted
Distribution; (j) payments by the Company or any Restricted Subsidiary in
respect of Indebtedness of the Company or any Restricted Subsidiary owed to the
Company or another Restricted Subsidiary; (k) the application of proceeds as
provided in the "Limitation on Asset Sales" covenant; or (l) the application of
proceeds as provided in clause (c) of the "Limitation on the Issuance of
Capital Stock of Restricted Subsidiaries" covenant; and provided, however,
that, in the case of clauses (b), (c) (except with respect to the Incurrence of
Indebtedness complying with the first proviso of clause (f) of the second
paragraph of the "Limitation on Indebtedness" covenant), (d), (e), (f) (other
than with respect to either Partnership), or (g) (other than Investments in
Unrestricted Subsidiaries any of the Capital Stock of which is held by either
Partnership, the general partner of either thereof or any Unrestricted
Subsidiary of either Partnership), no Event of Default, or event that after
notice or passage of time or both would become an Event of Default, shall have
occurred and be continuing or shall occur as a consequence thereof. (Section
4.04)
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary;
(b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary; (c) make loans or advances to the Company or any other Restricted
Subsidiary; or (d) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provision shall not restrict or prohibit any encumbrances or
restrictions existing: (a) in the Credit Agreements or in any other agreements
in effect on the Closing Date, including extensions, refinancings, renewals or
replacements thereof; provided; however, that the encumbrances and restrictions
in any such extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those encumbrances or
restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (b) under any Receivables Program or any other agreement
providing for the Incurrence of Indebtedness; provided, however, that the
encumbrances and restrictions in any such agreement are no less favorable in
any material respect to the Holders than those encumbrances and restrictions
contained in the agreement referred to in clause (a) above that is least
favorable to the Holders as of the Closing Date; (c) under or by reason of
applicable law; (d) with respect to any Person or the property or assets of
such Person acquired by the Company or any Restricted Subsidiary that existed
at the time of such acquisition and were not created in connection with or in
contemplation of such acquisition, so long as
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such encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property or
assets of such Person so acquired; (e) in the case of clause (d) of the first
paragraph of the "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant, (i) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset that is
a lease, license, conveyance or contract of similar property or asset, (ii) by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by the Indenture, or (iii) arising or
agreed to in the ordinary course of business and that do not, individually or
in the aggregate, materially detract from the value of property or assets of
the Company or any Restricted Subsidiary; (f) with respect to a Restricted
Subsidiary and imposed pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all the Capital Stock of, or
property and assets of, such Restricted Subsidiary; or (g) in either Limited
Partnership Agreement. Nothing contained in this "Limitation on Dividend and
Other Payment Restrictions Affecting Restricted Subsidiaries" covenant shall
prevent the Company or any Restricted Subsidiary from (x) entering into any
agreement permitting the Incurrence of Liens otherwise permitted in the
"Limitation on Liens" covenant or (y) restricting the sale or other disposition
of property or assets of the Company or any of its Restricted Subsidiaries that
secure Indebtedness of the Company or any of its Restricted Subsidiaries.
(Section 4.05)
Limitation on the Issuance of Capital Stock of Restricted Subsidiaries
Under the terms of the Indenture, the Company will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell any shares of its Capital
Stock (including options, warrants or other rights to purchase shares of such
Capital Stock) except (a) to the Company or another Restricted Subsidiary that
is a Wholly Owned Subsidiary of the Company; (b) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary; (c) if the Net Cash Proceeds from such
issuance or sale are applied, to the extent required to be applied, pursuant to
the "Limitation on Asset Sales" covenant; (d) in the case of TNLP, to TNCLP; or
(e) in the case of either Partnership, as otherwise permitted by either Limited
Partnership Agreement, so long as any such issuance or sale is for a valid
business purpose and not for the primary purpose of making distributions on the
Senior Preference Units from the Net Cash Proceeds of such issuance or sale to
any Person other than the Company or any of its Restricted Subsidiaries (as
determined in good faith by the Board of Directors, whose determination shall
be conclusive and evidenced by a Board Resolution). (Section 4.06)
Limitation on Transactions with Shareholders and Affiliates
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, enter into, renew or
extend any transaction (including, without limitation, the purchase, sale,
lease or exchange of property or assets, or the rendering of any service) with
any holder (or any Affiliate of such holder) of 5% or more of any class of
Capital Stock of the Company or any Restricted Subsidiary or with any Affiliate
of the Company or any Restricted Subsidiary, except upon fair and reasonable
terms no less favorable to the Company or such Restricted Subsidiary than could
be obtained in a comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate of such a holder.
The foregoing limitation does not limit, and shall not apply to, (a) any
transaction or series of related transactions (i) approved by a majority of the
disinterested members of the Board of Directors or (ii) for which the Company
or Restricted Subsidiary delivers to the Trustee a written opinion of a
nationally recognized investment banking firm stating that the transaction is
fair to the Company or such Restricted Subsidiary from a financial point of
view; (b) any transaction between the Company and any Restricted Subsidiary or
between Restricted Subsidiaries; (c) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(d) any Restricted Payments not prohibited by the "Limitation on Restricted
Payments" covenant; (e) any payments or other transactions pursuant to any tax
sharing agreement between the Company or any Restricted Subsidiary and any
other
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Person with which the Company or such Restricted Subsidiary is required or
permitted to file a consolidated tax return or with which the Company or such
Restricted Subsidiary is or could be part of a consolidated group for tax
purposes; (f) any transaction between the Company or any Restricted Subsidiary
and any holder of any Senior Preference Units (or any Affiliate thereof) that
would be restricted by this "Limitation on Transactions with Shareholders and
Affiliates" covenant as a result of such holder's ownership of Senior
Preference Units, Junior Preference Units or Common Units; or (g) the provision
of management, financial and operational services by the Company and its
Subsidiaries to Affiliates of the Company in which the Company or its
Subsidiaries have Investments and the payment of compensation for such
services; provided, however, that the Board of Directors has determined that
the provision of such services is in the best interests of the Company and its
Subsidiaries. Notwithstanding the foregoing, any transaction or series of
related transactions covered by the first paragraph of this "Limitation on
Transactions with Shareholders and Affiliates" covenant the aggregate amount of
which does not exceed $3 million in value need not be approved in the manner
provided for in clause (a) of this paragraph. (Section 4.07)
Limitation on Liens
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien
on any Principal Property, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all the Notes
and all other amounts due under the Indenture to be directly secured equally
and ratably with (or prior to) the obligation or liability secured by such Lien
unless, after giving effect thereto, the aggregate amount of any Indebtedness
so secured, plus the Attributable Indebtedness for all sale-leaseback
transactions restricted as described in the "Limitation on Sale-Leaseback
Transactions" covenant, does not exceed 10% of Consolidated Net Tangible
Assets.
The foregoing limitation does not apply to, and any computation of
Indebtedness secured under such limitation shall exclude, (a) Liens securing
obligations under the Credit Agreements up to the amount of Indebtedness
permitted to be Incurred under clause (a) of the second paragraph of the
"Limitation on Indebtedness" covenant; (b) other Liens existing on the Closing
Date; (c) Liens securing Indebtedness of Restricted Subsidiaries (other than
Acquired Indebtedness and refinancings thereof); (d) Receivables Programs; (e)
Liens securing Indebtedness (other than subordinated Indebtedness) Incurred
under clause (g) of the second paragraph of the "Limitation on Indebtedness"
covenant; (f) Liens granted in connection with the extension, renewal or
refinancing, in whole or in part, of any Indebtedness described in clauses (a)
through (e) above; provided, however, that the amount of Indebtedness secured
by such Lien is not increased thereby (except to the extent that Indebtedness
under clause (a) above is increased to the maximum amount permitted to be
outstanding under clause (a) of the second paragraph of the "Limitation on
Indebtedness" covenant); and provided further, however, that the extension,
renewal or refinancing of Indebtedness of the Company may not be secured by
Liens on assets of any Restricted Subsidiary other than to the extent the
Indebtedness being extended, renewed or refinanced was at any time previously
secured by Liens on assets of such Restricted Subsidiary; (g) Liens with
respect to Acquired Indebtedness and refinancings thereof permitted under
clause (j) of the second paragraph of the "Limitation on Indebtedness"
covenant; provided, however, that such Liens do not extend to or cover any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets of the Subsidiary acquired; or (h) Permitted Liens. (Section
4.08)
Limitation on Sale-Leaseback Transactions
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, enter into any sale-leaseback transaction
involving any Principal Property, unless the aggregate amount of all
Attributable Indebtedness with respect to such transactions, plus all
Indebtedness secured by Liens on Principal Properties (excluding secured
Indebtedness that is excluded as described in the "Limitation on Liens"
covenant) does not exceed 10% of Consolidated Net Tangible Assets.
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The foregoing restriction does not apply to, and any computation of
Attributable Indebtedness under such limitation shall exclude, any sale-
leaseback transaction if: (a) the lease is for a period, including renewal
rights, of not in excess of three years; (b) the sale or transfer of the
Principal Property is entered into prior to, at the time of, or within 12
months after the later of the acquisition of the Principal Property or the
completion of construction thereof; (c) the lease secures or relates to
industrial revenue or pollution control bonds; (d) the transaction is between
the Company and any Restricted Subsidiary or between Restricted Subsidiaries;
or (e) the Company or such Restricted Subsidiary, within 12 months (24 months
in the case of sales of plants or facilities) after the sale of any Principal
Property is completed, applies an amount not less than the net proceeds
received from such sale to the retirement of unsubordinated Indebtedness, to
Indebtedness of a Restricted Subsidiary, or to the purchase of other property
that will constitute a Principal Property or improvements thereto, or, in the
case of either Partnership, to such investment, reinvestment or other use as
shall be permitted or required by either Limited Partnership Agreement.
(Section 4.09)
Limitation on Asset Sales
Under the terms of the Indenture, in the event and to the extent that the Net
Cash Proceeds received by the Company or any of its Restricted Subsidiaries
from one or more Asset Sales occurring on or after the Closing Date in any
period of 12 consecutive months (other than Asset Sales by the Company or any
Restricted Subsidiary to the Company or another Restricted Subsidiary) exceed
10% of Consolidated Net Tangible Assets in any one fiscal year (determined as
of the date closest to the commencement of such 12-month period for which a
balance sheet of the Company and its Subsidiaries has been prepared), then the
Company will, or will cause such Restricted Subsidiary to, (a) within 12 months
(or, in the case of Asset Sales of plants or facilities, 24 months) after the
date Net Cash Proceeds so received exceed 10% of Consolidated Net Tangible
Assets in any one fiscal year (determined as of the date closest to the
commencement of such 12-month period for which a balance sheet of the Company
and its Subsidiaries has been prepared) (i) apply an amount equal to such
excess Net Cash Proceeds, or the amount not applied pursuant to clause (ii) or
(iii), to repay unsubordinated Indebtedness of the Company or Indebtedness of
any Restricted Subsidiary, in each case owing to a Person other than the
Company or any of its Subsidiaries; (ii) invest an equal amount, or the amount
not applied pursuant to clause (i) or (iii) (or enter into a definitive
agreement committing to so invest within 12 months after the date of such
agreement), in property or assets that are of a nature or type or are used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the business of, the Company and its Subsidiaries existing on
the date thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution); or
(iii) in the case of either Partnership, apply an equal amount, or the amount
not applied pursuant to clause (i) or (ii), to such investment, reinvestment or
other use as shall be permitted or required by either Limited Partnership
Agreement, and (b) apply such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (a)) as provided in the following paragraphs of this
"Limitation on Asset Sales" covenant. The amount of such excess Net Cash
Proceeds required to be applied (or to be committed to be applied) during such
12-month period or 24-month period, as the case may be, as set forth in clause
(i), (ii) or (iii) of the next preceding sentence and not applied as so
required by the end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of Excess
Proceeds not theretofore subject to an Excess Proceeds Offer (as defined below)
totals at least $10 million, the Company must, not later than the fifteenth
Business Day of such month, make an offer (an "Excess Proceeds Offer") to
purchase from the Holders on a pro rata basis an aggregate principal amount of
Notes equal to the Excess Proceeds on such date, at a purchase price equal to
101% of the principal amount thereof, plus accrued interest (if any) to the
date of purchase (the "Excess Proceeds Payment").
The Company will commence an Excess Proceeds Offer by mailing a notice to the
Trustee and each Holder stating: (a) that the Excess Proceeds offer is being
made pursuant to this "Limitation on Asset Sales" covenant and that all Notes
validly tendered will be accepted for payment on a pro rata basis; (b) the
purchase
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price and that date of purchase (which shall be a Business Day no earlier than
30 days nor later than 40 days from the date such notice is mailed) (the
"Excess Proceeds Payment Date"); (c) that any Note not tendered will continue
to accrue interest pursuant to its terms; (d) that, unless there shall be a
default in the payment of the Excess Proceeds Payment, any Note accepted for
payment pursuant to the Excess Proceeds Offer shall cease to accrue interest on
the Excess Proceeds Payment Date; (e) that Holders electing to have a Note
purchased pursuant to the Excess Proceeds Offer will be required to surrender
the Note, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of the Note or comparable form completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Excess Proceeds Payment
Date; (f) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Excess Proceeds Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his election to have such Notes
purchased; and (g) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered; provided, however, that each Note purchased and each
new Note issued shall be in an original principal amount of $1,000 or integral
multiples thereof.
On the Excess Proceeds Payment Date, the Company will (a) accept for payment
on a pro rata basis Notes or portions thereof tendered pursuant of the Excess
Proceeds Offer; (b) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and (c) deliver,
or cause to be delivered, to the Trustee all Notes or portions thereof so
accepted together with an Officers' Certificate specifying the Notes or
portions thereof accepted for payment by the Company. The Paying Agent will
promptly mail to the Holders of Notes so accepted payment in an amount equal to
the purchase price, and the Trustee will promptly (i) authenticate and mail to
such Holders a new Note equal in principal amount to any unpurchased portion of
the certificated Note surrendered and (ii) make arrangements with DTC to
reflect on DTC's records Notes in book-entry form equal in principal amount to
any unpurchased portion of the Global Note; provided that each Note purchased
and each new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof. The Company will publicly announce the results of
the Excess Proceeds Offer as soon as practicable after the Excess Proceeds
Payment Date. For purposes of this "Limitation on Asset Sales" covenant, the
Trustee shall act as the Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder, to the extent such laws and
regulations are applicable, in the event that such Excess Proceeds are received
by the Company under this "Limitation on Asset Sales" covenant and the Company
is required to repurchase Notes as described above. The Company may modify any
of the foregoing provisions of this "Limitation on Asset Sales" covenant to the
extent it is advised by independent counsel that such modification is necessary
or appropriate in order to ensure such compliance. (Section 4.10)
Repurchase of Notes upon Change of Control
Upon the occurrence of a Change of Control, each Holder shall have the right
to require the repurchase of its Notes by the Company in cash pursuant to the
offer described below (the "Change of Control Offer") at a purchase price equal
to 101% of the principal amount thereof, plus accrued interest (if any) to the
date of purchase (the "Change of Control Payment").
Within 45 days following any Change of Control, the Company shall mail a
notice to the Trustee and each Holder stating: (a) that a Change of Control has
occurred, that the Change of Control Offer is being made pursuant to this
"Repurchase of Notes upon Change of Control" covenant and that all Notes
validly tendered will be accepted for payment; (b) the purchase price and the
date of purchase (which shall be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed) (the "Change of Control
Payment Date"); (c) that any Note not tendered will continue to accrue interest
pursuant to its terms; (d) that, unless there shall be a default in the payment
of the Change of Control Payment, any Note accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest on the Change
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of Control Payment Date; (e) that Holders electing to have any Note or portion
thereof purchased pursuant to the Change of Control Offer will be required to
surrender such Note, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of such Note or comparable form completed,
to the Paying Agent at the address specified in the notice prior to the close
of business on the Business Day immediately preceding the Change of Control
Payment Date; (f) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his election to have such Notes
purchased; and (g) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered; provided, however, that each Note purchased and each
new Note issued shall be in an original principal amount of $1,000 or integral
multiples thereof.
On the Change of Control Payment Date, the Company will: (a) accept for
payment Notes or portions thereof tendered pursuant to the Change of Control
Offer; (b) deposit with the Paying Agent money sufficient to pay the purchase
price of all Notes or portions thereof so accepted; and (c) deliver, or cause
to be delivered, to the Trustee all Notes or portions thereof so accepted
together with an Officers' Certificate specifying the Notes or portions thereof
accepted for payment by the Company. The Paying Agent will promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price,
and the Trustee will (i) promptly authenticate and mail to such Holders a new
certificated Note equal in principal amount to any unpurchased portion of the
Note surrendered and (ii) make arrangements with DTC to reflect on DTC's
records Notes in book-entry form equal in principal amount to any unpurchased
portion of the Global Note; provided, however, that each Note purchased and
each new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof. The Company will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date. For purposes of this "Repurchase of Notes upon Change of
Control" covenant, the Trustee shall act as Paying Agent. The failure of the
Company to make or consummate a Change of Control Offer or pay the Change of
Control Payment when due will give the Trustee and the Holders of the Notes the
rights described under "--Events of Default."
None of the provisions relating to a purchase upon a Change of Control are
waivable by the Board of Directors of the Company. If a Change of Control were
to occur, there can be no assurance that the Company would have sufficient
funds to pay the redemption price for all Notes that the Company is required to
redeem or sufficient funds to fulfill other obligations arising from such
Change of Control, including any required redemption of the 10 3/4% Notes. In
the event that the Company were required to purchase outstanding Notes pursuant
to a Change of Control Offer, the Company expects that it would need to seek
third-party financing to the extent it does not have available funds to meet
its purchase obligations. There can be no assurance, however, that the Company
would be able to obtain such financing.
Under the present terms of the Terra Credit Agreement, the Company would be
required to obtain a consent from the lenders thereunder to incur any
Indebtedness to repurchase Notes pursuant to a Change of Control Offer. In
addition, the Company's ability to repurchase Notes may be limited by other
then-existing borrowing agreements. There can be no assurance that the Company
will be able to obtain a consent or a waiver of any such limitation. A Change
of Control may result in an event of default under the Terra Credit Agreement
and permit the lenders thereunder to declare all amounts outstanding thereunder
to be immediately due and payable. The rights of the Holders to receive the
Change of Control Payment for the Notes or any other amount due on the Notes is
effectively subordinated to the holders of Indebtedness of the Company's
subsidiaries. See "Ranking."
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder, to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs under
this "Repurchase of Notes upon Change of Control" covenant and the Company is
required to repurchase Notes as described above. The Company may modify any of
the foregoing provisions
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of this "Repurchase of Notes upon Change of Control" covenant to the extent it
is advised by independent counsel that such modification is necessary or
appropriate in order to ensure such compliance. (Section 4.11)
Amendments to Limited Partnership Agreements
Under the terms of the Indenture, the Company will not permit the general
partner of either Partnership to make or propose any amendment, supplement or
other modification to either Limited Partnership Agreement that would have a
material adverse effect on the interests of the Holders, except as shall be
required by either Limited Partnership Agreement. (Section 4.16)
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the Indenture:
(a) the Company defaults in the payment of the principal of, or premium, if
any, on, any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise; (b) the Company defaults in the payment
of interest on any Note when the same is due and payable, and such default
continues for a period of 30 days; (c) the Company defaults in the performance
of or breaches any other covenant or agreement of the Company in the Indenture
or under the Notes and such default or breach continues for a period of 30
consecutive days after written notice to the Company by the Trustee or the
Holders of 25% or more in aggregate principal amount of the Notes; (d) there
occurs with respect to any issue or issues of Indebtedness of the Company
and/or one or more Significant Subsidiaries having an outstanding principal
amount of $10 million or more in the aggregate, whether such Indebtedness now
exists or shall hereafter be created, an event of default that has caused the
holder or holders thereof, or representatives of such holder or holders, to
declare such Indebtedness to be due and payable prior to its Stated Maturity
and such Indebtedness has not been discharged in full or such acceleration has
not been rescinded or annulled within 30 days of such acceleration; (e) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $10 million in the aggregate for all such final judgments or orders
(treating any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company or any Significant Subsidiary and shall not be
discharged, and there shall be any period of 30 consecutive days following
entry of the final judgment or order that causes the aggregate amount for all
such final judgments or orders outstanding against all such Persons to exceed
$10 million during which a stay of enforcement of such final judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; (f) a court
having jurisdiction in the premises enters a decree or order for (i) relief in
respect of the Company or any Significant Subsidiary in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (ii) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all the property and assets
of the Company or any Significant Subsidiary or (iii) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; (g) the Company or any Significant Subsidiary
(i) commences a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (ii) consents to
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all the property and assets
of the Company or any Significant Subsidiary or (iii) effects any general
assignment for the benefit of creditors; (h) the Company and/or one or more
Significant Subsidiaries fails to make (i) at the final (but not any interim)
fixed maturity of any issue of Indebtedness a principal payment of $10 million
or more or (ii) at the final (but not any interim) fixed maturity of more than
one issue of such Indebtedness principal payments aggregating $10 million or
more and, in the case of clause (i), such defaulted payment shall not have been
made, waived or extended within 30 days of the payment default and, in the case
of clause (ii), all such defaulted payments shall not have been made, waived or
extended within 30 days of the payment default that causes the amount described
in clause (ii) to exceed $10 million; or (i) the nonpayment of any two or more
items of Indebtedness that would constitute at the time of such nonpayments,
but for the individual amounts of such Indebtedness, an Event of
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Default under clause (d) or clause (h) above, or both, and which items of
Indebtedness aggregate $10 million or more. (Section 6.01)
If an Event of Default (other than an Event of Default specified in clause
(f) or (g) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders (the
"Acceleration Notice")), may, and the Trustee at the request of the Holders
will, declare the entire unpaid principal of, premium, if any, and accrued
interest on, the Notes to be immediately due and payable. Upon a declaration of
acceleration, such principal, premium, if any, and accrued interest shall
become and be immediately due and payable without presentment, demand, protest
or further notice or act (all of which are expressly waived by the Company). In
the event of a declaration of acceleration because an Event of Default set
forth in Clause (d) or (h) above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if
the event of default triggering such Event of Default pursuant to clause (d) or
(h) shall be remedied, cured by the Company and/or such Significant Subsidiary
or waived by the holders of the relevant Indebtedness within 60 days after the
declaration of acceleration with respect thereto. If an Event of Default
specified in clause (f) or (g) above occurs with respect to the Company, all
unpaid principal of, premium, if any, and accrued interest on, the Notes then
outstanding shall become and be immediately due and payable automatically,
without any declaration, presentment, demand, protest, notice or other act on
the part of the Trustee or any Holder (all of which are expressly waived by the
Company). The Holders of at least a majority in principal amount of the
outstanding Notes, by written notice to the Company and to the Trustee, may
waive all past defaults or events that, after the passage of time or the giving
of notice or both, would be an Event of Default and rescind and annul a
declaration of acceleration and its consequences if (a) all existing Events of
Default, other than the nonpayment of the principal of, premium, if any, and
accrued interest on the Notes that have become due solely by such declaration
of acceleration, have been cured or waived and (b) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.
(Section 6.02) For information as to the waiver of defaults, see "Modification
and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith may
be unduly prejudicial to the rights of Holders not joining in the giving of
such direction. (Section 6.05) A Holder may not pursue any remedy with respect
to the Indenture or the Notes unless: (a) the Holder gives the Trustee written
notice of a continuing Event of Default; (b) the Holders of at least 25% in
aggregate principal amount of outstanding Notes make a written request to the
Trustee to pursue the remedy; (c) such Holder or Holders offer the Trustee
indemnity satisfactory to the Trustee against any costs, liability or expense;
(d) the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of indemnity; and (e) during such 60-day period,
the Holders of a majority in aggregate principal amount of the outstanding
Notes do not give the Trustee a direction that is inconsistent with the
request. (Section 6.06) However, such limitations do not apply to the right of
any Holder of a Note to receive payment of the principal of, premium, if any,
or interest on, such Holder's Note or to bring suit for the enforcement of any
such payment, on or after the respective due dates expressed in the Notes,
which rights shall not be impaired or affected without the consent of the
Holder. (Section 6.07) The Holders and the Trustee may exercise their rights
and remedies under the Indenture and under the Notes against the capital stock
of TNC or the assets of TNC and its subsidiaries only in a manner consistent
with the fiduciary obligations of TNC and the Company associated with the
general partnership interests in the Partnerships (including, without
limitation, the interests of the Partnerships and the partners thereof);
provided that the foregoing shall not require the Holders or the Trustee to
take any action with respect to any other assets of the Company. (Section 6.03)
The Indenture will require certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company
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and its subsidiaries and the Company's performance under the Indenture and that
the Company has fulfilled all obligations thereunder, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
and the nature and status thereof. The Company will also be obligated to notify
the Trustee of any default or defaults in the performance of any covenants or
agreements under the Indenture. (Section 4.17)
For additional information concerning the terms and conditions of, and events
of default relating to, the Credit Agreements, see "Description of Other
Indebtedness."
Except as described in "Repurchase of Notes upon Change of Control," the
Indenture does not contain any provision that would provide protection of the
holders of the Notes against a sudden and dramatic decline in credit quality
resulting from a takeover, recapitalization or similar restructuring of the
Company.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Under the terms of the Indenture, the Company will not consolidate with,
merge with or into, or sell, convey, transfer, lease or otherwise dispose of
all or substantially all its property and assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions) to, any Person (other than a Restricted Subsidiary that is a
Wholly Owned Subsidiary of the Company with a positive net worth; provided,
however, that, in connection with any merger of the Company with a Restricted
Subsidiary that is a Wholly Owned Subsidiary of the Company, no consideration
(other than Common Stock in the Surviving Person or the Company) shall be
issued or distributed to the shareholders of the Company), or permit any Person
to merge with or into the Company, unless: (a) the Company shall be the
continuing Person, or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or that acquired or leased
such property and assets of the Company shall be a corporation organized and
validly existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company on all the Notes and under the Indenture; (b)
immediately after giving effect to such transaction, no Event of Default and no
event that, after notice or passage of time or both, will become an Event of
Default shall have occurred and be continuing; (c) immediately after giving
effect to such transaction on a pro forma basis, the Interest Coverage Ratio of
the Company (or any Person becoming the successor obligor of the Notes) is at
least 1.10:1, or, if less, at least equal to the Interest Coverage Ratio of the
Company immediately prior to such transaction; provided, however, that, if the
Interest Coverage Ratio of the Company before giving effect to such transaction
is within the range set forth in column (A) below, then the pro forma Interest
Coverage Ratio of the Company (or any Person becoming the successor obligor of
the Notes) shall be at least equal to the lesser of (i) the ratio determined by
multiplying the percentage set forth in column (B) below by the Interest
Coverage Ratio of the Company prior to such transaction and (ii) the ratio set
forth in column (C) below:
<TABLE>
<CAPTION>
(A) (B) (C)
--- -- --
<S> <C> <C>
1.11:1 to 1.99:1........................................ 90% 1.6:1
2.00:1 to 2.99:1........................................ 80% 2.1:1
3.00:1 to 3.99:1........................................ 70% 2.4:1
4.00:1 or more.......................................... 60% 2.5:1;
</TABLE>
and provided further, however, that, if the pro forma Interest Coverage Ratio
of the Company (or any Person becoming the successor obligor of the Notes) is
3:1 or more, the calculation in the next preceding proviso shall be
inapplicable and such transaction shall be deemed to have complied with the
requirements of this clause (c); (d) immediately after giving effect to such
transaction on a pro forma basis, the Company (or any Person that becomes the
successor obligor of the Notes) shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to
such transaction; and (e) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate compliance
with clauses (c) and (d)) and an Opinion of Counsel, in each case stating that
such
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consolidation, merger or transfer and such supplemental indenture comply with
this provision and that all conditions precedent provided for therein relating
to such transaction have been complied with; provided, however, that clauses
(c) and (d) above do not apply if, in the good faith determination of the Board
of Directors, whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is to change the state of incorporation
of the Company; and provided further, however, that any such transaction shall
not have as one of its purposes the evasion of the foregoing limitations.
(Section 5.01)
DEFEASANCE
Defeasance and Discharge
The Indenture will provide that the Company will be deemed to have paid and
will be discharged from any and all obligations in respect of the Notes and the
provisions of the Indenture will no longer be in effect with respect to the
Notes on the one hundred twenty-third day after the deposit described below
(except for, among other matters, certain obligations to register the transfer
or exchange of the Notes, to replace stolen, lost or mutilated Notes, to
maintain paying agencies and to hold monies for payment in trust) if, among
other things, (a) the Company has irrevocably deposited with the Trustee, in
trust, money and/or U.S. Government Obligations that, through the payment of
interest and principal in respect thereof in accordance with their terms, will
provide money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes; (b) the Company has
delivered to the Trustee (i) either an Opinion of Counsel to the effect that
Holders will not recognize income, gain or loss for Federal income tax purposes
as a result of the Company's exercise of its option under this "Defeasance"
provision and will be subject to Federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred, which Opinion of Counsel
must be accompanied by a ruling of the Internal Revenue Service to the same
effect unless there has been a change in applicable Federal income tax law
after the date of the Indenture such that a ruling is no longer required, or a
ruling directed to the Company or the Trustee received from the Internal
Revenue Service to the same effect as the aforementioned Opinion of Counsel,
and (ii) an Opinion of Counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and after
the passage of 123 days following the deposit, the trust fund will not be
subject to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law; (c) immediately after
giving effect to such deposit on a pro forma basis, no Event of Default, or
event that after notice or passage of time or both would become an Event of
Default, shall have occurred and be continuing on the date of such deposit or
during the period ending on the one hundred twenty-third day after the date of
such deposit, (d) such deposit shall not result in a breach or violation of, or
constitute a default under, the Indenture or any other agreement or instrument
to which the Company is a party or by which the Company is bound; and (e) if at
such time the Notes are listed on a national securities exchange, the Company
has delivered to the Trustee an Opinion of Counsel to the effect that the Notes
will not be delisted as a result of such deposit, defeasance and discharge.
(Section 8.02)
Defeasance of Certain Covenants and Certain Events of Default
The Indenture further will provide that the provisions of the Indenture will
no longer be in effect with respect to clauses (c) and (d) under
"Consolidation, Merger and Sale of Assets" and all the covenants described
herein under "Covenants" and clause (c) under "Events of Default" (with respect
to such covenants and clauses (c) and (d) under "Consolidation, Merger and Sale
of Assets") and clauses (d), (e), (h) and (i) under "Events of Defaults" shall
be deemed not to be Events of Default upon, among other things, the irrevocable
deposit with the Trustee, in trust, of money and/or U.S. Government Obligations
that through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of, premium, if any, and accrued interest on, the Notes on the
Stated Maturity of such payments in accordance with the terms of the Indenture
and the Notes, the satisfaction of the provisions described in clauses (b)(ii),
(c) and (d) of the next preceding paragraph and the delivery by the
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Company to the Trustee of an Opinion of Counsel to the effect that, among other
things, the Holders will not recognize income, gain or loss for Federal income
tax purposes as a result of such deposit and defeasance of certain covenants
and Events of Default and will be subject to Federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred. (Section 8.03)
Defeasance and Certain Other Events of Default
In the event the Company exercises its option to omit compliance with certain
covenants and provisions of the Indenture, as described in the next preceding
paragraph, and the Notes are declared due and payable because of the occurrence
of an Event of Default that remains applicable, the amount of money and/or U.S.
Government Obligations on deposit with the Trustee will be sufficient to pay
amounts due on the Notes at the time of their Stated Maturity but may not be
sufficient to pay amounts due on the Notes at the time of the acceleration
resulting from such Event of Default. However, the Company shall remain liable
for such payment.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the written consent of the Holders of not less than a majority
in aggregate principal amount of the outstanding Notes; provided, however, that
no such modification or amendment may, without the consent of each Holder
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, (b) reduce the principal amount of, or
premium, if any, or interest on, any Note, (c) change the place or currency of
payment of principal of, premium, if any, or interest on, any Note, (d) impair
the right to institute suit for the enforcement of any payment on or after the
Stated Maturity (or in the case of a redemption, on or after the Redemption
Date) of any Note, (e) reduce the percentage of outstanding Notes the consent
of whose Holders is necessary to modify or amend the Indenture, (f) waive a
default in the payment of principal of, premium, if any, or interest on, the
Notes or (g) reduce the percentage of aggregate principal amount of outstanding
Notes the consent of whose Holders is necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults. (Article
Nine)
COMMISSION REPORTS AND REPORTS TO HOLDERS
The Indenture provides that the Company will furnish copies of the periodic
reports required to be filed with the Commission under the Exchange Act to the
Trustee. If the Company is not subject to the periodic reporting and
informational requirements of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission, and the Company
will provide to the Trustee, annual reports containing the information required
to be contained in a Form 10-K under the Exchange Act, quarterly reports
containing the information required to be contained in a Form 10-Q under the
Exchange Act, and from time to time such other information as is required to be
contained in a Form 8-K under the Exchange Act. The Company shall also furnish
all such reports to Holders of the Notes or to the Trustee for forwarding to
each Holder of Notes. If filing such reports by the Company with the Commission
is not permitted under the Exchange Act, the Company will promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such reports to any person the Company reasonably believes is a
prospective holder of Notes. (Section 4.18)
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on, any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator,
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shareholder, officer, director, employee or controlling person of the Company
or of any successor Person thereof. Each Holder, by accepting such Notes,
waives and releases all such liability. (Section 10.09)
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. If an Event of Default has occurred and is continuing,
the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs. (Section 7.01)
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claims
as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest,
it must eliminate such conflict or resign.
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DESCRIPTION OF OTHER INDEBTEDNESS
The following is a brief description of the basic terms of and instruments
governing certain indebtedness and other obligations of the Company and its
subsidiaries. Capitalized terms used in such instruments but not defined herein
have the meaning ascribed to them in such instruments. These summaries do not
purport to be complete and are subject to, and qualified in their entirety by
reference to, the instruments governing such indebtedness and other
obligations.
10 3/4% NOTES
The Company presently has outstanding $158.8 million in aggregate principal
amount of the 10 3/4% Notes. The 10 3/4% Notes are issued under an Indenture
dated as of October 15, 1993 (the "1993 Indenture") between the Company (as
successor by merger to AMCI) and Society National Bank, as trustee, and will
mature on September 30, 2003. The Company assumed the obligations under the 10
3/4% Notes and the 1993 Indenture as a result of the acquisition of AMCI by the
Company. The 10 3/4% Notes are senior, unsecured obligations of the Company,
ranking pari passu in right of payment with all other senior indebtedness of
the Company, including the Exchange Notes and the Notes, if any. Because the
Company is a holding company, all existing and future liabilities of the
Company's subsidiaries, including those under the Credit Agreement, are
effectively senior to the 10 3/4% Notes.
The 10 3/4% Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after September 30, 1998, initially at 105.375% of
their principal amount, plus accrued interest, declining to 100% of their
principal amount on September 30, 2000. In addition, at any time prior to
September 30, 1996, the Company may, at its option, redeem up to $61.25 million
aggregate principal amount of 10 3/4% Notes out of the proceeds of one or more
underwritten public offerings of equity securities at a redemption price of
110% of their principal amount, plus accrued interest.
The 1993 Indenture provides that upon a Change of Control (as defined in the
1993 Indenture) each holder may require the repurchase of its 10 3/4% Notes in
cash at a purchase price of 101% of the principal amount thereof, plus accrued
interest, pursuant to an offer to repurchase which must be mailed within 45
days after the Change of Control. The Company's acquisition of AMCI constituted
a Change of Control under the 1993 Indenture. The Company purchased $16.2
million aggregate principal amount of 10 3/4% Notes in the related repurchase
offer made pursuant to the 1993 Indenture.
The 1993 Indenture contains certain covenants, which are substantially
similar to those in the Indenture, that limit various actions by the Company
and certain of its subsidiaries, including the incurrence of indebtedness, the
payment of dividends and other distributions on capital stock, the purchase,
redemption or retirement of capital stock or subordinated indebtedness, the
making of certain investments, the extent to which the Company and its
subsidiaries may agree to consensual restrictions on the ability of
subsidiaries to pay dividends and indebtedness owed to the Company and other
subsidiaries, the sale of subsidiary stock to third parties, transactions with
affiliates and shareholders, the incurrence of liens, the participation in
sale-leaseback transactions, sales of assets, mergers and amendments to the
limited partnership agreements of TNCLP and TNLP.
CREDIT AGREEMENT
Following is a description of the Amended and Restated Credit Agreement dated
as of May 12, 1995 (as amended from time to time, the "Credit Agreement") among
Terra Capital, TNLP, certain guarantors, the issuing banks and the lenders
named therein and Citibank, as agent. The Credit Agreement was initially
entered into in connection with the Company's acquisition of AMCI. The Credit
Agreement is filed as an exhibit to this Exchange Offer Registration Statement.
See "Available Information."
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The Facilities
The Credit Agreement provides for the following credit facilities: a $209.3
million term loan facility maturing in October 1999 ("Terra Facility A"), a
$79.5 million term loan facility maturing in October 2001 ("Terra Facility B"),
a $175.0 million revolving credit facility maturing in October 1999 ("Terra
Working Capital Facility") and a $25.0 million revolving credit facility
maturing in October 1999 ("TNLP Working Capital Facility").
Terra Facilities A and B were used to finance the acquisition of AMCI and to
refinance certain outstanding indebtedness of the Company and AMCI and their
respective subsidiaries at the time of the AMCI acquisition. The Terra Working
Capital Facility is available to provide for the on-going working capital needs
of Terra Capital, Terra International and BMLP and, until December 31, 1995, up
to $40 million may be used to finance the purchase of SPUs. The TNLP Working
Capital Facility is available to provide for the on-going working capital needs
of TNLP. The primary obligor with respect to the Credit Agreement is Terra
Capital (with the exception of the TNLP Working Capital Facility). See
"Summary--Company Structure."
Interest and Commitment Fees
Loans under the Credit Agreement bear interest at one, three or six-month
LIBOR, plus the Applicable Margin (as defined in the Credit Agreement). The
Applicable Margin is 1.5% for all of the Facilities except Terra Facility B
until April 1996; thereafter the Applicable Margin will be subject to
adjustment up to 2% and down to 1% depending on the Company's consolidated
ratio of debt to cash flow. The Applicable Margin for Terra Facility B is 2.5%.
Interest rates based on Citibank's Base Rate are also available under the
Credit Agreement. Commitment fees of 0.5% per annum (subject to reduction if
the ratio of debt to cash flow falls to a certain level) are charged for unused
facilities.
Amortization
Subject to prepayment as summarized below, the loans under the Facilities are
due as follows: Terra Facility A--semiannual payments of approximately
$23,254,000 through October 20, 1999; Terra Facility B--semiannual payments of
$500,000 through April 1999, and $15,100,000 thereafter through October 20,
2001; Terra Working Capital Facility--October 20, 1999 and TNLP Working Capital
Facility--October 20, 1999. Prepayments on Terra Facility A and Terra Facility
B will be required in an amount equal to 75% of Terra Capital's consolidated
annual Excess Cash Flow (earnings before interest, taxes, depreciation and
amortization less the sum of cash interest expense, minority interest payments,
capital expenditures, "Specified Payments" (meaning all interest due on the
Notes, the Exchange Notes and the 10 3/4% Notes, dividends on the common shares
of the Company not exceeding $10 million in 1995, $13 million in 1996, $17
million in 1997, $20 million in 1998 and $23 million thereafter, dividends on
equity securities issued to retire loans under the Credit Agreement and
ordinary expenses of the Company plus up to $5 million per year for other pre-
existing obligations), scheduled payments of principal on indebtedness, cash
payments of taxes and certain optional prepayments of term loans under the
Credit Agreement, with additional adjustments for changes in non-cash working
capital), reducing to 50% after $20 million has been so paid (and, for 1995,
subject to reduction based on any amount (excluding borrowed amounts) paid to
purchase SPUs); 100% of the net proceeds over $10 million per year of non-
ordinary course asset sales, reducing to 75% after the date on which the
aggregate principal amount of term loans outstanding under the Credit Agreement
has been reduced to $238,750,000 (the "Specified Paydown Date"); 100% of the
net proceeds of any equity security or public debt issuances (excluding the
Notes and the Exchange Notes) until the Specified Paydown Date; and 100% of the
net insurance and condemnation proceeds from casualty events (net of expenses,
liens and repair and replacement costs), reducing to 75% after the Specified
Paydown Date. The Company does not expect to apply any of the insurance
proceeds received as a result of the December 1994 explosion at the Port Neal
Facility to the prepayment of the Facilities. On December 31, 1995, the Company
is obligated to make a prepayment on Terra Facility A and Terra Facility B in
an amount equal to 100% of
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the net proceeds of the Offering to the extent such proceeds have not been
applied to the purchase of SPUs. Optional prepayments of loans under the Credit
Agreement may also be made without premium or penalty.
Collateral
Loans under the Credit Agreement are currently guaranteed by the Company,
Terra Holdings, Terra Capital, TNC, BMLP, BMCH and TMC, and are secured by
pledges of the stock of Terra Capital, Terra International, TNC, TMC and BMCH
and the limited partner interests in BMLP and security interests in
substantially all of the personal property of BMCH, TMC and TNLP; provided that
the security interests in TNLP's assets currently secure only the TNLP Working
Capital Facility.
Covenants
The Credit Agreement contains covenants customary for financings of this type
including, without limitation: (a) a limitation on annual capital expenditures
of $40 million, subject to a one year carryover of any unused amounts and as
adjusted for unused acquisition amounts (provided that the Company may apply an
amount equal to the insurance proceeds with respect to the explosion of the
Port Neal Facility plus $30 million to the rebuilding of the Port Neal
Facility), (b) a prohibition on optional redemptions and repurchases of
subordinated indebtedness, (c) limitations on additional debt, liens, asset
sales, investments, changes in lines of business and transactions with
affiliates and (d) an annual limitation on acquisitions of $15.0 million
(increasing to $50.0 million when Terra Facilities A and B have been paid down
to $150.0 million or less and the debt to cash flow ratio has reached 2.5 to 1
or better), subject to a 50% carryover for one year of any unused amount.
The Credit Agreement also includes financial covenants requiring the Company
to meet and maintain certain financial tests. These include requirements that
the Company maintain, on a consolidated basis: (a) a ratio of earnings before
interest, taxes, amortization and depreciation to interest charges of greater
than 4.0 to 1, increasing to 4.50 to 1 in 1998 and 5.0 to 1 in 2001, (b) until
the Specified Paydown Date, a ratio of debt to cash flow of not more than 3.75
to 1 in 1995 and 3.0 to 1 thereafter, (c) after the Specified Paydown Date, a
ratio of debt to capital of not more than 0.65 to 1 until September 30, 1995,
decreasing periodically thereafter to 0.50 to 1.00 for periods on and after
October 1, 1997, (d) a current ratio of at least 1.25 to 1 through 1997 and
1.50 to 1 thereafter and (e) a minimum net worth of $375.0 million plus
increases in capital stock and 50% of net income in fiscal year 1994 and
thereafter.
Events of Default and Other Matters
The Credit Agreement also contains customary events of default, including,
without limitation, those relating to failure to pay amounts due, breach of a
representation or warranty, failure to perform covenants, bankruptcy or
insolvency, litigation and unsatisfied judgments, certain defaults under other
debt agreements, and violations of the Employee Retirement Income Security Act
of 1974 (as amended, "ERISA") and environmental laws. There will also be an
event of default under the Credit Agreement if, prior to the Specified Paydown
Date, Minorco ceases to own a majority of the outstanding voting stock of the
Company and, after the Specified Paydown Date, if Minorco ceases to own at
least 20% of the outstanding voting stock of the Company or Minorco ceases to
be the single largest holder of capital stock of the Company.
Under an agreement between the Company and Citibank, as agent for the lenders
under the Credit Agreement, if dividends and other payments with respect to the
capital stock of Terra Capital exceed the sum of Specified Payments plus 50% of
the portion of Excess Cash Flow from the previous year that is not required to
be used to prepay the facilities, the lenders under the Credit Agreement may
choose to terminate their commitments to lend or cause the Company to
repurchase their loans.
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TERRA CANADA REVOLVING CREDIT FACILITY
Terra Canada has a $35 million (Canadian) revolving credit facility (as
amended, the "Canadian Revolving Facility") with the Bank of Nova Scotia to
provide for working capital needs and general corporate purposes. The Canadian
Revolving Facility expires November 23, 1995 and is renewable at the discretion
of the bank. Indebtedness under the Canadian Revolving Facility is guaranteed
by Terra International. Under this guarantee, Terra International is subject
to, among other things, certain financial covenants and restrictions on
indebtedness. U.S. dollar denominated loans under the Canadian Revolving
Facility bear interest at one, two, three or six-month LIBOR plus 0.625%.
Alternative interest rates based on the Canadian prime rate and the greater of
the annual base rate of the Bank of Canada or a federal funds rate are also
available. A facility fee of 0.125% per annum computed on the committed limit
of the Canadian Revolving Facility, whether used or unused, is also payable.
The Canadian Revolving Facility contains covenants customary for financings
of this type including, but not limited to, (a) covenants by Terra Canada to
maintain a consolidated tangible net worth (shareholders' equity less the value
of all intangible assets on a consolidated basis) of $5.5 million (Canadian)
and a ratio of consolidated aggregate current assets to current liabilities of
not less than 1:1 and (b) limitations on additional liens and indebtedness. The
Canadian Revolving Facility contains customary events of default, including,
but not limited to, those related to failure to pay amounts due, certain
defaults under other debt agreements and bankruptcy or insolvency. An event of
default also occurs if Terra International ceases (or if such has been
announced or is pending) to own all of the outstanding shares of capital stock
of Terra Canada or if the Company ceases (or if such has been announced or is
pending) to own, directly or indirectly, all of the issued and outstanding
shares of capital stock of Terra International.
OTHER OBLIGATIONS OF THE COMPANY'S SUBSIDIARIES
The following briefly describes certain other indebtedness and obligations of
Terra International and Terra Canada. See also the Company's financial
statements and the notes thereto included and incorporated by reference herein.
Terra International is a party to a receivables purchase agreement dated as
of March 31, 1994, which expires March 31, 1996, allowing for the sale of an
undivided interest in a designated revolving pool of accounts receivable up to
$50 million in proceeds. As of March 31, 1995, $50 million of proceeds had been
received.
Terra International also has outstanding $9.2 million Industrial Development
Revenue Bonds dated April 1, 1992 which bear interest at an average of 6.8% and
are subject to sinking fund requirements of $165,000 in 1995 and increasing to
$1,240,000 for the final payment in 2011. The bonds are secured by a first
mortgage on the Company's headquarters building in Sioux City, Iowa.
Terra International has $35.5 million unsecured notes outstanding as of March
31, 1995 with various institutional investors. Such notes bear interest at
rates between 8.48% and 9.625% and mature between 1996 and 2005. Terra
International is also a party to various non-cancelable operating leases for
agricultural equipment, rail cars and office, production and storage facilities
expiring on various dates through 2001. In addition, it is a party to various
letters of credit and swap agreements and financial derivatives to manage
exposure to interest rates and natural gas prices.
Terra Canada has a $37 million lease arrangement covering certain assets of
the Canadian Facility, which will be increased by approximately $20 million to
provide for an expanded urea plant. Current annual lease payments are
approximately $4 million (Canadian). The lease expires April 8, 1997, but can
be extended for up to an additional five years with the consent of the lessor
and is guaranteed by Terra International.
Terra Canada has various foreign exchange forward and option contracts to
manage exposure to currency fluctuations. These agreements are entered as
designated hedges of fixed obligations and hedges of net foreign currency
transaction exposures. It also has various swap agreements to manage exposure
to interest rates.
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TNCLP SENIOR PREFERENCE UNITS
TNC holds a 2% interest as general partner in TNCLP and TNLP on a combined
basis. TNCLP's limited partnership interests are divided into (i) Senior
Preference Units with a 39.8% limited partner interest and (ii) Junior
Preference Units and Common Units with a combined 58.2% limited partner
interest. TNC owns all the outstanding Junior Preference Units and Common
Units. The Senior Preference Units are entitled to receive a minimum quarterly
distribution of $0.605 per unit, plus arrearages, before any amounts are paid
to TNC on its Junior Preference Units and Common Units. In addition, as
required under the limited partnership agreement, an $18.5 million reserve has
been funded from excess available cash to support the payment of future
distributions on the Senior Preference Units. This reserve remained fully
funded at March 31, 1995. After payment of the minimum quarterly distribution
on the Senior Preference Units, assuming the reserve is fully funded, the
Junior Preference Units are entitled to receive the minimum quarterly
distribution, plus arrearages, and after the Junior Preference Units are paid,
the Common Units are entitled to receive the minimum quarterly distribution,
plus arrearages other than arrearages outstanding on June 30 of any year on or
prior to the Junior Conversion Date (as defined in TNCLP's limited partnership
agreement), which shall be eliminated. Available cash remaining after the
Common Units have received the minimum quarterly distribution is distributed to
all unit holders pro rata, except that the right of the Senior Preference Units
to participate in any such additional distribution terminates on the Senior
Conversion Date, which is generally defined as the date (but no sooner than
December 31, 1996) on which cash distributions of at least $2.64 per Senior
Preference Unit have been paid for three consecutive 12-month periods. TNC, as
general partner, also receives 2% of all distributions of Available Cash and is
entitled, as an incentive, to larger percentage interests to the extent that
distributions significantly exceed the minimum quarterly distributions. TNCLP's
limited partnership agreement provides that if the Company or its affiliates
were to acquire 75% or more of the Senior Preference Units, TNCLP would have
the right to call, or to assign to the Company the right to acquire, all Senior
Preference Units not held by the Company and its affiliates at a price based on
recent market prices. TNCLP's limited partnership agreement also provides that,
on or after the Senior Conversion Date but no earlier than March 31, 1997,
TNCLP will have the right to redeem all outstanding Senior Preference Units at
a price based on recent market prices. In such event, holders of Senior
Preference Units would have the right to convert their Senior Preference Units
into Common Units (subject to certain listing requirements). See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Open
Market Purchase Program for TNCLP SPUs."
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PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that it will make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale and
Participating Broker-Dealers shall be authorized to deliver this Prospectus for
a period not exceeding 180 days after the Expiration date. In addition, until
, all dealers effecting transactions in the Exchange Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the Exchange
Notes or a combination of such methods of resale, at market prices prevailing
at the time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such Participating Broker-Dealer and/or the
purchasers of any such Exchange Notes. Any Participating Broker-Dealer that
resells the Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any omissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any Participating Broker-Dealer
that requests such documents in the Letter of Transmittal. See "Exchange
Offer--Purpose and Effect of the Exchange Offer."
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AVAILABLE INFORMATION
The Company has filed with the Commission the Exchange Offer Registration
Statement pursuant to the Securities Act, and the rules and regulations
promulgated thereunder, covering the Exchange Notes being offered hereby. This
Prospectus does not contain all the information set forth in the Exchange Offer
Registration Statement. For further information with respect to the Company and
the Exchange Offer, reference is made to the Exchange Offer Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Exchange Offer Registration Statement, reference is made to the
exhibit for a more complete description of the document or matter involved, and
each such statement shall be deemed qualified in its entirety by such
reference.
The Company and TNCLP are subject to the information requirements of the
Exchange Act and in accordance therewith are required to file periodic reports
and other information with the Commission. Reports, proxy statements and other
information filed by the Company and TNCLP as well as the Exchange Offer
Registration Statement, including the exhibits thereto, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the Commission at 75 Park Place, New York, New York 10007 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. In addition, reports, proxy statements and other information
may be inspected, with respect to the Company and TNCLP, at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005 and, with
respect to the Company, at the offices of the Toronto Stock Exchange, Exchange
Tower, 2 First Canadian Place, Toronto, Ontario M5X1J2 Canada, upon which the
common stock of the Company is listed.
The Indenture provides that the Company will furnish copies of the periodic
reports required to be filed with the Commission under the Exchange Act to the
Trustee. If the Company is not subject to the periodic reporting and
information requirements of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission, and the Company
will provide to the Trustee, annual reports containing the information required
to be contained in a Form 10-K under the Exchange Act, quarterly reports
containing the information required to be contained in a Form 10-Q under the
Exchange Act and from time to time such other information as is required to be
contained in a Form 8-K under the Exchange Act. The Company shall also furnish
all such reports to Holders of the Exchange Notes or to the Trustee for
forwarding to each Holder of Exchange Notes. If filing such reports by the
Company with the Commission is not permitted under the Exchange Act, the
Company will promptly upon written request and payment of the reasonable cost
of duplication and delivery, supply copies of such reports to any person the
Company reasonably believes is a prospective holder of Exchange Notes.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-8520) are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, (ii) the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1995; and (iii) the
Company's Current Reports on Form 8-K dated March 27, 1995 and May 11, 1995, as
amended by the Company's Current Report on Form 8-K/A dated May 12, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the date on which the Exchange Offer is consummated shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any subsequently filed document which also
is or is deemed to be incorporated by reference herein modified or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE FROM
GEORGE H. VALENTINE, VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY,
TERRA INDUSTRIES INC., TERRA CENTRE, 600 FOURTH STREET, P.O. BOX 6000, SIOUX
CITY, IOWA 51102-6000, TELEPHONE (712) 277-1340. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE FIVE BUSINESS DAYS PRIOR
TO THE EXPIRATION DATE.
TAX CONSIDERATIONS
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary
view, and no ruling from the Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conditions set forth herein. Any such
changes or interpretations may or may not be retroactive and could affect the
tax consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. The Company
recommends that each holder consult such holder's own tax advisor as to the
particular tax consequences of exchanging such holder's Notes for Exchange
Notes, including the applicability and effect of any state, local or foreign
tax laws.
The exchange of the Notes for Exchange Notes pursuant to the Exchange Offer
should not be treated as an "exchange" for federal income tax purposes because
the Exchange Notes should not be considered to differ materially in kind or
extent from the Notes. Rather, the Exchange Notes received by a holder should
be treated as a continuation of the Notes in the hands of such holder. As a
result, there should be no federal income tax consequences to holders
exchanging Notes for Exchange Notes pursuant to the Exchange Offer.
LEGAL MATTERS
Certain legal matters regarding the issuance of the Notes pursuant to the
Offering will be passed upon for the Company by Kirkland & Ellis, Chicago,
Illinois.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company as of December 31, 1994 and 1993, for each of the
three years in the period ended December 31, 1994, included and incorporated by
reference in this Prospectus and in the Exchange Offer Registration Statement,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports, which are included and incorporated by reference herein (which
reports express an unqualified opinion and include an explanatory paragraph
referring to the Company's change in its method of accounting for major
maintenance turnarounds and post-employment benefits effective January 1,
1994), and have been so included and incorporated by reference in reliance upon
the reports of such firm given upon their authority as experts in accounting
and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Terra Industries Inc. Consolidated Financial Statements:
Independent Auditors' Report............................................ F-2
Consolidated Statements of Financial Position--March 31, 1995
(unaudited) and
December 31, 1994 and 1993............................................. F-3
Consolidated Statements of Income--Three Months Ended March 31, 1995 and
1994 (unaudited), Year Ended December 31, 1994, 1993 and 1992.......... F-4
Consolidated Statements of Changes in Stockholders' Equity--Three Months
Ended March 31, 1995 and 1994 (unaudited), Year Ended December 31,
1994, 1993 and 1992.................................................... F-5
Consolidated Statements of Cash Flows--Three Months Ended March 31, 1995
and 1994 (unaudited), Year Ended December 31, 1994, 1993 and 1992...... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
F-1
<PAGE>
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
F-2
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------
1995 1994 1993
----------- ---------- ---------
(UNAUDITED)
ASSETS
------
<S> <C> <C> <C>
Cash and short-term investments............. $ 133,145 $ 158,384 $ 65,102
Accounts receivable, less allowance for
doubtful accounts of $9,739, $8,224 and
$5,788..................................... 213,881 157,026 122,774
Inventories................................. 538,094 332,952 244,995
Deferred tax asset--current................. 49,641 43,992 26,011
Other current assets........................ 53,566 31,069 10,586
---------- ---------- ---------
Total current assets.................... 988,327 723,423 469,468
---------- ---------- ---------
Equity and other investments................ 12,764 14,181 2,218
Property, plant and equipment, net.......... 569,348 552,843 110,670
Deferred tax asset--non-current............. -- -- 24,742
Excess of cost over net assets of acquired
businesses................................. 320,908 320,559 12,353
Partnership distribution reserve fund....... 18,480 18,480 --
Net assets of discontinued operations....... -- -- 3,488
Other assets................................ 54,600 58,484 11,543
---------- ---------- ---------
Total assets............................ $1,964,427 $1,687,970 $ 634,482
========== ========== =========
<CAPTION>
LIABILITIES
-----------
<S> <C> <C> <C>
Debt due within one year.................... $ 76,009 $ 67,658 $ 9,636
Accounts payable............................ 301,039 181,050 99,886
Accrued and other liabilities............... 295,316 200,774 128,659
---------- ---------- ---------
Total current liabilities............... 672,364 449,482 238,181
---------- ---------- ---------
Long-term debt.............................. 512,820 511,706 119,061
Deferred income taxes....................... 93,656 84,246 451
Other liabilities........................... 53,316 53,477 33,809
Minority interest........................... 182,183 170,630 --
Commitments and contingencies (Note 11)..... -- -- --
---------- ---------- ---------
Total liabilities....................... 1,514,339 1,269,541 391,502
---------- ---------- ---------
<CAPTION>
STOCKHOLDERS' EQUITY
--------------------
<S> <C> <C> <C>
Capital stock
Common Shares, authorized 133,500 shares;
outstanding 81,018, 80,965 and 69,455
shares................................... 133,800 133,770 122,257
Paid-in capital............................. 630,241 630,111 516,128
Cumulative translation adjustment........... (1,093) (1,259) (488)
Accumulated deficit......................... (312,860) (344,193) (394,917)
---------- ---------- ---------
Total stockholders' equity.............. 450,088 418,429 242,980
---------- ---------- ---------
Total liabilities and stockholders'
equity................................. $1,964,427 $1,687,970 $ 634,482
========== ========== =========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
F-3
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------ ----------------------------------
1995 1994 1994 1993 1992
-------- -------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Net sales............. $434,121 $255,264 $1,633,499 $1,212,510 $1,062,045
Other income, net..... 9,219 4,240 32,448 25,491 20,146
-------- -------- ---------- ---------- ----------
443,340 259,504 1,665,947 1,238,001 1,082,191
-------- -------- ---------- ---------- ----------
Cost and Expenses
Cost of sales......... 291,772 221,974 1,330,202 1,021,187 904,246
Depreciation and
amortization......... 15,559 4,456 27,218 15,470 14,994
Selling, general and
administrative
expense.............. 52,995 40,306 193,975 161,791 137,232
Equity in loss
(earnings) of
unconsolidated
affiliates........... 1,197 554 (743) (2,275) --
-------- -------- ---------- ---------- ----------
361,523 267,290 1,550,652 1,196,173 1,056,472
-------- -------- ---------- ---------- ----------
Income (loss) from
operations........... 81,817 (7,786) 115,295 41,828 25,719
Interest income....... 2,666 856 5,541 3,261 3,084
Interest expense...... (14,007) (2,935) (22,082) (12,944) (10,617)
Minority interest..... (16,593) -- (8,809) -- --
-------- -------- ---------- ---------- ----------
Income (loss) from
continuing operations
before income taxes.. 53,883 (9,865) 89,945 32,145 18,186
Income tax provision
(benefit)............ 20,930 (3,580) 33,700 9,300 7,757
-------- -------- ---------- ---------- ----------
Income (loss) from
continuing
operations........... 32,953 (6,285) 56,245 22,845 10,429
Loss from discontinued
operations:
(Loss) income from
operations, net of
taxes.............. -- -- -- -- (4,025)
Gain (loss) on
disposition, net of
taxes.............. -- -- -- -- 2,360
-------- -------- ---------- ---------- ----------
Income (loss) before
extraordinary items
and cumulative effect
of accounting
changes.............. 32,953 (6,285) 56,245 22,845 8,764
Extraordinary gain
(loss) on early
retirement of debt... -- (2,614) (3,060) -- --
Cumulative effect of
accounting changes... -- 3,376 3,376 -- 22,265
-------- -------- ---------- ---------- ----------
Net Income (Loss)....... $ 32,953 $ (5,523) $ 56,561 $ 22,845 $ 31,029
======== ======== ========== ========== ==========
Weighted average number
of shares outstanding.. 81,215 69,961 72,870 69,064 69,103
======== ======== ========== ========== ==========
Income (Loss) Per Share:
Continuing operations. $ 0.41 $ (0.09) $ 0.77 $ 0.33 $ 0.15
Discontinued
operations........... -- -- -- -- (0.02)
-------- -------- ---------- ---------- ----------
Income (loss) before
extraordinary items.. 0.41 (0.09) 0.77 0.33 0.13
Extraordinary gain
(loss) on early
retirement of debt... -- (0.04) (0.04) -- --
Cumulative effect of
accounting changes... -- 0.05 0.05 -- 0.32
-------- -------- ---------- ---------- ----------
Net Income (Loss)....... $ 0.41 $ (0.08) $ 0.78 $ 0.33 $ 0.45
======== ======== ========== ========== ==========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
F-4
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON TRUST PAID-IN TRANSLATION ACCUMULATED
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
Unaudited:
Stock Incentive Plan.. 30 -- 130 -- -- 160
Translation
adjustment........... -- -- -- 166 -- 166
Dividends............. -- -- -- -- (1,620) (1,620)
Net Income............ -- -- -- -- 32,953 32,953
-------- ------- -------- ------- --------- --------
March 31, 1995........ $133,800 $ -- $630,241 $(1,093) $(312,860) $450,088
======== ======= ======== ======= ========= ========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
F-5
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------ ---------------------------
1995 1994 1994 1993 1992
-------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income (loss)........... $ 32,953 $ (5,523) $ 56,561 $22,845 $ 31,029
Adjustments to reconcile net
income (loss) to net cash
(used in) provided by
operating activities:
Depreciation and
amortization............. 16,174 4,456 27,218 15,470 14,994
Income taxes.............. 3,761 (2,759) 20,956 5,500 6,313
Cumulative effect of
accounting changes....... -- (3,376) (3,376) -- (22,265)
Minority interest in
earnings................. 16,593 -- 8,809 -- --
Other non-cash items...... (4,060) 3,765 10,923 (839) 2,826
Change in current assets and
liabilities, excluding
working capital
purchased/sold:
Accounts receivable....... (59,703) (53,478) 19,615 (24,540) (1,764)
Inventories............... (201,662) (143,609) (59,303) (6,718) (32,136)
Other current assets...... (4,489) (955) (13,056) (2,893) (875)
Accounts payable.......... 119,989 151,361 60,478 (9,945) (2,071)
Accrued and other
liabilities.............. 83,071 42,870 39,405 2,452 38
Other....................... (2,744) (489) 212 (2,354) 684
-------- -------- -------- ------- --------
Net Cash (Used In) Provided by
Operating Activities......... (117) (7,737) 168,442 (1,022) (3,227)
-------- -------- -------- ------- --------
Investing Activities
Acquisitions, net of cash
acquired................... (10,340) (11,306) (373,722) (58,260) --
Purchase of property, plant
and equipment.............. (14,007) (10,463) (31,213) (21,620) (17,620)
Proceeds from asset sales... -- -- -- 24,391 23,065
Discontinued operations..... (478) (988) (2,138) 5,630 (5,504)
Proceeds from investments... 246 573 690 537 --
-------- -------- -------- ------- --------
Net Cash (Used In) Provided By
Investing Activities......... (24,579) (22,184) (406,383) (49,322) (59)
-------- -------- -------- ------- --------
Financing Activities
Net short-term borrowings... 7,199 69,758 13,795 7,313 --
Proceeds from issuance of
long-term debt............. -- -- 326,407 250 30,000
Principal payments on long-
term debt.................. (1,403) (67,171) (101,416) (12,545) (5,842)
Debt issuance costs......... -- (2,533) (13,581) -- --
Stock issuance/repurchase--
net........................ 155 1,131 117,666 513 --
Distribution to minority
interests.................. (5,040) -- (5,040) -- --
Dividends................... (1,620) (1,392) (5,837) (1,386) --
-------- -------- -------- ------- --------
Net Cash (Used In) Provided by
Financing Activities......... (709) (207) 331,994 (5,855) 24,158
-------- -------- -------- ------- --------
Foreign exchange effect on
cash and short-term
investments.................. 166 (454) (771) (488) --
-------- -------- -------- ------- --------
(Decrease) Increase in Cash
and Short-Term Investments... (25,239) (30,582) 93,282 (56,687) 20,872
Cash and Short-Term
Investments at Beginning of
Period....................... 158,384 65,102 65,102 121,789 100,917
-------- -------- -------- ------- --------
Cash and Short-Term
Investments at End of Period. $133,145 $ 34,520 $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.
F-6
<PAGE>
TERRA INDUSTRIES INC.
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.
Interim Financial Information:
The unaudited consolidated financial statements as of March 31, 1995 contain
all adjustments necessary to summarize fairly the financial position of the
Corporation and all majority-owned subsidiaries and the results of the
Corporation's operations for the three months ended March 31, 1995 and 1994.
All such adjustments are of a normal recurring nature. Because of the seasonal
nature of the Corporation's operations and effects of weather-related
conditions in several of its marketing areas, earnings of any single reporting
period should not be considered as indicative of results for a full year.
F-7
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 an approximate one-third
interest in Royster-Clark, Inc. for $12.2 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 $39.8 million. Terra Asgrow
Florida operates 16 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
F-8
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
results of operations as if the acquisitions of AMCI, Terra Asgrow Florida and
Terra Canada had occurred at the beginning of 1993:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
THREE MONTHS ENDED ---------------------
MARCH 31, 1994 1994 1993
------------------ ---------- ----------
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C>
Revenues........................ $356,088 $2,084,800 $1,716,300
Income (loss) before extraordi-
nary items and cumulative ef-
fect of accounting changes..... $ (2,469) $ 110,370 $ 14,060
Net income (loss)............... $ (1,707) $ 110,680 $ 11,510
Income (loss) per share before
extraordinary items............ $ (0.03) $ 1.37 $ 0.18
Net income (loss) per share..... $ (0.02) $ 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
F-9
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
tax consequences of events recognized in the Corporation's financial statements
or tax returns. SFAS 109 requires the Corporation to recognize the income tax
benefit of operating loss and tax credit carryforwards expected to be realized.
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>
1992
-------------
(IN MILLIONS)
<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 totaled $4.6
million in 1994, $4.7 million in 1993 and $4.5 million in 1992.
6. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------
1995 1994 1993
---------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials............................... $ 44,855 $ 38,988 $ 22,983
Finished goods.............................. 493,239 293,964 222,012
-------- -------- --------
Total................................... $538,094 $332,952 $244,995
======== ======== ========
</TABLE>
F-10
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------
1995 1994 1993
---------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Land and buildings..................... $ 89,964 $ 89,154 $ 66,343
Plant and equipment.................... 631,330 605,900 179,095
Finance leases......................... 7,471 7,471 --
--------- --------- ---------
728,765 702,525 245,438
Less accumulated depreciation and
amortization.......................... (159,417) (149,682) (134,768)
--------- --------- ---------
Total.............................. $ 569,348 $ 552,843 $ 110,670
========= ========= =========
</TABLE>
8. DEBT DUE WITHIN ONE YEAR
Debt due within one year consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ----------------
1995 1994 1993
----------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term borrowings....................... $28,307 $21,108 $ 7,313
Current maturities of long-term debt........ 47,702 46,550 2,323
------- ------- -------
Total................................... $76,009 $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.
F-11
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------
1995 1994 1993
---------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Customer deposits........................... $134,579 $ 66,470 $ 50,714
Payroll and benefit costs................... 26,574 45,630 17,072
Income taxes................................ 27,654 8,727 17,025
Other....................................... 106,509 79,947 43,848
-------- -------- --------
Total................................... $295,316 $200,774 $128,659
======== ======== ========
</TABLE>
10. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------
1995 1994 1993
---------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Unsecured Senior Notes, 10.75%, due 2003. $158,755 $158,755 $ --
Bank term loans, floating rate, due in
installments through 2001............... 310,000 310,000 --
Bank term loan, floating rate, due 1999.. 35,000 35,000 --
8.5% Convertible Subordinated Debentures. -- -- 72,057
Unsecured Senior Notes, 8.48%, due 2005.. 30,000 30,000 30,000
Industrial Development Revenue Bonds
bearing interest at an average 6.8% with
increasing payments from 1995 to 2011... 9,210 9,210 9,355
Unsecured Notes, 8.75% to 9.63%, due 1996
to 1998................................. 5,500 6,500 8,500
Other.................................... 12,057 8,791 1,472
-------- -------- --------
560,522 558,256 121,384
Less current maturities.................. (47,702) (46,550) (2,323)
-------- -------- --------
Total................................ $512,820 $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,
F-12
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 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>
F-13
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 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 Corporation retains collection and
administrative responsibility on the participating interests sold. 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 and March 31, 1995, the proceeds of the uncollected balance
of receivables sold totaled $50 million.
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, financial
position or net cash flows of the Corporation.
F-14
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 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>
1994 1993
-------------------- -------------------
CONTRACT UNREALIZED CONTRACT UNREALIZED
MMBTU GAIN (LOSS) MMBTU GAIN (LOSS)
-------- ---------- -------- ----------
(IN THOUSANDS)
<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>
F-15
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
In the first quarter of 1995, due to the decline in natural gas prices, the
Corporation extended its forward pricing positions for natural gas. At March
31, 1995, the Corporation had entered into forward pricing positions covering
approximately 65% of its natural gas requirements for the remainder of 1995,
42% of its requirements for 1996 and 22% of its requirements for 1997. At March
31, 1995, liquidation of the Corporation's open positions would have resulted
in a loss of $10 million. As of March 31, 1995, realized losses of $3.1 million
relating to future periods had been deferred.
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 expired March 31, 1995.
Methanol Prices--BMLP entered into a methanol hedging agreement (the Methanol
Hedging Agreement) effective October 1994. Pursuant to the agreement, BMLP
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
F-16
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
for each of these periods are 155.5 million, 140 million and 130 million
gallons, respectively. BMLP's methanol production facility has a production
capacity of 280 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 BMLP would expect to pay at December 31, 1994 to
liquidate the agreement for its remaining term, is approximately $41 million,
based on an appraisal.
As of March 31, 1995, an additional $15.4 million has been recorded as
payable under the Methanol Hedging Agreement for the period January 1, 1995
through March 31, 1995. The estimated fair value of the agreement, representing
the amount that BMLP would expect to pay at March 31, 1995 to liquidate the
agreement for its remaining term, is approximately $5 million based on a
management estimate.
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
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(IN MILLIONS)
<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.
F-17
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
F-18
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of changes in the Corporation's outstanding capital stock follows:
<TABLE>
<CAPTION>
COMMON TRUST TOTAL
SHARES SHARES SHARES
------ ------ ------
(IN THOUSANDS)
<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 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
UNDER OPTION PER SHARE
------------ ---------------
(IN THOUSANDS)
<S> <C> <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>
F-19
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The number of options exercisable at December 31 for each of the past three
years follows:
<TABLE>
<CAPTION>
PRICE RANGE
OPTIONS PER SHARE
------- ---------------
(IN THOUSANDS)
<S> <C> <C> <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>
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<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.
The following table reconciles the plans' funded status to amounts included
in the Consolidated Statements of Financial Position at December 31:
<TABLE>
<CAPTION>
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
---------------- ----------- ---------------- -----------
(IN THOUSANDS)
<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>
F-20
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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>
1994 1993
-------- --------
(IN THOUSANDS)
<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>
1994 1993 1992
------ ------ ------
(IN THOUSANDS)
<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>
F-21
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<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>
19. INCOME TAXES
Components of the income tax provision (benefit) applicable to continuing
operations are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- ------
(IN THOUSANDS)
<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
======= ======= ======
</TABLE>
F-22
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The income tax provision differs from the federal statutory provision for the
following reasons:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
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 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>
1994 1993
--------- -------
(IN THOUSANDS)
<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
F-23
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
1994 1993 1992
------- ------- --------
(IN THOUSANDS)
<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.
F-24
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 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
DISTRIBUTION PRODUCTS METHANOL OTHER TOTAL
------------ -------- -------- -------- ----------
(IN THOUSANDS)
<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.
F-25
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
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
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.
F-26
<PAGE>
[Inside back Cover Page.]
[GRAPHIC OF AGRICULTURAL BUSINESS CYCLE BY QUARTER]
First Quarter
-------------
. Wholesale sales of fertilizer and chemicals occur to fill storage and build
inventory.
. Crop input planning with growers continues.
. Dealer program sign-ups continue.
. Planting in the Southwest begins.
. Winter vegetable harvesting continues in Florida.
Second Quarter
--------------
. Planting in the Corn Belt and mid-South begins.
. Custom application of fertilizer and chemicals occurs in the Corn Belt and
mid-South.
. Over half of the year's agricultural sales occur.
Third Quarter
-------------
. Side dressing and winter wheat fertilizer applied.
. Fields inspected; insecticides and late, post-emergent herbicides applied.
. Harvesting begins.
. Majority of turf and nursery sales occur.
. Seed ordering begins in Midwest.
. Fall/winter vegetable planting begins in Florida.
Fourth Quarter
--------------
. Harvesting continues.
. Soil tested; crop input plans developed with growers.
. Wholesale chemical sales begin.
. Supplier programs negotiated; sales strategies developed.
. Dealer program sign-ups begin.
. Seed sales begin nationwide.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER
TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 3
Risk Factors.............................................................. 14
The Company............................................................... 19
Use of Proceeds........................................................... 20
Capitalization............................................................ 21
Exchange Offer............................................................ 22
Selected Financial Data................................................... 30
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 32
Business.................................................................. 43
Management................................................................ 52
Description of Exchange Notes............................................. 54
Description of Other Indebtedness......................................... 82
Plan of Distribution...................................................... 87
Tax Considerations........................................................ 89
Legal Matters............................................................. 89
Experts................................................................... 89
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1995 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES OFFERED HEREBY, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PRO-
SPECTUS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
TERRA INDUSTRIES INC.
---------------------
PROSPECTUS
---------------------
OFFER TO EXCHANGE ITS
10 1/2% SENIOR NOTES DUE 2005, SERIES B FOR ANY AND ALL OF ITS OUTSTANDING 10
1/2% SENIOR NOTES DUE 2005, SERIES A
, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Maryland General Corporate Law provides the following with respect to the
indemnification of directors and officers:
(a) Any director made a party to any proceeding in his or her capacity as
a director, may be indemnified against judgments, penalties, fines,
settlements and reasonable expenses actually incurred in connection with
the proceeding unless it is established that: (i) the act or omission of
the director was material to such proceeding and was committed in bad faith
or was the result of active and deliberate dishonesty; (ii) the director
actually received an improper personal benefit in money, property or
services or (iii) in the case of criminal proceedings, the director had
reasonable cause to believe that the act or omission was unlawful. A
director may not be indemnified in respect of any proceeding charging
improper personal benefit and in which the director was so adjudged.
(b) Directors who have been successful, on the merits or otherwise, in
the defense of any proceeding by reason of service in that capacity shall
be (unless limited by charter) indemnified against reasonable expenses
incurred by the director in such proceeding. Officers of the Company shall
(unless limited by charter) be indemnified as and to the same extent.
(c) Articles of Incorporation may expand subject to certain restrictions
or limit the liability of directors and officers.
The indemnification provided by Maryland General Corporate Law is not
exclusive of any other rights to which a director or officer may be entitled.
The Company's Articles of Incorporation provide with respect to
indemnification of directors and officers that the Company shall indemnify (i)
its directors to the fullest extent provided by the general laws of the State
of Maryland now or hereafter in force, including the advance of expenses under
the procedures provided by such laws; (ii) its officers to the same extent as
it shall indemnify its directors; and (iii) its officers who are not directors
to such further extent as shall be authorized by the Board of Directors and be
consistent with law. The Company also carries directors' and officers'
liability insurance.
The foregoing shall not limit the authority of the Company to indemnify other
employees and agents consistent with law.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<S> <C>
4.1 Indenture, dated as of June 22, 1995, between the Company and First Trust
National Association, as trustee.
4.2 Form of Exchange Note (included in Exhibit 4.1).
4.3 Registration Rights Agreement, dated as of June 22, 1995, among the
Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citicorp
Securities, Inc.
4.4 Indenture, dated as of October 15, 1993 between Terra Industries (as
successor by merger to AMCI) and Society National Bank, as trustee, filed
as Exhibit 99.2 to the Company's S-3 dated October 13, 1994 (File No. 33-
52493), is incorporated herein by reference.
4.5 Amended and Restated Credit Agreement, dated as of May 12, 1995, among
Terra Capital, TNLP, certain guarantors, the issuing banks and the lenders
named therein and Citibank, as agent, without exhibits or schedules.
5* Opinion of Kirkland & Ellis.
12 Statement of Computation of Ratios.
23.1* Consent of Kirkland & Ellis (included in Exhibit 5).
23.2 Consent of Deloitte & Touche LLP.
24 Power of Attorney.
25 Statement of Eligibility of Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Instructions to Registered Holder.
</TABLE>
- --------
*To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
Not Applicable.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions described under Item 20, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the Company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN SIOUX CITY, STATE OF IOWA, ON JULY
3, 1995.
Terra Industries Inc.
/s/ George H. Valentine
By: _________________________________
George H. Valentine
Its: Vice President, General
Counsel and Corporate Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board July 3, 1995
____________________________________
Reuben F. Richards
* Chief Executive Officer, July 3, 1995
____________________________________ President and Director
Burton M. Joyce (Principal Executive
Officer)
* Vice President and Chief July 3, 1995
____________________________________ Financial Officer
Francis G. Meyer (Principal Financial
Officer)
/s/ Robert E. Thompson Vice President, Controller July 3, 1995
____________________________________ (Principal Accounting
Robert E. Thompson Officer)
* Director July 3, 1995
____________________________________
Edward G. Beimfohr
* Director July 3, 1995
____________________________________
Carol L. Brookins
* Director July 3, 1995
____________________________________
Edward M. Carson
* Director July 3, 1995
____________________________________
David E. Fisher
* Director July 3, 1995
____________________________________
Basil T.A. Hone
* Director July 3, 1995
____________________________________
Anthony W. Lea
* Director July 3, 1995
____________________________________
John R. Norton III
* Director July 3, 1995
____________________________________
Henry R. Slack
</TABLE>
/s/ George H. Valentine
*By: __________________________
George H. Valentine
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.1 Indenture, dated as of June 22, 1995, between the
Company and First Trust National Association, as
trustee.
4.2 Form of Exchange Note (included in Exhibit 4.1).
4.3 Registration Rights Agreement, dated as of June 22,
1995, among the Company, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Citicorp Securities,
Inc.
4.4 Indenture, dated as of October 15, 1993 between Terra **
Industries (as successor by merger to AMCI) and Soci-
ety National Bank, as trustee, filed as Exhibit 99.2
to the Company's S-3 dated October 13, 1994 (File No.
33-52493), is incorporated herein by reference.
4.5 Amended and Restated Credit Agreement, dated as of
May 12, 1995, among Terra Capital, TNLP, certain
guarantors, the issuing banks and the lenders named
therein and Citibank, as agent, without exhibits or
schedules.
5* Opinion of Kirkland & Ellis.
12 Statement of Computation of Ratios.
23.1* Consent of Kirkland & Ellis (included in Exhibit 5).
23.2 Consent of Deloitte & Touche LLP.
24 Power of Attorney.
25 Statement of Eligibility of Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Instructions to Registered Holder.
</TABLE>
- --------
*To be filed by amendment.
**Incorporated by reference.
<PAGE>
Exhibit 4.1
- -------------------------------------------------------------------------------
TERRA INDUSTRIES INC.
and
FIRST TRUST NATIONAL ASSOCIATION,
Trustee
INDENTURE
Dated as of June 22, 1995
10 1/2% Senior Notes due 2005
- -------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
---------------------
TIA SECTIONS INDENTURE SECTIONS
- ------------ ------------------
(S) 310 (a)(1)..................................... 7.09
(a)(2)..................................... 7.09
(b)........................................ 7.07; 10.02
(S) 311 ........................................... 7.04
(S) 313 (a)........................................ 7.05
(S) 314 (a)........................................ 4.18; 10.02
(a)(4)..................................... 4.17
(c)(1)..................................... 10.03
(c)(2)..................................... 10.03
(e)........................................ 10.04
(S) 315 (a)........................................ 7.01
(S) 316 (a) (last sentence)........................ 2.07
(a)(1)(A).................................. 6.05
(a)(1)(B).................................. 6.04
(b)........................................ 6.07
(S) 317 (a)(1)..................................... 6.08
(a)(2)..................................... 6.09
(S) 318 (a)........................................ 10.01
(c)........................................ 10.01
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
PARTIES..................................................................... 1
RECITALS.................................................................... 1
ARTICLE 1 Definitions and Incorporation by Reference....................... 1
SECTION 1.01 Definitions................................... 1
SECTION 1.02 Incorporation by Reference of Trust Indenture
Act........................................... 22
SECTION 1.03 Rules of Construction......................... 23
ARTICLE 2 The Securities................................................... 23
SECTION 2.01 Form and Dating............................... 23
SECTION 2.02 Execution, Authentication and Denominations... 24
SECTION 2.03 Registrar and Paying Agent.................... 25
SECTION 2.04 Paying Agent to Hold Money in Trust........... 25
SECTION 2.05 Transfer and Exchange......................... 26
SECTION 2.06 Replacement Securities........................ 29
SECTION 2.07 Outstanding Securities........................ 29
SECTION 2.08 Temporary Securities.......................... 29
SECTION 2.09 Cancellation.................................. 30
SECTION 2.10 CUSIP Numbers................................. 30
SECTION 2.11 Defaulted Interest............................ 30
SECTION 2.12 Form of Legend on Restricted Securities....... 30
<PAGE>
Page
----
SECTION 2.13 Form of Legend for Book-Entry Securities...... 31
ARTICLE 3 Redemption..................................................... . 32
SECTION 3.01 Right of Redemption........................... 32
SECTION 3.02 Notices to Trustee............................ 32
SECTION 3.03 Selection of Securities to Be Redeemed........ 32
SECTION 3.04 Notice of Redemption.......................... 33
SECTION 3.05 Effect of Notice of Redemption................ 34
SECTION 3.06 Deposit of Redemption Price................... 34
SECTION 3.07 Payment of Securities Called for Redemption... 34
SECTION 3.08 Securities Redeemed in Part................... 34
ARTICLE 4 Covenants........................................................ 35
SECTION 4.01 Payment of Securities......................... 35
SECTION 4.02 Maintenance of Office or Agency............... 36
SECTION 4.03 Limitation on Indebtedness.................... 36
SECTION 4.04 Limitation on Restricted Payments............. 40
SECTION 4.05 Limitation on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries....................... 44
SECTION 4.06 Limitation on the Issuance of Capital
Stock of Restricted Subsidiaries.............. 45
SECTION 4.07 Limitation on Transactions with
Shareholders and Affiliates................... 46
SECTION 4.08 Limitation on Liens........................... 47
SECTION 4.09 Limitation on Sale-Leaseback
Transactions.................................. 48
ii
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Page
----
SECTION 4.10 Limitation on Asset Sales..................... 49
SECTION 4.11 Repurchase of Securities upon Change of
Control....................................... 52
SECTION 4.12 Corporate Existence........................... 53
SECTION 4.13 Payment of Taxes and Other Claims............. 53
SECTION 4.14 Notice of Defaults and Other Events........... 54
SECTION 4.15 Maintenance of Properties and Insurance....... 54
SECTION 4.16 Amendments to Limited Partnership
Agreements.................................... 54
SECTION 4.17 Compliance Certificates....................... 55
SECTION 4.18 Commission Reports and Reports to
Holders....................................... 55
SECTION 4.19 Waiver of Stay, Extension or Usury
Laws.......................................... 56
ARTICLE 5 Successor Corporation............................................ 56
SECTION 5.01 When Company May Merge, Etc................... 56
SECTION 5.02 Successor Corporation Substituted............. 57
ARTICLE 6 Default and Remedies............................................. 58
SECTION 6.01 Events of Default............................. 58
SECTION 6.02 Acceleration.................................. 60
SECTION 6.03 Other Remedies................................ 60
SECTION 6.04 Waiver of Past Defaults....................... 61
SECTION 6.05 Control by Majority........................... 61
SECTION 6.06 Limitation on Suits........................... 61
SECTION 6.07 Rights of Holders to Receive Payment.......... 62
iii
<PAGE>
Page
----
SECTION 6.08 Collection Suit by Trustee.................... 62
SECTION 6.09 Trustee May File Proofs of Claim.............. 62
SECTION 6.10 Priorities.................................... 63
SECTION 6.11 Undertaking for Costs......................... 63
SECTION 6.12 Restoration of Rights and Remedies............ 64
SECTION 6.13 Rights and Remedies Cumulative................ 64
SECTION 6.14 Delay or Omission Not Waiver.................. 64
ARTICLE 7 Trustee.......................................................... 64
SECTION 7.01 Rights and Duties of Trustee.................. 64
SECTION 7.02 Individual Rights of Trustee.................. 66
SECTION 7.03 Trustee's Disclaimer.......................... 66
SECTION 7.04 Notice of Default............................. 66
SECTION 7.05 Reports by Trustee to Holders................. 66
SECTION 7.06 Compensation and Indemnity.................... 66
SECTION 7.07 Replacement of Trustee........................ 67
SECTION 7.08 Successor Trustee by Merger, Etc.............. 68
SECTION 7.09 Eligibility................................... 68
ARTICLE 8 Discharge of Indenture........................................... 69
SECTION 8.01 Termination of Company's Obligations.......... 69
SECTION 8.02 Defeasance and Discharge of Indenture......... 70
SECTION 8.03 Defeasance of Certain Obligations............. 72
SECTION 8.04 Application of Trust Money.................... 74
SECTION 8.05 Repayment to Company.......................... 74
SECTION 8.06 Reinstatement................................. 75
iv
<PAGE>
Page
----
ARTICLE 9 Amendments, Supplements and Waivers.............................. 75
SECTION 9.01 Without Consent of Holders.................... 75
SECTION 9.02 With Consent of Holders....................... 76
SECTION 9.03 Revocation and Effect of Consent.............. 77
SECTION 9.04 Notation on or Exchange of Securities......... 77
SECTION 9.05 Trustee to Sign Amendments, Etc............... 77
SECTION 9.06 Conformity with Trust Indenture Act........... 78
ARTICLE 10 Miscellaneous.................................................... 78
SECTION 10.01 Trust Indenture Act of 1939................... 78
SECTION 10.02 Notices....................................... 78
SECTION 10.03. Certificate and Opinion as to Conditions
Precedent..................................... 79
SECTION 10.04 Statements Required in Certificate or
Opinion....................................... 79
SECTION 10.05 Rules by Trustee, Paying Agent or
Registrar..................................... 80
SECTION 10.06 Payment Date Other Than a Business
Day........................................... 80
SECTION 10.07 GOVERNING LAW................................. 80
SECTION 10.08 No Adverse Interpretation of Other
Agreements.................................... 80
SECTION 10.09 No Recourse Against Others.................... 80
v
<PAGE>
Page
----
SECTION 10.10 Successors....................................... 80
SECTION 10.11 Duplicate Originals.............................. 81
SECTION 10.12 Separability..................................... 81
SECTION 10.13 Table of Contents, Headings, Etc................. 81
EXHIBIT A
APPENDIX I
vi
<PAGE>
INDENTURE dated as of June 22, 1995, between TERRA INDUSTRIES INC., a
Maryland corporation (the "Company"), and FIRST TRUST NATIONAL ASSOCIATION, a
national banking association, Trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 10 1/2%
Senior Notes due 2005, Series A (the "Series A Securities"), and an issue of
10 1/2% Senior Notes due 2005, Series B (the "Series B Securities," and together
with the Series A Securities, the "Securities"), in the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture (each of the Series A Securities
and the Series B Securities shall sometimes be referred to hereinafter as a
"series"). The outstanding principal amount of the Series A Securities and
Series B Securities, in the aggregate, shall not exceed $200 million taken as a
whole.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done and the Company has done
all things necessary to make the Securities, when executed by the Company and
authenticated and delivered by the Trustee hereunder and duly issued by the
Company, the valid obligations of the Company as hereinafter provided.
This Indenture is subject, and shall be governed by, the provisions of
the Trust Indenture Act of 1939, as amended, that are required to be a part of
and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows.
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01 Definitions.
"Acceleration Notice" has the meaning provided in Section 6.02 of this
Indenture.
1
<PAGE>
"Acquired Indebtedness" is defined to mean Indebtedness of a Person
existing at the time such Person became a Subsidiary and not Incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary.
"Additional Interest" has the meaning provided in Section 4.01 of this
Indenture.
"Adjusted Consolidated Net Income" is defined to mean, for any period,
the aggregate net income (or loss) of any Person and its consolidated
Subsidiaries for such period determined in conformity with GAAP; provided,
however, that the following items shall be excluded in computing Adjusted
Consolidated Net Income (without duplication): (a) the net income (or loss) of
such Person (other than net income (or loss) attributable to a Subsidiary of
such Person) in which any other Person (other than such Person or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to such Person or any of its
Subsidiaries by such other Person during such period; (b) solely for the
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (iii) of the first paragraph of Section 4.04 of this
Indenture (and in such case, except to the extent includable pursuant to the
foregoing clause (a)), the net income (or loss) of such Person accrued prior to
the date it becomes a Subsidiary of any other Person or is merged into or
consolidated with such other Person or any of its Subsidiaries or all or
substantially all the property and assets of such Person are acquired by such
other Person or any of its Subsidiaries; (c) the net income (or loss) of any
Subsidiary of any Person to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary of such net income is not
at the time permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary; (d) any gains or losses (on an after-
tax basis) attributable to Asset Sales; (e) except for the purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (iii) of the first paragraph of Section 4.04 of this Indenture, any
amounts paid or accrued as dividends on Preferred Stock of such Person or
Preferred Stock of any Subsidiary (other than the Partnerships) of such Person
owned by Persons other than such Person or any of its Subsidiaries; (f) all
extraordinary gains and extraordinary losses; and (g) all noncash charges
reducing net income of such Person that relate to stock options or stock
appreciation rights and all cash payments reducing net income of such Person
that relate to stock options or stock appreciation rights; provided, however,
that, solely for the purpose of calculating the Interest Coverage Ratio (and in
such case, except to the extent includable pursuant to clause (a) above),
"Adjusted Consolidated Net Income" of such Person shall include the amount of
all cash dividends or other cash distributions received by such Person or any
Subsidiary of such Person from an Unrestricted Subsidiary.
2
<PAGE>
"Affiliate" is defined to mean, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person, is
defined to mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" is defined to mean any Registrar, Paying Agent, authenticating
agent or co-registrar.
"Asset Acquisition" is defined to mean (a) an investment by the
Company or any of its Subsidiaries in any other Person pursuant to which such
Person shall become a Subsidiary of the Company or any of its Subsidiaries or
shall be merged or consolidated with the Company or any of its Subsidiaries; or
(b) an acquisition by the Company or any of its Subsidiaries of the assets of
any Person other than the Company or any of its Subsidiaries that constitutes
substantially all of a division or line of business of such Person.
"Asset Disposition" is defined to mean the sale or other disposition
by the Company or any of its Subsidiaries (other than to the Company or another
Subsidiary of the Company) of (a) all or substantially all the Capital Stock of
any Subsidiary of the Company or (b) all or substantially all the assets that
constitute a division or line of business of the Company or any of its
Subsidiaries.
"Asset Sale" is defined to mean, with respect to any Person, any sale,
transfer or other disposition (including by way of merger, consolidation or
sale-leaseback transaction) in one transaction or a series of related
transactions by such Person or any of its Subsidiaries to any Person other than
the Company or any of its Subsidiaries of (a) all or any of the Capital Stock of
any Subsidiary of such Person; (b) all or substantially all the assets of an
operating unit or business of such Person or any of its Subsidiaries; or (c) any
other assets of such Person or any of its Subsidiaries outside the ordinary
course of business of such Person or such Subsidiary and, in each case, that is
not governed by the provisions of Article 5 of this Indenture; provided,
however, that, for purposes of determining the restrictions under Section 4.10
of this Indenture, sales, transfers or other dispositions of inventory,
receivables and other current assets shall not be included within the meaning of
"Asset Sale."
"Attributable Indebtedness" is defined to mean, when used in
connection with a sale-leaseback transaction referred to in Section 4.09 of this
Indenture, at any date of determination, the product of (a) the net proceeds
from such sale-leaseback transaction, and (b) a fraction, the numerator of which
is the number of full years of the term of the
3
<PAGE>
lease relating to the property involved in such sale-leaseback transaction
(without regard to any options to renew or extend such term) remaining at the
date of the making of such computation, and the denominator of which is the
number of full years of the term of such lease (without regard to any options to
renew or extend such term) measured from the first day of such term.
"Average Life" is defined to mean, at any date of determination with
respect to any debt security, the quotient obtained by dividing (a) the sum of
the product of (i) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security
multiplied by (ii) the amount of such principal payment, by (b) the sum of all
such principal payments.
"Board of Directors" is defined to mean the Board of Directors of the
Company or any committee of such Board of Directors duly authorized to act under
this Indenture.
"Board Resolution" is defined to mean a copy of a resolution,
certified by the Secretary or an Assistant Secretary of the Company, to have
been duly adopted by the Board of Directors and to be in full force and effect
on the date of such certification, and delivered to the Trustee.
"Book-Entry Security" is defined to mean a Security represented by a
Global Security.
"Business Day" is defined to mean any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, or in the city of
the Corporate Trust Office of the Trustee, are authorized or obligated by law to
be closed.
"Canadian Credit Agreement" is defined to mean the Revolving Term
Credit Facility dated as of April 2, 1993, as amended, between Terra Canada and
The Bank of Nova Scotia (or any successors thereto), together with all the other
documents related thereto (including, without limitation, any Guarantees and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented, extended, renewed,
replaced or otherwise modified from time to time, including, without limitation,
any agreement increasing the amount thereof in accordance with the limitations
in this Indenture and any agreement extending the maturity of, refinancing or
otherwise restructuring (including, but not limited to, the inclusion of
additional borrowers or Guarantors thereunder that are Subsidiaries of the
Company) all or any portion of the Indebtedness under such agreements or any
successor agreements.
"Capital Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting
4
<PAGE>
or nonvoting) of such Person's capital stock or equity interests in a
partnership, joint venture, limited liability company or other equity that is
outstanding or issued on or after the date of this Indenture, including, without
limitation, all Common Stock and Preferred Stock.
"Capitalized Lease" is defined to mean, as applied to any Person, any
lease of any property (whether real, personal or mixed) the discounted present
value of the rental obligations of such Person as lessee of which, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person;
and "Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.
"Change of Control" is defined to mean such time as (a) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act),
other than Minorco or any of its Affiliates, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than fifty percent (50%)
of the total voting power of the then outstanding Voting Stock of the Company;
or (b) individuals who at the beginning of any period of two consecutive
calendar years constituted the board of directors of the Company (together with
any new directors whose election by the board of directors of the Company or
whose nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the members of the board of directors of the
Company then still in office who either were members of the board of directors
of the Company at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the members of the board of directors of the Company then in office.
"Change of Control Offer" has the meaning provided in Section 4.11 of
this Indenture.
"Change of Control Payment" has the meaning provided in Section 4.11
of this Indenture.
"Change of Control Payment Date" has the meaning provided in Section
4.11 of this Indenture.
"Closing Date" is defined to mean the date on which the Series A
Securities are originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
5
<PAGE>
"Common Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or nonvoting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture, or common equity
interests in a partnership, including, without limitation, all series and
classes of such common stock, all the Common Units and the general partnership
interests in the Partnerships.
"Common Unit" is defined to mean a Common Unit as defined in the TNCLP
Limited Partnership Agreement.
"Company" is defined to mean Terra Industries Inc., a Maryland
corporation, and its successors.
"Consolidated EBITDA" is defined to mean, with respect to any Person
for any period, the sum of the amounts for such period of (a) Adjusted
Consolidated Net Income, (b) Consolidated Interest Expense, (c) income taxes
(other than income taxes (either positive or negative) attributable to
extraordinary and nonrecurring gains or losses or sales of assets), (d)
depreciation expense, (e) amortization expense, (f) minority interest and (g)
all other noncash items reducing Adjusted Consolidated Net Income, less all
noncash items increasing Adjusted Consolidated Net Income, all as determined on
a consolidated basis for such Person and its Subsidiaries in conformity with
GAAP; provided, however, that, if a Person has any Subsidiary (other than the
Partnerships) that is not a Wholly Owned Subsidiary of such Person, Consolidated
EBITDA of such Person shall be reduced (to the extent not otherwise excluded by
the definition of Adjusted Consolidated Net Income) by an amount equal to (i)
the Adjusted Consolidated Net Income of such Subsidiary multiplied by (ii) the
quotient of (A) the number of shares of outstanding Common Stock of such
Subsidiary not owned on the last day of such period by such Person or any
Subsidiary of such Person divided by (B) the total number of shares of
outstanding Common Stock of such Subsidiary on the last day of such period; and
provided further, however, that Consolidated EBITDA of such Person shall be
reduced by amounts paid as distributions on limited partnership interests of
either Partnership owned by Persons other than the Company or any of its
Subsidiaries.
"Consolidated Interest Expense" is defined to mean, with respect to
any Person for any period, the aggregate amount of interest in respect of
Indebtedness (including amortization of original issue discount on any
Indebtedness and the interest portion of any deferred payment obligation
(excluding, without limitation, amounts deferred by trade creditors until the
occurrence of certain events) calculated in accordance with the effective
interest method of accounting; all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed by such Person) and all but the principal
component of rentals in respect of
6
<PAGE>
Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be
accrued by such Person and its consolidated Subsidiaries during such period;
excluding, however, (a) any amount of such interest of any Subsidiary of such
Person if the net income (or loss) of such Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income for such Person pursuant to
clause (c) of the proviso in the definition thereof (but only in the same
proportion as the net income (or loss) of such Subsidiary is excluded from the
calculation of Adjusted Consolidated Net Income for such Person pursuant to
clause (c) of the proviso in the definition thereof) and (b) any premiums, fees
and expenses (and any amortization thereof) payable in connection with the
recapitalization of the Company consummated in 1994, the Company's proposal to
acquire all of the outstanding Senior Preference Units which was terminated in
May 1995 and the Company's open market purchase program for up to five million
Senior Preference Units approved in May 1995, all as determined on a
consolidated basis in conformity with GAAP.
"Consolidated Net Tangible Assets" is defined to mean the total amount
of assets of the Company and its Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (a) all
current liabilities of the Company and its consolidated Subsidiaries (excluding
intercompany items) and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recently available quarterly or year-end consolidated balance
sheet of the Company and its consolidated Subsidiaries, prepared in conformity
with GAAP.
"Consolidated Net Worth" is defined to mean, at any date of
determination, shareholders' equity as set forth on the most recently available
quarterly or year-end consolidated balance sheet of the Company and its
consolidated Subsidiaries, less any amounts attributable to Redeemable Stock or
any equity security convertible into or exchangeable for Indebtedness, the cost
of treasury stock and the principal amount of any promissory notes receivable
from the sale of Capital Stock of the Company or any Subsidiary of the Company,
each item to be determined in accordance with GAAP (excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Corporate Trust Office" is defined to mean the office of the Trustee
at which the corporate trust business of the Trustee shall, at any particular
time, be principally administered, which office is, at the date of this
Indenture, located at 180 East Fifth Street, St. Paul, Minnesota, 55101,
Attention: Corporate Finance.
7
<PAGE>
"Credit Agreements" is defined to mean the Terra Credit Agreement and
the Canadian Credit Agreement.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in currency
values to or under which the Company or any of its Subsidiaries is a party or a
beneficiary on the date of this Indenture or becomes a party or a beneficiary
thereafter.
"Default" is defined to mean any event that, after the giving of
notice or the passage of time or both, would constitute an Event of Default.
"Depository" is defined to mean, with respect to the Securities issued
in the form of one or more Book-Entry Securities, The Depository Trust Company
("DTC") or another Person designated as Depository by the Company, which must be
a clearing agency registered under the Exchange Act.
"Event of Default" has the meaning provided in Section 6.01 of this
Indenture.
"Excess Proceeds" has the meaning provided in Section 4.10 of this
Indenture.
"Excess Proceeds Offer" has the meaning provided in Section 4.10 of
this Indenture.
"Excess Proceeds Payment" has the meaning provided in Section 4.10 of
this Indenture.
"Excess Proceeds Payment Date" has the meaning provided in Section
4.10 of this Indenture.
"Exchange Act" is defined to mean the Securities Exchange Act of 1934,
as amended.
"Exchange Offer Registration Statement" is defined to mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, filed pursuant to the Securities Act pursuant to which the Series A
Securities are exchanged for Series B Securities as provided in the Registration
Rights Agreement.
"GAAP" is defined to mean generally accepted accounting principles in
the United States of America as in effect as of the date of this Indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting
8
<PAGE>
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations based on GAAP
contained in this Indenture shall be computed in conformity with GAAP, except
that calculations made for purposes of determining compliance with the terms of
the covenants set forth in Articles 4 and 5 and with other provisions of this
Indenture shall be made without giving effect to (a) the amortization of any
expenses incurred in connection with the recapitalization of the Company
consummated in 1994, the Company's proposal to acquire all of the outstanding
Senior Preference Units which was terminated in May 1995 and the Company's open
market purchase program for up to five million Senior Preference Units approved
in May 1995; and (b) except as otherwise provided, the amortization of any
amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and
17.
"Global Securities" is defined to mean a Security evidencing all or a
part of the Securities to be issued as Book-Entry Securities issued to the
Depository in accordance with Section 2.05.
"Guarantee" is defined to mean any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (b) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Holder" or "Securityholder" is defined to mean the registered holder
of any Security.
"Incur" is defined to mean, with respect to any Indebtedness, to
incur, create, issue, assume, Guarantee or otherwise become liable for or with
respect to, or become responsible for, the payment of, contingently or
otherwise, such Indebtedness; provided, however, that neither the accrual of
interest (whether such interest is payable in cash or in kind) nor the accretion
of original issue discount shall be considered an Incurrence of Indebtedness.
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"Indebtedness" is defined to mean, with respect to any Person at any
date of determination (without duplication), (a) all indebtedness of such Person
for borrowed money; (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (c) all obligations of such
Person in respect of letters of credit, banker's acceptances, or other similar
instruments (including reimbursement obligations with respect thereto); (d) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables; (e) all obligations of
such Person as lessee under Capitalized Leases; (f) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided, however, that the amount of
such Indebtedness shall be the lesser of (i) the fair market value of such asset
at such date of determination and (ii) the amount of such Indebtedness; (g) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person; (h) all obligations in respect of
borrowed money under the Credit Agreements and any Guarantees thereof; (i) to
the extent not otherwise included in this definition, obligations under Currency
Agreements and Interest Rate Agreements; and (j) any Redeemable Stock. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability determined by such Person's board of directors, in good faith,
as reasonably likely to occur, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided,
however, that the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP; and provided
further, however, that Indebtedness shall not include (x) any liability for
Federal, state, local or other taxes, (y) obligations of the Company or any of
its Restricted Subsidiaries pursuant to Receivables Programs, or (z) obligations
of the Company or any of its Restricted Subsidiaries pursuant to contracts for,
or options, puts or similar arrangements relating to, the purchase of raw
materials or the sale of inventory at a time in the future.
"Indenture" is defined to mean this Indenture as originally executed
or as it may be amended, supplemented or otherwise modified from time to time
pursuant to the applicable provisions of this Indenture.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Citicorp Securities, Inc.
"Interest Coverage Ratio" is defined to mean, with respect to any
Person on any Transaction Date, the ratio of (x) the aggregate amount of
Consolidated EBITDA of such Person for the four fiscal quarters for which
financial statements in respect thereof
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are available immediately prior to such Transaction Date to (y) the aggregate
Consolidated Interest Expense of such Person during such four fiscal quarters.
In making the foregoing calculation (which shall be made without duplication),
(a) pro forma effect shall be given to (i) any Indebtedness Incurred subsequent
to the end of the four-fiscal-quarter period referred to in clause (x) and prior
to the Transaction Date (other than Indebtedness Incurred under a revolving
credit or similar arrangement to the extent of the commitment thereunder (or
under any predecessor revolving credit or similar arrangement) on the last day
of such period), (ii) any Indebtedness Incurred during such period to the extent
such Indebtedness is outstanding at the Transaction Date (with Indebtedness
Incurred under a revolving credit or similar arrangement calculated as described
in clause (c) below), and (iii) any Indebtedness to be Incurred on the
Transaction Date (excluding Indebtedness to be Incurred under a revolving credit
or similar arrangement in connection with an acquisition to the extent that
Indebtedness under a revolving credit or similar arrangement was theretofore
repaid with the proceeds of an offering of Capital Stock (other than Redeemable
Stock) in which it was contemplated that the amount of such repayment would
later be Incurred in connection with such acquisition), in each case as if such
Indebtedness had been Incurred on the first day of such four-fiscal-quarter
period and after giving pro forma effect to the application of the proceeds
thereof as if such application had occurred on such first day; (b) Consolidated
Interest Expense attributable to interest on any Indebtedness (whether existing
or being Incurred) computed on a pro forma basis and bearing a floating interest
rate shall be computed as if the average borrowing rate in effect during such
four-fiscal-quarter period (taking into account any Interest Rate Agreement
applicable to such Indebtedness) had been the applicable rate for the entire
period; (c) Consolidated Interest Expense attributable to interest on any
Indebtedness under a revolving credit or similar facility computed on a pro
forma basis shall be computed based upon the average daily balance of such
Indebtedness during the applicable period, as adjusted to eliminate the effects
of any temporary repayment of such Indebtedness from proceeds of an offering of
Capital Stock (other than Redeemable Stock) later applied to an acquisition as
described in clause (a)(iii) above; (d) there shall be excluded on a pro forma
basis from Consolidated Interest Expense any Consolidated Interest Expense
related to any amount of Indebtedness that was outstanding during such four-
fiscal-quarter period or thereafter but that is not outstanding or is to be
repaid on the Transaction Date, except for Consolidated Interest Expense accrued
(as adjusted pursuant to clause (b)) during such four-fiscal-quarter period
under a revolving credit or similar arrangement to the extent of the commitment
thereunder (or under any successor revolving credit or similar arrangement) on
the Transaction Date; (e) pro forma effect shall be given to Asset Dispositions
and Asset Acquisitions (including giving pro forma effect to the application of
proceeds of any Asset Disposition) that occur during such four-fiscal-quarter
period or thereafter and prior to the Transaction Date as if they had occurred
and such proceeds had been applied on the first day of such four-fiscal-quarter
period; (f) with respect to any
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such four-fiscal-quarter period commencing prior to the Closing Date, the
Closing Date shall be deemed to have taken place on the first day of such
period; and (g) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the application of proceeds
of any asset disposition) that have been made by any Person that has become a
Subsidiary of the Company or has been merged with or into the Company or any
Subsidiary of the Company during the four-fiscal-quarter period referred to
above or subsequent to such period and prior to the Transaction Date and that
would have been Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Subsidiary of the Company as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions
that occurred on the first day of such period; provided, however, that, to the
extent that clause (e) or (g) of this sentence requires that pro forma effect be
given to an Asset Acquisition or an Asset Disposition, such pro forma
calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired for which financial statements are available.
"Interest Payment Date" is defined to mean each semiannual interest
payment date on June 15 and December 15 of each year, commencing December 15,
1995.
"Interest Rate Agreement" is defined to mean any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement designed to protect the Company or any of its Subsidiaries
against fluctuations in interest rates to or under which the Company or any of
its Subsidiaries is a party or a beneficiary on the date of this Indenture or
becomes a party or a beneficiary hereafter.
"Interest Rate Increase" has the meaning provided in Exhibit A to this
Indenture.
"Investment" is defined to mean, with respect to any Person, any
direct or indirect advance, loan (other than advances to customers in the
ordinary course of business that are recorded as accounts receivable on the
balance sheet of such Person or its Subsidiaries) or other extension of credit
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, any other Person. For
purposes of the definition of "Unrestricted Subsidiary" and Section 4.04 of this
Indenture, (a) the designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be deemed an "Investment" by the Company in such newly
designated Unrestricted Subsidiary in an amount (the "Investment Amount") equal
to the fair market value of the
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assets of such Subsidiary that are required to be reflected on such Subsidiary's
balance sheet in accordance with GAAP, less the total liabilities of such
Subsidiary that are required to be reflected on such Subsidiary's balance sheet
in accordance with GAAP, in each case on a consolidated basis, at the time that
such Subsidiary is designated an Unrestricted Subsidiary, (b) the designation of
an Unrestricted Subsidiary as a Restricted Subsidiary shall be deemed a
reduction of Investments by the Company in Unrestricted Subsidiaries in an
amount equal to the Investment Amount with respect to such Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary of the Company and (c) any property, other than cash or
services, transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, with such value to be
determined by the Board of Directors in good faith (whose determination shall be
conclusive and evidenced by a Board Resolution) in any case in which the value
of the properties transferred individually or in a series of related
transactions exceeds $10 million.
"Junior Preference Unit" is defined to mean a Junior Preference Unit
as defined in the TNCLP Limited Partnership Agreement.
"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"Limited Partnership Agreement" is defined to mean either the TNCLP
Limited Partnership Agreement or the TNLP Limited Partnership Agreement.
"Minorco" is defined to mean Minorco, a company incorporated under the
laws of Luxembourg as a societe anonyme.
"Net Cash Proceeds" is defined to mean, with respect to any Asset
Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Subsidiary
of the Company) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (a) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale; (b) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company and
its Subsidiaries, taken as a whole; (c) payments made to repay unsubordinated
Indebtedness of the Company or
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Indebtedness of any Restricted Subsidiary outstanding at the time of such Asset
Sale that either (i) is secured by a Lien on the property or assets sold or (ii)
is required to be paid as a result of such sale; and (d) appropriate amounts to
be provided by the Company or any Subsidiary of the Company as a reserve against
any liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP.
"Officer" is defined to mean, with respect to the Company, the
Chairman of the Board, the President, any Vice President, the Chief Financial
Officer, the Treasurer or any Assistant Treasurer, or the Secretary or any
Assistant Secretary.
"Officers' Certificate" is defined to mean a certificate signed by two
Officers. Each Officers' Certificate (other than certificates provided pursuant
to Section 4.17 of this Indenture) shall include the statements provided for in
Section 10.04 of this Indenture.
"Operating Lease" is defined to mean, as applied to any Person, any
lease of any property (whether real, personal or mixed) that is not a
Capitalized Lease.
"Opinion of Counsel" is defined to mean a written opinion signed by
legal counsel who is acceptable to the Trustee. Such counsel may be an employee
of or counsel to the Company or the Trustee. Each such Opinion of Counsel shall
include the statements provided for in Section 10.04 of this Indenture.
"Partnership" is defined to mean either TNCLP or TNLP.
"Paying Agent" has the meaning provided in Section 2.03, except that,
for the purposes of Article 8, the Paying Agent shall not be the Company or a
Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Permitted Distribution" is defined to mean (a) the declaration and
payment of any dividend or distribution by either Partnership on any of the
Capital Stock of either thereof pursuant to the terms of either Limited
Partnership Agreement; or (b) the purchase, redemption, retirement or other
acquisition for value of outstanding Senior Preference Units, Junior Preference
Units or Common Units (or any successor equity interest of either Partnership or
any successor limited partnership, including any such equity interest received
upon conversion or exchange of any Senior Preference Unit, Junior Preference
Unit or Common Unit).
"Permitted Investment" is defined to mean (a) the making of an
Investment by the Company or any Restricted Subsidiary (other than the general
partner of the
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<PAGE>
Partnerships) in a Restricted Subsidiary that is not a Wholly Owned Subsidiary
of the Company, so long as such Investment is for a valid business purpose and
not for the primary purpose of making distributions on the Senior Preference
Units from the proceeds of such Investment to any Person other than the Company
or any of its Restricted Subsidiaries (as determined in good faith by the Board
of Directors, whose determination shall be conclusive and evidenced by a Board
Resolution); (b) the making of an Investment by the general partner of either
Partnership in either thereof; or (c) the making of an Investment by one
Partnership in the other Partnership.
"Permitted Liens" is defined to mean (a) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (b) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (c) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (d) Liens incurred or
deposits made to secure the performance of tenders, bids, leases, statutory or
regulatory obligations, bankers' acceptances, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (e) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Subsidiaries; (f) Liens (including extensions and renewals thereof) upon real
or tangible personal property acquired after the Closing Date; provided,
however, that (i) such Lien is created solely for the purpose of securing
Indebtedness Incurred (A) to finance the cost (including the cost of improvement
or construction) of the item of property or assets subject thereto and such Lien
is created prior to, at the time of or within 12 months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (B) to refinance any Indebtedness previously so
secured, (ii) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (iii) any such Lien shall not extend to or
cover any property or assets other than such item of property or assets and any
improvements on such item; (g) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the Company or any
of its Subsidiaries; (h) Liens encumbering property or assets under construction
arising from progress or partial payments by a customer of the Company of any of
its
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Subsidiaries relating to such property or assets; (i) any interest or title of a
lessor in the property subject to any Capitalized Lease or Operating Lease;
provided, however, that any sale-leaseback transaction related thereto complies
with Section 4.09 of this Indenture; (j) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (k) Liens on property of,
or on Capital Stock or Indebtedness of, any entity existing at the time such
entity becomes, or becomes a part of, any Restricted Subsidiary; (l) Liens in
favor of the Company or any Restricted Subsidiary; (m) Liens securing any real
property or other assets of the Company or any Subsidiary of the Company in
favor of the United States of America or any State, or any department, agency,
instrumentality or political subdivision thereof, in connection with the
financing of industrial revenue bond facilities or of any equipment or other
property designed primarily for the purpose of air or water pollution control;
provided, however, that any such Lien on such facilities, equipment or other
property shall not apply to any other assets of the Company or such Subsidiary
of the Company; (n) Liens arising from the rendering of a final judgment or
order against the Company or any Subsidiary of the Company that does not give
rise to an Event of Default; (o) Liens securing reimbursement obligations with
respect to letters of credit that encumber documents and other property relating
to such letters of credit and the products and proceeds thereof; (p) Liens in
favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (q) Liens
encumbering customary initial deposits and margin deposits, and other Liens that
are either within the general parameters customary in the industry and incurred
in the ordinary course of business or otherwise permitted under the terms of the
Credit Agreements, in each case securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contracts, options, futures
contracts, futures options or similar agreements or arrangements designed to
protect the Company or any of its Subsidiaries from fluctuations in the price of
commodities; (r) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Subsidiaries in the ordinary course of business in
accordance with the past practices of the Company and its Subsidiaries prior to
the Closing Date; and (s) Liens on or sales of receivables and other Liens
reasonably related to a Receivables Program.
"Person" is defined to mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Plan" is defined to mean any employee benefit plan, pension plan,
management equity plan, stock option plan or similar plan or arrangement of the
Company or any Subsidiary of the Company, or any successor plan thereof.
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"Preferred Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or nonvoting) of such Person's preferred or
preference stock, or preference equity interests in a partnership, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such preferred or preference stock, all
the Senior Preference Units and all the Junior Preference Units.
"Principal" of a debt security, including the Securities, is defined
to mean the principal amount due on the Stated Maturity as shown on such debt
security.
"Principal Property" is defined to mean any real property (including
related fixtures), plant or equipment owned or leased by the Company or any
Restricted Subsidiary, other than real property, plant or equipment that, in the
good faith determination of the Board of Directors (whose determination shall be
conclusive and evidenced by a Board Resolution), is not of material importance
to the respective businesses conducted by the Company or any Restricted
Subsidiary as of the date of such determination; provided, however, that, unless
otherwise specified by the Board of Directors, any real property (including
related fixtures), plant or equipment with a fair market value of less than $5
million shall not be a "Principal Property."
"Qualified Institutional Buyer" or "QIB" have the meanings provided in
Rule 144A under the Securities Act.
"Receivables Program" is defined to mean, with respect to any Person,
obligations of such Person or its Subsidiaries pursuant to accounts or notes
receivable securitization programs and any extension, renewal, modification or
replacement of such programs, including, without limitation, any agreement
increasing the amount of, extending the maturity of, refinancing or otherwise
restructuring all or any portion of the obligations under such programs or any
successor agreement or agreements.
"Redeemable Stock" is defined to mean any class or series of Capital
Stock of any Person that by its terms or otherwise is (a) required to be
redeemed prior to the Stated Maturity of the Securities, (b) redeemable at the
option of the holder of such class or series of Capital Stock at any time prior
to the Stated Maturity of the Securities or (c) convertible into or exchangeable
for Capital Stock referred to in clause (a) or (b) above or Indebtedness having
a scheduled maturity prior to the Stated Maturity of the Securities.
"Redemption Date," when used with respect to any Security to be
redeemed, is defined to mean the date fixed for such redemption by or pursuant
to this Indenture.
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"Redemption Price," when used with respect to any Security to be
redeemed, is defined to mean the price at which such Security is to be redeemed
pursuant to this Indenture.
"Registered Exchange Offer" is defined to mean the exchange offer
which may be effected pursuant to the Registration Rights Agreement.
"Registrar" has the meaning provided in Section 2.03 of this
Indenture.
"Registration Rights Agreement" is defined to mean the agreement
between the Company and the Initial Purchasers, dated as of June 22, 1995.
"Regular Record Date" for the interest payable on any Interest Payment
Date is defined to mean the June 1 or December 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
"Responsible Officer," when used with respect to the Trustee, is
defined to mean the chairman or any vice-chairman of the board of directors of
the Trustee, the chairman or any vice-chairman of the executive committee of the
board of directors of the Trustee, the chairman of the trust committee, the
president, any vice president, any assistant vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above-designated
officers and also is defined to mean, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning specified in Section 4.04 of
this Indenture.
"Restricted Security" has the meaning provided in Section 2.12 of this
Indenture.
"Restricted Subsidiary" is defined to mean any Subsidiary of the
Company other than an Unrestricted Subsidiary.
"Securities" is defined to mean, collectively, the Series A Securities
and the Series B Securities.
"Securities Act" is defined to mean the Securities Act of 1933, as
amended.
"Security Register" has the meaning provided in Section 2.03 of this
Indenture.
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"Senior Preference Units" is defined to mean a Senior Preference Unit
as defined in the TNCLP Limited Partnership Agreement.
"Series A Securities" is defined to mean the 10 1/2% Senior Notes due
2005, Series A of the Company, that are authenticated and delivered under this
Indenture.
"Series B Securities" is defined to mean the 10 1/2% Senior Notes due
2005, Series B of the Company, that are authenticated and delivered under this
Indenture.
"Shelf Registration Statement" is defined to mean a registration
statement filed pursuant to the Securities Act and Rule 415 thereunder (or any
successor rule) pursuant to which the Series A Securities are registered for
resale as provided in the Registration Rights Agreement.
"Significant Subsidiary" is defined to mean, at any date of
determination, any Subsidiary of the Company that, together with its
Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for
more than 10% of the consolidated revenues of the Company; or (b) as of the end
of such fiscal year, was the owner of more than 10% of the consolidated assets
of the Company, in each case as reflected on the most recently available
quarterly or year-end consolidated financial statements of the Company for such
fiscal year.
"Stated Maturity" is defined to mean, (a) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(b) with respect to any scheduled installment of principal or interest on any
debt security, the date specified in such security as the fixed date on which
such installment of principal or interest is due and payable.
"Subsidiary" is defined to mean, with respect to any Person, any
corporation of which more than 50% of the outstanding Voting Stock is owned,
directly or indirectly, by the Company or by one or more other Subsidiaries of
the Company, or by such Person and one or more other Subsidiaries of such
Person, and any partnership, association, joint venture, limited liability
company or other entity in which the Company or one or more other Subsidiaries
of the Company, or such Person and one or more other Subsidiaries of such
Person, owns a general partnership interest or more than 50% of the equity
interests; provided, however, that, except as the term "Subsidiary" is used in
the definitions of "Significant Subsidiary" and "Unrestricted Subsidiary", an
Unrestricted Subsidiary shall not be deemed to be a direct or indirect
Subsidiary of the Company for purposes of this Indenture.
"Terra Canada" is defined to mean Terra International (Canada) Inc.,
an Ontario corporation, and its successors.
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"Terra Capital" is defined to mean Terra Capital, Inc., a Delaware
corporation, and its successors.
"Terra Credit Agreement" is defined to mean the Amended and Restated
Credit Agreement dated as of May 12, 1995, among Terra Capital, TNLP, certain
guarantors, the issuing banks and the lenders and the agent named therein (or
any successors thereto), together with all the other documents related thereto
(including, without limitation, any Guarantees and security documents), in each
case as such agreements may be amended (including any amendment and restatement
thereof), supplemented, extended, renewed, replaced or otherwise modified from
time to time, including, without limitation, any agreement increasing the amount
thereof in accordance with the limitations of the Indenture and any agreement
extending the maturity of, refinancing or otherwise restructuring (including,
but not limited to, the inclusion of additional borrowers or Guarantors
thereunder that are Subsidiaries of the Company and whose obligations are
Guaranteed by the Company thereunder) all or any portion of the Indebtedness
under such agreements or any successor agreements.
"TIA" or "Trust Indenture Act" is defined to mean the Trust Indenture
Act of 1939, as amended (15 U.S. Code 77aaa-77bbb).
"TNC" is defined to mean Terra Nitrogen Corporation, a Delaware
corporation, and its successors.
"TNCLP" is defined to mean Terra Nitrogen Company, L.P., a Delaware
limited partnership, and its successors.
"TNCLP Limited Partnership Agreement" is defined to mean the Agreement
of Limited Partnership of Terra Nitrogen Company, L.P. (formerly Agricultural
Minerals Company, L.P.), dated as of December 4, 1991, among TNC, the Company
and any other persons who become partners in TNCLP as provided therein, as such
agreement may be amended, supplemented, or otherwise modified from time to time
as permitted by this Indenture.
"TNLP" is defined to mean Terra Nitrogen, Limited Partnership, a
Delaware limited partnership, and its successors.
"TNLP Limited Partnership Agreement" is defined to mean the Agreement
of Limited Partnership of Terra Nitrogen, Limited Partnership, dated as of
December 4, 1991, among TNC, the Company and TNCLP (formerly Agricultural
Minerals Company, L.P.), as such agreement may be amended, supplemented or
otherwise modified from time to time as permitted by the Indenture.
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"Trade Payables" is defined to mean, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation to trade
creditors created, assumed or Guaranteed by such Person or any of its
Subsidiaries arising in the ordinary course of business in connection with the
acquisition of goods or services and shall specifically include amounts owed to
but deferred by trade creditors until the occurrence of certain events.
"Transaction Date" is defined to mean, with respect to the Incurrence
of any Indebtedness by the Company or any of its Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Trustee" is defined to mean the party named as such in the first
paragraph of this Indenture until a successor replaces it in accordance with the
provisions of Article 7 of this Indenture and thereafter is defined to mean such
successor.
"United States Bankruptcy Code" is defined to mean Title 11 of the
United States Code, as amended from time to time hereafter, or any successor
federal bankruptcy law.
"Unrestricted Subsidiary" is defined to mean (a) any Subsidiary of the
Company that, at the time of determination, shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below; and (b) any
Subsidiary of an Unrestricted Subsidiary; provided that, in case of clauses (a)
and (b), neither the Company nor any of its other Subsidiaries (other than
another Unrestricted Subsidiary) (i) provides credit support for, or Guarantees
of, any Indebtedness of such Subsidiary or any Subsidiary of such Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) or (ii) is directly or indirectly liable for any Indebtedness of
such Subsidiary or any Subsidiary of such Subsidiary, except to the extent that
the Company and its Restricted Subsidiaries would otherwise, in each case, be
permitted to make a Restricted Payment pursuant to, or an Investment in such
Subsidiary permitted by, Section 4.04 of this Indenture. The Board of Directors
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary, unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided, however, that either
(i) the Subsidiary to be so designated has total assets of $1,000 or less at the
time of designation or (ii) if such Subsidiary has assets greater than $1,000 at
the time of designation, that such designation would be permitted under Section
4.04 of this Indenture. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company; provided, however, that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of
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additional Indebtedness under the first paragraph of Section 4.03(a) of this
Indenture and (y) no Default or Event of Default shall have occurred and be
continuing. All such designations by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officer's Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" is defined to mean securities that are
(i) direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof at any time
prior to the Stated Maturity of the Securities, and shall also include a
depository receipt issued by a bank or trust company as custodian with respect
to any such U.S. Government Obligation or a specific payment of interest on or
principal of any such U.S. Government Obligation held by such custodian for the
account of the holder of a depository receipt; provided, however, that (except
as required by law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or the
specific payment of interest on or principal of the U.S. Government Obligation
evidenced by such depository receipt.
"Voting Stock" is defined to mean, with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote for the election
of directors or other governing body of such Person, or any general partnership
interest in any partnership.
"Wholly Owned Subsidiary" is defined to mean, with respect to any
Person, any Subsidiary of such Person if all the Common Stock or other similar
equity ownership interests (but not including Preferred Stock) in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned directly or indirectly by
such Person.
SECTION 1.02 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Securityholder;
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"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03 Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular;
(e) provisions apply to successive events and transactions;
(f) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision;
(g) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP set
forth above; and
(h) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
ARTICLE 2
The Securities
SECTION 2.01 Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the applicable form
annexed hereto as Exhibit A. The Securities may have notations, legends or
endorsements required by law,
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<PAGE>
stock exchange agreements to which the Company is subject or usage, including as
set forth in Sections 2.12 and 2.13 of this Indenture. The Company shall approve
the form of the Securities and any notation, legend or endorsement on the
Securities. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
The definitive Securities shall be printed, lithographed, engraved or
produced by any combination of these methods on a steel engraved border or steel
engraved borders or may be produced in any other manner, all as determined by
the Officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 2.02 Execution, Authentication and Denominations. Two
Officers shall execute the Securities for the Company by facsimile or manual
signature in the name and on behalf of the Company.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee or authenticating agent authenticates the
Security, the Security shall be valid nevertheless.
A Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee or an authenticating agent shall authenticate for original
issue Series A Securities or Series B Securities, as the case may be, in the
aggregate principal amount of up to $200 million, upon a written order of the
Company signed by at least one Officer; provided, however, that the Trustee
shall be entitled to receive an Officers' Certificate and an Opinion of Counsel
of the Company, as contemplated by Section 10.04, that it may reasonably request
in connection with such authentication of Securities. Such order shall specify
the amount of Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $200 million except as
provided in Sections 2.06 and 2.07 of this Indenture.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication
24
<PAGE>
by such authenticating agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate of the Company.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 in original principal amount and any
integral multiple thereof.
SECTION 2.03 Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar"), an office or agency where Securities may be
presented for payment (the "Paying Agent") and an office or agency where notices
and demands to or upon the Company in respect of the securities and this
Indenture may be served. The Company shall cause the Registrar to keep a
register of the Securities and of their transfer and exchange (the "Security
Register"). The Company may have one or more co-registrars and one or more
additional Paying Agents.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands. The Company may remove any Agent upon written notice to
such Agent and the Trustee; provided, however, that no such removal shall become
effective until (a) the acceptance of an appointment by a successor Agent to
such Agent as evidenced by an appropriate agency agreement entered into by the
Company and such successor Agent and delivered to the Trustee or (b)
notification to the Trustee that the Trustee shall serve as such Agent until the
appointment of a successor Agent in accordance with clause (a) of this proviso.
The Company, any Subsidiary of the Company, or any Affiliate of any of them may
act as Paying Agent, Registrar or coregistrar, and/or agent for service of
notice and demands.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notice and demands. If, at any time, the Trustee is
not the Registrar, the Registrar shall make available to the Trustee on or
before each Interest Payment Date and at such other times as the Trustee may
reasonably request the names and addresses of the Holders as they appear in the
Security Register.
SECTION 2.04 Paying Agent to Hold Money in Trust. No later than each
due date of the principal of, premium, if any, and interest on any Securities,
the Company shall deposit with the Paying Agent money sufficient to pay such
principal, premium, if any, and interest so becoming due. The Company shall
require each Paying Agent other
25
<PAGE>
than the Trustee to agree in writing that such Paying Agent shall hold in trust
for the benefit of the Holders or the Trustee all money held by the Paying Agent
for the payment of principal of, premium, if any, and interest on the Securities
(whether such money has been paid to it by the Company or any other obligor on
the Securities), and such Paying Agent shall promptly notify the Trustee of any
default by the Company (or any other obligor on the Securities) in making any
such payment. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed, and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon doing so,
the Paying Agent shall have no further liability for the money so paid over to
the Trustee. If the Company or any Subsidiary of the Company or any Affiliate of
any of them acts as Paying Agent, it will, on or before each due date of any
principal of, premium, if any, or interest on the Securities, segregate and hold
in a separate trust fund for the benefit of the Holders a sum sufficient to pay
such principal of, premium, if any, or interest so becoming due until such sums
shall be paid to such Holders or otherwise disposed of as provided in this
Indenture, and will promptly notify the Trustee of such action or failure to so
act.
SECTION 2.05 Transfer and Exchange. When Securities are presented to
the Registrar or a co-registrar with a request to register the transfer or to
exchange them for an equal principal amount of Securities of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange of the
Securities, but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental charge payable
upon exchanges pursuant to Section 2.08, 3.08 or 9.04 of this Indenture).
The Registrar need not register the transfer or exchange of Securities
for a period of fifteen (15) days before a selection of Securities to be
redeemed.
If a Series A Security is a Restricted Security in certificated form,
then as provided in this Indenture and subject to the limitations herein set
forth, the Holder, provided it is a Qualified Institutional Buyer, may exchange
such Security for a Book-Entry Security by instructing the Trustee (by
completing the Transferee Certificate attached to the Security, the form of
which is attached to this Indenture as Appendix I) to arrange for such Series A
Security to be represented by a beneficial interest in a Global Security in
accordance with the customary procedures of the Depository, unless the Company
has elected not to issue a Global Security.
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<PAGE>
The Company may at any time determine not to have Securities (other
than Restricted Securities) represented in certificated form, in which event the
Holder of a Security (other than Restricted Securities) in certificated form may
be required to exchange such Security for a Book-Entry Security.
Upon any exchange provided for in the preceding paragraph, the Company
shall execute and the Trustee shall authenticate and deliver to the Person
specified by the Depository a new Security or Securities registered in such
names and in such authorized denominations as the Depository, pursuant to the
instructions of the beneficial owner of the Securities requesting the exchange,
shall instruct the Trustee. Thereupon, the beneficial ownership of such Global
Security shown on the records maintained by the Depository or its nominee shall
be reduced by the amounts so exchanged and an appropriate endorsement shall be
made by or on behalf of the Trustee on the Global Security.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer,
or for exchange or redemption, shall (if so required by the Company or the
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing.
Every Restricted Security shall be subject to the restrictions on
transfer provided in the legend required to be set forth on the face of each
Restricted Security pursuant to Exhibit A, Section 2.12 and the restrictions set
forth in this Section 2.05, and the Holder of each Restricted Security, by such
Holder's acceptance thereof (or interest therein), agrees to be bound by such
restrictions on transfer.
The restrictions imposed by this Section 2.05 and Section 2.12 upon
the transferability of any particular Restricted Security shall cease and
terminate on (a) the later of June 22, 1998 or three years after the last date
on which the Company or any Affiliate of the Company was the owner of such
Restricted Security (or any predecessor of such Restricted Security) or (b) (if
earlier) if and when such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act or transferred
pursuant to Rule 144 or Rule 904 under the Securities Act (or any successor
provision), unless the Holder thereof is an affiliate of the Company within the
meaning of Rule 144 (or such successor provisions). Any Restricted Security as
to which such restrictions on transfer shall have
expired in accordance with
their terms or shall have
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<PAGE>
terminated may, upon surrender of such Restricted Security for exchange to the
Registrar in accordance with the provision of this Section 2.05 (accompanied, in
the event that such restrictions on transfer have terminated pursuant to Rule
144 or Rule 904 (or any successor provision), by an Opinion of Counsel
satisfactory to the Company and the Trustee, to the effect that the transfer of
such Restricted Security has been made in compliance with Rule 144 or Rule 904
(or any such successor provision)), be exchanged for a new Series A Security, of
like tenor and aggregate principal amount, which shall not bear the restrictive
legend required by Section 2.12. The Company shall inform the Trustee of the
effective date of any Registration Statement registering the Series A Securities
under the Securities Act no later than two Business Days after such effective
date.
Notwithstanding any other provision of this Section 2.05, unless and
until it is exchanged in whole or in part for Series A Securities in
certificated registered form, a Global Security representing Book-Entry
Securities may not be transferred, except as a whole by the Depository to a
nominee of the Depository or by another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository.
Notwithstanding the foregoing, no Global Security shall be registered
for transfer or exchange, or authenticated and delivered, whether pursuant to
this Section, Section 2.06, 2.08, 3.08, 4.10, 4.11 or 9.04 or otherwise, in the
name of a Person other than the Depository for such Global Security or its
nominee until (i) the Depository notifies the Company that it is unwilling or
unable to continue as Depository for such Global Security or if at any time the
Depository ceases to be a clearing agency registered under the Exchange Act, and
a successor Depository is not appointed by the Company within 30 days, (ii) the
Company executes and delivers to the Trustee a Company order that all such
Global Securities shall be exchangeable or (iii) there shall have occurred and
be continuing an Event of Default. Upon the occurrence in respect of any Global
Security representing the Securities of any one or more of the conditions
specified in clauses (i), (ii), and (iii) of the preceding sentence, such Global
Security may be registered for transfer or exchange for Series A Securities in
certificated form registered in the names of, authenticated and delivered to,
such Persons as the Trustee or the Depository, as the case may be, shall direct.
In addition, in accordance with the provisions of this Indenture and subject to
certain limitations herein set forth, an owner of a beneficial interest in a
Global Security which is a Series A Security may request a Security in
certificated form in exchange in whole or in part, as the case may be, for such
beneficial owner's interest in the Global Security.
Except as provided above, any Security authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, any Global
Security, whether
28
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pursuant to this Section, Sections 2.06, 2.08, 3.08, 4.10, 4.11 or 9.04 or
otherwise, shall also be a Global Security and bear the legend specified in
Section 2.13
SECTION 2.06 Replacement Securities. If a mutilated Security is
surrendered to the Trustee or if the Holder claims that the Security has been
lost, destroyed or wrongfully taken, the Company shall issue and the Trustee
shall authenticate a replacement Security of like tenor and principal amount. If
required by the Trustee or the Company, an indemnity bond must be furnished that
is sufficient in the judgment of both the Trustee and the Company to protect the
Company, the Trustee or any Agent from any loss that any of them may suffer if a
Security is replaced. The Company may charge such Holder for its expenses in
replacing a Security. In case any such mutilated, lost, destroyed or wrongfully
taken Security has become or is about to become due and payable, the Company in
its discretion may pay such Security instead of issuing a new Security in
replacement thereof.
Every replacement Security is an additional obligation of the Company
and shall be entitled to the benefits of this Indenture.
SECTION 2.07 Outstanding Securities. Securities outstanding at any
time are all Securities that have been authenticated by the Trustee except for
those canceled by it, those delivered to it for cancellation and those described
in this Section 2.07 as not outstanding. A Security does not cease to be
outstanding because the Company or one of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.06, it ceases to be
outstanding unless and until the Trustee receives proof satisfactory to it that
such replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on a maturity date money sufficient to pay Securities payable on
that date, then on and after that date such Securities cease to be outstanding
and interest on them shall cease to accrue.
SECTION 2.08 Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have insertions, substitutions, omissions and
other variations determined to be appropriate by the Officers executing the
temporary Securities, as evidenced by their execution of such temporary
Securities. Without unreasonable delay, but in no event later than the date that
the Registered Exchange Offer is consummated or a Shelf Registration Statement
is declared effective, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.
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<PAGE>
Until so exchanged, the temporary Securities shall be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 2.09 Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any securities surrendered to them for transfer,
exchange or payment. The Trustee shall cancel all Securities surrendered for
transfer, exchange, payment or cancellation and shall destroy them in accordance
with its normal procedure. The Company may not issue new Securities to replace
Securities it has paid in full or delivered to the Trustee for cancellation. The
Series A Securities surrendered to the Trustee for exchange pursuant to the
Registered Exchange Offer shall be cancelled and not reissued thereafter.
SECTION 2.10 CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use), and the Company, or the Trustee
on behalf of the Company, shall use CUSIP numbers in notices of redemption or
exchange as a convenience to Holders; provided, however, that any such notice
shall state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice or redemption
or exchange and that reliance may be placed only on the other identification
numbers printed on the Securities; and provided further, however, that failure
to use CUSIP numbers in any notice of redemption or exchange shall not affect
the validity or sufficiency of such notice.
SECTION 2.11 Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, it shall pay, or shall deposit with the Paying
Agent money in immediately available funds sufficient to pay, the defaulted
interest, plus (to the extent lawful) any interest payable on the defaulted
interest in any lawful manner. The Company may pay the defaulted interest to the
Persons who are Holders on a subsequent special record date. A special record
date, as used in this Section 2.11 with respect to the payment of any defaulted
interest, shall mean the fifteenth (15th) day next preceding the date fixed by
the Company for the payment of defaulted interest, whether or not such day is a
Business Day. At least fifteen (15) days before the subsequent special record
date, the Company shall mail to each Holder and to the Trustee a notice that
states the subsequent special record date, the payment date and the amount of
defaulted interest to be paid.
SECTION 2.12 Form of Legend on Restricted Securities. A Series A
Security shall be deemed a "Restricted Security" until the later of three years
after (a) the Closing Date and (b) the last date on which the Company or any
Affiliate of the Company was the owner of a Series A Security (or any
predecessor Security) and any Restricted Security, as the case may be, and any
Series A Security issued upon registration of transfer of, or in exchange for,
or in lieu of, such Restricted Security shall be subject to
30
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the restrictions on transfer provided in the legend set forth on the face of the
form of Series A Security in Exhibit A; provided, however, that the term
"Restricted Security" shall not include (a) any Series A Security which is
issued upon transfer of, or in exchange for, any Series A Security which is not
a Restricted Security or (b) any Series A Security as to which such restrictions
on transfer have been terminated in accordance with Section 2.05. Any Restricted
Security shall bear the legend set forth on the face of the Form of Series A
Security in Exhibit A hereto.
SECTION 2.13 Form of Legend for Book-Entry Securities. Any Global
Security authenticated and delivered hereunder shall bear a legend (which would
be in addition to any other legends required in the case of a Restricted
Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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ARTICLE 3
Redemption
SECTION 3.01 Right of Redemption. The Company may redeem all the
Securities at any time or any portion of the Securities from time to time, on or
after June 15, 2000, at the following Redemption Prices (expressed as
percentages of the principal amount) if redeemed during the 12-month period
beginning June 15 of the years indicated:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2000.................. 105.250%
2001.................. 102.625%
2002 and thereafter... 100.000%
</TABLE>
of the principal amount, plus accrued and unpaid interest (if any) to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date).
SECTION 3.02 Notices to Trustee. The Company shall notify the
Trustee of the listing of the Securities on a national securities exchange
within one Business Day after such listing.
If the Company elects to redeem Securities pursuant to Section 3.01 of
this Indenture and paragraph 6 of the Securities, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed.
The Company shall give each notice provided for in this Section 3.02
in an Officers' Certificate at least forty-five (45) days before the Redemption
Date (unless a shorter period shall be satisfactory to the Trustee).
SECTION 3.03 Selection of Securities to Be Redeemed. If less than
all the Securities are to be redeemed at any time, the Trustee shall select the
Securities to be redeemed in compliance with the requirements of the principal
national securities exchange, if any, on which the Securities are listed or, if
the Securities are not listed on a national securities exchange, on a pro rata
basis, by lot or by such other method as the Trustee in its sole discretion
shall deem fair and appropriate; provided, however, that no Securities of $1,000
in original principal amount or less shall be redeemed in part.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption. Securities in denominations of $1,000
in original principal amount may only be redeemed in whole. The Trustee may
select for redemption portions (equal to $1,000 in original principal amount or
any integral multiple
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thereof) of the principal of Securities that have denominations larger than
$1,000 in original principal amount. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company and the Registrar promptly in
writing of the Securities or portions of Securities to be called for redemption.
SECTION 3.04 Notice of Redemption. At least thirty (30) days but
not more than sixty (60) days before a Redemption Date, the Company shall mail a
notice of redemption by first class mail to each Holder whose Securities are to
be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) The name and address of the Paying Agent;
(d) that Securities called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price;
(e) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
the Redemption Date and the only remaining right of the Holders is to
receive payment of the Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Securities to the Paying Agent;
(f) that, if any Security is being redeemed in part, the portion of
the principal amount (equal to $1,000 in original principal amount or any
integral multiple thereof) of such Security to be redeemed and that, on and
after the Redemption Date, upon surrender of such Security, a new Security
or Securities in principal amount equal to the unredeemed portion thereof
will be reissued; and
(g) that, if any Security contains a CUSIP number as provided in
Section 2.10 of this Indenture, no representation is being made as to the
correctness of the CUSIP number either as printed on the Securities or as
contained in the notice of redemption and that reliance may be placed only
on the other identification numbers printed on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the name and at the expense of the Company. Concurrently with the
giving of such notice by the Company to the Holders, the Company shall deliver
to the Trustee an Officers' Certificate stating that such notice has been given.
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SECTION 3.05 Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the Redemption Date and at the Redemption Price. Upon surrender of any
Securities to the Paying Agent, such Securities shall be paid at the Redemption
Price, plus accrued interest through the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether
or not the Holder receives the notice. In any event, failure to give such
notice, or any defect therein, shall not affect the validity of the proceedings
for the redemption of the Securities.
SECTION 3.06 Deposit of Redemption Price. On or prior to any
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, shall segregate and hold in trust as
provided in Section 2.04 of this Indenture) money sufficient to pay the
Redemption Price of and accrued interest on all Securities to be redeemed on
that date other than Securities or portions thereof called for redemption on
that date that have been delivered by the Company to the Trustee for
cancellation.
SECTION 3.07 Payment of Securities Called for Redemption. If notice of
redemption has been given in the manner provided above, the Securities or
portion of Securities specified in such notice to be redeemed shall become due
and payable on the Redemption Date at the Redemption Price stated therein,
together with accrued interest to such Redemption Date, and from such date
(unless the Company shall default in the payment of such Securities at the
Redemption Price and accrued interest to the Redemption Date, in which case the
principal, until paid, shall bear interest from the Redemption Date at the rate
prescribed in the Securities), such Securities shall cease to accrue interest.
Upon surrender of any Security for redemption in accordance with a notice of
redemption, such Security shall be paid and redeemed by the Company at the
Redemption Price, together with accrued interest to the Redemption Date;
provided, however, that installments of interest whose Stated Maturity is on or
prior to the Redemption Date shall be payable to the Holders registered as such
at the close of business on the relevant Record Date.
SECTION 3.08 Securities Redeemed in Part. Upon surrender of any
Security that is redeemed in part, the Trustee shall authenticate for the Holder
a new Security equal in principal amount to the unredeemed portion of such
surrendered Security.
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ARTICLE 4
Covenants
SECTION 4.01 Payment of Securities. The Company shall pay the
principal of, premium, if any, and interest on the Securities on the dates and
in the manner provided in the Securities and this Indenture. An installment of
principal, premium, if any, or interest shall be considered paid on the date due
if the Trustee or Paying Agent (other than the Company, a Subsidiary of the
Company, or any Affiliate of any of them) holds on that date money designated
for and sufficient to pay the installment. If the Company, any Subsidiary of the
Company, or any Affiliate of any of them acts as Paying Agent, an installment of
principal, premium, if any, or interest shall be considered paid on the due date
if the entity acting as Paying Agent complies with the last sentence of Section
2.04 of this Indenture.
The principal of, premium, if any, and interest on Book-Entry
Securities represented by any Global Security shall be payable to the Depository
or its nominee, as the case may be, as the sole registered owner and the sole
holder of the Book-Entry Securities represented thereby. The principal of,
premium, if any, and interest on the Securities, if they are not Book-Entry
Securities represented by a Global Security, shall be payable at the office or
agency of the Company maintained for such purpose in The City of New York, or at
such other office or agency of the Company as may be maintained for such
purpose; provided, however, that at the option of the Company interest may be
paid by check mailed to addresses of the Persons entitled thereto as such
addresses shall appear on the Security Register.
The Company shall notify the Trustee within one Business Day after the
occurrence of any event resulting in an Interest Rate Increase. The Company
shall pay the additional interest arising from an Interest Rate Increase (such
interest being called the "Additional Interest") by depositing with the Trustee,
in trust, for the benefit of the Holders thereof, on or before the applicable
Interest Payment Date, immediately available funds in sums sufficient to pay the
Additional Interest then due. The Additional Interest due on any Series A
Security shall be payable on each applicable Interest Payment Date to the Person
in whose name that Series A Security or the Series B Security for which such
Series A Security has been exchanged (or one or more predecessor Securities) is
registered at the close of business on the Regular Record Date for the payment
of interest due on such Interest Payment Date as set forth in this Indenture.
The Company shall notify the Trustee within one Business Day of the occurrence
of an event which would result in the termination of the Interest Rate Increase.
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The Company shall pay interest on overdue principal, premium, if any,
and interest on overdue installments of interest, to the extent lawful, at the
rate per annum borne by the Securities.
SECTION 4.02 Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, the City of New York a Registrar and a
Paying Agent and an office or agency where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
SECTION 4.03 Limitation on Indebtedness. (a) The Company will not,
and will not permit any Restricted Subsidiary to, Incur any Indebtedness;
provided, however, that the Company and its Restricted Subsidiaries may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the Interest Coverage
Ratio of the Company would be greater than 2:1x.
Notwithstanding the foregoing, the Company and any Restricted
Subsidiary may Incur each and all of the following:
(i) (A) Indebtedness outstanding at any time under any term loan
portion of the Credit Agreements; provided, however, that the aggregate
principal amount of such Indebtedness outstanding at any time under this
clause (i)(A) shall not exceed $300 million, (B) Indebtedness outstanding
at any time under any revolving credit facility under the Credit
Agreements or under any other revolving credit or similar arrangements;
provided, however, that the aggregate principal amount of such
Indebtedness outstanding at any time under this clause (i)(B) shall not
exceed the greater of (x) $250 million and (y) the sum of 75% of the
Company's and its Restricted Subsidiaries' accounts and notes receivables
and 40% of the Company's and its Restricted Subsidiaries' inventory
(based on the average accounts and notes receivables (excluding, without
duplication, accounts and notes receivables subject to a Receivables
Program) and inventory over the last twelve months preceding the date of
incurrence), and (C) additional Indebtedness outstanding at any time in
an aggregate principal amount not to exceed $50 million;
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(ii) Indebtedness of the Company to any of its Restricted
Subsidiaries, or of a Restricted Subsidiary to the Company or to any
other Restricted Subsidiary;
(iii) Indebtedness the net proceeds of which are used to refinance
outstanding Indebtedness of the Company or any of its Restricted
Subsidiaries, other than Indebtedness Incurred under clause (i), (iv) or
(v) of this Section 4.03(a) and any refinancings thereof, in an amount
(or, if such new Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, with an original issue price) not to exceed the
amount so refinanced (plus premiums, accrued interest, fees and
expenses); provided, however, that Indebtedness the proceeds of which are
used to refinance the Securities or other Indebtedness of the Company
that is subordinated in right of payment to the Securities shall only be
permitted under this clause (iii) if (A) in case the Securities are
refinanced in part, such Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such Indebtedness is
issued, is expressly made pari passu with, or subordinate in right of
payment to, the Securities, (B) in case the Indebtedness to be refinanced
is subordinated in right of payment to the Securities, such Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to
which such Indebtedness is issued, is expressly made subordinate in right
of payment to the Securities, at least to the extent that the
Indebtedness to be refinanced is subordinated to the Securities, and (C)
in case the Securities are refinanced in part or the Indebtedness to be
refinanced is subordinated in right of payment to the Securities, such
Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to six months after the Stated
Maturity of the Securities and the Average Life of such Indebtedness is
six months greater than the remaining time before the Stated Maturity of
the Securities; and provided further, however, that in no event may
Indebtedness of the Company that is pari passu with, or subordinated in
right of payment to, the Securities be refinanced by means of
Indebtedness of any Restricted Subsidiary of the Company pursuant to this
clause (iii);
(iv) Indebtedness directly or indirectly Incurred to finance capital
expenditures of the Company or any of its Restricted Subsidiaries in an
aggregate principal amount not to exceed $10 million in any fiscal year
of the Company, and any refinancing of any such Indebtedness; provided,
however, that the amount of Indebtedness that may be Incurred in any
fiscal year of the Company pursuant to this clause (iv) shall be
increased by the amount of Indebtedness that could have been Incurred in
the prior fiscal year (including
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by reason of this proviso) of the Company pursuant to this clause (iv)
but was not so Incurred;
(v) Indebtedness of the Company outstanding at any time in an
aggregate amount not to exceed $20 million; provided, however, that such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, (A) is expressly made
subordinate in right of payment to the Securities and (B) provides that
no payments of principal of such Indebtedness by way of sinking fund,
mandatory redemption or otherwise (including defeasance) may be made by
the Company (including, without limitation, at the option of the holder
thereof, other than an option given to such holder pursuant to an "asset
sale" or "change of control" provision that is no more favorable (except
with respect to any premium payable) to the holders of such Indebtedness
than the provisions contained in Sections 4.10 and 4.11 of this Indenture
and such Indebtedness specifically provides that the Company will not
repurchase or redeem such Indebtedness pursuant to such provisions prior
to the Company's repurchase of the Securities required to be repurchased
by the Company under Sections 4.10 and 4.11 of this Indenture) at any
time prior to the Stated Maturity of the Securities;
(vi) Indebtedness Incurred by the Company in connection with the
purchase, redemption, acquisition, cancellation or other retirement for
value of shares of Capital Stock of the Company, options on any such
shares or related stock appreciation rights or similar securities, or the
satisfaction of put, call, liquidity or other similar rights with respect
to any such securities, held by officers, directors or employees or
former officers, directors or employees (or their estates or
beneficiaries under their estates or their permitted transferees) or by
any Plan, upon death, disability, retirement, termination of employment
or pursuant to the terms of such Plan or any other agreement under which
such shares of stock or related rights were issued or otherwise exist;
provided, however, that (A) such Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such Indebtedness
is issued, is expressly made subordinate in right of payment to the
Securities, (B) such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued,
provides that no payments of principal of such Indebtedness by way of
sinking fund, mandatory redemption or otherwise (including defeasance)
may be made by the Company at any time prior to the Stated Maturity of
the Securities, and (C) the scheduled maturity of all principal of such
Indebtedness is after the Stated Maturity of the Securities; and provided
further, however, that any such Indebtedness may provide for payment or
prepayment of principal and interest which when aggregated with all
principal and interest payable or prepayable on all other such
Indebtedness
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(plus all cash payments permitted to be made under clause (c) of the
second paragraph of Section 4.04 of this Indenture) does not exceed $10
million in any fiscal year;
(vii) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided in the
ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements; provided, however, that, in the case of Currency
Agreements that relate to other Indebtedness, such Currency Agreements do
not increase the Indebtedness of the Company outstanding at any time
other than as a result of fluctuations in foreign currency exchange rates
or by reason of fees, indemnities and compensation payable thereunder,
and (C) arising from agreements providing for indemnification, adjustment
of purchase price or similar obligations, or from Guarantees or letters
of credit, surety bonds or performance bonds securing any obligations of
the Company or any Subsidiary of the Company pursuant to such agreements,
in any case Incurred in connection with the acquisition or disposition of
any business, assets or Subsidiary of the Company, other than Guarantees
of Indebtedness Incurred by any Person acquiring all or any portion of
such business, assets or Subsidiary of the Company for the purpose of
financing such acquisition;
(viii) Indebtedness under Guarantees Incurred by the Company or any
of its Restricted Subsidiaries in respect of obligations of Unrestricted
Subsidiaries outstanding at any time in an aggregate amount not to exceed
$5 million;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries the net proceeds of which are used to pay Federal, state or
local taxes arising as a result of any recharacterization of either
Partnership as an association taxable as a corporation;
(x) Acquired Indebtedness; provided, however, that, at the time of
the Incurrence thereof, after giving pro forma effect to such Incurrence,
the Company could Incur at least $1.00 of Indebtedness under the first
paragraph of this Section 4.03(a), and refinancings of any thereof;
provided, however, that such refinancing Indebtedness may not be Incurred
by any Person other than the Company or the Restricted Subsidiary that is
the obligor on such Acquired Indebtedness; and
(xi) Indebtedness outstanding or as to which commitments are in place
on the date of this Indenture other than Indebtedness described in clause
(i)(A) or (B) above.
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(b) Notwithstanding any other provision of this Section 4.03, (i) the
maximum amount of Indebtedness that the Company or any Restricted Subsidiary may
Incur pursuant to this Section 4.03 shall not be deemed to be exceeded due
solely to the result of fluctuations in the exchange rates of currencies; (ii)
the Company shall not Incur any Indebtedness that is expressly subordinated to
any other Indebtedness of the Company, unless such Indebtedness, by its terms or
the terms of any agreement or instrument pursuant to which such Indebtedness is
issued, is also expressly made subordinate to the Securities at least to the
extent it is subordinated to such other Indebtedness; and (iii) upon any
refinancing of any Indebtedness permitted to be Incurred under clause (iii) or
(x) of the second paragraph of Section 4.03(a) of this Indenture, the amount of
Indebtedness permitted to be Incurred pursuant to such clause shall be increased
by the amount of premiums, fees and expenses incurred in connection with such
refinancing and by the amount of accrued interest on such Indebtedness at the
time of such refinancing.
(c) For purposes of determining any particular amount of Indebtedness
under this Section 4.03, the following amounts shall not be included: (1)
Guarantees of, contingent obligations (including obligations of a general
partner for liabilities of a partnership) with respect to, or obligations with
respect to letters of credit supporting, Indebtedness otherwise included in the
determination of such particular amount; and (2) any Liens granted pursuant to
the equal and ratable provisions referred to in the first paragraph of Section
4.08 of this Indenture. For purposes of determining compliance with this
Section 4.03, (x) in the event that an item of Indebtedness meets the criteria
of more than one of the types of Indebtedness described in the above clauses,
the Company, in its sole discretion, shall classify such item of Indebtedness
and only be required to include the amount and type of such Indebtedness in one
of such clauses; (y) Indebtedness permitted under this Section 4.03 need not be
permitted solely by reference to one provision permitting such Indebtedness but
may be permitted in part by reference to one such provision and in part by
reference to one or more other provisions of this Section 4.03 permitting such
Indebtedness; and (z) the amount of Indebtedness issued at a price that is less
than the principal amount thereof shall be equal to the amount of the liability
in respect thereof determined in conformity with GAAP.
SECTION 4.04 Limitation on Restricted Payments. The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
(a) declare or pay any dividend or make any distribution on its Capital Stock
(other than (i) on the Capital Stock of Restricted Subsidiaries that are Wholly
Owned Subsidiaries of the Company and (ii) dividends or distributions payable
solely in shares of its, or any Restricted Subsidiary's, Capital Stock (other
than Redeemable Stock) of the same class held by such holders or in options,
warrants or other rights to acquire such shares of Capital Stock) held by
Persons other than the Company or another Restricted Subsidiary, (b) purchase,
redeem, retire or otherwise acquire for value any shares of Capital Stock of
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the Company, any Restricted Subsidiary or any Unrestricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by Persons other than the Company or another Restricted Subsidiary, (c) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company that is subordinated in right of payment to the
Securities, (d) make any Investment in any Restricted Subsidiary that is not a
Wholly Owned Subsidiary of the Company, other than a Permitted Investment, or
(e) make any Investment in any Unrestricted Subsidiary (such payments or other
actions described in clauses (a) through (e) being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment: (i) a Default or Event of Default shall have occurred and be
continuing, (ii) the Company could not Incur at least $1.00 of Indebtedness
under the first paragraph of Section 4.03(a) of this Indenture, or (iii) the
aggregate amount expended for all Restricted Payments (the amount so expended,
if other than in cash, to be determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board Resolution)
after the Closing Date shall exceed the sum of (A) 50% of the aggregate amount
of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net
Income is a loss, minus 100% of such amount) of the Company (determined by
excluding income resulting from the transfers of assets received by the Company
or a Restricted Subsidiary from an Unrestricted Subsidiary) accrued on a
cumulative basis during the period (taken as one accounting period) beginning on
January 1, 1995 and ending on the last day of the last fiscal quarter preceding
the Transaction Date, plus (B) the aggregate net proceeds (including the fair
market value of noncash proceeds as determined in good faith by the Board of
Directors) received by the Company or any of its Restricted Subsidiaries from
any issuance and sale permitted by this Indenture of its Capital Stock (not
including Redeemable Stock) to a Person that is not a Subsidiary of the Company,
including an issuance or sale permitted by this Indenture for cash or other
property upon the conversion of any Indebtedness of the Company or any of its
Restricted Subsidiaries subsequent to the Closing Date, or from the issuance of
any options, warrants or other rights to acquire Capital Stock of the Company or
any of its Restricted Subsidiaries (in each case, exclusive of any Redeemable
Stock or any options, warrants or other rights that are redeemable at the option
of the holder, or are required to be redeemed, prior to the Stated Maturity of
the Securities), plus (C) an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries (other than Unrestricted Subsidiaries so designated
pursuant to clause (g) of the second paragraph of this Section 4.04 and other
than Investments made in Unrestricted Subsidiaries pursuant to such clause (g))
resulting from payments of interest on Indebtedness, dividends, repayments of
loans or advances, or other transfers of assets, in each case to the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries or from redesignations
of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), not to exceed in the case of any
Unrestricted Subsidiary
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the amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary, plus (D) $25 million.
The foregoing provision shall not take into account, and shall not be
violated by reason of:
(a) the payment of any dividend within 120 days after the date of
declaration thereof if, at such date of declaration, such payment would
comply with the foregoing provision;
(b) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the Securities, including premium, if any, and accrued and
unpaid interest, with the proceeds of Indebtedness Incurred under the first
paragraph of Section 4.03(a) of this Indenture or clause (iii) or (v) of
the second paragraph of such Section 4.03(a);
(c) the repurchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company, any
Restricted Subsidiary or any Unrestricted Subsidiary, options on any such
shares or related stock appreciation rights or similar securities, or the
satisfaction of put, call, liquidity or other similar rights with respect
to any such securities, held by officers, directors or employees or former
officers, directors or employees (or their estates or beneficiaries under
their estates or their permitted transferees) or by any Plan, upon death,
disability, retirement, termination of employment or pursuant to the terms
of such Plan or any other agreement under which such shares of stock or
related rights were issued or otherwise exist; provided, however, that the
aggregate cash payment made for all such repurchases, redemptions,
acquisitions, cancellations, retirements or other satisfactions of or with
respect to such shares, options or other rights after the Closing Date
(plus payments or prepayments of principal and interest permitted on
Indebtedness Incurred under clause (vi) of the second paragraph of Section
4.03(a) of this Indenture) does not exceed $10 million in any fiscal year
and that any consideration in excess of such $10 million is in the form of
Indebtedness that would be permitted to be Incurred under clause (vi) of
the second paragraph of Section 4.03(a) of this Indenture;
(d) the repurchase, redemption or other acquisition of Capital Stock
of the Company in exchange for, or out of the proceeds of a substantially
concurrent offering of, shares of Capital Stock of the Company (other than
Redeemable Stock);
(e) the repurchase, redemption, retirement or other acquisition of
Indebtedness of the Company that is subordinated in right of payment to the
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Securities in exchange for, or out of the net proceeds of a substantially
concurrent offering of, shares of Capital Stock of the Company (other than
Redeemable Stock);
(f) payments or distributions pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of Article 5 of this Indenture;
(g) the making of (i) up to $10 million of Investments in Unrestricted
Subsidiaries plus the amount of any reduction in such Investments in such
Unrestricted Subsidiaries made pursuant to this clause (g) resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries, or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investments"), not
to exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made by the Company or any Restricted Subsidiary in
such Unrestricted Subsidiary pursuant to this clause (g), (ii) Investments
in the Company, Unrestricted Subsidiaries or Restricted Subsidiaries with
the proceeds of any sale of Capital Stock of the Company or (in the case of
Investments in the Company or any Restricted Subsidiaries) of any
Restricted Subsidiary permitted by this Indenture, and (iii) Investments in
Unrestricted Subsidiaries in the form of loans or advances from the Company
or any Restricted Subsidiary representing capitalized labor costs for
services performed by the Company or any Restricted Subsidiary to such
Unrestricted Subsidiaries in the ordinary course of business;
(h) the purchase, redemption, acquisition, cancellation or other
retirement for a nominal value per right of any rights granted to all the
holders of Common Stock of the Company pursuant to any shareholders' rights
plan adopted for the purpose of protecting shareholders from unfair
takeover tactics; provided, however, that any such purchase, redemption,
acquisition, cancellation or other retirement of such rights shall not be
for the purpose of evading the limitations of this Section 4.04 (all as
determined in good faith by the Board of Directors);
(i) any Permitted Distribution;
(j) payments by the Company or any Restricted Subsidiary in respect of
Indebtedness of the Company or any Restricted Subsidiary owed to the
Company or another Restricted Subsidiary;
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(k) the application of proceeds as provided in Section 4.10 of this
Indenture; or
(l) the application of proceeds as provided in clause (c) of Section
4.06 of this Indenture;
provided, however, that, in the case of clauses (b), (c) (except with respect to
the Incurrence of Indebtedness complying with the first proviso of clause (vi)
of the second paragraph of Section 4.03(a) of this Indenture), (d), (e), (f)
(other that with respect to either Partnership), or (g) (other than Investments
in Unrestricted Subsidiaries any of the Capital Stock of which is held by either
Partnership, the general partner of either thereof or any Unrestricted
Subsidiary of either Partnership), no Default or Event of Default shall have
occurred and be continuing or shall occur as a consequence thereof.
SECTION 4.05 Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. The Company will not, and will not permit
any Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary;
(b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary;
(c) make loans or advances to the Company or any other Restricted Subsidiary;
or (d) transfer any of its property or assets to the Company or any other
Restricted Subsidiary.
The foregoing provision shall not restrict or prohibit any
encumbrances or restrictions existing:
(a) in the Credit Agreements or in any other agreements in effect on
the Closing Date, including extensions, refinancings, renewals or
replacements thereof; provided, however, that the encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements
are no less favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are being
extended, refinanced, renewed or replaced;
(b) under any Receivables Program or any other agreement providing for
the Incurrence of Indebtedness; provided, however, that the encumbrances
and restrictions in any such agreement are no less favorable in any
material respect to the Holders than those encumbrances and restrictions
contained in the agreement referred to in clause (a) above that is least
favorable to the Holders as of the Closing Date;
(c) under or by reason of applicable law;
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(d) with respect to any Person or the property or assets of such
Person acquired by the Company or any Restricted Subsidiary that existed at
the time of such acquisition and were not created in connection with or in
contemplation of such acquisition, so long as such encumbrances or
restrictions are not applicable to any Person or the property or assets of
any Person other than such Person or the property or assets of such Person
so acquired;
(e) in the case of clause (d) of the first paragraph of this Section
4.05, (i) that restrict in a customary manner the subletting, assignment or
transfer of any property or asset that is a lease, license, conveyance or
contract or similar property or asset, (ii) by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by this Indenture, or (iii) arising or agreed to in
the ordinary course of business and that do not, individually or in the
aggregate, materially detract from the value of property or assets of the
Company or any Restricted Subsidiary;
(f) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all the Capital Stock of, or property and assets of, such
Restricted Subsidiary; or
(g) in either Limited Partnership Agreement.
Nothing contained in this Section 4.05 shall prevent the Company or
any Restricted Subsidiary from (x) entering into any agreement permitting the
incurrence of Liens otherwise permitted in Section 4.08 of this Indenture or (y)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company or
any of its Restricted Subsidiaries.
SECTION 4.06 Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell any shares of its Capital Stock
(including options, warrants or other rights to purchase shares of such Capital
Stock) except:
(a) to the Company or another Restricted Subsidiary that is a Wholly
Owned Subsidiary of the Company;
(b) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary;
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(c) if the Net Cash Proceeds from such issuance or sale are applied,
to the extent required to be applied, pursuant to Section 4.10 of this
Indenture;
(d) in the case of TNLP, to TNCLP; or
(e) in the case of either Partnership, as otherwise permitted by
either Limited Partnership Agreement, so long as any such issuance or sale
is for a valid business purpose and not for the primary purpose of making
distributions on the Senior Preference Units from the Net Cash Proceeds of
such issuance or sale to any Person other than the Company or any of its
Restricted Subsidiaries (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution).
SECTION 4.07 Limitation on Transactions with Shareholders and
Affiliates. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any holder
(or any Affiliate of such holder) of 5% or more of any class of Capital Stock of
the Company or any Restricted Subsidiary or with any Affiliate of the Company or
any Restricted Subsidiary, except upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary than could be obtained in
a comparable arm's-length transaction with a Person that is not such a holder or
an Affiliate of such a holder.
The foregoing limitation does not limit, and shall not apply to:
(a) any transaction or series of related transactions (i) approved by
a majority of the disinterested members of the Board of Directors or (ii)
for which the Company or Restricted Subsidiary delivers to the Trustee a
written opinion of a nationally recognized investment banking firm stating
that the transaction is fair to the Company or such Restricted Subsidiary
from a financial point of view;
(b) any transaction between the Company and any Restricted Subsidiary
or between Restricted Subsidiaries;
(c) the payment of reasonable and customary regular fees to directors
of the Company who are not employees of the Company;
(d) any Restricted Payments not prohibited by Section 4.04 of this
Indenture;
(e) any payments or other transactions pursuant to any tax sharing
agreement between the Company or any Restricted Subsidiary and any other
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Person with which the Company or such Restricted Subsidiary is required or
permitted to file a consolidated tax return or with which the Company or
such Restricted Subsidiary is or could be part of a consolidated group for
tax purposes;
(f) any transaction between the Company or any Restricted Subsidiary
and any holder of any Senior Preference Units (or any Affiliate thereof)
that would be restricted by this Section 4.07 as a result of such holder's
ownership of Senior Preference Units, Junior Preference Units or Common
Units; or,
(g) the provision of management, financial and operational services by
the Company and its Subsidiaries to Affiliates of the Company in which the
Company or its Subsidiaries have Investments and the payment of
compensation for such services; provided, however, that the Board of
Directors has determined that the provision of such services is in the best
interests of the Company and its Subsidiaries.
Notwithstanding the foregoing, any transaction or series of related
transactions covered by the first paragraph of this Section 4.07, the aggregate
amount of which does not exceed $3 million in value, need not be approved in the
manner provided for in clause (a) above.
SECTION 4.08 Limitation on Liens. The Company will not, and will
not permit any Restricted Subsidiary to, create, incur, assume or suffer to
exist any Lien on any Principal Property, or any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary, without making effective provision
for all the Securities and all other amounts due under this Indenture to be
directly secured equally and ratably with (or prior to) the obligation or
liability secured by such Lien unless, after giving effect thereto, the
aggregate amount of any Indebtedness so secured, plus the Attributable
Indebtedness for all sale-leaseback transactions restricted as described in
Section 4.09 of this Indenture, does not exceed 10% of Consolidated Net Tangible
Assets.
The foregoing limitation does not apply to, and any computation of
Indebtedness secured under such limitation shall exclude:
(a) Liens securing obligations under the Credit Agreements up to the
amount of Indebtedness permitted to be Incurred under clause (i) of the
second paragraph of Section 4.03(a) of this Indenture;
(b) other Liens existing on the Closing Date;
(c) Liens securing Indebtedness of Restricted Subsidiaries (other than
Acquired Indebtedness and refinancings thereof);
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(d) Receivables Programs;
(e) Liens securing Indebtedness (other than subordinated Indebtedness)
Incurred under clause (vii) of the second paragraph of Section 4.03(a) of
this Indenture;
(f) Liens granted in connection with the extension, renewal or
refinancing, in whole or in part, of any Indebtedness described in clauses
(a) through (e) above; provided, however, that the amount of Indebtedness
secured by such Lien is not increased thereby (except to the extent that
Indebtedness under clause (a) above is increased to the maximum amount
permitted to be outstanding under clause (i) of the second paragraph of
Section 4.03(a) of this Indenture); and provided further, however, that the
extension, renewal or refinancing of Indebtedness of the Company may not be
secured by Liens on assets of any Restricted Subsidiary other than to the
extent the Indebtedness being extended, renewed or refinanced was at any
time previously secured by Liens on assets of such Restricted Subsidiary;
(g) Liens with respect to Acquired Indebtedness and refinancings
thereof permitted under clause (x) of the second paragraph of Section
4.03(a) of this Indenture; provided, however, that such Liens do not extend
to or cover any property or assets of the Company or any Restricted
Subsidiary other than the property or assets of the Subsidiary acquired; or
(h) Permitted Liens.
SECTION 4.09 Limitation on Sale-Leaseback Transactions. The Company
will not, and will not permit any Restricted Subsidiary to, enter into any sale-
leaseback transaction involving any Principal Property, unless the aggregate
amount of all Attributable Indebtedness with respect to such transactions, plus
all Indebtedness secured by Liens on Principal Properties (excluding secured
Indebtedness that is excluded as described in Section 4.08 of this Indenture),
does not exceed 10% of Consolidated Net Tangible Assets.
The foregoing restriction does not apply to, and any computation of
Attributable Indebtedness under such limitation shall exclude, any sale-
leaseback transaction if:
(a) the lease is for a period, including renewal rights, of not in
excess of three years;
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(b) the sale or transfer of the Principal Property is entered into
prior to, at the time of, or within 12 months after the later of the
acquisition of the Principal Property or the completion of construction
thereof;
(c) the lease secures or relates to industrial revenue or pollution
control bonds;
(d) the transaction is between the Company and any Restricted
Subsidiary or between Restricted Subsidiaries; or
(e) the Company or such Restricted Subsidiary, within 12 months (24
months in the case of sales of plants or facilities) after the sale of any
Principal Property is completed, applies an amount not less than the net
proceeds received from such sale to the retirement of unsubordinated
Indebtedness, to Indebtedness of a Restricted Subsidiary, or to the
purchase of other property that will constitute a Principal Property or
improvements thereto, or, in the case of either Partnership, to such
investment, reinvestment or other use as shall be permitted or required by
either Limited Partnership Agreement.
SECTION 4.10 Limitation on Asset Sales. In the event and to the
extent that the Net Cash Proceeds received by the Company or any of its
Restricted Subsidiaries from one or more Asset Sales occurring on or after the
Closing Date in any period of 12 consecutive months (other than Asset Sales by
the Company or any Restricted Subsidiary to the Company or another Restricted
Subsidiary) exceed 10% of Consolidated Net Tangible Assets in any one fiscal
year (determined as of the date closest to the commencement of such 12-month
period for which a balance sheet of the Company and its Subsidiaries has been
prepared), then the Company will, or will cause such Restricted Subsidiary to,
(a) within 12 months (or, in the case of Asset Sales of plants or facilities, 24
months) after the date Net Cash Proceeds so received exceed 10% of Consolidated
Net Tangible Assets in any one fiscal year (determined as of the date closest to
the commencement of such 12-month period for which a balance sheet of the
Company and its Subsidiaries has been prepared) (i) apply an amount equal to
such excess Net Cash Proceeds, or the amount not applied pursuant to clause (ii)
or (iii) , to repay unsubordinated Indebtedness of the Company or Indebtedness
of any Restricted Subsidiary, in each case owing to a Person other than the
Company or any of its Subsidiaries; (ii) invest an equal amount, or the amount
not so applied pursuant to clause (i) or (iii) (or enter into a definitive
agreement committing to so invest within 12 months after the date of such
agreement), in property or assets that are of a nature or type or are used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the business of, the Company and its Subsidiaries existing on
the date thereof (as determined in good faith by the Board of Directors, whose
determination shall be
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conclusive and evidenced by a Board Resolution); or (iii) in the case of either
Partnership, apply an equal amount, or the amount not applied pursuant to clause
(i) or (ii), to such investment, reinvestment or other use as shall be permitted
or required by either Limited Partnership Agreement, and (b) apply such excess
Net Cash Proceeds (to the extent not applied pursuant to clause (a)) as provided
in the following paragraphs of this Section 4.10. The amount of such excess Net
Cash Proceeds required to be applied (or to be committed to be applied) during
such 12-month period or 24-month period, as the case may be, as set forth in
clause (i), (ii) or (iii) of the next preceding sentence and not applied as so
required by the end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined
below) totals at least $10 million, the Company must, not later than the
fifteenth Business Day of such month, make an offer (an "Excess Proceeds Offer")
to purchase from the Holders on a pro rata basis an aggregate principal amount
of Securities equal to the Excess Proceeds on such date, at a purchase price
equal to 101% of the principal amount thereof, plus accrued interest (if any) to
the date of purchase (the "Excess Proceeds Payment").
The Company will commence an Excess Proceeds Offer by mailing a notice
to the Trustee and each Holder stating:
(a) that the Excess Proceeds Offer is being made pursuant to this
Section 4.10 and that all Securities validly tendered will be accepted for
payment on a pro rata basis;
(b) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 40 days from the date
such notice is mailed) (the "Excess Proceeds Payment Date");
(c) that any Security not tendered will continue to accrue interest
pursuant to its terms;
(d) that, unless there shall be a default in the payment of the Excess
Proceeds Payment, any Security accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on the Excess Proceeds
Payment Date;
(e) that Holders electing to have a Security purchased pursuant to the
Excess Proceeds Offer will be required to surrender the Security, together
with the form entitled "Option of the Holder to Elect Purchase" on the
reverse side of the Security or comparable form completed, to the Paying
Agent at the address specified in the notice prior to the close of business
on the Business Day immediately preceding the Excess Proceeds Payment Date;
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(f) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Excess Proceeds Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Securities delivered for purchase and
a statement that such Holder is withdrawing his election to have such
Securities purchased; and
(g) that Holders whose Securities are being purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided, however, that each
security purchased and each new Security issued shall be in an original
principal amount of $1,000 or integral multiples thereof.
On the Excess Proceeds Payment Date, the Company will:
(a) accept for payment on a pro rata basis Securities or portions
thereof tendered pursuant to the Excess Proceeds Offer;
(b) deposit with the Paying Agent money sufficient to pay the purchase
price of all Securities or portions thereof so accepted; and
(c) deliver, or cause to be delivered, to the Trustee all Securities
or portions thereof so accepted together with an Officers' Certificate
specifying the Securities or portions thereof accepted for payment by the
Company.
The Paying Agent will promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee will
promptly (i) authenticate and mail to such Holders a new certificated Security
equal in principal amount to any unpurchased portion of any certificated
Security surrendered and (ii) make arrangements with the Depository, to reflect
on such Depository's records Book-Entry Securities equal in principal amount to
any unpurchased portion of any Global Security; provided that each Security
purchased and each new Security issued shall be in an original principal amount
of $1,000 or integral multiples thereof.
The Company will publicly announce the results of the Excess Proceeds
Offer as soon as practicable after the Excess Proceeds Payment Date. For
purposes of this Section 4.10, the Trustee shall act as the Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder, to the extent such laws and
regulations are applicable, in the event that such Excess Proceeds are received
by the Company under this Section 4.10 and the Company is required to repurchase
Securities as described above. The Company may modify any of the foregoing
provisions of this
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Section 4.10 to the extent it is advised by independent counsel that such
modification is necessary or appropriate in order to ensure such compliance.
SECTION 4.11 Repurchase of Securities upon Change of Control. (a)
Upon the occurrence of a Change of Control, each Holder shall have the right to
require the repurchase of its Securities by the Company in cash pursuant to the
offer described below (the "Change of Control Offer") at a purchase price equal
to 101% of the principal amount thereof, plus accrued interest (if any) to the
date of purchase (the "Change of Control Payment").
(b) Within 45 days following any Change of Control, the Company shall
mail a notice to the Trustee and each Holder stating: (i) that a Change of
Control has occurred, that the Change of Control Offer is being made pursuant to
this Section 4.11 and that all Securities validly tendered will be accepted for
payment; (ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "Change of Control Payment Date"); (iii) that any
Security not tendered will continue to accrue interest pursuant to its terms;
(iv) that, unless there shall be a default in the payment of the Change of
Control Payment, any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest on the Change of Control Payment
Date; (v) that Holders electing to have any Security or portion thereof
purchased pursuant to the Change of Control Offer will be required to surrender
such Security, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of such Security or comparable form completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Change of Control Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Securities delivered for purchase and a
statement that such Holder is withdrawing his election to have such Securities
purchased; and (vii) that Holders whose Securities are being purchased only in
part will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided, however, that each Security
purchased and each new Security issued shall be in an original principal amount
of $1,000 or integral multiples thereof.
(c) On the Change of Control Payment Date, the Company will: (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Securities or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee all Securities or
portions thereof so accepted together with an Officers' Certificate specifying
the Securities or portions thereof accepted for payment by
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the Company. The Paying Agent will promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee will
promptly (i) authenticate and mail to such Holders a new certificated Security
equal in principal amount to any unpurchased portion of any certificated
Security surrendered and (ii) make arrangements with the Depository, to reflect
on such Depository's records Book-Entry Securities equal in principal amount to
any unpurchased portion of any Global Security; provided, however, that each
Security purchased and each new Security issued shall be in an original
principal amount of $1,000 or integral multiples thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 4.11, the Trustee shall act as Paying Agent.
(d) The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder, to the extent such laws
and regulations are applicable, in the event that a Change of Control occurs
under this Section 4.11 and the Company is required to repurchase Securities as
described above. The Company may modify any of the foregoing provisions of this
Section 4.11 to the extent it is advised by independent counsel that such
modification is necessary or appropriate in order to ensure such compliance.
SECTION 4.12 Corporate Existence. Subject to Articles 4 and 5 of
this Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate existence of each Subsidiary in accordance with the respective
organizational documents of the Company and of each Subsidiary of the Company
and the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate existence of
any Subsidiary of the Company, if the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries
taken as a whole; and provided further, however, that any Subsidiary of the
Company may consolidate with, merge into, or sell, convey, transfer, lease or
otherwise dispose of all or part of its property and assets to the Company or
any Wholly Owned Subsidiary of the Company.
SECTION 4.13 Payment of Taxes and Other Claims. The Company will
pay or discharge, or cause to be paid or discharged before any penalty accrues
thereon, (i) all material taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary of the Company or upon the income,
profits or property of the Company or any Subsidiary of the Company and (ii) all
material lawful claims for labor, materials and supplies that, if unpaid, might
by law become a Lien upon the property of the Company or any Subsidiary of the
Company; provided, however, that the Company shall not be required to pay or
discharge, or cause to be paid or discharged, any
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such tax, assessment, charge or claim the amount, applicability or validity of
which is being contested in good faith by appropriate proceedings and for which
adequate reserves have been made.
SECTION 4.14 Notice of Defaults and Other Events. In the event that
any Indebtedness of the Company or any Subsidiary of the Company having an
outstanding principal amount of $10,000,000 or more has been or could be
declared due and payable before its maturity because of the occurrence of any
event of default (i.e., following any required notice or passage of time or
both) under such Indebtedness (including, without limitation, any Default or
Event of Default under this Indenture), the Company, promptly after it becomes
aware thereof, will give written notice thereof to the Trustee.
SECTION 4.15 Maintenance of Properties and Insurance. The Company
will cause all properties used or useful in the conduct of its business or the
business of any Subsidiary of the Company and material to the Company and its
Subsidiaries taken as a whole to be maintained and kept in normal condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section 4.15 shall prevent the Company or any Subsidiary of the Company from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Board of Directors or the board of directors of such Subsidiary of the
Company having managerial responsibility for any such property, desirable in the
conduct of the business of the Company or such Subsidiary of the Company.
The Company will provide or cause to be provided, for itself and its
Subsidiaries, insurance (including appropriate self-insurance) against loss or
damage of the kinds customarily insured against by corporations similarly
situated and owning like properties, including but not limited to, products
liability insurance and public liability insurance with reputable insurers or
with the government of the United States of America, or an agency or
instrumentality thereof, in such amounts, with such deductibles and by such
methods as shall be customary for corporations similarly situated in the
industry.
SECTION 4.16 Amendments to Limited Partnership Agreements. The
Company will not permit the general partner of either Partnership to make or
propose any amendment, supplement or other modification to either Limited
Partnership Agreement that would have a material adverse effect on the interests
of the Holders, except as shall be required by either Limited Partnership
Agreement.
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SECTION 4.17 Compliance Certificates. (a) The Company shall deliver
to the Trustee not more than 90 days after the end of each fiscal year an
Officers' Certificate stating that a review has been conducted of the activities
of the Company and its subsidiaries and the Company's performance under this
Indenture and that the Company has fulfilled all obligations under this
Indenture. For purposes of this Section 4.17, such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture. If there has been a default in the fulfillment of
any such obligation, the certificate shall describe any such default and the
nature and status thereof.
(b) The Company shall deliver to the Trustee, within 90 days after the
end of the Company's fiscal year, a certificate signed by the Company's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the
Securities as they relate to accounting matters, (ii) that they have read the
most recent Officers' Certificate delivered to the Trustee pursuant to paragraph
(a) of this Section 4.17, and (iii) whether, in connection with their audit
examination, anything came to their attention that caused them to believe that
the company was not in compliance with any of the terms, covenants, provisions
or conditions of Article 4 and Section 5.01 of this Indenture as they pertain to
accounting matters and, if any Default or Event of Default has come to their
attention, specifying the nature and period of existence thereof; provided,
however, that such independent certified public accountants shall not be liable
in respect of such statement by reason of any failure to obtain knowledge of any
such Default or Event of Default that would not be disclosed in the course of an
audit examination conducted in accordance with generally accepted auditing
standards in effect at the date of such examination.
SECTION 4.18 Commission Reports and Reports to Holders. Regardless
of whether the Company is subject to the periodic reporting and informational
requirements of Sections 13 and 15(d) of the Exchange Act, the Company will, to
the extent permitted under the Exchange Act, file with the Commission the
annual, quarterly and other reports required by Section 13 or 15(d) of the
Exchange Act, and shall provide such reports to the Trustee within 15 days of
the date it would have been required to file such reports with the Commission
had it been subject to such Sections. The Company shall also furnish all such
reports to Holders of the Securities or to the Trustee for forewarding to each
Holder of Securities at the expense of the Company. The Company also shall
comply with the other provisions of TIA Section 314(a). The Trustee has no duty
to review these financials or other reports for purposes of determining
compliance with this or any other provision of the Indenture. If filing such
reports by the Company with the Commission is not permitted under the Exchange
Act, the Company will promptly, upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such reports to
any person the Company reasonably believes is a prospective holder of
Securities.
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SECTION 4.19 Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE 5
Successor Corporation
SECTION 5.01 When Company May Merge, Etc. The Company will not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all its property and assets (as an
entirety or substantially as an entirety in one transaction or a series of
related transactions) to, any Person (other than a Restricted Subsidiary that is
a Wholly Owned Subsidiary of the Company with a positive net worth; provided,
however, that, in connection with any merger of the Company with a Restricted
Subsidiary that is a Wholly Owned Subsidiary of the Company, no consideration
(other than Common Stock in the surviving Person or the Company) shall be issued
or distributed to the shareholders of the Company), or permit any Person to
merge with or into the Company, unless:
(a) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of
the Company shall be a corporation organized and validly existing under the
laws of the United States of America or any jurisdiction thereof and shall
expressly assume, by supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company on all of the Securities and under this Indenture;
(b) immediately after giving effect to such transaction, no Event of
Default and no Default shall have occurred and be continuing;
(c) immediately after giving effect to such transaction on a pro forma
basis, the Interest Coverage Ratio of the Company (or any Person becoming
the successor obligor of the Securities) is at least 1.10:1, or, if less,
at least equal to the
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Interest Coverage Ratio of the Company immediately prior to such
transaction; provided, however, that, if the Interest Coverage Ratio of the
Company before giving effect to such transaction is within the range set
forth in column (A) below, then the pro forma Interest Coverage Ratio of
the Company (or any Person becoming the successor obligor of the
Securities) shall be at least equal to the lesser of (i) the ratio
determined by multiplying the percentage set forth in column (B) below by
the Interest Coverage Ratio of the Company prior to such transaction and
(ii) the ratio set forth in column (C) below:
(A) (B) (C)
--- --- ---
1.11:1 to 1.99:1 90% 1.6:1
2.00:1 to 2.99:1 80% 2.1:1
3.00:1 to 3.99:1 70% 2.4:1
4.00:1 or more 60% 2.5:1
and provided further, however, that, if the pro forma Interest Coverage Ratio of
the Company (or any Person becoming the successor obligor of the Securities) is
3:1 or more, the calculation in the next preceding proviso shall be inapplicable
and such transaction shall be deemed to have complied with the requirements of
this clause (c);
(d) immediately after giving effect to such transaction on a pro forma
basis, the Company (or any Person that becomes the successor obligor of the
Securities) shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Company immediately prior to such
transaction; and
(e) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (c) and (d)) and an Opinion of Counsel, in each case stating that
such consolidation, merger or transfer and such supplemental indenture
comply with this Section 5.01 and that all conditions precedent provided
for herein relating to such transaction have been complied with; provided,
however, that clauses (c) and (d) above do not apply if, in the good faith
determination of the Board of Directors, whose determination shall be
evidenced by a Board Resolution, the principal purpose of such transaction
is to change the state of incorporation of the Company; and provided
further, however, that any such transaction shall not have as one of its
purposes the evasion of the limitations of this Section 5.01.
SECTION 5.02 Successor Corporation Substituted. Upon any
consolidation or merger, or any sale, conveyance, transfer, lease or other
disposition of all
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or substantially all of the property and assets of the Company in accordance
with Section 5.01 of this Indenture, the successor corporation formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor corporation had been
named as the Company herein.
ARTICLE 6
Default and Remedies
SECTION 6.01 Events of Default. An "Event of Default" occurs with
respect to the Securities if:
(a) the Company defaults in the payment of the principal of, or
premium, if any, on, any Security when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on any Security
when the same is due and payable, and such default continues for a period
of 30 days;
(c) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture or under the
Securities and such default or breach continues for a period of 30
consecutive days after written notice to the Company by the Trustee or the
Holders of 25% or more in aggregate principal amount of the Securities;
(d) there occurs with respect to any issue or issues of Indebtedness
of the Company and/or one or more Significant Subsidiaries having an
outstanding principal amount of $10 million or more in the aggregate,
whether such Indebtedness now exists or shall hereafter be created, an
event of default that has caused the holder or holders thereof, or
representatives of such holder or holders, to declare such Indebtedness to
be due and payable prior to its Stated Maturity and such Indebtedness has
not been discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration;
(e) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders (treating any deductibles, self-insurance or
retention as not so covered) shall be rendered against the Company or any
Significant Subsidiary and shall not be discharged, and there shall be any
period of 30 consecutive days
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following entry of the final judgment or order that causes the aggregate
amount for all such final judgments or orders outstanding against all such
Persons to exceed $10 million during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect;
(f) a court having jurisdiction in the premises enters a decree or
order for (i) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (ii)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant
Subsidiary or for all or substantially all the property and assets of the
Company or any Significant Subsidiary or (iii) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days;
(g) the Company or any Significant Subsidiary (i) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (ii) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all the property and
assets of the Company or any Significant Subsidiary or (iii) effects any
general assignment for the benefit of creditors;
(h) the Company and/or one or more Significant Subsidiaries fails to
make (i) at the final (but not any interim) fixed maturity of any issue of
Indebtedness a principal payment of $10 million or more or (ii) at the
final (but not any interim) fixed maturity of more than one issue of such
Indebtedness principal payments aggregating $10 million or more and, in the
case of clause (i), such defaulted payment shall not have been made, waived
or extended within 30 days of the payment default and, in the case of
clause (ii), all such defaulted payments shall not have been made, waived
or extended within 30 days of the payment default that causes the amount
described in clause (ii) to exceed $10 million; or
(i) the nonpayment of any two or more items of Indebtedness that would
constitute at the time of such nonpayments, but for the individual amounts
of such Indebtedness, an Event of Default under clause (d) or clause (h)
above, or both, and which items of Indebtedness aggregate $10 million or
more.
The notice required under clause (c) must specify the Default, demand
that it be remedied and state that the notice is a "Notice of Default." Such
notice shall be
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given by the Trustee if so requested in writing by the Holders of 25% of the
aggregate principal amount of the Securities then outstanding.
SECTION 6.02 Acceleration. If an Event of Default (other than an Event
of Default specified in clause (f) or (g) of Section 6.01 of this Indenture that
occurs with respect to the Company) occurs and is continuing under this
Indenture, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Securities then outstanding, by written notice to the Company (and
to the Trustee if such notice is given by the Holders (the "Acceleration
Notice")), may, and the Trustee at the request of the Holders will, declare the
entire unpaid principal of, premium, if any, and accrued interest on, the
Securities to be immediately due and payable, as specified below. Upon a
declaration of acceleration, such principal, premium, if any, and accrued
interest shall become and be immediately due and payable without presentment,
demand, protest or further notice or act (all of which are expressly waived by
the Company). In the event of a declaration of acceleration because an Event of
Default set forth in clause (d) or (h) of Section 6.01 of this Indenture has
occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (d) or (h) shall be remedied, cured by the
Company and/or such Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto. If an Event of Default specified in clause (f) or (g) of
Section 6.01 of this Indenture occurs with respect to the Company, all unpaid
principal of, premium, if any, and accrued interest on, the Securities then
outstanding shall become and be immediately due and payable automatically,
without any declaration, presentment, demand, protest, notice or other act on
the part of the Trustee or any Holder (all of which are expressly waived by the
Company). The Holders of at least a majority in principal amount of the
outstanding Securities, by written notice to the Company and to the Trustee, may
waive all past defaults or Defaults and rescind and annul a declaration of
acceleration and its consequences if (a) all existing Events of Default, other
than the nonpayment of the principal of, premium, if any, and accrued interest
on the Securities that have become due solely by such declaration of
acceleration, have been cured or waived and (b) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.
SECTION 6.03 Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, or interest
on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding.
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The Holders and the Trustee may exercise their rights and remedies
under this Indenture and under the Securities against the capital stock of TNC
or the assets of TNC and its subsidiaries only in a manner consistent with the
fiduciary obligations of TNC and the Company associated without the general
partnership interests in the Partnerships (including, without limitation, the
interests of the Partnerships and the partners thereof); provided that the
foregoing shall not require the Holders or the Trustee to take any action with
respect to any other assets of the Company.
SECTION 6.04 Waiver of Past Defaults. Subject to Sections 6.02, 6.07
and 9.02 of this Indenture, the Holders of at least a majority in aggregate
principal amount of the outstanding Securities, by notice to the Trustee, may
waive an existing Default or Event of Default and its consequences, except a
Default in the payment of principal of, premium, if any, or interest on any
Security as specified in clause (a) or (b) of Section 6.01 of this Indenture.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereto.
SECTION 6.05 Control by Majority. The Holders of at least a majority
in aggregate principal amount of the outstanding Securities may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders not joining in the giving of such direction.
SECTION 6.06 Limitation on Suits. A Holder may not pursue any remedy
with respect to this Indenture or the Securities unless:
(a) the Holder gives the Trustee written notice of a continuing Event
of Default;
(b) the Holders of at least 25% in aggregate principal amount of
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(c) such Holder or Holders offer the Trustee indemnity satisfactory to
the Trustee against any costs, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
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(e) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Securities do not give the Trustee a
direction that is inconsistent with the request.
For purposes of Section 6.05 of this Indenture and this Section 6.06,
in determining whether the Holders of the requisite principal amount of
outstanding Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Securities owned by the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the reasonable satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not any obligor upon the Securities or any Affiliate of the
Company or such other obligor.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over any such other Holder.
SECTION 6.07 Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Security to
receive payment of the principal of, premium, if any, or interest on, such
Holder's Security or to bring suit for the enforcement of any such payment, on
or after the respective due dates expressed in the Securities, shall not be
impaired or affected without the consent of the Holder.
SECTION 6.08 Collection Suit by Trustee. If an Event of Default in
payment of principal, premium, if any, or interest specified in clause (a) or
(b) of Section 6.01 of this Indenture occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor of the Securities for the whole amount of
principal, premium, if any, and accrued interest, if any, remaining unpaid,
together with interest on overdue principal, premium, if any, and, to the extent
that payment of such interest is lawful, interest on overdue installments of
interest, in each case at the rate borne by the Securities, and such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the trustee, its agents and counsel.
SECTION 6.09 Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable
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compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.06 of this
Indenture) and the Holders allowed in any judicial proceedings relative to the
Company (or any other obligor of the Securities), its creditors or its property
and shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same,
and any custodian in any judicial proceedings is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.06 of this Indenture. To the extent that
such payment of reasonable compensation, expenses, disbursements and advances of
the Trustee, its agent and counsel out of the estate in any such judicial
proceeding shall be denied for any reason, payment of the same shall be secured
by a lien on, and shall be paid out of, any and all dividends, distributions,
monies, securities and other property that the Holders may be entitled to
receive in such judicial proceedings, whether in liquidation or under any plan
of reorganization, arrangement or otherwise. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10 Priorities. If the Trustee collects any money pursuant
to this Article 6, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.06 of this
Indenture;
Second: to Holders for amounts then due and unpaid for principal of,
premium, if any, and interest on the Securities in respect of which or for
the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Securities for principal, premium, if any, and interest,
respectively; and
Third: to the Company or any other obligors of the Securities, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any
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party litigant in the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 of this Indenture, or a suit by Holders of more than
10% in principal amount of the outstanding Securities.
SECTION 6.12 Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then, and in
every such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 6.13 Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Securities in Section 2.06 of this Indenture, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14 Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article 6 or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient by the
Trustee or by the Holders, as the case may be.
ARTICLE 7
Trustee
SECTION 7.01 Rights and Duties of Trustee . Subject to TIA Sections
315(a) through (d):
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested
in it by this
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Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of its own
affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture which are adverse to
the Trustee; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture;
(c) the Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document;
(d) before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or any Opinion of Counsel, which shall conform to
Section 10.04 of this Indenture. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on any such
certificate or opinion;
(e) the Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with
due care;
(f) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders, unless such Holders shall have offered to the
Trustee security or indemnity reasonably acceptable to the Trustee against
the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(g) the Trustee or Paying Agent shall not be liable for interest on
any money recovered by it except as the Trustee or Paying Agent may agree
in writing with the Company. Money held in trust by the Trustee or Paying
Agent need not be segregated from other funds except to the extent required
by law and except under Article 8 of this Indenture; and
(h) the Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers;
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provided, however, that the Trustee's conduct does not constitute
negligence or bad faith.
SECTION 7.02 Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.03 Trustee's Disclaimer. The Trustee (a) makes no
representation as to the validity or adequacy of this Indenture or the
Securities, (b) shall not be accountable for the Company's use of the proceeds
from the Securities and (c) shall not be responsible for any statement in the
Securities other than its certificate of authentication.
SECTION 7.04 Notice of Default. If any Default or any Event of Default
occurs and is continuing and if such Default of Event of Default is known to the
Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
30 days after it occurs, unless such Default or Event of Default has been cured;
provided, however, that, except in the case of a default in the payment of the
principal of, premium, if any, or interest on any Security, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders.
The Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (a) any Event of Default occurring pursuant to clause
(a) or (b) of Section 6.01 of this Indenture if the Trustee is then acting as
Paying Agent or (b) any Default or Event of Default of which the Trustee shall
have received written notification or obtained actual knowledge, and such
notification shall not be deemed to include receipt of information obtained in
any report or other documents furnished under Section 4.18 of this Indenture,
which reports and documents the Trustee shall have no duty to examine.
SECTION 7.05 Reports by Trustee to Holders. Within 60 days after each
May 15, beginning with the first May 15 after the Closing Date, the Trustee
shall mail to each Holder as provided in TIA Section 313(c) a brief report dated
as of such May 15, in accordance with and to the extent required by TIA Section
313(a).
SECTION 7.06 Compensation and Indemnity. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing for it services.
The compensation of the Trustee shall not be limited by any law on compensation
of a trustee
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of an express trust. The Company shall reimburse the Trustee upon request for
all reasonable out-of-pocket expenses and advances incurred or made by it. Such
expenses shall include the reasonable compensation and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence or
bad faith on its part in connection with the administration of this Indenture
and its duties under this Indenture and the Securities, including the costs and
expenses of defending itself against any claim or liability and of complying
with any process served upon it or any of its officers in connection with the
exercise or performance of any of its powers or duties under this Indenture and
the Securities. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company shall pay reasonable fees and expenses
of such counsel. The Company need not pay for any settlements made without its
consent; provided, however, that such consent shall not be unreasonably
withheld. The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (f) or (g) of Section 6.01
of this Indenture, the expenses and the compensation for the services will be
intended to constitute expenses of the administration under the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
SECTION 7.07 Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.07.
The Trustee may resign by so notifying the Company in writing at least
30 Business Days prior to the date of the proposed resignation. The Holders of
a majority in principal amount of the outstanding Securities may remove the
Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Company. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.09 of this Indenture;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
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(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of the Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company. If the successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.06 of this Indenture, (a) the retiring Trustee shall transfer all property
held by it as Trustee to the successor Trustee, (b) the resignation or removal
of the retiring Trustee shall become effective and (c) the successor Trustee
shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If the Trustee fails to comply with Section 7.09 of this Indenture,
any Holder who satisfies the requirements of TIA Section 310(b) may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.07, the Company's obligations under Section 7.06 of this Indenture shall
continue for the benefit of the retiring Trustee.
SECTION 7.08 Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 7.09 Eligibility. This Indenture shall always have a Trustee
who satisfies the requirement of TIA Section 310(a)(1). The Trustee shall have a
combined capital and surplus (which shall include without duplication the
combined capital and surplus of the holding company of the Trustee) of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
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ARTICLE 8
Discharge of Indenture
SECTION 8.01 Termination of Company's Obligations. Except as
otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Securities and this Indenture if:
(a) all Securities previously authenticated and delivered (other than
destroyed, lost or stolen Securities that have been replaced or Securities
that are paid pursuant to Section 4.01 of this Indenture or Securities for
whose payment money or securities have theretofore been held in trust and
thereafter repaid to the Company, as provided in Section 8.05 of this
Indenture) have been delivered to the Trustee for cancellation and the
Company has paid all sums payable by it hereunder; or
(b) (i) the Securities mature within one year or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption, (ii) the Company
irrevocably deposits in trust with the Trustee during such one-year period,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds solely for the benefit of the
Holders for that purpose, money or U.S. Government Obligations sufficient
(in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee), without consideration of any reinvestment of any interest
thereon, to pay principal and interest on the Securities to maturity or
redemption, as the case may be, and to pay all other sums payable by it
hereunder, (iii) no Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit, (iv) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound and (v)
the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with.
With respect to the foregoing clause (a), the Company's obligations
under Section 7.06 shall survive. With respect to the foregoing clause (b), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01,
4.02, 7.06, 7.07, 8.04, 8.05 and 8.06 of this Indenture shall survive until the
Securities are no longer outstanding. Thereafter, only the Company's
obligations in Section 7.06 and 8.06 of this Indenture shall survive. After any
such irrevocable deposit, the Trustee upon request shall
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acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
SECTION 8.02 Defeasance and Discharge of Indenture. The Company will
be deemed to have paid and will be discharged from any and all obligations in
respect of the Securities and the provisions of this Indenture will no longer be
in effect with respect to the Securities on the one hundred twenty-third day
after the deposit referred to in clause (i) of this Section 8.02, and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same, except as to (a) rights of registration of transfer and
exchange, (b) substitution of apparently mutilated, defaced, destroyed, lost or
stolen Securities, (c) rights of Holders to receive payments of principal
thereof and interest thereon, (d) the Company's obligations under Section 4.02,
(e) the rights, obligations and immunities of the Trustee hereunder and (f) the
rights of the Holders as beneficiaries of this Indenture with respect to the
property so deposited with the Trustee payable to all or any of them; provided,
however, that the following conditions shall have been satisfied:
(i) with reference to this Section 8.02, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 7.09) and conveyed
all right, title and interest for the benefit of the Holders, under the
terms of an irrevocable trust agreement in form and substance satisfactory
to the Trustee as trust funds in trust, specifically pledged to the Trustee
for the benefit of the Holders as security for payment of the principal of,
premium, if any, and interest, if any, on the Securities, and dedicated
solely to, the benefit of the Holders, in and to (A) money in an amount,
(B) U.S. Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will provide,
not later than one day before the due date of any payment referred to in
this clause (i), an amount or (C) a combination thereof in an amount,
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, without consideration of the
reinvestment of such interest and after payment of all federal, state and
local taxes or other charges and assessments in respect thereof payable by
the Trustee, the principal of, premium, if any, and accrued interest on the
outstanding Securities on the Stated Maturity of such principal or
interest; provided, however, that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of principal, premium, if any, and interest with
respect to the Securities;
(ii) the Company shall have delivered to the Trustee (A) either (1) an
Opinion of Counsel to the effect that Holders will not recognize income,
gain or loss for Federal income tax purposes as a result of the Company's
exercise of its
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option under this Section 8.02 and will be subject to Federal income tax on
the same amount and in the same manner and at the same times as would have
been the case if such deposit, defeasance and discharge had not occurred,
which Opinion of Counsel must be accompanied by a ruling of the Internal
Revenue Service to the same effect unless there has been a change in
applicable Federal income tax law after the date of this Indenture such
that a ruling from the Internal Revenue Service is no longer required or
(2) a ruling directed to the Company or the Trustee received from the
Internal Revenue Service to the same effect as the aforementioned Opinion
of Counsel and (B) an Opinion of Counsel to the effect that (1) the
creation of the defeasance trust does not violate the Investment Company
Act of 1940 and (2) after the passage of 123 days following the deposit
(except, with respect to any trust funds for the account of any Holder who
may be deemed to be an "insider" for purposes of the United States
Bankruptcy Code, after one year following the deposit), the trust fund will
not be subject to the effect of Section 547 of the United States Bankruptcy
Code or Section 15 of the New York Debtor and Creditor Law in a case
commenced by or against the Company under either such statute, and either
(x) the trust funds will no longer remain the property of the Company (and
therefore will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally) or (y) if a court were to the rule under any such law in any
case or proceeding that the trust funds remained property of the Company,
(I) assuming such trust funds remained in the possession of the Trustee
prior to such court ruling to the extent not paid to the Holders, the
Trustee will hold, for the benefit of the Holders, a valid and perfected
security interest in such trust funds that is not avoidable in bankruptcy
or otherwise except for the effect of Section 552(b) of the United States
Bankruptcy Code on interest on the trust funds accruing after the
commencement of a case under such statute and (II) the Holders will be
entitled to receive adequate protection of their interests in such trust
funds if such trust funds are used in such case of proceeding;
(iii) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default or Default shall have occurred and be continuing
on the date of such deposit or during the period ending on the one hundred
twenty-third day after such date of deposit;
(iv) such deposit shall not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which the Company is
bound;
(v) if at such time the Securities are listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to
the
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effect that the Securities will not be delisted as a result of such
deposit, defeasance and discharge; and
(vi) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 8.02 have been complied with.
Notwithstanding the foregoing clause (i), prior to the end of the 123-
day period referred to in clause (ii)(B)(2) above, none of the Company's
obligations under this Indenture shall be discharged. Subsequent to the end of
such 123-day period with respect to this Section 8.02, the Company's obligations
in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01, 4.02, 7.06, 7.07, 8.05 and
8.06 of this Indenture shall survive until the Securities are no longer
outstanding. Thereafter, only the Company's obligations in Sections 7.06, 8.05
and 8.06 of this Indenture shall survive. If and when a ruling from the
Internal Revenue Service or an Opinion of Counsel referred to in clause (ii)(A)
above is able to be provided specifically without regard to, and not in reliance
upon, the continuance of the Company's obligations under Section 4.01 of this
Indenture, then the Company's obligations under such Section 4.01 of this
Indenture shall cease upon delivery to the Trustee of such ruling or Opinion of
Counsel and compliance with the other conditions precedent provided for herein
relating to the defeasance contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request, shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03 Defeasance of Certain Obligations. The Company may omit
to comply with any term, provision or condition set forth in clauses (c) and (d)
of Section 5.01 and Sections 4.03 through 4.17 of this Indenture and clause (c)
of Section 6.01 of this Indenture (with respect to Sections 4.03 through 4.17 of
this Indenture and clauses (c) and (d) of Section 5.01 of this Indenture) and
clauses (d), (e), (h) and (i) of Section 6.01 of this Indenture shall be deemed
not to be Events of Default, in each case with respect to the outstanding
Securities if:
(a) with reference to this Section 8.03, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 7.09 of this
Indenture) and conveyed in and to all right, title and interest to the
Trustee for the benefit of the Holders, under the terms of an irrevocable
trust agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee as security for
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payment of the principal of, premium, if any, and interest, if any, on the
Securities for, and dedicated solely to, the benefit of the Holders, in and
to (i) money in an amount, (ii) U.S. Government Obligations that, through
the payment of interest and principal in respect thereof in accordance with
their terms, will provide, not later than one day before the due date of
any payment referred to in this clause (a), money in an amount or (iii) a
combination thereof in an amount, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and accrued interest on, the outstanding Securities on the
Stated Maturity of such principal or interest; provided, however, that the
Trustee shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Securities;
(b) the Company has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the creation of the defeasance trust does not violate
the Investment Company Act of 1940, (ii) the Holders have a valid first-
priority security interest in the trust funds, (iii) the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such deposit and defeasance of certain covenants and Events of Default
and will be subject to Federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred and (iv) after the passage of 123
days following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes of
the United States Bankruptcy Code, after one year following the deposit),
the trust fund will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (A) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors rights generally) or (B) if a court were to rule under
any such law in any case or proceeding that the trust funds remained
property of the Company, (1) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not paid
to the Holders, the Trustee will hold, for the benefit of the Holders, a
valid and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust funds
accruing after the commencement of a case under such
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statute and (2) the Holders will be entitled to receive adequate protection
of their interests in such trust funds if such trust funds are used in such
case or proceeding;
(c) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default or Default shall have occurred and be continuing
on the date of such deposit or during the period ending on the one hundred
twenty-third day after the date of such deposit;
(d) such deposit shall not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which the Company is
bound;
(e) if at such time the Securities are listed in a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securities will not be delisted as a result
of such deposit, defeasance and discharge; and
(f) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 8.03 have been complied with.
SECTION 8.04 Application of Trust Money. Subject to Sections 8.05 and
8.06 of this Indenture, the Trustee or Paying Agent shall hold in trust money or
U.S. Government Obligations deposited with it pursuant to Section 8.01, 8.02 or
8.03 of this Indenture, as the case may be, and shall apply the deposited money
and the money from U.S. Government Obligations in accordance with the Securities
and this Indenture to the payment of principal of, premium if any, and interest
on the Securities; but such money need not be segregated from other funds except
to the extent required by law.
SECTION 8.05 Repayment to Company . Subject to Sections 7.06, 8.01,
8.02 and 8.03 of this Indenture, the Trustee and the Paying Agent shall promptly
pay to the Company upon request set forth in an Officers' Certificate any excess
money held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall pay
to the Company upon request any money held by them for the payment of principal,
premium, if any, or interest that remains unclaimed for two years; provided,
however, that the Trustee or such Paying Agent before being required to make any
payment may, in its discretion, cause to be published at the expense of the
Company once in a newspaper of general circulation in the City of New York or
mail to each holder entitled to such money at such Holder's address (as set
forth in the Security Register) notice that such money remains unclaimed and
that after a date specified therein (which shall be at least 30 days from the
date of
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such publication or mailing) any unclaimed balance of such money then remaining
will be repaid to the Company; and provided further, however, that the Trustee
may comply with any applicable escheat or abandoned property law. After payment
to the Company, Holders entitled to such money must look to the Company for
payment as general creditors unless an applicable law designates another Person,
and all liability of the Trustee and such Paying Agent with respect to such
money shall cease.
SECTION 8.06 Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with Section
8.01, 8.02 or 8.03 of this Indenture, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or
8.03 of this Indenture, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S. Government Obligations
in accordance with Section 8.01, 8.02 or 8.03 of this Indenture, as the case may
be; provided, however, that, if the Company has made any payment of principal
of, premium, if any, or interest on any Securities because of the reinstatement
of its obligations, the Company shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments, Supplements and Waivers
SECTION 9.01 Without Consent of Holders. The Company, when authorized
by a resolution of the Board of Directors, and the Trustee may amend or
supplement this Indenture or the Securities without notice to or the consent of
any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article 5 of this Indenture;
(c) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA;
(d) to provide for uncertified Securities in addition to or in place
of certificated Securities; or
(e) to make any change that does not adversely affect the rights of
any Holder.
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SECTION 9.02 With Consent of Holders. Subject to Sections 6.04 and
6.07 of this Indenture and without prior notice to the Holders, the Company,
when authorized by the Board of Directors (as evidenced by a Board Resolution),
and the Trustee may amend this Indenture and the Securities with the written
consent of the Holders of not less than a majority in aggregate principal amount
of the Securities then outstanding, and the Holders of not less than a majority
in aggregate principal amount of the Securities then outstanding by written
notice to the Trustee may waive future compliance by the Company with any
provision of this Indenture or the Securities.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount of, or
premium, if any, or interest on, any Security, or adversely affect any
right of repayment at the option of any Holder of any Security, or change
the place or currency of payment of principal of, premium, if any, or
interest on, any Security, or impair the right to institute suit for the
enforcement of any payment on or after the Stated Maturity (or in the case
of a redemption, on or after the Redemption Date) of any Security;
(b) reduce the percentage in principal amount of the outstanding
Securities required for any such supplemental indenture, for any waiver of
compliance with certain provisions of this Indenture or certain defaults
and their consequences provided for in this Indenture;
(c) waive a default in the payment of principal of, premium, if any,
or interest on, any Security; or
(d) modify any of the provisions of this Section 9.02, except to
increase any such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the
Holder of each outstanding Security affected thereby.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the
Company to mail
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such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such amendment, supplemental indenture or waiver.
SECTION 9.03 Revocation and Effect of Consent. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the security of the
consenting Holder; even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to its
Security or portion of its Security. Such revocation shall be effective only if
the Trustee receives the notice of revocation before the date such amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver shall
become effective on receipt by the Trustee of written consents from the Holders
of the requisite percentage in principal amount of the outstanding Securities.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies) and only those
Persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it is of the type described in any of clauses (a)
through (d) of Section 9.02 of this Indenture. In case of an amendment or
waiver of the type described in clauses (a) through (d) of Section 9.02 of this
Indenture, the amendment or waiver shall bind each Holder who has consented to
it and every subsequent Holder of a Security that evidences the same
indebtedness as the Security of the consenting Holder.
SECTION 9.04 Notation on or Exchange of Securities. If an amendment,
supplement or waiver changes the terms of a Security, the Trustee may require
the Holder to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security about the change terms and return it to the Holder and
the Trustee may place an appropriate notation on any Security thereafter
authenticated. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms.
SECTION 9.05 Trustee to Sign Amendments, Etc. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to
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this Article 9 is authorized or permitted by this Indenture. Subject to the
preceding sentence, the Trustee shall sign such amendment, supplement or waiver
if the same does not adversely affect the rights of the Trustee. The Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver that affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
SECTION 9.06 Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article 9 shall conform to the requirements
of the TIA as then in effect.
ARTICLE 10
Miscellaneous
SECTION 10.01 Trust Indenture Act of 1939. This Indenture is subject
to the provisions of the TIA that are required to be a part of this Indenture
and shall, to the extent applicable, be governed by such provisions.
SECTION 10.02 Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail addressed as follows:
if to the Company:
Terra Industries Inc.
600 Fourth Street
Terra Centre
Sioux City, Iowa 51101
Attention: Chief Financial Officer
if to the Trustee:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Finance
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to such
Holder at its address as it appears on the Security Register by first class mail
and shall be sufficiently given if so mailed within the time prescribed. Copies
of any such
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communication or notice to a Holder shall also be mailed to the Trustee and each
Agent at the same time.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, and except as
otherwise provided in this Indenture, if a notice or communication is mailed in
the manner provided above, it is duly given, whether or not the addressee
receives it.
SECTION 10.03. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 10.04 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in the Indenture shall include:
(a) a statement that the person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statement or opinion contained in such
certificate or opinion is based;
(c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with, and such other opinions
as the Trustee may reasonably request; provided, however, that, with
respect to matters of fact, an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
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SECTION 10.05 Rules by Trustee, Paying Agent or Registrar. The Trustee
may make reasonable rules for action by or at a meeting of Holders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 10.06 Payment Date Other Than a Business Day. If an Interest
Payment Date, Redemption Date, Stated Maturity or date of maturity of any
Security shall not be a Business Day at any place of payment, then payment of
principal of, premium, if any, or interest on such Security, as the case may be,
need not be made on such date, but may be made on the next succeeding Business
Day at such place of payment with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity or date of
maturity of such Security; provided, however, that no interest shall accrue for
the period from and after such Interest Payment Date, Redemption Date, Stated
Maturity or date of maturity, as the case may be, to the next succeeding
Business Day.
SECTION 10.07 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THIS INDENTURE AND THE SECURITIES. THE TRUSTEE, THE COMPANY AND THE
HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OF
THE SECURITIES.
SECTION 10.08 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.09 No Recourse Against Others. No recourse for the payment
of the principal of, premium, if any, or interest on, any of the Securities or
for any claim based thereon or otherwise in respect thereof or by reason
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any of the Securities or because of the
creation of any Indebtedness represented thereby, shall be had against any
incorporator, shareholder, officer, director, employee or controlling person,
past, present or future, of the Company or any successor Person thereof. Each
Holder, by accepting such Securities (or interest therein), waives and releases
all such liability.
SECTION 10.10 Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
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SECTION 10.11 Duplicate Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 10.12 Separability. In case any provision in this Indenture
or in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 10.13 Table of Contents, Headings, Etc. The Table of
Contents, Cross-Reference Table, and headings of the Articles and Sections of
this Indenture have been included for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms and provisions hereof.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
TERRA INDUSTRIES INC.
BY: /s/ Francis G. Meyer
---------------------------------
Name: Francis G. Meyer
Title: Vice President &
Chief Financial Officer
FIRST TRUST NATIONAL ASSOCIATION
BY: /s/ Scott Strodthoff
---------------------------------
Name: Scott Strodthoff
Title: Vice President
<PAGE>
STATE OF IOWA )
) SS:
COUNTY OF WOODBURY )
On this 22nd day of June, 1995, before me personally came Francis G.
Meyer, to me known, who, being by me duly sworn, did depose and say that he
resides in Sioux City, Iowa, that he is Vice President and Chief Financial
Officer of TERRA INDUSTRIES INC., one of the corporations described in and that
executed the above instrument; and that he signed his name thereto by authority
of the Board of Directors of said corporation.
/s/ Jane A. Rice
-------------------------------
Notary Public
(Notarial Seal)
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this 22nd day of June, 1995, before me personally came Scott
Strodthoff, to me known, who by me duly sworn, did depose and say that he
resides in Arden Hills, Minnesota; that he is Vice President of FIRST TRUST
NATIONAL ASSOCIATION, one of the entities described in and that executed the
above instrument; and that he signed his name thereto by authority of the
by-laws of said trust company.
/s/ Lisa Hochstadt
---------------------------------
Notary Public
(Notarial Seal)
<PAGE>
EXHIBIT A
---------
(FACE OF SERIES A SECURITY)
[Legend if Security is deemed a Restricted Security]
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (a)(2),
(a)(3) OR (a)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE
<PAGE>
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE
OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
[Legend if Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A-2
<PAGE>
TERRA INDUSTRIES INC.
10 1/2% Senior Note due 2005, Series A
NO. CUSIP NO. [880915 AC7]
[880915 AD5]
TERRA INDUSTRIES INC., a Maryland corporation (the "Company," which
term includes any successor corporation) under the Indenture hereinafter
referred to, for value received, promises to pay to ________________, or its
registered assigns, the principal sum of ______________ ($_________), in United
States dollars on June 15, 2005, at the office or agency of the Company referred
to below, and to pay interest thereon from June 22, 1995, or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semiannually on June 15 and December 15, in each year, commencing December
15, 1995 at the rate of 10 1/2% per annum, in United States dollars, until the
principal hereof is paid or duly provided for. In addition, in the event that
either (a) an Exchange Offer Registration Statement is not filed by the Company
with the Commission in connection with a Registered Exchange Offer on or prior
to July 22, 1995, (b) such Exchange Offer Registration Statement is not declared
effective by the Commission on or prior to September 20, 1995, or (c) (i) the
Registered Exchange Offer is not consummated on or prior to October 20, 1995 or
(ii) a Shelf Registration Statement has not been declared effective on or prior
to October 20, 1995 in the event the Registered Exchange Offer is not
consummated or a Shelf Registration has been requested by the Initial
Purchasers, the interest rate borne by the Series A Securities shall be
increased (an "Interest Rate Increase") by one quarter of one percent per annum;
commencing July 22, 1995 in the case of (a) above, commencing September 20, 1995
in the case of (b) above, commencing October 20, 1995 in the case of (c) above;
provided that the aggregate increase in such interest rate from the original
interest rate will in no event exceed one percent per annum; provided, further,
that upon the filing of an Exchange Offer Registration Statement in the case of
(a) above, the effectiveness of the Exchange Offer Registration Statement in the
case of (b) above, or the effectiveness of the Shelf Registration Statement or
the day before the date of the consummation of the Registered Exchange Offer, as
the case may be, in the case of (c) above, the interest rate borne by the
Securities shall from the date of such filing, effectiveness or day before the
date of consummation, as the case may be, be reduced by the full amount of any
such Interest Rate Increase.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be June 1 or December 1 (whether or not a Business Day),
as the case may be, next preceding such Interest
A-3
<PAGE>
Payment Date. Any such interest paid or duly provided for within 30 days after
the Interest Payment Date on which such interest payment was due will, as
provided in such Indenture, be paid to such Person, together with interest on
such past due interest payment at the interest rate borne by the Series A
Securities, to the extent lawful. Any such interest not so paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Series A Securities, to the extent lawful, shall forthwith cease to be
payable to the Holder on such Regular Record Date, and shall be paid to the
Person in whose name this Security (or one or more predecessor Securities) is
registered at the close of business on a special record date for the payment of
such defaulted interest which shall be the fifteenth day next preceding the date
fixed by the Company for the payment of default interest, notice whereof shall
be given to Holders of Securities not less than 15 days prior to such special
record date.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
TERRA INDUSTRIES INC.
By:
------------------------------------
Title:
---------------------------------
By:
------------------------------------
Title:
---------------------------------
A-5
<PAGE>
(Form of Trustee's Certificate of Authentication)
This is one of the 10 1/2% Senior Notes due 2005, Series A described
in the within-mentioned Indenture.
Dated: __________, ____
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:
------------------------------
Authorized Signature
A-6
<PAGE>
(REVERSE SIDE OF SERIES A SECURITY)
TERRA INDUSTRIES INC.
10 1/2% Senior Note due 2005, Series A
1. Principal and Interest.
----------------------
The Company will pay the principal of this 10 1/2% Senior Note due
2005, Series A (a "Series A Security") on June 15, 2005.
The Company promises to pay interest on the principal amount of this
Security on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of record of the
Securities at the close of business on June 1 or December 1 immediately
preceding the applicable Interest Payment Date) on each Interest Payment Date,
commencing December 15, 1995. Interest on the Securities will accrue from the
most recent date to which interest has been paid, or, if no interest has been
paid, from June 22, 1995; provided, however, that, if there is no existing
default in the payment of interest and if this Security is authenticated between
a Regular Record Date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such Interest Payment Date.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate of 10 1/2% per annum.
2. Method of Payment.
-----------------
The Company will pay interest (except defaulted interest) on the
principal amount of the Securities on each June 15 and December 15, commencing
December 15, 1995, to the persons who are Holders (as reflected in the Security
Register) at the close of business on the June 1 or December 1 immediately
preceding the applicable Interest Payment Date, in each case, even if the
Security is canceled on registration of transfer or registration of exchange
after such payment date; provided, however, that, with respect to the payment of
principal, the Company will make payment to the Holder that surrenders this
Security to a Paying Agent on or after June 15, 2005. The Company will pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, with respect to Securities in certificated form, the Company may pay
interest by check mailed to the address of the Person entitled thereto as such
address shall appear on the Security
A-7
<PAGE>
Register. If a payment date is a date other than a Business Day at a place of
payment, payment may be made at that place on the next succeeding day that is a
Business Day and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice. The Company,
any Subsidiary of the Company, or any Affiliate of any of them may act as Paying
Agent, Registrar or co-registrar.
4. Registration Rights.
-------------------
The Holder of this Series A Security is entitled to the benefits of
the Registration Rights Agreement between the Company and the Initial
Purchasers, dated June 22, 1995, pursuant to which, subject to the terms and
conditions thereof, the Company is obligated to consummate the Registered
Exchange Offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for 10 1/2% Senior Notes due 2005, Series B
(herein called the "Series B Securities") in like principal amount as provided
therein. The Series A Securities and the Series B Securities are together
referred to as the "Securities." The Series A Securities rank pari passu in
right of payment with the Series B Securities.
5. Indenture; Limitations.
----------------------
The Company issued the Series A Securities under an Indenture dated as
of June 22, 1995 (the "Indenture"), between the Company and First Trust National
Association (the "Trustee"). Capitalized terms herein are used as defined in
the Indenture unless otherwise indicated. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act. The Securities are subject to all such terms, and
Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Security and the terms of
the Indenture, the terms of the Indenture shall control.
The Securities are general obligations of the Company. The Indenture
limits the original aggregate principal amount of the Series A Securities to
$200,000,000.
6. Optional Redemption.
-------------------
The Company may redeem all the Securities or any portion of the
Securities from time to time, on or after June 15, 2000, at the following
Redemption Prices (expressed as percentages of the principal amount) if redeemed
during the 12-month period beginning June 15 of the years indicated:
A-8
<PAGE>
Year Redemption Price
---- ----------------
2000........................ 105.250%
2001........................ 102.625%
2002 and thereafter......... 100.000%
of the principal amount, plus accrued and unpaid interest (if any) to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date).
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder to be redeemed at such
Holder's last address as it appears in the Security Register. Securities in
original denominations larger than $1,000 may be redeemed in part. On the
Redemption Date, interest ceases to accrue on Securities or portions of
Securities called for redemption, unless the Company defaults in the payment of
the Redemption Price.
8. Denominations; Transfer; Exchange.
---------------------------------
If this Series A Security is in certificated form, then as provided in
the Indenture and subject to certain limitations therein set forth, the transfer
of this Series A Security is registrable on the Security Register of the
Company, upon surrender of this Series A Security for registration of transfer
at the office or agency of the Company maintained for such purpose in The City
of New York or at such other office or agency of the Company as may be
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar
duly executed by, the Holder hereof or its attorney duly authorized in writing,
and thereupon one or more new Series A Securities, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferree or transferees.
If this Series A Securities is a Restricted Security in certificated
form, then as provided in the Indenture and subject to certain limitations
therein set forth, the Holder, provided it is a Qualified Institutional Buyer,
may exchange this Series A Security for a Book-Entry Security by instructing the
Trustee (by completing the Transferee Certificate in the form attached to this
Security) to arrange for such Series A Security to be represented by a
beneficial interest in a Global Security in accordance with the customary
procedures of the Depository, unless the Company has elected not to issue a
Global Security.
If this Series A Security is a Global Security, it is exchangeable for
a Series A Security in certificated form only if (x) the Depository is at any
time unwilling or
A-9
<PAGE>
unable to continue as depository and a successor depository is not appointed by
the Company within 30 days or (y) there shall have occurred and be continuing an
Event of Default or (z) the Company may at any time determine not to have Series
A Securities represented by a Global Security. In addition, in accordance with
the provisions of the Indenture and subject to certain limitations therein set
forth, an owner of a beneficial interest in a Global Security which is a Series
A Security may request a Series A Security in certificated form, in exchange in
whole or in part, as the case may be, for such beneficial owner's interest in
the Global Security. In any such instance, an owner of a beneficial interest in
a Global Security will be entitled to physical delivery in certificated form of
Series A Securities in authorized denominations equal in aggregate principal
amount to such beneficial interest and to have such Series A Securities
registered in its name.
Series A Securities in certificated form are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Series A Securities are exchangeable for a
like aggregate principal amount of Securities of a differing authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange or redemption of Series A Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
9. Rule 144A Information.
---------------------
At any time when the Company is not subject to Section 13 or 15(d) of
the Exchange Act, upon the written request of a Holder of a Series A Security,
the Company will promptly furnish or cause to be furnished such information as
is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto) to such Holder or to a prospective purchaser of
such Series A Security who such Holder informs the Company is reasonably
believed to be a "Qualified Institutional Buyer" within the meaning of Rule 144A
under the Securities Act, as the case may be, in order to permit compliance by
such Holder with Rule 144A under the Securities Act.
10. Persons Deemed Owners.
---------------------
A Holder may be treated as the owner of a Security for all purposes.
11. Unclaimed Money.
---------------
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the
A-10
<PAGE>
Company for payment, unless an abandoned property law
designates another person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Securities (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Securities, except in
certain circumstances for certain sections thereof, and (b) to the Stated
Maturity, the Company will be discharged from certain covenants set forth in the
Indenture.
13. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Securities then outstanding, and any
existing default or compliance with any provision may be waived with the consent
of the Holders of a majority in aggregate principal amount of the Securities
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Securities to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Securities in addition to or in place of certificated Securities and make any
change that does not adversely affect the rights of any Holder.
14. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to pay dividends, create Liens, enter into sale-
leaseback transactions, sell assets, engage in transactions with Affiliates or
incur Indebtedness. At the end of each fiscal year, the Company must report to
the Trustee on compliance with such limitations.
15. Successor Corporations.
----------------------
When a successor person or other entity assumes all the obligations of
its predecessor under the Securities and the Indenture, the predecessor person
will be released from those obligations.
16. Defaults and Remedies.
---------------------
An Event of Default is: a default in payment of principal of or
premium, if any, on the Securities; default in the payment of interest on the
Securities for 30 days; failure by the Company for 30 days after notice to it to
comply with any of its other agreements in the Indenture; certain events of
bankruptcy or insolvency; certain final
A-11
<PAGE>
judgments which remain undischarged; and certain events of default on other
Indebtedness of the Company and/or one or more of its Significant Subsidiaries.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable. If a
bankruptcy or insolvency default with respect to the Company occurs and is
continuing, the Securities automatically become due and payable. Holders may
not enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of at
least a majority in principal amount of the Securities then outstanding may
direct the Trustee in its exercise of any trust or power.
17. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
--------------------------
No stockholder, director, officer, employee or incorporator as such,
past, present or future, of the Company or any successor corporation shall have
any liability for any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
19. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
20. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Terra
Industries Inc., 600 Fourth Street, Terra Centre, Sioux City, Iowa 51101,
Attention: Chief Financial Officer.
A-12
<PAGE>
I or we assign and transfer this Security to:
- --------------------------------------------
Please insert social security or other identifying number of assignee
- ---------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Print or type name, address and zip code of assignee and irrevocably
appoint
---------------------------------------------------------------------
[Agent], to transfer this Security on the books of the Company. The Agent may
substitute another to act for him.
Dated Signed
----------------------------- -----------------------------
- ----------------------------------------------------------------------------
(Sign exactly as name appears on the other side of this Security)
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant
to Section 4.10 or Section 4.11, as applicable, of the Indenture, check the
Box: [_].
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 4.10 or Section 4.11 as applicable, of the
Indenture, state the amount (in original principal amount):
$ .
---------------
Date: Your Signature:
---------------------- ---------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
-----------------------------------------------
A-14
<PAGE>
(FACE OF SERIES B SECURITY)
[Legend if Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TERRA INDUSTRIES INC.
10 1/2% Senior Note due 2005, Series B
NO. CUSIP NO. 880915 -- --
TERRA INDUSTRIES INC., a Maryland corporation (the "Company," which
term includes any successor corporation) under the Indenture hereinafter
referred to, for value received, promises to pay to ________________ or
registered assigns, the principal sum of ______________ ($_________) in United
States dollars on June 15, 2005, at the office or agency of the Company referred
to below, and to pay interest thereon from June 22, 1995, or from the most
recent Interest Payment Date to which
A-15
<PAGE>
interest has been paid or duly provided for, semiannually on June 15 and
December 15, in each year, commencing December 15, 1995 at the rate of 10 1/2%
per annum, in United States dollars, until the principal hereof is paid or duly
provided for; provided that to the extent interest has been paid or duly
provided for with respect to the Series A Security exchanged for this Series B
Security, interest on this Series B Security shall accrue from the most recent
Interest Payment Date to which such interest on the Series A Security has been
paid or duly provided for. In addition, for any period in which the Series A
Security exchanged for this Series B Security was outstanding, in the event that
either (a) an Exchange Offer Registration Statement is not filed by the Company
with the Commission in connection with a Registered Exchange Offer on or prior
to July 22, 1995, (b) such Exchange Offer Registration Statement is not declared
effective by the Commission on or prior to September 20, 1995, or (c) (i) the
Registered Exchange Offer is not consummated on or prior to October 20, 1995 or
(ii) a Shelf Registration Statement has not been declared effective on or prior
to October 20, 1995 in the event the Registered Exchange Offer is not
consummated or a Shelf Registration has been requested by the Initial
Purchasers, the interest rate borne by the Securities shall be increased (an
"Interest Rate Increase") by one-quarter of one percent per annum; commencing
July 22, 1995 in the case of (a) above, commencing September 20, 1995 in the
case of (b) above, commencing October 20, 1995 in the case of (c) above;
provided that the aggregate increase in such interest rate from the original
interest rate will in no event exceed one percent per annum; provided, further,
that upon the filing of an Exchange Offer Registration Statement, in the case of
(a) above, the effectiveness of the Exchange Offer Registration Statement in the
case of (b) above, or the effectiveness of the Shelf Registration Statement or
the day before the date of the consummation of the Registered Exchange Offer, as
the case may be, in the case of (c) above, the interest rate borne by the
Securities shall from the date of such filing, effectiveness or day before the
date of consummation, as the case may be, be reduced by the full amount of any
such Interest Rate Increase; and provided, further, that to the extent interest
at such increased interest rate has been paid or duly provided for with respect
to the Series A Security exchanged for this Series B Security, interest at such
increased interest rate, if any, on this Series B Security shall accrue from the
most recent Interest Payment Date to which such interest on the Series A
Security has been paid or duly provided for.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be June 1 or December 1 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date. Any such
interest paid or duly provided for within 30 days after the Interest Payment
Date on which such interest payment was due will, as provided in such
Indenture, be paid to such Person, together with interest on such past due
interest payment at the interest rate borne by the Series B Securities, to the
extent lawful. Any
A-16
<PAGE>
such interest not so paid, or duly provided for, and interest on such defaulted
interest at the interest rate borne by the Series B Securities, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and shall be paid to the Person in whose name this Security (or one or
more predecessor Securities) is registered at the close of business on a special
record date for the payment of such defaulted interest which shall be the
fifteenth day next preceding the date fixed by the Company for the payment of
default interest, notice whereof shall be given to Holders of Securities not
less than 15 days prior to such special record date.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
TERRA INDUSTRIES INC.
By: _________________________________
Title: ______________________________
By: _________________________________
Title: ______________________________
A-17
<PAGE>
(Form of Trustee's Certificate of Authentication)
This is one of the 10 1/2% Senior Notes due 2005, Series B described
in the within-mentioned Indenture.
Dated: __________, ____
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By: ______________________________
Authorized Signature
A-18
<PAGE>
(REVERSE SIDE OF SERIES B SECURITY)
TERRA INDUSTRIES INC.
10 1/2% Senior Note due 2005, Series B
1. Principal and Interest.
----------------------
The Company will pay the principal of this 10 1/2% Senior Note due
2005, Series B (a "Series B Security") on June 15, 2005.
The Company promises to pay interest on the principal amount of this
Security on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of record of the
Securities at the close of business on June 1 or December 1 immediately
preceding the applicable Interest Payment Date) on each Interest Payment Date,
commencing December 15, 1995; provided that to the extent interest has been paid
or duly provided for with respect to the Series A Security exchanged for this
Series B Security, interest on this Series B Security shall accrue from the most
recent Interest Payment Date to which such interest on the Series A Security has
been paid or duly provided for. Interest on the Securities will accrue from the
most recent date to which interest has been paid, or, if no interest has been
paid, from June 22, 1995; provided, however, that, if there is no existing
default in the payment of interest and if this Security is authenticated between
a Regular Record Date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such Interest Payment Date.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate of 10 1/2% per annum.
2. Method of Payment.
-----------------
The Company will pay interest (except defaulted interest) on the
principal amount of the Securities on each June 15 and December 15, commencing
December 15, 1995, to the persons who are Holders (as reflected in the Security
Register) at the close of business on the June 1 or December 1 immediately
preceding the applicable Interest Payment Date, in each case, even if the
Security is cancelled on registration of transfer or registration of exchange
after such payment date; provided, however, that, with respect to the payment of
principal, the Company will make payment to the Holder that surrenders this
Security to a Paying Agent on or after June 15, 2005. The Company will pay
principal, premium, if any, and interest in money of the United States that at
the time of
A-19
<PAGE>
payment is legal tender for payment of public and private debts. However, with
respect to Securities in certificated form, the Company may pay interest by
check mailed to the address of the Person entitled thereto as such address shall
appear on the Security Register. If a payment date is a date other than a
Business Day at a place of payment, payment may be made at that place on the
next succeeding day that is a Business Day and no interest shall accrue for the
intervening period.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice. The Company,
any Subsidiary of the Company, or any Affiliate of any of them may act as Paying
Agent, Registrar or co-registrar.
4. Registration Rights.
-------------------
The Series B Securities were issued pursuant to the Registered
Exchange Offer pursuant to which the 10 1/2% Senior Notes due 2005, Series A
(herein called the "Series A Securities") in like principal amount were
exchanged for the Series B Securities. The Series A Securities and the Series B
Securities are together referred to as the "Securities." The Series B
Securities rank pari passu in right of payment with the Series A Securities.
5. Indenture; Limitations.
----------------------
The Company issued the Series B Securities under an Indenture dated as
of June 22, 1995 (the "Indenture"), between the Company and First Trust National
Association (the "Trustee"). Capitalized terms herein are used as defined in
the Indenture unless otherwise indicated. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act. The Securities are subject to all such terms, and
Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Security and the terms of
the Indenture, the terms of the Indenture shall control.
The Securities are general obligations of the Company. The Indenture
limits the original aggregate principal amount of the Series B Securities to
$200,000,000.
6. Optional Redemption.
-------------------
The Company may redeem all the Securities or any portion of the
Securities from time to time, on or after June 15, 2000, at the following
Redemption Prices (expressed as percentages of the principal amount) if redeemed
during the 12-month period beginning June 15 of the years indicated:
A-20
<PAGE>
Year Redemption Price
---- ----------------
2000......................... 105.250%
2001......................... 102.625%
2002 and thereafter.......... 100.000%
of the principal amount, plus accrued and unpaid interest (if any) to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date).
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder to be redeemed at such
Holder's last address as it appears in the Security Register. Securities in
original denominations larger than $1,000 may be redeemed in part. On the
Redemption Date, interest ceases to accrue on Securities or portions of
Securities called for redemption, unless the Company defaults in the payment of
the Redemption Price.
8. Denominations; Transfer; Exchange.
---------------------------------
If this Series B Security is in certificated form, then as provided in
the Indenture and subject to certain limitations therein set forth, the transfer
of this Series B Security is registrable on the Security Register of the
Company, upon surrender of this Series B Security for registration of transfer
at the office or agency of the Company maintained for such purpose in The City
of New York or at such other office or agency of the Company as may be
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar
duly executed by, the Holder hereof or its attorney duly authorized in writing,
and thereupon one or more new Series B Securities, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
In addition, the Company may at any time determine not to have Series
B Securities represented in certificated form, in which event the Holder of a
Series B Security in certificated form may be required to exchange this Series B
Security for a Book-Entry Security.
If this Series B Security is a Global Security, it is exchangeable for
a Series B Security in certificated form only if (x) the Depository is at any
time unwilling or unable to continue as depository and a successor depository is
not appointed by the Company within 30 days or (y) there shall have occurred and
be continuing an Event of Default or (z) the Company may at any time determine
not to have Series B Securities represented by a Global Security. In addition,
in accordance with the provisions of the
A-21
<PAGE>
Indenture and subject to certain limitations therein set forth, an owner of a
beneficial interest in a Global Security which is a Series B Security may
request a Series B Security in certificated form, in exchange in whole or in
part, as the case may be, for such beneficial owner's interest in the Global
Security. In any such instance, an owner of a beneficial interest in a Global
Security will be entitled to physical delivery in certificated form of Series B
Securities in authorized denominations equal in aggregate principal amount to
such beneficial interest and to have such Series B Securities registered in its
name.
Series B Securities in certificated form are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set foth, the Series B Securities are exchangeable for a
like aggregate principal amount of Securities of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange or redemption of Series B Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
9. Rule 144A Information.
At any time when the Company is not subject to Section 13 or 15(d) of
the Exchange Act, upon the written request of a Holders of a Series B Security,
the Company will promptly furnish or cause to be furnished such information as
is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto) to such Holder or to a prospective purchaser of
such Series B Security who such Holder informs the Company is reasonably
believed to be a "Qualified Institutional Buyer" within the meaning of Rule 144A
under the Securities Act designated by such Holders, as the case may be, in
order to permit compliance by such Holder with Rule 144A under the Securities
Act.
10. Persons Deemed Owners.
A Holder may be treated as the owner of a Security for all purposes.
11. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
A-22
<PAGE>
12. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Securities (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Securities, except in
certain circumstances for certain sections thereof, and (b) to the Stated
Maturity, the Company will be discharged from certain covenants set forth in the
Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Securities then outstanding, and any
existing default or compliance with any provision may be waived with the consent
of the Holders of a majority in aggregate principal amount of the Securities
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Securities to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Securities in addition to or in place of certificated Securities and make any
change that does not adversely affect the rights of any Holder.
14. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to pay dividends, create Liens, enter into sale-
leaseback transactions, sell assets, engage in transactions with Affiliates or
incur Indebtedness. At the end of each fiscal year, the Company must report to
the Trustee on compliance with such limitations.
15. Successor Corporations.
When a successor person or other entity assumes all the obligations of
its predecessor under the Securities and the Indenture, the predecessor person
will be released from those obligations.
16. Defaults and Remedies.
An Event of Default is: a default in payment of principal of or
premium, if any, on the Securities; default in the payment of interest on the
Securities for 30 days; failure by the Company for 30 days after notice to it to
comply with any of its other agreements in the Indenture; certain events of
bankruptcy or insolvency; certain final judgments which remain undischarged; and
certain events of default on other Indebtedness of the Company and/or one or
more of its Significant Subsidiaries.
A-23
<PAGE>
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable. If a
bankruptcy or insolvency default with respect to the Company occurs and is
continuing, the Securities automatically become due and payable. Holders may
not enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of at
least a majority in principal amount of the Securities then outstanding may
direct the Trustee in its exercise of any trust or power.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator as such,
past, present or future, of the Company or any successor corporation shall have
any liability for any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
20. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Terra
Industries Inc., 600 Fourth Street, Terra Centre, Sioux City, Iowa 51101,
Attention: Chief Financial Officer.
A-24
<PAGE>
I or we assign and transfer this Security to:
- --------------------------------------------
Please insert social security or other identifying number of assignee
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Print or type name, address and zip code of assignee and irrevocably
appoint________________________________________________________________
[Agent], to transfer this Security on the books of the Company. The Agent may
substitute another to act for him.
Dated ____________________ Signed ______________________
________________________________________________________________________
(Sign exactly as name appears on the other side of this Security)
A-25
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 4.10 or Section 4.11, as applicable, of the Indenture, check the Box:
[ ].
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 4.10 or Section 4.11 as applicable, of the
Indenture, state the amount (in original principal amount):
$ _______________.
Date: ___________________ Your Signature: _____________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee: __________________________________
A-26
<PAGE>
APPENDIX I
FORM OF TRANSFEREE CERTIFICATE
Date:
------------------
TERRA INDUSTRIES INC.
c/o First National Trust Assocition
First Trust Center
180 East 5th Street, Suite 200
St. Paul, MN 55101
Dear Sirs:
I. We hereby request that $ aggregate principal amount of
10 1/2% Senior Notes due 2005, Series A (the "Notes") of Terra Industries Inc.
(the "Company"), be registered in the name set forth below and confirm that
either:
A. For Transfers Other Than to Qualified Institutional Buyers:
[Check One]
[_] (1) each person in whose name the Notes are to be registered
upon transfer (or, in the case of a transfer to a nominee, each
beneficial owner of such Notes) has been advised that such Notes have
been sold or transferred to it in reliance upon Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), and the
address of the person in whose name the Notes are to be registered
upon transfer is an address outside the United States (as defined in
Regulation S) and such person is not a U.S. Person (as defined in
Regulation S).
[_] (2) the new beneficial owner is an institutional investor and
an "accredited investor" (as defined in Regulation D under the
Securities Act) that is acquiring the Notes for investment purposes
and not for distribution; it has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of its investment in the Notes, and it and any
accounts for which it is acting are each able to bear the economic
risk or its investment; and it is acquiring the Notes purchased by its
for its own account or for one or more accounts as to each of which it
exercises sole investment discretion.
A-27
<PAGE>
If this letter is being completed by a prospective purchaser, the
undersigned purchaser confirms that the Notes will only be transferred in
accordance with the provisions of the Indenture, dated as of , 1995,
between Terra Industries Inc. and First Trust National Association, as Trustee,
pursuant to which the Notes were issued, and the legend on the Notes, and
further, that it understands that, in connection with any such transfer, the
Company and the Trustee may request, and if so requested the undersigned
purchaser will furnish, such certificates and other information as may be
required to confirm that any such transfer complies with the restrictions set
forth therein.
B. For Transfers to Qualified Institutional Buyers:
[_] The Notes are being transferred to a "Qualified Institutional Buyer" (as
defined in Rule 144A under the Securities Act), which person has been advised
that the Notes have been sold or transferred to it in reliance upon Rule 144A,
and such person wishes the Trustee to arrange for such Notes to be represented
by a beneficial interest in a global security and held in book-entry form in
accordance with the customary procedures of The Depository Trust Company.
II. The Notes should be registered as follows (unless the box under
I.B above is checked):
Name:
Address:
Tax Identification Number:
Physical Location of Notes (including address):
Contact:
III. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:
-----------------------------------
Title:
A-28
<PAGE>
Exhibit 4.3
-------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE 22, 1995
AMONG
TERRA INDUSTRIES INC.
AND
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
AND
CITICORP SECURITIES, INC.
-------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into this 22nd day of June, 1995, among Terra Industries Inc., a Maryland
corporation (the "Company"), and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Citicorp Securities, Inc. (collectively, the "Initial
Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated June 15,
1995, among the Company and the Initial Purchasers (the "Purchase Agreement"),
which provides for the sale by the Company to the Initial Purchasers of an
aggregate of $200 million principal amount of the Company's 10 1/2% Senior Notes
due 2005, Series A (the "Securities"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Company has agreed to
provide to the Initial Purchasers and their direct and indirect transferees the
registration rights set forth in this Agree ment. The execution of this
Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of l934, as amended
from time to time.
"Closing Date" shall mean the Closing Time as defined in the Purchase
Agreement.
1
<PAGE>
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company, provided, however, that such depositary
must have an address in the Borough of Manhattan, in the City of New York.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2.1 hereof.
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2.1 hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement,
including the Prospectus contained therein, all exhibits thereto and all
documents incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2.1
hereof.
"Exchange Securities" shall mean the 10 1/2% Senior Notes due 2005,
Series B issued by the Company under the Indenture containing terms identical to
the Securities in all material respects (except for references to series,
certain interest rate provisions, restrictions on transfers and restrictive
legends), to be offered to Holders of Securities in exchange for Registrable
Securities pursuant to the Exchange Offer.
"Holder" shall mean an Initial Purchaser, for so long as it owns any
Registrable Securities, and each of its successors, assigns and direct and
indirect transferees for so long as such Person is a registered owner of
Registrable Securities under the Indenture.
"Indenture" shall mean the Indenture relating to the Securities, dated
as of June 22, 1995, between the Company and First Trust National Association,
as trustee, as the same may be amended, supplemented, waived or otherwise
modified from time to time in accordance with the terms thereof.
2
<PAGE>
"Initial Purchaser" or "Initial Purchasers" shall have the meaning set
forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities; provided that
whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company, any other obli gor on the Securities or any affiliate of the Company
shall be disregarded in determining whether such consent or approval was given
by the Holders of such required percentage amount.
"Participating Broker-Dealer" shall mean Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Citicorp Securities, Inc. and any other broker-dealer
which makes a market in the Securities with the prior written consent of the
Company and exchanges Registrable Securities in the Exchange Offer for Exchange
Securities.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including any such
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Shelf Registration Statement, and by
all other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble.
"Registrable Securities" shall mean the Securities; provided, however,
that Securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to such Securities shall have been declared effective
under the 1933 Act and such Securities shall have been disposed of pursuant to
such Registration Statement, (ii) such Securities have been sold to the public
pursuant to Rule
3
<PAGE>
l44(k) (or any similar provision then in force, but not Rule 144A) under the
1933 Act, (iii) such Securities shall have ceased to be outstanding or (iv)
such Securities have been exchanged for Exchange Securities upon the
consummation of the Exchange Offer (except in the case of Securities
purchased from the Company and continued to be held by the Initial
Purchasers).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and filing fees,
including, if applicable, the customary fees and expenses of any "qualified
independent underwriter" (and its counsel) in connection with any such
entity's performing the duties of a "qualified independent underwriter" that
is required to be retained by any holder of Registrable Securities in
accordance with the rules and regulations of the NASD, (ii) all fees and
expenses incurred in connection with compliance with state securities or
blue sky laws and compliance with the rules of the NASD (including
reasonable fees and disbursements of counsel for any underwriters or Holders
in connection with blue sky qualification of any of the Exchange Securities
or Registrable Securities), (iii) all expenses of any Persons in preparing
or assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the
listing of any of the Registrable Securities on any securities exchange or
exchanges if and to the extent required under this Agreement, (v) all
rating agency fees, (vi) the fees and disbursements of counsel for the
Company and of the independent public accountants of the Company, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, (vii) the fees and expenses of
the Trustee, and any escrow agent or custodian, (viii) the reasonable fees
and disbursements of Fried, Frank, Harris, Shriver & Jacobson, special
counsel representing the Holders of Registrable Securities or the Initial
Purchasers if and to the extent necessary under this Agreement and (ix) any
fees and disbursements of the underwriters customarily required to be paid
by issuers or sellers of securities and the fees and expenses of any special
experts retained by the Company in connection with any Registration
Statement, but excluding underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of Registrable
Securities by a Holder.
4
<PAGE>
"Registration Statement" shall mean any registration statement of the
Company which covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement, and all amendments
and supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2.2 of this
Agreement which covers all of the Registrable Securities on an appropriate
form under Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Securities under
the Indenture.
5
<PAGE>
2. Registration Under the 1933 Act.
2.1 Exchange Offer. The Company shall (A) use its best efforts to prepare
and, not later than 30 days following the Closing Date, file with the SEC an
Exchange Offer Registration Statement with respect to the proposed Exchange
Offer and the issuance and delivery to the Holders, in exchange for the
Registrable Securities, a like principal amount of Exchange Securities, (B) use
its best efforts to cause the Exchange Offer Registration Statement to be
declared effective under the 1933 Act within 90 days of the Closing Date, (C)
use its best efforts to keep the Exchange Offer Registration Statement
effective until the closing of the Exchange Offer and (D) use its best efforts
to cause the Exchange Offer to be consummated not later than 120 days following
the Closing Date. The Exchange Securities will be issued under the Indenture.
Upon the effectiveness of the Exchange Offer Registration Statement, the Company
shall promptly commence the Exchange Offer, it being the objective of such
Exchange Offer to enable each Holder eligible and electing to exchange
Registrable Securities for Exchange Securities (assuming that such Holder is not
an affiliate of the Company within the meaning of Rule 405 under the 1933 Act
and is not a broker-dealer tendering Registrable Securities acquired directly
from the Company for its own account, acquires the Exchange Securities in the
ordinary course of such Holder's business and has no arrangements or
understandings with any person to participate in the Exchange Offer for the
purpose of distributing the Exchange Securities) to transfer such Exchange
Securities from and after their receipt without any limitations or restrictions
under the 1933 Act and without material restrictions under the securities laws
of a substantial proportion of the several states of the United States.
In connection with the Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Exchange Offer open for acceptance for a period of not
less than 30 calendar days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
(c) utilize the services of the Depositary for the Exchange Offer;
6
<PAGE>
(d) permit Holders to withdraw tendered Registrable Securities at any
time prior to 5:00 p.m. (Eastern Standard Time), on the last business day of the
Exchange Period, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for exchange,
and a statement that such Holder is withdrawing his election to have such
Securities exchanged;
(e) notify each Holder that any Registrable Security not tendered will
remain outstanding and continue to accrue interest, but will not retain any
rights under this Agreement (except in the case of the Initial Purchasers and
Participating Broker-Dealers as provided herein); and
(f) otherwise comply in all material respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the Company
shall:
(i) accept for exchange all Registrable Securities duly
tendered and not validly withdrawn pursuant to the Exchange Offer in
accordance with the terms of the Exchange Offer Registration
Statement and the related letter of transmittal;
(ii) deliver to the Trustee for cancellation all Registrable
Securities so accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Securities to each Holder of Registrable Securities so
accepted for exchange in a principal amount equal to the principal
amount of the Registrable Securities of such Holder so accepted for
exchange.
Interest on each Exchange Security will accrue from the last date on
which interest was paid on the Registrable Securities surrendered in exchange
therefor or, if no interest has been paid on the Registrable Securities, from
the date of original issuance. The Exchange Offer shall not be subject to any
conditions, other than (i) that the Exchange Offer, or the making of any
exchange by a Holder, does not violate applicable
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law or any applicable interpretation of the staff of the SEC, (ii) the due
tendering of Registrable Securities in accordance with the Exchange Offer, (iii)
that each Holder of Registrable Securities exchanged in the Exchange Offer shall
have represented that all Exchange Securities to be received by it shall be
acquired in the ordinary course of its business and that at the time of the
consummation of the Exchange Offer it shall have no arrangement or understanding
with any person to participate in the distribution (within the meaning of the
1933 Act) of the Exchange Securities, is not an affiliate of the Company nor a
broker-dealer tendering Securities acquired directly from the Company for its
own account and shall have made such other representations as may be reasonably
necessary under applicable SEC rules, regulations or interpretations to render
the use of Form S-4 or other appropriate form under the 1933 Act available, (iv)
that no action or proceeding shall have been instituted or threatened in any
court or by or before any governmental agency with respect to the Exchange
Offer which, in the Company's judgment, would reasonably be expected to impair
the ability of the Company to proceed with the Exchange Offer and (v) that there
shall not have been adopted or enacted any law, statute, rule or regulation
which, in the Company's judgment, would reasonably be expected to materially
impair the ability of the Company to proceed with the Exchange Offer. The
Company shall inform the Initial Purchasers of the names and addresses of the
Holders to whom the Exchange Offer is made, and the Initial Purchasers shall
have the right, subject to applicable law, to contact such Holders and otherwise
facilitate the tender of Registrable Securities in the Exchange Offer.
2.2 Shelf Registration. (i) If, because of any change in law, SEC
rules or regulations or applicable interpretations thereof by the staff of the
SEC, the Company is not permitted to effect the Exchange Offer as contemplated
by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer
Registration Statement is not consummated within 120 days of the date hereof,
(iii) upon the request of the Initial Purchasers before 60 days after the
consummation of the Exchange Offer, or on such later date as may be mutually
agreed upon by the Company and the Initial Purchasers, with respect to the
Registrable Securities held by them on or before consummation of the Exchange
Offer which constitute a portion of the Registrable Securities originally
purchased from the Company (and not Registrable Securities subsequently acquired
by the Initial Purchasers as Participating Broker-Dealers in connection with
market making activities), or (iv) if a Holder is not permitted to participate
in the Exchange Offer or would not receive fully tradable Exchange Securities
pursuant to the Exchange Offer if it were to participate in the Exchange Offer
and so notifies the Company within 45 days following the consummation of the
Exchange Offer (and providing a
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<PAGE>
reasonable basis for its conclusions), the Company shall, at its cost:
(a) Use its best efforts to prepare, and as promptly as
practicable, file with the SEC, and thereafter shall use its best
efforts to cause to be declared effective as promptly as practicable, a
Shelf Registration Statement relating to the offer and sale of the
Registrable Securities by the Holders from time to time in accordance
with the methods of distribution elected by the Majority Holders and
set forth in such Shelf Registration Statement.
(b) Use its best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the prospectus forming part
thereof to be usable by Holders for a period of three years from the
date the Shelf Registration Statement is declared effective by the SEC
(or one year from the date the Shelf Registration Statement is declared
effective if such Shelf Registration Statement is filed upon the
request of the Initial Purchasers pursuant to clause (iii) above), or
for such shorter period that will terminate when all Registrable
Securities covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement or cease to be outstanding
or otherwise to be Registrable Securities.
(c) Notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
supplement thereto complies in all material respects with the 1933
Act and the rules and regulations thereunder, (ii) any Shelf
Registration Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Shelf Registration Statement, and any
supplement to such Prospectus (as amended or supplemented from time to
time), does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements, in
light of the circumstances under which they were made, not misleading.
The Company further agrees, if necessary, to supplement or amend the Shelf
Registration Statement, as required by Section 3(b) below, and to furnish to the
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<PAGE>
Holders of Registrable Securities copies of any such supplement or amendment
promptly after its being used or filed with the SEC.
2.3 Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2.1 or 2.2. With respect
to Registration Expenses described in clause (viii) of the definition of
Registration Expenses, the Company shall not be obligated to make any payments
in connection with the registration pursuant to Section 2.1 and shall pay no
more than forty-five thousand dollars ($45,000.00) plus reasonable disbursements
in connection with the registration pursuant to Section 2.2. Other than
Registration Expenses, each Holder shall pay all expenses of its counsel,
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement.
2.4 Effectiveness. (a) The Company will be deemed not to have used its
best efforts to cause the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, to become, or to remain, effective
during the requisite period if the Company voluntarily takes any action that
would directly result in any such Registration Statement not being declared
effective or in the holders of Registrable Securities covered thereby not being
able to exchange or offer and sell such Registrable Securities during that
period as and to the extent contemplated hereby, unless such action is required
by applicable law.
(b) An Exchange Offer Registration Statement pursuant to Section 2.1 hereof
or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be
deemed to have become effective unless it has been declared effective by the
SEC; provided, however, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to a Shelf Registration Statement is
prohibited by any stop order, injunction or other order or requirement of the
SEC or any other governmental agency or court, such Registration Statement will
be deemed not to have become effective during the period of such interference,
until the offering of Registrable Securities pursuant to such Registration
Statement may legally resume.
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3. Registration Procedures.
In connection with the obligations of the Company with respect to
Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company
shall use its best efforts to:
(a) prepare and file with the SEC a Registration Statement, within the
relevant time period specified in Section 2, on the appropriate form under the
1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the
case of a Shelf Registration, be available for the sale of the Registrable
Securities by the selling Holders entitled hereunder to the benefits thereof
and (iii) shall comply as to form in all material respects with the requirements
of the applicable form and include or incorporate by reference all financial
statements required by the SEC to be filed therewith or incorporated by
reference therein, and use its best efforts to cause such Registration Statement
to become effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary under applicable
law to keep such Registration Statement effective for the applicable period; and
cause each Prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933 Act and
comply with the provisions of the 1933 Act applicable to them with respect to
the disposition of all securities covered by each Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities, at least five business days prior to filing, that a
Shelf Registration Statement with respect to the Registrable Securities is
being filed and advising such Holders that the distribution of Registrable
Securities will be made in accordance with the method selected by the Majority
Holders; (ii) furnish to each Holder of Registrable Securities and to each
underwriter of an underwritten offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other documents as
such Holder or underwriter may reasonably request, including financial
statements and schedules and, if the Holder so requests, all exhibits in order
to facilitate the public sale or other disposition of the Registrable
Securities; and (iii) hereby consent to the use (in compliance with applicable
law) of the Prospectus or any amendment or supplement
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<PAGE>
thereto by each of the selling Holders of Registrable Securities in connection
with the offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(d) use its best efforts to register or qualify the Registrable Securities
under all applicable state securities or "blue sky" laws of such jurisdictions
as any Holder of Registrable Securities covered by a Registration Statement and
each underwriter of an underwritten offering of Registrable Securities shall
reasonably request by the time the applicable Registration Statement is declared
effective by the SEC, and do any and all other acts and things which may be
reasonably necessary or advisable to enable each such Holder and underwriter to
consummate the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder in accordance with such Registration Statement;
provided, however, that the Company shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d), or (ii)
take any action which would subject it to general service of process or
taxation in any such jurisdiction where it is not then so subject;
(e) notify promptly each Holder of Registrable Securities under a Shelf
Registration or any Participating Broker-Dealer who has notified the Company
that it is utilizing the Exchange Offer Registration Statement as provided in
paragraph (f) below and, if requested by such Holder or Participating Broker-
Dealer, confirm such advice in writing promptly (i) when any such Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the SEC or any
state securities authority for post-effective amendments and supplements to any
such Registration Statement and related Prospectus or for additional
information after any such Registration Statement has become effective, (iii) of
the issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of any such Registration Statement or the
initiation of any proceedings for that purpose, (iv) in the case of a Shelf
Registration, if, between the effective date of any such Registration Statement
and the closing of any sale of Registrable Securities covered thereby, the
representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material respects,
(v) in the case of a Shelf Registration, of the happening of any event or the
discovery of any facts during the period a Shelf Registration Statement is
effective which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material
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<PAGE>
respect or which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not misleading
and (vi) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities or the Exchange
Securities, as the case may be, for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose;
(f) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution" which section shall be reasonably acceptable to the Initial
Purchasers, and which shall contain a summary statement of the positions taken
or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that holds Registrable Securities
acquired for its own account as a result of market-making activities or other
trading activities and that will be the beneficial owner (as defined in Rule
13d-3 under the Exchange Act) of Exchange Securities to be received by such
broker-dealer in the Exchange Offer, whether such positions or policies have
been publicly disseminated by the staff of the SEC or such positions or
policies, in the reasonable judgment of the Initial Purchasers and its counsel,
represent the prevailing views of the staff of the SEC, including a statement
that any such broker-dealer who receives Exchange Securities for Registrable
Securities pursuant to the Exchange Offer may be deemed a statutory underwriter
and must deliver a prospectus meeting the requirements of the 1933 Act in
connection with any resale of such Exchange Securities, (ii) furnish to each
Participating Broker-Dealer who has delivered to the Company the notice
referred to in Section 3(e), without charge, as many copies of each Prospectus
included in the Exchange Offer Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, as such Participating
Broker-Dealer may reasonably request, (iii) hereby consent to the use of the
Prospectus forming part of the Exchange Offer Registration Statement or any
amendment or supplement thereto, by any person subject to the prospectus
delivery requirements of the SEC, including all Participating Broker-Dealers,
in connection with the sale or transfer of the Exchange Securities covered by
the Prospectus or any amendment or supplement thereto, and (iv) include in the
transmittal letter or similar documentation to be executed by an exchange
offeree in order to participate in the Exchange Offer (x) the following
provision:
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities, it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with any resale
of Exchange Securities received
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<PAGE>
in respect of such Registrable Securities pursuant to the Exchange
Offer;" and
(y) a statement to the effect that by a broker-dealer making the acknowledgment
described in clause (x) and by delivering a Prospectus in connection with the
exchange of Registrable Securities, the broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the 1933 Act;
(B) in the case of any Exchange Offer Registration Statement, the
Company agrees to deliver to the Initial Purchasers on behalf of the
Participating Broker-Dealers upon the effectiveness of the Exchange Offer
Registration Statement (i) an opinion of counsel substantially in the form
attached hereto as Exhibit A, (ii) an officers' certificate substantially in the
form customarily delivered in a public offering of debt securities and (iii) a
comfort letter in customary form if permitted by Statement on Auditing Standards
No. 72 of the American Institute of Certified Public Accountants; and
(C) notwithstanding anything else contained in this Agreement, the
Company shall not be required to amend or supplement the Prospectus contained in
the Exchange Offer Registration Statement, as would otherwise be contemplated by
Sections 3(b) or 3(k), for a period exceeding 180 days after the end of the
Exchange Period and Participating Broker-Dealers shall not be authorized by the
Company to deliver and shall not deliver such Prospectus after such period in
connection with the resales contemplated by this Section 3;
(g) (i) in the case of an Exchange Offer, furnish counsel for the Initial
Purchasers and (ii) in the case of a Shelf Registration, furnish counsel for the
Holders of Registrable Securities identified to the Company copies of any
request by the SEC or any state securities authority for amendments or
supplements to a Registration Statement and Prospectus or for additional
information;
(h) use its reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities covered thereby, and each underwriter, if any, without
charge, at least one conformed copy of each Registration Statement and any post-
effective amendment
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<PAGE>
thereto, including financial statements and schedules (without documents
incorporated therein by reference and all exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the selling Holders
of Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and enable such Registrable Securities to be in such
denominations (consistent with the provisions of the Indenture) and registered
in such names as the selling Holders or the underwriters, if any, may reasonably
request at least three business days prior to the closing of any sale of
Registrable Securities;
(k) in the case of a Shelf Registration, upon the occurrence of any event or
the discovery of any facts, each as contemplated by Section 3(e)(v) hereof, use
its best efforts to prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities or Participating
Broker-Dealers, such Prospectus will not contain at the time of such delivery
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(l) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with printed certificates for
the Exchange Securities or the Registrable Securities, as the case may be, in a
form eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust Indenture Act
of 1939 (the "TIA") in connection with the registration of the Exchange
Securities or Registrable Securities, as the case may be, (ii) cooperate with
the Trustee and the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms of
the TIA and (iii) execute, and use its best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
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<PAGE>
(n) in the case of a Shelf Registration, enter into customary agreements
(including underwriting agreements) and take all other customary and appropriate
actions in order to expedite or facilitate the disposition of such Registrable
Securities and in such connection whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration:
(i) to the extent possible, make such representations and
warranties to the Holders of such Registrable Securities and the
underwriters, if any, in form, substance and scope as are customarily
made by issuers to underwriters in similar underwritten offerings as
may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any,
and the holders of a majority in principal amount of the Registrable
Securities being sold) addressed to each selling Holder and the
underwriters, if any, covering the matters customarily covered in
opinions requested in sales of similar securities or underwritten
offerings and such other matters as may be reasonably requested by
such Holders and underwriters;
(iii) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
underwriters, if any, and use reasonable efforts to have such letter
addressed to the selling Holders of Registrable Securities (to the
extent consistent with Statement on Auditing Standards No. 72 of the
American Institute of Certified Public Accounts), such letters to be
in customary form and covering matters of the type customarily covered
in "cold comfort" letters to underwriters in connection with similar
underwritten offerings;
(iv) if requested, enter into a securities sales agreement with
the Holders and an agent of the Holders providing for, among other
things, the appointment of such agent for the selling Holders for the
purpose of soliciting purchases of Registrable Securities, which
agreement shall be in form, substance and scope customary for similar
offerings;
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<PAGE>
(v) if an underwriting agreement is entered into, cause the
same to set forth indemnification provisions and procedures
substantially equivalent to the indemnification provisions and
procedures set forth in Section 4 hereof with respect to the
underwriters and all other parties to be indemnified pursuant to said
Section including, at the request of any underwriters, in the form
customarily provided to such underwriters in similar types of
transactions; and
(vi) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings to the Holders of a majority in principal amount of the
Registrable Securities being sold and the managing underwriters, if
any.
The above shall be done, to the extent customary, at (i) the effectiveness of
such Registration Statement (and each post-effective amendment thereto) and
(ii) each closing under any underwriting or similar agreement as and to the
extent required thereunder;
(o) in the case of a Shelf Registration, make available for inspection by
representatives of the Holders of the Registrable Securities and any
underwriters participating in any disposition pursuant to a Shelf Registration
Statement and any counsel or accountant retained by such Holders or
underwriters, all financial and other records, pertinent corporate documents and
properties of the Company reasonably requested by any such persons, and cause
the respective officers, directors, employees, and any other agents of the
Company to supply all information reasonably requested by any such
representative, underwriter, special counsel or accountant in connection with a
Registration Statement;
(p) (i) in the case of an Exchange Offer Registration Statement, a
reasonable time prior to the filing of any Exchange Offer Registration
Statement, any Prospectus forming a part thereof, any amendment to an Exchange
Offer Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Initial Purchasers and make such changes
in any such document prior to the filing thereof as the Initial Purchasers may
reasonably request and, except as otherwise required by applicable law, not
file any such document in a form to which the Initial Purchasers on behalf of
the Holders of Registrable Securities shall reasonably object, and make the
representatives of the Company available for discussion of such documents as
shall be reasonably requested by the Initial Purchasers; and
17
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(ii) in the case of a Shelf Registration, a reasonable time prior to
filing any Shelf Registration Statement, any Prospectus forming a part thereof,
any amendment to such Shelf Registration Statement or amendment or supplement to
such Prospectus or documents incorporated by reference into a Registration
Statement or Prospectus, provide copies of such document to the Holders of
Registrable Securities, to the Initial Purchasers, to counsel on behalf of the
Holders identified to the Company and to the underwriter or underwriters of any
then contemplated underwritten offering of Registrable Securities, if any, make
such changes in any such document prior to the filing thereof as the Initial
Purchasers, the counsel to the Holders or the underwriter or underwriters
reasonably request and except as otherwise required by applicable law, not file
any such document in a form to which the Majority Holders or the Initial
Purchasers on behalf of the Holders of Registrable Securities or any underwriter
may reasonably object and make the representatives of the Company available for
discussion of such document as shall be reasonably requested by the Holders of
Registrable Securities, the Initial Purchasers on behalf of such Holders, or any
underwriter;
(q) in the case of a Shelf Registration, use its best efforts to cause all
Registrable Securities to be listed on any securities exchange on which 10 1/2%
Senior Notes due 2005, Series B of the Company are then listed if requested by
the Majority Holders, or if requested by the underwriter or underwriters of an
underwritten offering of Registrable Securities, if any;
(r) in the case of a Shelf Registration, use its best efforts to cause the
Registrable Securities to be rated by the appropriate rating agencies, if so
requested by the Majority Holders, or if requested by the underwriter or
underwriters of an underwritten offering of Registrable Securities, if any, if
such Registrable Securities have not theretofore been rated;
(s) otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering at least 12 months which
shall satisfy the provisions of Section 11(a) of the 1933 Act, including
pursuant to Rule 158 thereunder;
(t) cooperate and assist in any filings required to be made with the NASD
and, in the case of a Shelf Registration, in the performance of any reasonable
due diligence investigation by any underwriter and its counsel (including any
"qualified in-
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dependent underwriter" that is required to be retained in accordance with the
rules and regulations of the NASD); and
(u) upon consummation of an Exchange Offer, obtain a customary opinion of
counsel to the Company addressed to the Trustee for the benefit of all Holders
of Registrable Securities participating in the Exchange Offer, including that
(i) the Company has duly authorized, executed and delivered the Exchange
Securities and the related indenture, and (ii) each of the Exchange Securities
and related indenture constitute a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its respective terms
(with customary exceptions).
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Company such information
regarding the Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing. The Company may exclude from such registration the Registrable
Securities of any seller or Participating Broker-Dealer who fails to furnish
such information within a reasonable time after receiving such written request.
Each seller or Participating Broker-Dealer as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such seller or Participating Broker-Dealer, as the
case may be, not materially misleading.
In the case of a Shelf Registration Statement, each Holder agrees that, upon
receipt of any notice from the Company of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(v) hereof,
such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to a Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 3(k) hereof,
and, if so directed by the Company, such Holder will deliver to the Company (at
its expense) all copies in such Holder's possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice. If the
Company shall give any such notice to suspend the disposition of Registrable
Securities pursuant to a Shelf Registration Statement as a result of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(e)(v) hereof, the Company shall be deemed to have used its best
efforts to keep the Shelf Registration
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Statement effective during such period of suspension provided that the Company
shall use its best efforts to file and have declared effective (if an amendment)
as soon as practicable an amendment or supplement to the Shelf Registration
Statement and shall extend the period during which the Shelf Registration
Statement shall be maintained effective pursuant to this Agreement by the
number of days during the period from and including the date of the giving of
such notice to and including the date when the Holders shall have received
copies of the supplemented or amended Prospectus necessary to resume such
dispositions; provided that such period shall not extend beyond three years.
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in such
offering; provided that such underwriters are acceptable to the Company. No
Holder of Registrable Securities may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes, executes and delivers to the Company and any underwriter all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
4. Indemnification; Contribution.
-----------------------------
(a) The Company agrees to indemnify and hold harmless the Initial
Purchasers, each Holder, each Participating Broker-Dealer, each Person who
participates as an underwriter (any such Person being an "Underwriter") and each
Person, if any, who controls any Holder or Underwriter within the meaning of
Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
(or any amendment thereto) pursuant to which Exchange Securities or
Registrable Securities were registered under the 1933 Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of
any untrue statement or alleged untrue statement of a
20
<PAGE>
material fact contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred (including
fees and disbursements of counsel chosen by any indemnified party),
reasonably incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under subparagraph
(i) or (ii) above;
provided, however, that (a) the Company's obligations under this Section 4 shall
not apply to any loss, claim, damage, liability or expense to the extent arising
out of any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information furnished to
the Company by the Initial Purchasers, any Holder or Underwriter expressly for
use in a Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto) and (b) such indemnity with respect to any
preliminary Prospectus or Prospectus shall not inure to the benefit of any
Person (or any person controlling such Person) from whom the person asserting
any such loss, claim, damage, or liability purchased the Registrable Securities
which are the subject thereof if such person did not receive a copy of the final
Prospectus (or the Prospectus as amended or supplemented) at or prior to the
confirmation of the sale of such Registrable Securities to such person in any
case where such delivery is required by the 1933 Act and the untrue statement or
omission of a material fact contained in such preliminary Prospectus or
Prospectus was corrected in the final Prospectus (or the Prospectus as amended
or supplemented).
21
<PAGE>
(b) Each Holder severally, but not jointly, agrees to indemnify and
hold harmless the Company, the Initial Purchasers, each Underwriter and the
other selling Holders, and each of their respective directors and officers
(including each officer of the Company who signed the Registration Statement),
and each Person, if any, who controls the Company, the Initial Purchasers, any
Underwriter or any other selling Holder within the meaning of Section 15 of the
1933 Act, against any and all loss, liability, claim, damage and expense
described in the indemnity contained in Section 4(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus included therein (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company expressly for use in the Shelf Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto); provided, however, that no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such Holder from
the sale of Registrable Securities pursuant to such Shelf Registration
Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action or proceeding commenced against it in respect
of which indemnity may be sought hereunder, but failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. An indemnifying party
may participate at its own expense in the defense of such action. If it so
elects within a reasonable time after receipt of such notice, an indemnifying
party, jointly with any other indemnifying parties receiving such notice, may
assume the defense of such action with counsel chosen by it and reasonably
satisfactory to the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the ground that
there may be legal defenses available to them which are different from or in
addition to those available to such indemnifying party and representation of the
indemnified parties and indemnifying parties would be inappropriate in the
reasonable judgment of the indemnified parties. If an indemnifying party
assumes the defense of such action, the indemnifying parties shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. In no event shall the indemnifying
party or parties be liable for the fees and expenses of more than one counsel
(which, in the case of the Initial Purchasers, and their controlling persons,
shall be designated in writing by the Initial Purchasers) for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same
22
<PAGE>
general allegations or circumstances. The indemnifying party shall not be
liable for any action settled by any indemnified party without its written
consent.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section 4 is
for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, the Company, the Holders and the
Initial Purchasers shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the Holders; provided, however, that no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation. As between the Company, the
Holders and the Initial Purchasers, the Company, the applicable Holders and the
Initial Purchasers shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement in such proportions as shall be appropriate to reflect the relative
benefits received by the Company, on the one hand, the Holders on another hand
and the Initial Purchasers on another hand, from the offering of the Securities
or the Exchange Securities included in such offering as well as any other
relevant equitable considerations. The relative benefits received by the
Company from the offering of the Securities, the Exchange Securities or
Registrable Securities shall be deemed to include the proceeds received by the
Company in connection with the offering of the Registrable Securities pursuant
to the Purchase Agreement. The Company, the Holders and the Initial Purchasers
of the Registrable Securities agree that it would not be just and equitable if
contribution pursuant to this Section 4 were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the relevant equitable considerations. For purposes of this Section 4, each
Person, if any, who controls the Initial Purchasers or a Holder within the
meaning of Section 15 of the 1933 Act shall have the same rights to contribution
as the Initial Purchasers or such Holder, and each director of the Company, each
officer of the Company who signed the Registration Statement, and each Person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as the Company, as the case may
be. The parties hereto agree that any underwriting discount or commission or
reimbursement of fees paid to the Initial Purchasers pursuant to the Purchase
Agreement shall not be deemed to be a benefit received by the Initial Purchasers
in connection with the offering of the Exchange Securities or Registrable
Securities included in such offering. No person shall be liable for any action
settled without its written consent.
23
<PAGE>
5. Miscellaneous.
5.1 Rule 144 and Rule 144A. During any period the Securities or
Registrable Securities are "restricted securities" within the meaning of Rule
144(a)(3) under the 1933 Act and the Company is not subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the Company will upon the request of any Holder (a) make publicly
available such information as is necessary to permit sales pursuant to Rule 144
under the 1933 Act, (b) deliver such information to a prospective purchaser of
such Securities or Registrable Securities who such Holder informs the Company
such Holder reasonably believes is a "Qualified Institutional Buyer" within the
meaning of Rule 144A under the 1933 Act in order to permit compliance by such
Holder with 144A under the 1933 Act, and (c) take such further action that is
reasonable in the circumstances, in each case, to the extent required from time
to time to enable such Holder to sell its Registrable Securities without
registration under the 1933 Act within the limitation of the exemptions provided
by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to
time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time
to time, or (iii) any similar rules or regulations hereafter adopted by the SEC.
During such period, upon the request of any Holder of Registrable Securities,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
5.2 No Inconsistent Agreements. The Company has not entered into and
the Company will not after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with the
rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
5.3 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure.
5.4 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered first-
class mail,
24
<PAGE>
telex, telecopier, or any courier guaranteeing overnight delivery
(a) if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 5.4, which address initially is the address set forth in the Purchase
Agreement with respect to the Initial Purchasers; and (b) if to the Company,
initially at the Company's address set forth in the Purchase Agreement, and
thereafter at such other address of which notice is given in accordance with the
provisions of this Section 5.4.
All such notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; two business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and on the next business
day if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee under the
Indenture, at the address specified in such Indenture.
5.5 Successor and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms of the Purchase Agreement or applicable law. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.
5.6 Third Party Beneficiaries. The Initial Purchasers (even if the Initial
Purchasers are not Holders of Registrable Securities) shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Holders, on the other hand, and shall have the right to enforce
such agreements directly to the extent they deem such enforcement necessary or
advisable to protect their rights or the rights of Holders hereunder. Each
Holder of Registrable Securities shall be a third party
25
<PAGE>
beneficiary to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.
5.7 Counterparts. This Agreement may be executed in any number of
counterparts and by the 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.
5.8 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
5.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
26
<PAGE>
5.10 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
27
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
TERRA INDUSTRIES INC.
By: /s/ Francis G. Meyer
------------------------------------
Name: Francis G. Meyer
Title: Vice President and
Chief Financial Officer
28
<PAGE>
Confirmed and accepted as
of the date first above
written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CITICORP SECURITIES, INC.
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Michael F. Senft
-----------------------------------------------
Name: Michael F. Senft
Title: Managing Director
29
<PAGE>
Exhibit A
---------
FORM OF OPINION OF COUNSEL
--------------------------
1. The Exchange Offer Registration Statement and the Prospectus
(other than the financial statements, notes or schedules thereto and other
financial data and supplemental schedules included or incorporated by reference
therein or omitted therefrom and the Form T-1, as to which such counsel need
express no opinion), comply as to form in all material respects with the
requirements of the 1933 Act and the applicable rules and regulations
promulgated under the 1933 Act.
2. In the course of such counsel's review and discussion of the
contents of the Exchange Offer Registration Statement and the Prospectus,
including documents incorporated by reference therein, with certain officers and
employees of the Company and its independent accountants, but without
independent check or verification, no facts have come to such counsel's
attention which cause such counsel to believe that the Exchange Offer
Registration Statement, including documents incorporated by reference therein
(other than the financial statements, notes and schedules thereto and other
financial information contained or incorporated by reference therein or omitted
therefrom and the Form T-1, as to which such counsel need express no belief), at
the time the Exchange Offer Registration Statement became effective, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading, or that the Prospectus (other than the financial
statements, notes and schedules thereto and other financial information
contained therein, as to which such counsel need express no belief) contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
1
<PAGE>
Exhibit 4.5
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of May 12, 1995
among
TERRA CAPITAL, INC.
and
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.
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
Section 1.01. Certain Defined Terms...................................... 2
Section 1.02. Computation of Time Periods................................ 37
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........................................ 42
Section 2.03. Repayment.................................................. 44
Section 2.04. Termination or Reduction of the Working
Capital Commitments....................................... 45
Section 2.05. Prepayments................................................ 46
Section 2.06. Interest................................................... 49
Section 2.07. Fees....................................................... 49
Section 2.08. Conversion and Continuation of Advances.................... 51
Section 2.09. Increased Costs, Illegality, Etc........................... 52
Section 2.10. Payments and Computations.................................. 54
Section 2.11. Taxes...................................................... 56
Section 2.12. Sharing of Payments, Etc................................... 59
Section 2.13. Letters of Credit.......................................... 60
Section 2.14. Replacement of Lender...................................... 65
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Conditions Precedent to Amendment and
Restatement................................................ 67
Section 3.02. Conditions Precedent to Each Borrowing
and Issuance............................................... 70
Section 3.03. Determinations Under Section 3.01........................... 70
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the
Company.................................................... 70
Section 4.02. Representations and Warranties of each
Lender..................................................... 77
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE V
COVENANTS OF TERRA
<S> <C>
Section 5.01. Affirmative Covenants...................................... 77
Section 5.02. Negative Covenants......................................... 84
Section 5.03. Reporting Requirements..................................... 94
Section 5.04. Financial Covenants........................................ 98
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default.......................................... 100
Section 6.02. Actions in Respect of the Letters of
Credit Upon Default....................................... 104
ARTICLE VII
THE AGENT
Section 7.01. Authorization and Action................................... 104
Section 7.02. Agent's Reliance, Etc...................................... 105
Section 7.03. Citibank and Affiliates.................................... 106
Section 7.04. Lender Credit Decision..................................... 106
Section 7.05. Indemnification............................................ 106
Section 7.06. Collateral Duties.......................................... 107
Section 7.07. Successor Agent............................................ 107
ARTICLE VIII
THE GUARANTEE
Section 8.01. The Guarantee.............................................. 108
Section 8.02. Obligations Unconditional.................................. 109
Section 8.03. Reinstatement.............................................. 110
Section 8.04. Subrogation................................................ 111
Section 8.05. Remedies................................................... 111
Section 8.06. Instrument for the Payment of Money........................ 111
Section 8.07. Continuing Guarantee....................................... 112
Section 8.08. Rights of Contribution..................................... 112
Section 8.09. General Limitation on Guarantee
Obligations............................................... 113
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, Consents, Etc.................................. 113
Section 9.02. Notices, Etc............................................... 114
Section 9.03. No Waiver; Remedies........................................ 115
Section 9.04. Costs, Expenses and Indemnification........................ 115
Section 9.05. Right of Setoff............................................ 117
Section 9.06. Governing Law; Submission to
Jurisdiction.............................................. 118
Section 9.07. Assignments and Participations............................. 118
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.08. Execution in Counterparts.................................. 122
Section 9.09. No Liability of the Issuing Banks.......................... 122
Section 9.10. Confidentiality............................................ 123
Section 9.11. WAIVER OF JURY TRIAL....................................... 123
Section 9.12. Survival................................................... 123
Section 9.13. Captions................................................... 124
Section 9.14. Successors and Assigns..................................... 124
</TABLE>
SCHEDULES
---------
SCHEDULE 2.01 List of Commitments and Lending
Offices
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 5.01(o) Hedge Agreements
SCHEDULE 5.02(a)(iii) Existing Liens
SCHEDULE 5.02(b)(xii) Terms for 1995 Terra Debt
SCHEDULE 5.02(f) Existing Investments
EXHIBITS
--------
EXHIBIT A-1 Form of Terra Facility A Note
EXHIBIT A-2 Form of Terra Facility B Note
EXHIBIT A-3 Form of Terra Working Capital
Facility Note
EXHIBIT A-4 Form of TNLP Working Capital
Facility 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 TNLP Pledge and Security
Agreement
EXHIBIT B-5 Form of Amendment to Security
Documents
EXHIBIT C Form of Notice of Borrowing
EXHIBIT D Form of Opinion of Special Counsel
for the Obligors
EXHIBIT E-1 Form of Loan Purchase Agreement
EXHIBIT E-2 Form of Amendment to Loan Purchase Agreement
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Provisions Relating to Certain Investments
(iii)
<PAGE>
CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 12, 1995 among:
(1) TERRA CAPITAL, INC., a Delaware corporation (the "Company");
(2) TERRA NITROGEN, LIMITED PARTNERSHIP, a Delaware limited partnership
formerly known as Agricultural Minerals, Limited Partnership and a
Subsidiary of the Company ("TNLP");
(3) each of the corporations and limited partnerships listed on the signature
pages hereof under the caption "GUARANTORS";
(4) each of the lenders (the "Initial Lenders") listed on the signature pages
hereof; and
(5) 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) The Company, Terra, TNLP, certain Guarantors, the Initial Lenders,
the Issuing Banks and the Agent are parties to a Credit Agreement dated as of
October 20, 1994 (as heretofore amended to and in effect on the Restatement
Date, as hereinafter defined, the "Existing Credit Agreement") providing,
subject to the terms and conditions thereof, for the making of working capital
and term advances to, and the issuance of letters of credit for the account of,
the Company and for the making of working capital and term advances to, and the
issuance of letters of credit for the account of, TNLP.
(2) The parties hereto wish to amend the Existing Credit Agreement, among
other things, (a) to reflect the prepayment in full of the "AMLP Facility A
Advances" and the reduction of the "AMLP Facility B Commitments" outstanding
thereunder, (b) to reflect the prepayment in full of the "Terra Facility C
Advances" outstanding thereunder, (c) to combine the "Terra Facility A Advances"
and "Terra Facility D Advances" into one term credit facility hereunder, (d) to
permit certain reorganization transactions herein described, and (e) to make
certain other changes to the Existing Credit Agreement and the other Loan
Documents, all on the terms and conditions set forth herein, it being the
intention of the parties hereto that the advances and letters of credit
outstanding under the Existing
Credit Agreement
<PAGE>
-2-
Credit Agreement on the Restatement Date shall continue and remain outstanding
and not be repaid on the Restatement Date.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree that
the Existing Credit Agreement shall (subject to the satisfaction of the
conditions precedent specified in Section 3) be amended and restated in its
entirety 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.
"Advance" means any Terra Facility A Advance, Terra Facility B Advance
or Working Capital 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",
"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: Larry Benison (or his successor), 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.
Credit Agreement
<PAGE>
-3-
"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:
<TABLE>
<CAPTION>
Fiscal Year Allowance
----------- ---------
<S> <C>
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
</TABLE>
"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:
<TABLE>
<CAPTION>
Fiscal Year Allowance
----------- ---------
<S> <C>
1995 $15,000,000
1996 $25,000,000
1997 $25,000,000
1998 and each
fiscal year
thereafter $30,000,000
</TABLE>
"AMCI" means Agricultural Minerals and Chemicals Inc., a corporation merged
into Terra prior to the Restatement Date.
"AMCI Senior Note Indenture" means the Indenture dated as of October 15,
1993 between Terra (as successor to 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 Terra (as successor to
AMCI) due 2003 issued pursuant to the AMCI Senior Note Indenture.
"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
Credit Agreement
<PAGE>
-4-
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 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 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 Restatement Date until the Quarterly Date falling in
April, 1996, 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 changed 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:
<TABLE>
<CAPTION>
Applicable Margin (% p.a.)
-----------------------------
<S> <C> <C>
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%
</TABLE>
Credit Agreement
<PAGE>
-5-
<TABLE>
<CAPTION>
<S> <C> <C>
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%
</TABLE>
(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.
"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
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
Credit Agreement
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-6-
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).
"BMCH" means BMC Holdings, Inc., a Delaware corporation and wholly owned
Subsidiary of the Company.
"BMLP" means Beaumont Methanol, Limited Partnership, a Delaware limited
partnership and wholly owned Subsidiary of the Company.
"BMLP Transaction Date" means December 30, 1994.
"Borrower" means each of the Company and TNLP; 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 Term Facility or the Terra Working
Capital Facility, to the Company, and (b) in the case of the TNLP Working
Capital Facility, to TNLP.
"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 TNLP, the account
of TNLP 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.
Credit Agreement
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<PAGE>
-7-
"Borrowing" means a Terra Facility A Borrowing, a Terra Facility B
Borrowing and a Working Capital Borrowing.
"Bridge Indebtedness" means any Debt incurred by the Company under Section
5.02(b)(xiii).
"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 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 Agreement
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<PAGE>
-8-
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.
"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 October 20, 1994.
"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.
"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).
"Consolidated" refers to the consolidation of accounts in accordance with
GAAP.
Credit Agreement
----------------
<PAGE>
-9-
"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.
"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.
"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
Credit Agreement
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<PAGE>
-10-
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 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. For purposes of computing the Debt to Cash Flow Ratio for any
period ending on or prior to the first anniversary of the Closing Date, EBITDA
for such period shall be calculated giving pro forma effect to the merger of
AMCI with and into Terra as if such merger had occurred on the first day of such
period.
Credit Agreement
----------------
<PAGE>
-11-
"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.
"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 the
Company 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, the Company 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 the Company.
"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,
Credit Agreement
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<PAGE>
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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 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 Materials, including,
without limitation, CERCLA, the Resource Conservation and Recovery Act, the
Hazardous Materials Transportation Act, the Clean Water Act, the Toxic
Credit Agreement
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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 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)
Credit Agreement
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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
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.
Credit Agreement
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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 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 (other than
any such payments constituting the purchase, redemption or other
acquisition of Senior Preference Units), 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
Credit Agreement
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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
(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 plus
(viii) the aggregate amount of all optional prepayments of Term
Advances made pursuant to Section 2.05(a) during such fiscal year,
provided, that, unless the Required Lenders otherwise agree, each such
optional prepayment is applied to the Advances in the manner specified
in Section 2.05(c), 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 "Terra Facility C Advances" and "AMLP Facility A
Advances" (each as defined in the Existing Credit Agreement) made
pursuant to Section 2.05(a) of the Existing Credit Agreement during
the fiscal year ending December 31, 1994 or the fiscal year ending
December 31, 1995.
"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.
"Existing Credit Agreement" has the meaning specified in the Preliminary
Statements to this Agreement.
"Facility" means Terra Facility A, Terra Facility B or a Working Capital
Facility.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day
Credit Agreement
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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 April 28, 1995 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 outstanding Working Capital Advances, plus
(c) the aggregate 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).
"Guaranteed Obligations" means the Terra Guaranteed Obligations and the
TNLP Guaranteed Obligations.
"Guarantors" means the Terra Guarantors and the TNLP 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
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(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 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 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.
"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 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
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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) the Company may not select any Interest Period that ends after
any Principal Payment Date for a Term Facility 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 relevant Working Capital Commitment Termination Date;
(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 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
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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; provided, that the purchase of equipment,
fixed assets, real property or improvements from such Person do not constitute
Investments in such Person to the extent the same constitute Capital
Expenditures.
"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 TNLP L/C Cash Collateral Account.
"L/C Related Documents" has the meaning specified in Section 2.13(e).
"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 outstanding Advances under such Facility
or, in the case of a Working Capital Facility, has a Working Capital Commitment
under such Facility.
"Letter of Credit Commitment" means the Terra Letter of Credit Commitment
or the TNLP Letter of Credit Commitment, "Letter of Credit Liability" means a
Terra Letter of Credit Liability or a TNLP Letter of Credit Liability, and
"Letter of Credit Sublimit" means the Terra Letter of Credit Sublimit or the
TNLP 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.
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"Loan Documents" means, collectively, this Agreement, the Notes, the
Security Documents and the Loan Purchase Agreement.
"Loan Purchase Agreement" means a Loan Purchase Agreement between the Agent
and Terra in the form of Exhibit E-1, 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.
"Management Agreements" means one or more management agreements entered
into after December 15, 1994 between the Company and certain of its Affiliates
providing for the performance by the Company of certain treasury, purchasing,
legal and/or other services for such Affiliates, as such agreements are in
effect from time to time.
"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;
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(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 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 Agreement" means the Merger Agreement dated as of August 8, 1994,
among Terra, AMCI Acquisition Corporation and AMCI, as from time to time
amended.
"Methanol Hedging Agreement" means the Methanol Hedging Agreement dated as
of the Closing Date between BMLP (as successor to Beaumont Methanol Corporation)
and Morgan Stanley Leveraged Equity Fund II, as Agent, as from time to time
amended.
"Minorco" means Minorco, a Luxembourg corporation, and its successors.
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"Minorco USA" means Minorco (U.S.A.) Inc., a Colorado corporation, and its
successors.
"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 Debt 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 (C)
amounts promptly applied to or set aside for the repair or replacement of
the property suffering such Casualty Event; provided, that (x) 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 and (y) the proceeds of insurance received by Terra and its
Subsidiaries in connection with the December 13, 1994 Casualty Event at the
Port Neal Facility shall be deemed to be applied to the repair or
replacement of the Port Neal Facility if
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such proceeds are applied to the purchase of one or more Subsidiaries of
the Company, or any of their respective properties, as contemplated in the
definition of "Reorganization Transaction" in this Section 1.01;
(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 or 1995 Terra
Debt, the aggregate amount of all cash received by Terra and its
Subsidiaries in respect thereof net of reasonable expenses (including
reasonable registration fees, underwriting fees and discounts and exchange
offer 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 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).
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"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 first to repay Bridge Indebtedness and, after payment in full of Bridge
Indebtedness, to prepay Term Advances pursuant to Section 2.05(b).
"1995 Terra Debt" means any Debt incurred by Terra under Section
5.02(b)(xii).
"Note" means a Terra Facility A Note, a Terra Facility B Note or a Working
Capital 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, 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 TNLP Obligors.
"OECD" means the Organization for Economic Cooperation and Development.
"Other Taxes" has the meaning specified in Section 2.11(b).
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"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 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,
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(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,
(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 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, and (b) one or more additional
facilities entered into by the Company and/or any of its Subsidiaries (which may
be effected by an amendment to the facility referred to in clause (a) of this
definition or otherwise) providing for the sale of Receivables, provided, that
the aggregate amount outstanding under all of the Permitted Receivables
Facilities, taken together, may not at any time exceed $150,000,000 plus
reasonable reserves.
"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.
"Port Neal Facility" means TI's facility in Port Neal, Iowa.
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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 and the Terra Facility B Principal Payment Dates.
"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, in the case of a
Working Capital Facility prior to the Working Capital Commitment Termination
Date for such Facility, the amount of such Lender's Working Capital Commitment
under such Facility), and the denominator of which is the aggregate Advances or
Working Capital 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 the Company
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.
"Quarterly Dates" means January 20, April 20, July 20 and October 20 in
each year, the first of which shall be the first such day after the Restatement
Date, 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, 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
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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 Illinois 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 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 Working Capital Commitments and 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.
"Reorganization Transaction" means a corporate reorganization of one or
more Subsidiaries of the Company consummated prior to March 31, 1997, pursuant
to which TI will acquire, directly or through one or more intermediate
transactions, not less than 80% of the equity interests in TNC or any of its
Subsidiaries (or any of their respective successors), which reorganization shall
be subject to each of the following conditions:
(a) after giving effect to and at all times during the Reorganization
Transaction, the Agent, for its benefit and the benefit of the Lenders and
Issuing Banks, will hold security interests in all Collateral so held by
the Agent immediately prior to the Reorganization Transaction;
(b) none of Terra Capital Holdings, TMC, BMCH or BMLP shall be party
to any part of the Reorganization Transaction (except that Terra Capital
Holdings may receive capital contributions from Terra, and may make capital
contributions to one or more of its
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Subsidiaries, in connection with the Reorganization Transaction);
(c) no Obligor shall, after giving effect to the Reorganization
Transaction, be subject to 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, in each
case other than any such arrangement binding upon such Person immediately
prior to the Reorganization Transaction;
(d) no part of the Reorganization Transaction shall consist of the
sale of ownership interests in any Subsidiary of the Company to any Person
other than the Company or a Subsidiary of the Company;
(e) no part of the Reorganization Transaction shall have a Material
Adverse Effect; and
(f) the Obligors shall have delivered to the Agent such agreements,
instruments and other documents (including, without limitation, charter
documents, proof of corporate and other authority, certificates of officers
of the Obligors, amendments and supplements to Security Documents, Uniform
Commercial Code financing statements, legal opinions and evidence of all
necessary government and third-party consents, authorizations and
approvals) as the Agent may reasonably request in connection with the
Reorganization Transaction.
"Restatement Date" has the meaning assigned to such term in Section 3.01.
"Rolling Period" means any period of four consecutive fiscal quarters of
Terra.
"Security Documents" means the Holdings Pledge Agreement, the Terra Capital
Pledge Agreement, the Subsidiary Pledge and Security Agreement, the TNLP 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
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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.
"Senior Preference Units" means the "Senior Preference Units" issued and
outstanding under, and as defined in, the Agreement of Limited Partnership dated
as of December 4, 1991 of TNCLP, as such Agreement of Limited Partnership is in
effect on the Restatement Date.
"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 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 Paydown Date" means the earliest date as of which the aggregate
outstanding principal amount of the Term Advances does not exceed $238,750,000.
"Specified Payments" means, for any fiscal year of Terra, (a) all interest
due and payable on the AMCI Senior Notes and on the 1995 Terra Debt (if any)
during such fiscal year, (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
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dividends and payments, 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.
"SPU Redemption" means the purchase, redemption or other acquisition from
time to time of all or a portion of the outstanding Senior Preference Units by
Terra and its Subsidiaries (or any of them):
(a) on such terms and conditions as could not reasonably be expected
to have a Material Adverse Effect; and
(b) in accordance in all material respects with the terms and
conditions hereof.
"SPU Redemption Time" means the time as of which all of the Senior
Preference Units shall have been purchased or otherwise redeemed pursuant to the
SPU Redemption.
"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 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 TNC, BMCH, TMC and BMLP and (from and after
the SPU Redemption Time) TNLP and its successors.
Credit Agreement
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"Subsidiary Pledge and Security Agreement" means a Pledge and Security
Agreement in the form of Exhibit B-3 hereto between certain of the Guarantors
and the Agent, as from time to time amended.
"Term Advances" means each of the Terra Facility A Advances and the Terra
Facility B Advances and "Term Facility" means each of Terra Facility A and Terra
Facility B.
"Terra" means Terra Industries Inc., a Maryland corporation and an indirect
parent of the Company.
"Terra Advance" means a Terra Facility A Advance, a Terra Facility B
Advance and a Terra Working Capital Advance.
"Terra Capital Holdings" means Terra Capital Holdings, Inc., a Delaware
corporation and the direct parent of the Company.
"Terra Capital Pledge Agreement" means a Pledge Agreement in the form of
Exhibit B-2 hereto between the Company and the Agent, as from time to time
amended.
"Terra Facility A" means the term credit facility provided hereunder in
respect of the Terra Facility A Advances, "Terra Facility A Advance" has the
meaning specified in Section 2.01(a) and "Terra Facility A Borrowing" means a
borrowing consisting of simultaneous Terra Facility A Advances of the same Type.
"Terra Facility A 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 Principal Payment Dates" means the Quarterly Dates
falling on or nearest to April 20 and October 20 of each year, commencing with
October 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 Advances, "Terra Facility B Advance" has the
meaning specified in Section 2.01(b) and "Terra Facility B Borrowing" means a
borrowing consisting of simultaneous Terra Facility B Advances of the same Type.
"Terra Facility B Note" means a promissory note of the Company payable to
the order of a Lender, in substantially
Credit Agreement
----------------
<PAGE>
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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
October 20, 1995 through and including October 20, 2001.
"Terra Guaranteed Obligations" has the meaning specified in Section 8.01.
"Terra Guarantors" means Terra, Terra Capital Holdings, TNC, TMC, BMCH,
BMLP and (from and after the SPU Redemption Time) TNLP and its successors.
"Terra L/C Cash Collateral Account" means each of 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 the Company or any of its Subsidiaries (other than, prior to the
SPU Redemption Time, TNLP 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.
"Terra Letter of Credit Liability" means, as of any date of determination,
all of the liabilities of the Company 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 (a) prior to the SPU Redemption
Time, $30,000,000 and (b) from and after the SPU Redemption Time, $45,000,000.
"Terra Obligors" means the Terra Guarantors and the Company.
"Terra Working Capital Advance" means an Advance made or outstanding
pursuant to Section 2.01(c), "Terra Working
Credit Agreement
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Capital Borrowing" means a borrowing consisting of simultaneous Terra Working
Capital Advances of the same Type and "Terra Working Capital Commitment" has the
meaning specified in Section 2.01(c).
"Terra Working Capital Commitment Termination Date" means the earlier of
(a) October 20, 1999 (provided, that if such day is not a Business Day, the
Terra Working Capital Commitment Termination Date shall be the immediately
preceding Business Day), and (b) the termination or cancellation of the Terra
Working Capital Commitments pursuant to the terms of this Agreement.
"Terra Working Capital Facility" means the revolving credit facility
provided hereunder in respect of the Terra Working Capital Commitments.
"Terra Working Capital Facility Note" means a promissory note of the
Company payable to the order of a Lender, in substantially the form of Exhibit
A-3, as from time to time amended.
"TI" means Terra International, Inc., a Delaware corporation and a wholly
owned Subsidiary of the Company.
"TMC" means Terra Methanol Corporation, a Delaware corporation and a wholly
owned Subsidiary of the Company.
"TNC" means Terra Nitrogen Corporation, a Delaware corporation formerly
known as Agricultural Minerals Corporation and a wholly owned Subsidiary of the
Company.
"TNCLP" means Terra Nitrogen Company, L.P., a Delaware limited partnership
formerly known as Agricultural and Minerals Company, L.P. and a Subsidiary of
the Company.
"TNLP Guaranteed Obligations" has the meaning specified in Section 8.01.
"TNLP Guarantors" means Terra, Terra Capital Holdings, the Company, TNC,
TMC, BMCH and BMLP.
"TNLP Letter of Credit" means a letter of credit issued by an Issuing Bank
for account of TNLP or any of its Subsidiaries pursuant to Section 2.13(a).
"TNLP 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 "TNLP Letter of Credit Commitment", as such amount may be
reduced pursuant to Section 2.04.
Credit Agreement
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"TNLP Letter of Credit Liability" means, as of any date of determination,
all of the liabilities of TNLP to the Issuing Banks in respect of TNLP Letters
of Credit, whether such liability is contingent or fixed, and shall consist of
the sum of (a) the aggregate Available Amount of all TNLP 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 TNLP Letters of Credit.
"TNLP Letter of Credit Sublimit" means $15,000,000.
"TNLP Obligors" means the TNLP Guarantors and TNLP.
"TNLP Pledge and Security Agreement" means a Pledge and Security Agreement
in the form of Exhibit B-4 between TNLP and the Agent, as from time to time
amended.
"TNLP Working Capital Advance" means an Advance made or outstanding
pursuant to Section 2.01(d), "TNLP Working Capital Borrowing" means a borrowing
consisting of simultaneous TNLP Working Capital Advances of the same Type and
"TNLP Working Capital Commitment" has the meaning specified in Section 2.01(d).
"TNLP Working Capital Commitment Termination Date" means the earliest of
(a) October 20, 1999 (provided, that if such day is not a Business Day, the TNLP
Working Capital Commitment Termination Date shall be the immediately preceding
Business Day), (b) the termination or cancellation of the TNLP Working Capital
Commitments pursuant to the terms of this Agreement, and (c) the date on which
the SPU Redemption Time occurs.
"TNLP Working Capital Facility" means the revolving credit facility
provided hereunder in respect of the TNLP Working Capital Commitments.
"TNLP Working Capital Facility Note" means a promissory note of TNLP
payable to the order of a Lender, in substantially the form of Exhibit A-4, as
from time to time amended.
"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.
"Trigger Date" means the earliest date as of which each of the following is
true:
Credit Agreement
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(a) the aggregate outstanding principal amount of the Term Advances
does not exceed $150,000,000; and
(b) the Debt to Cash Flow Ratio for the most recently completed four
fiscal quarters of Terra ending on or most recently ended prior to the date
of determination does not exceed 2.50 to 1.
"Type" refers to the distinction between Advances bearing interest at the
Base Rate and Advances bearing interest at the Eurodollar Rate.
"Unused Terra Working Capital Commitment" means, with respect to any Lender
at any time, (a) such Lender's Terra Working Capital Commitment at such time
minus (without duplication) (b) the sum of (i) the aggregate outstanding
principal amount of all Terra Working Capital Advances made by such Lender and
(ii) such Lender's Pro Rata Share of the aggregate Available Amount of all Terra
Letters of Credit outstanding at such time and of all unreimbursed drawings
thereunder.
"Unused TNLP Working Capital Commitment" means, with respect to any Lender
at any time, (a) such Lender's TNLP Working Capital Commitment at such time
minus (without duplication) (b) the sum of (i) the aggregate outstanding
principal amount of all TNLP Working Capital Advances made by such Lender and
(ii) such Lender's Pro Rata Share of the aggregate Available Amount of all TNLP
Letters of Credit outstanding at such time and of all unreimbursed drawings
thereunder.
"U.S. Dollars" and "$" means lawful money of the United States of America.
"Working Capital Advance" means a Terra Working Capital Advance or a TNLP
Working Capital Advance, "Working Capital Borrowing" means a Terra Working
Capital Borrowing or a TNLP Working Capital Borrowing, "Working Capital
Commitment" means a Terra Working Capital Commitment or TNLP Working Capital
Commitment, "Working Capital Commitment Termination Date" means the Terra
Working Capital Commitment Termination Date or the TNLP Working Capital
Commitment Termination Date, and "Working Capital Facility" means the Terra
Working Capital Facility or the TNLP Working Capital Facility.
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".
Credit Agreement
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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) On the Restatement Date, the "Terra Facility A Advance" and
"Terra Facility D Advance" of each Lender under the Existing Credit
Agreement shall automatically, without any action on the part of any
Person, be consolidated into one advance to the Company and shall be deemed
to be a Terra Facility A Advance hereunder for all purposes of this
Agreement (each, a "Terra Facility A Advance"). The principal amount of the
Terra Facility A Advance of each Lender as of the Restatement Date shall be
the amount set forth opposite such Lender's name on Schedule 2.01 under the
caption "Terra Facility A Advances" and the aggregate principal amount
thereof as of the Restatement Date shall be $209,285,714.22.
(ii) The amount of any Terra Facility A Advance that is repaid or
prepaid may not be reborrowed.
(b) Terra Facility B.
(i) On the Restatement Date, the "Terra Facility B Advance" of each
Lender under the Existing Credit Agreement shall automatically, without any
action on the part of any Person, be deemed to be a Terra Facility B
Advance hereunder for all purposes of this Agreement (each, a "Terra
Facility B Advance"). The principal amount of the Terra Facility B Advance
of each Lender as of the Restatement Date shall be the amount set forth
opposite such Lender's name on Schedule 2.01 under the caption "Terra
Facility B Advances" and the aggregate principal amount thereof as of the
Restatement Date shall be $79,500,000.00.
(ii) The amount of any Terra Facility B Advance that is repaid or
prepaid may not be reborrowed.
Credit Agreement
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(c) Terra Working Capital Facility.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances ("Terra Working Capital Advances")
to the Company from time to time on any Business Day during the period from
the Restatement Date until the Terra Working Capital 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 Working Capital 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 Working Capital Commitment" (such
amount being such Lender's "Terra Working Capital Commitment"), and, as to
all Lenders, in an aggregate amount at any one time outstanding not to
exceed $200,000,000 (provided, that at all times prior to the SPU
Redemption Time the aggregate amount of the Terra Working Capital
Commitments shall be deemed to be reduced for all purposes hereof by the
aggregate amount of the TNLP Working Capital Commitments as in effect from
time to time). On the Restatement Date, all outstanding "Terra Facility E
Advances" of each Lender under the Existing Credit Agreement shall
automatically, without any action on the part of any Person, be deemed to
be Terra Working Capital Advances hereunder. The aggregate principal amount
of the Terra Working Capital Advances of each Lender as of the Restatement
Date shall be the amount set forth opposite such Lender's name on Schedule
2.01 under the caption "Terra Working Capital Advances".
(ii) The Terra Working Capital Advances shall be made by the Lenders
ratably according to their respective Terra Working Capital Commitments.
(iii) Within the limits of each Lender's Terra Working Capital
Commitment in effect from time to time, the Company may borrow under this
Section 2.01(c) 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(c); provided, that the aggregate outstanding principal amount
of Terra Working Capital Advances when added to the aggregate Terra Letter
of Credit Liability may not at any time exceed the aggregate amount of the
Terra Working Capital Commitments at such time.
(iv) The proceeds of the Terra Working Capital Advances shall be used
solely to finance the ongoing working capital needs of the Company and its
Subsidiaries (other than, prior to the SPU Redemption Time, TNLP and its
successors); provided, that:
Credit Agreement
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(x) if all or any portion of the proceeds of the issuance (if
any) of the 1995 Terra Debt not applied to the repayment of Bridge
Indebtedness shall be applied to repay Terra Working Capital Advances
under Section 2.05(a) during the fiscal year of Terra ending December
31, 1995 (the aggregate amount so applied to repay the Terra Working
Capital Advances being the "Application Amount"), proceeds of
subsequent Borrowings under the Terra Working Capital Facility
shall also be permitted to be used either (1) to finance the SPU
Redemption during such fiscal year or (2) to finance the prepayment of
Advances pursuant to Section 2.05(b)(v), in either case in an
aggregate amount not exceeding the Application Amount; and
(y) proceeds of Terra Working Capital Advances in an aggregate
amount not exceeding $40,000,000 (in addition to Terra Working Capital
Advances referred to in clause (x) above) may be used to finance the
SPU Redemption during the fiscal year of Terra ending December 31,
1995.
(v) Notwithstanding the foregoing provisions of Section 2.01(c), 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
Working Capital Borrowing or the last day of the previous such 12-month
period and ending one year thereafter, no Terra Working Capital Borrowings
may be made or outstanding under this Section 2.01(c); provided, that this
Section 2.01(c)(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 Working Capital Advances in
respect thereof pursuant to Section 2.13(c), which Terra Working Capital
Advances (subject to the other terms and conditions of this Agreement) may
remain outstanding during such period.
(d) TNLP Working Capital Facility.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances ("TNLP Working Capital Advances")
to TNLP from time to time on any Business Day during the period from the
Restatement Date until the TNLP Working Capital 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
"TNLP Working Capital 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 "TNLP Working Capital
Credit Agreement
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Commitment" (such amount being such Lender's "TNLP Working Capital
Commitment"), and, as to all Lenders, in an aggregate amount at any one
time outstanding not to exceed $25,000,000. On the Restatement Date, all
outstanding "AMLP Facility B Advances" of each Lender under the Existing
Credit Agreement shall automatically, without any action on the part of any
Person, be deemed to be TNLP Working Capital Advances hereunder. The
aggregate principal amount of the TNLP Working Capital Advances of each
Lender as of the Restatement Date shall be the amount set forth opposite
such Lender's name on Schedule 2.01 under the caption "TNLP Working Capital
Advances".
(ii) The TNLP Working Capital Advances shall be made by the Lenders
ratably according to their respective TNLP Working Capital Commitments.
(iii) Within the limits of each Lender's TNLP Working Capital
Commitment in effect from time to time, TNLP may borrow under this Section
2.01(d) 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(d);
provided, that the aggregate outstanding principal amount of TNLP Working
Capital Advances when added to the aggregate TNLP Letter of Credit
Liability may not at any time exceed the aggregate amount of the TNLP
Working Capital Commitments at such time.
(iv) The proceeds of the TNLP Working Capital Advances shall be used
solely to finance the ongoing working capital needs of TNLP.
(v) Notwithstanding the foregoing provisions of Section 2.01(d), TNLP
agrees that, for a period of 30 consecutive days during each period of 12
consecutive months commencing on the date of the initial TNLP Working
Capital Borrowing or the last day of the previous such 12-month period and
ending one year thereafter, no TNLP Working Capital Borrowings may be made
or outstanding under this Section 2.01(d); provided, that this Section
2.01(d)(v) shall not prevent TNLP from requesting the issuance of TNLP
Letters of Credit during any such period pursuant to Section 2.13, or the
Lenders from making TNLP Working Capital Advances in respect thereof
pursuant to Section 2.13(c), which TNLP Working Capital Advances (subject
to the other terms and conditions of this Agreement) may remain outstanding
during such period.
Credit Agreement
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(e) 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.
(f) 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 Working
Capital 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 Borrowing, (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) 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).
(iii) Each Lender shall, before 1:00 P.M. (New York City time) on the
date of each Working Capital Borrowing after the Restatement Date, 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 Working Capital 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 TNLP Working Capital Borrowing, the Agent shall
first make a portion of such funds equal to any unreimbursed drawing
Credit Agreement
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under any TNLP 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) neither 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 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 either 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 Working
Capital Borrowing 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
Credit Agreement
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such time under Section 2.06 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 Working Capital 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) 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 as follows:
(i) in the case of the Terra Facility A Advances, in nine 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:
<TABLE>
<CAPTION>
<S> <C>
Terra Facility A
Principal Payment Date
Falling on or
Nearest To Amount
----------------------- --------------
October 20, 1995 $23,253,968.25
April 20, 1996 23,253,968.25
October 20, 1996 23,253,968.25
April 20, 1997 23,253,968.25
October 20, 1997 23,253,968.25
April 20, 1998 23,253,968.25
October 20, 1998 23,253,968.25
April 20, 1999 23,253,968.25
October 20, 1999 23,253,968.22
</TABLE>
(ii) in the case of the Terra Facility B Advances, in 13 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:
Credit Agreement
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<TABLE>
<CAPTION>
<S> <C>
Terra Facility B
Principal Payment Date
Falling on or
Nearest To Amount
------------------------ --------------
October 20, 1995 $ 500,000.00
April 20, 1996 500,000.00
October 20, 1996 500,000.00
April 20, 1997 500,000.00
October 20, 1997 500,000.00
April 20, 1998 500,000.00
October 20, 1998 500,000.00
April 20, 1999 500,000.00
October 20, 1999 15,100,000.00
April 20, 2000 15,100,000.00
October 20, 2000 15,100,000.00
April 20, 2001 15,100,000.00
October 20, 2001 15,100,000.00
</TABLE>
(b) Terra Working Capital Advances. The Company hereby promises to
pay to the Agent for the account of each Lender the full outstanding principal
amount of the Terra Working Capital Advances of such Lender on the Terra Working
Capital Commitment Termination Date.
(c) TNLP Working Capital Advances. TNLP hereby promises to pay to
the Agent for the account of each Lender the full outstanding principal amount
of the TNLP Working Capital Advances of such Lender on the TNLP Working Capital
Commitment Termination Date.
(d) 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.
Section 2.04. Termination or Reduction of the Working Capital
Commitments.
(a) Optional. The Borrowers may at any time or from time to time,
upon not less than two Business Days' notice to the Agent, terminate in whole or
reduce in part the Working Capital Commitments under the relevant Working
Capital Facility, provided, that (i) each partial reduction of the Working
Capital Commitments under such Facility shall be in an aggregate amount of
$5,000,000 or an integral multiple of $1,000,000 in excess
Credit Agreement
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thereof, and (ii) the aggregate amount of the Working Capital Commitments under
either Working Capital Facility shall not be reduced below the Letter of Credit
Commitment for such Facility.
(b) Mandatory. The Terra Working Capital Commitments shall be
automatically and permanently reduced to zero on the Terra Working Capital
Commitment Termination Date. The TNLP Working Capital Commitments shall be
automatically and permanently reduced to zero on the TNLP Working Capital
Commitment Termination Date.
(c) Reductions Pro Rata. Each reduction of the Working Capital
Commitments under a Working Capital Facility shall be applied to the respective
Working Capital Commitments of the Lenders according to their respective Pro
Rata Shares of such Working Capital Facility.
(d) General. Working Capital Commitments once terminated or reduced
may not be reinstated.
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 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 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
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principal amount of the Advances then outstanding under the relevant
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 shall prepay the Advances in an aggregate
amount equal to (x) 75% of Excess Cash Flow for such fiscal year minus (y)
in the case of the prepayment made with respect to Excess Cash Flow for the
fiscal year ending December 31, 1995, the Excess SPU Amount (as defined
below), if any; 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%. For purposes of
this clause (i), "Excess SPU Amount" means the excess, if any, of the
aggregate consideration paid by Terra and its Subsidiaries to purchase,
redeem or otherwise acquire Senior Preference Units pursuant to the SPU
Redemption over the aggregate amount of Debt (other than Terra Working
Capital Advances) incurred by Terra and its Subsidiaries to finance such
purchase, redemption or other acquisition.
(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 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 the Company or any of its Subsidiaries of
Receivables under a Permitted Receivables Facility shall not be deemed to
be a Disposition for purposes of this clause (ii); and (z) upon the
Specified Paydown Date, the figure 100% set forth above shall automatically
be deemed to be reduced to 75%.
(iii) Equity Issuance, Etc. Upon the making of any Equity Issuance or
any other public issuance of securities (including without limitation the
New Terra Equity but excluding the issuance (if any) of the 1995 Terra
Debt), the Company shall prepay the Advances in an aggregate amount equal
to the excess, if any of (x) 100% of the Net Available Proceeds thereof
over (y) the aggregate amount of Bridge Indebtedness contractually required
to be repaid by the Company in connection with such issuance; provided,
that
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this clause (iii) shall cease to apply upon the Specified Paydown Date.
(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
Company 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 or set aside for such
purpose (provided, that funds so set aside are applied to the repair or
replacement of such property as soon as reasonably practicable under the
circumstances); provided, that upon the Specified Paydown Date, 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 under and as defined in the Security Documents)
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-Redemption of Senior Preference Units, Etc. On December 31,
1995, the Company shall prepay the Advances in an aggregate amount equal to
the excess, if any, of (x) 100% of the net proceeds received by Terra and
its Subsidiaries from the issuance (if any) of the 1995 Terra Debt to the
extent such proceeds (or proceeds of Terra Working Capital Advances, if
such use is permitted pursuant to Section 2.01(c)(iv)) have not theretofore
been applied to the redemption of Senior Preference Units pursuant to the
SPU Redemption over (y) the aggregate amount of Bridge Indebtedness
contractually required to be repaid by the Company in connection with such
issuance.
(c) Application. Prepayments described in Section 2.05(b) shall be
applied to the prepayment of the Term Advances ratably according to the
respective aggregate outstanding principal amounts thereof and to the respective
installments thereof ratably.
(d) 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.
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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 TNLP shall
pay interest on the unpaid principal amount of each TNLP Working Capital 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:
(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
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portion of such Lender's Terra Working Capital Commitment and (ii) in the case
of TNLP, on the average daily unused portion of such Lender's TNLP Working
Capital Commitment, in each case for the period from the Restatement Date (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 Working Capital Commitment Termination Date for the relevant
Facility at the Applicable Commitment Fee Rate, payable in arrears (x) quarterly
after the Restatement Date on each Quarterly Date and (y) on the Working Capital
Commitment Termination Date for the relevant Facility. Notwithstanding anything
to the contrary contained herein or in the Existing Credit Agreement, commitment
fee accrued under Section 2.07(a) of the Existing Credit Agreement for the
period prior to the Restatement Date shall be payable on the first Quarterly
Date hereunder following the Restatement Date.
(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 Working
Capital Commitment Termination Date and calculated, for any day, after
giving effect to any payments made under such Letter of Credit on such day.
(ii) TNLP 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 TNLP 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 TNLP 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 TNLP Working
Capital Commitment Termination Date and 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,
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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 Restatement 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 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
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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 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
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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 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
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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 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 of
such Lender 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 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
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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 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
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(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 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
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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 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
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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 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.
(f) For any period with respect to which a Lender has failed to
provide the Borrowers and the Agent with the
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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 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.
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Section 2.13. Letters of Credit.
(a) Issuance of Letters of Credit, Etc. 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 the Terra Working
Capital Facility being herein called "Terra Letters of Credit" and letters of
credit so issued under the TNLP Working Capital Facility being herein called
"TNLP Letters of Credit"; the Terra Letters of Credit and the TNLP 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 Working Capital Commitment Termination Date under the relevant
Facility; provided, that:
(i) the Terra Working Capital Commitments shall be utilized under
this Section 2.13 solely for the issuance of Terra Letters of Credit for
the account of the Company and, to the extent specified by the Company, any
of its Subsidiaries (other than, prior to the SPU Redemption Time, TNLP or
any of its Subsidiaries);
(ii) the TNLP Working Capital Commitments shall be utilized under this
Section 2.13 solely for the issuance of TNLP Letters of Credit for the
account of TNLP and, to the extent specified by TNLP, any of its
Subsidiaries;
(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 Working Capital
Commitment Termination Date for the relevant Facility.
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On the Restatement Date, all outstanding "Terra Letters of Credit" outstanding
under the Existing Credit Agreement (the "Existing Terra Letters of Credit")
shall automatically, without any action on the part of any Person, be deemed to
be Terra Letters of Credit hereunder for all purposes of this Agreement. On the
Restatement Date, all outstanding "AMLP Letters of Credit" outstanding under the
Existing Credit Agreement (the "Existing AMLP Letters of Credit") shall
automatically, without any action on the part of any Person, be deemed to be
TNLP Letters of Credit hereunder for all purposes of this Agreement. At the SPU
Redemption Time, all outstanding TNLP Letters of Credit shall automatically,
without any action on the part of any Person, be deemed to be Terra Letters of
Credit hereunder for all purposes of this Agreement. On each day during the
period commencing with the issuance by an Issuing Bank of any Terra Letter of
Credit (or, in the case of any Existing Terra Letter of Credit, during the
period commencing with the Restatement Date) and until such Letter of Credit
shall have been drawn in full or expired or been terminated, the Terra Working
Capital 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 TNLP Letter of Credit
(or, in the case of any Existing TNLP Letter of Credit, during the period
commencing with the Restatement Date) and until such Letter of Credit shall have
been drawn in full or expired or been terminated, the TNLP Working Capital
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 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
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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.
(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 Working Capital 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
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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
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
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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.
(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 either 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;
(iv) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent,
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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. 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 Working
Capital 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 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
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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)(vi) with respect to such assignment; or
(ii) (x) terminate the Working Capital 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 "Substitute Lender")
to assume Working Capital Commitments hereunder and to make Advances hereunder
in an amount equal to the respective Working Capital 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)(vi) with respect
to such assignment, and (z) in the case of a Substitute Lender that will 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 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
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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 2.14:
(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 Working
Capital Commitments that shall have been terminated pursuant to said clause
(b) (including the Working Capital Commitments then proposed to be
terminated) shall exceed 30% of the aggregate amount of the Working Capital
Commitments in effect on the Restatement Date.
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Conditions Precedent to Amendment and Restatement. The
Existing Credit Agreement shall be amended and restated to read in full as set
forth herein on the date (the "Restatement Date") on which the Agent shall
notify the Company that the Agent shall have received the following in form and
substance satisfactory to it:
(a) The Notes, duly executed by each Borrower.
(b) The following documents, each dated the Restatement Date (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) a copy of each amendment to the charter or articles of
incorporation or articles of limited partnership, as the case may be,
of each Obligor made subsequent to the Closing Date (or, in the case
of BMLP and TMC, subsequent to BMLP Transaction Date), certified (as
of a date reasonably near the Restatement Date) by the Secretary of
State of the state of its
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incorporation or organization as being a true and correct copy
thereof; and
(ii) 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 Restatement Date (the statements made in which
certificate shall be true on and as of the Restatement Date),
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 Closing Date
(or, in the case of BMLP and TMC, subsequent to BMLP Transaction
Date), (B) the absence, except to the extent provided in said
certificate, of any amendments to the bylaws of such Obligor
subsequent to the Closing Date (or, in the case of BMLP and TMC,
subsequent to BMLP Transaction Date), 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.
(c) An amendment to each of the Holdings Pledge Agreement, the Terra
Capital Pledge Agreement, the Subsidiary Pledge and Security Agreement and
the TNLP Pledge and Security Agreement, in substantially the form of
Exhibit B-5, duly executed by each of the intended parties thereto,
together with:
(i) such appropriately completed and duly executed copies of
Uniform Commercial Code financing statements and financing statement
amendments as the Agent shall have requested in order to continue the
perfection and protection of the Liens created by the Security
Documents and covering the Collateral described therein, and
(ii) 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 continue the perfection and
protection of the Liens created thereby.
(d) An amendment to the Loan Purchase Agreement, in substantially the
form of Exhibit E-2, duly executed by Terra and the Agent.
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(e) A true and correct copy of the materials (if any) distributed
generally to the holders of the Senior Preference Units in connection with
the SPU Redemption.
(f) 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.
(g) A favorable opinion of Milbank, Tweed, Hadley & McCloy, special
New York counsel for the Agent, in form and substance satisfactory to the
Agent.
(h) A certificate of the Senior Financial Officer to the effect that:
(x) the representations and warranties contained in each Loan
Document are correct on and as of the Restatement Date, before and
after giving effect to the amendment and restatement provided for
hereby, 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
(y) no event has occurred and is continuing that constitutes a
Default or an Event of Default.
(i) 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 Borrowers
at least one Business Day prior to the Restatement Date).
(j) Evidence that TNLP shall have repaid in full all of the "AMLP
Facility A Advances" outstanding under the Existing Credit Agreement.
(k) Evidence of receipt of all governmental and third party consents
and approvals necessary in connection with this Agreement (without the
imposition of any conditions except those that are acceptable to the
Lenders) and that the same remain in effect.
(l) 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.
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Section 3.02. Conditions Precedent to Each Borrowing and Issuance.
The obligation of each Lender to make an Advance on the occasion of each
Borrowing (excluding, however, 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 either 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 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 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, 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 Restatement Date
specifying its objection thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Company. The
Company represents and warrants as follows:
(a) Each Obligor (i) is a corporation (or, in the case of TNLP or
BMLP, 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
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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) is a complete and accurate list of
all Material Subsidiaries of each Obligor as of the Restatement Date,
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 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 TNLP or BMLP, 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 and each other Loan Document to which it is or is
intended to be a party, and the consummation of the credit transactions
between Borrowers and Lenders contemplated hereby, are within such
Obligor's powers (corporate or other), have been (or will, prior to the
Restatement Date, be) duly authorized by all necessary corporate action,
and do not (i) contravene such Obligor's charter, by-laws or in the case of
TNLP or BMLP, its agreement of limited partnership, (ii) violate any
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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 U and 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
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 or any
other Loan Document to which it is or is to be a party, or for the
consummation of the credit transactions between Borrowers and Lenders
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(c)) 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.
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(e) This Agreement has been, and each of the Notes and each other
Loan 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 and each other Loan 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, 1994 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 March 31, 1995 and
the related statements of income and cash flows of Terra for the three
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 March
31, 1995, and said statements of income and cash flows for the three 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 December 31, 1994, there
has been no Material Adverse Change with respect to Terra.
(g) (A) No written information, exhibit or report (as at the
Restatement Date) 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 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 Restatement Date could reasonably
be
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expected to affect the legality, validity or enforceability of this
Agreement, any Note, any other Loan Document 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; except as expressly
permitted in Section 2.01(c)(iv), 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; and no proceeds of any
Advance will be used for any purpose which violates the provisions of the
regulations of the Board of Governors of the Federal Reserve System. After
applying the proceeds of each Advance, not more than 25% of the value of
the assets of either Borrower and such Borrower's Subsidiaries (as
determined in good faith by such Borrower) that are subject to Section
5.02(a) or Section 5.02(e) will consist of or be represented by Margin
Stock. If requested by any Lender or the Agent, each Borrower will furnish
to the Agent and each Lender a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U, the
statements made in which shall be such, in the opinion of each Lender, as
to permit the transactions contemplated hereby in accordance with
Regulation U.
(j) Set forth on Schedule 4.01(j) is a complete and accurate list, as
of the Restatement Date, 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 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
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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 Restatement 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 material 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
material 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 (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 Restatement Date 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.
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(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 Restatement Date 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 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) 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 Restatement Date, 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
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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 of such Act or any rule, regulation or
order of the Securities and Exchange Commission thereunder.
(x) Each of Terra and the Company (both individually and collectively
with their respective Subsidiaries) is Solvent.
(y) Set forth on Part I of Schedule 4.01(y) is a complete and
accurate list, as of the Closing Date, of all existing Debt of each
Obligor, showing as of the Closing Date (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.
Section 4.02. Representations and Warranties of each Lender. Each
Lender hereby represents and warrants that such Lender, in good faith, has not
relied upon Margin Stock as collateral for the Obligations of the Obligors
hereunder and under the other Loan Documents.
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 Working Capital 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.
(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
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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 Reorganization Transaction, 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
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
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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.
(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
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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 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;
(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; and
(iv) the Reorganization Transaction.
(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
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or Issuing Bank through the Agent may reasonably require 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. Cause the Company to 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 in an aggregate amount, for any period, equal to the amount
set forth opposite such period on Schedule 5.01(o).
(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, except to the extent necessary to give effect to the
Reorganization Transaction:
(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;
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(ii) Terra 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 the Company, and will own no other
property (other than cash and other property incidental to its business as
a holding company);
(iii) the Company will at all times own (1) beneficially and of
record, all of the issued and outstanding capital stock (other than
directors' qualifying shares) of TI, BMCH, TMC and TNC and (2) no other
property (other than (v) cash, (w) Receivables of one or more of its
Subsidiaries transferred to it pursuant to the terms of the Permitted
Receivables Facilities, (x) Senior Preference Units purchased pursuant to
the SPU Redemption, and capital stock of a wholly owned Subsidiary of the
Company organized for the purpose of holding such Senior Preference Units,
(y) other property incidental to its business as a holding company and (z)
other property used solely in connection with its performance of services
pursuant to the terms of the Management Agreements);
(iv) BMCH will at all times own, beneficially and of record, 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);
(v) TMC will at all times own, beneficially and of record, a 1%
general partnership interest in BMLP; and at all times TMC will own no
other property (other than cash and other property incidental to its
business as a holding company);
(vi) TNC will own no property other than ownership interests of TNCLP
and its successors and a general partnership interest in TNLP and its
successors (other than (x) cash, (y) capital stock of a wholly owned
Subsidiary of TNC organized for the purpose of holding Senior Preference
Units and (z) other property incidental to its business as a holding
company); and
(vii) TNCLP will at all times own no property other than ownership
interests of TNLP and its successors (other than cash, Senior Preference
Units purchased pursuant to the SPU Redemption 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
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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, neither TNCLP nor TNLP shall
convert to a corporate form except pursuant to the SPU Redemption.
(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.
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 Working Capital 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;
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(iii) Liens existing on the Closing Date and 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 Obligations in respect of letters of credit permitted
under Section 5.02(b)(iv);
(v) Liens on Receivables and incidental property of the Company
or any of its Subsidiaries to secure such Person's Obligations under
the Permitted 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 Specified Paydown Date, the figure
80% set forth above shall automatically be deemed to be increased to
90%);
(vii) Any Lien arising after the Closing Date 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
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
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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 Closing Date, 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;
(xiv) Additional Liens upon property created after the Closing
Date, provided, that the aggregate Debt secured thereby and incurred
on and after the Closing Date 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.
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(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;
(v) Obligations of the Company and its Subsidiaries under the
Permitted 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 Net Available Proceeds of
which are used first to repay Bridge Indebtedness and, after payment
in full of Bridge Indebtedness, to repay Advances in the manner
specified in Section 2.05(c);
(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;
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(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 Closing Date 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 above shall be deemed to be increased to $50,000,000);
(xii) Debt of Terra incurred during the period following the
Restatement Date and prior to the SPU Redemption Time in an aggregate
principal amount not exceeding $200,000,000 (and Debt of Terra
evidenced by instruments issued in exchange for such Debt), the terms
and conditions of which are in all material respects as contemplated
in Schedule 5.02(b)(xii), and the Net Available Proceeds of which are
used (1) first to repay Bridge Indebtedness and (2) after payment in
full of Bridge Indebtedness, for one or more of the following: (x) to
finance the SPU Redemption, (y) to repay Terra Working Capital
Advances in the manner specified in Section 2.01(c)(iv) and (z) to
repay Advances in the manner specified in Section 2.05(c);
(xiii) unsecured Debt of the Company to one or more of the
Lenders in an aggregate principal amount not exceeding $75,000,000
having a final maturity no later than the first anniversary of the
Restatement Date, the proceeds of which are used to finance in part
the SPU Redemption; and
(xiv) renewals, refinancings and replacements of the Debt
permitted under clauses (vi), (vii), (ix) and (xiii) 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
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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 the
Company may be merged or consolidated with or into the Company
(provided, that the Company shall be the continuing or surviving
corporation) or any other wholly owned Subsidiary of the Company and
(y) the Company 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 the Company, the Company is the continuing or
surviving corporation, and (2) in any other case, the continuing or
surviving corporation is a wholly owned Subsidiary of the Company; and
(ii) nothing herein shall be deemed to prohibit the
Reorganization Transaction.
(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 member of the Specified Group
to another member of the Specified Group (where "Specified Group"
means, collectively, the Company and each of its wholly owned
Subsidiaries other than, prior to the SPU Redemption Time, TNLP).
(iv) to the extent not permitted pursuant to clause (iii) above,
dispositions of assets by one Obligor to another and by an Obligor to
one of its or
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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 (iv) (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;
(v) nothing in this Section 5.02(e) shall prohibit the Company or
any of its Subsidiaries from selling Receivables under any Permitted
Receivables Facility (subject to the restrictions specified in the
definition of said term); and
(vi) nothing in this Section 5.02(e) shall prohibit the
Reorganization Transaction.
(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
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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)(i)) 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 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;
(x) Investments made pursuant to Terra's Supplemental Deferred
Compensation Plan, and its Excess Benefit Plan, each as in effect on
the Closing Date;
(xi) Investments by Terra consisting of the purchase, redemption,
retirement or other acquisition of shares of common stock of Terra,
and Investments by Terra and its Subsidiaries consisting of the
purchase, redemption or other acquisition of Senior Preference Units
pursuant to the SPU Redemption; and
(xii) other Investments contemplated by the Reorganization
Transaction.
(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
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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), it
being understood that the SPU Redemption will not constitute a breach of
this Section 5.02(g).
(h) Capital Expenditures.
--------------------
(i) Make Capital Expenditures (except as permitted under Section
5.02(h)(ii)) in any fiscal year in an aggregate amount, for Terra and
its Subsidiaries on a Consolidated basis, exceeding the sum of (x)
$40,000,000 plus (y) 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 Expenditures made pursuant to this clause (i) 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; or
(ii) During the period from the Restatement Date to December 31,
1997, make Capital Expenditures in connection with the reconstruction
of the Port Neal Facility, in addition to Capital Expenditures allowed
under Section 5.02(h)(i), in an aggregate amount exceeding
$30,000,000.
(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 as carried on at the Closing
Date (but after giving effect to the transactions contemplated by the
Merger Agreement).
(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
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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) and (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 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.
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(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.
(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.
(q) Margin Stock. Permit more than 25%, after applying the proceeds of
each Advance, of the value of the assets of either Borrower and such
Borrower's Subsidiaries (as determined in good faith by such Borrower) that
are subject to Section 5.02(a) or Section 5.02(e) to consist of or be
represented by Margin Stock.
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 Working Capital 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 Terra, Terra will furnish to the Agent, with sufficient copies for
each Lender and each Issuing Bank, a Consolidated balance sheet of Terra
and its 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 and its 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
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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 has taken and proposes to take with respect thereto, (B)
stating that since December 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 5.03(m) of the
Existing Credit Agreement or Section 5.03(l) 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 Terra, 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 and its Subsidiaries,
including therein a Consolidated balance sheet of Terra and its
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 and its 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 and its 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 and its
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 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
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Default or Event of Default has occurred and is continuing, a statement as
to the nature thereof and the action that Terra has taken and proposes to
take with respect thereto, (B) stating that since December 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 5.03(m) of the Existing Credit Agreement or Section
5.03(l).
(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 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).
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(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 under any Environmental Law
that could reasonably be expected to have Material Adverse Effect.
(j) 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, the Company or TNLP shall have filed with the Securities and
Exchange Commission (or any governmental agency substituted therefor) or
any national securities exchange.
(k) 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 TNLP generally or to holders of Subordinated
Indebtedness, New Terra Debt or 1995 Terra Debt generally, copies of all
financial statements and proxy statements so mailed.
(l) 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 5.03(m) of the Existing
Credit Agreement.
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(m) SPU Redemption. As soon as available, Terra will furnish to the
Agent, each Lender and each Issuing Bank true and correct copies of all
materials distributed generally to the holders of the Senior Preference
Units in connection with the SPU Redemption.
(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
Working Capital Commitment hereunder, Terra will:
(a) Debt to Cash Flow Ratio. Until the Specified Paydown Date,
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:
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 Specified Paydown
Date, 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:
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Period Ratio
------ -----
From the Closing Date 0.65 to 1.00
to September 30, 1995
From October 1, 1995 0.625 to 1.00
to April 1, 1996
April 2, 1996 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:
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:
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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.
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 clause (e), (o) or (p) of Section 5.01, or clause
(a), (b), (c), (d), (e), (g), (i) or (q) 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
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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, 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 of the Existing Credit Agreement 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 Specified Paydown Date, 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 Specified Paydown Date,
(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 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
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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
(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 Working Capital 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
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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 Working Capital 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 Borrowers.
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 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, which funds shall be retained by the Agent
in the relevant L/C Collateral Account (as provided therein as collateral
security for the Letter of Credit Liabilities) until such time as the Letters of
Credit shall have been terminated and all of such Letter of Credit Liabilities
paid in full.
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
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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 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 Working
Capital 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 Working Capital 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 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
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Pledge Agreement, under the Subsidiary Pledge and Security Agreement and under
the TNLP 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
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
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Borrowers, 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 Borrowers, 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 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
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or otherwise) in accordance with the terms of such extension or renewal.
(b) The TNLP 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 TNLP Advances
made by the Lenders to, and the Notes held by each Lender of, TNLP and all other
amounts from time to time owing to the Lenders, each Issuing Bank or the Agent
by TNLP under this Agreement and under the Notes and by any TNLP 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 "TNLP
Guaranteed Obligations"). The TNLP Guarantors hereby further jointly and
severally agree that if TNLP shall fail to pay in full when due (whether at
stated maturity, by acceleration or otherwise) any of the TNLP Guaranteed
Obligations, the TNLP 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 TNLP 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 TNLP 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 TNLP
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 TNLP Guaranteed Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might
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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
TNLP 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.
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
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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).
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.
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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 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
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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 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, (2) change the percentage of the
Working Capital Commitments or of the aggregate unpaid principal amount of the
Advances, or the number or 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
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consent shall, unless in writing and signed by the Required Lenders and each
Lender that would be adversely affected by such amendment, waiver or consent,
(1) increase the Working Capital Commitment 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 Working Capital
Commitments 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 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 Borrowers, 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;
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(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: Larry Benison (or his successor),
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.
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,
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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, 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
Reorganization Transaction or any part thereof, (ii) the SPU Redemption or any
part thereof, (iii) the Transactions (as defined in the Existing Credit
Agreement) or any part thereof, including, without limitation, the Initial
Merger and the Second Merger referred to therein and any of the other
transactions contemplated thereby (collectively, the "Merger Transactions") or
(iv) 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 Reorganization Transaction, the SPU
Redemption or the other transactions
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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 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 the Reorganization
Transaction or any part thereof, the SPU Redemption or any part thereof, the
Merger Transactions or any part thereof 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 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
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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 Working Capital Commitments, the
Advances owing to it and the Note or Notes held by it); provided, that:
(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 Working Capital Commitments 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 Working
Capital 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
relevant
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Borrower, 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 or Note under
any Facility (or, in the case of a Working Capital Facility, its related
Working Capital Commitment) shall be made in such manner so that the same
portion of its Advances and Note under such Facility (and, in the case of a
Working Capital Facility, its related Working Capital Commitment) is
assigned to the respective assignee,
(v) each such assignment by a Lender of its Terra Facility A
Advances, Terra Facility A Notes, Working Capital Advances, Working Capital
Notes or Working Capital Commitment shall be made in such manner so that
the same portion of its Terra Facility A Advances, Terra Facility A Notes,
Working Capital Advances, Working Capital Notes and Working Capital
Commitment is assigned to the respective assignee, and
(vi) 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.
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
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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 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 Working Capital
Commitments 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 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 Borrowers. Within five
Business Days after its receipt of such notice, the relevant Borrower, at its
own expense, shall
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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
portion of the Facilities assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a portion of such
Facilities, a new Note or Notes to the order of the assigning Lender in an
amount equal to the portion so 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, A-3 or A-4, 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 Working Capital 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 Working Capital
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 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 or any portion
of its rights and obligations under this Agreement to one or more successor
Issuing Banks 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 respective
successor Issuing Banks shall succeed to such portion of such rights and
obligations and such assigning Issuing Bank shall be discharged from its duties
and obligations under this Agreement to such extent, including, without
limitation, such portion of its Letter of Credit Commitment.
Credit Agreement
----------------
<PAGE>
-122-
(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.
(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 Working Capital 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 Working Capital
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 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
Credit Agreement
----------------
<PAGE>
-123-
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 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 OBLIGORS, 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
Credit Agreement
----------------
<PAGE>
-124-
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 Working Capital Commitments. In addition, 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.
Credit Agreement
----------------
<PAGE>
-125-
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.
THE BORROWERS
-------------
TERRA CAPITAL, INC.
By /s/ Robert E. Thompson
---------------------------
Title: Vice President
TERRA NITROGEN, LIMITED PARTNERSHIP
By Terra Nitrogen Corporation,
its General Partner
By /s/ Vaughn M. Klopfenstein
---------------------------
Title: Vice President
GUARANTORS
----------
TERRA INDUSTRIES INC.
By /s/ Robert E. Thompson
---------------------------
Title: Vice President
TERRA NITROGEN CORPORATION
By /s/ Vaughn M. Klopfenstein
---------------------------
Title: Vice President
BEAUMONT METHANOL, LIMITED
PARTNERSHIP
By Terra Methanol Corporation,
its General Partner
By /s/ George H. Valentine
---------------------------
Title: Vice President
TERRA METHANOL CORPORATION
By /s/ George H. Valentine
---------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
-126-
BMC HOLDINGS, INC.
By /s/ George H. Valentine
---------------------------
Title: Vice President
TERRA CAPITAL HOLDINGS, INC.
By /s/ George H. Valentine
---------------------------
Title: Vice President
THE AGENT
---------
CITIBANK, N.A.
By /s/ Judith C. Fishlow
---------------------------
Title: Attorney-in-fact
CO-ARRANGER
-----------
CHEMICAL BANK
By /s/ Judith C. Fishlow
---------------------------
Title: Attorney-in-fact
THE ISSUING BANKS
-----------------
CITIBANK, N.A.
By /s/ Ronald Potter
---------------------------
Title: Managing Director
THE LENDERS
-----------
CITIBANK, N.A.
By /s/ Judith C. Fishlow
---------------------------
Title: Attorney-in-fact
CHEMICAL BANK
By /s/ Ronald Potter
---------------------------
Title: Managing Director
Credit Agreement
----------------
<PAGE>
-127-
ARAB BANKING CORPORATION
By /s/ Grant E. McDonald
---------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS
By /s/ M.H. Claggett
---------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ F.C.H. Ashby
---------------------------
Title: Senior Manager Loan
Operations
CAISSE NATIONAL DE CREDIT AGRICOLE
By /s/ W. Leroy Startz
-------------------------------
Title: First Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By /s/ Lawrence W. Sidwell
-------------------------------
Title: Vice President
By /s/ Ian Reece
-------------------------------
Title: Vice President & Manager
CREDIT LYONNAIS CHICAGO BRANCH
By /s/ Sandra E. Horwitz
-------------------------------
Title: Vice President
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By /s/ Sandra E. Horwitz
-------------------------------
Title: Authorized Signatory
Credit Agreement
----------------
<PAGE>
-128-
DRESDNER BANK AG, CHICAGO AND GRAND
CAYMAN BRANCHES
By /s/ John Schaus/Graham Lewis
---------------------------------
Title: FVP/AVP
FIRST BANK NATIONAL ASSOCIATION
By /s/ Jeffrey R. Torrison
---------------------------------
Title: Vice President
THE FUJI BANK, LIMITED
By /s/ Hidehiko Ide
---------------------------------
Title: General Manager
By N/A
---------------------------------
Title:
MELLON BANK, N.A.
By /s/ George B. Davis
---------------------------------
Title: Vice President
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset
Management, L.P., as
investment advisor
By /s/ John W. Fraser
---------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By /s/ John W. Fraser
----------------------------
Title: Authorized Signatory
NATIONSBANK OF TEXAS, N.A.
By /s/ Perry B. Stephenson
----------------------------
Title: Senior Vice President
Credit Agreement
----------------
<PAGE>
-129-
PROTECTIVE LIFE INSURANCE COMPANY
By /s/ Mark K. Okada
----------------------------
Title: Principal Protective
Asset Management Co.
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
By Chancellor Senior Secured
Management, Inc., its
Portfolio Advisor
By /s/ Gregory L. Smith
-----------------------
Title: Vice President
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS 2 (ROSA2)
By Chancellor Senior Secured
Management, Inc., its
Portfolio Advisor
By /s/ Gregory L. Smith
-----------------------
Title: Vice President
UNION BANK OF SWITZERLAND, CHICAGO
BRANCH
By /s/ J. Timothy Shortly
----------------------------
Title: Managing Director and
Branch Manager
By /s/ Denis J. Campbell IV
----------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
EXHIBIT 12
TERRA INDUSTRIES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNTS IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------- ---------------------------------
PRO FORMA PRO FORMA
FOR AMCI FOR AMCI
ACQUISITION ACQUISITION
1990 1991 1992 1993 1994 1994 1994 1994 1995
-------- ------- ------- ------- -------- ----------- --------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(A) Earnings:
Income from continuing
operations before
income taxes,
extraordinary items
and cumulative effect
of accounting changes. $(14,938) $13,106 $18,186 $32,145 $ 89,945 $181,884 $ (9,865) $ (3,879) $ 53,883
Add:
(a) Fixed charges per
Item (B) below........ 24,297 20,701 17,237 22,483 36,562 73,461 5,866 17,469 18,082
(b) Dividends of
unconsolidated
affiliates............ -- -- -- 537 190 190 73 73 246
Deduct:
(a) Undistributed
income from
unconsolidated
affiliates............ -- -- -- (2,275) (743) (743) 554 554 1,197
-------- ------- ------- ------- -------- -------- --------- --------- ---------
$ 9,359 $33,807 $35,423 $52,890 $125,954 $254,792 $ (3,372) $ 14,217 $ 73,408
======== ======= ======= ======= ======== ======== ========= ========= =========
(B) Fixed charges:
Interest on
indebtedness, expensed
or capitalized........ $ 17,629 $14,352 $10,617 $12,944 $ 22,082 $ 57,922 $ 2,935 $ 14,102 $ 14,007
Amortization of debt
discount and expense
and premium on
indebtedness, expense
or capitalized........ 40 40 47 250 316 316 79 79 79
Portion or rents
representative of the
interest factor....... 6,628 6,309 6,573 9,289 14,164 15,223 2,852 3,288 3,996
-------- ------- ------- ------- -------- -------- --------- --------- ---------
Fixed charges, for
computation purposes.. $ 24,297 $20,701 $17,237 $22,483 $ 36,562 $ 73,461 $ 5,866 $ 17,469 $ 18,082
======== ======= ======= ======= ======== ======== ========= ========= =========
Ratios of earnings to
fixed charges(1)(2).... -- 1.63 2.06 2.35 3.45 3.47 -- -- 4.06
======== ======= ======= ======= ======== ======== ========= ========= =========
</TABLE>
- --------
(1) Earnings available for fixed charges were insufficient to cover fixed
charges by $14.9 million for the year ended December 31, 1990, and $9.2
million and $3.3 million for the historical and pro forma three-month
periods ended March 31, 1994, respectively. As a result, the financial
ratios for such periods are not meaningful and, therefore, not included.
(2) Assuming the 10 1/2% Senior Notes due 2005 were issued at the beginning of
1994, fixed charges would have been increased to $79,847 for pro forma
1994, and $19,065 and $19,228 for the pro forma three-month periods ended
March 31, 1994 and 1995, respectively. As a result, the ratio of pro forma
earnings to pro forma fixed charges would be 3.19 for 1994 and 3.82 for the
three-month period ended March 31, 1995. Pro forma earnings available for
fixed charges would have been insufficient to cover pro forma fixed charges
by $4.8 million for the three-month period ended March 31, 1994.
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Terra Industries Inc. on Form S-4 of our reports dated February 1, 1995
(which reports express an unqualified opinion and include an explanatory
paragraph referring to the Company's change in its method of accounting for
major maintenance turnarounds and post-employment benefits effective January 1,
1994) appearing in and incorporated by reference in the Annual Report on Form
10-K of Terra Industries Inc. for the year ended December 31, 1994, and to the
use of our report dated February 1, 1995, appearing in the Prospectus, which is
part of this Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
-------------------------------------
Deloitte & Touche LLP
Omaha, Nebraska
June 29, 1995
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Burton M. Joyce, Francis G. Meyer and
George H. Valentine and each of them, his or her true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities
(including his or her capacity as a director and/or officer of Terra Industries
Inc.), to sign a registration statement on Form S-4 for an exchange offer in
connection with the company's 10-1/2% Senior Notes due 2005 and any or all
amendments (including post-effective amendments) to such registration statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this power of
attorney has been signed on the date or dates indicated, by the following
persons in the capacities indicated:
Signature Title Date(s)
/s/ Reuben F. Richards Chairman of the Board June 20, 1995
- ------------------------
Reuben F. Richards
/s/ Burton M. Joyce Chief Executive Officer, June 20, 1995
- ------------------------ President and Director
Burton M. Joyce (Principal Executive Officer)
/s/ Francis G. Meyer Vice President,Chief June 22, 1995
- ------------------------ Financial Officer (Principal
Francis G. Meyer Financial Officer and
Principal Accounting Officer)
/s/ Edward G. Beimfohr Director June 22, 1995
- ------------------------
Edward G. Beimfohr
/s/ Carol L. Brookins Director June 20, 1995
- ------------------------
Carol L. Brookins
<PAGE>
/s/ Edward M. Carson Director June 20, 1995
- ------------------------
Edward M. Carson
/s/ David E. Fisher Director June 26, 1995
- ------------------------
David E. Fisher
/s/ Basil T.A. Hone Director June 20, 1995
- ------------------------
Basil T.A. Hone
/s/ Anthony W. Lea Director June 21, 1995
- ------------------------
Anthony W. Lea
/s/ John R. Norton III Director June 20, 1995
- ------------------------
John R. Norton III
/s/ Henry R. Slack Director June 22, 1995
- ------------------------
Henry R. Slack
<PAGE>
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
TERRA INDUSTRIES INC.
(Exact name of Registrant as specified in its charter)
Maryland 52-1145429
(State of Incorporation) (I.R.S. Employer
Identification No.)
600 Fourth Street
P.O. Box 6000
Souix City, Iowa 51102-6000
(Address of Principal Executive Offices) (Zip Code)
10 1/2% Senior Notes due 2005
(Title of the Indenture Securities)
<PAGE>
GENERAL
-------
1. General Information Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Item 3-15 are not applicable because to the best of the Trustee's knowledge
the obligor is not in default under any Indenture for which the Trustee acts
as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification. Each of the exhibits listed below is
incorporated by reference from a previous registration numbered 33-60253.
1. Copy of Articles of Association.
2. Copy of Certificate of Authority to Commence Business.
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).
4. Copy of existing By-Laws.
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what persons
have been underwriters for any securities of the obligors within three years
prior to the date of filing this statement, or what persons are owners of 10% or
more of the voting securities of the obligors, or affiliates, are based upon
information furnished to the Trustee by the obligors. While the Trustee has no
reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Trust National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 23rd day of June, 1995.
FIRST TRUST NATIONAL ASSOCIATION
[SEAL]
/s/ Richard H. Prokosch
-----------------------------------
Richard H. Prokosch
Vice President
/s/ Mark E. LeMay
- ---------------------
Mark E. LeMay
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, FIRST TRUST NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: June 23, 1995
FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
-----------------------------------
Richard H. Prokosch
Vice President
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 1/2% SENIOR NOTES DUE 2005, SERIES A
OF
TERRA INDUSTRIES INC.
PURSUANT TO THE PROSPECTUS DATED , 1995
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1995, UNLESS EXTENDED.
To: First Trust National Association, the Exchange Agent
By Registered or Certified Mail, Overnight Courier or Hand:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Theresa Shackett, Specialized Finance
or
Confirm by Telephone:
By Facsimile: (612) 244-1196
(612) 244-1145
Attention: Theresa Shackett,
Specialized Finance
For general information contact the Exchange Agent's Bondholder Relations
Department at (612) 244-0444.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus dated ,
1995 (the "Prospectus") of Terra Industries Inc. (the "Company") and this
Letter of Transmittal (the "Letter of Transmittal"), which together describe
the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount
of its 10 1/2% Senior Notes due 2005, Series B (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement, for each $1,000
principal amount of its outstanding 10 1/2% Senior Notes due 2005, Series A
(the "Notes"), of which $200,000,000 principal amount is outstanding. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on , 1995, unless
the Company, in its sole discretion, extends the Exchange Offer, in which case
the term shall mean the latest date and time to which the Exchange Offer is
extended. The term "Holder" with respect to the Exchange Offer means any person
in whose name Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. Capitalized terms used but not defined herein have the respective
meanings set forth in the Prospectus.
This Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing the Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "Exchange Offer-- Procedures for Tendering" by any
financial institution that is a participant in the Book-Entry Transfer Facility
and whose name appears on a security position listing as the owner of Notes
(such participants acting on behalf of holders are referred to herein, together
with such holders, as "Authorized Holders") or (iii) tender of the Notes is to
be made according to the guaranteed delivery procedures described in the
Prospectus under the caption "Exchange Offer--Guaranteed Delivery Procedures."
See Instruction 2. Delivery of documents to the Book-Entry Transfer Facility
does not constitute delivery to the Exchange Agent.
<PAGE>
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Notes must complete
this Letter of Transmittal in its entirety.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ______________________________________________
Account Number: _____________________________________________________________
Transaction Code Number: ____________________________________________________
Principal Amount of Tendered Notes: _________________________________________
If Holders desire to tender Notes pursuant to the Exchange Offer and (i) time
will not permit this Letter of Transmittal, certificates representing Notes or
other required documents to reach the Exchange Agent prior to the Expiration
Date, or (ii) the procedures for book-entry transfer cannot be completed prior
to the Expiration Date, such Holders may effect a tender of such Notes in
accordance with the guaranteed delivery procedures set forth in the Prospectus
under the caption "Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2 below.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (See Instruction 2):
Name of Registered Holder(s): _______________________________________________
Window Ticket No. (if any): _________________________________________________
Date of Execution of Notice of Guaranteed Delivery: _________________________
Name of Eligible Institution
that Guaranteed Delivery: ___________________________________________________
If Delivered by Book Entry Transfer,
the Account Number: _________________________________________________________
Transaction Code Number: ____________________________________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
----------------------------------------------------------------------
Attention: __________________________________________________________________
Listed below are the Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the certificate numbers and principal
amount of Notes should be listed on a separate signed schedule affixed hereto.
2
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF 10 1/2% SENIOR NOTES DUE 2005, SERIES A*
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF PRINCIPAL TENDERED (MUST BE
REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED AN INTEGRAL MULTIPLE
(PLEASE FILL IN, IF BLANK) NUMBER(S) BY CERTIFICATE(S) OF $1,000)**
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
TOTAL
- ---------------------------------------------------------------------------------------
</TABLE>
*Need not be completed by Holders tendering by book-entry transfer.
**Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of 10 1/2% Senior Notes due 2005, Series A will be deemed
to have tendered the entire aggregate principal amount represented by the
column labeled "Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of 10 1/2%
Senior Notes due 2005, Series A. All tenders must be in integral multiples
of $1,000.
BOX 2 BOX 3
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE
(SEE INSTRUCTIONS 4, 5 AND 6) INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if To be completed ONLY if
certificates for Notes in a certificates for Notes in a
principal amount not tendered, or principal amount not tendered, or
Exchange Notes issued in exchange Exchange Notes issued in exchange
for Notes accepted for exchange, for Notes accepted for exchange,
are to be issued in the name of are to be sent to someone other
someone other than the than the undersigned, or to the
undersigned. undersigned at an address other
than that shown above.
Issue certificate(s) to:
Deliver certificate(s) to:
Name: _____________________________
(Please Print) Name: _____________________________
(Please Print)
Address: __________________________
Address: __________________________
-----------------------------------
----------------------------------- (Include Zip Code)
(Include Zip Code)
-----------------------------------
----------------------------------- (Tax Indemnification or Social
(Tax Indemnification or Social Security Number)
Security Number)
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to Terra Industries Inc., a Maryland corporation (the
"Company"), the principal amount of Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Notes with the
full power of substitution to (i) present such Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Company, (ii) deliver certificates for such Notes to the Company
and deliver all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (iii) present such Notes for transfer on the
books of the Company and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Notes, all in accordance with the terms of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claims, when the same are acquired by the
Company. The undersigned hereby further represents that any Exchange Notes
acquired in exchange for Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is the undersigned, that neither the undersigned nor
any other such person has any arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
such Exchange Notes and that neither the undersigned nor any such other person
is an "affiliate," as defined in Rule 405 under the Securities Act of the
Company nor a broker-dealer tendering notes acquired directly from the Company
for its own account. In addition, the undersigned and any such person
acknowledge that (a) any person participating the Exchange Offer for the
purpose of distributing the Exchange Notes must, in the absence of an exemption
therefrom, comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale of the Exchange Notes
and cannot rely on the position of the staff of the Commission enunciated in
no-action letters and (b) failure to comply with such requirements in such
instance could result in the undersigned or such person incurring liability
under the Securities Act for which the undersigned or such person is not
indemnified by the Company. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the assignment, transfer and purchase of
the Notes tendered hereby. If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in and does not intend to engage
in, a distribution of Exchange Notes. If the undersigned is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Notes that
were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
If any Notes tendered herewith are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Notes will
be returned, without expense, to the undersigned at the address shown below or
to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
4
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Notes pursuant to the procedures
described under the caption "Exchange Offer--Procedures for Tendering" in the
Prospectus and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Exchange Offer, subject only to withdrawal of such tenders on
the terms set forth in the Prospectus under the caption "Exchange Offer--
Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates (or electronic transfers)
representing the Exchange Notes issued in exchange for the Notes accepted for
exchange and any certificates (or electronic transfers) for Notes not tendered
or not exchanged, in the name(s) of the undersigned. Similarly, unless
otherwise indicated in Box 3 under "Special Delivery Instructions," please send
the certificates, if any, representing the Exchange Notes issued in exchange
for the Notes accepted for exchange and any certificates for Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below in the undersigned's signature(s). In
the event that both "Special Registration Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the
Exchange Notes issued in exchange for the Notes accepted for exchange in the
name(s) of, and return any certificates for Notes not tendered or not exchanged
to, the person(s) so indicated. The undersigned understands that the Company
has no obligation pursuant to the "Special Registration Instructions" and
"Special Delivery Instructions" to transfer any Notes from the name of the
registered Holder(s) thereof if the Company does not accept for exchange any of
the Notes so tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, may tender their Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 2 regarding the
completion of this Letter of Transmittal printed below.
5
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X
- --------------------------------------------------------------- --------------
Date
X
- --------------------------------------------------------------- --------------
Date
Area Code and Telephone Number: _______________________________
The above lines must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Notes or by a participant in the Book-Entry Transfer
Facility, exactly as such participant's name appears on a security position
listing as the owner of the Notes, or by person(s) authorized to become
registered holder(s) by a properly completed bond power from the registered
holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If Notes to which this Letter of Transmittal relate are held of record by two
or more joint holders, then all such holders must sign this Letter of
Transmittal. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, then such person must (i) set forth his
or her full title below and (ii) submit evidence satisfactory to the Company of
such person's authority so to act. See Instruction 5 regarding the completion
of this Letter of Transmittal printed below.
Name(s): _______________________________________________________________________
(Please Print)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(Include Zip Code)
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: ____________________________
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address, Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: _________________________________________________________________________
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR BOOK-
ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer into the Exchange Agent's account with the
Book-Entry Transfer Facility for tendered Notes transferred electronically), as
well as a properly completed and duly executed copy of this Letter of
Transmittal (or facsimile thereof), a Substitute Form W-9 (or facsimile
thereof) and any other documents required by this Letter of Transmittal must be
received by the Exchange Agent at its address set forth herein prior to the
Expiration Date. The method of delivery of certificates for Notes and all other
required documents is at the election and sole risk of the tendering holder and
delivery will be deemed made only when actually received by the Exchange Agent.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. As an alternative to delivery by mail, the holder may
wish to use an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure timely delivery. Neither the Company nor the
Exchange Agent is under an obligation to notify any tendering holder of the
Company's acceptance of tendered Notes prior to the consummation of the
Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes but
whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal and any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Notes according to the guaranteed
delivery procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States, or is otherwise an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or
hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered Notes, and the principal
amount of tendered Notes and stating that the tender is being made thereby
and guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the tendered Notes (or a confirmation of book-entry
transfer into the Exchange Agent's account with the Book-Entry Transfer
Facility for Notes transferred electronically) and any other required
documents will be deposited by the Eligible Institution with the Exchange
Agent; and
(iii) such properly completed and executed Letter of Transmittal and
certificates representing the tendered Notes in proper form for transfer
(or a confirmation of book-entry transfer into the Exchange Agent's account
with the Book-Entry Transfer Facility for Notes transferred electronically)
must be received by the Exchange Agent within three New York Stock Exchange
trading days after the Expiration Date.
Any holder who wishes to tender Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery relating to such Notes prior to the Expiration
Date. Failure to complete the guaranteed delivery procedures outlined above
will not, of itself, affect the validity or effect a revocation of any Letter
of Transmittal form properly completed and executed by a Holder who attempted
to use the guaranteed delivery person.
3. TENDER BY HOLDER. Only a holder of Notes may tender such Notes in the
Exchange Offer. Any beneficial owner of Notes who is not the registered holder
and who wishes to tender should arrange with
7
<PAGE>
such holder to execute and deliver this Letter of Transmittal on such owner's
behalf or must, prior to completing and executing this Letter of Transmittal
and delivering such Notes, either make appropriate arrangements to register
ownership of the Notes in such owner's name or obtain a properly completed bond
power from the registered holder.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes is tendered, the tendering holder should fill in the principal
amount tendered in the column labeled "Aggregate Principal Amount Tendered" of
the box entitled "Description of 10 1/2% Senior Notes due 2005, Series A" (Box
1) above. The entire principal amount of Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of Notes is not tendered, Notes for the principal amount of
Notes not tendered and Exchange Notes exchanged for any Notes tendered will be
sent to the holder at his or her registered address (or transferred to the
account of the Book-Entry Facility designated above), unless a different
address (or account) is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Notes
without alteration, enlargement, or any change whatsoever. If this Letter of
Transmittal is signed by a participant in the Book-Entry Transfer Facility, the
signature must correspond with the name as it appears on the security position
listing as the owner of the Notes.
If any of the tendered Notes are owned of record by two or more joint owners,
all such owners must sign this Letter of Transmittal. If any tendered Notes are
held in different names on several Notes, it will be necessary to complete,
sign, and submit as many separate copies of the Letter of Transmittal documents
as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder, and
Exchange Notes are to be issued and any untendered or unaccepted principal
amount of Notes are to be reissued or returned to the registered holder, then
the registered holder need not and should not endorse any tendered Notes nor
provide a separate bond power. In any other case the registered holder must
either properly endorse the Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (in either case, executed
exactly as the name(s) of the registered holder(s) appear(s) on such Notes,
and, with respect to a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of Notes, exactly as
the name(s) of the participant(s) appear(s) on such security position
listings), with the signature(s) on the endorsement or bond power guaranteed by
an Eligible Institution unless such certificates or bond powers are signed by
an Eligible Institution.
If this Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter of
Transmittal.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Notes tendered herewith (or by a
participant in the Book-Entry Transfer Facility whose appears on a security
position listing as the owner of the Tendered Notes) and the issuance of
Exchange Notes (and any Notes not tendered or not accepted) are to be issued
directly to such registered holder(s) (or, if signed by a participant in the
Book-Entry Transfer Facility, any Exchange Notes or Notes not tendered or not
accepted are to be deposited to such participant's account at such Book-Entry
Transfer Facility) and neither the "Special Delivery Instructions" (Box 3) nor
the "Special Registration Instructions" (Box 2) has been completed, or (ii)
such Notes are tendered for the account of an Eligible Institution. In all
other cases, all signatures on this Letter of Transmittal must be guaranteed by
an Eligible Institution.
8
<PAGE>
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address (or account at the Book-
Entry Transfer Facility) in which the Exchange Notes and/or substitute Notes
for principal amounts not tendered or not accepted for exchange are to be sent
(or deposited), if different from the name and address or account of the person
signing this Letter of Transmittal. In the case of issuance in a different
name, the employer identification number or social security number of the
person named must also be indicated and the indicated and the tendering holders
should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the holder
of the Notes or deposited at such holders' account at the Book-Entry Transfer
Facility.
7. TRANSFER TAXES. Transfer taxes, if any, applicable to the sale and
transfer of Notes pursuant to the Exchange Offer will be payable by the
tendering holder.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
of any Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number "TIN"), which, in the
case of a holder who is an individual is his or her social security number. If
the Company is not provided with the correct TIN, the holder may be subject to
a $50 penalty imposed by Internal Revenue Service. (If withholding results in
an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the Notes are registered in more than one name or are not in
the name of the actual owner, see the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for information on which
TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Notes
not validly tendered or any Notes, the Company's acceptance of which would, in
the opinion of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Notes must be cured within such time as the Company shall determine.
The Company will use reasonable efforts to give notification of defects or
irregularities with respect to tenders of Notes, but shall not incur any
liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes on transmittal of this Letter of Transmittal will be
accepted.
9
<PAGE>
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen, or destroyed should contact the
Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Notes when, as and if the Company has given
written and oral notice thereof to the Exchange Agent. If any tendered Notes
are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Notes will be returned, without expense, to the undersigned at the
address shown above (or credited to the undersigned's account at the Book-Entry
Transfer Facility designated above) or at a different address as may be
indicated under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "Exchange
Offer--Withdrawal of Tenders."
PAYOR'S NAME: TERRA INDUSTRIES INC.
- --------------------------------------------------------------------------------
Name (if joint names, list
first and circle the name
of the person or entity
whose number you enter in
Part 1 below. See
instructions if your name
has changed.)
SUBSTITUTE --------------------------------------------------------
FORM W-9 Address
--------------------------------------------------------
DEPARTMENT OF THE TREASURY
City, State and Zip Code
INTERNAL REVENUE SERVICE
--------------------------------------------------------
PAYER'S REQUEST FOR --------------------------------------------------------
PART 2--Check the box if you are NOT subject to
backup withholding under the provisions of section
3408(a)(1)(C) of the Internal Revenue Code because
(1) you have not been notified that you are subject
to backup withholding as a result of failure to
report all interest of dividends or (2) the Internal
Revenue Service has notified you that you are no
longer subject to backup withholding. [_]
TAXPAYER List account number(s) here (optional)
IDENTIFICATION --------------------------------------------------------
NUMBER (TIN) PART 1--PLEASE PROVIDE Social Security Number or
YOUR TAXPAYER TIN
IDENTIFICATION NUMBER
("TIN") IN THE BOX AT
RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW
--------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE.
PART 3--
Awaiting
TIN [_]
SIGNATURE ___________DATE ____________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
10
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 1/2% SENIOR NOTES DUE 2005, SERIES A
OF
TERRA INDUSTRIES INC.
This form must be used by a holder of 10 1/2% Senior Notes due 2005, Series A
(the "Notes") of Terra Industries Inc. (the "Company") who wishes to tender
Notes to the Exchange Agent pursuant to the guaranteed delivery procedures
described in the "Exchange Offer--Guaranteed Delivery Procedures" of the
Prospectus dated , 1995 (the "Prospectus") and in Instruction 2 to the
related Letter of Transmittal. Any holder who wishes to tender Notes pursuant
to such guaranteed delivery procedures must ensure that the Exchange Agent
receives this Notice of Guaranteed Delivery prior to the Expiration Date of the
Exchange Offer. Capitalized terms not defined herein have the meanings ascribed
to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1995, UNLESS EXTENDED (THE "EXPIRATION DATE").
FIRST TRUST NATIONAL ASSOCIATION
(THE "EXCHANGE AGENT")
By Registered or Certified Mail,
Overnight Courier or Hand Delivery:
First Trust National Association By Facsimile:
180 East Fifth Street (612) 244-1145
St. Paul, Minnesota 55101 Attention: Theresa Shackett,
Attention: Theresa Shackett, Specialized Finance
Specialized Finance
Confirm by Telephone:
For general information contact the (612) 244-1196
Exchange Agent's Bondholder Relations
Department at (612) 244-0444.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) OF
NOTES OR
ACCOUNT NUMBER AT THE BOOK-ENTRY AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- -----------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------
</TABLE>
<PAGE>
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) Date: ________________________, 1995
or
Address: ___________________________
Authorized Signature: ______________ ------------------------------------
------------------------------------
------------------------------------ Area Code and Telephone No. ________
Name(s) of Registered Holder(s): ___
------------------------------------
------------------------------------
------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): _____________________________________________________________________
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Capacity: ____________________________________________________________________
Address(es): _________________________________________________________________
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GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent
of the Letter of Transmittal (or facsimile thereof), together with the Notes
tendered hereby in proper form for transfer (or confirmation of the book-
entry transfer of such Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility described in the Prospectus under the caption
"Exchange Offer--Guaranteed Delivery Procedures" and in the Letter of
Transmittal) and any other required documents, all by 5:00 p.m., New York
City time, on the third New York Stock Exchange trading day following the
Expiration Date.
Name of Firm: ______________________ ------------------------------------
Authorized Signature
Address: ___________________________ Name: ______________________________
------------------------------------
Title: _____________________________
Area Code and Telephone No.: _______
Date: ________________________, 1995
DO NOT SEND NOTES WITH THIS FORM, ACTUAL SURRENDER OF NOTES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
2
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face
of the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the
owner of Notes, the signature must correspond with the name shown on the
security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
3
<PAGE>
Exhibit 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
TERRA INDUSTRIES INC.
10 1/2% SENIOR NOTES DUE 2005, SERIES A
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated , 1995
(the "Prospectus") of Terra Industries Inc., a Maryland corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the 10 1/2% Senior Notes due 2005, Series A (the
"Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (fill in amount):
$ of the 10 1/2% Senior Notes due 2005, Series A.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] TO TENDER the following Notes held by you for the account of the
undersigned (insert principal amount of Notes to be tendered if any):
$
[_] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to, the representations that (i)
the undersigned is acquiring the Exchange Notes in the ordinary course of
business of the undersigned, (ii) the undersigned is not participating, does
not intend to participate, and has no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes, (iii) the
undersigned acknowledges that any person participating in the Exchange Offer
for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Act"), in connection with a secondary resale transaction
of the Exchange Notes acquired by such person and cannot rely on the position
of the Staff of the Securities and Exchange Commission set forth in no action
letters that are discussed in the section of the Prospectus entitled "Exchange
Offer--Resales of the Exchange Notes" and (iv) the undersigned is not an
"affiliate," as defined in Rule 405 under the Act, of the Company or a broker-
dealer tendering Notes acquired directly from the Company for its own account;
(b) to agree, on behalf of the undersigned, as set forth in the Letter of
Transmittal; and (c) to take such other action as necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of such
Notes.
SIGN HERE
Name of beneficial owner(s): ________________________________________________
Signature(s): _______________________________________________________________
Name (please print): ________________________________________________________
Address: ____________________________________________________________________
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Telephone Number: ___________________________________________________________
Taxpayer Identification or Social Security Number: __________________________
Date: _______________________________________________________________________
