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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission file number: 1-8520
TERRA INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
MARYLAND
(State or other jurisdiction of
incorporation or organization)
52-1145429
(I.R.S. Employer
Identification No.)
TERRA CENTRE
600 FOURTH STREET
P. O. BOX 6000
SIOUX CITY, IOWA
(Address of principal executive offices)
51102-6000
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (712) 277-1340
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- -------------------
COMMON SHARES, WITHOUT PAR VALUE NEW YORK STOCK EXCHANGE
TORONTO STOCK EXCHANGE
10-3/4% SENIOR NOTES DUE 2003 N/A
10-1/2% SENIOR NOTES DUE 2005 N/A
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
______________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of Registrant's voting stock held by non-
affiliates of Registrant, at December 31, 1995, was approximately $545,400,000.
On December 31, 1995, Registrant's outstanding voting stock consisted of
81,173,402 Common Shares, without par value.
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DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders of Registrant for the fiscal year ended December
31, 1995. Certain information therein is incorporated by reference into Part I,
Part II and Part IV hereof.
Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held
on April 30, 1996. Certain information therein is incorporated by reference into
Part III hereof.
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TABLE OF CONTENTS
PART I
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<TABLE>
<CAPTION>
<S> <C> <C>
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.................................... 1
ITEM 3. LEGAL PROCEEDINGS................................................ 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 11
EXECUTIVE OFFICERS OF THE COMPANY................................ 12
PART II
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ITEM 5. MARKET FOR TERRA INDUSTRIES' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.............................................. 13
ITEM 6. SELECTED FINANCIAL DATA.......................................... 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................ 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE............................................. 14
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.................. 14
ITEM 11. EXECUTIVE COMPENSATION........................................... 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 14
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.. 14
SIGNATURES................................................................. 20
INDEX TO FINANCIAL STATEMENT SCHEDULES, REPORTS AND CONSENTS............... S-1
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PART I
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ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
Terra Industries Inc., a Maryland corporation ("Terra" or the "Company"),
conducts its ongoing operations in North America primarily through its
subsidiaries. The Company's principal operating subsidiaries include Terra
International, Inc., an indirect wholly owned subsidiary ("Terra
International"), Terra International (Canada) Inc., a wholly owned subsidiary of
Terra International ("Terra Canada"), Beaumont Methanol, Limited Partnership, an
indirect wholly owned subsidiary ("BMLP"), Terra Nitrogen Corporation, an
indirect wholly owned subsidiary ("TNC"), and Terra Nitrogen, Limited
Partnership ("TNLP"). TNC is TNLP's sole general partner and owns, directly or
indirectly, approximately 60% of TNLP. Approximately 5% of TNLP is indirectly
owned by another wholly owned subsidiary of the Company and approximately 35% of
TNLP is indirectly owned by other limited partners in the form of publicly
traded Senior Preference Units of Terra Nitrogen Company, L.P. ("TNCLP"), the
99% limited partner of TNLP. Unless otherwise referred to herein or the context
otherwise requires, references to the "Company" or "Terra" shall mean Terra
Industries Inc., including, where the context so requires, its direct and
indirect subsidiaries. The principal corporate office of the Company is located
at Terra Centre, 600 Fourth Street, Sioux City, Iowa 51102-6000 and its
telephone number is 712-277-1340.
GENERAL
The Company is a leader in each of its three business segments: (i) the
distribution of crop production products 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 products 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 December
31, 1995, approximately:
. 380 farm service centers;
. 90 fertilizer storage facilities; and
. 890 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 "Courtright Facility") and
Arkansas (the "Blytheville Facility");
. a methanol production plant, which is located in Texas (the "Beaumont
Facility") (the Woodward Facility also includes methanol production
capacity);
. a crop protection products formulation plant, which is located in
Arkansas (the "Blytheville Formulation Facility"); and
. seven additional liquid crop protection product formulation facilities.
For certain financial information regarding the Company's industry segments
(Distribution, Nitrogen Products and Methanol), see Note 20 to the Company's
Consolidated Financial Statements incorporated herein.
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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 products), 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 approximately
15% of the Company's total crop protection product sales in 1995. As of December
31, 1995, the Riverside/(R)/ line includes approximately 145 products, of which
seven were added in 1995, 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 inventory, 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 one of the largest independent seed distributors. The Company
focuses marketing efforts on its proprietary brand of corn hybrids, soybean,
wheat and cotton seed varieties, which provide higher margins. These products
represented approximately 14% of the Company's total seed sales in 1995. The
Company also has maintained in the past few years an exclusive retail storefront
marketing and distribution agreement for DEKALB brand seed in the Midwest, which
accounted for approximately 9% of the Company's total 1995 seed sales.
Services. In addition to selling products used 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.
Analytical results are down-loaded to a mainframe computer located at the
company headquarters in Sioux City, Iowa. These results are readily accessible
to most farm center locations through computer terminal links to the mainframe.
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. Recommendations can be made for
practically 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.
Terra has made a strong commitment to their customers by taking an active role
in "precision agriculture". Precision agriculture utilizes technological
advances which allow growers to view and treat individual, site-specific areas
within their fields versus whole field applications, thus allowing for more
efficient utilization of their input dollars. The Company has invested in
hardware, software and people to meet the demand of Precision in Agriculture/TM/
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
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laboratory, use of the CropMaster/R/ program and other services. The Company has
504 MarketMaster/TM/ dealer sites as of December 31, 1995.
Marketing and Distribution. The Company markets its products primarily to
agricultural customers, including both dealers and growers. For 1995,
approximately 70% of the Company's distribution revenues were attributable to
grower sales through farm service center locations and approximately 30% were
attributable to 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 utilize the Company's farm service centers, for delivery,
billing and other systems and services.
The Company's distribution operations are organized into Northern and Southern
Divisions, which include thirteen 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
responsibility, personal safety and field application. The field salespeople are
supported by the Ag Analytical Services laboratory, a staff of technical service
representatives and research stations 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 products 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. The Blytheville Formulation Facility is one of thirteen plants in
the U.S. and formulates seven DF products and nine liquid products.
Approximately 65% of the plant's volume in 1995 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. The Blytheville Formulation Facility is owned in fee.
NITROGEN PRODUCTS
Nitrogen is one of three primary nutrients essential for plant growth.
Nitrogen fertilizer products must be reapplied each year in areas of extensive
agricultural usage because of absorption by crops and leaching 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 urea ammonium nitrate solution ("UAN"). A significant portion of the
Company's ammonia production is upgraded into other nitrogen fertilizer products
such as urea and UAN.
Products. Although, to some extent, the various nitrogen fertilizer products
are interchangeable, each has its own distinct characteristics which produce
agronomic preferences among end users. Farmers decide which type of nitrogen
fertilizer to apply based on the crop planted, soil and weather conditions,
regional farming practices, relative nitrogen fertilizer prices and the cost and
availability of appropriate storage, handling and application equipment.
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Ammonia. Anhydrous ammonia is the simplest form of nitrogen fertilizer and
is the feedstock for the production of most other nitrogen fertilizers,
including urea and UAN. It is produced by natural gas reacting 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 pound of nitrogen. Ammonia has a distinctive odor and requires
refrigeration or pressurization for transportation and storage.
Urea. Urea is produced for both the feed and fertilizer market by converting
ammonia into liquid urea, which can be turned into a solid form. Urea has a
nitrogen content of 46% by weight, the highest level for any solid nitrogen
product. The Company produces both solid urea in the granulated form, generally
for the fertilizer market, and urea liquor for feed supplements.
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 and accelerating field preparation for
planting. 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 increase UAN demand.
The Company's sales mix of its three principal nitrogen products (including
TNLP on a pro forma basis) for the years ended December 31, 1995, 1994 and 1993
was approximately (based on tons sold):
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1995 1994 1993
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Ammonia 25% 25% 23%
Urea 14% 16% 16%
UAN 61% 59% 61%
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Plants. All of the Company's Facilities are integrated facilities for the
production of ammonia, liquid urea and UAN and other nitrogen products. In
addition, the Courtright Facility and Blytheville Facility produce solid urea.
The
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total annual gross ammonia production capacity of the following nitrogen
fertilizer facilities operated by the Company is currently 2.7 million short
tons:
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<CAPTION>
Gross Annual
Ammonia Production Year when Terra first Year facility
Capacity (tons) acquired interest built
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Port Neal Facility (Iowa) 345,000 1965 1967 *
Woodward Facility (Oklahoma) 390,000 1976 1978
Courtright Facility (Canada) 480,000 1993 1966
Verdigris Facility (Oklahoma) 1,050,000 1994
First ammonia and UAN plant 1975
Second ammonia plant 1977
Second UAN plant 1979
Blytheville Facility (Arkansas) 420,000 1994
Ammonia plant 1967
Urea plant 1975
</TABLE>
* This facility is being substantially rebuilt.
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 the Company's fertilizer manufacturing facilities for the years
ended December 31, 1995, 1994 and 1993, in the aggregate, was approximately 97%,
95%, and 102%, respectively.
The Port Neal Facility was the site of a major explosion on December 13,
1994. An investigative committee formed by the Company, which included
independent experts, determined that the explosion was primarily caused by a
defect in the design of the nitric acid sparger in the neutralizer vessel of the
ammonium nitrate plant at the Port Neal Facility. The Company undertook to
repair the facility and began producing ammonia again at the Port Neal Facility
in late December 1995. The Company expects the urea and nitrogen solution
upgrading facilities to be fully operational in the second quarter of 1996.
Property damage and business interruption insurance payments received thus far
have been used to finance, in part, the plant repair and to recover lost
profits. The Company is in discussions with its insurers as to additional
insurance proceeds to which the Company believes it should be entitled. In the
meantime, the Company expects to continue to receive interim progress payments
from its insurers. Terra has invested additional funds for other enhancements
and improvements at the Port Neal Facility.
The Company owns in fee the real estate on which the Port Neal Facility is
located and has a 75% ownership interest in the related improvements after
transfering the improvements in September 1995 to a subsidiary that was
structured to finance and complete the reconstruction of such facility.
The Courtright Facility's liquid urea and granulation capacities are
increasing as a result of a plant upgrade project expected to be completed in
1996. Part of the liquid urea upgrade has been operating since late 1995. The
upgrade project will enable the replacement of up to 65,000 tons of annual
ammonia sales with urea and UAN sales. The final project cost is expected to be
approximately $32 million, funded principally through lease financing.
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The lease financing agreement for the Courtright Facility expires in April
1997 and requires annual lease payments. The Company has a purchase option
during the term of the lease and at expiration for approximately $72 million
(Cdn). If, at the end of the lease term, the purchase option is not exercised,
the Company must pay to the lessor approximately $61 million (Cdn), subject to
reimbursement based on the proceeds realized upon the sale of the facility by
the lessor.
Located at the Verdigris Facility are two ammonia plants, two nitric acid
plants and two UAN solution plants and the Port Terminal. The plants are owned
in fee by TNLP, while the Port Terminal is leased from the Tulsa-Rogers County
Port Authority. The leasehold interest is scheduled to expire in April 1999, and
TNLP has the option to renew the lease for two additional, consecutive terms of
five years each.
The Blytheville Facility consists of an anhydrous ammonia plant, a granular
urea plant and a UAN solution plant. The UAN plant began production in late
1994. The ammonia plant at the Blytheville Facility is leased from the City of
Blytheville at a nominal annual rental. The lease term is scheduled to expire in
November 1999, and TNLP has the option to extend the lease for twelve successive
terms of five years each at the same rental rate. TNLP has the unconditional
right to purchase the plant for a nominal price at the end of the lease term
(including any renewal term). The urea plant is also leased from the City of
Blytheville. The lease is scheduled to expire in November 1999, and TNLP has the
option to renew the lease for four successive periods of five years each at a
nominal annual rental. TNLP also has an option to purchase the property for a
nominal price.
The Woodward Facility is owned in fee.
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 18% of the Company's total sales of its manufactured nitrogen
products. In 1995, approximately 8% of the Company's fertilizer production was
supplied to its farm service center locations for sale to growers, while the
rest was sold to outside customers. In 1995, no outside customer accounted for
greater than 10% of total manufactured nitrogen fertilizer sales.
The Company has production facilities and significant storage capacity
throughout the Midwestern U.S. and in other 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
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 1995.
Product. Methanol is a liquid petrochemical made primarily from natural gas.
It is used as a feedstock in the production of other chemical products such as
formaldehyde, acetic acid and chemicals used in the building products industry.
Methanol is also used as a feedstock in the production of MTBE, an oxygenate
used as an additive in reformulated gasoline and an octane enhancer used in non-
reformulated gasoline. Reformulated gasoline has lower volatility and is less
aromatic than non-reformulated 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.
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Plants. During the first half of 1994, the Company completed the capital
improvements necessary for optional production of methanol instead of ammonia
for about 30% of the Woodward Facility's ammonia capacity. The design of the
Woodward Facility enabled this conversion to be accomplished for approximately
$16 million of capital spending, which the Company believes is approximately
half the capital cost required to convert most other ammonia plants to methanol
production. The Company has approximately 40 million gallons of annual methanol
capacity at the Woodward Facility. This facility is owned by the Company in fee.
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 methanol 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, 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. Company employees have assumed all functions previously
provided by Trammochem.
Methanol customers are primarily large chemical or MTBE producers located in
the United States; however, some sales have been made to customers in Central
and South America.
Methanol Contracts. BMLP has a number of long-term methanol sales contracts,
the most significant of which is with DuPont. In 1995, BMLP sold approximately
60% of its production under such contracts. For 1996, 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, as amended, DuPont has agreed to purchase 108
million gallons of methanol through 1997 and 54 million gallons of methanol each
year thereafter until 2001 (representing 39% and 19%, respectively, of the
Beaumont Facility capacity). The price for the methanol delivered under the
DuPont contract is generally indexed to a published source. The DuPont contract
will continue in effect after the initial term unless terminated by either party
on two year's notice.
Under a 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. No payment was due for the
initial period. BMLP will be required to make additional payments under the
methanol hedging agreement if methanol prices are 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 it is required to make
payments under such 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.
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CREDIT
A substantial portion of the Company's sales to its grower and dealer
customers is made on credit terms customary in the industry. The Company also
maintains 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 $65
million in 1994 and $88 million in 1995 in credit lines to grower customers
under this program. Although there is additional credit risk associated with the
grower finance program, it is mitigated through a well defined application,
screening and approval process. The Company has not experienced and does not
expect to experience significant bad debts in its grower finance program.
SEASONALITY AND VOLATILITY
The agricultural crop production products business is seasonal, based upon
the planting, growing and harvesting cycles. Inventories must be accumulated to
be available for seasonal sales, requiring significant storage capacity.
Inventory accumulations are financed by suppliers or short-term borrowings,
which are retired with the proceeds of the sales of such inventory. In times of
lower demand, the Company can reduce purchases of crop inputs for the
distribution portion of its business, thereby decreasing inventory carrying
costs. In the past, over half of the Company's sales generally occurred during
the second quarter of each year. This seasonality also generally results in
higher fertilizer prices during peak periods, with prices typically reaching
their highest point in the spring, decreasing in the summer, increasing in the
fall (as depleted inventories are restored) through the spring.
The agricultural crop production 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), quantities of fertilizers imported to and
exported from North America, current and projected grain inventories 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 inventories, the mix
of crops planted and crop prices. Because of these factors which are outside of
the Company's control, there can be no assurance that the relatively high
nitrogen fertilizer price levels achieved in 1995 will continue.
As with any commodity chemical, the price of methanol can be volatile. The
industry has experienced cycles of oversupply, resulting in depressed prices and
idled capacity, followed by periods of shortage and rapidly rising prices.
Methanol prices by mid-1995 returned to historical levels after reaching
uncharacteristically high prices in late 1994 and early 1995. During 1994,
several factors combined to create a tight market and dramatically increased
prices: increased world demand for methanol, a large number of plant shutdowns
and turnarounds in the industry and the phase-in of federally mandated standards
for reformulated gasoline. In part, future demand for methanol will depend on
the regulatory environment with respect to reformulated gasoline. Most methanol
sold in the U.S. is sold pursuant to long-term contracts based on market index
pricing and a fixed volume.
RAW MATERIALS
The principal raw material used to produce nitrogen fertilizer and methanol
is natural gas. The Company estimates that natural gas costs comprised nearly
50% of the total costs and expenses associated with the Company's manufactured
fertilizer operations in 1995. The Company estimates that the purchase and
transportation of 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 effectively fix or cap the price of approximately 40% to 80% of its
natural gas requirements for the upcoming 12 months using supply contracts,
financial derivatives and other forward pricing techniques. Depending on market
conditions, the Company may also effectively fix or cap the price for a portion
of its natural gas requirements for longer periods of time. In the first quarter
of 1995, the Company extended its forward pricing positions for natural gas due
to the decline in natural gas prices
8
<PAGE>
and favorable outlook for its manufactured products. 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. As of December 31, 1995,
the Company had effectively fixed or capped prices for approximately 78% of its
natural gas requirements for 1996 and 46% for 1997. Liquidation of these open
financial derivatives based on December 31, 1995 market prices would have
resulted in an unrealized gain of $14.9 million. Realized gains on closed
contracts of $11.4 million relating to future periods have been deferred as of
December 31, 1995.
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 90 liquid, dry and anhydrous
ammonia fertilizer terminal storage facilities 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. ("Terra Express"), a wholly owned truck
transportation subsidiary of Terra International, the Company provides
transportation services to its own facilities and customers as a contract
carrier. Terra Express uses approximately 72 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.
The Company leases approximately 1,800 railcars and owns ten nitric acid
railcars.
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. 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. The Courtright Facility utilizes local gas storage
service provided by a local utility, and purchased gas is transported from
western Canada through the TransCanada Pipeline under various delivery
contracts. The Company transports purchased natural gas for the Blytheville
Facility through a natural gas pipeline company under an agreement that extends
through September 1998. 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.
RESEARCH AND DEVELOPMENT
The Company owns and 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 on property leased from others and 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.
9
<PAGE>
COMPETITION
The market for the fertilizer, crop protection products and seed distributed
by the Company is highly competitive. In 1995, sales attributable to the
Company's farm service centers accounted for roughly 5% 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 by providing a comprehensive line of products and what the
Company believes to be superior services to growers and dealers, as well as on
price.
Nitrogen fertilizer is a global commodity and the Company's customers
include end-users, dealers and other fertilizer producers. Customers 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 Company believes that it competes with other
manufacturers of nitrogen fertilizer on 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. Terra Canada's
operations are subject to various federal and provincial regulations regarding
such matters, including the Canadian Environmental Protection Act administered
by Environment Canada, and the Ontario Environmental Protection Act administered
by the Ontario Ministry of the Environment. The Company is also involved in the
manufacture, handling, transportation, 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.
Terra International has been designated as a potentially responsible party
("PRP") under CERCLA and its state analogues with respect to various sites.
Under such laws, all PRPs 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 PRPs, the
existence of contractual indemnities, the availability of defenses and the
speculative nature of the costs involved, the Company's management believes that
its liability with respect to these matters will not be material.
Certain state regulatory agencies have enacted requirements to provide
secondary containment for crop protection product 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
10
<PAGE>
its farm service centers and terminals, and estimates that the future cost of
complying with these regulations in 1996 and beyond will be approximately $6
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 3,500 full-time employees at December 31,
1995, none of whom were covered by a collective bargaining agreement. The
Company also hires temporary employees on a seasonal basis, and hired
approximately 1,600 temporary employees during its spring selling season in
1995.
ITEM 3. LEGAL PROCEEDINGS.
Various legal proceedings are pending against the Company and its
subsidiaries. Management of the Company considers that the aggregate liability
resulting from these proceedings will not be material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No items were submitted to a vote of security holders of the Company during
the fourth quarter of 1995.
11
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following paragraphs set forth the name, age and offices of each present
executive officer of Terra, the period during which each executive officer has
served as such and each executive officer's business experience during the past
five years:
<TABLE>
<CAPTION>
Present positions and offices with the Company
Name and age and principal occupations during the past five years
----------- ----------------------------------------------------
<S> <C>
Michael L. Bennett (42) President of Terra Distribution Division since November 1995; Senior Vice
President of Terra since February 1995; Senior Vice President, Distribution
of Terra International since October 1994; Vice President, Northern
Division thereof from January 1992 to October 1994; Vice President,
Wholesale Fertilizer Division thereof from January 1990 to January 1992.
John S. Burchfield (55) Vice President, Human Resources of Terra since March 1992; Vice
President, Human Resources of AON Corporation from January 1989 to
November 1991.
Lawrence S. Hlobik (51) President of Terra Nitrogen Division and Senior Vice President of Terra
since February 1996; Senior Vice President, Marketing of Terra Nitrogen
Corporation from February 1995 to February 1996; Vice President,
Marketing of Arcadian Corporation from 1989 to February 1995.
Burton M. Joyce (54) President and Chief Executive Officer of Terra since May 1991; Executive
Vice President and Chief Operating Officer thereof from February 1988 to
May 1991.
Francis G. Meyer (44) Senior Vice President and Chief Financial Officer of Terra since November
1995; Vice President and Chief Financial Officer of Terra from November
1993 to November 1995; Controller thereof from August 1991 to
November 1993; Vice President, Controller of Terra International from
June 1986 to August 1991.
Paula C. Norton (50) Vice President, Corporate and Investor Relations of Terra since February
1995; Director, Corporate Relations of Terra from January 1993 to
February 1995; Director, Corporate Communication of Universal Foods
Corp. prior thereto.
Reuben F. Richards (66) Chairman of the Board of Terra since December 1982; Chief Executive
Officer thereof from December 1982 to May 1991 and President thereof
from July 1983 to May 1991; Director of Engelhard Corporation since
prior to 1990 and Chairman of the Board thereof from May 1985 to
December 1994; Chairman of the Board of Minorco USA since May 1990
and Chief Executive Officer and President thereof since February 1994.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Present positions and offices with the Company
Name and age and principal occupations during the past five years
----------- ----------------------------------------------------
<S> <C>
W. Mark Rosenbury (48) Vice President, Business Development and Strategic Planning of Terra
since November 1995; President of Terra Nitrogen Corporation from
November 1994 to February 1996; Executive Vice President of Terra from
November 1993 to November 1995; Chief Operating Officer thereof from
November 1993 to November 1994; Vice President and Chief Financial
Officer thereof from August 1991 to November 1993; Vice President and
Corporate Controller thereof from January 1987 to August 1991.
Robert E. Thompson (44) Vice President, Controller of Terra since November 1994; Vice President,
Finance and Controller of Ameritech Custom Business Services from April
1993 to June 1994; Controller of Ameritech Services, Inc. from October
1990 to April 1993; Controller of Ameritech Applied Technologies prior
thereto.
George H. Valentine (47) Senior Vice President, General Counsel and Corporate Secretary of Terra
since November 1995; Vice President, General Counsel and Corporate
Secretary of Terra from November 1993 to November 1995; Assistant
General Counsel of Household International, Inc. from February 1986 to
November 1993.
</TABLE>
There are no family relationships among the executive officers and directors
of Terra or arrangements or understandings between any executive officer and any
other person pursuant to which any executive officer was selected as such.
Officers of Terra are elected annually to serve until their respective
successors are elected and qualified.
PART II
-------
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information with respect to the market for the Company's common equity and
related stockholder matters contained in Terra's 1995 Annual Report to
Stockholders under the captions "Quarterly Financial and Stock Market Data
(Unaudited)" and "Stockholders and Dividends" is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA.
Information with respect to selected financial data contained in Terra's
1995 Annual Report to Stockholders under the caption "Financial Summary" is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information with respect to management's discussion and analysis of
financial condition and results of operations contained in Terra's 1995 Annual
Report to Stockholders under the caption "Financial Review" is incorporated
herein by reference.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the notes thereto and
the report of independent auditors thereon, and the information set forth under
the caption "Quarterly Financial and Stock Market Data (Unaudited)" contained in
Terra's 1995 Annual Report to Stockholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Information with respect to directors of the Company under the caption
"Election of Directors" in the Proxy Statement for the Annual Meeting of
Stockholders of Terra to be held on April 30, 1996, is incorporated herein by
reference. Information with respect to executive officers who are not also
directors of the Company appears under the caption "Executive Officers of the
Company" in Part I hereof and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation under the caption
"Executive Compensation and Other Information" in the Proxy Statement for the
Annual Meeting of Stockholders of Terra to be held on April 30, 1996, is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to security ownership of certain beneficial owners
and management under the caption "Equity Security Ownership" in the Proxy
Statement for the Annual Meeting of Stockholders of Terra to be held on April
30, 1996, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to certain relationships and related transactions
under the caption "Certain Relationships and Related Transactions" in the Proxy
Statement for the Annual Meeting of Stockholders of Terra to be held on April
30, 1996, is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
1. Consolidated Financial Statements of Terra and its subsidiaries
(incorporated herein by reference to Terra's 1995 Annual Report to
Stockholders).
Consolidated Statements of Financial Position at December 31, 1995 and
1994.
Consolidated Statements of Income for the years ended December 31,
1995, 1994 and 1993.
14
<PAGE>
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993.
Notes to the Consolidated Financial Statements.
Independent Auditors' Report.
Quarterly Production Data (Unaudited).
Quarterly Financial and Stock Market Data (Unaudited).
Revenues.
Stockholders and Dividends.
Volumes and Prices (Unaudited).
Financial Summary.
2. Index to Financial Statement Schedules
See Index to Financial Statement Schedules of Terra and its
subsidiaries at page S-1.
3. Other Financial Statements
Individual financial statements of Terra's subsidiaries are omitted
because all such subsidiaries are included in the consolidated
financial statements being filed. Individual financial statements of
50% or less owned persons accounted for on the equity method have been
omitted because such 50% or less owned persons considered in the
aggregate, as a single subsidiary, would not constitute a significant
subsidiary.
(b) EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
1. Amended and Restated Deferred Compensation Agreement made as of May 1,
1991, by and between Terra Industries and R. F. Richards filed as
Exhibit 10 to Terra Industries' Form 8-K dated September 30, 1991.
2. Resolution adopted by the Personnel Committee of the Board of Directors
of Terra Industries with respect to supplemental retirement benefits
for certain senior executive officers of Terra Industries, filed as
Exhibit 10.4.2 to Terra Industries' Form 10-Q for the fiscal quarter
ended March 31, 1991.
3. 1992 Stock Incentive Plan of Terra Industries filed as Exhibit 10.1.6
to Terra Industries' Form 10-K for the year ended December 31, 1992.
4. Form of Restricted Stock Agreement of Terra Industries under its 1992
Stock Incentive Plan filed as Exhibit 10.1.7 to Terra Industries' Form
10-K for the year ended December 31, 1992.
5. Form of Incentive Stock Option Agreement of Terra Industries under its
1992 Stock Incentive Plan filed as Exhibit 10.1.8 to Terra Industries'
Form 10-K for the year ended December 31, 1992.
15
<PAGE>
6. Form of Nonqualified Stock Incentive Agreement of Terra Industries
under its 1992 Stock Incentive Plan filed as Exhibit 10.1.9 to Terra
Industries' Form 10-K for the year ended December 31, 1992.
7. Excess Benefit Plan of Terra Industries, as amended effective as of
January 1, 1992, filed as Exhibit 10.1.13 to Terra Industries' Form 10-
K for the year ended December 31, 1992.
8. Restricted Stock Agreement of Burton M. Joyce dated May 1, 1991, filed
as Exhibit 10.1.14 to Terra Industries' Form 10-K for the year ended
December 31, 1992.
9. Terra Industries Supplemental Deferred Compensation Plan effective as
of December 20, 1993, filed as Exhibit 10.1.9 to Terra Industries' Form
10-K for the year ended December 31, 1993.
10. Amendment No. 1 to the Terra Industries Supplemental Deferred
Compensation Plan, filed as Exhibit 10.1.15 to Terra Industries' Form
10-Q for the quarter ended September 30, 1995.
11. 1995 Incentive Award Program for Officers and Key Executives of Terra
Industries filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for
the year ended December 31, 1994.
12. 1996 Incentive Award Program for Officers and Key Executives of Terra
Industries filed as Exhibit 10.1.12 to Terra Industries' Form 10-K for
the year ended December 31, 1995.
(c) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the fourth quarter of 1995.
(d) EXHIBITS
3.1.1 Articles of Restatement of Terra Industries filed with the State of
Maryland on September 11, 1990, filed as Exhibit 3.1 to Terra
Industries' Form 10-K for the year ended December 31, 1990, is
incorporated herein by reference.
3.1.2 Articles of Amendment of Terra Industries filed with the State of
Maryland on May 6, 1992, filed as Exhibit 3.1.2 to Terra Industries'
Form 10-K for the year ended December 31, 1992, is incorporated herein
by reference.
3.1.3 Articles Supplementary of Terra Industries filed with the State of
Maryland on October 13, 1994, filed as Exhibit 4.1.3 to Terra
Industries' Form 8-K/A dated November 3, 1994, is incorporated herein by
reference.
3.2 By-Laws of Terra Industries, as amended through August 7, 1991, filed as
Exhibit 3 to Terra Industries' Form 8-K dated September 30, 1991, is
incorporated herein by reference.
4.1 Indenture dated as of October 15, 1993 among Terra Industries (as
successor by merger to Agricultural Minerals and Chemicals Inc.) and
Society National Bank, including form of Senior Note, filed as Exhibit
99.2 to Terra Industries' Registration Statement on Form S-3, as
amended, (File No. 33-52493), is incorporated herein by reference.
4.2 Indenture, dated as of June 22, 1995 between the Company and First Trust
National Association, as trustee, including form of Exchange Note, filed
as Exhibit 4.1 to Terra Industries' Registration Statement on Form S-4,
as amended (File No. 33-60853), is incorporated herein by reference.
16
<PAGE>
4.3 Amended and Restated Credit Agreement dated as of December 14, 1995
among Terra Industries Inc., Terra Capital, Inc., Terra Nitrogen,
Limited Partnership, Certain Guarantors, Certain Lenders, Certain
Issuing Banks and Citibank, N.A. without exhibits or schedules.
Other instruments defining the rights of holders of long-term debt of
Terra Industries and its subsidiaries are not being filed because the
total amount of securities authorized under any such instrument does
not exceed 10 percent of the total assets of Terra Industries and its
subsidiaries on a consolidated basis. Terra Industries agrees to
furnish a copy of any such instrument to the Securities and Exchange
Commission upon request.
10.1.1 Amended and Restated Deferred Compensation Agreement made as of May 1,
1991, by and between Terra Industries and R. F. Richards filed as
Exhibit 10 to Terra Industries' Form 8-K dated September 30, 1991, is
incorporated herein by reference.
10.1.2 Resolution adopted by the Personnel Committee of the Board of Directors
of Terra Industries with respect to supplemental retirement benefits
for certain senior executive officers of Terra Industries, filed as
Exhibit 10.4.2 to Terra Industries' Form 10-Q for the fiscal quarter
ended March 31, 1991, is incorporated herein by reference.
10.1.3 1992 Stock Incentive Plan of Terra Industries filed as Exhibit 10.1.6
to Terra Industries' Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.
10.1.4 Form of Restricted Stock Agreement of Terra Industries under its 1992
Stock Incentive Plan filed as Exhibit 10.1.7 to Terra Industries' Form
10-K for the year ended December 31, 1992, is incorporated herein by
reference.
10.1.5 Form of Incentive Stock Option Agreement of Terra Industries under its
1992 Stock Incentive Plan, filed as Exhibit 10.1.8 to Terra Industries'
Form 10-K for the year ended December 31, 1992, is incorporated herein
by reference.
10.1.6 Form of Nonqualified Stock Incentive Agreement of Terra Industries
under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.9 to Terra
Industries' Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.
10.1.7 Terra Industries Inc. Supplemental Deferred Compensation Plan effective
as of December 20, 1993 filed as Exhibit 10.1.9 to Terra Industries'
Form 10-K for the year ended December 31, 1993, is incorporated herein
by reference.
10.1.8 Amendment No. 1 to the Terra Industries Inc. Supplemental Deferred
Compensation Plan, filed as Exhibit 10.1.15 to Terra Industries' Form
10-Q for the quarter ended September 30, 1995, is incorporated herein
by reference.
10.1.9 Excess Benefit Plan of Terra Industries, as amended effective as of
January 1, 1992, filed as Exhibit 10.1.13 to Terra Industries' Form
10-K for the year ended December 31, 1992, is incorporated herein by
reference.
10.1.10 Restricted Stock Agreement of Burton M. Joyce dated May 1, 1991, filed
as Exhibit 10.1.14 to Terra Industries' Form 10-K for the year ended
December 31, 1992, is incorporated herein by reference.
10.1.11 1995 Incentive Award Program for Officers and Key Executives of Terra
Industries filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for
the year ended December 31, 1994, is incorporated herein by reference.
17
<PAGE>
10.1.12 1996 Incentive Award Program for Officers and Key Executives of Terra
Industries.
10.2 Asset Sale and Purchase Agreement among Inspiration Consolidated Copper
Company and Cyprus Miami Mining Corporation and Cyprus Christmas Mine
Corporation dated as of June 30, 1988, filed as Exhibit 10.19 to Terra
Industries' Form 10-K for the year ended December 31, 1988, is
incorporated herein by reference.
10.3.1 Stock Purchase Agreement, dated as of June 14, 1991, among Minorco,
Kirkdale Investments Limited, Terra Industries and Hudson Holdings
Corporation, filed as Exhibit 2 to Terra Industries' Form 8-K dated
June 14, 1991, is incorporated herein by reference.
10.3.2 Amended and Restated Stock Purchase Agreement, dated as of July 31,
1991, among Minorco, Kirkdale Investments Limited, Terra Industries and
Hudson Holdings Corporation, filed as Exhibit 1 to Terra Industries
Form 8-K dated July 31, 1991, is incorporated herein by reference.
10.3.3 Option Agreement, dated as of June 14, 1991, among Kirkdale Investments
Limited and Terra Industries, filed as Exhibit 3 to Terra Industries'
Form 8-K dated June 14, 1991, is incorporated herein by reference.
10.3.4 Amendment to Stock Option Agreement, dated July 31, 1991, among
Minorco, Kirkdale Investments Limited and Terra Industries, filed as
Exhibit 2 to Terra Industries' Form 8-K dated July 31, 1991, is
incorporated herein by reference.
10.4 Asset and Share Purchase Agreement, dated as of April 8, 1993, by and
between Terra International, Inc., Terra International (Canada) Inc.
and ICI Canada Inc., filed as Exhibit A to Terra Industries' Form 8-K
dated April 8, 1993, is incorporated herein by reference.
10.5 Asset Purchase Agreement, dated as of December 30, 1993, by and between
Terra International, Inc., The Upjohn Company and Asgrow Florida
Company, filed as Exhibit A to Terra Industries' Form 8-K dated
December 31, 1993, is incorporated herein by reference.
10.6 Merger Agreement dated as of August 8, 1994 among Terra Industries
Inc., AMCI Acquisition Corp. and Agricultural Minerals and Chemicals
Inc. without exhibits or schedules, filed as Exhibit 2 to Terra
Industries' Registration Statement on Form S-3, as amended, (File No.
33-52493), is incorporated herein by reference.
10.7 Methanol Hedging Agreement among BMLP (as successor by merger to
Beaumont Methanol Corporation) and The Morgan Stanley Leveraged Equity
Fund II, L.P. as Counterparty, form of which filed as Exhibit 99.1 to
Terra Industries' Registration Statement on Form S-3, as amended, (File
No. 33-52493), is incorporated herein by reference.
10.8 Agreement of Limited Partnership of TNCLP (formerly known as
Agricultural Minerals Company, L.P.) dated as of December 4, 1991,
filed as Exhibit 99.3 to Terra Industries' Registration Statement on
Form S-3, as amended, (File No. 33-52493), is incorporated herein by
reference.
10.9 Agreement of Limited Partnership of TNLP (formerly known as
Agricultural Minerals, Limited Partnership) dated as of December 4,
1991, filed as Exhibit 99.4 to Terra Industries' Registration Statement
on Form S-3, as amended, (File No. 33-52493), is incorporated herein by
reference.
10.10 General and Administrative Services Agreement Regarding Services by
Terra Industries Inc., filed as Exhibit 10.11 to Terra Industries Inc.
Form 10-Q for the quarter ended March 31, 1995, is incorporated herein
by reference.
18
<PAGE>
10.11 General and Administrative Services Agreement Regarding Services by
Terra Nitrogen Corporation, filed as Exhibit 10.12 to Terra Industries
Inc. Form 10-Q for the quarter ended March 31, 1995, is incorporated
herein by reference.
13 Financial Review and Consolidated Financial Statements as contained in
the Annual Report to Stockholders of Terra Industries for the fiscal
year ended December 31, 1995.
21 Subsidiaries of Terra Industries.
24 Powers of Attorney.
27 Financial Data Schedule. [EDGAR filing only]
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TERRA INDUSTRIES INC.
By: /S/Francis G. Meyer
-------------------------------------------------
Francis G. Meyer
Senior Vice President and Chief Financial Officer
Date: March 15, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Chairman of the Board March 15, 1996
- --------------------------
Reuben F. Richards
* Chief Executive Officer, President March 15, 1996
- -------------------------- and Director
Burton M. Joyce (Principal Executive Officer)
* Senior Vice President and Chief Financial Officer March 15, 1996
- -------------------------- (Principal Financial Officer)
Francis G. Meyer
* Vice President, Controller March 15, 1996
- -------------------------- (Principal Accounting Officer)
Robert E. Thompson
* Director March 15, 1996
- --------------------------
Edward G. Beimfohr
* Director March 15, 1996
- --------------------------
Carol L. Brookins
* Director March 15, 1996
- --------------------------
Edward M. Carson
* Director March 15, 1996
- --------------------------
David E. Fisher
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C>
* Director March 15, 1996
- --------------------------
Basil T.A. Hone
* Director March 15, 1996
- --------------------------
Anthony W. Lea
* Director March 15, 1996
- --------------------------
William R. Loomis, Jr.
* Director March 15, 1996
- --------------------------
John R. Norton III
* Director March 15, 1996
- --------------------------
Henry R. Slack
</TABLE>
*By: /S/George H. Valentine
-----------------------
George H. Valentine
Attorney-in-Fact
21
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES, REPORTS AND CONSENTS
------------------------------------------------------------
Page
----
Report of Deloitte & Touche LLP on Financial Statement Schedules.......... S-2
Consent of Deloitte & Touche LLP.......................................... S-2
Schedule No.
- ------------
I Condensed Financial Information of Registrant............. S-3
II Valuation and Qualifying Accounts:
Years Ended December 31, 1995, 1994 and 1993.............. S-8
Financial statement schedules not included in this report have been omitted
because they are not applicable or the required information is shown in the
consolidated financial statements or the notes thereto.
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT ON
-------------------------------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
To the Board of Directors and Stockholders of Terra Industries Inc.:
We have audited the consolidated financial statements of Terra Industries
Inc. as of December 31, 1995 and 1994 and for each of the three years in the
period ended December 31, 1995, and have issued our report thereon dated
February 2, 1996; such financial statements and report are included in the 1995
Annual Report to Stockholders of Terra Industries Inc. and are incorporated
herein by reference. Our audits also included the Financial Statement
Schedules of Terra Industries Inc. listed in Item 14(a) of this Form 10-K.
These Financial Statement Schedules are the responsibility of the management of
Terra Industries Inc. Our responsibility is to express an opinion based on our
audits. In our opinion, such Financial Statement Schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 2, 1996
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Registration Nos.
33-46735, 33-46734, 33-30058 and 33-4939) and Registration Statements on Form
S-3 (Registration Nos. 2-90808, 2-84876 and 2-84669) of Terra Industries Inc.
of our report dated February 2, 1996, included in the 1995 Annual Report to
Stockholders of Terra Industries Inc. which is incorporated by reference in
this Form 10-K. We also consent to the incorporation by reference in such
Prospectuses of our report on the Financial Statement Schedules, appearing
above.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 13, 1996
S-2
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
---------------------------------------------
STATEMENTS OF FINANCIAL POSITION
- ------------------------------------------------------------------------------
(in thousands) December 31,
- ------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and short-term investments $ 10,700 $ 10,511
Accounts receivable, net 1,721 3,069
Deferred tax asset - current 23,768 43,992
Other current assets 82 4,516
- ------------------------------------------------------------------------------
Total current assets 36,271 62,088
Investment in and advances to Terra Capital, Inc. 1,021,406 530,327
Other assets 14,073 13,769
- ------------------------------------------------------------------------------
Total assets $1,071,750 $ 606,184
==============================================================================
LIABILITIES
Income taxes payable $ 15,897 $ 1,914
Accrued and other liabilities 14,865 12,901
- ------------------------------------------------------------------------------
Total current liabilities 30,762 14,815
Long-term debt 358,755 158,755
Deferred income taxes 105,437 6,235
Other liabilities 4,942 6,691
- ------------------------------------------------------------------------------
Total liabilities 499,896 186,496
- ------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock 133,970 133,770
Paid-in capital 631,195 630,111
Accumulated deficit (193,311) (344,193)
- ------------------------------------------------------------------------------
Total stockholders' equity 571,854 419,688
- ------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,071,750 $ 606,184
==============================================================================
</TABLE>
See accompanying Notes to the Condensed Financial Statements.
S-3
<PAGE>
<TABLE>
<CAPTION>
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
---------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
- ------------------------------------------------------------------------------------------------
(in thousands, except per-share amounts) For the Year Ended December 31,
- ------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Equity in earnings of Terra Capital, Inc. $ 186,048 $ 64,065 $ 26,691
Interest and other income 1,367 (49) 140
- ------------------------------------------------------------------------------------------------
Total income 187,415 64,016 26,831
- ------------------------------------------------------------------------------------------------
EXPENSES
Selling, general and administrative expense 3,328 3,788 5,929
Interest expense 29,183 6,382 5,853
Income tax benefit (8,978) (5,329) (7,796)
- ------------------------------------------------------------------------------------------------
Total expenses 23,533 4,841 3,986
- ------------------------------------------------------------------------------------------------
Income before extraordinary items and
cumulative effect of accounting changes 163,882 59,175 22,845
Extraordinary loss on early retirement of debt (4,338) (2,614) ---
- ------------------------------------------------------------------------------------------------
Net income 159,544 56,561 22,845
Cash dividends paid to common stockholders (8,662) (5,837) (1,386)
Accumulated deficit - beginning of year (344,193) (394,917) (416,376)
- ------------------------------------------------------------------------------------------------
ACCUMULATED DEFICIT - END OF YEAR $(193,311) $(344,193) $(394,917)
================================================================================================
INCOME (LOSS) PER COMMON SHARE:
Income before extraordinary items $ 2.01 $ 0.81 $ 0.33
Extraordinary loss on early retirement of debt (0.05) (0.03) ---
- ------------------------------------------------------------------------------------------------
NET INCOME $ 1.96 $ 0.78 $ 0.33
================================================================================================
</TABLE>
See accompanying Notes to the Condensed Financial Statements.
S-4
<PAGE>
<TABLE>
<CAPTION>
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
---------------------------------------------
STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) For the Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 159,544 $ 56,561 $ 22,845
Adjustments to reconcile net income to
net cash used by operations:
Equity in earnings of subsidiaries (186,048) (64,065) (26,691)
Loss on early retirement of debt 4,338 2,614 ---
Deferred income taxes 44,293 15,291 (4,494)
Other non-cash items 672 48 81
Change in working capital components 16,071 (9,538) (4,062)
Other 785 344 (7,256)
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 39,655 1,255 (19,577)
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from asset sales and
discontinued operations 5,832 541 40,205
Capital contributions to subsidiaries --- (113,000) (30,000)
Proceeds from investments --- 500 ---
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 5,832 (111,959) 10,205
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term debt decrease --- (82,395) ---
Net long-term debt increase 200,000 --- ---
Loss on early retirement of debt --- (2,533) ---
Debt issuance costs (3,666) (2,873) ---
Issuance of common shares --- 113,000 ---
Dividends (8,662) (5,837) (1,386)
Stock issuance/repurchase - net 1,187 4,666 513
Advances from (to) subsidiaries - net (234,157) 72,938 (50,001)
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (45,298) 96,966 (50,874)
----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH 189 (13,738) (60,246)
CASH AND INVESTMENTS AT BEGINNING OF YEAR 10,511 24,249 84,495
- -----------------------------------------------------------------------------------------------------------------------------------
CASH AND INVESTMENTS AT END OF YEAR $ 10,700 $ 10,511 $ 24,249
===================================================================================================================================
Interest Paid $ 27,521 $ 6,285 $ 6,229
==================================================================================================================================
TAXES PAID $ 21,651 $ 16,065 $ 3,320
==================================================================================================================================
</TABLE>
See accompanying Notes to the Condensed Financial Statements.
S-5
<PAGE>
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
---------------------------------------------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The Condensed Financial Statements include the Registrant only and reflect the
equity method of accounting for its beneficially owned subsidiaries, Terra
Capital, Inc., Terra International, Inc. (TII), Terra Nitrogen Corporation (TNC)
and Beaumont Methanol, Limited Partnership (BMLP). Net income in 1995 and 1994
was reduced by $4.3 million and $2.6 million, or $0.05 and $0.03 per share,
respectively, due to the write-off of deferred financing fees in connection with
the early retirement of debt.
2. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
(in thousands) 1995 1994
- ---------------------------------------------------------------------------
Senior Notes, 10.5%, due 2005 $200,000 $ ---
Senior Notes, 10.75%, due 2003 158,755 158,755
- ---------------------------------------------------------------------------
358,755 158,755
Less current maturities --- ---
- ---------------------------------------------------------------------------
Total $358,755 $158,755
===========================================================================
In 1995, the Registrant issued $200 million unsecured 10.5% Senior Notes due in
full June 15, 2005. The 10.5% Senior Notes are redeemable at the option of the
Registrant, in whole or part, at any time on or after June 15, 2000, initially
at 105.250% of their principal amount, plus accrued interest, declining to
102.625% on or after June 15, 2001, and declining to 100% on or after June 15,
2002. The 10.5% 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. Net proceeds of $28.8 million were used
to acquire 974,900 of the outstanding Senior Preference Units (SPUs) of TNCLP.
The remaining net proceeds were used to repay bank term loans.
The 10.75% unsecured Senior Notes are redeemable at the option of the
Registrant, 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 Registrant may, at its option, redeem up to $61.25 million aggregate
principal amount out of the proceeds of one or more public offerings of equity
securities at a redemption price of 110% of their principal amount, plus accrued
interest. The 10.75% Senior Notes Indenture contains restrictions similar to
those in the 10.5% Senior Notes Indenture.
3. COMMITMENTS AND CONTINGENCIES
The Registrant is committed to a non-cancelable office lease expiring in 1998.
Total minimum rental payments are: 1996, $3.2 million; 1997, $3.3 million and
1998, $1.7 million. These amounts are not reduced by sublease rentals, which in
1995 were $2.1 million.
The Registrant is contingently liable for retiree medical benefits of employees
of coal mining operations sold on January 12, 1993. Under the purchase
agreement, the purchaser agreed to indemnify the Registrant against its
obligations under certain employee benefit plans. Due to the Coal Industry
Retiree Health Benefit Act of 1992, certain retiree medical benefits of union
coal miners have become statutorily mandated, and all companies owning 50
percent or more of any company liable for such benefits as of certain specified
dates becomes liable for such
S-6
<PAGE>
benefits if the company directly liable is unable to pay them. As a result, if
the purchaser becomes unable to pay its retiree medical obligations assumed
pursuant to the sale, the Registrant may have to pay such amount. The Registrant
has estimated that the present value of liabilities for which it retains
contingent responsibility approximates $9 million at December 31, 1995. In the
event the Registrant would be required to assume this liability, mineral
reserves associated with the sold coal subsidiary would revert to the
Registrant.
The Registrant had letters of credit outstanding totaling $8.9 million at
December 31, 1995 and $9.7 million at December 31, 1994, guaranteeing various
insurance and financing activities. Short-term investments of $8.9 million at
December 31, 1995 and $9.6 million at December 31, 1994 are restricted to
collateralize certain of the letters of credit.
4. INCOME TAXES
The Registrant files a consolidated U.S. federal tax return. Beginning in 1995,
the Registrant adopted tax sharing agreements, under which all domestic
operating subsidiaries provide for and remit income taxes to the Registrant
equal to their pretax accounting income, adjusted for permanent differences
between pretax accounting income and taxable income. The tax sharing agreements
allocate the benefits of operating losses and temporary differences between
financial reporting and tax basis income to the Registrant.
S-7
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
TERRA INDUSTRIES INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1995, 1994, and 1993
---------------------------------------------
(in thousands)
Additions
Balance at Charged to Less Write- Balance
Beginning Costs and offs, Net of at End
Description of Period Expenses Recoveries of Period
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995:
- -----------------------------
Allowance for Doubtful Accounts $8,224 $7,798 $(5,396) $10,626
Year Ended December 31, 1994:
- -----------------------------
Allowance for Doubtful Accounts $5,788 $2,231 $ 205 $ 8,224
Year Ended December 31, 1993:
- -----------------------------
Allowance for Doubtful Accounts $6,427 $1,758 $(2,397) $ 5,788
</TABLE>
S-8
<PAGE>
EXHIBIT INDEX
4.3 Amended and Restated Credit Agreement dated as of December 14, 1995
among Terra Industries Inc., Terra Capital, Inc., Terra Nitrogen,
Limited Partnership, Certain Guarantors, Certain Lenders, Certain
Issuing Banks and Citibank, N.A. without exhibits or schedules.
10.1.12 1996 Incentive Award Program for Officers and Key Executives of Terra
Industries.
13 Financial Review and Consolidated Financial Statements as contained in
the Annual Report to Stockholders of Terra Industries for the fiscal
year ended December 31, 1995.
21 Subsidiaries of Terra Industries.
24 Powers of Attorney.
27 Financial Data Schedule. [EDGAR filing only]
S-9
<PAGE>
[CONFORMED COPY]
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of December 14, 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.
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms..................................... 2
Section 1.02. Computation of Time Periods............................... 35
Section 1.03. Accounting Terms.......................................... 35
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
Section 2.01. The Advances.............................................. 36
Section 2.02. Making the Advances....................................... 38
Section 2.03. Repayment................................................. 41
Section 2.04. Termination or Reduction of the Commitments............... 41
Section 2.05. Prepayments, Etc.......................................... 42
Section 2.06. Interest.................................................. 44
Section 2.07. Fees...................................................... 45
Section 2.08. Conversion and Continuation of Advances................... 46
Section 2.09. Increased Costs, Illegality, Etc.......................... 48
Section 2.10. Payments and Computations................................. 50
Section 2.11. Taxes..................................................... 52
Section 2.12. Sharing of Payments, Etc.................................. 54
Section 2.13. Letters of Credit......................................... 55
Section 2.14. Replacement of Lender..................................... 60
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Conditions Precedent to Amendment and Restatement......... 62
Section 3.02. Conditions Precedent to Each Borrowing and Issuance....... 65
Section 3.03. Determinations Under Section 3.01......................... 65
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Company............. 65
Section 4.02. Representations and Warranties of each Lender............. 72
(i)
<PAGE>
Page
----
ARTICLE V
COVENANTS OF TERRA
Section 5.01. Affirmative Covenants...................................... 72
Section 5.02. Negative Covenants......................................... 80
Section 5.03. Reporting Requirements..................................... 89
Section 5.04. Financial Covenants........................................ 93
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default.......................................... 94
Section 6.02. Actions in Respect of the Letters of Credit Upon Default... 98
ARTICLE VII
THE AGENT
Section 7.01. Authorization and Action................................... 99
Section 7.02. Agent's Reliance, Etc...................................... 99
Section 7.03. Citibank and Affiliates.................................... 100
Section 7.04. Lender Credit Decision..................................... 100
Section 7.05. Indemnification............................................ 100
Section 7.06. Collateral Duties.......................................... 101
Section 7.07. Successor Agent............................................ 102
ARTICLE VIII
THE GUARANTEE
Section 8.01. The Guarantee.............................................. 102
Section 8.02. Obligations Unconditional.................................. 103
Section 8.03. Reinstatement.............................................. 105
Section 8.04. Subrogation................................................ 105
Section 8.05. Remedies................................................... 105
Section 8.06. Instrument for the Payment of Money........................ 106
Section 8.07. Continuing Guarantee....................................... 106
Section 8.08. Rights of Contribution..................................... 106
Section 8.09. General Limitation on Guarantee Obligations................ 107
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, Consents, Etc.................................. 107
Section 9.02. Notices, Etc............................................... 109
Section 9.03. No Waiver; Remedies........................................ 109
Section 9.04. Costs, Expenses and Indemnification........................ 110
Section 9.05. Right of Setoff............................................ 112
Section 9.06. Governing Law; Submission to Jurisdiction.................. 112
Section 9.07. Assignments and Participations............................. 113
(ii)
<PAGE>
CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 14,
1995 among:
(1) TERRA CAPITAL, INC., a Delaware corporation (the "Company");
(2) TERRA NITROGEN, LIMITED PARTNERSHIP, a Delaware 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, TNLP, certain Guarantors, the Initial Lenders, the
Issuing Banks and the Agent are parties to an Amended and Restated Credit
Agreement dated as of May 12, 1995 (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 "Terra Facility
B Advances" outstanding thereunder, (b) to combine "Terra Facility A" and the
"Terra Working Capital Facility" into one working capital facility hereunder and
to increase the aggregate Commitments thereunder and (c) 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 on the Restatement Date shall continue and remain outstanding
and not be repaid on the Restatement Date.
Credit Agreement
----------------
<PAGE>
- 2 -
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):
"Advance" means a Terra Advance or a TNLP 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: John Mann (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.
"AMCI" means Agricultural Minerals and Chemicals Inc., a corporation
merged into Terra prior to the First 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.
Credit Agreement
----------------
<PAGE>
- 3 -
"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
the Applicable Commitment Fee Rate shall, from the Restatement Date until
the Quarterly Date falling in March, 1996, be 0.25% per annum; and
provided, further, that (subject to the foregoing proviso) 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 Commitment Fee Rate" shall be changed to the percentage per
annum 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:
Range of Debt Applicable Commitment
to Cash Flow Ratio Fee Rate
------------------ ---------------------
Greater than 3.00 to 1 0.500%
Less than or equal to
3.00 to 1 and greater
than 2.00 to 1 0.375%
Less than or equal to
2.00 to 1 and greater
than 1.25 to 1 0.250%
Less than or equal to
1.25 to 1 and greater
than 0.75 to 1 0.225%
Less than or equal to
0.75 to 1 0.200%
"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 in effect
at such time.
Credit Agreement
----------------
<PAGE>
- 4 -
"Applicable Margin" means, (a) with respect to all Base Rate Advances,
0.50% per annum and (b) with respect to all Eurodollar Rate Advances, 2.00%
per annum; provided, that the Applicable Margin with respect to all Base
Rate Advances and Eurodollar Rate Advances shall, from the Restatement Date
until the Quarterly Date falling in March, 1996, be 0.25% per annum (in the
case of such Base Rate Advances) and 0.75% per annum (in the case of such
Eurodollar Rate Advances); and provided, further, that (subject to the
foregoing proviso) 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.)
---------------------------
Range of Debt Base Rate Eurodollar Rate
to Cash Flow Ratio Advances Advances
----------------------- --------- ---------------
<S> <C> <C>
Greater than 3.00 to 1 0.500% 2.000%
Less than or equal to
3.00 to 1 and greater
than 2.00 to 1 0.375% 1.250%
Less than or equal to
2.00 to 1 and greater
than 1.25 to 1 0.250% 0.750%
Less than or equal to
1.25 to 1 and greater
than 0.75 to 1 0.000% 0.625%
Less than or equal to
0.75 to 1 0.000% 0.500%
</TABLE>
"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.
Credit Agreement
----------------
<PAGE>
- 5 -
"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
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 U.S. 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 U.S. Dollar deposits of Citibank in the
United States.
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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.
"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 either Facility, such reference
shall be deemed to refer (a) in the case of the Terra Facility, to the
Company, and (b) in the case of the TNLP 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.
"Borrowing" means a Terra Borrowing or a TNLP Borrowing.
"Business Day" means a day on which banks are not required or
authorized to close in New York City and, if such Business Day relates to a
Eurodollar Rate Advance, on which dealings are carried on in the London
interbank market.
"Capital Expenditures" means, for any period with respect to any
Person, the sum of all expenditures during such period (whether paid in
cash or accrued as liabilities during such period) that, in conformity with
GAAP, are required to be included in or reflected on the balance sheet of
such Person in respect of equipment, fixed assets, real property or
improvements, or for replacements or substitutions therefor or additions
thereto, plus (without
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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 (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.
"Citibank" means Citibank, N.A., a national banking association.
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"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.
"Commitment" means a Terra Commitment or a TNLP Commitment.
"Commitment Termination Date" means the Terra Commitment Termination
Date or the TNLP Commitment Termination Date.
"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.
"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.
"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
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than any Obligations in respect of letters of credit supporting any such
trade payable or like item), (c) all Obligations of such Person evidenced
by notes, bonds, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of such
property), (e) all Capital Lease Obligations and Major Operating Lease
Obligations of such Person, (f) all Obligations, contingent or otherwise,
of such Person under acceptance, letter of credit or similar facilities
(other than Obligations in respect of letters of credit referred to in
clause (b) of this definition), (g) all Obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment in respect
of any Redeemable capital stock, which Obligations shall be valued at the
greater of its voluntary or involuntary liquidation preference plus accrued
and unpaid dividends, (h) all Obligations of such Person in respect of
Hedge Agreements, (i) all Debt of others referred to in clauses (a) through
(h) above guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Debt or to advance or supply funds
for the payment or purchase of such Debt, (ii) to purchase, sell or lease
(as lessee or lessor) property, or to purchase or sell services, primarily
for the purpose of enabling the debtor to make payment of such Debt or to
assure the holder of such Debt against loss, (iii) to supply funds to or in
any other manner invest in the debtor (including any agreement to pay 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 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
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merger of AMCI with and into Terra as if such merger had occurred on the
first day of such period.
"Default" means any event that would constitute an Event of Default
but for the requirement that notice be given or time elapse or both.
"Disposition" means any sale, assignment, transfer or other
disposition of any property (whether now owned or hereafter acquired) by
Terra or any of its Subsidiaries, but excluding any sale, assignment,
transfer or other disposition of any property (i) sold or disposed of in
the ordinary course of business and on ordinary business terms, or (ii) by
any Obligor to another Obligor or by any Obligor to a wholly owned
Subsidiary of an Obligor, or (iii) that consists of outmoded or obsolete
items, provided, that the aggregate value of all such excluded outmoded or
obsolete items with a value of $1,000,000 or more each shall not exceed
$10,000,000.
"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 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 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).
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"Eligible Assignee" means (a) any other Lender or any affiliate of any
Lender; (b) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$1,000,000,000; (c) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof, and
having a net worth in excess of $100,000,000; (d) a commercial bank
organized under the laws of any other country that is a member of the OECD
or has concluded special lending arrangements with the International
Monetary 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
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Materials, including, without limitation, CERCLA, the Resource Conservation
and Recovery Act, the Hazardous Materials Transportation Act, the Clean
Water Act, the Toxic Substances Control Act, the Clean Air Act, the Safe
Drinking Water Act, the Atomic Energy Act and the Federal Insecticide,
Fungicide and Rodenticide Act, in each case, as amended from time to time.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"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(c)(7) of ERISA; (b) the provision by the administrator
of any Plan of such Person or any of its ERISA Affiliates of a notice of
intent to terminate such Plan, pursuant to Section 4041(c) of ERISA as a
distress termination; (c) the cessation of operations at a facility of such
Person or any of its ERISA Affiliates in the circumstances described in
Section 4062(e) of ERISA; (d) the withdrawal by such Person or any of its
ERISA Affiliates from a Multiple Employer Plan during a plan year for which
it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(e) the satisfaction of the conditions set forth in Sections 302(f)(1)(A)
and (B) of ERISA to the creation of a lien upon property or rights to
property of such Person or any ERISA Affiliate for failure to make a
required payment to a Plan; (f) the adoption of an amendment to a Plan of
such Person or any of its ERISA Affiliates requiring the provision of
security to such Plan, pursuant to Section 307 of ERISA; or (g) the
institution by the PBGC of proceedings to terminate a Plan of such Person
or any of its ERISA Affiliates, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that constitutes grounds for the
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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. The Eurodollar Rate for each
Interest Period for each Eurodollar Rate Advance comprising part of the
same Borrowing shall be determined by the Agent on the basis of applicable
rates furnished to and received by the Agent from the Reference Banks two
Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 2.09.
"Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.06(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Borrowing means the
reserve percentage (if any) applicable two Business Days before the first
day of such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve
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requirement (including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for a member bank of the Federal
Reserve System in New York City with deposits exceeding $1,000,000,000 with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities that
includes deposits by reference to which the interest rate on Eurodollar
Rate Advances is determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"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 the Terra Facility or the TNLP Facility.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Agent from three Federal funds brokers of recognized standing selected
by it.
"First Restatement Date" means May 12, 1995.
"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 Advances, plus (c) the aggregate amount of all Letters of
Credit to the extent of unreimbursed drawings thereunder; provided, that
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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 (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 to the Existing Credit Agreement 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).
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"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.
"Intercompany Receivables Facility" means a facility entered into by
the Company and/or any of its Subsidiaries, as sellers, and one or more
Receivables Subsidiaries, as purchasers, providing for the sale of
Receivables by said sellers to said purchasers.
"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 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 Terra Commitment Reduction Date unless, after giving effect
thereto, the aggregate principal amount of Terra Advances having
Interest Periods that end after such Terra Commitment Reduction Date
shall be equal to or less than the aggregate principal amount of Terra
Advances scheduled to be outstanding after giving effect to the
payments of principal required to be made on such Terra Commitment
Reduction Date;
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(b) no Interest Period for any Advance may end after the
relevant Commitment Termination Date;
(c) 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
(d) whenever the first day of any Interest Period occurs on the
last day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month), such Interest Period shall end on the last Business Day of the
appropriate subsequent calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock, warrants, rights,
options, obligations or other securities of such Person, any capital
contribution to such Person or any other investment in such Person,
including, without limitation, (a) any arrangement pursuant to which the
investor incurs Debt of the types referred to in clauses (i) and (j) of the
definition of "Debt" in respect of such Person, (b) the acquisition of all
or substantially all of the assets of such Person or of any division of
such Person, and (c) any merger of or consolidation with such Person;
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).
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"Lenders" means the Initial Lenders listed on the signature pages
hereof and each Eligible Assignee that shall become a party hereto pursuant
to Section 9.07. When reference is made in this Agreement or any other Loan
Document to any "relevant" Lender in connection with any Facility, such
reference shall be deemed to refer to a Lender that has a Commitment or
outstanding Advances 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.
"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.
"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 to the Existing Credit
Agreement, 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 and other Persons providing for the performance by the Company
of certain treasury, purchasing, legal and/or other services for such
Affiliates and such other Persons, as such agreements are in effect from
time to time.
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"Margin Stock" has the meaning specified in Regulations G, U and X.
"Material Adverse Change" means, with respect to any Person, any
material adverse change in the business, assets, operations, properties or
financial condition of such Person and its Subsidiaries taken as a whole,
or any material adverse change in the contingent liabilities of such Person
which could reasonably be expected to result in any of the foregoing, other
than any of the foregoing resulting solely from a general economic change
in the industry of such Person and its Subsidiaries.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, properties or financial condition of Terra
and its Subsidiaries taken as a whole, or a material adverse effect on the
contingent liabilities of such Person which could reasonably be expected to
result in any of the foregoing, (b) the rights and remedies of the Agent,
any Issuing Bank or any Lender under any Loan Document or (c) the ability
of any Obligor to perform its Obligations under any Loan Document to which
it is or is to be a party.
"Material Contract" means:
(A) each Hedge Agreement;
(B) each contract to which Terra or any of its Subsidiaries is a
party (a "Specified Party") that (a) provides for the provision of
goods or services by the Specified Party or the receipt of goods or
services by the Specified Party, (b) has a term of more than one year
(unless such contract may be cancelled at the sole option of another
Person party to such contract), (c) involves the payment or receipt by
the Specified Party of consideration having a fair market value in
excess of $1,000,000 in any fiscal year of Terra and (d) provides for
either: (i) the provision of goods or services to another Person that
is obligated to purchase from the Specified Party a specified quantity
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
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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.
"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.
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"Net Available Proceeds" means:
(a) in the case of 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 (i)
such Net Available Proceeds shall be net of (x) 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 (y) 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 (ii) such Net Available Proceeds shall be net of any repayments by
Terra or any of its Subsidiaries of Debt to the extent that (x) such
Debt is secured by a Lien on the property that is the subject of such
Disposition and (y) 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; and
(b) 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 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 (I) 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 or (II) such proceeds are applied as
provided in the Port Neal Consent.
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"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).
"1995 Terra Debt" means Debt incurred by Terra under the 1995 Terra
Debt Indenture.
"1995 Terra Debt Indenture" means the Indenture dated as of June 22,
1995 between Terra and First Trust National Association, as Trustee,
providing for the issuance of Terra's 10.50% Senior Notes, as from time to
time amended.
"Note" means a Terra Note or a TNLP 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.
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"Original Credit Agreement" means the Credit Agreement dated as of
October 20, 1994 among the Company, Terra and TNLP, as Borrowers, certain
Guarantors, the "Lenders" and "Issuing Banks" referred to therein and
Citibank, as Agent, as in effect immediately prior to the First Restatement
Date.
"Other Distributions" means Dividend Payments made with respect to the
capital stock of the Company, the proceeds of which are used by Terra
solely for (i) Terra Stock Repurchases or (ii) the purchase, redemption or
other acquisition of Senior Preference Units pursuant to the SPU
Redemption.
"Other Taxes" has the meaning specified in Section 2.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Investments" means:
(a) direct obligations of the United States of America, or of any
agency thereof, or obligations guaranteed as to principal and interest by
the United States of America, or by any agency thereof, in either case
maturing not more than one year from the date of acquisition thereof;
(b) readily marketable direct obligations of the United States of
America, or of any agency thereof, or readily marketable 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 three years
from the date of acquisition thereof (provided, that the aggregate amount
of Permitted Investments outstanding at any time under this paragraph (b)
having maturities in excess of one year from the date of determination
shall not exceed $25,000,000 at any time);
(c) readily marketable direct obligations issued by any State of the
United States of America or any political subdivision thereof or of the
government of Canada or any agency thereof, in each case maturing not more
than one year from the date of acquisition thereof and having the highest
credit rating obtainable from either of Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Services ("Standard & Poor's");
(d) money market mutual funds (including, without limitation, tax-free
money market mutual funds) with assets consisting solely of U.S. Dollars
and securities principally
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of the types described in paragraphs (a), (b) and (c) in this definition;
(e) certificates of deposit issued by, repurchase and reverse
repurchase agreements with, banker's acceptances of, and eurodollar time
deposits 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 (or any
national or regional brokerage firm) and whose unsecured, unguaranteed
long-term senior debt obligations are rated at least A by Standard & Poor's
and at least A2 by Moody's, maturing not more than 270 days from the date
of acquisition thereof;
(f) 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 or less than A2 by
Moody's;
(g) commercial paper and variable rate demand notes, in each case
rated at least A-1 by Standard & Poor's or at least P-1 by Moody's and
maturing not more than 270 days from the date of acquisition thereof;
(h) tax-exempt auction rate preferred stock and taxable and tax-exempt
auction rate securities, in each case rated at least AAA by Standard &
Poor's and Aaa by Moody's and maturing not more than 60 days from the date
of acquisition thereof;
(i) "Liquidity Optimized Guaranteed Investment Contracts" with
insurance companies having short-term debt ratings of at least A-1 by
Standard & Poor's and P-1 by Moody's and maturing not more than 30 days
from the date of acquisition thereof;
(j) Canadian dollar-denominated banker's acceptances of Canadian banks
rated at least R1-mid by Dominion Bond Rating Service ("Dominion") and
maturing not more than one year from the date of acquisition thereof; and
(k) Canadian dollar-denominated commercial paper rated at least R1-mid
by Dominion and maturing not more than one year from the date of
acquisition thereof.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced (or, if
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such a proceeding has been commenced, such proceeding is being contested in
good faith by appropriate proceedings and enforcement of any Lien has been
and is stayed):
(a) Liens for taxes, assessments and governmental charges or
levies to the extent not required to be paid under Section 5.01(b),
(b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens, statutory landlord's Liens
and other similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of more than 30
days or which are being contested in good faith and by appropriate
proceedings,
(c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations,
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases (other than capital leases),
surety and appeal bonds, and performance bonds and other obligations
of a like nature incurred, in each case arising in the ordinary course
of business,
(e) as to any particular property at any time, such easements,
encroachments, covenants, rights of way, minor defects, irregularities
or encumbrances on title which do not materially impair the use of
such property for the purpose for which it is held by the owner
thereof,
(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
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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 (other than Intercompany 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.
"PNC" has the meaning assigned to such term in the Port Neal Consent.
"Port Neal Consent" means the Consent, Waiver and Amendment dated as
of July 31, 1995 relating to the Existing Credit Agreement.
"Port Neal Facility" means TI's facility in Port Neal, Iowa.
"Port Neal Holdings" means "Holdco", as such term is defined in the
Port Neal Consent.
"Port Neal Plant" has the meaning assigned to such term in the Port
Neal Consent.
"Port Neal Transaction" means the "Proposed Transaction" under and as
defined in the Port Neal Consent.
"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.
"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 Facility prior to the Commitment Termination Date for such
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Facility, the amount of such Lender's Commitment under such Facility), and
the denominator of which is the aggregate Advances or Commitments, as the
case may be, under such Facility at such time, multiplied by (b) such
amount.
"Purchase Event" means that, during any period commencing January 1,
1995, the aggregate amount of Dividend Payments with respect to the capital
stock of the Company during such period exceeds the sum of (a) the
aggregate amount of Specified Payments for such period plus (b) Cumulative
Adjusted Net Income (as hereinafter defined) for such period plus (c) the
amount available during such period for Restricted Transactions under
Section 5.02(h) to the extent not utilized for Restricted Transactions
during such period. Notwithstanding anything herein to the contrary, a
Purchase Event will not be deemed to occur hereunder unless a "Purchase
Event" also would have occurred pursuant to the terms of the Original
Credit Agreement. For purposes of this definition:
"Adjusted Net Income Amount" means, for any fiscal year of Terra,
the greater of (x) 33-1/3% of the net income of Terra and its
Subsidiaries on a Consolidated basis during such fiscal year and (y)
$20,000,000.
"Cumulative Adjusted Net Income" means, for any period, the sum,
for each complete fiscal year of Terra (beginning with the fiscal year
ending December 31, 1995) during such period, of the Adjusted Net
Income Amounts for all such fiscal years.
"Quarterly Dates" means March 31, June 30, September 30 and December
31 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.
"Receivables Subsidiary" means a wholly owned Subsidiary of Terra
Capital Holdings that is also a Subsidiary of the Company, which Subsidiary
is formed solely for the purpose of, and is engaged solely in the business
of, (x) purchasing Receivables of the Company and one or more of its
Subsidiaries under an Intercompany Receivables Facility and, at its option,
selling all or a portion of such Receivables under a Permitted Receivables
Facility and/or (y) owning the capital stock of, or other ownership
interests in, one or more Receivables Subsidiaries.
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"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 Terra Commitment Termination
Date hereunder, whether by operation of a sinking fund or otherwise, or
upon the occurrence of a condition not solely within the control of the
issuer or (b) is redeemable on any date prior to the Terra Commitment
Termination 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 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 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;
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(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 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.
"Restricted Transactions" means, collectively, Capital Expenditures
and Specified Acquisitions.
"Rolling Period" means any period of four consecutive fiscal quarters
of Terra.
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"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 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 Acquisitions" means Investments (including, without
limitation, Investments arising by reason of any merger or consolidation
permitted under Section 5.02(d)(i)(y), but excluding Investments
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contemplated by the Port Neal Transaction) 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.
"Specified Payments" means, for any period, (a) all interest due and
payable on the AMCI Senior Notes and on the 1995 Terra Debt during such
period, (b) all scheduled dividends payable during such period on
convertible Preferred Stock or other equity securities issued and applied
to prepay the Advances (to the extent the Commitments hereunder are reduced
simultaneously with such issuance), (c) ordinary and necessary expenses
incurred by Terra as a result of its operations as a publicly-held holding
company and (d) 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
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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.
"Subsidiary Pledge and Security Agreement" means a Pledge and Security
Agreement in the form of Exhibit B-3 to the Existing Credit Agreement
between certain of the Guarantors and the Agent, as from time to time
amended.
"Terra" means Terra Industries Inc., a Maryland corporation and an
indirect parent of the Company.
"Terra Advance" means an Advance made or outstanding pursuant to
Section 2.01(a).
"Terra Borrowing" means a borrowing consisting of simultaneous Terra
Advances of the same Type.
"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 to the Existing Credit Agreement between the Company and the
Agent, as from time to time amended.
"Terra Commitment" has the meaning specified in Section 2.01(a).
"Terra Commitment Reduction Dates" shall mean the Quarterly Dates
falling on or nearest to December 31 of each year, commencing with December
31, 1996, through and including December 31, 2000.
"Terra Commitment Termination Date" means the earlier of (a) December
31, 2000 (provided, that if such day is not a Business Day, the Terra
Commitment Termination Date shall be the immediately preceding Business
Day), and (b) the termination or cancellation of the Terra Commitments
pursuant to the terms of this Agreement.
"Terra Facility" means the revolving credit facility provided
hereunder in respect of the Terra Commitments.
"Terra Guaranteed Obligations" has the meaning specified in
Section 8.01.
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"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 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 Obligors" means the Terra Guarantors and the Company.
"Terra Stock Repurchase" means the purchase, redemption, retirement or
other acquisition of shares of common stock of Terra.
"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.
Credit Agreement
----------------
<PAGE>
- 34 -
"TNC" means Terra Nitrogen Corporation, a Delaware corporation and a
wholly owned Subsidiary of the Company.
"TNCLP" means Terra Nitrogen Company, L.P., a Delaware limited
partnership and a Subsidiary of the Company.
"TNLP Advance" means an Advance made or outstanding pursuant to
Section 2.01(b).
"TNLP Borrowing" means a borrowing consisting of simultaneous TNLP
Advances of the same Type.
"TNLP Commitment" has the meaning specified in Section 2.01(b).
"TNLP Commitment Termination Date" means the earliest of (a) December
31, 2000 (provided, that if such day is not a Business Day, the TNLP
Commitment Termination Date shall be the immediately preceding Business
Day), (b) the termination or cancellation of the TNLP Commitments pursuant
to the terms of this Agreement, and (c) the date on which the SPU
Redemption Time occurs.
"TNLP Facility" means the revolving credit facility provided hereunder
in respect of the TNLP Commitments.
"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.
"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.
Credit Agreement
----------------
<PAGE>
- 35 -
"TNLP Letter of Credit Sublimit" means $15,000,000.
"TNLP Note" means a promissory note of TNLP payable to the order of a
Lender, in substantially the form of Exhibit A-2, as from time to time
amended.
"TNLP Obligors" means the TNLP Guarantors and TNLP.
"TNLP Pledge and Security Agreement" means a Pledge and Security
Agreement in the form of Exhibit B-4 to the Existing Credit Agreement
between TNLP and the Agent, as from time to time amended.
"Type" refers to the distinction between Advances bearing interest at
the Base Rate and Advances bearing interest at the Eurodollar Rate.
"Unused Commitment" means, at any time, the aggregate amount of all
Lenders' Unused Terra Commitments at such time and all Lenders' Unused TNLP
Commitments at such time.
"Unused Terra Commitment" means, with respect to any Lender at any
time, (a) such Lender's Terra Commitment at such time minus (without
duplication) (b) the sum of (i) the aggregate outstanding principal amount
of all Terra Advances made by such Lender and (ii) such Lender's Pro Rata
Share of the aggregate Available Amount of all Terra Letters of Credit
outstanding at such time and of all unreimbursed drawings thereunder.
"Unused TNLP Commitment" means, with respect to any Lender at any
time, (a) such Lender's TNLP Commitment at such time minus (without
duplication) (b) the sum of (i) the aggregate outstanding principal amount
of all TNLP Advances made by such Lender and (ii) such Lender's Pro Rata
Share of the aggregate Available Amount of all TNLP Letters of Credit
outstanding at such time and of all unreimbursed drawings thereunder.
"U.S. Dollars" and "$" means lawful money of the United States of
America.
Section 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" mean
"to but excluding".
Section 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
Credit Agreement
----------------
<PAGE>
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
Section 2.01. The Advances.
(a) Terra Facility.
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances ("Terra Advances") to the Company
from time to time on any Business Day during the period from the
Restatement Date until the Terra 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
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 Commitment" (such amount being such Lender's "Terra Commitment"),
and, as to all Lenders, in an aggregate amount at any one time outstanding
not to exceed $375,000,000 (provided, that at all times prior to the SPU
Redemption Time the aggregate amount of the Terra Commitments shall be
deemed to be reduced for all purposes hereof by the aggregate amount of the
TNLP Commitments as in effect from time to time). On the Restatement Date,
all outstanding "Terra Facility A Advances" and "Terra Working Capital
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 Advances hereunder. The aggregate principal amount of the Terra
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
Advances".
(ii) The Terra Advances shall be made by the Lenders ratably according
to their respective Terra Commitments.
(iii) Within the limits of each Lender's Terra Commitment in effect
from time to time, the Company may borrow under this Section 2.01(a) 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(a);
provided, that the aggregate outstanding principal amount of Terra Advances
when added to the aggregate Terra Letter of Credit Liability may not at any
time exceed the aggregate amount of the Terra Commitments at such time.
Credit Agreement
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(iv) The proceeds of the Terra Advances shall be used solely (A) for
general corporate purposes of the Company and its Subsidiaries (other than,
prior to the SPU Redemption Time, TNLP and its successors), including,
without limitation, to finance the ongoing working capital needs of, and to
refinance outstanding Debt of, such Persons, (B) to finance all or a
portion of the SPU Redemption (provided, that proceeds of Terra Advances
used for such purpose shall not exceed $125,000,000 in the aggregate) and
(C) to finance the purchase, redemption, retirement or other acquisition of
shares of common stock of Terra.
(v) Notwithstanding the foregoing provisions of Section 2.01(a), the
Company agrees that, for a period of 30 consecutive days during each fiscal
year (beginning with the fiscal year beginning January 1, 1996), it will
prepay the Terra Advances in such amounts as shall be necessary so the
aggregate outstanding principal amount of the Terra Advances shall not
exceed the Terra Cleanup Amount as in effect at such time; provided, that
this Section 2.01(a)(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 Advances in respect thereof
pursuant to Section 2.13(c), which Terra Advances (subject to the other
terms and conditions of this Agreement) may remain outstanding during such
period. For purposes hereof, "Terra Cleanup Amount" means, at any time
during the periods set forth in column (A) below, the respective amount set
forth for such period in column (B) below:
<TABLE>
<CAPTION>
(A) (B)
Period Terra Cleanup Amount
--------------------------- ---------------------
<S> <C>
Prior to December 31, 1996 $150,000,000
From January 1, 1997 to $120,000,000
December 31, 1997
From January 1, 1998 to $ 90,000,000
December 31, 1998
From January 1, 1999 to $ 60,000,000
December 31, 1999
From and after January 1, 2000 $ 30,000,000
</TABLE>
Credit Agreement
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(b) TNLP Facility.
-------------
(i) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances ("TNLP Advances") to TNLP from time
to time on any Business Day during the period from the Restatement Date
until the TNLP 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 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 Commitment"
(such amount being such Lender's "TNLP 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 "TNLP Working Capital
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 Advances hereunder. The aggregate principal amount of the TNLP
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
Advances".
(ii) The TNLP Advances shall be made by the Lenders ratably according
to their respective TNLP Commitments.
(iii) Within the limits of each Lender's TNLP Commitment in effect
from time to time, TNLP may borrow under this Section 2.01(b) 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(b); provided, that the
aggregate outstanding principal amount of TNLP Advances when added to the
aggregate TNLP Letter of Credit Liability may not at any time exceed the
aggregate amount of the TNLP Commitments at such time.
(iv) The proceeds of the TNLP Advances shall be used solely for
general corporate purposes of TNLP, including, without limitation, to
finance its ongoing working capital needs and to refinance outstanding
Debt.
(c) Minimum Amounts. Each 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.
(d) 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.
Credit Agreement
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Section 2.02. Making the Advances.
(a) (i) Except as otherwise provided in Section 2.13, each Borrowing
shall be made on notice, given not later than 11:00 A.M. (New York City
time) on the Business Day of (or, with respect to a Borrowing of Eurodollar
Rate Advances, 10:00 A.M. (New York City time) on the second Business Day
prior to the date of) the proposed Borrowing, by the relevant Borrower to
the Agent, which shall give to each Lender prompt notice thereof by telex,
telecopier or cable. Each such notice of a Borrowing (a "Notice of
Borrowing") shall be by telex, telecopier or cable, confirmed immediately
in writing, in substantially the form of Exhibit C, specifying therein (1)
the requested date of such Borrowing, (2) the Facility under which such
Borrowing is to be made, (3) the requested Type of Advances comprising such
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 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 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
Borrowing, the Agent shall first make a portion of such funds equal to any
unreimbursed drawing 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
Credit Agreement
----------------
<PAGE>
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2.09, and (ii) Eurodollar Rate Advances may not be outstanding under more
than 15 separate Interest Periods under either Facility at any one time.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
relevant Borrower. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the
relevant Borrower shall indemnify each relevant Lender against any loss,
cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Borrowing for
such Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such
Advance, as a result of such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a relevant Lender
prior to 12:00 Noon (New York City time) on the date of any Borrowing that
such Lender will not make available to the Agent such Lender's ratable
portion of such Borrowing, the Agent may assume that such Lender has made
such portion available to the Agent on the date of such Borrowing in
accordance with Section 2.02(a) and the Agent may, in reliance upon such
assumption, make available to the relevant Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have
so made such ratable portion available to the Agent and the Agent shall
have made available such corresponding amount to the relevant Borrower,
such Lender and the relevant Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
relevant Borrower until the date such amount is repaid to the Agent, at (i)
in the case of the relevant Borrower, the interest rate applicable at such
time under Section 2.06 to Advances comprising such Borrowing and (ii) in
the case of such Lender, the Federal Funds Rate. If such Lender shall repay
to the Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Advance as part of such Borrowing for purposes of
this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Advance on the date of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to
Credit Agreement
----------------
<PAGE>
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make the Advance to be made by such other Lender on the date of any
Borrowing.
Section 2.03. Repayment.
(a) Terra Advances. The Company hereby promises to pay to the Agent
for the account of each Lender the full outstanding principal amount of the
Terra Advances of such Lender on the Terra Commitment Termination Date. In
addition, if following any Terra Commitment Reduction Date the aggregate
principal amount of the Terra Advances, together with the aggregate amount of
all Terra Letter of Credit Liabilities, shall exceed the Terra Commitments, the
Company shall, first, pay Advances and, second, provide cover for Terra Letter
of Credit Liabilities in the manner specified in Section 2.05(d)) in an
aggregate amount equal to such excess.
(b) TNLP Advances. TNLP hereby promises to pay to the Agent for the
account of each Lender the full outstanding principal amount of the TNLP
Advances of such Lender on the TNLP Commitment Termination Date.
(c) All Advances. 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.
Section 2.04. Termination or Reduction of the 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 Commitments under the relevant Facility, provided, that (i)
each partial reduction of the Commitments under such Facility shall be in an
aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, and (ii) the aggregate amount of the Commitments under either Facility
shall not be reduced below the Letter of Credit Commitment for such Facility.
(b) Mandatory -- Terra Commitments. The Terra Commitments shall be
automatically and permanently reduced to zero on the Terra Commitment
Termination Date. In addition, the aggregate amount of the Terra Commitments
shall be automatically reduced on each Terra Commitment Reduction Date set forth
in column (A) below to the amount set forth in column (B) below opposite such
Terra Commitment Reduction Date:
Credit Agreement
----------------
<PAGE>
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<TABLE>
<CAPTION>
(A) (B)
Terra Terra
Commitment Reduction Commitments Reduced
Date Falling on or to the Following
Nearest to: Amounts ($)
-------------------- -------------------
<S> <C>
December 31, 1996 $355,000,000
December 31, 1997 $335,000,000
December 31, 1998 $315,000,000
December 31, 1999 $295,000,000
</TABLE>
(c) Mandatory -- TNLP Commitments. The TNLP Commitments shall be
automatically and permanently reduced to zero on the TNLP Commitment Termination
Date.
(d) Reductions Pro Rata. Each reduction of the Commitments under a
Facility shall be applied to the respective Commitments of the Lenders according
to their respective Pro Rata Shares of such Facility.
(e) General. Commitments once terminated or reduced may not be
reinstated.
Section 2.05. Prepayments, Etc.
(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).
Credit Agreement
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(ii) Each prepayment of Advances under this Section 2.05(a) shall be
made for account of the relevant Lenders according to their respective Pro
Rata Shares of the principal amount of the Advances then outstanding under
the relevant Facility.
(b) Mandatory Prepayments; Commitment Reductions.
(i) 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, on the first anniversary
of each Disposition the Company shall prepay the Terra Advances (and/or
provide cover for Terra Letter of Credit Liabilities as specified in
Section 2.05(d)), and the Terra Commitments shall be subject to automatic
reduction, in an aggregate amount equal to (A) 75% of the Net Available
Proceeds of such Disposition minus (B) the amount of such Net Available
Proceeds theretofore invested or committed to be invested in the business
of the Company and its Subsidiaries; provided, that (x) for purposes of
this clause (i) the aggregate Net Available Proceeds of all such
Dispositions in a fiscal year shall be deemed to be reduced by $25,000,000
(but shall not be deemed to be less than zero); and (y) the sale by the
Company or any of its Subsidiaries of Receivables under an Intercompany
Receivables Facility or under a Permitted Receivables Facility shall not be
deemed to be a Disposition for purposes of this clause (i).
(ii) Casualty Events. Upon the date 360 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, the Company shall prepay the
Terra Advances (and/or provide cover for Terra Letter of Credit Liabilities
as specified in Section 2.05(d)), and the Terra Commitments shall be
subject to automatic reduction, in an aggregate amount, if any, equal to
(A) 75% 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 minus (B) the amount of such Net Available Proceeds
theretofore invested or committed to be invested in the business of the
Company and its Subsidiaries. Nothing in this clause (ii) 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
Credit Agreement
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<PAGE>
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proceeds of insurance, condemnation award or other compensation received in
respect of any Casualty Event.
(c) Application. On the dates specified in clauses (i) and (ii) of
Section 2.05(b), the Terra Commitments shall be reduced automatically in an
aggregate amount equal to the amount specified in such paragraphs (and to the
extent that, after giving effect to such reduction, the aggregate principal
amount of Terra Advances and Terra Letter of Credit Liabilities would exceed the
Terra Commitments, the Company shall, first, prepay Terra Advances and, second,
provide cover for Terra Letter of Credit Liabilities as specified in paragraph
(d) below, in an aggregate amount equal to such excess).
(d) Cover for Terra Letter of Credit Liabilities. In the event that
the Company shall be required pursuant to Section 2.03(a) or Section 2.05(b) to
provide cover for Terra Letter of Credit Liabilities, the Company shall effect
the same by paying to the Agent same day funds in an amount equal to the
required amount, which funds shall be deposited in the Terra L/C Cash Collateral
Account until such time as the Terra Letters of Credit shall have been
terminated and all of the Terra Letter of Credit Liabilities paid in full.
(e) Payments with Interest. All prepayments under this Section 2.05
shall be made together with accrued interest to the date of such prepayment on
the principal amount prepaid.
Section 2.06. Interest.
(a) Ordinary Interest. The Company shall pay interest on the unpaid
principal amount of each Terra Advance owing to each Lender from the date of
such Advance until such principal amount shall be paid in full, and TNLP shall
pay interest on the unpaid principal amount of each TNLP 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
Credit Agreement
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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 Terra Commitment of such Lender and (ii) in
the case of TNLP, on the average daily Unused TNLP Commitment of such Lender, 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
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 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
Credit Agreement
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<PAGE>
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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 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
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, 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.
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
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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 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
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Advances shall result in a greater number of separate Interest Periods in
respect of Eurodollar Rate Advances under any Facility than permitted under
Section 2.02(b)(ii). Each such notice of Continuation shall, within the
restrictions specified above, specify (i) the date of such Continuation, (ii)
the aggregate amount and Facility of, and the Interest Period for, the Advances
being Continued and (iii) the duration of the initial Interest Period for the
Eurodollar Rate Advances subject to such Continuation. Each notice of
Continuation shall be irrevocable and binding on the relevant Borrower.
Section 2.09. Increased Costs, Illegality, Etc.
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of (to the extent any such introduction or change occurs
after the date hereof) any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
adopted or made after the date hereof (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Rate Advances under any Facility, then
the relevant Borrower shall from time to time, upon demand by such Lender (with
a copy of such demand to the Agent), pay to the Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost; provided, that, before making any such demand, each Lender
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable Lending Office
if the making of such a designation would avoid the need for, or reduce the
amount of, such increased cost and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender. A certificate as to the
amount of such increased cost, submitted to the relevant Borrower by such
Lender, shall be conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines in good faith that compliance with any
law or regulation enacted or introduced after the date hereof or any guideline
or request from any central bank 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
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light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's commitment to lend hereunder or to the issuance or maintenance of any
Letters of Credit. A certificate as to such amounts submitted to the relevant
Borrower by such Lender, shall be conclusive and binding for all purposes,
absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances, (i) the
Required Lenders reasonably determine and notify the Agent that the Eurodollar
Rate for any Interest Period for such Advances will not adequately reflect the
cost to such Required Lenders of making, funding or maintaining their respective
Eurodollar Rate Advances for such Interest Period, or (ii) if fewer than two
Reference Banks furnish timely information to the Agent for determining the
Eurodollar Rate for any Eurodollar Rate Advances, the Agent shall forthwith so
notify the Borrowers and the Lenders, whereupon (x) each Eurodollar Rate Advance
will automatically, on the last day of any then existing Interest Period
therefor, Convert to a Base Rate Advance, and (y) the obligation of the Lenders
to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances
shall be suspended until the Agent shall notify the Borrowers and such Lenders
that the circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of (to the extent any
such introduction or change occurs after the date hereof) any law or regulation
shall make it 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.
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(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 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
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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 (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
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until the date such Lender repays such amount to the Agent, at the Federal Funds
Rate.
Section 2.11. Taxes.
(a) Any and all payments by each Obligor hereunder or under the
relevant Notes shall be made, in accordance with Section 2.10, free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Issuing Bank, each Lender and the Agent, net
income taxes that are imposed by the United States and franchise taxes and net
income taxes that are imposed on such Issuing Bank, such Lender or the Agent by
the state or foreign jurisdiction under the laws of which such Issuing Bank,
such Lender or the Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of such Issuing Bank and each Lender,
franchise taxes and net income taxes that are imposed on it by the state or
foreign jurisdiction of such Issuing Bank's or such Lender's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If an Obligor shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Issuing Bank, any Lender or the Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.11) such Issuing Bank, such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Obligor shall make such deductions and (iii) such Obligor shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, each Obligor agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any 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
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30 days from such date such Issuing Bank, such Lender or the Agent (as the case
may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, each
Obligor will furnish to the Agent, at its address referred to in Section 9.02,
appropriate evidence of payment thereof. If such Obligor shall make a payment
hereunder or under the Notes through an account or branch outside the United
States, or a payment is made on behalf of such Obligor by a payor that is not a
United States Person, such Obligor will, if no taxes are payable in respect of
such payment, furnish, or will cause such payor to furnish, to the Agent, at
such address, a certificate from the appropriate taxing authority or
authorities, or an opinion of counsel acceptable to the Agent, in either case
stating that such payment is exempt from or not subject to Taxes. For purposes
of this subsection (d) and subsection (e), the terms "United States" and "United
States Person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside
the United States shall, on or prior to the date of its execution and delivery
of this Agreement (in the case of each Initial Lender) and on the date of the
Assignment and Acceptance pursuant to which it became a Lender (in the case of
each other Lender), and from time to time thereafter if requested in writing by
either Borrower or the Agent (but only so long as such Lender remains lawfully
able to do so after the date such Lender becomes a Lender hereunder), provide
the Agent and the Borrowers with either (i) Internal Revenue Service form 1001
or 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
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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 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
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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.
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
Facility (letters of credit so issued under the Terra Facility being herein
called "Terra Letters of Credit" and letters of credit so issued under the TNLP
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
Restatement Date until the date 90 days prior to the Commitment Termination Date
under the relevant Facility; provided, that:
(i) the Terra 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 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;
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(iii) the aggregate Available Amount of all Letters of Credit issued
by all Issuing Banks under either Facility shall not exceed at any time the
Letter of Credit Sublimit for such Facility, and the aggregate outstanding
principal amount of all Advances under such Facility when added to the
aggregate amount of Letter of Credit Liabilities under such Facility shall
not exceed the aggregate 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 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 require the renewal
thereof to a date beyond, the date 30 days prior to the Commitment
Termination Date for the relevant Facility.
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 "TNLP Letters of Credit" outstanding under the
Existing Credit Agreement (the "Existing TNLP 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
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 Commitment of each
Lender shall be deemed to be utilized for all purposes of this Agreement
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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 thereby. If the requested form of such
Letter of Credit is acceptable to such Issuing Bank in its discretion, such
Issuing Bank will, upon fulfillment of the applicable conditions set forth
in Article III, make such Letter of Credit available to the relevant
Borrower at its office referred to in Section 9.02 or as otherwise agreed
with such Borrower in connection with such issuance.
(ii) Each Issuing Bank shall furnish (A) to the Agent on the first
Business Day of each week a written report summarizing the issuance and
expiration dates of Letters of Credit issued by such Issuing Bank during
the previous week and drawings during such week under all Letters of Credit
issued by such Issuing Bank, (B) to each Lender and to the relevant
Borrower on the first Business Day of each month, a written report
summarizing the issuance and expiration dates of the Letters of Credit
issued by such Issuing Bank under the relevant Facility during the
preceding month and drawings during such month under all Letters of Credit
under such Facility issued by the Issuing Bank and (C) to the Agent and
each Lender on the first Business Day of each calendar quarter, a written
report setting forth the average daily aggregate Available Amount during
the preceding calendar quarter of all Letters of Credit issued by such
Issuing Bank under the relevant Facility.
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(c) Drawing and Reimbursement.
(i) The payment by an Issuing Bank of a draft drawn under any Letter
of Credit shall constitute for all purposes of this Agreement the making by
such Issuing Bank of an advance to the relevant Borrower in the amount of
such payment, which the relevant Borrower agrees to repay on demand and, if
not paid on demand, shall bear interest, from the date demanded to the date
paid in full (and which interest shall be payable on demand), (x) from and
including the date of demand to but not including the second Business Day
thereafter at the Base Rate in effect for each such day plus the Applicable
Margin in effect for each such day, and (y) from and including said second
Business Day thereafter at the Post-Default Rate. Without limiting the
obligations of such Borrower hereunder, upon demand by such Issuing Bank
through the Agent, each Lender having a Commitment under the relevant
Facility shall make Advances under such Facility in an aggregate amount
equal to the amount of such Lender's Pro Rata Share of such advance by
making available for the account of its Applicable Lending Office to the
Agent for the account of such Issuing Bank, by deposit to the Agent's
Account, in same day funds, an amount equal to the sum of (A) its Pro Rata
Share of the outstanding principal amount of such advance plus (B) interest
accrued and unpaid to and as of such date on the outstanding principal
amount of such advance.
(ii) Each Lender agrees to make such 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 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 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 Advances is absolute and
unconditional.
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(d) Increased Costs.
(i) If any change in any law or regulation or in the interpretation
thereof (to the extent any such change occurs after the date hereof) by any
court or administrative or governmental authority charged with the
administration thereof shall either (x) impose, modify or deem applicable
any reserve, special deposit or similar requirement against letters of
credit or guarantees issued by, or assets held by, or deposits in or for
the account of, any Issuing Bank or any Lender or (y) impose on any Issuing
Bank or any Lender any other condition regarding this Agreement or such
Issuing Bank or such Lender or any Letter of Credit, and the result of any
event referred to in the preceding clause (x) or (y) shall be to increase
the cost to such Issuing Bank or Lender of issuing or maintaining any
Letter of Credit or any commitment hereunder in respect of Letters of
Credit, then, upon demand by such Issuing Bank or such Lender, the
Borrowers shall immediately pay to such Issuing Bank or such Lender, from
time to time as specified by such Issuing Bank or such Lender, additional
amounts that shall be sufficient to compensate such Issuing Bank or such
Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrowers by such Issuing Bank or such
Lender shall be conclusive and binding for all purposes, absent manifest
error.
(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:
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(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, 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
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2.09(d) (such Lender being herein called an "Affected Lender"), then, so long as
such condition exists, the Borrowers may, after the date 30 days after the date
of such request or suspension, either:
(i) (x) designate an Eligible Assignee acceptable to the Agent and
each Issuing Bank (which acceptance will not be unreasonably withheld) that
is not an Affiliate of the Borrowers (such Eligible Assignee being herein
called a "Replacement Lender") to assume the Affected Lender's Commitments
and other obligations hereunder and to purchase the Affected Lender's
Advances and other rights under the Loan Documents (all without recourse to
or representation or warranty by, or expense to, the Affected Lender) for a
purchase price equal to the aggregate principal amount of the outstanding
Advances held by the Affected Lender plus all accrued but unpaid interest
on such Advances and accrued but unpaid fees owing to the Affected Lender
(and upon such assumption, purchase and substitution, and subject to the
execution and delivery to the Agent by the Replacement Lender of
documentation satisfactory to the Agent and 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 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
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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 Commitments hereunder and to make
Advances hereunder in an amount equal to the respective Commitments and Advances
of the Affected Lender under each of the Facilities and, subject to (x) the
execution and delivery to the Agent by the Substitute Lender of documentation
satisfactory to the Agent, (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) 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 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 Commitments
that shall have been terminated pursuant to said clause (b) (including the
Commitments then proposed to be terminated) shall exceed 30% of the
aggregate amount of the Commitments in effect on the 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:
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(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 First Restatement Date,
certified (as of a date reasonably near the Restatement Date) by the
Secretary of State of the state of its 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 First
Restatement Date, (B) the absence, except to the extent provided in
said certificate, of any amendments to the bylaws of such Obligor
subsequent to the First Restatement 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, 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
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(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, duly executed by Terra and the Agent.
(e) 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.
(f) A favorable opinion of Milbank, Tweed, Hadley & McCloy, special
New York counsel for the Agent, in form and substance satisfactory to the
Agent.
(g) 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.
(h) 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).
(i) 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.
(j) Such other approvals, opinions and documents relating to this
Agreement and the transactions contemplated
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hereby as any Lender or any Issuing Bank may, through the Agent, reasonably
request.
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 Advance pursuant to Section
2.13), and the right of each Borrower to request the issuance of Letters of
Credit under either 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.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties
of the Company. The Company represents and warrants as follows:
(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
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
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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
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
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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.
(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 September 30, 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
September 30, 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
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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 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(a)(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
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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 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.
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(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.
(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").
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(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 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 Restatement Date, of all existing Debt of each
Obligor, showing as of the Restatement 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 Terra Commitment Termination 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.
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ARTICLE V
COVENANTS OF TERRA
Section 5.01. Affirmative Covenants. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder, Terra will, and will cause each of the Obligors
to:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, with all applicable laws, rules, regulations and
orders, such compliance to include, without limitation, compliance with
ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the
Organized Crime Control Act of 1970 (except to the extent that non-
compliance with any thereof could not reasonably be expected to have a
Material Adverse Effect).
(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
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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 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 the Port Neal 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 $1,000,000 or (ii) the occurrence and
during the continuance of a Default or Event of Default arising under
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Section 5.01(c), and in each case at the written request of the Agent, such
Obligor shall provide to the Agent 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 (provided, that if such Obligor, in
the exercise of its reasonable judgment, determines not to have such an
environmental site assessment report prepared, such Obligor shall instead
deliver to the Agent a copy of such Obligor's internal site assessment
report relating to relevant property). Without limiting the generality of
the foregoing, if the Agent determines at any time that a material risk
exists that any such report will not be provided within a reasonable time
following such request, the Agent may retain an environmental consulting
firm to prepare such report at the expense of such Obligor, such Obligor
and each of its Subsidiaries hereby granting to the Agent, 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
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is no longer used or useful in the conduct of its business or which, in the
exercise of the reasonable judgment of the relevant Obligor, is to be
refinanced and except to the extent failure to comply with the foregoing
would not have a Material Adverse Effect, and cause each of its Material
Subsidiaries to do so.
(k) Performance of Related Documents. Perform and observe all of the
terms and provisions of each Related Document to be performed or observed
by it, maintain each such Related Document in full force and effect and
enforce such Related Document in accordance with its terms, except to the
extent the failure to do any of the foregoing could not reasonably be
expected to have a Material Adverse Effect.
(l) Performance and Compliance with Material Contracts. Perform and
observe, and cause each of its Subsidiaries to perform and observe, all the
terms and provisions of each Material Contract to be performed or observed
by it, maintain each such Material Contract in full force and effect and
enforce each such Material Contract in accordance with its terms, except to
the extent the failure to do any of the foregoing could not reasonably be
expected to have a Material Adverse Effect.
(m) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of its Affiliates on terms that are fair and
reasonable and no less favorable to such Obligor or such Subsidiary than
would obtain in a comparable arm's-length transaction with a 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 wholly owned
Subsidiaries of Terra or between wholly owned Subsidiaries of Terra
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;
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(iv) the Reorganization Transaction;
(v) the Port Neal Transaction; and
(vi) transactions under Intercompany Receivables Facilities.
(n) Further Assurances. (i) Promptly upon reasonable request by the
Agent or any Lender or Issuing Bank through the Agent correct, and cause
each Subsidiary promptly to correct, any material defect or error that may
be discovered in any Loan Document, which material defect or error is the
result of any untrue statement of material fact under any Loan Document or
the omission to state a material fact necessary to make the statements made
therein not misleading, or in the execution, acknowledgment or recordation
of any Loan Document, and (ii) promptly upon reasonable request by the
Agent or any Lender or Issuing Bank through the Agent do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and re-
register, and cause any such Subsidiary promptly to do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and re-
register, any and all such further acts, deeds, conveyances, pledge
agreements, assignments, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as the Agent or any Lender or Issuing Bank
through the Agent may reasonably require 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) 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:
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(i) Terra will at all times own, beneficially and of record, all
of the issued and outstanding capital stock (other than directors'
qualifying shares) of Terra Capital Holdings;
(ii) Terra 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 (x) cash, (y) other property incidental to
its business as a holding company and (z) capital stock of, or other
ownership interests in, Receivables Subsidiaries);
(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:
(A) cash and Permitted Investments,
(B) Receivables of one or more of its Subsidiaries
transferred to it, and capital stock of, or other ownership
interests in, Receivables Subsidiaries,
(C) 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,
(D) other property incidental to its business as a
holding company,
(E) other property used solely in connection with its
performance of services pursuant to the terms of the
Management Agreements and
(F) other Investments permitted to be held by the
Company pursuant to Section 5.02(f) (to the extent such
Investments, in the case of those made under clauses (iv),
(v), (vi) and (xiii) of said Section 5.02(f), are subject to
the Lien of the Security Documents);
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(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);
(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);
(viii) Port Neal Holdings at all times prior to the transfer of
PNC contemplated in paragraph 2(I) of the Port Neal Consent will own,
beneficially and of record, all of the issued and outstanding capital
stock (other than directors' qualifying shares) of PNC, and will own
no other property (other than (x) cash and other property incidental
to its business as a holding company, (y) the property described in
the Port Neal Transaction as being held by Port Neal Holdings and (z)
any Senior Preference Units acquired by Port Neal Holdings as part of
the SPU Redemption and any loans made to Terra and its Subsidiaries);
and
(ix) PNC will at all times own no property other than the
property described in the Port Neal Consent as being held by PNC and
other property used in the repair and operation of the Port Neal
Plant.
In the event that any such additional shares of stock or other ownership
interests shall be issued to an Obligor by any Subsidiary thereof, 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
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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.
(p) 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 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 (but subject to Section 5.02(p)), 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 Commitment hereunder, Terra will not, and will not permit any of its
Material Subsidiaries to:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Material Subsidiaries to create, incur, assume or suffer to
exist, any Lien on or with respect to any of its properties of any
character (including, without limitation, accounts) whether now owned or
hereafter acquired, or sign or file, or permit any of its Subsidiaries to
sign or file, under the Uniform Commercial Code of any jurisdiction, a
financing statement that names such Obligor or any of its Subsidiaries as
debtor, or sign, or permit any of its Subsidiaries to sign, any security
agreement authorizing any secured party thereunder to file such financing
statement, or assign, or permit any of its Subsidiaries to assign, any
accounts or other right to receive income, excluding from the operation of
the foregoing restrictions the following:
(i) Liens created by the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the Restatement 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
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exceeding $15,000,000 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 Intercompany Receivables Facilities and/or 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 100% of the fair market value (as determined in good faith
by the Senior Financial Officer) of such property at the time it was
acquired;
(vii) Any Lien arising after the Restatement 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 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;
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(ix) Liens upon property of a Person that becomes a Subsidiary
of Terra after the Restatement 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
Restatement Date, provided, that the aggregate Debt secured thereby
and incurred on and after the Restatement Date shall not exceed
$10,000,000 in the aggregate at any one time outstanding;
(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; and
(xvi) Liens created pursuant to, or as part of, the Port Neal
Transaction.
(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;
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(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 $50,000,000;
(v) Obligations of the Company and its Subsidiaries under the
Intercompany Receivables Facilities and 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 Terra Commitment Termination Date), redemption, average life to
maturity, covenants, events of default and other terms) are reasonably
satisfactory to the Required Lenders;
(vii) Debt outstanding (or committed to be made available) as at
September 30, 1995 and set forth on Schedule 4.01(y);
(viii) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(ix) in the case of any of its Subsidiaries, Debt owed to Terra
or to a wholly owned Subsidiary of Terra;
(x) Debt secured by Liens permitted under Section 5.02(a)(vi);
purchase money Debt secured by Liens permitted under 5.02(a)(ix); and
Debt in an aggregate principal amount not exceeding $10,000,000 at
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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 Restatement Date in an aggregate principal
amount not exceeding $50,000,000 at any one time outstanding;
(xii) 1995 Terra Debt (and Debt of Terra evidenced by
instruments issued in exchange for such Debt), and renewals,
refinancings and replacements thereof (without increase in the
principal amount or change in any direct or contingent obligor, and on
such other terms and conditions as shall be no less favorable to Terra
and its Subsidiaries than the Debt being so renewed, refinanced or
replaced);
(xiii) renewals, refinancings and replacements of the Debt
permitted under clauses (vi), (vii), (ix), (x) and (xi) 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); and
(xiv) Debt incurred pursuant to, or as part of, the Port Neal
Transaction.
(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 prior to
the Restatement Date and identified on Schedule 5.02(c), (y) the Methanol
Hedging Agreement, and (z) other Hedge Agreements entered into in the
ordinary course of business and in a reasonably prudent manner and not for
speculative purposes, in each case in order to protect against the
fluctuation in interest rates, foreign exchange rates or commodity prices.
(d) Mergers, Etc. Merge with or into or consolidate with or into any
Person, or permit any of its Material Subsidiaries to do so, except that:
(i) if no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (x) any Subsidiary of 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
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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;
(ii) nothing in this Section 5.02(d) shall be deemed to prohibit
the Reorganization Transaction; and
(iii) nothing in this Section 5.02(d) shall be deemed to
prohibit the Port Neal 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);
(iv) (X) 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 any other Obligor's wholly owned
Subsidiaries, (Y) other Dispositions to the extent the Net Available
Proceeds thereof are invested or committed to be invested in the
business of the Company and its Subsidiaries within one year from the
date of the relevant Disposition, and (Z) other Dispositions in an
aggregate amount not to exceed $50,000,000 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 (but taking
into account property acquired in exchange for, or to be acquired
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substantially contemporaneously with the disposition of, the assets so
sold or expected to be sold), 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 (x) under any
Permitted Receivables Facility (subject to the restrictions specified
in the definition of said term) or (y) under any Intercompany
Receivables Facility;
(vi) nothing in this Section 5.02(e) shall prohibit the
Reorganization Transaction; and
(v) nothing in this Section 5.02(e) shall prohibit the Port Neal
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, Specified
Acquisitions to the extent permitted to be made under Section 5.02(h);
(vi) Investments consisting of acquisitions of property
(including, without limitation, ownership
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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 $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 Restatement Date;
(xi) Investments by Terra consisting of Terra Stock Repurchases;
(xii) Investments by Terra and its Subsidiaries consisting of
the purchase, redemption or other acquisition of Senior Preference
Units pursuant to the SPU Redemption;
(xiii) other Investments contemplated by the Reorganization
Transaction;
(xiv) other Investments contemplated by the Port Neal
Transaction; and
(xv) capital contributions to Receivables Subsidiaries.
(g) Payments to Minority Interests. Pay or cause to be paid, or
permit any of its Subsidiaries to pay or cause to be paid, to any holder of
a minority interest any amount with respect to such minority interest in
excess of the amount to which such holder is legally entitled, unless Terra
or such Subsidiary simultaneously receives payment in an amount equal to or
greater than its ratable share of the amount of the related distribution
(determined in accordance with the respective interests then held by Terra
and such Subsidiary, on the one hand, and such holder, on the other),
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it being understood that the SPU Redemption will not constitute a breach of
this Section 5.02(g).
(h) Restricted Transactions. Permit the aggregate amount of
Restricted Transactions in any fiscal year (the "Subject Fiscal Year"), for
Terra and its Subsidiaries on a Consolidated basis, to exceed the sum of
(i) $150,000,000 plus (ii) for fiscal years beginning January 1, 1996 and
thereafter, the lesser of (x) an amount equal to the unused portion (if
any) of the amount available for Restricted Transactions pursuant to
paragraph (i) of this Section 5.02(h) for the prior fiscal year and (y)
$100,000,000 and minus (iii) the amount of Other Distributions made during
the Subject Fiscal Year.
(i) Change in Nature of Business. Make, or permit any of its
Material Subsidiaries to make, any material change in the nature of the
business of Terra and its Subsidiaries taken as a whole as carried on at
the Restatement Date.
(j) Charter Amendments. Amend, or permit any of its Material
Subsidiaries to amend, its articles of incorporation or bylaws, or amend
any partnership agreement to which it or any of its Subsidiaries is a party
(except for amendments to authorize the issuance of preferred or common
stock), in each case to the extent any such amendment could reasonably be
expected to have a Material Adverse Effect.
(k) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally accepted
accounting principles in effect in the United States; provided, that in the
event of any change in generally accepted accounting principles from the
date of the financial statements referred to in Section 4.01(f) and upon
delivery of any financial statement and accompanying certificate of
compliance required to be furnished under subsections (b) and (c) of
Section 5.03, Terra shall deliver to the Lenders a statement of
reconciliation conforming any information contained in such financial
statement and a certificate of compliance required to be furnished pursuant
to subsections (b) 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
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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 Restatement Date,
any indenture, agreement, instrument or other arrangement that, directly or
indirectly, prohibits or restrains, or has the effect of prohibiting or
restraining, or imposes materially adverse conditions upon, the declaration
or payment of dividends or the making of loans or advances to or
Investments in or the sale, assignment, transfer or other disposition of
property to Terra or any Subsidiary thereof.
(n) Subordinated Indebtedness. Purchase, redeem, retire or otherwise
acquire for value, or set apart any money for a sinking, defeasance or
other analogous fund for the purchase, redemption, retirement or other
acquisition of, or make any voluntary payment or prepayment of the
principal of or interest on, or any other amount owing in respect of, any
Subordinated Indebtedness (and such Obligor will not permit any of its
Subsidiaries to do any of the foregoing), in each case except for regularly
scheduled payments of principal and interest in respect thereof required
pursuant to the instruments evidencing such Subordinated Indebtedness, or
amend the documentation creating or evidencing Subordinated Indebtedness.
(o) Transactions with Affiliates. Except to the extent otherwise
expressly permitted hereunder, enter into any transaction with any
Affiliate on terms less favorable than would pertain in a transaction
entered into with a third party on an arm's-length basis.
(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.
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Section 5.03. Reporting Requirements. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder:
(a) Default Notice. Each Obligor will furnish to the Agent, as soon
as possible and in any event within five Business Days after such Obligor
knows or has reason to believe that a Default or Event of Default has
occurred (which Default or Event of Default is continuing on the date of
the following statement), a statement of the Senior Financial Officer
setting forth details of such Default or Event of Default and the action
that such Obligor has taken and proposes to take with respect thereto.
(b) Quarterly Financials. As soon as available and in any event
within 60 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 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 Section 5.03(m) of the Original Credit Agreement,
Section 5.03(l) 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.
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(c) Annual Financials. As soon as available and in any event within
110 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 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 Original Credit Agreement, Section 5.03(l) of the Existing Credit
Agreement or Section 5.03(l).
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(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(c)(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).
(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
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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 TNCLP 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 TNCLP generally or to holders of Subordinated
Indebtedness 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 110 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 fiscal year
in which the Terra Commitment Termination Date is scheduled to occur, in
each case in form and detail similar to the financial projections and
budget delivered under Section 5.03(m) of the Original Credit Agreement or
Section 5.03(l) of the Existing Credit Agreement.
(m) 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.
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Section 5.04. Financial Covenants. So long as any principal of or
interest on any Advance or any other amount payable under this Agreement shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder, Terra will:
(a) Debt to Cash Flow Ratio. 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
-------------- -----
1995 3.75 to 1.00
1996 and each fiscal 3.00 to 1.00
year thereafter
(b) Interest Coverage Ratio. Maintain the Interest Coverage Ratio at
not less than the ratio set forth below for each Rolling Period ending in
the respective fiscal years of Terra set forth below:
Each
Rolling Period
Ending In Ratio
-------------- ------------
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
(c) 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:
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(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 (o) 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 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 $10,000,000 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
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(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 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 Original Credit Agreement shall for any reason (other than
pursuant to the terms hereof and thereof) cease to create a valid and
perfected
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first priority Lien (subject only to Permitted Liens) on the Collateral
purported to be covered thereby; or
(k) Minorco ceases to own, directly or indirectly, at least 20% of the
issued and outstanding shares of voting capital stock of Terra; or 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 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
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determined adversely to Terra or any of its Subsidiaries, and the amount
thereof (either individually or in the aggregate) is reasonably likely to
have a Material Adverse Effect (insofar as such amount is payable by Terra
or any of its Subsidiaries but after deducting any portion thereof that is
reasonably expected to be paid by other creditworthy Persons);
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrowers, declare the
obligation of each Lender to make Advances and of each Issuing Bank to issue
Letters of Credit to be terminated, whereupon the same shall forthwith terminate
(and this clause (i) shall also be applicable if there shall occur a Purchase
Event), and (ii) shall at the request, or may with the consent, of the Required
Lenders, by notice to the Borrowers, declare the Advances and the Notes, all
interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Advances and
the Notes, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrowers; provided, that
in the event of an actual or deemed entry of an order for relief with respect to
any Obligor or any of its Subsidiaries under the Federal Bankruptcy Code, (x)
the obligation of each Lender to make Advances and of any Issuing Bank to issue
Letters of Credit shall automatically be terminated and (y) the Advances and the
Notes, all such interest and all such amounts shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the 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
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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 the excess of (a) such
aggregate Available Amount over (b) the total amount of funds, if any, then held
in such L/C Cash Collateral Account that the Agent determines to be free and
clear of any such right and claim.
ARTICLE VII
THE AGENT
Section 7.01. Authorization and Action. Each Lender and each Issuing
Bank hereby appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement and
the other Loan Documents as are delegated to the Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto.
As to any matters not expressly provided for by the Loan Documents, including,
without limitation, enforcement or collection of the Notes, the Agent shall not
be required to exercise any discretion or take any action, and shall not be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) except upon the instructions of the Required
Lenders, and such instructions shall be binding upon all Lenders and all holders
of the Notes; provided, that the Agent shall not be required to take any action
that exposes it to personal liability or that is contrary to this Agreement or
applicable law. The Agent agrees to give to each Issuing Bank and each Lender
prompt notice of each notice given to it by the Borrowers or Terra pursuant to
the terms of this 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
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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 or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
Section 7.03. Citibank and Affiliates. With respect to its
Commitments, the Advances made by it and the Notes issued to it, Citibank shall
have the same rights and powers under the Loan Documents as any other Lender and
may exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures for, accept investment banking
engagements from and generally engage in any kind of business with, any Obligor,
any of its Subsidiaries, any of its Affiliates and any Person who may do
business with or own securities of any Obligor or any such Subsidiary or
Affiliate, all as if Citibank were not the Agent and without any duty to account
therefor to the Lenders or any Issuing Bank.
Section 7.04. Lender Credit Decision. Each Lender and each Issuing
Bank acknowledges that it has, independently and without reliance upon the
Agent, any Issuing Bank or any other Lender and based on the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender and each Issuing Bank also acknowledges that
it will, independently and without reliance upon the Agent, any Issuing Bank or
any other Lender and
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based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
Section 7.05. Indemnification. The Lenders agree to indemnify the
Agent (to the extent not promptly reimbursed by the Borrowers), ratably
according to the principal amounts of the Notes then held by each of them (or if
no Advances are at the time outstanding, ratably according to the amounts of
their Commitments), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against any of them in any way relating to or arising out of the
Loan Documents or any action taken or omitted by any of them under the Loan
Documents; provided, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent. Without limitation of the foregoing, each Lender
agrees to reimburse the Agent promptly upon demand for its ratable share of any
costs and expenses payable by the Borrowers under Section 9.04 of this
Agreement, under the Holdings Pledge Agreement, under the Terra Capital Pledge
Agreement, under the Subsidiary Pledge and Security Agreement and under the 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
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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 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.
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ARTICLE VIII
THE GUARANTEE
Section 8.01. The Guarantee.
(a) The Terra Guarantors hereby jointly and severally guarantee to
each Lender, each Issuing Bank and the Agent and their respective successors and
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest on the Terra
Advances made by the Lenders to, and the Notes held by each Lender of, the
Company and all other amounts from time to time owing to the Lenders, each
Issuing Bank or the Agent by the Company under this Agreement and under the
Notes and by any Terra Obligor under any of the other Loan Documents, in each
case strictly in accordance with the terms thereof (such obligations being
herein collectively called the "Terra Guaranteed Obligations"). The Terra
Guarantors hereby further jointly and severally agree that if the Company shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Terra Guaranteed Obligations, the Terra Guarantors will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Terra
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, by acceleration or otherwise) in accordance with the terms
of such extension or renewal.
(b) The 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.
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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 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,
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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 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
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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.
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
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excess until payment and satisfaction in full of all of such obligations.
For purposes of this Section 8.08, (i) "Excess Funding Guarantor"
shall mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor
that has paid an amount in excess of its Pro Rata Portion of such Guaranteed
Obligations, (ii) "Excess Payment" shall mean, in respect of any Guaranteed
Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro
Rata Portion of such Guaranteed Obligations and (iii) "Pro Rata Portion" shall
mean, for any Subsidiary Guarantor, the ratio (expressed as a percentage) of (x)
the amount by which the aggregate present fair saleable value of all properties
of such Subsidiary Guarantor (excluding any shares of stock of any other
Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of
such Subsidiary Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder and any obligations of any other Subsidiary Guarantor that
have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which
the aggregate fair saleable value of all properties of the Company and all of
the Subsidiary Guarantors exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of the Company and the Subsidiary Guarantors
hereunder) of the Company and all of the Subsidiary Guarantors, all as of the
Closing Date. If any Subsidiary becomes a Subsidiary Guarantor hereunder
subsequent to the Closing Date, then for purposes of this Section 8.08 such
subsequent Subsidiary Guarantor shall be deemed to have been a Subsidiary
Guarantor as of the Closing Date and the aggregate present fair saleable value
of the properties, and the amount of the debts and liabilities, of such
Subsidiary Guarantor as of the Closing Date shall be deemed to be equal to such
value and amount 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
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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
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 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 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.
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(b) Except as otherwise provided in the Security Documents, the Agent
shall not consent to release any Collateral (except as contemplated by the
Security Documents) or terminate any Lien under any Security Document unless
such release or termination shall be consented to in writing by Lenders owed or
holding in the aggregate at least 75% of the sum of the then aggregate unpaid
principal amount of the Advances, the then aggregate Unused Commitments 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 Facility
under which such Letter of Credit has been issued); provided, that (1) 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; and (2) no such consent
shall be required to release any Lien covering property that is the subject of a
disposition of property permitted hereunder (including, without limitation,
dispositions of Receivables pursuant to the Permitted Receivables Facilities)
and, upon such a permitted disposition, such property shall be deemed to be
transferred free and clear of the Lien of the Security Documents without any
action on the part of any party (and the Agent is hereby authorized to execute
such releases and other documents, and to take such other action, as the Company
may reasonably request to give effect thereto).
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;
(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: John Mann (or
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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, 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
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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 Original 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 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,
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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 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
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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 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 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 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 Borrower, the Agent and each Issuing Bank, such approval not to be
unreasonably withheld,
(iii) each such assignment shall be to an Eligible Assignee,
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(iv) each such assignment by a Lender of its Advances, Commitment or
Note under any Facility shall be made in such manner so that the same
portion of its Advances, Commitment and Note under such Facility is
assigned to the respective assignee,
(v) each such assignment by a Lender of its Advances, Commitments and
Notes shall be made in such a manner so that the same portion of its Terra
Advances, TNLP Advances, Terra Commitment, TNLP Commitment, Terra Note and
TNLP Note 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 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
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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 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 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 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
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dated the effective date of such Assignment and Acceptance and shall otherwise
be in substantially the form of Exhibit A-1 and A-2, as the case may be.
(e) Each Lender may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitments, the Advances owing to it and the Note or
Notes held by it); provided, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitments) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of any such Note for all purposes of this Agreement, (iv) the
Obligors, the Agent, the Issuing Banks and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and (v) no participant under any
such participation shall have any right to approve any amendment or waiver of
any provision of any Loan Document, or any consent to any departure by any
Obligor therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other 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.
(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
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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 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 Commitment, Advance or other amount owing hereunder without the
prior consent of each Lender; provided, that the Lenders and the Issuing Banks
may assign all of their interests in the Commitments, Advances and such other
amounts pursuant to the Loan Purchase Agreement.
Section 9.08. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 9.09. No Liability of the Issuing Banks. Each Borrower
assumes all risks of the acts or omissions of any beneficiary or transferee of
any Letter of Credit with respect to its use of such Letter of Credit. Neither
the relevant Issuing Bank nor any of its officers or directors shall be liable
or responsible for: (a) the use that may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith; (b)
the validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the
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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 each Guarantor under Section
8.03, and the obligations of the Lenders under Section 7.05, shall survive the
repayment of the Advances and the termination of the Commitments. In addition,
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
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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.
Section 9.15. Survival of Port Neal Consent. It is understood and
agreed that the Port Neal Consent, and the consents and waivers of the Lenders
set forth therein, shall remain in full force and effect notwithstanding the
amendment and restatement of the Existing Credit Agreement contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
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/ V.M. Klopfenstein
-----------------------
Title: Vice President
GUARANTORS
----------
TERRA INDUSTRIES INC.
By /s/ F.G. Meyer
----------------------------
Title: Senior Vice President
TERRA NITROGEN CORPORATION
By /s/ V.M. Klopfenstein
----------------------------
Title: Vice President
BEAUMONT METHANOL, LIMITED
PARTNERSHIP
By Terra Methanol Corporation,
its General Partner
By /s/ G.H. Valentine
-----------------------
Title: Vice President
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TERRA METHANOL CORPORATION
By /s/ F.G. Meyer
----------------------------
Title: Vice President
BMC HOLDINGS, INC.
By /s/ G. H. Valentine
----------------------------
Title: Vice President
TERRA CAPITAL HOLDINGS, INC.
By /s/ G. 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/ James H. Ramage
----------------------------
Title: Vice President
THE ISSUING BANKS
-----------------
CITIBANK, N.A.
By /s/ Judith C. Fishlow
----------------------------
Title: Attorney-in-Fact
THE LENDERS
-----------
CITIBANK, N.A.
By /s/ Judith C. Fishlow
----------------------------
Title: Attorney-in-Fact
Credit Agreement
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CHEMICAL BANK
By /s/ James H. Ramage
----------------------------
Title: Vice President
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/ Dean Balice
----------------------------
Title: Senior Vice President
Branch Manager
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By /s/ Dana W. Hemenway
----------------------------
Title: Vice President
By /s/ Ian Reece
----------------------------
Title: Vice President & Manager
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CREDIT LYONNAIS CHICAGO BRANCH
By /s/ Sandra E. Horwitz
----------------------------
Title: First Vice President
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By /s/ Sandra E. Horwitz
----------------------------
Title: Authorized Signature
DRESDNER BANK AG, CHICAGO AND GRAND
CAYMAN BRANCHES
By /s/ John H. Schaus
----------------------------
Title: First Vice President
By /s/ Graham D. Lewis
----------------------------
Title: Assistant Vice President
FIRST BANK NATIONAL ASSOCIATION
By /s/ Marc Meirovitz
----------------------------
Title: Commercial Banking
Officer
THE FUJI BANK, LIMITED
By /s/ Peter L. Chinnici
----------------------------
Title: Joint General Manager
MELLON BANK, N.A.
By /s/ George B. Davis
----------------------------
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By /s/ Perry B. Stephenson
----------------------------
Title: Senior Vice President
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UNION BANK OF SWITZERLAND, CHICAGO
BRANCH
By /s/ Walter R. Wolff
----------------------------
Title: Managing Director
By /s/ Denis J. Campbell IV
----------------------------
Title: Vice President
Credit Agreement
----------------
<PAGE>
TERRA INDUSTRIES INC.
INCENTIVE AWARD PROGRAM
OFFICER & KEY EXECUTIVE
1996
----
I. Purpose of the Plan
-------------------
The purpose of this Incentive Award Program is to motivate officers
and key executives of the company toward achievement of planned annual
goals and improved results.
II. Eligibility in the Plan
-----------------------
Participation in this Incentive Award Program is limited to officers
and key executives of Terra Industries Inc., Terra Distribution and
Terra Nitrogen where participation is expected to contribute directly
to the company's performance and success in accomplishment of its
planned goals.
III. Special Provisions and Considerations
-------------------------------------
Terra's incentive plan year coincides with the company's fiscal year.
The Chief Executive Officer will establish the corporate financial
goals, which are approved by the Board of Directors, which will be
used to establish the 1996 incentive pool. Each officer and key
executive participating in this plan will be assigned an index which
establishes their target incentive as a percentage of year-end base
salary. Each officer and key executive participating in this plan will
also establish a set of individual goals or objectives, the importance
of each is reflected in their weight which sums to one-hundred percent
(100%).
The Chief Executive Officer is responsible for approving each plan
participant's individual goals or objectives and will reach mutual
agreement with each participant on the full set of incentive goals as
soon as possible in the 1996 fiscal year. Each plan participant must
execute and periodically report on a goal document approved and signed
by the Chief Executive Officer.
<PAGE>
-2-
IV. Funding the Officer and Key Executive Incentive Award Program
-------------------------------------------------------------
The funding for the officer and key executive incentive award pool is
based on the accomplishment of Terra Industries Inc. approved income
and return-on-equity objectives, which will fund the incentive pool.
The income goal will receive fifty percent (50%) weight and the
return-on-equity goal will receive fifty percent (50%) weight.
The pool starts to fund at seventy-five percent (75%) when the
company's composite performance reaches seventy-five percent (75%) and
increases on a percentage basis where one-hundred percent (100%) of
composite performance equals a one-hundred percent (100%) funding of
the pool. Over-achievement is calculated in the same manner with the
pool capped at two-hundred percent (200%) of plan attainment. The pool
may be increased by up to twenty percent (20%) at the Chief Executive
Officer's discretion. Overall, the pool cannot exceed 200% of target
including the discretionary portion of the pool.
V. Basis of the Incentive Award
----------------------------
The starting point in determining each participant's individual
incentive award is the evaluation of the individual objectives. The
participant's individual raw award is calculated by taking each
participant's year-end salary, times their individual index and then
adjusted by their individual performance. The sum of adjusted raw
awards creates an adjusted raw pool which is then compared with the
sum of the plan participant's year-end salary, times their index which
is then adjusted by the corporation's composite performance. This
adjusted raw pool is adjusted up or down to match the incentive pool.
All participant incentives are paid from the incentive pool.
The Chief Executive Officer has the discretion to adjust any
individual's participation up or down to reflect unusual or unplanned
events or to reflect the degree of difficulty of the goals. He may
adjust amounts between plan participants and may add amounts from the
discretionary part of the pool. The Chief Executive Officer may also
choose to award less than the full amount of the pool.
<PAGE>
-3-
VI. Review, Revision and Modification of the Goals
----------------------------------------------
Under normal business conditions, the corporate goals or individual
objectives will not be altered or revised once established for the
year. Unexpected and unforeseen developments during the course of the
incentive award year may prompt re-examination of an officer's or key
executive's established goals. It is the responsibility of each
officer and key executive to note the conditions of change which would
prompt such a review and take timely action. Such action would include
review with the President for need of revision of an established goal
as soon as possible after the detected change. The change(s) is
subject to final approval of the President.
VII. Payment of Award
----------------
The incentive award will be paid each officer and key executive in
cash as soon as possible after the close of the fiscal year and after
approval of the President's recommendations by the Personnel Committee
of the Board of Directors.
To be eligible for full payment, the officer or key executive must
have been in the employ of Terra Industries Inc. or one of its
subsidiaries January 1 of the incentive plan year and must be actively
employed by the corporation on the date the incentive award is paid.
VIII. Special Provision
-----------------
A newly elected officer or key executive will participate in the
officer's and key executive's incentive program in proportion to the
number of full months worked as an officer or key executive during the
incentive program year.
An officer or key executive who retires, becomes permanently disabled
or dies shall cease to participate in the officer's and key
executive's incentive program as of the end of the month coincident
with retirement, disability or death. The proportionate incentive
award will be paid as soon as possible after the close of the fiscal
year. While it is the intent of the company to make awards under this
plan and to continue the plan from year to year, it reserves the right
to amend or terminate the plan entirely at its discretion.
<PAGE>
TERRA INDUSTRIES INC.
1995 ANNUAL REPORT
FINANCIAL SECTION
FINANCIAL TABLE OF CONTENTS
Financial Review
Consolidated Statements of Financial Position
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders' Equity
Notes to the Consolidated Financial Statements
Responsibility for Financial Statements
Independent Auditors' Report
Quarterly Production Data
Quarterly Financial and Stock Market Data
Revenues
Stockholders and Dividends
Volumes and Prices
Five-Year Financial Summary
<PAGE>
CONFIDENTIAL
2
FINANCIAL REVIEW
CONSOLIDATED RESULTS
Favorable market conditions and the October 1994 acquisition of Agricultural
Minerals and Chemicals Inc. (AMCI) contributed to record earnings in 1995. Net
income for 1995 increased to $159.5 million from $56.6 million in 1994 and $22.8
million in 1993 with per share earnings of $1.96, $0.78 and $0.33, respectively.
Revenues increased to $2.29 billion in 1995 from $1.67 billion in 1994 and $1.24
billion in 1993.
Net income in 1995 and 1994 was reduced by $4.3 million and $3.1 million, or
$0.05 and $0.04 per share, respectively, due to the write-off of deferred
financing fees in connection with the early retirement of debt. Additionally,
1994 results included a net gain of $3.4 million, or $0.05 per share, to
recognize the cumulative effect of a change in the method of accounting for
major maintenance costs and adoption of Statement of Financial Accounting
Standards (SFAS) 112, "Employers Accounting for Post-Employment Benefits."
FINANCIAL COMPARABILITY AND OVERVIEW
The Corporation's improved earnings reflect internal growth and acquisitions
which have increased its manufacturing and distribution capabilities. The
following acquisitions are included in operating results.
On October 20, 1994, the Corporation acquired the stock of AMCI, for $506
million in cash. Through the AMCI acquisition and subsequent open market
purchases, the Corporation (as the general partner) has an approximate 65%
ownership interest in ammonia production and upgrading facilities located in
Verdigris, Oklahoma and Blytheville, Arkansas. The acquisition also included a
methanol production facility located in Beaumont, Texas.
On September 15, 1994, the Corporation acquired a 34% interest in Royster-Clark,
Inc. for $12 million in cash. Royster-Clark is a 110-location distributor of
crop production products in the mid-Atlantic region with annual sales of
approximately $200 million.
On December 31, 1993, the Corporation purchased net assets of certain operations
of Asgrow Florida, Inc. (Terra Asgrow Florida), a distributor of crop production
products, for $39 million in cash. Terra Asgrow
<PAGE>
CONFIDENTIAL
3
Florida currently operates 15 distribution centers and is a supplier to the
vegetable, citrus and ornamental plant markets, primarily in Florida.
Effective March 31, 1993, for $19.9 million in cash plus an operating lease, the
Corporation acquired the rights to an ammonia production and upgrading facility
near Sarnia, Ontario and ownership interests in 32 farm service centers in
Ontario, New Brunswick and Nova Scotia. Thirty of the farm service centers are
50% owned and two are 100% owned.
FACTORS THAT AFFECT OPERATING RESULTS
Factors that may affect the Corporation's future operating results include: the
relative balance of supply and demand for nitrogen fertilizers and methanol, the
number of planted acres - which is impacted by both worldwide demand and
governmental policies - 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 production products, the availability and cost of
natural gas, the effect of environmental legislation on demand for the
Corporation's products, the availability of financing sources to fund seasonal
working capital needs, and the potential for interruption to operations due to
accident or natural disaster.
Prices for nitrogen products are influenced by the world supply and demand
balance for ammonia and nitrogen-based products. Demand is affected by
population growth and rising living standards that determine food consumption.
Supply is affected by worldwide capacity and the availability of nitrogen
product exports from major producing regions such as the former Soviet Union,
the Middle East and South America.
Methanol is used as a raw material in the production of formaldehyde, methyl
tertiary butyl ether (MTBE), acetic acid and numerous other chemical
derivatives. The price of methanol is highly influenced by the supply and demand
for each of these secondary markets, in particular MTBE, an oxygenate used in
reformulated gasoline and an octane enhancer used in non-reformulated gasoline.
Future demand for MTBE and methanol will depend on the degree to which Clean Air
Act Amendments are implemented and enforced, potential legislation, the
willingness of regulatory agencies to grant waivers, and the availability and
use of alternative oxygenates, principally ethyl tertiary butyl ether (ETBE),
which is manufactured from ethanol.
With the acquisition of AMCI, the Corporation increased its annual production
capacity for methanol from 40 million to 320 million gallons. Approximately 45%
of the Corporation's production capacity is subject to a
<PAGE>
CONFIDENTIAL
4
methanol hedging agreement (the Methanol Hedging Agreement) (see Note 12 to the
Consolidated Financial Statements) which will affect margins on this portion of
the Corporation's methanol production through December 31, 1997 should average
methanol prices exceed average natural gas prices by certain amounts.
The number of acres planted and types of crops planted are influenced by
government programs designed to manage carryover stocks and commodity prices of
certain crops. Due to the higher quantities of crop production products per acre
for corn and cotton, compared with other major crops, changes in corn and cotton
acreages have a more significant effect on the demand for the Corporation's
products and services than changes in other crops. With worldwide grain stocks
at a record low and the government conservation reserve program beginning to
expire, planted acreage is expected to increase in 1996. Corn acreage in the
U.S. is estimated to increase to 80.6 million acres from 71.4 million in 1995.
Planted cotton acreage is estimated to decrease to 15.5 million from 16.8
million acres.
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 than normal crop production products being applied
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 crop production
products purchased from the Corporation. During 1995 planting conditions were
unfavorable due to wet weather in many areas of the U.S. causing a reduction in
planted acres and use of certain crop production products.
Reliable sources for supply of crop production products at competitive prices
are critical to the Distribution portion of the Corporation's business. The
Corporation's sources for fertilizer, crop protection products and seed are
typically manufacturers without the capability to distribute products to the
North American grower. The Corporation has entered into purchase agreements
which should ensure an adequate supply of products for its grower and dealer
customers through 1996.
The principal raw material used to produce manufactured nitrogen products and
methanol is natural gas. Natural gas costs comprise almost 50% of the total
costs and expenses associated with nitrogen production and in excess of 50% of
the total costs and expenses associated with methanol. The Corporation's natural
gas procurement policy is to effectively fix or cap the price of approximately
40% to 80% of its natural gas
<PAGE>
CONFIDENTIAL
5
requirements for a 12-month period through various supply contracts, financial
derivatives and other forward pricing techniques. Depending on market
conditions, the Corporation may also effectively fix or cap the price of natural
gas for longer periods of time. The Corporation believes that there is
sufficient supply to allow stable costs for the foreseeable future and has
entered into firm contracts to minimize the risk of interruption or curtailment
of natural gas supplies during the heating season. At December 31, 1995, the
Corporation had natural gas contracts covering 78%, 46% and 31% of its natural
gas requirements for 1996, 1997 and 1998, respectively.
The Corporation's distribution business segment is highly seasonal with the
majority of sales occurring during the second quarter in conjunction with spring
planting activity. Due to the seasonality of the business and the relatively
brief periods during which products can be used by customers, the Corporation
builds inventories during the first quarter of the year in order to ensure
timely product availability during the peak sales season. The Corporation's
ability to purchase product at off-season prices and carry inventory until
periods of peak demand generally contributes to higher margins. For its current
level of sales, the Corporation requires lines of credit to fund inventory
increases and to support customer credit terms. The Corporation believes that
its credit facilities are adequate for expected sales levels in 1996 and for the
next several years.
The Corporation's manufacturing operations may be subject to significant
interruption if one or more of its facilities were to experience a major
accident or were damaged by severe weather or other natural disaster. The
Corporation currently maintains insurance (including business interruption
insurance) and expects that it will continue to do so in an amount which it
believes is sufficient to allow the Corporation to withstand major damage to any
of its facilities. The Corporation's Port Neal facility experienced such a
casualty on December 13, 1994.
DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation uses derivative financial instruments to manage risk in the
areas of (a) foreign currency fluctuations, (b) changes in natural gas supply
prices, (c) changes in interest rates and (d) the effect of methanol prices
relative to natural gas prices. See Note 12 to the Consolidated Financial
Statements for information on the use of derivative financial instruments.
<PAGE>
CONFIDENTIAL
6
RESULTS OF OPERATIONS
1995 COMPARED WITH 1994
CONSOLIDATED RESULTS
The Corporation reported net income of $159.5 million, or $1.96 per share, on
revenues of $2.29 billion in 1995 compared with net income of $56.6 million, or
$0.78 per share, on revenues of $1.67 billion in 1994. Results for 1995 include
a full year's effect of the AMCI acquisition which took place on October 20,
1994. The effect of including a full year of operations of the acquired business
increased 1995 revenues by $433 million and net income by $60 million. Other
significant factors that contributed to a successful 1995 were continued growth
in the Distribution segment despite a reduction in planted acres, a 24% increase
in nitrogen prices and natural gas costs which averaged 15% less than the prior
year. 1995's results were also achieved despite the effect of methanol prices
which declined significantly in 1995.
The Corporation classifies its operations into three business segments:
Distribution, Nitrogen Products and Methanol. The Distribution segment includes
sales of products purchased from manufacturers, including the Corporation, and
resold by the Corporation. Distribution revenues are derived primarily from
grower and dealer customers through sales of crop protection products,
fertilizers, seed and services. The Nitrogen Products segment represents those
operations directly related to wholesale sales of nitrogen products from the
Corporation's ammonia manufacturing and upgrading facilities. The Methanol
segment represents wholesale sales of methanol from the Corporation's two
methanol manufacturing facilities.
<PAGE>
CONFIDENTIAL
7
Total revenues and operating income for the years ended December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
Pro Forma
1994
(in thousands) 1995 (unaudited - see below) 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Distribution $ 1,495,166 $ 1,318,416 $ 1,318,416
Nitrogen Products 635,126 539,152 296,557
Methanol 194,565 246,404 70,274
Other - net (32,684) (19,145) (19,300)
- -------------------------------------------------------------------------------
$ 2,292,173 $ 2,084,827 $ 1,665,947
===============================================================================
OPERATING INCOME:
Distribution $ 41,207 $ 33,784 $ 33,784
Nitrogen Products 263,787 111,961 48,369
Methanol 77,138 129,888 42,679
Other expense - net (4,430) (9,466) (9,537)
- -------------------------------------------------------------------------------
377,702 266,167 115,295
Interest expense - net (51,086) (49,367) (16,541)
Minority interest (47,234) (34,916) (8,809)
- -------------------------------------------------------------------------------
Total from operations $ 279,382 $ 181,884 $ 89,945
===============================================================================
</TABLE>
The unaudited, pro forma results of operations have been prepared to give
effect to the Corporation's (i) acquisition of AMCI, (ii) issuance of 9.7
million Common Shares, and (iii) borrowing under a credit agreement entered
into in connection with the acquisition, assuming that all such transactions
had occurred on January 1, 1994. The pro forma financial data is presented for
informational purposes only and is not necessarily indicative of the results
that actually would have been obtained if the transactions had occurred on
January 1, 1994. In addition, the pro forma results are not intended to be a
projection of future operating results or trends.
DISTRIBUTION
Distribution revenues were $1.50 billion in 1995 compared with $1.32 billion in
1994, an increase of 13%. Higher volumes and the expansion of the retail
distribution network contributed to increased sales despite wet weather during
the spring planting season and a reduction in planted acres. Same store sales
increased by approximately 7%. About $100 million of the 1995 sales growth
consisted of increased retail chemical sales including sales of Terra's own
brand of Riverside products. Riverside product sales increased by $19 million.
Distributed fertilizer sales increased $62 million. Seed and other sales and
services increased by $17 million.
Operating income for the Distribution business was $41.2 million in 1995
compared with $33.8 million in 1994. Overall gross profit increased by
approximately $50 million. Increased sales volumes added
<PAGE>
CONFIDENTIAL
8
approximately $30 million in gross profits while higher margin grower and
Riverside brand sales accounted for the remainder. Selling, general and
administrative expenses increased $42.6 million. An estimated 60%, or $25
million, of the expense increase relates to expansion of the Distribution
business. The remaining increase of $17 million includes increased marketing
and promotional spending, an increase in bad debt experience from 1994 and
inflationary cost increases.
NITROGEN PRODUCTS
Nitrogen Products revenues were $635 million in 1995 compared with $297 million
in 1994. The increase reflects the inclusion in the Corporation's Consolidated
Financial Statements of a full year of results from the Verdigris, Oklahoma and
Blytheville, Arkansas ammonia plants acquired in October 1994. The acquired
plants raised the Corporation's total production capacity from 1.3 million to
2.7 million gross tons of ammonia. Revenues also increased as a result of an
approximate 24% increase in prices.
Operating income for the Nitrogen Products business was $264 million in 1995
compared with $48 million in 1994. The increase reflects a full year of results
from the Verdigris, Oklahoma and Blytheville, Arkansas plants as well as the
effect of the approximate 24% increase in prices. Additionally, natural gas
costs decreased by approximately 15% compared with 1994 costs. The increase in
operating margin to 42% in 1995 from 16% in 1994 primarily reflects the change
in nitrogen prices and natural gas costs.
The Corporation's Port Neal facility was extensively damaged as a result of an
explosion on December 13, 1994. The facility was insured for property damage,
business interruption and third party liability claims. Revenues and operating
income in 1995 include the estimated lost profits which are recoverable under
the Corporation's insurance policy. The Corporation received interim payments to
cover its property damage, business interruption and third party claims and
expects to receive additional payments. In December 1995, ammonia production
resumed at the Port Neal facility. Upon final settlement of the property claim,
the Corporation expects to record a substantial nonrecurring gain, representing
the difference between the final property settlement and the carrying value of
the facility at the time of the explosion.
<PAGE>
CONFIDENTIAL
9
METHANOL
Methanol revenues were $195 million in 1995 compared with $70 million in 1994.
The increase reflects the inclusion in the Corporation's Consolidated Financial
Statements of a full year of results from the Beaumont, Texas methanol facility,
which was acquired in October 1994, and a full year of operation of the
Corporation's Woodward, Oklahoma plant, whose capacity was partially converted
from ammonia to methanol production in April 1994. The production capacities of
the two plants are 280 million gallons per year and 40 million gallons per year,
respectively.
Operating income totaled $77 million in 1995 compared with $43 million in 1994.
Prices for methanol rose rapidly in the fourth quarter of 1994 and then fell
sharply in February, March and April of 1995. The reduction in operating margin
from 61% in 1994 to 40% in 1995 primarily reflects the decline in selling
prices. The Corporation expects methanol prices to continue within their
"normal" historical range of $0.30 to $0.60 per gallon. Gross profits were $82.6
million in 1995 compared with $44.8 million in 1994. Selling, general and
administrative expenses were $5.5 million in 1995 compared with $2.1 million in
1994.
In October 1994, the Corporation entered into the Methanol Hedging Agreement.
Under the Methanol Hedging Agreement the Corporation is required to make
payments should the market price of methanol increase in relation to the cost of
natural gas for defined quantities of production. As a result of the unusually
high methanol prices at the end of 1994, $15.9 million was accrued as payable
under the Methanol Hedging Agreement. This accrual was reversed in 1995 as
prices declined to lower levels. The effect of the accrual and its subsequent
reversal was to decrease 1994 revenues and operating income by $15.9 million and
increase 1995 revenues and operating income by a like amount. No amounts have
been paid or are presently accrued as of December 31, 1995 pursuant to the
Methanol Hedging Agreement.
OTHER OPERATING EXPENSE - NET
Other operating expense was $4.4 million in 1995 compared with $9.5 million in
1994. Other operating expense consists of corporate level expenses, including
certain insurance coverages, corporate finance fees and other costs.
<PAGE>
CONFIDENTIAL
10
INTEREST EXPENSE - NET
Interest expense, net of interest income, totaled $51.1 million in 1995 compared
with $16.5 million in 1994. The increase was principally the result of higher
interest expense due to additional debt in connection with the acquisition of
AMCI.
MINORITY INTEREST
Minority interest, representing third party unitholder interest in the earnings
of Terra Nitrogen Company, L.P. (TNCLP), increased to $47.2 million in 1995
compared with $8.8 million in 1994. The increase was due to the inclusion of a
full year of operations of TNCLP in the Corporation's Consolidated Financial
Statements and the effect of higher nitrogen prices on TNCLP's results.
INCOME TAXES
Income tax provision was recorded at an effective rate of 41.3% for 1995
compared with 37.5% for 1994. The increased rate results primarily from the
amortization of goodwill from the AMCI acquisition which is not deductible for
tax purposes.
RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
CONSOLIDATED RESULTS
The Corporation reported net income of $56.6 million, or $0.78 per share, on
revenues of $1.67 billion in 1994 compared with net income of $22.8 million, or
$0.33 per share, on revenues of $1.24 billion in 1993. 1994 includes the results
for Terra Asgrow Florida and AMCI subsequent to its acquisition on October 20,
1994. These acquisitions added approximately $190 million to revenue and $21
million to operating income. Excluding the impact of these acquisitions,
revenues increased $240 million, or 19%, over 1993 and operating income
increased $12 million, or 46%.
<PAGE>
CONFIDENTIAL
11
Total revenues and operating income for the years ended December 31, 1994 and
1993 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Distribution $ 1,318,416 $ 1,019,438
Nitrogen Products 296,557 228,910
Methanol 70,274 ---
Other - net (19,300) (10,347)
- -------------------------------------------------------------------------------
$ 1,665,947 $ 1,238,001
===============================================================================
OPERATING INCOME:
Distribution $ 33,784 $ 16,903
Nitrogen Products 48,369 28,654
Methanol 42,679 ---
Other expense - net (9,537) (3,729)
- -------------------------------------------------------------------------------
115,295 41,828
Interest expense - net (16,541) (9,683)
Minority interest (8,809) ---
- -------------------------------------------------------------------------------
Total from operations $ 89,945 $ 32,145
===============================================================================
</TABLE>
DISTRIBUTION
Distribution revenues of $1.32 billion in 1994, increased $299 million, or 29%,
over 1993 results. Approximately $198 million of the growth relates to a 30%
increase in crop protection products sales resulting principally from the
acquisition of Terra Asgrow Florida (which added approximately $80 million),
acquisition of new locations and higher planted acreage. Growth in the
Corporation's own brand of Riverside products accounted for $22 million of the
increase. Distributed fertilizer sales increased $55 million, and seed and other
sales and services increased $45 million as a result of higher planted acreage
in 1994 and favorable weather conditions. 1993 revenues were negatively impacted
by the flooding and wet weather conditions in the central U.S. which reduced
planted acres and crop production product application rates.
Operating income for the Distribution business was $33.8 million in 1994
compared with $16.9 million in 1993. Gross margin percentages remained
relatively constant and overall gross profit increased approximately $46.5
million. Selling, general and administrative expenses increased $24.4 million.
This includes an increase in compensation costs of $17.4 million due to normal
wage increases and additional personnel resulting from expansion activities. In
addition, equipment leasing and facilities costs increased $4.2 million.
<PAGE>
CONFIDENTIAL
12
NITROGEN PRODUCTS
Nitrogen Products revenues increased 30% to $296.6 million in 1994 from $228.9
million in 1993. The acquisition of AMCI on October 20, 1994, accounted for
$60.4 million of revenue growth. Excluding the impact of the acquisition,
revenues increased $7.3 million, or 3.2%. 1994 revenues were reduced by
approximately $10 million due to the April 1994 conversion of 30% of the
capacity of the Corporation's Woodward, Oklahoma plant from ammonia to methanol
production.
Operating income for the Nitrogen Products business was $48.4 million in 1994
compared with $28.7 million in 1993. The acquisition of AMCI contributed $18.9
million to the increase in operating income. Excluding the AMCI acquisition and
a $7 million non-recurring charge described below, operating earnings increased
$7.8 million due to price increases of $15.3 million, partially offset by higher
natural gas costs and the conversion of ammonia capacity to methanol.
On December 13, 1994, the Corporation's Port Neal facility in Iowa was
extensively damaged as a result of an explosion. The Corporation recognized a $7
million charge against 1994 earnings to cover its aggregate expected
unrecoverable costs associated with the incident, including deductibles and
other uninsured costs.
METHANOL
In April 1994, about 30% of the production capacity of the Woodward, Oklahoma
plant was converted from the production of ammonia to methanol. Additionally, on
October 20, 1994, through the acquisition of AMCI, the Corporation acquired a
methanol production facility in Beaumont, Texas. The Corporation had no methanol
operations in 1993.
Methanol revenues were $70.3 million and operating income for the Methanol
business was $42.7 million in 1994. Gross profit on methanol was $44.8 million
and selling, general and administrative expenses were $2.1 million.
Under the Methanol Hedging Agreement, $15.9 million was expensed in 1994 and
reflected as a payable at December 31, 1994.
<PAGE>
CONFIDENTIAL
13
OTHER OPERATING EXPENSE - NET
Other operating expense was $9.5 million in 1994 compared with $3.7 million in
1993. The increase over 1993 was 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 was principally the result of higher
interest expense due to the assumption of $175 million of long-term debt and the
issuance of $270 million of additional debt, both in connection with the
acquisition of AMCI.
INCOME TAXES
The income tax provision increased in 1994 due to higher pretax book income and
the utilization during 1993 of previously unrecognized capital loss
carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's primary uses of funds will be to fund its working capital
requirements, make payments on its indebtedness and other obligations, make
quarterly distributions on TNCLP's Senior Preference Units (SPUs), and make
capital expenditures and acquisitions. Its principal sources of funds will be
cash flow from operations and borrowings under its current bank facility.
Additionally, the Corporation expects to receive insurance reimbursements
related to its Port Neal casualty loss. The Corporation believes that cash from
operations and available financing sources will be sufficient to meet
anticipated cash requirements.
During 1995, the Corporation utilized cash from operations to retire long-term
debt, invest in additional farm service centers and make manufacturing
improvements. Additionally, the Corporation used the proceeds of a $200 million
note issue to purchase TNCLP units on the open market and pay down bank term
debt. Proceeds from the issuance of preferred stock in a subsidiary and the
interim payments from the Corporation's insurance carriers have been utilized to
fund certain expenditures related to the Corporation's Port Neal casualty loss.
Net cash provided by operating activities was $243 million in 1995 compared with
$168 million in 1994. The increase was principally due to the higher cash
earnings attributable to a full year of operations of the
<PAGE>
CONFIDENTIAL
14
Corporation's acquired businesses and the impact of higher nitrogen prices
offset by spending related to the Port Neal casualty loss in excess of interim
payments from insurers.
In 1995 investing activities totaled $95 million. Spending on the construction
of the Corporation's Port Neal facility totaled $133 million of which $128
million was offset by insurance proceeds. Acquisitions, consisting principally
of retail distribution locations, totaled $22 million. In addition, purchases of
property, plant and equipment of $44 million in 1995 consisted of expansion of
existing service centers, additions and routine replacements of distribution
equipment, and improvements and replacements at manufacturing facilities. The
Corporation expects 1996 capital spending, exclusive of expenditures related to
the Port Neal casualty and the acquisition of retail distribution locations, to
be approximately $50 million. During 1996, the Corporation expects to make
additional expenditures related to the Port Neal casualty loss. The Corporation
is in discussions with its insurers and expects that additional proceeds will be
received in connection with the insurance claim.
On March 27, 1995, the Corporation announced its offer to purchase all 7.6
million of the publicly held SPUs representing a 39.8% partnership interest in
the Corporations's acquired nitrogen business. On May 11, 1995, the Board of
Directors of the Corporation withdrew its offer and approved an open market
purchase program pursuant to which the Corporation may purchase up to five
million SPUs from time to time at prices and in quantities determined by the
Corporation's management. As of December 31, 1995, 974,900 SPUs had been
acquired by the Corporation for $28.8 million. The Corporation will finance any
further purchases of SPUs with available cash or debt.
The Corporation issued $200 million of 10.5% Senior Notes during 1995 used
principally to prepay outstanding long-term bank debt. The Corporation made
additional prepayments on the bank term loans in the fourth quarter made
possible due to strong cash flows provided by operating activities. The
Corporation's debt, including current maturities, as a percentage of total
capital (excluding minority interest) was reduced to 42% at December 31, 1995
compared with 57% at December 31, 1994.
During 1995, the Corporation transferred the Port Neal facility to Port Neal
Holdings Corp. (PNH). PNH was structured to finance and complete construction of
the Port Neal facility through its wholly owned subsidiary, Port Neal
Corporation (PNC). PNH issued, to unrelated third parties, $25.0 million of non-
convertible
<PAGE>
CONFIDENTIAL
15
preferred stock. The preferred stock represents 25% of the voting rights of PNH
and accrues dividends commensurate with market interest rates.
During 1995, the Corporation distributed $36.8 million to minority unitholders
and paid quarterly dividends aggregating $8.7 million on the Corporation's
Common Shares.
Year-end accounts receivable and inventory balances increased by $22 million and
$34 million, respectively. The increases were partially offset by a $22 million
increase in accounts payable. The increases were attributable to higher fourth
quarter sales and off-season purchasing to obtain discounts and to meet
anticipated demand. The ratio of current assets to current liabilities increased
to 1.7 to 1 at December 31, 1995 from 1.6 to 1 at December 31, 1994.
Cash generated from operations during 1996 is expected to be adequate to meet
normal business requirements and service debt. Cash balances at December 31,
1995 were $138.7 million of which $8.9 million was used to collateralize letters
of credit supporting recorded liabilities. The Corporation's bank facility
contains certain restrictions, which are described in Notes 8 and 10.
Additionally, the public holders of TNCLP's SPUs representing a 35% interest in
the Corporation's Blytheville, Arkansas and Verdigris, Oklahoma ammonia plants
are entitled to receive a minimum quarterly distribution of $0.605 per unit, or
$4.0 million, plus arrearages before any distribution to the Corporation's
Common Units. At December 31, 1995 there were no distributions in arrears.
<PAGE>
CONFIDENTIAL
16
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
At December 31,
- ----------------------------------------------------------------------------
(in thousands) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and short-term investments $ 138,707 $ 158,384
Accounts receivable, less allowance for doubtful
accounts of $10,626 and $8,224 178,738 157,026
Inventories 367,272 332,952
Deferred tax asset -- current 23,768 43,992
Other current assets 55,511 31,069
- ----------------------------------------------------------------------------
Total current assets 763,996 723,423
- ----------------------------------------------------------------------------
Equity and other investments 15,408 14,181
Property, plant and equipment, net 694,358 552,843
Excess of cost over net assets of acquired businesses 308,414 320,559
Partnership distribution reserve fund 18,480 18,480
Other assets 67,202 58,484
- ----------------------------------------------------------------------------
Total assets $1,867,858 $1,687,970
============================================================================
LIABILITIES
Debt due within one year $ 30,425 $ 67,658
Accounts payable 203,400 181,050
Accrued and other liabilities 222,298 200,774
- ----------------------------------------------------------------------------
Total current liabilities 456,123 449,482
- ----------------------------------------------------------------------------
Long-term debt 407,162 511,706
Deferred income taxes 111,871 84,246
Other liabilities 138,218 53,477
Minority interest 182,901 170,630
Commitments and contingencies (Note 11)
- ----------------------------------------------------------------------------
Total liabilities 1,296,275 1,269,541
- ----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock
Common Shares, authorized 133,500 shares;
81,173 and 80,965 shares outstanding 133,970 133,770
Paid-in capital 631,195 630,111
Cumulative translation adjustment (271) (1,259)
Accumulated deficit (193,311) (344,193)
- ----------------------------------------------------------------------------
Total stockholders' equity 571,583 418,429
- ----------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,867,858 $1,687,970
============================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
CONFIDENTIAL
17
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Year ended December 31,
- -----------------------------------------------------------------------------------------
(in thousands, except per-share amounts) 1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $2,215,874 $1,633,499 $1,212,510
Other income, net 76,299 32,448 25,491
- -----------------------------------------------------------------------------------------
2,292,173 1,665,947 1,238,001
- -----------------------------------------------------------------------------------------
COST AND EXPENSES
Cost of sales 1,657,070 1,344,062 1,026,332
Selling, general and administrative expense 259,295 207,333 172,116
Equity in earnings of unconsolidated affiliates (1,894) (743) (2,275)
- -----------------------------------------------------------------------------------------
1,914,471 1,550,652 1,196,173
- -----------------------------------------------------------------------------------------
Income from operations 377,702 115,295 41,828
Interest income 13,811 5,541 3,261
Interest expense (64,897) (22,082) (12,944)
Minority interest (47,234) (8,809) ---
- -----------------------------------------------------------------------------------------
Income before income taxes, extraordinary items
and cumulative effect of accounting changes 279,382 89,945 32,145
Income tax provision 115,500 33,700 9,300
- -----------------------------------------------------------------------------------------
Income before extraordinary items and
cumulative effect of accounting changes 163,882 56,245 22,845
Extraordinary loss on early retirement of debt (4,338) (3,060) ---
Cumulative effect of accounting changes --- 3,376 ---
- -----------------------------------------------------------------------------------------
NET INCOME $ 159,544 $ 56,561 $ 22,845
=========================================================================================
Weighted average number of shares outstanding 81,332 72,870 69,064
=========================================================================================
INCOME PER SHARE:
Income before extraordinary items $ 2.01 $ 0.77 $ 0.33
Extraordinary loss on early retirement of debt (0.05) (0.04) ---
Cumulative effect of accounting changes --- 0.05 ---
- -----------------------------------------------------------------------------------------
NET INCOME $ 1.96 $ 0.78 $ 0.33
=========================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
CONFIDENTIAL
18
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Year ended December 31,
- ---------------------------------------------------------------------------------------
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 159,544 $ 56,561 $ 22,845
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 66,075 27,218 15,470
Deferred income taxes 47,849 20,956 5,500
Cumulative effect of accounting changes --- (3,376) ---
Minority interest in earnings 47,234 8,809 ---
Other non-cash items 2,544 10,923 (839)
Change in current assets and liabilities,
excluding working capital purchased/sold:
Accounts receivable (24,557) 19,615 (24,540)
Inventories (30,466) (59,303) (6,718)
Other current assets 46 (13,056) (2,893)
Accounts payable 22,950 60,478 (9,945)
Accrued and other liabilities 35,349 39,405 2,452
Unreimbursed Port Neal casualty (68,748) --- ---
Other (14,699) 212 (2,354)
- ---------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 243,121 168,442 (1,022)
- ---------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Port Neal plant construction (133,106) --- ---
Insurance proceeds from plant casualty 127,557 --- ---
Acquisitions, net of cash acquired (22,326) (373,722) (58,260)
Purchase of property, plant and equipment (44,023) (31,213) (21,620)
Purchase of minority interest - TNCLP (28,834) --- ---
Discontinued operations 4,944 (2,138) 5,630
Proceeds from asset sales --- --- 24,391
Proceeds from investments 726 690 537
- ---------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (95,062) (406,383) (49,322)
- ---------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term borrowings 4,906 13,795 7,313
Proceeds from issuance of long-term debt 203,112 326,407 250
Principal payments on long-term debt (349,134) (101,416) (12,545)
Debt issuance costs (8,333) (13,581) ---
Stock issuance/repurchase - net 1,187 117,666 513
Distribution to minority interests (36,750) (5,040) ---
Sale of minority interest in subsidiaries 24,950 --- ---
Dividends (8,662) (5,837) (1,386)
- ---------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (168,724) 331,994 (5,855)
- ---------------------------------------------------------------------------------------
Foreign Exchange Effect on Cash
and Short-Term Investments 988 (771) (488)
- ---------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND SHORT-TERM
INVESTMENTS (19,677) 93,282 (56,687)
- ---------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF
YEAR 158,384 65,102 121,789
- ---------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 138,707 $ 158,384 $ 65,102
=======================================================================================
INTEREST PAID $ 77,800 $ 16,500 $ 11,800
=======================================================================================
TAXES PAID $ 47,665 $ 22,600 $ 3,800
=======================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
CONFIDENTIAL
19
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Cumulative
Common Trust Paid-In Translation Accumulated
(in thousands) Shares Shares Capital Adjustment Deficit Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 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
Exercise of stock options 192 --- 1,073 --- --- 1,265
Translation adjustment --- --- --- 988 --- 988
Stock Incentive Plan 8 --- 11 --- --- 19
Dividends --- --- --- --- (8,662) (8,662)
Net income --- --- --- --- 159,544 159,544
- -----------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995 $ 133,970 $ --- $ 631,195 $ (271) $(193,311) $ 571,583
=================================================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
CONFIDENTIAL
20
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). All significant
intercompany accounts and transactions have been eliminated.
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 ranging from 15 to 20 years for
buildings and 3 to 15 years for plant and equipment. Maintenance and repair
costs are expensed as incurred.
Excess of costs over net assets of acquired business:
The Corporation amortizes costs in excess of fair value of net assets of
businesses acquired using the straight-line method over periods ranging from 15
to 18 years. Management periodically determines the recoverability of this
asset through an assessment of future operations.
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.
Accounting standards not adopted:
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 121, "Accounting for the Impairment of
Long-Lived Assets." SFAS 121 required that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Corporation will adopt
SFAS 121 as required in 1996 but does not expect that any adjustments will be
required to the holding value of long-lived assets.
In October 1995, the Financial Accounting Standards Board issued SFAS 123,
"Accounting for Stock Based Compensation." Beginning in 1996, SFAS 123 requires
expanded disclosures of stock-based compensation arrangements with employees and
encourages, but does not require, the recognition of employee compensation
expense related to stock compensation based on the fair value of the equity
instrument granted. Companies that do not adopt the fair value recognition
provisions of SFAS 123 and continue to follow the existing APB
<PAGE>
CONFIDENTIAL
21
Opinion 25 rules to recognize and measure compensation, will be required to
disclose the pro forma amounts of net income and earnings per share that would
have been reported had the company elected to follow the fair value recognition
of SFAS 123. Management will determine in 1996 the Corporation's approach to
SFAS 123. The impact on the Corporation's financial position and results of
operations is not expected to be material.
Hedging transactions:
Realized gains and losses from hedging activities and premiums paid for option
contracts are deferred and recognized in the month to which the hedged
transactions relate.
Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications:
Certain reclassifications have been made to prior years' financial statements to
conform with current year presentation.
Per-share results:
Earnings-per-share data are based on the weighted average number of Common
Shares outstanding. The dilutive effect of the Corporation's outstanding
restricted shares, stock options and convertible debentures was not significant.
<PAGE>
CONFIDENTIAL
22
2. ACQUISITIONS
On October 20, 1994, the Corporation acquired AMCI for $506 million in cash.
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), Beaumont Methanol, Limited Partnership (BMLP) and Terra
Nitrogen Company, L.P. (TNCLP). As a result of the acquisition and subsequent
open market purchases (see Note 10 - Long-Term Debt) the Corporation and its
subsidiaries have approximately a 65 percent ownership interest in TNCLP,
formerly Agricultural Minerals Company, L.P., which operates nitrogen products
manufacturing facilities in Verdigris, Oklahoma and Blytheville, Arkansas
through an operating partnership, Terra Nitrogen, Limited Partnership (TNLP),
formerly Agricultural Minerals, Limited Partnership. Terra Methanol Corporation
(TMC) is the general partner of BMLP which operates a methanol production
facility in Beaumont, Texas. The acquisition has been accounted for using the
purchase method of accounting.
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. As a result of the acquisition of AMCI, the Corporation also
assumed AMCI's obligations including its 10.75% Senior Notes due 2003 (see Note
10 - Long-Term Debt).
On September 15, 1994, the Corporation acquired a 34% interest in Royster-Clark,
Inc. for $12 million in cash. Royster-Clark is a 110-location distributor of
crop input and protection products in the mid-Atlantic region.
On December 31, 1993, Terra International, Inc. purchased net assets of certain
operations of Asgrow Florida Company, Inc. (Terra Asgrow Florida), a distributor
of fertilizer, chemicals and seed, for $39 million. Terra Asgrow Florida
currently operates 15 distribution centers and is a supplier to the vegetable,
citrus and ornamental plant markets, mostly in Florida.
On April 8, 1993, a wholly owned subsidiary of the Corporation, Terra
International (Canada) Inc. (Terra Canada) acquired rights to an anhydrous
ammonia manufacturing plant and related upgrading facilities (the nitrogen
plant) located at Courtright, Ontario effective as of March 31, 1993. In
addition, Terra Canada purchased working capital associated with the nitrogen
plant and interest in 32 farm service centers operating under the trademark,
Agromart(TM). All but two of the Agromarts(TM) are owned by corporations in
which Terra Canada has a 50% interest, and the remaining 50% interests are owned
by local management and other investors. The remaining two Agromarts(TM) are
wholly owned by Terra Canada. The amount paid in connection with the
transaction was approximately $73 million (Cdn) of which approximately $47
million (Cdn) was provided through lease financing and the remainder was funded
by a working capital line of credit and cash.
Operating results of the acquired businesses subsequent to the respective dates
of each acquisition are included in the Consolidated Statements of Income. The
following represents unaudited pro forma summary results of
<PAGE>
CONFIDENTIAL
23
operations as if the acquisitions of AMCI, Terra Asgrow Florida and Terra Canada
had occurred at the beginning of 1993:
<TABLE>
<CAPTION>
(in thousands, except per-share data) Year ended December 31,
- -----------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------
<S> <C> <C>
Revenues $2,084,827 $1,716,300
Income before extraordinary items and
cumulative effect of accounting changes $ 110,370 $ 14,060
Net income $ 110,680 $ 11,510
Income per share before extraordinary items $ 1.37 $ 0.18
Net income per share $ 1.37 $ 0.15
- -----------------------------------------------------------------------
</TABLE>
The pro forma operating results were adjusted to include lease expense rather
than depreciation for the Terra Canada nitrogen plant, increased costs of seed
sales, depreciation of the fair value of capital assets acquired based on
estimated useful lives at respective acquisition dates, amortization of
intangibles, reduction of incentive compensation expense for plans terminated at
acquisition, interest expense on the acquisition borrowings, the issuance of
common stock and the effect of income taxes.
The pro forma information listed above does not purport to be indicative of the
results that would have been obtained if the operations were combined during the
above periods, and is not intended to be a projection of future operating
results or trends.
<PAGE>
CONFIDENTIAL
24
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 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. Prior to the adoption of SFAS 112, the Corporation
recognized such expenses in the period the benefits were paid.
<PAGE>
CONFIDENTIAL
25
4. RELATIONSHIP WITH MAJORITY STOCKHOLDER
Minorco, through its beneficial ownership of Common Shares, owns approximately
53 percent of the equity of the Corporation. The Corporation procures certain
insurance coverages for Minorco and related companies, subleases office space to
Minorco, and shares the cost of certain employees of both organizations.
Payments to the Corporation in settlement of these services are made on an
ongoing basis and totaled $1.0 million, $0.9 million and $1.0 million in 1995,
1994 and 1993, respectively.
<PAGE>
CONFIDENTIAL
26
5. INVENTORIES
Inventories consisted of the following at December 31:
(in thousands) 1995 1994
- -------------------------------------------------------------
Raw materials $ 36,499 $ 38,988
Finished goods 330,773 293,964
- -------------------------------------------------------------
Total $ 367,272 $ 332,952
=============================================================
<PAGE>
CONFIDENTIAL
27
6. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
- ----------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 105,715 $ 89,154
Plant and equipment 556,206 584,814
Finance leases 4,716 7,471
Construction in progress 171,967 21,086
- ----------------------------------------------------------------
838,604 702,525
Less accumulated depreciation and
amortization (144,246) (149,682)
- ----------------------------------------------------------------
Total $ 694,358 $ 552,843
================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
28
7. PORT NEAL CASUALTY
On December 13, 1994, the Corporation's Port Neal facility in Iowa was
extensively damaged as a result of an explosion. There were four employee
fatalities plus injuries or damages to other people and property. Insurance was
in force to cover damage to the Corporation's property, business interruption
and third party liability claims. A $7 million pretax charge was recorded in
1994 for expected uninsured costs associated with the incident, including
deductibles. As of December 31, 1995, the Corporation had received interim
payments of $175.3 million on its claim. The Corporation is in discussions with
its insurers as to additional insurance proceeds which the Corporation believes
it should be entitled. Estimated lost profits recoverable under the business
interruption policy are being included in income. Insurance proceeds received
under the Corporation's property damage claim are being deferred pending final
settlement of the claim. The Corporation has invested additional funds for
other enhancements and improvements at the Port Neal facility.
The Corporation expects to record a substantial non-recurring gain, representing
the difference between the property insurance settlement on the Port Neal
facility with the Corporation's insurers and the carrying value of the facility
at the time of the explosion. The amount of the gain will be dependent on final
construction, clean-up expenditures and the settlement reached with the
Corporation's insurance carriers. As of December 31, 1995, $80.3 million has
been recorded as a deferred gain and is included in other liabilities.
<PAGE>
CONFIDENTIAL
29
8. DEBT DUE WITHIN ONE YEAR
Debt due within one year consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings $ 26,014 $ 21,108
Current maturities of long-term debt 4,411 46,550
- -------------------------------------------------------------------
Total $ 30,425 $ 67,658
===================================================================
Weighted average short-term borrowings $ 53,483 $ 49,242
===================================================================
Weighted average interest rate 8.4% 6.5%
===================================================================
</TABLE>
During 1995, the Corporation amended its credit agreement to provide revolving
credit facilities of up to $375 million for domestic seasonal working capital
needs and other corporate purposes. The Corporation also has a $25.7 million
($35 million Cdn) revolving credit facility used to provide for working capital
needs for its Canadian operations. There was $26.0 million outstanding at
December 31, 1995 under the domestic facility and no outstanding borrowing under
the Canadian facility. Interest on borrowings under these lines is charged at
current market rates.
Under the amended credit agreement, the Corporation has agreed, among other
things, to maintain certain financial covenants including minimum net worth and
interest coverage ratios, maximum debt to cash flow 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 December 31, 2000. A
commitment fee is charged on the unused portion of the facilities under the
credit agreement, currently 1/4 percent adjustable based on the Corporation's
most recent quarter debt to cash flow ratio. The credit agreement is secured by
the stock of certain principal subsidiaries of the Corporation as well as the
personal property of the former AMCI 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 October 17, 1996 and is renewable
every 120 days for a 360-day term. A commitment fee of 1/8 percent is paid on
the facility.
<PAGE>
CONFIDENTIAL
30
9. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
- -------------------------------------------------------
<S> <C> <C>
Customer deposits $ 101,851 $ 66,470
Payroll and benefit costs 33,242 45,630
Income taxes 26,209 8,727
Other 60,996 79,947
- -------------------------------------------------------
Total $ 222,298 $ 200,774
=======================================================
</TABLE>
<PAGE>
CONFIDENTIAL
31
10. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Senior Notes, 10.5%, due 2005 $ 200,000 $ ---
Senior Notes, 10.75%, due 2003 158,755 158,755
Bank term loans, floating rate, due in installments through 2001 --- 310,000
Bank term loan, floating rate, due 1999 --- 35,000
Senior Notes, 8.48%, due 2005 30,000 30,000
Industrial Development Revenue Bonds bearing interest at an
average 6.81% with increasing payments from 1996 to 2011 9,045 9,210
Notes, 8.75% to 9.63%, due 1996 to 1998 4,500 6,500
Other 9,273 8,791
- --------------------------------------------------------------------------------------------------
411,573 558,256
Less current maturities (4,411) (46,550)
- --------------------------------------------------------------------------------------------------
Total $ 407,162 $ 511,706
==================================================================================================
</TABLE>
Scheduled principal payments for each of the five years 1996 through 2000 are
$4.4 million, $2.6 million, $2.6 million, $3.5 million and $8.2 million,
respectively.
In 1995, the Corporation issued $200 million unsecured 10.5% Senior Notes due in
full June 15, 2005. The 10.5% Senior Notes are redeemable at the option of the
Corporation, in whole or part, at any time on or after June 15, 2000, initially
at 105.250% of their principal amount, plus accrued interest, declining to
102.625% on or after June 15, 2001, and declining to 100% on or after June 15,
2002. The 10.5% 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. Net proceeds of $28.8 million were
used to acquire 974,900 of the outstanding Senior Preference Units (SPUs) of
TNCLP. The remaining net proceeds were used to repay bank term loans.
The 10.75% unsecured Senior Notes are redeemable at the option of the
Corporation, in whole or part, at any time on or after September 30, 1998,
initially at 105.375% of their principal amount, plus accrued interest,
declining to 102.688% on or after September 30, 1999, and declining to 100% on
or after September 30, 2000. In addition, at any time prior to September 30,
1996, the Corporation may, at its option, redeem up to $61.25 million aggregate
principal amount out of the proceeds of one or more public offerings of equity
securities at a redemption price of 110% of their principal amount, plus accrued
interest. The 10.75% Senior Notes Indenture contains restrictions similar to
those in the 10.5% Senior Notes Indenture.
The Corporation entered into a secured credit agreement with financial
institutions to provide Bank Term Loans (Loans) to finance a portion of the 1994
acquisition of AMCI and to refinance existing debt of $40 million at the
Corporation and $35 million at TNLP. The $35 million TNLP debt was repaid in
May 1995. In December 1995, the remaining Loans outstanding were converted into
advances under an amended credit agreement providing up to $375 million in
revolving credit described more fully in Note 8 - Debt Due Within One Year.
The $30 million unsecured 8.48% Senior Notes require annual principal payments
commencing November 1, 1999 through May 1, 2005. The notes include 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
Corporation has executed interest rate swap agreements to convert one-half of
the 8.48% unsecured Senior
<PAGE>
CONFIDENTIAL
32
Notes to LIBOR-based floating rate instruments. The interest rate agreements
became effective on April 15, 1993 and terminate on April 15, 2003.
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.
<PAGE>
CONFIDENTIAL
33
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 2010. Total minimum rental
payments are as follows:
(in thousands)
- ------------------------------------
1996 $ 45,216
1997 38,420
1998 25,114
1999 12,584
2000 and thereafter 14,661
- ------------------------------------
Total $ 135,995
====================================
The Corporation entered into 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 $72 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 $61 million (Cdn) subject to reimbursement
based on the proceeds realized upon the sale of the nitrogen plant by the
lessor. Terra Canada has entered into certain agreements in order to convert
its obligations with respect to the nitrogen plant set forth above from Canadian
dollar and fixed rental obligations to U.S. dollar and variable rental
obligations based on interest rate changes tied to LIBOR.
Total rental expense under all leases, including short-term cancelable operating
leases, was approximately $46.8 million, $37.3 million and $24.7 million for the
years ended December 31, 1995, 1994 and 1993, respectively.
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 $9
million at December 31, 1995. In the event the Corporation would be required to
assume this liability, mineral reserves associated with the sold coal subsidiary
would revert to the Corporation.
During March 1994, the Corporation entered into an agreement to sell its
receivables. Under this agreement, which expires March 31, 1996, the
Corporation may sell with limited recourse an undivided interest in a designated
pool of its accounts receivable and receive up to $50 million in proceeds.
Undivided interests in new receivables may be sold as collections reduce
previously sold interests. The undivided interests are sold at a discount that
is included in selling, general and administrative expense in the Consolidated
Statements of Income. At December 31, 1995, the proceeds of the uncollected
balance of receivables sold totaled $50 million. The Corporation retains
collection and administrative responsibility on the participating interests
sold.
The Corporation is involved in various legal actions and claims, including
environmental matters, arising from the normal course of business. It is the
opinion of management that the ultimate resolution of these matters
<PAGE>
CONFIDENTIAL
34
will not have a material adverse effect on either the results of operations,
financial position or net cash flows of the Corporation.
<PAGE>
CONFIDENTIAL
35
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 had no recorded value and a fair value of
$0.7 million at December 31, 1995. The contracts had no recorded value and
would have cost $0.8 million to liquidate at December 31, 1994. 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 $78.0 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 to cover a
portion of its estimated net Canadian dollar requirements over a
twelve-month period. As of December 31, 1995, the existing forward
contracts represented approximately 30% of anticipated net 1996
Canadian dollar requirements of approximately $46 million (Cdn).
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 futures
contracts, swaps and options. These contracts are traded up to thirty-one months
forward and settlement dates are scheduled to coincide with gas purchases during
that future period. A swap is a contract 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 give the holder 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 and option contracts
require initial premium payments ranging from 2% to 5% of contract value.
The following summarizes open natural gas contracts at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
- ---------------------------------------------------------------------
Contract Unrealized Contract Unrealized
MMBtu Gain MMBtu (Loss)
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Futures 6,840 $ 592 5,080 $ (1,838)
Swaps 167,040 13,475 59,855 (18,793)
Options 6,470 797 11,926 (709)
- ---------------------------------------------------------------------
180,350 $ 14,864 76,861 $ (21,340)
=====================================================================
</TABLE>
Annual production requirements are 133,000 MMBtu. Contracts were in place at
December 31, 1995 to cover 78% of 1996 natural gas requirements, 46% for 1997
and 31% for 1998.
<PAGE>
CONFIDENTIAL
36
Gains and losses on settlement of these contracts and premium payments on option
contracts are credited or charged to manufacturing cost in the month in which
the hedged transaction occurs. The risk and reward of outstanding natural gas
positions are directly related to increases or decreases in natural gas prices
in relation to the underlying NYMEX natural gas contract prices. Realized gains
on closed contracts and premium payments on option contracts of $11.4 million
and $7.7 million, respectively, relating to future periods have been deferred.
During 1995, natural gas hedging activities produced cost increases of
approximately $34.5 million, or 16%, of total natural gas purchases compared
with spot prices. During 1994, natural gas hedging increased cost by
approximately $15.5 million, or 13%, of total natural gas purchases.
The Corporation has also limited the effect of natural gas price fluctuations
through the use of basis swaps. Such contracts require payments to the
Corporation for the amount, if any, that monthly published gas prices from the
source specified in the contract exceed the average of the daily settlement
prices for the last three scheduled trading days of NYMEX natural gas futures on
an adjusted basis as specified in the contract for the applicable determination
period, and vice versa. As of December 31, 1995 and 1994, MMBtu's under such
contracts totaled 14.7 million and 0.5 million, respectively.
INTEREST RATE FLUCTUATIONS - The Corporation has limited the effect of interest
rate fluctuations for a portion of its floating rate obligations 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, 1995, the
Corporation had $161 million of obligations subject to variable interest rates.
The interest rate collar agreements, with a notional amount of $160 million
(which declines over the remaining 2-year period), cover 99.4% of the variable
interest rate obligations at December 31, 1995.
The unamortized cost of the collar agreements is $0.7 million at December 31,
1995 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, 1995. The cost to liquidate the collar agreement at December 31, 1995 would
be $1.7 million.
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 1995, the net interest rate effect of the swap arrangements
totaled 1.8% effectively reducing the interest rate on its $30 million of 8.48%
Senior Notes to 7.58%. 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, 1995, the notional amount of the swap
agreement was approximately $35.8 million and would cost $0.2 million to
liquidate.
METHANOL PRICES - The Corporation entered into a methanol hedging agreement (the
Methanol Hedging Agreement) effective October 1994. Pursuant to the agreement,
the Corporation 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 amount due, if any, is dependent upon average
methanol and natural gas prices during each of the periods. Payments are due
five days after the end of each period. The quantities subject to the agreement
for each of these periods are 155.5 million, 140 million and 130 million
gallons, respectively. The Corporation's methanol production facilities have a
production capacity of 320 million gallons of methanol per year.
<PAGE>
CONFIDENTIAL
37
The $4 million received pursuant to the Methanol Hedging Agreement is being
recognized as income over the term of the agreement. No amounts have been paid
or are presently accrued under the terms of the agreement. The estimated fair
value of the agreement, representing the amount that the Corporation would
expect to pay at December 31, 1995 to liquidate the agreement for its remaining
term, is less than $1 million.
<PAGE>
CONFIDENTIAL
38
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, 1995 and 1994. 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>
1995 1994
- ----------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(in millions) Amount Value Amount Value
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets
Cash and short-term investments $ 138.7 $ 138.7 $ 158.4 $ 158.4
Receivables 178.7 178.7 157.0 157.0
Equity and other investments 15.4 17.7 14.2 16.6
Other assets 9.0 9.6 16.0 16.2
Financial Liabilities
Long-term debt (411.6) (444.8) (558.3) (555.4)
==================================================================================
</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 price of these or similar issues or by discounting
expected cash flows at the rates currently offered to the Corporation for debt
of the same remaining maturities.
CONCENTRATION OF CREDIT RISK - The Corporation is subject to credit risk through
trade receivables and short-term investments. Although a substantial portion of
its debtors' ability to pay is dependent upon the agribusiness economic sector,
credit risk with respect to trade receivables is minimized due to a large
customer base and its geographic dispersion. Short-term cash investments are
placed with well capitalized, high quality financial institutions and in short
duration corporate and government debt securities funds. By policy, the
Corporation limits the amount of credit exposure in any one type of investment
instrument.
FINANCIAL INSTRUMENTS - At December 31, 1995, the Corporation had letters of
credit outstanding totaling $29.5 million, guaranteeing various insurance and
financing activities. Short-term investments of $8.9 million and $9.6 million
at December 31, 1995 and 1994, respectively, are restricted to collateralize
certain of the letters of credit.
<PAGE>
CONFIDENTIAL
39
14. STOCKHOLDERS' EQUITY
The Corporation allocates $1.00 per share upon the issuance of Common Shares to
the Common Share capital account.
In 1995, the Corporation issued 54,400 restricted shares and 38,400 shares were
canceled under the 1992 Stock Incentive Plan (the 1992 Plan). No restricted
shares vested during 1995. At December 31, 1995, 388,000 of the 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. During 1994,
229,218 shares issued under the 1992 Plan were vested with plan participants and
139,282 shares were canceled. In 1994, the Corporation issued an additional
372,000 restricted Common Shares under the 1992 Plan to certain key employees of
the Corporation. 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. The Corporation has authorized 16,500,000 Trust Shares for
issuance and none are outstanding at December 31, 1995.
A summary of changes in the Corporation's outstanding capital stock follows:
<TABLE>
<CAPTION>
Common Trust Total
(in thousands) Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C>
December 31, 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
Exercise of stock options 192 --- 192
Stock Incentive Plan 16 --- 16
- --------------------------------------------------------------
December 31, 1995 81,173 --- 81,173
==============================================================
</TABLE>
At December 31, 1995, 2.6 million Common Shares were reserved for issuance upon
award of restricted shares and exercise of employee stock options.
In September 1995, the Corporation transferred its Port Neal facility (including
improvements then in progress) and $1.3 million in cash to Port Neal Holdings
Corp. (PNH) and issued, to unrelated third parties, $25 million of non-
convertible preferred stock. As a result, the Corporation indirectly owns 100%
of the common stock of PNH (representing 75% of the voting rights of PNH). PNH
was structured to finance and complete the construction of the Port Neal
facility through its wholly owned subsidiary, Port Neal Corporation (PNC). The
preferred stock represents 25% of the voting rights of PNH and accrues dividends
at a floating rate commensurate with market interest rates. The Corporation
accounts for the preferred stock as a minority
<PAGE>
CONFIDENTIAL
40
interest. Various agreements between the Corporation and certain subsidiaries
were entered into with PNH and/or PNC including intercompany debt obligations
and lease arrangements.
<PAGE>
CONFIDENTIAL
41
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 Plans. 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, 1995, 1,226,982 Common Shares were
available for grant under the 1992 Plan. A summary of activity under the 1992,
1987 and 1983 Plans follows:
<TABLE>
<CAPTION>
Shares Price Range
(in thousands) Under Option Per Share
- --------------------------------------------------------------------------
<S> <C> <C>
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
Granted 9 12.75 to 13.13
Exercised 192 3.38 to 9.63
- --------------------------------------------------------------------------
Balance at December 31, 1995 1,350 $ 3.38 to $13.13
==========================================================================
The number of options exercisable at December 31 for each of the past three
years follows:
Price Range
(in thousands) Options Per Share
- --------------------------------------------------------------------------
1993 1,777 $ 3.38 to $11.38
1994 1,244 3.38 to 9.63
1995 1,052 3.38 to 9.63
==========================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
42
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 were as
follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current service cost $ 4,120 $ 3,248 $ 2,627
Interest on projected benefit obligation 4,746 3,971 3,539
Actual loss (return) on assets (12,763) 361 (4,629)
Net amortization and other 8,080 (4,764) 853
- ------------------------------------------------------------------------------
Pension expense $ 4,183 $ 2,816 $ 2,390
==============================================================================
</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>
(in thousands) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Plans with Plans with
Plans with accumulated Plans with accumulated
assets in excess benefits in assets in excess benefits in
of accumulated excess of of accumulated excess of
benefits plan assets benefits plan assets
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligations $ (46,543) $ (2,496) $ (35,301) $ (1,780)
Accumulated benefit obligations $ (50,778) $ (2,718) $ (39,084) $ (1,933)
Projected benefit obligations $ (70,658) $ (3,160) $ (53,344) $ (2,257)
Plan assets at fair value 60,460 --- 48,312 ---
- -----------------------------------------------------------------------------------------------------------------------
Funded status (10,198) (3,160) (5,032) (2,257)
Unrecognized net experience loss (gain) (2,737) 526 (219) (333)
Unrecognized prior service cost 205 311 254 347
Unrecognized net transition (asset) obligation 1,744 372 (3,103) 586
Additional minimum liability --- (767) --- (276)
- -----------------------------------------------------------------------------------------------------------------------
Pension liability included in the Consolidated
Statements of Financial Position $ (10,986) $ (2,718) $ (8,100) $ (1,933)
=======================================================================================================================
</TABLE>
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, 1995 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rate 7.25% 8.5% 7.5%
Long-term per annum compensation increase 5.0% 5.0% 5.0%
Long-term return on plan assets 9.5% 9.5% 9.5%
=====================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
43
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
$3.7 million in 1995, $1.9 million in 1994 and $1.4 million in 1993.
<PAGE>
CONFIDENTIAL
44
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:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement medical benefit obligation:
Retirees $ (2,713) $ (2,133)
Fully eligible active plan participants (2,140) (1,615)
Other active participants (6,617) (4,430)
- -----------------------------------------------------------------------------------
Funded status (11,470) (8,178)
Unrecognized net loss (141) (2,071)
Unrecognized prior service benefit (1,784) (1,912)
- -----------------------------------------------------------------------------------
Accrued post-retirement benefit cost $(13,395) $(12,161)
===================================================================================
</TABLE>
Net periodic post-retirement medical benefit cost consisted of the following
components:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned $ 521 $ 534 $ 526
Interest cost on accumulated post-retirement
medical benefit obligation 730 624 614
Net amortization and other (193) (127) (127)
- -----------------------------------------------------------------------------------
Net periodic post-retirement medical benefit cost $ 1,058 $ 1,031 $ 1,013
===================================================================================
</TABLE>
The Corporation limits its future obligation for post-retirement medical
benefits by capping at 5% the annual rate of increase in the cost of claims it
assumes under the plan. The weighted average discount rate used in determining
the accumulated post-retirement medical benefit obligation is 7.25% in 1995,
8.5% in 1994 and 7.5% in 1993.
<PAGE>
CONFIDENTIAL
45
18. OTHER INCOME, NET
Other income consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Fertilizer service revenue $ 25,132 $ 17,294 $ 13,531
Service charge income 8,178 6,008 3,930
Other, including business interruption 42,989 9,146 8,030
- -----------------------------------------------------------------------------
Total $ 76,299 $ 32,448 $ 25,491
=============================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
46
19. INCOME TAXES
Components of the income tax provision (benefit) applicable to operations are as
follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 45,938 $ 9,925 $ 4,884
Foreign 12,285 2,416 3,750
State 9,416 4,291 4,709
- -----------------------------------------------------------------
67,639 16,632 13,343
- -----------------------------------------------------------------
Deferred:
Federal 42,673 15,197 (4,126)
Foreign 3,568 2,533 451
State 1,620 (662) (368)
- -----------------------------------------------------------------
47,861 17,068 (4,043)
- -----------------------------------------------------------------
Total income tax provision $ 115,500 $ 33,700 $ 9,300
=================================================================
</TABLE>
The income tax provision differs from the federal statutory provision for the
following reasons:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Income from operations before taxes:
U.S. $ 237,892 $ 75,842 $ 19,046
Canada 41,490 14,103 13,099
- ---------------------------------------------------------------------------
$ 279,382 $ 89,945 $ 32,145
===========================================================================
Statutory income tax:
U.S. $ 83,262 $ 26,545 $ 6,666
Canada 15,891 5,359 4,978
- ---------------------------------------------------------------------------
99,153 31,904 11,644
Non-deductible expenses, primarily
goodwill 6,020 650 698
State and local income taxes 8,345 2,545 3,061
Benefit of loss carryforwards (1,183) (613) (4,494)
Change in federal tax rates --- --- (1,233)
Undistributed equity earnings (470) (430) (865)
Other 3,635 (356) 489
- ---------------------------------------------------------------------------
Income tax provision $ 115,500 $ 33,700 $ 9,300
===========================================================================
</TABLE>
Current deferred tax assets totaled $23.8 million and $44.0 million at December
31, 1995 and 1994, respectively, while deferred tax liabilities totaled $111.9
million and $84.2 million at December 31, 1995 and 1994, respectively.
Undistributed earnings of the Canadian subsidiary, considered permanently
invested, for which deferred income taxes have not been provided, were $44.0
million at December 31, 1995. The tax
<PAGE>
CONFIDENTIAL
47
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>
(in thousands) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
NOL, capital loss and tax credit carryforwards $ 21,807 $ 41,402
Discontinued business costs 7,832 5,792
Unfunded employee benefits 17,376 10,130
Accrued liabilities (66) 10,497
Inventory valuation 3,157 4,899
Account receivable allowances 3,765 3,091
Investments in partnership (29,536) (20,805)
Depreciation (103,247) (93,957)
Valuation allowance (4,022) (2,170)
Other (5,168) 867
- ----------------------------------------------------------------------------
$ (88,102) $ (40,254)
============================================================================
</TABLE>
Remaining unutilized NOL carryforwards were approximately $12.5 million and $4.8
million at December 31, 1995 and 1994, respectively. NOL carryforwards that
have not been utilized expire in 2005. Alternative minimum tax (AMT) credits
were $13.4 million and $36.7 million at December 31, 1995 and 1994,
respectively. AMT credits have an indefinite life. The Corporation's capital
loss carryforwards totaled $11.5 million and $6.2 million at December 31, 1995
and 1994, respectively. Capital loss carryforwards that are not utilized will
expire in 1997. A valuation allowance is provided since the realization of tax
benefits of capital loss carryforwards is not assured.
Components of income tax provision (benefit) included in net income other than
from continuing operations are as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ (2,392) $ (1,647) $ ---
State (107) (44) ---
- -----------------------------------------------------------------
(2,499) (1,691) ---
- -----------------------------------------------------------------
Deferred:
Federal --- 1,816 ---
State --- 331 ---
- -----------------------------------------------------------------
--- 2,147 ---
- -----------------------------------------------------------------
$ (2,499) $ 456 $ ---
=================================================================
</TABLE>
Current tax benefits in 1995 and 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.
<PAGE>
CONFIDENTIAL
48
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
(in thousands) Distribution Products Methanol Other Total
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Sales $ 1,495,166 $ 635,126 $ 194,565 $ (32,684) $ 2,292,173
Operating earnings 41,207 263,787 77,138 (4,430) 377,702
Identifiable assets 564,243 984,363 225,034 94,218 1,867,858
Depreciation and amortization 12,245 32,518 16,636 4,676 66,075
Capital expenditures 14,347 150,687 10,329 1,766 177,129
- ----------------------------------------------------------------------------------------------------
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
====================================================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
49
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, 1995.
During the period which commenced December 4, 1991, and not ending prior to
December 31, 1996 (the Preference Period), Senior Preference Units (SPUs) and
Common Units participate equally in distributions after each class of units has
received its Minimum Quarterly Distribution, subject to the General Partner's
right to receive cash distributions.
The General Partner receives a combined minimum 2% of total cash distributions,
and as an incentive, the General Partner's participation increases if cash
distributions exceed specified target levels. During the Preference Period,
distributions are subject to the rights of SPUs 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 Common Unitholders.
On December 31, 1995 all Junior Preference Units were converted to SPUs. 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 SPUs
will have the right, subject to fulfillment of certain stock exchange listing
requirements, to convert their SPUs into fully participating Common Units.
<PAGE>
CONFIDENTIAL
50
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying Consolidated Financial Statements of Terra Industries Inc. and
its subsidiaries have been prepared in conformity with generally accepted
accounting principles appropriate in the circumstances. The integrity and
objectivity of data in these financial statements and supplemental data,
including estimates and judgments related to matters not concluded by year end,
are the responsibility of management.
The Corporation has a system of internal accounting controls that provides
management with reasonable assurance that transactions are recorded and executed
in accordance with its authorizations, that assets are properly safeguarded and
accounted for, and that financial records are maintained to permit preparation
of financial statements in accordance with generally accepted accounting
principles. This system includes written policies and procedures, and
organizational structure that segregates duties, and a comprehensive program of
periodic audits by the internal auditors. The Corporation also has instituted
policies and guidelines that require employees to maintain the highest level of
ethical standards.
The Audit Committee of the Board of Directors is responsible for the review of
the internal audit function, the financial statements and reporting practices of
the Corporation. The Audit Committee meets periodically with management,
internal auditors and the independent accountants. The independent accountants
and internal auditors have access to the Audit Committee and, without management
present, have the opportunity to discuss the adequacy of internal accounting
controls and to review the quality of financial reporting.
The Consolidated Financial Statements contained in this Annual Report have been
audited by our independent accountants. Their audits included a review of
internal accounting controls to establish a basis for reliance thereon in
determining the nature, extent and timing of audit tests applied in their
examinations of the Consolidated Financial Statements.
Burton M. Joyce Francis G. Meyer Robert E. Thompson
President and Chief Financial Officer Chief Accounting Officer
Chief Executive Officer
<PAGE>
CONFIDENTIAL
51
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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 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 2, 1996
<PAGE>
CONFIDENTIAL
52
<TABLE>
<CAPTION>
QUARTERLY PRODUCTION DATA (unaudited)
- -------------------------------------------------------------------------------
Quarter Quarter Quarter Quarter Year
Ended Ended Ended Ended Ended
March 31 June 30 Sept. 30 Dec. 31 Dec. 31
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 Net Production (tons):
Anhydrous ammonia 262,210 274,377 247,117 257,026 1,040,730
Nitrogen solutions 662,508 659,044 596,833 696,272 2,614,657
Urea 154,140 140,554 154,745 110,594 560,033
Methanol (million gallons) 75.1 58.7 81.4 83.7 298.9
1994 Net Production (tons):
Anhydrous ammonia 205,426 184,397 137,503 253,286 780,612
Nitrogen solutions 243,628 221,039 211,012 619,512 1,295,191
Urea 55,268 50,493 42,487 149,628 297,876
Methanol (million gallons) --- 6.4 5.6 69.2 81.2
===============================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
53
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL AND STOCK MARKET DATA (unaudited)
- ---------------------------------------------------------------------------------------------
(in thousands, except
per-share data and stock prices) March 31, June 30, Sept. 30, Dec. 31,
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Total revenues $ 443,340 $ 1,003,669 $ 492,265 $ 352,899
Gross profit $ 139,059 $ 245,841 $ 135,122 $ 115,081
Income before extraordinary items $ 32,953 $ 85,065 $ 29,235 $ 16,629
Net income $ 32,953 $ 85,065 $ 24,897 $ 16,629
Per Share:
Income before extraordinary items $ 0.41 $ 1.05 $ 0.36 $ 0.20
Net income $ 0.41 $ 1.05 $ 0.31 $ 0.20
Dividends $ 0.02 $ 0.02 $ 0.03 $ 0.03
Common Share price:
High $ 13.38 $ 12.38 $ 14.88 $ 14.25
Low $ 9.75 $ 9.75 $ 12.00 $ 11.75
=============================================================================================
1994
Total revenues $ 259,504 $ 818,252 $ 287,905 $ 300,286
Gross profit $ 36,351 $ 141,106 $ 46,937 $ 104,491
Income (loss) before extraordinary items $ (6,285) $ 47,902 $ 699 $ 13,929
Net income (loss) $ (5,523) $ 47,902 $ 699 $ 13,483
Per Share:
Income (loss) before extraordinary items $ (0.09) $ 0.68 $ 0.01 $ 0.18
Net income (loss) $ (0.08) $ 0.68 $ 0.01 $ 0.17
Dividends $ 0.02 $ 0.02 $ 0.02 $ 0.02
Common Share price:
High $ 8.75 $ 8.25 $ 13.13 $ 13.00
Low $ 6.25 $ 6.63 $ 5.88 $ 8.75
=============================================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
54
<TABLE>
<CAPTION>
REVENUES
- -------------------------------------------------------------------------------
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Manufactured nitrogen products $ 635,126 $ 296,557 $ 228,910
Methanol 194,565 70,274 ---
Resale fertilizer 360,725 307,400 257,585
Crop protection products 956,727 859,151 660,616
Seed 78,588 71,355 50,599
Other 66,442 61,210 40,291
- -------------------------------------------------------------------------------
Total $ 2,292,173 $ 1,665,947 $ 1,238,001
===============================================================================
</TABLE>
<PAGE>
CONFIDENTIAL
55
<TABLE>
<CAPTION>
VOLUMES & PRICES (unaudited)
- ----------------------------------------------------------------------------
1995 1994 Pro Forma
- ----------------------------------------------------------------------------
Sales Realized Sales Realized
(quantities in thousands) Volumes Price/unit Volumes Price/unit
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ammonia(1) (tons) 1,089 $ 195 1,223 $ 162
UAN(1) (tons) 2,667 95 2,857 79
Urea(1) (tons) 640 189 671 153
Other nitrogen products (tons) 102 138 99 120
Methanol (gallons) 316,022 0.62 300,843 0.82
============================================================================
</TABLE>
(1) 1995 sales volumes exclude Port Neal production
<PAGE>
CONFIDENTIAL
56
STOCKHOLDERS AND DIVIDENDS
- --------------------------------------------------------------------------------
The Corporation's Common Shares are traded principally on the New York Stock
Exchange. At January 31, 1996, 81 million Common Shares were outstanding and
held by 4,998 stockholders.
<PAGE>
CONFIDENTIAL
57
<TABLE>
<CAPTION>
FINANCIAL SUMMARY
- --------------------------------------------------------------------------------------------------
(in thousands, except
per-share and employee data) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Working capital $ 307,873 $ 273,941 $ 231,287 $ 215,817 $ 156,587
Total assets $ 1,867,858 $ 1,687,970 $ 634,482 $ 580,192 $ 517,162
Long-term debt $ 411,573 $ 558,256 $ 121,384 $ 133,679 $ 114,805
Stockholders' equity $ 571,583 $ 418,429 $ 242,980 $ 221,476 $ 190,296
RESULTS OF OPERATIONS
Revenues $ 2,292,173 $ 1,665,947 $ 1,238,001 $ 1,082,191 $ 1,022,597
Costs and expenses (1,914,471) (1,550,652) (1,196,173) (1,056,472) (996,928)
Interest income 13,811 5,541 3,261 3,084 1,789
Interest expense (64,897) (22,082) (12,944) (10,617) (14,352)
Minority interest (47,234) (8,809) --- --- ---
Income tax
(provision) benefit (115,500) (33,700) (9,300) (7,757) (1,073)
- --------------------------------------------------------------------------------------------------
Income (loss) from
continuing operations 163,882 56,245 22,845 10,429 12,033
Discontinued operations --- --- --- (1,665) (168,808)
Extraordinary items (4,338) (3,060) --- --- 5,115
Cumulative effect of
accounting changes --- 3,376 --- 22,265 ---
- --------------------------------------------------------------------------------------------------
Net income (loss) $ 159,544 $ 56,561 $ 22,845 $ 31,029 $ (151,660)
==================================================================================================
EARNINGS (LOSS) PER SHARE:
Continuing operations $ 2.01 $ 0.77 $ 0.33 $ 0.15 $ 0.18
Discontinued operations --- --- --- (0.02) (2.51)
Extraordinary (loss)
gain on early retirement
of debt (0.05) (0.04) --- --- 0.07
Cumulative effect of
accounting changes --- 0.05 --- 0.32 ---
- --------------------------------------------------------------------------------------------------
Total $ 1.96 $ 0.78 $ 0.33 $ 0.45 $ (2.26)
==================================================================================================
DIVIDENDS PER SHARE $ 0.10 $ 0.08 $ 0.02 $ --- $ ---
==================================================================================================
CAPITAL EXPENDITURES
Continuing operations $ 177,129 $ 31,213 $ 21,620 $ 17,620 $ 12,728
Discontinued operations --- --- --- 2,231 8,432
- --------------------------------------------------------------------------------------------------
Total $ 177,129 $ 31,213 $ 21,620 $ 19,851 $ 21,160
==================================================================================================
Permanent employees
at end of period 3,415 3,210 2,570 2,020 2,000
==================================================================================================
</TABLE>
Amounts have been restated as appropriate to reflect continuing operations.
<PAGE>
Exhibit 21
TERRA INDUSTRIES INC.
MAJORITY OWNED SUBSIDIARIES
December 31, 1995
<TABLE>
<CAPTION>
Percentage Percentage
Name of Company Held by TRA Held by Sub Jurisdiction
- --------------- ----------- ----------- ------------
<S> <C> <C> <C>
I. El Rancho Rock & Sand, Inc. 100 California
II. Hudson Bay Gold Inc. 100 Canada
III. Inspiration Coal Inc. 100 Delaware
IV. Inspiration Coal Development Company 100 Delaware
which owns
----------
A. Ashland Mining Corporation 100 W. Virginia
B. Briarwood Mining Inc. 100 Virginia
C. Plateau Fuels, Inc. 100 Kentucky
D. Southern Floyd Coal, Inc. 100 Kentucky
V. Inspiration Consolidated Copper Company 100 Maine
which owns
----------
A. Black Pine Mining Company 100 Montana
B. Inspiration Development Company 100 Delaware
VI. Inspiration Gold Incorporated 100 Delaware
VII. Terra Capital Holdings, Inc. 100 Delaware
which owns
----------
A. Terra Capital, Inc. 100 Delaware
which owns
----------
1. Terra Methanol Corporation 100 Delaware
2. Terra International, Inc. 100 Delaware
which owns
----------
a. Farmbelt Chemicals, Inc. 100 Delaware
b. Farmers Agricultural Credit Corporation 100 Iowa
c. Northern Agricultural Credit Corporation 100 Minnesota
d. Riverside/Terra Corporation 100 Delaware
e. Terra International (Oklahoma) Inc. 100 Delaware
</TABLE>
<PAGE>
Exhibit 21
TERRA INDUSTRIES INC.
MAJORITY OWNED SUBSIDIARIES
December 31, 1995
<TABLE>
<CAPTION>
Percentage Percentage
Name of Company Held by TRA Held by Sub Jurisdiction
- --------------- ----------- ----------- ------------
<S> <C> <C> <C>
Terra Capital, Inc. (continued)
which owns
----------
Terra International, Inc.
(continued)
which owns
----------
f. Terra Real Estate
Corporation 100 Iowa
g. Terra Real Estate
Development Corporation 100 Iowa
h. Terra Express, Inc. 100 Delaware
i. Terra International
(Canada) Inc. 100 Ontario, Canada
which owns
----------
1. Belmont Farm Supply Inc. 50 Federal
2. Bluewater Agromart
Limited 50 Ontario
3. Brussels Agromart Ltd. 50 Ontario
4. Cardinal Farm Supply
Limited 50 Ontario
5. Fingal Farm Supply
Limited 50 Ontario
6. Grand Falls Agromart
Ltd. 50 Federal
7. Hartland Agromart Ltd. 50 Federal
8. Harvex Agromart Inc. 50 Ontario
9. Hoegy's Farm Supply Limited 50 Ontario
10. Lakeside Grain
& Feed Limited 50 Ontario
11. Macroblend Limited 50 Ontario
12. Maple Farm Supply
Limited 50 Ontario
13. Max Underhill's Farm
Supply Limited 50 Ontario
14. Munro Agromart Ltd. 50 Ontario
15. Oakwood Agromart Ltd. 50 Ontario
16. Oxford Agropro Ltd. 50 Ontario
17. Scotland Agromart Ltd. 50 Ontario
18. Setterington's Fertilizer
Service Limited 50 Ontario
19. Sprucedale Agromart
Limited 50 Ontario
20. Tri-County Agromart Ltd. 50 Ontario
</TABLE>
<PAGE>
Exhibit 21
TERRA INDUSTRIES INC.
MAJORITY OWNED SUBSIDIARIES
December 31, 1995
<TABLE>
<CAPTION>
Percentage Percentage
Name of Company Held by TRA Held by Sub Jurisdiction
- --------------- ----------- ----------- ------------
<S> <C> <C> <C>
Terra Capital, Inc. (continued)
which owns
----------
Terra International, Inc.
(continued)
which owns
----------
j. Port Neal Holdings
Corp./1/ 75 Delaware
which owns
----------
1. Port Neal Corporation 100 Delaware
3. BMC Holdings, Inc. 100 Delaware
which owns
----------
a. Beaumont Methanol,
Limited Partnership/2/ 99 Delaware
4. Terra Nitrogen Corporation 100 Delaware
which owns
----------
a. Terra Nitrogen Company,
L.P./3/ 60 Delaware
which owns
----------
1. Terra Nitrogen, Limited
Partnership/4/ 99 Delaware
</TABLE>
- -----------------
/1/ An outside investor has a 25% voting interest represented by 1,000,000
shares of Cumulative Variable Rate Voting Preferred Stock.
/2/ Terra Methanol Corporation is 1% General Partner.
/3/ Terra Nitrogen Corporation's interest includes 1.0101% as General Partner.
It excludes however approximately a 5% interest held by Terra Capital Inc.
in Terra Nitrogen Company, L.P.
/4/ Terra Nitrogen Corporation is 1% General Partner.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
EDWARD G. BEIMFOHR
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 15th day of February , 1996.
------------ ---------------------
/s/ Edward G. Beimfohr
----------------------------------------------
EDWARD G. BEIMFOHR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
CAROL L. BROOKINS
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 19th day of February , 1996.
------------------ ---------------
/s/ Carol L. Brookins
----------------------------------------
CAROL L. BROOKINS
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
EDWARD M. CARSON
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 19th day of February , 1996.
--------------- --------------
/s/ Edward M. Carson
---------------------------------------
EDWARD M. CARSON
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
DAVID E. FISHER
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 19th day of February , 1996.
-------------------- ----------------
/s/ David E. Fisher
----------------------------------------
DAVID E. FISHER
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
BASIL T.A. HONE
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 19th day of February , 1996.
-------------------- -------------------
/s/ Basil T.A. Hone
-------------------------------------
BASIL T.A. HONE
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
BURTON M. JOYCE
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Robert
E. Thompson, or each of them, with full power of substitution and
resubstitution, my true and lawful attorney, for me and in my name, place and
stead, to sign my name as a director of Terra Industries Inc. (the "Company") to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 and any amendments or supplements thereto, and to file said Annual Report
and any amendment or supplement thereto, with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 19th day of February , 1996.
------------------- -------------------
/s/ Burton M. Joyce
----------------------------------------
BURTON M. JOYCE
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
ANTHONY W. LEA
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 21st day of February , 1996.
------------------ --------------------
/s/ Anthony W. Lea
--------------------------------------
ANTHONY W. LEA
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
WILLIAM R. LOOMIS, JR.
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 13th day of February , 1996.
----------------- ----------------
/s/ William R. Loomis, Jr.
---------------------------------------
WILLIAM R. LOOMIS, JR.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
JOHN R. NORTON III
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 19th day of February , 1996.
------------------ ----------------
/s/ John R. Norton III
----------------------------------------
JOHN R. NORTON III
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
REUBEN F. RICHARDS
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 19th day of February , 1996.
------------------ ---------------
/s/ Reuben F. Richards
--------------------------------------
REUBEN F. RICHARDS
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
HENRY R. SLACK
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as a director of Terra Industries Inc. (the "Company") to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and any
amendments or supplements thereto, and to file said Annual Report and any
amendment or supplement thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 14th day of February , 1996.
------------------ --------------
/s/ Henry R. Slack
-------------------------------------
HENRY R. SLACK
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
FRANCIS G. MEYER
hereby constitute and appoint George H. Valentine, Robert E. Thompson and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as Senior Vice President and Chief Financial Officer of Terra Industries
Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any amendments or supplements thereto, and to
file said Annual Report and any amendment or supplement thereto, with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 19th day of February , 1996.
------------------ ------------------
/s/ Francis G. Meyer
-----------------------------------------
FRANCIS G. MEYER
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I,
ROBERT E. THOMPSON
hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton
M. Joyce, or each of them, with full power of substitution and resubstitution,
my true and lawful attorney, for me and in my name, place and stead, to sign my
name as Vice President, Controller of Terra Industries Inc. (the "Company") to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 and any amendments or supplements thereto, and to file said Annual Report
and any amendment or supplement thereto, with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended.
I hereby ratify and confirm all that said attorneys, or each of them, or
his substitute or substitutes, have done or shall lawfully do by virtue of this
Power of Attorney.
WITNESS my hand this 19th day of February , 1996.
------------------ ----------------
/s/ Robert E. Thompson
---------------------------------------
ROBERT E. THOMPSON
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the consolidated statement of financial position of Terra Industries Inc. as of
December 31, 1995 and the related consolidated statement of income for the year
then ended and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 126,356
<SECURITIES> 12,351
<RECEIVABLES> 189,364
<ALLOWANCES> (10,626)
<INVENTORY> 367,272
<CURRENT-ASSETS> 763,996
<PP&E> 838,604
<DEPRECIATION> (144,246)
<TOTAL-ASSETS> 1,867,858
<CURRENT-LIABILITIES> 456,123
<BONDS> 407,162
<COMMON> 133,970
0
0
<OTHER-SE> 437,613
<TOTAL-LIABILITY-AND-EQUITY> 1,867,858
<SALES> 2,215,874
<TOTAL-REVENUES> 2,292,173
<CGS> 1,657,070
<TOTAL-COSTS> 1,881,524
<OTHER-EXPENSES> 80,181
<LOSS-PROVISION> 7,798
<INTEREST-EXPENSE> 64,897
<INCOME-PRETAX> 279,382
<INCOME-TAX> 115,500
<INCOME-CONTINUING> 163,882
<DISCONTINUED> 0
<EXTRAORDINARY> (4,338)
<CHANGES> 0
<NET-INCOME> 159,544
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 0
</TABLE>
