sc14d9
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION
STATEMENT UNDER
SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF
1934
Terra Industries Inc.
(Name of Subject
Company)
Terra Industries
Inc.
(Name of Person Filing
Statement)
Common Shares, without par value
(Title of Class of
Securities)
880915103
(CUSIP Number of Class of
Securities)
John W. Huey, Esq.
Vice President, General Counsel and
Corporate Secretary
Terra Industries Inc.
Terra Centre
600 Fourth Street
P.O. Box 6000
Sioux City, Iowa
51102-6000
Telephone:
(712) 277-1340
(Name, address and telephone
numbers of person authorized to receive notices and
communications on behalf of the
persons filing statement)
Copies to:
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Faiza J. Saeed, Esq.
Thomas E. Dunn, Esq.
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Telephone:
(212) 474-1000
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David C. Karp, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telephone: (212) 403-1000
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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TABLE OF CONTENTS
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ITEM 1.
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SUBJECT
COMPANY INFORMATION.
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Name and
Address.
The name of the subject company to which this
Solicitation/Recommendation Statement on
Schedule 14D-9
(together with any exhibits and annexes attached hereto, this
Statement) relates is Terra Industries Inc.,
a Maryland corporation (Terra or the
Company). Terras principal executive
offices are located at Terra Centre, 600 Fourth Street,
P.O. Box 6000, Sioux City, Iowa
51102-6000.
Terras telephone number at this address is
(712) 277-1340.
Securities.
The title of the class of equity securities to which this
Statement relates is the common stock, without par value, of the
Company (the Terra Common Shares). As of
March 10, 2010, there were 100,105,516 Terra Common Shares
issued and outstanding and an additional 4,464,701 Terra Common
Shares were reserved for issuance under Terras equity
compensation plans, of which up to a maximum of 952,736 Terra
Common Shares were issuable or otherwise deliverable in
connection with the vesting of outstanding equity awards of
Terra. In addition, as of March 10, 2010, Terra had
500 shares of 4.25% Series A Cumulative Convertible
Perpetual Preferred Shares, without par value (the
Series A Preferred Stock), outstanding.
The shares of Series A Preferred Stock are convertible into
Terra Common Shares, subject to the terms and conditions
applicable to such series.
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ITEM 2.
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IDENTITY
AND BACKGROUND OF FILING PERSON.
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Name and
Address.
The name, business address and business telephone number of
Terra, which is the subject company and the person filing this
Statement, are set forth in Item 1 above.
Offer.
This Statement relates to the offer by CF Industries Holdings,
Inc., a Delaware corporation (CF),
through its indirect wholly-owned subsidiary, Composite
Merger Corporation, a Maryland corporation
(CF Sub), as disclosed in the
Tender Offer Statement on Schedule TO, dated March 5,
2010, and as amended on March 11, 2010 (as amended or
supplemented from time to time, the
Schedule TO), to exchange each
outstanding Terra Common Share for the Per Share
Consideration, which is equal to (i) $37.15 in
cash, less any applicable withholding taxes and without
interest, and (ii) 0.0953 of a share of common stock, par
value $0.01 per share, of CF (together with the associated
preferred stock purchase rights) (the CF Common
Stock), upon the terms and subject to the
conditions set forth in (a) the Preliminary
Prospectus/Offer to Exchange, dated March 5, 2010 (the
Exchange Offer), and (b) the related
Letter of Transmittal (which, together with the Exchange Offer
and any amendments or supplements thereto from time to time,
constitute the Offer). In addition, holders
of Terra Common Shares whose shares are exchanged in the Offer
will receive cash in lieu of any fractional CF Common Stock to
which they may be entitled. CF and CF Sub first filed the
Schedule TO with the Securities and Exchange Commission
(the SEC) on March 5, 2010. On the same
date, CF also filed with the SEC a Registration Statement on
Form S-4
(the Registration Statement) relating to the
CF Common Stock to be issued in connection with the Offer.
According to the Registration Statement, the Offer will expire
at 5:00 p.m., New York City Time, on April 2, 2010,
unless CF or CF Sub extends the Offer in accordance with the
Merger Agreement (as defined below).
On March 12, 2010, Terra, CF and CF Sub entered into an
Agreement and Plan of Merger (the Merger
Agreement), which is filed as Exhibit (a)(8)
hereto and is incorporated herein by reference. Pursuant to the
terms and subject to the conditions of the Merger Agreement,
following the consummation of the Offer, CF Sub will merge with
and into Terra with each remaining Terra Common Share (other
than shares already owned by CF, Terra or their wholly-owned
subsidiaries) being converted into the right to receive the same
Per Share Consideration as is received by Terra stockholders
pursuant to the Offer (the Second-Step
Merger). Upon consummation of the Second-Step Merger,
Terra will be an indirect, wholly-owned subsidiary of CF (the
2
Surviving Corporation). For further details
regarding the Merger Agreement, please see Item 3.
Past Contacts, Transactions, Negotiations and Agreements.
Relationship with CF and regarding the Second-Step
Merger, please see Item 8. Additional Information.
Second-Step Merger.
CF Subs obligation to accept for payment any validly
tendered Terra Common Shares pursuant to the Offer is subject to
the satisfaction or waiver of certain conditions set forth in
the Merger Agreement, including the following:
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the Minimum Tender Condition Terra
stockholders shall have validly tendered and not properly
withdrawn prior to the expiration of the Offer (as it may be
extended and re-extended in accordance with the Merger
Agreement) that number of Terra Common Shares which represents a
majority of the Terra Common Shares outstanding on a
fully-diluted basis, including after giving effect to the
issuance of Terra Common Shares pursuant to the
Top-Up
Option (as defined in the Merger Agreement);
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the Canadian Regulatory Condition any
waiting period (including any extensions thereof) applicable to
the Offer and the Second-Step Merger under the Competition Act
(Canada), as amended, or any no-close period (including any
extensions thereof) applicable to the Offer and the Second-Step
Merger under the Canada Transportation Act, as amended, shall
have expired or been terminated;
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the Registration Statement Condition the
Registration Statement shall have been declared effective by the
SEC under the Securities Act of 1933, as amended (the
Securities Act), no stop order suspending the
effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall have
been initiated or threatened by the SEC; and
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the NYSE Listing Condition the shares of
CF Common Stock to be issued pursuant to the Offer and the
Second-Step Merger and such other shares to be reserved for
issuance in connection with the Offer and the Second-Step Merger
shall have been approved for listing on the New York Stock
Exchange (the NYSE).
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Further, CF Sub is not required to accept for payment any
validly tendered Terra Common Shares pursuant to the Offer if
any of the following conditions or events exists:
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any law shall have been adopted or promulgated, or any
temporary, preliminary or permanent order shall have been issued
and remain in effect by a governmental entity of competent
jurisdiction having the effect of making the Offer or the
Second-Step Merger illegal or otherwise prohibiting consummation
of the Offer, the Second-Step Merger or the transactions
contemplated by the Merger Agreement;
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(i) the representations and warranties of Terra in the
Merger Agreement that since January 1, 2010, there has not
been any change, development, event, occurrence, effect or state
of facts that, individually or in the aggregate, has resulted in
or would reasonably be expected to result in a material adverse
effect on Terra (a Terra Material Adverse
Effect) shall not be true and correct in all respects
as of the date of the Merger Agreement or as of the time when CF
Sub consummates the Offer (the Acceptance
Time) as though made at the Acceptance Time,
(ii) the representations and warranties of Terra in the
Merger Agreement related to Terras capitalization,
authority and approval of the Terra board of directors (the
Board) with respect to the Offer and the
Second-Step Merger and the exemption of the Offer and
Second-Step Merger from the Maryland Business Combination Act
(the MBCA) shall not be true and correct in
all material respects as of the date of the Merger Agreement or
as of the Acceptance Time as though made at the Acceptance Time
(other than representations and warranties that by their terms
speak as of another date, which shall not be true and correct as
of such date) or (iii) all other representations and
warranties of Terra in the Merger Agreement, in each case, made
as if none of such representations and warranties contained any
qualifications or limitations as to materiality or
Terra Material Adverse Effect shall not be true and correct, in
each case, as of the date of the Merger Agreement or as of the
Acceptance Time as though made on and as of the Acceptance Time
(other than representations and warranties that by their terms
speak as of another date, which shall not be true and correct as
of such date), except where the failure of such representations
and warranties to be true and correct as so made, individually
or in the aggregate, does not have and is not reasonably
expected to result in a Terra Material Adverse Effect;
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3
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Terra shall not have performed or complied in all material
respects with all agreements and covenants required to be
performed by it under the Merger Agreement at or prior to the
Acceptance Time;
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Terra shall not have converted all of its outstanding shares of
Series A Preferred Stock or any Series A Preferred
Stock shall be outstanding; or
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the Merger Agreement shall have been terminated in accordance
with its terms (the No-Termination Condition).
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The Merger Agreement provides that Merger Sub reserves the right
to waive any of the conditions to the Offer, other than the
Minimum Tender Condition, the Registration Statement Condition,
the NYSE Listing Condition and the No-Termination Condition.
The Schedule TO states that the principal executive offices
of CF are located at 4 Parkway North, Suite 400, Deerfield,
Illinois 60015.
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ITEM 3.
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PAST
CONTACTS, TRANSACTIONS, NEGOTIATIONS AND
AGREEMENTS.
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Except as described in this Statement, as of the date of this
Statement, there are no material agreements, arrangements or
understandings, nor any actual or potential conflicts of
interest, between Terra or any of its affiliates, on the one
hand, and (i) Terra or any of its executive officers,
directors or affiliates, or (ii) CF, CF Sub or any of
their respective executive officers, directors or affiliates, on
the other hand.
Any information contained in the pages incorporated herein by
reference shall be deemed modified or superseded for purposes of
this Statement to the extent that any information contained
herein modifies or supersedes such information.
Relationship
with CF.
On March 12, 2010, Terra, CF and CF Sub entered into the
Merger Agreement. A summary of the Merger Agreement is contained
in the Current Report on Form 8-K filed by Terra with the
SEC on March 12, 2010 and incorporated herein by reference.
Such summary does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement, which is
filed as Exhibit (a)(8) hereto and is incorporated herein by
reference.
The Merger Agreement is filed as an exhibit to this Statement
to provide Terras stockholders with information regarding
the terms of the Merger Agreement and is not intended to modify
or supplement any factual disclosures about Terra or CF in
Terras or CFs public reports filed with the SEC. In
particular, the Merger Agreement and the summary of terms
contained in the Current Report on Form 8-K filed by Terra
with the SEC on March 12, 2010 and incorporated herein by
reference are not intended to be, and should not be relied upon
as, disclosures regarding any facts or circumstances relating to
Terra or CF. The representations and warranties in the Merger
Agreement have been negotiated with the principal purpose of
(i) establishing the circumstances under which CF Sub may
have the right not to consummate the Offer or CF or Terra may
have the right to terminate the Merger Agreement, and
(ii) allocating risk between the parties, rather than
establishing matters as facts. The representations and
warranties also may be subject to a contractual standard of
materiality different from that generally applicable under
federal securities laws.
CF discloses in the Schedule TO that (i) during the
period from January 8, 2010 through January 14, 2010,
CF Industries, Inc., a wholly-owned subsidiary of CF,
sold approximately 5 million Terra Common Shares through
ordinary brokerage transactions on the open market, (ii) as
of March 5, 2010, CF Composite, Inc., a wholly-owned
subsidiary of CF (CF Composite), beneficially
owned of record 1,000 Terra Common Shares, representing less
than 1% of the outstanding Terra Common Shares, (iii) CF
shares beneficial ownership of the 1,000 Terra Common Shares
with CF Composite and (iv) the shares beneficially owned by
CF Composite were purchased through an ordinary brokerage
transaction on the open market on January 20, 2009 for an
average price of $19.724 per Terra Common Share.
4
Pursuant to
Rule 14d-5
under the Securities Exchange Act of 1934, as amended (the
Exchange Act), CF paid Terra $182,260
in 2009 for the approximate cost of mailing materials related to
CFs prior exchange offer to Terra stockholders.
4.1
Certain other agreements, arrangements or understandings between
Terra or any of its affiliates and CF, CF Sub or any of their
respective executive officers, directors or affiliates, as
described in Item 3. Past Contacts, Transactions,
Negotiations and Agreements in the
Schedule 14D-9
filed by Terra with the SEC on March 5, 2009, are
incorporated herein by reference.
Arrangements
with Current Executive Officers and Directors of
Terra.
Overview.
The vested Terra Common Shares held by Terras directors
and executive officers as of the Acceptance Time will be treated
in the same manner as vested Terra Common Shares held by other
Terra stockholders.
Aside from their interests as Terra stockholders, Terras
directors and executive officers have interests in the Offer
that may be different from, or in addition to, those of other
Terra stockholders generally. In considering the recommendation
of the Board that you tender your Terra Common Shares into the
Offer, you should be aware of these interests. The members of
the Board were aware of and considered these interests, among
other matters, in making their decision. As described in more
detail below, the interests of Terras executive officers
in the Offer that are different from, or in addition to, those
of other Terra stockholders consist of:
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the accelerated vesting of Terra restricted stock awards
immediately prior to the Acceptance Time, which restricted stock
awards will then be treated in the same manner as vested Terra
Common Shares held by other Terra stockholders;
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the accelerated vesting of equity awards relating to Terra
Common Shares granted pursuant to Terras equity incentive
plans that are subject to performance-based vesting and are
settled in Terra Common Shares pursuant to their terms
(Performance Share Awards), and the
cancellation of such awards in exchange for cash;
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the fixing of the performance metric under Terras annual
incentive compensation plan at the Acceptance Time at the
greater of (i) target performance and (ii) actual
performance during the quarters completed through the Acceptance
Time;
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the receipt of certain payments and benefits under the executive
officers employment severance agreements, as well as
prorated bonuses under Terras annual incentive
compensation plan, upon certain types of terminations of
employment following the Acceptance Time;
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the receipt of
gross-up
payments to make the executive officers whole for any excise tax
imposed as a result of Section 280G of the Internal Revenue
Code of 1986, as amended (the Code), on any
compensation received;
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the funding of a rabbi trust with respect to certain executive
officers supplemental retirement benefits; and
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the continuation of certain compensation and benefits until
December 31, 2011 pursuant to the terms of the Merger
Agreement.
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The Merger Agreement requires CF to cause, from and after the
Acceptance Time, Terra and, if after the consummation of the
Second-Step Merger, the Surviving Corporation, to indemnify all
current and former directors and officers of Terra to the
fullest extent permitted by law for acts or omissions occurring
at or prior to the effective time of the Second-Step Merger and
to honor all existing rights to indemnification in favor of such
directors and officers.
The dates used below to quantify these interests have been
selected for illustrative purposes only. They do not necessarily
reflect the dates on which certain events will occur.
5
Equity
Awards.
Terras executive officers hold restricted stock awards and
Performance Share Awards. Each share of restricted stock that
remains outstanding as of immediately prior to the Acceptance
Time, including those held by Terras executive officers,
will vest immediately prior to the Acceptance Time and will be
treated in the same manner as Terra Common Shares held by other
Terra stockholders. Each Performance Share Award that remains
outstanding as of immediately prior to the Acceptance Time,
including those held by Terras executive officers, will be
canceled at the Acceptance Time, and the holder of such
Performance Share Award will be entitled to receive the product
of (a) the greater of (i) the number of Terra Common
Shares subject to such Performance Share Award based on
Terras actual performance calculated during the quarters
completed through the Acceptance Time and (ii) the target
number of Terra Common Shares subject to such Performance Share
Award and (b) an amount in cash equal to the sum of
(x) the cash portion of the Per Share Consideration and
(y) the product of (1) the average closing sales
price, rounded to four decimal points, of CF Common Stock
on the NYSE (as reported in the Wall Street Journal, New York
City edition) for the period of the ten consecutive trading days
ending on the second full trading day prior to the Acceptance
Time and (2) the portion of the Per Share Consideration
paid in shares of CF Common Stock.
The following table summarizes the restricted stock and
Performance Share Awards held by Terras executive officers
that will be outstanding as of the Acceptance Time, and the
value of the consideration that each executive officer will
receive pursuant to the Offer or the Second-Step Merger in
connection with the cancellation of such awards, assuming for
these purposes that (i) the Acceptance Time occurs on
April 2, 2010, (ii) Performance Share Awards granted
for the
2008-2010
and
2009-2011
performance cycles will vest at 200% of target,
(iii) Performance Share Awards granted for the
2010-2012
performance cycle will vest at 100% of target and (iv) the
aggregate value of the Per Share Consideration is $47.40
(calculated based on the closing price of CF Common Stock on
March 1, 2010).
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Number of Shares
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Value of Shares
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Underlying
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Underlying
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Number of
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Value of
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Aggregate
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Performance
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Performance
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Restricted
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Restricted
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Equity Award
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Executive Officers
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Share Awards
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Share Awards
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Shares
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Shares
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Consideration
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Michael L. Bennett
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256,300
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$
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12,148,617
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58,000
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$
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2,749,200
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$
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14,897,817
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Daniel D. Greenwell
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47,149
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$
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2,234,869
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21,200
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$
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1,004,880
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$
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3,239,749
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John W. Huey
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37,893
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$
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1,796,138
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17,800
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$
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843,720
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$
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2,639,858
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Joseph D. Giesler
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31,703
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$
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1,502,740
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15,100
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$
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715,740
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$
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2,218,480
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Richard S. Sanders Jr.
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32,046
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$
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1,518,969
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14,900
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$
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706,260
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$
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2,225,229
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Joe A. Ewing
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31,561
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$
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1,495,992
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14,500
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$
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687,300
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$
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2,183,292
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Douglas M. Stone
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37,551
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$
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1,779,910
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16,400
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$
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777,360
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$
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2,557,270
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Earl B. Smith
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28,153
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$
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1,334,430
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8,400
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$
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398,160
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$
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1,732,590
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Geoffrey J. Obeney
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26,741
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$
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1,267,508
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7,900
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$
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374,460
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$
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1,641,968
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Edward J. Dillon
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19,469
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$
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922,854
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10,000
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$
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474,000
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$
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1,396,854
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Employment
Severance Agreements.
Terra has entered into individual employment severance
agreements with certain officers and key employees, including
all of Terras executive officers, that provide for certain
payments and benefits upon a termination of employment by Terra
without cause or by the employee for good reason (as described
below) any time within the 24 months following a change in
control, such as the consummation of the Offer.
Under the employment severance agreements with Terras
executive officers, good reason following a change
in control means (i) a failure to pay the executive officer
any compensation when due, (ii) a delivery by Terra of a
notice of intent to terminate the executive officers
employment for any reason, other than for cause or
permanent disability, (iii) a 10% or greater reduction in
base salary or target bonus, (iv) a relocation of the
executive officers principal place of employment by more
than 50 miles, (v) a material diminution in titles,
duties, responsibilities or status, (vi) a removal from any
of the offices held immediately prior to the effective time of
the change in control or (vii) a material reduction in
retirement, insurance or fringe benefits.
6
The employment severance agreements for the executive officers
provide for the following payments and benefits upon a
qualifying termination:
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a lump-sum cash payment equal to two times the sum of
(i) the executive officers then-current annual base
salary and (ii) the executive officers target cash
annual incentive opportunity for the year of termination;
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continuation of company-paid medical and dental benefits for up
to 24 months;
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acceleration of vesting of any unvested equity-based awards;
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outplacement services for one year; and
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crediting of two years of additional age and service credit
under Terras Excess Benefit Plan (the
SERP) for those executive officers who
participate in the SERP (only Messrs. Bennett, Giesler and
Sanders participate in the SERP).
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Pursuant to the employment severance agreements, an executive
officer will not be entitled to the payments and benefits
described above unless he executes and does not revoke a release
of claims in favor of Terra. Executive officers will also be
subject to non-competition and non-solicitation covenants for
one year following termination of employment.
In addition, each executive officer is entitled to a
gross-up
payment to make him whole for any excise tax imposed as a result
of Section 280G of the Code on any of his compensation.
Based on compensation and benefit levels as of March 11,
2010 and assuming that the Acceptance Time occurs on
April 2, 2010 and that each executive officer experiences a
qualifying termination of employment at that time, the executive
officers would be entitled to receive the following cash
severance payments and other benefits under their employment
severance agreements.
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Continuation of
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Additional Age
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Medical and
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and Service
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Cash
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Dental
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Credit under
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Outplacement
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280G Tax
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Executive Officer
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Severance
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Benefits(1)
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SERP(2)
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Services(3)
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Gross-up(4)
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Total
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Michael L. Bennett
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$
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3,500,000
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$
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23,753
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$
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473,383
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$
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84,000
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$
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$
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4,081,136
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Daniel D. Greenwell
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$
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1,330,000
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$
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29,674
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$
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$
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45,600
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|
|
$
|
|
|
|
$
|
1,405,274
|
|
John W. Huey
|
|
$
|
911,550
|
|
|
$
|
18,346
|
|
|
$
|
|
|
|
$
|
36,462
|
|
|
$
|
973,245
|
|
|
$
|
1,797,343
|
|
Joseph D. Giesler
|
|
$
|
790,400
|
|
|
$
|
18,346
|
|
|
$
|
99,164
|
|
|
$
|
29,640
|
|
|
$
|
|
|
|
$
|
937,550
|
|
Richard S. Sanders Jr.
|
|
$
|
806,400
|
|
|
$
|
23,753
|
|
|
$
|
81,204
|
|
|
$
|
30,240
|
|
|
$
|
|
|
|
$
|
941,597
|
|
Joe A. Ewing
|
|
$
|
816,000
|
|
|
$
|
29,674
|
|
|
$
|
|
|
|
$
|
30,600
|
|
|
$
|
|
|
|
$
|
876,274
|
|
Douglas M. Stone
|
|
$
|
1,050,000
|
|
|
$
|
29,674
|
|
|
$
|
|
|
|
$
|
36,000
|
|
|
$
|
1,039,962
|
|
|
$
|
2,023,505
|
|
Earl B. Smith
|
|
$
|
686,400
|
|
|
$
|
23,752
|
|
|
$
|
|
|
|
$
|
27,456
|
|
|
$
|
742,392
|
|
|
$
|
1,377,135
|
|
Geoffrey J. Obeney
|
|
$
|
652,050
|
|
|
$
|
23,753
|
|
|
$
|
|
|
|
$
|
26,082
|
|
|
$
|
763,512
|
|
|
$
|
1,367,912
|
|
Edward J. Dillon
|
|
$
|
649,200
|
|
|
$
|
29,674
|
|
|
$
|
|
|
|
$
|
25,968
|
|
|
$
|
761,936
|
|
|
$
|
1,389,001
|
|
|
|
|
(1) |
|
Terra determined the value of medical and dental benefits based
on assumptions used for financial reporting purposes under ASC
715, Compensation Retirement Benefits. |
|
(2) |
|
Terra determined these amounts by adding two years of credited
service to the December 31, 2009 total pension benefit
(i.e., sum of tax qualified pension and SERP) for the executive
officer and then determined the present value of that accrued
benefit deferred to the date the executive officer reaches the
age of 63, which is the earliest age at which unreduced pension
benefits would be available to the executive officer with an
extra two years of age. |
|
(3) |
|
Terra determined the value of post-termination outplacement
services based on a value equal to approximately 12% of the
executive officers annual base salary as of March 11,
2010. |
|
(4) |
|
Terra determined the amount of the excise tax payment by
multiplying by 20% the excess parachute payments
that would arise as a result of Section 280G of the Code in
connection with the consummation of |
7
|
|
|
|
|
the Offer. Terra utilized the following key assumptions to
determine the executive officers tax
gross-up
payments: |
|
|
|
|
|
based on Terras performance as of March 11, 2010,
Performance Share Awards granted for the
2008-2010
performance cycle and the
2009-2011
performance cycle are currently expected to vest at 200% of
target. Therefore, the amount of excise tax with respect to such
Performance Share Awards was calculated assuming that all
performance goals with respect to such Performance Share Awards
had already been met at the 200% level. The result is that the
amount of the excise tax attributable to both such Performance
Share Awards and the restricted shares is based solely on the
value of accelerated vesting and the lapse of the obligation to
perform future services. Since Terras performance for the
2010-2012
performance cycle is not yet predictable, the amount of the
excise tax with respect to the Performance Share Awards granted
for such cycle was calculated based on the full value for such
awards;
|
|
|
|
a statutory federal income tax rate of 35% and a Medicare tax
rate of 1.45%;
|
|
|
|
each executive officers Section 280G base
amount was determined based on average
W-2
compensation for the period from 2005 through 2009 (or the
period of the executive officers employment with Terra, if
shorter); and
|
|
|
|
the interest rate assumption was 120% of the applicable federal
rate as of February 2010.
|
Annual
Incentive Compensation.
Under Terras 2010 Officers and Key Employees Annual
Incentive Plan, upon a change in control, such as the
consummation of the Offer, the performance metric used to
calculate the cash awards will become fixed at the greater of
(i) target performance and (ii) actual performance
during the quarters completed through the effective time of the
change in control. A participant who remains employed through
December 31, 2010 will receive his or her full bonus under
the plan calculated in such manner. If a participants
employment is terminated following the Acceptance Time without
cause or for good reason (defined as in the employment severance
agreements), the participant will be entitled to a prorated
bonus for 2010 through the participants termination date.
Each of Terras executive officers currently participates
in the 2010 Officers and Key Employees Annual Incentive Plan.
Based on compensation levels as of March 11, 2010 and
assuming that (i) the Acceptance Time occurs on
April 2, 2010, (ii) each executive officer experiences
a qualifying termination of employment at that time and
(iii) actual performance during the quarters completed
through the Acceptance Time is less than or equal to target
performance, the executive officers would be entitled to receive
the following prorated bonus payments under the 2010 Officers
and Key Employees Annual Incentive Plan.
|
|
|
|
|
Executive Officer
|
|
Prorated Bonus
|
|
|
Michael L. Bennett
|
|
$
|
264,658
|
|
Daniel D. Greenwell
|
|
$
|
71,836
|
|
John W. Huey
|
|
$
|
38,293
|
|
Joseph D. Giesler
|
|
$
|
37,355
|
|
Richard S. Sanders Jr.
|
|
$
|
38,111
|
|
Joe A. Ewing
|
|
$
|
38,564
|
|
Douglas M. Stone
|
|
$
|
56,712
|
|
Earl B. Smith
|
|
$
|
28,835
|
|
Geoffrey J. Obeney
|
|
$
|
27,392
|
|
Edward J. Dillon
|
|
$
|
27,272
|
|
8
Rabbi
Trust.
Terra maintains a rabbi trust, which is intended to
provide a source of funds to assist Terra in meeting its
liabilities under the SERP. No later than five days following
the effective time of a change in control, such as the
consummation of the Offer, Terra will be obligated to make an
irrevocable contribution to the trust in an amount such that the
trust will, immediately following such contribution, hold assets
sufficient to pay each SERP participant or beneficiary,
including Messrs. Bennett, Giesler and Sanders, his or her
accrued benefits under the SERP as of the effective time of the
change in control. The trustee has broad investment powers with
respect to the trust assets, but it may not invest in securities
or obligations issued by Terra or any affiliate of Terra.
The following table shows the accrued benefits of each of
Messrs. Bennett, Giesler and Sanders under the SERP as of
December 31, 2009.
|
|
|
|
|
Executive Officer
|
|
Accrued Benefits
|
|
|
Michael L. Bennett
|
|
$
|
1,208,251
|
|
Joseph D. Giesler
|
|
$
|
11,276
|
|
Richard S. Sanders Jr.
|
|
$
|
6,549
|
|
Director
Compensation.
Under Terras director compensation policy, Mr. Henry
R. Slack, Chairman of the Board, receives an annual cash
retainer of $100,000 (paid quarterly). Terras other
non-employee directors each receive an annual cash retainer of
$27,500 (paid quarterly) and meeting fees of $1,250 per meeting
attended, including committee meetings. Mr. David
E. Fisher receives an additional annual cash retainer of
$10,000 (paid quarterly) for serving as Chairman of the Audit
Committee. Ms. Martha O. Hesse, Chairman of the
Nominating and Corporate Governance Committee, and Mr. Dod
A. Fraser, Chairman of the Compensation Committee, each
receive an additional annual cash retainer of $4,000 (paid
quarterly) for serving as committee chairs. Directors who are
employees of Terra, currently only Mr. Michael
L. Bennett, do not receive additional separate compensation
for service on the Board.
Non-employee directors also receive a portion of their
compensation in the form of fully vested Terra Common Shares.
The number of Terra Common Shares awarded to directors under
these stock awards is determined by reference to a fixed-dollar
amount divided by the price for Terra Common Shares for the
previous 20 trading days immediately preceding the date of
grant, rounded up to the next whole Terra Common Share. The
dollar value used in the numerator is $150,000 for all
non-employee directors, except for Mr. Slack, whose
numerator is $225,000. In addition, the Board has determined
that each newly elected outside director will receive,
simultaneously with his or her election to the Board, an initial
grant of Terra Common Shares that is equivalent to the annual
equity grant described above.
Indemnification
of Directors and Officers.
Section 2-418
of the Maryland General Corporation Law (the
MGCL) permits a corporation to indemnify
directors and officers (each an indemnified
person), among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by
them in connection with any proceeding to which they may be a
party by reason of their service in those capacities, unless it
is established that (i) the act or omission of such
indemnified person was material to the matter giving rise to the
proceeding and was either committed in bad faith or was the
result of active and deliberate dishonesty, (ii) the
indemnified person actually received an improper personal
benefit in money, property or services or (iii) in the case
of any criminal proceeding, such indemnified person had
reasonable cause to believe that the act or omission was
unlawful.
Pursuant to Article Seventh of its Charter, Terra
indemnifies (i) its directors to the full extent provided
by the general laws of Maryland, including the advance of
expenses under the procedures provided by such laws,
(ii) its officers to the same extent it indemnifies its
directors and (iii) its officers who are not directors to
such further extent as shall be authorized by the Board and be
consistent with law. Terras Bylaws similarly provide
9
for mandatory indemnification of Terras directors and
officers to the maximum extent permitted by Maryland law. Terra
has also entered into indemnification agreements with its
directors and executive officers. These agreements provide for
the maximum indemnity available under the MGCL, as well as
certain procedural requirements in order to obtain
indemnification, the timing of required determinations,
indemnification payments, advancement of expenses and the rights
of directors and officers in the event Terra fails to provide
indemnification or advance expenses. Terra has also purchased
liability insurance for its officers and directors, which
provides coverage against certain liabilities for actions taken
by such individuals in their capacities as such, including
liabilities under the Securities Act.
Terras Charter provides that, to the fullest extent
permitted by Maryland law, no director or officer will be
personally liable to the Company or its stockholders for money
damages.
Section 2-405.2
of the MGCL provides that a corporations charter may
include any provision expanding or limiting the liability of its
directors and officers to the corporation or its stockholders as
described under
Section 5-418
of the Courts and Judicial Proceedings Article of the Annotated
Code of Maryland (the CJP Article).
Section 5-418
of the CJP Article provides that the charter of a Maryland
corporation may include any provision expanding or limiting the
liability of its directors and officers to the corporation or
its stockholders for money damages, but may not include any
provision that restricts or limits the liability of its
directors or officers to the corporation or its stockholders:
(i) to the extent that it is proved that the person
actually received an improper benefit or profit in money,
property or services for the amount of the benefit or profit in
money, property or services actually received or (ii) to
the extent that a judgment or other final adjudication adverse
to the person is entered in a proceeding based on a finding in
the proceeding that the persons action, or failure to act,
was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding.
The Merger Agreement requires CF to cause, from and after the
Acceptance Time, Terra and, if after the consummation of the
Second-Step Merger, the Surviving Corporation, to indemnify all
current and former directors and officers of Terra to the
fullest extent permitted by law for acts or omissions occurring
at or prior to the effective time of the Second-Step Merger and
to honor all existing rights to indemnification in favor of such
directors and officers.
The Merger Agreement requires CF to cause, from and after the
Acceptance Time, Terra and, if after the consummation of the
Second-Step Merger, the Surviving Corporation, to maintain the
current directors and officers liability insurance
(or substitute insurance of at least the same coverage and
amounts and on equal or better terms) for six years following
the effective time of the Second-Step Merger. However, the
Surviving Corporation will not be required to pay premiums that
on an annual basis exceed 300% of the current annual aggregate
premiums paid by Terra.
|
|
ITEM 4.
|
THE
SOLICITATION OR RECOMMENDATION.
|
Solicitation
or Recommendation.
For the reasons set forth below, the Board by unanimous vote of
those directors voting with one absent director separately
indicating agreement determined that the Offer, the Second-Step
Merger and the other transactions contemplated by the Merger
Agreement are advisable to, and in the best interests of, Terra
and its stockholders and by unanimous vote of those directors
voting with one absent director separately indicating agreement
approved the Merger Agreement, the Offer, the Second-Step Merger
and the other transactions contemplated by the Merger Agreement.
The Board by unanimous vote of those directors voting with one
absent director separately indicating agreement recommends that
Terra stockholders accept the Offer by tendering their Terra
Common Shares into the Offer and approve the Second-Step Merger
(to the extent such approval is required under Maryland law for
the consummation of the Second-Step Merger).
10
Background
of the Offer and Reasons for Recommendation.
Background
of the Offer.
During the period from May 2008 to July 2008, Dr. Thorleif
Enger, then President and Chief Executive Officer of Yara
International ASA (Yara), and
Mr. Michael L. Bennett, President and Chief Executive
Officer of Terra, had conversations regarding Yaras
interest in a possible strategic transaction between Yara and
Terra. During this period, Mr. Bennett told Dr. Enger
that he had discussed Yaras interest with the Board,
however the Board was not convinced that it was the right time
for Terra to pursue a business combination transaction and Yara
ultimately turned its attention to an alternative transaction.
On January 15, 2009, CF made an unsolicited proposal to
acquire Terra in exchange for CF Common Stock, and on
February 23, 2009, CF commenced an exchange offer for all
of the outstanding Terra Common Shares. On February 25,
2009, Agrium Inc. (Agrium) made an
unsolicited proposal to acquire CF for a mix of cash and Agrium
common stock, conditioned upon CF not acquiring Terra. During
2009, CF made seven unsolicited proposals for a business
combination with Terra, and Agrium made several revised
proposals for a business combination with CF. CF eventually
changed the form of consideration to a mix of cash and CF Common
Stock in its unsolicited proposal to Terra of November 1,
2009. Under that proposal, CF proposed to acquire Terra on the
basis of $24.50 in cash (net of Terras previously declared
$7.50 per Terra Common Share special cash dividend (as described
below)) and 0.1034 of a share of CF Common Stock for each Terra
Common Share. CFs November 1 proposal had a value of
$33.11 per Terra Common Share, based on CFs closing stock
price on Friday, October 30, 2009.
Each of CFs proposals made during 2009 was carefully
considered by the Board, with the assistance of Terras
legal advisors, Cravath, Swaine & Moore LLP
(Cravath) and Wachtell, Lipton,
Rosen & Katz (Wachtell and together
with Cravath, the Legal Advisors),
Terras financial advisor, Credit Suisse Securities (USA)
LLC (Credit Suisse), and Mr. William R.
Loomis, Jr., the former Chairman of the Board, who had been
engaged by the Board as a consultant in January 2009 (together
with the Legal Advisors and Credit Suisse, the
Advisors). The Board unanimously rejected
each such proposal as being contrary to the best interests of
Terra and its stockholders for, among other things, failure to
appropriately value Terra.
In furtherance of its proposals for a business combination with
Terra, on February 3, 2009 and again on September 9,
2009, CF notified Terra that it had nominated and would solicit
proxies for an opposition slate of three nominees for election
as directors at Terras 2009 annual meeting of
stockholders. On October 14, 2009, CF filed a definitive
proxy statement with the SEC with respect to such solicitation.
Following the public announcement of CFs initial proposal
in January 2009, Mr. Jørgen Ole Haslestad, President
and Chief Executive Officer of Yara, telephoned Mr. Bennett
to express Yaras continued interest in Terra. Throughout
the course of 2009, Mr. Bennett engaged in preliminary
conversations with the chief executive officers of several
companies in the industry, including Yara, to gauge their
possible interest in an alternative transaction to a CF/Terra
combination. In furtherance of those conversations, Terra
entered into confidentiality agreements with two such companies
in August and September of 2009.
On August 6, 2009, CF announced that the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), pre-merger waiting period applicable to a
CF/Terra combination had expired at 11:59 p.m., Eastern
time, on August 5, 2009.
On August 31, 2009, CF announced that the exchange offer
commenced in February 2009 had expired and would not be
extended. No Terra Common Shares were purchased by CF pursuant
to the exchange offer.
On September 28, 2009, CF announced that it had acquired
6,985,048 common shares, or approximately 7%, of Terra, in the
open market at a cost of approximately $247 million.
On October 29, 2009, Terra issued a press release
announcing that the Board had declared a $7.50 per Terra Common
Share special cash dividend. The special cash dividend was paid
to Terra stockholders on December 11, 2009.
11
On November 13, 2009, CF sent a letter to the Board stating
that if Terra stockholders elected CFs three nominees to
the Board at Terras 2009 annual meeting, CF would not
object if the Board decided to reappoint Terras three
incumbent directors.
During the morning of November 20, 2009, Terra held its
2009 annual meeting of stockholders. Later that day, Terra
issued a press release announcing that based on a preliminary
review of the proxies voted at the annual meeting, it appeared
that Terra stockholders had elected to the Board the three
individuals nominated by CF.
On the evening of November 20, 2009, representatives of CF
contacted representatives of Terra to express CFs interest
in negotiating a proposed merger agreement over that weekend.
The next day, a representative of CFs legal advisor,
Skadden, Arps, Slate, Meagher & Flom LLP and
Affiliates (Skadden), provided a draft merger
agreement to a representative of Cravath, reflecting the terms
of CFs proposal of November 1, 2009, and including a
go-shop with a proposed
break-up fee
of $150 million, plus expense reimbursement.
On November 22, 2009, the Board held a meeting by
teleconference to discuss CFs approach of
November 20, 2009, and to review such approach with
Terras Advisors. The Board unanimously rejected engagement
with CF on those terms. At that same meeting, the Board, by a
unanimous vote of those directors whose terms did not expire in
2009, expanded the number of directors constituting the whole
Board to eleven, effective as of the time the results of the
election of directors at the 2009 annual meeting of stockholders
were certified and declared final, and voted to fill the
vacancies created at such time by reappointing Ms. Martha
O. Hesse, Mr. Dennis McGlone and Mr. Henry R. Slack to
the Board.
On December 1, 2009, Mr. Bennett and Mr. Loomis
met with Mr. Haslestad and Mr. Hallgeir Storvik, Chief
Financial Officer and Head of Strategy of Yara, in London,
United Kingdom. They discussed in general terms Yaras
expressions of interest to Terra regarding the possibility of a
strategic transaction. Mr. Storvik described the nature of
the approvals and financing which would be required by Yara if
the parties were to pursue a transaction. There was no
negotiation concerning price or other terms. However,
Mr. Haslestad stated that he believed the value of a Yara
proposal would be competitive with that proposed by CF in its
most recent proposal and that the form of consideration would be
all cash. Mr. Haslestad also stated that Yara had no
interest in participating in a bidding contest.
On the same day, Terra issued a press release confirming that
Terra stockholders had elected CFs three nominees to the
Board.
During the morning of December 4, 2009, Mr. Haslestad
telephoned Mr. Bennett to inform him that he had discussed
with Yaras board of directors a potential transaction with
Terra, and that Yara would be in a position to match the value
of the proposal made by CF on November 1, 2009, with an all
cash proposal, if Terra decided it was interested in pursuing a
transaction. Mr. Haslestad again reiterated that while Yara
would be interested in exploring a transaction with Terra, it
would not be drawn into a bidding contest.
During the afternoon of December 4, 2009, CF submitted to
the Board its seventh unsolicited proposal over the course of
the year, pursuant to which CF proposed to acquire all of the
outstanding Terra Common Shares for $29.25 in cash (net of
Terras previously declared $7.50 per Terra Common Share
special cash dividend) and 0.1034 of a share of CF Common Stock
for each Terra Common Share. In its December 4, 2009 letter
to the Board, CF stated that it had previously provided to Terra
a form of merger agreement that it was prepared to enter into,
but proposed a revised
break-up fee
of $1 per Terra Common Share, plus expense reimbursement.
CFs December 4 proposal had a value of $38.41 per Terra
Common Share, based on CFs closing stock price that day.
Later that day, a representative of Skadden submitted to a
representative of Cravath a confirmatory due diligence request
list on behalf of CF. Representatives of CF and Terra engaged in
several general conversations over the course of that weekend,
during which time representatives of CF stated that CFs
most recent proposal was its all in value and that
CF had at most nickels and quarters left in the
context of signing a transaction. Those statements, and the
statement that CF had emptied its pockets, were
repeated in press accounts following public disclosure of
CFs proposal on December 7, 2009, and attributed to
representatives of CF.
12
On December 5, 2009, Mr. Bennett telephoned
Mr. Haslestad to inform him of CFs revised proposal.
On the same day, Mr. Bennett called the chief executive
officers of the two other companies in the industry with which
Terra had previously entered into confidentiality agreements, to
gauge their interest in a potential business combination
transaction with Terra. Both chief executive officers indicated
that their companies would not be interested in pursuing such a
transaction with Terra.
On December 6, 2009, at a meeting of the Board held by
teleconference, the Board reviewed CFs proposal of
December 4, 2009 with Terras Advisors, and was
provided with an update on communications with CFs
advisors and on Mr. Bennetts conversations with the
chief executive officers of three companies in the industry,
including Yaras Chief Executive Officer,
Mr. Haslestad.
Following some initial due diligence by Yara on December 7,
2009, Messrs. Bennett and Haslestad had several telephone
conversations on December 7 and 8, 2009 to further discuss
Yaras view as to value. Mr. Haslestad indicated to
Mr. Bennett that he felt confident that Yara would be in a
position to make an all-cash offer that would be competitive
with CFs most recent proposal.
On December 9, 2009, at a regularly scheduled meeting of
the Board, and again on December 13, 2009, at a meeting of
the Board held by teleconference, the Board reviewed CFs
proposal of December 4, 2009, with Terras Advisors.
Representatives of Terras Legal Advisors reviewed with the
Board their duties as directors under Maryland law, and Credit
Suisse reviewed with the Board its financial analysis of
CFs proposal. The Board was also provided with an update
on communications with CFs advisors, on
Mr. Bennetts conversations with the chief executive
officers of the three companies in the industry with whom
Mr. Bennett had spoken since CFs latest proposal,
including Yaras Chief Executive Officer,
Mr. Haslestad, and on stockholder reaction to CFs
proposal. On December 13, 2009, the Board unanimously
rejected CFs proposal of December 4, 2009. The Board
also authorized Mr. Bennett to continue his conversations
with Mr. Haslestad in order to determine Yaras
seriousness as a potential bidder and ascertain Yaras
ultimate position on valuation.
On December 15, 2009, CF issued a press release announcing
that it would allow its financing commitments for its proposed
acquisition of Terra to expire on December 31, 2009.
On December 17, 2009, Terra and Yara executed a
confidentiality agreement, which was subsequently amended as of
February 6, 2010. During the next several weeks, Yara
continued its review of Terras business.
On January 4, 2010, a representative of CFs financial
advisor, Morgan Stanley & Co. Incorporated
(Morgan Stanley), telephoned a representative
of Credit Suisse to request that Terra provide to CF whatever
information was reviewed by the Board in connection with its
decision to reject CFs proposal of December 4, 2009,
as well as the confirmatory due diligence requested in such
proposal. The representative of Credit Suisse telephoned the
representative of Morgan Stanley on January 12, 2010, to
inform him that Terra had declined to provide CF with the
information requested.
On January 8, 2010, Mr. Haslestad telephoned
Mr. Bennett to inform him that Yaras board of
directors continued to be supportive of a potential transaction
with Terra, but had certain preconditions. Mr. Haslestad
sent a confirming note stating that Yara would be able to match
and add a margin on top of the value of CFs proposal of
December 4, 2009, subject to certain conditions, including
that Terra commit to negotiate exclusively with Yara for a
period of 30 working days. The note also stated that the
definitive merger agreement would need provision for Norwegian
Parliamentary approval of an equity issuance by Yara.
On January 10, 2010, Mr. Bennett telephoned
Mr. Haslestad to tell him that his note did not provide
sufficient clarity as to the terms Yara was prepared to propose
for a potential transaction to merit its consideration by the
Board. Accordingly, Mr. Bennett suggested that the parties
and their respective legal and financial advisors meet in New
York later in the week to discuss with more specificity
Yaras proposal as to price, deal certainty and deal
protection.
On January 13, 2010, Mr. Bennett and representatives
of Terras Legal Advisors met with Mr. Trygve
Faksvaag, Chief Legal Counsel of Yara, and representatives of
Yaras legal advisor, Latham & Watkins LLP
(Latham), to discuss certain of the terms and
conditions in the January 8, 2010 note from
Mr. Haslestad.
13
During the meeting, Terras Legal Advisors stated that
valuation, deal certainty and deal protection would be critical
to the Boards assessment of whether to even consider
Yaras requirement that Terra enter into exclusive
discussions with it.
Later that afternoon, Mr. Bennett and Mr. Haslestad
met at the offices of Cravath in New York, New York and further
discussed certain of the terms and conditions in the
January 8, 2010 note from Mr. Haslestad. In that
discussion, Mr. Haslestad stated that his view as to value
was $40.75 in cash per Terra Common Share, that he was firm in
his view and that he saw no basis for continuing discussions
unless that was understood.
On January 14, 2010, CF announced, without prior notice to
Terra, that it had withdrawn its proposal to acquire Terra, that
it had sold all of its Terra Common Shares and that it was no
longer pursuing a business combination with Terra.
On January 15, 2010, Mr. Haslestad telephoned
Mr. Bennett to inform him that Yaras board of
directors had formally authorized Mr. Haslestad to offer to
acquire all of the outstanding Terra Common Shares for $40.75
per share in cash.
On January 20, 2010, Mr. Haslestad sent
Mr. Bennett a letter outlining Yaras non-binding
expression of interest for the potential acquisition of Terra.
In the letter, Mr. Haslestad stated his expectation that
Terra would agree to negotiate exclusively with Yara for a
period of 20 days, and stated that Yara was interested in
acquiring through a merger all of the outstanding Terra Common
Shares for $40.75 per share in cash. The letter further
indicated that Yara would require a $200 million
break-up fee
if the transaction was not consummated for certain customary
reasons, and that Yara would be willing to agree to a reverse
break-up fee
of equivalent size payable in the event Yaras required
stockholder approval for its proposed equity issuance was not
received.
On January 22, 2010, the Board held a meeting by
teleconference to review Mr. Haslestads letter of
January 20, 2010, with Terras Advisors. Later that
day, Mr. Bennett telephoned Mr. Haslestad to inform
him that the Board had authorized Mr. Bennett to pursue
further discussions with Yara and grant exclusivity to Yara.
Over the next several days, the parties and their respective
legal advisors negotiated the terms of an exclusivity agreement.
Terra and Yara entered into an exclusivity agreement dated as of
January 24, 2010, pursuant to which the parties agreed to
negotiate exclusively with one another for a period starting on
the date of such agreement and ending at
11:59 p.m., New York City time, on February 14,
2010, which included a right of Terra, consistent with the
duties of the directors, to engage in discussions with third
parties who approached it on an unsolicited basis during the
exclusivity period. No third parties approached Terra with an
unsolicited proposal for a business combination during the
exclusivity period.
On January 24, 2010, Mr. Bennett and
Mr. Haslestad met at the offices of Cravath in New York,
New York to discuss the proposed terms contained in
Mr. Haslestads letter of January 20, 2010.
On February 1, 2010, Mr. Haslestad sent
Mr. Bennett a letter outlining Yaras revised
non-binding expression of interest for the potential acquisition
of Terra. In the letter, Mr. Haslestad indicated that,
subject to the completion of confirmatory due diligence, the
execution of definitive documentation and the receipt of
required approvals for the execution of such definitive
documentation, Yara was interested in acquiring through a merger
all of the outstanding Terra Common Shares for $41.10 per share
in cash, subject to increase in the event Yara did not hold a
stockholders meeting to approve Yaras proposed equity
issuance within 90 days of signing the merger agreement.
The letter stated that the definitive merger agreement would
provide for a
break-up fee
and reverse
break-up fee
symmetrically sized at 3% of the transaction value and that the
transaction would not be subject to any financing condition
beyond the approval of the equity issuance at the Yara
stockholders meeting. The letter further stated that the terms
and conditions contained therein constituted Yaras
best and final offer.
On February 2, 2010, the Board held a meeting by
teleconference to review Mr. Haslestads letter of
February 1, 2010, with Terras Advisors. Later that
day, Mr. Bennett telephoned Mr. Haslestad to inform
him that the Board had authorized him to pursue further
discussions with Yara.
14
On the evening of February 2, 2010, Terras Legal
Advisors submitted a draft merger agreement to Latham. During
the period from February 5, 2010 through February 11,
2010, negotiations took place between Mr. Bennett and
Terras Legal Advisors, on the one hand, and
Mr. Haslestad, Mr. Faksvaag and Latham, on the other
hand, in respect of issues relating to the merger agreement.
During the afternoon of February 12, 2010, at a special
meeting of the Board, the Board reviewed with its Advisors the
proposed definitive Yara merger agreement that had been
negotiated between representatives of Terra and Yara. At this
meeting, Credit Suisse delivered to the Board an oral opinion,
which opinion was confirmed by delivery of a written opinion
dated February 12, 2010, to the effect that as of that date
and based upon and subject to the qualifications, limitations
and assumptions set forth therein, the $41.10 in cash per share
to be received by the holders of Terra Common Shares pursuant to
the Yara merger agreement was fair, from a financial point of
view, to such holders. Following extensive discussion and
deliberations, the Board unanimously approved the Yara merger
agreement.
Following the February 12, 2010 meeting of the Board, the
parties executed the Yara merger agreement and, on
February 15, 2010, Terra issued a press release announcing
the Yara transaction.
On March 2, 2010, Mr. Stephen R. Wilson, President and
Chief Executive Officer of CF, sent a letter to the Board
setting forth an unsolicited offer from CF to acquire Terra for
consideration consisting of $37.15 in cash and 0.0953 of a share
of CF Common Stock per Terra Common Share. CFs March 2
proposal had a value of $47.40 per Terra Common Share, based on
CFs closing stock price on March 1, 2010.
On the same day, Terra issued a press release confirming receipt
of the above letter and announcing that the Board would evaluate
the terms of the CF proposal and would have no further comment
until the Board had completed this evaluation. Later that day,
Terra sent written notice to Yara of Terras receipt of the
CF proposal.
Over the next several days, Mr. Bennett and
Mr. Haslestad and representatives of Terras and
Yaras respective financial advisors had several telephone
conversations to discuss the CF proposal.
During the afternoon of March 3, 2010, at a meeting of the
Board held by teleconference, the Board reviewed CFs
proposal of March 2, 2010. During that meeting, the Board
unanimously determined that CFs proposal of March 2,
2010 could reasonably be expected to result in a Superior
Proposal (as such term was defined in the Yara merger agreement).
On March 5, 2010, CF commenced an exchange offer for all of
the outstanding Terra Common Shares at the same price per share
set forth in its March 2, 2010 letter. On the same day, a
representative of Skadden sent to a representative of Cravath
the draft form of merger agreement included in the exchange
offer materials filed by CF with the SEC. Later that day, Terra
sent written notice to Yara of Terras receipt of the draft
Merger Agreement.
On March 6, 2010, Terras Legal Advisors submitted to
Skadden comments on the draft Merger Agreement and a
confirmatory due diligence request list on behalf of Terra.
On March 7, 2010, Mr. Wilson telephoned
Mr. Bennett and they had a brief conversation.
On March 8, 2010, Mr. Haslestad telephoned
Mr. Bennett to discuss an upcoming meeting they were
scheduled to have relating to integration matters.
On the same day, Terras Legal Advisors had several
telephonic discussions with representatives of Skadden regarding
Terras comments on the draft Merger Agreement. Also that
day, representatives of Terra and Terras Advisors
conducted a due diligence telephone conference with
representatives of CF, Morgan Stanley and Skadden.
On March 9, 2010, at a meeting of the Board held by
teleconference, the Board reviewed the terms and conditions of
the draft Merger Agreement, including the agreed resolution of
Terras comments and remaining open items, with
Terras Advisors, and was provided with an update on
Mr. Bennetts communications with Mr. Haslestad
and Mr. Wilson. After discussion, the Board determined that
CFs proposal was reasonably expected to be consummated and
was more favorable to Terra stockholders than the Yara merger
and the other
15
transactions contemplated by the Yara merger agreement from a
financial point of view, taking into account all financial,
regulatory, legal and other aspects of such proposal, and, as
such, constituted a Superior Proposal (as such term was defined
in the Yara merger agreement). The Board delegated to a
committee of two directors the authority to execute and deliver
the requisite notice to Yara under the Yara merger agreement
upon receipt of a final form of Merger Agreement from CF
reflecting resolution of the remaining open items in a manner
acceptable to the committee.
Later that day, Skadden sent Terras Legal Advisors a
revised form of Merger Agreement. The parties negotiated final
comments to that form of agreement and on March 10, 2010,
it was executed by CF, together with a letter agreement
governing how long CFs binding offer would remain
outstanding and stating that CF would pay (on behalf of Terra)
the termination fee to Yara under the Yara merger agreement.
Terra then notified Yara that the Board had determined that
CFs proposal, as reflected in the form of Merger Agreement
attached to such notice, was a Superior Proposal (as such term
was defined in the Yara merger agreement), that the five
business day match period provided for in the Yara merger
agreement would expire at 5:00 p.m., Eastern time, on
March 17, 2010 and of Terras intent to terminate the
Yara merger agreement following such match period and,
thereafter, Terra notified CF that it provided such notice to
Yara.
On March 10, 2010, Mr. Bennett telephoned
Mr. Haslestad to discuss the notice provided to Yara by the
Board earlier that day.
On March 11, 2010, Terra received a letter from Yara
informing it that Yara did not intend to make a proposal that
would be at least as favorable to the stockholders of Terra as
the CF proposal and waiving its right to exercise the five
business day match right under the Yara merger agreement.
During the afternoon of March 11, 2010, at a meeting of the
Board held by teleconference, the Board discussed the letter
received from Yara earlier that day and the form of Merger
Agreement that had been previously negotiated between
representatives of Terra and CF and executed by CF. At this
meeting, representatives of Terras Legal Advisors reviewed
with the Board their duties as directors under Maryland law.
Also at this meeting, Credit Suisse reviewed with the Board its
financial analysis of the $37.15 in cash and 0.0953 of a
share of CF Common Stock per Terra Common Share to be received
by the holders of such shares and delivered to the Board an oral
opinion, which opinion was confirmed by delivery of a written
opinion dated March 11, 2010, to the effect that as of that
date and based upon and subject to the qualifications,
limitations and assumptions set forth therein, the $37.15 in
cash and 0.0953 of a share of CF Common Stock per Terra
Common Share to be received by the holders of such shares
pursuant to the Offer and the Second-Step Merger is fair, from a
financial point of view, to such holders. Following further
discussion, and after consultation with Terras Advisors,
the Board by unanimous vote of those voting with one absent
director separately indicating agreement (i) approved the
Merger Agreement, the Offer, the Second-Step Merger and the
other transactions contemplated by the Merger Agreement,
(ii) declared that the Offer, the Second-Step Merger and
the other transactions contemplated by the Merger Agreement are
advisable to, and in the best interests of, Terra and its
stockholders and (iii) recommended that Terra stockholders
accept the Offer by tendering their Terra Common Shares into the
Offer and approve the Second-Step Merger (to the extent such
approval is required under Maryland law for the consummation of
the Second-Step Merger).
Later that day, Agrium announced that it will no longer pursue
an acquisition of CF or the election of its nominees to the CF
board of directors and will allow its unsolicited exchange offer
for CF to expire on March 22, 2010.
On March 12, 2010, Terra notified Yara and CF that the
Board had elected to terminate the Yara merger agreement. CF
paid (on behalf of Terra) to Yara the termination fee due under
the Yara merger agreement which terminated in accordance with
its terms. Concurrently with the termination of the Yara merger
agreement, Terra executed the Merger Agreement.
Later that day, CF and Terra issued a joint press release
announcing the Merger Agreement. A summary of certain terms of
the Merger Agreement is contained in the Current Report on
Form 8-K filed by Terra with the SEC on March 12, 2010
and incorporated herein by reference. Such summary does not
purport to be complete and is
16
qualified in its entirety by reference to the Merger Agreement,
which is filed as Exhibit (a)(8) hereto and is incorporated
herein by reference.
Reasons
for the Recommendation.
After careful consideration, the Board by unanimous vote of
those directors voting with one absent director separately
indicating agreement approved the Merger Agreement, the Offer,
the Second-Step Merger and the other transactions contemplated
by the Merger Agreement, declared that the Offer, the
Second-Step Merger and the other transactions contemplated by
the Merger Agreement are advisable to, and in the best interests
of, Terra and its stockholders and recommended that Terra
stockholders accept the Offer by tendering their Terra Common
Shares into the Offer and approve the Second-Step Merger (to the
extent such approval is required under Maryland law for the
consummation of the Second-Step Merger).
In the course of reaching its decision to approve the Merger
Agreement, the Offer, the Second-Step Merger and the other
transactions contemplated by the Merger Agreement, the Board
consulted with Terra management, as well as its financial and
legal advisors, and considered a number of factors that it
believed supported its decision, including the following:
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recent and historical market prices for Terra Common Shares, as
compared to the financial terms of the Offer, including the fact
that the nominal price to be paid in the Offer (based on
CFs closing stock price on March 11, 2010) represents
a 40.6% premium over Terras closing stock price on
February 12, 2010, the last trading day prior to the
announcement of the Yara merger agreement;
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the fact that Terra had previously entered into the Yara merger
agreement pursuant to which Yara would have acquired Terra at a
purchase price of $41.10 in cash per Terra Common Share and that
the nominal value of the Offer (based on CFs closing stock
price on March 11, 2010) represents a 13.7% premium over
such purchase price;
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that CF has obtained U.S. antitrust clearance and the Offer
does not require EU antitrust approval or review by CFIUS;
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that the Offer is not subject to the approval of CFs
stockholders, otherwise has limited conditions and is expected
to close in April 2010;
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its knowledge of Terras business, operations, financial
condition, earnings and prospects, as well as the risks in
achieving those prospects;
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its knowledge of the current industry environment affecting
Terra, including the trend toward consolidation in the
fertilizer industry and the strong correlation between general
macroeconomic conditions and industry conditions;
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the financial analyses reviewed and discussed with the Board by
representatives of Credit Suisse on March 11, 2010, as well
as the oral opinion of Credit Suisse rendered to the Board on
such date (which was subsequently confirmed in writing by
delivery of Credit Suisses written opinion dated the same
date) to the effect that as of such date and based upon and
subject to the assumptions, limitations and qualifications set
forth therein, the $37.15 in cash and 0.0953 shares of CF Common
Stock per Terra Common Share to be received by the holders of
such shares pursuant to the Offer and the Second-Step Merger was
fair, from a financial point of view, to such stockholders. The
summary of Credit Suisses opinion in this Statement is
qualified in its entirety by the full text of Credit
Suisses opinion, which is attached to this Statement as
Annex B;
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the fact that the Offer consideration consists primarily of
cash, providing Terra stockholders with certainty of value and
liquidity, while the stock consideration included in the Offer
consideration allows Terra stockholders the ability to
participate in the growth and long-term value creation potential
of the combined company, including the expected synergies;
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17
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its assessment of the Offer consideration in light of knowledge
acquired over the past year through CFs public proposals,
Terras negotiations with Yara and managements
private discussions with other industry participants;
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its belief that the Merger Agreement, the Offer, the Second-Step
Merger and the other transactions contemplated by the Merger
Agreement were more favorable to Terra stockholders than other
strategic alternatives reasonably available to Terra and its
stockholders;
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the fact that, subject to compliance with the terms and
conditions of the Merger Agreement, Terra is permitted to
furnish information to and conduct negotiations with any third
party that makes a bona fide written unsolicited acquisition
proposal for Terra;
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the fact that, subject to compliance with the terms and
conditions of the Merger Agreement, Terra is permitted to
terminate the Merger Agreement in order to enter into an
agreement with respect to a superior proposal after giving CF
the opportunity to match the superior proposal and upon the
payment to CF of a termination fee;
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the fact that the terms and conditions of the Merger Agreement
and the transactions contemplated by the Merger Agreement,
including the level of commitment by CF to obtain competition
approvals and the absence of a financing condition, provide
Terra with reasonable certainty that CF will be required to
purchase Terra Common Shares tendered in the Offer and to close
the Second-Step Merger on a timely basis; and
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the fact that if the Offer fails to close because of
(i) the failure of the Canadian Regulatory Condition, the
failure of the Registration Statement Condition or the failure
of the NYSE Listing Condition or (ii) the imposition of
certain injunctions preventing the closing of the Offer or the
Second-Step Merger, and the Merger Agreement is terminated, CF
would be required to pay Terra a $123 million termination
fee.
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The Board also considered a number of risks and other
potentially negative factors concerning the Merger Agreement,
the Offer, the Second-Step Merger and the other transactions
contemplated by the Merger Agreement, including the following:
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the fact that the Offer consideration consists primarily of
cash, which, while providing certainty of value, would not allow
Terra stockholders to participate more fully in the Surviving
Corporations future earnings or growth or to derive a
greater benefit from any appreciation in the value of CF Common
Stock after the consummation of the Offer;
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the fact that the Offer and the Second-Step Merger might not be
completed in a timely manner or at all due to the necessity of
receiving approvals under the applicable competition laws of
Canada;
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the fact that the stock consideration to be received in the
Offer is difficult to value;
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the potential disruption to Terras business that could
result from the announcement and pendency of the Offer or the
Second-Step Merger, including the possible diversion of
management and employee attention, potential employee attrition
and the potential effect on Terras business relationships;
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the restrictions on Terras ability to solicit or engage in
discussions or negotiations regarding alternative business
combination transactions, subject to specified exceptions, and
the requirement that Terra pay a termination fee and reimburse
CF for its payment of the Yara termination fee in order to
accept a superior proposal, which may discourage a competing
proposal to acquire Terra that may be more advantageous to Terra
stockholders;
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the inclusion in the Merger Agreement of a non-solicitation
covenant and provision for Terras payment of a termination
fee of $123 million to CF and the reimbursement of the Yara
termination fee paid by CF in the case of certain events, which
the Board understood, while potentially having the effect of
discouraging third parties from proposing a competing business
combination transaction after the Merger Agreement was signed,
were conditions to CFs willingness to enter into the
Merger Agreement;
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18
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that CF is not obligated to purchase any Terra Common Shares in
the Offer unless, among other things, the Minimum Tender
Condition, the Registration Statement Condition and the NYSE
Listing Condition are satisfied, there shall be no law, order or
injunction that prohibits the consummation of the Offer or the
Second-Step Merger and Terra shall have complied with its
covenants and shall not have breached its representations and
warranties (subject to applicable materiality
qualifiers); and
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the restrictions on Terras business prior to the
consummation of the Offer, requiring Terra to conduct its
business in all material respects only in the ordinary course of
business and consistent with past practice, subject to specified
limitations, which may delay or prevent Terra from undertaking
business opportunities that may arise during the term of the
Merger Agreement, whether or not the Offer is consummated.
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The foregoing discussion of the factors considered by the Board
is not intended to be exhaustive, but, rather, includes the
material factors considered by the Board. In reaching its
decision to approve the Merger Agreement, the Offer, the
Second-Step Merger and the other transactions contemplated by
the Merger Agreement, the Board did not quantify or assign any
relative weights to the factors considered, and individual
directors may have given different weights to different factors.
The Board did not reach any specific conclusion on each factor
considered, but, with the assistance of Terra management and its
financial and legal advisors, conducted an overall review of
these factors.
Intent
to Tender.
To the knowledge of Terra, after making reasonable inquiry, all
of Terras directors, executive officers, affiliates and
subsidiaries currently intend to tender all Terra Common Shares
held of record or beneficially owned by such person pursuant to
the Offer.
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ITEM 5.
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PERSONS/ASSETS
RETAINED, EMPLOYED, COMPENSATED OR USED.
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Terra has retained Credit Suisse to act as Terras
financial advisor in connection with the Offer and related
matters. Terra has agreed to pay Credit Suisse certain customary
fees for its services, portions of which became payable upon its
engagement or will become payable during the course of its
engagement. A significant portion of the fees is payable to
Credit Suisse upon consummation of a transaction with any third
party, including upon consummation of the Offer. Credit Suisse
also became entitled to a fee upon the rendering of each of its
fairness opinion in connection with the Merger Agreement and its
fairness opinion in connection with the Yara merger agreement.
Terra also has agreed to reimburse Credit Suisse for all
reasonable and customary expenses, including reasonable fees and
expenses of legal counsel, and to indemnify Credit Suisse and
related persons against certain liabilities, including
liabilities under the federal securities laws, arising out of
such engagement. Credit Suisse also advised Terra in connection
with CFs unsolicited proposals for Terra in 2009, the
proxy contest between CF and Terra related to Terras 2009
annual meeting of stockholders and Terras proposed merger
with Yara.
Terra has also retained William R. Loomis to act as Terras
advisor in connection with the Offer and related matters. Terra
has agreed to pay Mr. Loomis certain fees for his services,
portions of which became payable upon his engagement or will
become payable during the course of his engagement. A
significant portion of the fees is payable to Mr. Loomis
upon consummation of a transaction with any third party,
including upon consummation of the Offer. Terra also has agreed
to reimburse Mr. Loomis for all reasonable and customary
expenses, including reasonable fees and expenses of legal
counsel, and to indemnify Mr. Loomis against certain
liabilities, including liabilities under the federal securities
laws, arising out of such engagement. Mr. Loomis also
advised Terra in connection with CFs unsolicited proposals
for Terra in 2009, the proxy contest between CF and Terra
related to Terras 2009 annual meeting of stockholders and
Terras proposed merger with Yara.
Terra has engaged MacKenzie Partners, Inc.
(MacKenzie) to assist it in connection with
Terras communications with its stockholders in connection
with the Offer and related matters. Terra has agreed to pay
customary compensation to MacKenzie for such services. In
addition, Terra has agreed to reimburse MacKenzie for its
reasonable out-of-pocket expenses and to indemnify it and
certain related persons against
19
certain liabilities relating to or arising out of the
engagement. MacKenzie also advised Terra in connection with
CFs unsolicited proposals for Terra in 2009, the proxy
contest between CF and Terra related to Terras 2009 annual
meeting of stockholders and Terras proposed merger with
Yara.
Terra has also retained Joele Frank, Wilkinson Brimmer Katcher
(Joele Frank) as its public relations advisor
in connection with the Offer and related matters. Terra has
agreed to pay customary compensation to Joele Frank for such
services. In addition, Terra has agreed to reimburse Joele Frank
for its reasonable out-of-pocket expenses and to indemnify it
and certain related persons against certain liabilities relating
to or arising out of the engagement. Joele Frank also advised
Terra in connection with CFs unsolicited proposals for
Terra in 2009, the proxy contest between CF and Terra related to
Terras 2009 annual meeting of stockholders and
Terras proposed merger with Yara.
Except as set forth above, neither Terra nor any person acting
on its behalf has or currently intends to employ, retain or
compensate any person to make solicitations or recommendations
to the stockholders of Terra on its behalf with respect to the
Offer or the Second-Step Merger.
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ITEM 6.
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INTEREST
IN SECURITIES OF THE SUBJECT COMPANY.
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Securities
Transactions.
No transactions with respect to Terra Common Shares have been
effected by Terra or, to Terras knowledge after making
reasonable inquiry, by any of its executive officers, directors,
affiliates or subsidiaries during the 60 days prior to the
date of this Statement, except as set forth below:
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Number
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Price
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Nature of
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Name of Person
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Transaction Date
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of Shares
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Per Share
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Transaction
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Michael L. Bennett
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February 12, 2010
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98,237
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See Note(a)
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Vesting of Equity Award
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Michael L. Bennett
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February 12, 2010
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68,039
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$33.25
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Withholding of
Shares(b)
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Joe A. Ewing
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February 12, 2010
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12,386
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See Note(a)
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Vesting of Equity Award
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Joe A. Ewing
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February 12, 2010
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6,987
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$33.25
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Withholding of
Shares(b)
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Joseph D. Giesler
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February 12, 2010
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13,383
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See Note(a)
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Vesting of Equity Award
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Joseph D. Giesler
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February 12, 2010
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7,539
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$33.25
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Withholding of
Shares(b)
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Daniel D. Greenwell
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February 12, 2010
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14,807
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See Note(a)
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Vesting of Equity Award
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John W. Huey
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February 12, 2010
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15,946
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See Note(a)
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Vesting of Equity Award
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John W. Huey
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February 12, 2010
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2,928
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$33.25
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Withholding of
Shares(b)
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Richard S. Sanders, Jr.
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February 12, 2010
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12,671
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See Note(a)
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Vesting of Equity Award
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Richard S. Sanders, Jr.
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February 12, 2010
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7,145
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$33.25
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Withholding of
Shares(b)
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Douglas M. Stone
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February 12, 2010
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10,536
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See Note(a)
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Vesting of Equity Award
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Douglas M. Stone
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February 12, 2010
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5,955
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$33.25
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Withholding of
Shares(b)
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(a) |
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Represents additional Terra Common Shares that were issued
pursuant to 200% vesting on February 12, 2010 of
Performance Share Awards that were granted in 2007. |
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(b) |
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Represents Terra Common Shares that were withheld from the
Performance Share Awards that vested on February 12, 2010
to satisfy tax liability. |
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ITEM 7.
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PURPOSES
OF THE TRANSACTION AND PLANS OR PROPOSALS.
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Subject
Company Negotiations.
Except as set forth in this Statement (including in the exhibits
and annexes to this Statement) or as incorporated in this
Statement by reference, Terra is not currently undertaking or
engaged in any negotiations in response to the Offer that relate
to, or would result in, (i) a tender offer for, or other
acquisition of, Terra Common Shares by Terra, any of its
subsidiaries or any other person, (ii) any extraordinary
transaction, such as a merger, reorganization or liquidation,
involving Terra or any of its subsidiaries, (iii) any
purchase, sale or transfer of a material amount of assets of
Terra or any of its subsidiaries or (iv) any material
change in the present dividend rate or policy, or indebtedness
or capitalization, of Terra.
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Except as described above or otherwise set forth in this
Statement (including in the exhibits and annexes to this
Statement) or as incorporated in this Statement by reference,
there are no transactions, resolutions of the Board, agreements
in principle or signed contracts in response to the Offer that
relate to, or would result in, one or more of the events
referred to in the preceding paragraph.
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ITEM 8.
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ADDITIONAL
INFORMATION.
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Regulatory
Approvals.
U.S.
Antitrust Approval.
The Offer and the Second-Step Merger are subject to review by
the Federal Trade Commission (the FTC) and
the Antitrust Division of the U.S. Department of Justice
(the Antitrust Division). Under the
HSR Act, the Offer and the Second-Step Merger may not be
completed until certain information has been provided to the FTC
and the Antitrust Division and a required waiting period has
expired or has been terminated. The HSR Act notifications made
in connection with CFs prior exchange offer for Terra
remain applicable to the Offer and the Second-Step Merger. On
August 5, 2009, the extended waiting period under the HSR
Act expired without any enforcement action and on
August 12, 2009, the FTC provided CF with written notice
that it had closed its investigation. CF has fulfilled its
obligations under the HSR Act and may acquire a majority of
Terra Common Shares without any additional filing under the HSR
Act provided that it does so on or before August 5, 2010.
Canadian
Antitrust Considerations.
The Offer and the Second-Step Merger are also subject to review
pursuant to the Competition Act (Canada). Under the Competition
Act (Canada), the Offer and the Second-Step Merger may not be
completed until certain information has been provided to the
Canadian Commissioner of Competition (the Competition
Commissioner) and a required waiting period has
expired or been terminated, provided there is no order in effect
prohibiting completion at the relevant time. In connection with
CFs prior exchange offer for Terra, CF provided such
information to the Competition Commissioner and the required
waiting period under the Competition Act (Canada) expired on
March 24, 2009. On June 19, 2009, the Competition
Commissioner issued a no-action letter stating she did not
intend to challenge the proposed transaction. Under the
Competition Act (Canada), the transaction may be completed
within one year of the date that CF provided the required
information to the Competition Commissioner in connection with
its prior exchange offer to Terras stockholders
(March 10, 2009). This one-year period expired on
March 9, 2010. As the one-year period following CFs
submission of the required information to the Competition
Commissioner in connection with its prior exchange offer to
Terras stockholders expired on March 9, 2010, and in
order to ensure compliance with the Competition Act, CF
submitted its notification and a request for early termination
of the mandatory waiting period concerning the offer on
March 2, 2010. The waiting period will expire on
April 1, 2010, unless earlier terminated by the Competition
Commissioner or extended pursuant to request for additional
information.
At any time before a merger (as such term is defined
under the Competition Act (Canada)) is completed, even where the
applicable waiting period has expired or been terminated, the
Competition Commissioner may apply to the Competition Tribunal
for an interim order forbidding any person named in the
application from doing any act or thing where it appears to the
Competition Tribunal that such act or thing may constitute or be
directed toward the completion or implementation of a proposed
merger. The Competition Tribunal may issue an interim order
where the Competition Commissioner requires more time to
complete her inquiry and the Tribunal finds that, in the absence
of an interim order, a party to the proposed merger or another
person is likely to take an action that would substantially
impair the ability of the Competition Tribunal to remedy the
effect of the proposed merger on competition because that action
would be difficult to reverse.
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Canada
Transportation Act.
The Offer and the Second-Step Merger may be subject to
notification under the Canada Transportation Act. Under the
Canada Transportation Act, if the Offer or Second-Step Merger is
subject to notification, they cannot be completed until certain
information has been provided to the Canadian Minister of
Transport (the Transport Minister) and either
the Transport Minister notifies the parties that he is of the
opinion that the offer does not raise issues with respect to the
public interest as it relates to national transportation or the
transaction is approved by the Governor in Council. Under the
Canada Transportation Act, if the Transport Minister is of the
opinion that a proposed transaction does not raise issues with
respect to the public interest as it relates to national
transportation, he shall give notice to the parties within
42 days of receiving the required information. If the
Transport Minister is of the opinion that a proposed transaction
raises issues with respect to the public interest as it relates
to national transportation, he can initiate a review of the
transaction.
In order to ensure compliance with the Canada Transportation
Act, in connection with CFs prior exchange offer for
Terra, CF provided the required information to the Transport
Minister. The Transport Minister notified CF on April 7,
2009 that the proposed transaction did not raise public interest
issues as it relates to national transportation. In order to
ensure continued compliance with the Canada Transportation Act,
CF submitted an updated notification to the Transport Minister
on March 2, 2010. The initial
42-day
period under the Canada Transportation Act thus expires on
April 13, 2010, unless the Transport Minister issues an
opinion before that date that the Offer or the Second-Step
Merger does not raise public interest issues as it relates to
national transportation.
Takeover
Laws.
Maryland
Business Combination Act.
The Merger Agreement provides, among other things, that the
Board has declared advisable and approved the Offer and the
Second-Step Merger, subject to any required stockholder
approval, and irrevocably exempted during the term of the Merger
Agreement the Offer and the Second-Step Merger from the
restrictions imposed by the MBCA.
The MBCA would otherwise apply to the Offer, the Second-Step
Merger or any other business combination (as defined
in the MBCA) involving CF or CF Sub (and any of CFs
subsidiaries) and Terra. If the MBCA applied to the Second-Step
Merger, it could significantly delay CFs or CF Subs
(and any of CFs subsidiaries) ability to acquire the
entire equity interest in Terra. The MBCA, in general, prevents
an interested stockholder (generally, a stockholder
beneficially owning 10% or more of a corporations
outstanding voting stock, or an affiliate or associate of the
corporation who beneficially owned 10% or more of the
corporations outstanding voting stock at any time within
the preceding two years) from engaging in a business combination
(such as a merger or consolidation and certain other
transactions) with a Maryland corporation for a period of five
years following the most recent date on which such stockholder
became an interested stockholder. A person is not an interested
stockholder if the corporations board of directors
approved in advance the transaction by which such person would
otherwise have become an interested stockholder. In approving
such a transaction, the board of directors of a corporation may
provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined
by the board of directors of the corporation.
After the five year period following the most recent date on
which such stockholder became an interested stockholder, any
business combination between the Maryland corporation and the
interested stockholder must be recommended by the board of
directors of the corporation and approved by the affirmative
vote of at least (1) 80% of the votes entitled to be cast
by holders of outstanding shares of voting stock of the
corporation, voting together as a single class and
(2) two-thirds of the votes entitled to be cast by holders
of voting stock of the corporation, other than voting stock held
by the interested stockholder with whom or with whose affiliate
the business combination is to be effected or held by an
affiliate or associate of the interested stockholder. These
super-majority vote requirements do not apply if the holders of
common stock receive a minimum price, as defined under the MBCA,
for their shares in the form of cash or other consideration in
the same form as previously paid by the interested stockholder
for its shares.
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The statute permits various exemptions from its provisions,
including business combinations that are exempted by the board
of directors prior to the time that the interested stockholder
becomes an interested stockholder. The approval of the board of
directors may be altered or repealed at any time unless the
resolution adopted by the board of directors is made irrevocable
by its terms.
Other
State Takeover Laws.
A number of states have adopted takeover laws and regulations
which purport to varying degrees to be applicable to attempts to
acquire securities of corporations which are incorporated in
such states or which have or whose business operations have
substantial economic effects in such states, or which have
substantial assets, security holders, principal executive
offices or principal places of business in such states. If any
state takeover statute is found to be applicable to the Offer or
the Second-Step Merger, the Merger Agreement provides that Terra
and the Board shall use their reasonable best efforts to ensure
that the Offer and the Second-Step Merger may be consummated as
promptly as practicable on the terms contemplated by the Merger
Agreement.
Maryland
Control Share Acquisition Act.
The Maryland Control Share Acquisition Act (the
MCSAA) provides that control
shares of a Maryland corporation acquired in a
control share acquisition have no voting rights
except to the extent approved by a vote of two-thirds of the
votes entitled to be cast on the matter, excluding shares of
stock as to which the acquiring person, officers of the
corporation and employees of the corporation who are also
directors of the corporation are entitled to exercise or direct
the exercise of the voting power of the shares in the election
of directors.
Control shares are voting shares of stock which, if
aggregated with all other shares of stock owned by the acquiror
or in respect of which the acquiror is entitled to exercise or
direct the exercise of voting power (except solely by virtue of
a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following
ranges of voting power: (i) one-tenth or more but less than
one-third, (ii) one-third or more but less than a majority
or (iii) a majority or more of all voting power.
Control shares do not include shares that the
acquiring person is entitled to vote as a result of having
previously obtained stockholder approval. A control share
acquisition means the acquisition, directly or indirectly,
of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions
(including an undertaking to pay expenses), may compel the board
of directors to call a special meeting of stockholders to be
held within 50 days of such demand to consider the voting
rights of the shares.
If voting rights are not approved at the meeting or if the
acquiror does not deliver an acquiring person statement as
required under the MCSAA, then, subject to certain conditions
and limitations, the corporation may redeem any or all of the
control shares, except those for which voting rights have
previously been approved, for fair value determined, without
regard to voting rights, as of the date of the last control
share acquisition or of any special meeting of stockholders at
which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a
stockholders meeting and the acquiror becomes entitled to
vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of
the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share paid in the
control share acquisition, and certain limitations and
restrictions generally applicable to the exercise of appraisal
rights do not apply in the context of a control share
acquisition.
The MCSAA does not apply to shares acquired in a merger,
consolidation or share exchange if the corporation is a party to
the transaction or to acquisitions approved or exempted by the
charter or the bylaws of the corporation by a provision adopted
at any time before the acquisition of the shares.
Terras Bylaws provide that the MCSAA will not apply to any
acquisition by any person of shares of stock of the Company. The
Merger Agreement provides that, except as set forth in the
Merger Agreement, Terra may not amend its Bylaws prior to the
effective date of the Second-Step Merger.
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Second-Step
Merger Provisions.
The purpose of the Offer as stated by CF in the Registration
Statement is for CF to acquire control of, and ultimately the
entire equity interest in, Terra. If the Offer is consummated,
CF will, pursuant to the terms of the Merger Agreement, promptly
after completion of the Offer, consummate the Second-Step Merger
with each remaining Terra Common Share (other than shares
already owned by Terra, CF or their wholly-owned subsidiaries)
being converted into the right to receive the same Per Share
Consideration as is received by Terra stockholders pursuant to
the Offer. After this Second-Step Merger, the former Terra
stockholders will no longer have any ownership interest in Terra.
If, pursuant to the Offer, CF acquires at least 90% of all
outstanding shares of Terra entitled to vote as a group or a
class on the Second-Step Merger, then, pursuant to
Section 3-106
of the MGCL, after consummation of the Offer, CF will be able to
effect the Second-Step Merger without a vote of Terras
stockholders. Such a second-step merger requires that
(i) the board of each corporation which is a party to the
merger has approved such merger by a majority vote of all its
members, (ii) the charter of the successor corporation is
not amended in the merger (other than to change its name, the
name or other designation or the par value of any class or
series of its stock or the aggregate par value of its stock) and
(iii) the contract rights of the shares of CF Common Stock
exchanged for Terra Common Shares are identical to the contract
rights of the Terra Common Shares that were exchanged. In order
to take advantage of the foregoing second-step merger
provisions, unless waived by all stockholders who would have
been entitled to vote on the merger but for the foregoing
provisions, CF must also give notice of the merger to each of
Terras stockholders at least 30 days before the
articles of merger are filed with the State Department of
Assessments and Taxation of Maryland. A Notice of Merger
pursuant to Section
3-106 of the
MGCL was included in the Prospectus/Offer to Exchange filed by
CF with the SEC on March 5, 2010.
If CF, through CF Sub pursuant to the Offer or otherwise, does
not acquire at least 90% of the outstanding shares entitled to
vote as a group or class on the Second-Step Merger, under the
MGCL, the Second-Step Merger must be declared advisable by the
Board and approved by the affirmative vote of stockholders of
Terra holding a majority of the outstanding shares entitled to
vote as a group or class on the Second-Step Merger. If CF
acquires, through CF Sub pursuant to the Offer or otherwise, at
least a majority of the outstanding shares entitled to vote as a
group or class on the Second-Step Merger, CF would have
sufficient voting power to approve the Second-Step Merger
without the affirmative vote of any other stockholder of Terra.
Further, upon consummation of the Offer, CF will have the right
to designate a majority of the directors to the Board.
The Board by unanimous vote of those directors voting with one
director absent separately indicating agreement adopted
resolutions determining that the Second-Step Merger is advisable
to, and in the best interest of, Terra and its stockholders and
approving the Second-Step Merger.
Top-Up
Option.
Subject to the terms and conditions of the Merger Agreement,
Terra has granted to CF
and/or CF
Sub an irrevocable one-time option (the
Top-Up
Option) to purchase for $47.40 in cash per Terra
Common Share up to that number of Terra Common Shares (the
Top-Up
Shares) equal to the lowest number of Terra Common
Shares that, when added to the number of Terra Common Shares
owned by CF Sub at the time of the exercise of the
Top-Up
Option, shall constitute one Terra Common Share more than 90% of
the Terra Common Shares outstanding immediately after the
issuance of the
Top-Up
Shares calculated on a fully-diluted basis, or, at CFs
option, on a primary basis. The
Top-Up
Option is exercisable only one time and only if (i) the
issuance of the
Top-Up
Shares does not require the approval of Terras
stockholders under applicable law, including the rules of the
NYSE, (ii) the exercise of the
Top-Up
Option and the issuance and delivery of the
Top-Up
Shares is not prohibited by any law or order and (iii) the
Top-Up
Option is exercisable for not more than the number of shares of
Terra Common Shares in excess of the number of Terra Common
Shares authorized but unissued or reserved for issuance at the
time the
Top-Up
Option is exercised. The
Top-Up
Option may be exercised at any one time within 10 business days
following the completion of the Offer and prior to the earlier
to occur of the completion of the Merger and the termination of
the Merger Agreement.
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Appraisal
Rights.
Terras stockholders do not have appraisal rights in
connection with the Offer and are not expected to have appraisal
rights in connection with the Second-Step Merger. As a general
matter, however,
Section 3-202(a)
of the MGCL provides stockholders with the right to demand and
to receive payment of the fair value of their stock in the event
of (i) a merger or consolidation, (ii) a share
exchange, (iii) a transfer of assets in a manner requiring
stockholder approval, (iv) an amendment to the
corporations charter which alters the contract rights of
any outstanding stock, as expressly set forth in the charter,
and substantially adversely affects the stockholders
rights (unless the right to do so is reserved in the charter) or
(v) certain business combinations with interested
stockholders which are subject to or exempted from the MBCA (as
discussed above under the heading Maryland Business
Combination Act). Except with respect to certain
business combinations, pursuant to
Section 3-202(c)
of the MGCL, the right to demand and receive payment of fair
value does not apply (1) in general, to stock listed on a
national securities exchange, (2) to stock of the successor
corporation in a merger (unless the merger alters the contract
rights of the stock and the charter does not reserve the right
to do so, or converts the stock in whole or in part into
something other than stock of the successor corporation, cash or
certain other interests), (3) to stock that is not entitled
to be voted on the transaction, other than solely because of
Section 3-106
of the MGCL, or that the stockholder did not own on the record
date for determining stockholders entitled to vote on the
transaction, (4) if the corporations charter provides
that the holders of the stock are not entitled to exercise the
rights of an objecting stockholder or (5) if stock is that
of an open-end investment company registered with the SEC under
the Investment Company Act of 1940 and the stock is valued in
the transaction at its net asset value. Except in the case of
appraisal rights existing as a result of the MCSAA (as discussed
above under the heading Maryland Control Share
Acquisition Act), these appraisal rights are available
only when the stockholder files with the corporation a timely,
written objection to the transaction and does not vote in favor
of the transaction. In addition, the stockholder must make a
demand on the successor corporation for payment of the stock
within 20 days of the acceptance of articles by the State
Department of Assessments and Taxation of Maryland, stating the
number and class of shares for which such stockholder is
demanding payment. As such, in connection with any Second-Step
Merger, if Terra Common Shares are not listed on a national
securities exchange on the date notice of the Second-Step Merger
is given to, or waived by, each of Terras stockholders (if
the Second-Step Merger is effected under
Section 3-106
of the MGCL), or the record date for determining the Terra
stockholders entitled to vote on the Second-Step Merger (if the
Second-Step Merger is not effected under
Section 3-106
of the MGCL), and a minority stockholder of Terra has complied
with the foregoing requirements, such minority stockholder will
have appraisal rights with respect to the shares held by such
minority stockholder. A stockholder who fails to comply with
these requirements is bound by the terms of the transaction.
Opinion
of Terras Financial Advisor.
On March 11, 2010, Credit Suisse rendered its oral opinion
to the Board (which was subsequently confirmed in writing by
delivery of Credit Suisses written opinion dated the same
date) to the effect that, as of March 11, 2010, the $37.15
in cash and 0.0953 of a share of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger was
fair, from a financial point of view, to such stockholders.
Credit Suisses opinion was directed to the Board and
only addressed the fairness from a financial point of view of
the $37.15 in cash and 0.0953 of a share of CF Common Stock per
Terra Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger, and did
not address any other aspect or implication of the Offer and the
Second-Step Merger. The summary of Credit Suisses opinion
in this Statement is qualified in its entirety by reference to
the full text of its written opinion, which is included as
Annex B to this Statement and sets forth the
procedures followed, assumptions made, matters considered,
qualifications and limitations on the review undertaken and
other matters considered by Credit Suisse in preparing its
opinion. Holders of Terra Common Shares are encouraged to read
this opinion carefully in its entirety. However, neither Credit
Suisses written opinion nor the summary of its opinion and
the related analyses set forth in this
25
Statement are intended to be, and they do not constitute,
advice or a recommendation to any holder of Terra Common Shares
as to whether such holder should tender any Terra Common Shares
into the Offer or act on any matter relating to the Offer and
the Second-Step Merger.
In arriving at its opinion, Credit Suisse:
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reviewed a draft, dated March 10, 2010, of the Merger
Agreement, certain related agreements, as well as certain
publicly available business and financial information relating
to Terra and CF;
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reviewed certain other information relating to Terra and CF,
including financial forecasts relating to Terra and CF (certain
of which were publicly available), as well as pricing
information related to natural gas and certain other commodities
reflected in such forecasts and data, which were provided to or
discussed with Credit Suisse by Terra;
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met with Terras management to discuss the business and
prospects of Terra and CF;
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considered certain financial and stock market data of Terra and
CF, and compared that data with similar data for other publicly
held companies in businesses Credit Suisse deemed similar to
that of Terra and CF;
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considered, to the extent publicly available, the financial
terms of certain other business combinations and transactions
which have been effected or announced; and
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considered such other information, financial studies, analyses
and investigations and financial, economic and market criteria
which Credit Suisse deemed relevant.
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In connection with its review, Credit Suisse did not
independently verify any of the foregoing information and
assumed and relied on such information being complete and
accurate in all material respects. With respect to the financial
forecasts for Terra and CF and the estimated data for Terra and
CF, the management of Terra advised Credit Suisse, and Credit
Suisse assumed, that such forecasts were reasonably prepared on
bases reflecting the best currently available estimates and
judgments of Terras management as to the future financial
performance of Terra and CF, and that such other data (including
the assumptions related to pricing of natural gas and certain
other commodities) have also been reasonably prepared on bases
reflecting the best currently available estimates of Terra. With
respect to the publicly available financial forecasts for Terra
and CF referred to above, Credit Suisse has reviewed and
discussed such forecasts with the management of Terra and has
assumed, with Terras consent, that such forecasts
represent reasonable estimates and judgments with respect to the
future financial performance of Terra and CF. Credit Suisse also
assumed, with Terras consent, that, in the course of
obtaining any regulatory or third party consents, approvals or
agreements in connection with the Offer and the Second-Step
Merger, no modification, delay, limitation, restriction or
condition would be imposed that would have an adverse effect on
Terra, CF or the Offer and the Second-Step Merger in any respect
material to the analyses of Credit Suisse and that the Offer and
the Second-Step Merger will be consummated in accordance with
the terms of the Merger Agreement without waiver, modification
or amendment of any material term, condition or agreement
thereof. Representatives of Terra advised Credit Suisse, and
Credit Suisse assumed, that the final form of the Merger
Agreement, when executed by the parties thereto, conformed to
the draft reviewed by Credit Suisse in all respects material to
its analyses. Credit Suisse also noted that payment will be made
in full by CF (on behalf of Terra) of the $123 million
termination fee payable to Yara pursuant to
Section 8.2(b)(i) of the Agreement and Plan of Merger,
dated as of February 12, 2010, by and between the Company,
Yara and Yukon Merger Sub, Inc., an indirect wholly owned
subsidiary of Yara (which transaction we refer to as the Yara
Transaction). In addition, Credit Suisse has not been requested
to make, and has not made, an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise)
of Terra or CF, nor has Credit Suisse been furnished with any
such evaluations or appraisals.
Credit Suisses opinion addressed only the fairness, from a
financial point of view, to the holders of Terra common stock of
the $37.15 in cash and 0.0953 of a share of CF Common Stock per
Terra Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger and did
not address any other aspect or implication of the Offer and the
Second-Step Merger or any other
26
agreement, arrangement or understanding entered into in
connection with the Offer and the Second-Step Merger or
otherwise, including, without limitation, the fairness of the
amount or nature of, or any other aspect relating to, any
compensation to any officers, directors or employees of any
party to the Transaction, or class of such persons, relative to
the $37.15 in cash and 0.0953 of a share of CF Common Stock per
Terra Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger or
otherwise. The issuance of Credit Suisses opinion was
approved by its authorized internal committee.
Credit Suisses opinion was necessarily based upon
information made available to it as of the date of its opinion
and financial, economic, market and other conditions as they
existed and could be evaluated on that date and upon certain
assumptions regarding such financial, economic, market and other
conditions, which are currently subject to unusual volatility
and which, if different than assumed, could have a material
impact on Credit Suisses analyses. Credit Suisses
opinion also was based on assumptions provided by Terras
management as to the pricing of natural gas and certain other
commodities, which is subject to significant volatility and
which, if different than assumed, could have a material impact
on Credit Suisses analyses. Credit Suisse did not express
any opinion as to what the value of shares of CF Common Stock
actually will be when issued to holders of Terra Common Shares
pursuant to the Offer and the Second-Step Merger or the prices
at which CF Common Stock will trade at any time. Credit
Suisses opinion did not address the merits of the Offer
and the Second-Step Merger as compared to alternative
transactions or strategies that may be available to Terra, nor
did it address Terras underlying business decision to
proceed with the Offer and the Second-Step Merger.
Credit Suisses opinion was for the information of the
Board in connection with its consideration of the Offer and the
Second-Step Merger and does not constitute advice or a
recommendation to any stockholder of Terra as to whether such
stockholder should tender any Terra Common Shares into the Offer
or act on any matter relating to the proposed Offer and the
Second-Step Merger.
In preparing its opinion, Credit Suisse performed a variety of
analyses, including those described below. The summary of Credit
Suisses valuation analyses is not a complete description
of the analyses underlying Credit Suisses opinion. The
preparation of a fairness opinion is a complex process involving
various quantitative and qualitative judgments and
determinations with respect to the financial, comparative and
other analytic methods employed and the adaptation and
application of those methods to the unique facts and
circumstances presented. As a consequence, neither Credit
Suisses opinion nor the analyses underlying its opinion
are readily susceptible to partial analysis or summary
description. Credit Suisse arrived at its opinion based on the
results of all analyses undertaken by it and assessed as a whole
and did not draw, in isolation, conclusions from or with regard
to any individual analysis, analytic method or factor.
Accordingly, Credit Suisse believes that its analyses must be
considered as a whole and that selecting portions of its
analyses, analytic methods and factors, without considering all
analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.
In performing its analyses, Credit Suisse considered business,
economic, industry and market conditions, financial and
otherwise, and other matters as they existed on, and could be
evaluated as of, the date of its opinion. No company,
transaction or business used in Credit Suisses analyses
for comparative purposes is identical to Terra, CF or the
proposed Offer and the Second-Step Merger. While the results of
each analysis were taken into account in reaching its overall
conclusion with respect to fairness, Credit Suisse did not make
separate or quantifiable judgments regarding individual
analyses. The implied reference range values indicated by Credit
Suisses analyses are illustrative and not necessarily
indicative of actual values nor predictive of future results or
values, which may be significantly more or less favorable than
those suggested by the analyses. In addition, any analyses
relating to the value of businesses or securities do not purport
to be appraisals or to reflect the prices at which businesses or
securities actually may be sold, which may depend on a variety
of factors, many of which are beyond the control Terra, CF and
of Credit Suisse. Accordingly, the estimates used in, and the
results derived from, Credit Suisses analyses are
inherently subject to substantial uncertainty.
27
Credit Suisses opinion and analyses were provided to the
Board in connection with its consideration of the proposed Offer
and the Second-Step Merger and were among many factors
considered by the Board in evaluating the proposed Offer and the
Second-Step Merger. Neither Credit Suisses opinion nor its
analyses were determinative of the Offer and the Second-Step
Merger consideration or of the views of the Board with respect
to the proposed Offer and the Second-Step Merger.
The following is a summary of the material valuation analyses
performed in connection with the preparation of Credit
Suisses opinion and reviewed with the Board on
March 11, 2010. The analyses summarized below include
information presented in tabular format. The tables alone do not
constitute a complete description of the analyses. Considering
the data in the tables below without considering the full
narrative description of the analyses, as well as the
methodologies underlying and the assumptions, qualifications and
limitations affecting each analysis, could create a misleading
or incomplete view of Credit Suisses analyses.
Terra
Analyses.
Discounted
Cash Flow Analysis.
Credit Suisse performed a discounted cash flow analysis to
calculate the estimated net present value of the unlevered
after-tax free cash flows that Terra could generate from
calendar years 2010 through 2014, using projected financial
information that was provided by Terras management, which
excluded the incremental estimated net present value of
Terras Diesel Exhaust Fluid business (which we refer to as
DEF), which Credit Suisse calculated separately. For DEF, Credit
Suisse separately calculated the estimated net present value of
the unlevered after-tax free cash flows that DEF could generate
from calendar years 2010 through 2015, using projected financial
information that was provided by Terras management
forecasts. Credit Suisse calculated a range of estimated
terminal values for Terra by applying a range of terminal
multiples of 4.5x to 7.5x to the average of Terras
estimated annual earnings before interest, taxes, depreciation
and amortization (EBITDA) for the years 2010 through 2014 (and
for the years 2010 through 2015 for the separate calculation of
DEF). The estimated free cash flows and terminal values were
then discounted to present value using discount rates ranging
from 8.5% to 12.5%. The estimated free cash flows and terminal
values of DEF were separately discounted to present value using
discount rates ranging from 10% to 25%.
These analyses indicated the following implied per share equity
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
|
|
|
|
|
Implied per Share Equity Value
|
|
|
Reference Range for Terra
|
|
Implied Value of Per Share Consideration
|
|
$29.72 to $48.88
|
|
|
$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
|
|
Selected
Public Companies Analysis.
Credit Suisse reviewed financial and stock market information of
Terra and the following selected publicly traded companies in
the fertilizer industry located in North America and outside of
North America, respectively:
North America
|
|
|
|
|
Agrium Inc.
|
|
|
|
Intrepid Potash, Inc.
|
|
|
|
The Mosaic Company
|
|
|
|
Potash Corporation of Saskatchewan Inc.
|
Outside of North America
28
|
|
|
|
|
Incitec Pivot Limited
|
|
|
|
K+S Aktiengesellschaft
|
|
|
|
Yara
|
Although none of the selected public companies is directly
comparable to Terra, the companies included were chosen because
they are publicly traded companies with operations that, for
purposes of analysis, may be considered similar to certain
operations of Terra.
Credit Suisse reviewed the multiples of the selected companies
using closing stock prices as of March 8, 2010, and
information it obtained from public filings, publicly available
research analyst estimates and other publicly available
information. Credit Suisse then applied a range of enterprise
value to estimated 2010 and 2011 EBITDA multiples for the
selected public companies to corresponding financial data for
Terra, using EBITDA estimates provided by Terra management.
This analysis indicated the following implied per share equity
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
|
|
|
|
|
Implied per Share Equity Value
|
|
|
Reference Range for Terra
|
|
Implied Value of Per Share Consideration
|
|
$33.81 to $49.05
|
|
|
$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
|
|
Selected
Transactions Analysis.
Credit Suisse reviewed certain transaction values and multiples
in the following selected publicly-announced (or proposed)
transactions, which involved companies with businesses in the
fertilizer industry:
|
|
|
|
|
Acquiror
|
|
Target
|
|
Yara
|
|
|
Terra Industries Inc.
|
|
Vale S.A.
|
|
|
Fertilizantes Fofatados S.A. Fosfertil (Bunge
Ltd.s 42.3% stake)
|
|
Agrium Inc.
|
|
|
CF Industries Holdings, Inc.
|
|
Yara International ASA
|
|
|
Saskferco Products Inc.
|
|
Incitec Pivot Limited
|
|
|
Dyno Nobel Limited
|
|
Yara
|
|
|
Kemira Growhow Oyj
|
|
Incitec Pivot Limited
|
|
|
Southern Cross Fertilisers Pty Ltd
|
|
Terra Industries Inc.
|
|
|
Mississippi Chemical Corporation
|
|
Cargill Inc.
|
|
|
IMC Global Inc.
|
|
IMC Global Inc.
|
|
|
Harris Chemical Group, Inc.
|
|
Terra Industries Inc.
|
|
|
Imperial Chemical Industries PLCs fertilizer business
|
|
Agrium Inc.
|
|
|
Viridian Inc.
|
|
Potash Corporation of Saskatchewan Inc.
|
|
|
Arcadian Corporation
|
|
While none of the selected transactions are directly comparable
with the proposed Offer and the Second-Step Merger, the selected
transactions involve companies with operations that, for
purposes of analysis, may be considered similar to certain
operations of Terra.
Credit Suisse reviewed, among other things, the enterprise value
to LTM EBITDA multiples implied by the selected transactions for
each of the target companies involved in the selected
transactions based on publicly available financial information
with respect to those target companies. The enterprise value for
each of the target companies was based on the equity value of
those target companies implied by the applicable transaction.
Credit Suisse then applied a range of enterprise value to LTM
EBITDA multiples from the target companies (other than Terra in
the Yara Terra proposed transaction and CF
Industries Holdings, Inc. in the
29
Agrium Inc. CF Holdings Industries, Inc. proposal)
involved in the selected transactions to the following financial
data for Terra:
|
|
|
|
|
2009 EBITDA
|
|
|
|
Average EBITDA from
2002-2008
|
|
|
|
Peak EBITDA from
2002-2008
|
This analysis indicated the following implied per share equity
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
|
|
|
|
|
Implied per Share Equity Value
|
|
|
Reference Range for Terra
|
|
Implied Value of Per Share Consideration
|
|
$13.60 - $32.97
|
|
|
$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
|
|
Newco
Analyses.
Discounted
Cash Flow Analysis.
Credit Suisse performed a discounted cash flow analysis to
calculate the estimated net present value of the pro forma
unlevered after-tax free cash flows that CF could generate from
calendar years 2010 through 2014 assuming that the proposed
Offer and the Second-Step Merger are consummated, using
projected financial information that was provided by
Terras management, which excluded the incremental
estimated net present value of the DEF business. Credit Suisse
calculated a range of estimated terminal values for CF after
giving effect to the Offer and the Second-Step Merger by
applying a range of terminal multiples of 4.5x to 7.5x to the
average of Terras and CFs estimated annual EBITDA
for the years 2010 through 2014, which included adjustments for
certain synergies projected by CF and adjusted by Terras
management. The estimated free cash flows and terminal values
were then discounted to present value using discount rates
ranging from 8.5% to 12.5%. The implied equity values were
divided by the number of pro forma shares outstanding for CF
assuming the proposed Offer and the Second-Step Merger are
consummated, and multiplied by 0.0953 (the share consideration
of CF Common Stock to be received per Terra Common Share
pursuant to the proposed Offer and the Second-Step Merger) and
added to the $37.15 in cash to be received per Terra Common
Share pursuant to the Offer and Second-Step Merger.
This analysis indicated the following implied per share offer
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
|
|
|
|
|
Implied per Share Offer Value
|
|
|
Reference Range for Terra
|
|
Implied Value of Per Share Consideration
|
|
$42.09 - $48.15
|
|
|
$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
|
|
Selected
Public Companies Analysis.
Credit Suisse reviewed financial and stock market information of
Terra and CF and the selected publicly traded companies listed
above under the heading Terra Analyses
Selected Public Companies Analysis. Although none of the
selected public companies is directly comparable to Terra or CF,
the companies included were chosen because they are publicly
traded companies with operations that, for purposes of analysis,
may be considered similar to certain operations of Terra and CF.
Credit Suisse reviewed the multiples of the selected companies
using closing stock prices as of March 8, 2010, and
information it obtained from public filings, publicly available
research analyst estimates and other publicly available
information. Credit Suisse then applied a range of enterprise
value to estimated 2010 and 2011 EBITDA multiples for the
selected public companies to corresponding financial data for
Terra and CF assuming that the proposed Offer and the
Second-Step Merger are consummated, using EBITDA estimates
30
provided by Terra management, which included adjustments for
certain synergies projected by CF and adjusted by Terras
management. The implied equity values were divided by the number
of pro forma shares outstanding for CF assuming the proposed
Offer and the Second-Step Merger are consummated, and multiplied
by 0.0953 (the share consideration of CF Common Stock to be
received per Terra Common Share pursuant to the proposed Offer
and the Second-Step Merger) and added to the $37.15 in cash to
be received per Terra Common Share pursuant to the Offer and
Second-Step Merger.
This analysis indicated the following implied per share offer
value reference range for Terra Common Shares, as compared to
the cash and the implied value of CF Common Stock per Terra
Common Share to be received by the holders of Terra Common
Shares pursuant to the Offer and the Second-Step Merger:
|
|
|
|
|
Implied per Share Offer Value
|
|
|
Reference Range for Terra
|
|
Implied Value of Per Share Consideration
|
|
$43.50 - $50.65
|
|
|
$46.96 (based on the closing stock price of CF Common Stock as
of March 8, 2010)
|
|
Other
Matters.
Terra engaged Credit Suisse as its financial advisor in
connection with the proposed Offer and the Second-Step Merger.
Terra selected Credit Suisse based on Credit Suisses
qualifications, experience and reputation, and its familiarity
with Terra and its business. Credit Suisse is an internationally
recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with
mergers and acquisitions, leveraged buyouts, negotiated
underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and
valuations for corporate and other purposes. Pursuant to
Terras engagement letter with Credit Suisse, Terra has
agreed to pay Credit Suisse a customary fee for its services in
connection with the Offer and the Second-Step Merger, a
significant portion of which is contingent upon consummation of
the Offer and the Second-Step Merger. Credit Suisse also became
entitled to a fee upon the rendering of its opinion. Terra has
also agreed to reimburse Credit Suisse for certain expenses and
to indemnify Credit Suisse and certain related parties for
certain liabilities and other items arising out of or relating
to Credit Suisses engagement.
Credit Suisse and its affiliates have in the past provided
investment banking and other financial services to Terra and its
affiliates, for which Credit Suisse and its affiliates have
received compensation, including having acted as
(i) financial advisor to Terra in connection with the Yara
Transaction upon the closing of which Credit Suisse would also
have been entitled to receive a fee, (ii) financial advisor
to Terra in connection with the consideration of various
proposals made by CF for a business combination with Terra,
(iii) financial advisor to Terra in 2008 in connection with
the review of Terras strategic alternatives (which
alternatives included a potential transaction involving CF), and
(iv) joint lead managing underwriter in connection with the
2009 offering by a subsidiary of Terra of $600,000,000 of
7.75% Senior Notes due 2019. Credit Suisse and its
affiliates may in the future provide financial advice and
services to Terra, CF and their respective affiliates or any
company that may be involved in the Offer or Second-Step Merger
for which Credit Suisse and its affiliates would expect to
receive compensation. Credit Suisse is a full service securities
firm engaged in securities trading and brokerage activities as
well as providing investment banking and other financial
services. In the ordinary course of business, Credit Suisse and
its affiliates may acquire, hold or sell, for Credit
Suisses and its affiliates own accounts and the
accounts of customers, equity, debt and other securities and
financial instruments (including bank loans and other
obligations) of Terra, CF and any other companies that may be
involved in the Offer or Second-Step Merger, as well as provide
investment banking and other financial services to such
companies.
Forward-Looking
Statements.
Certain statements in this Statement may constitute
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements
made in connection with the Exchange Offer proposed by CF
referred to in this Statement are not subject to the safe harbor
protections provided to forward-looking statements under the
Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based upon assumptions as to
future events that may not prove to be accurate. Actual outcomes
31
and results may differ materially from what is expressed or
forecasted in these forward-looking statements. As a result,
these statements speak only as of the date they were made and
Terra undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise, except as otherwise
required by law. Words such as expects,
intends, plans, projects,
believes, estimates, and similar
expressions are used to identify these forward-looking
statements. The forward-looking statements contained herein
include statements about the Offer and Second-Step Merger.
Forward-looking statements are not guarantees of future
performance and involve risks, uncertainties and assumptions
that are difficult to predict. These risks, uncertainties and
assumptions include, among others:
|
|
|
|
|
the possibility that various closing conditions to the Offer and
Second-Step Merger may not be satisfied or waived,
|
|
|
|
uncertainty as to how many Terra Common Shares will be tendered
into the Offer,
|
|
|
|
the risk that competing offers will be made,
|
|
|
|
the risk that Offer or Second-Step Merger will not close within
the anticipated time periods,
|
|
|
|
the risk that disruptions from the Offer and Second-Step Merger
will harm Terras relationships with its customers,
employees and suppliers,
|
|
|
|
the diversion of management time on issues related to the Offer
and Second-Step Merger,
|
|
|
|
the outcome of any legal proceedings challenging the Offer or
Second-Step Merger,
|
|
|
|
the amount of the costs, fees, expenses and charges related to
the Offer and Second-Step Merger,
|
|
|
|
changes in financial and capital markets,
|
|
|
|
general economic conditions within the agricultural industry,
|
|
|
|
competitive factors and price changes (principally, sales prices
of nitrogen and methanol products and natural gas costs),
|
|
|
|
changes in product mix,
|
|
|
|
changes in the seasonality of demand patterns,
|
|
|
|
changes in weather conditions,
|
|
|
|
changes in environmental and other government regulations,
|
|
|
|
changes in agricultural regulations and
|
|
|
|
changes in the securities trading markets.
|
Additional information as to these factors can be found in
Terras 2009 Annual Report/10-K and in Terras
subsequent Quarterly Reports on
Form 10-Q
(when available), in each case in the sections entitled
Business, Risk Factors, Legal
Proceedings, and Managements Discussion and
Analysis of Financial Condition and Results of Operations,
and in the Notes to the consolidated financial statements.
The following Exhibits are filed herewith or incorporated herein
by reference:
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(a)(1)
|
|
Joint press release issued by CF Industries Holdings, Inc.
and Terra Industries Inc., dated March 12, 2010, filed as
Exhibit 99.1 to Terra Industries Inc.s Form 8-K,
dated March 12, 2010 and incorporated herein by reference.
|
(a)(2)
|
|
Preliminary Prospectus/Offer to Exchange, dated March 5, 2010,
filed as Exhibit (a)(4) to CF Industries Holdings,
Inc.s Schedule TO filed on March 5, 2010 and incorporated
herein by reference.
|
32
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(a)(3)
|
|
Form of Letter of Transmittal, filed as Exhibit (a)(1)(A)
to CF Industries Holdings, Inc.s Schedule TO filed on
March 5, 2010 and incorporated herein by reference.
|
(a)(4)
|
|
Form of Notice of Guaranteed Delivery, filed as
Exhibit (a)(1)(B) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated herein by
reference.
|
(a)(5)
|
|
Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees, filed as Exhibit (a)(1)(C) to
CF Industries Holdings, Inc.s Schedule TO filed on March
5, 2010 and incorporated herein by reference.
|
(a)(6)
|
|
Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees, filed as
Exhibit (a)(1)(D) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated herein by
reference.
|
(a)(7)
|
|
Form of Guidelines for Certificate of Taxpayer Identification
Number on Form W-9, filed as Exhibit (a)(1)(E) to CF
Industries Holdings, Inc.s Schedule TO filed on March 5,
2010 and incorporated herein by reference.
|
(a)(8)
|
|
Agreement and Plan of Merger dated as of March 12, 2010 by
and among CF Industries Holdings, Inc., Composite Merger
Corporation and Terra Industries Inc., filed as Exhibit 2.1
to Terra Industries Inc.s Form
8-K dated
March 12, 2010 and incorporated herein by reference.
|
(e)(1)
|
|
Employment Severance Agreement between Terra Industries Inc. and
Michael L. Bennett dated October 5, 2006, filed as
Exhibit 10.1 to Terra Industries Inc.s Form 8-K
dated October 5, 2006 and incorporated herein by reference.
|
(e)(2)
|
|
Form of Employment Severance Agreement for Section 16(b)
Executive Officers, filed as Exhibit 10.2 to Terra
Industries Inc.s Form 8-K dated October 5, 2006 and
incorporated herein by reference.
|
(e)(3)
|
|
Amendment Number One to Employment Severance Agreement, filed as
Exhibit 10.1.31 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2007 and
incorporated herein by reference.
|
(e)(4)
|
|
Trust Agreement, dated as of February 12, 2010, between Terra
Industries Inc. and Wells Fargo Bank, N.A.
|
(e)(5)
|
|
Form of Indemnity Agreement of Terra Industries Inc., filed as
Exhibit 10.1 to Terra Industries Inc.s Form 8-K
dated July 7, 2006 and incorporated herein by reference.
|
(e)(6)
|
|
Terra Industries Inc. Stock Incentive Plan of 2002, filed as
Exhibit 10.1.18 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2001 and
incorporated herein by reference.
|
(e)(7)
|
|
Revised Form of Restricted Stock Award of Terra Industries Inc.
under its Stock Incentive Plan of 2002, filed as
Exhibit 10.9 to Terra Industries Inc.s Form 10-Q
for the quarter ended September 30, 2005 and incorporated herein
by reference.
|
(e)(8)
|
|
Form of Long-Term Incentive Award for Performance Shares of
Terra Industries Inc. under its Stock Incentive Plan of 2002,
filed as Exhibit 10.1.23 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2005 and
incorporated herein by reference.
|
(e)(9)
|
|
Form of Unrestricted Annual Share Award to Non-Employee
Directors under Terra Industries Inc.s Stock Incentive
Plan of 2002, filed as Exhibit 99.1 to Terra Industries
Inc.s Form 8-K dated August 14, 2006 and
incorporated herein by reference.
|
(e)(10)
|
|
2007 Omnibus Incentive Compensation Plan, adopted by the Board
of Directors of Terra Industries Inc. and subsequently approved
by its stockholders at the annual meeting of Terra Industries
Inc. on May 8, 2007, attached as Appendix A to Terra Industries
Inc.s Proxy Statement on Schedule 14A filed with the
Securities and Exchange Commission on March 15, 2007 and
incorporated herein by reference.
|
(e)(11)
|
|
Amendment to Restricted Share Agreement, filed as
Exhibit 10.1.32 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2007 and
incorporated herein by reference.
|
33
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(e)(12)
|
|
Amendment to Performance Share Award Agreement, filed as
Exhibit 10.1.33 to Terra Industries Inc.s
Form 10-K for the year ended December 31, 2007 and
incorporated herein by reference.
|
(e)(13)
|
|
Form of Performance Share Award Agreement, filed as
Exhibit 10.2 to Terra Industries Inc.s Form 10-Q
for the quarter ended June 30, 2008 and incorporated herein by
reference.
|
(e)(14)
|
|
Revised Form of Long-Term Incentive Award for Performance Shares
under the 2007 Terra Industries Inc. Omnibus Stock Incentive
Plan, filed as Exhibit 10.1 to Terra Industries Inc.s
Form 10-Q for the quarter ended March 31, 2009 and
incorporated herein by reference.
|
(e)(15)
|
|
2010 Officers and Key Employees Annual Incentive Plan of Terra
Industries Inc.
|
(e)(16)
|
|
Item 3 to Terra Industries Inc.s Schedule 14D-9, filed on
March 5, 2009 and incorporated herein by reference.
|
34
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is
true, complete and correct.
TERRA INDUSTRIES INC.
|
|
|
|
By:
|
/s/ Michael
L. Bennett
|
Name: Michael L. Bennett
|
|
|
|
Title:
|
President and Chief Executive Officer
|
Dated: March 12, 2010
35
EXHIBIT INDEX
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(a)(1)
|
|
Joint press release issued by CF Industries Holdings, Inc.
and Terra Industries Inc., dated March 12, 2010, filed as
Exhibit 99.1 to Terra Industries Inc.s
Form 8-K,
dated March 12, 2010 and incorporated herein by reference.
|
(a)(2)
|
|
Preliminary Prospectus/Offer to Exchange, dated March 5,
2010, filed as Exhibit (a)(4) to CF Industries
Holdings, Inc.s Schedule TO filed on March 5,
2010 and incorporated herein by reference.
|
(a)(3)
|
|
Form of Letter of Transmittal, filed as Exhibit (a)(1)(A)
to CF Industries Holdings, Inc.s Schedule TO filed on
March 5, 2010 and incorporated herein by reference.
|
(a)(4)
|
|
Form of Notice of Guaranteed Delivery, filed as
Exhibit (a)(1)(B) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated herein
by reference.
|
(a)(5)
|
|
Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees, filed as
Exhibit (a)(1)(C) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated
herein by reference.
|
(a)(6)
|
|
Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees, filed
as Exhibit (a)(1)(D) to CF Industries Holdings, Inc.s
Schedule TO filed on March 5, 2010 and incorporated
herein by reference.
|
(a)(7)
|
|
Form of Guidelines for Certificate of Taxpayer Identification
Number on
Form W-9,
filed as Exhibit (a)(1)(E) to CF Industries Holdings,
Inc.s Schedule TO filed on March 5, 2010 and
incorporated herein by reference.
|
(a)(8)
|
|
Agreement and Plan of Merger dated as of March 12, 2010 by
and among CF Industries Holdings, Inc., Composite Merger
Corporation and Terra Industries Inc., filed as Exhibit 2.1
to Terra Industries Inc.s Form
8-K dated
March 12, 2010 and incorporated herein by reference.
|
(e)(1)
|
|
Employment Severance Agreement between Terra Industries Inc. and
Michael L. Bennett dated October 5, 2006, filed as
Exhibit 10.1 to Terra Industries Inc.s
Form 8-K
dated October 5, 2006 and incorporated herein by reference.
|
(e)(2)
|
|
Form of Employment Severance Agreement for Section 16(b)
Executive Officers, filed as Exhibit 10.2 to Terra
Industries Inc.s
Form 8-K
dated October 5, 2006 and incorporated herein by reference.
|
(e)(3)
|
|
Amendment Number One to Employment Severance Agreement, filed as
Exhibit 10.1.31 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2007 and incorporated
herein by reference.
|
(e)(4)
|
|
Trust Agreement, dated as of February 12, 2010,
between Terra Industries Inc. and Wells Fargo Bank, N.A.
|
(e)(5)
|
|
Form of Indemnity Agreement of Terra Industries Inc., filed as
Exhibit 10.1 to Terra Industries Inc.s
Form 8-K
dated July 7, 2006 and incorporated herein by reference.
|
(e)(6)
|
|
Terra Industries Inc. Stock Incentive Plan of 2002, filed as
Exhibit 10.1.18 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2001 and incorporated
herein by reference.
|
(e)(7)
|
|
Revised Form of Restricted Stock Award of Terra Industries Inc.
under its Stock Incentive Plan of 2002, filed as
Exhibit 10.9 to Terra Industries Inc.s
Form 10-Q
for the quarter ended September 30, 2005 and incorporated
herein by reference.
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(e)(8)
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Form of Long-Term Incentive Award for Performance Shares of
Terra Industries Inc. under its Stock Incentive Plan of 2002,
filed as Exhibit 10.1.23 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2005 and incorporated
herein by reference.
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(e)(9)
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Form of Unrestricted Annual Share Award to Non-Employee
Directors under Terra Industries Inc.s Stock Incentive
Plan of 2002, filed as Exhibit 99.1 to Terra Industries
Inc.s
Form 8-K
dated August 14, 2006 and incorporated herein by reference.
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36
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Exhibit
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Number
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Description
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(e)(10)
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2007 Omnibus Incentive Compensation Plan, adopted by the Board
of Directors of Terra Industries Inc. and subsequently approved
by its stockholders at the annual meeting of Terra Industries
Inc. on May 8, 2007, attached as Appendix A to Terra
Industries Inc.s Proxy Statement on Schedule 14A
filed with the Securities and Exchange Commission on
March 15, 2007 and incorporated herein by reference.
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(e)(11)
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Amendment to Restricted Share Agreement, filed as
Exhibit 10.1.32 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2007 and incorporated
herein by reference.
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(e)(12)
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Amendment to Performance Share Award Agreement, filed as
Exhibit 10.1.33 to Terra Industries Inc.s
Form 10-K
for the year ended December 31, 2007 and incorporated
herein by reference.
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(e)(13)
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Form of Performance Share Award Agreement, filed as
Exhibit 10.2 to Terra Industries Inc.s
Form 10-Q
for the quarter ended June 30, 2008 and incorporated herein
by reference.
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(e)(14)
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Revised Form of Long-Term Incentive Award for Performance Shares
under the 2007 Terra Industries Inc. Omnibus Stock Incentive
Plan, filed as Exhibit 10.1 to Terra Industries Inc.s
Form 10-Q
for the quarter ended March 31, 2009 and incorporated
herein by reference.
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(e)(15)
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2010 Officers and Key Employees Annual Incentive Plan of Terra
Industries Inc.
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(e)(16)
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Item 3 to Terra Industries Inc.s
Schedule 14D-9,
filed on March 5, 2009 and incorporated herein by
reference.
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37
ANNEX A
Directors,
Executive Officers and Affiliates
of Terra Industries Inc.
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Directors
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David E. Fisher
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Dod A. Fraser
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Martha O. Hesse
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Peter S. Janson
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James R. Kroner
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John N. Lilly
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Dennis McGlone
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Henry R. Slack
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David A. Wilson
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Irving B. Yoskowitz
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Executive Officers
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Michael L. Bennett*
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Edward J. Dillon
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Joe A. Ewing
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Joseph D. Giesler
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Daniel D. Greenwell
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John W. Huey
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Geoffrey J. Obeney
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Richard S. Sanders Jr.
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Earl B. Smith
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Douglas M. Stone
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A-1
ANNEX B
March 11, 2010
Board of Directors
Terra Industries Inc.
Terra Center
600 Fourth Street
P.O. Box 6000
Sioux City, Iowa 51102
Members of the Board:
You have asked us to advise you with respect to the fairness to
the holders of common stock, without par value (Company
Common Stock), of Terra Industries Inc. (the
Company), from a financial point of view, of
the Consideration (as defined below) to be received by such
stockholders pursuant to the terms of the Agreement and Plan of
Merger, to be entered into (the Merger
Agreement) by and among CF Industries Holdings, Inc.
(Parent), Composite Merger Corporation, an
indirect wholly owned subsidiary of Parent (Merger
Sub) and the Company. The Merger Agreement provides
for, among other things, (i) the exchange offer (the
Offer) by Merger Sub to purchase all of the
outstanding shares of Company Common Stock at a per share
purchase price of $37.15 in cash (the Cash
Consideration), and 0.0953 shares of common
stock, par value $0.01 per share (Parent Common
Stock), of Parent (the Stock
Consideration and, together with the Cash
Consideration, the Consideration), and
(ii) the subsequent merger (the Merger
and, together with the Offer, the
Transaction) of Merger Sub with and into the
Company, whereby the Company will become a wholly owned
subsidiary of Parent and each outstanding share of Company
Common Stock not acquired in the Offer, other than those shares
owned by Parent, Merger Sub and the Company or any wholly owned
subsidiary of Parent or the Company, will be converted into the
right to receive the Consideration.
In arriving at our opinion, we have reviewed a draft of the
Merger Agreement, dated March 10, 2010, certain related
agreements, as well as certain publicly available business and
financial information relating to the Company and Parent. We
also have reviewed certain other information relating to the
Company and Parent, including financial forecasts relating to
the Company and Parent (certain of which were publicly
available), as well as pricing information related to natural
gas and certain other commodities reflected in such forecasts
and data, which were provided to or discussed with us by the
Company. We also have met with the management of the Company to
discuss the business and prospects of the Company and Parent. We
have also considered certain financial and stock market data of
the Company and Parent, and we have compared that data with
similar data for other publicly held companies in businesses we
deemed similar to that of the Company and Parent and we have
considered, to the extent publicly available, the financial
terms of certain other business combinations and transactions
which have been effected or announced. We also considered such
other information, financial studies, analyses and
investigations and financial, economic and market criteria which
we deemed relevant.
In connection with our review, we have not independently
verified any of the foregoing information and have assumed and
relied on such information being complete and accurate in
B-1
Board of
Directors
Terra Industries Inc.
March 11, 2010
Page 2
all material respects. With respect to the financial forecasts
for the Company and Parent and the estimated data for the
Company and Parent that we have reviewed, the management of the
Company has advised us, and we have assumed, that such forecasts
have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the
Companys management as to the future financial performance
of the Company and Parent, and that such other data (including
the assumptions related to pricing of natural gas and certain
other commodities) have also been reasonably prepared on bases
reflecting the best currently available estimates of the
Company. With respect to the publicly available financial
forecasts for the Company and Parent referred to above, we have
reviewed and discussed such forecasts with the management of the
Company and have assumed, with your consent, that such forecasts
represent reasonable estimates and judgments with respect to the
future financial performance of the Company and Parent. We have
also assumed, with your consent, that in the course of obtaining
any regulatory or third party consents, approvals or agreements
in connection with the Transaction, no modification, delay,
limitation, restriction or condition will be imposed that would
have an adverse effect on the Company, Parent or the Transaction
in any respect material to our analyses and that the Transaction
will be consummated in accordance with the terms of the Merger
Agreement without waiver, modification or amendment of any
material term, condition or agreement thereof. Representatives
of the Company have advised us, and we have assumed, that the
terms of the Merger Agreement, when executed, will conform in
all respects material to our analyses to the terms reflected in
the draft reviewed by us. We also noted that payment will be
made in full by Parent (on behalf of the Company) of the
$123 million termination fee payable to Yara International
ASA (Yara) pursuant to Section 8.2(b)(i)
of the Agreement and Plan of Merger, dated as of
February 12, 2010, by and between the Company, Yara and
Yukon Merger Sub, Inc., an indirect wholly owned subsidiary of
Yara (the Yara Merger Agreement). In
addition, we have not been requested to make, and have not made,
an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or Parent,
nor have we been furnished with any such evaluations or
appraisals.
Our opinion addresses only the fairness, from a financial point
of view, to the holders of Company Common Stock of the
Consideration to be received in the Transaction and does not
address any other aspect or implication of the Transaction or
any other agreement, arrangement or understanding entered into
in connection with the Transaction or otherwise, including,
without limitation, the fairness of the amount or nature of, or
any other aspect relating to, any compensation to any officers,
directors or employees of any party to the Transaction, or class
of such persons, relative to the Consideration or otherwise. The
issuance of this opinion was approved by our authorized internal
committee.
Our opinion is necessarily based upon information made available
to us as of the date hereof and financial, economic, market and
other conditions as they exist and can be evaluated on the date
hereof and upon certain assumptions regarding such financial,
economic, market and other
B-2
Board of Directors
Terra Industries Inc.
March 11, 2010
Page 3
conditions, which are currently subject to unusual volatility
and which, if different than assumed, could have a material
impact on our analyses. Our opinion also is based on assumptions
provided by the Companys management as to the pricing of
natural gas and certain other commodities, which is subject to
significant volatility and which, if different than as assumed,
could have a material impact on our analyses. We are not
expressing any opinion as to what the value of shares of
Parent Common Stock actually will be when issued to the holders
of the Company Common Stock pursuant to the Transaction or the
prices at which shares of Parent Common Stock will trade at any
time. Our opinion does not address the merits of the Transaction
as compared to alternative transactions or strategies that may
be available to the Company, nor does it address the underlying
business decision of the Company to proceed with the Transaction.
We have acted as financial advisor to the Company in connection
with the Transaction and will receive a fee for our services, a
significant portion of which is contingent upon the consummation
of the Transaction. We also became entitled to receive a fee
upon the rendering of our opinion. In addition, the Company has
agreed to indemnify us and certain related parties for certain
liabilities and other items arising out of or related to our
engagement. We and our affiliates have in the past provided
investment banking and other financial services to the Company
and its affiliates, for which we and our affiliates have
received compensation, including having acted as
(i) financial advisor to the Company in connection with its
entry into the Yara Merger Agreement upon the closing of which
we would have also been entitled to receive a fee,
(ii) financial advisor to the Company in connection with
the consideration of various proposals made by Parent for a
business combination with the Company, (iii) financial
advisor to the Company in 2008 in connection with the review of
the Companys strategic alternatives (which alternatives
included a potential transaction involving Parent), and
(iv) joint lead managing underwriter in connection with a
subsidiary of the Companys offering in 2009 of
$600,000,000 of 7.75% Senior Notes due 2019. We and our
affiliates may in the future provide financial advice and
services, to the Company, Parent and their respective affiliates
or any company that may be involved in the Transaction for which
we and our affiliates would expect to receive compensation. We
are a full service securities firm engaged in securities trading
and brokerage activities as well as providing investment banking
and other financial services. In the ordinary course of our
business, we and our affiliates may acquire, hold or sell, for
our and our affiliates own accounts and for the accounts
of customers, equity, debt and other securities and financial
instruments (including bank loans and other obligations) of the
Company, Parent and any other companies that may be involved in
the Transaction, as well as provide investment banking and other
financial services to such companies.
It is understood that this letter is for the information of the
Board of Directors of the Company in connection with its
evaluation of the Transaction and does not constitute a
recommendation to any stockholder as to whether such stockholder
should tender any shares of Company Common Stock into the Offer
or act on any matter relating to the proposed Transaction.
B-3
Board of Directors
Terra Industries Inc.
March 11, 2010
Page 4
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Consideration to be received by the
holders of Company Common Stock in the Transaction is fair, from
a financial point of view, to such stockholders.
Very truly
yours,
CREDIT SUISSE SECURITIES (USA) LLC
By: /s/ David
A. DeNunzio
Title: Managing Director
B-4