PRER14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant þ |
Filed by a Party other than the Registrant o |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to 240.14a-12 |
Terra Industries Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box): |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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Form, Schedule or Registration Statement No.: |
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Date Filed: |
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PRELIMINARY
PROXY SUBJECT TO COMPLETION
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Terra Industries Inc.
600 Fourth Street
P.O. Box 6000
Sioux City, IA 51102-6000
Telephone: (712) 277-1340 |
[ ], 2009
To Our Stockholders:
We are pleased to invite you to attend the annual meeting of stockholders of Terra Industries Inc.
to be held at [ ] on [ ], 2009, at [ ].
The accompanying notice of our 2009 Annual Meeting of Stockholders and Proxy Statement describe the
matters to be considered and voted upon at the annual meeting. In conjunction with the annual
meeting, we will also report on Terra and its business, and you will have an opportunity to discuss
matters of interest concerning Terra.
As you may already be aware, on February 23, 2009, CF Industries Holdings, Inc., through its wholly
owned subsidiary, Composite Acquisition Corporation, commenced an unsolicited exchange offer to
acquire all outstanding common shares of Terra at a fixed exchange ratio of 0.4235 common shares of
CF for each common share of Terra (the Offer). On March 9, 2009, CF sent a letter to the
Board reaffirming CFs intent to pursue a business combination with Terra and stating that CF would
be prepared to enter into a negotiated merger agreement with Terra on the basis of an exchange
ratio based on $27.50 for each Terra common share, with an exchange ratio of not less than 0.4129
of a CF common share and not more than 0.4539 of a CF common share
(the March 9 Proposal). On March 23, 2009, CF sent another letter to the Board stating that CF would be
prepared to enter into a negotiated merger agreement with Terra on the basis of an exchange ratio based on
$30.50 for each Terra common share, with an exchange ratio of not less than 0.4129 of a CF common share
and not more than 0.4539 of a CF common share, the same collar as the
March 9 Proposal (the March 23
Proposal, and together with the Offer and the March 9 Proposal,
CFs Proposals).
In an
attempt to advance CFs proposal for a business combination with
Terra, on
February 3, 2009, CF Composite, Inc., a wholly owned subsidiary of CF, notified us that it
intends to nominate and, together with CF and certain other participants, solicit proxies for an opposition
slate of three nominees for election as directors at the annual meeting.
After careful consideration of the terms
of CFs Proposals in consultation with Terras financial and legal advisors, the Board
unanimously concluded that CFs Proposals run counter to Terras strategic objectives,
substantially undervalue Terra both absolutely and relative to CF and would deliver less value to
Terras stockholders than would owning Terra on a stand-alone
basis.
As we have previously communicated to you, our Board of Directors and management remain committed
to enhancing stockholder value by continuing to execute our strategic plan, which we believe will
deliver significantly more value to stockholders than CFs Proposals. The initiation by CF of a costly
and disruptive proxy contest interferes with the execution of our strategic plan and our
realization of this goal. Any support for CF Composites
nominees would be an endorsement of CFs Proposals, which are
not in the best interests of Terra and its stockholders. Please read the section of
the accompanying Proxy Statement entitled CFs
Proposals for more information on CFs Proposals and the
reasons for the Boards
recommendation.
1
The Board of Directors unanimously recommends that you vote FOR the election of each of the Board
of Directors nominees named on the enclosed WHITE proxy card. The Board of Directors urges
you NOT to vote or submit any blue proxy card sent to you by CF or any of its affiliates.
We hope all our stockholders will be able to attend the annual meeting. It is important that you be represented, whether or not you plan to attend the annual meeting
personally. Please promptly complete, sign, date and return the enclosed WHITE proxy card
in the postage-paid envelope provided to ensure that your vote will be received and counted. In the
alternative, you may vote your WHITE proxy card by telephone or via the Internet as
described in more detail in the section of the accompanying Proxy Statement entitled How To Vote;
Submitting Your Proxy; Revoking Your Proxy.
Your vote is very important to us. If you have questions or require any assistance with voting your
shares, please call our proxy solicitor, MacKenzie Partners, Inc., toll-free at (800) 322-2885.
On behalf of the Board of Directors and management, thank you for your support during 2008. We look
forward to seeing you at the meeting.
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Michael L. Bennett
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Henry R. Slack |
President and Chief Executive Officer
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Chairman |
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Terra Industries Inc.
600 Fourth Street
P.O. Box 6000
Sioux City, IA 51102-6000
Telephone: (712) 277-1340 |
Notice of 2009 Annual Meeting of Stockholders
To the Stockholders:
The annual meeting of the stockholders of Terra Industries Inc. (Terra) will be held at [ ],
on [ ], 2009 at [ ] in order to:
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elect three Class II directors to serve until the 2012 annual meeting of stockholders,
and until their successors are elected and qualified; |
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consider and act upon a proposal to ratify the Audit Committees selection of the firm
of Deloitte & Touche LLP as Terras independent registered public accounting firm for 2009;
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transact such other business as may properly come before the annual meeting. |
The above matters are described in the Proxy Statement accompanying this Notice. You are urged,
after reading the Proxy Statement, to vote your shares by proxy using one of the following methods:
(a) vote by telephone, (b) vote via the Internet or (c) complete, sign, date and return your
WHITE proxy card in the postage-paid envelope provided. Voting instructions are described
in more detail in the section of the accompanying Proxy Statement entitled How To Vote; Submitting
Your Proxy; Revoking Your Proxy.
We
also urge you NOT to vote or submit any blue proxy card sent to you by CF Industries
Holdings, Inc. or any of its affiliates. You can revoke any such proxy card you may have previously
submitted in accordance with the instructions set forth under How To Vote; Submitting Your Proxy;
Revoking Your Proxy of the accompanying Proxy Statement.
Only stockholders of record of Terras common shares at the close of business on [ ], 2009 are
entitled to notice of, and to vote at, the annual meeting.
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John W. Huey |
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Vice President, General Counsel |
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and Corporate Secretary |
[ ], 2009
1
Table of Contents
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ii
About the Annual Meeting
General
The annual meeting of the stockholders of Terra Industries Inc. (Terra or the Company) will be
held at [ ], on [ ], 2009 at [ ].
The mailing address of Terras principal executive offices is Terra Centre, 600 Fourth Street, P.O.
Box 6000, Sioux City, Iowa 51102-6000. This Proxy Statement and the accompanying WHITE
proxy card are first being sent or given to stockholders on or about [ ], 2009.
Terras
Board of Directors (the Board of Directors or Board), through this Proxy Statement and the
accompanying WHITE proxy card, is soliciting your vote on matters being submitted for
stockholder approval at the annual meeting. At the meeting, stockholders will vote on the election
of three Class II directors, the ratification of Deloitte & Touche LLP as Terras independent
registered public accountants for 2009 and such other business as may properly come before the
annual meeting.
As you may already be aware, on February 23, 2009, CF Industries Holdings, Inc. (CF), through its
wholly owned subsidiary, Composite Acquisition Corporation, commenced an unsolicited exchange offer
to acquire all outstanding common shares of Terra at a fixed exchange ratio of 0.4235 common shares
of CF for each common share of Terra (the Offer). On March 9, 2009, CF sent a letter
to the Board reaffirming CFs intent to pursue a business combination with Terra and stating that
CF would be prepared to enter into a negotiated merger agreement with Terra on the basis of an
exchange ratio based on $27.50 for each Terra common share, with an exchange ratio of not less
than 0.4129 of a CF common share and not more than 0.4539 of a CF
common share (the March 9 Proposal).
On March 23, 2009, CF sent another letter to the Board stating that CF would be prepared to
enter into a negotiated merger agreement with Terra on the basis of an exchange ratio based on
$30.50 for each Terra common share, with an exchange ratio of not less than 0.4129 of a CF
common share and not more than 0.4539 of a CF common share, the same collar as the
March 9 Proposal (the March 23 Proposal, and together with the Offer and the March 9 Proposal,
CFs Proposals).
In an attempt to advance CFs proposal for a business
combination with Terra, on
February 3, 2009, CF Composite, Inc. (CF Composite), a wholly owned subsidiary of CF, notified us
that it intends to nominate and, together with CF and certain other participants, solicit proxies
for an opposition slate of three nominees for election as directors at the annual meeting.
After careful consideration of the terms
of CFs Proposals in consultation with Terras financial and legal advisors, the Board
unanimously concluded that CFs Proposals run counter to Terras strategic objectives,
substantially undervalue Terra both absolutely and relative to CF and would deliver less value to
Terras stockholders than would owning Terra on a stand-alone
basis.
As we have previously communicated to you, our Board of Directors and management remain committed
to enhancing stockholder value by continuing to execute our strategic plan, which we believe will
deliver significantly more value to stockholders than CFs Proposals. The initiation by CF of a costly
and disruptive proxy contest interferes with the execution of our strategic plan and our
realization of this goal. Any support for CF Composites
nominees would be an endorsement of CFs Proposals, which are not in the best interests
of Terra and its
stockholders. Please read the section of
the accompanying Proxy Statement entitled CFs
Proposals for more information on CFs Proposals
and the reasons for the Boards recommendation.
The Board of Directors unanimously recommends that you vote FOR the election of each of the Board
of Directors nominees named on the WHITE proxy card accompanying this Proxy Statement.
Please read How To Vote; Submitting Your Proxy; Revoking Your Proxy for more information on how
to vote or revoke your proxy.
Nominations by CF, CF Composite, their respective affiliates and certain other related persons
(collectively, the CF Group) have NOT been endorsed by Terras Board of Directors.
We urge you NOT to sign or return any blue proxy card that you may receive from the CF Group.
The Company is not responsible for the accuracy of any information provided by or relating to the
CF
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Group contained in any proxy solicitation materials filed or disseminated by the CF Group or any
other statements that they may otherwise make.
The Board of Directors is not aware at this date of any matter proposed to be presented at the
annual meeting other than the election of directors and the ratification of the Audit Committees
selection of independent registered public accountants. The persons named on the accompanying
WHITE proxy card will have discretionary authority to vote on any other matter that is
properly presented at the meeting, according to their best judgment.
Securities Entitled To Vote
The only securities eligible to be voted at the annual meeting are Terras common shares. Only
holders of common shares at the close of business on the record date, [ ], 2009, are entitled
to vote. Each common share represents one vote, and all shares vote together as a single class.
There were [ ] common shares issued and outstanding on [ ], 2009.
Quorum; Vote Required
The presence in person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting constitutes a quorum. Stockholders are entitled to one (1) vote
per share.
A majority of all the votes cast at a meeting at which a quorum is present is sufficient to approve
any matter which properly comes before the meeting, except as otherwise provided by law or by
Terras charter, and except that a plurality of all the votes cast at a meeting at which a quorum
is present is sufficient to elect a director.
In the election for directors, every stockholder has the right to vote each share of stock owned by
such stockholder on the record date for as many persons as there are directors to be elected.
Cumulative voting is not permitted. To be elected, a director-nominee must receive a plurality of
the votes cast at the meeting. Because CF Composite has indicated that it will nominate three
candidates for election to the Board of Directors, the Company expects that the number of nominees
for election as directors at the annual meeting will exceed the number of directors to be elected
at the annual meeting. This means that the three nominees standing in the election who receive the
greatest number of votes cast at the annual meeting will be elected as directors. Only votes cast
FOR a nominee will be counted. Common shares of stockholders abstaining from voting but otherwise
present at the meeting in person or by proxy (abstentions), votes withheld and broker non-votes
will not be counted as votes cast for such purpose and therefore will have no effect on the results
of the election.
The proposal to ratify the Audit Committees selection of independent registered public accountants
must receive a majority of the votes cast at the annual meeting. Abstentions and broker non-votes
will not be counted as votes cast for such purposes and therefore will have no effect on the
results of the vote.
How To Vote; Submitting Your Proxy; Revoking Your Proxy
You may vote your shares either by voting in person at the annual meeting or by submitting a
completed proxy. By submitting a proxy, you are legally authorizing another person to vote your
shares. The enclosed WHITE proxy card designates Henry R. Slack, Michael L. Bennett and
Daniel D. Greenwell to vote your shares in accordance with the voting instructions you indicate on
your WHITE proxy card.
2
If you submit your executed WHITE proxy card designating Messrs. Slack, Bennett and
Greenwell as the individuals authorized to vote your shares, but you do not indicate how your
shares are to be voted, then your shares will be voted by those individuals in accordance with the
Board of Directors recommendations, which are described in this Proxy Statement. In addition, if
any other matters are properly brought up at the annual meeting (other than the proposals contained
in this Proxy Statement), then each of these individuals will have the authority to vote your
shares on those matters in accordance with his discretion and judgment. The Board of Directors
currently does not know of any matters to be raised at the annual meeting other than the proposals
contained in this Proxy Statement.
We urge you to vote by doing one of the following:
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Vote by Mail: You can vote your shares by mail by completing, signing, dating and
returning your WHITE proxy card in the postage-paid envelope provided. In order for
your proxy to be validly submitted and for your shares to be voted in accordance with your
instructions, we must receive your mailed WHITE proxy card by 5:00 p.m. Eastern Time,
on [ ], 2009. |
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Vote by Telephone: You can also vote your shares by calling toll free
1-888-693-8683, at any time on a touch-tone telephone and following the recorded instructions.
If you submit your proxy by telephone, then you may submit your voting instructions up until
11:59 p.m. Eastern Time, on [ ], 2009. If you are a beneficial owner, or you hold your
shares in street name as described below, please contact your bank, broker or other holder
of record to determine whether you will be able to vote by telephone. |
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Vote by Internet: You can vote your shares via the Internet by going to
www.cesvote.com and following the steps outlined on the secure Web site. If you submit your
proxy via the Internet, then you may submit your voting instructions up until 11:59 p.m.
Eastern Time, on [ ], 2009. If you are a beneficial owner, or you hold your shares in
street name as described below, please contact your bank, broker or other holder of record
to determine whether you will be able to vote via the Internet. |
The Board of Directors recommends that you do NOT sign or return any blue proxy card that may be
sent to you by the CF Group, even as a protest. Withholding authority to vote for CF Composites
nominees on a blue proxy card that the CF Group may send you is not the same as voting FOR the
Board of Directors nominees.
Your proxy is revocable. If you are a stockholder of record, after you have submitted your
WHITE proxy card, you may revoke it by mail before the annual meeting by sending a written
notice to Terras Vice President, General Counsel and Corporate Secretary at Terra Centre, 600
Fourth Street, P.O. Box 6000, Sioux City, IA 51102-6000. If you wish to revoke your submitted
WHITE proxy card and submit new voting instructions by mail, then you must sign, date and
mail a new WHITE proxy card with your new voting instructions, which we must receive by
5:00 p.m. Eastern Time, on [ ], 2009. If you are a stockholder of record and you voted your
WHITE proxy card by telephone or via the Internet, you may revoke your submitted proxy
and/or submit new voting instructions by that same method, which must be received by 11:59 p.m.
Eastern Time, on [ ], 2009. You also may revoke your WHITE proxy card by
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attending the annual meeting and voting your shares in person. Attending the annual meeting without
taking one of the actions above will not revoke your proxy. If you are a beneficial owner, or you
hold your shares in street name as described below, please contact your bank, broker or other
holder of record for instructions on how to change or revoke your vote.
The Board of Directors urges you NOT to sign or return any blue proxy card that may be sent to
you by the CF Group. If you have previously submitted a blue proxy card that may have been sent
to you by the CF Group, you may change any vote you may have cast in favor of CF Composites
nominees and vote in favor of the Board of Directors nominees by following the instructions on the
WHITE proxy card to vote by telephone or via the Internet, or by completing, signing,
dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided,
or by attending the annual meeting and voting your shares in person.
Your vote is very important to the Company. If you do not plan to attend the annual meeting, we
encourage you to read this Proxy Statement and submit your completed WHITE proxy card prior
to the annual meeting in accordance with the above instructions so that your shares will be
represented and voted in accordance with your instructions. Even if you plan to attend the annual
meeting in person, we recommend that you vote your shares in advance as described above so that
your vote will be counted if you later decide not to attend the annual meeting.
You are entitled to attend the annual meeting only if you are a stockholder of record or a
beneficial owner as of the close of business on [ ], 2009, or if you hold a valid proxy for the
annual meeting.
If your shares are not registered
in your name but in the street name of a bank, broker or other holder of record
(a nominee),
then your name will not appear in the Companys register of stockholders. Your nominee, as
the record holder of your shares, is required to vote those shares in accordance with your
instructions. If you do not give instructions to your nominee, the nominee will be entitled to
vote the shares with respect to discretionary items but will not be permitted to
vote the shares with respect to non-discretionary items (those shares are treated as
broker non-votes). If the CF Group solicits proxies to elect CFs nominees to
the Board of Directors at the annual meeting, then the election of directors will be a
non-discretionary item for any nominee holding shares on your behalf.
As a result, if your shares are held in street name and you do not provide
instructions as to how your shares are to be voted in the election of directors, your nominee
will not be able to vote your shares in the election of directors, and your shares will not be
voted for any of the Board of Directors or the CF Groups nominees. In order for you
to attend
the annual meeting, you must bring a letter or account statement showing that you beneficially
own the shares held by the nominee, as well as proper photo identification. Note that even if
you attend the annual meeting, you cannot vote the shares that are held by your nominee unless
you have a proxy from your nominee. We urge you to provide instructions to your nominee so
that your votes may be counted on this important matter. We urge you to vote your shares by
following the instructions provided on the enclosed WHITE proxy card and returning the
WHITE proxy card to your nominee to ensure that your shares will be voted on your behalf.
If you have questions or require any assistance with voting your shares, please contact our proxy
solicitor, MacKenzie Partners, Inc. at:
MACKENZIE PARTNERS, INC.
105 Madison Avenue
New York, New York 10016
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
Email: terraproxy@mackenziepartners.com
4
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting
The Proxy Statement and the 2008 Annual Report to Stockholders are available on the Companys Web
site at http://www.terraindustries.com/Investors/Terra-Industries-(TRA)/Fact-Sheet.aspx.
Information on how to obtain directions to be able to attend the meeting and vote in person are
available by contacting Kim Mathers, Communications Manager of Terra, at (712) 233-6411 or
MacKenzie Partners, Inc., toll-free at (800) 322-2885.
or
You may write to us at:
Terra Industries Inc.
Investor Relations
Terra Centre
600 Fourth Street
P.O. Box 6000
Sioux City, IA 51102-6000
The Company makes available, free of charge on its Web site, this Proxy Statement, Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the Exchange Act), as soon as reasonably practicable after these documents are
electronically filed with, or furnished to, the Securities and Exchange Commission (the SEC).
These documents are posted on the Web site at www.terraindustries.com. Select the Investors link,
followed by Terra Industries (TRA), and choose SEC Filings.
5
CFs Proposals
Background
of CFs Proposals and the Solicitation
On the evening of January 15, 2009, while in attendance at a fertilizer industry function,
Mr. Michael L. Bennett, President and Chief Executive Officer of Terra, was approached by
Mr. Stephen R. Wilson, President and Chief Executive Officer of CF. During their conversation,
Mr. Wilson delivered a letter to Mr. Bennett proposing a business combination between Terra and CF,
whereby CF would acquire all outstanding Terra common shares at a fixed exchange ratio of 0.4235 CF
common shares for each Terra common share. Mr. Wilson also noted that CF would make public the
contents of the letter that evening.
On the same evening, Mr. Bennett notified Terras Board and other members of senior management
of CFs unsolicited public proposal.
On January 16, 2009, by way of press release, Terra publicly confirmed receipt of CFs
unsolicited proposal.
That same day, Terras Board met by telephone with members of senior management, as well as
representatives from Cravath, Swaine & Moore LLP (Cravath) and Wachtell, Lipton, Rosen & Katz
(Wachtell and together with Cravath, the Legal Advisors), Terras legal advisors, and Credit
Suisse Securities (USA) LLC (Credit Suisse and together with the Legal Advisors, the Advisors),
Terras financial advisors. During this meeting, the participants discussed CFs proposal, the
fiduciary duties of the Board members in relation to the proposal and the process for evaluating
the proposal. At the conclusion of the meeting, the Board directed management and the Advisors to
continue working diligently with respect to their review of CFs proposal.
On January 26, 2009, the Board convened a special meeting with members of senior management
and representatives of the Advisors at the offices of Cravath. Also in attendance was Mr. William
R. Loomis, Jr., the former Chairman of the Board, who had been engaged by the Board as a consultant
in connection with CFs unsolicited proposal. At this meeting, management and the Advisors
presented to the Board an overview of CFs proposal and the Legal Advisors provided a review of the
fiduciary duties of a board of directors upon receipt of an unsolicited proposal, such as the one
received from CF, and reviewed with the Board certain actions that Terra was permitted to take
pursuant to Terras charter and bylaws and applicable law.
The Board carefully considered the full range of strategic, industrial, financial and legal aspects
of CFs proposal and the nature and timing of the proposal. After a lengthy discussion, the Board
unanimously concluded that such proposal did not present a compelling case for creation of
additional value for stockholders of either Terra or CF, and that such proposal substantially
undervalued Terra on an absolute basis and relative to CF. Accordingly, the Board unanimously
determined to reject CFs proposal.
On the morning of January 28, 2009, Messrs. Bennett and Slack sent a letter to
Mr. Wilson providing CF with Terras response to CFs proposal. Terra also issued and press release disclosing this letter.
6
Later that day, CF issued a press release reiterating its proposal and announcing that it
remained committed to a combination with Terra and would consider its options to that end.
On or about February 2, 2009, Mr. Wilson telephoned Mr. Bennett to request a meeting between
the two executives to discuss CFs proposal, without providing any further details.
On February 3, 2009, CF delivered a notice to Terra and issued a press release stating that it
submitted a slate of three nominees for election to Terras Board at Terras 2009 annual meeting of
stockholders and intended to commence an exchange offer for all of the outstanding Terra common
shares at the same exchange ratio as disclosed in CFs proposal of January 15, 2009.
Later that evening, Terra issued a press release in response to CFs press release, in which
it acknowledged that CF had submitted a slate of nominees and noted that Terras Board is composed
of eight highly qualified directors, seven of whom are independent. In addition, Terra restated the
Boards view that CFs proposal did not present a compelling case to create additional value for
the stockholders of either company, and that it substantially undervalued Terra on an absolute
basis and relative to CF. In the press release, Terra noted that Terras Board and management
remained committed to enhancing stockholder value by continuing to execute Terras strategic plan
which the Board believes would deliver significantly more value to Terras stockholders than CFs
proposal. Terra also noted that many of Terras major stockholders had expressed to Terra their
disinterest in CFs proposal and their support of Terras strategy (which was based on various discussions held between Terras management and its key stockholders).
On February 5, 2009, the Board convened a special meeting with the representatives of the
Advisors at the offices of Cravath. Also in attendance was Mr. Loomis. During this meeting, the
Board discussed in-depth various strategic alternatives that were available to Terra. The Board
also considered Mr. Wilsons request for a meeting with Mr. Bennett and decided that the two
executives should meet.
On February 9, 2009, Mr. Bennett, along with Mr. Loomis, had a meeting with Mr. Wilson and
Mr. Robert Kindler of Morgan Stanley, CFs financial advisor, in Sioux City, Iowa. During the
meeting, Mr. Wilson reiterated CFs interest in the business combination with Terra and its merits,
indicated CFs interest in having Mr. Bennett and other members of the Board join CFs board of
directors and noted CFs
7
desire to have Mr. Bennett serve as the Executive Vice Chairman of the combined company.
Mr. Wilson further stated that the value provided in CFs proposal was full and fair. Mr. Bennett
agreed to inform the Board of the details of their meeting at Terras upcoming Board meeting.
On February 17 and 18, 2009, the Board met at regularly scheduled meetings at the offices of
Cravath. During the meeting on February 18, 2009, attended by the members of management, Terras
Advisors, Mr. Loomis and the representatives of MacKenzie, the Board was apprised of the recent
developments relating to CFs proposal and discussed Terras ongoing strategic plan. The Board was
also provided with the details of the meeting among Messrs. Bennett, Wilson, Loomis and Kindler.
Following the meeting, Mr. Loomis telephoned Mr. Kindler and stated that the details of the
February 9th meeting were discussed with the Board and that the Boards position with respect to
CFs proposal had not changed since its rejection of the proposal on January 28, 2009.
On February 18, 2009, CF filed the Notification and Report Form with the Department of
Justice, Antitrust Division and the Federal Trade Commission relating to its proposed acquisition
of Terra.
On February 23, 2009, CF and Composite Acquisition Corporation commenced the exchange offer by
filing a Tender Offer Statement on Schedule TO and a Registration Statement on Form S-4 with the
SEC. CF also issued a press release regarding the commencement of the exchange offer.
At the same time, Mr. Wilson sent a letter to the Board, noting that CF was commencing the
Offer at the same exchange ratio as disclosed in its earlier proposal. The letter stated that CF
did not see any reason to consider changing the terms of its proposal, but that CF was prepared to
review any information Terra could provide that would justify a change in terms, and was prepared
to keep an open mind in that regard. The letter also stated that CF intended to proceed with the
proxy contest to replace three of Terras directors at the upcoming annual meeting of stockholders
of Terra. In addition, the letter stated that CF would welcome having a number of Terras board
members join the board of directors of the combined company and that it was important to CF that
Mr. Bennett be one of those board members and continue to serve in a senior executive capacity.
Later that same day, Terra issued a press release advising its stockholders to take no action
with respect to the exchange offer.
On February 25, 2009, Mr. Michael M. Wilson, President and Chief Executive Officer of Agrium
Inc., a corporation incorporated under the Canada Business Corporations Act (Agrium), submitted a
proposal by Agrium to the board of directors of CF to acquire all of the capital stock of CF for
cash and Agrium shares at $72.00 per CF common share, or a total of $3.6 billion, based on the
February 24, 2009 closing price of Agriums shares (the Agrium Offer). According to Agriums
proposal, the Agrium Offer is conditioned upon CFs termination of the Offer.
On the same day, by way of press release, CF publicly confirmed receipt of Agriums proposal.
On March 3, 2009, the Board met by telephone with members of senior management,
representatives of the Advisors and Mr. Loomis. After a thorough review of the terms and conditions
of the Offer, the Board unanimously concluded that the Offer does not present a compelling case to
create additional value for the stockholders of either Terra or CF, substantially undervalues Terra
on an absolute basis and relative to CF and is not in the best interests of Terra and its
stockholders. Accordingly, the Board unanimously determined to recommend that Terras stockholders
reject the Offer and not tender their Terra common shares in the Offer, and approved the filing of
the Solicitation/Recommendation Statement on Schedule 14D-9.
On the morning of March 9, 2009, Mr. Wilson sent a letter to the board of directors of Agrium
rejecting the Agrium Offer.
8
Also on the morning of March 9, 2009, Mr. Wilson sent a letter to the Board reaffirming CFs
intent to pursue a business combination with Terra and stating that CF would be prepared to enter
into a negotiated merger agreement with Terra on the basis of an exchange ratio based on $27.50 for
each Terra common share, with an exchange ratio of not less than 0.4129 of a CF common share and
not more than 0.4539 of a CF common share. The letter also stated that CF was prepared, as part of
this proposal, to issue participating preferred stock that would trade at parity with CF Industries
common shares so as to avoid the requirement under the New York Stock Exchange (the NYSE) rules
to obtain CF stockholder approval to issue the required number of CF common shares to Terras
stockholders.
In addition, on March 9, 2009, CF issued a press release regarding its decision to reject the
Agrium Offer and disclosing the above letter and filed an amendment to its Schedule TO.
On the morning of March 11, 2009, the Board met by telephone with members of Terras senior
management, Mr. Loomis and the representatives of the Advisors and MacKenzie. After careful
consideration of the terms of the March 9 Proposal, the Board, with the assistance of its Advisors, unanimously concluded that
CFs proposal continues to run counter to Terras strategic objectives, substantially undervalues
Terra both absolutely and relative to CF, and would deliver less value to Terras stockholders than
would owning Terra on a stand-alone basis. Later that day,
Messrs. Bennett and Slack sent a letter to Mr. Wilson
providing CF with Terras response to the March 9 Proposal. Terra also issued a press release disclosing this letter.
On March 12, 2009, CF filed a preliminary proxy statement on Schedule 14A with the SEC with
respect to its solicitation of proxies to vote in favor of the election of CFs nominees at Terras
2009 annual meeting of stockholders. On the same day, CF issued a press release announcing the
filing of its preliminary proxy materials.
On March 16, 2009, Agrium commenced an exchange offer with respect to all outstanding CF
common shares by filing a Tender Offer Statement on Schedule TO and a Registration Statement on
Form F-4 with the SEC. Agrium also issued a press release announcing commencement of its exchange
offer.
On the same day, CF issued a press release stating that it will file with the SEC the required
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Agrium exchange offer
within 10 business days.
On March 19, 2009, CF voluntarily withdrew its Notification and Report Form previously filed
with the Antitrust Division and the FTC on February 18, 2009, relating to its proposed acquisition
of Terra. CF also issued a press release announcing that it would re-file the Notification and
Report Form on March 23, 2009.
On the morning of March 23, 2009, CF filed a Solicitation/Recommendation Statement on Schedule
14D-9 with the SEC recommending that its stockholders reject the exchange offer commenced by Agrium
on March 16, 2009 with respect to outstanding CF common shares and not tender their CF common
shares pursuant to the exchange offer.
Also on the morning of March 23, 2009, Mr. Wilson sent a letter to the Board reaffirming CFs
intent to pursue a business combination with Terra and stating that CF would be prepared to enter
into a negotiated merger agreement with Terra, structured as the March 9 Proposal, on the basis of
an exchange ratio based on $30.50 for each Terra common share, with an exchange ratio of not less
than 0.4129 of a CF common share and not more than 0.4539 of a CF common share, the same collar as
CFs March 9 Proposal.
That day, CF issued a press release disclosing this letter, as well as a press release
announcing its recommendation to CF stockholders with respect to the exchange offer commenced by
Agrium for all outstanding CF common shares.
In addition, on March 23, 2009, CF filed with the SEC a revised preliminary proxy statement on
Schedule 14A with respect to its solicitation of proxies to vote in favor of the election of CFs
nominees at Terras 2009 annual meeting of stockholders.
On the morning of March 24, 2009, the Board met by telephone with members of Terras senior
management, Mr. Loomis and the representatives of the Advisors and MacKenzie. After careful
consideration of the terms of CFs March 23 Proposal, the Board, with the assistance of its
Advisors, unanimously concluded that CFs proposal continues to run counter to Terras strategic
objectives, substantially undervalues Terra both absolutely and relative to CF, and would deliver
less value to Terras stockholders than would owning Terra on a stand-alone basis. Later that day,
Messrs. Bennett and Slack sent a letter to Mr. Wilson providing CF with Terras response to the
March 23 Proposal. Terra also issued a press release disclosing this letter.
On the morning of March 27, 2009, Agrium publicly announced that it had revised its exchange
offer to acquire all outstanding shares of CF by increasing the cash portion of the consideration
from $31.70 to $35.00.
On March 29, 2009, CF issued a press release announcing that its board of directors has
recommended that CFs stockholders reject Agriums increased offer of March 27, 2009 to acquire all
outstanding shares of CF.
On March 30, 2009, Agrium filed with the SEC amendments to its Tender Offer Statement on
Schedule TO and Registration Statement on Form F-4 reflecting the terms of its increased offer to
acquire all of CFs outstanding common shares.
On April 13, 2009, the Board adopted an amendment to Terras Bylaws providing that Terras
annual meeting of stockholders will be held each calendar year on the date that is designated by
the Board, consistent with a recent change in Maryland law which eliminated the necessity for
companies to specify in their bylaws either a specific date or a 31-day period during which their
annual meeting must be held. On April 14, 2009, Terra filed a Form 8-K announcing the amendment.
On April 21, 2009, CF voluntarily withdrew its Notification and Report Form filed with respect
to the Offer on March 23, 2009 with the FTC and Antitrust Division under the HSR Act.
On April 24, 2009, CF announced that it had extended the Offer, which was scheduled to expire
at 5:00 p.m. Eastern Time, on May 15, 2009, until 5:00 p.m. Eastern Time, on June 12, 2009, unless
further extended. All other terms and conditions of the Offer remained unchanged.
On May 4, 2009, CF re-filed its Notification and Report Form with respect to the Offer with
the FTC and Antitrust Division under the HSR Act.
On May 11, 2009, Agrium publicly announced that it had revised its exchange offer to
acquire all outstanding common shares of CF by increasing the cash portion of the consideration
from $35.00 to $40.00. Agrium also announced that it had extended the expiration of the Agrium
Offer until 12:00 midnight, Eastern Time, on June 15, 2009.
On May 15, 2009, CF issued a press release announcing that its board of directors rejected
Agriums revised offer of May 11, 2009 to acquire all outstanding common shares of CF.
On May 22, 2009, CF announced that it had extended the expiration date of the Offer, which was
scheduled to expire at 5:00 p.m., Eastern Time, on June 12, 2009, until 5:00 p.m., Eastern Time, on
June 26, 2009, unless further extended. All other terms and conditions of the Offer remained
unchanged.
On June 3, 2009, CF issued a press release announcing that it had received a Request for
Additional Information (the Second Request) from the FTC in connection with its proposed business
combination with Terra. The Second Request extends the waiting period under the HSR Act during
which the FTC is permitted to review the transaction for up to an additional 30 days following CFs
compliance with the Second Request, unless earlier terminated.
On the same day, Agrium reaffirmed its offer for CF and extended the expiration of the Agrium
Offer until 12:00 midnight, Eastern Time, on June 22, 2009, from June 15, 2009.
On June 19, 2009, CF announced that it had extended the expiration date of the Offer, which
was scheduled to expire at 5:00 p.m., Eastern Time, on June 26, 2009, until 5:00 p.m., Eastern
Time, on July 10, 2009, unless further extended. All other terms and conditions of the Offer
remained unchanged.
On June 23, 2009, Agrium announced that it had extended the expiration date of the Agrium
Offer until 12:00 midnight, Eastern Time, on July 22, 2009.
Reasons
for Recommendation
After
careful consideration, including a thorough review of CFs
Proposals with Terras financial
and legal advisors, Terras Board of Directors unanimously
determined that CFs Proposals are not in the
best
9
interests of Terra and Terras stockholders. In reaching its recommendation, Terras Board of
Directors considered, among other things, that:
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A combination with CF runs counter to Terras strategic objectives
which are designed to provide substantial value differentiators to
Terras stockholders. The Board believes that the industrial
logic behind CFs Proposals is not compelling. Terra has deliberately
pursued a strategy of lowering its dependence on agricultural urea
and ammonia sales by, among other things, upgrading its product
mix to urea ammonium nitrate solutions and industrial ammonium
nitrate and increasing its sales into the industrial and
environmental markets. A combination with CF would shift that
focus back to agricultural urea and ammonia, which represent 70%
of CFs nitrogen sales and only 16% of Terras. Moreover, Terra
has deliberately located its core manufacturing assets away from
the U.S. Gulf Coast, where Terra believes import competition is most
severe.1 In
addition, Terras geographic plant positions in Oklahoma and Iowa
provide Terra with favorable transportation cost to its customers
located in the Corn Belt as compared to its U.S. Gulf Coast competitors, and its joint
venture in Trinidad provides it with access to natural
gas at a cost that historically has been lower than in the United
States. Of CFs total ammonia production volumes, 73% is located on
the U.S. Gulf Coast whereas 65% of Terras is located inland or in
gas advantaged countries. |
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CFs Proposals are opportunistic and substantially undervalue Terra on
both an absolute basis and relative to CF. Terras Board of
Directors believes that CFs Proposals do not fully reflect the
underlying fundamental value of Terras assets, operations and
strategic plan, including its strong market position, large cash
position (net of customer prepayments) at March 3, 2009, of
approximately $857 million, or $8.55 per share, and future growth
prospects (particularly with respect to the Companys
Environmental Technologies business). CFs Proposals do not reflect Terras much greater
relative contribution of nitrogen results to the combined entity,
and are opportunistically timed to take advantage of Terras stock
price being temporarily depressed relative to CFs stock price as
compared to historic average trading prices during early 2006
through early 2008. |
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CFs projected synergies claims are aggressive and the combination
is subject to substantial execution risk. Terras management team
has led four significant acquisition integration efforts and is
fully aware of the difficulty in achieving acquisition synergies.
CFs management, by contrast, does not have experience effecting
business combinations like the one proposed by CF. |
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Terras management and the Board believe that CF offers no convincing basis to conclude its
synergy estimates are achievable, particularly given CFs lack of experience in
acquisitions. Moreover, the Board believes CFs claimed synergies are not sufficient to
mitigate or compensate Terras stockholders for the integration risks
that are inherent in such a transaction and are not compelling relative to the size of the
combined enterprise. |
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Terra, on a stand-alone basis, will deliver greater value for its
stockholders than CFs Proposals. The Board believes that Terras
stand-alone prospects are strong and will deliver more value to
stockholders than CFs Proposals with significantly less risk.
Among the factors which the Board believes result in Terra being well positioned in
the current environment include Terras: |
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strong balance sheet with cash reserves; |
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product mix oriented to the growth trends in upgraded products for agricultural and
industrial markets; |
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Environmental Technologies business, which is uniquely positioned for revenue and
margin growth;2 |
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pure play focus on nitrogen products; |
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1 |
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Terras belief is based on its fundamental knowledge of the nitrogen fertilizer industry, including
its understanding of the primary points of entry for imported nitrogen products entering the United
States (namely, the U.S. Gulf Coast region), which it has accumulated over more than forty years of
operation, as well as reports of the U.S. Department of Commerce. In a report illustrating the
points of entry and the amount of imports of ammonia, dry urea and UAN into the United States, as
reported by the major customs districts, the U.S. Department of Commerce reported that in 2008,
4,581 metric tons of ammonia, 3,444 metric tons of dry urea and 841 metric tons of UAN entered the
United States through the Gulf Coast compared to 3,513 metric tons of ammonia, 2,596 metric tons of
dry urea and 1,810 metric tons of UAN, respectively, for all other U.S. points of entry. |
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Terra Environmental Technologies is a leader in nitrogen oxide abatement chemistry, the leading
North American diesel exhaust fluid (DEF) producer and the only North American business that has
specifically targeted the DEF market with other distributors (which market Terra believes will grow
to approximately two million tons of urea liquor by 2014-2015), maintains a dedicated technical
support staff to assist customers with application of Terras products and provides robust supply
chain oversight for the critical automotive application of DEF. Terras geographic and product mix
diversifications are important assets to this business. |
10
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sufficient scale to efficiently manage supply in the context of demand fluctuations; |
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diverse customer and market mix without significant customer or market
concentrations; and |
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geographic asset diversification and lower transportation costs to end-users. |
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A combination with CF would expose Terras stockholders to risks associated with the phosphate fertilizer market
without compelling scale in that nutrient. Terra does not believe CF will have sufficient assets or scale to be a
leading participant in the phosphate market. Participation in such a non-core market dilutes the value proposition of
a pure nitrogen investment and exposes Terras stockholders to
risks, primarily the fluctuation in demand for phosphate, that may reduce the value of Terras stockholders investment in the
nitrogen business if the two companies were combined. Stockholders wishing to diversify into phosphate can accomplish
this through their own investments without the risks associated with a combination with CF. |
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CFs Proposals are highly conditional, creating significant uncertainty for Terras stockholders. The
Offer is subject to more than twenty conditions, including limits on market index declines, due diligence
and CF stockholder approval, creating significant uncertainty for Terras stockholders as to whether it will
be completed and, if completed, a risk of substantial delay and associated expenses.
CFs March 9 Proposal and March 23 Proposal do not constitutes a binding offer to Terra or its
stockholders and do not amend the terms of the existing Offer. Both of CFs March 9 Proposal and March
23 Proposal also contain few details as to the actual terms of the transaction contemplated by such
proposals and are unclear as to how such a transaction would be implemented, creating additional
uncertainty for Terras stockholders.
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11
s
Proposal 1: Election of Directors
Election of Directors
The Board of Directors is divided into three classes, and directors in each class serve staggered,
three-year terms. The term of office of the three directors assigned to Class II expires at this
annual meeting, and such three directors are nominated for re-election at this annual meeting to
serve three-year terms until the annual meeting in 2012 and until their successors are elected and
qualify. As provided by Maryland law, the terms of office of the three directors assigned to Class
I continue until the annual meeting in 2011, and the terms of office of the two directors assigned
to Class III continue until the annual meeting in 2010, and in each case until their successors are
elected and qualify. The directors in each class are set forth below.
To be elected, a nominee must receive a plurality of the votes cast at the meeting. Unless
otherwise indicated by your WHITE proxy card, if you return a validly completed and
executed WHITE proxy card or vote your WHITE proxy card by telephone or via the
Internet, your shares will be voted FOR the nominees named below. As of the date of this Proxy Statement, the Board of Directors has no reason to
believe that any of the nominees named below will be unable or unwilling to serve. Each nominee
named below has consented to being named in this Proxy Statement and to serve if elected.
All of the nominees named below are incumbent directors. Set forth below opposite the name and age
of each nominee for Class II director, and for the Class I and Class III directors whose terms are
continuing, are his or her present positions and offices with Terra, his or her present principal
occupation and those carried on during the past five years, the other boards of directors of
companies subject to reporting requirements of the U.S. Federal securities laws on which he or she
currently serves and the year in which he or she first served as a director of Terra.
12
Nominees for Election as Class II Director
Terms Expiring at Annual Meeting in 2009
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Present Positions and Offices with Terra, Principal Occupation |
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First Year as |
Name and Age |
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During the Past Five Years and Other Public Company Boards |
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Director |
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Martha O. Hesse (66)
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Ms. Hesse has been a private investor since 2003. Prior to this, Ms. Hesse founded, owned and was
President and Chief Executive Officer of Hesse Gas Company, a nationwide natural gas marketing
company, from 1992 to 2003. She served as Chairman of the U.S. Federal Energy Regulatory
Commission from 1986 to 1989, the first woman to hold such position, and previously served as
assistant secretary for Management and Administration for the U.S. Department of Energy, as well as
Senior Vice President of First Chicago Corporation, a multibank holding company. Ms. Hesse
co-founded and was Chief Operating Officer of SEI Information Technology, a database management
company, from 1969 until 1980. Ms. Hesse currently serves as Chairman of the Boards of Enbridge
Energy Company, Inc., the general partner of Enbridge Energy Partners, LP, which owns and operates
certain crude oil, petroleum and natural gas-related assets in the United States, and Enbridge
Energy Management, LLC, which manages the business and affairs of the partnership, and is a member
of the Audit, Finance and Risk Committees of each. She is also a director of Amec plc, a supplier
of consultancy, engineering and project management services to the energy, power and process
industries, serving as chair of the Compliance and Ethics Committee, and a director of Mutual Trust
Financial Group, an insurance-based financial services organization.
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2001 |
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Henry R. Slack (59)
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Mr. Slack has served as Chairman of Terra since April 2001. Prior to his retirement, he was Chief
Executive Officer of Minorco SA, an international mining company, from 1991 until 1999, when that
company merged with Anglo American Corporation to form Anglo American plc. He has also served as a
director of E. Oppenheimer and Son International Limited, a private investment and holding company,
since 1979; served as Chairman of First Africa Group, a private investment banking firm, from 2006
until its acquisition in 2009; and was Chairman of Task (USA) Inc., a private investment firm, from
September 1999 to June 2002. Mr. Slack was a member of the Board of Directors and the executive
committee of Anglo American Corporation, an international mining company, from 1981 until 1999. He
has also served on the Board of Directors of Salomon Brothers Inc., a provider of
investment-banking, securities underwriting, and foreign exchange trading services, from 1982 to
1988, SAB Miller plc., one of the worlds largest brewers, from 1998 to 2002, and for more than
twenty years on the Board of Engelhard Corporation, a supplier of catalysts used in the petroleum,
chemical and food industries, until its acquisition in 2006.
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1983 |
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Dennis McGlone (59)
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Mr. McGlone has been a private investor since October 2005. Prior to this, Mr. McGlone served as
President, Chief Executive Officer and Director of Copperweld Corp., a major North American
producer of steel tubing and fabricated tubular products, from February 2004 to October 2005; President, Chief
Operating Officer, and Director of Copperweld from October 2002 to February 2004; and Vice
President of Copperweld from July 2001 to October 2002. He served as Vice President, Corporate
Officer of Armco Inc./AK Steel, a leading U.S. producer and
international marketer of steel products for automotive, appliance,
construction, power generation and distribution, and process
industries, from 1996 to March 2001.
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2006 |
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Class III Directors Continuing in Office
Terms Expiring at Annual Meeting in 2010
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Present Positions and Offices with Terra, Principal Occupation |
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First Year as |
Name and Age |
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During the Past Five Years and Other Public Company Boards |
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Director |
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David E. Fisher (66)
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Mr. Fisher has served as a director of Falcon Oil & Gas Ltd., a global energy company, since 2007
and is Chairman of its Audit Committee and a member of its Compensation Committee. Mr. Fisher is
the Chairman of Real Associates Limited, a private company which invests in commercial and
residential property principally located in Scandinavia, and has served in that capacity since
2005. He has over 25 years experience in the natural resources and extractive industries, having
served as Finance Director of Minorco SA, an international mining company, from 1992 until his
retirement in 1999.
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1993 |
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Present Positions and Offices with Terra, Principal Occupation |
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First Year as |
Name and Age |
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During the Past Five Years and Other Public Company Boards |
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Director |
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Dod A. Fraser (58)
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Mr. Fraser has served as President of Sackett Partners Incorporated., a consulting company he
established in 2000, since retiring from a 27-year career in investment banking. Previously, Mr.
Fraser was a General Partner of Lazard Frères & Co., which he joined in 1978, and most recently,
from 1995 to 2000, he was with The Chase Manhattan Bank, now JP Morgan Chase, where he was a
Managing Director and Group Executive leading the global oil and gas group. Mr. Fraser also has
served as a board member of Smith International, Inc. (Smith), an oilfield service company, since
2004 and Forest Oil Corporation (Forest Oil), an independent oil and gas company, since 2000. He
serves as Chairman of the Audit Committees of both Smith and Forest Oil, and a member of the
Compensation Committee of Smith and the Nominating and Corporate Governance Committee of Forest
Oil.
|
|
|
2003 |
|
Class I Directors Continuing in Office
Terms Expiring at Annual Meeting in 2011
|
|
|
|
|
|
|
|
|
Present Positions and Offices with Terra, Principal Occupation |
|
First Year as |
Name and Age |
|
During the Past Five Years and Other Public Company Boards |
|
Director |
|
Peter S. Janson (61)
|
|
Mr. Janson retired from AMEC Inc., an engineering and environmental services firm, in 2002. Mr.
Janson served as Chairman and Chief Executive Officer of AMEC Inc. and director of AMEC plc from
2000 to 2002 and as President and Chief Executive Officer of Agra Inc., an engineering and
environmental services firm (which was sold to AMEC Inc. in 2000), from 1999 to 2000. Mr. Janson
also serves as a director of Teekay Corporation, a provider of international crude oil and
petroleum product transportation services, serving on the Audit and Compensation and Human
Resources Committees. Mr. Janson served as a director of Tembec Industries Inc., a forest products
company, from 2004 to 2008, and as a director of ATS Automation Tooling Systems Inc., a provider of
custom designed, built and installed manufacturing solutions, from 2004 to 2007.
|
|
|
2005 |
|
|
|
|
|
|
|
|
Michael L. Bennett
(55)
|
|
Mr. Bennett, who has been employed by the Company for 34 years, has served as President and Chief
Executive Officer of Terra since April 2001 and as Executive Vice President and Chief Operating
Officer of Terra from February 1997 to April 2001. Mr. Bennett has served as President of Terra
Nitrogen GP Inc. (TNGP) (or its predecessor), a subsidiary of Terra and the General Partner of
Terra Nitrogen Company, L.P., since June 1998, as Chairman of the Board of TNGP since April 2002
and a director of TNGP (or its predecessor) since 1995. Mr. Bennett has served as a director of
Alliant Energy Corporation (Alliant Energy), a public utility holding company, since 2003 and is
a member of the Capital Approval, the Audit and the Executive Committees, and is the Chairman of
the Nominating and Governance Committee and the Lead Independent Director. Mr. Bennett has also
served as a director of Interstate Power and Light Company, Wisconsin Power and Light Company and
Alliant Energy Resources, Inc., each a first tier subsidiary of Alliant Energy, since 2003.
|
|
|
2001 |
|
|
|
|
|
|
|
|
James R. Kroner (47)
|
|
Mr. Kroner has been a private investor since his retirement in December 2005. Mr. Kroner served as
Chief Financial Officer and Chief Investment Officer for Endurance Specialty Holdings Ltd.
(Endurance), a publicly traded insurance and reinsurance company, from December 2001 to
December 2005 and as Managing Director of Fox Paine & Company, a private equity firm, from
January 2000 to December 2001. Mr. Kroner served as a director of Endurance from 2002 to 2003.
Mr. Kroner has served as a director of United America Indemnity, Ltd, a specialty property and
casualty insurer, since 2007, and serves as Chairman of its Audit and Section 162(m) Committees.
|
|
|
2006 |
|
The Board of Directors unanimously recommends that you vote FOR the election of each of the
above-named director-nominees for Class II director.
14
The Company has received notice from CF Composite that it intends to nominate three individuals for
election to the Board of Directors at the annual meeting. You may receive proxy solicitation
materials from the CF Group, including an opposition proxy statement
and a blue proxy card. The
Board of Directors urges you NOT to vote or submit any blue proxy card sent to you by the CF
Group. If you have previously returned or voted a blue proxy card sent to you by the CF Group,
you may revoke it in accordance with the instructions set forth above under How To Vote;
Submitting Your Proxy; Revoking Your Proxy.
15
Corporate Governance
General
Terra strives to uphold the highest standards of ethical conduct, to follow corporate governance
best practices, to report accurately and transparently and to fully comply with the laws, rules and
regulations that govern Terras business.
Terras Board of Directors currently consists of eight members. In accordance with its Corporate
Governance Guidelines, Terras Board of Directors has affirmatively determined that David E.
Fisher, Dod A. Fraser, Martha O. Hesse, Peter S. Janson, James R. Kroner, Dennis McGlone and Henry
R. Slack each meet the criteria for independence required by the NYSE
listing standards. The Board of Directors independence determination was based on information
provided by our directors and discussions among our officers and directors. Following its
evaluation, the Board of Directors concluded that none of the non-employee directors was involved
in any transactions, relationships or arrangements not otherwise disclosed that would impair his or
her independence. Mr. Bennett did not meet the independence standards because he is an employee of
Terra and TNGP (or its predecessor), which is the General Partner of Terra Nitrogen Company, L.P.
and an indirect, wholly owned subsidiary of Terra. The Nominating and Corporate Governance
Committee reviews and designates director-nominees in accordance with the policies and principles
of its charter and the Corporate Governance Guidelines.
Except for Mr. Bennetts employment described above with TNGP, no occupation carried on by any
director during the past five years was carried on with any corporation or organization that is a
parent, subsidiary or other affiliate of the Company. There are no family relationships among any
of the directors and any executive officer of the Company, nor is there any arrangement or
understanding between any director, executive officer and any other person pursuant to which that
director or executive officer was selected as a director or executive officer of the Company, as
the case may be. There are no material proceedings in which any director or executive officer of
the Company is a party adverse to the Company or any of its subsidiaries, or has a material
interest adverse to the Company or any of its subsidiaries.
Terra has structured its Board of Directors to provide separate positions for a non-executive
Chairman of the Board of Directors and a chief executive officer. The Board of Directors plans to
maintain these responsibilities as separate positions.
During 2008, in accordance with the Corporate Governance Guidelines, the independent directors met
at regularly scheduled executive sessions of the Board of Directors without management. The
Chairman of the Board, Henry R. Slack, presided at all these executive sessions, which are held at
each of our Board of Directors meetings.
The Board of Directors currently has three committees: Audit, Compensation, and Nominating and
Corporate Governance. A description of each committee and its function appears in the Board of
Directors and Committees section of this proxy statement under the heading Committees of the
Board of Directors. The Audit, Compensation, and Nominating and Corporate Governance Committees
are each composed solely of independent directors as required by the NYSE listing standards. Each
committee has its own charter setting forth the qualifications for membership and the committees
purposes, goals and responsibilities. Each of these committees has the power to hire independent
legal,
16
financial or other advisors it deems necessary, without consulting or obtaining the advance
approval of any Terra officer.
The Board of Directors has also adopted a Code of Ethics and Standards of Business Conduct, which
outlines the principles, policies and laws that govern Terras activities and which serve as a tool
for professional conduct in the workplace. The Code of Ethics and Standards of Business Conduct
applies to Terras principal executive officer and principal financial officer, as well as all
other officers, directors and employees.
It is the Board of Directors practice to encourage all its members to attend the Companys annual
stockholders meeting, although no written policy has been adopted in that regard. All Board members
attended the Companys 2008 stockholder meeting held May 6, 2008, in New York, New York.
Current versions of Terras Corporate Governance Guidelines, Code of Ethics and Standards of
Business Conduct and committee charters can be found in the Investors section under Governance
on Terras website at www.terraindustries.com, and are available in print, free of charge, to any
stockholder upon request.
Communication
Interested parties who wish to report questionable practices by Terra employees may do so by
calling Terras toll free, anonymous hotline at 1-866-551-8010 (in the U.S. and Canada) or at
011-44-866-551-8010 (in the U.K.). Interested parties who wish to communicate any message or voice
a complaint to the Board of Directors, any of its committees or the non-management directors should
address their communications to: Henry R. Slack, Chairman of the Board; Terra Industries Inc.;
Terra Centre; 600 Fourth Street; Sioux City, Iowa 51101. Such communications can also be made by
calling 712-277-1340 or by e-mail at boardethics@terraindustries.com.
17
Board of Directors and Committees
Committees of the Board of Directors
Audit Committee. The Audit Committee met five times in 2008 and is currently composed of Mr. Fisher
(Chairman), Ms. Hesse, Mr. Janson and Mr. Kroner. The committee is composed entirely of
non-employee directors, each of whom meets the independence requirements of the NYSE listing
standards. In accordance with Terras Audit Committee charter, all members of the committee are
financially literate and the Board of Directors has determined that Mr. Fisher meets the
requirements to be named audit committee financial expert as the term has been defined by the
SEC. The Audit Committee charter is available on Terras website as set out in the Corporate
GovernanceGeneral section above.
The Audit Committee reviews Terras procedures for reporting financial information to the public.
The Audit Committee also reviews Terras internal audits, reports and related recommendations. Its
members are directly responsible for Terras independent auditor and have the sole authority to
appoint or replace the independent auditor. The committee reviews the scope of the annual audit,
reviews related reports and recommendations and preapproves any non-audit services provided by the
independent registered public auditor. In addition, the committee maintains, through regularly
scheduled meetings, open lines of communication between the Board of Directors and Terras
financial management, internal auditors and independent registered public auditor. See the Audit
Committee Report below.
Compensation Committee. The Compensation Committee met three times in 2008 and is currently
composed of Messrs. Fraser (Chairman), Fisher, Janson and McGlone. Each of the members of the
committee meets the independence requirements of the NYSE listing standards. The committees
functions include establishing the compensation to be paid to Terras executive officers. The
committee also administers certain employee benefit plans, establishes and, in consultation with
management, administers compensation guidelines and personnel policies. See the report on
Executive Compensation below. The Compensation Committee charter is available on Terras website
as set out in the Corporate GovernanceGeneral section above.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee
met two times in 2008. It is currently composed of Ms. Hesse (Chairman), Mr. Fraser and Mr. Slack.
Each of the members of the committee meets the independence requirements of the NYSE listing
standards. The committees functions include helping the Board of Directors fulfill its
responsibilities to stockholders by shaping the Companys corporate governance and enhancing the
quality and independence of the Board of Directors nominees. In addition, the committee identifies
and reviews qualifications of potential Terra director candidates, to include those recommended by
stockholders, and makes recommendations to the Board of Directors for nomination or election. The
Nominating and Corporate Governance Committee generally identifies nominees for new directors based
upon outside research and recommendations from directors and officers of the Company. Nominees for
director are selected on the basis of broad experience, wisdom, integrity, ability to make
independent analytical inquiries, understanding of Terras business environment, and willingness to
devote adequate time and energy to Board of Directors duties. The Board of Directors considers
directors of diverse backgrounds, in terms of both the individuals involved and their various
experiences and areas of expertise. Each Board of Directors member must ensure that future
commitments (including commitments to serve on boards of other companies) do not materially
interfere with the members
service as a Terra director. The Nominating and Corporate Governance Committee charter is available
on Terras website as set out in the Corporate GovernanceGeneral section above.
18
The Nominating and Corporate Governance Committee charter also provides that the committee will
review candidates who have been recommended by stockholders. Appropriate materials describing the
personal and professional background and experience of candidates recommended by stockholders
should be communicated to the Board of Directors as set out in the Corporate Governance section of
this proxy statement under the heading Communication. The committee will evaluate all such
stockholder recommended candidates on the basis of the same qualities and characteristics as
described in the preceding paragraph.
The Board of Directors establishes special Board of Directors committees from time to time,
determining such committees specific functions as they are established. The Board of Directors and
its committees occasionally take action by unanimous written consent in lieu of a meeting.
Meetings of the Board of Directors
The Board of Directors held five regular meetings and three special meetings in 2008. Each director
attended at least 92 percent of the total meetings of the Board of Directors and its committees of
which he or she was a member.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed of the directors named as signatories to the Compensation
Committee Report below. No director has any direct or indirect material interest in or
relationship with Terra other than shareholdings as discussed below and as related to his or her
position as a director, except as described under the caption Transactions with Related Persons.
During 2008, no officer or other employee of Terra served on the board of directors of any other
entity, where any officer or director of such entity also served on Terras Board of Directors.
19
Equity Security Ownership
Principal stockholders. The following table shows the ownership of Terra securities as of
April 24, 2009 by the only persons known to Terra to beneficially own more than five percent of any class
of Terra voting securities. The information in this table is based on information reported to the
SEC by or on behalf of such persons:
|
|
|
|
|
|
|
|
|
Name and address of |
|
Title of |
|
Amount and nature of beneficial |
|
Percentage |
beneficial owner |
|
class |
|
ownership(1) |
|
of class |
FMR LLC (2)
82 Devonshire Street
Boston, Massachusetts 02109
|
|
Common Shares |
|
11,187,505 sole voting and dispositive power |
|
|
11.22 |
% |
|
Barclays
Global Investors
NA.(3)
45 Fremont Street San Francisco, California 94105 |
|
Common Shares |
|
5,246,187 sole voting and investment power |
|
|
5.26 |
% |
|
|
|
|
|
|
|
|
|
TPG-Axon
Capital Management,
LP(4)
888 Seventh Avenue
38th Floor New York, New York 10019 |
|
Common Shares |
|
5,130,000 shared voting and dispositive power |
|
|
5.15 |
% |
|
|
|
(1) |
|
The number of common shares listed does not include shares of the 4.25%
Series A Cumulative Convertible Perpetual Preferred Shares. |
|
(2) |
|
FMR LLC (FMR) reports that Fidelity Management & Research Company (Fidelity), a
wholly-owned subsidiary of FMR, is the beneficial owner of 9,443,190 common shares of Terra. It
further reports that FMRs beneficial ownership includes (i) 15 common shares of Terra beneficially
owned by Strategic Advisers, Inc., a wholly-owned subsidiary of FMR, (ii) 1,415,000 common shares
of Terra beneficially owned by Pyramis Global Advisors, LLC (PGALLC), an indirect wholly-owned
subsidiary of FMR, (iii) 123,070 common shares of Terra beneficially owned by Pyramis Global
Advisors Trust Company (PGATC), an indirect wholly-owned subsidiary of FMR, and (iv) 206,230
common shares of Terra beneficially owned by FIL Limited (FIL). Edward C. Johnson 3d, Chairman
of FMR and FIL, and FMR, through its control of Fidelity, and the funds each has sole dispositive
power over 9,443,190 common shares of Terra owned by the funds. Mr. Johnson and FMR, through its
control of PGALLC and PGATC, each has sole dispositive power over (i) 1,415,000 common shares and
sole power to vote or to direct the voting of 1,415,000 common shares of Terra owned by the
institutional accounts or funds advised by PGALLC and (ii) 123,070 common shares and sole power to
vote or to direct the voting of 123,070 common shares of Terra owned by the institutional accounts
managed by PGATC, respectively. Neither FMR nor Mr. Johnson has the sole power to vote or direct
the voting of the shares owned directly by the Fidelity funds, which power resides with the funds
Boards of Trustees. FMR further reports that members of the family of Mr. Johnson, through their
ownership of 49% of the voting power of FMR and the execution of a shareholders voting agreement
with all other Series B shareholders of FMR, may be deemed, under the Investment Company Act of
1940, to form a controlling group with respect to FMR. Partnerships controlled predominantly by
members of the family of Mr. Johnson own 47% of the total votes which may be cast by all holders of
FIL voting stock. |
|
|
|
(3) |
|
Barclays Global Investors, NA reports that it is an investment adviser and
the shares reported are held by the company in trust accounts for the economic benefit of the
beneficiaries of those accounts. |
|
|
|
(4) |
|
TPG-Axon Capital Management, LP (TPG-Axon Management) reports that it is an
investment manager to TPG-Axon Partners, LP (TPG-Axon Domestic) and TPG-Axon Partners
(Offshore), Ltd. (TPG-Axon Offshore), has the power to direct the disposition and voting of
the shares held by TPG-Axon Domestic and TPG-Axon Offshore, and further that TPG-Axon Partners
GP, LP (PartnersGP) is the general partner of TPG-Axon Domestic and TPG-Axon GP, LLC
(GPLLC) is the general partner of PartnersGP and TPG-Axon Management. It further reports
that Dinakar Singh LLC (Singh LLC) is a Managing Member of GPLLC and that Mr. Dinakar Singh,
an individual, is the Managing Member of Singh LLC and in such capacity may be deemed to
control Singh LLC, GPLLC and TPG-Axon Management, and therefore may be deemed the beneficial
owner of the securities held by TPG-Axon Domestic and TPG-Axon Offshore. |
|
20
Directors
and Officers. The following table shows, as of April 24, 2009, the number of Terra common
shares owned by (i) each director; (ii) Terras chief executive officer (who is also a director);
(iii) the six other most highly-compensated executive officers; and (iv) all directors and
executive officers as a group.
|
|
|
|
|
|
|
Number of Common Shares |
Name |
|
Beneficially
Owned(1) |
|
D.E. Fisher |
|
|
47,970 |
|
D.A. Fraser |
|
|
31,550 |
|
M.O. Hesse |
|
|
49,228 |
|
P.S. Janson |
|
|
20,000 |
|
J.R. Kroner |
|
|
20,100 |
|
D. McGlone |
|
|
18,100 |
|
H.R. Slack |
|
|
41,900 |
|
M.L. Bennett |
|
|
588,931 |
|
D.D. Greenwell |
|
|
83,460 |
|
J.D. Giesler |
|
|
115,634 |
|
J.W. Huey |
|
|
34,367 |
|
R.S. Sanders Jr. |
|
|
105,339 |
|
Directors and all executive officers as a group (17 persons) |
|
|
1,269,580 |
|
|
|
|
|
(1) |
|
Each director or executive officer has sole voting and investment
power over the shares shown as beneficially owned. Each director and executive
officer individually and beneficially owned less than one percent, and the
directors and executive officers as a group owned 1.27 percent of Terras issued
and outstanding common shares as of the date set forth above. These share numbers include ownership of restricted
common shares, which are subject to certain vesting conditions, and shares held
under Terras Employees Savings and Investment Plan. |
|
Change
in Control. Except for CFs Proposals to acquire all of the
Companys outstanding common shares, the Company is not aware of any arrangements,
including any pledge by any person of securities of the Company, the consummation or
operation of which may at a subsequent date result in a change of control of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Terras executive officers, directors and beneficial
owners of more than 10 percent of Terras common shares to file initial reports of beneficial
ownership and reports of changes in beneficial ownership of the shares with the SEC and the NYSE.
Executive officers and directors are required by SEC regulations to furnish Terra with copies of
all Section 16(a) reports they file. All persons who were Terra executive officers, directors and
beneficial owners of more than 10 percent of Terras common shares at any time during 2008 filed
all reports required under Section 16(a) during and with respect to 2008 in a timely manner, except
Joseph D. Giesler, Henry R. Slack and
21
Douglas M. Stone, who each inadvertently filed one Form 4 late. This conclusion is based solely on
a review of the copies of such filings furnished to Terra and of written representations from
Terras executive officers and directors.
Executive Compensation and Other Information
Compensation Discussion and Analysis
I. Background
This compensation discussion and analysis discusses the material elements of compensation of our
named executive officers for 2008. In 2008, our named executive officers were:
|
|
|
Michael L. Bennett, President and Chief Executive Officer; |
|
|
|
|
Daniel D. Greenwell, Senior Vice President and Chief Financial Officer; |
|
|
|
|
Joseph D. Giesler, Senior Vice President Commercial Operations; |
|
|
|
|
Richard S. Sanders, Jr., Vice President Manufacturing; and |
|
|
|
|
John W. Huey, Vice President, General Counsel and Corporate Secretary. |
As a producer and marketer of nitrogen products for agricultural and industrial markets, Terras
operating results are affected by the volatile nature of the nitrogen products industry. Demand
for nitrogen products remained strong for much of 2008, contributing to our record earnings and
returns during 2008. However, the current period of strong growth for 2007 and much of 2008 was
preceded by a period of approximately six years of difficult market conditions characterized by
losses and low returns. We expect that market volatility will continue to be a factor in this
industry. In fact, during the fourth quarter 2008, the broad economic decline negatively impacted
nitrogen product demand, leading to reduced sales prices and curtailment of shipments. We have
designed our executive compensation program to reflect these fundamental factors. For additional
details regarding the cyclical nature of the nitrogen products industry and our performance in
light of these conditions, see the Managements Discussion and Analysis of Financial Conditions
and Results of Operations in our 2008 Annual Report on Form 10-K.
II. Overview
Objectives
The Compensation Committees primary objectives in designing our executive compensation program are
to (i) provide competitive incentive rewards for the achievement of specific annual goals by Terra;
(ii) minimize fixed costs during cyclical downturns; and (iii) provide incentives to manage our
North American and United Kingdom asset base as well as new investments to earn returns in excess
of our cost of capital over the long term.
22
Elements of Compensation
Our compensation program is comprised of three primary components:
|
|
|
Base Salary:
|
|
Base salaries are targeted at the low
end of the market range in order to
maintain low fixed cash costs during
cyclical downturns. |
|
|
|
Annual Incentives:
|
|
Annual incentives are paid in cash and
provide the opportunity during periods
of average and cyclically robust
performance for management to earn
competitive total cash compensation
through a combination of salary and
annual incentive payments. |
|
|
|
Long-Term Incentives:
|
|
Long-term incentives are paid in
restricted shares and performance shares
in order to align the interests of our
executive officers with those of our
stockholders. While a portion is
subject to time-based vesting in order
to promote retention, for our most
senior officers, a significant portion
is comprised of performance share grants
that will not vest unless Terra meets
specified performance goals and will
vest at above-target levels in the case
of superior company performance. In
particular, the vesting criteria for the
performance share grants has significant
upside potential tied to the ability of
our senior officers to successfully
manage our existing asset base and
invest in new assets to generate returns
in excess of the cost of capital.
Together with base salary and annual
cash incentive awards, long-term
incentive awards are intended to provide
the opportunity for our executive
officers to achieve total compensation
at approximately the 50th percentile of
companies in our survey comparison group
if target levels of performance are met. |
The Compensation Committees approach to executive compensation is to review all three elements of
compensation together, rather than considering each element separately, and to benchmark total
compensation levels against a survey comparison group of approximately 400 companies, as described
in the next paragraph. On a total compensation basis, the combination of base salaries, annual
cash incentive awards and long-term incentives should provide our executive officers with
above-average compensation for above-average individual and company performance and below-average
compensation for below-average performance.
Role of Peer Groups and Competitive Benchmarking
In implementing our compensation program, our Compensation Committee has reviewed studies conducted
by its compensation consultant, Towers Perrin, which compare our compensation to that of companies
that are similar to us in revenue, market capitalization or industry profile. For 2008, the survey
comparison group, which included approximately 400 companies, was comprised of a combination of
general industry and chemical industry companies. Towers Perrin employed regression analysis
to normalize the data relative to Terras annual revenues to ensure comparability. Our Compensation
Committee also reviewed publicly available data on the compensation paid to the chief executive
officers, chief financial officers and chief legal officers of 24 companies in our industry or a
related industry, including most of the 13 companies included in the Performance Chart that appears
on page 25 of our 2008 Annual Report on Form 10-K. However, the broader survey comparison group
serves as the Compensation Committees main source of executive compensation benchmarking. We
23
believe that the broader group is appropriate in our case, because Terra has few direct U.S.
competitors,
and many of the companies in our industry peer group do not compete with us in executive
recruitment. In addition, we recruit executive talent from across a broad range of industries.
Internal Pay Equity
Our Compensation Committees approach to determining the compensation of Michael Bennett, our Chief
Executive Officer, is generally the same approach that is used to determine the compensation levels
of our other senior executives, with two principal exceptions.
First, the performance measure for Mr. Bennetts annual incentive award differs from those of our
other executive officers. The individual goals applicable to Mr. Bennett under our Annual
Incentive Plan are based on total company performance, whereas the individual goals of the
executives who report directly to Mr. Bennett are generally based on their particular areas of
responsibility. This distinction is intended to reflect Mr. Bennetts level of accountability and
influence with respect to overall company performance.
Additionally, in the case of long-term incentive awards, which are comprised of a combination of
time-based restricted stock and performance share awards, two-thirds of Mr. Bennetts awards are
comprised of performance shares, whereas half of the other senior executives awards are comprised
of performance shares. The Compensation Committee believes that Mr. Bennett has a greater ability
to influence company performance, and, therefore, his awards should have more upside and downside
potential than awards granted to our other executive officers.
III. Role of Our Compensation Consultant
In 2005, our Compensation Committee selected and retained Towers Perrin to serve as its independent
compensation consultant. Towers Perrin advises and consults with the Chairman of our Compensation
Committee in connection with our compensation programs and has particularly focused on long-term
incentive compensation, stock ownership guidelines and executive severance and change in control
arrangements. While Towers Perrin advises our Compensation Committee in making its decisions,
including by providing our Compensation Committee with information about current market practices,
our Compensation Committee retains ultimate authority to make all final determinations. Our Vice
President, Investor Relations and Human Resources, Joe Ewing, often provides Towers Perrin with the
necessary data and background information that it needs in order to prepare materials requested by
the Compensation Committee.
At the request of our Compensation Committee, Towers Perrin also assisted us in preparing the
executive compensation disclosure in this proxy statement and in our 2008 proxy statement by
reviewing the Compensation Discussion and Analysis and, based on data we provided, assisting in the
preparation of the proxy tables.
IV. 2008 Executive Compensation Program
Our Compensation Committee developed a 2008 executive compensation program that provided for the
following:
24
A. Base Salaries
For 2008, our executive officers received base salaries at approximately the 25th percentile of the
survey comparison group of companies. The Compensation Committee determined that base salaries
should be targeted around that level in order to control fixed costs in light of the volatile
nature of the nitrogen products industry. The Summary Compensation Table below details the annual
base salaries paid in 2008 to each of our named executive officers.
In February 2008, Mr. Bennett proposed increases to the base salaries of our named executive
officers, based on his evaluation of each of our named executive officers performance. The
Compensation Committee considered the proposed salary increases for our named executive officers
and determined that salary increases were appropriate in order to maintain base salaries at the
25th percentile level. The Compensation Committee also took into account the individual
performance of each of the named executive officers when determining the amount of salary increase
to award.
|
|
|
|
|
|
|
|
|
Executive |
|
2007 Base Salary |
|
2008 Base Salary |
Bennett |
|
$ |
550,000 |
|
|
$ |
600,000 |
|
Greenwell |
|
$ |
300,000 |
|
|
$ |
330,000 |
|
Giesler |
|
$ |
232,000 |
|
|
$ |
240,000 |
|
Sanders |
|
$ |
220,000 |
|
|
$ |
242,000 |
|
Huey |
|
$ |
275,000 |
|
|
$ |
285,000 |
|
B. Annual Incentive Compensation
The cash incentive awards to be paid to our executive officers are allocated from an overall pool
of available funds that is established by our Compensation Committee during the first quarter of
each year based on the aggregate value of the potential awards payable to all participants in our
Annual Incentive Plan. Payout levels under the Annual Incentive Plan are determined based on a
combination of individual performance against individual goals and our achievement of return on
capital employed (ROCE) targets, as described below. Prior to 2008, payout levels under the
Annual Incentive Plan were based on the achievement of net income targets. The Compensation
Committee decided in 2008 to switch to ROCE targets because ROCE is a better indicator of the
operating and investment decisions of management and requires management to be disciplined in the
use of Terras capital, and also to create consistency between the Annual Incentive Plan and the
long-term incentive programs.
Mr. Bennett prepared a proposal for his own individual performance goals that was reviewed,
modified and approved by the Compensation Committee in the first quarter of 2008. In addition,
during the first quarter of 2008, each other executive officer worked with Mr. Bennett to establish
individual performance goals for 2008, which focused on the executives corresponding function,
department or business unit and which tracked Mr. Bennetts own individual goals from an overall
corporate perspective. At the same time, during the first quarter of 2008, the Compensation
Committee approved the 2008 target annual incentive awards for each of our executive officers.
The 2008 individual performance goals for each of our named executive officers included the
achievement of budgeted net income of $334 million for 2008.
Mr. Bennetts individual goals for 2008 also included development and implementation of strategies
to deal with enhancing organizational capabilities, pursuit of feedstock diversification
opportunities, and growth and development of the Terra Environmental Technologies business.
Mr. Greenwells individual goals for 2008 also included development and implementation of a
strategy to deal with Terras cash balances, identification of feedstock diversification
opportunities, and implementation of a tax restructuring plan.
Mr. Gieslers individual goals for 2008 also included development and implementation of strategies
for the successful expansion and restart of existing facilities, optimization of production mix to
maximize available margin and least cost distribution, and organizational planning objectives
relating to supply chain and natural gas procurement.
Mr. Sanders individual goals for 2008 also included exceeding 2008 budgeted plant production
statistics and achieving budgeted fixed operating costs, managing capital expenditures within
budget, reduction in the number and severity of accidents, and reduction in environmental
reportable incidents.
Mr. Hueys individual goals for 2008 also included management and control of department and outside
legal expenses while supporting the goals and objectives of management, full and timely compliance
with all SEC reporting requirements, and completion of final aspects of the UK joint venture.
While funding of the incentive pool for 2008 was dependent on 2008 ROCE, performance by each
executive officer against the corresponding individual performance goals based on recommendations
by Mr. Bennett was used by the Compensation Committee to determine the executives actual award.
In its exercise of discretion to determine individual awards under our Annual Incentive Plan, our
Compensation Committee applied negative discretion to adjust the amount of certain individual
awards
downward. In a
25
similar manner, the Board of Directors evaluates Mr. Bennetts performance at the
end of each year and determines the extent to which he has met his performance goals and sets his
actual bonus.
The following table, which sets forth the target and actual annual incentive award for each of our
named executive officers under our 2005, 2006, 2007 and 2008 Annual Incentive Plans, reflects how
the cyclical nature of our business affected our Annual Incentive Plan payouts. Our performance
for 2007 and 2008 was robust while our performance for 2005 and 2006 was below target.
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Target |
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Actual |
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Target |
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Actual |
|
Target |
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Actual |
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2005 |
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2005 |
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2006 |
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2006 |
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2007 |
|
2007 |
|
Target 2008 |
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Actual 2008 |
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Annual |
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Annual |
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Annual |
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Annual |
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Annual |
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Annual |
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Annual |
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Annual |
Executive |
|
Incentives |
|
Incentives |
|
Incentives |
|
Incentives |
|
Incentives |
|
Incentives |
|
Incentives |
|
Incentives |
Bennett |
|
$ |
315,000 |
|
|
$ |
200,000 |
|
|
$ |
575,000 |
|
|
$ |
0 |
|
|
$ |
825,000 |
|
|
$ |
1,468,500 |
|
|
$ |
900,000 |
|
|
$ |
1,710,000 |
|
Greenwell |
|
$ |
78,750 |
|
|
$ |
52,000 |
|
|
$ |
116,000 |
|
|
$ |
0 |
|
|
$ |
150,000 |
|
|
$ |
300,000 |
|
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$ |
198,000 |
|
|
$ |
396,000 |
|
Giesler |
|
$ |
86,000 |
|
|
$ |
54,000 |
|
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$ |
134,400 |
|
|
$ |
0 |
|
|
$ |
139,200 |
|
|
$ |
230,000 |
|
|
$ |
144,000 |
|
|
$ |
275,000 |
|
Sanders |
|
$ |
64,750 |
|
|
$ |
50,000 |
|
|
$ |
98,500 |
|
|
$ |
0 |
|
|
$ |
132,000 |
|
|
$ |
245,000 |
|
|
$ |
145,200 |
|
|
$ |
290,000 |
|
Huey |
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|
N/A |
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|
|
N/A |
|
|
$ |
132,500 |
(1) |
|
$ |
0 |
|
|
$ |
137,500 |
|
|
$ |
265,000 |
|
|
$ |
142,500 |
|
|
$ |
275,000 |
|
|
|
|
(1) |
|
Mr. Hueys 2006 target incentive amount was prorated to reflect that he was
hired on October 25, 2006. |
The target individual award to each of the executive officers under the Annual Incentive Plan is
determined as a percentage of the executive officers base salary. The target awards to each of
our named executive officers pursuant to the 2008 Annual Incentive Plan were 150% for Mr. Bennett,
60% for each of Messrs. Greenwell, Giesler and Sanders and 50% for Mr. Huey. These target awards
were chosen to allow our executive officers to achieve total compensation at approximately the 50th
percentile if target levels of performance are met, and are identical to the target awards for our
named executive officers under the 2007 Annual Incentive Plan.
The Annual Incentive Plan covers our officers and certain other key employees. The size of the
pool is determined based on the aggregation of the individual target awards and is funded based on
our achievement of ROCE. The funding of the pool for the 2008 Annual Incentive Plan was determined
based on the following performance measures:
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|
If Terras 2008 ROCE was less than 7%, the incentive pool would not have been
funded. |
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|
If Terras 2008 ROCE was equal to 7%, 50% of the target annual incentive pool
would have been funded. |
|
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|
|
For each 0.06% by which Terras 2008 ROCE was greater than 7%, an additional 1%
of the target annual incentive pool would have been funded. |
Under this formula, if Terra had achieved a 2008 ROCE of 10%, the incentive pool would have been
funded at 100% of the target amount, and with a 2008 ROCE of 16%, the incentive pool would have
been funded at the maximum level of 200% of the target amount. The actual 2008 ROCE was greater
than 16%, resulting in the funding of the incentive pool with a total amount of $5,758,725, equal
to the maximum level.
The Compensation Committee selected achievement of 10% ROCE as the target for 100% funding of the
incentive pool for 2008, because that level of ROCE, according to outside studies performed by
investment bankers at the request of our Chief Financial Officer, was approximately equal to our
cost of capital for 2008.
26
The Compensation Committees approach in determining ROCE for purposes of the Annual Incentive Plan
is that while annual incentive compensation levels for our executive officers should reflect
operating costs incurred during the relevant year, decisions made by the Board of Directors about
Terras capital structure should neither increase nor decrease executive compensation levels. This
approach was reflected in the calculation of 2008 ROCE, which excluded all income and gains
unrelated to the operations and operating assets of Terra and included all losses and expenses
related to operations and operating assets of Terra.
While achievement of a threshold amount of ROCE is required in order for the incentive pool to be
funded, the Compensation Committee retains discretion to make funds available for annual incentive
awards outside of the Annual Incentive Plan to reward exceptional individual performance even if
threshold performance measures are not met.
C. Long-Term Incentives
In accordance with our philosophy of tying long-term incentive awards to company performance, the
Compensation Committee has designed our long-term incentive program to accomplish the following
objectives: (1) reward achievement of ROCE targets on a cumulative basis over a three-year period;
(2) provide more substantial incentives for achieving returns above the cost of capital; (3) assist
with attraction and retention of executives; and (4) align management incentives with shareholder
interests through the use of equity awards. To these ends, our long-term incentive compensation is
comprised of a combination of performance share awards, which only vest upon achievement of
performance goals relating to our ROCE, and restricted shares, which vest based on continued
employment.
Each year, the Compensation Committee sets an annual target award for each executive officer who
participates in our long-term incentive plan. For 2008, in the case of executive officers other
than Mr. Bennett, target grants were 130% of annual base salary. Mr. Bennetts target grant was
set at 300% of his annual base salary. The Compensation Committee determined that these target
levels were appropriate for 2008 based on market data with respect to the comparison group of
companies and the objective of setting long-term compensation to allow our executive officers to
achieve total compensation at approximately the 50th percentile if target levels of performance are
met. The target value of the long-term incentive awards for 2008 for each of the named executive
officers (expressed as a percentage of base salary) is set forth
under Long-Term Incentive Awards beginning on page 42.
The Compensation Committee determined that in the case of executive officers other than
Mr. Bennett, 50% of the value of the 2008 long-term incentive grant should be subject to time-based
vesting criteria to assist in executive retention, while the remaining 50% should be subject to
performance-based vesting criteria. As previously noted, Mr. Bennett received one-third of his
grant in restricted shares and two-thirds in performance share grants. The performance share
grants for 2008 were approved by the Compensation Committee on February 13, 2008 and were made on
February 22, 2008, and the restricted share grants for 2008 were approved by the Compensation
Committee on July 15, 2008 and were made on July 16, 2008.
In accordance with applicable disclosure rules, the Summary Compensation Table on page 37 reflects the amounts we recognized as an accounting expense pursuant to FAS 123R for 2008 in
connection with awards granted in 2008 and in prior years. These values were not, however,
considered by us or the Compensation Committee when determining the long-term incentive award
grants. Instead, the Compensation Committee considered the fair market value of the shares on the
grant date and, in the case
27
of performance share awards, the value of potential payouts based on achievement of the performance
targets described below. The full grant date values (determined in accordance with FAS 123R) are
set forth in the Grants of Plan-Based Awards in 2008 Table on page 40, and the fair market value of
these awards, based on our stock price of $16.67 per share as of December 31, 2008, is set forth in
the Outstanding Equity Awards at 2008 Fiscal Year-End Table on page 46.
2008 Performance Share Awards
For purposes of the 2008 performance share grants, the number of shares to be issued will depend on
Terras annualized average ROCE over the three-year performance period ending on December 31, 2010.
We use ROCE as the performance metric because ROCE is a critical indicator of good operating and
investment decisions by management, is an important measurement for judging success of Terras
strategic initiatives, and is a critical metric for investors.
The following table illustrates target and actual achievement of ROCE as of December 31, 2008, with
respect to the 2006-2008, 2007-2009 and 2008-2010 performance periods.
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Level of Payout for |
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Actual |
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Actual Average |
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Performance Share |
Performance |
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Target |
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Achievement of |
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Annual ROCE (as |
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Awards (as a % of |
Period |
|
ROCE |
|
ROCE (by year) |
|
of 12/31/08) |
|
target) |
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2006 |
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4.303 |
% |
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2006-2008 |
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9 |
% |
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2007 |
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29.560 |
% |
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34.306 |
% |
|
200% |
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2008 |
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73.186 |
% |
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2007-2009 |
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|
9 |
% |
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2007 |
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|
|
29.560 |
% |
|
|
51.373 |
% |
|
To be determined |
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2008 |
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|
|
73.186 |
% |
|
|
after 12/31/09 |
2008-2010 |
|
|
10 |
% |
|
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2008 |
|
|
|
73.1863 |
% |
|
|
73.186 |
% |
|
To be determined after 12/31/10 |
The performance share grant payouts for the 2008 grant cycle (with a performance period ending in
2010) will be determined based on the following measures:
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|
If Terras annualized average ROCE for the period is less than 5%, no shares
will be delivered. |
|
|
|
|
If Terras annualized average ROCE for the period is between 5% and 10%, 1% of
the target number of shares will be delivered for each 0.05% by which annualized
average ROCE
exceeds 5%. Thus, if annualized average ROCE is equal to 10%, 100% of the target number
of shares will be delivered. |
28
|
|
|
If Terras annualized average ROCE for the period exceeds 10%, an additional 1%
of the target number of shares will be delivered for each 0.025% by which annualized
average ROCE exceeds 10%, up to a maximum of 200% of the target number of shares. |
Annualized average ROCE of 10% over a cumulative three year period was determined by the
Compensation Committee to be an appropriate goal, as outside studies performed by investment
bankers indicated that it is approximately equal to our cost of capital. As noted above in the
description of the Annual Incentive Plan, the Compensation Committee believes that while long-term
performance awards to our executive officers should reflect operating costs incurred during the
relevant performance period, decisions made by the Board of Directors about Terras capital
structure should not affect executive compensation levels.
Achievement of ROCE is the performance goal that determines both the funding of the 2008 Annual
Incentive Plan bonus pool and payout of the 2008 performance share awards. In selecting
performance metrics for both arrangements, the Compensation Committee considered the objectives of
each type of arrangement and set threshold, target and maximum levels for both arrangements
accordingly. While achievement of 10% ROCE was determined to be the appropriate target level under
both arrangements, the Compensation Committee determined that unlike the Annual Incentive Plan,
which provides no awards to any participants if the performance for the year is below the level
that would fund the target incentive pool at 50%, participants who hold performance shares may earn
as few as 1% of the target number of shares for performance that is at the threshold level over the
three-year term of the performance period. This approach is intended to ensure that poor
performance during an early part of the performance period will not discourage participants by
causing the performance measurements to be impossible to achieve but allows participants to earn
some portion of the performance shares if performance in the later part of the performance period
has improved. In addition, while achievement of ROCE under the Annual Incentive Plan provides for
a straight-line increase in the percentage at which the bonus pool is funded, the performance
share awards provide for a two tiered approach, pursuant to which achievement of ROCE above the
target level results in a greater increase in the total percentage of shares awarded. The
Compensation Committee determined that this distinction was appropriate in order to provide
additional incentives to encourage our officers to excel in creating long-term value for our
shareholders.
Performance share grants vest at the end of a three-year performance period, based on achievement
of performance goals and assuming that the participant remains employed by Terra. Upon vesting of
a performance share grant, the holder is entitled to receive a number of shares ranging from 0% to
200% of the target number of shares subject to the award, based on achievement of ROCE. Individual
performance does not play a part in determining the level of vesting. Except in the case of death,
total disability or other special circumstances identified by the Compensation Committee, the
performance share grants will be forfeited if employment terminates for any reason prior to
vesting, except that in the event of a change in control of Terra, vesting of the performance share
awards will immediately accelerate and the holder will be entitled to the greater of the target
number of shares subject to the award and a number based on actual company performance prior to the
change in control. In the event of termination of employment due to death, the holder will become
entitled to a number of performance shares based on actual performance prior to death. In the
event of termination of employment due to
total disability, performance shares will continue to vest following termination based on
achievement of performance goals.
29
2008 Restricted Share Awards
The restricted shares are subject to cliff vesting with 100% of the award vesting on the third
anniversary of the grant date, assuming that the participant remains employed by Terra at such
time. Except in the case of death, total disability or termination of employment without cause or
for good reason (both as defined in the award agreement) following a change in control of Terra or
in other special circumstances identified by the Compensation Committee, the restricted shares will
be forfeited if employment terminates for any reason prior to vesting. In the event of termination
of employment due to death or total disability, the vesting of restricted shares will accelerate in
full. Grants of restricted shares made prior to 2008 will vest in full automatically upon a change
in control of Terra. In 2008, the Compensation Committee considered the issue of vesting of
restricted shares upon a change in control and determined that automatic vesting upon a change in
control might not be in the shareholders best interests, and that full vesting of the restricted
shares upon certain terminations following a change in control of Terra would provide more
retention value while still providing appropriate protection to the holder of the restricted
shares. As a result, the Compensation Committee decided that, following a change in control of
Terra, the vesting of restricted shares granted in 2008 and later years shall only accelerate if
the holder is terminated without cause or for good reason.
Changes to Incentive Compensation Programs for 2009
For past grants under the Annual Incentive Plan and the long-term incentive program, cash has been
excluded from the calculation of ROCE. ROCE is defined as average annual income from operations
reduced by 35% for normal income tax expense divided by average capital employed. Average capital
employed was previously defined to mean common and preferred stockholders equity plus short and
long-term debt, deferred income taxes and minority interest, less cash. In February 2009, the
Compensation Committee examined different scenarios for how the inclusion or exclusion of cash in
the denominator of ROCE would impact managements decisions and affect the level of net income
required to generate the target levels of ROCE under the Annual Incentive Plan and long-term
incentive program.
After careful review, the Compensation Committee concluded that the inclusion of cash in the ROCE
calculation would create additional incentives for management to use and invest cash wisely to
generate additional growth and income. Therefore, for awards made in 2009 pursuant to both the
Annual Incentive Plan and the performance-based portion of the long-term incentive program, the
Compensation Committee has determined that the formula to determine ROCE will include cash.
As the Compensation Committee noted during its study, the change to the ROCE formula will cause the
amount of net income that will be required in order for the executive officers to reach their
maximum payout levels pursuant to the awards to be almost twice the amount of net income that would
be required if cash was excluded from the calculation of ROCE. This change represents a
significant increase in the level of performance required to generate payments under both the
Annual Incentive Plan and the long-term incentive program.
In addition to adding cash into the calculation of ROCE, the Compensation Committee selected
performance targets for the 2009 Annual Incentive Plan and the 2009 performance share grants that
are
higher than the levels for previous grants. The funding of the pool for the 2009 Annual Incentive
Plan will be determined based on the following performance measures:
|
|
|
If Terras 2009 ROCE is less than 9%, the incentive pool will not be funded. |
30
|
|
|
If Terras 2009 ROCE is equal to 9%, 50% of the target annual incentive pool will be
funded. |
|
|
|
|
For each 0.07% by which Terras 2009 ROCE is greater than 9%, an additional 1% of
the target annual incentive pool will be funded. |
Under this formula, if Terra achieves 2009 ROCE of 12.5%, the incentive pool will be funded at 100%
of the target amount, and with 2009 ROCE of 19.5%, the incentive pool will be funded at the maximum
level of 200% of the target amount.
The performance share grant payouts for the 2009-2011 grant cycle (with a performance period ending
in 2011) will be determined based on the following measures:
|
|
|
If Terras annualized average ROCE for the period is less than 7.5%, no shares will
be delivered. |
|
|
|
|
If Terras annualized average ROCE for the period is between 7.5% and 12.5%, 1% of
the target number of shares will be delivered for each 0.05% by which annualized
average ROCE exceeds 7.5%. Thus, if annualized average ROCE is equal to 12.5%, 100% of
the target number of shares will be delivered. |
|
|
|
|
If Terras annualized average ROCE for the period exceeds 12.5%, an additional 1% of
the target number of shares will be delivered for each 0.025% by which annualized
average ROCE exceeds 12.5%, up to a maximum of 200% of the target number of shares for
an annualized average ROCE of 15% or higher. |
The Compensation Committee selected the target of 12.5% ROCE for both the 2009 Annual Incentive
Plan and the 2009 performance share grants because annualized average ROCE of 12.5% over a
cumulative three-year period is approximately equal to our cost of capital, as indicated in outside
studies performed by investment bankers.
The Compensation Committee also determined that, unlike prior grants of performance shares, the
2009 performance shares grants should not vest automatically upon a change in control. Instead, for
the 2009 performance share grants and grants in future years, following a change in control of
Terra, the number of shares that each holder will be entitled to receive will become fixed as of
the date of the change of control at the greater of the target number of shares subject to the
award and a number based on actual company performance prior to the change in control. Each holder
of the performance shares will receive such performance shares on the earlier of the date that such
award would otherwise vest or the date that such holder is terminated without cause or for good
reason (both as defined in the performance share award agreement).
D. Severance
Prior to 2006, we were a party to executive retention agreements with our senior executives that
provided for payments and benefits in the event of a termination of employment following a change
in control, but no executives were covered by employment agreements or other severance arrangements
that established the level of payments and benefits to be provided in connection with a termination
that was not related to a change in control. During this period, executive severance was generally
determined through individual negotiations, which often led to a variety of inconsistent results.
In 2006, the Compensation Committee
31
decided that a standard form of severance agreement covering
non-change in control severance was needed to promote additional stability, ensure equitable
treatment and avoid the need for individual negotiations. At the same time, the Compensation
Committee decided to review its change in control severance practices. In connection with the
Compensation Committees review of our severance practices, Towers Perrin provided the Compensation
Committee with information about severance benefits that are generally provided in the event of an
involuntary termination of a senior executives employment, both in the change in control and
non-change in control contexts.
Based on the Compensation Committees review, on October 5, 2006, we entered into employment
severance agreements with each individual who was an executive officer of Terra at that time. In
addition, we entered into an employment severance agreement with Mr. Huey in October 2006 when he
became an executive officer.
All employment severance agreements with our executive officers are identical except that Mr.
Bennetts agreement provides for an initial term of five years rather than three, and the approval
of three-quarters of our Board is required in order to terminate Mr. Bennett for cause. Our
Compensation Committee considered these distinctions appropriate in order to reflect Mr. Bennetts
unique role within our company. For a thorough description of the material terms of the agreements
with each of our named executive officers, see Employment Severance Agreements beginning on page 41. For a description and quantification of the payments and benefits
that may be provided to the named executive officers under these agreements, see Post-Employment
Payments beginning on page 53.
The Compensation Committee selected the severance multiples and levels of benefits based on
information that Towers Perrin provided in 2006 regarding current market practices relating to
executive severance. Annually, the Compensation Committee considers and may extend the term of the
agreements by one year. Should the Compensation Committee decide not to extend their terms, the
agreements will expire one year thereafter.
In July 2008, the Compensation Committee reviewed the key terms of the employment severance
agreements with our executives and the potential impact of the agreements upon a change in control
of Terra, including information provided by Towers Perrin regarding the potential amounts of excise
tax gross-ups that would be payable under different stock price scenarios. The Compensation
Committee decided to extend the terms of the agreements (other than Mr. Bennetts agreement, which
expires in 2011) by one year from the originally scheduled expiration date of October 2009, without
changes to the key terms of the agreements other than the addition of the willful breach of the
Companys code of conduct and failure to comply with government investigations to the definition of
cause.
E. Defined Benefit Pension Plans
We do not offer defined benefit pension plans to our employees who were hired on or after July 1,
2003. We do, however, maintain the Terra Industries Inc. Employees Retirement Plan, which is a
tax-qualified defined benefit pension plan maintained for the benefit of all U.S. employees hired
before July 1, 2003 (which includes each of our named executive officers, other than Messrs.
Greenwell or Huey).
On January 1, 1992, we adopted a supplemental executive retirement plan (the SERP). The
Compensation Committee and the Board of Directors established the SERP so that certain management
and highly compensated employees would not be ineligible for the benefits that would have been
provided to them under our tax-qualified defined benefit pension plan but for the limits imposed by
the
32
Internal Revenue Code and the Employee Retirement Income Security Act. The SERP is an unfunded
plan. Participants in the SERP have the status of unsecured creditors of Terra. As of
December 31, 2008, the only named executive officers who had accrued benefits under the SERP were
Messrs. Bennett, Giesler and Sanders.
For a description of the benefits accrued by each of our named executive officers under our defined
benefit pension plans as of December 31, 2008, see the Pension Benefits in Fiscal Year 2008 Table on page 49.
F. Defined Contribution Plans
We maintain a 401(k) plan, which is a tax-qualified defined contribution plan maintained for the
benefit of all U.S. employees, including our named executive officers. The 401(k) plan permits
employees to contribute a portion of their pay to the plan on a pre-tax basis. We also provide for
a company matching contribution as well as a direct company contribution in the case of employees
who are not eligible to participate in the Terra Industries Inc. Employees Retirement Plan. The
amount of our 2008 contribution to the 401(k) on behalf of each of our named executive officers is
set forth in the explanation of the All Other Compensation column of the Summary Compensation
Table.
We established a nonqualified Supplemental Deferred Compensation Plan on December 20, 1993. Due to
the substantial restrictions imposed by Section 409A of the Internal Revenue Code, on December 31,
2004, we froze the plan with respect to future deferrals. In general, the plan allowed
participants to defer certain portions of annual base salary and annual incentive awards and to
determine how to invest amounts deferred pursuant to the plan. The plan is unfunded. Participants
in the plan have the status of unsecured creditors of Terra. As of December 31, 2008, the only
named executive officers with an outstanding balance in the plan were Messrs. Giesler and Sanders.
G. Employee Welfare and Fringe Benefit Plans
Our named executive officers are eligible to participate in our welfare and fringe benefit plans on
the same basis as all of our other full-time employees. These benefits include our medical, dental
and vision plans, life insurance, short-term and long-term disability plans, business travel
accident insurance, tuition reimbursement, healthcare spending accounts, and dependent care
spending accounts. In addition, due to limitations on the level of base salary covered by our
primary long-term disability policy and in order to provide executive officers with long-term
disability coverage equal to 60% of base salary (which is the rate of coverage provided to all U.S.
employees), we maintain supplemental long-term disability policies.
H. Perquisites
The named executive officers are provided company-paid memberships in a local country club of their
choice. We cover any costs associated with this perquisite, including taxes. This perquisite is
provided in order to allow the executives to entertain business associates of Terra, such as
partners in joint ventures, customers and suppliers. The named executive officers are also
permitted to use the club amenities for personal and family activities.
33
V. Other Matters
A. Stock Ownership/Retention Guidelines
The Compensation Committee reviewed market data assembled by Towers Perrin to arrive at a
recommendation with respect to stock ownership by our executive officers. The purpose of the
guidelines is to encourage our executive officers to own and retain shares of our stock, thereby
aligning their interests with those of our other stockholders. Although these guidelines are not
mandatory, executive officers are strongly encouraged to follow them. However, special
circumstances may require an executive officer to depart from the guidelines on occasion. Current
ownership guidelines are as follows:
|
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|
|
|
|
|
Chief Executive Officer
|
|
4 times annual base salary |
|
|
Senior Vice Presidents
|
|
3 times annual base salary |
|
|
Vice Presidents
|
|
1 times annual base salary |
Fifty percent of unvested restricted shares will count toward the ownership guidelines prior to
vesting. After satisfying the ownership guidelines described above, the executive officers are
asked to hold an additional 50% of any shares awarded to them under our long-term incentive
programs (including restricted shares and performance share grants) for a minimum of 12 months
following vesting.
As of December 31, 2008, Mr. Bennetts share ownership exceeded 9 times his annual base salary.
The other named executive officers, with the exception of Mr. Greenwell, also exceeded their
respective guideline multiples as of December 31, 2008. Mr. Greenwells share ownership was
approximately 2.42 times his annual base salary as of December 31, 2008 due to the recent decline
in the price of our stock.
In October 2007, our Board of Directors implemented share ownership guidelines
of 20,000 shares for all non-employee directors except the Chairman, which guideline is
30,000 shares. All newly elected directors are to be allowed a five-year period from election to
satisfy the new guidelines.
B. Indemnity Agreements
Terras charter and bylaws provide indemnification for its officers and directors to the maximum
extent permitted by law. In general, we will pay the costs of legal defense, settlements or
judgments on behalf of the officer or director relating to actions taken in the course of
employment or service with Terra, as long as conduct meets applicable standards. We have entered
into Indemnity Agreements with the executive officers and directors, including the named executive
officers. The agreements provide the maximum indemnity available under Maryland General Corporate
Law, which is substantially the same as that provided under our charter and bylaws, and provide for
certain procedural requirements in order
to obtain indemnification, the timing of required determinations, indemnification payments,
advancement of expenses, and the rights of officers and directors in the event that we fail to
provide indemnification or to advance expenses.
C. Role of Executive Officers in Determining Compensation
Executive officers who are directly involved in administering the executive compensation program
include Mr. Bennett and Mr. Ewing, who is our Vice President, Investor Relations and Human
Resources. Mr. Bennett is excluded from discussions and decisions regarding his own compensation.
Mr. Ewing manages the administrative aspects of the Compensation Committees relationship with
Towers Perrin, as
34
well as the calculation and presentation to the Compensation Committee of
proposed executive annual salaries, annual incentive awards, and long-term incentive awards.
Mr. Ewing corresponds frequently with Mr. Fraser, the Chairman of our Compensation Committee.
Mr. Ewing communicates frequently with Mr. Bennett in all matters relating to executive
compensation, other than those matters that relate to Mr. Bennetts own compensation. Mr. Ewing
also occasionally relies on Mr. Greenwell, our Senior Vice President and Chief Financial Officer,
to calculate and review Terras ROCE, which is the relevant performance measure under our Annual
Incentive Plan and our long-term incentive program. Mr. Huey, Vice President, General Counsel and
Corporate Secretary, is engaged with respect to legal and SEC issues relating to executive
compensation, including reporting and disclosure issues.
Pursuant to its charter, the Compensation Committee is required to meet at least twice annually but
will meet more frequently to the extent necessary. In 2008, the Compensation Committee met three
times. Generally, executive officers who attend the meetings are Mr. Bennett, Mr. Ewing, and
Mr. Huey, who acts as secretary of the meeting. Mr. Bennett and Mr. Ewing present the
recommendations for any changes to compensation of our executive officers, except that no
recommendations are made with respect to Mr. Bennett. Mr. Bennett makes recommendations to the
Compensation Committee regarding the level of annual and long-term incentive awards for executive
officers other than himself and reviews the performance of such executive officers with regards to
payout levels of incentive awards, but the Compensation Committee makes the final determinations
regarding grants and payout levels of awards. Mr. Bennetts day-to-day knowledge of the
performance of the executives of Terra enables him to better evaluate the performance of the
executives. The Compensation Committee considers the recommendations of Mr. Bennett as well as
market data and the overall compensation objectives of Terra in making its determinations. Final
decisions regarding compensation for Mr. Bennett are made by the Compensation Committee in
executive session, excluding all members of management. Decisions regarding Mr. Bennett are then
communicated by Messrs. Slack and Fraser to Mr. Bennett and subsequently to Mr. Ewing. Mr. Ewing
is responsible for implementing all approved changes. Decisions regarding the other executive
officers are communicated by Mr. Bennett to Mr. Ewing.
D. Deductibility of Executive Compensation
As part of its role, the Compensation Committee reviews and considers the deductibility of
executive compensation under Section 162(m) of the Internal Revenue Code. Section 162(m) provides
that the Company may not deduct compensation of more than $1,000,000 paid in any year to the Chief
Executive Officer or any of the three other most highly compensated officers (excluding the Chief
Financial Officer), to the extent that such compensation is not performance-based as defined in
Section 162(m). To qualify as performance-based compensation, certain pre-established objective
performance goals and certain other conditions must be met. We have considered the potential
impact of Section 162(m) on
Terras compensation plans and have determined that it is consistent with Terras best interests
for the compensation of our executives to qualify for the deduction available under Section 162(m)
where possible. Therefore, we have designed certain of our plans and programs, including the 2008
Annual Incentive Plan and the 2008 performance share grants, as described above, to qualify for
deductibility under Section 162(m).
In 2008, the Internal Revenue Service released guidance impacting the deductibility pursuant to
Section 162(m) of certain bonuses or other programs if the bonus or program is referred to in the
severance formula of an employees employment agreement. We are considering the impact of this
guidance on our plans and programs and on the employment severance agreements described above, and,
upon their
35
renewal in October 2009, we may decide to revise the language contained in the
employment severance agreements to comply with this guidance.
Compensation Committee Report
We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on
such review and discussions, we recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in Terras Annual Report on Form 10-K and this proxy statement
on Schedule 14A.
Members of the Compensation Committee
of the Board of Directors
Dod A. Fraser, Chairman
David E. Fisher
Peter S. Janson
Dennis McGlone
36
Executive Compensation
Summary Compensation Table
The following table summarizes the compensation of each of our named executive officers for the
fiscal year ended December 31, 2008. The named executive officers are our Chief Executive Officer,
Chief Financial Officer and three other most highly compensated executive officers ranked by their
total compensation in the table below.
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Change in |
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Pension Value |
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& Non- |
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qualified |
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|
|
|
|
Non-Equity |
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Deferred |
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|
|
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|
|
|
|
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|
|
|
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Stock |
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Option |
|
Incentive Plan |
|
Compensation |
|
All Other |
|
|
|
Name & Principal |
|
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|
|
|
|
|
|
|
|
|
Bonus |
|
Awards |
|
Awards |
|
Compensation |
|
Earnings |
|
Compensation |
|
|
|
Position |
|
|
Year |
|
|
Salary ($) |
|
($)(1) |
|
($)(2) |
|
($)(2) |
|
($)(3) |
|
($)(4)(5) |
|
($)(6) |
|
|
Total ($) |
|
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|
|
|
|
|
|
|
|
M. Bennett, |
|
|
|
2008 |
|
|
|
$ |
592,308 |
|
|
$ |
|
|
|
$ |
2,879,126 |
|
|
$ |
|
|
|
$ |
1,710,000 |
|
|
$ |
184,533 |
|
|
$ |
25,028 |
|
|
|
$ |
5,390,994 |
|
President & CEO |
|
|
|
2007 |
|
|
|
$ |
540,385 |
|
|
$ |
|
|
|
$ |
2,770,201 |
|
|
$ |
|
|
|
$ |
1,468,500 |
|
|
$ |
96,713 |
|
|
$ |
24,166 |
|
|
|
$ |
4,899,965 |
|
|
|
|
|
2006 |
|
|
|
$ |
492,308 |
|
|
$ |
|
|
|
$ |
1,147,153 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
80,572 |
|
|
$ |
22,421 |
|
|
|
$ |
1,742,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Greenwell, |
|
|
|
2008 |
|
|
|
$ |
325,385 |
|
|
$ |
|
|
|
$ |
586,218 |
|
|
$ |
|
|
|
$ |
396,000 |
|
|
$ |
|
|
|
$ |
23,800 |
|
|
|
$ |
1,331,403 |
|
SVP & CFO (7) |
|
|
|
2007 |
|
|
|
$ |
268,404 |
|
|
$ |
1,250 |
|
|
$ |
377,773 |
|
|
$ |
|
|
|
$ |
298,750 |
|
|
$ |
|
|
|
$ |
35,285 |
|
|
|
$ |
981,462 |
|
|
|
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Giesler, |
|
|
|
2008 |
|
|
|
$ |
238,769 |
|
|
$ |
|
|
|
$ |
481,653 |
|
|
$ |
|
|
|
$ |
275,000 |
|
|
$ |
31,359 |
|
|
$ |
21,460 |
|
|
|
$ |
1,048,241 |
|
SVP Commercial Operations |
|
|
|
2007 |
|
|
|
$ |
230,462 |
|
|
$ |
|
|
|
$ |
559,488 |
|
|
$ |
|
|
|
$ |
230,000 |
|
|
$ |
26,366 |
|
|
$ |
20,578 |
|
|
|
$ |
1,066,894 |
|
|
|
|
|
2006 |
|
|
|
$ |
222,615 |
|
|
$ |
|
|
|
$ |
295,988 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
31,718 |
|
|
$ |
24,248 |
|
|
|
$ |
574,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Sanders, Jr. |
|
|
|
2008 |
|
|
|
$ |
238,615 |
|
|
$ |
|
|
|
$ |
450,186 |
|
|
$ |
|
|
|
$ |
290,000 |
|
|
$ |
28,185 |
|
|
$ |
23,066 |
|
|
|
$ |
1,030,053 |
|
VP Manufacturing |
|
|
|
2007 |
|
|
|
$ |
216,154 |
|
|
$ |
|
|
|
$ |
456,517 |
|
|
$ |
|
|
|
$ |
245,000 |
|
|
$ |
18,420 |
|
|
$ |
21,777 |
|
|
|
$ |
957,868 |
|
|
|
|
|
2006 |
|
|
|
$ |
197,692 |
|
|
$ |
|
|
|
$ |
233,094 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
20,077 |
|
|
$ |
23,540 |
|
|
|
$ |
474,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Huey
|
|
|
|
2008 |
|
|
|
$ |
283,462 |
|
|
$ |
|
|
|
$ |
407,612 |
|
|
$ |
|
|
|
$ |
275,000 |
|
|
$ |
|
|
|
$ |
21,403 |
|
|
|
$ |
987,476 |
|
VP, General Counsel |
|
|
|
2007 |
|
|
|
$ |
273,077 |
|
|
$ |
|
|
|
$ |
217,079 |
|
|
$ |
|
|
|
$ |
265,000 |
|
|
$ |
|
|
|
$ |
26,919 |
|
|
|
$ |
782,075 |
|
& Corporate Secretary (7) |
|
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
(1) |
|
Represents annual incentive plan payments in excess of the named executive officers maximum opportunity under the annual incentive plan. |
|
(2) |
|
Represents the compensation costs of equity grants for financial reporting purposes for the year under FAS 123R, rather than an amount paid to or realized by the
named executive officer. See Terras Annual Report on Form 10-K for the assumptions made in determining FAS 123R values. The FAS 123R value as of the grant date for
equity grants is spread over the number of months of service required for the grant to become non-forfeitable. For additional information about stock-based grants
made in 2008, see the Grants of Plan-Based Awards table and accompanying footnotes and narrative. |
|
(3) |
|
Reflects the amount earned for 2008 performance under the annual incentive plan, up to the individuals maximum incentive opportunity. Amounts were earned in
2008 and paid in 2009, and 2007 amounts were earned in 2007 and paid in 2008. |
|
(4) |
|
In the case of each of our named executive officers other than Messrs. Greenwell and Huey, amounts shown are solely an estimate of the increase for 2008 in the
actuarial present value of the named executive officers age 65 accrued benefit under the Terra Industries Inc. Employees Retirement Plan (Retirement Plan) and, in
the case of Messrs. Bennett, Giesler and Sanders, under the Terra Industries Inc. Excess Benefit Plan (SERP). No amount is payable under these plans before a
participant attains age 55. |
|
|
(5) |
|
Assumptions used to calculate the actuarial present value of the accrued benefits of the named executive officers are further described under Pension Benefits
in Fiscal Year 2008 Table on page 49. The Change in Pension Value and Non-qualified Deferred Compensation Earnings Column also reports the amount of above market earnings
on compensation that is deferred outside of tax-qualified plans. No amount is reported with respect to earnings on deferred compensation plans because above market
rates are not permitted under the Supplemental Deferred Compensation Plan. |
|
|
|
(6) |
|
See All Other Compensation disclosure for details. |
|
(7) |
|
Messrs. Greenwell and Huey were not named executive officers in 2006. |
38
All Other Compensation Table
The following table describes each component of the All Other Compensation column in the Summary
Compensation Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites & |
|
Contributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
to Defined |
|
|
|
|
|
Tax |
|
|
|
|
|
|
|
|
Personal |
|
Contribution |
|
Insurance |
|
Reimbursements |
|
|
|
|
|
Name |
|
|
Benefits(1) |
|
Plans(2) |
|
Premiums(3) |
|
(4) |
|
Other(5) |
|
|
Total |
|
|
|
|
|
|
|
M. Bennett,
President & CEO |
|
|
$ |
6,885 |
|
|
$ |
10,800 |
|
|
$ |
2,798 |
|
|
$ |
4,484 |
|
|
$ |
60 |
|
|
|
$ |
25,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Greenwell,
SVP & CFO |
|
|
$ |
6,885 |
|
|
$ |
11,118 |
|
|
$ |
496 |
|
|
$ |
5,241 |
|
|
$ |
60 |
|
|
|
$ |
23,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Giesler, SVP
Commercial
Operations |
|
|
$ |
5,773 |
|
|
$ |
11,230 |
|
|
$ |
521 |
|
|
$ |
3,876 |
|
|
$ |
60 |
|
|
|
$ |
21,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Sanders,
VP Manufacturing |
|
|
$ |
7,306 |
|
|
$ |
10,333 |
|
|
$ |
521 |
|
|
$ |
4,846 |
|
|
$ |
60 |
|
|
|
$ |
23,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Huey,
VP, General Counsel
& Corporate
Secretary |
|
|
$ |
4,685 |
|
|
$ |
10,975 |
|
|
$ |
1,849 |
|
|
$ |
3,833 |
|
|
$ |
60 |
|
|
|
$ |
21,403 |
|
|
|
|
(1) |
|
Amounts include only country club dues for each executive. |
|
(2) |
|
Includes company contributions to each executives 401(k) account. |
|
(3) |
|
Includes group life insurance premiums for coverage in excess of $50,000. |
|
(4) |
|
Includes tax gross-ups paid by Terra in 2008 on perquisites and other benefits from 2007. These gross-ups are based only on
taxes from company payment of country club dues for all of the named executive officers. |
|
(5) |
|
Value of gift card given to each named executive officer during 2008. |
39
Grants of Plan-Based Awards in 2008
The following table provides information on awards under the Annual Incentive Plan and restricted
share and performance share awards granted in 2008 to each of our named executive officers. The
amount of the performance share awards and restricted share awards that was expensed in 2008 is
shown in the Summary Compensation Table on page 37.
|
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All Other |
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All Other |
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Option |
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Stock |
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Awards: |
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Awards: |
|
Number |
|
|
Exercise |
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Estimated Future Payouts Under |
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|
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Number |
|
of |
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|
or Base |
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|
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|
Grant Date |
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|
|
|
|
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|
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Type |
|
|
Non-Equity Incentive Plan |
|
|
Estimated Future Payouts Under |
|
|
of Shares |
|
Securities |
|
|
Price of |
|
Market |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
of |
|
|
Awards(4) |
|
|
Equity Incentive Plan Awards(5) |
|
|
of Stock |
|
Underlying |
|
|
Option |
|
Price on |
|
|
of Stock & |
|
|
|
Grant |
|
Date of |
|
|
Award |
|
|
Threshold |
|
Target |
|
Maximum |
|
|
Threshold |
|
Target |
|
Maximum |
|
|
or Units |
|
Options |
|
|
Awards |
|
Grant |
|
|
Option |
Name |
|
|
Date(1) |
|
Action(2) |
|
|
(3) |
|
|
($) |
|
($) |
|
($) |
|
|
(#) |
|
(#) |
|
(#) |
|
|
(#)(6) |
|
(#) |
|
|
($ / Sh) |
|
Date |
|
|
Awards(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Bennett, |
|
|
16-Jul-08 |
|
15-Jul-08 |
|
|
RS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,100 |
|
|
|
|
|
|
|
NA |
|
|
$ |
46.44 |
|
|
|
$ |
561,924 |
|
President & CEO
|
|
|
22-Feb-08 |
|
13-Feb-08 |
|
|
PS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000 |
|
|
|
56,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
47.75 |
|
|
|
$ |
2,674,000 |
|
|
|
|
22-Feb-08 |
|
|
|
|
|
|
AI |
|
|
|
450,000 |
|
|
|
900,000 |
|
|
|
1,800,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA |
|
D. Greenwell, |
|
|
16-Jul-08 |
|
15-Jul-08 |
|
|
RS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,300 |
|
|
|
|
|
|
|
NA |
|
|
$ |
46.44 |
|
|
|
$ |
199,692 |
|
SVP & CFO
|
|
|
22-Feb-08 |
|
13-Feb-08 |
|
|
PS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,900 |
|
|
|
9,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
47.75 |
|
|
|
$ |
467,950 |
|
|
|
|
22-Feb-08 |
|
|
|
|
|
|
AI |
|
|
|
99,000 |
|
|
|
198,000 |
|
|
|
396,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA |
|
J. Giesler, |
|
|
16-Jul-08 |
|
15-Jul-08 |
|
|
RS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,200 |
|
|
|
|
|
|
|
NA |
|
|
$ |
46.44 |
|
|
|
$ |
148,608 |
|
SVP Commercial
Operations
|
|
|
22-Feb-08 |
|
13-Feb-08 |
|
|
PS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,600 |
|
|
|
7,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
47.75 |
|
|
|
$ |
343,800 |
|
|
|
22-Feb-08 |
|
|
|
|
|
|
AI |
|
|
|
72,000 |
|
|
|
144,000 |
|
|
|
288,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Sanders, |
|
|
16-Jul-08 |
|
15-Jul-08 |
|
|
RS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,200 |
|
|
|
|
|
|
|
NA |
|
|
$ |
46.44 |
|
|
|
$ |
148,608 |
|
VP Manufacturing
|
|
|
22-Feb-08 |
|
13-Feb-08 |
|
|
PS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,600 |
|
|
|
7,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
47.75 |
|
|
|
$ |
343,800 |
|
|
|
22-Feb-08 |
|
|
|
|
|
|
AI |
|
|
|
72,600 |
|
|
|
145,200 |
|
|
|
290,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA |
|
J. Huey, |
|
|
16-Jul-08 |
|
15-Jul-08 |
|
|
RS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,700 |
|
|
|
|
|
|
|
NA |
|
|
$ |
46.44 |
|
|
|
$ |
171,828 |
|
VP, Gen. Counsel &
Corp. Secretary
|
|
|
22-Feb-08 |
|
13-Feb-08 |
|
|
PS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,300 |
|
|
|
8,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
47.75 |
|
|
|
$ |
410,650 |
|
|
|
22-Feb-08 |
|
|
|
|
|
|
AI |
|
|
|
71,250 |
|
|
|
142,500 |
|
|
|
285,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects the date grants were actually made. |
|
(2) |
|
Reflects the date grants were approved by the Compensation Committee. |
|
(3) |
|
For purposes of this table, RS means a grant of Restricted Stock, PS means a grant of Performance Stock and AI means a grant under the Annual Incentive Plan. |
|
(4) |
|
Reflects grants made under Terras Annual Incentive Plan. Actual payouts under this plan are based on performance versus financial targets over the corresponding fiscal year and individual performance. Cash payouts are made after
completion of the one-year performance period. Threshold awards are 50% of target and maximum awards are 200% of target. |
|
(5) |
|
Reflects grants of performance shares made under Terras long-term incentive performance plan. Actual payouts under this plan are based on performance versus financial targets over a three-year period and depend on actual
performance versus targets over the performance period, except that in the event of a change in control, performance shares will be issued immediately at the higher of target or actual performance level for the quarters completed prior
to the change in control. Threshold award is zero shares, and maximum award is 200% of targeted shares. |
|
(6) |
|
Reflects grants of restricted shares that have time-based vesting, which vest 100% on the third anniversary of the grant date or immediately upon a change in control (except for 2008 grants, which vest 100% on the third anniversary
of the grant date or upon a change in control and subsequent qualifying termination). |
|
(7) |
|
Amounts reflect maximum payouts for the performance share grants and stock price on the date of grant. |
40
The following is a description of material factors necessary to understand the information
disclosed in the Summary Compensation Table and the Grants of Plan-Based Awards table. This
description is intended to supplement the information discussed in the Compensation Discussion and
Analysis.
Employment Severance Agreements
Background
On October 5, 2006, we entered into an employment severance agreement with each of our named
executive officers other than Mr. Huey, with whom we entered into an employment severance agreement
on October 25, 2006. The named executive officers were previously parties to executive retention
agreements with us, which provided for severance and other benefits in the event of a termination
of employment following a change in control. The new employment severance agreements supersede and
replace the executive retention agreements and provide for severance and other benefits in the
event of a termination of employment under circumstances that are both related to and unrelated to
a change in control.
Term
Each employment severance agreement has a three-year term, with the exception of the agreement with
Mr. Bennett, which has a five-year term. The term may be extended for additional one-year periods
in the sole discretion of the Board of Directors. The employment severance agreements may not be
terminated during the two-year period following a change in control of Terra without the
executives consent.
Severance and Post-Termination Benefits
The employment severance agreements provide that the executives will be entitled to certain
compensation and benefits upon a qualifying termination of employment. The extent and nature of
the compensation and benefits are identified and quantified in the disclosure entitled
Post-Employment Payments, which appears on page 53 of this Proxy Statement.
Excise Tax Gross-Up
The employment severance agreements provide that the executives will be entitled to a gross-up
payment to make the executives whole for any excise taxes imposed as a result of Section 280G of
the Internal Revenue Code. Entitlement to a gross-up payment is not contingent on an executives
termination of employment. The estimated amount of the excise tax gross-up for each named
executive officer is quantified in the disclosure entitled Post-Employment Payments, which
appears on page 53 of this Proxy Statement.
Restrictive Covenants
The employment severance agreements contain restrictive covenants that apply following termination
of a named executive officers employment with Terra and are described in the disclosure entitled
Post-Employment Payments, which appears on page 53 of this Proxy Statement.
41
Annual Incentive Compensation
2008 Officer and Key Employee Incentive Plan
We maintain an Annual Incentive Plan in which our officers and other key employees selected by Mr.
Bennett are entitled to participate. As described in the Compensation Discussion and Analysis, the
Annual Incentive Plan provides participants, including the named executive officers, the
opportunity to earn annual cash incentive awards based upon the achievement of certain performance
goals. Awards are paid from a pool established by the Compensation Committee. Funding of the pool
for 2008 was based on performance targets relating to return on capital employed. A description of
performance target levels and corresponding funding levels is set forth in the Compensation
Discussion and Analysis.
Each named executive officers threshold, target and maximum incentive award amounts are disclosed
in the Grants of Plan-Based Awards table. Annual incentive payments may not be increased to an
amount greater than the named executive officers target bonus times the pool funding percentage,
but may be decreased in the discretion of the Compensation Committee. Payment of an annual
incentive award is made as soon as practicable following our determination of whether and to what
extent performance goals have been satisfied, subject to approval by the Compensation Committee.
Generally, in order to be entitled to receive an annual incentive award payment, an employee must
be employed during the applicable fiscal year and until the date of payment.
For 2008, our Compensation Committee set the following target annual incentive award amounts for
the named executive officers:
|
|
|
Mr. Bennetts target annual incentive award was equal to 150% of base salary; |
|
|
|
|
The target annual incentive award for each of Messrs. Greenwell, Giesler and Sanders
was equal to 60% of base salary; and |
|
|
|
|
Mr. Hueys target annual incentive award was equal to 50% of base salary. |
In 2008, Terra exceeded the maximum level of performance under the Annual Incentive Plan, and
therefore the incentive pool was funded at the maximum level. Each of our named executive officers
was eligible to receive an amount of up to 200% of their target annual incentive award amounts.
The actual awards granted to each of our named executive officers was determined by our
Compensation Committee, based on its determination of each named executive officers fulfillment of
his individual performance goals. For each of Messrs. Bennett, Giesler, Sanders and Huey, the
Compensation Committee, in its discretion, granted an award that was less than such executives
maximum target level. For Mr. Greenwell, the Compensation Committee, in its discretion, granted an
award that was equal to his maximum target level. This result is reflected in the Non-Equity
Incentive Plan Compensation and Bonus columns of the Summary Compensation Table.
Long-Term Incentive Awards
We maintain the Terra Industries Inc. Stock Incentive Plan of 2002, which we refer to as the 2002
Plan, and the 2007 Omnibus Incentive Compensation Plan, which we refer to as the 2007 Plan, under
which the Compensation Committee may grant to the named executive officers, as well as other
eligible employees,
42
stock options, stock appreciation rights, restricted shares, performance shares
and other forms of stock-based compensation.
2008 Long-Term Incentive Grants
For 2008, the Compensation Committee granted each of our named executive officers an award based on
a combination of restricted shares and performance shares. Each named executive officers target
grant was determined as a percentage of base salary. For 2008, our Compensation Committee set the
following target long-term incentive award values for the named executive officers:
|
|
|
Mr. Bennetts target long-term incentive award was equal to 300% of base salary; |
|
|
|
|
The target long-term incentive award for each of Messrs. Greenwell, Giesler, Sanders and Huey
was equal to 130% of base salary. |
With the exception of Mr. Bennett, all executive officers were expected to receive one half of
their grants in the form of restricted shares and the other half in the form of performance share
grants. Mr. Bennett received one-third of his grant in restricted shares and two-thirds in
performance share grants. In all cases, the number of shares subject to the grant was calculated
by dividing the target dollar value of the award by the average of Terras closing stock price
during the twenty trading days prior to the date that the awards were approved by the Compensation
Committee. The average stock price was rounded to the nearest fifty cents, and the target number
of shares was rounded to the nearest 100 shares.
The number of shares of Terra common stock subject to each grant and the grant date fair value of
these awards is reflected in the Grants of Plan-Based Awards table. The accounting cost recognized
in 2008 with respect to outstanding equity grants is reflected in the Summary Compensation Table.
|
|
|
Restricted share grants. We granted restricted shares to each of our
named executive officers on July 16, 2008. The principal terms and conditions of these
grants are described below. |
|
|
|
Vesting. Each restricted share grant is subject to
cliff vesting with respect to 100% of the restricted shares subject to the
award on the third anniversary of the grant date. However, in the event of a
termination of employment without cause or for good reason following a change
in control of Terra (within the meaning of the restricted share award
agreements) or termination of employment due to death or total disability, all
restricted shares will become immediately vested. The Compensation Committee
has the authority to extend or accelerate the vesting period at any time, in
its discretion. |
|
|
|
|
Forfeiture. Upon an executives termination of
employment for any reason other than death, total disability, termination
without cause or for good reason following a change in control of Terra or such
other circumstances as determined by the Compensation Committee in its sole
discretion, any unvested restricted shares held by the executive will be
immediately forfeited and terminated. |
|
|
|
|
Voting and Dividend Rights. Holders of restricted shares are entitled to all rights of a stockholder of Terra, including the
right to vote and receive dividends with respect to |
43
|
|
|
the restricted shares.
However, if any distribution is made to our stockholders other than a cash
dividend, then any securities or other property received by other stockholders
will be subject to the same restrictions applicable to the restricted shares. |
|
|
|
Performance share grants. We granted performance shares to each of our
named executive officers on February 22, 2008. The principal terms and conditions of
these grants are described below. |
|
|
|
Vesting. Each performance share grant is subject to
cliff vesting with respect to all shares subject to the award after December
31, 2010, based on achievement of the performance goals during the period from
January 1, 2008 through December 31, 2010, as described in the Compensation
Discussion and Analysis. Upon vesting, a holder will become entitled to
receive a number of shares ranging from 0% to 200% of the target number of shares subject to the award, based on achievement of performance goals. In the
event of a change in control of Terra (within the meaning of the performance
share award agreements), vesting of performance share awards will immediately
accelerate and the holder will be entitled to the greater of the target number
of shares subject to the award and a number based on actual company performance
prior to the change in control. In the event of termination of employment due
to death, the holder will become entitled to a number of performance shares
based on actual performance prior to death. In the event of termination of
employment due to total disability, performance shares will continue to vest
following termination based on achievement of performance goals. In special
circumstances, as determined by the Compensation Committee, the Compensation
Committee may extend the period for earning all or a portion of a holders
performance shares. |
|
|
|
|
Forfeiture. Upon an executives termination of
employment prior to the end of the performance period for any reason other than
death, total disability or such other circumstances as determined by the
Compensation Committee in its sole discretion, any unvested performance shares
held by the executive will be immediately forfeited and terminated. |
Pre-2008 Long-Term Incentive Grants
In accordance with applicable disclosure rules, the Stock Awards column of the Summary Compensation
Table reflects the amounts that we recognized as an accounting expense for 2008 in connection with
restricted shares and performance share awards granted in 2008 and in prior years. An expense was
recognized in 2008 for prior-year awards granted in 2005, 2006 and 2007. We granted time-based
restricted shares in 2005, 2006 and 2007 on terms and conditions that are substantially the same as
the grants made in 2008 and described above, except that the prior grants of restricted shares will
vest in full upon the change in control of Terra. We also made performance share grants in 2006
and 2007. These grants, which were made on February 17, 2006 and February 28, 2007, were subject
to three-year performance periods ending on December 31, 2008 and December 31, 2009, respectively.
44
Retirement Benefits
Defined Benefit Pension Plans
We maintain a U.S. tax-qualified defined benefit plan, and an excess benefit plan, which we refer
to as the SERP which covers certain named executive officers. For a description of the material
terms of these plans and the present value of each named executive officers accumulated benefits
under these plans as
of December 31, 2008, see the Pension Benefits in Fiscal Year
2008 Table and accompanying disclosure, beginning on page 49.
Defined Contribution Plans
We maintain a 401(k) plan, which is a tax-qualified defined contribution plan maintained for the
benefit of all U.S. employees, including each of our named executive officers. The 401(k) plan
permits employees to contribute a portion of eligible pay to the plan on a pre-tax basis. During
2008, we matched 100% of the first 3% of eligible compensation that an employee contributed to the
401(k) plan and 60% of the next 3% of pay contributed. In addition, in the case of employees hired
after June 30, 2003 and who are therefore ineligible to participate in the U.S. tax-qualified
defined benefit plan, we made an additional non-elective contribution for 2008 equal to 3.2% of
eligible compensation. The amount of our 2008 contribution to the 401(k) plan on behalf of each of
our named executive officers is set forth in the explanation of the All Other Compensation column
of the Summary Compensation Table.
45
Outstanding Equity Awards at 2008 Fiscal Year-End
The following table provides information on the holdings of stock option and stock awards by each
of our named executive officers as of December 31, 2008.
|
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|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
Equity Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards: |
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|
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|
|
|
|
|
|
|
|
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Awards: |
|
Plan Awards: |
|
|
|
|
|
|
|
Number of |
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Market or Payout |
|
|
|
|
|
|
|
Securities |
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value |
|
Unearned |
|
Value of |
|
|
|
|
|
|
|
Underlying |
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Number of |
|
of Shares or |
|
Shares, Units |
|
Unearned Shares, |
|
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
Unexercised |
|
Option |
|
Option |
|
|
Shares or Units of |
|
Units of Stock |
|
or Other Rights |
|
Units or Other |
|
|
|
|
|
|
|
Options (#) |
|
Options (#) Un- |
|
Unearned |
|
Exercise |
|
Expiration |
|
|
Stock That Have Not |
|
That Have Not |
|
That Have Not |
|
Rights That Have |
|
|
|
|
Name |
|
|
Exercisable |
|
exercisable |
|
Options (#) |
|
Price ($) |
|
Date |
|
|
Vested (#) |
|
Vested ($)(1) |
|
Vested (#) |
|
Not Vested ($)(1) |
|
|
|
|
M. Bennett, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,000 |
(2) |
|
$ |
1,283,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
President & CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,400 |
(3) |
|
$ |
340,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,100 |
(4) |
|
$ |
201,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138,000 |
(5) |
|
$ |
2,300,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,000 |
(6) |
|
$ |
933,520 |
|
|
|
|
|
D. Greenwell, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,400 |
(2) |
|
$ |
356,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP & CFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,200 |
(3) |
|
$ |
120,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,300 |
(4) |
|
$ |
71,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,800 |
(5) |
|
$ |
346,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,800 |
(6) |
|
$ |
163,366 |
|
|
|
|
|
J. Giesler, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,100 |
(2) |
|
$ |
401,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP Commercial
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,600 |
(3) |
|
$ |
93,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,200 |
(4) |
|
$ |
53,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,800 |
(5) |
|
$ |
313,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,200 |
(6) |
|
$ |
120,024 |
|
|
|
|
|
R. Sanders, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
(2) |
|
$ |
333,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
VP Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,300 |
(3) |
|
$ |
88,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,200 |
(4) |
|
$ |
53,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,800 |
(5) |
|
$ |
296,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,200 |
(6) |
|
$ |
120,024 |
|
|
|
|
|
J. Huey, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000 |
(2) |
|
$ |
400,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
VP, General Counsel &
Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,600 |
(3) |
|
$ |
110,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,700 |
(4) |
|
$ |
61,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,400 |
(5) |
|
$ |
373,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,600 |
(6) |
|
$ |
143,362 |
|
|
|
|
|
See footnotes on following page.
46
|
|
|
(1) |
|
Based on a year-end closing price of $16.67 per share. |
|
(2) |
|
Restricted shares will time-vest on August 3, 2009 or earlier upon a change-in-control. |
|
(3) |
|
Restricted shares will time-vest on July 26, 2010 or earlier upon a change-in-control. |
|
(4) |
|
Restricted shares will time-vest on July 18, 2011 or earlier upon a change-in-control and
subsequent qualifying termination. |
|
(5) |
|
This performance plan cycle will end December 31, 2009. The actual number of shares paid out
subsequent to that time will depend on actual performance versus targets over the performance
period, except that in the event of a change-in-control, performance shares will be paid out
immediately at the higher of target or actual performance level of the quarters completed
prior to the change-in-control. The threshold award is zero; therefore, the number of shares
and market value shown in the Equity Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights That Have Not Vested column are based on performance through
December 31, 2008 (200% of target) for the 2007 performance plan grant. |
|
(6) |
|
This performance plan cycle will end December 31, 2010. The actual number of shares paid out
subsequent to that time will depend on actual performance verses targets over the performance
period, except that in the event of a change-in-control, performance shares will be paid out
immediately at the higher of target or actual performance level of the quarters completed
prior to the change-in-control. The threshold award is zero; therefore, the number of shares
and market value shown in the Equity Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights That Have Not Vested column are based on performance through
December 31, 2008 (200% of target) for the 2008 performance plan grant. |
47
Option Exercises and Stock Vested
The following table provides information, for each of our named executive officers, on the number
of restricted shares that became vested in 2008 and the value realized before payment of any
applicable withholding taxes and broker commissions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
Acquired on |
|
Value Realized |
|
|
Acquired on Vesting |
|
Value Realized |
Name |
|
|
Exercise (#) |
|
on Exercise ($) |
|
|
(#) |
|
on Vesting ($) |
|
|
|
|
|
|
|
M. Bennett, |
|
|
|
|
|
|
|
|
|
|
|
|
54,000 |
(1) |
|
|
3,008,880 |
|
President & CEO |
|
|
|
|
|
|
|
|
|
|
|
|
308,000 |
(2) |
|
|
5,134,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Greenwell, |
|
|
|
|
|
|
|
|
|
|
|
|
9,579 |
(3) |
|
|
380,957 |
|
SVP & CFO |
|
|
|
|
|
|
|
|
|
|
|
|
7,500 |
(1) |
|
|
417,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,800 |
(2) |
|
|
713,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Giesler, |
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
(1) |
|
|
1,393,000 |
|
SVP
Commercial Operations |
|
|
|
|
|
|
|
|
|
|
|
|
48,200 |
(2) |
|
|
803,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Sanders, |
|
|
|
|
|
|
|
|
|
|
|
|
18,500 |
(1) |
|
|
1,030,820 |
|
VP Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
(2) |
|
|
666,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Huey, VP,
General Counsel &
Corporate Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects time-vesting restricted shares vesting on July 30, 2008, at a price of $55.72. Shares
were granted on July 29, 2005. |
|
(2) |
|
Reflects performance share awards for performance from January 1, 2006 through December 31, 2008.
Shares were not actually delivered until February 17, 2009, when the Compensation Committee determined
the level of performance achieved. Number of shares is based on performance through December 31, 2008
(200% of target) and the share price is based on the December 31, 2008 closing price of $16.67. |
|
(3) |
|
Reflects time-vesting restricted shares vesting on April 7, 2008, at a price of $39.77. Shares
were granted on April 4, 2005. |
48
Pension Benefits in Fiscal Year 2008
The following table sets forth information on the pension benefits for each of our named executive
officers as of December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value |
|
|
|
|
|
|
Number of |
|
of |
|
Payments |
|
|
|
|
Years Credited |
|
Accumulated |
|
During Last |
Name |
|
Plan Name |
|
Service (#)(1) |
|
Benefit ($)(2) |
|
Fiscal Year ($) |
M. Bennett, President & CEO |
|
Terra Industries Inc. Employees Retirement Plan |
|
|
36 |
|
|
$ |
571,695 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terra Industries Inc. Excess Benefit Plan |
|
|
36 |
|
|
$ |
800,882 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Greenwell, SVP & CFO (3) |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Giesler, SVP Commercial Operations |
|
Terra Industries Inc. Employees Retirement Plan |
|
|
21 |
|
|
$ |
219,454 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terra Industries Inc. Excess Benefit Plan |
|
|
21 |
|
|
$ |
5,589 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Sanders, VP Manufacturing |
|
Terra Industries Inc. Employees Retirement Plan |
|
|
15 |
|
|
$ |
164,670 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terra Industries Inc. Excess Benefit Plan |
|
|
15 |
|
|
$ |
4,532 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Huey, VP, |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
General Counsel &
Corporate Secretary
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Except in the case of Mr. Giesler, credited service is the period of the executives actual service with Terra. In the
case of Mr. Giesler, credited service commenced on August 1, 1987, which was the date Mr. Giesler became employed by
Freeport McMoran Inc. (FMI). FMI owned Agricultural Minerals and Chemicals Inc., which was acquired by Terra. Mr.
Gieslers benefits under the Retirement Plan are offset by benefits under the FMI defined benefit pension plan. |
|
(2) |
|
Actuarial present value for the Retirement Plan and SERP was determined in accordance with the following assumptions: |
|
|
|
Discount rate equals 6.75%. |
|
|
|
|
Postretirement mortality was projected using the 2008 IRC 430 Annuitant Mortality Table. |
|
|
|
|
Employees are assumed to have elected benefits in the form of a single life annuity.
|
|
|
|
|
Benefits commence at age 65. |
(3) |
|
Messrs. Greenwell and Huey are not participants in the Terra Industries Inc. Employees Retirement Plan or Excess
Benefit Plan. |
We maintain a U.S. tax-qualified defined benefit plan (the Terra Industries Inc. Employees
Retirement Plan or the Retirement Plan) for the benefit of all U.S. employees hired before July
1, 2003, including each of our named executive officers except Messrs. Greenwell and Huey. The
Retirement Plan is closed to employees hired on or after July 1, 2003.
We also maintain an excess benefit plan (the SERP). The purpose of the SERP is to restore those
benefits that a participant would otherwise lose in the tax-qualified plan due to Internal Revenue
Code compensation limits and benefit limits.
49
Retirement Plan
Benefit Accrual Formula
The Retirement Plan provides an unreduced single life annuity at age 65 equal to an amount which:
Multiplies
|
|
|
1.55% of the highest 60-month average pensionable compensation by |
|
|
|
|
Years of credited service and |
Subtracts
|
|
|
0.6% of the highest 60-month average pensionable compensation up to the social
security compensation limit multiplied by years of credited service (up to a maximum of
35 years). |
Prior to 2004, pensionable compensation included total salary and wages paid to the participant for
services rendered in the period considered as service, including bonuses, overtime, commissions and
salary deferrals under a Section 401(k) or Section 125 plan. Effective January 1, 2004, bonuses
are no longer considered as part of pensionable compensation.
Vesting
An employee hired prior to July 1, 2003 became eligible to participate once he or she had completed
a 12 consecutive month period of at least 1,000 hours of service. Benefits under the Retirement
Plan cliff vest after five years of service.
Early Retirement
Eligibility for early retirement under the Retirement Plan is age 55 with 5 years of vesting
service. For a participant who commences pension benefits directly from active status, the early
retirement reductions are 3% per year from age 65, 10% per year from age 60, 8% per year from age
59, 6% per year from age 58 and 5% per year from age 56. All other participants who commence
pension benefits prior to age 65 are subject to an actuarial reduction of 6.67% per year from age
65 and 3.33% per year from age 60. As of the date of this Proxy Statement, only Mr. Bennett is
eligible for early retirement under the Retirement Plan.
Forms of Benefit
Participants in the Retirement Plan generally can choose among the following optional forms of
benefit:
|
|
|
Single life annuity |
|
|
|
|
50% joint and survivor annuity |
|
|
|
|
75% joint and survivor annuity |
|
|
|
|
100% joint and survivor annuity |
|
|
|
|
10-year or 15-year certain and life annuity |
50
|
|
|
Social Security level income benefit. |
Each option is provided on an actuarially equivalent basis.
SERP
The Retirement Plan benefits are limited by various constraints by the Internal Revenue Code. The
SERP is an unfunded plan maintained to provide benefits to a certain group of management and highly
compensated employees. The terms of the SERP, as they relate to our named executive officers, with
respect to benefit accrual formula, vesting, early retirement and forms of benefit are the same as
the Retirement Plan, except that under the SERP, pensionable compensation is not subject to the
limits imposed by the Internal Revenue Code and deferred compensation is not excluded from the
definition of pensionable compensation under the SERP.
51
Nonqualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate |
|
|
|
|
Executive |
|
Registrant |
|
Aggregate |
|
Withdrawals |
|
Aggregate |
|
|
Contributions |
|
Contributions |
|
Earnings |
|
/ |
|
Balance at |
|
|
in Last FY |
|
in Last FY |
|
in Last FY |
|
Distributions |
|
Last FYE |
Name |
|
($)(1) |
|
($)(1) |
|
($)(1) |
|
($) |
|
($) |
|
M. Bennett, |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
President & CEO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Greenwell, |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
SVP & CFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Giesler, |
|
$ |
|
|
|
$ |
|
|
|
$ |
976 |
|
|
$ |
|
|
|
$ |
39,847 |
|
SVP Commercial Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Sanders, |
|
$ |
|
|
|
$ |
|
|
|
$ |
(88,448 |
) |
|
$ |
|
|
|
$ |
135,694 |
|
VP Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Huey, |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
VP, General Counsel &
Corporate Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The deferred compensation plan was frozen prior to 2008. See the narrative accompanying this table for more
detail about this plan. |
The Nonqualified Deferred Compensation table shows information about our Supplemental Deferred
Compensation Plan, which was frozen with respect to future deferrals on December 31, 2004. In
general, prior to January 1, 2005, the plan allowed participants to defer up to 20% of the
participants annual base salary and 20% of the participants annual cash incentive awards and to
determine how to invest amounts deferred pursuant to the plan.
Participants with notional account balances remaining under the Supplemental Deferred Compensation
Plan are permitted to invest their balances in various mutual funds. Participants are permitted to
make unlimited changes to their investment alternatives under the Supplemental Deferred
Compensation Plan.
For 2008, the value of Mr. Gieslers account balance increased by 3% and the value of Mr. Sanders
account balance decreased by 39%. Such changes were solely attributable to investment gains or
losses, as applicable.
52
Post-Employment Payments
This section describes and quantifies potential payments that may be made to each named executive
officer at, following, or in connection with the resignation, severance, retirement, or other
termination of the named executive officers employment or a change in control of Terra.
M. Bennett, President & CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
Change in |
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrelated to a |
|
Control |
|
Control & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
Without |
|
Qualifying |
|
|
Death |
|
Disability |
|
For Cause |
|
Voluntary |
|
Control |
|
Termination |
|
Termination |
|
|
|
Cash Severance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,250,000 |
|
|
$ |
|
|
|
$ |
3,000,000 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares |
|
$ |
1,825,365 |
|
|
$ |
1,825,365 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,623,658 |
|
|
$ |
1,825,365 |
|
Performance Share Awards |
|
$ |
3,233,980 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,233,980 |
|
|
$ |
3,233,980 |
|
Unexercisable Options |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
5,059,345 |
|
|
$ |
1,825,365 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
4,857,638 |
|
|
$ |
5,059,345 |
|
Retirement Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
357,090 |
|
DC Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
357,090 |
|
Unvested Deferred
Compensation |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
21,583 |
|
|
$ |
|
|
|
$ |
21,583 |
|
Outplacement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
72,000 |
|
|
$ |
|
|
|
$ |
72,000 |
|
Perquisites |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Long-Term Disability |
|
$ |
|
|
|
$ |
1,878,390 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Tax Gross-Ups |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,117,608 |
|
Total |
|
$ |
|
|
|
$ |
1,878,390 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
93,583 |
|
|
$ |
|
|
|
$ |
2,211,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,059,345 |
|
|
$ |
3,703,755 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,343,583 |
|
|
$ |
4,857,638 |
|
|
$ |
10,627,626 |
|
53
D. Greenwell, SVP & CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying |
|
Change in |
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
Control |
|
Control & |
|
|
|
|
|
|
|
|
|
|
For |
|
|
|
|
|
Unrelated to a |
|
Without |
|
Qualifying |
|
|
Death |
|
Disability |
|
Cause |
|
Voluntary |
|
Change in Control |
|
Termination |
|
Termination |
Cash Severance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
792,000 |
|
|
$ |
|
|
|
$ |
1,056,000 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares |
|
$ |
548,443 |
|
|
$ |
548,443 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
476,762 |
|
|
$ |
548,443 |
|
Performance Share Awards |
|
$ |
510,102 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
510,102 |
|
|
$ |
510,102 |
|
Unexercisable Options |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
1,058,545 |
|
|
$ |
548,443 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
986,864 |
|
|
$ |
1,058,545 |
|
Retirement Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
DC Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Unvested Deferred
Compensation |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
28,510 |
|
|
$ |
|
|
|
$ |
28,510 |
|
Outplacement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
39,600 |
|
|
$ |
|
|
|
$ |
39,600 |
|
Perquisites |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Long-Term Disability |
|
$ |
|
|
|
$ |
2,368,971 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Tax Gross-Ups |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
701,757 |
|
Total |
|
$ |
|
|
|
$ |
2,368,971 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
68,110 |
|
|
$ |
|
|
|
$ |
769,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,058,545 |
|
|
$ |
2,917,414 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
860,110 |
|
|
$ |
986,864 |
|
|
$ |
2,884,412 |
|
J. Giesler, SVP Commercial Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying |
|
Change in |
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
Control |
|
Control & |
|
|
|
|
|
|
|
|
|
|
For |
|
|
|
|
|
Unrelated to a |
|
Without |
|
Qualifying |
|
|
Death |
|
Disability |
|
Cause |
|
Voluntary |
|
Change in Control |
|
Termination |
|
Termination |
Cash Severance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
576,000 |
|
|
$ |
|
|
|
$ |
768,000 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares |
|
$ |
548,443 |
|
|
$ |
548,443 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
495,099 |
|
|
$ |
548,443 |
|
Performance Share Awards |
|
$ |
433,420 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
433,420 |
|
|
$ |
433,420 |
|
Unexercisable Options |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
981,863 |
|
|
$ |
548,443 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
928,519 |
|
|
$ |
981,863 |
|
Retirement Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
79,131 |
|
DC Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
79,131 |
|
Unvested Deferred
Compensation |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
15,252 |
|
|
$ |
|
|
|
$ |
15,252 |
|
Outplacement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
28,800 |
|
|
$ |
|
|
|
$ |
28,800 |
|
Perquisites |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Long-Term Disability |
|
$ |
|
|
|
$ |
983,356 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Tax Gross-Ups |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
983,356 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
44,052 |
|
|
$ |
|
|
|
$ |
44,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
981,863 |
|
|
$ |
1,531,799 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
620,052 |
|
|
$ |
928,519 |
|
|
$ |
1,873,046 |
|
54
R. Sanders, VP Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying |
|
Change in |
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
Control |
|
Control & |
|
|
|
|
|
|
|
|
|
|
For |
|
|
|
|
|
Unrelated to a |
|
Without |
|
Qualifying |
|
|
Death |
|
Disability |
|
Cause |
|
Voluntary |
|
Change in Control |
|
Termination |
|
Termination |
Cash Severance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
580,800 |
|
|
$ |
|
|
|
$ |
774,400 |
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares |
|
$ |
475,095 |
|
|
$ |
475,095 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
421,751 |
|
|
$ |
475,095 |
|
Performance Share Awards |
|
$ |
416,750 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
416,750 |
|
|
$ |
416,750 |
|
Unexercisable Options |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
891,845 |
|
|
$ |
475,095 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
838,501 |
|
|
$ |
891,845 |
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
58,844 |
|
DC Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
58,844 |
|
Unvested Deferred Compensation |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
21,583 |
|
|
$ |
|
|
|
$ |
21,583 |
|
Outplacement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
34,200 |
|
|
$ |
|
|
|
$ |
34,200 |
|
Perquisites |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Long-Term Disability |
|
$ |
|
|
|
$ |
1,189,613 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Tax Gross-Ups |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
1,189,613 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
55,783 |
|
|
$ |
|
|
|
$ |
55,783 |
|
|
Total |
|
$ |
891,845 |
|
|
$ |
1,664,708 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
636,583 |
|
|
$ |
838,501 |
|
|
$ |
1,780,872 |
|
J. Huey, VP, General Counsel & Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying |
|
Change in |
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
Control |
|
Control & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrelated to a |
|
Without |
|
Qualifying |
|
|
Death |
|
Disability |
|
For Cause |
|
Voluntary |
|
Change in Control |
|
Termination |
|
Termination |
Cash Severance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
641,250 |
|
|
$ |
|
|
|
$ |
855,000 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares |
|
$ |
571,781 |
|
|
$ |
571,781 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
510,102 |
|
|
$ |
571,781 |
|
Performance Share Awards |
|
$ |
516,770 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
516,770 |
|
|
$ |
516,770 |
|
Unexercisable Options |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
1,088,551 |
|
|
$ |
571,781 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,026,872 |
|
|
$ |
1,088,551 |
|
Retirement Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
DC Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Unvested Deferred Compensation |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
28,510 |
|
|
$ |
|
|
|
$ |
28,510 |
|
Outplacement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
29,040 |
|
|
$ |
|
|
|
$ |
29,040 |
|
Perquisites |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
LongTerm Disability |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Tax GrossUps |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
571,677 |
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
57,550 |
|
|
$ |
|
|
|
$ |
629,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,088,551 |
|
|
$ |
571,781 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
698,800 |
|
|
$ |
1,026,872 |
|
|
$ |
2,572,778 |
|
55
Named Executive Officers Employed by the Company as of December 31, 2008
We have entered into executive severance agreements and maintain certain plans that will require us
to pay compensation and provide certain benefits to each of our named executive officers at,
following, or in connection with the executives termination of employment or a change in control
of Terra. The material terms and conditions relating to these payments and benefits are described
below. Unless otherwise specifically noted, the terms described below apply to each named
executive officer on an identical basis.
Involuntary Termination Without Cause or Voluntary Termination for Good Reason on December 31,
2008, Other Than During the Two-Year Period Following a Change in Control
If a named executive officers employment with Terra had been involuntarily terminated by Terra
without cause or voluntarily terminated by the executive for good reason on December 31, 2008,
the executive would have been entitled to the following payments and benefits:
|
|
|
A lump-sum cash severance payment in an amount equal to 1.5 times the sum of his annual
base salary at termination and his target annual incentive award for 2008; |
|
|
|
|
Continuation of medical and dental benefits until the earlier of two years following
the date of termination or the date the executive becomes covered by another employers
major medical plan; and |
|
|
|
|
Outplacement services at our expense until the earlier of the first anniversary of
termination and the date that the executive becomes employed by a new employer. |
Termination Due to Death on December 31, 2008
If a named executive officers employment with Terra was terminated due to death on December 31,
2008, then his estate would have been entitled to the following payments and benefits:
|
|
|
Immediate vesting of all unvested restricted shares; and |
|
|
|
|
Immediate vesting of all unvested performance shares at a level based on actual
performance during the performance period through December 31, 2008. |
Termination Due to Disability on December 31, 2008
If a named executive officers employment with Terra was terminated due to his disability on
December 31, 2008, he would have been entitled to the following payments and benefits:
|
|
|
Immediate vesting of all unvested restricted shares; and |
|
|
|
|
Payment of monthly disability benefits. |
Change in Control Without a Qualifying Termination on December 31, 2008
If a change in control of Terra occurred on December 31, 2008, each named executive officer would
have been entitled to the following benefits:
|
|
|
Immediate vesting of all unvested restricted shares granted prior to July 2008; |
|
|
|
|
Immediate vesting of a number of performance shares equal to the greater of the target
number of shares subject to each outstanding performance share grant and a number based on
actual performance during the performance period through December 31, 2008; and |
|
|
|
|
Payment of a gross-up to make the executive whole for any excise tax imposed as a
result of Section 280G of the Internal Revenue Code. |
56
Involuntary Termination Without Cause or Voluntary Termination for Good Reason on December 31,
2008 During the Two-Year Period Following a Change in Control
If a named executive officers employment with Terra was involuntarily terminated by Terra without
cause or voluntarily terminated by the executive for good reason on December 31, 2008 and
during the two-year period following a change in control of Terra, he would have been entitled to
the following payments and benefits:
|
|
|
A lump-sum cash severance payment in an amount equal to two times the sum of his annual
base salary at termination and his target annual incentive award for 2008; |
|
|
|
|
Continuation of medical and dental benefits until the earlier of two years following
the date of termination or the date the executive becomes covered by another employers
major medical plan; |
|
|
|
|
Outplacement services at our expense until the earlier of the first anniversary of
termination and the date that the executive becomes employed by a new employer; |
|
|
|
|
Immediate vesting of all benefits accrued under the SERP and two years of additional
age and service credit for purposes of calculating such benefits (only applicable to
Messrs. Bennett, Giesler and Sanders, because Messrs. Greenwell and Huey do not participate
in the SERP); |
|
|
|
|
Immediate vesting of all unvested restricted shares; |
|
|
|
|
Immediate vesting of a number of performance shares equal to the greater of the target
number of shares subject to each outstanding performance share grant and a number based on
actual performance during the performance period through December 31, 2008; and |
|
|
|
|
Payment of a gross-up to make the executive whole for any excise tax imposed as a
result of Section 280G of the Internal Revenue Code. |
Material Defined Terms
The terms cause and good reason as used above are defined under the employment severance
agreements and mean the following:
Cause means (i) the willful and continued failure of the executive to perform substantially the
executives duties with Terra (other than any such failure resulting from incapacity due to
physical or mental illness); (ii) the willful engaging by the executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to Terra; or (iii) the executives
willful and material breach of the employment severance agreement.
Good Reason means, other than during the two-year period following a change in control (as
defined in the employment severance agreements), (i) our failure to pay the executive any
compensation when due (other than an inadvertent failure that is remedied within 10 business days
following notice by the executive) and (ii) delivery by Terra to the executive of a notice to
terminate the executives employment other than for cause or permanent disability (as defined
in the employment severance agreement).
Good Reason means, during the two-year period following a change in control (as defined in the
employment severance agreements), (i) our failure to pay the executive any compensation when due
(other than an inadvertent failure that is remedied within 10 business days following notice by the
executive); (ii) delivery by Terra to the executive of a notice to terminate the executives
employment other than for cause or permanent disability (as defined in the employment severance
agreements);
(iii) a reduction in the executives annual base salary of 10% or more from the level in effect
immediately prior to the change in control; (iv) the relocation of the executives principal
place of employment to a location more than 50 miles from such executives principal place of
employment immediately prior to
57
the change; (v) a reduction in the executives target annual
incentive award of more than 10% from the level in effect immediately prior to the change in
control; (vi) a material diminution in the executives titles, duties, responsibilities or status
from those in effect immediately prior to the change in control; (vii) the removal of the
executive from, or any failure to re-elect the executive to, any of the offices the executive held
immediately prior to the change in control; or (viii) any material reduction in the executives
retirement, insurance or fringe benefits from the levels in effect immediately prior to the change
in control.
The term change in control, as defined under the employment severance agreements, means, in
general, the occurrence of any one of the following events: (i) certain changes in the membership
of a majority of the Board of Directors; (ii) consummation of certain mergers or consolidations of
Terra with any other corporation following which our stockholders hold less than 60% of the
combined voting power of the surviving entity; (iii) approval by our stockholders of a plan of
complete liquidation or dissolution of Terra; or (iv) certain acquisitions by a third party or
third parties, acting in concert, of at least 25% of our then outstanding voting securities.
The definition of change in control for purposes of the restricted share agreements and the
performance share agreements is substantially the same as that definition for purposes of the
employment severance agreements.
Release Requirement
Pursuant to the employment severance agreements, an executive will not be entitled to severance and
other separation benefits unless he executes a release of claims in favor of Terra and the release
becomes effective and irrevocable.
Post-Employment Covenants
In exchange for the above-described payments and benefits to the extent provided for under the
employment severance agreements, following termination of employment, the executive will remain
subject to confidentiality, cooperation and non-solicitation/non-competition covenants that are set
forth in the employment severance agreements. The confidentiality covenant prohibits the executive
from disclosing confidential information as defined under the employment severance agreements.
The cooperation covenant requires the executive to cooperate with Terra in connection with any
lawsuit or investigation that is related to the executives employment with Terra. The
non-solicitation/non-competition covenant prohibits the executive, for a period of one year
following his termination of employment, from (i) engaging in any activity that is in competition
with Terra (including any business relating to the production or marketing of nitrogen products)
and (ii) soliciting or hiring any of our employees without our consent.
Methodologies and Assumptions Used for Calculating Other Potential Post-Employment Payments
For purposes of quantifying the other potential post-employment payments disclosed in the following
tables, we utilized the following assumptions and methodologies:
|
|
|
Date of triggering event: The date of each triggering event is December 31,
2008. |
|
|
|
|
Determination of cash severance: Following a qualifying triggering event, each
named executive |
58
|
|
|
officer is entitled to cash severance equal to the sum of the named
executive officers current base salary and target annual incentive award multiplied by
the appropriate severance multiple. The severance multiple is 1.5 in the case of a
termination other than within two years following a change in control of Terra, and is
two in the case of a termination during the two-year period following a change in
control. In accordance with this formula, each named executive officers cash
severance was determined based on the following: |
|
|
|
Mr. Bennett: Annual base salary of $600,000 as of December 31, 2008,
and 2008 target annual incentive award of $900,000. |
|
|
|
|
Mr. Greenwell: Annual base salary of $330,000 as of December 31, 2008,
and 2008 target annual incentive award of $198,000. |
|
|
|
|
Mr. Giesler: Annual base salary of $240,000 as of December 31, 2008,
and 2008 target annual incentive award of $144,000. |
|
|
|
|
Mr. Sanders: Annual base salary of $242,000 as of December 31, 2008,
and 2008 target annual incentive award of $145,200. |
|
|
|
|
Mr. Huey: Annual base salary of $285,000 as of December 31, 2008, and
2008 target annual incentive award of $142,500. |
|
|
|
Number of performance shares subject to vesting in the event of a change in
control: The performance share award agreements provide that in the event of a change
in control of Terra, a number of performance shares equal to the greater of the target
number of shares subject to each outstanding performance share grant and a number based
on actual performance during the performance period through December 31, 2008 will
become vested. Based on company performance as of December 31, 2008, the actual
performance number for each of the outstanding performance share grants is at least
equal to the maximum level of performance, and, therefore, we have assumed vesting at
the maximum level (200% of target). |
|
|
|
|
Number of restricted shares subject to vesting in the event of death or
disability: The restricted share award agreements for the outstanding grants of
restricted shares provide that in the event of a termination of employment due to death
or disability, the restricted shares subject to such grant will vest in full. |
|
|
|
|
Number of performance shares subject to vesting in the event of death: The
performance share award agreements provide that in the event of a termination of
employment due to death, performance shares will vest at a level based on actual
performance during the performance period through the date of death. Based on company
performance as of December 31, 2008, the actual performance number for each of the
outstanding performance share grants is at least equal to the maximum level of
performance, and, therefore, we have assumed vesting at the maximum level (200% of
target). |
|
|
|
|
Value of restricted shares and performance shares subject to vesting: The
value of each restricted share and performance share that was subject to vesting upon a
triggering event was determined by multiplying the number of shares subject to vesting
by the closing price of Terra common stock on December 31, 2008, the last trading day
of 2008 (i.e., $16.67). |
|
|
|
|
Value of continuation of health and dental benefits: The value of health and
dental benefits which are continued for a two-year period following certain qualifying
triggering events was determined based on assumptions used for financial reporting
purposes under Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 106
(Employers Accounting for Postretirement Benefits Other Than Pensions). |
|
|
|
|
Value of post-termination outplacement services: The value of post-termination
outplacement services was determined based on a value equal to approximately 12% of an |
59
|
|
|
executives annual base salary as of the date of termination of employment, which was
adjusted based on assumptions used for financial reporting purposes under Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 106
(Employers Accounting for Postretirement Benefits Other Than Pensions). |
|
|
|
Incremental value of accelerated vesting of SERP benefits and additional
age/service credit in the event of a change in control: These amounts, which are
applicable to Messrs. Bennett, Giesler and Sanders, were calculated by adding two years
of credited service to the year-end 2008 total pension benefit (i.e., sum of
tax-qualified pension and SERP) for the named executive officer and then determining
the present value of that accrued benefit deferred to the date the executive reaches
age 63, which is the earliest age at which unreduced pension benefits would be
available to the executive with an extra two years of age. The actuarial basis for
these determinations is the same as the basis used in the Pension Benefits Table. |
|
|
|
|
Value of monthly disability benefits: The value of monthly disability benefits
is based on the present value of the excess of each named executive officers monthly
disability benefit under our long-term disability plan that covers the executive as of
December 31, 2008, over the monthly disability benefit that would be payable under our
long-term disability plan that is generally available to all employees. Amounts are
calculated using a 7% discount rate and assuming that each named executive officer
continues to receive monthly disability benefits until age 65. |
|
|
|
|
Determination of excise tax payments and tax gross-up payments made in
connection with a change in control: We determined the amount of the excise tax
payment by multiplying by 20% the excess parachute payment that would arise in
connection with payments made to the applicable named executive officers upon either
(i) a change in control of Terra or (ii) a qualifying termination of employment
following a change in control. The excess parachute payment was determined in
accordance with the provisions of Section 280G of the Internal Revenue Code. We
utilized the following key assumptions to determine the applicable named executive
officers tax gross-up payment: |
|
|
|
based on our performance through December 31, 2008, all of our
outstanding performance share awards are currently expected to vest at 200% of the
target level. Therefore, the amount of the excise tax with respect to the
performance share awards was calculated assuming that all performance goals with
respect to the performance share awards had already been met at the 200% level.
The result is that the amount of the excise tax attributable to both the
performance share awards and the restricted shares is based solely on the value of
the accelerated vesting and the lapse of the obligation to perform future services; |
|
|
|
|
a statutory Federal income tax rate of 35%, a Medicare tax rate of
1.45% and a state income tax rate of 8.98%, which is the maximum individual income
tax rate for Iowa; |
|
|
|
|
each named executive officers Section 280G base amount was
determined based on average W-2 compensation for the period from 2003-2007 (or the
period of the executives employment with Terra, if shorter); and |
|
|
|
|
the interest rate assumption was 120% of the applicable Federal rate
for December 2008. |
60
Director Compensation
The following table summarizes the compensation of each of our non-employee directors for the
fiscal year ended December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
Value & |
|
|
|
|
|
|
Fees Earned |
|
|
|
|
|
|
|
|
|
Incentive |
|
Nonqualified |
|
|
|
|
|
|
or Paid |
|
Stock |
|
Option |
|
Plan |
|
Deferred |
|
All Other |
|
|
|
|
in Cash |
|
Awards |
|
Awards |
|
Compensation |
|
Compensation |
|
Compensation |
|
|
Name |
|
($)(1) |
|
($)(2)(3) |
|
($) |
|
($) |
|
Earnings ($) |
|
($) |
|
Total ($) |
|
Fisher, D. |
|
$ |
57,500 |
|
|
$ |
166,242 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
223,742 |
|
Fraser, D. |
|
$ |
46,500 |
|
|
$ |
166,242 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
212,742 |
|
Hesse, M. |
|
$ |
50,250 |
|
|
$ |
166,242 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
216,492 |
|
Janson, P. |
|
$ |
46,250 |
|
|
$ |
166,242 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
212,492 |
|
Kroner, J. |
|
$ |
43,750 |
|
|
$ |
150,009 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
193,759 |
|
McGlone, D. |
|
$ |
41,250 |
|
|
$ |
150,009 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
191,259 |
|
Slack, H. |
|
$ |
100,000 |
|
|
$ |
249,364 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
349,364 |
|
|
|
|
(1) |
|
This column sets forth the amount of the fees earned by each director from Terra during 2008. For information about the
nature of such fees, see the narrative accompanying this table. |
|
(2) |
|
These amounts represent the accounting cost of stock-based compensation granted from 2005 through 2008 that was accrued
during 2008. |
|
(3) |
|
Includes restricted share awards of 10,000 shares made in 2005 (except for the grant to the Chairman of the Board, Mr.
Slack, which was for 15,000 shares) and share awards of 3,100 shares made in 2008 (except for the grant to the Chairman of the
Board, Mr. Slack, which was for 4,650 shares). Grants made in 2005 vest over a three-year period; grants made since 2006 are
immediately vested. |
In May 2003, the Board of Directors voted to compensate non-employee directors using a combination
of cash and shares. In 2007, the Board of Directors again reviewed the compensation plan and
structure for non-employee directors and made certain revisions thereto while leaving intact the
mix of cash and shares.
Director Fees Paid in Cash
Under the director compensation policy, in 2008, Mr. Slack, Chairman of the Board, received an
annual cash retainer of $100,000 (paid quarterly). The other non-employee directors each received
an annual retainer of $27,500 (paid quarterly) and meeting fees of $1,250 per meeting attended,
including committee meetings. Mr. Fisher received an additional annual cash retainer of $10,000
(paid quarterly) for serving as Chairman of the Audit Committee. Ms. Hesse, Chairman of the
Nominating and Corporate Governance Committee, and Mr. Fraser, Chairman of the Compensation
Committee, each received an additional annual cash retainer of $4,000 (paid quarterly) for serving
as committee chairs.
61
Director Stock Awards
2008 Stock Awards
Pursuant to a resolution of the Board of Directors dated August 16, 2006, the Board of Directors
determined that beginning in 2006 and on a going-forward basis, director stock awards would be
delivered in the form of fully vested shares of Terra common stock. By resolution of the Board of
Directors dated October 23, 2007, the Board of Directors determined that new equity grants should
be made August 1 each year, and that starting August 2008, the number of shares awarded shall be
determined by reference to a fixed dollar amount divided by the share price of Terra shares for the
previous 20 trading days immediately preceding the date of grant, rounded up to the next whole
share. The dollar value used in the numerator is $150,000 for all non-employee directors except for
Mr. Slack, the Chairman, in which case the numerator is the sum of $225,000. This level of stock
award was selected based on a prior market study of compensation paid to non-employee directors of
public companies. In addition, the Board of Directors determined that each newly elected outside
director will receive, simultaneously with his or her election to the Board of Directors, an
initial grant of Terra shares that is equivalent to the annual equity grant as described above. On
August 1, 2008, each director other than Mr. Slack received a grant of 3,100 shares of Terra common
stock, and Mr. Slack received a grant of 4,650 shares of Terra common stock.
Director Stock Ownership Guides
Pursuant to resolution of the Board of Directors dated October 23, 2007, the Board of Directors
implemented, effective immediately, Terra stock ownership guidelines for all non-employee
directors. The guide for all non-employee directors is 20,000 shares for all except the Chairman,
which guide is 30,000 shares. All newly elected directors are to be allowed a five-year period from
election to satisfy the new guidelines.
Other Director Compensation
We reimburse all directors for reasonable travel and other necessary business expenses incurred in
the performance of their services for Terra. Non-employee directors do not receive any additional
payments or perquisites. A director who is a Terra employee, such as Mr. Bennett, does not receive
any additional compensation for service as a director.
62
Transactions with Related Persons
During 2008, the Company was engaged in no transactions, nor are any such transactions currently
proposed, in which a related party, as that term is defined in Title 17, Chapter II, Subpart
§229.404 of the Code of Federal Regulations, had or will have a direct or indirect material
interest and which involves an amount exceeding $120,000.
Policies and Procedures
The Audit Committee of the Board of Directors reviews all material transactions with any related
person as identified by management. Related persons include any of our directors, executive
officers, certain of our stockholders and immediate family members of any of the foregoing.
At its February 2008 meeting, the Audit Committee and Board of Directors adopted a written policy
for evaluating related person transactions. To identify related person transactions under such
policy, each year we submit and require our directors and officers to complete Director and Officer
Questionnaires identifying any transactions with us in which the officer or director or their
family members have an interest. Additionally, all material undertakings by the Company are
reviewed by management, with a view, in part, to identify if a related person is involved. Pursuant
to our policy, we periodically compile a list of related persons (Related Person List) based on
information gathered from responses to the Director and Officer Questionnaire along with
information concerning stockholders who beneficially own more than five percent (5%) of the voting
securities of Terra, and distribute the list to key members of management for review. Management is
instructed to review the Related Person List and promptly inform the General Counsel of any current
or proposed transactions with any person on the list. The General Counsel is to report to the Audit
Committee any potential related person transaction so identified. We review related person
transactions due to the potential for a conflict of interest. A conflict of interest occurs when an
individuals private interest interferes, or appears to interfere, in any way with the Companys
interest. Our Code of Business Conduct and Ethics requires all directors, officers and employees
who may have a potential or apparent conflict of interest to immediately notify our General
Counsel.
We expect our directors, officers and employees to act and make decisions that are in the Companys
best interests and encourage them to avoid situations which present a conflict between our
interests and their own personal interests. Our directors, officers and employees are prohibited
from taking any action that may make it difficult for them to perform their duties,
responsibilities and services to Terra in an objective and fair manner. The Nominating and
Corporate Governance Committee is charged with responsibility to bring before the Board of
Directors all requests for a waiver of the Companys Code of Ethics and Standards of Business
Conduct.
63
Audit Committee Report
The responsibilities of the Audit Committee, which are set forth in the Audit Committee charter
adopted by the Board of Directors, include providing oversight to Terras financial reporting
process through periodic meetings with Terras independent auditors, internal auditors and
management to review accounting, auditing, internal controls and financial reporting matters. Terra
management is responsible for the preparation and integrity of the financial reporting information
and related systems of internal controls. The Audit Committee, in carrying out its role, relies on
Terras senior management, including its senior financial management, its internal audit function,
and its independent auditors.
The Audit Committee appointed Deloitte & Touche LLP (Deloitte & Touche) as the independent
registered public accounting firm for Terra for 2009 and recommends that stockholders vote in favor
of Proposal 2: Ratification of Selection of Independent Accountants.
The Audit Committee has reviewed and discussed with senior management Terras audited financial
statements included in the 2008 Annual Report to Stockholders. Management has confirmed to us that
the data in such financial statements (i) has been prepared with integrity and objectivity and is
managements responsibility, and (ii) has been prepared in conformity with generally accepted
accounting principles.
The Audit Committee has discussed with Deloitte & Touche, Terras independent registered accounting
firm, the matters required to be discussed by the Statement on Auditing Standards No. 61 (SAS 61)
Communications with Audit Committees. SAS 61 requires Terras independent registered accounting
firm to provide us with additional information regarding the scope and results of their audit of
Terras financial statements, including with respect to (i) their responsibility under generally
accepted auditing standards, (ii) significant accounting policies, (iii) management judgments and
estimates, (iv) any significant audit adjustments, (v) any disagreements with management, and
(vi) any difficulties encountered in performing the audit.
The Audit Committee has received from Deloitte & Touche a letter providing the disclosures required
by the applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte
& Touches communications with the Audit Committee concerning its independence. Deloitte & Touche
has discussed its independence with us and has confirmed in such letter that, in its professional
judgment, it is independent of Terra within the meaning of the Federal securities laws and other
applicable requirements. Deloitte & Touche has also discussed with us its findings related to its
review of Terras internal control procedures as required by Section 404 of the Sarbanes-Oxley Act.
Based on the review and discussions described above with respect to Terras audited financial
statements for the year ended December 31, 2008, the Audit Committee has recommended to the Board
of Directors that such financial statements be included in Terras Annual Report for 2008 on Form
10-K for filing with the SEC.
The Audit Committee has a policy concerning the approval of audit and non-audit services to be
provided by Terras independent registered public accounting firm. A copy of this policy can be
found in Terras Audit Committee charter on our website at www.terraindustries.com. Select the
Investors link, followed by Terra Industries (TRA) and choose Governance. The policy requires
that all services provided by Terras independent auditors to Terra, including audit services and
permitted audit-related and non-audit related services, be pre-approved by the Audit Committee.
64
In giving our recommendation to the Board of Directors, we have relied on (i) managements
representation that the data in such financial statements has been prepared with integrity and
objectivity and in conformity with generally accepted accounting principles, and (ii) the report of
Terras independent registered accounting firm with respect to such financial statements.
Members of the Audit Committee
of the Board of Directors
D.E. Fisher, Chairman
M.O. Hesse
P.S. Janson
J.R. Kroner
65
Proposal 2: Ratification of Selection of Independent Accountants
The Board of Directors recommends that the stockholders ratify the Audit Committees selection of
Deloitte & Touche as independent accountants for Terra for the fiscal year 2009.
It is expected that members of Deloitte & Touche will attend the annual meeting to make a statement
if they desire to do so and to respond to any appropriate questions that may be asked by
stockholders.
Principal Accountant Audit Fees and Service Fees
The table below describes fees for professional audit services rendered by Deloitte & Touche,
Terras principal accountant, for the audit of Terras annual financial statements for the years
ended December 31, 2008 and December 31, 2007 and fees billed for other services rendered by
Deloitte & Touche during those periods. All such audit and other services, as well as related fees
for 2008, were approved in advance by the Audit Committee.
|
|
|
|
|
|
|
|
|
Type of Fee |
|
2008 |
|
|
2007 |
|
|
Audit Fees
(1) |
|
$ |
1,359,397 |
|
|
$ |
1,411,841 |
|
Audit
Related Fees
(2) (4) |
|
|
146,980 |
|
|
|
253,261 |
|
|
Total Audit and Audit Related Fees |
|
|
1,506,377 |
|
|
|
1,665,102 |
|
|
Tax Fees
(3) (4) |
|
|
462,443 |
|
|
|
305,621 |
|
All Other
Fees (4) |
|
|
0 |
|
|
|
0 |
|
|
Total |
|
$ |
1,968,820 |
|
|
$ |
1,970,723 |
|
|
|
|
|
(1) |
|
Audit Fees, including those for statutory audits, include the aggregate fees paid by Terra during the fiscal
year indicated for professional services rendered by Deloitte & Touche for the audit of Terras annual financial statements
and review of financial statements included in Terras Form 10-Qs. |
|
(2) |
|
Audit Related Fees include the aggregate fees paid related to the audit of the Companys retirement, savings and
investment plans, and audit related procedures as a result of the GrowHow UK Limited joint venture. |
|
(3) |
|
Tax Fees include the aggregate fees paid by Terra during the fiscal year indicated for professional services
rendered by the principal accountant for tax compliance, tax advice and tax planning. |
|
(4) |
|
The full amount of each such service and related fees was approved in advance by the Audit Committee. |
The Audit Committee has advised Terras Board of Directors that it has determined that the
non-audit services rendered by Terras independent registered accounting firm during Terras most
recent fiscal year are compatible with maintaining such auditors independence.
The Board of Directors unanimously recommends that you vote FOR the ratification of the Audit
Committees selection of independent accountants.
66
Submission of Stockholder Proposals for 2010 Annual Meeting
Stockholder proposals intended for submission at the 2010 annual meeting of stockholders must be
received by Terra at its principal executive offices on or before [ ], 2009 to be eligible for
inclusion in Terras proxy statement and accompanying proxy for such meeting. If a stockholder
intends to bring a matter before the 2010 annual meeting of stockholders other than by submitting a
proposal for inclusion in the proxy statement, the stockholder must give timely notice to Terra and
otherwise satisfy the requirements of the Exchange Act. To be timely, such notice must be received
by the Corporate Secretary at Terras principal executive offices not earlier than [ ], 2010
and not later than [ ], 2010.
Miscellaneous
Terra will pay all solicitation expenses in connection with this Proxy Statement and related
Company proxy soliciting material. Proxies are being solicited through the mail. Certain executive
officers and other employees of Terra named in Annex A, on behalf of the Company and without
additional compensation, may also solicit proxies personally, by telephone, fax, email or other
electronic means. Stockholders may also be solicited by means of press releases issued by the
Company and posted on its Web site.
In addition, Terra has engaged MacKenzie Partners, Inc. (MacKenzie) to assist it in connection
with soliciting proxies for a fee estimated not to exceed $[ ], plus reasonable out-of-pocket
expenses. Terra has agreed to indemnify MacKenzie against certain liabilities relating to or
arising out of the engagement. MacKenzie estimates that approximately [ ] of its employees will
assist in this proxy solicitation, which they may conduct personally, by mail, telephone, fax,
email or other electronic means.
Terra will request banks, brokers and other custodians, nominees and fiduciaries to forward proxy
soliciting material to the beneficial owners of shares held of record by such persons and obtain
their voting instructions. The Company will reimburse such persons at approved rates for their
expenses in connection with the foregoing activities.
We estimate that our expenses related to the solicitation in excess of those normally spent for an
annual meeting as a result of the proxy contest (and excluding the salaries and wages of our
regular employees and officers) will be approximately $[ ], of which $[ ] has been incurred
as of the date of this Proxy Statement. Additional information about
persons who are participants in this proxy solicitation is set forth in Annex A.
A copy of
Terras Annual Report on Form 10-K, including any amendments, for the fiscal year ended December 31, 2008 filed with
the SEC (without exhibits) will be made available to stockholders without charge upon written
request to the Investor Relations Department, Terra Industries Inc., Terra Centre, 600 Fourth
Street, P.O. Box 6000, Sioux City, Iowa 51102-6000.
[ ], 2009
67
Annex A
Information Regarding Participants
The
directors and the executive officers and employees of the Company who are
participants in the solicitation of proxies in connection with the
annual meeting (collectively, the Participants) are listed below, together with the amount of
each class of the Companys securities beneficially owned by
each of these persons as of April 24,
2009, including the number of securities for which beneficial ownership can be acquired within
60 days of such date. No Participant listed below owns any equity securities of the Company of
record that such Participant does not own beneficially. Except as otherwise noted below, the
business address of each Participant is Terra Centre, 600 Fourth Street, P.O. Box 6000, Sioux City,
Iowa 51102-6000.
|
|
|
|
|
|
|
|
|
Common Shares |
Name |
|
Title |
|
Beneficially Owned |
David E. Fisher(1)
|
|
Director
|
|
47,970 |
Dod A. Fraser(2)
|
|
Director
|
|
31,550 |
Martha O. Hesse(3)
|
|
Director
|
|
49,228 |
Peter S. Janson(4)
|
|
Director
|
|
20,000 |
James R. Kroner(5)
|
|
Director
|
|
20,100 |
Dennis McGlone(6)
|
|
Director
|
|
18,100 |
Henry R. Slack(7)
|
|
Chairman of the Board
|
|
41,900 |
Michael L. Bennett
|
|
Director, President and Chief Executive Officer
|
|
588,931 |
Debra J. Bliven
|
|
Assistant Corporate Secretary
|
|
1,744 |
Edward J. Dillon
|
|
Vice President and Controller
|
|
4,900 |
Joe A. Ewing
|
|
Vice President, Investor Relations and Human
Resources
|
|
71,730 |
Joseph D. Giesler
|
|
Senior Vice President, Commercial Operations
|
|
115,634 |
Daniel D. Greenwell
|
|
Senior Vice President and Chief Financial Officer
|
|
83,460 |
John W. Huey
|
|
Vice President, General Counsel and Corporate
Secretary
|
|
34,367 |
Kim L. Mathers
|
|
Communications Manager
|
|
1,721 |
Geoffrey J. Obeney
|
|
Vice President, Information Technology
|
|
2,600 |
Richard S. Sanders Jr.
|
|
Vice President, Manufacturing
|
|
105,339 |
Earl B. Smith
|
|
Vice President, Business Development
|
|
2,900 |
Douglas M. Stone
|
|
Senior Vice President, Sales and Marketing
|
|
30,871 |
William
L. Watson
|
|
Legal/Corporate Communications Assistant
|
|
100 |
|
|
|
(1) |
|
Mr. Fishers business address is 39 Rue des Genets, L-8131 Bridel, Grand Duchy of
Luxembourg. |
|
(2) |
|
Mr. Frasers business address is 800 Westchester
Avenue, Suite 641 North, Rye Brook, NY 10573.
|
|
(3) |
|
Ms. Hesses business address is 4171 Autumn Hills Drive, Winnemucca, NV 89445. |
|
(4) |
|
Mr. Jansons business address is 88-3 Chemin Sugar Hill, Knowlton, Quebec, J0E 1V0,
Canada. |
|
(5) |
|
Mr. Kroners business address is 4575 S. Dean Martin Drive, Suite 3304, Las Vegas,
NV 89103. |
68
|
|
|
(6) |
|
Mr. McGlones business address is 202 White Oak Drive, Slippery Rock, PA 16057. |
|
(7) |
|
Mr. Slacks business address is P.O. Box 28, Peapack, NJ 07977. |
Information Regarding Transactions in our Securities
by Participants
The following table sets forth information regarding purchases and sales of the Companys
securities by Participants during the past two years. Except as set forth below or as otherwise
disclosed in this Proxy Statement, no part of the purchase price or market value of these
securities is represented by funds borrowed or otherwise obtained for the purpose of acquiring or
holding such securities. To the extent that any part of the purchase price or market value of any
of these securities is represented by funds borrowed or otherwise obtained for the purpose of
acquiring or holding such securities, the amount of the indebtedness as of the latest practicable
date is set forth below. If such funds were borrowed or obtained otherwise than pursuant to a
margin account or bank loan in the regular course of business of a bank, broker or dealer, a
description of the transaction and the parties is set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Transaction |
Name |
|
Transaction Date |
|
Common Shares |
|
Footnote |
Michael L. Bennett
|
|
April 2, 2007
|
|
|
(8,500 |
) |
|
|
(1 |
) |
|
|
May 1, 2007
|
|
|
(16,000 |
) |
|
|
(1 |
) |
|
|
May 3, 2007
|
|
|
(1,000 |
) |
|
|
(2 |
) |
|
|
May 15, 2007
|
|
|
(2,500 |
) |
|
|
(2 |
) |
|
|
July 2, 2007
|
|
|
(16,000 |
) |
|
|
(1 |
) |
|
|
July 25, 2007
|
|
|
20,400 |
|
|
|
(3 |
) |
|
|
July 30, 2007
|
|
|
(33,960 |
) |
|
|
(4 |
) |
|
|
October 1, 2007
|
|
|
(16,000 |
) |
|
|
(1 |
) |
|
|
October 31, 2007
|
|
|
(3,600 |
) |
|
|
(2 |
) |
|
|
December 6, 2007
|
|
|
(750 |
) |
|
|
(2 |
) |
|
|
January 2, 2008
|
|
|
(16,000 |
) |
|
|
(1 |
) |
|
|
February 22, 2008
|
|
|
56,000 |
|
|
|
(5 |
) |
|
|
February 22, 2008
|
|
|
252,000 |
|
|
|
(6 |
) |
|
|
February 22, 2008
|
|
|
(106,974 |
) |
|
|
(4 |
) |
|
|
February 26, 2008
|
|
|
(3,075 |
) |
|
|
(2 |
) |
|
|
April 1, 2008
|
|
|
(16,000 |
) |
|
|
(1 |
) |
|
|
May 1, 2008
|
|
|
(50,000 |
) |
|
|
(1 |
) |
|
|
July 1, 2008
|
|
|
(50,000 |
) |
|
|
(1 |
) |
|
|
July 16, 2008
|
|
|
12,100 |
|
|
|
(3 |
) |
|
|
July 30, 2008
|
|
|
(22,923 |
) |
|
|
(4 |
) |
|
|
August 22, 2008
|
|
|
(2,050 |
) |
|
|
(2 |
) |
|
|
October 1, 2008
|
|
|
(4,800 |
) |
|
|
(1 |
) |
|
|
February 17, 2009
|
|
|
121,000 |
|
|
|
(7 |
) |
|
|
February 17, 2009
|
|
|
308,000 |
|
|
|
(8 |
) |
|
|
February 17, 2009
|
|
|
(126,389 |
) |
|
|
(4 |
) |
Debra J. Bliven
|
|
None |
|
|
|
|
|
|
|
|
Edward J. Dillon
|
|
September 25, 2008
|
|
|
200 |
|
|
|
(13 |
) |
|
|
September 29, 2008
|
|
|
100 |
|
|
|
(13 |
) |
|
|
November 3, 2008
|
|
|
4,600 |
|
|
|
(3 |
) |
|
|
February 17, 2009
|
|
|
12,600 |
|
|
|
(7 |
) |
Joe A. Ewing
|
|
July 25, 2007
|
|
|
5,100 |
|
|
|
(3 |
) |
|
|
December 24, 2007
|
|
|
(4,285 |
) |
|
|
(4 |
) |
|
|
February 22, 2008
|
|
|
6,800 |
|
|
|
(5 |
) |
|
|
February 22, 2008
|
|
|
19,000 |
|
|
|
(6 |
) |
|
|
February 22, 2008
|
|
|
(6,432 |
) |
|
|
(4 |
) |
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Transaction |
Name |
|
Transaction Date |
|
Common Shares |
|
Footnote |
|
|
March 4, 2008
|
|
|
(1,800 |
) |
|
|
(2 |
) |
|
|
March 5, 2008
|
|
|
(1,200 |
) |
|
|
(2 |
) |
|
|
March 6, 2008
|
|
|
(2,000 |
) |
|
|
(9 |
) |
|
|
July 16, 2008
|
|
|
3,000 |
|
|
|
(3 |
) |
|
|
July 30, 2008
|
|
|
(4,033 |
) |
|
|
(4 |
) |
|
|
August 28, 2008
|
|
|
(1,000 |
) |
|
|
(2 |
) |
|
|
February 17, 2009
|
|
|
15,200 |
|
|
|
(7 |
) |
|
|
February 17, 2009
|
|
|
36,400 |
|
|
|
(8 |
) |
|
|
February 17, 2009
|
|
|
(12,005 |
) |
|
|
(4 |
) |
David E. Fisher
|
|
July 30, 2007
|
|
|
(3,000 |
) |
|
|
(4 |
) |
|
|
August 1, 2007
|
|
|
7,000 |
|
|
|
(10 |
) |
|
|
August 1, 2007
|
|
|
(3,000 |
) |
|
|
(4 |
) |
|
|
September 5, 2007
|
|
|
18,000 |
|
|
|
(11 |
) |
|
|
September 5, 2007
|
|
|
(5,400 |
) |
|
|
(4 |
) |
|
|
September 11, 2007
|
|
|
(12,600 |
) |
|
|
(9 |
) |
|
|
July 30, 2008
|
|
|
(3,000 |
) |
|
|
(4 |
) |
|
|
August 1, 2008
|
|
|
3,100 |
|
|
|
(10 |
) |
|
|
August 1, 2008
|
|
|
(930 |
) |
|
|
(4 |
) |
Dod A. Fraser
|
|
August 1, 2007
|
|
|
10,000 |
|
|
|
(10 |
) |
|
|
October 30, 2007
|
|
|
(10,000 |
) |
|
|
(9 |
) |
|
|
February 25, 2008
|
|
|
(2,000 |
) |
|
|
(9 |
) |
|
|
February 25, 2008
|
|
|
(3,000 |
) |
|
|
(2 |
) |
|
|
August 1, 2008
|
|
|
3,100 |
|
|
|
(10 |
) |
|
|
August 14, 2008
|
|
|
(1,550 |
) |
|
|
(9 |
) |
|
|
August 21, 2008
|
|
|
(5,000 |
) |
|
|
(9 |
) |
Joseph D. Giesler
|
|
May 2, 2007
|
|
|
(5,000 |
) |
|
|
(9 |
) |
|
|
June 5, 2007
|
|
|
(4,500 |
) |
|
|
(9 |
) |
|
|
July 30, 2007
|
|
|
(9,735 |
) |
|
|
(4 |
) |
|
|
August 1, 2007
|
|
|
5,600 |
|
|
|
(3 |
) |
|
|
August 3, 2007
|
|
|
3,600 |
|
|
|
(11 |
) |
|
|
August 3, 2007
|
|
|
(3,600 |
) |
|
|
(9 |
) |
|
|
August 15, 2007
|
|
|
(6,000 |
) |
|
|
(9 |
) |
|
|
October 30, 2007
|
|
|
(7,000 |
) |
|
|
(9 |
) |
|
|
February 22, 2008
|
|
|
7,200 |
|
|
|
(5 |
) |
|
|
February 22, 2008
|
|
|
50,000 |
|
|
|
(6 |
) |
|
|
February 22, 2008
|
|
|
(19,613 |
) |
|
|
(4 |
) |
|
|
February 26, 2008
|
|
|
(5,000 |
) |
|
|
(9 |
) |
|
|
March 3, 2008
|
|
|
(5,300 |
) |
|
|
(9 |
) |
|
|
April 30, 2008
|
|
|
(5,000 |
) |
|
|
(9 |
) |
|
|
July 16, 2008
|
|
|
3,200 |
|
|
|
(3 |
) |
|
|
July 30, 2008
|
|
|
(10,613 |
) |
|
|
(4 |
) |
|
|
August 13, 2008
|
|
|
(10,000 |
) |
|
|
(9 |
) |
|
|
September 17, 2008
|
|
|
(11,022 |
) |
|
|
(12 |
) |
|
|
February 17, 2009
|
|
|
15,000 |
|
|
|
(7 |
) |
|
|
February 17, 2009
|
|
|
48,200 |
|
|
|
(8 |
) |
|
|
February 17, 2009
|
|
|
(16,257 |
) |
|
|
(4 |
) |
Daniel D. Greenwell
|
|
July 25, 2007
|
|
|
7,200 |
|
|
|
(3 |
) |
|
|
February 22, 2008
|
|
|
9,800 |
|
|
|
(5 |
) |
|
|
February 22, 2008
|
|
|
15,000 |
|
|
|
(6 |
) |
|
|
February 22, 2008
|
|
|
(4,902 |
) |
|
|
(4 |
) |
|
|
July 16, 2008
|
|
|
4,300 |
|
|
|
(3 |
) |
|
|
July 30, 2008
|
|
|
(3,184 |
) |
|
|
(4 |
) |
|
|
August 29, 2008
|
|
|
(3,800 |
) |
|
|
(9 |
) |
|
|
February 17, 2009
|
|
|
23,000 |
|
|
|
(7 |
) |
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Transaction |
Name |
|
Transaction Date |
|
Common Shares |
|
Footnote |
|
|
February 17, 2009
|
|
|
42,800 |
|
|
|
(8 |
) |
|
|
February 17, 2009
|
|
|
(14,040 |
) |
|
|
(4 |
) |
Martha O. Hesse
|
|
August 2, 2007
|
|
|
10,000 |
|
|
|
(10 |
) |
|
|
November 7, 2007
|
|
|
(15,000 |
) |
|
|
(9 |
) |
|
|
August 5, 2008
|
|
|
3,100 |
|
|
|
(10 |
) |
John W. Huey
|
|
July 25, 2007
|
|
|
6,600 |
|
|
|
(3 |
) |
|
|
February 22, 2008
|
|
|
8,600 |
|
|
|
(5 |
) |
|
|
July 16, 2008
|
|
|
3,700 |
|
|
|
(3 |
) |
|
|
February 17, 2009
|
|
|
17,800 |
|
|
|
(7 |
) |
Peter S. Janson
|
|
August 1, 2007
|
|
|
10,000 |
|
|
|
(10 |
) |
|
|
February 22, 2008
|
|
|
(10,000 |
) |
|
|
(9 |
) |
|
|
August 1, 2008
|
|
|
3,100 |
|
|
|
(10 |
) |
|
|
August 21, 2008
|
|
|
(8,100 |
) |
|
|
(9 |
) |
|
|
December 8, 2008
|
|
|
(5,000 |
) |
|
|
(9 |
) |
James R. Kroner
|
|
August 1, 2007
|
|
|
10,000 |
|
|
|
(10 |
) |
|
|
August 29, 2007
|
|
|
(2,000 |
) |
|
|
(2 |
) |
|
|
October 31, 2007
|
|
|
(1,500 |
) |
|
|
(2 |
) |
|
|
February 26, 2008
|
|
|
(1,500 |
) |
|
|
(9 |
) |
|
|
August 1, 2008
|
|
|
3,100 |
|
|
|
(10 |
) |
|
|
October 28, 2008
|
|
|
2,000 |
|
|
|
(13 |
) |
Kim L. Mathers
|
|
None |
|
|
|
|
|
|
|
|
Dennis McGlone
|
|
August 1, 2007
|
|
|
10,000 |
|
|
|
(10 |
) |
|
|
December 4, 2007
|
|
|
(5,000 |
) |
|
|
(9 |
) |
|
|
August 1, 2008
|
|
|
3,100 |
|
|
|
(10 |
) |
Geoffrey J. Obeney
|
|
February 22, 2008
|
|
|
6,000 |
|
|
|
(5 |
) |
|
|
July 16, 2008
|
|
|
2,600 |
|
|
|
(3 |
) |
|
|
February 17, 2009
|
|
|
12,600 |
|
|
|
(7 |
) |
Richard S. Sanders, Jr.
|
|
May 30, 2007
|
|
|
(4,000 |
) |
|
|
(9 |
) |
|
|
June 4, 2007
|
|
|
(10,782 |
) |
|
|
(12 |
) |
|
|
June 5, 2007
|
|
|
3,600 |
|
|
|
(11 |
) |
|
|
July 25, 2007
|
|
|
5,300 |
|
|
|
(3 |
) |
|
|
July 30, 2007
|
|
|
(8,113 |
) |
|
|
(4 |
) |
|
|
August 24, 2007
|
|
|
(5,000 |
) |
|
|
(9 |
) |
|
|
September 4, 2007
|
|
|
(5,000 |
) |
|
|
(9 |
) |
|
|
October 30, 2007
|
|
|
(10,000 |
) |
|
|
(9 |
) |
|
|
December 5, 2007
|
|
|
(3,642 |
) |
|
|
(9 |
) |
|
|
February 22, 2008
|
|
|
7,200 |
|
|
|
(5 |
) |
|
|
February 22, 2008
|
|
|
37,000 |
|
|
|
(6 |
) |
|
|
February 22, 2008
|
|
|
(14,126 |
) |
|
|
(4 |
) |
|
|
May 16, 2008
|
|
|
(6,000 |
) |
|
|
(9 |
) |
|
|
July 16, 2008
|
|
|
3,200 |
|
|
|
(3 |
) |
|
|
July 30, 2008
|
|
|
(7,854 |
) |
|
|
(4 |
) |
|
|
August 20, 2008
|
|
|
(1,770 |
) |
|
|
(9 |
) |
|
|
August 21, 2008
|
|
|
(8,230 |
) |
|
|
(9 |
) |
|
|
February 17, 2009
|
|
|
15,200 |
|
|
|
(7 |
) |
|
|
February 17, 2009
|
|
|
40,000 |
|
|
|
(8 |
) |
|
|
February 17, 2009
|
|
|
(13,168 |
) |
|
|
(4 |
) |
Henry R. Slack
|
|
August 1, 2007
|
|
|
15,000 |
|
|
|
(10 |
) |
|
|
November 6, 2007
|
|
|
(30,000 |
) |
|
|
(9 |
) |
|
|
November 8, 2007
|
|
|
20,000 |
|
|
|
(11 |
) |
|
|
November 9, 2007
|
|
|
(20,000 |
) |
|
|
(9 |
) |
|
|
August 1, 2008
|
|
|
4,650 |
|
|
|
(10 |
) |
|
|
August 22, 2008
|
|
|
(40,000 |
) |
|
|
(9 |
) |
Earl B. Smith
|
|
February 8, 2008
|
|
|
100 |
|
|
|
(13 |
) |
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Transaction |
Name |
|
Transaction Date |
|
Common Shares |
|
Footnote |
|
|
February 22, 2008
|
|
|
6,200 |
|
|
|
(5 |
) |
|
|
July 16, 2008
|
|
|
2,800 |
|
|
|
(3 |
) |
|
|
February 17, 2009
|
|
|
13,400 |
|
|
|
(7 |
) |
Douglas M. Stone
|
|
July 25, 2007
|
|
|
5,300 |
|
|
|
(3 |
) |
|
|
February 22, 2008
|
|
|
8,000 |
|
|
|
(5 |
) |
|
|
July 16, 2008
|
|
|
3,500 |
|
|
|
(3 |
) |
|
|
February 17, 2009
|
|
|
18,200 |
|
|
|
(7 |
) |
William L. Watson
|
|
None |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Sale of shares pursuant to a 10b5-1 plan. |
|
(2) |
|
Gift of shares. |
|
(3) |
|
Restricted share award. |
|
(4) |
|
Payment of tax liability by withholding of securities received upon the vesting or exercise,
as applicable, of an award of restricted shares, performance shares, fully-vested shares or stock
options. |
|
(5) |
|
Grant of performance shares for the 2008-2010 performance cycle. Number represents the maximum
number of performance shares that may be earned, which is 200% of the target level of performance. |
|
(6) |
|
Vesting of performance shares for the 2005-2007 cycle at the 200% level. |
|
(7) |
|
Grant of performance shares for the 2009-2011 performance cycle. Number represents the maximum
number of performance shares that may be earned, which is 200% of the target level of performance. |
|
(8) |
|
Vesting of performance shares for the 2006-2008 cycle at the 200% level. |
|
(9) |
|
Open market sale of shares. |
|
(10) |
|
Annual award of shares to directors. |
|
(11) |
|
Exercise of non-qualified stock options. |
|
(12) |
|
Sale of shares in participants 401(k) plan. |
|
(13) |
|
Open market purchase of shares. |
72
Miscellaneous Information Concerning Participants
Except as described in this Annex A or otherwise disclosed in this Proxy Statement,
|
|
|
No associate of any Participant beneficially owns, directly or indirectly,
any securities of the Company. |
|
|
|
|
No Participant beneficially owns, directly or indirectly, any securities of
any subsidiary of the Company. |
|
|
|
|
Since the beginning of the Companys last fiscal year, no Participant or
any of his or her associates or immediate family members was a party to any
transaction, or is to be a party to any currently proposed transaction, in
which (i) the Company was or is to be a participant, (ii) the amount involved
exceeded or exceeds $120,000, and (iii) any such Participant, associate or
immediate family member had or will have a direct or indirect material
interest. |
|
|
|
|
No Participant or any of his or her associates has any arrangement or
understanding with any person with respect to any future employment by the
Company or its affiliates, or with respect to any future transactions to which
the Company or any of its affiliates will or may be a party. |
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No Participant is, or was within the past year, a party to any contract,
arrangement or understanding with any person with respect to any securities of
the Company, including, but not limited to, joint ventures, loan or option
arrangements, puts or calls, guarantees against loss or guarantees of profit,
division of losses or profits, or the giving or withholding of proxies. |
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|
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No Participant has any substantial interest, direct or indirect, by
security holdings or otherwise, in any matter to be acted upon at the annual
meeting. |
73
PRELIMINARY
PROXY SUBJECT TO COMPLETION
Proxy Solicited on Behalf of Terra Industries Inc. Board of Directors
2009 Annual Meeting of Terra Industries Inc. Stockholders
[ ], 2009, [ ] Local Time
[ ]
[ ]
YOUR VOTE IS IMPORTANT
Please take a moment now to vote your common shares of Terra
Industries Inc. for the upcoming Annual Meeting of Stockholders.
PLEASE REVIEW THE PROXY STATEMENT
AND VOTE TODAY IN ONE OF THREE WAYS
(See reverse side for instructions)
WHITE PROXY COMMON
Proxy Solicited on Behalf of Terra Industries Inc. Board of Directors
2009 Annual Meeting of Terra Industries Inc. Stockholders
The undersigned hereby acknowledges receipt of the Notice of the 2009 Annual Meeting of
Stockholders and Proxy Statement, each dated [ ], 2009, and revoking all prior proxies, herby
appoints HENRY R. SLACK, MICHAEL L. BENNETT and DANIEL D. GREENWELL, and each or either of them as
Proxy Holders with power of substitution, to vote at the Annual Meeting of Stockholders (including
any adjournments or postponements) of TERRA INDUSTRIES INC. to be held on [ ], 2009, with all
powers the undersigned would possess if personally present, on the election of directors, on the
Proposals described in the Proxy Statement and, in accordance with their discretion, on any other
business that may come before the meeting.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but
you need not mark any boxes if you wish to vote in accordance with the Board of Directors
recommendations. The Proxy Holders cannot vote your shares unless you sign and return this card.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
THERE ARE THREE WAYS TO VOTE: BY INTERNET, TELEPHONE OR MAIL
Internet and telephone voting is available 24 hours a day, 7 days a week
through 11:59 PM Eastern Time the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
INTERNET
www.cesvote.com
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Go to the website listed above. |
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Have your WHITE PROXY CARD ready. |
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Follow the simple instructions that appear on your computer screen. |
TELEPHONE
1-888-693-8683
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Use any touch-tone telephone. |
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|
Have your WHITE PROXY CARD ready. |
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Follow the simple recorded instructions. |
MAIL
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|
Mark, sign and date your WHITE PROXY CARD. |
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|
Detach your WHITE PROXY CARD. |
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|
Return your WHITE PROXY CARD in the postage-paid envelope provided. |
Please Vote, Sign, Date and Return Promptly in the Enclosed Postage-
Paid Envelope
(continued from other side)
6 DETACH PROXY CARD HERE TO VOTE BY MAIL 6
COMMON
The Board of Directors recommends a vote FOR all the nominees listed and FOR
Proposal 2.
PROPOSAL 1 To elect 1 Martha O. Hesse, 2 Henry R. Slack, 3 Dennis McGlone to the Board of
Directors.
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FOR ALL
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WITHHOLD FROM ALL
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FOR ALL, WITH
EXCEPTIONS |
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o
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o
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o
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INSTRUCTIONS: To withhold authority to vote for any individual
Nominee(s) mark the FOR ALL, WITH EXCEPTIONS box and
Write the number of the excepted nominee(s) in the space below.
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PROPOSAL 2 Ratification of Audit Committees
selection of Deloitte & Touche LLP as independent accountants for 2009.
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FOR
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AGAINST
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ABSTAIN |
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o
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o
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o
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Please sign exactly as name appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian, please also give your full title. If a
corporation, please sign in full corporate name by an authorized officer. If a partnership, please
sing in full partnership name by an authorized person.
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Dated:
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, 2009 |
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Signature: |
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Title or Authority: |
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Signature (if held jointly): |
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PLEASE SIGN, DATE AND RETURN THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE TODAY.