ANHYDROUS AMMONIA SALES AGREEMENT
THIS ANHYDROUS AMMONIA SALES
AGREEMENT ("Agreement") is entered into on this 22 nd of
January, 2004, and made effective January 20, 2004, between KOCH
NITROGEN COMPANY, a Nebraska corporation, with principal offices at
4111 East 37 th Street North, Wichita, Kansas 67220
(herein called "Koch") and EL DORADO CHEMICAL COMPANY, an Oklahoma
corporation, with principal offices at 16 S. Pennsylvania,
Oklahoma City, Oklahoma 73107 (herein called "Buyer"). Koch and
Buyer are sometimes collectively referred to herein as the
"Parties" and individually referred to herein as a
"Party."
WITNESSETH:
WHEREAS, the parties entered into
a previous agreement, dated December 9, 2002 (the "Previous
Agreement") and it is their intent to terminate the Previous
Agreement; and
WHEREAS, as specified in this
Agreement, Buyer and Koch desire to enter into an anhydrous ammonia
sales agreement under which Koch agrees to supply to Buyer, and
Buyer agrees to purchase from Koch, 100% of its anhydrous ammonia
Product Requirements (as defined below), as set forth
herein.
NOW THEREFORE, in consideration of
the mutual promises herein contained, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as
follows:
I.
DEFINITIONS
Whenever used in this Agreement,
the following terms shall have the following respective
meanings:
A."Adder" shall have the same
meaning assigned to that term in Article VI, Section B.
B. "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by, or under
direct or indirect common control with such Person. For purposes of
this definition, the term "control" (including the correlative
terms "controlled by" and "under the common control of"), as used
with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, through the ownership of
voting securities, by contract or otherwise.
C. "Ammonia Pipeline" shall mean the anhydrous ammonia pipeline
currently owned by Kaneb Pipe Line Operating Partnership, L.P.
D. "Ammonia Pipeline Tariff" means the Ammonia Pipeline's current
tariff for interstate movement of anhydrous ammonia, as amended
from time to time.
E. "Ammonia Pipeline Transportation Charge" shall have the same
meaning assigned to that term in Article VI, Section C.
F. "Buyer Facility" shall mean Buyer's chemical production facility
located at El Dorado, Arkansas, as presently configured.
G. *** [Redacted Text] shall mean the *** [Redacted Text] per
metric ton of the weekly price range published under the heading
"Ammonia Delivered US Gulf Tampa Of which-Tampa" in Fertecon
Ammonia Report ("Fertecon") and (ii) the *** [Redacted Text]
per metric ton of the weekly price range published under the
heading "Ammonia c+f Tampa" in the FMB Weekly Fertilizer
Report ("FMB") for the week Product is delivered to Buyer. For
example, if Product is delivered to Buyer by the Ammonia Pipeline
during the week from Monday, December 15, 2003 through Sunday,
December 21, 2003, the *** [Redacted Text] published in the
December 18, 2003 issue of Fertecon and the December 18,
2003 issue of FMB shall apply. The parties acknowledge that
currently, both Fertecon and FMB publish a price range for Tampa/US
Gulf prices and a Tampa only price. The Tampa only price, as set
forth above, shall be used to calculate the *** [Redacted Text]. If
either publication or the price contained in such publication that
is necessary to calculate the *** [Redacted Text] is not published
for a particular week for any reason, then the publication or
price, as applicable, from the previous week shall be used to
calculate the *** [Redacted Text]. Examples of how *** [Redacted
Text] is calculated are set forth on Exhibit 1.
H. "Delivery Point" shall mean: (i) for pipeline deliveries, the
discharge side of the Ammonia Pipeline's Product meter located at
Buyer's Facility, or (ii) for rail or truck deliveries, the point
at Buyer's Facility where the truck or rail cars enter Buyer's
Facility, or (iii) an alternate delivery point along the Ammonia
Pipeline; provided that Buyer gives Koch at least forty-five (45)
days written notice prior to the date it wishes to begin delivery
at such alternate delivery point.
I.
"Koch Facility" shall mean Koch's anhydrous ammonia production
facility at Sterlington, Louisiana. Currently, the Koch Facility
has one (1) ammonia production unit capable of producing
ammonia.
J.
"Koch Terminal" shall mean Koch's anhydrous ammonia terminal at
Taft, Louisiana, capable of receiving ammonia by vessels, loading
and shipping ammonia in a barge, and re-injecting ammonia into the
Ammonia Pipeline.
K.
"Month" shall mean a calendar month.
L.
"Monthly Average Price" shall be defined as the average of the
Prices stated in the weekly provisional invoices dated during the
Month.
M. "Performance Assurance" means collateral in the form of either
cash, letter(s) of credit, or other security acceptable to Koch in
its sole discretion.
N.
"Person" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, unincorporated
organization, business, syndicate, sole proprietorship,
association, organization, other entity or governmental body.
O.
"Price" shall be described in Article VI, Section A hereof.
P.
"Product" shall mean commercial anhydrous ammonia provided
hereunder having the following specifications:
Ammonia (NH 3 )
Content:
99.5%
minimum, by weight %
Water:
0.2% minimum to 0.5% maximum, by weight %
Oil:
5 ppm maximum, by weight
Q.
"Product Requirements" shall mean total Product purchased by Buyer
for Buyer's account for further processing at Buyer's Facility.
Currently, the Product Requirements during a calendar year at
Buyer's Facility are approximately 165,000 short tons, exclusive of
any tolling arrangements by Buyer with third parties. Product
Requirements shall not include approximately 45,000 short tons of
anhydrous ammonia annually, for production of finished product for
Orica USA Inc. The 45,000 short tons referenced above shall be
excluded from the Product Requirements during the Term of this
Agreement, unless Buyer requests and Koch elects, at Koch's sole
option, to include such quantity in the Product Requirements.
Provided that Buyer has given Koch at least sixty (60) days prior
written notice, Product Requirements shall not include Product
supplied to Buyer's Facility which shall be produced by Buyer or an
Affiliate of Buyer and physically delivered to Buyer's
Facility.
R.
"short ton" shall mean 2000 pounds.
S.
"Taxes" shall have the same meaning assigned to that term in
Article IX, Section
A hereof.
T.
"Total Credit Exposure" shall mean the sum of the (i) outstanding
invoice(s) for Product delivered from Koch to Buyer, (ii) the
estimated invoice for Product delivered to Buyer but not yet
invoiced by Koch, and (iii) the estimated invoice amount for
Product that shall be delivered from Koch to Buyer until the
payment due date of the oldest outstanding invoice, less the
amount of any Performance Assurance.
II.
TERM
A.
Primary Term
. The term of this Agreement (the
"Term") shall commence at 12:01 a.m. central time on January 20,
2004 and shall terminate at 11:59 p.m. on December 31, 2004, unless
otherwise terminated earlier in accordance with this Agreement. The
term "Term" shall include the renewal of the term of this Agreement
as provided in Article II, Section B below.
B.
Renewal.
At the end of any Term, this
Agreement may be extended for a one (1) year period (commencing on
January 1 st and ending on December 31 st )
upon the written agreement of both Koch and Buyer made no later
than November 1 st of the then current year.
Notwithstanding the foregoing, neither Party shall be obligated to
renew this Agreement.
III.
QUANTITY
A.
Quantity
. During the Term, Buyer shall
purchase from Koch one hundred percent (100%) of its Product
Requirements for Buyer's Facility.
B.
No Resale
. Buyer shall use the Product
delivered to Buyer for processing at Buyer's Facility only, and
shall not resell, transfer, exchange, or otherwise assign Product
without first obtaining the prior written consent of Koch, which
consent may be granted or withheld by Koch in its sole
discretion.
C.
Measurement
. The quantity of Product delivered
hereunder to Buyer by the Ammonia Pipeline shall be governed by the
weights and measures taken by meters owned by the Ammonia Pipeline
at the Delivery Point pursuant to the Ammonia Pipeline Tariff. For
truck or rail deliveries, the quantity of Product delivered to
Buyer shall be governed by the weights and measures taken as the
trucks or rail cars are loaded at the Koch Facility, Koch Terminal,
or at an alternative third party supply source. The foregoing
measurements of said quantities shall be final and conclusive,
unless proven to be in error.
IV.
QUALITY
All Product delivered hereunder shall conform to the specifications
set forth in Article I, Section P. All claims by Buyer that any
Product delivered hereunder does not conform to the specifications
set forth in Article I, Section P, shall be made in writing and
sent within thirty (30) days after Koch's delivery of such Product
to the Delivery Point. Failure to give written notice of such claim
within the specified time shall constitute shall constitute an
unqualified acceptance of the Product and a waiver by Buyer of all
claims with respect thereto.
V.
WARRANTIES
A.
As its exclusive warranties, Koch warrants to Buyer that, at the
Delivery Point: (i) the Product shall conform to the specifications
specifically set forth in Article I, Section P and (ii) title to
the Product shall be free from any security interest, lien, or
encumbrance. EXCEPT AS SPECIFICALLY SET FORTH IN THE PRECEDING
SENTENCE, (I) BUYER acknowledges and agrees that KOCH AND ITS
AFFILIATES HAVE NOT MADE, DO NOT MAKE, AND EXPRESSLY DISCLAIM ANY
WARRANTIES, REPRESENTATIONS, COVENANTS, OR GUARANTEES, EITHER
EXPRESS OR IMPLIED, WHETHER ARISING BY OPERATIONS OF LAW OR
OTHERWISE, AS TO THE MERCHANTABILITY, QUANTITY, CONDITION, OR
QUALITY OF THE PRODUCT OR ITS SUITABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OR USE AND (ii) THE PRODUCT IS SOLD "AS
IS".
B.
Koch's liability, and Buyer's exclusive remedy, for any cause of
action arising out of or related to the breach of Koch's warranty
above, is, at Buyer's option, limited to (i) replacement of the
non-conforming Product at the Delivery Point or (ii) a refund to
Buyer of the portion of the Price allocable to such non-conforming
Product. IN NO EVENT WILL KOCH'S CUMULATIVE LIABILITY UNDER THE
AGREEMENT EXCEED THE TOTAL SALES PRICE OF THE PRODUCT OR THE COST
OF SUBSTITUTE PRODUCT, WHETHER ARISING UNDER WARRANTY, GUARANTEE,
CONTRACT, NEGLIGENCE, STRICT LIABILITY, INDEMNIFICATION, FAILURE OF
ESSENTIAL PURPOSE OR ANY OTHER CAUSE OR COMBINATION OF CAUSES
WHATSOEVER. WITHOUT LIMITATION ON THE FOREGOING, UNDER NO
CIRCUMSTANCES SHALL EITHER KOCH OR BUYER BE LIABLE OR HAVE ANY
RESPONSIBILITY TO THE OTHER OR ANY OTHER THIRD PARTY FOR ANY
INDIRECT, SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES,
INCLUDING, WITHOUT LIMITATION, LOST EARNINGS, LOST PROFITS, OR
BUSINESS INTERRUPTION.
VI.
PRICE
A.
#9; Price . For each short ton of Product sold to Buyer
hereunder, Koch shall charge, and Buyer shall pay to Koch, the
following Price:
Price
per short ton = *** {Redacted Text]
Price shall be determined on *** [Redacted Text] basis.
B.
Adder
. Adder shall equal *** [Redacted
Text] per short ton. However, if Koch: (i) resumes ammonia
production at the Koch Facility and (ii) operates the Koch Facility
at a production rate of at least eighty percent (80%) of such
facility's capacity for at least ten (10) consecutive days, then
the Adder shall be *** [Redacted Text] per short ton commencing on
the 10 th day after such conditions have been satisfied.
If Koch terminates ammonia production at the Koch Facility, then
the Adder shall be *** [Redacted Text] per short ton commencing on
the 10 th day after such termination.
C.
Ammonia Pipeline
Transportation Charge .
The Ammonia Pipeline Transportation Charge per short ton shall be a
flat rate of *** [Redacted Text] per short ton, regardless of
whether Koch injects Product into the Ammonia Pipeline at the Koch
Terminal, Koch Facility, or an alternative injection point. The ***
[Redacted Text] per short ton rate is based upon the current
Ammonia Pipeline Tariff of *** [Redacted Text] per short ton from
Sterlington, Louisiana and *** [Redacted Text] per short ton from
Taft, Louisiana to the Delivery Point for pipeline deliveries at
Buyer's Facility. In the event the Ammonia Pipeline Tariff rate
changes for the injection points where Koch injects Product for
delivery to Buyer, then the flat rate of *** [Redacted Text] per
short ton shall change accordingly in proportion to the difference
between the revised Ammonia Pipeline Tariff rates and the ***
[Redacted Text] flat rate. By example only, if the Ammonia Pipeline
Tariff from Taft, Louisiana increases to *** [Redacted Text] per
short ton, then the Ammonia Pipeline Transportation Charge would
increase from *** [Redacted Text] per short ton to *** [Redacted
Text] per short ton for Product injected at Taft, Louisiana for
delivery to the Delivery Point at Buyer's Facility.
D.
Market Publications and
Prices . If either (a)
Fertecon or FMB or (b) the price contained in such publication that
is necessary to calculate the *** [Redacted Text] is not published
for three (3) consecutive weeks, then Koch and Buyer shall meet in
person, negotiate, and agree on a substitute publication or price,
as applicable, within thirty (30) days of such event. During such
thirty (30) day period, the publication or price that is published,
as applicable, shall solely be used to calculate the Price
hereunder. For example, if FMB was not published for three
(3) consecutive weeks in March 2004, then Fertecon would
solely be used to calculate the *** [Redacted Text].
VII.
CREDIT; PAYMENT TERMS
A. Koch shall provide Buyer a line
of credit to facilitate purchases under this Agreement; provided
that in no event shall Buyer's Total Credit Exposure exceed ***
[Redacted Text]. Such credit line may be decreased or terminated at
any time at the sole discretion of Koch. Upon written notice of
Koch's election to decrease or terminate Buyer's credit line, Buyer
may terminate this Agreement. Buyer's failure to give written
notice to Koch of the termination of this Agreement within thirty
(30) days from the date of such notice shall constitute an
unqualified acceptance of such reduction or termination and a
waiver by Buyer of the right to terminate this Agreement. In
addition to Koch's rights to decrease or terminate Buyer's credit
line as set forth in this Article VII, Section A above, and in
addition to any other rights or remedies to which Koch may be
entitled at law or in equity, in the event that Koch determines, in
its sole discretion, that (a) the creditworthiness or future
performance of Buyer is impaired or unsatisfactory or (b) Buyer's
Total Credit Exposure may exceed the established credit line, Koch
may (i) immediately suspend deliveries of all Product; or (ii)
require prepayment by wire transfer at least two (2) business days
prior to a scheduled shipment of Product.
B.
Koch shall prepare and fax to Buyer a weekly provisional invoice by
Tuesday of every week during the Month, in an amount equal to the
Price per short ton based on the previous Friday's Price multiplied
by the short tons delivered to Buyer during the period from the
previous Monday through Sunday based on the meter reading at the
Delivery Point provided by Buyer to Koch every Monday. Twenty-one
(21) days after the invoice date, Buyer shall pay the full
am
