PHANTOM UNIT AGREEMENT
Exhibit 10.17
[NAME]
[DATE]
[DATE]
Dear: [NAME]
You currently hold _________ Phantom Units of Terra Nitrogen Company, L.P. (“Terra Nitrogen”),
of which _____ were granted to you in equal installments on each of June 1, 2005, 2006 and 2007,
and _______ were received as a result of cash distributions that were made prior to the date hereof
to holders of common units representing limited partner interests of Terra Nitrogen (“Common
Units”). In order to address the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), and the regulations thereunder as in effect from time to time
(“Section 409A”), the material terms of your Phantom Units are now set forth in this agreement (the
“Agreement”).
1. Each Phantom Unit will entitle you to a cash payment based on the value of one Common
Unit, as set forth herein.
2. In the event of a cash distribution to holders of Common Units, you shall be entitled to
receive an additional number of Phantom Units equal to (A) the number of Phantom Units that you
hold as of the date on which such distribution is paid to holders of Common Units (the “Payment
Date”) divided by the Closing Price (as defined below) per Common Unit on the Payment Date
multiplied by (B) the value per Common Unit of the cash distribution. Each additional Phantom Unit
that you receive pursuant to this Paragraph 2 shall be subject to all terms and conditions set
forth in this Agreement, including the right to receive additional Phantom Units with respect
thereto, as provided in this Paragraph 2.
For purposes of this Agreement, “Closing Price” shall mean, as of any date, (i) the closing sales
price per Common Unit (A) as reported on the New York Stock Exchange — Composite Transactions for
such date or (B) if the Common Units are listed on any other national stock exchange, as reported
on the stock exchange composite tape for securities traded on such stock exchange for such date or,
with respect to each of clauses (A) and (B), if there were no sales on such date, on the closest
preceding date on which there were sales of Common Unit or (ii) in the event there shall be no
public market for the Common Units on such date, the fair market value per Common Unit as
determined in good faith by the board of directors of Terra Nitrogen GP Inc. (“TNGP”) or any
successor thereto.
3. Following the termination of your service as a non-management director of TNGP or any
successor thereto for any reason, for each Phantom Unit that you hold, you will be entitled to
receive a lump-sum cash payment equal to the average Closing Price per
Common Unit for the 20-trading-day period immediately
preceding termination of your service, provided that any such termination of your service must
constitute a “separation from service” within the meaning of Section 409A. The cash payment
described in this Paragraph 3 shall be paid to you within 90 days following your separation
service.
4. In the event of a change in ownership or effective control of Terra Nitrogen or a change
in the ownership of a substantial portion of the assets of Terra Nitrogen (within the meaning of
Section 409A) (collectively, a “Change in Control”), for each Phantom Unit that you hold, you will
be entitled to receive a lump-sum cash payment, not later than the 10th day following the
consummation of the Change in Control, equal to the Closing Price on the date the Change in Control
is consummated, provided that if Common Units are surrendered in the Change in Control transaction
for the right to receive a cash payment, you shall instead be entitled to receive an amount in cash
equal to the value per Common Unit received in the transaction by holders of Common Units.
5. (a) Notwithstanding Paragraph 3, 4 or any other provision of this Agreement to the
contrary, in accordance with a special transition rule under Section 409A of the Code that is
scheduled to expire on December 31, 2007, you are being presented with a one-time opportunity to
request conversion of all or a portion of your Phantom Units that are outstanding as of the date of
this Agreement into the right to receive a cash payment on January 15, 2008; provided, however,
that in no case may you request, nor will TNGP agree, to convert such number of Phantom Units such
that following conversion, you shall hold less than 2,000 Phantom Units.
(b) If
you would like to make a request, then on or before December 10, 2007 at 3:00 p.m.
EST, TNGP must receive, via facsimile at the number set forth in Paragraph 8 below, a signed copy
of such request. Your request must indicate the number of Phantom Units that you would like to be
converted into the right to receive a cash payment. Should you make such a request, your request
will be deemed to be irrevocable when it is received via facsimile by TNGP, and you will not be
permitted to amend or modify it thereafter for any reason (including by increasing or decreasing
the number of Phantom Units subject to the request). In the event that TNGP accepts your request,
on January 15, 2008, you will be entitled to a cash payment equal to the product of (i) the number
of Phantom Units that TNGP has agreed to convert into cash multiplied by (ii) the Closing Price per
Common Unit on the trading day on which your request was made, provided that if your faxed request
is received by TNGP after 3:00 p.m. EST on such day, or if your request is received on a day that
is not a trading day, your request will be deemed to have been made on the next trading day (the
relevant trading day pursuant to this clause (ii) is herein referred to as the “Determination
Date”).
(c) Following the Determination Date, you will no longer be considered a holder of the Phantom
Units that are subject to such request and, accordingly, will no longer have the right to receive
any additional Phantom Units with respect thereto in the event that the Determination Date occurs
before the record date for the payment of distributions to holders of Common Units. However, in
the event that the Determination Date occurs after such record date but before the following
Payment Date, you will be entitled to additional
Phantom Units with respect to the Phantom Units that are subject to the request.
(d) Any Phantom Units that you hold that are not converted into a cash payment in accordance
with this Paragraph 5 will remain outstanding and will continue to be governed by the terms of this
Agreement.
6. (a) It is intended that the provisions of this Agreement comply with Section 409A, and all
provisions of this Agreement shall be construed and interpreted in a manner consistent with the
requirements for avoiding taxes or penalties under Section 409A.
(b) Neither you nor any of your creditors or beneficiaries shall have the right to subject the
Phantom Units to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment. Except as permitted under Section 409A, any amounts payable to you or
for your benefit with respect to the Phantom Units may not be reduced by, or offset against, any
amount owing by you to TNGP or any of its affiliates.
(c) If, at the time of your separation from service (within the meaning of Section 409A), (i)
you shall be a specified employee (within the meaning of Section 409A and using the identification
methodology selected by TNGP from time to time) and (ii) TNGP shall make a good faith determination
that an amount payable hereunder constitutes deferred compensation (within the meaning of Section
409A) the payment of which is required to be delayed pursuant to the six-month delay rule set forth
in Section 409A in order to avoid taxes or penalties under Section 409A, then TNGP shall not pay
such amount on the otherwise scheduled payment date but shall instead pay it, without interest, on
the first business day after such six-month period.
(d) Notwithstanding any provision of this Agreement to the contrary, in light of the
uncertainty with respect to the proper application of Section 409A, TNGP reserves the right to make
amendments to this Agreement as TNGP deems necessary or desirable to avoid the imposition of taxes
or penalties under Section 409A. In any case, you shall be solely responsible and liable for the
satisfaction of all taxes and penalties that may be imposed on you or for your account in
connection with this Agreement (including any taxes and penalties under Section 409A), and neither
TNGP nor any of its affiliates shall have any obligation to indemnify or otherwise hold you
harmless from any or all of such taxes or penalties.
7. Except as set forth in Paragraph 6, no provisions of this Agreement may be amended,
modified, waived or discharged except by a written document signed by you and a duly authorized
representative of TNGP.
8. All communications to the Company shall be sent to the following address:
| Terra Nitrogen GP Inc. 000 Xxxxxx Xxxxxx X.X. Xxx 0000 Xxxxx Xxxx XX 00000-0000 |
||||
| Attention: | Xxxx X. Xxxx Vice President, General Counsel and Corporate Secretary |
|||
| Fax: 000-000-0000 | ||||
9. This Agreement shall be construed in accordance with and governed by the laws of the State
of Delaware.
| Very truly yours, | ||||||
| TERRA NITROGEN GP INC. | ||||||
| By: | ||||||
Accepted and agreed:
[NAME]
|
