EXHIBIT 99
CONFORMED COPY
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DATED 31ST DECEMBER, 1997
TERRA INTERNATIONAL (CANADA) INC.
and
ICI CHEMICALS & POLYMERS LIMITED
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AMMONIUM NITRATE HEDGING AGREEMENT
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XXXXX & XXXXX
London
THIS AGREEMENT is made on 31st December, 1997 BETWEEN:
(1) TERRA INTERNATIONAL (CANADA) INC., 000 Xxxx Xxxx Xxxxxx, Xxxxx 000 Xxxxxx,
Xxxxxxx, Xxxxxx X0X 0X0 an Ontario corporation ("Terra"); and
(2) ICI CHEMICALS & POLYMERS LIMITED, (registered number 358535) a company
incorporated under the laws of England (the "Counterparty").
WHEREAS:
(A) An affiliate of Terra has acquired from the Counterparty a business (the
"Business") engaged in the manufacture of ammonium nitrate in the United
Kingdom pursuant to a Sale of Business Agreement dated 20th November 1997.
(B) The revenues of the Business from sales of ammonium nitrate during the
calendar years ending 31st December, 1998, 1999, 2000, 2001, 2002 and, if
clause 3 applies, 2003 (each year is referred to as a "Rights Period") are
expected to vary depending on the market price of ammonium nitrate at the
time of sale, with such revenues increasing if prices increase and
declining if prices decline.
(C) Terra and its affiliates are desirous of reducing their risk with respect
to future changes in the market prices of ammonium nitrate with respect to
the Business by receiving a fixed cash payment from the Counterparty in
exchange for undertaking an obligation to make future payments to the
Counterparty in the event that a portion of the ammonium nitrate produced
by the Business is sold for more than a specified amount during the Rights
Periods.
(D) Terra Industries Inc., the ultimate parent company of Terra, has agreed to
guarantee the obligations of Terra, and certain other subsidiaries, in
connection with the acquisition of the Business.
NOW THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereby agree as follows:
1. PURCHASE OF RIGHTS
The Counterparty will pay to Terra on each of the first three Payment Days
(as such term is defined in clause 2(a) below) the sum of (Pounds) 2.7
million; provided, however, that if any amount is payable on such Payment
Day from Terra to the Counterparty under clause 2(a) below, the
Counterparty may instead instruct Terra to deduct the amount which would
otherwise be due under this clause from the amount Terra is required to pay
under clause 2(a) below.
2. GRANTS OF RIGHTS
(a) Terra will pay to the Counterparty, within 30 days after the end of
each Rights Period (such day being referred to as a "Payment Day"),
the amount, if any, computed to be due for such Rights Period in
accordance with this paragraph.
For each Rights Period, the amount, if any, payable hereunder by Terra
to the Counterparty shall be an amount in pounds sterling equal to the
product of 500,000 times:
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(i) the average delivered selling price (taking account of all
rebates and discounts) per metric tonne of all bagged ammonium
nitrate fertiliser (the "Product") sold in the UK by the then
owner of the Business during such Rights Period, minus
(ii) (pounds)100.
Notwithstanding the foregoing, the total amount payable hereunder
shall, subject to clause 3 below, not exceed (pounds)58.1 million in
the aggregate for all Rights Periods.
(b) If Terra so elects by written notice of not less than 14 days to the
Counterparty and provided Terra Industries Inc. is not insolvent,
Terra may, in lieu of making any portion or all of the foregoing
payment for any Rights Period, deliver to the Counterparty at such
address as the Counterparty nominates for the purpose in the UK, up to
500,000 tonnes of Product for such Rights Period against payment by
the Counterparty to Terra in cash of (pounds)100 per tonne so
delivered. For each tonne so delivered, the number 500,000 used in
clause 2(a) will be reduced by one.
3. UNRECOMPENSED FORCE MAJEURE
(a) If the Counterparty would be entitled to be paid an amount in excess
of the Capped Amount (as defined below) in any Rights Period but an
Unrecompensed Force Majeure Event (as defined below) has occurred then
Terra shall be entitled to serve a Hardship Notice upon the
Counterparty in accordance with sub-clause (b) below.
(b) A Hardship Notice shall comprise a certificate by an officer of Terra,
countersigned by an officer of Terra Industries Inc., confirming that
the circumstances in sub-clause (a) have occurred supported by a
certificate from Terra's insurers to the effect that the insurance
cover is not available in respect of the Unrecompensed Force Majeure
Event (in the terms described in the definition "Unrecompensed Force
Majeure Event" below).
(c) If a Hardship Notice is validly served it shall have the following
effect:
(i) the maximum payment for the Rights Period in question shall be
the Capped Amount;
(ii) the maximum amount payable under this agreement shall be
increased from (pounds)58.1 million to (pounds)61.1 million;
and
(iii) the period in respect of which payments may be due hereunder
shall be extended by one additional calendar year.
(d) In this Agreement "Unrecompensed Force Majeure Event" means any event
beyond the reasonable control of the (then) owner of the Business
which materially affects the operation of the Business and subsists
for a continuous period of 60 days or more and for which by reason of
the nature of the incident(s) the then owner is not able to be
recompensed under the business interruption insurance in force in
respect of the Business for the Rights Period in question.
(e) In this Agreement the "Capped Amount" means (pounds)12.7 million in
any of the years ending 31 December, 1998, 1999 or 2000 and (pounds)10
million in any of the subsequent years.
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4. SALE
(a) This Agreement shall apply irrespective of which member or members of
the group of companies of which Terra Industries Inc. is the ultimate
parent company is the owner of the Business.
(b) This Agreement shall not prevent Terra selling or otherwise disposing
of the Business or its interest therein but such sale or disposal
shall not relieve Terra (or Terra Industries Inc. under its guarantee)
of the obligations to make payments under this Agreement and
references to sales of Product shall be deemed to include sales by any
successor. Terra shall be obliged to ensure that all rights of the
Counterparty under this Agreement, including rights of verification,
are not prejudiced by any such sale or disposal.
5. VERIFICATION RIGHTS
(a) On each Payment Day, Terra shall provide to the Counterparty a
certificate signed by an officer, certifying the calculations made
and date used for such calculations to be used in determining the
amount, if any, due on such Payment Day.
(b) Terra shall keep complete, true and accurate books of account and
records for the purpose of showing the correctness of the above
calculations and such certificate. Those books and records shall be
made available during normal working hours for inspection by an
independent chartered public accountant selected by the Counterparty
(the "Accountant"), to whom Terra has no reasonable objection, for the
purpose of verifying the correctness of the applicable certificate.
(c) The Accountant shall be obliged to treat such books and records as
confidential: provided, however, that the Accountant may disclose to
the Counterparty whether the applicable certificate is correct and, if
it is not, how it is not.
(d) The Counterparty shall pay the costs of such inspection unless the
Accountant determines that the calculation is incorrect in which case
the costs shall be borne as the Accountant shall determine having
regard to the degree by which the calculation is incorrect.
(e) The determination of the Accountant shall be final and binding on the
parties.
6. GOVERNING LAWS
This Agreement shall be governed by, and construed and interpreted in
accordance with the laws of England (excluding principles of conflicts of
laws).
7. INDEPENDENT ACCOUNTANT
(a) If the parties disagree on the application of clause 3 (Unrecompensed Force
Majeure) either party may give notice to the other requiring the
appointment of an independent accounting firm of international reputation
(the "Independent Accountant"). If the parties are unable to agree upon
the Independent Accountant within 14 days of such notice, then the
Independent Accountant shall be appointed by the President for the time
being of the Institute of Chartered Accountants in England and Wales on the
application of either party.
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(b) If the Independent Accountant delays or becomes unwilling or incapable of
acting or if for any other reason the President for the time being of the
Institute of Chartered Accountants in England and Wales thinks fit he may
discharge the Independent Accountant and, in the absence of agreement
between the parties, appoint another in his place.
(c) The Independent Accountant shall act as an expert and not as an arbitrator
and his decision shall (in the absence of manifest error or material
departure from instructions) be final and binding on the parties. The
Independent Accountant shall afford the parties the opportunity of making
written representations to him.
(d) The fees and expenses of the Independent Accountant shall be borne by the
parties in equal shares unless the Independent Accountant otherwise
determines.
8. Notices
Any notice, request, instruction, correspondence or other document to be
given hereunder by either party to the other shall be in writing and shall
be delivered in person or by confirmed facsimile transmission as follows:
Terra:
c/o Terra Industries, Inc.
000 Xxxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxx Xxxx, Xxxx 00000
Facsimile: 001 712 279 8703
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Counterparty:
ICI Chemicals & Polymers Limited
Xxx Xxxxx
Xxxxxxx
Xxxxxxxx
XX0 0XX
Facsimile: 00 44 1928 515 555
Attention: The Company Secretary
Notice given by personal delivery shall be effective upon actual receipt.
Notices given by facsimile transmission shall be effective at 5.00 p.m.,
local time, at the place of receipt on the next business day after
transmission of confirmation of receipt by the sending party. Either party
may change any address to which notices are required to be given by giving
notice thereof as provided above.
9. Miscellaneous
(a) The section headings contained in this Agreement are for the
convenience of the parties only and shall not be interpreted as part
of this Agreement.
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(b) Waiver by one party of the other party's breach of any provision of
this Agreement shall not be deemed a waiver of any subsequent or
continuing breach of such provision or of the breach of any other
provision or provisions hereof.
(c) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(d) All amounts of money referred to in this Agreement shall be construed
to mean money which at the time is lawful of money to the United
Kingdom.
(e) Each party hereto represents and warrants that this Agreement has been
duly authorized, executed and delivered and constitutes a legal, valid
and binding agreement enforceable against it in accordance with its
terms.
(f) Terra hereby waives and relinquishes any right of set-off or
counterclaim deduction or retention which Terra might otherwise have
in relation to any payment under this Agreement.
(g) This Agreement shall not be modified except by written instrument
executed by duly authorized representatives of the parties.
(h) This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same Agreement and
any party may enter into this Agreement by executing a counterpart.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first written above.
TERRA INTERNATIONAL (CANADA) INC.
By: X.X. XXXXXXXXX
Name: X.X. XXXXXXXXX
Title: VICE PRESIDENT
ICI CHEMICALS & POLYMERS LIMITED
By: X.X. XXXXXXXX
Name: X.X. XXXXXXXX
Title: BUSINESS MANAGER
