SECOND AMENDMENT TO AN SUPPLY AGREEMENT
SECOND
AMENDMENT TO AN SUPPLY AGREEMENT
This
Second Amendment to AN Supply Agreement (“Second Amendment”), is entered into by
and between Orica USA, Inc. (“Orica”) and El Dorado Chemical Company (“EDC”),
with retroactive effect to January 1, 2006 (“Effective Date”) in reference to
the following:
A. |
Orica
and EDC entered into that certain AN Supply Agreement dated November
1,
2001 (the “Original Agreement”), as amended by that certain letter
amendment dated December 13, 2002 relating to ammonia supply, as
amended
by a letter amendment dated January 23, 2004, and as further amended
by a
letter amendment dated June 27, 2006 (collectively, the “First
Amendment”). The Original Agreement and First Amendment are collectively
hereinafter referred to as the “Agreement”. Capitalized terms that are not
otherwise defined herein shall have the meaning given such terms
in the
Agreement.
|
B. |
The
parties desire to extend the term of the Agreement to December 31,
2010,
with available two-year notice of termination after December 31,
2008.
|
C. |
The
parties desire to set, commencing April 1, 2006 through December
31, 2006,
a minimum rate of AN purchases by Orica from the EDC Plant of 15,000
Tons
per Month, with Orica to use commercially reasonable efforts to purchase
in Year 2006 the Minimum Quantity of 200,000 Tons of
AN.
|
D. |
The
parties desire to set, commencing January 1, 2007, the Minimum Quantity
of
AN purchases by Orica from the EDC Plant at 210,000 Tons per Year,
at the
rate of no less than 16,000 Tons per
Month.
|
E. |
The
parties desire to set, commencing January 1, 2007, the *** at ***
and to
eliminate the Additional Fee.
|
F. |
The
parties desire to remove from the Agreement all references to and
obligations in connection with “Slurry Explosives Corporation”, “SEC” and
“SEC Tons”.
|
G. |
The
parties desire to confirm their agreement that, notwithstanding any
provision of the Agreement, EDC shall be entitled to sell from the
EDC
Plant up to 15,000 Tons of AN Solution per Year and up to 10,000
Tons of
XXXX per Year for explosives uses.
|
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the parties agree as follows:
1. Preamble.
The
preamble is hereby incorporated herein by reference; provided that in case
of
any inconsistency between any part of the preamble and any part of the body
of
this Agreement the body of this Agreement shall prevail.
2. Term.
The
reference to “December 31, 2006” in Section 2.1 of the Agreement is hereby
deleted, and “December 31, 2010” is inserted in its place.
***INDICATES
CERTAIN INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM THIS
PUBLIC
FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL TREATMENT
BY THE
SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN
FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION
FOR
PURPOSES OF SUCH REQUEST.
3. Minimum
Quantity and Monthly Purchases for 2006.
Commencing April 1, 2006 through December 31, 2006, Orica shall purchase
AN from
the EDC Plant at the rate of no less than 15,000 Tons per Month, but in no
event
at a rate in excess of the manufacturing capability of AN at the EDC Plant.
For
Year 2006 only, Orica will use commercially reasonable efforts to purchase
200,000 Tons of AN from the EDC Plant. Liquidated Damages for Year 2006 shall
be
based on 180,000 Tons of AN. Liquidated Damages for a shortfall of annual
purchases shall be determined on accordance with Schedule D.
4. Minimum
Quantity and Monthly Purchases Commencing 2007.
Commencing January 1, 2007 and thereafter throughout the Term, the Minimum
Quantity shall equal 210,000 Tons of AN per Year. Commencing January 1, 2007,
Orica will purchase AN from the EDC Plant at the rate of no less than 16,000
Tons per Month, but in no event in excess of the manufacturing capability
of AN
at the EDC Plant. Liquidated Damages for a shortfall of annual purchases
shall
be determined on accordance with Schedule D.
5. Schedule
D Replaced.
For
clarification, Schedule D to the Agreement is deleted, and the amended Schedule
D attached to this Second Amendment is inserted in its place. Schedule D
provides additional detail with respect to Liquidated Damages payments and
calculations.
6. ***.
Commencing January 1, 2007 and thereafter throughout the Term, the definition
of
*** in Schedule C to the Agreement shall be deemed amended by deleting the
reference to “***,” and inserting in its place the amount of “***.”
7. Additional
Fee.
Commencing January 1, 2007 and thereafter throughout the Term, all references
and obligations with respect to the “Additional Fee” and Additional Fee
Calculation in Schedule C to the Agreement shall be deemed deleted.
8. SEC
References.
Commencing on the Effective Date, all references to and obligations with
respect
to “Slurry Explosives Corporation”, “SEC”, and “SEC Tons” are hereby deleted so
that neither Slurry Explosives Corporation nor SEC has any continuing effect
on
or in the Agreement.
9. Carve
Out for AN Solution and XXXX.
Commencing on the Effective Date, notwithstanding anything to the contrary
in
the Agreement, EDC may sell or otherwise convey from the EDC Plant up to
15,000
Tons of AN Solution per Year and up to 10,000 Tons of XXXX per Year into
the
industrial market for explosives uses.
10. No
Other Changes.
Except
as provided in this Second Amendment, all other terms of the Agreement shall
remain in full force and effect.
IN
WITNESS WHEREOF, the parties have executed this Second Amendment effective
as of
the date first written above.
***INDICATES
CERTAIN INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM THIS
PUBLIC
FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL TREATMENT
BY THE
SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN
FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION
FOR
PURPOSES OF SUCH REQUEST.
ORICA
USA, INC.
By:_______________________________________
Name:____________________________________
Title:_____________________________________
Date
of
Signature:___________________________
EL
DORADO
CHEMICAL COMPANY
By:_______________________________________
Name:____________________________________
Title:_____________________________________
Date
of
Signature:___________________________
***INDICATES
CERTAIN INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM THIS
PUBLIC
FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL TREATMENT
BY THE
SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN
FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION
FOR
PURPOSES OF SUCH REQUEST.
SCHEDULE
“D”
LIQUIDATED
DAMAGES CALCULATION
Payment
by Orica
In
the
event Orica purchases less than 180,000 Tons in the Year 2006 or less than
210,000 Tons in any Year thereafter (“Minimum Quantity”), from the EDC Plant and
subject to the remainder of this Schedule “D”, the following calculation shall
be made:
The
Actual Manufacturing Fee per Ton for the relevant Year is determined by dividing
***.
If
Orica
has taken delivery of less than 180,000 Tons in the Year 2006 or less than
210,000 Tons in any Year thereafter and the Actual Manufacturing Fee exceeds
the
Provisional Manufacturing Fee, EDC shall invoice Orica a dollar amount equal
to
the difference between the Total Actual Costs and the Total Amount Paid by
Orica
in respect of those shipments. Orica shall pay such invoice as hereinafter
provided.
The
result of the foregoing calculation, on a per Ton basis, is hereinafter referred
to as “Liquidated Damages”.
The
following two (2) examples are based on hypothetical figures and are not
intended to portray actual results that might be achieved from varying
production levels.
Example
1: Orica has not purchased 210,000 Tons (or, adjusted to 180,000 Tons for
2006)
Dollars
|
Tons
|
Dollars
per Ton
|
|
***
|
$***
|
210,000
|
$***
|
***
|
$***1
|
210,000
|
$***
|
***
|
20,000
|
||
***
|
$***
|
190,000
|
$***
|
***
|
$***
|
190,000
|
***
|
Manufacturing
Fee Total
|
$***1
|
190,000
|
$***
|
Fees
already paid
|
$***
|
190,000
|
$***
|
Net
owed EDC
|
$***
|
$***
|
D-1
***INDICATES
CERTAIN INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM THIS
PUBLIC
FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL TREATMENT
BY THE
SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN
FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION
FOR
PURPOSES OF SUCH REQUEST.
In
addition to the foregoing, Orica shall remain obligated to pay *** in accordance
with Schedule “C” hereto.
The
Minimum Quantity shall be reduced pro-rata in the event of:
(a) |
non-delivery
of Ammonia to the EDC Site during such periods as EDC is supplying
Ammonia
pursuant to Section 3.1 of the Agreement if (x) such failure is due
to an
act or omission of EDC or the breach of EDC of the supply contract
with
its Ammonia supplier or (y) EDC is able to recover insurance proceeds
to
cover is Claim associated with the non-delivery of such Ammonia and
then
only to the extent of such net recovery after payment of applicable
deductibles; or
|
(b)
|
Labor
Difficulties at Orica’s or its Affiliates’ (including, without limitation,
Xxxxxx Xxxxxxxx, LLC) or distributors’ customers coal mining operations
normally supplied from the EDC Plant or with railroads used to
transport
AN to those customers, provided that Orica shall provide to EDC
written
notice of any such Labor Difficulties within five (5) days of Orica’s
knowledge of such Labor Difficulties, and that Orica uses its best
efforts, but not requiring the expenditure of funds, to mitigate
the
impact of such Labor Difficulties on EDC. Any reduction of Minimum
Quantities shall cease upon the cessation of applicable Labor
Difficulties; or
|
(c)
|
The
Reduction of Orica’s Obligations to EDC, in the circumstances described in
the following provisions of this Schedule
“D”.
|
For
greater certainty and notwithstanding any other provision of this Agreement,
in
no case shall Orica be required to pay Liquidated Damages as a result of
EDC’s
failure to supply AN no matter the cause of such failure unless same is due
to
the actions or omissions of Orica.
Reduction
of Orica’s Obligations to EDC:
If
EDC
fails to supply 180,000 Tons in Year 2006 or 210,000 Tons in any Year
thereafter, which AN
has
been
ordered pursuant to the terms of this Agreement, and such EDC failure to
supply
is not due to any act or omission of Orica, then, subject to the next following
paragraph (below Example 2), the calculation of the Manufacturing Fee pursuant
to Schedule “C” hereto and the calculation of Liquidated Damages pursuant to
this Schedule “D” will be made as if a minimum of 180,000 Tons in Year 2006 or
210,000 Tons for any Year thereafter were delivered to Orica to the extent
such
shortfall is due to EDC’s failure to deliver. However, Orica shall not have any
obligation to EDC in respect of the costs incurred by EDC associated with
the
Tons not manufactured and not delivered to Orica which Orica is entitled
to
deduct from the Minimum Quantity as provided for above. A demand by Orica
for AN
production in excess of the EDC Plant’s practical capacity, considering
seasonality and weather, shall not cause a reduction of Liquidated
Damages.
D-2
***INDICATES
CERTAIN INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM THIS
PUBLIC
FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL TREATMENT
BY THE
SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN
FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION
FOR
PURPOSES OF SUCH REQUEST.
Example
2: Orica’s demand is 210,000. Orica has purchased 200,000 Tons
because
EDC
fails to produce 10,000 Tons:
DOLLARS
|
TONS
|
DOLLARS
PER TON
|
|
***
|
$***
|
210,000
|
$***
|
***
|
$***
|
||
***
|
$***
|
200,000
|
$***
|
***
|
$***
|
||
***
|
$***
|
200,000
|
$***
|
***
|
***
|
||
Manufacturing
Fee
|
$***
|
Result
for this hypothetical calculation: No Liquidated Damages Payable by
Orica.
Other
Provisions
Orica
will provide EDC with a forecast Monthly off-take of its 180,000 Tons for
Year
2006 or 210,000 Tons for any Year thereafter (or such additional amount per
Month as Orica may advise). In the event Orica has taken delivery of less
than
the cumulative amount reflected in its forecast (such Tons not taken being
referred to as “Shortfall”), and EDC declares Force Majeure under this
Agreement, upon cessation of the event of Force Majeure, EDC may request
Orica
to take additional quantities of AN in subsequent Months, according to an
agreed
schedule, to “make-up” Tons not manufactured during the period of Force Majeure.
Orica will use its best efforts, without expenditure of funds, to take
additional “make-up” Tons of AN in subsequent Months, up to a maximum of the
Shortfall. In the event there has been no Shortfall at the date EDC declares
Force Majeure, Orica shall have no obligation to take “make-up” Tons and Orica
shall be entitled to reduce its Minimum Quantity obligation in accordance
with
the preceding paragraph (above Example 2).
B. ***.
If,
for
any reason, Orica forecasts that it will not take delivery on a monthly basis
of
its Annual Estimate, Orica shall promptly so advise EDC.
The
parties shall then consult as to the best method to operate the assets at
the
EDC Site to deliver AN in accordance with Orica’s new forecast and at reduced
costs. *** These reductions will initially be achieved by, to the extent
feasible, re-deploying the people, assets and products manufactured at the
EDC
Site for other purposes. *** include those which relate to the voluntary
use by
EDC in another one of its operations at the EDC Site, or the sale of EDC
of,
inputs the costs of which have been charged to Orica pursuant to Schedule
“C” to
this Agreement or this Schedule “D”, provided that no reduction of Liquidated
Damages will be made hereunder until and after 83,806 Tons of DSN acid is
manufactured by EDC in a Year. If a cost reduction opportunity necessitates
an
expenditure of funds in order to achieve the savings and both parties agree
to
make the expenditure, those funds will be expended by Orica and EDC in
proportion to the benefit each will receive
D-3
***INDICATES
CERTAIN INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM
THIS PUBLIC
FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL TREATMENT
BY THE
SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN
FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION
FOR
PURPOSES OF SUCH REQUEST.
C. Payment:
Any
payments which Orica may make pursuant to the provisions of this Schedule
“D”
shall constitute Orica’s sole obligation to compensate EDC for Orica’s failure
to take delivery of the Minimum Quantity of AN. EDC shall prepare a calculation
of any Liquidated Damages for each Year (“Annual LD Report”), which will be
delivered by EDC to Orica by February 28 of each Year and shall be subject
to
Orica’s Verification Right which Orica may exercise in a similar manner to its
right in respect of the Manufacturing Fee. Any amounts owed by Orica to EDC
as
shown by the Annual LD Report shall be paid to EDC within thirty (30) days
of
Orica’s receipt of the Annual LD Report, subject to Orica’s Verification Right.
In the event that Orica wishes to exercise its Verification Right, Orica
shall
pay all undisputed amounts owing to EDC within such 30-day period which payment
shall not waive Orica’s right to dispute the remainder.
D-4
***INDICATES
CERTAIN INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM THIS
PUBLIC
FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL TREATMENT
BY THE
SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN
FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION
FOR
PURPOSES OF SUCH REQUEST.