NITRIC ACID SUPPLY, OPERATING AND MAINTENANCE AGREEMENT
Exhibit 10.2
SECOND
AMENDMENT TO THE
BY AND
AMONG EL DORADO NITROGEN, L.P., EL DORADO CHEMICAL COMPANY, AND BAYER
MATERIALSCIENCE LLC
This
Second Amendment to the Nitric Acid Supply, Operating and Maintenance Agreement
(this “Second Amendment”) is made and entered into on this 16th day of June
2010, by and among EL DORADO NITROGEN, L.P., a Texas limited partnership
(“EDNLP”), EL DORADO CHEMICAL COMPANY, an Oklahoma corporation (“El Dorado”),
and BAYER MATERIALSCIENCE LLC, a Delaware limited liability company
(“BMS”).
PREAMBLE
WHEREAS,
EDNLP, El Dorado and BMS are parties to that certain Nitric Acid Supply,
Operating and Maintenance Agreement (“Agreement”) dated October 23, 2008 and
amended by the First Amendment dated June 29, 2009; and
WHEREAS,
the parties desire to and have agreed to amend the Nitric Acid Supply, Operating
and Maintenance Agreement to incorporate the details of a project to reduce
N2O
emissions and the details surrounding the handling of credits;
Therefore,
in consideration of the premises and the mutual covenants and agreements set
forth herein, the parties hereto, intending to be legally bound, agree as
follows:
AGREEMENT
1.
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Definitions. Capitalized
terms used herein not otherwise defined herein shall have the meaning
specified in the Agreement.
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2.
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Section 1,
Definitions. The following definitions are hereby
added
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Abatement
Catalyst – Shall mean the catalyst which after installed in the Nitric Acid
Facility, as part of the N2O Emission
Project, shall serve to reduce N2O
emissions.
Climate
Action Reserve or CAR – Shall mean a national program focused on ensuring
environmental integrity of greenhouse gas emissions reduction projects which
developed protocols to provide regulatory-quality guidelines for project
development.
Climate
Reserve Tons or CRT – Shall mean carbon offset credits more fully described in
the CAR protocols which can be sold through the CAR system.
Initial
Baseline Period – Shall mean the period of time which defines the initial level
of emissions of N2O, to be
used as the baseline for comparing subsequent total reduced N2O emissions
in order to generate verifiable CRTs.
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED FROM THIS PUBLIC
FILING PURSUANT TO A REQUEST BY LSB INDUSTRIES, INC. FOR CONFIDENTIL 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.
Project
Developer – Shall mean a third party which will assist in the development,
implementation and management of the N2O Emission
Project.
N2O - Shall
mean nitrous oxide. N2O shall not
be considered a Spill as set forth in definition 1.76 of the
Agreement. N2O is
currently not regulated under the Clean Air Act as referenced in Definition
1.35, Environmental Health and Safety Laws.
N2O Emission
Project – Shall mean the initiative whose intent is to reduce N2O emissions
from the Nitric Acid Facility through the addition of a secondary Abatement
Catalyst.
3.
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Section 2, Nitric
Acid. The following section is hereby added as Section 2.7,
N2O Emission
Project as follows:
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“A. For
the remainder of the Initial Term, and for any extension of the Initial Term and
Renewal Term(s) thereafter for so long as BMS determines to continue the N2O Emission
Project, the parties shall work together to reduce N2O emissions
from the Nitric Acid Facility. A secondary Abatement Catalyst shall
be installed after appropriate modifications are made to the Nitric Acid
Facility. The purchase of such Abatement Catalyst and related items
shall be treated as any other BMS Capital Addition. EDNLP shall not
enter into any agreements or commit to make reasonable expenditures associated
with this N2O Emission
Project without BMS’s prior written consent. At the expiration or
termination of the Term, any CRTs generated by the Nitric Acid Facility
subsequent to the expiration or termination date of this Agreement shall be for
the sole benefit of BMS.
B. EDNLP
shall lead the project by using reasonable efforts to conduct thorough research,
collect data according to CAR guidelines and hire a Project
Developer. The Project Developer shall review all relevant data
and data collection method(s), and also prepare the appropriate documents for
submission to the CAR. The Project Developer shall interact with the
CAR to ensure timely approval. EDNLP shall provide the reasonable
supporting information necessary to complete such documents.
C. The
Initial Baseline Period to be used during this project shall be the level of
N2O
emissions per ton Nitric Acid production from the Nitric Acid Facility from late
October 2009 through approximately June 2010. The parties expect to
install the Abatement Catalyst in June of 2010. In the event that the
Abatement Catalyst is not installed in June of 2010, the Initial Baseline Period
shall be determined by the level of N2O emissions
per ton Nitric Acid production from the Nitric Acid Facility from the time the
Nitric Acid Facility starts production after the June 2010 Catalyst change
through the date upon which such Catalyst is next changed, which is currently
estimated to be February 2011.
The
decision to install, replace or repair the Abatement Catalyst, if needed, shall
be at BMS’s discretion, unless required to meet emission standards
established by Law.
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D. EDNLP
shall arrange for an accredited third party to verify the reduction of N2O emissions
during each verification period. After verification, CRT credits
related to the N2O Emission
Project shall be deposited into EDNLP’s CAR account. Upon receipt of
verified CRT credits, EDNLP shall, at BMS’s option, either i) sell a portion of
the CRTs in order to generate funds to reimburse BMS for all cumulative expenses
and expenditures BMS incurred, including but not limited to Abatement Catalyst
costs and capital costs, and BMS management costs, as well as those expenditures
and expenses considered reimbursable to EDNLP from BMS as described
herein or ii) determine the amount of credits that could be sold at the then
current market value to cover the costs and transfer such number of CRTs to
BMS’s CAR account, at which time BMS shall cover such expenses without selling
such CRT credits. Notwithstanding anything to the contrary, the BMS management
costs shall not exceed $100,000 through June 30, 2014, and $100,000 for each
five year extension or renewal of the Term, if any.
Once and
if all such costs are reimbursed to BMS, the remaining CRTs shall be shared
between BMS and EDNLP based on the percentage ***. Once EDNLP’s
percentage is so determined, notwithstanding anything to the contrary, EDNLP
shall receive not less than *** percent (***%) of such remaining
CRTs. EDNLP’s percentage shall not change during the life of the
project. This percentage shall be payable for the remainder of the
Initial Term, and for any extension of the Initial Term and Renewal Term(s)
thereafter for so long as BMS determines to continue the N2O Emission
Project.
At BMS’s
option, EDNLP shall then either i) transfer BMS’s portion of the CRTs to BMS’s
CAR account or ii) sell the CRTs on BMS’s behalf and transfer the proceeds to
BMS. Payments due BMS under this Section shall be made by EDNLP
within ten (10) days of receipt of funds from the sale of the CRTs.
E. BMS
agrees to reimburse EDNLP for all reasonable third party, out of pocket expenses
associated with the execution of the project, including but not limited to:
Project Developer fees, which include 5% of CRTs generated by the
project; related CRT requirements; CAR membership fees; verifier
costs; Continuous Emissions Monitoring System (“CEMS”) maintenance costs
including software upgrades; CRT issuance and transfer fees on the CAR exchange;
and reasonable EDNLP management costs not otherwise reimbursed under this
Agreement. Notwithstanding anything to the contrary, the EDNLP
management fixed costs shall not exceed $100,000 through June 30, 2014, and
$100,000 for each five year extension or renewal of the Term, if
any. These costs shall not be considered an Excluded Fixed Cost as
set forth in Definition 1.42 (D) of the Agreement.
***
INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM THIS PUBLIC
FILING PURSUANT TO A REQUEST BY LSB INDUSTRIES, INC. 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.
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F. If
this project does not generate enough CRTs or if the sale price of the CRTs is
not sufficient to cover the costs paid by BMS, in no event shall EDNLP be liable
for any reimbursements to BMS for expenses incurred or reimbursed by
BMS. Both parties agree that the total cumulative expenditures
incurred by BMS, including amounts reimbursed by BMS to EDNLP, must be covered
prior to the sharing of any CRTs.”
4.
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Section
3. Maintenance and Operating Services. The
following section is hereby added as a final paragraph to Section
3:
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“In
order to register the N2O
emission project as set forth in Section 2.7 herein, EDNLP shall submit to
CAR an Attestation of Title form (“AT Form”) indicating that EDNLP has
exclusive rights to the greenhouse gas reductions or removals associated
with the project and for which CAR will issue CRTs. BMS does
not object to the submission of the AT Form in EDNLP’s name, provided that
any related CRTs are handled as described
herein.”
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5.
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No Other
Changes. Subject to the changes immediately above, all
other provisions of the Project and Supply Agreement remain in full force
and effect without modification.
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6.
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Representations and
Warranties. BMS hereby represents and warrants to EDNLP,
and EDNLP represents to BMS as
follows:
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(a) this
Second Amendment has been duly and validly authorized, executed and delivered by
such party and constitutes the legal, valid and binding obligations of each such
party enforceable against it in accordance with their respective terms;
and
(b) the
execution, delivery and performance of this Second Amendment by such party will
not:
(i) violate
or conflict with its charter or bylaws;
(ii) breach or
result in a default (or an event which, with the giving of notice or the passage
of time, or both, would constitute a default) under, require any consent under,
result in the imposition of any lien under or give to others any rights or
termination, acceleration, suspension, revocation, cancellation or amendment of
any agreement to which it is a party;
(iii) breach or
otherwise violate any order, writ, judgment, injunction or decree issued by any
governmental person or entity which names such party or is directed to such
party or any of its respective properties or assets;
(iv) violate
any Laws; or
(v) require
any consent, authorization, approval, exemption or other action by, or any
filing, registration or qualification with, any governmental
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person or
entity other than those which have been made or obtained prior to the date
hereof.
7.
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Counterparts;
Telefacsimile Execution. This Second Amendment may be
executed in any number of counterparts, and by each of the parties on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all of which shall constitute but one and the same
instrument. Delivery of an executed counterpart of this Second
Amendment by electronic scan or telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this Second
Amendment. Any party delivering an executed counterpart of this
Second Amendment by electronic scan or telefacsimile also shall deliver a
manually executed counterpart of this Second Amendment, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability or binding effect of this Second
Amendment.
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IN
WITNESS HEREOF, the parties hereto have executed this Second Amendment to the
Nitric Acid Supply, Operating, and Maintenance Agreement effective the date
first above written.
BAYER
MATERIALSCIENCE LLC
By: /s/ Xxxxx Xxx
Name: Xxxxx Xxx
Title: V.P. Basic Chemicals
Production
EL DORADO
NITROGEN, L.P.
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: President
EL DORADO
CHEMICAL COMPANY
By: /s/ Xxxx
Xxxxxx
Name: Xxxx Xxxxxx
Title:
Vice President
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