Exhibit 10.7

 

Execution Version

 

AMMONIUM NITRATE SUPPLY AGREEMENT

 

By and Between

 

TERRA MISSISSIPPI NITROGEN, INC.

 

And

 

ORICA USA INC.

 

Dated July 21, 2005

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TABLE OF CONTENTS

 

I.

   DEFINITIONS    3

II.

   TERM    9

III.

   QUANTITY AND EXCLUSIVITY    10

IV.

   QUALITY    13

V.

   WARRANTIES    14

VI.

   PRICE    14

VII.

   INVOICING AND PAYMENT    22

VIII.

   DELIVERY    23

IX.

   INDEMNIFICATION    25

X.

   TAXES    29

XI.

   EVENT OF FORCE MAJEURE    29

XII.

   REVIEW MEETINGS: REPORTING    30

XIII.

   HARDSHIP    30

XIV.

   TERMINATION    30

XV.

   RIGHTS NOT WAIVED    31

XVI.

   NOTICES    32

XVII.

   ASSIGNMENT    32

XVIII.

   INDEPENDENT CONTRACTOR    33

XIX.

   NON-COMPETITION    33

XX.

   #2 PRILLING PLANT CONVERSION    35

XXI.

   AUDIT RIGHT    36

XXII.

   ENTIRE AGREEMENT/AMENDMENT    37

XXIII.

   CONFIDENTIALITY    37

XXIV.

   SECTION HEADINGS    38

XXV.

   LEGAL COMPLIANCE    38

XXVI.

   DISPUTE RESOLUTION    38

XXVII.

   GOVERNING LAW    39

 

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Portions of this Exhibit were omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment. Such
portions are marked by a series of asterisks.

 

AMMONIUM NITRATE SUPPLY AGREEMENT

 

THIS AMMONIUM NITRATE SUPPLY AGREEMENT is entered into on July 21, 2005 but
effective as of the Effective Date (as hereinafter defined) by and between Terra
Mississippi Nitrogen, Inc. (“Seller”), a Delaware corporation with principal
offices at 600 Fourth Street, Sioux City, Iowa 51101, and Orica USA Inc.
(“Buyer”), a Delaware corporation with principal offices at 33101 East Quincy
Avenue, Watkins, Colorado 80137.

 

RECITALS

 

A. Seller is in the business of manufacturing and selling agricultural and
industrial products.

 

B. Seller currently manufactures and desires to sell to Buyer ANS (as defined
below), and Buyer desires to purchase ANS from Seller, upon the terms and
conditions described herein.

 

C. Buyer has agreed to provide the necessary process design to assist Seller to
convert Seller’s Facility (as defined below) to the production of IGAN (as
defined below) and agreed to pay the Facility Fee (as defined below) to
reimburse Seller for the costs of such conversion.

 

D. Upon completion of the Conversion Project (as defined below), Seller desires
to sell, and Buyer desires to purchase, IGAN, upon the terms and conditions
described herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants, promises, and
agreements contained herein, Seller and Buyer agree as follows:

 

I. DEFINITIONS

 

Whenever used in this Agreement, the following terms shall have the following
respective meanings (such terms to be applicable equally to the singular as well
as the plural forms of the terms defined):

 

“#2 IGAN Project” shall have the meaning set forth in Article XX of this
Agreement.

 

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“Additional Capacity” shall have the meaning set forth in Section III.D of this
Agreement.

 

“Affected Party” shall have the meaning set forth in Section XIII.A of this
Agreement.

 

“Affiliated Company” shall have the meaning set forth in Section XVII of this
Agreement.

 

“AGAN” shall mean agricultural grade ammonium nitrate.

 

“Agreement” shall mean this Ammonium Nitrate Supply Agreement, and any Schedules
or Exhibits hereto, as the same may be amended from time to time in accordance
with the provisions set forth herein.

 

“ANS” shall mean ammonium nitrate solution meeting the Specifications.

 

“ANS Throughput Fee” shall have the meaning set forth in Section VI.E. of this
Agreement.

 

“Annual Reserved Capacity” shall mean, for Contract Years commencing in *** and
thereafter, ***% of Buyer’s actual purchases of Shipped ANS and IGAN during the
preceding Contract Year, but in no event to exceed *** Tons for Shipped ANS and
***Tons for IGAN.

 

“Base Reserved Capacity” shall mean (i) for IGAN, *** Tons; and (ii) for Shipped
ANS, *** Tons (of which ***Tons shall be Tranche 1 Shipped ANS and *** Tons
shall be Tranche 2 Shipped ANS).

 

“Buyer” shall have the meaning set forth in the introductory paragraph to this
Agreement.

 

“Buyer Indemnitees” shall have the meaning set forth in Section IX.A. of this
Agreement.

 

“Claim” shall mean any action, suit, proceeding, hearing, investigation, audit,
litigation, charge, complaint, claim, or demand by any Person.

 

“Commercial Explosives” shall mean explosives and related products and services
used in mining, quarrying, construction, seismic and related applications.

 

“Commissioned” or “Commissioning” shall mean the first business day after which
the last of all of the following have occurred: (a) all materials, supplies,
goods, tools, machinery and equipment comprising the converted Facility have
been constructed, erected, installed, inspected and tested in accordance with
the Project Definition and the design and engineering documents created by
Seller based on the Project Definition, both as subsequently amended by mutual

 

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agreement, and the converted Facility has been tied in to Seller’s Plant, in
each case to the extent necessary to permit the safe and sound startup and
operation of the converted Facility as a fully integrated system (but excluding
correction of minor non-operational matters such as painting, signage and
landscaping), (b) the converted Facility has been in reasonably continuous
operation (subject to storage limitations) and has produced at least an average
daily volume of *** Tons of IGAN over a period of fourteen (14) consecutive
days, as demonstrated by performance tests conducted by Seller, (c) Buyer has
conducted testing establishing to its satisfaction that the converted Facility
is producing IGAN meeting the Specifications during the time period in
subparagraph (b) above, (d) the Parties have executed a writing indicating their
agreement that the standards set forth in clauses (a) through (c) have been
satisfied, and (e) Seller has obtained all Permits required by applicable Laws
for operation of the Facility.

 

“Contract Year” shall mean, except for the Initial Contract Year, a period of
twelve (12) consecutive Months, commencing on January 1 and ending on
December 31 of the same year.

 

“Conversion Agreement” shall mean that certain Conversion Agreement of even date
herewith pursuant to which Seller has agreed to convert the Facility on the
terms and conditions described therein.

 

“Conversion Kit” shall mean the Drums, pre-dryer conveyors, pre-dryer air
preheaters, pre-dryer fan, dryer elevator, dryer air preheater, dryer fan,
pre-cooler elevator, pre-cooler conveyers, and other machinery and equipment
constructed and installed in the converted Facility pursuant to the Project
Definition.

 

“Conversion Kit Proceeds” shall have the meaning set forth in Section VI.D.2. of
this Agreement.

 

“Conversion Project” shall mean the conversion of the Facility for the
manufacture of IGAN pursuant to and as further defined in the Conversion
Agreement.

 

“Conversion Project Capital Budget” shall have the meaning assigned it in the
Conversion Agreement.

 

“Damages” shall mean any and all Claims, losses, liens, injuries to persons or
property, and causes of action of every kind and character including strict
liability claims and administrative law actions and orders, including but not
limited to, the amounts of judgments, fines, penalties, interest, court costs,
investigation expenses, and costs and legal fees (including but not limited to
attorneys’ and experts’ fees), but shall in no event, as between or among Buyer,
Buyer’s Indemnitees, Seller, and Seller’s Indemnitees, include special,
indirect, consequential, punitive, exemplary or other similar damages, including
Claims for lost profits, lost business opportunities or business interruption.

 

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“Delivery” or “Delivered” shall mean the point and at such time as the Product
reaches the Delivery Point.

 

“Delivery Point” shall mean (i) for Shipped ANS, where the ANS loading pipe
flange connects with Buyer’s or Nelson Brothers’ transportation equipment, and
(ii) for IGAN, where the IGAN loading equipment enters Buyer’s or Nelson
Brothers’ transportation equipment.

 

“Effective Date” shall mean the date upon which the converted Facility is
Commissioned and Seller possesses the legal and physical capacity to provide
IGAN and the related storage and loading services hereunder upon the terms and
conditions described herein, subject to Section II.B. hereof regarding the
Facility Fee.

 

“Event of Force Majeure” shall mean any strike or other labor trouble, fire,
flood, riot, war, embargo, accident, acts of God or terrorism, requisition or
direction by Governmental or Regulatory Authority, priorities or compliance with
governmental action or any Law, shortage of essential materials or equipment, or
any other circumstance beyond reasonable control of the obligee, whether similar
to or dissimilar from the above enumerated causes.

 

“Expansion Capital Expenditure” shall mean budgeted capital expenditure projects
relating to the Facility during the Term which are used (i) to increase, or are
intended to result in an increase in, the IGAN production capacity of the
Facility beyond the capacity achieved by the Conversion Project, or (ii) to
improve, or are intended to result in an improvement in, the efficiency of the
Facility beyond the efficiency achieved by the Conversion Project, or (iii) to
enhance, or are intended to result in an enhancement of, the quality of the IGAN
produced at the Facility above the Specifications set forth in Exhibit B hereto.

 

“Facility” shall mean the #3 ammonium nitrate prilling plant, the #4 finishing
train, the Storage Dome and associated loadout equipment within the Plant.

 

“Facility Fee” shall mean that portion of the Price for IGAN to be paid by Buyer
to Seller Monthly as set forth in Section VI.D.1. of this Agreement.

 

“Forecasts” shall have the meaning set forth in Section III.E. of this
Agreement.

 

“Governmental or Regulatory Authority” means any court, tribunal, arbitrator,
authority, agency, commission, official or other instrumentality of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision.

 

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“IGAN” shall mean industrial grade ammonium nitrate prills meeting the
Specifications.

 

“Indemnified Party” shall have the meaning set forth in Section IX.C. of this
Agreement.

 

“Indemnifying Party” shall have the meaning set forth in Section IX.C. of this
Agreement.

 

“Initial Contract Year” shall mean the period from the Effective Date through
the next succeeding December 31.

 

“Initial Term” shall have the meaning set forth in Section II.A. of this
Agreement.

 

“Laws” means all laws, statutes, rules, regulations, ordinances and other
pronouncements in effect on the date of this Agreement having the effect of law
of the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision or of any Governmental or Regulatory
Authority.

 

“Liability” or “Liabilities” means all Claims and Damages, regardless of whether
any such Claims or Damages would be required to be disclosed on a balance sheet
prepared in accordance with generally accepted accounting principles or are
known as of the Effective Date.

 

“Maintenance Expenditures” shall have the meaning set forth in Section VI.E.1.
of this Agreement.

 

“Maintenance Budget” shall have the meaning set forth in Section VI.E.1. of this
Agreement.

 

“Month” shall mean a calendar month.

 

“Nelson Brothers” shall mean Nelson Brothers, LLC, a joint venture between Buyer
and Nelson Brothers Management Services, Inc.

 

“Non-Affected Party” shall have the meaning set forth in Section XIII.A of this
Agreement.

 

“Notice of Claim” shall have the meaning set forth in Article IX hereof.

 

“Order” means any writ, judgment, judicial decision, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).

 

“Output” shall have the meaning set forth in Article XX of this Agreement.

 

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“Party” means Buyer or Seller, as the case may be, and “Parties” shall, unless
the context dictates otherwise, mean Buyer and Seller collectively.

 

“Permit” shall mean means any permit, license, exemption, action, certificate of
authority, authorization, approval, or registration issued by or required to be
issued by a Governmental or Regulatory Authority in connection with ownership or
operation of the Facility.

 

“Person” shall mean any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.

 

“Permitted Successor or Assign” shall have the meaning set forth in Section XVII
of this Agreement.

 

“Plant” shall mean Seller’s ammonia, nitric acid, ANS, AGAN, and urea ammonium
nitrate solution manufacturing facility and site located in Yazoo County,
Mississippi.

 

“PPI” shall mean the U.S. Department of Labor, Bureau of Labor Statistics,
Producer Price Index Finished Goods/Less Food and Energy for the most recent
Contract Year.

 

“PPI Base” shall mean the PPI for Contract Year 2008.

 

“Price” shall mean the purchase price per Ton of IGAN and of Shipped ANS
(divided between Tranche 1 Shipped ANS and Tranche 2 Shipped ANS), as set forth
in Section VI of this Agreement.

 

“Products” shall mean IGAN and Shipped ANS.

 

“Project Definition” shall mean the document prepared by Buyer and agreed to by
Seller entitled “Project South Project Definition” (No. EN2364 – PD – 001 (Rev
F), which incorporates the Process Design (as defined in the Conversion
Agreement) and which Seller shall use a basis for carrying out the Conversion
Work (as defined in the Conversion Agreement) and completing the Conversion
Project (as defined in the Conversion Agreement).

 

“Quarter” shall mean a calendar quarter.

 

“Related Agreements” means this Agreement, the Conversion Agreement and the
Interim Supply Agreement dated July 21, 2005 between the Parties.

 

“Scales” shall have the meaning set forth in Section III.F. of this Agreement.

 

“Seller” shall have the meaning set forth in the introductory paragraph to this
Agreement.

 

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“Seller’s Blue Book” shall mean Seller’s Monthly ****************** report, by
product, for each plant or other facility comprising the Plant.

 

“Seller Indemnitees” shall have the meaning set forth in Section IX.B. of this
Agreement.

 

“Shipped ANS” shall mean ANS that meets Specifications for Delivery to Buyer and
Buyer’s customers in such form. For purposes of determining the Price for
Shipped ANS, Shipped ANS shall be divided between “Tranche 1 Shipped ANS” (as
shipped to Orica) and “Tranche 2 Shipped ANS” (as shipped to Nelson Brothers).

 

“Side Letter Agreement” means the letter agreement between the Parties and other
Persons dated July 21, 2005 regarding the capital for the Conversion Project.

 

“Specifications” shall mean the specifications as set forth in Exhibit B,
attached to this Agreement. For purposes of this definition, Tranche 1 Shipped
ANS and Tranche 2 Shipped ANS shall have the same Specifications.

 

“Storage Dome” shall mean Seller’s storage dome at the Plant which is capable
upon Commissioning of storing approximately 3,600 Tons of IGAN, based upon
Buyer’s storage pile height recommendation.

 

“Term” shall have the meaning set forth in Section II.A. of this Agreement.

 

“Territory” shall mean the United States of America, Canada, and Mexico.

 

“Ton” shall mean a short ton of two thousand (2,000) pounds avoirdupois.

 

“Tranche 1 Shipped ANS” shall have the meaning set forth in the definition of
Shipped ANS herein.

 

“Tranche 2 Shipped ANS” shall have the meaning set forth in the definition of
Shipped ANS herein.

 

“True-Up Date” shall have the meaning set forth in Section VII.D. hereof.

 

II. TERM

 

  A.

Subject to paragraph B below, this Agreement shall continue in force and effect
for an initial term commencing on the Effective Date and ending on December 31,
2016 (the “Initial Term”). Either Party shall have the right to terminate this
Agreement effective at the end of the Initial Term by giving the other Party
notice by December 31, *** of its intention to so terminate. If neither Party
gives notice by December 31, ***, the Agreement shall automatically be extended
to December 31,

 

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***; and if neither Party gives notice by December 31, ***, the Agreement shall
automatically be extended to December 31, ***; and thereafter mutatis mutandis
on an every **-years basis. The Initial Term and any extension thereof shall be
referred to in this Agreement as the “Term.”

 

  B. Notwithstanding Section II.A. hereof, this Agreement shall nevertheless be
effective from and after the date of its execution solely to govern Buyer’s
obligations in respect of the Facility Fee as more particularly described in
Section VI.D. hereof.

 

III. QUANTITY AND EXCLUSIVITY

 

  A. For Contract Years through ***, Seller shall make available to Buyer
Products up to the Base Reserved Capacity. Buyer shall have the exclusive right,
but not the obligation, to purchase and take delivery of Products up to the Base
Reserved Capacity through Contract Year ***.

 

  B. For Contract Years commencing in ***, Seller shall make available to Buyer
Products up to the Annual Reserved Capacity. Buyer shall have the exclusive
right, but not the obligation, to purchase and take delivery of Products up to
the Annual Reserved Capacity. The exclusivity provisions of this Section III.B
shall continue in force and effect through the end of Contract Year *** and
thereafter during all subsequent Contract Years unless and until the occurrence
of the following:

 

  1. Subject to Seller’s election not to supply the ************ Tons of IGAN as
more fully described in Section VI.A.2. of this Agreement, in which case Buyer
shall for purposes of this Section III.B.1. be deemed to have purchased and
receive a credit for such Tons, if Buyer ********* have not purchased an
aggregate of ****** Tons of Products from the Effective Date through the end of
Contract Year ***, which quantity shall be pro-rated as to IGAN only (and not
ANS) in the event and to the extent the Effective Date is later than
****************, Seller shall have the right, but not the obligation, to give
Buyer notice in ****** of Seller’s intention to terminate, effective *********,
****** Buyer’s exclusive right to purchase the Products. If Seller has timely
delivered such notice and if Buyer **************** do not purchase an aggregate
of at least *** Tons of Products in Contract Year ***, Buyer shall no longer
have the exclusive right to purchase Products in Contract Year *** or
thereafter. If Buyer *************** do purchase an aggregate of at least ***
Tons of Products in Contract Year ***, then Buyer shall retain the exclusive
right to purchase Products in Contract Year ***, and such Seller’s notice shall
become null and void.

 

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  2. Subject to Seller’s election not to supply the *********Tons of IGAN as
more fully described in Section VI.A.II of this Agreement, in which case Buyer
shall for purposes of this Section III.B.2. be deemed to have purchased and
receive a credit for such Tons, if Buyer ********* have not purchased an
aggregate of ****** Tons of Products in Contract Year *** or any subsequent
Contract Year, Seller shall have the right, but not the obligation, to give
Buyer notice in ****** of the succeeding Contract Year of Seller’s intention to
terminate Buyer’s exclusive right to purchase the Products during the Contract
Year following the year in which notice is given. If Seller has timely delivered
such notice and if Buyer ********* do not purchase an aggregate of at least
****** Tons of Products in the Contract Year in which notice is given, Buyer
shall no longer have the exclusive right to purchase the Products in the
Contract Year following the year in which notice is given or thereafter. If
Buyer **************** do purchase an aggregate of at least ****** Tons of
Products in the Contract Year in which notice is given, then Buyer shall retain
the exclusive right to purchase Products in the Contract Year following the year
in which notice is given, and such Seller’s notice shall become null and void.

 

  C. In the event that Buyer’s exclusive right to purchase Products is no longer
applicable as a result of the operation of Paragraph B. above, this Agreement
shall nevertheless continue in full force and effect on the following basis:

 

  1. The Price shall continue to be calculated as described herein;

 

  2. The Annual Reserved Capacity shall continue to be calculated as described
herein;

 

  3. Subject to and after making available the Annual Reserved Capacity to Buyer
and subject to subparagraph III.C.4. below as to IGAN, Seller shall be entitled
to sell Products and AGAN for use in Commercial Explosives applications in the
Territory; and

 

  4. Subject to and after making available the *********************** to Buyer,
Seller shall be entitled to use any ********************** at the Facility to
produce IGAN for ***************, in which event (i) ********** of operating the
Facility as provided herein, and (ii)
***************************************************

 

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  D. In the event that, during any Contract Year, Buyer requires Products in
excess of the Base Reserved Capacity or the Annual Reserved Capacity (as
applicable, the “Additional Capacity”), and such Additional Capacity is
available at the Plant, Seller may, at its option, make available such
Additional Capacity to Buyer at either the Price or on price terms otherwise
agreed to by the Parties.

 

  E. Beginning on the Effective Date and thereafter on or before the seventh
business day of each Month during the Term, Buyer will provide Seller with a
rolling 120-day forecast of the requirements of Buyer for each Product (the
“Forecasts”). The Parties agree that the Forecasts are estimates only, and that
Buyer shall not be obligated to purchase the quantity of Products set forth in
any Forecast. Buyer’s annual Forecast for the Initial Contract Year is ******
Tons of Shipped ANS and ****** Tons of IGAN, which quantity shall be pro-rated
as to IGAN only (and not ANS) in the event the Effective Date is later than
********* Buyer’s annual Forecast for Contract Year *** is ****** Tons of
Shipped ANS and ****** Tons of IGAN. Buyer’s annual Forecast for Contract Year
*** is ****** Tons of Shipped ANS and ****** Tons of IGAN.

 

  F. Seller shall install, own and operate scales and other measurement
facilities (the “Scales”) in order to measure the Tons of Product delivered by
Seller to Buyer under this Agreement. Such Scales shall include without
limitation:

 

  1. Scales suitable to determine the weights of rail and truck shipments of ANS
and IGAN; and

 

  2. Laboratory and analytical services and facilities capable of performing all
necessary quality control methods and procedures, including scale calibration.

 

Seller shall calibrate the Scales as required for state certification by
applicable Mississippi law, and shall maintain and repair the Scales in
accordance with the state of Mississippi repair and maintenance standards and
laws for such Scales. All Scales shall be open to inspection by Buyer at all
reasonable times. In the event either Party disputes the accuracy of any
measurement taken by all or any one of the Scales, such Scales shall be tested
by an independent testing agency mutually acceptable to the Parties. The expense
of any such test shall be borne by the Buyer; provided that, if such independent
test demonstrates that the measurements taken by the Scales are less than 99%
accurate on average, then (i) the costs of the independent test shall be borne
by Seller and (ii) the Scales shall be recalibrated to the standard required for
state of Mississippi certification as soon as reasonably possible. The
settlement of any discrepancy in Price paid as a result of inaccurate
measurements shall

 

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be made on the immediately succeeding invoice. If the Parties are unable to
ascertain when the inaccuracy commenced, the inaccuracy will be deemed to have
commenced on a date which is halfway between the date of the last recalibration
and the date of the calibration which revealed the inaccuracy.

 

  G. At all times during the Term, the Buyer shall have the right to request
Seller to utilize the full storage capacity of the Storage Dome to store IGAN
produced at the Facility for delivery and sale to Buyer, provided that if Buyer
loses exclusivity under Section III.B. hereof, then the storage capacity in the
Storage Dome shall also be available for Seller’s use.

 

  H. Notwithstanding the foregoing in this Article III and references to sales
to Nelson Brothers in this Agreement, the exclusivity rights granted hereunder
by Seller are specific as to Buyer. Seller shall have no exclusivity obligation
to Nelson Brothers and the Parties agree that Nelson Brothers is not intended to
be a third-party beneficiary to this Agreement.

 

IV. QUALITY

 

  A. All Products Delivered shall conform to the Specifications. All claims by
Buyer that any Product Delivered hereunder does not conform to the
Specifications shall be made within forty-five (45) days of Delivery of such
Product. Except with respect to claims based on Seller’s breach of its
representations or warranties under Section V.(ii). as to title, failure to give
notice of such claim within the specified time shall constitute a waiver of such
claim.

 

  B. In the event that any Products Delivered do not conform to the
Specifications, Seller shall, at Buyer’s option, either (i) Deliver to the
location where the nonconformance was identified equivalent quantities of
conforming Products as promptly as practical at Seller’s expense, or (ii) refund
the Price paid by Buyer for the nonconforming Products and any transportation
and handling costs incurred by Buyer prior to determination of the
nonconformance. In both cases Seller shall reimburse to Buyer all costs incurred
by Buyer to dispose of nonconforming Products provided however that Buyer shall
make all reasonable efforts to cooperate with Seller to minimize such disposal
costs. The foregoing remedies are not exclusive and, except as expressly
provided to the contrary herein, Buyer shall be entitled to all rights and
remedies otherwise available to it under applicable law.

 

  C. Buyer and Seller shall mutually agree on any IGAN additives or coatings.

 

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V. WARRANTIES

 

Seller represents and warrants that (i) at the time of Delivery to the Delivery
Point, the Products will conform to Specifications, and (ii) Seller will convey
good and marketable title to the Products, free and clear of any and all liens,
mortgages, security interests, charges or other encumbrances. EXCEPT AS SET
FORTH IN THIS AGREEMENT, SELLER ASSUMES NO OTHER LIABILITY WITH RESPECT TO
PRODUCT AND MAKES NO OTHER WARRANTY WHETHER OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR OTHERWISE, EXPRESSED OR IMPLIED, WITH RESPECT THERETO.

 

VI. PRICE

 

  A. The Price of the Products shall be calculated as follows:

 

  1. ANS:

 

  a. For Tranche # 1 ANS shall be the sum of:

 

  i. the annual *************************************** as determined by the
“Ammonia Based Version” of “Yazoo City AN Synthesis” in Seller’s Blue Book,
including, once Seller has fully recovered its investment, if any, to achieve
such efficiencies, any and all efficiency improvements at the Plant such as, but
not limited to, changes in the Seller’s costs to purchase and deliver natural
gas by pipeline to the Plant, except that fixed costs may be limited by this
Subsection VI. A. 1. a., plus

 

  ii. the annual *************************************** of “Turnaround
Amortization” in Seller’s Blue Book, plus

 

  iii. the annual *************************************** of “Catalyst
Amortization, Excluding Fabrication” in Seller’s Blue Book, plus

 

  iv. a markup to Seller equal to
**************************************************, plus

 

  v. the annual *************************************** of “Depreciation” in
Seller’s Blue Book, not to exceed *** per Ton of ANS.

 

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The annual ****************************************** component of the
****************** of ANS applicable to and payable by Buyer shall not, when
multiplied by the actual annual Quantity of ANS for Contract Year ***, exceed
*** (****** Tons / ****** Tons – to be proportionately reduced if and to the
extent the Effective Date is later than *********) of the annual
*************************************** for “Yazoo City AN Synthesis”. The
corresponding figures in Contract Year *** would be *** (****** Tons / ******
Tons) and in subsequent Contract Years *** (****** Tons / ****** Tons) based on
Buyer’s Forecasts in Section III.E. hereof, which Forecasts are subject to
change as provided therein.

 

  b. For Tranche # 2 ANS shall be, for the period through Calendar Year *** and
thereafter (unless Seller provides Buyer with ********* prior written notice to
terminate this pricing for Tranche #2 ANS), ****** per Ton of ANS, based upon a
“burner tip” cost of natural gas at the Plant of *** per mmbtu (calculated as a
NYMEX Henry Hub natural gas price of *** per mmbtu plus *** per mmbtu pipeline
delivery cost). Prior to such termination notice, such Price shall be adjusted
****** by a natural gas into ANS usage factor of *** multiplied by the
difference between *** per mmbtu and Index price, in dollars per mmbtu,
indicated under ************ example, the ****** price equals ****** per mmbtu.
If Seller provides Buyer with ****** prior written notice to terminate this
pricing calculation for Tranche # 2 ANS, such notice not to be effective earlier
than *********, then the Tranche # 2 ANS Price will no longer be in effect as of
the effective date of such notice and the Tranche # 2 ANS Price will thereafter
be the same as the Tranche # 1 ANS Price. The Tranche # 2 ANS Price shall not,
at any time or under any circumstance, exceed the then applicable Tranche # 1
ANS Price.

 

  2. IGAN:

 

  a. For ************ Tons per year, shall be the sum of:

 

  i. the sum of **********************************************************, plus

 

  ii. a markup to Seller equal to the sum calculated pursuant to Section VI. A.
2. a. i. above*****************
***************************************************:

 

15

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Contract Years 2006 and 2007

   *********************************

Contract Years 2008 and 2009

   *********************************

Contract Years 2010 and 2011

   *********************************

Contract Years 2012 and 2013

   ********************************* ****************************

Contract Years 2014 and thereafter

   ********************************* ****************************

 

For purposes of the *** adjustment referenced above, for Contract Years *** and
***, the ****** mark-up to Seller will be calculated as follows: ********* ***.
For Contract Years *** and beyond, the ****** mark-up to Seller will be
calculated as follows: ***************. For example, in ***, the ****** mark-up
to Seller would be calculated as follows:
*******************************************
****************************************************. In Contract Year ***, the
*** from *** would determine the ****** with the same pattern for each
succeeding Contract Year; plus

 

  iii. the annual ***************************************** of “Depreciation” in
Seller’s Blue Book, not to exceed *** per Ton of ANS,

 

the sum of the costs determined pursuant to Sections VI. A. 2. a. i., ii. and
iii. above then *********

 

  iv. the actual annual ANS into IGAN usage factor in Tons of ANS per Ton of
IGAN, as determined in Seller’s Blue Book, plus

 

  v. the annual *************************************** in Seller’s Blue Book,
plus

 

  vi.

the annual *************************************** for the Facility, as
determined in Seller’s Blue Book; with the exceptions being that (A) during
Contract Years *** and ***, the annual *********** ************************
shall be calculated on the basis that the Buyer bears, during Contract Year ***,
not more than *** (****** Tons / ****** Tons

 

16

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– to be proportionately reduced if and to the extent the Effective Date is later
than ******) of the annual ****************************************** for the
Facility and, during Contract Year ******** (****** Tons / ****** Tons) of the
annual ************************************************* for the Facility, and
(B) commencing in Contract Year *** and in subsequent Contract Years, Buyer
shall bear the annual ******************************************** for the
Facility, provided however that Seller shall bear a proportionate share of the
annual ***************************** for the Facility if the Seller manufactures
for its own account and sale AGAN ********* by using the Facility; and

 

  b. for the ****** Tons per year shall be, at Buyer’s option, either:

 

  i. the same Price as calculated in Section VI. A. 2. a. above, or

 

  ii. a Price as otherwise negotiated on a case-by-case basis by Seller and
Buyer, in which event Buyer shall present to Seller ******************, and
Seller shall have the option to ************************ *********. If Seller
************************** ********* presented by Buyer, then Seller shall bear
a proportionate share of the annual “Actual – Total Spending” of the “Total -
Fixed Costs (Cash Only)” for the Facility, attributable to the ***************
************ by Seller, calculated based on the ratio that the Tons of IGAN
represented by the ********* ****** by Seller bears to 260,000 Tons, provided
that Seller shall not bear such proportionate share of the annual “Actual –
Total Spending” of the “Total - Fixed Costs (Cash Only)” for the Facility,
attributable to the *************** by Seller, if the Price of IGAN required by
Buyer to realize such opportunity would result in Seller receiving
****************** ****** such IGAN.

 

  B. IMPORTED AMMONIA:

 

In the event that Seller elects to idle the ammonia production plant at its
Plant, or is otherwise unable to produce ammonia at its Plant, and procures
ammonia supplied from another source or sources in connection with the
manufacture of ANS and IGAN for Buyer, then such ammonia shall be factored into
ANS and IGAN Prices as follows.

 

17

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  1. Affililate Ammonia. If any such ammonia is supplied from one or more of
Seller’s Affiliated Company’s North American ammonia production facilities, then
the ammonia will be factored into such ANS and IGAN Prices at
******************************************************************************************
*********************************************************************************.

 

  2. Non-Affiliate North American Ammonia. If any such ammonia is supplied from
a non-Affiliate North American source, then the ammonia will be factored into
such ANS and IGAN Prices at the actual price paid by Seller to purchase the
ammonia and have it delivered to the Plant.

 

  3. Non-North American Ammonia. If any such ammonia is supplied from offshore
sources (that is, non-North American manufactured ammonia), then such ammonia
shall be factored into such ANS and IGAN Prices ******************
***********************************************************************************************.
For purposes of clarity, Seller’s ****** cost for imported ammonia shall be
deemed to include, without limitation, any importation charges and terminal
throughput charges.

 

  4. North American and Non-North American Sources. If any such ammonia is
supplied from both North American and Non-North American sources, then such
ammonia will be factored into ANS and IGAN Prices at the ******** in 1. above,
or the actual price paid in 2. *** above, by Seller to purchase the ammonia and
have it delivered to the Plant based upon Seller’s ****** accounting with
respect to such ammonia.

 

  C. FIRM-PRICED AMMONIA:

 

  1. Buyer shall have the right to request, upon reasonable notice to Seller and
subject to Seller’s natural gas hedging policy and credit limitations in effect
at the time of said notice, that Seller make firm for a period of time, not less
than ********* and not more than *********, the cost of a quantity of natural
gas used in the manufacture of the Products, such that the natural gas component
of the ANS Price and/or IGAN Price, as the case may be, likewise be made firm
for the same period of time and, after taking into account the actual usage
factors involved in the manufacturing processes, in the same amount.

 

  2.

If Buyer exercises such right and Seller purchases such natural gas on a firm
basis, Buyer shall purchase from Seller the ANS and/or IGAN which corresponds to
such natural gas purchases, unless

 

18

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Seller is unable to manufacture such ANS and/or IGAN in which case, except to
the extent Buyer otherwise directs, Seller will liquidate the natural gas
position and the gains or losses resulting from said liquidation shall be for
Buyer’s account.

 

  3. Buyer shall pay all transaction costs associated with the hedging
activities described in this Section VI.C.

 

  D. FACILITY FEE:

 

  1. Seller shall provide the capital funding for the Conversion Project, in
accordance with the Conversion Project Capital Budget, and Buyer shall, in
addition to payment for ANS, IGAN and Maintenance and Capital Expenditures as
provided for in this Article, repay, in equal Monthly installments, such capital
amount with interest at an annual interest rate of *** (such amount plus such
interest, the “Facility Fee”). The principal portion of the Facility Fee shall
include all engineering, procurement, construction, erection, installation and
Commissioning work, services, equipment, machinery and materials costs actually
incurred by Seller or Buyer and paid by Seller prior to the Effective Date
hereof or to be paid by Seller in the ordinary course after the Effective Date
directly in connection with the Conversion Project. Buyer shall begin making the
Facility Fee payments on the earlier to occur of Commissioning and ************.
Buyer shall nominate, prior to the earlier to occur of Commissioning and
************, the length of the term over which the principal amount of the
Facility Fee shall be repaid, such term not to be less than ********* and nor
more than ************. At any time during the nominated term, Buyer shall have
the option to prepay the remaining unpaid balance of the principal amount and
the unpaid interest accrued to the date of such payment on the unpaid principal
balance.

 

  2.

Buyer shall be responsible for payment of the Facility Fee attributable to the
portion of the Conversion Project Capital Budget actually spent by Seller until
all principal and interest accrued and owing is repaid in full, regardless of
whether the Facility is Commissioned, except in the events that (i) Buyer
terminates the Conversion Agreement pursuant to Section 3.2 thereof, prior to
the Commissioning of the Facility by reason of Seller’s breach of that Agreement
as finally determined under Article X thereof; (ii) the Facility cannot be
Commissioned due to Seller’s negligence in the engineering, procurement,
construction, erection, installation or start-up of the Facility as finally
determined under Article X of the Conversion Agreement; (iii) Buyer’s obligation
to pay the Facility Fee is reduced pursuant to Section III.C.4. of this
Agreement; or

 

19

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(iv) Buyer terminates this Agreement pursuant to (a) Section XI.B. hereof as a
result of a Seller declaration of Event of Force Majeure, provided that the
Facility Fee shall be reduced in this instance (I) only if there is physical
damage to the Conversion Kit and (II) only to the extent that Seller receives
insurance proceeds attributable to the Conversion Kit, provided further, that
any deductible paid by Seller shall not reduce Buyer’s obligation with respect
to the Facility Fee, provided further that Seller has made, and hereby covenants
to make, all insurance claims available to it with respect to an Event of Force
Majeure that resulted in physical damage to the Conversion Kit (“Conversion Kit
Proceeds”), provided further that Buyer shall continue to make the Facility Fee
payments while any claim by Seller for Conversion Kit Proceeds is pending, and
provided further that any Conversion Kit Proceeds shall first be credited
against the balance of the Facility Fee, if any, and any remaining balance of
the Conversion Kit Proceeds shall then be paid to Buyer to the extent of any
Facility Fee payments made by Buyer since the date of the event giving rise to
such Event of Force Majeure, (b) Section XIV.B.1.-3. hereof if Seller rejects
this Agreement under the U.S. Bankruptcy Code or otherwise ceases performance
hereunder as a result of an event described therein, (c) Section XIV.B.4.,
subject to any payments Buyer may be obligated to make pursuant to
Section 3.5(d) of the Conversion Agreement if Buyer exercises its right to
purchase under said Section, or (d) Section XVII. hereof.

 

  E. ANS THROUGHPUT FEE

 

In addition to payment of the Price for ANS set out in Section VI.A.1., and to
reimburse Seller for its costs to construct new ANS storage and railcar loading
facilities at the Plant, Buyer shall also pay to Seller *** per Ton for each Ton
of ANS supplied to Buyer under this Agreement on or after the Effective Date
until the earlier of (i) Buyer has paid to Seller a total of ****** or
(ii) ****** years after the Effective Date, in which event Buyer shall on such
date pay to Seller the difference between ****** and the amount paid to that
date by Buyer.

 

  F. MAINTENANCE & CAPITAL EXPENDITURES:

 

  1.

Seller’s practice is to treat all safety, health & environment and maintenance
expenses for the on-going operation of the Facility (“Maintenance Expenditures”)
as a fixed cost and such expenses will charged to Buyer as part of the
********************* described above. Seller shall propose, prior to October 1
of each Contract Year, an estimated annual budget (the “Maintenance Budget”) for
such Maintenance Expenditures at the Facility during

 

20

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the following Contract Year based on Seller’s past experience in the operation
of the Facility, including a reasonable contingency. Such Maintenance Budget
shall, to the extent known, outline the timing and amount for individual
Maintenance Expenditures, the reasons therefore, their economic or other
justification and any other relevant facts. Seller and Buyer shall discuss in
good faith and endeavor to agree a final Maintenance Budget within 90 days of
the submission by Seller of the proposed Maintenance Budget, failing which said
dispute shall be resolved in accordance with Article XXVI. hereof.

 

  2. Seller shall have the right to expend the Maintenance Budget without
further consultation with Buyer; provided however that Seller (a) shall notify
Buyer in advance of any single expenditure, or series of related expenditures,
which exceed $50,000, and (b) may not exceed such Budget without Buyer’s express
written approval. Notwithstanding the foregoing, Seller shall be entitled to
incur emergency expenses for Buyer’s account which are necessary, in the good
faith judgment of Seller, for the continued operation of the Facility in order
to satisfy Seller’s IGAN sale obligations hereunder, including repairs,
maintenance or other changes as may be necessary for regulatory, health or
safety reasons. If Seller determines that it will exceed the Maintenance Budget
or incurs any emergency expenses, Seller shall notify Buyer within three
(3) business days of such determination or incurring such expense.

 

  3. Notwithstanding Paragraphs 1 and 2 above, Seller shall be responsible for,
and shall not be entitled to recover from Buyer, the amount of any expense
arising due to the negligence of Seller, the Seller Indemnitees or Seller’s
contractors or subcontractors.

 

  4. Seller shall annually establish a five (5) year capital plan for the Plant.
To the extent that such capital plan relates to the Facility, Seller shall
provide Buyer with details of such plan.

 

  5. Buyer shall be responsible for the cost of any Expansion Capital
Expenditure approved by Buyer and shall, as mutually agreed with Seller, either
(a) pre-fund such Expenditure; or (b) reimburse Seller for the amount of such
Expenditure made by Seller (i) in accordance with Section VII.A. of this
Agreement upon presentation of reasonably detailed supporting documentation, or
(ii) if Seller agrees, through an increase in the principal amount of the
Facility Fee equal to the amount of the Expansion Capital Expenditure.

 

21

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  G. STORAGE COSTS:

 

The Price shall include Seller’s cost to store ANS in Seller’s storage tanks and
IGAN in the Storage Dome, weigh the Products on the Scales and Deliver the
Products to the Delivery Point.

 

  H. PRICE EXAMPLES:

 

The Examples set forth in Exhibit A hereto are provided for illustrative
purposes only and are not intended to represent the actual Price Buyer will pay
Seller for the Products.

 

VII. INVOICING AND PAYMENT

 

  A. Shipped ANS will be billed by Seller to Buyer on a shipment-by-shipment
basis (i.e., one invoice for each shipment). For billing purposes, the quantity
of the shipment, on a 100% AN basis, shall be defined as the net weight of ANS
in the rail car or truck trailer as determined by the Scales, and by the
concentration of the Shipped ANS as determined by Seller’s standard analytical
methods and procedures. The quantity of the shipment, on a 100% basis, shall be
the arithmetic result of the net weight multiplied by the concentration
percentage (e.g., 40,000 pounds net weight multiplied by 83% AN concentration in
the ANS equals 33,200 pounds of ANS, 100% AN basis, for billing purposes).

 

  B. IGAN will be billed by Seller to Buyer on a shipment-by-shipment basis
(i.e., one invoice for each shipment). For billing purposes, the quantity of the
shipment shall be based on the net weight of IGAN in the rail car or truck
trailer as determined by the Scales.

 

  C. Products shall be invoiced in accordance with Subsections VII.A. and B. at
an estimated price (the “Interim Price”) and the difference between the Interim
Price and the Price shall be reconciled initially on a Quarterly basis and
finally on a Contract Year basis as described in Subsection D. below. Seller and
Buyer shall cooperate in good faith to mutually agree on the Interim Price prior
to the start of each Quarter. If Seller and Buyer cannot so mutually agree, then
the Interim Price then being paid shall be the Interim Price for the following
Quarter through the True-Up Date, after which date the Interim Price for the
balance of such Quarter shall be the trued-up Price for the immediately
preceding Quarter. Each invoice will include the Price for Products purchased by
Buyer and will separate the Price for Shipped ANS between Tranche 1 Shipped ANS
and Tranche 2 Shipped ANS.

 

  D.

No later than the thirtieth (30th) day following the end of each Quarter (the
“True-Up Date”), Seller shall calculate and provide to Buyer an adjustment which
reconciles the billings based upon the Interim Price to

 

22

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the Price calculated based upon the year-to-date Seller’s Blue Book information
as of the end of that Quarter, and Seller shall either issue a credit memo or an
invoice to the Buyer, as the case may be. Such adjustment and its invoicing will
take into account adjustments, if any, made at the end of previous Quarters in
that Contract Year. No later than the sixtieth (60th) day following the end of
each Contract Year, Seller shall calculate and provide to Buyer an adjustment
which reconciles the billings based upon the Interim Price to the final Price
calculated based upon the full Contract Year Seller’s Blue Book information, and
Seller shall either issue a credit memo or invoice to Buyer, as the case may be.

 

  E. Buyer will pay all amounts on each invoice on a net thirty (30) days basis
from date of invoice, subject to Tranche 2 Shipped ANS described in Paragraph F.
below and disputed invoices. In the event that Buyer reasonably and in good
faith disputes any invoice hereunder, Buyer shall so notify Seller within thirty
(30) days from the date of the invoice, with notice to Seller of the reasons for
such dispute and Buyer shall pay the portion of such invoiced amount not so
disputed. Buyer shall pay the disputed portion of the invoiced amount within
seven (7) days of resolution of the dispute pursuant to Article XXVI. Buyer’s
failure to pay the disputed portion of any invoiced amount shall not be deemed a
breach hereof.

 

  F. At Buyer’s request and direction, the Tranche 2 Shipped ANS will be ordered
directly from Seller by Nelson Brothers, in which case Seller shall invoice
Nelson Brothers for such shipments as described in Section VII.A. above. In the
event that Nelson Brothers does not remit payment to Seller in accordance with
the terms of this Agreement, Buyer shall remit such payment within three
(3) business days of receiving notice from Seller that Nelson Brothers has
failed to timely remit such payment.

 

VIII. DELIVERY

 

  A. Simultaneously with the delivery of each Forecast, Buyer shall provide to
Seller its good faith estimate of the shipping schedule for the Delivery of
Products during that the next succeeding Month. Each such order will include
(i) the amount of IGAN to be Delivered, and (ii) the amount of Shipped ANS to be
Delivered, allocated between Tranche 1 Shipped ANS and Tranche 2 Shipped ANS.
Subject to such variations as may be necessitated by reason of an Event of Force
Majeure as set out in Section XI., Seller shall Deliver the ordered Products,
and Buyer shall take delivery of the ordered Products, at the applicable
Delivery Point. Buyer shall promptly notify Seller of any known or anticipated
changes that will prevent Buyer from receiving such quantities of Product during
any given Month. Buyer shall also use reasonable commercial efforts to purchase
Products in equal Monthly quantities during each Contract Year.

 

23

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  B. Buyer shall provide all trucks and railcars necessary for the
transportation of Products from the applicable Delivery Point. Unless otherwise
agreed, Seller shall (i) deliver all Products supplied hereunder into railcars
or truck trailers supplied by Buyer, (ii) load Products into Buyer supplied
railcars and release such railcars within three (3) days from the arrival of
such railcars at Seller’s Plant, and (iii) load Products into Buyer supplied
trucks and release such trucks within the free loading period allowed by the
carrier; provided, however, that such time frames shall be extended by any
intervening weekend, holiday or Event of Force Majeure. If Seller fails to
comply with the foregoing, Seller shall reimburse Buyer, within thirty (30) days
of receipt of Buyer’s invoice, for all demurrage and other out-of-pocket
expenses incurred by Buyer resulting from such delay. Buyer shall use
commercially reasonable efforts to schedule railcars or trucks for loading at a
rate that will permit Seller to load such railcars and trucks within the time
frames set forth herein. Notwithstanding the foregoing in this Section VIII.B.,
Buyer’s use of Seller’s trackage for railcars shall be limited to fifteen
(15) cars at any one time and Seller’s obligation to make Delivery to Buyer
shall be limited to ****** rail cars per day for ANS, *********) rail cars per
day for IGAN, ****** truck trailers per day for ANS, and ********* truck
trailers per day for IGAN, and Seller shall not be responsible for any demurrage
or other out-of-pocket costs incurred by Buyer due to Seller’s not loading
railcars or trucks in excess of the foregoing limits. All IGAN shipped via
Buyer’s truck trailers shall be subject to Buyer’s compliance with Seller’s
“Delivery Notification System”. Buyer acknowledges receipt of Seller’s Delivery
Notification System documentation and Seller agrees to provide Buyer with any
amendments thereto.

 

  C. Buyer acknowledges that Seller does not currently have the capability to
load IGAN into bags. If, after the date hereof, Buyer desires Seller to provide
such services, it shall so notify Seller in writing, and Seller shall install
such bagging equipment at Buyer’s cost as promptly as reasonably practicable
upon agreement of engineering design, provided that Seller shall have sole
discretion as to placement of such equipment. Seller shall not be obliged to
provide manpower to operate the bagging equipment but shall use reasonable best
efforts to provide such manpower or, if such efforts prove unsuccessful, assist
Buyer to obtain services from a third party supplier. Seller shall have the
option to match any offer made by a third-party to provide manpower to operate
the bagging equipment. If Seller provides bagging services in the absence of a
third party offer, Seller’s out-of-pocket costs associated with bagging the IGAN
and Delivering it into Buyer’s transportation equipment, plus a commercially
reasonable upcharge, shall be Buyer’s costs for such services, which shall be
documented by written amendment hereto.

 

24

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  D. Title, custody and risk of loss for the Products shall pass from Seller to
Buyer at the applicable Delivery Point. Seller shall, at Buyer’s expense,
provide transportation emergency response services to Buyer in the event an
incident occurs prior to departure from the Plant of trucks and railcars loaded
with Products.

 

IX. INDEMNIFICATION

 

  A. Seller agrees to be responsible for any Damages arising in connection with
(i) Seller’s breach of any representation or warranty in this Agreement,
(ii) Seller’s failure to Deliver Product to Buyer at the applicable Delivery
Point which meets Specifications, (iii) the storage of IGAN and ANS for, and
Delivery of IGAN and ANS to, Buyer, (iv) any other default by Seller in the
performance of its covenants and agreements herein, (v) Seller’s operation of
the Facility or the Plant or (vi) the negligence or willful misconduct of
Seller’s employees and Seller’s agents or subcontractors, or any of their
employees, in each instance to the fullest extent permitted by law, and Seller
hereby agrees to protect, defend, indemnify, and hold Buyer, its parent company,
partners, subsidiaries and any other related or Affiliated Companies, and their
respective directors, officers, employees, attorneys-in-fact, agents, and
Affiliated Companies, (collectively the “Buyer Indemnitees”) free and harmless
from and against any and all such Damages incurred by any Buyer Indemnitee or
arising in favor of any governmental agencies, third parties, contractors or
subcontractors, regardless of whether such Damages are to the Buyer Indemnitees,
the employees or officers of either, or any other persons or entity. The duty to
defend, protect, indemnify and save the Buyer Indemnitees harmless referred to
in the preceding sentence shall include, but not be limited to, Damages which
result from the comparative, concurrent or contributing negligence of any person
or entities including, but not limited to, the Buyer Indemnitees, their agents,
employees or officers. Notwithstanding the foregoing, Seller shall not be liable
for Damages to the extent resulting from the breach of Buyer’s warranties or
covenants herein or the negligence or willful misconduct of the Buyer
Indemnitees. Seller’s duty of indemnification shall survive the termination or
expiration of this Agreement. Seller’s obligations under this Section IX.A. are
guaranteed by Terra Industries Inc. pursuant to that certain Continuing Guaranty
of Terra Industries Inc. of even date herewith.

 

  B.

Buyer agrees to be responsible for any Damages arising in connection with
(i) Buyer’s breach of any representation or warranty in this Agreement, (ii) the
default by Buyer in the performance of its covenants and agreements herein,
(iii) following Delivery to Buyer or Nelson

 

25

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Brothers at the applicable Delivery Point, the storage, handling,
transportation, use, and sale of the Products, or (iv) the negligence or willful
misconduct of Buyer’s employees and Buyer’s agents or subcontractors, or any of
their employees, in each instance to the fullest extent permitted by law, and
Buyer hereby agrees to protect, defend, indemnify, and hold Seller, its parent
company, partners, subsidiaries and any other related or Affiliated Companies,
and their respective directors, officers, employees, attorneys-in-fact, agents,
and Affiliated Companies, (collectively the “Seller Indemnitees”) free and
harmless from and against any and all such Damages incurred by any Seller
Indemnitee or arising in favor of any governmental agencies, third parties,
contractors or subcontractors, regardless of whether such Damages are to the
Seller Indemnitees, the employees or officers of either or any other persons or
entity. The duty to defend, protect, indemnify and save the Seller Indemnitees
harmless referred to in the preceding sentence shall include, but not be limited
to, Damages which result from the comparative, concurrent or contributing
negligence of any person or entities including, but not limited to, the Seller
Indemnitees, their agents, employees or officers. Notwithstanding the foregoing,
Buyer shall not be liable for Damages to the extent resulting from the breach of
Seller’s warranties or covenants herein or the negligence or willful misconduct
of the Seller Indemnitees. Buyer’s duty of indemnification shall survive the
termination or expiration of this Agreement. Buyer’s obligations under this
Section IX.B. are guaranteed by Orica Investments Pty. Ltd. pursuant to that
certain Continuing Guaranty of Orica Investments Pty. Ltd. of even date
herewith. Buyer hereby represents that Orica Investments Pty. Ltd. is the direct
wholly-owned subsidiary of Orica Limited and presently owns substantially all of
the equity interests of Buyer’s non-Australian Affiliates.

 

  C.

IN NO EVENT SHALL EITHER SELLER OR BUYER BE LIABLE TO THE OTHER PARTY OR THE
OTHER PARTY’S INDEMNITEES UNDER ANY PROVISION OF THIS AGREEMENT (INCLUDING,
WITHOUT LIMITATION, ANY INDEMNITY PROVISION HEREOF) FOR PUNITIVE, EXEMPLARY,
CONSEQUENTIAL, INCIDENTAL, INDIRECT, OR SPECIAL DAMAGES IN TORT OR CONTRACT.
FURTHERMORE, NEITHER SELLER NOR BUYER SHALL BE LIABLE TO THE OTHER PARTY OR THE
OTHER PARTY’S INDEMNITEES UNDER ANY PROVISION OF THIS AGREEMENT FOR LOST
PROFITS, LOST BUSINESS OPPORTUNITIES OR BUSINESS INTERRUPTION. THE PRECEDING
SENTENCES SHALL NOT BE CONSTRUED, HOWEVER, AS LIMITING THE OBLIGATION OF EITHER
SELLER OR BUYER TO INDEMNIFY THE OTHER PARTY OR THE OTHER PARTY’S INDEMNITEES
AGAINST CLAIMS ASSERTED BY THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, THIRD
PARTY CLAIMS FOR PUNITIVE,

 

26

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EXEMPLARY, CONSEQUENTIAL, INCIDENTAL, INDIRECT OR SPECIAL DAMAGES, OR FOR LOST
PROFITS, LOST BUSINESS OPPORTUNITIES OR BUSINESS INTERRUPTION.

 

  D. If there occurs an event that either Party asserts is an indemnifiable
event pursuant to Section IX.A. or IX.B., the Party seeking indemnification (the
“Indemnified Party”) shall promptly provide notice (the “Notice of Claim”) to
the other Party or Parties obligated to provide indemnification (the
“Indemnifying Party”). Providing the Notice of Claim shall be a condition
precedent to any Liability of the Indemnifying Party hereunder, and the failure
to provide prompt notice as provided herein will relieve the Indemnifying Party
of its obligations hereunder, but only if and to the extent that such failure
materially prejudices the Indemnifying Party hereunder. If the Indemnified Party
provides a Notice of Claim to the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnitee and, after notice from the
Indemnifying Party to such Indemnified Party of such election so to assume the
defense thereof, the Indemnifying Party shall not be liable to the Indemnified
Party hereunder for any legal expenses of other counsel or any other expenses,
in each case subsequently incurred by the Indemnified Party, in connection with
the defense thereof other than reasonable costs of investigation; provided,
however, that if the Indemnified Party reasonably believes that counsel for the
Indemnifying Party cannot represent both the Indemnified Party and the
Indemnifying Party because such representation would be reasonably likely to
result in a conflict of interest, then the Indemnified Party shall have the
right to its own defense by counsel (limited to one firm) of its own choosing
and at the sole cost and expense of the Indemnifying Party. The Indemnified
Party agrees to reasonably cooperate with the Indemnifying Party and its counsel
in the defense against any such asserted Liability. In any event, the
Indemnified Party shall have the right to participate at its own expense in the
defense of such asserted Liability. No Indemnifying Party, in the defense of any
Claim shall, except with the written consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement that does not include as
an unconditional term thereof the release of the Indemnified Party from all
Liability in respect to such Claim or that does not solely require the payment
of money damages by the Indemnifying Party. The Indemnifying Party agrees to
afford the Indemnified Party and its counsel the opportunity to be present at,
and to participate in, conferences with all Persons asserting any Claim against
the Indemnified Party or conferences with representatives of or counsel for such
Persons. In no event shall the Indemnifying Party, without the written consent
of the Indemnified Party, settle any Claim on terms that provide for (i) a
criminal sanction against the Indemnified Party or (ii) injunctive relief
affecting the Indemnified Party.

 

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  E. Upon receipt of a Notice of Claim, the Indemnifying Party shall have twenty
(20) calendar days to contest its indemnification obligation with respect to
such claim, or the amount thereof, by written notice to the Indemnified Party
(the “Contest Notice”); provided, however, that if, at the time a Notice of
Claim is submitted to the Indemnifying Party the amount of the Damage in respect
thereof has not yet been determined, such twenty (20) day period in respect of,
but only in respect of the amount of the Damage, shall not commence until a
further written notice (the “Notice of Liability”) has been sent or delivered by
the Indemnified Party to the Indemnifying Party setting forth the amount of the
Damage incurred by the Indemnified Party that was the subject of the earlier
Notice of Claim. Such Contest Notice shall specify the reasons or bases for the
objection of the Indemnifying Party to the Claim, and if the objection relates
to the amount of the Damages asserted, the amount, if any, that the Indemnifying
Party believes is due the Indemnified Party, and any undisputed amount shall be
promptly paid over to the Indemnified Party. If no such Contest Notice is given
within such twenty (20) day period, the obligation of the Indemnifying Party to
pay the Indemnified Party the amount of the Damage set forth in the Notice of
Claim, or subsequent Notice of Liability, shall be deemed established and
accepted by the Indemnifying Party.

 

  F. If the Indemnifying Party fails to assume the defense of such Claim or,
having assumed the defense and settlement of such Claim, fails reasonably to
contest such Claim in good faith, the Indemnified Party, without waiving its
right to indemnification, may assume, at the cost of the Indemnifying Party, the
defense and settlement of such Claim; provided, however, that (i) the
Indemnifying Party shall be permitted to join in the defense and settlement of
such Claim and to employ counsel at its own expense, (ii) the Indemnifying Party
shall cooperate with the Indemnified Party in the defense and settlement of such
Claim in any manner reasonably requested by the Indemnified Party and (iii) the
Indemnified Party shall not settle such Claim without soliciting the views of
the Indemnifying Party and giving them due consideration.

 

  G. The Indemnifying Party shall make any payment required to be made under
this Article in cash and on demand. Any payments required to be paid by an
Indemnifying Party under this Article that are not paid within five (5) business
days of the date on which such obligation becomes final shall thereafter be
deemed delinquent, and the Indemnifying Party shall pay to the Indemnified
Party, immediately upon demand, interest at the rate of ten percent (10%) per
annum, not to exceed the maximum nonusurious rate allowed by applicable Law,
from the date such payment becomes delinquent to the date of payment of such
delinquent sums, which interest shall be considered to be Damages of the
Indemnified Party.

 

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X. TAXES

 

To the extent legally permissible, all present and future taxes relating to the
Products wherein the taxation is coincident with or subsequent to title passing
to Buyer shall be for the account of Buyer and all other taxes shall be for the
account of Seller, except to the extent that any such taxes are attributable to
Buyer’s income or included in the costs used to calculate the Price in
accordance with Article VI. hereof.

 

XI. EVENT OF FORCE MAJEURE

 

  A. Neither Party will be liable for failure to perform or for delay in
performing this Agreement where such failure or delay is caused by an Event of
Force Majeure. The obligated Party’s obligation to perform its undertakings
shall be excused during the period such Event of Force Majeure shall continue;
provided, however, that an Event of Force Majeure shall not excuse or delay any
payment obligation hereunder; and provided further that the Party asserting an
Event of Force Majeure shall use its commercially reasonable efforts to overcome
the Event of Force Majeure. The Party asserting that an Event of Force Majeure
has occurred shall send the other Party notice thereof within three (3) days
after the beginning of such claimed Event of Force Majeure setting forth a
description of the Event of Force Majeure, an estimate of its effect upon the
Party’s ability to perform its obligations under this Agreement and the expected
duration thereof. The notice shall be supplemented by such other information or
documentation as the Party receiving the notice may reasonably request. As soon
as possible after the cessation of any Event of Force Majeure, the Party which
asserted such event shall give the other Party notice of such cessation.
Whenever possible, each Party shall give the other Party notice of any
threatened or impending Event of Force Majeure.

 

  B. In the event Seller or Buyer experiences an Event of Force Majeure that
lasts for or is anticipated to last for more than one hundred eighty
(180) consecutive days, either Seller or Buyer shall have the right to terminate
this Agreement.

 

  C.

In the event that Seller’s Deliveries of Products from the Facility are impeded
due to an Event of Force Majeure, Seller shall apportion deliveries of Products
among its contract customers (including regular customers not then under
contract) and Seller’s then existing requirements on a pro-rata basis, and
Seller shall not be obligated to take any action which would increase its costs
of performing this Agreement above the costs which it would have incurred in the
absence

 

29

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of such Event of Force Majeure. At the option of either Party, the number of
Tons of each Product that a Party exercising its right under this Section is
excused from delivering or receiving by reason of Event of Force Majeure shall
no longer be subject to this Agreement. The Term of the Agreement may be
extended by mutual agreement of the Parties for any period to allow Delivery of
Products not Delivered, purchased or accepted due to an Event of Force Majeure.
The Purchase Price for such Product shall be as set forth in Section VI.,
calculated for the Month that the Product is actually Delivered.

 

XII. REVIEW MEETINGS; REPORTING

 

  A. The Parties shall meet at least twice each Contract Year at mutually
agreeable times to review the operation of, and discuss issues relating to, this
Agreement.

 

  B. In order to permit Buyer to monitor the costs of the Conversion Project and
the cost components of the Price, Seller shall furnish to Buyer on a Monthly
basis reasonably detailed reports concerning such costs.

 

XIII. HARDSHIP

 

  A. If, at any time during the Term of this Agreement, a change occurs which
substantially adversely affects either Party (as applicable, the “Affected
Party”), other than a change of the nature described in Article XX, as a result
of which the Affected Party incurs or would be likely to incur substantial
hardship in complying with the provisions of this Agreement, then the Affected
Party may notify the other Party (the “Non-Affected Party”) in writing that the
Affected Party wishes to discuss the terms and performance of this Agreement in
light of such changed conditions.

 

  B. Within thirty (30) days after delivery of any notice under Section XIII.A
above, the Parties shall meet at a mutually acceptable time and place to discuss
in good faith the means, if any, to relieve such hardship in a manner equitable
to both Parties, and at such meeting the Affected Party shall make available to
the Non-Affected Party such data and information as the Affected Party deems
necessary to justify its request for relief. For the avoidance of doubt, nothing
in this Section XIII.B shall alter the rights and obligations of the Parties
under this Agreement in any way except to the extent that the Parties agree to
do so in writing at or following any such meeting.

 

XIV. TERMINATION

 

  A.

Subject to Section VII.E. hereof, if Buyer shall be late in making any payment
for Products hereunder (other than late payments that result from Seller’s
negligence or omission) and such delay shall continue for

 

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a period of fifteen (15) days after notice thereof is delivered by Seller to
Buyer, Seller may, at its sole discretion by notice to Buyer, elect one or more
of the following remedies:

 

  1. Cease to make any further Delivery hereunder until Buyer has made up the
late payment and has taken steps to assure Seller that there shall be no such
delinquencies in the future;

 

  2. Refuse to make any further Deliveries hereunder except upon cash payments
on Delivery; or

 

  3. Require that all late payments bear interest from the due date to the date
of payment in full at a rate of 18% per annum;

 

provided, however, that if Buyer shall be late in making any payment for
Products hereunder (other than late payments that result from Seller’s
negligence or omission) and such delay shall continue for a total period of
thirty (30) days after the aforesaid notice thereof is delivered by Seller to
Buyer then Seller may, at its option by notice to Buyer, terminate this
Agreement. The election by Seller of any of the above courses of action shall in
no way limit any other remedies available to Seller in law or in equity for
Buyer’s failure to pay the Price.

 

  B. If either Party shall:

 

  1. Voluntarily petition, or be the subject of such a petition, under or
otherwise seek the benefit of any bankruptcy, reorganization, arrangement or
insolvency law; or

 

  2. Make a general assignment for the benefit of creditors; or be adjudicated
bankrupt or insolvent; or

 

  3. Allow a receiver or trustee of its business to be appointed; or

 

  4. Fail to perform any part of this Agreement (other than as is excused under
another provision hereof) and upon notice of such failure by the other Party,
fail to remedy the same within thirty (30) days of such notice;

 

then, in any of said events, this Agreement may be terminated at the option of
the other Party, effective as of the date set forth in the terminating Party’s
notice, and the terminating Party shall retain all of its rights and remedies at
law or in equity.

 

XV. RIGHTS NOT WAIVED

 

The waiver by either Party hereto of any breach of this Agreement by the other
Party hereto shall not be deemed to be a waiver of any succeeding or

 

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other breach of this Agreement. Each and every right, power and remedy may be
exercised from time to time and so often and in such order as may be deemed
expedient by the Party, and the exercise of any such right, power or remedy
shall not be deemed a waiver of the right to exercise at the same time or
thereafter, any other right, power or remedy.

 

XVI. NOTICES

 

Except as otherwise provided herein, any notices, requests or other
communications required or permitted by any provision of this Agreement shall be
in writing and shall be deemed delivered if delivered by hand or mailed by U.S.
Postal Service, postage prepaid, by registered or certified mail, nationally
recognized overnight courier, or sent by facsimile and

 

if to Seller, addressed to:    or, if to Buyer, addressed to:

Terra Industries Inc.

600 Fourth Street

Sioux City, Iowa 51101

Fax (712) 233-5586

Contact Name: Joe Giesler

  

Orica USA Inc.

33101 East Quincy Avenue

Watkins, Colorado 80137

Fax (303) 268-5251

Contact Name: President

with a copy to:    with a copy to:

Terra Industries Inc.

600 Fourth Street

Sioux City, Iowa 51101

Fax (712) 233-5586

Contact Name: General Counsel

  

Orica USA Inc.

33101 East Quincy Avenue

Watkins, Colorado 80137

Fax (303) 268-5252

Contact Name: General Counsel

 

Any Party may change the address to which notices are to be given by mailing
written notice thereof to the other Party as provided above.

 

XVII. ASSIGNMENT

 

Neither Party shall assign any of its rights and obligations under this
Agreement to a third party without first having obtained the prior written
consent of the other Party, such consent not to be unreasonably withheld,
delayed or denied; provided, however, either Party with prior notice to the
other shall be permitted to assign its rights and obligations under this
Agreement to the successor of the assigning Party as a result of a statutory
merger or consolidation or to the purchaser of all or substantially all of such
Party’s assets, or to an Affiliated Company which has the capability (as
determined by the non-assigning Party in the exercise of its reasonable
discretion) to perform the assigning Party’s obligations hereunder (collectively
a “Permitted Successor or Assign”). From and after the effective date of any
assignment of this Agreement, and the rights and

 

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obligations hereunder, which has been consented to in writing by the
non-assigning Party, the assigning Party shall be deemed released from all
obligations and liabilities hereunder which are based on acts, omissions, facts,
events or circumstances first arising, occurring or existing after the effective
date of the assignment. The rights and obligations of the Parties herein set
forth shall inure to and be binding upon Permitted Successors and Assigns. For
the purpose of this Agreement, an “Affiliated Company” shall mean any
corporation or other business enterprise which directly or indirectly controls,
is controlled by, or is under common control with the Party; and for the purpose
of this definition, a corporation that directly or indirectly has the power to
vote more than fifty percent (50%) of the shares or other securities at the time
entitled to vote upon the election of directors or managers of a second
corporation shall be deemed to control the second corporation. Notwithstanding
the foregoing, in the event either Party intends to sell or otherwise transfer
all or substantially all of its assets to which this Agreement relates to a
third party purchaser or other transferee, or transfer this Agreement to an
Affiliated Company, the selling Party shall, unless prohibited by
confidentiality undertaking, notify the other Party at least sixty (60) days
before the closing of such transaction. The selling Party shall also require its
purchaser or transferee to assume the selling Party’s rights and obligations
under this Agreement upon the closing of such transaction. Any assignment or
attempted assignment in contravention of the foregoing shall be null and void,
shall be considered a material breach of the Agreement and shall permit the
other Party in addition to any other rights which it may have, forthwith to
terminate this Agreement.

 

XVIII. INDEPENDENT CONTRACTOR

 

Seller shall be an independent contractor, and neither Seller nor its Affiliated
Companies are servants, agents or employees of Buyer. Seller shall perform its
obligations under this Agreement by its own means and methods, it being
understood that Buyer is interested only in the Delivery of Products to the
applicable Delivery Point in accordance with this Agreement. As an independent
contractor, Seller shall be responsible for (i) all applicable state, federal,
and other payroll taxes, including contributions and taxes assessed against any
amounts paid to its agents or wages paid to its employees in connection with its
obligations under this Agreement, and (ii) any and all taxes or charges imposed
by any governmental authority based upon or measured by Seller’s income or
receipts, including without limitation any federal, state or local income or
franchise taxes. In addition, neither this Agreement nor any of the services
provided under this Agreement shall be deemed to create a partnership, joint
venture or any other cooperative arrangement between Buyer and Seller or the
Affiliated Companies of either Party with respect to the subject matter of this
Agreement.

 

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XIX. NON-COMPETITION

 

  A. Subject to the provisions of Section III.C, the remainder of this
Article XIX and Article XX, during the Term, neither Seller nor any Seller
Affiliated Company shall sell any Products or AGAN manufactured at the Plant
into, or for distribution or use in, Commercial Explosives applications in the
Territory nor sell said Products or AGAN to any Person who Seller reasonably
believes is likely to distribute or use them in Commercial Explosives
applications in the Territory.

 

  B. In the event that Buyer terminates this Agreement pursuant to Section
XIV.B.4 or XVII. hereof, and Buyer does not notify Seller pursuant to
Section 3.5(d) of the Conversion Agreement of Buyer’s intention to purchase the
Conversion Kit (as defined therein), then the provisions of Section XIX.A. shall
continue for a period of one year from the date of termination of this
Agreement. If instead Buyer notifies Seller pursuant to Section 3.5(d) of the
Conversion Agreement of Buyer’s intention to purchase the Conversion Kit (as
defined therein), and Seller is able to convey the Conversion Kit to Buyer
together with a release by Seller’s lenders, in a form and substance reasonably
satisfactory to Buyer, of all liens and security interests (if applicable) on
the Conversion Kit, then the provisions of Section XIX.A. shall continue for a
period of one year from the date of termination of this Agreement. If instead
Seller is unable to convey the Conversion Kit to Buyer or is unable to provide
Buyer with a release by Seller’s lenders, in a form and substance reasonably
satisfactory to Buyer, of all liens and security interests (if applicable) on
the Conversion Kit, then the provisions of Section XIX.A. shall continue for a
period of two years from the date of termination of this Agreement.

 

  C. In the event that Seller or any Seller Affiliated Company shall

 

  1. Decide, or be solicited, to develop any of their plants as of the Effective
Date (other than the Plant) for the manufacture of IGAN for sale or use in
Commercial Explosives applications in the Territory; or

 

  2. Decide, or be solicited, to commence the sale of AGAN or ANS from any of
their plants (other than the Plant) as of the Effective Date for use in
Commercial Explosives applications in the Territory; then

 

Seller or the relevant Seller Affiliated Company shall notify Buyer before
initiating substantive discussions with the soliciting party or any other
suppliers or users of Commercial Explosives and Seller or the relevant Seller
Affiliated Company shall not initiate substantive discussions with the
soliciting party or any other suppliers or users of

 

34

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Commercial Explosives until Seller has complied with the following provisions.
Seller agrees, and shall cause the relevant Seller Affiliated Company, to meet
with Buyer at a mutually acceptable time and place to discuss in good faith
Buyer’s interest in acquiring distribution rights with respect to such sales.
Seller or Seller Affiliated Company shall make available to the Buyer such data
and information as the Buyer deems reasonably necessary to evaluate the proposed
distribution rights. If Seller or such Seller Affiliated Company and Buyer do
not reach agreement upon the terms of such distribution rights, and Seller or
such Seller Affiliated Company thereafter sells IGAN, AGAN or ANS from its
plants (other than the Plant) for sale or use in Commercial Explosives
applications in the Territory, then, unless otherwise agreed, Buyer shall be
considered to have purchased such products for the purposes of Article III.B. of
this Agreement.

 

  D. Notwithstanding the provisions of Section XIX.A, Seller may (i) sell ANS
and AGAN for use in Commercial Explosives applications in the Territory,
provided that such Products are supplied as of June 1, 2005 pursuant to written
agreements between Seller and its customers existing on such date, including any
extensions of such written agreements for substantially the same volumes, and
(ii) sell Products (without regard to Specifications) and other products
manufactured by or on behalf of Seller for use outside Commercial Explosives
applications. Buyer shall have the right to engage a third party auditor to
confirm Seller’s compliance with this clause. If the auditor confirms Seller’s
compliance, then such audit will be at Buyer’s expense. If the auditor
determines that Seller is not in compliance, Seller shall cease the activity
which contravenes this Subsection and such audit will be at Seller’s expense.

 

XX. #2 PRILLING PLANT CONVERSION

 

If, as a result of actual or imminent regulatory changes which significantly
reduce Seller’s sales volumes of AGAN at the Plant, Seller decides to initiate
the conversion of its #2 prilling plant at the Plant (the “#2 IGAN Project”) to
enable manufacture of the full output of such #2 prilling plant as IGAN (the
“Output”), then Seller shall notify Buyer of its decision before initiating
discussions with any other suppliers or users of Commercial Explosives and
Seller shall not initiate discussions with any other suppliers or users of
Commercial Explosives until Seller has complied with the following provisions.
Within thirty (30) days of Seller’s notice, Seller and Buyer shall meet to
discuss the participation of Buyer in the #2 IGAN Project and marketing by Buyer
of the Output.

 

  A. If the Parties reach agreement, then this Agreement shall continue in full
force and effect, modified only to the extent necessary to reflect the
additional agreement of the Parties.

 

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  B. If the Parties do not reach agreement, but Seller proceeds with the #2 IGAN
Project and markets any or all of the Output to another supplier or suppliers of
Commercial Explosives, then this Agreement shall continue in full force and
effect, and the provisions of Section XIX.A shall not be construed to prevent
such sales so long as Seller’s price to the other supplier or suppliers is not
less than the then-current Price hereunder for IGAN plus the allocable portion
of the Facility Fee, if any. Buyer shall have the right to engage a third party
auditor to confirm Seller’s compliance. If the auditor confirms Seller’s
compliance, then such audit will be at Buyer’s expense. If the auditor
determines that Seller is not in compliance, then such audit will be at Seller’s
expense and Seller will make the necessary price adjustments and payments to
Buyer.

 

  C. If the Parties do not reach agreement, but Seller proceeds with the #2 IGAN
Project and markets any or all of the Output directly to users of Commercial
Explosives, then this Agreement shall continue in full force and effect and the
provisions of Section XIX.A shall not be construed to prevent such sales;
provided, however, that Buyer shall have the right, but not the obligation, to
terminate this Agreement at any time thereafter upon three (3) year’s notice to
Seller.

 

XXI. AUDIT RIGHT

 

  A. During the Term, Seller shall keep and maintain proper, detailed, accurate
and complete records and supporting documentation, regardless of the medium by
which they are created or stored, in respect of all matters relating to this
Agreement (collectively, the “Records”). Seller shall keep and retain all
Records for a period of 24 Months after the end of any Contract Year to which
the Records relate (“Record Retention Period”).

 

  B. Buyer acknowledges and agrees that the Records of Seller contain sensitive
and confidential information, the disclosure of which would cause irreparable
injury to Seller.

 

  C.

At any time prior to the expiry of the Record Retention Period, Buyer may, in
order to verify and validate the calculation of any formula or the amount of any
Price, payment or cost under this Agreement or the quantity of Products
delivered hereunder, audit the Records of Seller. Audits shall be carried out at
any time prior to the expiry of the Record Retention Period, during normal
business hours but upon prior written request to Seller. Buyer may enter the
business premises of Seller where the Records are located, and inspect, audit
and copy any or all of the Records. Each Party shall co-operate with the other
Party in carrying out the inspection, audit and copying of such Records
including, without limitation, by providing access to, and assistance with, all
computer systems and other electronic means by which any such Records may be

 

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kept. The inspection of any or all of the Records by Buyer, from time to time,
shall be performed at Buyer’s own cost and expense provided that if such
inspection determines that the calculations made by Seller are less than 99%
accurate on average during the Months covered by the audit, then the costs of
the audit shall be borne by Seller.

 

  D. If Buyer identifies an error in the calculation of any amount, the
applicable invoice in which the error was determined shall be increased or
decreased, as the case may be, by an amount equal to such overpayment or such
underpayment, as the case may be.

 

XXII. ENTIRE AGREEMENT/AMENDMENT

 

This Agreement, the Exhibits hereto, the Related Agreements and the Side Letter
Agreement constitute the entire agreement among the Parties and supersede all
prior agreements and understandings, oral or written, among the Parties hereto
with respect to the subject matter hereof and thereof. There are no warranties,
representations or other agreements between the Parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby.This Agreement may be amended only by a written document signed by duly
authorized representatives of each of the Parties hereto. Any printed terms or
conditions contained in any printed forms used in placing or acknowledging
orders hereunder, or otherwise used in any way in connection with the sale and
purchase provided for in this Agreement, shall not have the effect of modifying
or amending this Agreement in any respect.

 

XXIII. CONFIDENTIALITY

 

  A. Buyer and Seller shall maintain in confidence all information concerning
Seller’s costs and Price realizations to be disclosed to Buyer in connection
with Seller’s performance under this Agreement. Such information shall be
disclosed to no person or entity other than Buyer’s and Nelson Brothers’
officers and other personnel who need to know the same in connection with
Buyer’s performance under this Agreement, and such officers and other personnel
shall be advised of the confidential nature of such information. Each Party
shall take all reasonable precautions to prevent such information from being
acquired by any unauthorized person, firm or company. Buyer shall be obligated
to obtain an appropriate confidentiality agreement from Nelson Brothers
regarding such information, or in the absence of any such agreement, Buyer shall
be responsible for any breach of this provision by Nelson Brothers or its
officers or other personnel.

 

  B.

Except as required by applicable securities law, neither Buyer nor Seller shall
advertise, circulate, or release any information regarding this

 

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Agreement to any person, organization, news agency, or media without written
consent of the other Party. However, Buyer shall be entitled to provide Buyer’s
customers, including without limitation Nelson Brothers, with information Seller
may approve to assure such customers that Buyer will be able to supply the
customers’ needs. Seller shall be entitled to provide Seller’s suppliers, and
any other parties as necessary with such information as Buyer shall approve to
enable the supply of Products under this Agreement.

 

XXIV. SECTION HEADINGS

 

Section headings are for the convenience of the Parties and are not considered
parts of the Agreement, it being stipulated that any headings in conflict with
the substantive provisions of the Agreement shall have no force and effect.

 

XXV. LEGAL COMPLIANCE

 

Each Party shall be subject to all applicable laws, rules, regulations and
ordinances issued by any national, state or local regulatory or governing body
and may act in accordance therewith until such time as the same may be repealed
or held invalid by final judgment in a court of competent jurisdiction.

 

XXVI. DISPUTE RESOLUTION

 

  A. This process may be initiated by either Party by notice to the other Party.
Except as otherwise expressly provided in this Agreement, and except to the
extent a Party deems it reasonably necessary to seek immediate injunctive or
equitable relief, in which event a Party may seek such relief to protect its
interests in an appropriate forum, in the event of any controversy arising out
of or relating to this Agreement, or any breach thereof, the Parties agree for a
period of thirty (30) days following notification that a controversy or breach
has arisen or occurred to attempt in good faith to resolve any such controversy
or breach between the respective officers for each Party who are responsible for
the administration of this Agreement. Despite any injunctive relief, the Parties
will continue to participate in good faith in the procedures specified herein.
All applicable statutes of limitation, including, without limitation,
contractual limitation periods provided for in this Agreement, shall be tolled
while the procedures specified in this Section XXVI. are pending. The Parties
will take all actions, if any, necessary to effectuate the tolling of any
applicable statutes of limitation. If such senior officers are unable to resolve
the controversy or breach within the said thirty (30) days, then the Parties
shall submit the dispute to the President of each Party for resolution for a
period of fifteen (15) days. If the Parties’ respective Presidents resolve the
controversy or breach, the Parties will adhere to their resolution, and make
such amendments to this Agreement as may be necessary.

 

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  B. In the event the Presidents are unable to resolve the controversy or breach
within said fifteen (15) days, either Party may submit the controversy or breach
to binding arbitration by notice to the other Party and the American Arbitration
Association. The Parties agree that this Agreement affects interstate commerce.
The Parties further agree that such binding arbitration shall be settled
exclusively in Wilmington, Delaware (unless the Parties mutually agree to
another location for convenience of the Parties and witnesses) pursuant to the
provisions of the Federal Arbitration Act and according to the Commercial Rules
of the American Arbitration Association then in effect in the State of Delaware.
The arbitrator shall be chosen from a panel of five (5) retired federal judges
provided by the American Arbitration Association. Alternate strikes shall be
made to the panel commencing with the Party requesting the arbitration until one
name remains. Such individual shall be the arbitrator for the dispute and shall
be appointed within thirty (30) days of the date of the demand for arbitration
by one of the Parties to this Agreement. The Party requesting the arbitration
shall notify the arbitrator who shall hold a hearing(s) within ninety (90) days
of the notice. The arbitrator shall render a decision within sixty (60) days
after the conclusion of the hearing(s). In all arbitration proceedings, with
respect to each particular dispute, the arbitrator shall be required to approve
either the position advocated by Seller or the position advocated by Buyer,
whichever best reflects and implements the purposes and intent of this
Agreement. Any decision rendered by the arbitrator which does not reflect either
a position advocated by Seller or a position advocated by Buyer shall be beyond
the scope of authority granted to the arbitrator and the issue in question will
be returned to the arbitrator for a decision consistent with the terms of this
Section. The decision of the arbitrator shall be in writing and shall be final
and binding upon the Parties as to the controversy or breach submitted. Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. All American Arbitration Association fees and the fees and
expenses of the arbitrator will be divided equally between the Parties. The
attorneys’ fees and other arbitration costs and expenses of the Parties shall be
borne by the Party whose contention was not upheld by the arbitrator, except to
the extent the arbitrator rules otherwise.

 

XXVII. GOVERNING LAW

 

This Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement the year and day
above stated by their respective officers thereunto duly authorized.

 

(“Seller”)

  Terra Mississippi Nitrogen, Inc.     By:  

/s/ Michael L. Bennett

--------------------------------------------------------------------------------

    Printed Name:   Michael L. Bennett     Title:   President

(“Buyer”)

  Orica USA Inc.     By:  

/s/ Don Brinker

--------------------------------------------------------------------------------

    Printed Name:   Don Brinker     Title:   President & CEO

 

40

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EXHIBIT A

PRICE

[The following calculations are provided as examples]

 

SAMPLE PRICE CALCULATION

 

Portions of this Exhibit were omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment. Such
portions are marked by a series of asterisks.

 

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Yazoo City AN Synthesis

April 2005

                 

$ per short ton

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Ammonia Based Version

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ANS

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IGAN

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Comments

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Note: Verbatum.

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Note: Verbatum.

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Note: Verbatum.

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Note: Verbatum.

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Note: Verbatum.

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Note: Verbatum.

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        Note: Verbatum, modified by Section VI. A. I. a.

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Note: Verbatum.

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          Shipped ANS Price To Orica – Tranche # 1   

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A-1

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SAMPLE PRICE CALCULATION

 

Yazoo City ANF (to be the “Facility”)

April 2005

                 

$ per short ton

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Feedstock Version

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ANS

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IGAN

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Comments

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Note: Conversion factor of 0.9885 tons per ton.

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Note: Inclusive of additives and coatings.

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Note: Verbatum.

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Note: Verbatum.

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Note: Verbatum.

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Note: Verbatum, modified by Section VI. A. 2. a. vi.

IGAN Price To Orica

       

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A-2

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SAMPLE PRICE CALCULATION

 

Base Shipped ANS Price To Orica - Tranche # 2

   **************    per ton of ANS

Base NYMEX Henry Hub Natural Gas Price

  

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per MMBtu of natural gas

"Natural Gas To ANS" Usage Factor

  

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MMBtu of natural gas per ton of ANS

Market Center Spot Gas Price, South Louisiana Henry Hub Natural Gas Price
(example July 2005)   

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per MMBtu of natural gas

Month Shipped ANS Price To Orica - Tranche # 2

  

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per ton of ANS

 

A-3

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EXHIBIT B - Specifications

 

IGAN (complying with UN1942, Class 5.1 requirements)

 

Property

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Specification Range

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Typical

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Total Nitrogen, wt%

  34.0 Min.   34.6

Bulk Density, lb/ft3

  46.0 Min. to 54.0 Max.   48.0

Bulk Density, g/cm3

  0.74 Min. to 0.84 Max.   0.78

Oil Absorption, wt%

  6.0 Min. to 13.0 Max.   10.4

Moisture, wt%

  0.15 Max.   0.06

Organic coating, wt%

  0.06 to 0.09 Max.   0.08 Total organics, wt%   0.2 Max    

pH (10% solution)

  4.5 Min. to 5.7 Max.   5.3

Friability

  5.0 Min. to 18.0 Max   10.0

Prill Size Distribution Screen Analysis (U.S. Standard)

   

+6 Mesh, wt%

    0.0 Max.   0.0

+14 Mesh, wt%

  90.0 Min.   95.0

+20 Mesh, wt%

  97.0 Min.   98.5

-20 Mesh, wt%

    3.0 Max.   1.5

 

Ammonium Nitrate Solution

 

Chemical

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Specification Range

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Typical

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Ammonium Nitrate, wt%

  83.5 Min. to 88.0 Max.   84.0

pH

  5.0 Min. to 6.0 Max.   5.2

Temperature, 0F

  230 Min. to 250 Max.   235 to 245 Appearance   Clear of clay or other foreign
material.    

 

Physical (dependent upon concentration)

Specific Gravity, 200 0F

  1.36   1.36

Salt out temperature, 0F

  156 to 188   160

Density, lb/gal @ 200 0F

  11.35   11.35

 

B-1