PRODUCT SALES AGREEMENT
This Product Sales Agreement ("Agreement") is made and entered into this
23rd day of February 2000, by and between Penn Octane Corporation, a Delaware
corporation ("Penn Octane"), and Xxxx Hydrocarbon Company, a division of Xxxx
Industries, Inc., a Kansas corporation ("Xxxx").
WHEREAS, Xxxx purchases from its affiliate the entire Propane production
from the Xxxx Refinery; and
WHEREAS, Penn Octane desires to purchase from Xxxx all of the Propane Xxxx
purchases from its affiliate from the Xxxx Refinery; and
WHEREAS, Xxxx and Penn Octane desire to enter into an agreement for the
sale of such Propane on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein, and for other good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, Xxxx and Penn Octane agree as
follows:
1. Definitions. For purposes of this Agreement, the following
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definitions shall apply:
(a) "Barrel" shall mean forty-two (42) U.S. Gallons.
(b) "Coastal Delivery Point" shall mean the interconnection in the Xxxx
Refinery between Coastal's Corpus Christi pipeline and the
propane/propylene pipeline owned by Xxxx'x affiliate.
(c) "Contract Year" shall mean each 12 Month period beginning on April 1,
2000.
(d) "Delivery Point(s)" shall mean, as specified in Section 4 below, (i)
the Exxon Delivery Point, (ii) the Coastal Delivery Point, or (iii)
the New Exxon Connection.
(e) "Delivery Point Meter(s)" shall mean the meters maintained for custody
transfer purposes at or near the Delivery Point(s) specified above.
(f) "Exxon Delivery Point" shall mean the interconnection between the
Exxon propane pipeline at the Xxxxx valve station and the propylene
pipeline owned by Xxxx'x affiliate.
(g) "Gallon" shall mean a U.S. Gallon of 231 cubic inches or 0.133681
cubic feet of liquid at sixty (60) degrees Fahrenheit and at the
equilibrium vapor pressure of the liquid.
(h) "Month" shall mean a period commencing at 12:01 a.m. CST on the first
day of a calendar month and ending at 12:01 a.m. CST on the first day
of the next succeeding calendar month.
(i) "Party" or "Parties" shall mean Xxxx and/or Penn Octane individually
or collectively as the context demands.
(j) "Propane" shall mean the API specifications for HD5 propane.
(k) "Xxxx Refinery" shall mean the refinery owned by Xxxx Petroleum Group,
L.P. located near Corpus Christi, Texas.
2. Commitment. Subject to the provisions herein, Xxxx shall sell and
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deliver, and Penn Octane shall purchase and receive, a volume of Propane equal
to the Propane purchased by Xxxx from its affiliate from the Xxxx Refinery. The
estimated amount of such Propane is 6,500 Barrels per day. Notwithstanding the
foregoing, the maximum daily volume delivered shall not exceed 7,000 Barrels per
day unless otherwise agreed by the Parties. The Parties understand and
expressly agree that Xxxx is under no obligation to sell or deliver any minimum
quantity of Propane to Penn Octane pursuant to this Agreement or to cause its
affiliate to operate the Xxxx Refinery or otherwise produce Propane. However,
the Parties understand and expressly agree that if Xxxx'x affiliate produces any
Propane from the Xxxx Refinery and Xxxx purchases such Propane, Xxxx shall
deliver such Propane under the provisions of this Agreement.
3. Term. This Agreement shall be effective, regardless of when
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executed, as of April 1, 2000 and shall continue until March 30, 2003 ("Primary
Term") and thereafter from year-to-year unless and until (i) either Party
terminates the Agreement by providing written notice to the other at least
ninety (90) days prior to the expiration of the Primary Term or any anniversary
of the expiration of the Primary Term or (ii) this Agreement is terminated
pursuant to Section 5.
4. Delivery Points. Xxxx shall deliver the Propane sold hereunder to
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the Exxon Delivery Point. If the New Exxon Connection (defined in Section 5(c))
is built during the term of this Agreement, Xxxx shall deliver the Propane to
the New Exxon Connection in lieu of the Exxon Delivery Point. If the Exxon
Delivery Point or New Exxon Connection, as applicable, is unable or unwilling to
accept all or a portion of the Propane for any reason, Xxxx shall deliver the
Propane not accepted to the Coastal Delivery Point. Xxxx shall use reasonable
efforts to make deliveries to the Exxon Delivery Point or the New Exxon
Connection, as applicable, prior to initiating deliveries to Coastal.
5.
(a) Price. Subject to the following, for each Gallon of Propane
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delivered hereunder, Penn Octane shall pay Xxxx an amount equal to the
following ("Sale Price"): (i) the monthly average of the daily high and low
postings per Gallon as published by OPIS for Mont Belvieu TET Propane, xxxx
(ii) xxxxxxxxxxx. The Parties recognize that Penn Octane shall be
responsible for any tariff rate, charge, penalty or fee incurred for the
transportation on Coastal's Corpus Christi pipeline. If Xxxx pays such
rates, charges, penalties or fee for the Propane delivered hereunder, Penn
Octane shall reimburse Xxxx for such costs.
(b) Third Party Offer. Notwithstanding the foregoing, if Xxxx
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receives a bona fide offer from a third party ("Offer") for the purchase of
the Propane sold hereunder for similar quantity and term during the next
Contract Year at a price more than the Sale Price, Xxxx may provide Penn
Octane a copy of the Offer on or before the December 31 preceding the
Contract Year at issue. If Penn Octane agrees to the price set forth in
the Offer prior to the March 1 preceding the Contract Year at issue, the
Sale Price shall be changed to the price set forth in the Offer for the
applicable Contract Year. If Penn Octane does not agree to the price set
forth in the Offer prior to March 1 and Xxxx elects to accept such Offer,
this Agreement shall terminate at the end of the Contract Year in which
Xxxx provided notice of the Offer. Provided, however, notwithstanding
the foregoing, if Xxxx completes construction of the New Exxon Connection
during the first Contract Year as described below, Xxxx cannot provide
Penn Octane with an Offer which would be applicable to the second
Contract Year.
(c) New Exxon Connection. Xxxx and its affiliate are
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investigating the feasibility of the construction of a new pipeline
interconnection ("New Exxon Connection") between the Xxxx Refinery and
Exxon's 12-inch propane pipeline at Exxon's Xxxxx valve station. At Xxxx'x
option, if Xxxx or its affiliate begins construction of this New Exxon
Connection during the first six months of the Primary Term and completes
construction by the end of the first Contract Year, Penn Octane shall pay
Xxxx, for the first 2,300,000 barrels of Propane, xxxxxxxxxxx for each
Gallon delivered hereunder up to the beginning on the date the New Exxon
Connection is operational, in addition to any other charges due hereunder
6. Title; Risk of Loss. Title to and risk of loss of the Propane shall
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pass from Xxxx to Penn Octane as the Propane passes the flange connections
between the delivery and receiving pipeline at the Delivery Point(s). Penn
Octane shall own and have control, custody, and possession of the Propane, shall
bear all costs and risks of transporting same, and shall be responsible for any
damage, loss or injury caused thereby after Xxxx delivers the Propane at the
Delivery Point(s). Penn Octane shall inspect the Propane immediately after
delivery. Penn Octane's failure to give written notice to Xxxx of any claim
within fifteen (15) days from date of delivery shall constitute an unqualified
acceptance of such product and a waiver by Penn Octane of all claims with
respect thereto.
7. Measurement. The quantities of Propane delivered to Penn Octane
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shall be determined by the Delivery Point Meter(s). All quantities shall be
corrected to standard conditions of sixty (60) degrees Fahrenheit and
equilibrium vapor pressure in accordance with the API Manual of Petroleum
Measurement Standards.
8. Warranties. Xxxx warrants that: (a) at the time the Propane is
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delivered to the Delivery Point(s), the Propane will meet the specifications
required herein; and (b) Xxxx has good title to the Propane at delivery
hereunder. XXXX EXTENDS NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. WITHOUT LIMITATION OF THE FOREGOING SENTENCE, ALL OTHER
WARRANTIES OF XXXX, EXPRESSED OR IMPLIED, ARE EXCLUDED.
9. Payment. Penn Octane shall remit all sums due Xxxx pursuant to any
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invoice within ten (10) business days after the date of the invoice. Should
Penn Octane fail to pay all or any part of any invoice when due, interest on the
outstanding balance shall accrue from the date due until the date payment is
received by Xxxx at the lesser of (i) the Chase Manhattan prime lending rate,
plus two percent (2%) per annum, or (ii) the maximum interest rate allowed by
law. Any invoice shall be final as to the Parties unless questioned in writing
within 2 years after payment has been made thereon. If Penn Octane fails to pay
all or any part of any invoice, it shall not be in breach of this provision
until five (5) days after receiving notice from Xxxx of such non-payment.
10. Taxes. Penn Octane shall be responsible for all other taxes
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imposed or levied by a governmental agency upon or after the delivery of Propane
at the Delivery Point(s). If Xxxx pays or remits a tax which is Penn Octane's
responsibility, Penn Octane shall reimburse Xxxx for such taxes within 10 days
after the date of Xxxx'x invoice. If Penn Octane is exempt from paying a tax,
it shall provide Xxxx with a certificate evidencing the exemption.
11. Letter of Credit. For the term of this Agreement, Penn Octane
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shall obtain and maintain an irrevocable, standby letter of credit in a format
satisfactory to Xxxx and issued by a bank acceptable to Xxxx. Penn Octane shall
provide Xxxx'x Credit Department, at the address below, this letter of credit at
least 3 business days prior to any delivery hereunder.
Xxxxx Xxxxxxx
Xxxx Industries, Inc.
0000 Xxxx 00xx Xxxxxx, Xxxxx
Xxxxxxx, XX 00000 XXX
Phone: (000) 000-0000
Fax: (000) 000-0000
Telex: 417376
12. Force Majeure. Notwithstanding any other provision in this
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Agreement, no failure to carry out or observe any of the provisions of this
Agreement, except the obligation to pay money when due, shall give rise to any
claim against either Party or be deemed a breach of this Agreement if such
failure or omission arises from an event of Force Majeure. "Force Majeure" shall
mean any cause or causes reasonably beyond the control of either Party or which
either Party is unable to prevent or overcome by the exercise of reasonable
diligence. Without limiting the generality of the foregoing, the following
shall be deemed to be events of Force Majeure: (a) acts of God or the public
enemy, fire, explosion, storms, flood, war, riot, sabotage, accident, embargo;
or (b) interruption of or delay in transportation, lack of capacity on
pipelines, inadequacy, shortage or failure of a Party's normal source of supply
of product, breakdowns, labor trouble from whatever cause arising and whether or
not the demands of the employees involved are reasonable and within said party's
power to concede; or (c) compliance with any order, action, direction or request
of any governmental officer, department, agency, authority or committee thereof,
including any direction or order restricting or limiting the selling price of
the Propane which renders it impossible for Xxxx, in its sole discretion, to
make a reasonable profit on such sale.
In the event either Party hereto is rendered unable, by reason of Force Majeure,
to carry out in whole or in part its obligations under this Agreement, other
than the obligation to make payments due hereunder, that Party shall give notice
of the Force Majeure event in writing or by facsimile to the other Party as soon
as possible after the occurrence of the event. The obligations of the notifying
Party shall, insofar as they are affected by such Force Majeure, be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall, as far as possible, be remedied with all reasonable dispatch;
provided, however, that the settlement of strikes, lockouts and labor
difficulties shall be solely within the discretion of the Party claiming Force
Majeure.
13. Indemnity. Penn Octane shall indemnify and hold Xxxx and its
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affiliates harmless from any claim, demand, lawsuit, cause of action, strict
liability claim, penalty, fine, or administrative law action or order, and from
expenses (including but not limited to attorneys' fees) and costs of every kind
and character on account of personal injuries, death, damage to property, or
damage to the environment and arising out of or related to Penn Octane's, or
Penn Octane's employees', agents', contractors', or carriers' transportation,
use, handling, re-sale, misuse, or disposal of the Propane purchased hereunder,
or arising out of or in any way incident to the use or misuse of pipeline
facilities in which the Propane is transported or stored subsequent to the
passage of title to the Propane from Xxxx to Penn Octane hereunder. Penn
Octane's duty to indemnify and hold harmless hereunder shall survive termination
of this Agreement or the cessation of business transactions between Penn Octane
and Xxxx.
14. Unsafe Conditions. Xxxx reserves the sole right to reject any
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pipelines presented for transportation which would present an unsafe or
potentially unsafe situation. In addition, Xxxx reserves the sole right to
refuse to deliver any product under any conditions it deems unsafe, which is
caused by, including but not limited to, personnel, equipment, procedures,
and/or weather conditions.
15. Limitation of Remedies. Xxxx'x liability, and Penn Octane's
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exclusive remedy, for any cause of action (whether in contract, warranty,
guarantee, failure of essential purpose, tort, violation of law, strict
liability or otherwise) arising out of or related to this Agreement is expressly
limited, at Xxxx'x option, to: (a) replacement of nonconforming product; or (b)
payment of the Sale Price allocable to the Propane determined to be
nonconforming. IN NO EVENT SHALL XXXX'X CUMULATIVE LIABILITY HEREUNDER BE IN
EXCESS OF THE TOTAL SALES PRICE AT THE DELIVERY POINT. WITHOUT LIMITATION OF
ANY OTHER PROVISION HEREIN, XXXX SHALL NOT BE OBLIGATED FOR LOST PROFITS OR ANY
SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES. PENN OCTANE REPRESENTS
AND AGREES THAT THE RETURN OF THE FULL SALES PRICE BY XXXX SHALL PREVENT THE
FOREGOING REMEDIES FROM FAILING OF THEIR ESSENTIAL PURPOSE, AND THAT SUCH
REMEDIES ARE FAIR AND ADEQUATE.
16. Odorization. PENN OCTANE ACKNOWLEDGES AND AGREES THAT XXXX WILL NOT
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STENCH THE PROPANE SOLD HEREUNDER, AND THAT XXXX IS UNDER NO OBLIGATION, LEGAL
OR OTHERWISE, TO DO SO. TO THE FULLEST EXTENT PERMITTED BY LAW, PENN OCTANE
AGREES TO INDEMNIFY AND HOLD HARMLESS XXXX AND ITS AFFILIATES FROM AND AGAINST
ANY CLAIM, ACTION, CAUSE OF ACTION OR ADMINISTRATIVE OR ENFORCEMENT ACTION OF
ANY KIND, OR ANY CLAIMED LIABILITY, LOSS, DAMAGE OR EXPENSE, ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THE LACK OF STENCHING OF THE PROPANE. Penn Octane
hereby certifies that stenching or odorization of the Propane will (1) be
harmful to its use or further processing; and (2) serves no useful purpose as a
warning agent in such use or further processing. Penn Octane further represents
and acknowledges that it is familiar with and knowledgeable of the legal
requirements regarding odorization, and that Penn Octane will comply with all
such requirements. Penn Octane grants to Xxxx the right, in its reasonably
exercised discretion, to conduct such inquiries, audits, and other activities as
may be reasonably necessary to verify the accuracy of the foregoing
certifications and representations.
17. Warnings. Penn Octane acknowledges receipt of the Material Safety
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Data Sheet for the Propane, and has reviewed and understands the warnings and
information regarding the characteristics and hazards of handling or using the
Propane contained therein and otherwise set forth in this Agreement. The
Parties acknowledge and agree that Xxxx has no practical or effective method of
warning Penn Octane's customers of the characteristics and hazards of the
Propane, and that Xxxx is under no obligation to provide any such warnings or
other product information to any such downstream purchasers. Penn Octane
warrants and represents that it is capable of communicating such warnings and
information, and that Penn Octane will communicate such warnings and information
to all persons Penn Octane reasonably anticipates handling, using or otherwise
coming into contact with the Propane, including without limitation, warnings and
information regarding the odorization of the Propane.
18. Hazardous Materials. If, and to the extent, Penn Octane transports
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hazardous materials (as listed in the Tables of 49 C.F.R. 172.101 and 172.102 as
amended from time to time) pursuant to this Agreement, Penn Octane hereby
warrants that all hazardous materials shall be prepared for transportation in
compliance with all applicable federal, state and local laws, rules and
regulations regarding the handling and transportation of hazardous materials.
Penn Octane shall indemnify and defend Xxxx from all liability, of whatever
nature, to which Xxxx may become subject as a result of Penn Octane's failure to
comply therewith.
19. Law and Jurisdiction. This Agreement shall be governed by,
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construed and enforced in accordance with the laws of the State of Kansas,
without regard to principles of conflicts of law. The Parties agree that venue
is to be Wichita, Kansas. This Agreement shall be subject to all applicable
laws, rules, regulations and orders of any governmental agency or tribunal with
jurisdiction over the Parties or the subject matter hereof. If any provision of
this Agreement is held to be invalid, illegal or unenforceable, all other
provisions shall remain valid, effective and fully enforceable.
20. Notices. All notices, reports and other communications required or
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permitted hereunder shall be deemed properly given if in writing and sent by
registered or certified mail, with all postage or charges fully prepaid, or by
facsimile to the other Party at the address(es) stated below.
PENN OCTANE: XXXX:
Penn Octane Corporation Xxxx Hydrocarbon Company
0000 Xxxxxxxx Xxxxx, Xxxxx 000 L P.O. Box 2256
Kingwood, TX 77339 Wichita, Kansas 67201-2256
Attn: VP Gas Liquids Attn: NGL Accounting
Fax No.: (000) 000-0000 Fax No.: (000) 000-0000
Notices of change of address of either Party shall be given in writing to the
other in accordance with this section.
21. Third Party Beneficiaries. There are no third-party beneficiaries
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to this Agreement, and the provisions of this Agreement shall not impart rights
enforceable by any person, firm or organization not a Party or not a successor
or assignee of a Party to this Agreement.
22. Joint Action. This Agreement was prepared jointly by the Parties,
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and not by either Party to the exclusion of the other.
23. Assignment. Neither this Agreement nor any interest herein shall
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be assigned by either Party without the prior written consent of the other
Party; provided that consent to an assignment shall not be unreasonably
withheld. Any assignment made in contravention of this section shall be void at
the option of the other Party.
24. Titles. The numbering and titling of particular provisions of this
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Agreement are solely for convenience of reference and shall have no effect on
the interpretation or construction of this Agreement.
25. Counterparts. This Agreement may be executed in multiple
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counterparts and by different Parties on separate counterparts, each of which
when so executed shall be deemed to be an original and all of which, taken
together, shall constitute one agreement.
26. Entire Agreement. No statements or agreements, oral or written, not
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contained herein or in a future amendment hereto executed by both Parties shall
vary or modify the terms hereof. Neither Party shall claim any amendments,
modifications or release from any provisions hereof unless the same is in
writing signed by each of the Parties hereto and specifically states the same is
an amendment to this Agreement.
27. Waiver. Notwithstanding any other provision of this Agreement, no
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waiver by either Party of any breach or default in performance of any covenant
herein by the other Party shall operate or be construed as a waiver of any other
breach or default, whether of a like or different character, nor shall any
failure to exercise any right hereunder be considered a waiver of such right in
the future.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the 23rd day of February 2000.
PENN OCTANECORPORATION XXXX HYDROCARBON COMPANY,
a division of Xxxx Industries, Inc.
By: By:
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Printed Name: Printed Name:
Title: Title:
