Exhibit 10.5

Paramount Petroleum Contract
 

 

 

 

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PURCHASE AND SALE AGREEMENT


THIS PURCHASE AND SALE AGREEMENT. (Agreement) by and between PARAMOUNT
PETROLEUM CORPORATION, a Delaware corporation, with its principal offices
located at 14700 Downey Avenue, Paramount, California 90723 (hereafter,
"Seller" or "PPC") and INTERMOUNTAIN REFINING COMPANY, a New Mexico corporation,
with its principal offices located at 1921 Bloomfield Boulevard, Farmington,
New Mexico  87401 (hereafter, "Buyer" or "IRC").


W I T N E S S E T H:


WHEREAS, IRC owns certain tanks, land, loading racks and associated
equipment usable in the manufacture, storage and shipment of asphalt cements,
asphalt emulsions and cutback asphalts, and operates an asphalt terminalling
facility located near the City of Fredonia, State of Arizona ("IRC's Terminal");
and


WHEREAS, Seller owns certain emulsion asphalt manufacturing equipment
and facilities (the "Equipment") which when combined with certain equipment
owned by IRC and assembled at IRC's Terminal is to be leased to Buyer pursuant
to that certain Lease Agreement ("the Lease") between PPC and IRC dated
November 29, 1999; and


WHEREAS, IRC desires to purchase and PPC desires to sell certain asphaltic
materials to IRC for the manufacture of emulsified and cut back asphalts
in accordance with PPC's specifications and the storage and re-delivery
of paving asphalts ("Asphalt Products"); and


WHEREAS, PPC desires to purchase and IRC desires to sell such Asphalt
Products to PPC; and


WHEREAS, IRC and PPC will each provide the other with stand-by irrevocable
letters of credit to ensure each party's performance in accordance with
the terms and conditions set for the herein:


NOW, THEREFORE, for and in consideration of the promises and the mutual
covenants and agreements contained herein, the parties hereto do hereby
agree as follows:

I.



AGREEMENT OF PARTIES


1.1 IRC hereby agrees that it will manufacture, store and re-deliver
Asphalt Products that meet the product specifications attached hereto as
"Exhibit A", and/or as provided by PPC from time to time.

 


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1.2 PPC agrees to disclose its Product Specifications to those designated
personnel of IRC to permit IRC to manufacture asphalt products meeting
the product specifications designated in "Exhibit A".  The contents
of "Exhibit A", as well as any and all changes, modifications or corrections
to said Exhibits shall be the responsibility of PPC.  PPC represents
and warrants that the information and data contained in said Exhibits are
true and correct in all material respects.  PPC also agrees to provide
technical assistance and the performance at certain laboratory tests as
reasonably requested by IRC.


1.3  IRC shall treat all information received from PPC as confidential
except for that information specifically designated by PPC as non-confidential. 
IRC agrees to use the confidential information received from PPC only in
performance of activities pursuant to the rights granted by PPC under this
Agreement, and only during the term of this Agreement.


1.4 IRC agrees to lease from PPC the Equipment according to the terms
and conditions of that certain Equipment Lease Agreement between the parties
hereto dated November 29, 1999, and incorporated herein by this reference
and attached hereto as Exhibit "B".


1.5  IRC agrees to purchase such asphalt materials from PPC as
may be required to supply PPC's requirements for Asphalt Products in the
area served by IRC's terminal, f.o.b. IRC's Terminal, at a price based
upon the monthly average of high and low of Posted prices as published
by Poten & Partners for the Arizona/Utah (AZ/UT) area for the month
during which such asphalt is received by IRC.  The quantities of asphalt
purchased by IRC shall be determined by certified weights from a scale
at or near IRC's Terminal.  Title and risk of loss shall pass to IRC
at the unloading flange at IRC's Terminal.


1.6  The quantities of Asphalt Products sold and delivered by IRC
to PPC shall be determined by meter or by certified weights from a scale
located at or near IRC's Terminal.  Title and risk of loss shall pass
to PPC at IRC's loading flange.


1.7  To secure payment to PPC by IRC for the purchase of asphaltic
materials, IRC agrees to provide PPC with a stand-by irrevocable letter
of credit acceptable to PPC's Chief Financial Officer, as well as any lenders
providing credit facilities on behalf of PPC, in amounts sufficient to
cover IRC's anticipated purchases.


1.8  PPC agrees to provide IRC with a stand-by irrevocable letter
of credit acceptable to IRC's Chief Financial Officer, as well as any lenders
providing credit facilities on behalf of IRC, in amounts sufficient to
meet the anticipated charges for Asphalt Products purchased by PPC hereunder.

 

 


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II.



PRICING, PAYMENT AND COST REIMBURSEMENT


2.1  The amount paid to IRC by PPC for Asphalt Products purchased
hereunder shall be determined in accordance with the following formula:

 


P = 0.4 (TR-AM-C-CRC)
 

Where:

 

 P = Amount paid to IRC by PPC for Asphalt Products for any month.

 TR = PPC's total revenue from the sale of Asphalt Products net
of applicable taxes, discounts, penalties, other applicable contra charges,
etc., f.o.b. IRC's Terminal for any month.


 AM = The cost of asphaltic materials used in the Asphalt Products
delivered to PPC for any month as set forth in Paragraph 1.4.  In
determining such costs, FIFO accounting principals shall be employed.
 


 C = The sum of the following costs on a monthly basis attributable
to the operation of IRC's Terminal for the storage, manufacture and delivery
of Asphalt Products:
 


(a) Chemicals, additives, water and diluents

(b) Utilities, including fuel electric power and telephone

(c) Maintenance and repairs, (including contract maintenance) parts
and supplies

(d) Operating, maintenance and supervisory labor and payroll burden

(e) Insurance and taxes

(f) Equipment Lease

(g) General and administrative overhead

(h) Other applicable costs not specifically defined

 
CRC = A Capital recovery charge, which shall be computed on a monthly basis,
equal to 1/48 (0.020833...) of the total out of pocket capital costs expended
during the Primary Term of this Agreement.

 

2.2  The following procedure shall be applied to satisfy the payment
obligations of each party to the other:

 

 

 

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(1) With respect to the payment for asphaltic materials purchased by
IRC from PPC (formula component AM in Paragraph 2.1), for each calendar
month during which Asphalt Product sales occur, PPC shall first determine
the cost of the asphaltic material component in such sales in accordance
with Paragraphs 1.4 and 2.1 and credit IRC's payment obligation to PPC
by the amount so determined.

(2) With respect to the payment or reimbursement of IRC's costs (formula
component C in paragraph 2.1), PPC shall next deduct IRC's costs for each
calendar month from amounts remaining (TR-AM) in Paragraph 2.1) and reimburse
IRC for such costs.  In the event the result of TR-AM is insufficient
to cover IRC's costs for any given month, or in the event TR=0, costs incurred
by IRC shall be "banked" for recovery and reimbursement in subsequent months. 
For any month in which IRC does not receive full recovery of its costs,
it may, at its sole option, call for a full or partial reimbursement of
its costs by PC.  In this event, such reimbursements or "advances"
will be banked for the account of PPC for recovery in subsequent months. 
All requests for reimbursement of costs incurred by IRC shall be supported
by appropriate documentation.


(3) With respect to PPC's recoupment of capital recovery charges (formula
component CRC in paragraph 2.1), during any month when the balance remaining
after deducting the cost for asphalt materials and IRC's costs from total
revenues (TR - AM -C) is insufficient to provide for the capital recovery
charge, any shortfall shall be "banked" for the account of PPC for recovery
in subsequent months.


(4) Neither party shall receive a payment under formula component P
in Paragraph 2.1 until the "banks" for IRC and PPC have zero or negative
balances.

 
2.2  Approved Costs incurred by IRC in assembling the Equipment will
be reimbursed by PPC upon the submission of appropriately documented invoices. 
For purposes of this Agreement, until the Equipment is fully assembled
and the parties mutually agree that the Equipment is operational all such
costs incurred hereunder will be deemed to be "capitalized" hereunder.

 

 

 


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III.



TERM AND TERMINATION


 3.1  The term of this Agreement shall be four (4) years from
the date of the first delivery of Asphalt Products hereunder ("the Primary
Term") and shall continue from year to year thereafter unless terminated
by either party by written notice at least one hundred and eighty (180)
days prior to the end of the Primary Term or any annual extension thereof. 
The foregoing notwithstanding to the contrary, at anytime after the first
anniversary of the date of first delivery of Asphalt Product hereunder,
PPC may terminate this agreement by giving IRC no less than sixty (60)
days advanced written notice in the event that market conditions are such
that continuing with this Agreement becomes uneconomic in the sole judgment
of PPC, or in the event of unexpected competition for the products to be
manufactured, purchased, sold, stored, and redelivered hereunder.. 
Following the termination of the Agreement, PPC will remove its Equipment
in accordance with the terms of the Lease, and will at IRC's option purchase
IRC's inventory of asphaltic materials, Asphalt Products, and chemicals
and additives, if any, at IRC's cost.


3.2  In the event of the termination of this Agreement for any
reason, IRC shall promptly return to PPC any confidential information in
its possession and make no further use of the same.


3.3  Neither IRC nor PPC shall, by reason of the termination of
this Agreement, be liable to the other for compensation, reimbursement
or damages of any kind on account of the loss of prospective profits on
anticipated sales or on account of expenditures, investments, or commitments
in connection with the business or good will of IRC or PPC or otherwise,
except for payments for asphaltic materials, IRC's costs and IRC's price
for Asphalt Products, if any, as set forth herein.

IV.



INSURANCE AND INDEMNITIES


4.1  IRC shall maintain its Terminal in such a manner that it will
be able to produce Asphalt Products which meet the specifications shown
on "Exhibit A", or as provided by PPC from time to time.


4.2  The persons executing this Agreement have the authority to
bind the entity for which they are signing.  If reasonably requested,
either party hereto shall provide proof of that authority through the certified
and sealed corporate resolution that confirms such authority.

 

 


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4.3  Each party hereto agrees that during the term of this Agreement,
they will maintain worker's compensation insurance coverage in amounts
required by law.  Each party will also maintain property or covered
peril insurance coverage in amounts sufficient to cover any damage to the
Equipment, asphaltic materials, and asphaltic products, in amounts that
are mutually agreeable to the parties hereto, as well as commercial general
liability coverage, product liability coverage, which coverage will include
pollution endorsements, if reasonably available and which names the other
party as an additional insured.  Certificates of insurance to be provided
upon execution of this Agreement.


4.4  IRC agrees to defend, indemnify and hold harmless PPC, its
officers, directors, shareholders, employees, agents, representatives and
independent contractors for any and all liability for personal injuries
and any property damage which arises out of the duties and obligations
arising out of this Agreement, and its performance under this Agreement
except if such liability arises from PPC'' gross negligence or willful
misconduct.  IRC further agrees to indemnify, defend, and save PPC
harmless from any expense or liability whatsoever arising out of any and
all claims, demands or causes of action that may be asserted against PPC
on account of injuries to or deaths of persons, damage to property, or
injuries to the environment, occurring as a result of or in any way related
to the storage, manufacture, receipt, redelivery and handling of any of
the Products covered by this Agreement.  However, this duty to indemnify
does not cover any incidental, consequential of special damages of any
kind whatsoever.


4.5  PPC agrees to defend, indemnify and hold harmless IRC, its
officers, directors, shareholders, employees, agents, representatives and
independent contractors for any and all liability for personal injuries
and any property damage which arises out of its performance under this
Agreement, except if such liability arises from IRC's gross negligence
or willful misconduct.  PPC further agrees to indemnity, defend and
save IRC harmless from any expense or liability whatsoever arising out
of any and all claims, demands or causes of action that may be asserted
against IRC on account of injuries to or deaths of persons, damage to property,
or injuries to the environment, occurring as a result of or in any way
related to the transportation, supply and resale of any of the Products
covered by this Agreement.  However, this duty to indemnify does not
cover any incidental, consequential or special damages of any kind whatsoever.

V.



REPORTS AND PAYMENTS


5.1  IRC shall provide PPC documents evidencing asphaltic materials
received by IRC, inventories of asphaltic materials and Asphalt Products
on hand and Asphalt Products delivered to PPC on a daily basis, except
Saturdays and Sundays.

 


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5.2  No later than the seventh (7th) working day of each month
IRC shall provide PPC documents evidencing IRC's cost for the previous
month, as defined in Paragraph 2.1 of this Agreement.

 


5.3  No later than the twentieth (20th) day of each month, PPC
shall provide IRC an accounting of the previous month's business results
which essentially follows the formula and procedures described in Paragraphs
2.1 and 2.2 of this Agreement.  Such accounting shall also show the
balances in IRC's and PPC's "banks".


5.4  Any payments required under this Agreement shall be due and
receivable in the offices of the invoicing party five (5) business days
after receipt of a documented invoice by the invoiced party.  Any
payment due and not received by the due date shall accrue  interest
at the rate of one and one-half percent (1.5%) per month until paid; provided,
however, that the interest rate charged shall not exceed the maximum rate
permitted by law.

VI.



NOTICE


6.1  Any notice, demand, report r other communication by PPC hereunder
shall be sufficiently given if delivered to IRC at the following address:

 


TO IRC:   Mr. William Hagler

    President

    INTERMOUNTAIN REFINING CO., INC.

    1921 Bloomfield Blvd.

    Farmington, NM  87401

 
And by IRC if delivered to PPC at the following address:

 

TO PPC:   William L. Thorpe, Jr.

    Senior Vice President

    PARAMOUNT PETROLEUM CORPORATION

    14700 Downey Avenue

    Paramount, California  90723

With a Copy to:  Steven D. Farkas, Esq.

    Vice President & General Counsel

    PARAMOUNT PETROLEUM CORPORATION

    14700 Downey Avenue

    Paramount, California  90723
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Subsequent to the execution of this Agreement, either party hereto
may change the location of where notices hereunder are to be sent by providing
a written notice to the other party as provided herein.

VII.



INTERPRETATION AND APPLICABLE LAW


7.1  This Agreement supersedes all prior discussions, negotiations
and agreements between the parties and may not be amended except by agreement
in writing signed by all parties.


7.2  This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California, and should any clause, sentence,
or paragraph hereof  be judicially decided to be invalid, unenforceable
or void, such decision shall not have the effect of invalidating or voiding
the remainder of this Agreement, and the parties agree that such portion
or portions shall be deemed to have been stricken here from and the remainder
shall have the same force and effectiveness as if such portion or portions
had never been included herein.

VIII.



WAIVER


8.1  The failure of any party at any time to require performance
of any provision hereof shall not effect such party's right to enforce
the same at any late time.  No waiver of any provision or breach by
any party will be deemed a further or continuing waiver of breach of any
such provision or of any other provision hereof.

IX.



ENFORCEMENT


9.1  Should litigation be instituted to enforce any portion of
this Agreement, the prevailing party shall be reimbursed all of its costs
and expenses, including reasonable attorney's fees, expert witness fees
and court costs, in enforcing the same, upon the entry of a final and unappealable
decision of any court of competent jurisdiction.

X.



ASSIGNABILITY


10.1  This Agreement shall be personal to and not assignable by
IRC without the prior to written approval of PPC, and such approval shall
not be unreasonably.


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XI.



ENVIRONMENTAL INDEMNITY


11.1 IRC acknowledges that its Terminal may contain environmental contamination. 
IRC agrees to indemnify and hold harmless PPC for any and all claims or
causes of action, whether brought by a governmental agency or a third party,
which in any way relates to the environmental condition of the property,
or off-site impacts caused or allegedly caused by the condition of 
IRC's property or facility.

XII.



FORCE MAJEURE


12.1  Neither party shall be deemed to be in default or liable
to the other party for failure or delay in making or accepting deliveries
hereunder to the extent that such failure or delay is due to compliance
with unexpected legislation, acts, rules, orders, regulations, directives
or requests of any federal, state or local civilian or military authority,
or as a result of insurrection, wars, rebellions, riots, embargoes, strikes
or other labor difficulties, fire, explosions, floods, or actions of the
elements, acts of God, disruption or breakdown of production.  The
party claiming occurrence of a force majeure event must provide the other
party written notice of such event as soon as possible following the event,
but in no event later than seven (7) days from the date of the event. 
This provision shall not apply to payment of any sums due to either PPC
or IRC for asphaltic materials, or Asphalt Products and IRC's costs respectively.

XIII.



INSPECTION OF BOOKS AND RECORDS


13.1  Each party hereto shall have the right as its own expense,
during reasonable business hours, to examine, audit and/or photocopy the
books, the records, invoices, gauging and weighing charts of the other,
to the extent necessary to verify the accuracy of any invoice, statement,
charge, computation or demand made under or pursuant to any of the provisions
of this Agreement.  Any inaccuracy will be promptly corrected when
discovered; provided however, that neither party shall be required to maintain
books, records, invoices or charts for a period of more than three (3)
years following the termination of this Agreement.  Neither party
shall have any right to question or contest any charge or credit if the
matter is not called to the attention of the other party in writing within
three (3) years of the termination of this Agreement.

 

 

 

 


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XIV.



REPRESENTATIONS AND WARRANTIES


14.1  Each party hereto hereby represents, warrants and covenants
to the other that the following matters are true and correct as of the
execution of this Agreement and will also be true and correct as of the
effective date of this transaction.


(a) This Agreement, the accompanying Lease Agreement, and all other
documents and items to be executed and delivered by each party to the other
pursuant to the other pursuant to the terms of this Agreement, (i) have
been or will be duly authorized, executed and delivered by the party, (ii)
are or will be legal, valid and binding obligations of that party as of
the date of their respective executions, (iii) are or will be enforceable
in accordance with their respective terms, and (iv) do not and will not,
at the date of execution of this Agreement and the attached Equipment Lease
Agreement, violate any provisions of any agreement to which Buyer or Seller
is a party.

(b) To the actual Knowledge of each party, no attachments, execution
proceedings, assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other proceedings are pending or threatened against that
either Buyer or Seller nor are any of such proceedings contemplated by
either Buyer or Seller.

XV.



BANKRUPTCY


15.1  In the event that either party hereunder files for relief
under the Bankruptcy laws of the United States, institutes proceedings
for the benefits of creditors, applies for any form or reorganization,
or threatens any such proceedings, this Agreement and the Lease Agreement
shall become immediately terminable by the other party, any executory lease
benefits will immediately terminate, and any leased equipment may be removed
by the owner of that equipment.


ACCEPTED at Paramount, California, as set out below.


PPC:                                         
                                          
       
IRC:


WILLIAM L. THORPE, JR.                                      
                 
WILLIAM N. HAGLER


BY: William L. Thorpe, Jr.                                     
                       
BY: William N. Hager

 

ITS:  Senior Vice President                                    
                       
ITS: President


DATE:  11/30/99                                      
                                   
DATE:   11/30/99


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