Exhibit 10.10


    
      

    

    Exhibit
      10.10

       

      ELLA-BROWNSVILLE
        PIPELINE LEASE AGREEMENT

      


      This
        Ella-Brownsville
        Pipeline Lease Agreement (this
        "Agreement"), effective
        as of August 1, 2006 (the "Effective Date"), is between SEADRIFT PIPELINE
        CORPORATION, a Delaware corporation ("Seadrift") and PENN-OCTANE
        CORPORATION, a Delaware corporation ("POC"), individually the "Party"
        and collectively the "Parties". This Agreement supercedes the Ella-Brownsville
        Pipeline Lease Agreement effective September 1, 1993, as amended on
        October 10, 1993, May 21, 1997 and October 26, 1999, respectively, by and
        between
        Seadrift and POC.

      


      WITNESSETH:

      


      WHEREAS,
        Seadrift owns a six-inch (6") pipeline, including fittings, footings,
        and supports, valve station and corrosion control equipment, and
        other appurtenances
        thereto, extending approximately one-hundred-twenty-one (121) miles
        from ExxonMobil Corporation's King Ranch Gas Plant in Kleberg
        County, Texas,
        to
        the fence line of certain property owned by the Brownsville
        Navigation District
        ("BND") in Cameron County, Texas, which property is currently leased
        to Penn
        Octane Corporation (POC), the location of which pipeline is
        approximately shown
        on
        Exhibits A-1 and A-2 attached hereto (hereinafter called the
        "Pipeline");

      


      WHEREAS,
        Seadrift owns a three-inch (3") pipeline, including fittings, footings,
        and supports, valve station and corrosion control equipment, and
        other appurtenances
        thereto, extending 11.26 miles from Duke Energy Field Services LaGloria
        Gas Plant in Jim Wells County, Texas, to its intersection with the Pipeline
        in Kleberg County, Texas, the location of which pipeline is
        approximately shown
        on
        Exhibits A-1 and A-2 attached hereto (hereinafter called the "Pipeline
Lateral");



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      WHEREAS,
        Seadrift has installed the Pipeline and the Pipeline Lateral
        (hereinafter sometimes collectively called the "Pipeline Facilities")
pursuant
        to certain rights of way, easements, licenses, and other agreements as
more
        particularly identified in Exhibit B attached hereto (hereinafter called
        the
"Underlying
        Agreements");

      


      WHEREAS,
        POC desires to lease the Pipeline and the Pipeline Lateral
        from Seadrift, subject to the terms and conditions hereinafter
        stated:

      


      NOW,
        THEREFORE, for and in consideration of the mutual covenants
        and conditions contained herein, Seadrift and POC agree as follows:

      


      I.
        CONVEYANCE

      


      Seadrift
        does hereby lease and let to POC and POC does hereby hire
        and
        take from Seadrift the Pipeline and Pipeline Lateral, subject to the terms
        and
        conditions of this Agreement and the Underlying Agreements and all existing
        easements,
        covenants, restrictions, third-party rights, and other
        encumbrances.

      


      II.
        TERM OF AGREEMENT

      


      2.1  Lease
        Period - The term of this Agreement (hereinafter referred
        to as the "Term") shall commence on the Effective Date of this Agreement
        and, subject to the terms hereof, shall continue through December
        31, 2013.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      III.
        USE

      


      3.1  POC
        shall
        have the exclusive right to use the Pipeline Facilities
        solely for the transportation of either refined petroleum products, propane,
        butane, or a mixture of propane and butane (herein individually and collectively
        called the "Product") and for no other product or substance, whether
in
        gaseous, liquid, or any other form. POC shall not use the Pipeline Facilities
        for any
        other
        purpose, without the prior written consent of Seadrift, which consent
may
        be
        arbitrarily withheld.

      


      3.2  If,
        in
        the reasonable opinion of Seadrift's counsel, the existence
        of this Agreement or the use of the Pipeline Facilities by POC subjects Seadrift
        or any affiliate to the jurisdiction of, or regulation by, any federal or
        state
authority
        as a common carrier, or otherwise, then Seadrift shall have the right to
        take
        such
        appropriate measures as are reasonably necessary to avoid such jurisdiction,
        including for example the modification or termination of this Agreement;
        and Seadrift shall have the right to give POC sixty (60) days' notice
of
        its
        intention to modify or terminate this Agreement; however, during which
period
        Seadrift and POC shall work in good faith to resolve the issue.

      


      IV.
        FACILITIES

      


      POC
        shall
        install or cause to be installed piping interconnections, pumping facilities,
        and metering equipment as may be necessary or appropriate to effect the handling
        and delivery of the Product. All changes and modifications to
        the
        Pipeline Facilities will be made in accordance with Seadrift's minimum
safety
        standards and such other design and/or installation requirements as Seadrift
        may impose. Seadrift shall have the right to inspect such work prior to
its
        completion and to require any appropriate remedial work, including the
installation
        of shutoff valves and safety devices to maintain the Pipeline Facilities
        as
        separate and discrete from any facilities of third parties.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      V.
        OPERATION AND MAINTENANCE OF PIPELINE FACILITIES

      


      5.1  Operations.   POC
        shall be responsible
        for and will bear all of the
        expense for the operation of the Pipeline Facilities during the term of this
        Agreement, which is defined as the scheduling, dispatching, metering, pumping,
        analyzing,
        and other activities related to getting Product into and out of the Pipeline
        Facilities, the operation of all pumping, metering and analyzer equipment,
        performance of shutdowns and start-ups and preparation of pipeline segments
        for Maintenance to be performed by Seadrift ("Operation" or "Operating").
        POC shall perform its obligations regarding its use of the Pipeline Facilities
        in accordance with any and all requirements and restrictions contained
in
        the
        Underlying Agreements and all applicable local, state, and federal statutes,
        ordinances, rules, regulations, and requirements.

      


      5.2  Maintenance
        - Seadrift shall keep and maintain the Pipeline Facilities in a safe and
        orderly
        condition and shall perform, at its expense, all necessary or appropriate
        maintenance, repair and replacement work, including without limitation all
        maintenance, repair and replacement of fittings, couplings, pipelines, footings
        and supports, pumping, metering, valve station and cathodic protection
        equipment and any other equipment or appurtenances comprising the Pipeline
        Facilities ("Maintenance"). For the purposes of this Agreement, Maintenance
        shall also include at a minimum the following work: right-of-way maintenance,
        valve station maintenance, cathodic protection, pipeline repairs and
        adjustments, inspection and surveillance of the Pipeline
        Facilities.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      5.3  With
        advance notice provided to POC, Seadrift shall have the
        right
        to shut down the Pipeline and the Pipeline Lateral and/or displace the
Product
        from the Pipeline and the Pipeline Lateral in order to make
        repairs.

      


      5.4  Except
        as
        otherwise provided in this Agreement, POC shall not
        make
        any modifications, alteration, or additions to the Pipeline
        Facilities.

      


      VI.
        FEES

      


      6.1  Annual
        Fees - For the Pipeline use and maintenance services
        provided, POC agrees to pay Seadrift an annual fee of $1,600,000 for
the
        exclusive use of the Pipeline Facilities ("Lease Fee") The Lease Fee shall
        be
payable
        in advance in twelve (12) equal monthly installments of $133,333 each.
The
        monthly payments shall be without setoff, countdown, or deduction for any
        reason
        whatsoever, together with all taxes, excises or other governmental impositions,
        other than those as measured by net income, due on account of such
        fees.

      


      6.2  Invoicing
        and Payment - On or before the twentieth (20th)
        day
        of
        each month, Seadrift shall bill POC for the Lease Fee for the next calendar
        month. All fees are due and payable to Seadrift within ten (10) days
from
        date
        of invoice. If payment is not received within ten (10) days from date of
        invoice,
        the amount billed shall from the date of the invoice until paid, bear
interest
        calculated at an annual rate equal to the prime rate of interest plus
        two (2)
        percent as charged by Citibank N.A. of New York, New York, , provided that,
        if
        such
        interest rate exceeds the highest lawful rate, then interest hereunder shall
        be
        calculated at the highest lawful rate.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      6.3  Except
        as
        otherwise specifically provided in Section 9.1, the fee
        set
        forth in Article 6.1 shall be absolutely net to Seadrift, and except as
otherwise
        specifically provided herein, all costs, expenses, and obligations of every
        kind
        and nature whatsoever relating to the Pipeline Facilities which may arise
        or
        become due during the term of this Agreement shall be paid by POC.

      


      VII.
        OPERATING PRESSURE

      


      POC
        shall
        not cause or permit the Pipeline Facilities to be subjected to pressure
        exceeding 1,800 pounds per square inch gauge (psig) or otherwise cause
        or
        permit to arise with respect to the Pipeline Facilities any condition, state
        of
        facts,
        or occurrences which would damage or destroy the Pipeline Facilities or
constitute
        a nuisance or hazard to the public health or safety.

      


      VIII.
        TITLE AND RISK OF LOSS

      


      8.1  Title
        and
        risk of loss for the Product located in the Pipeline Facilities,
        including any injection into or removal therefrom, shall remain at all
times
        in
        POC, unless loss of Product is caused solely and proximately by the negligence
        or willful misconduct of Seadrift.

      


      8.2  POC
        represents and warrants to Seadrift that,

      


      A.  POC
        is
        knowledgeable and sophisticated with respect to the safe
        and
        proper handling of the Product.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      B.  POC
        will
        take such measures as may be necessary or appropriate
        to protect the health, safety, and well-being of the public, its personnel,
        and any third parties with respect to any problems or risks associated
with
        the
        performance of this Agreement or the existence of the Pipeline
        Facilities.

      


      8.3  In
        no
        event shall Seadrift be liable to POC for any special, incidental, or
        consequential damages, including without limitation loss of profits due
        to
        the existence, use, or Operation of the Pipeline Facilities during the Term
        of
        this
        Agreement.

      


      IX.
        TAXES

      


      9.1  Seadrift
        shall pay and discharge all ad valorem taxes and assessments
        applicable to the Pipeline Facilities except the Product contained in
the
        Pipeline Facilities pursuant to this Agreement and all payments otherwise
        required
        to be made under the Underlying Agreements in order to keep such Agreements
        in effect.

      


      9.2  Except
        as
        set forth in Section 9.1, POC shall pay and discharge
        all taxes, excises, and other governmental impositions due on account
of
        any
        fees or other payments made hereunder or otherwise arising out of this
Agreement,
        other than any taxes imposed upon Seadrift as measured by net income.

      


      X.
        TERMINATION OF LEASE

      


      10.1  At
        the
        expiration or other termination of this Agreement, POC
        shall
        promptly vacate and yield up the Pipeline Facilities to Seadrift, in
        the same
        condition or order and repair in which they are required to be kept throughout
        the Term thereof, reasonable wear and tear excepted.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      10.2  Prior
        to
        the expiration or other termination of this Agreement, POC
        shall
        cause all Product to be removed from the Pipeline Facilities, by purging
        or otherwise, and shall cause to be removed or otherwise eliminated any
nuisances
        or dangerous, harmful, or unhealthful conditions arising during the Term
        of
        this Agreement with respect to the Pipeline Facilities. POC shall then fill
        the
        Pipeline Facilities with nitrogen at a minimum pressure of 70 psig.

      


      XI.
        ENVIRONMENTAL MATTERS

      


      11.1  Definitions.   For
        the
        purposes of this Agreement, the following
        terms have the meanings herein assigned to them:

      


      "Claims"
        means
        any
        and all actual or alleged losses, costs, legal costs (including reasonable
        attorney fees, court costs and other costs of suit), expenses, injury
(including
        personal injury, physical pain, illness, disease, death, property damage
        or
        any
        invasion of personal rights) liabilities, claims, demands, damages (direct
        or
        indirect), penalties, fines, judgments, assessments, and settlements, imposed
        on,
        incurred by, suffered by, or asserted against any Person or any property
        (whether
        or not on the basis of negligence, contract, tort, strict or absolute
liability,
        breach of warranty, products liability, misrepresentation, violation of Laws
        or
        any causes whatsoever).

      


      "Environmental
        Claim" means
        any
        notice of violation, Claims, abatement order or
        other
        order or direction (conditional or otherwise), or other mandatory communication
        for any damage, including personal injury (including sickness, disease
        or death), tangible or intangible property damage, contribution, indemnity,
        damage to the environment, other damages, violation of pollution standards,
        nuisance, pollution, contamination or other adverse effects on the environment,
        and/or for fines, penalties or restrictions, including all liabilities for
        or
        in
        respect of any Remedial Action, resulting from or based upon at any
        time

      
        	
                (i)

              	
                the
                  existence of a Release (whether sudden or non-sudden or
                  accidental or
                  non-accidental) of, or exposure to, any Specified Substance, in,
                  into
                  or onto
                  the environment at, in, by, from, around or related to the Property
                  or any
                  part thereof; 

              


      

      
        	
                (ii)

              	
                the
                  use, handling, transportation, storage, treatment or disposal
                  of Specified
                  Substances in connection with the operation and maintenance of
                  the Property or any part
                  thereof;

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      
        	
                (iii)

              	
                the
                  violation, or alleged violation, of any Environmental Laws or any
                  Authorizations
                  issued pursuant to such Environmental Laws in connection with
                  the Property or any part thereof or

              


      

      
        	
                (iv)

              	
                the
                  failure to comply with an Environmental Law, including the Lost
                  Time
                  Value
                  of Money.

              


      

      


      "Environmental
        Liabilities" means
        all
        liabilities, whether strict, absolute, in negligence,
        in tort or under contract or arising under statute, regulation or other
Laws,
        arising out of any Environmental Claim.

      


      "Environmental
        Laws" means
        any
        and all Laws pertaining to the environment whose
        purpose is to protect the environment or wildlife and that are in effect
        in
any
        and
        all jurisdictions in which the Property is located, including the Clean Air
        Act
        ("CAA"), as amended; the Rivers and Harbors Act, as amended (also known
as
        the
        "Clean Water Act"); the Resource, Conservation and Recovery Act ("RCRA"),
        as amended; the Comprehensive Environmental Response, Compensation
        and Liability Act ("CERCLA"), as amended; the Superfund Amendments
        and Reauthorization Act of 1986 ("SARA"), as amended; the Toxic Substances
        Control Act ("TSCA"), as amended; the Hazardous Materials Transportation
        Act, as
        amended; and the Oil Pollution Act of 1990 ("OPA"), as amended.

      


      "Governmental
        Body" means
        any
        federal, state, tribal, county, municipal, or other
        authority or judicial, administrative or regulatory agency, board, body,
        department,
        bureau, commission, instrumentality, court tribunal or quasi-governmental
        authority in any jurisdiction (domestic or foreign) having jurisdiction
over
        the
        Property or any Party to this or any of the transactions or matters contemplated
        by this Agreement.

      


      "Laws"
        means
        any applicable laws, ordinances, orders, rules, regulations, judgments
        or decrees or imposed practices of any Governmental Bodies, including
        the common or civil law, and those relating to occupational safety and
health,
        consumer product safety, employee benefits, environmental laws, zoning
laws
        or
        regulations.

      


      "Lost
        Time Value of Money" is
        due to
        an acceleration of costs primarily caused by
        the
        other Party's voluntary conduct and not required or necessitated by any
        regulatory or reasonable business related conduct. Within thirty (30) days
        of
        the earlier
        of the termination or expiration date of this Agreement, Seadrift will submit
        to
        POC an
        invoice indicating the total actual cost of the remediation project incurred
        by Seadrift by month (based on third party invoices and excluding Seadrift's
        administrative and overhead costs), up to such termination or expiration
        date, along with supporting documentation. POC will pay the Lost Time
        Value of Money calculated on the monthly expenditures from such invoice
based
        on
        the following calculation:


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Lost
        Time
        Value of Money means that certain total amount of money resulting from
        the
        use of the following calculation wherein "i" equals the applicable interest
        rate,
        which rate shall be the quoted London Interbank Overnight Rate (LIBOR), "N"
        equals the compounding periods ( i.e. 2 years) and "X" equals the total cost
        of
        remediation.

      


      
        	
                Cost
                  of remediation (1 + i)N
                  =
                  X

                X
                  minus the Cost of remediation = Lost Time Value of
                  Money

              


      

      


      Example:

      


      Remediation
        Project costs $500,000 (1 + .02)2
        =
        $520,200

      $520,200
        minus $500,000 = $20,200 (Lost Time Value of Money)

      


      "Property" means
        the
        Pipeline Facilities, and any and all associated appurtenances
        and equipment and real property identified in the Underlying Agreements.

      


      "Release"
        means
        any
        presence, release, spill, emission, leaking, pumping, pouring,
        injection, escaping, deposit, disposal, discharge, dispersal, leaching or
        migration in, into or out of the indoor or outdoor environment and whether
        above
or
        below
        the surface of the earth (including the abandonment or disposal of any
barrels,
        containers or other closed receptacles containing any Specified Substances),
        or in, into or out of any vessel or facility, including the movement of
any
        Specified Substances through the air, soil, surface water, groundwater or
        property, and when used as a verb has a like meaning.

      


      "Remedial
        Action" means
        any
        action, whether voluntary or compelled, that is reasonably necessary under
        Environmental Laws to

      
        	 	
                (i)

              	
                clean
                  up, remediate, remove, treat or in any other way deal with Specified
                  Substances,

              


      

      
        	 	
                (ii)

              	
                prevent
                  any Release of Specified Substances in accordance with, or to the
                  standards required by, applicable remedial criteria, whether such
                  Release
                  would violate any Environmental Laws or would endanger or threaten
                  to endanger public health or welfare or the environment,
                  or

              


      

      
        	 	
                (iii)

              	
                perform
                  remedial studies, investigations, restoration or post-remedial
                  studies,
                  investigations and monitoring with respect to the presence of Specified
                  Substances in accordance with, or to the standards required by,
                  applicable remediation criteria.

              


      

      


      "Specified
        Substances" means


      
        	 	
                (i)

              	
                any
                  chemical, material or substance defined as or included in the definition
                  of "hazardous substances", "hazardous wastes", "hazardous materials",
                  "extremely hazardous waste", "restricted hazardous waste" or
                  "toxic substances" or words of similar import under any applicable
                  Environmental
                  Law;

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      
        	 	
                (ii)

              	
                any
                  (A) oil, natural gas, petroleum or petroleum derived substance
                  including
                  the materials shipped in or associated with the Pipeline Facilities,
                  any drilling fluids, produced waters and other wastes associated
                  with the exploration, development or production of crude oil,
                  natural gas or geothermal fluid, any flammable substances or explosives,
                  any radioactive materials, any hazardous wastes or substances,
                  any toxic wastes or substances or (B) other materials or pollutants,
                  that, in the case of both (A) and (B), (1) pose a hazard to any
                  of the Property, or to Persons on or about the Property or any
                  lands
                  that may be affected by the Release thereof or (2) cause any property
                  mentioned in (1) to be in violation of any Environmental
                  Law;

              


      

      
        	 	
                (iii)

              	
                asbestos,
                  urea formaldehyde foam insulation, toluene, polychlorinated biphenyls
                  and any electrical equipment which contains any oil or dielectric
                  fluid containing levels of polychlorinated biphenyls,
                  and

              


      

      
        	 	
                (iv)

              	
                any
                  sound, vibration, heat, radiation or other form of energy and any
                  other
                  chemical, material or substance, exposure to which is prohibited,
                  limited
                  or regulated by any Government
                  Authority.

              


      

      


      11.2  Environmental
        Covenant.   POC
        covenants that POC shall not
        store, produce, generate, transport (except the Products included in this
        Agreement),
        dispose, treat or handle any Specified Substances at, under or around
        the property which the Pipeline Facilities traverses except with Seadrift's
        prior
        written consent. POC covenants that it will comply with any and all Environmental
        Laws, now in force and effect or which may be passed, enacted, issued,
        revised, required or promulgated hereafter, incident to, arising out of or
        in
anyway
        connected with the utilization of the Property and/or any activities
conducted
        under, pursuant to, or by virtue of this Agreement. Not by way of limitation
        of the foregoing obligations, but in furtherance thereof, POC hereby
covenants
        that it will in no way release, discharge, dispose, discard, dump, bury
or
        store,
        Specified Substances of any nature or kind in, on or around the Property.

      


      11.3  POC'S
        ENVIRONMENTAL INDEMNITY.   POC
        AGREES
THAT,
        AS OF THE SEPTEMBER 1, 1993 AND SOLELY AS BETWEEN THE PARTIES,
        POC SHALL AND ONLY TO THE EXTENT OF POC'S SHARE OF NEGLIGENCE,
        FAULT AND/OR STRICT LIABILITY:

      


      (I)    
        BE
        SOLELY LIABLE AND RESPONSIBLE FOR ANY AND ALL CLAIMS
        AGAINST SEADRIFT OR ANY OF ITS REPRESENTATIVES WHICH ARISE
        AFTER SEPTEMBER 1, 1993: AND

      


      (II)    INDEMNIFY,
        DEFEND AND SAVE SEADRIFT AND EACH OF ITS REPRESENTATIVES
        HARMLESS FROM ANY AND ALL CLAIMS WHATSOEVER (INCLUDING, WITHOUT LIMITATION,
        THIRD PARTY CLAIMS)
        WHICH MAY BE BROUGHT AGAINST OR SUFFERED BY SEADRIFT
        OR ANY OF ITS REPRESENTATIVES OR WHICH THEY MAY SUSTAIN,
        PAY OR INCUR AS A RESULT OF ANY MATTER OR THING (INCLUDING THOSE INVOLVING
        PERSONAL INJURY, PHYSICAL PAIN, ILLNESS,
        DISEASE, DEATH OR PROPERTY DAMAGE OR ANY INVASION OF
        PERSONAL RIGHTS) ARISING OUT OF, RESULTING FROM, ATTRIBUTABLE
        TO OR CONNECTED WITH THE CONDITION OF THE PROPERTY,
        OR ANY ENVIRONMENTAL LIABILITIES PERTAINING TO THE PROPERTY, INCLUDING ALL
        REMEDIAL ACTIONS PERTAINING TO THE PROPERTY,
        ARISING FROM ANY RELEASE OF THE SPECIFIED SUBSTANCES
        SUBSEQUENT TO SEPTEMBER 1, 1993 OR BREACH OF POC'S
        COVENANTS AS SET FORTH IN SECTION 11.2.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      11.4  SEADRIFT'S
        ENVIRONMENTAL INDEMNITY.   SEADRIFT
        AGREES
        THAT, AS OF THE EFFECTIVE DATE AND SOLELY AS BETWEEN THE
        PARTIES, SEADRIFT SHALL:

      


      (I)    
        BE
        SOLELY LIABLE AND RESPONSIBLE FOR ANY AND ALL CLAIMS
        AGAINST POC OR ANY OF ITS REPRESENTATIVES WHICH OCCUR
        PRIOR TO SEPTEMBER 1, 1993; AND

      


      (II)    INDEMNIFY,
        DEFEND AND SAVE POC AND EACH OF ITS REPRESENTATIVES
        HARMLESS FROM ANY AND ALL CLAIMS WHATSOEVER
        (INCLUDING, WITHOUT LIMITATION, THIRD PARTY CLAIMS)
        WHICH MAY BE BROUGHT AGAINST OR SUFFERED BY POC OR ANY
        OF ITS REPRESENTATIVES OR WHICH THEY MAY SUSTAIN, PAY OR INCUR
        AS A RESULT OF ANY MATTER OR THING (INCLUDING THOSE INVOLVING
        PERSONAL INJURY, PHYSICAL PAIN, ILLNESS, DISEASE, DEATH
        OR PROPERTY DAMAGE OR ANY INVASION OF PERSONAL RIGHTS)
        ARISING OUT OF, RESULTING FROM, ATTRIBUTABLE TO OR CONNECTED
        WITH THE CONDITION OF THE PROPERTY, OR ANY ENVIRONMENTAL
        LIABILITIES PERTAINING TO THE PROPERTY, INCLUDING
        ALL REMEDIAL ACTIONS PERTAINING TO THE PROPERTY, ARISING
        FROM ANY RELEASE OF THE SPECIFIED SUBSTANCES PRIOR TO
        SEPTEMBER 1, 1993.

      


      11.5  Allocation
        of Environmental Liability.   With
        regard to
Sections
        11.3 and 11.4, to the extent that it can not be demonstrated whether the
        Release
        of the Specified Substances occurred during the Lease Period, the Parties
        will split the liability and responsibility associated with such Release
        of
the
        Specified Substances on 50/50 basis. In the event a Claim arises to which
        POC
        provides Seadrift indemnity under Section 11.3, Seadrift will provide the
        Remedial
        Action and provide the spill response, at the sole expense of POC. The
        costs
        associated with Seadrift providing such Remedial Action and the spill response
        for Claims indemnified under Section 11.3 will be similar to the level of
        costs
        Seadrift typically incurs for similar events when Seadrift bears 100% of
        the
such
        costs on its own. Seadrift, as opposed to POC, shall provide all notices
        and
communications
        to the Environmental Protection Agency and other Governmental
        Bodies regarding any Environmental Claim, Environmental Laws, Release
        or Remedial Action relating to the Property unless otherwise required by
        law.
        Each
        party represents and warrants to the other Party that to the best of its
        knowledge,
        there has not been any Release of any Specified Substances between
        September 1, 1993 and the Effective Date of this Agreement that has not
        been
        disclosed to the other Party.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      XII.
        INDEMNITY, LIMITATION OF LIABILITY AND INSURANCE

      


      12.1  GENERAL
        INDEMNIFICATION BY POC.   POC
        SHALL
INDEMNIFY,
        DEFEND AND SAVE SEADRIFT AND EACH OF ITS REPRESENTATIVES
        HARMLESS FROM AND AGAINST POC'S SHARE OF FAULT OR NEGLIGENCE ATTRIBUTABLE
        TO ALL
        CLAIMS WHATSOEVER WHICH
        MAY BE BROUGHT AGAINST OR SUFFERED BY SEADRIFT OR ANY
        OF ITS REPRESENTATIVES OR WHICH THEY MAY SUSTAIN, PAY OR INCUR AS A RESULT
        OF
        ANY MATTER OR THING (INCLUDING THOSE INVOLVING
        PERSONAL INJURY, PHYSICAL PAIN, ILLNESS, DISEASE, DEATH
        OR PROPERTY DAMAGE OR ANY INVASION OF PERSONAL RIGHTS)
        ARISING OUT OF, RESULTING FROM, ATTRIBUTABLE TO OR CONNECTED
        WITH


      
        	 	
                (1)

              	
                THE
                  PROPERTY OR ANY PART THEREOF OR INTEREST THEREIN,
                  AS A RESULT OF AN ACTION, OMISSION OR FAILURE
                  TO ACT WHICH OCCURS DURING THE TERM OF THIS
                  AGREEMENT,

              


      

      
        	 	
                (2)

              	
                THE
                  OPERATION OR USE OF THE PIPELINE FACILITIES AND EQUIPMENT
                  BY POC OR ANY OF ITS
                  REPRESENTATIVES,

              


      

      
        	 	
                (3)

              	
                ANY
                  ACTION, EVENT OR CIRCUMSTANCE WHICH OCCURS OR
                  EXISTS, OR IS ALLEGED TO HAVE OCCURRED OR EXISTED,
                  ON, ABOUT, IN, OVER, OR UNDER THE PROPERTY BECAUSE
                  OF POC'S OR ITS REPRESENTATIVE'S USE THEREOF OR PRESENCE THEREON,
                  OR

              


      

      
        	 	
                (4)

              	
                THE
                  RIGHTS OR OBLIGATIONS PROVIDED TO POC THROUGH THIS
                  AGREEMENT.

              


      

      


      12.2  SCOPE
        OF INDEMNIFICATION PROVISIONS.   IT
        IS
SEADRIFT
        AND POC'S INTENT THAT POC SHALL TO THE EXTENT OF POC'S
        SHARE OF THE NEGLIGENCE, FAULT AND/OR STRICT LIABILITY, DEFEND,
        INDEMNIFY AND HOLD HARMLESS SEADRIFT AND EACH OF ITS REPRESENTATIVES
        AGAINST ALL OF THE CONSEQUENCES OF 1) THE NEGLIGENCE,
        FAULT, AND/OR STRICT LIABILITY OF SEADRIFT OR ITS REPRESENTATIVES
        OCCURRING JOINTLY, CONCURRENTLY, AND/OR COMPARATIVELY
        WITH THE NEGLIGENCE, FAULT, AND/OR STRICT LIABILITY
        OF POC AND/OR ANY OTHER PERSON THAT IS NOT SEADRIFT OR
        ANY OF ITS REPRESENTATIVES OR 2) THE NEGLIGENCE, FAULT, AND/OR
        STRICT LIABILITY OF POC AND/OR ANY OTHER PERSON THAT IS
        NOT SEADRIFT OR ANY OF ITS REPRESENTATIVES, INCLUDING BUT NOT
        LIMITED TO JOINT, COMPARATIVE, AND/OR CONCURRENT NEGLIGENCE,
        FAULT, AND/OR STRICT LIABILITY OF POC AND/OR ANY OTHER
        PERSON THAT IS NOT SEADRIFT OR ANY OF ITS REPRESENTATIVES.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      12.3  LIMIT
        ON LIABILITY.   NOTWITHSTANDING
        ANY OTHER
PROVISION
        OF THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY OR
        ANY OF ITS REPRESENTATIVES HAVE ANY LIABILITY HEREUNDER AND
        NEITHER PARTY MAY NOT MAKE ANY CLAIM HEREUNDER OR IN RESPECT
        OF ANY INCIDENTAL, SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE
        OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, ANY
        LOSS OF REVENUES, PROFITS, OR BUSINESS OR OTHER ECONOMIC
        LOSS ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT.

      


      12.4  Insurance.   The
        Parties shall at
        their own expense, obtain
        insurance as provided below with insurance carriers rated at least
A-
        by A.M. Best, and authorized to do business in the state or area in which
        the
        Pipeline Facilities are located. Such shall be in force commencing on
the
        Effective Date of this Agreement and shall remain in force during the
Term
        of this Agreement. Permission is specifically granted each Party to
self
        insure any portion of these requirements provided a comprehensive
program
        of self insurance is utilized.

      


      
        	 	
                1.

              	
                Workers'
                  Compensation Insurance and Employer's Liability Insurance
                  including occupational disease in accordance with the laws of the
                  state(s)
                  where the work or services are to be performed.
                  The Parties and all subcontractors of any tier must be
                  subscribers to statutory Workers' Compensation
                  Insurance.

              


      

      


      
        	 	
                (a)

              	
                Workers'
                  Compensation Insurance shall have the minimum
                  limits as required by statute for the state(s) where
                  the work or services will be
                  performed.

              


      

      


      
        	 	
                (b)

              	
                Employer's
                  Liability Insurance shall have the following minimum
                  limits:

              


      

      


      
        	 	
                (i)

              	
                Bodily
                  Injury by accident - $1,000,000 each accident;

              


      

      


      
        	 	
                (ii)

              	
                Bodily
                  Injury by disease - $1,000,000 each employee;
                  and

              


      

      


      
        	 	
                (iii)

              	
                Bodily
                  Injury by disease - $1,000,000 policy
                  limit.

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      
        	 	
                2.

              	
                Commercial
                  General Liability Insurance, including Contractual liability,
                  products, completed operations (completed operations
                  coverage shall be extended for a period of 3 years following
                  final acceptance of the work or services), and personal
                  injury liability coverage, with limits of not less than
                  $5,000,000
                  per occurrence

              


      

      


      
        	 	
                3.

              	
                Automobile
                  Liability Insurance, on each and every unit of automobile
                  equipment, whether owned, non-owned, hired, operated, or used by
                  the
                  Parties and/or its Subcontractors of any
                  tier in the performance of this Agreement or any Agreement
                  or purchase order to which this Agreement applies, covering
                  injury, including death, and property damage, in an amount
                  not less than $1,000,000 per
                  accident.

              


      

      


      
        	 	
                4.

              	
                Excess
                  Liability or Umbrella insurance in excess of the limits
                  and
                  terms of the underlying liability insurances described in
                  the
                  foregoing subsections 1, 2, and 3, with a minimum combined
                  single limit for bodily injury and property damage of
                  $5,000,000
                  per occurrence,

              


      

      


      The
        amounts of insurance required in the foregoing subsections
        1, 2, and 3 and this subsection 4 may be satisfied by
        each party purchasing coverage in the amounts specified or
        by any combination thereof, so long as the total amount of insurance
        meets the requirements specified above.

      


      
        	 	
                5.

              	
                At
                  its sole cost and expense, POC shall maintain and keep in effect
                  throughout
                  the Term of this Agreement, fire and extended coverage
                  insurance
                  upon the Pipeline Facilities in the amount of their full
                  replacement
                  value. The proceeds and other benefits of such insurance
                  shall be payable to the insured and Seadrift. It is understood
                  that POC shall be responsible for obtaining or maintaining
                  adequate insurance coverage for the Product POC shall
                  release and hold harmless Seadrift from any claims, damages,
                  loss,
                  or liability arising as a result of damage or destruction to the
                  Product
                  or other property of POC in the event of a fire or other
                  occurrence
                  or any other condition now existing or hereafter arising
                  with
                  respect to the Pipeline Facilities. POC shall obtain from its
                  insurance
                  carriers a waiver of the right of subrogation against
                  Seadrift
                  for any loss or damage by fire or any other cause within the scope
                  of said
                  insurance policies.

              


      

      


      
        	 	
                6.

              	
                Additional
                  Insurance Requirements - POC
                  shall abide by the following
                  additional insurance
                  requirements:

              


      

      


      
        	 	
                (a)

              	
                Add
                  to Policies as Additional Insured: All insurance policies
                  purchased and maintained in compliance with Section
                  12.4.1 as well as any excess and/or umbrella insurance
                  policies, shall name Seadrift and Seadrift's parent
                  and/or Affiliates as additional
                  insureds.

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      
        	 	
                (b)

              	
                Waiver
                  of Subrogation: All insurance policies purchased and
                  maintained in compliance with Section 12.4.1 as well
                  as any excess and/or umbrella insurance policies, shall
                  be endorsed to provide that underwriters and insurance
                  companies of POC shall not have any right of subrogation
                  against Seadrift or Seadrift's parent and/or Affiliates.

              


      

      


      
        	 	
                (c)

              	
                Primary
                  Insurance: All insurance policies purchased and
                  maintained in compliance with Section 12.4.1 as well
                  as any excess and/or umbrella insurance policies, shall
                  be endorsed to provide that the coverage provided by
                  POC's insurance shall always be primary coverage and
                  non-contributing with respect to any insurance carried
                  by Seadrift or Seadrift's parent and/or
                  Affiliates.

              


      

      


      
        	 	
                (d)

              	
                Notice
                  of Cancellation: All insurance policies purchased and
                  maintained in compliance with Section 12.4.1 as well
                  as any excess and/or umbrella insurance policies, shall be endorsed
                  to
                  provide that 30 days' prior written notice
                  shall be given Seadrift or Seadrift's parent and/or Affiliates
                  in the event of cancellation or material change in
                  the policies.

              


      

      


      
        	 	
                (e)

              	
                Liability
                  Endorsement: All insurance policies purchased and
                  maintained in compliance with Section 12.4.1 as well
                  as any excess and/or umbrella insurance policies, shall
                  be endorsed to provide coverage for liability assumed
                  by POC under all written agreements between the
                  applicable Seadrift Afflliate(s) and
                  POC.

              


      

      


      
        	 	
                (f)

              	
                Waiver
                  of Right of Recovery: POC and its Subcontractors
                  of any tier at all times shall waive any right
                  of recovery against Seadrift or Seadrift's parent and/or
                  Affiliates for loss or damage covered by insurance
                  policies of the types purchased and maintained
                  in compliance with Section 12.4.1 as well as any
                  excess and/or umbrella insurance policies, regardless of whether
                  or not so
                  maintained.

              


      

      


      
        	 	
                (g)

              	
                Certificates:
                  POC shall furnish Seadrift or Seadrift's parent
                  and/or Affiliates, prior to the commencement of any
                  work or services in connection with this Agreement or
                  any agreement or purchase order to which this Agreement
                  applies, with a certificate or certificates, or copy of the policy
                  properly executed by the insurance carrier,
                  showing all the insurance described in Subsections
                  12.4.1, and, in the case of a certificate or certificates, including
                  specific reference to compliance with
                  Subsections 12.4.6(a), (b), (c), (d), and (e) and containing
                  the following statement, "The General Liability
                  and any excess and/or umbrella liability insurance
                  certified hereunder includes coverage for liability
                  assumed by the Insured under all written agreements
                  between The DOW Chemical Company and the
                  insured.

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      XIII.
        MANDATED PIPELINE ALTERATIONS

      


      If
        alteration to the Pipeline Facilities, including but not limited to lowerings
        or relocations, are mandated by any regulatory authority, easement,
        or other event, then Seadrift shall be responsible for determining
        and making and bearing the cost of such alterations. However,
        if the mandated alterations are a direct result of transporting Product
        by POC, or if the alterations would not be required of an idle pipeline,
        then Seadrift shall have the right to terminate this Agreement with one
        hundred and twenty (120) days' prior written notice to POC. If Seadrift
notifies
        POC of its decision to terminate the Agreement for the above reasons,
        then POC shall have the option to (i) agree to pay the cost of such mandated
        alterations, and (ii) commence work to make such mandated alterations
        within one hundred and twenty (120) days and therefore continue
        under this Agreement.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      XIV.
        PIPELINE IMPROVEMENT, MODIFICATIONS, ADDITIONS

      


      14.1  With
        the
        consent of Sea drift, which consent may not be unreasonably
        withheld, POC may choose to make improvements, modifications, or additions
        to
        the Pipeline Facilities which are reasonably necessary
        for the transportation of Product.

      


      14.2  POC
        shall
        be fully responsible for the cost of such improvements,
        modifications, or additions and for ensuring that they meet all
        local, state, and federal statutes and regulations and are in accordance
        with
        Seadrift's HS&EA requirements.

      


      14.3  All
        improvements, modifications, and additions to the Pipeline
        Facilities shall become the property of Seadrift except those which POC can
        readily remove without jeopardizing the integrity of the Pipeline
        Facilities and provided that POC obtains Seadrift's expressed written
        consent prior to removing said improvements, modifications and/or additions.

      


      XV.
        DEFAULT

      


      15.1  Each
        of
        the following shall be deemed a default by POC and a breach of this
        Agreement:

      


      A.    (i)    filing
        of
        a petition for adjudication as a bankrupt, or
        for
        reorganization, or for an arrangement under any federal
        or state statute:


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      
        	 	
                (ii)

              	
                dissolution
                  or liquidation of POC, without the transfer
                  to and assumption by a financially responsible
                  third party of this Agreement;

              


      

      
        	 	
                (iii)

              	
                appointment
                  of a permanent or temporary receiver
                  or a permanent or temporary trustee of all
                  or substantially all the property of
                  POC;

              


      

      
        	 	
                (iv)

              	
                taking
                  possession of the property of POC by a governmental
                  officer or agency pursuant to statutory
                  authority for dissolution, rehabilitation, reorganization,
                  or liquidation; or

              


      

      
        	 	
                (v)

              	
                making
                  by POC of an assignment for the benefit of
                  creditors.

              


      

      


      If
        any
        event mentioned in this Section 15.1 A. shall occur, Seadrift may thereupon
        or
        at any time thereafter elect to terminate this Agreement upon ten
        (10)
        days' prior written notice to POC and this Agreement shall terminate
        on the day in such notice specified with the same force and effect
        as
        if that date had been fixed for the expiration of the Term of this Agreement.

      


      B.    (i)    Default
        in the payment of the fees or any other amount
        herein reserved or any part thereof for a period of ten (10) days after
        written notice from Seadrift.

      


      (ii)   Default
        in the performance or any other covenant or
        condition of this Agreement on the part of POC to be performed for a period
        of
        thirty (30) days after written notice from Seadrift specifying the nature
        of
        such default. For purposes of this subdivision B (ii), no default on
        the
        part of POC in performance of work required to be performed or acts to
        be
        done shall be deemed to exist if, after receipt of the aforesaid notice
from
        Seadrift, POC diligently takes action to rectify the same and prosecutes
        such action to completion with reasonable diligence, subject, however,
        to unavoidable delays.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      15.2  In
        case
        of any such default under Section 15.1 B and at any
        time
        thereafter following the expiration of the respective grace periods above-mentioned,
        Seadrift may terminate this Agreement as of a specified date
        by
        giving POC written notice not less than thirty (30) days prior to the
specified
        date of termination and this Agreement shall expire on the date so
        specified as if that date had been fixed as the expiration date of the
Term
        of
        this Agreement. However, a default under Section 15.1 B shall be deemed waived
        if such default is made good before the date specified for termination
        in the notice of termination.

      


      15.3  The
        rights set forth in this Article 15 shall not be the exclusive
        remedy of Seadrift but shall be cumulative and in addition to any other
        rights or remedies permitted at law or equity.

      


      XVI.
        FIRE AND CASUALTY

      


      16.1  In
        the
        event of any damage to or destruction of the Pipeline
        Facilities by fire or other casualty occurrences so that all or any portion
        is rendered substantially unfit for its normal use and cannot be repaired
        within thirty (30) days from the date of such occurrence, then POC's
        obligations hereunder, to the extent affected by any such occurrence,
        shall be suspended until Sea drift completes the repair and restoration
        of the affected portion of the Pipeline Facilities to substantially the
        same
        condition as existed prior to such occurrence using reasonable speed
        and
        dispatch. POC shall have the right to review the plans and specifications,
        the identity of the contractor and projected cost of such work,
        and
        to submit comments to Sea drift prior to the commencement thereof;
        provided, however, that POC shall submit its comments regarding such
        work
        to Seadrift within thirty (30) days after its receipt of the applicable
        documents relating to the work. Seadrift shall make a good faith effort
        to
        address the concerns raised by POC in its comments, but Seadrift shall
        not
        be bound by such comments.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      16.2  In
        the
        event of any damage to or destruction of all or a portion
        of the Pipeline Facilities by an occurrence other than fire or other
casualty
        occurrence as provided in Section 16.1, then Seadrift shall repair and
        restore the affected portion of the Pipeline Facilities to substantially
        the
        same
        condition as existed prior to such occurrence using reasonable speed
        and
        dispatch and POC shall promptly reimburse Seadrift for the actual
        cost of such work less the insurance proceeds payable under Section
        12.5, if any; provided, however, that prior to the commencement of such work,
        POC shall have the right to review the plans and specifications, the
        identity of the contractor, and projected costs therefore. POC shall
        be entitled
        to submit comments to Seadrift regarding such work, provided that such comments
        are submitted within thirty (30) days after its receipt of the applicable
        documents relating to the work. Seadrift shall make a good faith effort
        to
        address the concerns raised by POC in its comments, but Seadrift shall
        not
        be bound by such comments.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      16.3  POC
        understands that Seadrift may be required to remove
        all Product from the affected portion of the Pipeline Facilities, by
purging,
        flaring or otherwise, and to remove or eliminate any nuisance or dangerous,
        harmful, or unhealthful condition arising out of such fire or other
        occurrence. Seadrift shall not be responsible to POC for Product so removed
        and POC shall promptly reimburse Seadrift for the actual cost of such
        work
        less the insurance proceeds payable under Section 12.5, if any.

      


      XVII.
        CONDEMNATION

      


      17.1  If
        due to
        any condemnation or taking by any public or quasi-public
        authority or other party having the right of eminent domain, (i) any part
        of the
        Pipeline Facilities is taken, or (ii) access to any material part of
        the
        Pipeline Facilities is denied, then and in any of the aforesaid events,
the
        Term
        of this Agreement shall, at the option of Seadrift or POC, cease and
        become null and void from the date when the party exercising the power
        of
        eminent domain actually takes or interferes with the use of the Pipeline
        Facilities or denies access thereto; provided, however, that in the event
        of
        any condemnation or other taking of part of the right-of-way for the
        Pipeline Facilities, Seadrift shall make reasonable, good faith efforts
        to acquire
        alternative right-of-way segments so as to maintain this Agreement in
        effect, and to refrain from exercising its termination option pursuant to
        this
        Section 17.1; and, provided further, that POC's obligations hereunder,
to
        the
        extent affected by such condemnation or taking, shall be suspended until
        the use
        of the Pipeline Facilities is restored by Seadrift. If Seadrift is unable
        to
        acquire alternative right-of-way segments, then, prior to exercising
        its termination option hereunder, Seadrift shall so notify POC and
        give
        POC a reasonable opportunity to try to secure such alternative right-of-way
        segments on behalf of Seadrift, at Seadrift's expense, or to obtain
        its own rights-of-way and to construct its own pipeline, at its expense,
        to be connected to the Pipeline Facilities.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      17.2  In
        the
        event of any partial taking which does not cause a termination
        of this Agreement pursuant to Section 17.1, then this Agreement
        shall remain in full force and effect.

      


      17.3  In
        no
        event shall POC have or make any claim against Seadrift for damages or awards
        with respect to such condemnation or taking
        as
        provided in Sections 17.1 or 17.2. After any condemnation or other
        taking as specified in Sections 17.1 or 17.2, which does not result in a
        termination
        of this Agreement, Seadrift shall, at its sole cost and expense, to the extent
        permitted by applicable law and as the same may be practicable due to the
        configuration of the Pipeline Facilities, make such repairs and alterations
        in
        order to restore the remainder of the Pipeline Facilities
        to the same condition as existed prior to the condemnation or taking.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      XVIII.
        NOTICES

      


      Any
        notices or communications required or permitted hereunder
        shall be deemed sufficiently given if delivered in person or sent by
        telecopy or overnight delivery by the United States Postal Service, certified
        mail, postage prepaid, return receipt requested, to the respective parties
        at the following addresses:

      


      If
        to Seadrift:

      


      400
        West
        Sam Houston Pkwy South

      P.O.
        Box
        3387

      Houston,
        TX 77253

      Phone
        713-978-3470

      Fax
        713-978-3670

      E-mail
        wilsontw@dow.com

      


      If
        to POC:

      


      Penn
        Octane Corporation

      Two
        Memorial Plaza

      820
        Gessner, Ste. 1285

      Houston,
        TX 77024

      Attn:
        President

      Phone:
        713-467-8235

      Fax
        :
        713-467-8258

      


      The
        date
        of delivery in person or by mail receipt as evidenced by the stamped
        postal receipt shall be deemed to be the date on which any such notice
        is
        given. Either party may change the persons or addresses to which
        notice or other communications are to be sent by giving written notice
        of
        any such changes in the manner provided herein for giving notice.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      XIX.
        COVENANT AGAINST LIENS

      


      POC
        shall
        not encumber, or suffer or permit to be encumbered,
        the Pipeline Facilities or the leasehold estate created hereby by
        any
        lien, charge or encumbrance, and POC shall have no authority or right
        to
        mortgage or hypothecate this Agreement, the leasehold estate created
        hereby, or the Pipeline Facilities in any way whatsoever. The violation
        of this Article 19 shall be considered a breach of this Agreement. Within
        ten (10) days after notice thereof, POC shall satisfy or otherwise cause
        to
        be removed of record any mechanic's, material men's, or other lien
        or
        encumbrance filed against the Pipeline Facilities arising out of its
occupancy
        or use thereof.

      


      XX.
        CONDITION OF PIPELINE FACILITIES

      


      20.1  POC
        has
        inspected the Pipeline Facilities and accepts the
        same
        "as is", without any reliance upon any representation, warranty, or
        guarantee, either express or implied, by Seadrift, its employees, or
agents.

      


      20.2  POC
        has
        inspected the Pipeline Facilities with respect to the
        safe
        and proper transportation of the Product and is satisfied that the Pipeline
        Facilities are in good and sufficient condition and state of repair for
        such
        purposes.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      20.3  Except
        as
        otherwise specifically set forth herein, SEADRIFT
        MAKES NO REPRESENTATIONS, WARRANTIES, OR GUARANTEES,
        EITHER EXPRESS OR IMPLIED, AS TO THE PIPELINE FACILITIES, NO WARRANTY OR
        GUARANTEE SHALL BE IMPLIED OR OTHERWISE
        CREATED UNDER THE UNIFORM COMMERCIAL CODE (OTHER
        THAN THE WARRANTY OF TITLE AS PROVIDED UNDER THE UNIFORM COMMERCIAL CODE)
        OR
        OTHERWISE AS TO THE PIPELINE FACILITIES,
        INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OR MERCHANTABILITY
        OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.

      


      XXI.
        TENANT'S CERTIFICATE

      


      POC
        shall, at any time and from time to time, within ten (10) days
        after Seadrift's written request, execute, acknowledge, and deliver to
Seadrift
        a written instrument in recordable form certifying that this Agreement
        is in full force and effect, and if modified, stating the modification
        and the dates to which the fees and other charges have been paid
        in
        advance, if any, and stating whether or not to the best knowledge of
POC,
        Seadrift is in default in the performance of any covenant, agreement, or
        condition contained in this Agreement and, if so, specifying each such
default
        of which POC may have knowledge. POC shall be entitled to receive
        a
        similar certificate from Seadrift according to the provisions of this
Section
        21, mutates
        mutandis.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      XXII.
        FORCE MAJEURE

      


      Except
        for the obligations of POC to pay fees and other charges
        as provided in this Agreement, the period of time during which Seadrift
        or POC is prevented from performing any act required to be performed
        under this Agreement, by reasons of fire, flood, hurricane, strikes,
        lock-outs, or other industrial disturbances, explosions, civil commotion,
        acts of God or the public enemy, government prohibitions or preemptions,
        embargoes, inability to obtain material or labor, the act or default of the
        other party, as the case may be, and which event makes performance
        hereunder commercially impracticable, shall be added to the time for performance
        of such act.

      


      XXIII.
        QUIET ENJOYMENT

      


      If
        and so
        long as POC shall pay the fees reserved hereunder and
        shall
        perform and observe all the terms, covenants, and conditions on the
        part
        of POC to be performed and observed, Seadrift covenants that POC
        shall
        lawfully and quietly hold, use, operate, and enjoy the Pipeline Facilities,
        subject, however, to the provisions of this Agreement and the Underlying
        Agreements.

      


      XXIV.
        WAIVER

      


      No
        consent or waiver, express, or implied, by Seadrift to or of any
        breach or default in the performance by POC of POC's obligations hereunder
        shall be deemed or construed to be a consent or a waiver of any other breach
        or
        default in the performance by POC of the same or any other obligations
        of POC hereunder Failure on the part of Seadrift to complain of
        any
        act or failure to act of POC or to declare POC in default, regardless
of
        how
        long such act or failure continues, shall not constitute a waiver by
Seadrift
        of its rights hereunder.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      XXV.
        COMPLIANCE WITH UNDERLYING AGREEMENTS

      


      Except
        as
        otherwise specifically set forth in Section 9.1, POC shall
        comply fully with all terms, covenants, conditions, and provisions of
the
        Underlying Agreements and shall not cause or permit any default thereunder
        or violation thereof. POC shall indemnify and hold harmless Seadrift
        from any breach or violation of this Article 25 in accordance with Section
        12.1.

      


      XXVI.
        BROKERAGE FEES

      


      Seadrift
        and POC acknowledge that no finder or real estate broker
        or
        agent or other party is entitled to any brokerage fee, commission, or
        other
        compensation on account of this Agreement or any transaction contemplated
        hereunder. POC shall indemnify and hold harmless Seadrift from
        all
        claims, damages, loss, or liability of Seadrift for any brokerage fee,
commission,
        or other compensation owing to any party claiming to represent
        POC hereunder. Seadrift shall indemnify and hold harmless POC from
        all
        claims, damages, loss or liability of POC for any brokerage fee, commission
        or other compensation owing to any party claiming to represent
        Seadrift hereunder.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      XXVII.
        INSPECTION BY LANDLORD

      


      During
        normal business hours and upon reasonable prior notice,
        and at any time in the event of emergency, POC shall permit the authorized
        representatives of Seadrift to inspect the Pipeline Facilities. Any
        exercise of said inspection rights shall not be in derogation of any Operation
        or other obligations of POC or impose on Seadrift the obligation to perform
        any
        remedial or other activities.

      


      XXVIII. CAPTIONS

      


      The
        captions of the sections of this Agreement are for the convenience
        of reference only and shall not affect the meaning or interpretation
        of this Agreement.

      


      XXIX.
        GOVERNING LAW

      


      The
        validity, interpretation, and performance of this Agreement shall
        be
        governed according to the laws of the State of Texas applicable to agreements
        made and to be performed entirely by the state.

      


      XXX.
        ENTIRE AGREEMENT

      


      30.1  This
        Agreement contains all the promises, agreements, conditions, and understandings
        between Seadrift and POC with respect to the Pipeline Facilities, and there
        are
        no promises, agreements, conditions, or understandings, either written or
        oral,
        between them as to such matters other than as set forth herein. No amendment,
        modification, or addition to this
        Agreement shall be effective unless it is contained in a written agreement
        executed by authorized representatives of both parties.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      30.2  The
        covenants, conditions, and agreements contained in
        this
        Agreement shall bind and inure to the benefits of the parties hereto
and
        their
        respective successors and permitted assigns.

      


      30.3  This
        Agreement may not be assigned by POC without the
        prior
        written consent of Seadrift, which consent shall not be unreasonably
        withheld. Any purported assignment without such approval shall
        be
        null and void. Seadrift may assign this Agreement to any entity that
        accedes to Seadrift's ownership interest in the Pipeline Facilities upon
        notice
        to
        POC.

      


      IN
        WITNESS THEREOF,
        the
        parties have caused this Pipeline Lease
        Agreement to be executed by their duly authorized officers as of the
day
        and
        year first above written.

      


      


      
        	
                SEADRIFT
                  PIPELINE CORPORATION

              	 	
                PENN
                  OCTANE CORPORATION

              
	 	 	 	 	 
	 	 	 	 	
                /s/
                  Charles
                  Handly

              
	
                By:

              	
                /s/
                  Kevin C. Weyer

              	 	
                By:

              	
                Charles
                  Handly

              
	
                Title:

              	
                President

              	 	
                Title:

              	
                President