EQUIPMENT LEASE AGREEMENT

 

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                                                                   EXHIBIT 10(o)

 

                            EQUIPMENT LEASE AGREEMENT

 

Silsbee Trading and Transportation Corp., a Texas Corporation, hereinafter

"STTC"), with an address at P. O. Box 695, Silsbee, Texas 77656, agrees to lease

to South Hampton Refining Co., a Texas Corporation, (hereinafter "SHRCO"), with

an address at P. O. Box 1636, Silsbee, Texas 77656, which agrees to lease from

STTC the Vehicles and Equipment described in SCHEDULE "A" attached hereto. The

term of the lease shall begin on January 1, 2004 and shall continue for a period

of Five (5) years unless terminated early as provided in the lease. Upon

expiration or termination of the Vehicle lease, SHRCO shall return the vehicles

to STTC at its location at Highway 418 in Hardin County, Texas, in the same

condition and appearance as when received, ordinary wear and tear excepted. Any

holding over after the expiration of the Vehicle lease shall be on a

month-to-month basis and subject to all the terms of this Lease.

 

     1.   MAINTENANCE AND REPAIR. STTC agrees, at its own cost and expense, to

          provide with respect to the Vehicles leased,: (a) all preventive

          maintenance, replacement parts, and repairs to keep the Vehicles in

          good repair and operating condition; (b) oil and lubricants necessary

          for the efficient operation of the Vehicles; (c) all necessary tires

          and tubes; (d) road service due to mechanical and tire failures; (e)

          periodic exterior washing; (f)initial painting and lettering of each

          Vehicle according to SHRCO specifications at the time the Vehicle is

          placed into service, at a cost not exceeding the per-vehicle allowance

          specified in SCHEDULE "A". In the event any Vehicle shall be disabled

          for any reason, SHRCO and/or its driver shall immediately notify STTC.

          SHRCO agrees that it will not cause or permit any person other than

          STTC or persons authorized by STTC to make any repairs or adjustments

          to a Vehicle, and shall abide by its directions concerning emergency

          repairs. In the event a Vehicle is disabled due to mechanical or tire

          failure, STTC shall, within a reasonable period of time after receipt

          of notification, properly repair, or cause the repair of, the Vehicle.

          SHRCO will cause its drivers to

 

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          report any trouble concerning the Vehicle not later than the date of

          occurrence and to check oil and coolant levels in each Vehicle on a

          daily basis to prevent damage.

 

2.   VEHICLE LEASE SERVICE AGREEMENT. STTC will provide for inspections,

          preventive maintenance, and routine repairs in such a manner and at

          such times as to minimize the disruption of the normal use of the

          Vehicle. SHRCO will deliver the Vehicles to the repair facility and

          pick them up as needed after repairs or maintenance is completed. Any

          tow charges resulting from routine maintenance or repairs will be paid

          by STTC.

 

3.   FUEL. Shrco shall provide all fuel for the Vehicles and shall be

          responsible for all reporting, taxes, and charges associated

          therewith.

 

4.   LICENSES, TAXES AND PERMITS. STTC shall, at its own expense, register and

          title each Vehicle, and pay for any Vehicle inspection fees, in the

          state of domicile of such Vehicle for the licensed weight. STTC shall

          also pay the Federal Highway Use Tax and all personal property tax

          applicable to such Vehicle in that domicile state. If permitted by

          law, STTC shall obtain, at SHRCO's expense, other vehicle licenses,

          registrations, or pro-rate or state reciprocity plates, as SHRCO may

          request. Any increase in these rates or fees or change in the method

          of assessment over the allowance shown in SCHEDULE "A" will be paid

          for by SHRCO. Other than as set forth above, SHRCO shall pay for all

          permits, plates, special licenses, fees, or taxes (including any

          penalties or interest) required by SHRCO's business or now or

          hereafter imposed upon the operation or use of the Vehicles, or on

          this lease or on the charges accruing under this lease, including, but

          not limited to, sales or use taxes, mileage or ton mileage taxes,

          highway and bridge tolls, and any new and/or additional taxes and

          fees.

 

5.   LEASE CHARGES. SHRCO agrees to pay STTC the charges provided for under this

          lease upon receipt of an invoice, without deduction or offset. STTC

          will invoice SHRCO on a monthly basis, including the billing of fixed

          charges in advance, and payment

 

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          shall be made to the location designated by STTC. Unless SHRCO shall

          protest the correctness of any invoice within seven (7) days of its

          receipt, SHRCO agrees that such invoice shall be presumed to be

          correct. Should SHRCO fail to pay any charges when due, SHRCO shall

          pay interest on such delinquent amounts at one and one-half percent

          (1-1/2%) per month or the maximum permissible rate allowed in the

          jurisdiction in which SHRCO's principal place of business is located,

          whichever is lower, from the date on which payment was due until paid,

          together with all expenses of collection and reasonable attorneys'

          fees. This interest charge shall not be construed as an agreement to

          accept late payments.

 

6.   VEHICLE USE AND DRIVERS. SHRCO shall use the Vehicle only in the normal and

          ordinary course of its business and operations and in a careful,

          non-abusive manner, and not beyond its capacity and SHRCO shall not

          make any alterations to the Vehicle without STTC's prior written

          consent. Subject to the terms of this lease, from the time of delivery

          to SHRCO of any Vehicle covered by this lease, SHRCO shall have

          exclusive possession, control, supervision and use of the Vehicle

          until its return to STTC. SHRCO agrees that all Vehicles shall be

          operated by safe, qualified, properly licensed drivers, who shall

          conclusively be presumed to be SHRCO's agent, servant or employee

          only, and subject to its exclusive direction and control. The Vehicles

          shall not be operated: (a) by a driver in possession of or under the

          influence of alcohol or any controlled drug, substance, or narcotic;

          (b) in a reckless or abusive manner; (c) off an improved road; (d) on

          an under inflated tire; (e) improperly loaded or loaded beyond maximum

          weight; or (f) in violation of any applicable laws, ordinances, or

          rules; and SHRCO shall protect, defend, indemnify and hold STTC

          harmless from and against all fines, claims, forfeitures, judgments,

          seizures, confiscations or penalties arising out of any such

          occurrence. SHRCO will be responsible for all expenses for removing or

          towing any mired or snowbound Vehicle. SHRCO agrees not to use or

          cause any Vehicle to be used for the transportation of

 

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          hazardous materials as defined by regulations promulgated by the Unite

          States Department of Transportation, unless otherwise agreed to in

          writing by STTC, nor for any illegal purpose. SHRCO will cause each

          Vehicle to be stored in a safe location. Upon receipt of a written

          complaint from STTC specifying any reckless, careless or abusive

          handling by any driver of the Vehicle(s), SHRCO shall prohibit the

          driver so identified from operating the Vehicle(s), In the event that

          SHRCO shall fail to do so or shall be prevented from so doing by any

          agreement with anyone on the driver's behalf, SHRCO shall reimburse

          STTC in full for any loss and expense incurred by STTC as a result of

          operation or use of the Vehicle(s) by such driver; and SHRCO shall

          protect, defend, indemnify and hold STTC and its shareholders harmless

          from and against any costs, expenses or damages arising out of the

          operation of any Vehicle(s) by such driver, notwithstanding that STTC

          may be designated in this lease as responsible for extending liability

          coverage or assuming the risk of loss of, or damage to, the Vehicle.

          SHRCO authorizes STTC to investigate the driving record of each driver

          and test such driver with respect to his ability to operate the

          Vehicle to which he will be assigned, without prejudice to any right

          or remedy of STTC under this lease. The drivers shall be selected and

          employed by SHRCO. STTC will have no responsibility for compensation,

          supervision or control of such drivers.

 

7.   PHYSICAL DAMAGE TO VEHICLES. SHRCO assumes the risk of loss of, or damage

          to, the Vehicle(s) covered by this lease from any and every cause

          whatsoever, including, but not limited to, casualty, collision, upset,

          fire, theft, malicious mischief, vandalism, graffiti, glass breakage,

          and mysterious disappearance, except as otherwise provided in this

          lease. SHRCO shall, at its sole cost, procure and maintain an

          automobile collision and comprehensive insurance policy protecting

          STTC against any and all loss or damage to the Vehicles covered by

          this lease, in form satisfactory to STTC, which policy shall provide

          that losses, if any, shall be payable to STTC and/or its

 

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          assignee. The amount of coverage for each vehicle shall be the fair

          market value of each item as of this date. SHRCO shall deliver to STTC

          all policies of insurance, or evidence satisfactory to STTC of such

          coverage, prior to delivery to SHRCO of any Vehicle covered by this

          lease. Each insurer shall agree, by endorsement upon the policy issued

          by it, or by an independent document provided to STTC, that it shall

          give STTC thirty (30) days' prior written notice of the effective date

          of any alteration or cancellation of such policy, and that such notice

          shall be sent by registered or certified mail postage prepaid, return

          receipt requested, to STTC, P. O. Box 695, Silsbee, Texas 77656.

 

8.