Agreemeent Dated As of April 1, 1994, Between BP Exploration

EXHIBIT 10.4

PROPANE SALES AGREEMENT


This agreement dated as of April 1, 1994 by and between BP Exploration & Oil Inc. an Ohio Corporation, ("BP") and Ferrellgas L.P., a Delaware Limited Partnership dba Ferrell North America ("Ferrell").


In consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:


1.0 PURCHASE


Subject to the provisions of paragraphs 5.1, 5.2 and 23.0 below, BP agrees to sell and Ferrell agrees to purchase 100% of the propane produced and recovered at BP's refineries located at Lima, Ohio, and Toledo, Ohio. It is estimated that the propane available to Ferrell in 1994 shall be as set forth in Exhibit A, but BP has no obligation to provide Ferrell with any minimum quantity of propane.


2.0 PRODUCT


The product to be sold and purchased hereunder is HD-5 Propane, specifications as set forth in Exhibit D. (sometimes referred to herein as "product").


3.0 SPECIFICATIONS / PRICING SOURCE


3.1 All propane sold hereunder shall meet the Gas Processors Association ("GPA") specification for HD-5 propane in effect at the time of delivery. In addition, odorant will be added as set forth in paragraph 11.0 hereof. THERE ARE NO OTHER ORAL OR WRITTEN GUARANTEES OR WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY GUARANTY OR WARRANTY OF MERCHANTABILITY, FITNESS, OR SUITABILITY OF THE PETROLEUM PRODUCT FOR ANY PARTICULAR PURPOSE.


3.2 Unless otherwise set forth in the terms of this agreement, for the purpose of determining price, all quotations shall be based on the average mean TET Propane, basis Mt. Belvieu, TX as published in O.P.I.S. Petroscan.


4.0 TERMS


4.1 Minimum Three Year Agreement


Subject to the provisions of paragraph 4.2 below, this agreement shall be in effect for a minimum period of three 3 years commencing April 1, 1994 and extending through March 31, 1997. It shall then continue for two years thereafter should neither party terminate this agreement in writing by October 31, 1996. Either BP or Ferrell shall have the independent right to terminate this agreement as of March 31, 1997 by providing written notice to the other party by October 31, 1996, as set forth in paragraph 32.0.


4.2 Termination By BP


In addition to any other rights of termination that BP may have in this agreement, BP reserves the right to terminate this agreement at any time upon prior written notice of 180 days should BP (i) elect to engage in the retail marketing of propane in an area that will be supplied with propane from the Lima and Toledo refineries, whether such marketing is through the purchase of an existing company or otherwise, or (ii) determine that sales between Ferrell and any of its affiliated companies, such as Ferrellgas L.P., do not conform to the requirements of paragraph 9.4 (iii) hereof.


5.0 ALTERNATE USES


5.1 Burn Value


BP will provide Ferrell, at the intervals described in paragraph 16.0, with the value ("burn value") to BP of burning the propane at each of its Lima and Toledo, refineries and the volume of such propane that can be burned at that value at each such refinery. Should this burn value exceed Ferrell's expected price netted back to the refinery gate, it is understood that such volume of propane will be burned at the refinery, provided, however, that Ferrell may nevertheless elect to purchase all or any portion of such propane rather than allow it to be burned, in which event it will pay BP the burn value for the amount of such propane so purchased.


The formula for calculating the burn value of a liquid gallon of propane is: BP's price paid for refinery fuel gas at its Lima or Toledo refinery, as applicable, expressed at the time such refinery fuel is used in dollars per million BTU (Gross) multiplied by 0.0931 million BTU per liquid gallon.


5.2 Alternate Fuels


If alternate refinery fuels are unavailable to BP, BP reserves the right to burn as much propane produced at its Lima or Toledo refineries as may be necessary to maintain refinery operations. In addition, BP shall have the right to withhold and divert as much propane from sale to Ferrell under this agreement as may be necessary to maintain sufficient quantities of alternate fuel in the propane (burn) cavern at BP's Toledo refinery to provide adequate alternate fuel to operate the refinery in the event that other sources of fuel to that refinery are interrupted. The amount of such alternate fuel is approximately 40,000 barrels. BP and Ferrell will consult with each other as to the time when any such diversion should occur.


6.0 DELIVERY


Deliveries shall be made within BP's usual business hours and at such times as may be required by Ferrell, provided that BP may require reasonable advance notice of each delivery to be given by Ferrell. At the time of giving notice, Ferrell shall furnish BP necessary shipping instructions. BP shall prepare and furnish Ferrell with copies of bills of lading and other shipping papers.


6.1 Tank Truck


Any transport tank truck deliveries shall be effected F.O.B. into the transport tank trucks at loading racks of BP's Lima and Toledo refineries.


6.2 Pipeline


Any pipeline deliveries shall be effected F.O.B. out of BP's Lima, OH refinery into the Texas Eastern Product Pipeline Company's (TEPPCO) Todhunter terminal near Dayton, Ohio (the "Todhunter Terminal") subject to mutual agreement by BP, the pipeline companies used to ship the propane to the Todhunter Terminal and the operator of the Todhunter Terminal, presently TEPPCO. In the event Ferrell is no longer given access to the Todhunter Terminal as a distribution location for Lima production, this will be deemed a fundamental change in the market and an event to initiate negotiations as discussed in paragraph 20.0.


6.3 Tank Car


Any railroad tank car deliveries shall be made F.O.B the railroad tank cars at the loading area at BP's Lima Refinery. In the event that Ferrell requires railroad tank car loading. Since BP has limited railroad tank car loading capability, BP shall supply the railroad tank cars on a best efforts loading basis. The terms which apply to the railroad tank car deliveries shall be pursuant to the Trip Lease as set forth in Exhibit E.


7.0 TITLE, LIABILITY, RISK OF LOSS


Liability of BP shall cease and title to and responsibility for the product delivered hereunder, including risk of loss, shall pass to and rest in Ferrell as follows;


7.1 Tank Truck


For delivery into tank trucks, as product is loaded into transport trucks at the point of delivery, which shall be at BP's Lima or Toledo refineries.


7.2 Pipeline


For delivery into pipelines, as product passes the flange between the pipeline, that delivers the product and the Todhunter Terminal.


7.3 Tank Car


For delivery into tank cars, as product is loaded into the tank car at the point of delivery, which shall be at BP's Lima refinery.


8.0 MEASUREMENTS


The volume of propane obtained by measurement hereunder shall be adjusted to a temperature of 60 Degrees F. using "GPA Standard Factors for Volume Correction and Specific Gravity Conversion of Liquified Petroleum Gases," GPA Publication No. 2142 in effect on the date of delivery.


8.1 Transport Truck


Transport truck delivery quantities will be determined: (i) by liquid metering devices (or such other method as the parties may hereafter agree in writing) at BP's propane loading facility at BP's Lima refinery and (ii) by weight at BP's Toledo refinery. All quantities shall be based on the transport bills of lading.


8.2 Tank Cars


Tank car delivery quantities will be determined by standard calibrated tank car tables for the tank cars used.


8.3 Pipeline


Pipeline delivery quantities will be determined by calibrated meters, or if calibrated meters are not available, by the measurement of the delivery tanks before and after delivery on the basis of mutually agreed upon gauge tables.


9.0 PRICE


9.1 Settlement Price


Except as otherwise provided in this agreement, Ferrell will pay BP the "Settlement Price". The Settlement Price shall consist of a "Minimum Price" (as defined below) plus a sharing revenue above the Minimum Price as provided for in paragraph 9.1 (ii).


i.) The "Minimum Price" per gallon shall be equal to the average of all of the daily spot high/low average prices for Mont Belvieu T.E.T. propane as published in O.P.I.S. Petroscan for each month, plus an additional $0.0300 per gallon.


ii.) BP and Ferrell will share equally the difference between Ferrell's average sales price netted back to refinery gate and the Minimum Price for all product sold during such term. This amount will then be added to the "Minimum Price" to determine the "Settlement Price." An example illustrating the Settlement Price calculation for the first term shall be as set forth in Exhibit B.


Any product sold by Ferrell pursuant to paragraphs 5.1 above and 18.0 below will not be included when calculating Ferrell's average sales price for the term.


9.2 Alternate Minimum Price


i.) If the average of the high/low average prices for Conway propane averages more than $0.0200 per gallon below the average of the high/low average prices for Mont Belvieu T.E.T. propane during a month, the "Minimum Price" will be calculated as fifty percent (50%) of the average of all of the daily spot high/low average prices for Mont Belvieu TET propane plus fifty percent (50%) of the average of all of the daily spot high/low average prices for Conway/Group 140 propane as published in O.P.I.S. Petroscan, for each month, plus $0.0300 per gallon.


ii.) For pricing terms corresponding to the first and fourth Quarters of a calendar year (January through March or October through December), if the average of the high/low average prices for Conway propane averages $0.0300 per gallon or more over the average of the high/low average prices for Mont Belvieu T.E.T. propane, the "Minimum Price" will become the high/low average price for Mont Belvieu T.E.T. propane plus $0.0350 per gallon for that pricing month.


9.3 Invoicing


i) For invoicing purposes, Ferrell will pay BP the previous month's settlement price for each gallon sold by truck or tank car at BP' s Lima and Toledo, Ohio refineries. Along with each payment, Ferrell shall provide BP a detailed account which substantiates the payment amount. At the end of each month. payment of any difference between the Settlement Price and the provisional invoice price will be made between BP and Ferrell, the Parties shall reconcile any overpayment or underpayment. In the event Ferrell has overpaid, BP shall refund the overpayment amount to Ferrell on the next Banking Day after the overpayment amount is determined. In the event Buyer has underpaid, Seller shall invoice Buyer for the underpayment amount with payment due one Banking Day after Buyer's receipt of Seller's adjusted invoice. By mutual agreement, an adjustment will be made if it is found large cash reconciliations are being made at the end of each term.


ii.) Invoices for pipeline sales will be generated upon completion of arrival of propane at the Todhunter Terminal at a price equal to the previous month's settlement price.


9.4 Determination of Price Netted Back To The Refinery Gate


i.) For all propane sold into tank trucks and tank cars F.O.B. the Lima and Toledo refinery loading racks, the price netted back to the refinery gate will be defined as the price at which the product is sold by Ferrell.


ii.) Except as provided in Paragraph 9.4 iii), for all product sold by Ferrell other than F.O.B. the Lima and Toledo refineries, the price netted back to the refinery gate will be defined as the price at which the product is sold by Ferrell minus the applicable transportation costs and charges incurred in delivering the product to the point of sale by Ferrell. These charges may include, but are not limited to:


- - - Actual truck fees charged to Ferrell if a third party trucking company is used. If Ferrell-owned transport trucks are used, the truck fee will be determined using common carrier truck rates in effect at the time of delivery for similar deliveries in the area in which the delivery was made. An example of a common carrier trucking company is Grammer Industries (GI) in Ohio.


- - - Actual published pipeline tariffs charged to Ferrell.


- - - Actual published railroad tariffs charged to Ferrell.


iii) During any month when Ferrell purchase product delivered from BP's Lima refinery to Todhunter by pipeline, the price netted back to the refinery gate shall be the average mean TET Propane, basis Mt. Belvieu, TX as published in O.P.I.S. Petroscan plus US$.0150 per Gallon.


iv.) The price netted back to the refinery gate for sales made on a delivered basis by Ferrell to any affiliate of Ferrell, will be determined as if such sale were made on an arms length basis to any of Ferrell's other customers, and shall be based on the alternative purchase economics report generated by any affiliate of Ferrell, a copy of which is attached hereto as Exhibit C. Ferrell will cause any affiliate of Ferrell to provide alternate purchase economics upon request as part of the auditing process. should BP determine that sales were made by Ferrell to an affiliate at a price less than that described above, BP will be refunded the difference. In addition, if it is determined that such sales are deliberately made at such less price, BP shall thereupon have the right to terminate this contract as provided in paragraph 4.2 above.


9.5 Sales Data From Ferrell


Ferrell will provide to BP, on a daily basis within four (4) days of date of delivery, by facsimile, telex or overnight mail, a summary of their sales data which will include, but not be limited to, shipping date, bill of lading number, quantity, Ferrell price netted back to the refinery gate, and total value of sale.


10.0 AUDITING


10.1 General Provisions


BP shall have the right, during and after any termination of this Agreement, upon 5 business days, advance notice, to audit the books and all records of Ferrell relating to the delivery of propane and to place personnel in Ferrell's office for such purpose, except that if BP reasonably believes that a shorter notice period is necessary due to deliberate falsification of documents or deliberate violation of the agreement to enable it to conduct an accurate audit, it shall have the right to do so on no less than 24 hours notice. Ferrell shall maintain such books and records for 42 months after the date of each invoice under this Agreement. Ferrell shall incorporate BP's right to audit into any assignments of this contract.


BP shall have the right to assess interest on any net underpayment at the end of each three month term that was the result of Ferrell providing inaccurate sales data to BP as discussed in paragraph 9.0, at the then-current thirty day U.S. Treasury bill rate plus two (2) percent, as such rate may change from time to time, during the period from the date of underpayment to the date of full reimbursement. For unresolved claims of interest or underpayment, BP reserves the right to submit the claim(s) to binding arbitration, with the cost shared equally by BP and Ferrell.


10.2 Records Retention


Ferrell shall maintain adequate books and records on its premises in Liberty, Missouri, and/or Houston, Texas, as may be necessary for BP to audit propane sales so as to determine Ferrell's average sales price netted back to the refinery gate.


10.3 Right Of Customer Inquiries


BP shall have the rig ...