PROMISSORY NOTE
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$498,000.00 New York, New York
September 10, 2000
FOR VALUE RECEIVED, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual residing at ▇▇-▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ the ("Borrower"), hereby
promises to pay to the order of Penn Octane Corporation, a Delaware corporation
(the "Lender"), at its offices located at ▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the Lender shall designate,
the principal amount of Four Hundred, Ninety Eight Thousand Dollars
($498,000.00) on April 30, 2001. The Borrower shall pay interest on the unpaid
principal amount hereof from the date hereof until paid, at a rate of ten
percent (10.00%) per annum, to be paid in arrears on April 30, 2001.
Should the indebtedness represented by this Promissory Note or any part
thereof be collected at law or in equity or in bankruptcy, receivership or other
similar court proceedings or this Promissory Note be placed in the hands of
attorneys for collection before or after maturity, the Borrower, its successors
and assigns, agree to pay, in addition to the principal and interest due and
payable hereon, reasonable attorneys' and collection fees.
If the Borrower shall fail to make payment of any installment of interest
on this Promissory Note when due, and if such default is not cured within ten
(10) days thereafter, or if the Borrower shall become insolvent or a voluntary
or uncontroverted petition shall be filed under the Federal Bankruptcy Code or
other similar Federal or state law dealing with arrangements for the relief of
creditors with respect to the Borrower (in each case, an "Event of Default"),
and in any such event, the holder shall have the right without notice to the
Borrower to declare this Promissory Note with accrued interest hereon to be
immediately due and payable (whether or not then due by the stated terms
hereof), whereupon the same shall become and be immediately due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrower.
This Note is secured by and entitled to the benefits of a Pledge and
Security Agreement dated the date hereof pursuant to which ▇▇▇▇▇▇▇▇'s
obligations hereunder are secured by fifty thousand five hundred and ninety
(60,809) shares of Common Stock, $0.01 par value, of the Lender owned by
▇▇▇▇▇▇▇▇.
No waiver by the holder of any breach of any covenant of the Borrower
herein contained or any term or condition hereof shall be construed as a waiver
of any subsequent breach of the same or of any other covenant, term or condition
herein.
This Promissory Note shall be deemed to have been made under, and in all
respects shall be governed by and construed in accordance with, the laws of the
State of New York.
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▇▇▇ ▇. ▇▇▇▇▇▇▇▇
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT dated as of September 10, 2000, made by ▇▇▇
▇. ▇▇▇▇▇▇▇▇ ("Borrower") in favor of Penn Octane Corporation, a Delaware
corporation (the "Corporation"), for the benefit of the Corporation.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, in connection with the exercise by Borrower of warrants to
purchase 200,000 shares of Common Stock, $0.01 par value, of the Corporation
(the "Common Stock") for $2.50 per share, the Corporation has agreed to accept
$2,000 in cash and a three-year promissory note dated the date hereof (the
"Promissory Note") from Borrower in the amount of $498,000 bearing interest at
the rate of 10.50% per annum. Principal and accrued interest is due April 30,
2001, and subject to the terms and conditions set forth in the Promissory Note;
and
WHEREAS, ▇▇▇▇▇▇▇▇ has agreed to grant a security interest in certain shares
of Common Stock owned by Borrower to secure, equally and ratably, the prompt and
complete payment when due of all Borrower's payment obligations under the
Promissory Note (the "Secured Obligations") and the performance and observance
by Borrower of the covenants, obligations and conditions to be performed and
observed by Borrower pursuant to the Promissory Note;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties hereto agree as follows:
1. Definitions.
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(a) The words "hereof," "herein" and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section references
are to this Agreement, unless otherwise specified.
(b) Unless otherwise defined herein, all terms defined in Article 8 and
9 of the Uniform Commercial Code in effect as of the date hereof in the State of
New York (the "Uniform Commercial Code") are used herein as therein defined.
2. Grant of Security Interest.
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(a) To secure the prompt and complete payment when due to all Secured
Obligations, now existing or hereafter arising, and the performance and
observance by Borrower of the covenants, obligations and conditions to be
performed and observed by Borrower pursuant to the Promissory Note, Borrower
hereby assigns and pledges to the Corporation and grants to the Corporation a
continuing security interest in all of its right, title and interest in and to
sixty thousand eight hundred and nine (60,809) shares of Common Stock of the
Corporation owned by Borrower (the "Pledged Stock") and the certificates
representing such Pledged Stock, and all dividends, cash rights, instruments and
other property and all proceeds of every kind thereof (whether the same are now
owned or exist or arise or are acquired before or after the date hereof) from
time to time received, receivable or otherwise distributed in respect of or in
exchange for, any or all of the Pledged Stock (whether the same are now owned or
exist or arise before or after the date hereof) (the Pledged Stock together with
all such certificates, dividends, cash, rights, instruments, property and
proceeds, being hereinafter referred to as the "Pledged Stock Collateral").
(b) Borrower hereby delivers to the Corporation, duly endorsed in blank
or accompanied by appropriate undated stock powers duly executed in blank, all
certificates or instruments representing or evidencing the Pledged Stock.
3. Stock Dividends, Distributions, Etc. If, while this Agreement is in
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effect, Borrower shall become entitled to receive or shall receive any stock,
any stock certificate representing same, options, rights or other Property
(including, without limitation, any certificate representing a stock dividend or
any distribution in connection with any re-capitalization, reclassification,
increase or reduction of capital, or issued in connection with any
reorganization), whether as an additional to, in substitution of, or in exchange
for, any shares of any Pledged Stock Collateral, or otherwise, or any payment or
distribution of capital on account of any Pledged Stock Collateral, Borrower
agrees to accept the same as the Corporation's agent and to hold the same in
trust on behalf of and for the benefit of the Corporation and to deliver the
same to the Corporation on or before the close of business on the second
Business Day following the receipt thereof by Borrower, in the exact form
received, with the endorsement of Borrower when necessary or appropriate undated
stock powers duly executed in blank, to be held by the Corporation, subject to
the terms of this Agreement, as additional Pledged Stock Collateral and any cash
distribution in connection therewith or cash proceeds therefrom shall be
deposited by the Corporation in a segregated account for Borrower (the "Borrower
Collateral Account"), and thereafter disposed of in accordance with this
Agreement.
4. Cash Dividends; Voting Rights. Unless Borrower is in default of his
---------------------------------
payment obligations under the Promissory Note for a period of ten (10) days
after written notice from the Corporation of such default, Borrower shall be
entitled, except as otherwise provided in Section 3, to receive all cash
distributions and cash dividends in respect of the Pledged Stock and to exercise
all voting and other consensual rights pertaining to the Pledged Stock.
▇▇▇▇▇▇▇▇ agrees to exercise all such voting and other consensual rights for the
purpose not inconsistent with or voilative of the terms of this Agreement. The
Corporation shall not have the right at any time to exercise any voting rights
with respect to the Pledged Stock; provided, however, that upon the sale or
other disposition of the Corporation's interest in the Pledged Stock or any part
thereof, any third party purchaser or other transferee shall have the full and
unrestricted right to vote the Pledged stock, in any manner permitted by
applicable law.
5. Proxies, Etc. The Corporation shall execute and deliver (or cause to be
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executed and delivered) to Borrower all such proxies and other instruments as
Borrower may be reasonable request for the purpose of enabling Borrower to
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exercise the voting or other rights which Borrower is entitled to exercise
pursuant to Section 4 hereof and to receive all distributions and dividends he
is authorized to receive and retain pursuant to Section 4 hereof.
6. Financing Statement. Borrower hereby agrees to execute such financing
---------------------
statements as the Corporation may request, from time to time, with respect to
the Pledged Stock Collateral, and take such action as may be required to perfect
and keep perfected the security interest in the Pledged Stock Collateral created
hereby, and Borrower hereby authorizes the Corporation to execute as its
attorney in fact and file any such financing statements on Borrower's behalf.
7. Rights of the Corporation. If Borrower is in default of his payment
-----------------------------
obligations under the Promissory Note and such default is not cured within a
period of ten (10) days thereafter, or if Borrower shall become insolvent or a
voluntary or uncontroverted involuntary petition shall be filed under the
Federal Bankruptcy Code or other similar Federal or state law dealing with
arrangements for the relief of creditors with respect to Borrower (in each case,
an "Event of Default"), Borrower shall not longer be entitled to receive any
cash dividends or distributions in respect of the Pledged Stock or to exercise
any voting rights, rights of conversion, exchange or subscription or any other
rights, privileges or options pertaining to any shares of the Pledged Stock;
and, upon the sale or other disposition of the Corporation's interest in the
Pledged Stock or any part thereof, any third party purchaser or other transferee
shall have the full and unrestricted right to exercise any and all such rights,
privileges or options.
8. Remedies.
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(a) If there shall have occurred an Event of Default, the Corporation
may at any time or from time to time exercise in respect of the Pledged Stock
Collateral, in addition to all other rights, powers and remedies provided for in
Section 7, at law, in equity or otherwise available to it, all the rights and
remedies of a secured party under the uniform Commercial Code and under any
other applicable law as in effect in any relevant jurisdiction and, in
connection therewith but not in limitation thereof, the Corporation may, without
demand for performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or private sale
or other disposition) to Borrower or any other Person (all and each of which
demands, advertisement and notices are hereby expressly waived), sell, assign,
grant an option or options to purchase or otherwise dispose of the Pledged Stock
Collateral or any part thereof in one or more parcels at public or private sale
or sales, at any exchange, broker's board or at any of the corporation's offices
or elsewhere and at such prices as the Corporation may deem best, for cash, or
credit or for future delivery, without assumption any credit risk, free of any
claim or right of whatsoever kind (including any right or equity of redemption)
of Borrower, which claim, right and equity are hereby expressly waived and
released, and upon such other terms and conditions as the Corporation may deem
commercially reasonable, provided, however, that Borrower shall not be credited
-----------------
with the net proceeds of any such credit sale or future delivery until the cash
proceeds thereof are actually received by the Corporation and are applied to the
Secured Obligations until satisfied.
(b) ▇▇▇▇▇▇▇▇ agrees that, to the extent notice of sale or other
disposition shall be required by applicable law, at least ten (10) days' notice
to Borrower of the time and place of any public sale or other disposition or the
time after which any private sale or other intended disposition may be made.
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Notice shall constitute reasonable notification thereof. Notification need not
be given to Borrower if it has signed, after an Event of Default has occurred, a
statement renouncing any right to notification of sale or other intended
disposition. The Corporation shall not be obligated to make any sale or other
disposition of Pledged Stock regardless of notice having been given.
(c) The Corporation may adjourn any public or private sale or other
disposition from time to time by announcement at the time and place fixed
therefore, and such sales or other disposition may, without further notice, be
made at the time and place to which it was so adjourned. The Corporation shall
have the right upon any such public sales or other disposition, to the extent
permitted by applicable law, to purchase the whole or any part of the Pledged
Stock Collateral so sold or disposed of. Any and all proceeds received by the
Corporation in respect part of the Pledged Stock, whether consisting of moneys,
checks, notes, drafts, bills of exchange, money orders or commercial paper of
any kind whatsoever, shall be deposited by the Corporation in the Borrower
Collateral Account and shall be held by the Corporation, to be withdrawn and
distributed by the Corporation as provided herein.
(d) The rights and remedies provided under this Agreement are
cumulative and may be exercised singly or concurrently, and are note exclusive
of any rights and remedies provided by law or equity.
(e) Borrower recognizes that the Corporation may be unable to effect a
public sales of all or a part of the Pledged Stock Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, or
other federal securities laws, as now or hereafter in effect, or in applicable
Blue Sky or other state securities laws, as now or hereafter in effect, but may
be compelled to resort one or more private sales to a restricted group or
purchasers who own account, for investment and not with a view to the
distributions or resale thereof. Borrower agrees that private sales so made may
be at prices and one other terms less favorable to the Corporation than if such
Pledged Stock Collateral were sold at public sales, and that the Corporation has
no obligation to delay sale of any such Pledged Stock Collateral of the period
of time necessary to permit the registration of such Pledged Stock Collateral
for the period of time necessary to permit the registration of such Pledged
Stock Collateral for public sales under such applicable securities laws.
Borrower agrees that private sales made under the foregoing circumstances shall
be deemed to have been made in a commercially reasonable manner.
(f) If the Corporation determines to exercise its right to sell all or
any of the Collateral, upon written request, Borrower shall from time to time
furnish to the Corporation all such information as the Corporation may request
in order to determine the Collateral which may be sold by Borrower as exempt
transactions under the federal securities laws.
(g) The proceeds of the sale of any of the Pledged Stock Collateral
sold pursuant to the Section 8 and cash constituting Pledged Stock Collateral
received under Section 2(a) shall be applied to the Corporation as follows:
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FIRST: to the payment of the costs and expenses of such sales,
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including out-of-pocket expenses of the Corporation and the fees and
out-of-pocket expenses of legal advisers employed by the Corporation in
connection therewith, and to the payment of all advances made by the Corporation
hereunder and payment of all costs and expenses incurred by the Corporation in
connection with the administration and enforcement of this Agreement:
SECOND: to the payment in full of the Promissory Note: and
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THIRD: the balance (if any) of such proceeds to Borrower, the
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successors or assigns of Borrower, or as a court of competent jurisdiction may
direct.
9. Representations: No Disposition, Etc. Borrower hereby represents and
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warrants that it now owns good and marketable title to the Pledged Stock, free
and clear of any liens, charges, encumbrances or security interests of any kind
whatsoever, and that the Pledge Stock is not subject to any restriction on
alienation or transfer, in each case, other than this Agreement, Borrower
covenants to defend the right, title and special property of ▇▇▇▇▇▇▇▇ in and to
the Pledged Stock against the claims and demands of all persons whatsoever.
Borrower hereby represents, warrants and covenants that Borrower is currently,
or shall be, the only owner of the Pledged Stock and that Borrower does not, and
will not have, outstanding rights, options, warrants, conversion rights or other
commitments or agreements for the purchase or acquisition of the Pledged Stock.
▇▇▇▇▇▇▇▇ agrees that he will not sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option or right with respect to, the Pledged Stock
Collateral, nor will it create, incur or permit to exist any lien, security
interest therein, change or encumbrance with respect to any of the Pledged Stock
Collateral, any interest, or any proceeds thereof except as permitted by this
Agreement.
10. Possession of the Collateral. The Corporation shall hold in its
--------------------------------
possession in the State of California all the Pledged Stock and all other
certificates, documents or instruments constituting Pledged Stock Collateral
pledged, assigned to transferred hereunder except as form time to time any such
certificate, document or instrument may be required for recordation or for the
purchase of enforcing or realizing upon any right or value thereby represented;
provided, however, that ▇▇▇▇▇▇▇▇ in his capacity as an officer of the
Corporation or otherwise, shall have no ability to assign, release, transfer or
otherwise deal with the Pledged Stock Collateral. The Corporation may, from
time to time, in its sole discretion appoint one or more agents or trustees
(which in no case shall be Borrower or any of his affiliates) to hold physical
custody, for the account of the Corporation, of any or all such certificates,
documents or instruments.
11. Collateral Agreement. Each of Borrower and the Corporation agrees that
----------------------
the parties hereto may supplement, amend or superseded this Agreement with a
collateral agreement among the Corporation, Borrower and a third party bank, as
trustee, pursuant to which such third party bank shall accept and maintain
possession of the Pledged Stock Collateral until such time as the Secured
Obligations shall have been satisfied.
12. Further Assurance. ▇▇▇▇▇▇▇▇ agrees that at any time and from time upon
------------------
the written request of the Corporation, ▇▇▇▇▇▇▇▇ will execute and deliver such
further documents, including a collateral agreement appointing a trustee other
than the Corporation and necessary financing statements, and do or cause to be
5
done such further acts and things as the Corporation may be reasonable request
in order to effect the purposes of this Agreement.
13. Release of Security Interest. Upon termination of this Agreement
--------------------------------
pursuant to Section 17 hereof, the security interest granted hereby shall
terminate. Upon any such termination, the Corporation will, at Borrower's
expense, execute and deliver to Borrower such documents as Borrower shall
reasonably request to evidence such termination including without limitation,
duly executed Uniform Commercial Code termination statement.
14. Limitation by Law; Severability.
-----------------------------------
(a) All rights, remedies and power provided in this Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Agreement are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and to be limited to the extent necessary so that they will not
render this Agreement illegal, invalid, unenforceable, in whole or in part, or
not entitled to be recorded, registered, or filed under the provisions of any
applicable law.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
15. Waivers, Amendments. None of the terms or provisions of this Agreement
---------------------
may be waived, altered, modified or amended by any act, delay, omission or
otherwise, except by an instrument in writing which is duly executed by ▇▇▇▇▇▇▇▇
and the Corporation. Any such waiver, alteration, modification or amendment
shall be valid only to the extent therein set forth. A waiver by the
Corporation of any right or remedy under this Agreement on any one occasion
shall not be construed as a bar to any right, remedy or power, which the
Corporation would otherwise have on any future occasion. No failure to exercise
not any delay in exercising on the part of the corporation, any right, remedy or
power under this Agreement, shall operate as a waiver thereof; further, no
single or partial exercise of any right, remedy or power under this Agreement
shall preclude any other or further exercise thereof or the exercise of any
other right, remedy or power.
16. Binding Effect; Successor and Assigns. This Agreement shall be binding
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upon and inure to the benefit of the parties hereto and shall inure to the
benefit of the Corporation its successors and assigns and nothing herein is
intended or shall be construed to give any other Person any right, remedy or
claim under, to or in respect of this Agreement or any Pledged Stock Collateral.
17. Termination of This Agreement. This Agreement shall terminate
---------------------------------
simultaneously with the payment in full of all principal and interest due under
the Promissory Note and, upon such termination, any Pledged Stock Collateral
held hereunder shall be released and delivered to Borrower or at his direction.
18. Notices. All notices or other communications hereunder shall be given
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in the following manner.
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If to the Corporation:
Penn Octane Corporation
▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
If to Borrower:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇
c/o Penn Octane Corporation
▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Any of the addresses set forth above may be changed from time to time by
written notice from the party requesting the change.
19. Applicable Law. This Agreement shall be governed by, and be construed
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and interpreted in accordance with, the internal laws of the State of New York
without reference to principles of conflict of laws, except as required by
mandatory provisions of law.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed and delivered by their duly authorized
officers as of the date first above written.
BORROWER
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▇▇▇ ▇. ▇▇▇▇▇▇▇▇
PENN OCTANE CORPORATION
By:
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Name:
Title:
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